northern foods plc annual report 2005
supplier 
ofchoice
northern foods plc
annual report 2005
northern foods plc
2180 century way
thorpe park
leeds
ls15 8zb 
tel 0113 390 0110
fax 0113 390 0211 
wwwnorthernfoodscom
          design and production 35
photography bill robinson
print st ives westerham press
northern foods is one of the 
uk’s leading food producers 
with a proven reputation 
for quality and innovation 
our mission is to be the 
supplier of choice to uk 
and irish retailers in added 
value convenience foods
contents
01 financial highlights
02 chairman’s review
04 chief executive’s operating review
08 financial review
11 board of directors and company secretary
12 qa with the chief executive
14 business review
22 corporate social responsibility review
26 report of the directors
31 directors’ remuneration report
41 independent auditors’ report
42 consolidated profit and loss account
43 consolidated balance sheet
44 consolidated cash flow statement
45 reconciliation of net cash flow
to movement in net debt
consolidated statement of 
total recognised gains and losses
reconciliation of movements 
in equity shareholders’ funds
46 company balance sheet
47 accounting policies
49 notes to the accounts
67 fiveyear record
68 shareholder analysis
69 financial calendar
company information
70 investor information
71 principal operations
       northern foods plc financial highlights 01
financial
highlights
business
highlights
ambient 
continuing sales up 75 per cent 
with continuing operating profit 
up 198 per cent to £315 million
frozen 
continuing operating profit 
held at £361 million despite 
continuing sales down 22 per cent
chilled
continuing sales up 20 per cent 
but continuing operating profit 
down 192 per cent to £350 million
before goodwill amortisation and exceptional items
financial summary for 2005
2005 yoy
continuing sales £m 14161 20
operating profit £m 1024 43
pretax profit £m 802 67
earnings per share pence 1295 60
dividend per share pence 905 17
pretax profit £m 43
earnings per share pence 053
before goodwill amortisation and exceptional items
 strategic review of the 
business completed
 new management team established
 business structure simplified
 factory closures and product 
transfers implemented
 disposal of noncore businesses
 get fit programme delivery on track
 new headquarters in leeds 
fully operational
 new finance director appointed
chilled convenience foods
estimated market share by manufacturer
•
northern foods £668m
•
greencore group £376m
•
geest £357m
•
samworth brothers £209m
•
uniq £152m
source northern foods data and analyst reports 2003
excluding cake and dairy
£152m
£209m
£357m
£376m
£668m
                                         peter blackburn
chairman
chairman’s review
we have made significant 
progress on our journey 
of transformation as 
we work to realise our 
potential as the supplier 
of choice to uk and irish
retailers in added value
convenience foods
02 chairman’s review northern foods plc
    dividend
the board’s confidence in the management team’s ability to deliver our
business change programme leads it to recommend an increased final
dividend of 570 pence per share 2004 560 pence together with the
increased interim dividend of 335 pence per share 2004 330 pence
paid in march 2005 this makes a total dividend for the year of 
905 pence 2004 890 pence a rise of 17 per cent
share buyback
we have made no share buybacks in the second half of the year
a total of 156 million shares were acquired in the first half at a 
cost of £242 million
the board
in february 2005 we announced that tony hobson currently deputy
chairman will succeed me as chairman of northern foods following
my planned retirement from the board in july 2005tony joined the board
in may 2002 as deputy chairman and senior independent director
colin dyer currently nonexecutive director and chair of the audit
committee will become deputy chairman orna nichionna currently
a nonexecutive director will become chair of the remuneration
committee and senior independent director david nish will join 
the board as a nonexecutive director on 1 july 2005 and will chair
the audit committee
in may 2005 jez maiden was appointed finance director at a date 
to be confirmed during the financial year ian ellis acted as head 
of finance and we are very grateful for his contribution
sean christie resigned as finance director by mutual consent 
on 22 october 2004 main board director howard sims resigned 
from the board on 30 june 2004 and retired from the company on 
31 december 2004 on 11 march 2005 we announced the appointment
of carol williams as company secretary following julian wild’s
departure from the business after 26 years our thanks go to sean
howard and julian for their services to the company
outlook
trading for the first seven weeks of the year is in line with our
expectations but clearly this is an early view in a fast moving 
and challenging market
i will shortly leave the company under the leadership of tony hobson
and pat o’driscoll and have every confidence in their ability to
achieve our plans and ambitions for northern foods and its customers
shareholders and employees we are building momentum towards 
a new northern foods
peter blackburn
chairman
1 june 2005
results
we have made significant progress on our journey of transformation
as we work to realise our potential as the supplier of choice to uk
and irish retailers in added value convenience foods
following a period of disappointing financial performance we began
the work of restructuring and refocusing the business in autumn
2003 the arrival of our new chief executive pat o’driscoll at the
end of march 2004 accelerated the pace in the last 12 months
a comprehensive strategic review of the business has taken place
a new management team has been established and a simplified
business structure and factory reorganisation has been implemented
further sales of noncore businesses have been made and the company
has moved to new headquarters in leeds the significant changes 
that we have made during the year have given northern foods a
sound platform from which to move forward
despite tough market conditions and difficult christmas trading
continuing sales grew at 20 per cent to £14161 million the
ambient division showed strong performances with continuing sales
up 75 per cent and continuing operating profit before goodwill
amortisation and exceptional items up 198 per cent to £315 million
results from the frozen division were broadly stable with continuing
operating profit before goodwill amortisation and exceptional items
held at £361 million the performance of the chilled division was
disappointing with continuing sales up 20 per cent but continuing
operating profit before goodwill amortisation and exceptional items
was down 192 per cent to £350 million
pretax profit
pretax profit before goodwill amortisation and exceptional items was
£802 million a reduction of 67 per cent against last year this resulted
in earnings per share before goodwill amortisation and exceptional
items of 1295 pence 2004 1377 pence pretax profit after goodwill
amortisation and exceptional items was £43 million compared to
£754 million last year resulting in earnings per share of 053 pence
2004 1278 pence operating exceptional items of £464 million included
£453 million relating to factory closures and group reorganisation
financial position
northern foods financial position remains sound and net debt remains
stable at £3333 million our business is characterised by strong 
cash flow over the next two years we will continue to address the
pension deficit and will bear exceptional cash costs associated with
the restructuring of the business however we expect to remain
comfortably positioned against our key measure of financial strength
– interest cover – throughout this period at the 2005 year end
interest cover before goodwill amortisation and exceptional items
was satisfactory at 46 times
analysed in the turnover and segmental analysis
northern foods plc chairman’s review 03
                  chief executive’s 
operating review
by taking fast decisive
action we are addressing 
the challenges of a difficult
operating environment 
and are shaping up to
compete as the market
becomes even tougher
04 chief executive’s operating review northern foods plc
pat o’driscoll
chief executive
     northern foods plc chief executive’s operating review 05
business review
as i outlined in our strategic business review in november 2004
northern foods has considerable strengths we have scale as one of
britain’s largest food manufacturers a reputation for quality products
wellinvested assets and skilled people we have leading market
positions in key growth categories together with strong own label
market shares and leading brands with our get fit programme 
we are now transforming the company to create an integrated
‘one northern’ business we have embarked on a threeyear
programme to make northern foods the supplier of choice to 
uk and irish retailers in added value convenience foods
market conditions
this year we faced tough trading conditions particularly in the
second half i believe that the trading environment will continue 
to be challenging with sales growth likely to be affected by more
cautious consumer sentiment and with retailers competing ever
harder for market share gains
sales
continuing sales were up 20 per cent at £14161 million underlying
sales excluding the impact of currency acquisitions divestments 
and the 53rd week last year grew by 27 per cent total underlying
growth with our top five retailers was around the same level strong
growth with tesco and asda was offset by slower growth with other
customers jointly with our largest customer marks  spencer
we have established a more structured categoryfocused relationship 
and also had some great success stories with products such as
melting middles chocolate puddings a star of their current advertising
campaign other highlights included new own label cake sales with
asda a new hot pies range with tesco taste the difference salads 
for sainsbury’s and chilled ready meals for morrisons in brands
the success of the creations seasonal biscuit range from fox’s 
and goodfella’s la bottega pizza have been notable
operating profit
operating profit before goodwill amortisation and exceptional items
was down 43 per cent at £1024 million with continuing businesses
showing a decline of 29 per cent
operating margin
our goal is to increase our continuing operating margin before
goodwill amortisation and exceptional items to 86 per cent by 2007
the operating margin before goodwill amortisation and exceptional
items for continuing operations was 72 per cent in 2005 satisfactory
results in ambient and frozen were offset by underperformance 
in chilled – driven by customer and category mix issues christmas
trading and some inflation underrecovery
ambient
the ambient division made good progress with continuing sales 
up 75 per cent and continuing operating profit before goodwill
amortisation and exceptional items up 198 per cent to £315 million
we continued to reap the benefits of last year’s integration of the fox’s
and elkes biscuit businesses fox’s branded products have outperformed
the market in all the business’s core sectors with yearonyear sales
growth of 111 per cent versus an industry growth rate of 10 per cent
within the seasonal sector the redesign of creations helped fox’s 
to outperform the market cake performance also improved due 
to new business wins and greater factory efficiencies
analysed in the turnover and segmental analysis
frozen
the frozen division delivered £361 million continuing operating
profit before goodwill amortisation and exceptional items and a 
105 per cent continuing operating margin before goodwill amortisation
and exceptional items this was despite a 22 per cent decrease 
in continuing sales mainly due to business losses resulting from
morrisons’ acquisition of safeway key to these results was rigorous
cost control and a tight operational focus the launch of premium 
la bottega pizzas helped maintain goodfella’s market leadership
chilled
the chilled division produced a disappointing performance with
continuing sales growing by only 20 per cent and continuing operating
profit before goodwill amortisation and exceptional items down 
192 per cent there were good results in products such as sandwiches
and pizzas but other categories including meal solutions and pastry
products failed to meet expectations our two factory closures and
new divisional structure were the first steps in addressing these issues
business transformation programme update
i am pleased with the progress of our get fit programmewe set clear
threeyear objectives for driving sales growth lowering costs to improve
efficiencies enhancing our commercial approach and developing 
an effective organisation and results are now beginning to appear
 simplified business structure
the reshaping of our business structure has gone to plan we have
consolidated 15 former operating companies into a more relevant
divisional structure ambient frozen and chilled in doing so
we eliminated a great deal of duplication removed a layer of
management and shortened and clarified reporting lines
 new operating board
we established an operating board comprising divisional and
functional directors in order to blend the business and specialist
expertise needed to address changing market demands in the process
we have made new functional appointments in human resources
supply chain technical commercial marketing and finance
an immediate benefit of our business restructure was the more
focused and streamlined approach to customer management
different parts of northern foods no longer talk to customers in
isolation and the benefits of better customer management are already
evident our new group commercial director will ensure we continue
to improve our approach
                        06 chief executive’s operating review northern foods plc
looking ahead
we have to accelerate the pace of change to meet our strategic
targets in an increasingly tough marketplace in the coming year 
we will therefore focus our efforts in two key areas driving sales
growth and reducing costs in the supply chain
sales growth remains critical and we will continue to target the
category and customer opportunities we identified in the strategic
business review constant innovation is also key and the appointment
of our group marketing director will help us to accelerate the 
pace and scope of new product development successful product
launches so far this year include a new count on us range supporting 
marks  spencer’s ‘eat well’ proposition
the performance of the chilled business is fundamental to the success
of our strategy in order to deliver improvement fast we need 
a streamlined effective and lower cost organisation in place
in may 2005 we therefore integrated our two chilled business units
into a single chilled division the move based on a detailed site
planning process will further remove duplication in our structure
lower business costs and help northern foods realise its growth
potential through more focused customer and consumer insight
in order to maximise the impact of the integration the divisional
director will be supported by the group supply chain commercial
marketing and technical directors
in conclusion although the year has been tough and results 
have suffered the changes under way are transforming northern
foods throughout the year our people have maintained their passion
for making outstanding food and giving excellent service to our
customers i do not underestimate the challenges ahead but i believe
our people have the will determination and the skills to make the
changes needed for success in a demanding industry i am proud of
their achievements to date and know that they will continue to help
northern foods realise its potential as we accelerate the pace of
change in 200506
in closing i would like to add a note of personal thanks to our retiring
chairman peter blackburn who has been an enormous strength in
recognising the need for change and enabling its delivery we all 
wish him every happiness in his retirement
pat o’driscoll
chief executive
1 june 2005
 factory restructuring completed
as we moved to rationalise our manufacturing capacity we announced
two factory closures in september 2004 one at evesham foods and
one at london road carlisle the process of closing these factories
took place with no disruption to production despite occurring at a
time which included the peak christmas trading period the closures
have allowed northern foods to transfer products to other sites and
so improve capacity utilisation i would like to thank the staff at both
sites but particularly those in carlisle who had to cope with major
flooding at the same time
 manufacturing excellence
we continued to improve our manufacturing efficiency offsetting
higher costs for labour raw materials and utilities through higher
productivity better utilisation of our capacity and better demand
planning companywide performance measures on key areas such 
as waste and labour utilisation were introduced to all sites and success
is already evident on one site we were able to halve waste levels in
just six months the lessons learned are being shared across the business
sap implementation at all northern foods sites and the upgrade 
to mysap have made it possible to monitor progress allowing us 
to compare manufacturing performance on a likeforlike basis
 procurement
we made good progress in working to capitalise on our scale as 
an integrated ‘one northern’ business our centralised procurement
team was established and made savings through a range of initiatives
such as eauctions while supplier conferences highlighted further
opportunities for improvement
in the year ahead we will accelerate the pace by consolidating our
supplier base using our scale as one of the largest purchasers of food
ingredients in the uk to achieve better terms and better standards 
of delivery and improving our overall supply chain efficiency this process
is being led by our newly appointed group procurement director
 people
in order to develop a ‘one northern’ culture characterised 
by leadership and accountability we revised our approach to
performance management and remuneration structure redesigned
our management information mi system and introduced 
companywide performance metrics we also initiated a leadership
development and training process to accelerate change in the business
and are committed to enhancing our employee communications
               northern foods plc chief executive’s operating review 07
what we’ve done
 by simplifying our structure we’ve
been able to sharpen our focus and
enhance customer relationships
 we launched a range of get fit
initiatives to reduce costs and
improve performance
 to measure our progress and build
accountability we introduced new
business reporting tools and linked
remuneration to reward 
what we said
 through a rigorous business review 
we identified the strengths and
weaknesses of northern foods
 we committed to drive sales
growth lower costs improve
efficiencies enhance our
commercial approach and 
develop our capabilities
 we set out clear threeyear targets
for growing our business and
becoming ‘supplier of choice’
 with good progress to date
we will accelerate the pace 
of delivery to meet our targets 
in tough market conditions
 we will sustain our efforts 
in managing our cost base and
streamlining our organisation 
whilst staying sharply focused 
on growing our sales
 in pursuit of our business ambition
we intend to be best in class
with products that excite our
customers worldclass supply 
chain management and 
outstanding employees
what
next
        our financial
position remains
satisfactory
despite difficult
trading conditions
ian ellis
head of finance
08 financial review northern foods plc
financial review
our financial position remains satisfactory despite difficult trading
conditions our business is characterised by strong cash flow over
the next two years we will continue to address the pension deficit
and will bear exceptional cash costs associated with the restructuring
of the business however we expect to remain comfortably positioned
against our key measure of financial strength – interest cover –
throughout this period at the 2005 year end interest cover before
goodwill amortisation and exceptional items was satisfactory 
at 46 times
sales
continuing sales were up 20 per cent at £14161 million underlying
sales excluding the impact of currency acquisitions divestments and
the 53rd week last year grew by 27 per cent total underlying growth
with our top five retailers was around the same level with strong
progress being made with both tesco and asda
ambient and chilled both showed continuing sales growth of 75 per cent
and 20 per cent respectively frozen showed a decline in continuing
sales of 22 per cent mainly because of changes in contracts resulting
from morrisons’ acquisition of safeway and lower promotional volumes
in our dalepak business
selling price increases of approximately 10 per cent are included 
in the above figures these were around 02 per cent below the level
of input cost inflation experienced within the year
operating profit
operating profit before goodwill amortisation and exceptional items
was down 43 per cent at £1024 million with continuing businesses
showing a decline of 29 per cent good performances were achieved
in both frozen and ambient but these were offset by a disappointing
result from chilled
continuing ambient operating profit before goodwill amortisation 
and exceptional items increased by £52 million to £315 million
a rise of 198 per cent this was achieved through cost savings
improved efficiencies and increased sales
continuing frozen operating profit before goodwill amortisation 
and exceptional items was held at £361 million with lower 
volumes being offset by improved efficiencies across the division
continuing chilled operating profit before goodwill amortisation 
and exceptional items was down 192 per cent at £350 million
relatively weak sales to our largest customer throughout the year
and a poor trading period in the run up to christmas affected
efficiencies and profitability overall efficiency levels were below 
our targets and cost inflation was not fully recovered
exceptional items
the group reorganisation and the proposed factory closures resulted 
in a £347 million posttax operating exceptional charge including
£11 million impairment of goodwill the resulting cash outflow was
£229 million these exceptional costs will continue into next year 
as we finalise the site closures and complete the group reorganisation
the losses on the sale of eden vale minsterley emile tissot and
cavaghan  gray seafood which have been treated as discontinued
operations were £259 million £61 million and £28 million respectively
the property at croydon and the office in hull were sold for net
proceeds of £136 million resulting in a profit of £93 million
the total posttax loss from the business and property sales was 
£221 million and included £293 million relating to goodwill
previously written off to reserves
analysed in the turnover and segmental analysis
             divestments and rationalisation
we realised proceeds of £346 million through the sale of the emile
tissot frozen foodservice business to dawn fresh foods limited on 
1 may 2004 the disposal of the eden vale minsterley fresh chilled dairy
products business to uniq prepared foods limited on 22 may 2004
and the disposal of the cavaghan  gray seafood chilled and frozen
fish business to ifp holdings limited a subsidiary of icelandic 
group plc on 4 november 2004
previously announced plans to close the evesham foods factory 
and the london road carlisle facility of cavaghan  gray during
2005 are on plan from both a cost and benefits point of view the
transfer of their production to other group factories will eliminate
unnecessary duplication and enhance plant utilisation and productivity
manufacturing ceased at the london road site on 31 march 2005 
and at the evesham site on 14 april 2005
 operating exceptional items
the cash outflow from the group reorganisation and the factory
closures was £229 million
balance sheet
the net result of trading capital expenditure acquisitions and
divestments led to a decrease in trading capital employed to 
£6594 million 2004 £6887 million net debt at the year 
end was £3333 million 2004 £3324 million ebitda interest 
cover before exceptional items was 75 times 2004 81 times
adding back goodwill previously written off our average invested
capital was £9012 million 2004 £9291 million the posttax return
on average invested capital roic before goodwill amortisation 
and exceptional items was 88 per cent 2004 92 per centwith the
weighted average cost of capital at 66 per cent we still achieved 
a healthy margin over the cost of funds
pensions
we believe that a defined benefit pension scheme is an important
benefit to our employees and is part of the remuneration package
offered to support the recruitment motivation and retention of high
calibre individuals having decided to maintain our final salary scheme in
2002 we increased contributions for all employees from 5 to 7 per cent
and removed a number of companyfunded early retirement provisions
for future service in march 2005 we announced the closure of the
scheme to new entrants and introduced pension builder a new defined
benefit scheme based on a career average principle
the latest full valuation of the final salary scheme was carried out 
as at 31 march 2002 using a marketbased approach the market
value of the scheme’s assets was £4499 million which represented 
95 per cent of the value of accrued benefits allowing for assumed
future increases in earnings the scheme is in the process of being
valued as at 31 march 2005
the fund is relatively immature with almost twice the level of
contributions going in as pensions paid out which leaves us able to
take a long term view of investment returns we continue to charge
pension costs against profits based on ssap 24 and the latest full
valuation of the scheme the variation credit due to the amortisation
of past surpluses reduces the pension charge by £07 million
pretax profit
pretax profit before goodwill amortisation and exceptional items 
was £802 million 67 per cent lower than last year after the
exceptional group reorganisation costs the losses on the sale of 
eden vale minsterley emile tissot and cavaghan  gray seafood the
profit on the disposal of croydon and the office in hull and goodwill
amortisation of £40 million there was a pretax profit of £43 million
compared to £754 million last year
t axation
the tax charge on profit before goodwill amortisation and exceptional
items for the year was 21 per cent 2004 18 per cent low irish tax
rates settlement of prior year items and tax efficient funding were
the main reasons for the difference between this rate and the basic
rate of uk corporation tax
earnings per share
excluding goodwill amortisation and exceptional items earnings 
per share fell 60 per cent to 1295 pence basic earnings per share 
fell to 053 pence 2004 1278 pence reflecting the inclusion of the
exceptional items from the group reorganisation the factory closures
and the losses on the business disposals
dividend
the total dividend for the year is 905 pence per share dividend 
cover before goodwill amortisation and exceptional items is 14 times
with the cash dividend during the year being £438 million
change in net debt
net debt was stable at £3333 million the key ratio to consider 
in evaluating our debt capacity is interest cover before goodwill
amortisation and exceptional items and this remained satisfactory at
46 times 2004 50 times ebitda interest cover before exceptional
items was 75 times 2004 81 times tight control of capital
expenditure was offset by higher working capital mainly caused 
by the movement in the pension prepayment of £339 million
this included the special pension contribution of £200 million
announced in march 2005 the movement in net debt is analysed below
2005 2004
£m £m
free cash flow 598 665
dividends 438 449
special pension contribution 200 –
cash outflow on exceptional items 229 49
net business disposals 335 182
exceptional asset sales 136 –
share buybacks 242 371
other cash flows 31 66
change in net debt 09 88
the change in net debt reflects the following items
 capital expenditure
we have held capital expenditure to a level below depreciation 
at £626 million going forward we will ensure tight control of 
this spend and keep it in line with depreciation within this spend
we have undertaken a number of strategic projects including the
completion of our installation of sap and the completion of our 
new pizza facility on the site of the former savoury foods factory 
in nottingham work is ongoing to open our new frozen pizza site in
ireland and a number of efficiency investments have been undertaken
across the group
northern foods plc financial review 09
                                            10 financial review northern foods plc
 currency
the group operates primarily in the uk forward foreign exchange
contracts and currency options may be used to hedge foreign
transactional cash flows accordingly any gains and losses on these
contracts are recognised in the profit and loss account when the
underlying transaction is settled to the extent that a forward foreign
exchange contract is not a hedge any resulting gain or loss is taken 
to the profit and loss account the group does not hedge against
translation and all significant derivatives require board approval
implementing international financial reporting standards
we are on schedule to implement international financial reporting
standards ifrs on 1 june 2005 we released a briefing announcement
on our corporate website indicating the major effects for northern
foods there is no cash impact and the indicative effects on profit
before tax goodwill amortisation and exceptional items for the year
ended 2005 are
2005
£m
pensions 15
convertible subordinated bonds 2
forward currency contracts 1
we will report under ifrs for the first time in the six months to
september 2005 and will release a restatement of our march 2005
figures under ifrs in early september 2005 under ias 19 we have
indicated a posttax pension deficit of £118 million which will appear
on the balance sheet of northern foods plc together with the reversal
of the posttax ssap 24 prepayment of £67 million
ian ellis
head of finance
1 june 2005
the net pension deficit under frs 17 is estimated to be £1166 million
down from £1557 million last year this reduction is as a result of the
growth in assets offset to some extent by the increase in liabilities
resulting from a lower discount rate it also reflects the £200 million
special contribution paid in march 2005 and the removal of the
remaining discretionary benefits in the scheme since the year end 
a further £200 million has been paid to the scheme to reduce the
deficit further
treasury management
the group has a centralised treasury function which operates within 
a policy framework approved and regularly reviewed by the board
the department is not run as a profit centre and is subject to internal
audit review its activities are routinely reported to the board the
purpose of the centralised treasury function is to manage the main
treasury risks including liquidity interest rates and foreign currency
while each business unit in the group is responsible for its own cash
management all resulting cash flows and balances are managed 
by the centralised treasury function to minimise borrowings and
interest costs
the main treasury policies are summarised below
 liquidity
the group operates a policy of maintaining certainty of funding 
by a combination of committed floating and fixed rate facilities
supplemented by uncommitted facilities the policy is to ensure 
that forecast net borrowings plus reasonable operating headroom 
are covered by committed facilities which mature at least 12 months 
after the year end
 bank facilities
the committed core of our funding arrangements is formed by 
long term facilities currently comprising a £4500 million fiveyear
revolving credit facility 2006 and a £913 million fixed rate bond 2008
short term funding requirements are met through a mix of committed
overdraft facilities of £230 million and other uncommitted short term
facilities of £670 million
 interest rates
the group manages its exposure to interest rate fluctuations on its
borrowings by operating with a mix of fixed and floating rate borrowings
the objective is to operate with fixed rate borrowings within a range
of 20 to 50 per cent of total borrowings over the medium term
although the group may operate outside that range during the year
board approval is required for use of interest rate derivatives and 
no interest rate derivatives are currently in place
                         board of directors
and company secretary
northern foods plc board of directors and company secretary 11
1
3
2
4
6
5
7
5 colin dyer 52 •†‡
joined the board in 1997 he is chief executive officer of jones lang
lasalle inc he was formerly chief executive officer of worldwide retail
exchange and former chief executive officer of courtaulds textiles plc
he chairs the audit committee
6 orna nichionna 49
•†‡
joined the board in 2002 she is a former partner of mckinsey  company
she is a nonexecutive director of bank of ireland uk holdings plc
bristol  west plc and bupa and is a trustee of the soil association
7 carol williams 47 company secretary
joined northern foods in 1990 she is head of the company’s legal
department and was appointed company secretary on 11 march 2005
she is a director of c i group services limited
in may 2005 the appointments of david nish 44 as nonexecutive
director and jez maiden 44 as finance director were announced
david nish is executive director infrastructure of scottish power plc
jez maiden was formerly group finance director of british vita plc
•
nonexecutive director

remuneration committee member
†audit committee member
‡nomination committee member
1 peter blackburn cbe 64 chairman •‡
joined the board in 2001 and became chairman in february 2002
he was previously chairman and chief executive of nestlé uk limited
he is a nonexecutive director of sig plc and compass group plc
and is a past president of the food and drink federation he chairs 
the nomination committee
2 anthony hobson 57 deputy chairman •†‡
joined the board in 2002 he is a nonexecutive director of hbos plc
sage group plc jlt group plc and glas cymru he was the group
finance director of legal  general group plc from 1987 to 2001
he chairs the remuneration committee
3 pat o’driscoll 46 chief executive
joined the board on 29 march 2004 she was previously retail vice
president of shell europe and prior to joining shell in 1997 she held
positions with leading uk retailers including safeway tesco and 
marks  spencer she was an independent director of assa abloy 
ab in sweden until 2004
4 matthew gribbin 47
joined northern foods in 1981 and has held a number of senior positions
within the northern foods group he joined the board in 2003 he is 
a council member of the federation of bakers he is chairman of
northern foods trustees limited
                          q

a
with the chief executive
pat o’driscoll answers questions on 
the changes and progress made in 
northern foods over the last 12 months
q can you outline the priorities for get fit
a our priorities in the short term are to improve performance 
in the chilled division with a simpler and leaner divisional structure
to lower overhead costs and to capture category and customer
opportunities we will also continue to leverage scale through 
central procurement and continuous improvement in manufacturing
q how long will it take when can we expect 
to see returns
a we are committed to a major business transformation over 
three years to 2007 we expect to see benefits coming through 
this year and accelerating next year as the changes gain momentum
q performance has been in decline for a number 
of years – is the turnaround achievable
a yes it is and the increasingly tough trading conditions mean 
we have to accelerate the pace of our get fit programme delivery
in our strategic business review we clearly identified our strengths and
weaknesses and now our energy is totally focused on implementing
the strategy for performance and improvement
q how will we know if it is working
a the signs of success are already visible in the many changes 
and innovations that are emerging tracking that progress is a key
component of the get fit programme and we have developed
management information tools which will help us identify successes
and measure performance against defined metrics
q the marketplace is getting tougher how will you
retain the savings that you expect from the get fit
initiatives and will you be able to invest in growth
a we will achieve this by accelerating the pace of delivery for sales
growth lowering competitive costs by improving our chilled performance
by pursuing efficiency gains and by building on our successes we are
continuing to invest in growth and in our customer proposition
q do you have the right management team 
in place now
a i am very pleased with the calibre of our restructured management
teamwe have a very strong group board and a dynamic operating board
which combines the right mix of business expertise and functional
excellence i am confident in the new management team’s ability 
to address the issues we face and achieve our business ambition 
at the pace our shareholders require
12 qa with the chief executive northern foods plc
               q northern has historically grown through
acquisition what are your plans in this area 
for the future
a we took the strategic decision to sell a number of businesses
where we did not have the scale to compete or where the business
was not focused on our key categories the approach has freed 
us up to focus with absolute clarity on transforming our current
business however we do recognise that a consolidating sector 
such as ours offers opportunities for acquisition we are therefore
receptive to acquisitions which would help us build or maintain
market leadership in categories that are important to us we will
consider each opportunity as it arises on the criteria of whether 
it enhances shareholder value
q how are you adding skills to northern foods
people to cope with the scale and pace of change 
it is facing
a the company is aligning people behind our ambition by asking
them to think and act in different ways – to challenge ideas identify
opportunities and accept that change is a constant there is a clear
responsibility on the management team to lead people through this
journey and provide them with the tools and coaching they need 
to succeed the get fit programme includes a number of specific
initiatives to support this need examples include the creation of
project working groups at site level to drive continuous improvement
the rollout of a leadership development programme and the
introduction of performancerelated remuneration it solutions are
also being harnessed to support change providing access to online
learning materials and best practice case studies everyone has
potential it is my responsibility to ensure it can flourish
q are there more major organisational 
changes to come
a an organisation that does not continually ask “how can 
we improve” is an organisation that will not lead the market
as we transform northern foods we will aggressively pursue 
the optimum operating model and the best people in the market
q how are you addressing the impact 
of business change on your customers
a our mission is to be the ‘supplier of choice to uk and irish
retailers in added value convenience foods’ and the integration 
of our business underpins the delivery of that mission by working 
as ‘one northern’ the company has been able to streamline its
commercial approach and manage key customer relationships more
effectively that in turn has let us identify new opportunities to
innovate and add value we are working hard to communicate the
rationale for changes and the positive responses we have received
indicate that we are on the right track during this period of business
transformation we need to ensure that our high reputation for quality
and delivery is not affected and we are keeping a careful eye on this
q what are your criteria for category focus 
and how will success be achieved
a our strategic business review highlighted consumer demands for
choice and convenience within our chosen categories we can provide
convenient added value meals snacks and treats we operate in
categories where we have strong market positions in either private
label or brands and we can use our manufacturing scale to achieve
competitive costs we are clear on the range of category and customer
opportunities we will target
q how are you reflecting the changing 
eating trends of consumers
a three dominant trends drive today’s consumer eating habits
convenience a desire for indulgence taste and quality and the
fulfilment of healthy eating goals northern foods wide range 
of meals snacks and treats provides choices in all three areas
we need to excel in what we do and will succeed by monitoring
changing food trends capturing consumer feedback and working
closely with our customers to adapt our ranges and develop new
products which support emerging trends
q can you describe ‘one northern’ – is it a brand
a ‘one northern’ is the term we use to describe our newly 
integrated approach to running our business it describes how 
we can address the market more powerfully as a single business
how we can capitalise on our scale and knowledge by centralising 
key activities and functions and how we can perform at pace by
planning as a single team and focusing our people on shared goals
over time we expect former operating company names to be replaced
with northern foods branding to reflect this management shift
we are committed 
to a major business
transformation 
over three years
northern foods plc qa with the chief executive 13
                  checking production quality
steven bakery operations manager
yum white chocolate  lemon mini muffins
sophie
enjoying crispy duck
becky and liberty
supplier
of choice
delivering
great 
taste
14 business review northern foods plc
          regimes the average consumer does not we recognised the business
potential of creating a biscuit range that was low in fat but still tasted
great officially low fat by fox’s was the result the range is designed
to help consumers make an educated choice about snacks with fat
content of less than 3 per cent and calories clearly indicated on every
pack the number of consumers buying into the brand has risen rapidly
during the year with purchases being made by more than 7 per cent of
households healthy biscuits are now the second largest biscuit sector
in the category with yearonyear growth of 10 per cent officially
low fat has massively outgrown the rest of the sector
building customer relationships
it was clear from the review that customers were seeking the
synergies that a better coordinated business could offer we know
retailers want suppliers that are quick to adapt in a fastchanging and
competitive market beyond the supply of great products and leading
edge innovation they want a collaborative approach to category
development detailed consumer insight and a mutual approach 
to reducing costs
the review showed that working with northern foods was previously
a complex proposition with multiple points of contact for the 
customer and a scattered approach to innovation we have therefore
organised our customer facing teams to make it easier for customers
to work with us we know from feedback that the approach is being
well received we also know that it is creating stronger customer
relationships and opening up new business opportunities for example
a client relationship with asda in the area of chilled savoury pastry
was shared with colleagues and resulted in a new business win for
fresh chilled cakes we are also working to develop our existing
‘category champions’ programme ensuring that our category knowhow
is translated into value added propositions for customers
the opportunities for northern foods are clear and we are focused 
on creating a powerful shared agenda with our customers in order 
to grow the business to its full potential
business review
this section describes how northern foods is pursuing its goal of
being ‘supplier of choice’ we look at four key areas our relationships
with consumers and customers our approach to category management
our capability within the business and opportunities for delivering
tighter cost control
the strategic business review carried out during the year confirmed
the inherent strengths of the business our scale our reputation for
quality our wellinvested assets and the skills and professionalism of
our people the report also confirmed that operating as a collection 
of small businesses meant we were failing to exploit our scale – activity
was fragmented and customer management was uncoordinated
meeting consumer needs
the review confirmed the quality reach and relevance of our
products social economic and demographic changes over the last 
10 years have transformed all our eating habits smaller households
busier lives the demand for choice fewer people able or willing 
to cook the decline of the family sitdown meal and more people 
taking foreign holidays are all factors influencing the kind of food 
that consumers want to buy as a result the convenience foods 
sector has outgrown the rest of the uk packaged food sector
as they juggle busy lives consumers are looking for food ideas which
are not only convenient but also satisfy their desire for indulgence
healthy eating and affordability northern foods is well positioned 
to support these needs
growth through innovation
these trends also play to the skills and capabilities of northern foods
not least our capacity to innovate our work in the healthy eating
sector of the business market demonstrates the point consumer
insight indicated that while some people want to follow rigid dietary
the strategic business
review confirmed that
northern foods has
considerable strengths
northern foods plc business review 15
             we start with the
advantage of a
strong and attractive
product range
16 business review northern foods plc
relevant products
translating superior insight into superior category positions is one 
of the challenges we are addressing at northern foods as we look 
to sharpen our competitive edge we start with the advantage of 
a strong and attractive product range – one that reflects the kind 
of foods that today’s consumers increasingly want to buy
with our expertise spread across three major areas of food production
frozen ambient and chilled the northern foods product portfolio 
of branded and own label products includes ready meals pies and
pastries pizza salads bread biscuits and cakes – a choice ranging from
savoury to sweet indulgence to healthier eating and snacks to meals
real category scale
northern foods operates in market categories which present strong
opportunities for growth compared to a 3 per cent growth for the
food market as a whole we are seeing an aggregated 5 per cent
growth rate in our core categories
within our own label business we enjoy strong market positions for
all our chosen categories with all the major retailers we have wide
and deep customer reach with key strengths in chilled savoury pastry
and ready meals and opportunities to build further on our positions
in other categories
our brands enjoy positions of strength we have market leadership 
in frozen pizza through our goodfella’s brand we are number one 
in premium biscuits through our fox’s brand and we have market
leadership in pork pies with our pork farms brand
focusing on our strengths
maintaining market position through continuous innovation and 
value delivery presents a major challenge for the entire sector
it is therefore critical to differentiate northern foods products 
in each category in which we operate
stronger focus on these chosen categories means getting out of 
those categories where we are not a scale player or where our business
is not focused on our primary uk and irish markets this approach 
drove the sale of the eden vale minsterley emile tissot and 
cavaghan  gray seafood businesses
driving growth through category development
at the same time we are applying ever greater rigour to our chosen
categories using market insight to improve performance for example
the goodfella’s brand team identified an opportunity to create a pizza
with broad family appeal in order to grow incremental sales in the
frozen pizza category
with the proposition ‘italian pleasure that brings your family together’
goodfella’s delicia is the most authentic stonebaked thin pizza in the
frozen market launched in 2003 the brand has captured an 11 per cent
market share – the highest in its sector
our sharper approach to category management has also meant that
we have been able to buck the trend in categories which are perceived
to be stable or in decline this ability was demonstrated with the
relaunch of creations a premium priced biscuit range from fox’s
the product is a seasonal one with a heavy reliance on the christmas
period fox’s recognised that creations was being bought to satisfy
different consumer needs and was often chosen as a gift accordingly
as part of an overall reformat of the product involving the introduction
of new biscuits and new pack design the company created a pack size
which was ideal for gifting backed by press and poster advertising
the relaunched range helped fox’s increase sales of creations by
nearly 40 per cent against an overall market segment decline of 
4 per cent it has also helped open up new commercial opportunities
including potential brand extensions
uk packaged food excludes fresh meat and fish
source tns euromonitor and northern foods estimates
            anticipating a steak  mushroom pie
nick
serving party food
broghan
creating new oriental dishes
dave development chef
delivering
great 
choice
northern foods plc business review 17
          decorating 700 cakes an hour
julie hand cake decorator
getting the deliveries organised
leroy distribution coordinator
lunch on the go with a bbq chicken wrap
marcus
delivering
great 
progress
18 business review northern foods plc
          during the year 
we set out to
simplify and streamline
our operations
northern foods plc business review 19
pursuing best practice and expanding our capability
during the year northern foods set out to simplify and streamline 
its operations the company moved from working as 15 smaller
operating companies to becoming an integrated business with 
a divisional structure focused on our core competencies of frozen
ambient and chilled food production the closure of two production
sites in evesham and carlisle allowed us to consolidate the production
of key product categories in the process
these structural changes have inevitably been painful but in our
pursuit of best practice they have been a fundamental part of the
process of focusing and aligning our operations and our people
continuous improvement
as we work to build capability a key area of focus has been the
pursuit of manufacturing excellence and this has been one of the
main get fit programme initiatives during the year a fivestep
approach to common standards and continuous improvement has
been established and the programme is benefiting from the greater
involvement of our employees
the success of the approach is best captured in the words of one 
of our factory managers “using daily reviews and action teams is
delivering real benefits to this site in terms of quantifiable results 
and an improved culture we started in the sleeveup and despatch
area and got people involved and working as a team and organising
the area so that it was a safer better place to work we tracked
improvements through daily reviews and basic key performance
indicators kpis the turnaround showed us what could be achieved
and we’ve now rolled out the process across the site persistent issues
are being tackled with action teams to ensure longer term benefits”
as we continue to raise operating standards we have also completed
a benchmark survey of all aspects of our supply chain we are now
responding to its findings through a process of detailed site planning
enabling exceptional performance
a major priority for the business is to capture value through 
the development of exceptional people processes and technology
we have started to see some great performances by motivating
developing and rewarding our leadership team to create a culture 
of continuous improvement we are working hard to infuse specific
leadership skills into the business adding edge to the considerable
knowhow that our people already have one tool to support this
process has been the introduction of a new leadership framework
which sets out several critical behaviour styles this is being underpinned
by the learning zone an online personal development tool which 
is being regularly accessed by our top managers
we also recognised that to build a winning culture characterised by
leadership and accountability rewarding people for success is key in
this context the development of a performancebased remuneration
policy was seen as a priority and this has been put in place for
implementation in 200506
technology will also play a key role in changing our business the
successful completion of the sap rollout and our update to mysap
during the year means that northern foods is now the only chilled
food manufacturer in the uk that successfully operates sap across 
its supply chain the challenge now is for northern foods to realise
the full benefit from this substantial investment
         the foundation we
established during the
year means we are in
better shape to perform
20 business review northern foods plc
managing our costs to optimise our performance
responding to the changing needs of consumers and the demands 
of retail customers has added complexity – and therefore costs – 
to the northern foods way of operating over the past few years
at the same time our decentralised business model resulted in 
an unacceptable level of overheads the inevitable increase in costs
resulted in disappointing financial performances a major priority 
for the get fit programme has therefore been to focus on areas
where we could reduce duplicate costs and manage processes and
operations in a more streamlined manner in order to achieve lower
overall costs
leveraging our buying scale
a notable get fit success has been our work in the area of
procurement where centralisation of the function has delivered some
impressive results under the guidance of new functional leadership
with specialist experience of procurement we accelerated our savings
by using our scale as one of the uk’s largest buyers of goods and
materials results are being achieved through a range of initiatives
including simplification of the buying process using sap data to 
speed up decision making and consolidating the number of suppliers
with which we work the use of online technology to create eauctions
has also been tested a range of savings has already been achieved 
in this area and the process has reinforced the benefits of our 
‘one northern’ buying scale
rigorous programme management
to drive the overall change process and ensure that cost savings are
realised we established a dedicated programme office using tight
project management disciplines this team has been specifically charged
with identifying productivity improvements for each of the get fit
initiatives progress will be tracked on a monthly basis allowing fast
corrective action wherever necessary and ensuring that success is
quickly identified and can therefore be shared across the business
measuring progress
a further important initiative in the year was the development and
implementation of our mi system which clearly defines groupwide
key results areas and associated kpis developed by the leadership
team these kpis have now been cascaded through the business and
provide a framework for focusing employees around key performance
metrics such as waste or labour savings the kpi metrics combined
with data from the mi system enable complete transparency of costs
across the business and are beginning to play a powerful role in
measuring our progress
based on the findings of our strategic business review we also carried 
out more planning during the year as we considered how further
significant cost reductions could be phased across the business this
analysis compared organisational structure against external best practice
and has now been translated into detailed site implementation plans
which charge the entire supply chain management team with
achieving greater savings
the strong foundation we have established during the year means 
we are in better shape to perform the changes being implemented
across the business provide northern foods with the platform we
need to achieve our strategic objective of building operating margin
by 100 basis points by 2007
            sharing roast vegetable tarts
the wright family
dunking a cookie at tea time
hazel
creating new christmas cake ranges
david tammie and john new product developers
delivering
great 
changes
northern foods plc business review 21
          responding to consumer eating trends
dounne snacking on a low fat cereal bar
supporting health  safety requirements
leroy tray cleaner
ensuring food safety
elizabeth food tasting panellist
delivering
on csr
22 corporate social responsibility review northern foods plc
          csr overview
fulfilling its corporate social responsibility csr commitments 
is one of the means by which northern foods can demonstrate its
leadership position in the food industry we have a longstanding
commitment to csr and recognise that we have a duty to all our
stakeholders including employees shareholders customers consumers
suppliers the wider community and the environment
while the company continues to fulfil its obligations we view the
shift in our business to an integrated organisation as an opportunity to
revisit and rescope our activities in this area and to establish common
targets for the business
to that end a new csr steering group chaired by a member of the
operating board has been set up to explore best practice review overall
csr objectives and assess risks and opportunities for the business
food safety
protecting consumers by ensuring the safety of the food we produce 
is a core requirement of the business and our central laboratory
services and site technical audit processes remain accredited to the
highest agreed international standards our systems of monitoring
performance at our sites at our suppliers and in our laboratories
allow us to assure food safety encourage continuous improvement
and react very quickly when food hazards such as sudan 1 arise in 
the food supply chain
because of our longestablished technical standards the introduction
of the general food regulations 2004 on 1 january 2005 with new
requirements for traceability within the food chain had no significant
impact on the business during the year we also centralised our 
riskassessed supplier audit programme and extended the activities 
of our food safety auditors to reflect new food standards agency fsa
guidelines an online training project was also initiated and is available
to employees through our intranet
northern foods plc corporate social responsibility review 23
we have a longstanding
commitment to corporate
social responsibility
food safety measures
site audits conducted
supplier audits
laboratory audits
trained in haccp 
hazard analysis and 
critical control points
trained in technical audit
200405
100
128
100
128
73
200304
100
108
100
101
108
comments
audits support the brc global
standards
suppliers audited on a riskassessed
basis
certified to northern foods
standards
a rolling process ensures 
multidisciplinary teams exist 
on all sites
another rolling process more than
330 people now trained
sudan 1
our food safety systems were put to the test in february 2005
when the sudan 1 issue emerged in 2003 surveillance data
identified the potential for sudan 1 adulteration of some chilli
powders and oils our database allowed us to identify potential
‘at risk’ suppliers and alert them to the possible hazard therefore
when the information about a problem began to emerge 
we were able to identify immediately which of our sites had
potentially received the worcester sauce containing sudan 1 
and alerted them to begin contingency planning as information
emerged about the specific batches affected we were able to
break the supply chain and successfully recall products in line
with our customers’ requirements the following day substitute
sources of vegetarian worcester sauce were already in use at 
our sites we cooperated throughout with the fsa so when 
the public alert was issued three days later action had already
been taken on all of our products as a result we minimised risk 
to consumers and the financial impact on our business
                 24 corporate social responsibility review northern foods plc
employee involvement and participation
in a rapidly changing business environment we recognise that
employee involvement and participation are key to maintaining a
motivated workforce considerable effort has been made to involve
northern foods people in continuous improvement activities there 
is an emphasis on improving communication and consultation both
within individual sites and across northern foods regular leadership
events and information cascades have been a feature of the year
ensuring that employees are informed about major business initiatives
an agreement between northern foods and employee representatives
confirmed that we have met our obligations under the information
and consultation of employees’ regulations 2004 the northern foods
national forum continued in the year and to reflect the new
organisation the company is extending this consultative approach 
by creating new divisional forums we also hold regular business
reviews with trade unions at national level to update them on
business performance
our commitment to employee consultations is producing benefits 
for the company and employees alike many innovative answers to
problems have resulted and more efficient ways of working have been
developed and implemented in addition the skills of our workforce
have grown as a result of significant investment in their training in
new techniques there are over 50 working groups now set up and 
we plan to increase this number significantly over the coming year
our commitment to adult education also continued through ongoing
support of learning centres which are in place at many of our sites
operating models vary but typically involve financial and resourcing
contributions from the company a local college and the onsite
union all helping to set up and resource a dedicated area for learning
the approach benefits both individuals and the company contributing
to improved employee participation and engagement
health and safety
northern foods continues its commitment to industry leadership 
in the area of health and safety and works hard to sustain a positive
health and safety culture thereby reducing the number of accidents
and associated absences health safety and risk management are
represented at the operating board and we continue to give clear
leadership and guidance to our sites through our dedicated health
and safety team the success of our approach has been recognised
externally during the year five sites secured occupational health and
safety awards from rospa four of these were gold awards and one
was a gold medal reflecting five years of continuous improvement
yearonyear performance has been maintained despite the major
business change programme now underwaywith a focus on continuous
improvement we have a system for auditing sites to identify major
priorities and create programmes to drive related improvements
slips and trips were identified as a major cause of injury for us and
the food industry as a whole we have therefore set specific targets
for reducing such accidents in the next financial year
environment
as a major food manufacturer northern foods is very aware of its
duty to protect the environment and recognises its role in supporting
long term environmental management initiatives during the year 
the company continued to enhance its environmental performance 
in line with its dual policy objectives of meeting legal obligations 
and assessing and managing environmental risks we continue to 
help shape the food sector environment agenda through liaison 
with the policy makers and the regulators
northern foods has exceeded the second energy efficiency 
target for the uk climate change levy agreement by an amount
equivalent to 11000 tonnes of carbon emissions saved it also met 
its obligations related to packaging waste and pollution prevention 
and control legislation
in anticipation of the full implementation in january 2006 of the
animal byproducts england regulations 2003 northern foods – 
with the help of the chilled food association – has continued to 
work with defra and the waste management industry to improve 
the infrastructure for the treatment of waste containing animal 
byproducts
health  safety 
performance measures
minor accidents
reportable accidents
major injuries per 
1000 employees
reportable accidents 
per million hours worked
days lost due to accidents
200405
5618
472
092
112
10335
200304
6509
541
075
123
11128
comments
a 14 decrease priority 
areas are slips manual handling
and being struck by objects
a 13 reduction for accidents 
a disappointing increase but 
well below the food industry 
average of 30
9 decrease versus an industry 
average rate of 145
a reduction of 7
employee teamwork drives continued improvement
a key part of the manufacturing excellence programme has 
been the creation of working groups to bring the initiative 
to life and to gain the feedback and support of our employees
through the use of daily reviews and kpi tracking the sites are
able to monitor progress and identify areas for improvement
the approach is already delivering financial dividends for example
one team achieved a 40 per cent saving by focusing on how to
reduce waste on their pizza line importantly the approach is also
driving employee involvement in the words of one of our factory
managers “people now have ownership and feel accountable 
for the changes taking place recognition of a job well done 
has been an important part of the transformation”
reducing rackrelated accidents
one of our sites recognised that a high number of its accidents
were associated with the manoeuvring of racks steps to identify
a better designed castor were taken in conjunction with a supplier
and the health  safety laboratory the successful trial delivered 
a reduction in rackrelated accidents over a twoyear period from
41 per cent to 17 per cent
                     northern foods plc corporate social responsibility review 25
community involvement and charitable giving
northern foods has an active policy of supporting local community
projects and international charities during the year we donated
£273000 2004 £291000 in cash to charities and voluntary groups
both in communities where we operate and in the wider world
donations remained steady as a proportion of operating profit
our main focus is on disadvantaged groups close to our manufacturing
sites and we have made donations to many charities to help the
homeless the unemployed young people suffering exclusion ethnic
minorities exoffenders and others we also support educational
projects in local schools and universities either in cash or in kind
through employee involvement in activities such as individual mentoring
northern foods is part of a global supply chain and we recognise 
our responsibility to help the global community we are one of 
oxfam’s longest standing corporate partners and we continued that
support in the year by donating £30000 towards its policy and
advocacy work the company also pledged £50000 to support the
creation of two child orphanages in southern india and sri lanka
following the tsunami disaster our manufacturing sites have raised 
a further £12000 towards the appeal through local employee
fundraising activities
ethical procurement
northern foods is one of the uk’s leading buyers of raw goods 
and materials we source products globally in line with broadening
consumer tastes and the requirement to purchase at the best 
price available
the ethical dimension of our procurement strategy is becoming
increasingly important we need to satisfy growing stakeholder
interest about safe and sustainable sourcing and protect the
employment conditions of the people who produce the goods 
that we buy the recent appointment of a new group director 
of procurement will deliver progress in this area
the process of centralising our procurement function has meant 
that progress in registering with sedex a secure webbased system
for companies to maintain data on labour standards at production
sites has been slower than anticipated to date16 northern foods
sites are registered and 11 have completed the required self assessment
prior to initiatives currently underway to reduce our overall supplier
numbers 24 northern foods suppliers were registered on sedex
we have set a target for all sites to register with sedex by the 
end of 200506
through the northern foods farm assurance policy first published 
in 2000 we continued our commitment to ensuring standards 
of animal welfare through the supply chain
addressing consumer needs
three trends dominate today’s consumer eating patterns convenience
a desire for indulgence taste and quality and a desire for healthy
eating our range of meals snacks and treats provides choices in 
all three areas
at the same time the government through its health of the nation
white paper is seeking to address predicted rises in health provision
costs relating to unhealthy lifestyles reducing the salt sugar and fat
content of prepared food is high on the agenda alongside labelling
diet and lifestyle education it is clear that northern foods as one 
of the uk’s leading food manufacturers has a role to play in shaping
the debate and in effecting change we achieve this in three ways
through the government through consumers and through retailers
firstly we continue to work with government and other interested
parties both directly and via our membership of the food  drink
federation the chilled food association and the federation of bakers
we are actively working to reduce salt in products in line with the
fsa targets and the fsa has acknowledged our leading contribution
to this work we have been invited to contribute to setting targets 
for salt reduction in other food categories
secondly we are working to develop products which satisfy consumers’
healthy eating goals and fulfil targeted reductions good sales of our
officially low fat range prove that you can achieve both objectives –
the range contains less than 3g of fat per 100g which constitutes 
low fat according to the official view of the fsa range extensions 
are planned in 200506
with much of our business in own label our activity on salt sugar
and fat reduction generally takes place in conjunction with our
customers who are equally aware of the health debate our third 
area of focus is therefore to work closely with them to develop new
products that reflect both changing tastes and regulatory pressures
addressing fsa sodium targets
in october 2004 a crossfunctional team in the frozen division was
set up to address fsa sodium targets using pizzas as its model
the company looked at each individual key component in the
recipe – pizza bases sauces cheeses and meats – for opportunities
to reduce sodium the team identified that reduced sodium pizza
bases cheeses and meats could be developed with a low sodium
yeast extract in the pizza sauce consumer desire for salt and
savoury flavours could still be satisfied development is complete
and the new reduced sodium ingredients are now ready for
implementation overall the effect on finished products should
be a 20 per cent reduction in sodium
          26 report of the directors northern foods plc
the directors of northern foods plc present their annual report and
the audited accounts of the company for the year ended 2 april 2005
principal activities and business review
northern foods plc is one of the uk’s leading food producers providing
own label and branded products to retailers this report should be
read in conjunction with the chairman’s review the chief executive’s
operating review the financial review and the business review which
together include information about group activities the financial
performance during the year and likely developments
registered office
the company’s registered office changed with effect from 
28 february 2005 when its new corporate headquarters opened in
leeds the new address is shown in the company information section
on page 69
results for the year
pretax profit before goodwill amortisation and exceptional items 
was £802 million 2004 £860 million after the exceptional group
reorganisation costs the loss on disposal of businesses the exceptional
profit on the sale of fixed assets and goodwill amortisation there was
a pretax profit of £43 million 2004 £754 million
dividend
an interim dividend of 335 pence per share was paid on 24 march 2005
and the directors recommend a final dividend of 570 pence per share
to be paid on 26 august 2005 to shareholders on the register on 
29 july 2005
directors
the following were directors of the company during the year
p h blackburn
m s christie resigned 22 october 2004
c dyer 
m t gribbin 
a j hobson 
o g nichionna 
p a o’driscoll 
h r sims resigned 30 june 2004
nonexecutive directors
directors’ biographical details are set out on page 11
p h blackburn will retire as chairman following the company’s 
annual general meeting in july 2005 and a j hobson will take 
over as chairman from that date
two new appointments to the board will be made d nish will join
the board as nonexecutive director on 1 july 2005 and will also chair
the audit committee j maiden has been appointed finance director
and will join the board on a date to be agreed a resolution proposing
the election of d nish will be put to a shareholder vote at the annual
general meeting
in accordance with the company’s articles of association c dyer
m t gribbin a j hobson and o g nichionna retire and being eligible
offer themselves for reelection the chairman confirms that following
formal evaluation the performance of all the retiring directors
continues to be effective and that they continue to demonstrate
commitment to their roles on the board and the board committees
c dyer has been a nonexecutive director since 1997 by the end 
of the 200506 financial year he will have served for nine years as 
a nonexecutive director since his first election by shareholders the
board has unanimously agreed that his knowledge and experience
remain invaluable to the business particularly at this time of major
change and firmly believes that his judgement and independence 
will not be affected by his continuing in office the board considers
therefore that c dyer remains an independent director
the executive directors’ service contracts including that of m t gribbin
the retiring executive director are referred to in the directors’
remuneration report the executive directors’ service contracts 
are terminable by the company giving one year’s notice
details of the remuneration of individual directors and of the
remuneration strategy approved by the board are included in the
remuneration report for the year ended 2 april 2005 set out on pages
31 to 40 a resolution will be proposed at the annual general meeting
to receive and adopt the 200405 remuneration report
the interests of the directors in the share capital of the company at
the year end are shown in the directors’ remuneration report other
than service contracts no director has a material beneficial interest 
in any contract to which the company or any of its subsidiaries
was a party during the year
company secretary
with effect from 11 march 2005 the board announced that julian wild
would cease to be company secretary carol williams head of the
company’s legal department was appointed to the position of
company secretary from that date the change was made following
the relocation of the company’s headquarters to leeds from hull
where julian wild had served the business for 26 years
employees
northern foods takes its responsibilities to its employees seriously
it is committed to equality and opportunity and aims to treat all 
of its employees fairly in every aspect of employment it is committed
to giving employees the opportunity to maximise their potential
employee share schemes
the company operates savingsrelated and executive share option
schemes reference to which is made under the share capital 
section below
share capital
the company was granted authority by shareholders at the annual
general meeting on 22 july 2004 for a share buyback programme 
of up to 10 per cent of its equity the latest programme started 
in july 2004 and a total of 10530000 ordinary shares have been
bought back under that authority and are being held in treasury
report of the directors
                      northern foods plc report of the directors 27
during the financial year a total of 15580000 shares were acquired
at a cost of £242 million since the programme started in february
2000 a total of £1678 million has been returned to shareholders
through buybacks
on 17 december 2004 options over 2313123 ordinary shares were
granted under the company’s executive share option scheme at a price
of 16967 pence per share
options have been exercised under the company’s executive and
savingsrelated share option schemes during the year as a result
participants in these schemes were allotted 2056542 new ordinary
shares in that period
unallotted shares outstanding under the above schemes at the year
end were 14155626 from 3 april 2005 to 1 june 2005 173639 
new ordinary shares have been allotted on the exercise of options
substantial holders of stock
the directors have received notification of an interest of 3 per cent 
or more in the issued share capital of the company from the following
axa sa 1102 per cent
sprucegrove investment management ltd 710 per cent
grantham mayo van otterloo  co llc 403 per cent
royal bank of scotland group plc 321 per cent
legal  general investment management limited 305 per cent
disposals
the following disposals took place in the year and are also referred 
to in the chief executive’s operating review and the financial review
 on 1 may 2004 cavaghan  gray group limited sold its 
emile tissot frozen foodservice business to dawn fresh foods 
for £35 million in cash less associated costs of £02 million
 on 22 may 2004 convenience foods limited sold its eden vale
fresh chilled dairy business to uniq prepared foods limited for 
£189 million in cash less associated costs of £04 million
 on 4 november 2004 northern foods plc sold its cavaghan  gray
seafood chilled and frozen fish business to ifp holdings limited
a subsidiary of icelandic group plc for £129 million in cash less
associated costs of £01 million
corporate social responsibility
the corporate social responsibility review on pages 22 to 25 gives
details of northern foods commitment to food safety health and safety
the environment employee involvement and participation consumers
community involvement and charitable giving and ethical procurement
charitable donations
during the year the group donated £273000 for charitable purpose
donations for the previous financial year totalled £291000 there were
no political contributions
supplier payment policy
it is the company’s policy that payments to suppliers are made 
in accordance with the terms and conditions agreed between the
company and its suppliers provided that all trading terms and
conditions have been met suppliers are paid on average within 
38 days 2004 32 days of receipt of invoice
annual general meeting
the notice convening the company’s annual general meeting to 
be held at 1000 am on thursday 21 july 2005 is contained in the
circular sent to shareholders with this report shareholders are asked
to note the change of time and venue
the board regards the annual general meeting as an opportunity 
to communicate directly with private investors it is attended by 
all board members shareholders are invited to ask questions and 
are able to meet the directors informally separate resolutions are
proposed on each substantially separate issue and the number 
of proxy votes cast for and against each resolution as well as the
number of votes withheld are announced to the meeting following
voting by a show of hands a poll would be called on any resolution
where it was appropriate or required the company offers an electronic
voting capability to investors
going concern
the directors have prepared the financial statements on the going
concern basis consistent with their view formed after making
appropriate enquiries that the group has adequate resources 
to continue in operational existence for the foreseeable future
auditors
deloitte  touche llp have expressed their willingness to continue 
in office as auditors of the company and a resolution proposing 
their reappointment will be submitted to the company’s annual
general meeting
corporate governance
compliance
northern foods is committed to high standards of corporate
governance the company has complied throughout the year with 
the provisions of the july 2003 frc combined code on corporate
governance the combined code and the associated turnbull
guidance as annexed to the listing rules
directors’ responsibilities for preparing the accounts
united kingdom company law requires the directors to prepare
accounts for each financial year which give a true and fair view 
of the state of affairs of the company and the group and of the 
profit or loss for that period
in preparing those accounts the directors are required to
 select suitable accounting policies and then apply them consistently
 make judgements and estimates that are reasonable and prudent 
 state whether applicable accounting standards have been followed
subject to any material departures disclosed and explained in 
the accounts
the directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the company and the group and enable them to ensure
that the accounts comply with the companies act 1985 they are
also responsible for safeguarding the assets of the company and the
group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities
the directors confirm that the accounts comply with the above
requirements
                         report of the directors
continued
the board
the board determines the strategic direction of the company and
reviews its operating and financial position the board has a formal
schedule of matters specifically reserved for it which can only be
amended by the board itself and which is reviewed annually
these matters include responsibility for approving overall group
strategy and financial policy board membership and board committees
acquisitions and divestments and major capital expenditure the
schedule of matters reserved to the board together with the terms 
of reference of the board committees are available on the company’s
website senior executives below board level are periodically invited
to attend board meetings to make presentations on their areas 
of responsibility
the board aims to hold one or more meetings each year at an
operating location appropriate training including social environmental
and ethical issues is available to all directors on an ongoing basis
the board of directors met ten times in the year all directors attended
every board meeting during the year except that a j hobson was
unable to attend one meeting the chairman also held other meetings
with the nonexecutive directors without the executives present
chairman and chief executive
there is a clear written division of responsibility between the
chairman and the chief executive the chairman is responsible 
for leadership of the board setting the agenda and ensuring its
effectiveness he is also responsible for ensuring that the directors
receive accurate timely and clear information and for effective
communication with shareholders the chief executive is responsible
for operating the business and implementing the board’s strategies
and is supported in these matters by the operating board
directors
under the company’s articles of association all directors are subject to
reelection at intervals of no more than three years the nonexecutive
directors stand for reelection each year
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 they have
access to all information regarding the company the advice and
services of the company secretary whose appointment and removal
may only be effected with the approval of the board and as required
may obtain external advice at the expense of the company their
remuneration consists only of fees upon appointment they receive a
range of information about the company and an induction programme
is arranged including site visits
it was announced on 28 february 2005 that p h blackburn would
step down as chairman on conclusion of the annual general meeting
in july he will be succeeded by a j hobson currently deputy chairman
and senior independent director c dyer will then become 
deputy chairman and o g nichionna will become senior
independent director
succession planning is a clear priority for the board the succession 
of p h blackburn by a j hobson as chairman of the company was
part of this planning the decision was unanimously approved by 
the whole board
appointments to the board are the responsibility of the full board 
on the recommendation of the nomination committee new executive
directors have a formal induction programme the board and directors
are subject to annual appraisal
board performance evaluation
the performance of the board and its principal committees was again
evaluated during the course of the year for consistency the approach
was largely the same as in the previous year obtaining completed
detailed questionnaires from all board members analysing these
responses and providing opportunity for directors to comment in
their own words on any issues not directly covered by the questionnaire
the outcome was discussed with individual directors by the chairman
and then by the board as a whole with progress on particular issues
from the previous year noted a j hobson as deputy chairman 
and senior independent director conducted an evaluation of the
performance of the chairman as previously which was discussed 
with other board members when the chairman was not present
board committees
there are three committees of the board each of which has written
terms of reference which define the role and responsibilities of the
committee and which are reviewed annually
 audit committee
the audit committee comprises c dyer chairman a j hobson and 
o g nichionna it met four times in the year attended by all members
a j hobson has significant recent and relevant financial experience
c dyer will resign as chairman of the audit committee and will be
succeeded by d nish when he joins the board as a nonexecutive
director on 1 july 2005
the committee meets with executive directors and management 
as well as privately with both external and internal auditors
the committee
 reviews and advises the board on the company’s interim and
annual financial statements its accounting policies and the 
content of its financial and business risks 
 reviews the nature and scope of the work to be performed by 
the internal and external auditors the results of that work and
management’s response
 makes recommendations on the appointment and remuneration 
of the external auditors and the policy for the provision of nonaudit
services by the external auditors
 oversees and reviews the company’s policy on ‘whistleblowing’
which provides for confidential disclosure by staff without fear 
of reprisal
28 report of the directors northern foods plc
                 the audit committee keeps under review the independence and
objectivity of the inhouse internal audit function and external 
audit and reviews the nature scope and findings of internal audit
the auditors report to the directors and the audit committee on 
the actions they take to comply with professional and regulatory
requirements and on best practice required to ensure their independence
nonaudit services to the group are awarded to providers with the
appropriate experience who offer the service at a competitive rate
this is in accordance with the policy laid down by the audit committee
which restricts the use of the company’s external auditors if the
nature of the work could present a threat to their independence
the terms of reference of the committee are available on the
company’s website
 remuneration committee
the remuneration committee comprises a j hobson chairman
p h blackburn c dyer and o g nichionna it met six times in the
year attended by all members except on two occasions when c dyer
was unavailable and establishes board policy in respect of all terms 
of employment for executive directors the directors’ remuneration
report can be found on pages 31 to 40 and the terms of reference 
of the committee are available on the company’s website
when a j hobson succeeds p h blackburn as chairman in july 2005
he will resign from the remuneration committee which will then be
chaired by o g nichionna a j hobson will attend the committee
meetings by invitation as a j hobson has been chairing the
committee for three years he has a great depth of knowledge of
remuneration matters inside northern foods which the company
would like to be available to the new chair
the chairman is responsible for the appraisal of the performance 
of the chief executive and this is an integral part of the role of the
remuneration committee
the role of the committee is to determine the broad policy and
framework for the remuneration of executive directors and senior
managers the committee also determines the nature and scale 
of incentive performance arrangements that encourage enhanced
performance and which reward individuals in a fair and responsible
manner for their contribution to the success of the business in setting
the remuneration policy for executive directors and senior managers
the committee also takes into account the reward policies for
managers generally
 nomination committee
the nomination committee comprises p h blackburn chairman
c dyer a j hobson and o g nichionna on the retirement of 
p h blackburn a j hobson will chair this committee the committee
meets as required to review the structure size and composition 
of the board following the appointment in may 2005 of a new
finance director and nonexecutive director the board will consist of
three executive directors and four nonexecutive directors and this
will be kept under regular review
the nomination committee selects and recommends suitable
candidates for appointment as directors of the company after
evaluating the balance of skills knowledge and experience on the board
the committee also monitors the need for succession planning and
makes recommendations accordingly
the committee met twice in the year attended by all members 
and commenced a thorough search for a new finance director and 
an additional nonexecutive director to replace a j hobson when 
he succeeds p h blackburn as chairman following the annual general
meeting in july 2005
the terms of reference of the committee are available on the
company’s website
relations with shareholders
the board attaches great importance to maintaining good relationships
with all shareholders who are kept informed of significant company
developments presentations are made of the interim and preliminary
results briefings are given to analysts and other meetings to discuss
company direction are held with institutional shareholders on 
a regular basis
the chief executive and the head of finance were closely involved in
investor relations and reported back to the board the views of major
shareholders investor meetings are arranged through the company’s
broker ubs investment bank the chairman the senior independent
director and other nonexecutive directors are available to meet
major shareholders whenever necessary and regularly do so the
senior independent director is available to shareholders to address
specific concerns
operating board
northern foods operating board met monthly and was responsible 
for the management of the group chaired by the chief executive
it comprises the divisional directors and functional directors
internal control and risk management
the board has overall responsibility for the group’s system of internal
control which covers all aspects of the business this includes financial
operational compliance control and risk management the board 
sets policies and seeks regular assurance that the system of internal
control is operating effectively
whilst the directors acknowledge their responsibility for the system
of internal control any such system can provide only reasonable
and not absolute assurance against material 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 as follows
northern foods plc report of the directors 29
             report of the directors
continued
 background
the risk culture in the group is based on a local flexible response to
business issues short lines of communication ensure a rapid upward
information flow this culture has developed from the nature of the
business focused as it is primarily on short shelflife foods
the operating board provides topdown strategic inputwhere formality
is necessary for example on food safety finance or health and 
safety matters then policies and procedures are in place to ensure
business conformity
the following summarises the way the group assesses and mitigates risk
 policies
the board sets policy over key areas of risk which are applicable to 
all business units dealing with controls over food safety accounting
treasury capital expenditure health and safety human resources 
and information technology
 group organisation and controls
the structure of the group was changed in june 2004 with the
creation of a new operating board comprising the chief executive
heads of the operating divisions and functional directors with 
groupwide responsibilities
there are clearly defined lines of authority and accountability and
established policies and procedures reviewed annually for all significant
aspects of the business there is a clear business process for the
identification evaluation and mitigation of hazard and risk
each division prepares detailed annual budgets and strategic plans
which are reviewed and updated on a regular basis weekly and
monthly accounts are prepared for each business unit and performance
is monitored against the original and any updated budget the group’s
operating board meets on a formal basis each month to review
divisional performance
during the year the board established a capital committee the
responsibilities of which are to set capital expenditure policy to
oversee the capital expenditure planning and budgeting process and
to approve capital expenditure up to an agreed level delegated from
the full board the capital committee meets on a bimonthly basis
the business units are supported by a corporate management resource
and by specialist central functions these specialist functions which
provide the technical skills to supplement the business units’ own resource
and provide assurance over the major areas of risk are as follows
 internal audit reviews the standard of internal financial control 
and the accuracy of financial reporting through a rolling cycle 
of audit visits under a programme of activity approved by the 
audit committee
 technical services provides risk management in the areas of food
safety food quality fire prevention and approval of contractors
providing building engineering and professional services
 food technology assesses and approves raw material suppliers
audits the quality management systems in the group provides
guidance on compliance with foodrelated and environmental
legislation sets technical standards and offers expertise on a 
wide range of food science and technology
 engineering sets standards for building construction and fire risk
management maintains a database of approved contractors
provides an expert consultancy for the acquisition management
and disposal of physical assets as well as assessing and approving
suppliers of capital equipment and nonsaleable revenue items
 health and safety provides professional advice on best practice 
and also audits health and safety procedures
 legal provides and obtains advice on a full range of legal issues
across the group and ensures good title to properties and 
intangible assets
 insurance provides adequate cover for major losses with appropriate
levels of deductible through a group programme with external
insurance brokers this cover is reviewed and negotiated annually
 human resources through its management resources review
ensures the adequacy of existing management and plans succession
 procurement identifies and manages key suppliers on a 
groupwide basis
the audit committee oversees both internal and external audit
procedures and monitors executive response to any significant 
control issues raised
the company regularly evaluates social environmental and ethical
see risks and ensures that there are effective systems in place 
for managing such risks information on see risks and opportunities 
for company value is provided in the corporate social responsibility
review on pages 22 to 25
 review process
the management of business risks continues to be an essential 
part of ensuring that the group and each business unit meets its
objectives and delivers value for shareholders
the formal process for reviewing business risks has been embedded 
in the budget process each business unit is required to carry out 
a formal review to assess business risks in terms of impact and
likelihood and the controls in place to manage those risks divisions
are required to formulate action plans where appropriate to improve
controls progress of these plans is reviewed by the operating board
and the internal auditors
the board is therefore able to confirm that there is an ongoing
process for identifying evaluating and managing the significant 
risks faced by the group that it has been in place for the year under
review and up to the date of approval of these accounts and that it 
is regularly reviewed by the board and accords with turnbull guidance
divisions and specialist functions report by exception on any matters
arising during the year to the monthly meetings of the operating
board the results of the formal half yearly reviews are taken forward
to the audit committee
by order of the board
carol williams
company secretary
1 june 2005
30 report of the directors northern foods plc
               directors’ remuneration report
1 introduction
the board has prepared this report in accordance with the requirements
of schedule 7a to the companies act 1985 the report also meets 
the relevant requirements of the combined code annexed to the
listing rules issued by the financial services authority and is prepared
to the accounting year end of 2 april 2005
this report to shareholders sets out the remuneration policy and explains
the policy under which our executive and nonexecutive directors and
management team were remunerated for the year ended 2 april 2005
it also provides details of the salary incentives share and pension
interests of all the directors for the year a resolution to approve the
report will be proposed at the annual general meeting of the company
the auditors are required to report to the company’s members 
on the audited element of the directors’ remuneration report and 
to state whether in their opinion that part of the report has been
properly prepared in accordance with the companies act 1985
2 remuneration committee
the remuneration committee is a committee of the board and the
members during the year were a j hobson chairman p h blackburn
c dyer and o g nichionna there were six meetings during the year
and with the exception of c dyer who missed two meetings all the
members attended all the meetings at the invitation of the chairman
of the committee the chief executive and group director of hr attend
committee meetings to provide background and context on matters
relating to executive remuneration but do not attend when their 
own remuneration or contracts are discussed
the role of the remuneration committee is to approve implement
and keep under review the remuneration policy and practice of the
group and specifically to
 agree with the board the framework and the value of remuneration
of executive directors and senior managers
 agree the terms of the executive directors’ service contracts 
and remuneration
 determine the nature and scale of long and short term performance
incentive arrangements that encourage enhanced performance 
and reward individuals in a fair and reasonable manner for their
contribution to the success of the group
in undertaking this role the committee considers remuneration policy
and rewards across the company and not just at board level
no director plays a part in any discussion about his or her pay the
remuneration committee has been formally delegated the authority
by the board to establish policy in respect of all terms of employment
for executive directors
the board believes that a properly constituted remuneration committee
is essential in establishing a system of remuneration which clearly
aligns the interests of executive directors and senior managers with
those of shareholders and links incentives for executives and other
managers to improvements in the absolute performance and relative
competitiveness of the company the committee’s terms of reference
are published on the company’s website
3 advisers to the remuneration committee
hewitt bacon  woodrow has continued to provide advice to the
committee on matters of remuneration policy during the year has
been scheme actuary to the northern foods pension scheme and
provides advice to the company on general remuneration matters
the committee saw no conflict in the nature of the services provided
to the committee
the committee appointed dla to advise on matters relating to
directors’ contracts dla also provides specific employment law
advice to the company
in determining directors’ remuneration for the year and in considering
proposals for the future the committee consulted p a o’driscoll
chief executive and n pickavance group director of hr the secretary
to the committee from april to september 2004 was e cockburn
personnel executive and from october 2004 was r cooper director
performance  reward both of whom also provided information on
pay practice in respect of executive directors and senior management
4 remuneration policy
to deliver its objective of creating real increases in shareholder value
relative to its peers the company needs to attract and retain the most
capable and committed people and create the right employment
conditions and reward opportunities for them
the company’s remuneration policy is designed to support the
recruitment motivation and retention of high calibre employees
remuneration is considered within the context of the sector of which
the company is a part and with which the company competes for
talent within the geography in which it operates employing people 
in the uk and ireland this sector includes uk food producers
uk divisions and subsidiaries within fmcg
following the appointment of p a o’driscoll as chief executive the
committee has completed a strategic review of its remuneration policy
the objective was to ensure that the remuneration of executive
directors and senior executives is directly linked to the delivery of
strategic objectives that are closely aligned with the interests of
shareholders the get fit agenda which describes our business strategy
is set out earlier in the chief executive’s operating review the policy
for 200506 includes the introduction of differentiated rewards according
to performance based on the introduction of rigorous individual
performance measures against the delivery of these strategic objectives
the new policy reflects the change from smaller autonomous
operating companies to a ‘one northern’ corporate structure
the policy continues to reward employees at the relevant midmarket
level for ontarget performance whilst delivering competitive rewards
for outstanding performers with a package designed to align their
interests with those of shareholders in the case of senior executives
this includes a reasonable proportion of total remuneration being
dependent upon individual and group performance the policy 
for directors is described in more detail below
northern foods plc directors’ remuneration report 31
           directors’ remuneration report
continued
5 remuneration policy for nonexecutive directors
nonexecutive directors are appointed for an initial term of three
years with the expectation that subject to satisfactory performance
they will be invited to serve a second and third threeyear term
the dates of the chairman’s and current nonexecutive directors’
letters of engagement the date on which their appointment took
effect and the current expiry dates are as follows
date of effective date expiry date
commencement of current term of current term
p h blackburn 13 nov 01 1 feb 05 31 jan 06
c dyer 1 jan 97 28 may 05 28 may 08
a j hobson 28 may 02 28 may 05 28 may 08
o g nichionna 28 may 02 28 may 05 28 may 08
in february 2005 p h blackburn announced his intention to retire
from the board of northern foods on the conclusion of the annual
general meeting in july 2005 and will be succeeded by a j hobson
currently deputy chairman
c dyer will reach the conclusion of his ninth year of office on 
31 december 2005 with the recent changes in board membership
the board believes that it is in the interests of the company the
board and shareholders that c dyer remains on the board for a final
threeyear term as an independent director his independence will be
considered annually by the board and his appointment will be subject
to an annual vote at the annual general meeting
the appointments of the chairman and the nonexecutive directors
may be terminated by either party on three months’ notice
no compensation is payable by the company on termination 
of an appointment
fees for the nonexecutive directors are reviewed annually in
september on the recommendation of the executive directors and
then approved by the board fees are set with regard to a range of
external information for equivalent companies there is no other
remuneration for nonexecutives except where the company meets
authorised expenses incurred on northern foods activities they are
not eligible for pension scheme membership and do not participate 
in any of the company’s annual or long term incentive schemes
6 remuneration policy for executive directors
the remuneration committee aims to ensure that the company’s
executive directors are fairly rewarded for their individual contributions
to the group’s performance the committee’s policy is to offer
differentiated remuneration packages dependent upon performance
which are capable of attracting retaining and motivating executive
directors of high calibre to ensure that the company is managed
effectively to the benefit of shareholders and will create real increases
in shareholder value relative to its industry sector
the committee in setting the remuneration of the executive directors
also takes account of and seeks to align this remuneration with the
management remuneration throughout northern foods the committee
continues to aim for a structured and balanced remuneration package
by looking at each element as well as the package as a whole
the committee believes that a significant proportion of the total
remuneration of a director should be performancerelated the
proportion of potential reward dependent upon group and individual
performance has been significantly increased for 200506
a more rigorous approach has been adopted to the assessment 
of individual performance leading to greater differentiation in awards
whereby greater emphasis is placed upon the individual’s contribution
to the group’s overall performance this is to ensure that the
remuneration package for executive directors is aligned even more
closely with shareholder interests twothirds of the chief executive’s
and twofifths of other executive directors’ total remuneration package
exclusive of pension benefits is dependent upon achieving clearly
defined performance targets
the four main components of the remuneration package for executive
directors and senior management in 200506 are
 basic annual salary is targeted at market median for the sector
but it is recognised that it may be necessary to pay above this 
to attract sufficiently high calibre executives
 an annual incentive plan based upon the delivery of annual
operating plans for the company and individual strategic objectives
described in performance contracts
 participation in long term incentive plans based upon the performance
of the group and individual the long term incentive plans are
geared so that outstanding individual performance generates 
a higher level of reward
 pension and other benefits
the balance of the fixed and variable pay at current value for 200506
exclusive of pension benefits is illustrated below for the two executive
directors the table is a theoretical model and assumes that ontarget
group performance is achieved for both short and long term incentives
and that the director’s individual performance is rated as satisfactory
the value of the share options is calculated using blackscholes
methodology
basic salary as a annual bonus as a long term incentives
proportion of target proportion of target as a proportion of
remuneration  remuneration  target remuneration 
m t gribbin 666 167 167
p a o’driscoll 552 172 276
61 salary
salaries of executive directors are reviewed annually taking into account
information from independent sources on salaries for comparable
roles in the industry and in other selected quoted companies
reviews also reflect the individual’s responsibilities performance 
and development and the group’s performance the remuneration
committee’s objective is and will continue to be to maintain salaries
at around the median level of the relevant employment market
although it may be necessary to pay above the median for a high
calibre individual salary is the only pensionable remuneration
62 annual incentive plan
the remuneration committee believes that achieving annual
performance targets is a high priority for the executive directors
incentive targets for executive directors are set each year by the
committee to take account of current business plans
the committee has modified the current annual incentive plan 
in 200506 to allow for greater differentiation in incentive award
dependent upon the individual’s contribution to group performance
the target incentive for an executive director is reduced to 25 per cent
of basic salary for satisfactory performance in the case of exceptional
individual performance and group results significantly above
expectations the incentive payment increases up to a maximum 
of 100 per cent of basic salary
32 directors’ remuneration report northern foods plc
             75 per cent of the maximum annual incentive is dependent upon 
a combination of individual and group performance and requires the
minimum achievement of specific financial targets for 200506
before payment of this element can be made
25 per cent of the maximum annual incentive is directly related to
the committee’s assessment of the director’s individual performance
against their personal performance contract set at the start of the
financial year which contains six individual and business performance
targets including targets for return on average invested capital roic
and free cash flow which are considered appropriately stretching 
by the committee
onefifth of any annual incentive earned will be paid as deferred
shares through the company’s share bonus plan shares acquired
through the share bonus plan will be purchased in the market and
held in trust for the executive for a period of three years these shares
will be forfeited should the executive director leave prior to the third
anniversary during this retention period the participants will be entitled
to dividends on the shares and to instruct the trustee how to vote
the targets set for 200506 are made up of financial business and
individual performance measures the financial element includes
profit performance the business element is related to specific targets
for roic and free cash flow and a number of commercially sensitive
strategic objectives for each individual and the executive team the
performance targets selected are considered appropriately stretching
by the committee
63 long term incentive share plans
the company’s long term incentive policy has been developed to
reflect market practice and to provide long term management focus and
motivation the remuneration committee believes that a significant
element of executive remuneration should be linked to the delivery 
of above average long term returns for shareholders
executives’ interest in both relative and absolute share price
performance is important and this is facilitated by share schemes 
and the encouragement to build a significant personal shareholding 
in the company the company is developing a policy for directors’
shareholdings which will be implemented from 1 april 2006
long term incentives are provided to executive directors in the form
of performance shares and share options executive directors will be
eligible to receive an annual grant of options and performance shares
provided that the combined expected value of awards made under
both plans in any one year does not exceed 100 per cent of basic
salary the value of share options is calculated using the blackscholes
methodology the level of grant for both options and performance
shares will be subject to individual performance as determined by 
the remuneration committee’s assessment of progress against the
strategic objectives set out in the director’s performance contract
these two long term incentive share plans are described below
631 executive share options
participation in the share option plan is at the discretion of the
remuneration committee the plan comprises an inland revenue
approved part and an unapproved part under the unapproved part
the company will have the right to direct that a share settled exercise
takes place options will generally be exercisable in the sevenyear
period following the third anniversary of grant and before the tenth
anniversary provided that the executive remains in employment 
and subject to satisfaction of the performance condition
consistent with best practice it is the committee’s intention that
grants will continue to be made annually to executive directors 
in the future
the performance condition for awards requires that for grants with 
a market value of up to one times salary the real growth in earnings
per share is greater than 3 per cent per annum over the threeyear
performance period before the options can be exercised in the event
that the committee makes grants with a market value of greater than
one times salary the performance condition for grants in excess of
one times salary would require that the real growth in earnings per
share is greater than 6 per cent per annum before the options can 
be exercised if the performance condition is not met at the end of
three years there is no facility for retesting the performance will be
assessed by comparing the adjusted earnings per share growth to the
growth in the rpi over the threeyear performance period
the committee believes that the performance condition for the 
long term incentive arrangements should align the interests of
directors with those of shareholders the committee also believes 
that real growth in earnings per share will only be achieved through
the delivery of both the commercial and financial objectives of the
company furthermore executives will only benefit from the plan 
if real growth in the earnings per share target is achieved and there 
is growth in the share price
632 performance share plan
the committee believes that the performance conditions for the
performance share plan psp should align the interests of directors
with those of shareholders the benefits available to senior management
participating in the plan will only accrue to them if the company 
has delivered significant benefits to shareholders over a threeyear
period participation in this plan is at the discretion of the
remuneration committee
under the plan the committee awards shares in the company to
senior management conditional upon the achievement of corporate
performance targets over a period of three years the number of 
shares conditionally awarded to each participant is determined by the
committee the market value of shares which may be conditionally
awarded to a participant in any year will be limited to a maximum 
of 75 per cent of salary
vesting of the plan is triggered by achieving two independent sets of
performance conditions with 50 per cent of the vesting conditional
upon each set as follows
 a measure of the company’s relative market performance as
assessed by growth in total shareholder return tsr against 
the ftse food producers index and
 a return on capital measure used as an absolute measure of
company performance the committee has determined return 
on capital as a current strategic priority for realising growth in
shareholder value in future years it is envisaged that the strategic
priorities will change
6321 total shareholder return
vesting of 50 per cent of the psp is triggered by comparing the
growth in tsr in terms of share price growth and dividends to that
of the tsr of the companies comprising the ftse food producers
index excluding unilever
northern foods plc directors’ remuneration report 33
           34 directors’ remuneration report northern foods plc
directors’ remuneration report
continued
the proportion of the award that will vest is assessed by reference 
to a vesting scale if the group’s performance is ranked below the
median this part of the conditional award will lapse where the
company is placed at the median or above the maximum number of
shares available for vesting will be calculated on a straight line basis
with 20 per cent of the conditional award being available when the
company is placed at the median and the maximum of 50 per cent 
of the award being available where the company is placed in the 
top quartile
the committee selected the relative tsr compared with companies
in the ftse food producers index excluding unilever as a measure
that reflects corporate performance relative to companies with
similar characteristics and subject to similar market conditions
unilever is excluded from the comparator group on the basis of 
size and product diversity
the companies currently comprising the ftse food producers index
excluding unilever are
abf premier
arla richmond
cadbury robert wiseman
cranswick sygen
dairy crest tate  lyle
devro uniq
northern foods
6322 return on capital
the proportion of the award that will vest is assessed by reference to
a vesting scale vesting of 50 per cent of the psp is triggered by the
achievement of a minimum growth in return on capital of 100 basis
points over three years measured against a base year of 200405
if the minimum target is not achieved this part of the conditional
award will lapse
the maximum number of shares available for vesting will be calculated
on a straight line basis with 75 per cent of the conditional award
being available if the company achieves growth of 100 basis points
and a maximum of 50 per cent of the award being available where
the company achieves growth of 200 basis points
for the purpose of determining any reward return on capital is
defined as operating profit divided by average invested capital 
being trading capital employed plus accumulated goodwill written off
this will be calculated under ifrs with the exception of the impact 
of the changes relating to pensions under ias 19
in response to any significant events including material trading
events the remuneration committee may at its discretion amend 
the performance conditions to reflect these changes
shares awarded under the plan are retained in trust on behalf of the
participants for a further two years during this retention period the
participants will be entitled to dividends on the shares and to instruct
the nominee how to vote at the end of the retention period the shares
will be transferred to participants from the trust
64 all employee share scheme 
an approved savingsrelated share option scheme is open to all
eligible employees in the uk and overseas and as it is an all employee
plan no performance conditions apply
65 benefits
in addition to basic salary all the executive directors receive certain
benefits principally a car or car allowance private medical insurance
and a pension
651 pensions
executive directors are members of the company pension scheme
their dependants are eligible for dependants’ pensions and the
payment of a lump sum in the event of death in service
the pension arrangements for directors appointed prior to 22 march
2005 provide for a pension on retirement at age 60 of twothirds 
of basic annual salary after 20 or more years’ eligible service subject
to inland revenue limits
during the year the committee undertook a complete review of the
company’s pension arrangements the decision was taken to close 
the final salary scheme northern foods pension scheme to new
members with effect from 22 march 2005 and introduce a new
career average revalued earnings care scheme called pension
builder with effect from 1 may 2005
for all employees including directors appointed after 22 march 2005
the pension arrangements provide for pension on retirement at age
65 based upon a career average accrual of either
 125 per cent of annual salary per annum revalued at rpi up to 
50 per cent with an employee contribution of 60 per cent or
 10 per cent of annual salary per annum revalued at rpi up to 
50 per cent with an employee contribution of 45 per cent
the pension builder scheme has an optional salary sacrifice
arrangement no other payments to directors are pensionable
currently the only director whose benefits under the scheme are
restricted by the inland revenue earnings cap is p a o’driscoll
benefits above the inland revenue earnings cap will be provided
through an unfunded unapproved retirement benefits scheme
none of the other directors’ benefits from the company scheme 
are restricted by current inland revenue limits
following the removal of the pensions earnings cap and the
introduction of the lifetime allowance under the finance act 2004
with effect from april 2006 it is intended to offer directors and 
senior managers who have exceeded the lifetime allowance the
following options
 continue to accrue pension under the scheme
 have benefits provided through an unfunded unapproved
retirements benefit scheme
 accept a cash alternative
66 additional directorships
executive directors are encouraged to hold one nonexecutive
directorship in a listed business in a noncompeting sector
fees for such directorships are retained by the executive director
67 directors’ contracts
it is the company’s policy that executive directors should have 
secure agreements providing for a maximum of one year’s notice
all executive directors have contracts which are subject to one 
year’s notice by either party
                 northern foods plc directors’ remuneration report 35
in the event of early termination the directors’ contracts provide 
for compensation up to a maximum of basic salary company car
private medical insurance and pension for the notice period
the details of the contracts are summarised in the table below
date of contract notice period
m s christie resigned 22 oct 2004 1 apr 96 12 months
m t gribbin 1 apr 03 12 months
p a o’driscoll 29 mar 04 12 months
h r sims resigned 30 jun 2004 1 apr 03 12 months
h r sims resigned as a director on 30 june 2004 and retired from the company on 
31 december 2004
to protect the interests of the company and its shareholders the
directors’ contracts contain restrictive covenants the principal terms
of which prevent the directors
 undertaking work for direct competitors either during their
employment with northern foods or within six months of 
their employment terminating without the express permission 
of the board
 enticing away from the group individuals or customers with whom
the directors had dealt in the 12 months prior to termination 
 enticing away from the group or employing senior or middle
managers from within the business with whom the directors had
direct contact or knowledge in the 12 months prior to termination
 
total shareholder return 1 april 2000 to 2 april 2005
2000 2001 2002 2003 2004 2005
250
200
150
100
50
0
tsr rebased to 100 at 1 april 2000
northern foods
ftse 250 index
financial year end
1000
1375
1750
2125
2500
8 directors’ remuneration and pension entitlements
the information in section 8 of the remuneration report has been audited by the company’s external auditors
81 emoluments
table 1 shows an analysis of the salary benefits and bonus elements of remuneration for the individual directors holding office during the year
ended 2 april 2005 pension entitlements are shown in table 2 and interests under share options and long term incentive arrangements are
disclosed in sections 83 and 84
accrued compensation
salary annual for loss
fees benefits bonus of office total total
2005 2005
2
2005
3
2005
4
2005 2004
3
t able 1 – directors’ remuneration notes £££££ £
executive directors
m s christie resigned 22 october 2004 1 180865 12558 – 315032 508455 296845
m t gribbin 233000 14568 – – 247568 238866
p a o’driscoll appointed 29 march 2004 1 470000 14218 – – 484218 12916
h r sims resigned 30 june 2004 1 58250 3505 – – 61755 238828
a j stewart resigned 3 september 2003 1 – –– –– 640875
nonexecutive directors
p h blackburn – chairman fee 5 134000 – – – 134000 127500
– additional fee –– ––– 37917
c dyer 5 37000 – – – 37000 33000
a j hobson 5 47000 – – – 47000 43000
o g nichionna 5 32000 – – – 32000 30500
1192115 44849 – 315032 1551996 1700247
notes to t able 1
note 1
figures for directors are prorated to reflect the date of appointment or resignation as a director
7 performance graph
in accordance with the requirements of schedule 7a to the
companies act 1985 the graph shows the company’s fiveyear
performance measured by tsr compared with the performance 
of the ftse 250 index also measured by tsr
the ftse 250 index has been selected as an appropriate comparison
because it represents a broad equity market index of which 
northern foods is a constituent
tsr measures share price growth with any dividends deemed to be
reinvested gross on the exdividend date the tsr shown is based on
daily spot prices
                                              36 directors’ remuneration report northern foods plc
directors’ remuneration report
continued
notes to t able 1 continued
note 2
benefits include medical insurance and company car or car allowance
note 3
no annual bonus has been awarded by the remuneration committee in respect of 200405 or 200304
note 4
m s christie resigned on 22 october 2004 as part of his contractual entitlement he received compensation for loss of office amounting 
to £315032 this comprises one year’s salary and the cost of life assurance permanent health insurance private medical insurance and car
allowance in addition to this m s christie was entitled to have his pension augmented by an additional one year’s service as shown in section
82 also included in his compensation for loss of office are legal costs of £1500 paid on his behalf in connection with his resignation and
outplacement costs of £10000
note 5
from 1 october 2004 the fee payable to nonexecutive directors was increased to £33000 per annum an additional annual fee of £5000 is
payable to the chair of the audit committee the fee of the chairman was increased to £138000 per annum and that of the deputy chairman 
to £48000 per annum which includes an annual fee of £5000 for acting as chair of the remuneration committee
82 pension benefits
transfer value
of real increase in
accrued additional accrued increase in transfer transfer transfer
pension at real pension pension at year less value at value at value less
31 march increase earned 2 april directors’ 31 march 2 april directors’
t able 2
2004 in year inflation in year 2005
2
contributions 2004
3
2005
3
contributions
directors’ pension entitlements notes £ £ £ £ ££ £ £ £
executive directors
m s christie 
resigned 22 october 2004 4 110539 8975 3427 12402 122941 78276 1001442 1177051 164293
m t gribbin 89781 4945 2783 7728 97509 37730 796045 1021740 209385
p a o’driscoll 6 – 15667 – 15667 15667 156902 – 172202 156902
h r sims resigned 30 june 2004 5 136014 3879 4216 8095 144109 56457 1995050 2481995 474713
notes to t able 2
note 1
the company provides executive directors with a pension which is payable at age 60 equal to twothirds base salary reduced where service 
to age 60 is less than 20 years member contributions are 7 per cent of base salary each year subject to inland revenue limits death in service
cover is a lump sum of four times pensionable earnings on the death of a director or a retired director a spouse’s pension of 50 per cent 
would be payable
early retirement may be granted with the consent of the company and the trustees of the scheme from age 50 but benefits are reduced by 
4 per cent per annum for ages 50 up to 59 years once in payment pensions are increased in line with inflation up to a ceiling of 3 per cent 
per annum in respect of pensionable service accrued to 31 march 1997 and inflation up to a ceiling of 5 per cent per annum on service accrued
thereafter the trustees with the consent of the company have discretion to apply such greater increase as they consider appropriate
note 2
the accrued pension at 2 april 2005 is the pension which the director would have been entitled to receive based on completed pensionable
service to 2 april 2005 payable from normal pension date age 60 and subject to revaluation increases between leaving and retirement
note 3
the transfer values are based on the accrued pensions at 31 march 2004 and at 2 april 2005 and are calculated as at 31 march 2004 and 
2 april 2005 respectively based on actuarial factors the transfer values are the lump sums which would have been paid to another pension
scheme for the benefit of the director if they left service at the respective dates a transfer value cannot be paid to a director personally
note 4
m s christie resigned from the company on 22 october 2004 and his entitlements are calculated at the date of his resignation the accrued 
pension figure shown for him is that payable after the augmentation of £61353 equivalent to one year’s service granted to him at leaving
note 5
h r sims resigned from the board on 30 june 2004 and retired from the company on 31 december 2004 he elected to draw his pension 
from 1 january 2005 and his entitlements are calculated as at his date of retirement the accrued pension figure shown for him is that 
payable before reduction for early payment the transfer value figure shown for him is the transfer value of his reduced early retirement 
pension prior to commutation and has been calculated on the cash equivalent basis for pensioner members
                                                             northern foods plc directors’ remuneration report 37
note 6
p a o’driscoll joined the pension scheme on 1 april 2004 her contributions are limited to 15 per cent of the inland revenue earnings cap
she is the only executive director affected by the earnings cap and her pension entitlement above the cap is provided by an unfunded unapproved
retirement benefits scheme life cover above the earnings cap is secured under a supplementary life assurance scheme
note 7
there were no contributions by the group to any money purchase pension arrangements in respect of any director
83 share options
details of grants exercises and lapses of options for individual directors under the executive share option scheme table 3 and the savingsrelated
share option scheme table 4 are as follows
date balance at exercised granted balance at
from 31 march during during 2 april
date of option which expiry 2004 year year 2005
1
t able 3 – executive share options grant price p exercisable date key number number number number
m s christie resigned 22 october 2004 15 jul 94 14560 15 jul 97 14 jul 04 a 35285 35285 – –
3 aug 95 13320 3 aug 98 21 apr 05 b 31051 – – 31051
17 jul 96 12800 17 jul 99 21 apr 05 b 100921 – – 100921
19 nov 01 15717 23 oct 04 19 may 05 c 19087 – – 19087
19 nov 01 15717 23 oct 04 19 may 05 d 130913 – – 130913
2 dec 02 16808 23 oct 04 2 jun 06 d 150000 – – 150000
19 dec 03 13700 23 oct 04 19 jun 07 d 200729 – – 200729
667986 35285 – 632701
m t gribbin 3 aug 95 13320 3 aug 98 2 aug 05 b 12702 – – 12702
17 jul 96 12800 17 jul 99 16 jul 06 b 25406 – – 25406
19 nov 01 15717 19 nov 04 18 nov 11 c 19087 – – 19087
19 nov 01 15717 19 nov 04 18 nov 11 d 60913 – – 60913
2 dec 02 16808 2 dec 05 1 dec 12 d 80000 – – 80000
19 dec 03 13700 19 dec 06 18 dec 13 d 164233 – – 164233
17 dec 04 16967 17 dec 07 16 dec 14 g – – 102994 102994
362341 – 102994 465335
p a o’driscoll 29 mar 04 15916 29 mar 07 28 mar 14 e 18848 – – 18848
29 mar 04 15916 29 mar 07 28 mar 14 f 424102 – – 424102
17 dec 04 16967 17 dec 07 16 dec 14 g – – 138504 138504
442950 – 138504 581454
h r sims resigned 30 june 2004 19 nov 01 15717 19 nov 04 18 nov 11 c 19087 – – 19087
19 nov 01 15717 19 nov 04 18 nov 11 d 60913 – – 60913
2 dec 02 16808 2 dec 05 1 dec 12 d 80000 – – 80000
19 dec 03 13700 19 dec 06 18 dec 13 d 164233 – – 164233
324233 – – 324233
key
a the options listed were originally granted under the company’s approved share option scheme 1984 there was no performance condition
attached to this grant of options
b these options were granted under the company’s executive share option scheme 1994 these options were subject to a performance 
target measured by reference to a total shareholder return the company met the performance condition by finishing above the median 
point against the comparator group of companies
c these options were granted under the company’s approved company share option plan 1998 these options are subject to a performance
target measured by reference to earnings per share the target requires that the real growth in earnings per share over the threeyear
performance period is greater than 3 per cent per annum compound the performance condition allows for retesting after years 
4 and 5 against the full period from grant the performance condition has not been met after three years and is subject to retesting 
on 19 november 2005
d these options were granted under the company’s executive share option plan 1994 these options are subject to a performance target
measured by reference to earnings per share the target requires that the real growth in earnings per share over the threeyear performance
period is greater than 3 per cent per annum compound the performance condition allows for retesting after years 4 and 5 against the 
full period from grant the performance condition for the options granted on 19 november 2001 has not been met after three years and 
is subject to retesting on 19 november 2005
e these options were granted under the company’s approved company share option plan 1998 on recruitment and in recognition of benefits
accrued at shell europe and are therefore not subject to a performance condition
f these options were granted under the company’s executive share option plan 1994 on recruitment and in recognition of benefits accrued 
at shell europe and are therefore not subject to a performance condition
g these options were granted under the company’s share option plan 2004 and are subject to a performance condition measured 
by reference to earnings per share the performance condition does not allow for retesting
                                                                  38 directors’ remuneration report northern foods plc
directors’ remuneration report
continued
notes to t able 3
note 1
balance at 2 april 2005 or at date of resignation
note 2
whilst a director of the company m s christie exercised an option on 28 june 2004 over 35285 shares at an option price of 1456 pence
the midmarket price on the date of exercise was 16525 pence
note 3
the remuneration committee granted m s christie permission to exercise his executive share options granted in 1995 and 1996 within 
six months from the date of resignation the performance period for options granted in 2001 2002 and 2003 had not ended and the 
committee therefore waived the performance condition and allowed m s christie 42 months from the date of grant to exercise these
outstanding executive share options since resigning from the board m s christie exercised on 4 january 2005 31051 shares at an option 
price of 1332 pence and 100921 shares at an option price of 1280 pence
note 4
h r sims resigned from the board on 30 june 2004 but did not retire from the company until 31 december 2004 at the time of his retirement
the performance period for options granted in 2001 2002 and 2003 had not ended and the committee therefore waived the performance
condition on all unapproved options and granted h r sims six months in which to exercise these options the performance condition was 
not waived in respect of approved options and the committee granted h r sims 42 months from the date of grant in which to exercise stating 
that if the performance condition is not achieved the option is to lapse this option has now lapsed h r sims exercised on 13 january 2005
164233 shares at an option price of 1370 pence
note 5
the midmarket price of the company’s shares was 1610 pence at 31 march 2004 and 1540 pence at 2 april 2005 during the year the market
price ranged between 1730 pence and 1445 pence
note 6
there were no lapses during the year
date balance at balance at
from 31 march 2 april
date of which expiry option 2004 2005
1
t able 4 – savingsrelated share options notes grant exercisable date price p number number
m s christie resigned 22 october 2004 1 14 aug 00 1 oct 05 31 mar 06 940 10771 –
h r sims resigned 30 june 2004 1 14 aug 00 1 oct 05 31 mar 06 940 10771 10771
notes to t able 4
note 1
balance at 2 april 2005 or at date of resignation
m s christie’s savingsrelated option lapsed on the date of resignation
h r sims resigned from the board on 30 june 2004 but did not retire from the company until 31 december 2004 at which time his option lapsed
note 2
there were no options granted or exercised during the year
note 3
the options listed were granted at 80 per cent of the prevailing middle market share price under the company’s savingsrelated share option 
scheme 1996
                                 northern foods plc directors’ remuneration report 39
84 long term incentive plans
841 performance share plan
the committee awarded shares under the psp conditional upon the achievement of corporate performance targets over a period of three years
performance is assessed against two criteria by comparing the growth in tsr in terms of share price growth and dividends to that of the tsr of 
the ftse food producers index excluding unilever and by assessing the underlying performance of northern foods by reference to the real growth
in earnings per share over the same period
vesting of the psp is triggered by real growth in earnings per share in excess of 3 per cent per annum over a threeyear period if this condition 
is met the proportion of the award vesting is assessed by comparing the growth in tsr in terms of share price growth and dividends to that 
of the tsr of the companies comprising the ftse food producers index excluding unilever
the tsr performance is assessed by reference to a vesting scale whereby for the full award to qualify for vesting the total return to the
company’s ordinary shareholders during the threeyear performance period places it in the top quartile of the comparator group if the group’s
performance is ranked at 50 per cent or lower all of the conditional awards will lapse where the company is placed between 50 per cent and 
the top quartile the maximum number of shares available for vesting will be calculated on a straight line basis with 25 per cent of the award
being available when the company is placed at 51 per cent and the entire award being available where the company is placed in 
the top quartile
the companies comprising the comparator group at the start of the performance period were
abf northern foods
arla richmond
cadbury robert wiseman
cranswick sygen
dairy crest tate  lyle
devro uniq
geest
shares maximum
beneficial released by potential award beneficial conditional
interest at the nominee granted interest at interest at
31 march 26 july 17 december 2 april 2 april
2004
1
2004
2
2004
4
2005
5
2005
4
t able 5 – performance share plan notes number number number £ number
m s christie resigned 22 october 2004 53450 26962 – 26488 –
m t gribbin 3 28273 14396 – 13877 –
p a o’driscoll 4 – – 173130 – 173130
h r sims resigned 30 june 2004 3 34358 17481 – 16877 –
116081 58839 173130 57242 173130
notes to t able 5
note 1
the interest in shares at 31 march 2004 comprised vested shares in respect of the awards made on 9 september 1999 and 7 september 2000 
held by the nominee for the twoyear retention period
note 2
shares awarded under the psp are retained in trust on behalf of the participants for a further two years after vesting during the retention 
period the participants are entitled to dividends on the shares and to instruct the nominee how to vote
the awards made in 1999 were released by the nominee on 26 july 2004 at the end of the twoyear retention period
note 3
at the time the awards were made m t gribbin and h r sims were not directors of the company
note 4
a conditional award was made to p a o’driscoll on 17 december 2004 the share price at the time of award was 16967 pence
the performance condition for this award is described above
note 5
the interest in shares at 2 april 2005 comprised vested shares in respect of the award made in 2000 held by the nominee for the twoyear
retention period
no other monies were paid or receivable by directors under long term incentive schemes in respect of qualifying services
                                40 directors’ remuneration report northern foods plc
directors’ remuneration report
continued
842 deferred share plan
no grants were made to executive directors under this scheme in the year 200405
85 directors’ aggregate remuneration
the total amounts of directors’ remuneration and other benefits were as follows
2005 2004
t able 6 – directors’ aggregate remuneration £ £
emoluments 1551996 1700247
gains on exercise of options 6933 3292
total 1558929 1703539
86 directors’ interests in shares
the interests of the directors in the share capital of the company at 31 march 2004 and 2 april 2005 are detailed below
ordinary shares
2
share options psp conditional awards
number number number
description 2 apr 31 mar 2 apr 31 mar 2 apr 31 mar
t able 7 – directors’ interests in shares of interest 2005
1
2004 2005
1
2004 2005 2004
executive directors
m s christie resigned 22 october 2004 beneficial 97116 97116 632701 678757 – –
m t gribbin beneficial 431476 431170 465335 362341 – –
p a o’driscoll beneficial 81453 81453 581454 442950 173130 –
h r sims resigned 30 june 2004 beneficial 55772 55772 335004 335004 – –
nonexecutive directors 
p h blackburn beneficial 40000 40000
c dyer beneficial 10000 10000
a j hobson beneficial 8000 8000
o g nichionna beneficial 15000 15000
notes to t able 7
note 1
balance as at 2 april 2005 or at date of resignation
note 2
balance includes beneficial interests in ordinary shares together with interests under long term incentive plans
the company’s register of directors’ interests which is available for inspection in accordance with the provisions of the companies act 1985
contains full details of directors’ shareholdings options and psp awards
at 2 april 2005 the executive directors of northern foods plc as potential beneficiaries of the northern foods employee share ownership trust
were interested in 3114793 ordinary shares held by the trustee
by order of the board
anthony hobson
chairman
remuneration committee
1 june 2005
                                                                             northern foods plc independent auditors’ report 41
independent auditors’ report
to the members of northern foods plc
we have audited the accounts of northern foods plc for the 52 weeks
ended 2 april 2005 which comprise the consolidated profit and loss
account the balance sheets the consolidated cash flow statement
the consolidated statement of total recognised gains and losses and the
related notes 1 to 30 together with the reconciliation of net cash flow
to movement in net debt the reconciliation of movements in equity
shareholders’ funds and accounting policies these accounts have been
prepared under the accounting policies set out thereinwe have also
audited the information in the part of the directors’ remuneration report
that is described as having been audited
this report is made solely to the company’s members as a body in
accordance with section 235 of the companies act 1985 our audit
work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditors’
report and for no other purpose to the fullest extent permitted by law
we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body for our audit work
for this report or for the opinions we have formed
respective responsibilities of directors and auditors
as described in the statement of directors’ responsibilities the company’s
directors are responsible for the preparation of the annual report and 
the accounts in accordance with applicable uk law and accounting
standards they are also responsible for the preparation of the other
information contained in the annual report including the directors’
remuneration report our responsibility is to audit the accounts and 
the part of the directors’ remuneration report described as having 
been audited in accordance with relevant uk legal and regulatory
requirements and auditing standards
we report to you our opinion as to whether the accounts give a true
and fair view and whether the accounts and the part of the directors’
remuneration report described as having been audited have been
properly prepared in accordance with the companies act 1985
we also report to you if in our opinion the report of the directors 
is not consistent with the accounts if the company has not kept proper
accounting records if we have not received all the information and
explanations we require for our audit or if information specified by law
regarding directors’ remuneration and transactions with the company
and other members of the group is not disclosed
we review whether the corporate governance statement reflects the
company’s compliance with the nine provisions of the july 2003 frc
combined code specified for our review by the listing rules of the
financial services authority and we report if it does notwe 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 uk auditing standards
issued by the auditing practices board an audit includes examination
on a test basis of evidence relevant to the amounts and disclosures in
the accounts and the part of the directors’ remuneration report described
as having been audited it also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of
the accounts and of whether the accounting policies are appropriate to
the circumstances of the company and the group consistently applied
and adequately disclosed
we planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the accounts
and the part of the directors’ remuneration report described as having
been audited are free from material 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 2 april 2005 and of the profit 
of the group for the 52 weeks then ended and
 the accounts and the part of the directors’ remuneration report
described as having been audited have been properly prepared 
in accordance with the companies act 1985
deloitte  touche llp
chartered accountants and registered auditors
leeds
1 june 2005
              consolidated profit and loss account
for the 52 weeks ended 2 april 2005
before before
goodwill goodwill goodwill goodwill
amortisation amortisation amortisation amortisation
and and and and
exceptional exceptional exceptional exceptional
items items total items items total
52 weeks 52 weeks 52 weeks 53 weeks 53 weeks 53 weeks
2005 2005 2005 2004 2004 2004
notes £m £m £m £m £m £m
group turnover
continuing 14161 – 14161 13877 – 13877
discontinued 327 – 327 1544 – 1544
group turnover 1 14488 – 14488 15421 – 15421
cost of sales 2 10650 288 10938 11422 15 11437
gross profit 3838 288 3550 3999 15 3984
net operating expenses 2 2814 216 3030 2929 205 3134
operating profit
continuing 1026 504 522 1057 187 870
discontinued 02 – 02 13 33 20
operating profit 13 1024 504 520 1070 220 850
share of associated undertakings 4 –– – 04 02 02
lossprofit on disposal of businesses 5 – 348 348 – 116 116
profit on sale of fixed assets 5 – 93 93 –– –
profit on ordinary activities before interest 1 1024 759 265 1074 106 968
net interest payable 6 222 – 222 214 – 214
profit on ordinary activities before taxation 802 759 43 860 106 754
taxation on profit on ordinary activities 7 168 151 17 155 55 100
profit on ordinary activities after taxation 8 634 608 26 705 51 654
equity dividends 9 436 – 436 446 – 446
retained lossprofit for the year 24 198 608 410 259 51 208
basic earnings per ordinary share 10 1295p 053p 1377p 1278p
diluted earnings per ordinary share 10 053p 1256p
dividend per ordinary share 905p 890p
average number of shares million 4896 5118
analysis of earnings before interest tax depreciation and amortisation ebitda
operating profit before goodwill amortisation
and exceptional items 1024 1070
add
associate – 04
depreciation 650 659
ebitda before exceptional items 1674 1733
42 consolidated profit and loss account northern foods plc
                                                                                                 consolidated balance sheet
as at 2 april 2005
2 april 3 april
2005 2004
as restated
notes £m £m
fixed assets
intangible fixed assets 11 614 643
tangible fixed assets 12 6178 6724
6792 7367
current assets
stocks 14 651 782
debtors amounts falling due within one year 15 1713 1687
debtors amounts falling due after more than one year 15 952 613
investments 16 98 149
cash at bank and in hand 255 350
3669 3581
creditors amounts falling due within one year 17 2779 2969
net current assets 890 612
total assets less current liabilities 7682 7979
creditors amounts falling due after more than one year
convertible subordinated bonds 2008 908 906
loans and other creditors 2788 2815
17 3696 3721
provisions for liabilities and charges 22 725 695
net assets 3261 3563
capital and reserves
called up share capital 23 1276 1271
share premium account 24 623 600
revaluation reserve 24 35 37
capital redemption reserve 24 236 236
reserve for treasury shares 24 386 144
other reserves 24 67 67
profit and loss account 24 1410 1496
equity shareholders’ funds 3261 3563
p a o’driscoll director
m t gribbin director
1 june 2005
northern foods plc consolidated balance sheet 43
                                                                            consolidated cash flow statement
for the 52 weeks ended 2 april 2005
52 weeks 53 weeks
2005 2004
notes £m £m
net cash inflow from operating activities 19 983 1549
returns on investments and servicing of finance
interest received 03 197
interest paid on finance leases – 03
other interest paid 226 397
net cash outflow from returns on investments and servicing of finance 223 203
t axation 14 21
capital expenditure and financial investment
purchase of tangible fixed assets 626 769
sale of tangible fixed assets 40 13
exceptional sale of tangible fixed assets 136 –
grants received 09 05
net cash outflow from capital expenditure and financial investment 441 751
acquisitions and disposals
cash outflow on acquisitions 28 11 327
cash inflow on disposals 28 346 509
net cash inflow from acquisitions and disposals 335 182
equity dividends paid 438 449
cash inflow before management of liquid resources and financing 202 349
management of liquid resources
decreaseincrease in current asset investments 51 43
financing
revolving credit facility 100 700
repayment of other borrowings 244 586
capital element of finance lease rental payments – 67
144 47
repurchase of shares 242 371
issue of equity share capital net of costs 28 34
net cash outflow from financing 358 290
decreaseincrease in cash in the year 105 16
44 consolidated cash flow statement northern foods plc
                                                                         reconciliation of net cash flow to movement in net debt
for the 52 weeks ended 2 april 2005
52 weeks 53 weeks
2005 2004
notes £m £m
decreaseincrease in cash in the year 105 16
cash inflowoutflow from movement in liquid resources 51 43
increase in revolving credit facility 100 700
repayment of other borrowings 244 586
capital element of finance lease rental payments – 67
changes in net debt resulting from cash flows 12 12
loans acquired with subsidiary – 74
loan notes issued on acquisition of subsidiary – 20
exchange adjustments 05 05
amortisation of bond and financing costs 02 01
movement in net debt in the year 09 88
net debt at start of year 3324 3236
net debt at end of year 20 3333 3324
consolidated statement of total recognised gains 
and losses
for the 52 weeks ended 2 april 2005
52 weeks 53 weeks
2005 2004
£m £m
profit attributable to equity shareholders 26 654
currency translation differences 29 27
total recognised gains and losses for the year 55 627
reconciliation of movements in equity shareholders’ funds
for the 52 weeks ended 2 april 2005
52 weeks 53 weeks
2005 2004
as restated
notes £m £m
profit attributable to equity shareholders 26 654
currency translation differences 29 27
total recognised gains and losses for the year 55 627
equity dividends 9 436 446
new share capital subscribed net of costs 2324 28 34
repurchase of shares 2324 242 371
vesting of shares – 16
goodwill previously written off included in retained lossprofit for the year 28 293 102
movement in equity shareholders’ funds 302 38
opening equity shareholders’ funds as previously reported 3607 3661
prior year adjustment 25 44 60
opening equity shareholders’ funds as restated 3563 3601
closing equity shareholders’ funds 3261 3563
reconciliation of net cash flow to movement in net debt
northern foods plc consolidated statement of total recognised gains and losses reconciliation of movements in equity shareholders’ funds 45
                                                                                        company balance sheet
as at 2 april 2005
2 april 3 april
2005 2004
as restated
notes £m £m
fixed assets
tangible fixed assets 12 2253 2445
investments 13 7716 7895
9969 10340
current assets
debtors amounts falling due within one year 15 8565 4756
debtors amounts falling due after more than one year 15 952 613
cash at bank and in hand 70 208
9587 5577
creditors amounts falling due within one year 17 8232 7124
net current assetsliabilities 1355 1547
total assets less current liabilities 11324 8793
creditors amounts falling due after more than one year
convertible subordinated bonds 2008 908 906
loans and other creditors 2700 2722
17 3608 3628
provisions for liabilities and charges 22 323 237
net assets 7393 4928
capital and reserves
called up share capital 23 1276 1271
share premium account 24 623 600
revaluation reserve 24 35 37
capital redemption reserve 24 236 236
reserve for treasury shares 24 386 144
profit and loss account 24 5609 2928
equity shareholders’ funds 7393 4928
p a o’driscoll director
m t gribbin director
1 june 2005
46 company balance sheet northern foods plc
                                                                       accounting policies
basis of accounting
the accounts are prepared under the historical cost convention except
for the revaluation of properties which is incorporated in the accounts
the accounts are prepared in accordance with applicable uk
accounting standards
during the year ended 2 april 2005 the group has adopted uitf
abstract 38 ‘accounting for esop trusts’ this requires a company’s
own shares in an esop trust to be shown as a deduction in shareholders’
funds rather than as an asset prior year comparatives have been
restated to comply with uitf abstract 38 as explained in note 25
a summary of the more important group accounting policies applied
consistently is set out below
basis of consolidation
accounts of all subsidiary undertakings are consolidated for the
periods during which they were members of the group all principal
companies in the group prepared accounts to 2 april 2005 associated
undertakings are dealt with on an equity accounting basis
turnover
turnover consists of sales to third parties net of trade discounts 
and excluding vat and sales related taxes sales are recognised 
as products are despatched
foreign currencies
transactions in foreign currencies are recorded at the rate of exchange
at the date of transaction or if hedged at the forward contract rate
monetary assets and liabilities in foreign currencies are expressed 
in sterling at the rates of exchange ruling at the balance sheet date
or if hedged at the forward contract rate
results of overseas subsidiary undertakings are translated at an
average rate for the year and the balance sheet translated at the 
rates ruling at the balance sheet date all exchange differences arising
on consolidation are taken directly to reserves any other exchange
differences are dealt with in the profit and loss account
stocks
these are valued at the lower of cost and net realisable value cost
includes an addition for production overheads where appropriate
goodwill
goodwill being the excess of the consideration over the fair value of
the separable net tangible assets at the date of acquisition of newly
acquired businesses or subsidiary undertakings is recorded as an
intangible fixed asset under frs 10 ‘goodwill and intangible assets’
in the absence of indications to the contrary purchased goodwill is
amortised over 20 years prior to the implementation of frs 10 the
group’s policy was to write off all goodwill directly to reserves on
disposal or closure of a previously acquired business the attributable
amount of goodwill previously written off to reserves is included in
determining the profit or loss on disposal
fixed assets
fixed assets are valued at cost or valuation less any provision for
impairment with subsequent additions at cost surpluses arising 
from the revaluation of properties are taken directly to reserves
net revaluation surpluses realised in respect of properties sold 
are transferred from the revaluation reserve to retained earnings
the group has taken advantage of the transitional provisions of 
frs 15 ‘tangible fixed assets’ and retained the book amounts of certain
freehold properties which were revalued prior to implementation 
of that standard the properties were last revalued in 1978 and the
valuations have not subsequently been updated
assets acquired under finance leases are capitalised as tangible 
fixed assets and the outstanding instalments exclusive of interest
are included in creditors interest is charged to the profit and loss
account in proportion to the outstanding amount
interest incurred on borrowings to finance construction of fixed 
assets is capitalised up to the date of commissioning
operating lease rentals are charged to the profit and loss account 
on a straight line basis over the lease term
depreciation
freehold land is not depreciated other fixed assets are generally
written off in equal annual instalments over their expected useful
lives as follows
buildings 2050 years
or over the remaining life of the lease 
if shorter
plant  equipment 515 years
motor vehicles 410 years
northern foods plc accounting policies 47
                   accounting policies
continued
government grants
government grants in respect of capital expenditure are credited 
to deferred income and are released to the profit and loss account 
over the expected useful lives of the relevant assets by equal annual
instalments grants of a revenue nature are credited to the profit 
and loss account so as to match them with the expenditure to which 
they relate
t axation
current tax including uk corporation tax and overseas tax is provided
at amounts expected to be paid or recovered using the tax rates and
laws that have been enacted or substantively enacted by the balance
sheet date
deferred tax is recognised in respect of all timing differences that 
have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax 
in the future or a right to pay less tax in the future have occurred 
at the balance sheet date timing differences are differences between 
the group’s taxable profits and its results as stated in the accounts
that arise from the inclusion of gains and losses in tax assessments 
in periods different from those in which they are recognised in 
the accounts
deferred tax is not recognised when fixed assets are revalued unless
by the balance sheet date there is a binding agreement to sell the
revalued assets and the gain or loss expected to arise on sale has
been recognised in the accounts neither is deferred tax recognised
when fixed assets are sold and it is more likely than not that the
taxable gain will be rolled over being charged to tax only if and 
when the replacement assets are sold
deferred tax is measured at the average tax rates that are expected 
to apply in the periods in which the timing differences are expected 
to reverse based on tax rates and laws that have been enacted 
or substantively enacted by the balance sheet date deferred tax is
measured on a discounted basis to reflect the time value of money
over the period between the balance sheet date and the dates on
which it is estimated that the underlying timing differences will
reverse the discount rates used reflect the 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
to the extent that a forward foreign exchange contract is not 
a hedge any resulting gain or loss is taken to the profit and loss
account the company does not hedge against translation
amounts payable or receivable in respect of any interest rate swap
agreements used to manage interest rate exposures are recognised 
as adjustments to interest expense over the period of the contracts
48 accounting policies northern foods plc
               notes to the accounts
1 turnover and segmental analysis 
operating operating
profit before profit before
goodwill goodwill profit on profit on
amortisation amortisation ordinary ordinary
and and activities activities net net
exceptional exceptional before before operating operating
turnover turnover items items interest interest assets assets
2005 2004 2005 2004 2005 2004 2005 2004
as restated
area of activity £m £m £m £m £m £m £m £m
continuing operations
chilled 7646 7498 350 433 45 356 3929 4024
frozen 3442 3520 361 361 309 305 2053 1930
ambient 3073 2859 315 263 290 211 1761 1715
14161 13877 1026 1057 554 872 7743 7669
discontinued operations
chilled 322 968 01 31 288 41 – 330
frozen 05 87 01 02 62 02 – 35
ambient – 489 – 42 61 135 – –
327 1544 02 13 289 96 – 365
total group 14488 15421 1024 1070 265 968 7743 8034
goodwill amortisation of £18m 2004 £13m relates to chilled £20m 2004 £19m relates to frozen and £02m 2004 £03m relates 
to ambient this includes £nil 2004 £01m relating to discontinued operations operating exceptional items of £395m 2004 £98m relates 
to chilled £40m 2004 £37m relates to frozen and £29m 2004 £50m relates to ambient this includes £nil 2004 £32m relating to
discontinued operations further details of discontinued operations are set out in note 28
interest of £222m 2004 £214m cannot be allocated to a segment
2005 2004
as restated
analysis of net assets £m £m
fixed assets 6792 7367
stocks 651 782
debtors 2665 2300
creditors 2365 2415
net operating assets 7743 8034
current taxation 147 173
deferred taxation 725 695
dividend payable 277 279
trading capital employed 6594 6887
net borrowings 3333 3324
net assets 3261 3563
geographical area – by origin
the directors have not presented an analysis by geographical area as this is considered to be seriously prejudicial
northern foods plc notes to the accounts 49
                                                                                                                                                           notes to the accounts
continued
2 analysis of profit and loss account
before goodwill before goodwill
goodwill amortisation goodwill amortisation
amortisation and amortisation and
and exceptional exceptional and exceptional exceptional
items items total items items total
2005 2005 2005 2004 2004 2004
£m £m £m £m £m £m
cost of sales 10650 288 10938 11422 15 11437
net operating expenses
distribution costs 1840 14 1854 1979 12 1967
administrative expenses 990 202 1192 972 217 1189
other operating income 16 – 16 22 – 22
total net operating expenses 2814 216 3030 2929 205 3134
the above includes cost of sales of £291m 2004 £1306m distribution costs of £22m 2004 £151m and administrative expenses of £16m 
2004 £107m relating to discontinued operations
administrative expenses includes £40m 2004 £35m of goodwill amortisationthe exceptional items are explained in note 5
3 operating profit
2005 2004
£m £m
this is stated after chargingcrediting
depreciation 650 659
exceptional provision for impairment of tangible fixed assets 150 105
amortisation of goodwill 40 35
exceptional provision for impairment of intangible fixed assets 11 –
profit on sale of tangible fixed assets 14 05
auditors’ remuneration
audit services 03 03
nonaudit services – 01
directors’ remuneration 16 17
operating lease charges
plant and machinery 132 148
land and buildings 39 34
information concerning individual directors’ remuneration pension entitlements shareholdings and share options is shown in the directors’
remuneration report
4 share of associated undertakings
2005 2004
£m £m
income from interest in associated undertakings – 04
goodwill amortisation of associated undertakings – 02
– 02
50 notes to the accounts northern foods plc
                                                               5 exceptional items
2005 2004
£m £m
operating exceptional items
restructuring costs 464 185
nonoperating exceptional items
lossprofit on disposal of businesses 348 116
profit on sale of fixed assets 93 –
operating exceptional items
the restructuring costs primarily relate to the group reorganisation and the factory closures at evesham foods and london road carlisle
this includes tangible fixed asset impairment of £150m the tax effect of operating exceptional items is a credit of £117m
nonoperating exceptional items
the loss on disposal of businesses relates to a £259m loss on sale of eden vale minsterley a £61m loss on sale of emile tissot and a £28m loss 
on sale of cavaghan  gray seafood the profit on sale of fixed assets relates to the disposals of the croydon property and the office in hull
the tax effect of nonoperating exceptional items is a credit of £34m
6 net interest payable
2005 2004
£m £m
bank interest receivable 03 03
interest payable on convertible subordinated bonds 62 63
interest payable on bank loans overdrafts and other loans 163 152
interest payable on finance leases – 02
222 214
northern foods plc notes to the accounts 51
                                  notes to the accounts
continued
7 t axation on profit on ordinary activities
2005 2004
£m £m
current taxation
uk corporation tax at 30 67 67
overseas tax 13 15
exceptional items 92 24
12 58
deferred taxation
uk deferred tax 88 71
overseas tax – 02
exceptional items 59 31
29 42
t axation on profit on ordinary activities 17 100
deferred taxation relates to origination and reversal of timing differences and includes a £08m credit in respect of prior years all tax on exceptional
items relates to the uk
the corporation tax charge for the year is lower than the standard uk corporation tax rate of 30 per cent the differences are explained below
2005 2004
£m £m
profit on ordinary activities before taxation 43 754
taxation on profit on ordinary activities at the standard uk corporation tax rate of 30 13 226
factors affecting the charge
capital allowances in excess of depreciation 03 21
short term timing differences – pension prepayment 101 42
lower tax rates on overseas earnings 43 48
adjustments to tax charge in respect of previous periods 08 24
goodwill not deductible for tax purposes 10 11
net exceptional chargescredits not deductible 120 03
tax relief on loss on exchange 01 01
timing differences – 14
other 01 26
current taxation creditcharge for year 12 58
factors affecting future current tax charges are as follows
the group’s tax rate is lower than the standard uk rate primarily due to the profits earned by the irish subsidiary no significant changes are
expected in the irish tax rates
52 notes to the accounts northern foods plc
                                                       8 profit for the financial year 
of the profit for the financial year a profit of £3115m 2004 £545m 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
2005 2004
£m £m
ordinary
interim paid 335p per share 2004 330p per share 159 167
final proposed 570p per share 2004 560p per share 277 279
436 446
10 earnings per ordinary share
2005 2004
£m £m
profit on ordinary activities after taxation 26 654
add taxation on profit on ordinary activities 17 100
profit on ordinary activities before taxation 43 754
add
goodwill amortisation 40 37
operating exceptional items 464 185
lossprofit on disposal of businesses 348 116
profit on sale of fixed assets 93 –
802 860
less taxation excluding tax relating to goodwill amortisation and exceptional items 168 155
earnings used for calculation of earnings per ordinary share before goodwill amortisation and exceptional items 634 705
earnings used for basic earnings per ordinary share 26 654
interest saved on conversion of debt – 43
earnings used for diluted earnings per ordinary share 26 697
2005 2004
no of no of
shares shares
million million
weighted average number of shares in issue 5092 5159
less
shares held in treasury 165 06
shares owned in employee share ownership trust 31 35
weighted average number of shares 4896 5118
add dilutive effect of
savingsrelated share options 13 20
executive share options 05 02
long term incentive plans 01 04
deferred share plan 01 –
convertible subordinated bonds – 406
weighted average number of shares used for calculation of diluted earnings per ordinary share 4916 5550
2005 2004
pence pence
basic earnings per ordinary share – after goodwill amortisation and exceptional items 053 1278
adjusted earnings per ordinary share – before goodwill amortisation and exceptional items 1295 1377
diluted earnings per ordinary share 053 1256
the adjusted earnings per ordinary share figure has been calculated to provide a clearer understanding of the trading performance of the group
northern foods plc notes to the accounts 53
                                                                                  notes to the accounts
continued
11 intangible fixed assets
goodwill
group £m
cost
at start of year 743
additions note 28 19
disposals 02
exchange differences 05
at end of year 765
amortisation
at start of year 100
charge for the year 40
exceptional provision for impairment 11
at end of year 151
net book amounts
at end of year 614
at start of year 643
12 t angible fixed assets
plant
freehold long short fixtures 
property leases leases vehicles total
group £m £m £m £m £m
cost or valuation
at start of year 2939 567 416 9432 13354
additions 10 39 – 580 629
disposals 04 – 27 60 91
exceptional disposals 53 – – – 53
disposal of businesses 198 08 – 959 1165
reclassifications 04 – – 04 –
exchange differences 09 – – 34 43
at end of year 2707 598 389 9023 12717
analysis
valuation – 1978 67 56 – – 123
cost 2640 542 389 9023 12594
2707 598 389 9023 12717
depreciation
at start of year 688 156 74 5712 6630
charge for the year 55 10 14 571 650
exceptional provision for impairment 74 – – 76 150
disposals 04 – 03 50 57
exceptional disposals 10 – – – 10
disposal of businesses 41 02 – 799 842
reclassifications 01 – – 01 –
exchange differences 01 – – 17 18
at end of year 764 164 85 5526 6539
net book amounts
at end of year 1943 434 304 3497 6178
at start of year 2251 411 342 3720 6724
the original cost of the group’s tangible fixed assets was £12645m and the depreciation thereon £6502m 2004 £13282m and £6595m
respectively
54 notes to the accounts northern foods plc
                     12 t angible fixed assets continued
plant 
freehold long short fixtures 
property leases leases vehicles total
company £m £m £m £m £m
cost or valuation
at start of year 2311 468 382 148 3309
additions 07 38 – 129 174
disposals 03 – – – 03
exceptional disposals 53 – – – 53
disposal of businesses 192 02 – – 194
group transfers 02 – – 57 55
at end of year 2072 504 382 220 3178
analysis
valuation – 1978 67 56 – – 123
cost 2005 448 382 220 3055
2072 504 382 220 3178
depreciation
at start of year 513 135 73 143 864
charge for the year 42 09 14 05 70
exceptional provision for impairment 41 – – – 41
disposals 02 – – – 02
exceptional disposals 10 – – – 10
disposal of businesses 41 – – – 41
group transfers 01 – – 02 03
at end of year 544 144 87 150 925
net book amounts
at end of year 1528 360 295 70 2253
at start of year 1798 333 309 05 2445
the original cost of the company’s tangible fixed assets was £3106m and the depreciation thereon £888m 2004 £3237m and £829m respectively
northern foods plc notes to the accounts 55
            notes to the accounts
continued
13 fixed asset investments
2005 2004
as restated
company £m £m
subsidiary undertakings
shares at cost
at start of year 9525 6050
cost of shares acquired 255 3421
reclassification from associated undertakings – 161
cost of shares disposed – 107
at end of year 9780 9525
long term loans due from subsidiary undertakings 1310 1607
long term loans due to subsidiary undertakings 3374 3237
7716 7895
principal operating subsidiary undertakings at the year end
convenience foods limited
f w farnsworth limited
fletchers bakeries limited
northern foods grocery group limited
nft distribution limited
green isle foods limited ireland
cavaghan  gray group limited
cavaghan  gray limited
solway foods limited
directly owned by northern foods plc
the above subsidiary undertakings are wholly owned ordinary shares operate and are incorporated in the uk except where otherwise stated
all are engaged in food manufacture and distribution
14 stocks
group group
2005 2004
£m £m
raw materials 282 368
work in progress 44 45
finished goods 325 369
651 782
15 debtors
group group company company
2005 2004 2005 2004
£m £m £m £m
amounts falling due within one year
trade debtors 1522 1454 – –
corporation tax – – 126 79
other debtors 109 159 27 53
other prepayments 82 74 22 10
amounts due from subsidiary undertakings – – 8390 4614
1713 1687 8565 4756
amounts falling due after more than one year
pension prepayment 952 613 952 613
56 notes to the accounts northern foods plc
                                                                                   16 current asset investments
group group
2005 2004
£m £m
at start of year 149 106
purchased during the year 164 3306
sold during the year 215 3263
51 43
at end of year 98 149
analysis of investments
listed investments 98 117
other investments – 32
98 149
the listed investments all of which are quoted on recognised stock exchanges are shown at the lower of cost and market value there is no material
difference between cost and market value
17 creditors
group group company company
2005 2004 2005 2004
£m £m £m £m
amounts falling due within one year
bank overdrafts 13 08 291 138
bank loans 60 06 60 –
loan notes note 21 05 21 05 21
other loans – 160 – 160
total borrowings falling due within one year note 18 78 195 356 319
trade creditors 1081 1308 06 58
other creditors including social security 384 352 106 110
accruals and deferred income 812 662 115 58
corporation tax 147 173 – –
proposed dividend 277 279 277 279
amounts due to subsidiary undertakings – – 7372 6300
2779 2969 8232 7124
amounts falling due after more than one year
revolving credit facility 2006 note 21 2700 2600 2700 2600
convertible subordinated bonds 2008 note 21 908 906 908 906
other loans – 122 – 122
total borrowings falling due after more than one year note 18 3608 3628 3608 3628
accruals and deferred income 88 93 – –
3696 3721 3608 3628
northern foods plc notes to the accounts 57
                                                                                                                notes to the accounts
continued
18 analysis of borrowings
group group company company
2005 2004 2005 2004
total borrowings £m £m £m £m
repayable within one year
bank overdrafts 13 08 291 138
bank loans 60 06 60 –
loan notes note 21 05 21 05 21
other loans – 160 – 160
amounts falling due within one year 78 195 356 319
repayable after more than one year
revolving credit facility 2006 note 21 2700 2600 2700 2600
convertible subordinated bonds 2008 note 21 908 906 908 906
other loans – 122 – 122
amounts falling due after more than one year 3608 3628 3608 3628
3686 3823 3964 3947
group group 
2005 2004
£m £m
borrowings falling due within one year 78 195
borrowings falling due after more than one year 3608 3628
total group borrowings 3686 3823
cash at bank and in hand 255 350
current asset investments note 16 98 149
net borrowings 3333 3324
liquidity risk
the group operates a policy of maintaining certainty of funding over the medium term by a combination of committed floating and fixed rate
facilities supplemented by uncommitted facilities the policy is to ensure that forecast net borrowings plus reasonable operating headroom 
are covered by committed facilities which mature at least 12 months after the year end at the year end £1800m 2004 £1900m remained
undrawn on the revolving credit facility
maturity of financial liabilities
the maturity profile of the group’s financial liabilities at the year end was as follows
group group company company
2005 2004 2005 2004
£m £m £m £m
in one year or less or on demand 78 195 356 319
in more than one year but not more than two years 2700 122 2700 122
in more than two years but not more than five years 908 3506 908 3506
total borrowings 3686 3823 3964 3947
further details of the group’s facilities are set out in note 21
interest rate risk
the group manages its exposure to interest rate fluctuations on its borrowings by operating with a mix of fixed and floating rate borrowings
the objective is to operate with fixed rate borrowings within a range of 20 to 50 per cent of total borrowings over the medium term although 
the group may operate outside that range during the year
the group’s fixed rate debt is based principally on the £913m 675 per cent convertible subordinated bonds 2008 detailed in note 21 no interest
rate derivatives are currently in place
58 notes to the accounts northern foods plc
                                                                                                             18 analysis of borrowings continued
interest rate risk profile of financial assets
group group
2005 2004
assets held as part of the financing arrangements of the group £m £m
cash at bank and in hand
sterling 153 306
euro 102 42
other currencies – 02
current asset investments 98 149
353 499
the euro deposits comprise floating rate deposits at 16 per cent 2004 17 per cent
current asset investments comprise a single floating rate investment fund in 2004 current asset investments comprised fixed rate sterling deposits
and securities of £149m with a weighted average interest rate of 60 per cent and a weighted average period to maturity of 19 years
interest rate risk profile of financial liabilities
floating rate fixed rate floating rate fixed rate
financial financial financial financial
liabilities liabilities total liabilities liabilities total
2005 2005 2005 2004 2004 2004
currency £m £m £m £m £m £m
sterling 2778 908 3686 2917 906 3823
the fixed rate financial liabilities relate to the convertible subordinated bonds 2008
fixed rate liabilities
weighted weighted
weighted average weighted average
average period for average period for
interest which rate interest which rate
rate is fixed rate is fixed
2005 2005 2004 2004
currency  years  years
sterling 68 33 68 43
the floating rate liabilities comprise amounts drawn on the revolving credit facility bank loans and overdrafts and loan notes bearing interest by
reference to market rates
fair values of financial assets and financial liabilities
the book value of the convertible subordinated bonds 2008 was £908m 2004 £906m and the fair value was £922m 2004 £929m based on
the quoted market price at the year end the fair value of forward foreign exchange contracts by reference to market exchange rates at the year end 
was £nil 2004 gain of £13m the book value of other financial assets and liabilities approximates to fair value due to their short maturities
currency exposure
the group operates primarily in the uk with a functional currency of sterling the functional currency of the overseas companies is euros
giving rise to foreign currency exposure the average and closing rates used in the accounts to translate euro to sterling were ¤1467  £1 
and ¤1457 £1 respectively 2004 ¤1440  £1 and ¤1507  £1 respectively
northern foods plc notes to the accounts 59
                                                    notes to the accounts
continued
18 analysis of borrowings continued
the monetary assets and liabilities of the group that are not denominated in the functional currency of the relevant operating companies involved
were as follows
net foreign currency assetsliabilities
other other
sterling currencies total sterling currencies total
2005 2005 2005 2004 2004 2004
functional currency of group operating companies £m £m £m £m £m £m
sterling – 04 04 – 03 03
euro 153 – 153 174 – 174
153 04 157 174 03 171
19 reconciliation of operating profit to net cash inflow from operating activities
2005 2004
£m £m
operating profit per profit and loss account 520 850
adjust for noncash items
depreciation 650 659
exceptional provision for impairment of tangible fixed assets 150 105
profit on sale of tangible fixed assets 14 05
amortisation of goodwill 40 35
exceptional provision for impairment of intangible fixed assets 11 –
amortisation of bond and financing costs 02 01
government grants 17 14
1342 1631
operating working capital movements
stock decreaseincrease 26 20
debtors increase 444 214
creditors increase 59 152
359 82
net cash inflow from operating activities 983 1549
the debtors increase includes £200m in respect of the special pension contribution
20 analysis of net debt
at start cash other non exchange at end 
of year flow cash changes movement of year
£m £m £m £m £m
cash at bank and in hand 350 100 – 05 255
bank overdrafts 08 05 – – 13
net cash 342 105 – 05 242
debt due after more than one year 3628 22 02 – 3608
debt due within one year 187 122 – – 65
current asset investments 149 51 – – 98
net debt 3324 12 02 05 3333
60 notes to the accounts northern foods plc
                                                                         21 financing
convertible subordinated bonds 2008
the bonds are in issue in registered form in amounts of £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 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 £100m at their
principal price
revolving credit facility 2006
the fiveyear syndicated revolving credit facility for £4500m was entered into in september 2001 at the year end borrowings under this facility were
£2700m 2004 £2600m these borrowings are repayable in periods of up to one year but are capable of being immediately refinanced as part of the
committed revolving credit facility
loan notes
loan notes due within one year total £05m this comprises £04m which bear interest at 10 per cent below the base rate and can be redeemed in
amounts of £20000 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 2008 other loan notes of £01m bear interest at 10 per cent below 
the base rate and 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 facilities and interest rates
the group had in place committed facilities of £230m 2004 £230m and uncommitted facilities of £670m 2004 £570m the group’s borrowings
under the revolving credit and uncommitted facilities bear interest at rates which generally fluctuate in line with market rates
22 provisions for liabilities and charges
deferred 
taxation
group £m
at start of year 695
charged to profit and loss account 29
other movements 01
at end of year 725
company
at start of year 237
charged to profit and loss account 86
at end of year 323
deferred tax liabilities are analysed as follows
group group company company
2005 2004 2005 2004
£m £m £m £m
amounts provided in respect of
accelerated capital allowances 563 641 104 126
other timing differences 287 186 287 186
undiscounted provision for deferred tax 850 827 391 312
discount 125 132 68 75
provision for deferred taxation 725 695 323 237
northern foods plc notes to the accounts 61
                                                notes to the accounts
continued
23 share capital
2005 2005 2004 2004
number amount number amount
million £m million £m
authorised ordinary shares of 25p each 7600 1900 7600 1900
allotted called up and fully paid ordinary shares of 25p each
at start of year 5085 1271 5232 1308
shares issued for cash under company share option schemes 20 05 34 08
repurchase of shares – cancelled –– 181 45
at end of year 5105 1276 5085 1271
during the year 156m ordinary shares of 25p each were purchased by the group in the market at a cost of £242m including stamp duty
commission and levies these shares are held in treasury bringing the total number of shares held in treasury to 219m
details of movements in share capital are shown in the report of the directors at the year end options were outstanding on 14155626 ordinary
shares exercisable at various dates to december 2014 at subscription prices ranging from 940p to 16967p
24 reserves
share capital reserve profit
premium revaluation redemption for treasury other and loss 
account reserve reserve shares reserves account
group £m £m £m £m £m £m
at start of year as previously reported 600 37 236 100 67 1496
prior year adjustment note 25 – – – 44 – –
at start of year as restated 600 37 236 144 67 1496
retained loss for the year – – – – – 410
premiums on shares issued under company share option schemes 23 – – – – –
repurchase of shares – – – 242 – –
goodwill previously written off included in retained loss for the year – – – – – 293
other movements – 02 – – – 02
exchange differences – –– –– 29
at end of year 623 35 236 386 67 1410
the accumulated amount of goodwill written off against consolidated reserves prior to the implementation of frs 10 was £1977m 2004 £2270m
the employee share ownership trust esot holds shares which are primarily used to satisfy awards made under long term incentive plans at the 
year end the esot held 3114793 2004 3114793 shares with a market value of £48m 2004 £50m the esot has waived its right to dividends
on unallocated shares
share capital reserve profit
premium revaluation redemption for treasury and loss
account reserve reserve shares account
company £m £m £m £m £m
at start of year as previously reported 600 37 236 100 2928
prior year adjustment note 25 – – – 44 –
at start of year as restated 600 37 236 144 2928
retained profit for the year – – – – 2679
premiums on shares issued under company share option schemes 23 – – – –
repurchase of shares – – – 242 –
other movements – 02 – – 02
at end of year 623 35 236 386 5609
25 prior year adjustment
during the year ended 2 april 2005 the group has complied with uitf abstract 38 ‘accounting for esop trusts’ this has resulted in a reduction 
in opening fixed asset investments of £44m with a corresponding reduction in shareholders’ funds there has been no impact on the current 
or prior year profit and loss account
62 notes to the accounts northern foods plc
                             26 pensions
the pension costs principally relate to the northern foods pension scheme the scheme which is a defined benefit scheme providing members 
with benefits based on pay and service the assets of the scheme are held in trustee administered funds separate from the finances of the group
the group also operates a number of other schemes none of which are considered to be material
in march 2005 the company announced the closure of the scheme and removed all remaining companyfunded early retirement provisions
pension builder was introduced for new employees and is a defined benefit scheme based on a career average principle
ssap 24
the pension costs relating to the scheme are assessed in accordance with the advice of an independent qualified actuary hewitt bacon  woodrow
using the projected unit method for the purposes of determining pension costs the most significant assumptions adopted were as follows
rate of increase in pensionable earnings 39 per cent per annum
rate of increase to pensions in payment 28 per cent per annum
rate of investment return 73 per cent per annum
the most recent actuarial valuation of the scheme was carried out as at 31 march 2002 using a marketbased 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
the contribution rate for the year was 127 per cent of pensionable earnings in addition the company made a special contribution of £200m 
during the year
frs 17
additional disclosures regarding the group’s defined benefit scheme are required under the transitional provisions of frs 17
the actuarial valuation described above has been updated at the year end by an independent qualified actuary hewitt bacon  woodrow
using revised assumptions that are consistent with the requirements of frs 17 investments have been valued for this purpose at fair value
for the purposes of determining the scheme liabilities under frs 17 the most significant assumptions adopted were as follows
2005 2004 2003
 
rate of increase of salaries 37 39 36
rate of increase to pensions in payment 26 28 25
rate of increase to deferred pensions 30 30 30
discount rate 54 55 59
inflation assumption 27 29 26
the fair value of the assets in the scheme together with those of the overseas scheme the present value of the liabilities and the expected rate 
of return as at the year ends 2005 2004 and 2003 were as follows
2005 2004 2003
long term long term long term
expected rate expected rate expected rate
of return 2005 of return 2004 of return 2003
£m £m £m
equities 83 4282 83 3744 83 2647
bonds 50 1297 50 1030 50 1037
other 40 62 40 60 40 290
total fair value of assets 5641 4834 3974
present value of scheme liabilities 7293 7051 6009
deficit in scheme 1652 2217 2035
related deferred tax asset 486 660 600
net pension deficit 1166 1557 1435
northern foods plc notes to the accounts 63
                                                notes to the accounts
continued
26 pensions continued
if the group had adopted frs 17 the group’s profit and loss account reserve would have been restated as follows
2005 2004
£m £m
group profit and loss account reserve excluding pension deficit 1410 1496
net pension deficit 1166 1557
ssap 24 prepayment 952 613
deferred tax on ssap 24 prepayment 286 184
group profit and loss account reserve 422 490
the amounts charged to operating profit under frs 17 would have been as follows
2005 2004
£m £m
current service cost 219 187
net operating charge 219 187
the amounts chargedcredited to net finance charge under frs 17 would have been as follows
2005 2004
£m £m
expected return on pension scheme assets 368 283
interest on pension scheme liabilities 390 348
net finance charge 22 65
the amounts included within the group’s statement of total recognised gains and losses under frs 17 would have been 
as follows
2005 2004
£m £m
difference between actual and expected return on scheme assets 142 519
experience gains and losses arising on scheme liabilities 07 05
effects of changes in assumptions underlying the present value of scheme liabilities 245 745
total actuarial gains and losses recognised in the group’s statement of total recognised gains and losses 380 221
deferred tax movement 119 66
total actuarial gains and losses recognised in the group’s statement of total recognised gains and losses 
net of deferred tax 261 155
the movement in deficit during the year under frs 17 would have been as follows
2005 2004
£m £m
deficit in scheme at start of year 2217 2035
movement in year
disposal of scheme – 43
current service cost 219 187
contributions 427 247
net finance charge 22 65
exchange adjustments 01 01
actuarial gainloss 380 221
deficit in scheme at end of year 1652 2217
related deferred tax asset 486 660
net pension deficit at end of year 1166 1557
64 notes to the accounts northern foods plc
                                                                               26 pensions continued
the experience gains and losses under frs 17 would have been as follows
2005 2004 2003
difference between the expected and actual return on scheme assets
amount £m 142 519 1279
percentage of scheme assets  25 107 322
experience gains and losses on scheme liabilities
amount £m 07 05 70
percentage of the present value of scheme liabilities  01 01 12
total actuarial gains and losses recognised in the group’s statement of total recognised 
gains and losses
amount £m 380 221 1439
percentage of the present value of scheme liabilities  52 31 239
27 financial commitments
capital expenditure authorised by the directors and to which the group and the company are contracted amounted to £167m and £nil respectively
2004 £47m and £nil respectively
annual commitments under noncancellable operating leases are analysed as follows
group group company company
2005 2004 2005 2004
£m £m £m £m
leases relating to land and buildings which expire
within one year 07 03 – –
in the second to fifth years inclusive 11 12 – –
in more than five years 22 18 08 03
40 33 08 03
leases relating to plant and machinery which expire
within one year 23 31 03 03
in the second to fifth years inclusive 69 99 07 07
in more than five years 04 – – –
96 130 10 10
28 acquisitions and disposals
acquisitions
on 21 june 2004 the group paid an amount of £11m to the irish grants agency forfas under an arrangement that existed with 
green isle food group limited prior to its acquisition by the group in july 1995 this resulted in goodwill on acquisition of £11m
during the year the group made an adjustment to the fair value on acquisition of solway foods holdings limited acquired in june 2003
this resulted in additional goodwill on acquisition of £08m there were no cash flows in respect of this transaction
disposals
the group made the following disposals of noncore businesses all of which have been treated as discontinued operations during the year
these reflect previously announced plans to focus on the group’s core strengths being the supply of chilled ambient and frozen foods to 
leading retailers
on 1 may 2004 the group sold the emile tissot frozen foodservice business to dawn fresh foods limited for a cash consideration of £35m 
less associated costs of £02m this resulted in a loss on sale of £61m after deducting £35m of goodwill previously written off to reserves
on 22 may 2004 the group sold the eden vale minsterley fresh chilled dairy business to uniq prepared foods limited for a cash consideration 
of £189m less associated costs of £04m this resulted in a loss on sale of £259m after deducting £240m of goodwill previously written off 
to reserves
on 4 november 2004 the group sold the cavaghan  gray seafood chilled and frozen fish business to ifp holdings limited a subsidiary of
icelandic group plc for a cash consideration of £129m less associated costs of £01m this resulted in a loss on sale of £28m after deducting
£18m of goodwill previously written off to reserves
northern foods plc notes to the accounts 65
                                                                          notes to the accounts
continued
29 contingent liabilities
contingent liabilities existed in relation to guarantees given by the parent company on behalf of subsidiary undertakings together with contingencies
in the normal course of the group’s business the parent company has guaranteed the overdrafts of subsidiary undertakings amounting to £nil
2004 £nil
a subsidiary undertaking is party to a letter of credit issued by barclays bank plc for £98m 2004 £98m secured against the assets of the
subsidiary undertaking
various group undertakings are also parties to litigation none of which is considered to be material
30 employees
2005 2004
group number number
average number employed during the year
production 18312 19587
distribution 1577 1582
administration 1790 1939
21679 23108
2005 2004
£m £m
remuneration
wages and salaries 3963 4037
social security costs 323 341
other pension costs 96 117
4382 4495
66 notes to the accounts northern foods plc
                               fiveyear record
profit and loss account 2001 2002 2003 2004 2005
turnover
continuing £m 11398 11973 12600 13877 14161
discontinued £m 2381 2619 1612 1544 327
total £m 13779 14592 14212 15421 14488
operating profit
continuing £m 1118 1169 1109 1057 1026
discontinued £m 111 82 47 13 02
total £m 1229 1251 1156 1070 1024
 of turnover  89 86 81 69 71
share of associated undertakings £m 14 04 14 04 –
net interest payable £m 202 245 195 214 222
profit before taxation £m 1041 1010 975 860 802
profit after taxation £m 792 774 796 705 634
exceptional items after taxation £m 55 101 242 14 568
goodwill amortisation £m 21 29 31 37 40
profit after taxation £m 826 644 1007 654 26
earnings per share
before goodwill amortisation and exceptional items p 1371 1391 1481 1377 1295
after goodwill amortisation and exceptional items p 1430 1157 1873 1278 053
dividend per share p 770 820 870 890 905
dividend cover times 18 17 17 15 14
asset analysis
operating assets £m 6868 7998 7848 8034 7743
other liabilities and provisions £m 962 1055 1011 1147 1149
trading capital employed £m 5906 6943 6837 6887 6594
accumulated goodwill written off £m 3082 3085 2466 2392 2150
total invested capital £m 8988 10028 9303 9279 8744
net borrowings £m 3244 4137 3236 3324 3333
total equity funds invested £m 5744 5891 6067 5955 5411
equity shareholders’ funds £m 2662 2806 3601 3563 3261
net gearing  1219 1474 899 933 1022
interest cover times 62 51 60 50 46
capital expenditure £m 783 1236 794 713 629
shareholder value analysis
profit before interest £m 1243 1255 1170 1074 1024
attributable taxation £m 310 309 238 219 235
normalised operating profit after tax nopat £m 933 946 932 855 789
return on average invested capital roic  107 99 101† 92 88
weighted average cost of capital wacc  73 73 63 69 66
margin over cost of funds  34 26 38 23 22
posttax return on average equity funds invested  139 133 133 117 112
stated before goodwill amortisation and exceptional items
†
stated after reducing the 2002 invested capital by £870m to reflect the sale of the ski and munch bunch brands and associated assets 
on 2 april 2002
the years ended 2001 to 2004 have been restated to comply with uitf abstract 38 ‘accounting for esop trusts’ the year ended 2001 
has been restated to comply with frs 19 ‘deferred tax’
northern foods plc fiveyear record 67
                                                                               shareholder analysis
at 20 may 2005
holders shares held
 of number  of
number holders ’000s capital
by classification
individuals 39865 9477 56229 1101
banks and nominees 1898 451 414750 8123
corporate shareholders 241 057 29328 575
investment companies 18 004 173 003
insurance companies 29 007 2146 042
pension funds 18 004 7953 156
42069 10000 510579 10000
by size of holding
1100 6720 1597 312 006
101500 14769 3511 3898 076
5011000 7122 1693 5340 105
10012000 5671 1348 8386 164
20015000 4974 1182 16027 314
500150000 2405 572 27981 548
50001100000 126 030 9019 177
100001 and over 282 067 439616 8610
42069 10000 510579 10000
this includes 219m shares held in treasury
68 shareholder analysis northern foods plc
         financial calendar
2005
final results announcement 1 june
annual report issued 21 june
latest date for receipt of forms of proxy 19 july
annual general meeting 21 july
shares quoted exdividend 27 july
record date for final dividend 29 july
halfyearly interest payment on 
convertible subordinated bonds 8 august 
final dividend payment on ordinary shares 26 august
interim results announcement november
2006
halfyearly interest payment on
convertible subordinated bonds 8 february
interim dividend payment on ordinary shares march
financial year end 1 april
registered office
2180 century way
thorpe park 
leeds ls15 8zb
telephone 0113 390 0110
facsimile 0113 390 0211
website wwwnorthernfoodscom
registered in england and wales
no 471864
auditors
deloitte  touche llp
merchant bankers
n m rothschild  sons limited
stockbrokers
ubs investment bank 
registrar to the ordinary shareholders
computershare investor services plc
the pavilions
bridgwater road
bristol bs99 7nh
telephone 0870 702 0134
email webqueriescomputersharecouk
website wwwcomputersharecom
principal paying and conversion agent and
registrar to the convertible bond holders
j p morgan chase bank
1 chaseside 
bournemouth bh7 7da
company information
northern foods plc financial calendar company information 69
                       shareholder services and helpline
shareholders who change address or who want to have their
dividends paid directly into their bank account should write to 
the registrar computershare investor services plc at the pavilions
bridgwater road bristol bs99 7nh if they require some other
information about their holding shareholders can contact the
registrar computershare investor services plc on the dedicated
northern foods shareholder information telephone line 0870 702 0134
or email their enquiry indicating that they are a northern foods
shareholder to webqueriescomputersharecouk
shareholder information on the internet
the northern foods website wwwnorthernfoodscom provides access
to shareholder information including our annual and interim reports
share price and recent share price trends financial highlights and
results presentations to analysts as well as a link to the registrar
computershare investor services plc at wwwcomputersharecom
the link to our registrar allows shareholders to access their individual
shareholder details these details are protected and shareholders will be
required to pass an identity check to access their personal information
this link also allows shareholders to download stock transfer dividend
mandate and change of address forms
electronic proxy voting
shareholders wishing to appoint a proxy electronically via the internet
should refer to the instructions contained in the circular sent to
shareholders with this report
dividend mandates
shareholders may choose to have dividends paid electronically into
their uk bank or building society account using the bacs system
this process ensures that the amount of the dividend is passed
directly into their account as cleared funds on the date the payment
is due confirmation of payment is contained in a dividend tax voucher
which is posted to shareholders’ registered addresses at the time 
of payment this voucher should be kept safely for future reference
any shareholder wishing to adopt this method of payment should
complete a dividend mandate form which can be found attached 
to the last dividend warrant alternatively a form can be downloaded
from the registrar’s website or requested by calling the above
telephone helpline on 0870 702 0134
capital gains tax
the base cost of a northern foods ordinary share at 31 march 1982
for capital gains tax purposes is 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 now arla foods uk plc on 
30 march 1998
any gain arising on disposal may also need to be adjusted to take
account of indexation allowances and since these adjustments will
depend on individual circumstances shareholders are recommended 
to consult their financial advisers
investor information
70 investor information northern foods plc
              central functions
northern foods corporate headquarters
2180 century way thorpe park leeds ls15 8zb
telephone 0113 390 0110
technical services centre
farnsworth house lenton lane nottingham ng7 2ns
telephone 0115 986 8231
shared service centre
trinity park house fox waywakefield wf2 8ee
telephone 01924 831300
ambient division
fox’s biscuits
po box 10 batley wf17 5jg
telephone 01924 444333
operations at batley kirkham and uttoxeter 
park cakes
ashton road oldham ol8 2nd
telephone 0161 633 1181
operations at oldham and bolton
matthew walker
heanor gate road heanor derbyshire de75 7rj
telephone 01773 760121
frozen division
green isle foods
ida industrial estate naas co kildare ireland
telephone 00 353 45 848000
operations at naas boyle gurteen portumna and longford
dalepak foods
dale house leeming bar northallerton dl7 9dq
telephone 01677 424111
walter hollands
baxenden near accrington bb5 2sa
telephone 01706 213591
fletchers kara grain d’or
claywheels lane sheffield s6 1ly
telephone 0114 234 8171
operations at fletchers bakeries sheffield kara manchester
and grain d’or harlesden
smiths flour mills
po box 3 eastgateworksop s80 1qy
telephone 01909 472216
operations at worksop langley mill and holbeach 
chilled division
palethorpes
maer lane market drayton tf9 3aw
telephone 01630 652271
pork farms bowyers
queens drive nottingham ng2 1lu
telephone 0115 986 6541
operations at nottingham trowbridge dorset chilled foods
shaftesbury and binghams sheffield
trafford park bakery
ashburton road west trafford park manchester m17 1qx
telephone 0161 873 7724
the pizza factory
gateside road lenton lane nottingham ng2 1lt
telephone 0115 986 8204
solway foods
3 godwin road earlstrees industrial estate corby
northants nn17 4ds
telephone 01536 464400
operations at corby and manton woodworksop 
nft distribution
azalea close clover nook industrial estate somercotes
alfreton de55 4qx
telephone 01773 523523
operations throughout the country
cavaghan  gray
brunel house brunel way carlisle ca1 3nq
telephone 01228 518200
operations at carlisle and hull
gunstones bakery
stubley lane dronfield sheffield s18 6pf
telephone 01246 414651
operations at dronfield and la baguette doree barnsley
riverside bakery
crossgate drive nottingham ng2 1lw
telephone 0115 986 6462
pennine foods
drakehouse crescentwaterthorpe sheffield s20 7jg
telephone 0114 247 6864
fenland foods
turnpike close earlesfield industrial estate grantham
lincolnshire ng31 7xu
telephone 01476 567733
principal operations
northern foods plc principal operations 71
                                                    72 notes northern foods plc
notes
    design and production 35
photography bill robinson
print st ives westerham press
northern foods is one of the 
uk’s leading food producers 
with a proven reputation 
for quality and innovation 
our mission is to be the 
supplier of choice to uk 
and irish retailers in added 
value convenience foods
contents
01 financial highlights
02 chairman’s review
04 chief executive’s operating review
08 financial review
11 board of directors and company secretary
12 qa with the chief executive
14 business review
22 corporate social responsibility review
26 report of the directors
31 directors’ remuneration report
41 independent auditors’ report
42 consolidated profit and loss account
43 consolidated balance sheet
44 consolidated cash flow statement
45 reconciliation of net cash flow
to movement in net debt
consolidated statement of 
total recognised gains and losses
reconciliation of movements 
in equity shareholders’ funds
46 company balance sheet
47 accounting policies
49 notes to the accounts
67 fiveyear record
68 shareholder analysis
69 financial calendar
company information
70 investor information
71 principal operations
       northern foods plc annual report 2005
supplier 
ofchoice
northern foods plc
annual report 2005
northern foods plc
2180 century way
thorpe park
leeds
ls15 8zb 
tel 0113 390 0110
fax 0113 390 0211 
wwwnorthernfoodscom
         


Summary:
 q

a
with the chief executive
pat o’driscoll answers questions on 
the changes and progress made in 
northern foods over the last 12 months
q can you outline the priorities for get fit
a our priorities in the short term are to improve performance 
in the chilled division with a simpler and leaner divisional structure
to lower overhead costs and to capture category and customer
opportunities we will also continue to leverage scale through 
central procurement and continuous improvement in manufacturing
q how long will it take when can we expect 
to see returns
a we are committed to a major business transformation over 
three years to 2007 we expect to see benefits coming through 
this year and accelerating next year as the changes gain momentum
q performance has been in decline for a number 
of years – is the turnaround achievable
a yes it is and the increasingly tough trading conditions mean 
we have to accelerate the pace of our get fit programme delivery
in our strategic business review we clearly identified our strengths and
weaknesses and now our energy is totally focused on implementing
the strategy for performance and improvement
q how will we know if it is working
a the signs of success are already visible in the many changes 
and innovations that are emerging tracking that progress is a key
component of the get fit programme and we have developed
management information tools which will help us identify successes
and measure performance against defined metrics
q the marketplace is getting tougher how will you
retain the savings that you expect from the get fit
initiatives and will you be able to invest in growth
a we will achieve this by accelerating the pace of delivery for sales
growth lowering competitive costs by improving our chilled performance
by pursuing efficiency gains and by building on our successes we are
continuing to invest in growth and in our customer proposition
q do you have the right management team 
in place now
a i am very pleased with the calibre of our restructured management
teamwe have a very strong group board and a dynamic operating board
which combines the right mix of business expertise and functional
excellence i am confident in the new management team’s ability 
to address the issues we face and achieve our business ambition 
at the pace our shareholders require
12 qa with the chief executive northern foods plc
               q northern has historically grown through
acquisition what are your plans in this area 
for the future
a we took the strategic decision to sell a number of businesses
where we did not have the scale to compete or where the business
was not focused on our key categories the approach has freed 
us up to focus with absolute clarity on transforming our current
business however we do recognise that a consolidating sector 
such as ours offers opportunities for acquisition we are therefore
receptive to acquisitions which would help us build or maintain
market leadership in categories that are important to us we will
consider each opportunity as it arises on the criteria of whether 
it enhances shareholder value
q how are you adding skills to northern foods
people to cope with the scale and pace of change 
it is facing
a the company is aligning people behind our ambition by asking
them to think and act in different ways – to challenge ideas identify
opportunities and accept that change is a constant there is a clear
responsibility on the management team to lead people through this
journey and provide them with the tools and coaching they need 
to succeed the get fit programme includes a number of specific
initiatives to support this need examples include the creation of
project working groups at site level to drive continuous improvement
the rollout of a leadership development programme and the
introduction of performancerelated remuneration it solutions are
also being harnessed to support change providing access to online
learning materials and best practice case studies everyone has
potential it is my responsibility to ensure it can flourish
q are there more major organisational 
changes to come
a an organisation that does not continually ask “how can 
we improve” is an organisation that will not lead the market
as we transform northern foods we will aggressively pursue 
the optimum operating model and the best people in the market
q how are you addressing the impact 
of business change on your customers
a our mission is to be the ‘supplier of choice to uk and irish
retailers in added value convenience foods’ and the integration 
of our business underpins the delivery of that mission by working 
as ‘one northern’ the company has been able to streamline its
commercial approach and manage key customer relationships more
effectively that in turn has let us identify new opportunities to
innovate and add value we are working hard to communicate the
rationale for changes and the positive responses we have received
indicate that we are on the right track during this period of business
transformation we need to ensure that our high reputation for quality
and delivery is not affected and we are keeping a careful eye on this
q what are your criteria for category focus 
and how will success be achieved
a our strategic business review highlighted consumer demands for
choice and convenience within our chosen categories we can provide
convenient added value meals snacks and treats we operate in
categories where we have strong market positions in either private
label or brands and we can use our manufacturing scale to achieve
competitive costs we are clear on the range of category and customer
opportunities we will target
q how are you reflecting the changing 
eating trends of consumers
a three dominant trends drive today’s consumer eating habits
convenience a desire for indulgence taste and quality and the
fulfilment of healthy eating goals northern foods wide range 
of meals snacks and treats provides choices in all three areas
we need to excel in what we do and will succeed by monitoring
changing food trends capturing consumer feedback and working
closely with our customers to adapt our ranges and develop new
products which support emerging trends
q can you describe ‘one northern’ – is it a brand
a ‘one northern’ is the term we use to describe our newly 
integrated approach to running our business it describes how 
we can address the market more powerfully as a single business
how we can capitalise on our scale and knowledge by centralising 
key activities and functions and how we can perform at pace by
planning as a single team and focusing our people on shared goals
over time we expect former operating company names to be replaced
with northern foods branding to reflect this management shift
we are committed 
to a major business
transformation 
over three years
northern foods plc qa with the chief executive 13