Northern Foods feels the pinch after Birds Eye axe

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The move to axe certain contracts was an attempt to boost margins, a strategy the food manufacturer behind Goodfella's pizza and Fox's biscuits says is on track.

Sales were down 1.6% over the quarter.

Bakery sales fell 5.6% on a like-for-like basis in the first quarter, but Northern said this was in line with expectations after it reduced promotional activity for its Fox's biscuits brand during the World Cup.

The company has previously invested in Fox's biscuits through a series of adverts featuring Vinnie the panda and it relaunched its Rocky bar.

In chilled foods, like-for-like sales were 14.3% up in the 13 weeks to July 3, boosted by strong demand in the warm weather.

It expects trading to remain challenging.

Panmure Gordon predicts that Northern Foods will make a profit of £40 million next year, not enough to make the shares worth buying, it warns.

The stock today slipped 1.25p to 45.5p. Panmure says fair value is more like 42p.

Debts are expected to increase from £185 million to £193 million.