Northern Foods’ Interim Management Statement for the 13 weeks ended 3 July 2010 (“first quarter”) has highlighted the following.

Overview

Trading as expected in challenging conditions

Q1 Group like for like sales* 1.6% lower, reflecting:

Chilled like for like sales* up 14.3%, with Sandwiches & Salads continuing to perform strongly and Ready Meals performance showing steady progress

Bakery like for like sales* down 5.6% as expected, as a result of our planned reduction in promotional activity; margins remain strong

Frozen like for like sales* down 24.9% following the planned exit of marginal business and of the Birds Eye contract in Frozen; and the transition to our new Goodfella’s pizza brand

Increased investment in the current half year:

Automation: continued investment in technology for Fox’s Biscuits

Brands: major relaunch for Goodfella’s pizza

With a strong financial position (net debt reduced by approximately 6% over the prior year) the Group is well positioned going forward

Performance

We are continuing our investments to position the business for growth, despite the challenging trading conditions. Our first half year will see incremental investment, principally in our Goodfella’s pizza brand, and in automation at Fox’s Biscuits which is progressing well to enhance future earnings and strengthen our competitive position.

Chilled grew its underlying revenue* by 14.3%, with a continuing strong performance in Sandwiches & Salads. Ready Meals performance showed continued steady improvement in the first quarter and the wind-down of our Swansea site is progressing smoothly. The phased introduction of our 10 year contract to supply British Airways commenced in March 2010 and this short haul contract is now fully operational.

Bakery underlying revenue* reduced by 5.6%, reflecting our decision to materially reduce promotional activity this quarter due to the World Cup. Normal promotional activity will continue in Q2 and margins remain strong. Our major investment in new automated technology within Fox’s Biscuits is progressing well and this programme is expected to complete early in our 2011/12 financial year.

In Frozen, as expected, underlying revenue* declined by 24.9% in the first quarter, following the year on year impact from exiting the Birds Eye co-pack business in June 2009. We will lap the exit of this contract in Q2 and our brand investment in Goodfella’s commenced during the first quarter, with the transition to a new brand, new product recipes and new packaging. We are continuing the roll out of the McDougalls pie brand.

Our financial position remains strong. Net debt is lower than the prior year quarter, whilst increasing modestly from the year end to reflect the start of seasonal working capital build and our investments in the business. Our replacement revolving credit facility (RCF) commenced this month, with a £250m facility, maturing in July 2012. 84% of our debt is at fixed rates, maturing in tranches between 2012 and 2020.

Stefan Barden, Chief Executive of Northern Foods, said: “We expect to see continued challenging trading conditions.

“We are focused on a range of initiatives to enhance the competitive position of the Group and to drive growth, with increased investment in brands, talent and technology in the first half year. With a strong financial position, Northern Foods remains well positioned going forward.”

* Excludes the impact of currency rate changes, product categories no longer manufactured, acquisitions and discontinued operations and the 53rd week.