Blackfriar: Northern food for thought as the clouds are still hovering

The Leeds-based company's shares have lost more than a third of their value over the past year, underperforming a five per cent rise in the UK food producers' index.

That's despite Northern currently paying a dividend yield of almost 10 per cent. Some analysts suggest this payout is unsustainable.

Chief executive Stefan Barden, appointed to the role in February 2007, deserves credit for the tough action he's taking to modernise and reposition Northern.

He's put Northern on an even keel. Profits warnings, once a regular feature in Northern's reporting calendar, disappeared under his reign. Gone are 18 individual business units that existed on his appointment – investors now have much more clarity.

Debt is also under control – Northern is by no means a Premier Foods.

But his latest move, a divisional streamlining, shrinking from five divisions to two, will ruffle a lot of feathers. The accompanying job cuts will be made among senior management, many of whom will have been with Northern for decades.

Barden appears to be nearing the end of a bottom-up restructuring. The first stage was to tackle marginal and loss making contracts, notably playing hardball with the like of Marks & Spencer and Morrisons.

While his refusal to do loss-making contracts shows steely determination, questions remain over what damage this has done to Northern's relations with its big customers.

Then his focus moved to the shop floor, where he has introduced robots at Fox's biscuits and closed aging sites such as Hull's Cavaghan and Gray ready meals factory. His vision is to shrink Northern's previously dinosaur-like footprint by focusing on fewer but larger ultra-modern factories.

But as we've seen with Project Golden, his Fox's masterplan, grand concepts such as a 50m biscuit superfactory have had to stay as concepts in the current economic climate.

Finally comes the management re-shuffle, getting rid of an expensive tier of senior management. This latest restructuring will cost 6m, a sum that has raised eyebrows in the industry.

That could be an indication of how expensive it has been to retain, and subsequently discard, this tier of employees. They've done the difficult work for Barden with the previous two stages and now they're surplus to requirements.

Or, as an industry source suggests, shrinking to two divisions could allow it to bury lacklustre performance by smaller business units in future.

Barden is the latest in a line of chief executives to try to restructure this venerable Yorkshire company. His vision for Northern is undeniably grand, and ruthless to boot.

But Northern's pension deficit, lowly share price, increased competition, demanding retailers, commodity inflation and tough consumer spending are all pressing down on him. Blackfriar wonders whether Barden will be given the time, or has the will, to see out his vision.

Blackfriar, still reeling from a seven-course Christmas lunch with Sainsbury's yesterday, will test out a new theory this morning.

Companies like to pamper journalists when they've got good news. So yesterday we were all treated to a Sainsbury's festive knees-up as it announced better than expected sales figures.

In contrast, Marks & Spencer is holding a 9.30am (crack of dawn for a journalist) conference call this morning to announce its second quarter trading statement. Not a hint of a mince pie in sight.

Analysts believe M&S will come up with good figures this morning. Blackfriar suspects otherwise. The proof will be in the pudding (or lack of it).