Blackfriar: Pensions legacy proves a drag on resurgent Northern

Earlier this week the chief executive presented a "solid" set of annual results that contained some very welcome news – Northern's dividend will be maintained.

With a total dividend of 4.5p, the Leeds-based group's shares yield a sector-beating 10 per cent.

Amid tough markets, net debt was lower and sales and underlying profits broadly stable.

But on the day shares fell three per cent as analysts questioned the sustainability of the payout. They are concerned Northern may be forced to cut the dividend to top up its pension pot.

"We do not see such a yield as being sustainable; so either the dividend is cut or the share price re-rates," said analysts at Shore Capital.

Shares in Northern have fallen more than 30 per cent since the start of the year.

Northern faces a triennial valuation of its pension scheme in March 2011 when the extent of its pension woes will be laid bare.

Like many big businesses, its pension scheme has been hammered during the downturn. Over the year its assets increased in value, but this was offset by higher inflation and more conservative pension accounting.

This meant its deficit more than doubled to 149.7m from 71.5m a year earlier.

Northern warned pension scheme liabilities "will continue to be unpredictable as interest rates and inflation remain volatile".

Its pension scheme woes are the legacy of its much bigger former footprint and a healthier population living longer.

Finance director Simon Herrick insisted Northern's intention is to maintain the dividend. "You can never say never, but at the moment there is no intention internally to be cutting the dividend."

He's working to reduce the pension pot's volatility, but has a job on his hands.

Much will depend on how much of the group's cash generation goes on debt repayments and capital investment.

Pension problems are proving an unwelcome distraction from Northern's growth story.

Under Barden, Northern has been transformed. A business which once regularly reported profits warnings, Northern has diversified and reduced its dependence on Marks & Spencer, its biggest customer.

It's ploughing cash into core brands such as Fox's biscuits with proven success. A 5m Goodfella's pizza campaign aims to win back market share taken by rival Dr Oetker.

Innovation is starting to take centre stage at Northern – it just needs breathing space to prove it.

Blackfriar is a little surprised by the furore that has been raised about people skiving off work in order to watch England's World Cup matches.

Apparently more than a third of us are planning to miss work to watch England play.

An estimated 38 per cent of full-time workers aged 18 to 45 are planning to be out of the office to cheer their team, a YouGov survey found.

A total of 2,463 people were asked what they were likely to do to watch a particular match.

While five per cent said they would take a sickie, 18 per cent said they would go to the pub with friends or colleagues and 23 per cent said they would take the day or half-day off.

The survey found five per cent would be prepared to miss or reschedule their first day in a new job to watch a key game on television, 28 per cent would reschedule a planned business lunch and 17 per cent would defer a meeting with their boss.

Fair enough, but there is actually only one England match that will be played during work time. Our first round match against Slovenia on Wednesday June 23 at 3pm. All the rest will be played at the weekend or at 7.30pm. So stop the warnings and enjoy – we need a pick-up.