UK food manufacturer Northern Foods has posted a drop in annual pre-tax profits in line with expectations and warned that tough conditions at its biscuit unit would impact its first-half grocery performance.

The group, which makes own-label ready meals and desserts for UK food retailers such as Marks & Spencer, reported pre-tax profits before goodwill amortisation and exceptional items of £97.5m (US$159.7m) for the year to end-March, a drop of 3.5% year-on-year.

Despite efforts to speed up new product development, cut costs and raise prices, Northern Foods said it expected biscuit trading to hurt the performance of its grocery business in the first half, reported Reuters.