CONVENIENCE foods manufacturer Greencore's profits have been hit by the failed merger with Northern Foods.

The Irish business, which employs 600 people on a 23-acre site at Barlby, near Selby, was on track to almost double pre-tax profits in the first half of 2011, from €10.7 million to €20.1 million.

The business had planned to create a new business Esssenta Foods, which would save it £40 million per year before it was outbid by Borparan Foods in January with a cash offer valuing Northern Foods at £342 million.

The business increased revenue from continuing operations from €409.5 million to €441.8 million in its interim results for the half-year ended March 25, but recorded a pre-tax profit of just £2.5 million, after the fight for Northern Foods cost it €13.1 million.

It also spent €500,000 on the acquisition of US sandwich business On A Roll and €4.1 million on a legal claim related to former activities.

Patrick Coveney, group chief executive officer, said the management would be focusing on the increasing prices of raw materials, which it has offset so far through increasing certain prices, reengineering products and efficiency programmes within the business.

He said: “Our business continues to perform well, despite some of the recent challenges in the UK and US food markets.

“This delivery is grounded in close customer relationships, strong operational performance, a passionate Greencore team and a focus on driving down financing costs following our disposal programme last year.”

He said the failure of the Northern Foods merger was “disappointing” but the group intended to seek further acquisitions.

“We learnt an enormous amount from the process and we are optimistic about our ability to drive growth and shareholder value from both our existing business and from corporate development in the months and years ahead,” he said.

During 2010, the group disposed of its malt, water and continental businesses, to focus on convenience foods, which accounts for more than 90 per cent of sales.

The restructuring generated more than €100 million, which was used to reduce the group’s debt, although it has risen again since September from €193.4 million to €236.7 million because of costs related to the Northern Foods merger and seasonal working capital outflow.