LONDON (ShareCast) - Northern Foods is mothball its Fenland Foods plant in Grantham after failing to agree a new contract with Marks & Spencer for the supply of ready meals.

The move will see lay-offs of 730 people at the factory, with the firm saying it could be two years before it re-opens. Northern said the decision reflects a strategy of only continuing with business where terms generate an adequate return for its shareholders. "We couldn't find a business model that was profitable for us,” Northern chief executive Stefan Barden told reporters.

The M&S contract generated approximately £45m of annual sales and represented the majority of production at the Fenland plant. The site operated at break-even profitability in the year ended 29 March 2008, Northern said.

Mothballing the plant is not expected to impact materially the group's profit before tax and restructuring items. There would be a one-off cash restructuring cost and a non-cash write-down of asset value, which will be reported in the 2008/09 financial result, it added.

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