The combined Northern Foods Group, encompassing Express Dairies, reported a 19.3% rise in profits now at a pre-tax level of £151.6 million.

Coming in at the top of analysts' forecasts Northern Foods increased their dividend by more than 10% to 10.4p.

Profits at Northern Foods alone grew by 8.9% to £94.3m.

Sales of prepared foods to their five largest customers grew by 5%. Marks and Spencer, Safeway, J.Sainsbury, Tesco and ASDA together accounted for 70% of the group's UK retail sales.

Chairman of the group Christopher Haskins said "Northern Foods intends to pursue a progressive dividend policy in the future, in line with the long term earnings potential and cash flow of the group."

Express Dairies expect to find a merger partner with the next year

Rival Unigate, which announced a lift in annual figures yesterday and left the door open to the possibility of a future merger, eased 2p to 662.5p.

The UK's largest supplier of milk and cream, Express Dairies who de-merged from Northern Foods in March announced pre-tax profits of £62.5 million, up 40% on the year.

The company was helped by lower raw milk prices, which overcame a decline in volume in its doorstep deliveries. Turnover was down 7% to £752m on a like-for-like basis. The group says it withdrew from unprofitable supply to smaller supermarkets during the year.

Express Dairies Chief Executive Neil Davidson said the group is still involved in the push for amalgamation of the UK dairy industry.

"We have been pretty open that we have been proactive about talking to people and that we would hope that some form of consolidation will take place in the next 12 months," he said.