NORTHERN Foods, the parent company of North Yorkshire frozen food firm Dalepak, has buoyed investors with news of a sharp rise in profits.

The group, based in Hull, said profits in the three months to December 31 were higher than in the previous quarter.

The improvement was largely due to a 7.2 per cent rise in overall sales and lower costs.

Total sales to five leading UK supermarket chains, including Tesco and Asda, grew by eight per cent in the period, despite the loss of a savoury products deal with Sainsbury's.

Northern Foods is trying to recover from a 16 per cent fall in half-year profits to £32.5m.

Unseasonal weather, which hit sales of non-chilled foods in the first half, continued to have an impact, while crop prices remained high.

In its update, the group said progress had been made towards stabilising second-half profits at last year's level of £58.7m.

The company said: "Further progress needs to be made in the final quarter to recover continuing raw material inflation in a very demanding trading environment and to achieve additional reductions in overhead costs."

The positive update sent shares up six per cent, with analysts expecting the company to post bottom line profits of £87m for the year to March 31.

This includes the impact of the sale of Fox's Confectionery in September and the disposal of the Batchelor's and Beck Smith businesses last month, as well as a share buyback programme.

The end of the financial year will also see a change at the top, with Pat O'Driscoll, former retail president of Shell Europe, taking over as chief executive.

She replaces Jo Stewart, who resigned in September in the wake of a profits warning.