NORTHERN Foods yesterday reported a pick-up in sales but warned trading remained difficult, with outbreaks of bird flu pushing up the cost of chicken.

The company, which makes Goodfella's pizzas and Fox's biscuits, has also been hit by the higher price of energy and more expensive beef.

In an update ahead of results for the six months to October 1, Northern said underlying sales were about 3.4 per cent higher than last time.

That compares with a 3.2 per cent rise for the 13 weeks to July 2, although Northern said surging input costs continued to hamper progress.

Finance director Jez Maiden said: "We have seen the rising cost of utilities starting to impact the first half and that will continue clearly in the second half. We have seen some impact from the uncertainties over avian flu, and that tended to push up the price of chicken we buy in the UK.

"Also, you are seeing the protein producers suffering the rising price of energy themselves."

Avian flu has killed 65 people and millions of birds in Asia since 2003. Romania and Turkey began culling hundreds of birds over the weekend, raising fears the disease could be spreading across Europe.

Northern employs 300 people at its Dalepak frozen food factory in Leeming Bar, North Yorkshire, which manufactures a range of meat and meat-free products, as well as the Ross brand of burgers.

In 2003, the Leeds-based company began a shake-up after a series of disappointing financial results.

It merged 15 companies into three divisions, closed two plants and shed 30 management posts and 1,000 other jobs as part of the overhaul, launched by chief executive Pat O'Driscoll.

She said yesterday: "As has been well documented, the trading environment remains tough and we will need to recover further input cost inflation in the second half, particularly in utilities."

Analysts expect pre-tax profits to be about £75.6m this year.