FDBusiness.com

Now focused on the UK following the £341.1 million disposal of its St Hubert French spreads business, Dairy Crest has reported a 7% increase in adjusted profit before tax to £50.6 million on revenue from continuing operations down 8.8% to £1.38 billion for the year ended 31 March 2013. The reported profit before tax was a loss of £0.4 million as a result of exceptional items, including exceptional charges of £56.5 million relating to restructuring.

Dairy Crest operates in three product categories – Cheese, Spreads and Dairies. Segment profit excluding St Hubert increased by £0.7 million to £69.3 million. Cheese profits recorded a small decrease to £33.3 million, reflecting increased costs of milk in 2011/12 translating into higher cost of sales in 2012/13. Spreads profits increased by £2.5 million to £25.7 million due to the benefit of cost savings initiatives and lower vegetable oil costs. Dairies profits of £10.3 million were effectively flat year-on-year, with the benefit of on-going cost savings being offset by the impact of residential decline and the higher cost of raw milk.

The decline in group revenue was chiefly due to lower sales in the Dairies business, following the decision to reduce sales in the middle ground and the closure of the Fenstanton and Liverpool dairies, coupled with the ongoing reduction in residential sales. Spreads revenue also decreased by £16.8 million but Cheese revenues increased slightly.

Dairy Crest’s Clover and Country Life spreads brands both gained market share during the year and Cathedral City (the UK’s leading cheese brand) grew ahead of the market. The focus on innovation is continuing to drive added value sales – 5% of total revenue and 9% of key brand revenue is now generated from products introduced in the last three years. Ongoing efforts to improve efficiency and cut costs across the group resulted in annualised cost savings of £23 million in 2012/13, with a further £20 million identified for 2013/14.

Mark Allen, chief executive of Dairy Crest,

The sale of St Hubert has resulted in a UK-focused business which has subsequently been reinforced by a reorganisation resulting in the removal of divisional operating and management structures. The cash proceeds have allowed Dairy Crest to restructure its debt after the year end and make a one-off contribution to the pension fund as well as retain capacity for future investment in the UK business.

”This has been an important year in the history of Dairy Crest. The sale of our French spreads business and subsequent restructuring of our balance sheet has strengthened our financial position and leaves us well placed to invest for growth in the UK, either internally or through acquisitions,” comments Mark Allen, chief executive of Dairy Crest, “In line with our long term strategy we have continued to manage proactively the business and remain focused on driving efficiencies. Taken together, our four key brands have increased their market share in the face of falling UK consumption.  We have also started to restore profits in our Dairies business.”

He continues: “Dairy Crest is today a more streamlined business, and all three of our product categories have encouraging medium-term profit growth prospects. Whilst we expect the consumer environment to remain subdued, we have strong foundations in place and trading in the current financial year has started in line with our expectations.”