Strong Contributions From Spreads and Cheese Offset by Dairies Losses at Dairy Crest
Dairy Crest has reported a 1% increase in group revenue to £682.1 million for the first half year ended 30 September with higher cheese and milk sales being offset by lower spreads sales. Total product group profit from continuing operations fell 8% to £25.0 million as improved Spreads product group profits and broadly maintained Cheese product group profits were outweighed by a deterioration in Dairies profitability despite an increase in property profits, arising from an ongoing programme of sales of delivery depots that are no longer required.
Group adjusted profit before tax (before exceptional items, amortisation of acquired intangibles and pension interest) was £21.3 million, down 3% versus £21.9 million in 2013.
Exceptional costs of £19.3 million were incurred during the six months ended 30 September 2014, including £9.3 million associated with the closure of Hanworth and Chard dairies announced in September 2014, £8.8 million in relation to the consolidation of spreads and butter manufacturing onto one site, and £1.1 million associated with the significant investment on whey projects at Davidstow. Profits before tax from continuing operations dropped to £0.9 million from £19.7 million in the first half of last year.
All of Dairy Crest’s four key brands grew retail market share and its cost reduction programme is on target to deliver savings of £20 million this year.
Mark Allen, chief executive of Dairy Crest, comments: “Dairy Crest has delivered adjusted first half profits broadly in line with last year and we have continued to grow our key brands and reduce our cost base. In an environment which remains particularly difficult to predict our immediate focus is on delivering the second half. The investments we are making to add value to whey are on track to grow future profits.”
Dairy Crest is disposing of its loss-making Dairies division to Muller UK & Ireland for £80 million. The disposal will leave Dairy Crest focused on its profitable, predominantly branded, cheese and spreads operations. It will also grow its revenue and profits by continuing to develop whey-based products, such as demineralised whey powder and galacto-oligosaccharide, for the fast growing global infant formula market.
Dairy Crest’s cheese and packet butter and spreads businesses recorded revenues of £442 million and product group profits of £56.1 million in the year ended 31 March 2014. This product group includes Dairy Crest’s market leading Cathedral City brand, Davidstow, Clover, Country Life and the fast growing Frylight one calorie cooking spray.
“The disposal will allow Dairy Crest to focus on continuing to grow our successful and innovative branded cheese and spreads operations. We will also deliver additional added value sales through our whey investment. We are confident that this focus will deliver further medium term profit growth for our shareholders,” says Mark Allen.
