FDBusiness.com

2015/16 was a significant year for Dairy Crest as it disposed of its Dairies business and completed a programme of significant investment in functional ingredients manufacture at its Davidstow facility in Cornwall to transform the group into a simpler business focused on growth and innovation in branded and value-added products.

For the year ended 31 March 2016, group revenue fell by 5.8% to £422.3 million and adjusted profit before tax (before exceptional items and amortisation of acquired intangibles), which is Dairy Crest’s key group profit measure, decreased by 1.9% to £57.7 million. Reported profit before tax of £45.4 increased by 23.4% from 2015 predominantly due to the lower level of exceptional items incurred.

Despite sales volumes of its four key brands increasing by 1.7%, Dairy Crest faced price deflation throughout the year across its cheese, whey and butter operations. Cheese and whey revenues fell by £10.7 million (3.9%) despite increased sales volumes. Revenue in Butter, Spreads and Oils fell by £17.4 million (10.2%). Other revenue comprised warehousing and distribution services provided to third parties.

The very difficult conditions in the liquid milk market throughout 2015 impacted the group’s Dairies business, which made pre-exceptional operating losses of £33.3 million in the nine months before its sale to Muller Group.

Mark Allen, chief executive of Dairy Crest.

Capital expenditure in the continuing business amounted to £56.4 million (down from £63.9 million in 2015) with the majority having been incurred at the Davidstow site where the demineralised whey and GOS facilities have been built. Commissioning started in the final quarter and finished in the first quarter of 2016/17. Dairy Crest now has well invested facilities and, following the new project expenditure at Davidstow, future levels of capital expenditure will fall further.

“This is an exciting time to be leading Dairy Crest. Although we expect food price deflation to persist in the short term, the business is well positioned to deliver profitable and sustainable growth,” comments Mark Allen, chief executive of Dairy Crest.

“We are making progress with all of our four key brands and the continued investment we are putting behind them this year gives me confidence that we can continue to grow their market share. The other focus for 2016/17 will be on accelerating sales of demineralised whey and GOS, the new infant formula ingredients and continuing to explore further applications for GOS.” He continues: “Future cash generation will improve as the sale of our Dairies business and completion of the investment at Davidstow removes a significant drain on cash.”