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The return of the lean, mean Dairy Crest machine

Following the sale of its lossmaking dairies business last December, Dairy Crest appears to be in far better shape
May 20, 2016

A rebound in Clover and Country Life volumes during the second half of the financial year helped brand owner Dairy Crest (DCG) report a resilient set of full-year results, despite wider industry contraction. It also helps that the business has undergone a serious transformation in the past year or so, finally offloading its lossmaking dairies business last December. In combination, volumes across the company's four key brands - Clover, Country Life, Cathedral City and Frylight - rose 2 per cent during FY2016.

IC TIP: Buy at 565p

Following the divisional sale, Dairy Crest bosses believe the business is "simpler, leaner and more responsive". It's down to only operating five manufacturing sites and employs fewer than 1,200 people, but chief executive Mark Allen says there are further ways to streamline the group. This includes overhauling existing IT systems and improving line performance efficiency at its production sites.

Cash-generation from continuing operations rose 46 per cent to £82.9m during the period, but Mr Allen says this will improve further now the disposal has removed a significant drain on funds.

Analysts at Shore Capital expect pre-tax profits of £61.5m for the year ending March 2017, giving EPS of 36.4p, compared with £57.7m and 34.2p in FY2016.

DAIRY CREST (DCG)
ORD PRICE:565pMARKET VALUE:£794m
TOUCH:564.5-565p12-MONTH HIGH:700pLOW: 480p
DIVIDEND YIELD:3.9%PE RATIO:20
NET ASSET VALUE:*NET DEBT:£229m

Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121.51-41.7-21.920.4
20131.38-10.7-5.920.7
20141.3954.235.821.3
2015 (restated)0.4536.821.521.7
20160.4245.427.922.1
% change-6+23+30+2

Ex-div: 7 Jul

Payment: 11 Aug

*Negative shareholders funds