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Dairy Crest's decision to refocus on branded products is paying off. During the last six months, sales of branded cheese like Cathedral City and Davidstow rose by 23 per cent and 22 per cent respectively. Utterly Butterly spreads grew by 18 per cent, while Petit Filous yoghurts increased by 24 per cent. St Hubert, the French spread business acquired last year, gained 4 per cent.
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These strong figures were achieved through increased marketing and promotional activity, but were partly mitigated by a weak performance from Clover, following a vast product recall in May.
Dairy Crest is also tackling the challenges in door step delivery of milk. The rate of decline has improved to 7 per cent, thanks to the integration of Express Dairies, bought last year from Arla Foods. And the group is now trying to develop Internet delivery services; they are currently at the trial stage, but have resulted in higher weekly average spend.
The group still faces headwinds from higher input prices, but has increased its raw milk prices by 35 per cent since June.
Broker Evolution Securities has upgraded its full year EPS forecasts by 17 per cent, to 57.1p.
Dairy Crest (DCG) |
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|---|---|---|---|---|
| ORD PRICE: | 587p | MARKET VALUE: | £ 777.4m | |
| TOUCH: | 587-588 | 12-MONTH HIGH: | 740p | LOW: 561p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 13 | |
| NET ASSET VALUE*: | - | NET DEBT: | £458m | |
| Half-year to 30 Sep | Turnover (£m) | Pretax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2006 | 589 | 30 | 17.8 | 6.7 |
| 2007 | 761 | 31 | 20.3 | 7.1 |
| % change | +29 | +3 | +14 | +6 |
Ex-div:02 Jan Payment:31 Jan *Negative shareholders funds |
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The share price has fallen by 20 per cent since August on concerns over increased raw material costs. But Dairy Crest has cut through these pressures like a hot knife through butter. Trading on a full year PE ratio of 10 times, the shares still rate good value.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
