This is a turning point for food group Dairy Crest (DCG). The company will finally offload its dairies division to German group Müller on 26 December 2015, netting it £40m-£50m (despite a £106m non-cash impairment) and ridding it of a business laid waste by oversupply and the supermarket price wars.
Meanwhile, developments at its Davidstow creamery will see the creation of whey-based ingredients predominantly for infant formula. This opens up not just a new product line, but also access to emerging markets such as China. Finance director Tom Atherton noted that the Middle Kingdom had "at a stroke" upped the scale of the opportunity with the removal of its one-child policy.
But the company has work to do on the brands it is keeping, which are front and centre of its strategy now that the milk star has fallen. Cathedral City cheese continues to outperform, increasing its volumes by 14 per cent, compared with just 1 per cent growth for the retail cheese market. But Mr Atherton acknowledged that Dairy Crest's spreads proposition needed to adapt to the shift in consumer taste towards butter, which tends to be cheaper and is considered more natural. There are now no artificial ingredients in Clover - a fact that will be marketed to improve sales.
Analysts at Peel Hunt expect pre-tax profits of £62m, leading to EPS of 36.7p, compared with £60.6m and 38.1p in FY2015.
| DAIRY CREST (DCG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 638p | MARKET VALUE: | £880m | |
| TOUCH: | 636-638p | 12-MONTH HIGH: | 657p | LOW: 411p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 46 | |
| NET ASSET VALUE: | * | NET DEBT: | £253m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 215.3 | 15.0 | 8.6 | 6.0 |
| 2015 | 203.8 | 13.1 | 7.6 | 6.1 |
| % change | -5 | -13 | -12 | +2 |
Ex-div: 7 Jan Payment: 28 Jan *Negative shareholders' funds | ||||
