The rationale for Dairy Crest's (DCG) decision to sell its dairy division to Bavarian multinational Müller is plain enough when you look at the group's full-year figures. The benefits of scale are becoming increasingly important in a bulk milk market dogged by persistent oversupply.
A fall in milk prices cut the group's dairy profit from £18.8m to just £1.8m for the year to March. Group operating profit halved to £32m, but that was largely due to £36.3m in impairments linked to site closures and product integration at the Kirkby complex.
Rising competition and falling consumer prices are making life difficult for food retailers and dairy farmers alike. This is reflected in the mixed showing from those parts of Dairy Crest's business that will be retained if regulatory authorities rubber-stamp the Müller sale. Sales of Dairy Crest's most successful brand - Cathedral City cheddar - were up 5 per cent as it continues to grow its market share. This helped offset a fall-away in sales of butter and spreads, with key brands Country Life and Clover registering declines over the period. Overall, however, profits from cheese and spreads were up a fifth to £66.9m as lower input prices bolstered profitability.
JPMorgan Cazenove expects adjusted EPS of 43.7p, against 38p for 2014-15.
| DAIRY CREST (DCG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 495p | MARKET VALUE: | £682m | |
| TOUCH: | 495-496p | 12-MONTH HIGH: | 521p | LOW: 368p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 33 | |
| NET ASSET VALUE: | 210p* | NET DEBT: | 69% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.60 | 77.8 | 43.2 | 19.7 |
| 2012 | 1.51 | -41.7 | -21.9 | 20.4 |
| 2013 | 1.38 | -10.7 | -5.9 | 20.7 |
| 2014 | 1.39 | 54.2 | 35.8 | 21.3 |
| 2015 | 1.33 | 22.1 | 15.0 | 21.7 |
| % change | -4 | -59 | -58 | +2 |
Ex-div: 2 Jul Payment: 6 Aug *Includes intangible assets of £100m, or 72p a share | ||||
