Dairy Crest's (DCG) cheese and dairy operations delivered a solid first-half performance, although growth was offset by weakness in the spreads business - leaving adjusted group operating profit 7 per cent lower at £27m. Lower interest costs, however, helped adjusted half-year pre-tax profit rise 18 per cent to £21.9m
The cheese business grew profit 13 per cent to £17.5m, driven by a 9 per cent rise in sales of Cathedral City cheddar and lower production costs. While, in the dairies division, cost savings helped profit to rise 37 per cent to £2.6m, despite higher milk costs. Sales of Frijj milkshakes did fall 17 per cent, but performance here is expected to improve as promotions pick up and new production lines come on stream. Although higher cream prices and weak demand left profits in the spreads and butter business down 39 per cent at £7.1m.
Dairy Crest will beat its £20m annual cost savings target this year and it's also investing £45m to manufacture de-mineralised whey powder (a cheese making by-product) to sell to the fast-growing infant formula market. Production will begin in 2015 and should eventually boost annual operating profit by over £5m.
Broker Peel Hunt expects full-year pre-tax profit of £63m, giving EPS of 36.9p (from £50.6m and 29.6p in 2013).
| DAIRY CREST (DCG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 519p | MARKET VALUE: | £709m | |
| TOUCH: | 519-520p | 12-MONTH HIGH: | 543p | LOW: 341p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 206p* | NET DEBT: | 68% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 688 | -13.1 | -7.00 | 5.70 |
| 2013 | 672 | 19.7 | 13.1 | 5.90 |
| % change | -2 | - | - | +4 |
Ex-div: 31 Dec Payment: 30 Jan *Includes intangible assets of £104m, or 76p a share | ||||
