6 June 1997

6.64p Dairy Crest share dividend

DAIRY Crest shareholders are set to receive a final dividend of 6.64p a share, after a year of increased turnover and profits.

Presenting the figures on Tues-day (June 3), chief executive, John Houliston, said results for the year to Mar 31 exceeded expectations at the time of flotation last summer, and were ahead of City forecasts.

Overall, the firm increased turn-over by 4% to £767m, and lifted operating profits 16% to £40m.

But, he said, this did not conflict with the 12% drop in milk prices seen in recent months. "Our duty is to reward our shareholders and drive our business forward," he said. "To do this we have to add value, to secure a margin over the pure commodity markets from whence Dairy Crest came.

"Farmers understand that if Dairy Crest is to succeed, we have to source our raw material competitively. Our milk bill rose 16% over-night when the market was deregulated in 1994. We are now seeing a slow return from those peaks."

Profit growth had come from the added value side of the business – cheese, spreads and milk-shakes. But the ingredients side had suffered from a 13% drop in intervention support prices, putting pressure on those margins.

And while butter/powder prices had improved earlier this year on world markets, the relentless rise in sterling had stopped UK manufacturers benefiting from any of this.

As such, "food services" (including dairy ingredients) had seen a 15% fall in operating profit to £13m on sales of £327m.

But the star performer was "consumer foods", which lifted operating profit 41% to £27m on sales of £440m. Dairy Crest now has a 37% share of the buoyant mature cheese and farmhouse Cheddar market, with its Davidstow and Cathedral City brands.

Dairy spreads (Clover and Willow), fresh dairy products (Petits Filous) and liquid products (Frijj) all added to this profit growth. "We shall continue to concentrate on the consumer foods markets where strong demand in mature Cheddar, added value milk drinks and dairy spreads provide substantial opportunities," said chairman, Mike Dowdall. "We are also now able to consider significant additional investment to expand our business." But the Whitland creamery remains shut.

Overall, Dairy Crest achieved a 17% growth in earnings a share to 22.4p in the year to Mar 31. Total dividend on Dairy Crest shares – 60% of which are still held by milk producers – came to 9.9p each. &#42