8 November 1996

Dairy Crest pre-tax profits up 7% despite costs of flotation

By Shelley Wright

DAIRY Crest, buoyed by the success of its stock market flotation in August, has announced its half-year results.

Despite £900,000 flotation costs, pre-tax profit to Sept 30 was up 7% on the same period last year, at £16.5m, and the firm announced an interim dividend of 3.26p a share.

Strongest performance came from the consumer foods division, which includes cheese, spreads, liquid milk and fresh dairy products sold through supermarkets and the grocery trade. Turnover increased by 22% to £218m and operating profit was up 42% to £12.9m compared with the first half of 1995/96.

Chief executive, John Houliston, said the star of the show during the six months had been mature Cheddar. Consumer preference for fuller flavoured cheese had resulted in the market growing by 15%, to a current annual value of £470m.

Dairy Crest was well positioned to take advantage of that growth with its Davidstow and Cathedral City brands. Its acquisition last year of the cheese specialists Mendip Foods had strengthened the firms position in the market. The Food Services division, which deals with ingredients and bottled milk for doorstep delivery, recorded an 8% fall in turnover to £163m. Operating profit fell by £1.1m, or 15% compared with the same period last year.

Mr Houliston said the reasons were twofold. First, prices on the international commodity markets had fallen from last years record levels. Second, the decline in doorstep deliveries had continued, with the market still shrinking at a rate of about 12% a year.

But both areas continued to be profitable, and he said the interim results offered clear evidence that the firm was robust.

And he was delighted that producer-shareholders had shown such faith in the company. Since shares were allocated, only 3% of farmers had sold their stake, despite the strong rise in price compared with the 155p flotation value.

Dairy Crest still sources about 80% of its raw milk from Milk Marque. But it also now deals directly with about 400 dairy farmers, through seven producer groups. &#42

John Houliston says Cheddar cheese is star performer.