28 May 1999

Dairy Crest reports third successive earnings rise

By Robert Harris

STRONG performance in premium products, notably mature cheddar, helped Dairy Crest achieve a 12% growth in earnings per share in the 12-month period to Mar 31, the third year in succession that the company has posted a double digit rise.

Shareholders, of which about 20,000 or 45% are farmers, will receive a final dividend of 8.15p a share, bringing the full year dividend to 12p. That is worth, on average, about £300 to each shareholder.

Overall turnover fell about 2% to £774m, mainly due to lower raw milk costs. But pre-tax profit rose 14% to £46.1m.

The results, says chief executive John Houliston, reflect the groups commitment to added value products, both in developing its own brands and those of major retailers.

This, in turn, could help producers too, he adds, defending the groups profits in a year when dairy incomes slumped by 39%.

"Dairy Crest wishes to buy milk on the most competitive basis possible," says Mr Houliston. "But I believe farmers will have greater security, both in terms of markets and returns, in the medium term if we succeed in driving our value added range forward. This will dilute the amount of milk going into internationally traded commodities and retailer sales."

The added value consumer foods division produced an operating profit of £31.4m, up 4.6%, backed by a £3.5m increase in advertising. Mature cheese brands Cathedral City and Davidstow chalked up volume growth of 10% and 15% respectively, well ahead of the national rise of 3%, says Mr Houliston.

Fresh dairy products (various Yoplait brands), spreads (including Clover) and liquid products (Frijj) also performed well.

Liquid milk volume to supermarkets dropped after several retailers reduced their supplier base. However, Dairy Crest has secured new contracts with Safeway and Iceland which should increase throughput this year, says Mr Houliston.

Operating profit in the food services division (commodity products and doorstep deliveries) rose 21% to £16.4m. The continuing strong £ capped commodity performance, though raw milk costs and product selling prices were more closely matched, says Mr Houliston.

Doorstep deliveries also benefited from lower raw milk costs and volumes rose 4% on the year.

Dairy Crest spent over £13.5m on acquisitions during the year, including cheese specialist Millway Foods two months ago. But there is still a further £60m available, says Mr Houliston. "We are keen to grow. But this doesnt mean we will overplay our hand. &#42