7 November 1997

DCshareholders in line for £175 average payout

By Shelley Wright

PRODUCER shareholders in Dairy Crest will receive £175, on average, after the firms announcement that it will pay an interim dividend of 3.5p a share.

Presenting half-year results, chief executive, John Houliston, said the dividend, up 7.4% on the same period last year, would be paid on Jan 22. Dairy farmers now retain just under 60% of the shares, compared with 70% when the company was floated in 1996.

He described Dairy Crests performance in the six months to Sept 30 as "pleasing", and in line with expectation. Turnover was up 3% to £392m, with operating profit rising 4% to £20m compared with the first half of 1996.

Further progress

"We anticipate further progress in the second half, reflecting additional growth in the added value businesses and some improvement in the commodity markets. We believe Dairy Crest is in a strong position to achieve further growth and to deliver improving shareholder returns."

Within the Consumer Foods division (which deals primarily with cheese, spreads and fresh milk sold through the retail trade), mature Cheddar continued to be the star of the portfolio. Sales of the Davidstow brand grew ahead of the 5% overall market increase, with volumes of Cathedral City up 30% on the year.

In the dairy spreads market, now worth about £185m nationally, Clover remained the number one seller with sales up 10% on last year. Overall, consumer foods turnover rose 2.7% with operating profit up 14% to £15m in the six months. But, in the food services sector (comprising doorstep milk deliveries and bulk ingredients), operating profit on a turnover of £168m fell by just under 16%, due entirely to the strength of sterling, said Mr Houliston.

The strong £ had wiped more than 10% from butter and skimmed milk powder prices. The cut in raw milk prices was not enough to offset that, resulting in the drop in profit. But he predicted the commodities market would improve in the second half.

Mr Houliston, like other dairy company bosses, remains steadfastly opposed to Milk Marques foray into processing with its recent purchase of the Aeron Valley cheese plant. "We think it would be inappropriate for Milk Marque to act as the major wholesaler while bidding for its own milk and then competing with its customers to market finished products. We will oppose the move in a formal way through the regulatory authorities," he said.

He did not accept that MMs position with Aeron Valley was the same as the relationship that Dairy Crest had with the old Milk Marketing Board. Dairy Crest was always run as an independent trading company, with accountants Touche Ross in place to guarantee there was no preferential treatment, he insisted. No such guarantees were on offer from Milk Marque. &#42

Football milk as just one of the marketing initiatives contributing to a "pleasing" first half.