Year of change at Dairy Crest sees more agile business

Dairy Crest’s year of disposals and investments seems to be paying off, with the company’s preliminary results showing healthier finances.

Adjusted profits – the company’s key measure of group profit – saw a slight dip of 1.9% to £57.7m in the year to 31 March 2016 after stripping out exceptional costs – up from the previous financial year, when adjusted profits fell 7%.

Profits before tax were also up 23% to £45.4m – a big improvement on the previous financial year, when pre-tax profits crashed down 59% to £22.1m. However, revenues took a hit, dropping 6% to £422.3m.

Dairies division sale

The company sold its loss-making dairies division to Muller Wiseman in December after approval by the Competition and Markets Authority. The division’s profits had plummeted 90% in the year to 31 March 2015.

See also: Dairy Crest’s dairies sale to Muller approved

About 700 dairy producers were transferred across to Muller as a result and Dairy Crest is now supplied by about 400 producers.

The processor has also made significant investments over the past year in production facilities for demineralised whey and galacto-oligosaccharide (GOS) – both used in infant formula – as part of a strategic partnership with Fonterra, the world’s biggest dairy exporting company.

‘Agile and responsive business’

Darren Shirley, analyst at stockbrokers Shore Capital, said Dairy Crest’s broadly flat year was “highly commendable”, given low global dairy commodity prices and a highly competitive UK grocery market.

He said he believed Dairy Crest was now well positioned to build and sustain “an attractive income stream”.

See also: Dairy Crest suffers painful profit drop

“We believe Dairy Crest has entered FY2017 as a smaller, but far simpler, agile and responsive business that is well positioned to drive growth through innovation across its stable of branded and value-added products, supported by robust and sustained cash generation,” said Mr Shirley.

Mark Allen, Dairy Crest Group’s chief executive, said the company was making progress on all four of its key brands – Cathedral City, County Life, Clover and Fry Light – and that it would also be focusing on accelerating sales of demineralised whey and GOS.