The dairies division suffered a pre-tax loss of £16.7M in the six months to September 30 and was treated as “discontinued operations” in results published today (November 5).
Dairy Crest may become a “key corporate target for 2016” after the £80M sale of its dairies which is set to complete on Boxing Day, predicted analysts from Shore Capital.
“With the disposal of the troubled dairies division near completion, Dairy Crest should approach calendar 2016 with an expectation that it may be a highly sought after proposition,” said analysts Clive Black and Darren Shirley.
‘A case of when’
“Who, what and when, well we’re clearly not in a position to be too demonstrable on this point but we would suggest that it will be a case of ‘when’ Dairy Crest is approached and not ‘if’.”
View from analysts
“We would suggest that it will be a case of ‘when’ Dairy Crest is approached and not ‘if’.”
- Clive Black and Darren Shirley, analysts, Shore Capital
Black and Shirley believed that the group would attract international trade interest with its market leading brands such as Cathedral City cheese and Clover dairy spreads.
“Those brands are underpinned by well invested manufacturing, packing and distribution capabilities, making for a lean and effective long-life dairy product organisation,” they said.
Group revenue from continuing operations fell 5% year-on-year to £203.8M, with cheese division sales down 2.2% and spreads division sales down about 10%, in the six months to September 30.
The cheese division was driven by Cathedral City, which grew sales and market growth, while Frylight cooking oil spray also achieved strong performance.
Dairy Crest chief executive Mark Allen said the firm would address the poor performance of its Clover and Country Life businesses, which were expected to revive in the second half.
‘Well positioned’ for growth
“The sale of our Dairies operations leaves Dairy Crest well positioned for long term profitable and sustainable growth alongside strong cash generation,” Allen said.
“Following the sale of our Dairies business, Dairy Crest will be a predominantly branded, simpler, more focused business with a significantly reduced overhead base.
“Future sales of ingredients for infant formula, which will start in the second half, will provide added impetus.”
Meanwhile, Shore Capital previously summarised Dairy Crest’s first half trading by saying “cheese motors, spreads lag”.
First half results at a glance
- Discontinued dairies division suffered pre-tax loss of £16.7M
- Group revenue from continuing operations down 5% to £203.8M
- Cheese division sales down 2.2% to £128.5M
- Spreads division sales down about 10% to £73.4M