The company said despite a difficult dairy market environment, it continued to perform satisfactorily thanks in particular to a strong increase in sales of its growing range of added value, branded and own label, dairy drinks and speciality milks. At the same time, it created the basis for future growth and development through the undertaking of a capital investment program to increase its processing capacity and capabilities.
Tim Smiddy, managing director of Crediton Dairy said, “2019 was a year of transformation for Crediton Dairy as we undertook significant steps to support the delivery of our strategy of being a highly efficient and flexible, added value, dairy drinks business. This included undertaking £8m ($10m) of capital investment to create a second filling hall for the production of innovative, added value dairy drinks and speciality milks which is now operational.
“In line with our business strategy, the year was also characterized by increasing sales of our growing range of both branded and own label, added value, dairy drinks and speciality milks. This was led by a further strong uplift in sales of Iced Coffee which increased by 58%, driven mainly by the continuing strong performance of Crediton’s Arctic Iced Coffee brand. While we also increased sales of our Moo Milk range of flavored milks and successfully launched our new Lactose Free Milk in a number of major retailers.”
Turnover was £74.5m ($93.7m) in 2019, an increase of 6.9%.
However, profit before tax dropped by 28.6% to £4.5m ($5.7m). Capital investment of £8m ($10.1m) was 4.5 times that invested in the previous year.
Turnover growth was driven primarily by improved product mix (with higher sales of added value products particularly iced coffee and lactose free milk, and higher overall sales volumes, partially offset by lower bulk cream prices.
Profitability was lower in 2019 with the key factors being lower bulk cream returns and higher one-off operating costs while the business completed the construction of its new filling hall and warehouse, partially offset by an improvement in product mix.
The net cash surplus at year end was £1.7m ($2.1m), down from £9.2m ($11.6m) at the previous year end. The book value of net assets grew from £23.4m ($29.4m) in 2018 to £24.8m ($31.2m) in 2019.
Crediton Dairy said it saw another year of growth across all product categories. Its core extended shelf life dairy drinks business performed well, due in particular to the launch of lactose-free milk and growth of own-label flavored milk. The iced coffee drinks business continued to grow in 2019 (up 58%) driven mainly by the Arctic Iced Coffee brand due to the listing of new products and wider store distribution.
Crediton Dairy undertook capital investment of £8m in 2019 to increase capacity and capability in its added value dairy drinks business. Expenditure on capital investment was higher in 2019 than the previous year due to a combination of investment in a second filling hall and the associated filling equipment, a new warehouse for storage of packaging and ingredients and ambient and chilled packed milk as well as enhancing site services.
In what has been a very volatile market, Crediton Dairy said so far in 2020 it has witnessed strong sales across much of its product range and in particular unprecedented levels of demand for long life milk during the coronavirus crisis.
Operationally, the dairy said it has increased production and said it has benefited from having a strong stock position in terms of packaging and ingredients and through being able to utilize the enhanced capacity and flexibility of its processing and filling operations.
The company said the longer-term impact of COVID-19 on the dairy sector and wider economy is still difficult to assess.
Nevertheless, Crediton Dairy said it believes it has the scale, capability and flexibility to address the challenges.
Smiddy said, “Having invested £22m ($27.6m) since the MBO in 2013, we have plans in place for an additional investment of £7m ($8.8m) over the next 12 months that will increase further our added value processing capacity and capability. Despite the impact of COVID-19, this we believe will leave Crediton Dairy well placed to meet growing consumer demand for new, added value dairy drinks and speciality milks that deliver both flavour and functionality.”