LIVERPOOL stockbroker Panmure Gordon stressed its ‘buy’ position on Dairy Crest’s shares after positive interim results today.
The dairy products group reported a 7% fall in revenues of £688.2m in the half year to September 30, but profits soared 65% to £49.3m.
Revenues excluded the St Hubert business which was sold in August for around £360m, generating a post-tax profit on the sale of £47.7m.
The group said it is now well placed to make targeted, value-enhancing acquisitions in the UK.
Its four key brands – Cathedral City, Country Life, Clover and Frijj – recorded sales growth of 11% compared with the same period last year and while revenues at its spreads division – primarily now focused on its Kirkby factory – fell 3% to £97.5m due to lower selling prices, profits were 11% better at £11.9m through improved margins.
In September the group announced the transfer of all Clover production from its sister spreads factory in Crudginton, Shropshire, to Kirkby, which will result in financial benefits in the second half of the financial year.
The move will result in 50 new jobs at Kirkby in the next 18 months.
However, the previous month it had shut its milk plant in Aintree leading to 200 job losses in a strategy to bring its loss-making milk division back into profit. It said in today’s statement that the plan is on track to restore a 3% return on sales in the medium term.
It said cost savings of £20m during the year are also on target.
Chief executive Mark Allen said: “Dairy Crest has had a busy first six months as we continued to navigate a challenging trading environment.
“The decisive actions we have taken during the period leave us well placed as we move forward.”
Damian McNeela and Graham Jones, analysts at Panmure Gordon’s Liverpool office, said today: “Dairy Crest’s interim results have come in below our expectations, but in-line with market expectations.
“We expect an improved performance from the dairies business in the second half as bulk cream prices have rallied strongly, and this should allow it to achieve our 2013 estimated forecasts. We reiterate our ‘buy’ recommendation.”
