FDBusiness.com

UK dairy group Dairy Crest has reported a 5% drop in first half revenue to £203.8 million with adjusted profit before tax from continuing operations down 38% to £16.0 million. In November 2014, Dairy Crest agreed to sell its Dairies operations to Muller UK & Ireland Group and this deal is now due to complete on 26 December 2015. Dairy Crest expects proceeds from the disposal to be in the range of £40–50 million subject to working capital adjustments. The additional amount due from selling properties not included in the sale to Müller remains unchanged at £20 million. The disposal will leave Dairy Crest focused on its Spreads, Butters, Cheese and Whey activities.

The decline in Dairy Crest’s revenue during the first half reflects lower selling prices across the business and reduced Spreads and Butters product group volumes. Total product group profit from continuing operations fell 32% to £20.0 million. Cheese and Whey product group profits fell by £7.7 million reflecting lower cheese realisations in advance of reduced cheese costs and lower whey realisations. Spreads and Butters product group profits were also down due to lower volumes, although margins were broadly maintained at 14.9% (2014: 15.5%).

Mark Allen, chief executive of Dairy Crest, comments: “The sale of our Dairies operations leaves Dairy Crest well positioned for long-term profitable and sustainable growth alongside strong cash generation. We expect this to start in the second half of 2015/16 despite the continuing challenging environment.”

He adds: “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. We expect the increased focus on growth and cash generation to allow us to maintain our strong track record of rewarding shareholders with higher dividends.”