Dairy Crest is today issuing its Interim Management Statement for the nine months ended 31 December 2015.
Trading Performance
The outlook for the full year remains in line with our expectations.
In a challenging market, our cheese and spreads brands have performed well, with all four key brands increasing or maintaining value share in the quarter. Combined sales of Cathedral City, Country Life, Clover and Frylight over the nine month period have remained broadly in line with the same period last year and volumes have increased by 2%. This is a robust performance in what remains a deflationary environment for both cheese and spreads.
In the third quarter, Cathedral City and Frylight have built on the strong performances seen in the first half of the year. Clover Simple, which has no artificial ingredients, launched successfully in September 2015 and Clover volumes have since grown year on year. Country Life sales volumes have increased markedly in the third quarter, benefitting from promotional activity built around the “Best of British” packaging.
Production of Infant Formula Ingredients begins
Production of demineralised whey powder and galacto-oligosaccharide (“GOS”) has commenced at our factory in Davidstow. These are both ingredients for the growing, global infant formula market which will give Dairy Crest access to new growth markets and customers.
On 18 December 2015, Dairy Crest announced that it had acquired the outstanding 50% share of Promovita Ingredients Limited (‘Promovita’), the joint venture established to develop and produce GOS. This gives Dairy Crest sole control over the development of the GOS business and trials looking into further applications for GOS are continuing.
Dairy Crest Innovation Centre
In December 2015, our innovation team moved into a new state of the art Innovation Centre on the Harper Adams University campus. This unique collaboration gives us access to leading food and agricultural research and will enhance our innovation capability in the future.
Sale of Dairies operations
On 26 December 2015 Dairy Crest successfully completed the Sale of its Dairies operations to Müller UK & Ireland Group (“Müller”). This is a transformative moment for Dairy Crest and the wider dairy sector. The UK dairy industry suffered a very difficult 2015. Milk production was high and realisations remained very low. In this environment, losses in our Dairies division continued until the sale on 26 December 2015.
Final proceeds are subject to certain adjustments and these are yet to be finalised. We now expect net proceeds before working capital adjustments to be around the lower end of our £40-£50 million guidance. Furthermore, we anticipate a negative working capital adjustment resulting in net proceeds before costs to be approximately £30 million.
Debt
Underlying cash generation in the retained business remains strong. However, higher than anticipated pre-sale losses in Dairies, the resultant impact on the sale proceeds and the £6 million acquisition of Promovita shares will impact reported levels of net debt at the year end.
New joint corporate brokers
We are pleased to announce the appointment of Peel Hunt and Shore Capital as the Company’s two joint brokers with immediate effect. JP Morgan Cazenove will continue to act as financial adviser to the Company.
Mark Allen, Chief Executive of Dairy Crest, commented:
“Dairy Crest is now a branded and added-value business well placed to achieve profitable and sustainable growth.
“The strength of our brands is demonstrated by their performance in a challenging, deflationary consumer environment.
“We are also entering an exciting new chapter for Dairy Crest. Our functional ingredients business will be a key part of Dairy Crest in the future, giving us access to new growth markets.
“The outlook for the full year remains in line with our expectations.”
Dairy Crest will issue its Preliminary Results for the year ending 31 March 2016 on 19 May 2016.
