Dairy Crest balance sheet "in good shape"

21 Sep 2018

Dairy Crest has issued a pre-close trading update for the six months ending 30 September 2018, ahead of announcing its Interim Results on 7 November 2018.

Dairy Crest balance sheet in good shape

Dairy Crest has issued a pre-close trading update for the six months ending 30 September 2018, ahead of announcing its Interim Results on 7 November 2018.

In the first half of the financial year it expects Group revenue to be ahead of last year, driven by strong performances from its two largest brands, Cathedral City and Clover.

Cathedral City’s revenue is expected to deliver good growth against strong volumes a year ago. The brand continues to go from strength to strength, Dairy Crest said, and was recently voted one of the top 10 brands by UK consumers in YouGov’s Annual Brand Health Rankings, based on consumers' perceptions of quality, value, satisfaction and reputation, as well as being voted number one in the chilled/frozen foods category.

Clover is expected to deliver both volume and revenue growth, continuing the positive performance from last year.

In line with the broader UK oil market, Frylight is expected to show a reduction in volume and revenue for the first half of the year due primarily to the unusually hot weather which impacted oil usage. However, the company said that trading has improved significantly in recent weeks and that trend is expected to continue into the second half.

Dairy Crest has continued to restrict Country Life promotional activity while butter costs remain high, and this continues to impact sales.

The Functional Ingredients business continues to grow in line with expectations.

Dairy Crest said it aims to deliver 10% of its revenues from products developed within the past three years. In 2017/18, 14% of revenues came from recent innovation.

Clover Light with no artificial ingredients launched last month. This reformulation follows the introduction of the original Clover spread with no artificial ingredients in September 2015 and is a further response to consumers wanting more natural, less artificial products.

The next few months will see several new product releases for Cathedral City. As part of the company’s continued focus on snacking, it will launch two new Cathedral City snack bars flavoured with caramelised onions and sweet chilli in October. Dairy Crest will also be partnering with Nickelodeon to promote its relaunched kids snacking range. In line with the company’s strategy to cater to a diverse set of consumer needs, Dairy Crest will be rolling out a Cathedral City Lactose Free range.

The company said it will shortly be unveiling a galacto-oligosaccharides (GOS) ‘shot’ for consumers which is marketed under the Promovita brand name. The prebiotic dietary fibre, which is said to nourish health-promoting bacteria in the gut, will be sold as liquid sachets to be taken daily.

Dairy Crest expects profit for the half year to be slightly ahead of the same period last year. Its expectations for the full year remain unchanged.

Following the equity issuance in May 2018, net debt will be significantly lower at the end of September 2018 compared to the same period last year.

“Our Cathedral City and Clover brands continue to drive the business forward, supported by an exciting pipeline of new product developments,” said Mark Allen, Chief Executive. “For Cathedral City to be named one of the UK’s top ten brands by consumers, alongside John Lewis, Amazon and Ikea, is testament to the power of the UK’s favourite cheese brand, and we see good growth potential in the UK and beyond.

Innovation is the cornerstone of this business and we’re looking forward to showcasing a number of examples at our Capital Markets event this week. Our Functional Ingredients business is progressing well and we are excited by the potential of the launch of the Promovita GOS ‘shot’.

Our balance sheet is in good shape and we are moving forward with the first phase of the expansion at Davidstow. Our expectations for the full year remain unchanged.”