The results for the year ended March 31, 2016 revealed that overall group profit (before interest, acquired intangible amortisation and exceptional items) fell by £0.9M to £66M.
Overall revenue from its four key brands, Cathedral City, Clover, Country Life and Frylight were down by 2.3% over the financial year.
Good performance
The company said this was a good performance in a deflationary marketplace.
Key brand sales volumes increased by 1.7% with all four brands growing volumes year-on-year in the second half. That was despite challenging conditions in the butters and spreads market.
In the past year the company said it had seen significant price deflation in the cheese, whey and butter categories, which had put downward pressure on prices.
Over the 2015/16 year the company sold its Dairies business and completed a programme of investment in functional ingredients manufacture at its Davidstow facility in Cornwall. The major food retailers, which are the main customers for the group, have also had to deal with both food deflation and continued intense competition. Dairy Crest said it expects these “tough conditions” to continue.
Cathedral City
Cathedral City outperformed the market with volumes increasing by 6.4% and revenue increasing by 0.8%. It now accounted for 55% of branded everyday cheese sales in the UK and almost three-fifth of households have bought the cheese in the past year, the company said.
Dairy Crest said it would be continuing to build on this success and had already started its refreshed branded packaging.
Mark Allen, chief executive of Dairy Crest Group, said: “We are making progress with all of our four key brands and the continued investment we are putting behind them this year gives me confidence that we can continue to grow their market share.
“Future cash generation will improve as the sale of our Dairies business and completion of the investment at Davidstow removes a significant drain on cash.”
In the analysts’ view:
Darren Shirley and Clive Black at Shore Capital said Dairy Crest had entered the year with a “simpler, agile and responsive business”. They said it was well positioned to drive growth through innovation across its branded and value added products.
“We believe the newly constituted group offers a unique proposition in the consumer universe, with a strong stable of mainly market leading brands providing growth and strong and sustained cash generation,” they said.
“We see Dairy Crest as a distinctive and attractive medium term investment proposition and furthermore, whilst we cannot predict corporate activity, we believe that Dairy Crest traits in a major economy like the UK, should serve as a source of comfort for investors.”