Top story

Dairy Crest (DCG) CEO Mark Allen hailed the first set of results since the sale of its milk business to Muller as profits rose 19% on higher volumes of its cheese and butter brands.

Revenue in the six months to 30 September slipped 7% to £190m in the competitive grocery market but pre-tax profits climbed to £15.6m.

Clover and Country Life both enjoyed volume growth of 7% and 8% respectively in the period but at the expense of value, which fell 2% and 8%.

Cathedral City suffered as Dairy Crest decided against aggressive promotions to maintain the premium positioning of the cheese brand. Volumes of the brand fell 5% and value was down 11%.

Cathedral City underwent a packaging redesign in the half supported by a new TV ad campaign – and there was also a relaunch of Cathedral City spreadable in three flavours. The second half will see increased listings and the launch of a new ‘lighter mature’ flavour.

The Frylight oil brand managed a 16% jump in volumes and value as it benefitted from consumers looking for healthier choices in the category.

CEO Mark Allen said: “We are pleased to have delivered a strong set of interim results in our first full trading period since the sale of dairies. Our four key brands are continuing to perform well in a challenging marketplace, with strong volume growth for Clover, Country Life and Frylight and a successful launch of new branding and packaging for Cathedral City.

“We are also seeing the benefits of Dairy Crest’s transformation into a leaner and more focused organisation, with strong profit growth and significantly improved cash generation during the first half. Our expectations for the full year remain unchanged.”

He added that the significant investment at Davidstow had opened up opportunities in high-margin, global infant formula markets, as well as the potential to develop new functional ingredients.

Dairy Crest increased it proposed interim dividend by 2% to 6.2p a share.

The share price opened 0.8% higher this morning at 593.5p.

Morning update

It’s a busy morning across the City and elsewhere.

Bakkavor has reported good revenue growth across the business as it battled the deflationary grocery environment. Group sales in the third quarter to 24 September increased 3% to £433.6m, with like-for-like sales also up 3% to £427.1m. Adjusted EBITDA rose 5% to £37.6m for the 13-week period. In the UK, Bakkavor revenues climbed 3% to £390.6m as volumes with key customers such as Tesco grew.

CEO Agust Gudmundsson said: “We are pleased that we have delivered another strong quarter, with good growth in both revenue and EBITDA across the group. Our success is driven by our continued investment in our business, a focus on efficiency and constant innovation.

“Looking ahead, our sector faces a number of challenges from increasing inflation and cost pressures, but our strong operational model and strong partnerships with our customers mean we are well placed to continue the progress of recent years.”

Soft drinks bottler Refresco increased revenues and profits in the third quarter as volumes jumped 8% to 1.8 billion litres. Co-Packing volumes grew by 61.1% to 486.3 million litres but private label volumes – where the group is shifting away focus – decreased 3.7% to 1.3 billion litres. Revenues in the period jumped to €571.7m compared with €539m a year earlier. Adjusted EBITDA also rose 7% to €67.9m.

CEO Hans Roelofs: “Our total volume and results developed favourably in the quarter. Volume growth was primarily driven by recent acquisitions and our strategy to rapidly grow the co-packing business. Strong comparatives last year, linked to good weather, and our earlier decision to discontinue low margin-large volume contracts was reflected in our lower private label volumes in the third quarter. The strong growth in co-packing especially has helped us to slightly outperform the soft drinks market in Europe on a like-for-like basis.

“We finalised the acquisition of US-based Whitlock Packaging in September and the integration of the newly acquired company is well on track creating a solid platform to execute our growth strategy in North America.”

Shars in Refresco leapt 5% to €13.86 on the back of the results.

Sausage casing manufacturer Devro has lowered profit expectation for 2017 as volumes are now forecast to be 10% lower than previously thought. The group said actions were being taken to rebalance the use of capacity across its global manufacturing base. However, the spare capacity is expected to squeeze margins.

The business said in a trading update for the past four months that volumes were flat from the first half, enhanced by improvements in Russia and South East Asia but impacted by further reductions in Latin America. “Combined, these factors have had an adverse impact on margins, offset by further benefits from lower input costs and foreign exchange. As a result, the board’s full-year expectations for underlying operating profit remain unchanged.”

Sales at logistics group Wincanton fell 1.7% to £561.8m in the six months to 30 September as a result of the contracts ending. However, the group created an e-commerce national fulfilment centre for Majestic Wine and renewed long term grocery partnerships with Co-op and Sainsbury’s. Underlying operating profit increased 19.2% to £26.1m as Wincanton benefitted from an improvement in performance of the Pullman home shopping contract and end of contract settlements.

CEO Adrian Colman said: “In the first half of the year the group has delivered strong financial results from disciplined operational performance. Following the reintroduction of a final dividend at the end of last year, we are pleased to follow this with an interim dividend in the current year.

“During the period we successfully renewed contracts with two of our largest customers, which were further supported by new contracts in retail & consumer, whilst at the same time extending our capabilities in the construction market by becoming the first 3PL provider to enter the ready-mixed concrete logistics market.

“We have seen no significant change to trading volumes since the date of the EU referendum. However, we will ensure we are prepared to meet any challenges that our end customer markets experience over the coming period as the United Kingdom works through its exit from the EU.”

Yesterday in the City

The FTSE 100 defied the predicted sell-off in the wake of the surprise victory for Donald Trump. London’s leading shares closed 1% higher at 6,911 points after initially opening 2% down in the morning.

Grocery stocks didn’t have such a good time, however. Sainsbury’s (SBRY) slumped 7% to 238.7p after another tough set of results.

Associated British Foods (ABF) dropped by from rises earlier in the week to close 2.3% down at 2,573p.

Imperial Brands (IMB), Unilever (ULVR) and Greencore (GNC) all fell, down 2.1% to 3,610.5p, 2.1% to 3,311p and 1.9% to 305.1p.

TATE & Lyle (TATE) was the big loser of the day on the back of the Trump win, plunging 12% to 659p. The fall reflected the ingredient group’s exposure to the Mexican peso and US dollar.

.

Topics