Dairy Crest enjoyed a 5% rise in underlying profitability for the year to 31 March, despite a slump in sales of its key brands.
Preliminary results this week revealed pre-tax adjusted profit rose £2.9m to £60.6m, while total group profit (before interest, acquired intangible amortisation and exceptional items) rose by £2.3m to £68.3m.
Total revenues fell by 1% to £416.6m as a result of price deflation in the first half of the financial year. However, Dairy Crest said revenues in the second half had improved as inflation returned to the food sector towards the end of 2016.
Price deflation hit cheese and whey revenue by 3.4%, while revenue in butters, spreads and oils fell by 1.2%. Overall revenues from Dairy Crest’s key brands was down 6%, which was in line with expectations, the supplier said.
Brand volumes were flat across the year, with growth in Frylight, Clover and Country Life spreadable offset by declines in Country Life block butter - which was promoted less - and Cathedral City, which fell by 3%. However, Cathedral City returned to volume growth during the second half of the year, driven by a brand refresh and increased marketing activity.
Net debt increased by 9% to £249.8m due to completion of the supplier’s Davidstow demineralised whey operation and a final payment to Müller after the sale of its dairies business.
Dairy Crest CEO Mark Allen said he was “excited” about the future of the business. “In the first full year since the transformational sale of our dairies business, we have delivered a robust performance in a tough market,” he added.
“Our industry-leading margins are the result of our focus on driving long-term value through brand building, innovation, investment in a world class supply chain and strong cost control,” Allen said.
“The business is well positioned to deliver profitable, sustainable growth and stronger cash generation. This underpins our commitment to growing our dividends and reducing debt,” he added.
The results come as Dairy Crest prepares to unveil its refreshed Dairy for Life category vision to retailers, which it said would reset its category growth ambitions in the run-up to 2020.
While maintaining the supplier’s category vision of moving cheese, butters and spreads from being “simple fridge fillers” to being “a source of daily inspiration”, the refreshed strategy would also look at boosting consumption in snacking and convenience, said category strategy manager Sarah Millar.
The launch of a new multipack Cathedral City snack bar was among the brand’s NPD highlights, alongside a relaunch of Clover Light with no artificial ingredients in October. The full category vision will be unveiled over the next two months.