Embed Size (px)
Citation preview
1
DAIRY CREST GROUP PLC
INTERIM RESULTS For the period ended 30 September 2007
2
Key Highlights
• Successful first half as reshaped business continues to grow:
- good growth from key pillar brands including Cathedral City, Utterly Butterly, Country Life Spreadable, St Hubert Omega 3 and Petits Filous
- new healthier variants of key brands performing well
- encouraging early results from trials of our new internet based doorstep delivery service ‘milk&more’
• Strong performance from St Hubert, as first step into Europe, with market share gains in France
• Clover performance improving following product recall in May
• Price increases being implemented to reflect rising raw milk costs
• Investment in new, highly automated, cheese packing facility at Nuneaton
3
Financial Review
Alastair Murray
4
Financial Highlights
• Group Revenue up 29% to £761.4m (2006: £588.6m)
• Adjusted profit before tax* up 21% to £37.1m (2006: £30.6m)
• Adjusted earnings per share* up 22% to 22.2p (2006: 18.2p)
• Interim dividend up 6% to 7.1p (2006: 6.7p)
• Net debt £458.5m (2006: £329.0m)
* Before exceptional items and amortisation of acquired intangibles
5
Income Statement
* Before exceptional items and amortisation of acquired intangibles
Year
Mar 07
£’m Half year
Sept 07
Half Year
Sept 06
80.0 Profit on operations* 42.2 32.0
(19.2) Finance costs (13.0) (9.0)
9.5 Other finance income: pensions 4.8 4.7
7.1 Share of JV net profit 3.1 2.9
77.4 Adjusted profit before tax* 37.1 30.6
(10.1) Exceptional items (2.4) (0.2)
(2.7) Amortisation of acquired intangibles (4.1) (0.6)
64.6 Profit before tax 30.6 29.8
(11.3) Taxation (3.7) (7.5)
(4.1) Discontinued operations - (2.9)
49.2 Group profit after tax 26.9 19.4
6
Exceptional Items
£’m Half Year Sep 07
Cash Non Cash
Total
Express integration (5.0) - (5.0)
Totnes Closure (2.4) (1.7) (4.1)
Westway property profit 6.7 - 6.7
(0.7) (1.7) (2.4)
7
Earnings and Dividends
Year Mar 07
Pence per share Half Year Sept 07
Half Year Sept 06
Change
48.7 Adjusted basic EPS 22.2 18.2 +22%
41.7 Basic EPS 20.3 17.8 +14%
22.9 Dividend declared 7.1 6.7 +6%
127.2 Shares in issue: m 132.2 124.8
8
Segmental Analysis
YearMar 07
£’m Half YearSept 07
Half YearSept 06
Revenue
381.3 Foods excl JV 248.8 165.9
68.5 Share of JV 34.9 34.0
449.8 Foods 283.7 199.9
928.0 Dairies 512.6 422.7
1,377.8 Total 796.3 622.6
Profit on operations *
52.9 Foods excl JV 28.7 24.7
7.1 Share of JV (post tax) 3.1 2.9
60.0 Foods 31.8 27.6
27.1 Dairies 13.5 7.3
87.1 Total 45.3 34.9
* Before exceptional items and amortisation of acquired intangibles
9
Operating Margin*
YearMar 07
% Half year Sept 07
Half YearSept 06
13.9% Foods excl JV 11.5% 14.9%
13.3% Foods incl JV (post tax) 11.2% 13.8%
2.9% Dairies 2.6% 1.7%
6.3% Group 5.7% 5.6%
* Before exceptional items and amortisation of acquired intangibles
10
Balance Sheet
YearMar 07
£’m Half Year Sept 07
Half YearSept 06
879.2 Net operating assets 873.2 605.8
(85.1) Tax (79.2) (23.4)
794.1 794.0 582.4
(451.0) Net debt (458.5) (329.0)
343.1 Net assets employed 335.5 253.4
131% Gearing 137% 130%
11
Operating Cash Flow
* Before exceptional items and amortisation of acquired intangibles** Net of grant amortisation*** Operating property profits and share based payments charges
YearMar 07
£’m Half Year Sept 07
Half YearSept 06
80.0 Adjusted profit on operations* 42.2 32.0
40.2 Depreciation and amortisation** 19.6 19.5
(3.1) Exceptional items (7.4) (0.2)
(15.2) Pensions (4.9) (1.8)
(4.9) Other *** (2.7) (4.0)
(2.8) Working capital (10.0) (21.1)
94.2 Operating cash flow 36.8 24.4
12
Cash Flow
YearMar 07
£’m Half Year Sept 07
Half YearSept 06
94.2 Operating cash flow 36.8 24.4
(36.3) Capital expenditure (net of grants)
(14.2) (18.8)
(49.1) Interest, tax and dividends (35.7) (26.1)
8.9 Dividends received from JV 2.4 2.8
(293.3) Acquisitions (0.6) (37.5)
58.3 Disposal of business - -
9.7 Disposals of assets 11.3 5.9
36.8 Equity placing, exchange & other (7.5) 0.5
(170.8) Movement in net debt (7.5) (48.8)
Net debt at 31 March 2007 (451.0)
Net debt at 30 September 2007 (458.5)
13
Pensions Summary
• Full actuarial valuation as at 31 March 2007 progressing to plan
- actuarial assumptions agreed and reflected in Sept 2007 valuation
- future funding discussions ongoing
• IAS19 gross deficit at 30 September 2007 of £11.1m
- £10.7m increase since March 2007
- based on more prudent life expectancy assumptions
• Additional cash contributions of £12.0m committed in 2007/08
14
Business Review
Mark Allen
15
Milk Price Increases
• Unprecedented upward movement in milk prices in 2007/08- worldwide demand for dairy products increasing- shortages in UK milk production
• Significant impact on cost base- other input costs are also rising (e.g. vegetable oil and HDPE)
Contract Liquid Cheese
2007 Per litre Cum
Change
Per litre Cum
Change
November 25.0 + 6.5p 25.3p +6.6p
October 25.0 +6.5p 24.6p +5.9p
September 21.5 +3.0p 21.7p +3.0p
August 19.5p +1.0p 19.7p +1.0p
July 18.9p +0.4p 19.1p +0.4p
April 18.5p 18.7p
35% 35%
Source: Milkprices.com, cheese prices are based on Davidstow contract
16
Price Increases
• Higher ingredients realisations
- SMP, cream, butter and whey
• Dairy Crest has achieved or is implementing significant price increases across most categories to reflect uplift in input costs
- Fresh milk: retail milk, middle ground and doorstep
- Potted cream
- Cheese: Cathedral City and retailer branded cheddar
- Packet Butter: Country Life and retailer brand butter
- Spreads
17
UK Spreads
• Strong growth from Utterly Butterly with sales up 18% by value- Omega 3 launched in August 2007- increased overall market share in dairy spreads with volumes up 9%
• Clover impacted by product recall in May with sales down 17% by value- factory improvements have constrained promotional activity- materially impacted performance of UK spreads
• Country Life Spreadable performing well with sales up 25% by value- early performance of Lighter variant has been encouraging- offset by Country Life packet butter with sales down 10% by value
• Price increases on packet butter and spreadsto offset higher cream and vegetable oil costs
• Focus on delivering improved performance for 2008/09
18
St Hubert
• Overall performance in line with our expectations
- sales up 4% over six months to September 2006
- increased market share of French spreads to 35%
• Continued strong growth from Omega 3 up 16% by value
- number one brand variant in French spreads
• Stabilised position of St Hubert 41
- increase in marketing and promotional activity
• Vallé performing well in Italy with sales up 3% by value
19
St Hubert Omega 3: No.1 brand
France – spreads market share evolution
Source: IRI (by value)
18.2
15.3
14.0
11.8
9.7
8.3
6.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07
%
SH Omega 3 Fr D'Or Pro Activ Primevere Fr D'Or Planta Fin SH 41 Le Fleurier
20
Cheese
• Strong growth from Cathedral City with sales up 23% by value- £148m brand at retail sales price
• Cathedral City Lighter (launched February 2007) performing well- Mild and Lighter - over 10% of Cathedral City sales in H1
• Strong Davidstow growth with sales up 22% by value
• Whey market has declined since summer
• H2 performance expected to benefit from price increases- tighter industry stock levels
• Investment in Nuneaton cheese packing site- project cost c. £25 million- initial packing capacity c. 33,000 tonnes- first commercial production early 2009
21
• Maintains leading position in children's sector with market share back over 50%
• Overall Yoplait brand sales up 7% by value
• Petits Filous and Frubes returned to strong growth
- Petits Filous up 24% by value
- Frubes up 16% by value
- increased promotional and marketing activity with emphasis on Vitamin D and Calcium
• Yop up 14% by value
• Weight Watchers and Wildlife down slightly against strong comparators last year
Yoplait Dairy Crest
22
Liquid Products and Ingredients
• Retail milk volumes up 6% by value and 2% by volume - retained as key supplier to Morrisons
• Continued focus on operational cost base- Totnes closed in September 2007
• Frijj margins enhanced through price increases and lower promotional activity
- sales down 1% by value
• Flavoured milk sales up 43% by value and potted cream sales up 18% by value
• Strong realisations in dairy ingredients- lower than expected milk volumes processed
through ingredients
23
Household
• Overall household volumes up 38% year on year
- benefit of inclusion of Express Dairies in H1
• Non-milk product sales up by 20%
• Underlying doorstep net decline improved to below 7%
• On track with Express Dairies integration
- Leicester head office now effectively closed
• Significant price increases achieved in the middle ground
• Doorstep price increase of 4 pence per pint successfully implemented in September
24
milk&more
• Trials now running in five depots:
- Surbiton, Epsom, Richmond, Hanworth and Wimbledon
• Modernised service based on internet ordering
- order online by 10pm for delivery the following morning
- online payment by debit and credit cards
• Focus on non milk products including locally sourced and organic
- organic fruit and vegetable boxes
- free range eggs
- organic orange juice
- smoothies
25
milk&more
• Early indications are encouraging with significant uplift in average spend per week per customer on both milk and non milk products
• Customers’ feedback has been generally very positive
- like online ordering environment and product range
• Online payment working well
• The visibility of customer orders and trading history is of significant benefit
• Considering options for rolling out service next year
26
Summary and Outlook
• Good first half performance
• Most key pillar brands are continuing to make good progress
- healthier variants performing well
• Clover performance improving following product recall in May
• Continuing trials of milk&more
• Price increases being implemented to reflect rising raw milk costs
• The Group’s expectations for the full year remain unchanged
27
DAIRY CREST GROUP PLC
INTERIM RESULTS For the period ended 30 September 2007
