Dairy Crest Group plc Interim results For the six months ended 30 September 2017 1
Dairy Crest Group plc Introduction Mark Allen, Chief Executive Interim Financial Review Tom Atherton, Group Finance Director Operational Review Mark Allen, Chief Executive
2017/18 Interim Financial Review Tom Atherton Group Finance Director
STRONG PERFORMANCE IN A CHALLENGING MARKET ● Revenue up 16% to £220.1m ● Adjusted profit before tax 1 up 8% to £20.6m ● Cathedral City volume growth of 10% ● Clover and Frylight growing market share strongly ● Pension deficit eliminated on an accounting basis ● Proposed interim dividend up 2% to 6.3p ● Full year expectations remain unchanged 1 From continuing operations before exceptional items (material and one-off in nature), amortisation of acquired intangibles and pension interest 4
MARKET LEADING BRANDS CONTINUING TO DELIVER Key Brand Market Volume Value Market Data** Growth* Growth* Everyday cheese volumes and value grew by 3% and Cheese +10% +7% 4% respectively Spread volumes and value fell by 3% and 2% Spreads +2% -8% +2% respectively Butter volumes fell by 1% while value grew by 20% Butters -14% +2% +5% Oils market growth of 3% volume and 6% value Oil +10% +9% Combined +4% +6% * Source: Dairy Crest volume and value: 6 months to 30 September 2017 vs 6 months to 30 September 2016 5 ** Source: IRI Kantar data 28 weeks ended 7 October 2017 vs 28 weeks ended 8 October 2016
INCOME STATEMENT Six months ended 30 September (£m) 2017 2016 Revenue 190.0 220.1 +16% Product group profit 1 25.1 23.1 +9% Finance costs (4.0) (4.5) Adjusted profit before tax 2 20.6 19.1 +8% Pension interest and intangible amortisation (0.6) (0.6) Exceptional items 131.4 (2.9) Group profit before tax 15.6 151.4 +871% Pre-exceptional effective tax rate 19.0% 18.9% Adjusted basic EPS from continuing operations 2 11.1p 11.9p +7% Basic EPS from continuing operations 3 87.6p 9.3p +842% 1 Profit on operations before pension interest, intangible amortisation 3 From continuing operations including an exceptional gain of £131.4m and exceptional items (2016: exceptional loss of £2.9m) 6 2 From continuing operations before exceptional items (material and one-off in nature), amortisation of acquired intangibles and pension interest
PRODUCT GROUP PERFORMANCE Six months Cheese & Butters, Spreads Other Group ended Functional & Oils 30 September Ingredients Revenue (£m) 135.3 +17% 80.9 +19% 3.9 220.1 +16% Profit*(£m) 22.1 +91% 3.0 -74% - 25.1 +9% Strong Cheese & Functional Ingredients performance helped to offset record high input costs for Butters, Spreads & Oils * Profit on operations before pension interest, intangible amortisation and exceptional items 7
CREAM PRICES UP 65% IN H1 FROM A HIGH BASE – COSTS AND BENEFITS UK wholesale cream price (£/tonne)* ● Higher input costs in butter business – impact on Country 3,000 +65% Life 2,500 ● Benefits cheese and 2,000 functional ingredients 1,500 business – sale of cream and whey butter by-products 1,000 500 0 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Prices have fallen recently but remain high versus historic average * Source: AHDB Dairy 8
EXCEPTIONAL ITEMS Six months ended 30 September (£m) 2017 2016 Pensions 132.4 - Kirkby improvement programme (1.7) - Profit on sale of closed manufacturing site 0.7 - Davidstow – demineralised whey & GOS - (5.1) Quadra writeback - 2.2 131.4 (2.9) Significant net exceptional gain 9
KIRKBY IMPROVEMENT PROGRAMME ENTERS SECOND PHASE 2014/15 Crudgington site closed Butters and spreads production consolidated at Kirkby 2017/18 24/7 working schedule to be introduced New site agreement, line improvements and voluntary leavers’ scheme to significantly improve site efficiency and flexibility Future Proceeds from sale of surplus land expected to fund site improvement programme Expected to deliver annualised cost savings of approximately £2.5 million 10
OPERATING CASH FLOW Six months to 30 September (£m) 2017 2016 Product group profit* 25.1 22.1 Depreciation and amortisation** 8.7 7.1 Working capital (11.6) 3.0 Pension (7.9) (5.9) Other - 1.3 Exceptional items (3.5) (12.0) Cash generated from operations 10.8 15.6 Rising input costs for milk and butter have increased working capital * Profit on operations before interest, amortisation of acquired intangibles and exceptional items. Prior period includes discontinued operations 11 ** Excludes acquired intangible amortisation and net of grant amortisation
NET DEBT MOVEMENT Six months to 30 September (£m) 2017 2016 Cash generated from operations 10.8 15.6 Capital expenditure (16.8) (10.1) Interest paid (4.5) (7.4) Dividends paid (22.8) (22.4) Disposal of assets (including sale and leaseback in 2016) 0.5 18.0 Disposal of business - (28.4) Proceeds from share schemes / other 1.2 1.4 Movement in net debt (31.6) (33.3) Closing net debt (281.4) (262.3) Committed to reducing net debt below 2x EBITDA 12
PENSION DEFICIT ELIMINATED ON AN ACCOUNTING BASIS ● Move from RPI to CPI delivers exceptional gain of £132.4 million ● Reported surplus of £39.9 million at 30 September 2017 ● Permanent reduction in funding requirement ● March 2016 actuarial deficit of £100 million; September 2017 estimated at £50 million ● Cash contributions of £10 million and £15 million this year and next ● Next valuation due March 2019 Pension fund now in surplus on an accounting basis 13
PROGRESSIVE DIVIDEND ● Proposed interim dividend increased Interim and final dividends 2010-2018 (pence) by 2% to 6.3p 25 20 ● Committed to delivering a progressive policy 15 with earnings cover for dividend targeted at 10 1.5 to 2.5 times 5 ● Business expected to deliver improved 0 earnings and cash flow cover in future Interim Final 14
Operational Review Mark Allen Chief Executive
DELIVERING AGAINST OUR STRATEGY To generate growth To make by building strong To simplify, make acquisitions To generate cash more resilient and positions in and reduce risk where they will branded and added reduce costs generate value value markets Kirkby restructuring 4 largest brands: Significant underway; Continue to look for Volume growth +4% agreement reached IT simplification opportunities Value growth +6% with Pension Trustee continues 16
CATHEDRAL CITY: THE NUMBER ONE UK CHEESE BRAND AND GROWING ● Strong performance Top 10 cheese brands by retail sales (£m)* – Volumes +10% – Revenue +7% Cathedral City 268 Dairylea 124 ● Value growth expected to exceed Philadelphia 92 volume growth for full year Pilgrims Choice 76 Babybel 59 ● Growing faster than the Everyday Cheese market Cheestrings 55 ● New product development focused on Seriously Strong 48 snacking and convenience Laughing Cow 30 Leerdammer 20 Cheddar brands President 17 * Source: IRI Kantar data 52 weeks ended 7 October 2017 17
CLOVER: CONTINUING TO WIN MARKET SHARE ● UK’s number 1 dairy spread Clover market share volume growth continues * ● Consumers attracted to its buttery taste and 20.0% no artificial ingredients 19.6% 19.5% 19.3% ● Benefitting from increased butter prices on shelf 19.0% ● Volume and value growth of 2% vs 18.5% category decline of 3% and 2% respectively 18.2% ● Value growth expected to exceed volume growth 18.0% 17.8% for full year 17.5% ● ‘Lighter’ version to be launched in 2018 17.0% 16.5% 2014/15 2015/16 2016/17 H1 17/18 * Source: IRI Kantar data 52 weeks ended March 2015 to 2017 and 28 weeks ended 7 October 2017; volume share of Spreads market 18
BALANCED BUTTERS AND SPREADS PORTFOLIO ● Reduced promotional activity on Country Life to protect margins ● All Dairy Crest spread brands outperforming the Volume growth H1 2017/18 market ● Vitalite is the UK’s number 1 dairy -free spread Dairy Crest spreads* +8% (excl. butter) – Double digit volume and value growth in H1 Spreads market** – -6% New Coconut variant well received (excl. butter and DC brands) ● Willow volume and value growth both exceeded 45% in H1 * Source: Dairy Crest volume 6 months to 30 September 2017 vs 6 months to 30 September 2016 19 ** Source: IRI Kantar data 28 weeks ended 7 October 2017 vs 28 weeks ended 8 October 2016. Spreads category excluding Dairy Crest brands
FRYLIGHT: THE CLEAR MARKET LEADER Frylight – largest oil brand by sales value* ● No 1 branded oil Oil brands – rolling 12 month sales ● Volume growth of 10% and value 30,000 growth of 9% 25,000 ● Growth expected to accelerate in H2 due to Rolling 12 month sales (£'000) increased distribution 20,000 ● Focus on raising awareness and highlighting 15,000 health benefits versus pouring oil 10,000 ● Itsu using Frylight in its 70 UK shops 5,000 0 Flora Napolina Crisp N Dry Filipo Berio Frylight c.60% of UK oil market is private label** * Source: Kantar retail sales value data 52 weeks to 8 October 2017 ** Source: Kantar volume data 52 weeks to 8 October 2017 20
Recommend
More recommend
