Express is an uncomplicated liquid milk business with hardly any added- value branded products, bar a trial of flavoured milk called Shakey Jake aimed at the under-eights. With sales in its doorstep delivery business declining by around 7 per cent a year, Express has allied itself to the big supermarkets, which now account for half of its milk volume. Though margins can be tight with these powerful customers, Express has grown its market share, both at the organic level and by the acquisition of Woodgate Farms Dairy in February.
In the doorstep business, Express will start the pounds 5m introduction of handheld computers for its milkmen from January following a successful trial. This will increase efficiencies and yield valuable customer information which can be used for direct marketing purposes.
With the underlying business solid, the big question for Express is when and how the milk market will consolidate. All the main players are talking with each other and it surely will not be long before we get a big deal. This should suit Express, which would achieve synergies in a merger/takeover, or pick up additional business as a result of overlapping contracts it chooses to sit on the sidelines.
On full-year forecasts of pounds 60m the shares trade on a forward rating of 11. Consolidation remains the prize but even without it there is little downside at these levels. A solid hold.