Profits growth gives spur to Dairy Crest flotation

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The Independent Online
DAIRY CREST, the manufacturing arm of the Milk Marketing Board, came a step closer to its pounds 400m-plus flotation, announcing yesterday a 38 per cent increase in pre-tax profits to pounds 17.2m for the six months to 30 September.

David Lewis, finance director, said the float was pencilled in for the spring or early summer of 1994, 'though it could be earlier'. The group expects to raise about pounds 100m- pounds 150m of new money, mainly to pay off debts to the MMB.

Recent profits growth suggests it could be a substantial flotation. 'I would be surprised if the overall valuation of the company was anything less than pounds 350m and I've seen figures as high as pounds 600m,' Mr Lewis said.

The group has just appointed Dewe Rogerson, the public relations firm, which has advised on many privatisations, and it will shortly choose its stockbroking adviser. The dual role of Schroder Wagg, which is the merchant bank adviser to both the MMB and Dairy Crest, is likely to be split.

Dairy Crest is being knocked into a more commercial shape. In the past it has acted as buyer of last resort to the MMB. The Bill providing for the dismantling of the MMB is currently going through Parliament.

The 30,000 dairy farmers in England and Wales who own the MMB will receive shares in Dairy Crest. Other shares will also be offered for sale.

Farmers are unlikely to retain perpetual control of Dairy Crest. However, the company wants a 'golden share' giving it temporary protection from predators when it first arrives on the stock market.

Dairy Crest has shed about 1,000 jobs in the past 12 months, reducing its workforce to 9,500. Up to 1,000 more jobs could go in the next 12 months, Mr Lewis said.

Sales grew by 1 per cent to pounds 518.4m in the half year. Profits were up 35 per cent to pounds 24.1m before a pounds 6.9m exceptional item to pay for factory closures and cost control programmes.

Geoffrey John, chairman, said: 'Trading conditions continued to be harsh with an increasingly competitive consumer foods market and the ongoing realignment from doorstep delivery to shop trade, which maintained acute pressure on margins in the dairy division.'

Last month Dairy Crest announced the closure of several cheese factories.