Dairy Crest Regulatory News (DCG)

24 Jul 2006 07:02

Arla Foods UK PLC24 July 2006 24th July 2006 Arla Foods UK plc Sale of the Express depot operations business and the Liverpool and Nottingham dairies to the Dairy Crest Group plc for £33 million Arla Foods UK plc announces that it has entered into an agreement for the saleof its middle ground and doorstep delivery businesses to the Dairy Crest Groupfor a consideration of £33 million. The transaction is expected to be completedin August 2006, following a consultation process with affected employees. Over the last five years, Arla has outperformed the market with doorstep volumedeclines held at under nine per cent per annum compared with a contraction ofsome 14 per cent per annum in the market as a whole. The structural decline inthe industry is reflected in the financial performance of the business beingsold, which in the year ended 30 September 2005 made operating profits beforegoodwill amortisation and exceptional costs of £12 million and profits beforetax of £7.2 million on revenue of £229 million. Profitability is expected to belower in the current financial year, reflecting the impact of the ongoingdecline of doorstep milk volumes. Arla believes that rationalisation of the sector supplying milk to the middleground and doorstep markets has been necessary for some time. This sale willenable Arla to focus more fully on its chosen strategies of building its leadingbrands and further reducing the total supply chain costs of its supermarketfresh liquid milk business, building on the £75m investment made in state of theart facilities last year. The assets being sold comprise the Express depot operations business and include77 depots, principally in the Midlands and north of England, with dairies inLiverpool and Nottingham, which will continue to receive their milk from currentsuppliers. The business currently distributes approximately 390 million litresper annum. As at 30 September 2005, the gross assets were £74m, with a bookvalue of the net tangible assets being sold of £26 million. The sale will resultin a goodwill write down of approximately £21 million, which will be reflectedin the year-end results. Proceeds of the sale will be used to reduce Groupborrowings. Transferring employees, who are active members of either the Express or Arladefined benefit pension schemes, will be invited to join the Dairy Crest Grouppension fund (a defined benefit scheme) from the date of transfer. All othertransferring employees will be invited to join the Dairy Crest stakeholderpension fund. Tim Smith, Chief Executive, Arla Foods UK plc, said: "The home deliverysector's share* of the liquid milk market in England and Wales has reduceddramatically since 2000, from 25 per cent to 11 per cent. In order for thissector to have a viable future, further consolidation of the industry wasrequired. Having explored a number of strategies for the business we determinedthat a sale now was the best value-creating alternative for our shareholders,with synergy benefits created by the combination of the two businesses reflectedin the price. Exiting from a declining sector of the market will enable us to direct 100 percent of our resources to the growth of the branded and added value elements ofour business, such as Cravendale, Lurpak and Anchor, for the benefit ofshareholders and our retail customers. We will also continue to build on our well-established strengths in the freshliquid milk business, leveraging the significant investments made in ourfacilities over the last three years and further improving the efficiency of ourmilk processing operations." * Source: TNS and company Ends Enquiries: Arla Foods UK plc 0113 382 7000Tim Smith, Chief Executive Hudson Sandler 020 7796 4133Michael Sandler/Jessica Rouleau Notes to Editors: • Arla's leading brands, Anchor, Lurpak and Cravendale are listed in the UK's top 100 grocery brands. • Arla Foods is the clear UK market leader in the supply of fresh liquid milk and cream to retailers. It enjoys a 44 per cent share of the British fresh milk market and makes daily deliveries to 2,200 supermarkets nationwide. This information is provided by RNS The company news service from the London Stock Exchange