Dairy Crest Regulatory News (DCG)

26 Sep 2006 07:02

Dairy Crest Group PLC26 September 2006 26 September 2006 Dairy Crest Group plc ("Dairy Crest" or the "Group") Proposed sale of majority of retailer brand cheese operations for £61.9 million Dairy Crest, the UK's leading branded dairy foods company, today announces theproposed sale of the majority of its retailer brand cheese operations to FirstMilk Limited ("First Milk") for a net cash consideration of £61.9 million. Theproposed sale is conditional on the approval of First Milk's members and isexpected to complete on 14 October following a consultation process withaffected employees. The sale of the business to First Milk is consistent with Dairy Crest's strategyto focus on building a branded and added value foods business and also with theindustry trend for greater ownership of such assets by milk producers. Themarket for retailer brand and commodity cheese is competitive and the businesshas delivered cyclical returns for the Group. The proposed sale includes the cheddar creameries at Haverfordwest (in whichFirst Milk already has a 20% interest) and Aspatria, as well as the Group'sprepacking and whey processing facilities at Maelor. As at 31 March 2006, thebook value of net assets being sold was £60.5 million and in the year ended 31March 2006 the business made an estimated operating profit of £3.4 million onsales of £194.2 million. As expected, in the current financial year, thebusiness's performance is being impacted by generally lower industry cheeseprices. Dairy Crest will focus its future cheese activities on accelerating thedevelopment of its branded and added value products which include CathedralCity, the UK's biggest cheddar brand, Davidstow, Country Life, Wexford and thestilton and speciality cheese business. We are retaining our creameries atDavidstow (premium cheddar), Wexford (cheddar) and Hartington (stilton andspeciality cheeses) and the prepacking site at Frome. Dairy Crest has alsoentered into a number of transitional arrangements with First Milk including anagreement for the packing of Dairy Crest's cheese brands at Maelor. Dairy Crestis considering developing a new prepacking facility at one of its retainedmanufacturing or distribution sites. Dairy Crest and First Milk will workclosely together during the period of transition to ensure that high customerservice levels are maintained. This transaction is expected to have a small positive impact on Group profits,part of which will be reinvested to drive the growth of the branded business.The proposed sale is expected to result in exceptional costs of approximately £4million. The cash proceeds from the transaction will be principally used torepay bank debt. Drummond Hall, Chief Executive, Dairy Crest Group plc, said: "This sale allows Dairy Crest to focus on accelerating the development ofCathedral City and its other cheese brands. The deal is expected to improve thereturn on capital employed in the cheese business. It will also improve thequality of the Group's earnings overall, with an increased proportion of Groupsales coming from brands. We believe that the business being sold will have a sound future under theownership of First Milk." For further information, please contact: Dairy Crest Group plc Nicole Lander, Media 07801 235756 Will Shaw, Investors 07919 568498 Brunswick Simon Sporborg 07974 982442 Laura Cummings 07974 982492 NOTES TO EDITORS: Dairy Crest: Dairy Crest focuses on building leadership positions in branded and added-valuemarkets across the dairy sector and investing in industry leading facilities tocreate competitive advantage. Dairy Crest operates in two divisions: the Foodsdivision which includes spreads, cheese and fresh dairy products (through ourYoplait Dairy Crest joint venture) and Dairies which includes liquid products,household and ingredients. The company's portfolio of brands includes: •Cathedral City, the UK's biggest cheddar brand, together with the Davidstow, Wexford, Over the Moon and Country Life cheese brands. •Clover, the brand leader in the dairy spreads segment, together with Country Life, Utterly Butterly, St. Ivel Gold, Vitalite and Willow. These brands give Dairy Crest a presence in every major sector of the UK spreads market. •St Ivel advance, a branded fresh milk with Omega 3, and Country Life organic milk. •Frijj the brand leader in the fresh flavoured milk drinks market. Dairy Crest is a leading supplier of fresh dairy products through the YoplaitDairy Crest joint venture with its brands Petits Filous and Frubes, togetherwith ranges including Wildlife and Weight Watchers. First Milk: First Milk is a commercially focused farmer-owned dairy business which suppliesover 2 billion litres of British milk from a base of over 3000 milk producers -a 16% share of the total UK milk pool. Its board includes Richard Greenhalgh, Chairman, who was previously Chairman ofUnilever UK and Peter Humphreys, Chief Executive, who has previously beenManaging Director of Eden Vale and a number of other international businesses. Formed in 2001 from the merger of two leading dairy groups, First Milk'sprincipal activity is to market milk on behalf of its members. The Group is alsoinvolved in the manufacture and sale of dairy products. In the year 2004/05 it reported turnover of £504 million and a surplus beforetax of £6.8 million. It collects milk from its 3000 farm members across the UK. Its current investments are: Company Shareholding--------- --------------Scottish Milk Products 80%Aeron Valley Cheese 20%Haverfordwest Cheese 20%Robert Wiseman Dairies plc 15% First Milk currently produces private label cheese for a number of UKsupermarkets. The full range includes: •Mull of Kintyre Extra Mature Scottish Cheddar - 'Best Scottish Cheese', British Cheese awards 2005 •Isle of Bute Mature Scottish Coloured Cheddar - 'Supreme Champion Cheese', Royal Highland Show 2006 •Isle of Arran Medium Scottish Coloured Dunlop This information is provided by RNS The company news service from the London Stock Exchange