Dairy Crest of a wave as focus on key brands reaps the rewards

Dairy Crest, whose brands also include Country Life butter, St Hubert Omega 3 spread and Frijj milkshake, reported a 5 per cent rise in underlying pre-tax profits to 40.1m for the six months to September 30.

It said higher profits in cheese – up 58 per cent to 12.5m – "more than offset" a lower performance in its dairies, which are battling against a highly competitive milk market.

Higher selling prices and efficiency savings also helped shore up results in the face of rising input costs, with profits increasing in spite of a 3 per cent fall in revenues. Targeted advertising and promotions saw sales across its five key brands grow 5 per cent against a year earlier.

The best performers were Cathedral City and St Hubert Omega 3, which delivered increases of 10 per cent and 7 per cent respectively.

Sales of Country Life – recently boosted by a promotional drive including 'Great British Butter' adverts featuring former Sex Pistol John Lydon – rose 2 per cent, but were held back by "significant" price hikes in the first quarter, it said.

Dairy Crest's dairies arm suffered a more difficult first half as profits dropped 24 per cent to 10.9m.

The group is concentrating on major retail contracts to combat a declining and competitive middle-ground milk market, which covers sales to smaller retailers, independents, coffee shops and foodservice companies.

It has secured deals with the supermarket giants Morrisons and Sainsbury's in recent months and said that it had won a share of Tesco's fresh milk business, with supply beginning next month.

The doorstep milk delivery business continues to decline as revenues fell 7 per cent against a year ago, but Dairy Crest assured its milk&more proposition was making progress.

It said 12 of its 123 depots saw higher sales and 20 limited declines to less than 2 per cent.

Mark Allen, chief executive, said: "Dairy Crest has enjoyed another good six months.

"In line with our strategy, we have continued to grow our brands, reduce our costs and control our debt.

" At the same time the improvements we have made to our quality, service and cost base have paid off with new contracts to supply fresh milk to major retailers.

"Our strategy has proved successful in the challenging economic environment and positions us to deliver further value going forward."

He said operational efficiencies and selling price increases would help to deliver profits in line with expectations."