Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Dairy Crest sets price for float:The Investment Column

Edited Tom Stevenson
Wednesday 31 July 1996 18:02 EDT
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

Dairy Crest, the former marketing arm of the Milk Marketing Board, looks set for a successful stock market flotation, two years after its first attempt was disrupted by the Government's de-regulation of the milk market.

The volatility this time around is not so much in the milk market as the stock market, which has caused Dairy Crest's advisers to price the issue slightly lower than expectations. At a price of 155p the company is valued at pounds 171m. Thirty per cent of the stock was placed with institutions yesterday with the remainder being given to the 28,000 farmers who jointly owned the company through the Residual Milk Marketing Board. On average they will pocket pounds 6,000 from the float.

Though dealings in the shares are not expected to start until 28 August, an internal market has been set up to enable farmers to trade their shares ahead of that deadline to avoid disorderly selling and buying by the farmer- shareholders.

At 155p, Dairy Crest shares are certainly priced competitively. They are on a price/earnings ratio of eight, while rivals Unigate and Northern Foods both trade on 11 with a less attractive yield. This makes Dairy Crest a good bet and at these levels it is hardly surprising that institutions appear to have fallen over themselves to grab a slice.

Dairy Crest has done much in recent years to slim itself down from a bloated co-operative but it remains Britain's third-largest dairy company. Going forward it will need to concentrate more on building higher-margin brands like its successful Clover spread and its young but growing Frijj range of milk drinks, while reducing its dependency on commodity items such as liquid milk.

The company's operating profits of pounds 35.2m last year on sales of pounds 740m show there is plenty of scope for more margin improvement to come. Good value.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in