Following the publication of Dairy Crest’s final figures Nicola Mallard of Investec upgraded the shares to ‘buy’ with a target price of 475p. The final figures were ‘a shade’ above Investec’s forecast.

The majority of the group’s profits are generated by the foods division, which enjoyed a good year, helped by the acquisition of St Hubert in France, and cheese stock profits in the UK. There should be further stock profits this year, which will also benefit from the relaunch of Clover.

The dairy operations benefited from the integration of the Express doorstep business and rigid cost control. Year end net debt was £475 million and it will be ‘broadly unchanged ‘ this year. The high debt will continue to ‘be seen as an issue’ according to Mallard but the PE is an undemanding 7.2.

She regards the shares as a ‘trading situation’ that is ‘not suitable for those with an aversion to high levels of debt’.

by John Marshall