Cheaper competition knocked Cathedral City cheese sales earlier in the year, forcing the company to revise its expectations, prompting a number of investment banks to cut their stock exchange rating.

The company made £85.1million in pre-tax profits for the year, rising 11 per cent from £76.8million the previous year.

"The figures are in keeping with our forecasts. There were two positive surprises; the scale of the dividend, and net debt was reduced by £70 million," said analyst Julian Hardwick.

Dairy Crest proposed a dividend of 18.9p per share, up 15 per cent, and reduced their net debt to £279.7 million.

A new marketing campaign for St Ivel Gold - bought with Utterly Butterly and Vitalite from Uniq in 2002 for £86.5million - ended 12 years of declining sales for the brand, making spreads Dairy Crest's most profitable business. The company's cheese stocks are now at their lowest level for over three years, which should help production this year.

"We are back into good, strong growth," said the company's Chief Executive, Drummond Hall. "We've got good brands and strong cash generation, and are well placed to develop the business."

The dairy firm is currently testing a parcel delivery service with Express Dairies through one of its London depots.

However, the company cautioned that imminent European reforms may cause uncertainty, and predicted broadly flat margins for the next period.