Express Dairies looks to the future

With solid gains in underlying profits and the proposed merger with Arla Foods expected to lead to further improvements, there is plenty for UK dairy group Express Dairies​ to be pleased about. But the group's optimism is somewhat tempered by the difficulties which continue to face the dairy sector, not least in the commodity market.

Express reported underlying operating profits from continuing businesses up 9.1 per cent to £37.3 million (€52.6m) in the year to 31 March, while underlying pre-tax profit increased by 23.5 per cent to £28.4 million.

While the exceptional charges of £12.7 million related to the restructuring of the business continued to weigh heavily on actual profit performance, the group said that it had nonetheless reduced its debt by £65.5 million to £103.3 million, and achieved cost savings of £9 million as a result of the reorganisation.

Pre-exceptional operating profits were ahead of 2002 at £37.3 million, up from £34.2 million, as the restructuring of the business continued to show benefits. Turnover for the year was down by 11.5 per cent to £697.2 million, however, reflecting a decline in milk powder prices during the year and the discontinuation of a supply contract with Safeway.

The retail market remained highly competitive during the year, the company said, and the company saw the volume of milk it sold to the major multiple grocers decline by some 1 per cent during the year, although this was partially due to the termination of the contract to supply the Safeway chain (a unilateral decision taken by the retailer and which is the focus of legal proceedings instigated by the dairy).

Doorstep deliveries continued to fall, with volumes down by 10 per cent during the year, although Express claimed that this was a better performance than the market as a whole. A new Postcomm licence, which became effective on 23 April 2003, allows the company to deliver up to 46 million packets and letters a year along with the milk, and Express is already working with major brand owners to develop deliveries of a range of products including contact lenses, catalogues, directories, CDs and books.

While the proposed merger with Arla Foods UK is currently subject to approval by the UK regulators, Express continued to stress the potential benefits of the deal. The enlarged group will have a turnover approaching £1.3 billion and will be a broader based dairy company with leading positions in the supply of fresh milk, cream and dairy spreads, including the market-leading Lurpak and Anchor brands.