Shares - - TALKING POINT -

Shares in food pro­ducer Dairy Crest cur­rently lan­guish at 467p as poor sen­ti­ment re­flects con­cerns over profit-im­ping­ing in­put costs and lim­ited pric­ing power. We see merit in buy­ing the shares at the cur­rent price for sev­eral rea­sons. The firm be­hind the Cathe­dral City, Clover and

Coun­try Life gro­cery brands, as well as rapidly grow­ing non-dairy spread of­fer­ing Vi­tal­ite, gen­er­ates a high re­turn on cap­i­tal.

It lever­ages high qual­ity as­sets, a strong sup­ply chain and lead­ing in­dus­try po­si­tions to gen­er­ate in­dus­try-lead­ing mar­gins, while a com­mit­ment to new prod­uct in­no­va­tion au­gurs well for the fu­ture of the busi­ness.

De­spite cut-throat lev­els of com­pe­ti­tion, in the first half of the fi­nan­cial year, Dairy Crest saw strong per­for­mances from its two big­gest brands,

Cathe­dral City and Clover.

Be­sides the core branded gro­ceries busi­ness, Dairy Crest of­fers up­side through a fast-de­vel­op­ing func­tional in­gre­di­ents busi­ness with tasty global growth po­ten­tial.

For the year to March 2019, Shore Cap­i­tal fore­casts pre-tax profit improve­ment to £66.7m (2018: £62.3m) and a div­i­dend hike from 22.6p to 22.8p, mean­ing there’s a port­fo­lio-nour­ish­ing 4.9% prospec­tive yield on of­fer. (JC)

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