Share tip of the week: Dairy Crest

Each week we look at a promising share listed in the FTSE 250. This week: Dairy Crest , the firm behind the Cathedral City, Nation Lifestyle, FRijj and Clover manufacturers


Dairy Crest, the business behind the Cathedral City, Nation Life, FRijj and Clover manufacturers, has seen its share cost fall by 20pc in 2014, with the supermarket cost war blamed for decreasing milk sales.

But some fund managers, like Chris White, who oversees the Premier Cash flow fund, feel the share value fall has been overdone. Mr White explained other factors of the firm’s organization had been being overlooked by investors who have rushed for the exits.

“Cathedral City has grown considerably above the previous decade and is now the 18th grocery brand in the United kingdom. The business is in the procedure of exploiting this brand strength by innovating new merchandise such as Cathedral City Spreadable,” stated Mr White.

“I see the dairies company as a free of charge choice. It generates wafer-thin margins thanks to pricing pressure from the supermarkets, but, if problems ease and management can succeed in turning it about, the division could be a significant revenue contributor to the group.”

One of the major attractions of the shares is the large 5pc dividend yield. Mr White mentioned this, mixed with the firm’s plans to enhance earnings by means of the sale of surplus properties, ought to comfort traders.

“The market place value of Dairy Crest’s freehold house must exceed the £110m book value,” Mr White explained. “This represents a considerable portion of its £600m complete worth.”

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