Scottish dairy firm secures Morrisons contract

By Laurence Gibbons

- Last updated on GMT

The family firm has won a contract with 500 Morrisons' stores
The family firm has won a contract with 500 Morrisons' stores

Related tags Milk Morrisons

Graham’s The Family Dairy has secured a contract to supply its branded milk and butter products to Morrisons stores throughout Scotland.

The Scottish firm told FoodManufacture.co.uk it expected awareness of the brand to grow extensively once its products started to be stocked from March 2015.

Graham’s The Family Dairy md, Robert Graham, said: “Graham’s The Family Dairy works in partnership with more than 90 farmers so our extended relationship with Morrisons guarantees that more consumers have access to milk and butter products from Scotland.”

No new jobs or production facilities

However, the contract would not lead to immediate job creation or investment in production for the Stirlingshire-based firm, which employs 500 staff, it said.  

Almost half of the households in Scotland now bought the firm’s products, Graham claimed.

“These new listings reinforce our commitment, and ability, to supply the highest quality Scottish produce and builds on our established relationship with Morrisons,” ​he added.

Morrisons will stock six of Graham’s milk and butter products, including its Scottish salted and unsalted block butter as well as its 2l whole milk, semi-skimmed milk and skimmed milk.

The firm’s Gold Top Jersey milk will also be stocked in 500 Morrisons’ stores nationwide.

The listing came after Scotland’s cabinet secretary for rural affairs and food Richard Lochhead urged more retailers to stock and promote Scotland’s dairy products.

Kantar Worldpanel recently ranked Graham’s The Family Dairy seventh in a list of the most popular take-home food and non-alcoholic drink brands.

David Gardner, Morrisons’ Scottish md, said: “We believe Graham’s Dairy can provide a great alternative offer to our Scottish customers​.

“With the Scottish dairy industry facing challenging times, this is great news for the sector and reaffirms our support for Scottish food and drink.”

New £20M dairy

Meanwhile, the firm was planning to build a £20M dairy in a bid to enable a “significant step change” ​that would benefit the Stirling economy and secure the long-term future of the dairy industry in Scotland, it said.

The new dairy is subject to the outcome of its Airthrey Green development proposals currently sitting with Stirling Council but could bring 450 new jobs over and above any construction related employment. It would also include up to 50 apprenticeships to bring local, young people into employment. 

The facility would house a research and development centre to allow Graham’s to continually develop and grow its brand through new products and meet the needs of its customers, the firm said.

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1 comment

Morrisons

Posted by roro01,

Morrisons' lower profit for 2014 is due to timing difference:

The company cut prices in early 2014 at a cost of £300m per year but said this will be offset by cost cutting of £300m per annum. The price reductions have immediate effect on profits whereas cost cutting takes longer to implement - for example, making 2600 junior managers redundant - hence the profit guidance for the current year provided by the company is £335m to £365m. This means that after implementing the planned cost cutting the profit will go up to £635m - £665m.

Morrisons has promised a total dividend of 13.65p per share for the current year - a yield of 7.4%. Morrisons dividend is safe as the company is confident it can cut cost by £1b and generate net cash flow of £2b over three years, against a backdrop of falling net debt - already fell from £2.85b to £2.6b in the third quarter and the company expects year-end net debt of £2.3b-£2.4b.

Morrisons is trading just above its tangible net asset book value of 181p per share. The latter implies zero goodwill book value and forecasts of zero profits so a price under 181p per share implies forecasts of losses whereas goodwill at book value = 20p per share and the company is a cash cow still generating hundred of million of pounds of profit each year. The profit guidance for the current year provided by the company in November is £335m - £365m.

Calculations I made some time ago:

Morrisons market capitalisation at a price of 176.7p = £4.12b, enterprise value (market capitalisation plus net debt of £2.6b) = £6.72b whereas market value of freehold properties = about £9b (Morrisons' pension fund is fully funded). The latter is HIGHER than the enterprise value by £2.28b. To put it another way:

Even if, theoretically, Morrisons were to decide today to stop trading and liquidate itself investors would be BETTER off as market value of its property per share = 385p (£9b/2335.08m shares), its net debt per share = 111p (£2.6b/2335.08m shares), so after paying off all its liabilities the value per share would be 274p which is much, much HIGHER than the current stock market price of 176.7p. 

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