Dairy Crest, which own brands such as Cathedral City, Frijj, Clover and Country Life butter reduced its dividend by 25%, to help it fund its defined benefit (DB) pension scheme.
Its pension fund deficit payments will resume from October 2009 at £20 million a year.
Mark Allen, chief executive of Dairy Crest Group, said: “In light of additional cash contributions to the pension fund and the dilutive effect of the Yoplait Dairy Crest disposal on 2009/10 earnings, the Board has reviewed the Group’s dividend policy. The Board has concluded that it is sensible to conserve cash and ensure the business is well funded to protect investment in its brands and into efficiency-driven capital projects. Accordingly, it has decided to rebase this and future dividends by 25%.”
The dividend will be 13p, compared to 17.3p last year. The total pension deficit at 31 March 2009 was £63.3 million compared to a £31.6 million surplus at 31 March 2008.
The dairy group paid an additional £12 million into its main UK scheme during the year and its trustee board agreed a £150 million transaction with Legal & General to insure around half of the fund’s liability for pensions in payment. The deal provides protection against both financial and demographic pension risks, in particular members living longer than expected.
The structure provides flexibility for Dairy Crest and the trustee board to explore further similar arrangements in the future.