Golden Vale, the dairy food group, is looking for further growth, following an 11.2 per cent rise in pre-tax profit to €14.85 million (£11.7 million), in the six months ended June 30th 1999.

The company is "making steady progress in the strategic development of the group as a market-focused food company and will continue to aggressively pursue this strategy through both organic growth and appropriate acquisitions", said group managing director, Mr Jim Murphy. However, the outlook for butter and milk powders, which were a big drag in the first half, remains poor. With market prices remaining low, the margin in milk is described as "inadequate". Milk input prices are expected to be slightly lower in the second half.

The interim statement sets out specific priorities for the remainder of the year. These include completion of the rationalisation plan in its butter and milk powders business and of the €28 million expansion of its prepared meals factory in Carrickmacross. It also plans to complete the construction of its new factory in Enniskillen and to complete the integration of Dairyborn Foods.

The latest profit growth was achieved despite a sharp drop in profitability from the butter and milk powder division. The group had the benefit of contributions from the sale of assets, the share of profits of an associated company, and acquisitions. If these and the goodwill amortisation, are stripped out, the underlying profit growth was much better than what is immediately apparent. This is reflected in the 24 per cent growth in operating profit (before these items) to €16.9 million.

The poor trading of the butter and powders division did hit the group's balance sheet, leading to a €14 million reduction in the value of Charleville milk processing assets. This represents 8.8 cents per share and was responsible for the reduction in shareholders' funds from €146.97 million to €124.6 million.

The interim dividend is being raised from 1.02 cents to 1.09 cents per share. Headline earnings per share grew from 5.97 cents to 7.96 cents.

Although net borrowings increased from €41.3 million to €68.3 million - reflecting the purchase of Dairyborn Foods, the rationalisation programme and increased working capital - the gearing is still an acceptable 56 per cent, up from 13 per cent.

Turnover increased by 6.7 per cent to €399 million. This was entirely due to consumer products which grew from €195 million to €222 million. Butter and milk powders saw a drop from €148 million to €142 million while agri-trading was up from €31 million to €35 million.

A breakdown of operating profit shows a rise from €9.2 million to €14.8 million in the consumer products division. Within this division, turnover in cheese, spreads and retail butter, declined by 1 per cent. This, the group said, reflects a significant reduction in sales from Golden Vale Holland, consistent with the rationalisation plan, which was almost fully offset by the inclusion of Dairyborn Foods. Volume sales growth in Ireland and Britain showed a 3 per cent growth.

Profit growth came from the implementation of the cheese rationalisation plan, including the closure of the Dutch manufacturing operation. The Danish subsidiary incurred a loss due to higher oil prices.

Turnover of fluid milk and other consumer products, fell by 6.5 per cent due mainly to currency translation. Profitability is said to have improved.