Britain's Dairy Crest Group announced the sale of most of its retailer-brand cheese operations for 61.9 million yesterday, and said first-half results would meet its expectations.

Dairy Crest, which is building a branded and added value foods business including products such as spreadable Country Life butter and grated Cathedral City cheese, said the sale was to farmer-owned dairy business First Milk.

The company, which first said on September 15 it was in talks about a sale, said the disposal was consistent with its strategy and "also with the industry trend for greater ownership of such assets by milk producers".

Dairy Crest said the assets being sold, including cheddar creameries at Haverfordwest and and Aspatria, made an estimated operating profit of £3.4 million on sales of £194 million in the year to end-March, when the business had a book value of £60.5 million.

The deal will have "a small positive impact on group profits, part of which will be reinvested to drive the growth of the branded business," the company said.

Investec Securities analyst Nicola Mallard said in a broker note: "The business was low margin and cyclical so the disposal improves the quality of earnings. It is likely that this operation might have only broken even in 2007".

Citigroup, which rates Dairy Crest stock a "Buy" with a 625 pence target, said: "Given the very strong run, we would expect some profit-taking. However, we believe that Dairy Crest are moving in the right direction". Reuters