UPDATE 2-Sex Pistol helps boost Dairy Crest butter sales

* No plans to raise capital; "very reticent" to cut dividend

* No change in expectations since Nov. profit warning

* To cut capital spending next financial year

* Shares down 1.5 pct, off early low

(Adds CEO, analyst comments, detail, background, shares)

By Mark Potter

LONDON, Feb 3 (Reuters) - Dairy Crest (DCG.L) has no plans to raise capital or cut its dividend, it said on Tuesday, as it reported steadying trade since a November profit warning, helped by a marketing campaign fronted by former Sex Pistol John Lydon.

The British maker of Cathedral City cheese, Yoplait yoghurts and Clover spreads said sales rose 4 percent in the nine months ended Dec. 31, down from 6 percent at the half-year stage, though this was partly due to the sale of a cheese business.

Volumes of Country Life spreads leapt 85 percent in the latest quarter, which the group attributed in part to promotions and also to the success of the John Lydon advertising campaign.

Its profit expectations were unchanged from November and it still expected net debt of about 500 million pounds ($708 million)by March 31, it said in a trading update.

That would be 3.25 times earnings before interest, tax, depreciation and amortisation (EBITDA), below its banking agreement ceiling of 3.5 times.

Dairy Crest shares have more than halved in value since September due to concerns over its debts and the profit warning.

Chief Executive Mark Allen was confident of keeping within the banking arrangements without raising extra cash, and said the group would be "very reticent" to cut its dividend.

"We fully intend to run the business within the existing bank covenants and (have) no plans to raise additional equity," he told Reuters in a telephone interview.

"One of the things that's pretty important to our shareholders is the dividend, so we would be very mindful of that when we have to make the decision," he added, noting a decision on the dividend payout would be made in May.

At 1115 GMT, Dairy Crest shares were down 1.5 percent at 200.5 pence, off an early low of 195.25 pence and valuing the business at about 266 million pounds.

MAKING SAVINGS

"We do continue to harbour concerns and reservations about debt and Dairy Crest," Shore Capital analyst Clive Black said in a research note, though he thought the firm would not breach its banking arrangements and was reassured by its cost cutting.

Allen said Dairy Crest had cut around 300 jobs as part of its recent cost cutting, but declined to say how much money the group expected to save.

He also said it would cut capital spending in the next financial year to well below 40 million pounds, compared with around 60 million for the year ending March 2009.

Cathedral City sales were up 14 percent in the three months to Dec. 31 and Dairy Crest was seeing no sign of customers switching to cheaper supermarket own-brand alternatives.

However, it had increased promotions by a "single-digit percentage", Allen said.

Dairy Crest said it was continuing to suffer from weak dairy ingredients markets, but it would be helped by recently agreed price cuts with its milk and milk-for-cheese suppliers.

Allen was comfortable with analysts' forecasts for the group to make an operating profit of around 98 million to 100 million pounds this financial year. ($1=.7063 pounds) (Editing by Greg Mahlich and Simon Jessop)