Dairy Crest outlook bright with Nine Elms sale

Dairy Crest of the UK has issued its interim management statement for the nine months ended 31 December 2013.  It has also agreed the sale of its Nine Elms residential and middle-ground milk depot. As a result, it expects to report profits for the year ending 31 March 2014 ahead of expectations. Sales of four key brands (Cathedral City Country Life, Clover and FRijj) have grown by 4% over the period.  New products introduced earlier this year include Clover Additions and Cathedral City Grated Portion, which are meeting targets. The firm has also recently launched Cathedral City Spreadable. Frijj is also expected to be in growth for the year, after the the successful upgrade of production facilities in the first half of the year.

“We have also continued with initiatives designed to improve the profitability of our dairies product group and remain committed to our medium-term target of 3% on sales,” says Mark Allen, chief executive of Dairy Crest. “We are on track to deliver cost savings ahead of our annual target of £20 million. Our demineralised whey powder project is progressing to plan and we are in advanced discussions with a small number of potential customers.”
However, all is not completely bright. The spreads segment will continue to be “challenging,” he warns.

Meanwhile, the sale of Nine Elms in London to Battersea Project Phase 5 Residential Compan for £17.6 million (€21.3m) in cash has generated a profit of £15 million on the disposal. Allen explains, “Residential milk deliveries have steadily declined over recent years as supermarkets have grown their share of the market. Property profits from the sale of depots such as Nine Elms offset the costs associated with this decline.  We had forecast property profits of around £8 million but we had also highlighted that Nine Elms was a particularly valuable property which would result in a spike in profits in the year in which it was sold.  We anticipate profits from the sale of depots we no longer require are likely to return to a more normal £5 million to £10 million in future years.”

The outlook is bright, due to the property sales. “We now anticipate that profits from the sale of properties will total around £18 million this year, £10 million ahead of previous expectations,” Allen says. “This will result in additional bonus payments to over 1,200 of our employees which will total around £2.5 million and lead us to report profits for the year ending 31 March 2014, ahead of expectations.”