Dairy Crest expects to report full-year profits ahead of market expectations, thanks to a £10M boost from the sale of its Nine Elms milk depot, according to its interim management statement covering the nine months to December 31 2013.
The sale of Nine Elms residential and middle ground milk depot in London to Battersea Project Phase 5 Residential Company Limited for £17.6M in cash will generate a profit of £15M on the disposal.
Dairy Crest said:“We now anticipate that profits from the sale of properties will total around £18M this year, £10M ahead of previous expectations.”
‘Challenging spreads market’
But the challenging spreads market will lead to full year spreads profits below previous expectations, it added. “Taken together these changes will increase adjusted profit before tax. This will result in additional bonus payments to over 1,200 of our employees, which will total around £2.5M and lead us to report profits for the year ending March 21 2014 ahead of expectations,” said the firm.
Meanwhile, sales of its four key brands – Cathedral City, Country Life, Clover and FRijj – rose by 4%, benefiting from continued strong momentum in Cathedral City.
City analyst Panmure Gordon thought the financial performance “broadly in line with expectations”.
Its analyst Damian McNeela agreed that underlying trading conditions remain challenging – particularly in dairy and spreads but thought cost savings and momentum in cheese spreads should help to alleviate this pressure.
‘Strong performance from Cathedral City’
While the 4% growth of key brands represented 1% growth at the interim stage, third quarter sales had edged lower to 7% from 11%, said McNeela. “The outturn reflects another strong performance from Cathedral City delivering double digit volume and value growth over the period – although the third quarter of last year provides an easy comparison.”
The analyst issued ‘hold’ advice on the firm’s stock.
Mark Allen, chief executive of Dairy Crest, described the firm’s third quarter performance as solid, as the combined sales of its four key brands continued to grow. “Innovation continues to support the development of these brands and our new launches are performing in line with our expectations,” he said.
“We are delighted to have secured over £17M from the sale of Nine Elms. This reflects the work we have done to maximise the potential of this site over recent years.”
"Profits this year were likely to be ahead of previous expectations, and significantly ahead of last year,” he added. “Looking forward, we will continue to grow added value sales and reduce costs in line with our well-established strategy.”
Dairy Crest plans to issue preliminary results for the year ending March 31 2014 on May 22.