Dairy Crest has said the sale of its Nine Elms milk depot will mean its full-year profits are likely to come in ahead of expectations despite a weaker-than-anticipated performance from spreads.
Giving a trading update today (31 January), the dairy said its year-to-date performance has been in line with expectations in a “challenging” environment.
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Sales of its four key brands – Cathedral City, Country Life, Clover and Frijj – rose by 4% in the first nine months of the year and the group made continued progress in reducing costs at its struggling dairies division. Dairy Crest again insisted it is on-track to hit savings ahead of its annual target of GBP20m (US$32.9m) and added it remains committed to a medium-term target of a 3% return on sales.
Dairy Crest is also looking to improve profitability by establishing demineralised whey powder production. The project is “progressing to plan” and the company is in “advanced talks” with a number of potential customers, Dairy Crest said.
The company has sold its Nine Elms depot in London to Battersea Project Phase 5 Residential Company Limited for GBP17.6m. The deal will result in a one-time gain profit of GBP15m.
“We now anticipate that profits from the sale of properties will total around GBP18m this year, GBP10m ahead of previous expectations,” Dairy Crest said. “However, the challenging spreads market will lead to full year spreads profits below previous expectations. Taken together these changes will increase adjusted profit before tax.”
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By GlobalDataPanmure Gordon analyst Damian McNeela said he expected lower spread profits to trim GBP2.5m off the bottom line, while Dairy Crest has indicated that it will pay GBP2.5m more in staff bonuses this year. “Accordingly we are increasing our adjusted profit-before-tax forecasts by GBP5m to GBP61.1m resulting in an 8% EPS upgrade to 39.8p,” he wrote in a note to investors.
Dairy Crest shares had edged up almost 1% at 10:00 GMT this morning.
