PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 11:37 UK, 31st Jan 2014, by Agrimoney.com
Dairy Crest reaps windfall from milkman's decline

Dairy Crest staff are in for a bonus top-up averaging more than 2,000 each after the dairy group sold a former dairy depot for 17.6m, a windfall from the decline of the milkman as consumers switch to supermarkets.

The UK milk processor said it would book a 15m profit on the disposal of its Nine Elms site in south London, formerly a depot for serving doorstep deliveries.

Of this, 2.5m will be split between Dairy Crest's 1,200 staff as a payout on top of their existing staff bonus, about which the group declined to reveal financial details.

"It determines people's remuneration. It can get very sensitive," a Dairy Crest spokesman told Agrimoney.com.

The company's annual report says that "since 2011 the vast majority of staff benefit from being part of a bonus scheme that is linked to their performance, our values and the results of the business".

The group's executive bonus scheme awarded chief executive Mark Allen a 272,000 payout in 2012-13.

Decline of the milk round

The sale of the depot comes amid a rolling programme of asset sales enabled by the switch by many consumers from buying from milkmen to purchasing from supermarkets, although Dairy Crest does offer one of the few remaining doorstep delivery schemes, Milk and More.

"Residential milk deliveries have steadily declined over recent years as supermarkets have grown their share of the market," the group said.

"Property profits from the sale of depots such as Nine Elms offset the costs associated with this decline," although the London site is seen as a particularly valuable asset.

"We anticipate profits from the sale of depots we no longer require are likely to return to a more normal 5m-10m in future years."

'Particularly valuable locations'

According to Credit Suisse, Dairy Crest sill has some 70-80 depots, "some in particularly valuable locations in the South East.

"There is no official landbank value, but we'd guess the estate is worth something in the order of 80m," the bank said.

Operating efficiencies are also enabling the release of sites, in meaning "we need to have fewer depots", the Dairy Crest spokesman said. 

Market reaction

The Nine Elms windfall will lift profits "ahead of previous expectations" despite the extra payout to staff, and a disappointing performance in spreads, said the group, whose brands include Clover, Country Life and Utterly Butterly, besides Cathedral City cheddar and Frijj milk drinks.

The statement was viewed by Numis analyst Charles Pick as providing "mixed news", with the property profit disguising trading in spreads which "has been grim and worse than expected".

The broker kept at "hold" its rating on Dairy Crest shares, with a price target of 493p.

Panmure Gordon also kept a "hold" recommendation, but raised its target price for the shares by 50p to 550p.

The stock stood 0.2% higher at 512p in morning deals in London.

LINKS
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events