Food & Drink: Windfall for Dairy Crest workers after £17.6m property deal
15:18 31 January 2014
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More than 1,200 staff at Cathedral City firm Dairy Crest are to share out an extra bonus pool worth £2.5million after the group secured a top price sale for one of its London milk depots.
The windfall comes as it said annual profits were now set to beat expectations and come in “significantly” ahead of a year earlier following a bumper year for profits on properties after securing a £17.6m sale of its Nine Elms site to the Battersea Power station development firm.
Managers and office staff will receive the payout in the summer, on top of the usual annual bonus scheme. Milkmen and factory workers take part in separate bonus schemes, but are also expected to benefit from the group’s profits boost.
Surrey-headquartered Dairy Crest made £15m profit on the sale of Nine Elms, which is set to see proceeds from property sales for the year to the end of March come in at around £18 million - £10 million more than expected.
Nine Elms employs around 50 milkmen and van drivers, but Dairy Crest said it will transfer affected staff to neighbouring depots over the next 18 months.
It is shutting depots at a pace of around five a year as it battles against a declining doorstep delivery market amid competition from supermarkets and convenience stores, although it still has around 80 sites across the UK. The group is also cutting costs and said it was on track to deliver savings above its annual £20m target.
Dairy Crest said its brands saw a mixed performance in the third quarter, with a sharp pick-up in sales growth for key products Cathedral City, Country Life, Clover and Frijj, but worsening conditions for its spreads business.
While the four major brands saw 4% growth in the nine months of its year so far, it said annual spreads profits would be lower-than-expected amid stiff competition and a falling market.
Consumers are using spreads less due to the increasing popularity of bread alternatives such as wraps, while they are also throwing less food away, according to Dairy Crest.
Charles Pick, analyst at Numis Securities, cautioned that excluding the property profit sales and after the bonus handout , the update revealed an underlying downgrade in full-year profits.
Panmure Gordon experts added: “Underlying trading conditions remain challenging, particularly in dairy and spreads, but cost savings and momentum in cheese spreads should help to alleviate this pressure.”