Dairy Crest cow

Work on Dairy Crest’s £4m innovation centre at Harper Adams University is set to be completed by October, CEO Mark Allen has revealed.

Speaking today (21 May) as the processor announced its final results for the 2014/15 financial year, Allen said the new facility, located on the agrifood university’s campus in Shropshire, would give it increased access to food and farming research and “help us continue to develop new products and ways of working”.

Dairy Crest moved its research and development staff to the university in the new year ahead of the new centre’s completion - described by Allen as “exciting”.

The processor set a year-on-year revenue growth target of 10% from NPD sales in 2010, with scientific research, technology and product development from the new facility at the core of this objective.

It currently sits ahead of all its main rivals at 7% [IRI branded retail sales, three years to October 2014], with Unilever and Arla at 6% and Lactalis and Mondelez at 5%.

“Our staff will have quality access to research and academics, and this is really important if we are going to lead the innovation agenda in the future,” he added, with the centre set to be fully operational before the end of 2015.

Elsewhere, Allen said the proposed sale of Dairy Crest’s dairies operation to Müller was “on track”, and he expected to hear the results of the first phase of the Competition and Markets Authority’s investigation into the deal within the next few weeks.

He added that if the deal were to fall through for any reason, Dairy Crest did have a “plan B”, which would entail a programme of continued cost reduction across the struggling division, which saw profits fall by 90% from £18.8m in 2013/14 to £1.8m in 2014/15.

Despite the dairies business’ continued poor performance, which in part explained a fall of 59% in Dairy Crest’s overall profit before tax from £54.2m to £22.1m, Allen said the past 12 months had been “another year of significant progress”.

Total product group profits for its retained cheese and spreads businesses were up 19% year on year to £66.9m, while Cathedral City and Frijj experienced sales growth of 5% and 7% respectively. The business also met its annual cost cutting target, making savings of more than £20m.

However, the spreads sector “remains difficult” with Clover sales 8% down and Country Life down 9%, while net debt rose by 40% to £198.7m as a result of accelerated capital expenditure.

“We expect that our net debt, which at the year-end remains within our target range, will fall once we have completed our major investment projects,” he added, with the receipt of the proceeds of the dairies sale accelerating the reduction.

Allen said that the business was on track to start production of demineralised whey powder and galacto-oligosacharide at its Davidstow plant before the end of the year, while its ‘Dairy for Life’ framework – launched in 2014 with the aim of growing the dairy category – had already seen Dairy Crest and its retail partners launch cross-sector promotions and additional store positionings.