London property boosts Dairy Crest

Cheese sales grew 14 per cent to £265m, and profit rose 19 per cent to £39m, as Cathedral City Cheddar outpaced a flat market. But spreads had a tough year, with higher cream prices raising the cost of making butter. Profit fell a third to £16.8m and sales slid 9 per cent to £177m. And the dairy business, which processes fresh milk and delivers it to retailers, reported an underlying profit of just £2.6m on sales of £945m - a vanishingly thin margin - as milk prices paid to farmers rose 8 per cent over the year.

However, the cost-cutting programme delivered £25m of savings, largely thanks to the ongoing rationalisation of the spreads manufacturing facilities onto a single site. A £45m investment into the production of demineralised whey powder for infant nutrition is also progressing well, and will contribute £5m a year to profit by 2015-16. Milk and cream prices are now starting to fall, but Dairy Crest's supermarket customers are pushing down their prices, too. The outlook for the year is tougher than expected, believe analysts at Panmure Gordon, who have cut their EPS forecasts for the current year by 8 per cent to 39.5p.