Multi-million pound Lombard funding boosts award-winning dairy brand
- With £16m Lombard funding, Dairy Crest streamlines processes and reduces costs, removing 250,000 miles of transport and more than 300 tonnes of CO2 from the supply chain
- Lombard provides bespoke financing solution recognising Dairy Crest’s operational needs
- Lombard completed the deal in six weeks despite challenging economic conditions
As the UK’s leading dairy foods company, Dairy Crest manufactures a wide range of everyday dairy brands including the award-winning Cathedral City cheddar, Clover dairy spread, Country Life butter and spreadable and FRijj fresh milkshakes. Dairy Crest also supplies milk to retailers from major supermarkets to village stores, while its milkmen deliver to around 1.3 million residential customers in England and Wales every day.
Over the past decade Dairy Crest has created a world-class cheese supply chain in order to meet increased demand for Cathedral City cheddar. The cheese is manufactured at the country’s most modern creamery in Davidstow, Cornwall and matured at a purpose-built store at Nuneaton.
Packing was historically carried out at Maelor, North Wales, but in 2008 Dairy Crest took the decision to build a fully automated cutting and packing facility alongside its maturation store and national distribution centre. This investment enabled Dairy Crest to streamline its processes, significantly reducing its costs and eliminating 250,000 transport miles (over 300 tonnes of CO2) by combining every element of the post-conversion supply chain.
The company invested its own capital in building the new pre-pack facility but recognised the benefits of using leasing to finance the purchase of the required plant and machinery.
Roger Robotham, Dairy Crest’s Corporate Development Director, explains, “It was important for us to secure a funding deal with a term that mirrors the useful economic life of the equipment and that wouldn’t adversely impact our operational flexibility. From a shortlist of asset finance providers, we chose Lombard as it really understood our business needs. It was able to offer a tailored funding proposal via a long term lease that included a competitive residual value and which didn’t affect our ability to use the equipment in the required manner. This agreement gave us the ability to fix our costs over the lease term and meant that we would be unaffected by any changes in interest rates.”
Paul Buxton, Lombard’s Relationship Director, says “We structured a financing solution for Dairy Crest in the midst of very challenging economic conditions as the ‘credit crunch’ was taking hold. It was important to have all aspects of the deal in perfect order to ensure the funding was delivered smoothly and the plant could become operational as soon as possible.”
Despite the complexities of the deal, Lombard utilised its strong relationship with its RBS banking partner to provide £16 million of asset funding against the machinery in the Nuneaton packaging plant. By taking an absolute view on the value of the assets, Lombard was able to structure a market-facing loan over a seven year term. The deal was completed in just six weeks.
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