25 June 2008 - Milk Link, the UK's most progressive farmer owned dairy processor, today announced its results for the year ended 29 March 2008.
Key financial highlights included:
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Our key measure of profit, Earnings Before Interest, Tax, Depreciation and Amortisation, increased from £28.2 million in 2007 to £30.5 million (+ 8.2%).
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Turnover increased from £509 million in 2007 to £523 million (+2.8%).
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Turnover per litre increased from 33.0ppl 2007 to 37.7ppl (+14.2%).
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Group gearing (the ratio of third party net debt to members’ funds) improved from 2.0 times to 1.7 times.
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General reserves which were £3.9 million in deficit at the end of 2007 were enhanced by £4.1 million to leave a surplus of £0.2 million.
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Operating costs reduced to £83.6 million from £84.7 million, despite significant increases in input costs, particularly those relating to energy.
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Average Member milk price increased by 8ppl to over 25ppl (+47%).
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Member Processing Interest Payment for 2007/08 increased to £4 million – a 10.6% return on Members’ Qualifying Loan balances.
Commenting on Milk Link’s performance Ronnie Bell, Milk Link Chairman said:
“The last year was one of continued growth and delivery for Milk Link. We ended the year financially and commercially stronger and most importantly we were able to translate this into increased returns for our farmer Members. Our average price paid to Members increased by over 8 pence per litre whilst the processing interest payment generated from the year represented just over a 10% return on their Qualifying Loans held in the business.
“Looking forward, although the wider dairy industry faces considerable challenges, I believe that Milk Link’s financial and commercial strength leaves us well positioned for the future. Above all, we remain totally committed to our strategy of vertical integration and, by adding value through processing, making more of our Members’ milk.”
Commenting further Neil Kennedy, Chief Executive of Milk Link said:
“I am pleased to be able to report that in the last financial year Milk Link made good progress towards our goal of becoming a leading producer of value added dairy products. In doing so, we were able to reward our Members loyalty, hard work and investment through substantially enhancing the returns paid to them as the business generated higher and better quality revenues.
“The Group’s financial performance was strong reflecting substantially increased selling prices across all our retail products and dairy ingredients, our much improved product and customer mix, the positive benefit of our 100% acquisition of The Cheese Company, and our continued emphasis on driving out cost and leveraging greater efficiencies across the business. The latter being particularly important given the substantial increases in fuel and energy costs that impacted on our processing and distribution operations.
“The dairy industry will undoubtedly continue to experience considerable instability and Milk Link, and indeed the wider industry, must continue to work to effectively address the resulting challenges and opportunities. I and my management team are extremely mindful, therefore, of the need to continue the long term development of the business.”
OPERATIONAL & COMMERCIAL HIGHLIGHTS
2007/08: A year of adding value
Branding
The year saw the launch and development of a number of branded cheeses.
• Sales and distribution of Tickler, our extra mature cheddar, grew strongly and it is now stocked in Sainsbury’s, Waitrose, Morrisons and Tesco.
• In Scotland our ‘Lockerbie’ brand of high quality cheeses and butter performed strongly and is now sold across in Sainsbury’s, Tesco and Morrisons.
• Our partnership with Yeo Valley to produce and market a range of top quality organic cheeses under the Yeo Valley Organic brand also delivered good sales growth and increased distribution.
• In the Out of Home sector, Bladen reinforced its position as the leading dairy brand for caterers and food service providers growing by 4.2% year on year.
• Sales of our Moo brand of long life milk and in particular Organic Moo continued to grow.
• In addition, sales of our branded extended shelf life flavoured milks also increased with in particular, MARS® Family Fuel milk (produced under a brand licencing agreement with Mars®) performing strongly.
Product Quality
The quality and consistency of the cheeses made at our creameries was increasingly recognised through:
• the growth in the number of products produced for leading retailers such as Sainsbury’s and Marks & Spencer which now prominently feature the names of our Taw Valley, Lockerbie, Tuxford & Tebbutt and Reece’s creameries;
• the winning of over 110 awards, including 22 gold medals, at the UK’s leading cheese shows.
Stronger Customer Relationships
Milk Link now trades with all the UK’s major food retailers and many of its leading food service and food processing companies.
• During the year we successfully developed stronger and deeper relationships with customers such as Sainsbury’s, M&S, Waitrose, Tesco, Iceland, 3663 and Booker through focusing on delivering quality products, innovation and service excellence to them.
Innovation
The business is committed to meeting the current and future needs of its customers by introducing innovation across its products, packaging and processing activities.
• This commitment was demonstrated by the creation of a new Innovation Team
• During 2008/09 a major development will be the opening of a new Innovation Centre for the business
2007/08: A year of greater efficiency
A key focus for the business during the year was the drive to reduce costs and secure efficiency, energy and environmental improvements across all our operations.
• The first phase of Project Vision a major investment programme at our Oswestry cheese packing plant was successfully completed on time and budget. This has reinforced Oswestry’s position as the most advanced cheese packing plant in the UK and has started to deliver major efficiency gains.
• Similarly we successfully instigated efficiency programmes at our Staplemead, Taw Valley and Lockerbie creameries as well as at Westbury Dairies.
• During the year we also completed a major IT investment with the deployment of a powerful SAP system across our cheese, long life milk, milk distribution and head office functions. This will deliver greater business integration, efficiencies and information flow across the business.
2007/08: A year of Member and milk recruitment and retention
• The year saw a downturn in milk production across the entire industry. Against this backdrop overall Member volumes remained largely steady with volumes lost through a relatively small number of resignations being largely counteracted by increased production from existing Members and a number of new recruits. In addition, we recruited some 50 million litres of milk in Cumbria on direct supply contracts.
• We also successfully introduced a number of new Market Related Contracts with approximately 95% of all Members now on one of these. This includes a specific contract for Members of the Rodda Producer Group which has successfully cemented our relationship with the highly successful Cornish Clotted Cream manufacturer.
• In addition, despite the tight supply of milk across the industry our Ingredient Services division traded over 300 million litres of milk during the year.