Milk Link’s solid year of growth and development

JUST days after announcing its agreement to purchase DFB’s Llandyrnog cheese creamery, Milk Link has announced its own annual results showing an increase in turnover and pre-tax profit, and a reduction in borrowings.

Chairman Ronnie Bell said despite a very challenging economic and trading environment, the year (to April 4, 2009) was one of solid growth and development for the co-op.

“We ended the year financially, structurally and commercially stronger and, most importantly, we were also able to increase returns to our farmer members.”

Turnover increased by 4.6 per cent to £547 million and pre-tax profit by 13.5 per cent to £10.1m.

Earnings before interest, tax, depreciation and amortisation (EBITDA) reduced from £30.5m to £28.7m reflecting higher milk prices paid out, a lower requirement for retained profit to meet bank covenants, and the fact there were no profits from cheese stocks as in the previous year.

Net bank debt fell by £8.5m to £76.1m and importantly, member funds rose to £60.9m at the year end resulting in an improvement in group gearing, from 1.66 times to 1.25 times.

Mr Bell said the milk price paid to members – average 25.6ppl – was an around 4ppl increase and members' processing interest payment represented a 10.8 per cent return on investment (members' qualifying loans).

Chief executive, Neil Kennedy, committed to further improve member returns and Milk Links' relative milk price.

Long-term contract

During the year, Milk Link won further customer brand business with many major retailers and including a long-term contract for a full range of cheddars into Waitrose and additional volumes of Stilton into Sainsbury's and Marks & Spencer. The volume of balancing milk for the likes of Arla and Wiseman also increased.

Milk Link has also been spending on its eight sites including £1.1m at the Oswestry cheese pack-ing facility and £1.5m at Crediton with the installation of the world's only Tetra A3i high speed carton filler (in a milk environment).

There has also been considerable investment in marketing and product development including a new Innovation Centre, and the start of a £1m cutting and packing hall at the Reece's speciality cheeses outlet in Malpas, Cheshire.

Looking to the current year, Mr Bell predicts conditions will continue to be ‘extremely difficult' with challenges and opportunities – and an accelerated need for market rationalisation and consolidation.

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