Milk Link reports solid performance

Despite an extremely difficult economic and trading environment, Milk Link continued to make good progress over the year as we strengthened both financially, structurally and commercially.

Ronnie Bell, Milk Link Chairman

Milk Link, the UKs most progressive integrated dairy business, today announced its results for the year ended 3 April 2010.

Financial highlights

  Turnover increased from 547 million in 2009 to 550 million (+0.5%).

  Earnings Before Interest, Tax, Depreciation, Amortisation (EBITDA),

increased from 28.7 million in 2009 to 29.2 million (+1.7%).

  Profit before Tax increased to 10.6 million from 0.5m in 2009 (in part reflecting the strategic reviews which took place in the prior year which led to exceptional charges of 9.6 million).

  Operating Cash Flow was 39.7 million up from 23.9 million (+66%).

  Net bank debt was only 4.8 million higher than the prior year of 76.1 million at 80.9 million, despite the acquisition of the Llandyrnog Creamery for 25.6 million during the year.

  Profit attributable to Members was 10.1 million.

• Processing Interest Payment relating to 2009/10 financial year was 3.3 million representing an 8.1% return on Members Qualifying Loans.

Operational highlights

• The acquisition of the Llandyrnog Creamery in North Wales reinforced Milk Links position as the largest producer of British cheeses.

• The amount of milk handled increased to over 1.4 billion litres (+13%).

• Milk Link was successful in recruiting c.600 additional new Members and direct supply farmers.

• Milk Link undertook a strategic refocusing of its long life milk & cream and flavoured milks business.  Integral to this was the closure of its Kirkcudbright facility and consolidation of all milk production into its Crediton Dairy.  The latter benefited from a major capital investment programme to create the most advanced production facility of its type in the UK.

Commercial highlights

• Milk Link continued to build its customer brand business with major customers such as Sainsburys, Waitrose, Tesco, Marks & Spencer, Morrisons, Iceland and the Co-op.

• Despite the very difficult trading conditions for all in the foodservice sector, Milk Link continued to build its business and relationships with major customers such as 3663, Booker and Brakes.

• Milk Link established a new Speciality Cheese business to complement its strong presence in the production of Blue Stilton and crumbly territorial cheeses. Key developments included the building of a new 1.4 million speciality cheese packing facility at Reeces Creamery in Cheshire and the establishing of a strategic alliance with Cornish Country Larder the leading British manufacturer of award-winning soft cheeses.

• Milk Links growing range of branded & licensed cheeses and milks benefited from increased marketing support, innovation and extra distribution through retail multiples and foodservice outlets.  In particular sales of:

–   Tickler, Milk Links award-winning extra mature Cheddar, rose by +56%

–   Flora pro-activ milk grew by +15%

–   Moo milks increased +18%.

• Sales of Milk Links new lighter cheese which has 30% less fat than standard Cheddar but doesnt compromise on taste and texture grew strongly.

• The quality of Milk Links cheeses was again recognised by the industry with the winning of a record 182 awards during the year.

Commenting on Milk Links performance Ronnie Bell, Milk Link Chairman said:

Milk Link continued to make good progress over the year as we strengthened both financially, structurally and commercially and made strong progress towards our objective of becoming the UKs leading added-value dairy processing business. We are now a national business with a growing market presence and reputation for producing high quality innovative products and delivering excellent service levels. We have an increasingly supportive membership, growing national milk pool and deepening relationships with an impressive list of strategic customers.

We are focused on continuing to develop the business and returning the benefits to our membership. Although trading and market conditions will continue to be both difficult and highly volatile over the next year, I am confident that the business is well positioned to ride out the economic storm and will continue to grow and outperform many of our competitors.

Commenting further Neil Kennedy, Chief Executive of Milk Link said:

Despite extremely difficult trading conditions, particularly in relation to the cheese market where deep and sustained discounting by the major Cheddar brands eroded value from the market, the Groups financial performance was strong.

This reflected the strengthening of our customer & product mix; our continued emphasis on driving out costs and improving efficiencies across the business; and our rigorous approach to cash and stock management.  This perhaps can be summed up by our determination, in everything we do, to add value efficiently. Indeed, given the ongoing economic and market pressures all in the dairy industry face, this will continue to be a constant mantra for the business.

Looking forward, over the next 12 months the trading and economic environment will continue to be extremely challenging, whilst global dairy commodity markets will remain highly volatile. At the same time, although there are some welcome signs that farmer confidence is improving across the dairy industry, we must ensure that this is developed and sustained. This will be vital if we are to give farmers the confidence to make the necessary levels of investment in their dairy enterprises and to encourage the next generation of dairy farmers who will be the lifeblood of the industry.

Our objective over the next year is to harness our increasing financial strength and strategic flexibility to further grow and develop. We will continue to take the necessary steps to strengthen and streamline our business. Above all, I believe that Milk Link still has a great deal of latent potential to be unlocked and that we are well positioned to take advantage of the opportunities that will undoubtedly arise as the dairy market continues to go through a period of sustained and rapid change.

Founded in 2000, Milk Link is the UKs most progressive integrated dairy producer and processor.  Wholly owned by British dairy farmers it processes their milk into a wide range of high quality dairy products including long life milk, creams, flavoured milks, custards, milk powders, yoghurts and dairy ingredients, supplying all of the UKs major retailers and many of its leading food service and food manufacturing organisations. It is also the UKs largest manufacturer of cheese, making a comprehensive range of award winning British cheeses.

Milk Links aim is to create a long term sustainable future for its farmer Members, through allowing them to benefit from a long term secure outlet for their milk, together with the additional margins available from processing it into added-value products.