Full Year Results to 31 March 2014

Full Year Results to 31 March 2014

28th January 2015

Financial Highlights

  • 15% revenue growth to £610m (2013: £530m)
  • 210% growth in operating profits before exceptionals to £6.5m (2013: £2.1m)
  • Return to profitability, with Profit Before Tax before exceptionals of £3.5m (2013: £(0.8)m)
  • 31% growth in members' return on investment to £2.5m (2013: £1.9m)
  • Milk prices peaked at 32.5ppl from December 2013
  • Net debt cut by 14.5% to £62.7m (2013: £73.3m)

Strategic Highlights

  • 2013-14 saw improved returns from commodity markets, resulting in higher milk prices for members, peaking at 32.5ppl in December 2013
  • Entered into a long-term strategic partnership with Adams Foods, providing a secure outlet for majority of First Milk's cheese production
  • Existing long term partnerships with Nestlé, Fonterra and Volac continue to perform well

Non-recurring (exceptional) costs

Net non-recurring costs totalled £7.8m, including £7.7m of depreciation and amortisation charges which have no cash impact.  These costs comprise:

  • A charge of £7.5m from the closure of the Maelor packing facility.  This followed the loss of a significant cheese contract and the consequent strategic review which concluded that it was no longer commercially viable for First Milk.  The site was closed in 2014 and the charge comprised a write down of assets of £4.9m and redundancy and other closure costs of £2.6m.
  1. On 6 March 2014 the Group entered into a long-term, strategic partnership with Adams Foods Limited.  This arrangement provides a secure outlet for much of First Milk's cheese production.  Adams Foods acquired First Milk's UK customer base for hard cheese for net proceeds of £3.0m, which has been recorded as an exceptional item. 
  1. Measures were taken to enhance the business's internal efficiency, resulting in non-recurring restructuring charges of £0.5m.
  • An acceleration of the amortisation and impairment of goodwill, totalling £2.8m, which relates to a reduction in the estimated useful life for goodwill from 20 to 5 years in accordance with FRS102 and an evaluation of the goodwill balance as at 31 March 2014. 

First Milk chairman, Sir Jim Paice MP commented,

"First of all, the Board appreciates that the accounts for the twelve months to 31 March 2014 have been published later than normal.  This delay was as a result of the measures announced on 8th January 2015.  It was important that the finalisation of those arrangements took precedence. 

"Whilst trading subsequent to the financial year end has been challenging and is covered in detail below, the year to 31 March 2014 was a good one for First Milk.  The group returned to profitability, benefited from increasing global demand for dairy products and the consequent uplift in revenue, and underwent significant strategic changes that will benefit First Milk over the long term. 

"On 31 December 2014, the Group accepted the resignation of Bob Stott, one of our independent non-executive directors, for health reasons.  Bob has served on the Board since 2011 and we have been fortunate to benefit from someone of his calibre and experience in that time.  We send him our very best wishes for the future.

Trading subsequent to the year end

"Since 31 March 2014, there has been considerable volatility in the returns generated from globally-traded dairy commodities.  This has coincided with a significant uplift in the level of milk production off-farm, resulting in an increase in milk supply for conversion into products which were declining in value.  This perfect storm of increased volumes and falling prices resulted in the Group incurring losses since the year end. 

"Despite seeking to align milk prices with milk returns, the losses incurred have restricted the amount of cash available to the business.  For several months the Board has been in discussion with our lenders and has had a series of very short term increases in our facilities.  This is despite the considerable fall in the value of the cheese stock against which the borrowings are secured. In January, the Board decided that this situation could not continue, and that First Milk must stand on its own feet and rebuild the fundamentals of the business ahead of the spring flush.

"As you are aware, we addressed these matters by taking specific actions, announced on 8 January 2015.  The Board recognises the additional financial pressure that these decisions will have placed on members, but they are necessary measures to secure the business for the future.  Deferring milk payments by a fortnight improves First Milk's cashflow significantly.  Furthermore, increasing members' capital investments into the business for a period of time ensures that First Milk's financial position will continue to improve over the coming months.  

"We understand that the milk payment deferral has caused concern for members and we are continuing to work with all major banks to ensure that bank managers are well equipped for any conversations they have with our members.  The Board's priority is to make the business and its processing assets as secure as possible in order to ensure First Milk continues to process and market every litre of its members' milk.   We will continue to take the necessary steps to ensure a positive future for you, our members."

ENDS

Notes to editors

About First Milk

First Milk is the UK's only major dairy company, 100% owned by British farmers.  It supplies a wide range of dairy products and dairy ingredients to customers in both national and international markets including block cheeses, soft cheeses, raw milk, butter, skimmed milk powder, whey proteins and sports nutrition brands.

It generates annual revenues of £610 million (2013/14 figures) and is headquartered in Glasgow with seven manufacturing sites across England, Scotland and Wales.

First Milk's aspiration is to provide consumers with great-tasting nutritious food, while delivering value for every part of its farmers' milk. As a business with a passion for innovation and sustainability, it is constantly seeking fresh ways of working with partners across the supply chain to drive pioneering solutions to industry challenges.

For further information on First Milk, please visit www.firstmilk.co.uk or follow the company on Twitter @first_milk and YouTube www.youtube.co.uk/firstmilk1. 

For media enquiries, please contact:

Lee Truelove
head of communications
M: 07767 241507
E: leetruelove@firstmilk.co.uk

Sacha Boljevic
communications executive
M: 07984 349936
E: sachaboljevic@firstmilk.co.uk

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