Dale-Farm-Annual-Report-19-20

D A L E F A R M C O O P E R A T I V E LT D

Annual Report & Accounts 2019/20

OUR GROUP Dale Farm is a Northern Ireland headquartered dairy cooperative, owned by 1,346 UK farmer members with a turnover of £505 million for the year. With an employee base of 1,199 people, Dale Farm’s areas of specialism span every step of the dairy chain - providing farm support services, collecting and marketing members’ milk, manufacturing a wide range of dairy and food ingredient products, and, ultimately, distributing these throughout the UK and into 40 export markets across the globe.

OUR MISSION Adding sustainable value to our members’ milk through supply chain excellence, consumer led branded and own label innovation, and building added value positions in the consumer and nutrition markets.

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Annual Report 2019/20

OUR BUSINESSES

OUR BRANDS

DALE FARM: A major UK dairy processor serving domestic and export markets.

DALE FARM INGREDIENTS: Supplier of dairy-based food ingredients to domestic and export markets.

ASH MANOR CHEESE: Grates, slices, dices and packs a range of convenience cheese products.

DALE FARM LAKELAND: Manufactures consumer dairy products, including yogurts, desserts and cottage cheese.

ROWAN GLEN: Manufactures consumer dairy products, including yogurts, probiotic drinks and desserts.

OUR YEAR IN NUMBERS

DALE FARM ICE CREAM: Distributes a wide range of ice cream products.

MULLINS ICE CREAM:

GROUP TURNOVER

GROUP EBITDA

£504.5M

£19.3M

£10.6M

£12.2M

Manufactures ice cream products.

DALE FARM COOPERATIVE: Collects, tests, markets and delivers ex-farm milk.

CAPEX INVESTMENT

DAIRY HERD MANAGEMENT: Provides herd recording and health management information, to improve farm productivity.

UNITED FEEDS: Manufactures animal feeds and other farm inputs.

TANKCARE: Supplies and maintains on-farm milk storage tanks.

Annual Report 2019/20

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Annual Report 2019/20

Contents Page ANNUAL REPORT Dale Farm Group ...............................................................................................02 Chairman’s Report ............................................................................................06 Chief Executive’s Review ................................................................................08 Executive Leadership Team ..........................................................................11 Business Review .................................................................................................12 Board of Directors .............................................................................................26 Corporate Governance ....................................................................................30

FINANCIAL STATEMENTS Strategic Report ................................................................................................32 Directors’ Report ...............................................................................................38 Directors’ Responsibilities Statement .......................................................40 Independent Auditors’ Report .....................................................................42 Group Income Statement ...............................................................................44 Group & Society Statement of Comprehensive Income ....................45 Statement of Changes in Equity .................................................................46 Group Statement of Financial Position ....................................................48 Society Statement of Financial Position ..................................................50 Group Statement of Cash Flows .................................................................52 Notes to the Financial Statements .............................................................54

Annual Report 2019/20

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Chairman’s Report It is with great honour that I have this year taken on the role of Chairman of Dale Farm Cooperative Ltd and am therefore in the position of reporting solid financial results for 2019/20.

Fred Allen Chairman

Firstly, I would like to pay tribute to my predecessor John Dunlop, who played a pivotal role in the development of Dale Farm as a cooperative over the last 10 years.

During his time, John helped the business strategically reinvest into its operations, acquire sites in GB and Mullins Ice Cream locally, and significantly develop the cheese side of the business.

The results achieved during 2019/20 reflect that Dale Farm’s strategy is working well. The weather posed significant challenge during this period but thanks to high quality milk and good leadership, we witnessed one of our most financially successful years to date.

I would like to thank our Chief Executive Nick Whelan and the Executive Leadership Team on behalf of the Board for their commitment, determination and ongoing drive to make Dale Farm Cooperative Ltd succeed. That loyalty and ambition is felt right through the business, so to every single employee I would also like to show the Board’s appreciation.

The people at Dale Farm, combined with our high quality milk supplied by our farmers, helped us deliver these financial results despite some market challenges in 2019/20. Dale Farm’s dairy products performed particularly well in retail and foodservice across the UK, as well as global exports.

Milk volumes and quality were relatively strong and cheese continued to perform particularly well within brand, own label and foodservice sectors, both locally and worldwide.

As we publish this report, there is no telling just how significantly the COVID-19 pandemic will impact on our industry. The times ahead will undoubtedly pose new challenges and as your cooperative’s Chairman, I will actively strive to lead your board in the best interest of the dairy farmers who day by day supply Dale Farm with the best milk – the true core of the business.

I believe there must be a particular focus on milk price going forward and every effort made to pay the best milk price we can to our members at all times. This will be uppermost in our minds as we continue to develop our cooperative.

Fred Allen Chairman 6

Annual Report 2019/20

The results achieved during 2019/20 reflect that Dale Farm’s strategy is working well. The weather posed significant challenge during this period but thanks to high quality milk and good leadership, we witnessed one of our most financially successful years to date.

Annual Report 2019/20

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Chief Executive’s Review

Nick Whelan

I am pleased that Dale Farm is reporting a solid year for 2019/20, despite some challenges we faced within our industry. These strong financial results, which saw us achieve Group operating profit of £12.2m, Group profit before tax of £9.8m, EBITDA of £19.3m and overall Group turnover of £504.5m, are the combined result of continued investment, excellent customer partnerships, our farmers, and most importantly, a team of hard-working, dedicated people, in every part of the business.

Chief Executive CHALLENGES During 2019/20, ice cream and feed markets were negatively impacted by weather – a situation beyond the control of the business that had a direct impact on sales within our business. We were also challenged by aggressive pricing from our competitors within the GB desserts market.

This area continues to prove extremely competitive.

The year brought with it a great deal of uncertainty in the run up to the decision around Brexit.

On behalf of our farmers and the dairy industry, I engaged with local government and Westminster regularly to stress the damage that a ‘no deal’ Brexit would have had on agrifood in Northern Ireland and encourage the best possible outcome for our sector.

We continue to work in collaboration with food industry bodies including Dairy UK, Dairy Council for Northern Ireland and NIFDA in order to maintain that momentum and garner support for dairy farmers as the situation evolves.

We will remain focused on supporting our farmer members, unlocking the potential of our people, investing in our business and innovating to ensure our operations are efficient and our products are first class.

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Annual Report 2019/20

FOCUS Our core strategy positions us well to build upon the steady growth we have delivered in recent years.

Dale Farm’s cheddar cheese performed consistently well across brand, own label and foodservice sectors in the domestic market and worldwide. We have a world class product, of which we can all be proud. Equally, our retail liquid milk is a central driver of our success and we’re thankful for the consistently high quality of milk provided to the business by our members.

During the year, Dale Farm paid a competitive milk price, amidst the context of the headwinds we were facing. We fully recognise and appreciate, however, that the business must be stronger on milk price this year. We reiterate our commitment to farmers – that we always endeavour to pay a competitive milk price – and this will be forefront of our minds in the year ahead.

There are undoubtedly further challenges ahead. The full impact of the unprecedented COVID-19 pandemic remains to be seen, which could be long lasting.

We will remain focused on supporting our farmer members, unlocking the potential of our people, investing in our business and innovating to ensure our operations are efficient and our products are first class.

I would like to recognise the excellent work of our now retired Chairman John Dunlop, who guided the business through a decade with great success. I warmly welcome our new Chairman Fred Allen and look forward to working with him and the rest of our Board moving forward.

Finally, I want to thank all Dale Farm employees for their continued efforts and expertise in helping drive the business, as we face the year ahead with focus, resilience and ambition.

Nick Whelan Group Chief Executive

Annual Report 2019/20

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Annual Report 2019/20

Executive Leadership Team

NICK WHELAN

STEPHEN CAMERON

STEPHEN J. ELLIOTT

MIKE DAWSON

Group Chief Executive

Group Commercial Director

Group Finance Director

Group HR & Corporate Services Director

KEITH AGNEW

CHRIS MCALINDEN

NASAIR HUSSAIN

Managing Director of Agri Division

Group Operations Director

Managing Director GB & Group Supply Chain and Procurement Director

Annual Report 2019/20

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Business Review Innovation Innovation remained central to our strategy in 2019/20, with the development of new Dale Farm consumer branded products, new own label products, ingredient opportunities and several process innovation projects.

Throughout the year, the Group launched 32 new products and introduced 72 product variants.

We rejuvenated 21 existing products, incorporating some 90 variants. Overall, it has been a busy period for the business, with 162 new and rejuvenated products delivered throughout 2019/20.

New consumer products introduced included several ice cream lines such as Dale Farm Joker ice cream tub and Dale Farm Crayons as well as the launch of a new Mullins gourmet range. Own label activity was particularly strong during the year in yogurts, custard and spreads.

Throughout the year, the Group launched 32 new products and introduced 72 product variants.

We rejuvenated 21 existing products, incorporating some 90 variants. Overall, it has been a busy period for the business, with 162 new and rejuvenated products delivered throughout 2019/20.

An important development was the optimisation of our in-line cheese standardisation system, which was installed in early 2018. This has led to sustained improvement in cheddar making yield and consistency.

Following on from development work on WPC80 whereby we added the functionality of heat stability, we went on to develop new heat stable WPC35 and WPC30 products.

Other new ingredient product developments included vitamin enriched skimmed milk powder (SMP) and fat-filled milk powder (FFMP) for use in animal feed applications in the UK.

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Annual Report 2019/20

COMM ERC I A L & O P E R AT I O NS

Commercial & Operations CHEESE Dale Farm’s Cheese business had another strong year in terms of output, performance and investment. Production output was at record levels, which helped drive reduced costs as well as further yield improvement.

Our overall cheese volume increased by 12%. The key drivers of this volume growth were retail and ingredients channels, which grew by 17% and 4% respectively.

Our partnerships with the UK’s two fastest growing grocery retailers continue to drive the retail side of our business. Our total volume across both retailers grew by 18%, in a cheddar market that grew at 4%.

The popularity of cheddar cheese across Europe does not appear to be diminishing. Indeed, volume across our Lidl Export retail business has trebled, as consumer demand increases. With the recent addition of the US and Serbia markets, we are now supplying Lidl with our cheddar into over 30 countries worldwide.

Our LEAN manufacturing improvement programme continued to progress across our Ash Manor and Dunmanbridge sites. By reducing nonproductive downtime, we have delivered our highest ever annualised bulk cheese output and cheese yields have benefited.

We were proud to successfully convert the Dunmanbridge site to natural gas from heavy fuel oil in 2020. Not only has this has reduced the site’s environmental emissions, it has also reduced costs through the lower gas cost per kWh.

Annual Report 2019/20

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B U S INE SS REVIEW

BEVERAGES & CREAM The retail Beverages business has had a strong year. Branded beverages performed well ahead of expectations thanks to new business secured within the convenience channel. This growth cemented the Dale Farm brand as the clear market leader in milk and cream in Northern Ireland.

Sales volumes across the retail sector were in line with forecast, whilst sales in foodservice showed impressive growth. The growing consumer appetite for hot beverages ‘on the go’ continued, boosting sales in the coffee shop sector. Doorstep milk sales continued to decline, with distributor attrition running at approximately 12% per annum.

Branded and own label consumer cream sales were ahead of forecast by almost 16%, with sales boosted through substantial growth in foodservice. Retail packed cream sales were also ahead of forecast, with a particularly strong performance by Dale Farm brand, thanks to increased distribution in the convenience sector.

Our drinks sales continued to grow ahead of expectations. Strong promotional activity on take home multipacks across the retail sector boosted numbers to 1.7% ahead of forecast.

Operational efficiency was consistent throughout the year at Pennybridge. Costs and yields were improved through our effective LEAN programme. Investment in site packing and processing enabled an upgrade on filling and process capacity for custard and cream leading to a significant new business win. As a result, custard sales were trebled this year. Work continued on depot rationalisation, improving site efficiency and boosting profitability overall.

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Annual Report 2019/20

COMM ERC I A L & O P E R AT I O NS

BUTTERS & SPREADS

FRESH PRODUCTS

Our Butter & Spreads business performed well against the backdrop of challenging market dynamics. Retail butter sales volumes grew significantly and were enhanced by new own label business with a national multiple retailer. Retail branded butter sales increased year on year by over 6%, reflected in market share gains in both volume and value.

Our Fresh Product business, which includes yogurts, yogurt drinks, cottage cheese, fermented creams and desserts performed ahead of last year. The business achieved top line growth of 11% driven by several new product launches during the year.

Foodservice butter sales volumes were slightly behind last year as we ceased business with low commercial returns. However, sales of butter portions during the year grew considerably and were ahead of forecast.

Spreads sales performed exceptionally well, elevated by new business gained in the food ingredients sector. Retail sales were in line with expectations, with the Dromona brand performing well ahead of the market.

The Dromona site benefited from increased operational investment.

An effluent plant upgrade futureproofed our environmental compliance, boosted volume capacity and set the business unit up for significant long-term growth.

Annual Report 2019/20

Shopper and consumer behaviours continue to evolve in this dynamic category with a continued demand for healthier products, reduced use of plastic and improved packaging recyclability. In response, we launched several kefir based products targeted towards gut health, we reduced our packaging content, increased recyclability and reduced sugar across a number of our products. The business also continued to expand its yogurt portfolio, achieving strong growth in the layered gourmet category.

Our refreshed look for Rowan Glen and Spelga yogurts performed in line with expectations. Our product quality continues to improve and is increasingly being used as a benchmark for the market.

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B U S INE SS R EVIEW

ICE CREAM The Dale Farm Ice Cream business had a challenging year due to poor weather over the key summer period. The ice cream market declined by 12% in the 12 months to March 2020 and this impacted all brands. However, the Dale Farm brand continued to grow market share in both the NI and RoI markets.

In NI, Dale Farm became the number 1 brand in value and volume in the impulse market. In RoI, the Dale Farm brand grew by 9% year on year, with all other ice cream brands in decline.

Mullins Ice Cream sales were behind the previous year, mainly due to the reduction in scoop ice cream sales over the summer. The number of outlets selling Mullins scoop ice cream increased, with 60 new sites secured throughout the year.

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10 new ice cream products were launched during 2019/20, including Crayons, a multipack of novelty ice lollies; a limited-edition Joker ice cream tub; two new indulgent Rapture impulse flavours - Salted Caramel and Triple Berry; and new multipacks of the ever-popular Rapture Mint and Honeycomb.

Mullins launched the gourmet ‘Ireland’s Favourites’ range, as well as introducing new flavour combinations into the revamped 900ml take home offering.

Dale Farm Ice Cream launched a multimedia marketing campaign to raise brand awareness in the RoI market. The ‘Don’t Overthink It’ campaign ran across national radio, digital screens, Spotify and social media. We also hit the road for the second year of our Big Summer Road Trip, bringing our ice cream van to events across Ireland.

Annual Report 2019/20

COMM ERC I A L & O P E R AT I O NS

POWDERS Powder and whey markets remained volatile during 2019/20.

The uncertainty of Brexit, currency volatility, African Swine Flu, trade disputes between China and the USA and, in the final quarter, the COVID-19 pandemic, all influenced returns in both the whey protein and milk powder markets.

SMP started the year at €1,900/T, trending higher for most of the year, peaking at €2,650/T before falling back suddenly to €1,800 in March 2020. High protein whey protein concentrate (WPC) had a relatively stable year in comparison to recent years, with a range of no more than €1000/T over the period, from a high €5,500/T to a low of €4,500/T. We increased our customer base through new business in the UK, Europe, USA, India and China, adding additional customers for WPC30 and WPC35 as well as WPC80. We developed sales of our innovative Low Lactose & Heat Stable WPC80 and entered the USA market with sales of grass-fed WPC80.

Annual Report 2019/20

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B U S INE SS R EVIEW

Agri-Division MILK SUPPLY

FARM SERVICES

Milk supplies from members were ahead of the previous year for each of the 12 months throughout 2019/20. This signalled the second consecutive year of month on month growth in our milk pool. The increase was driven by further expansion of our membership, with 28 new entrants and three new suppliers joining Dale Farm. The average amount of milk produced per member increased by 5.4% to 675,770 litres. 22 members retired from milk production.

Our Farm Liaison team had a busy year assisting members with milk quality issues, preparing for Red Tractor farm audits, attending member meetings, and handling general queries.

The overall increase of 5.3% in milk production from our producers significantly increased the amount of milk produced in NI, which rose to an estimated 2.4 billion litres, up 1.7% from 2.36 billion litres in 2018/19.

Somatic Cell Counts (SCC) rose slightly during the year, while the Bactocount average remained the same. For the second consecutive year, the butterfat and protein content of milk increased, which resulted in a 25 year high for milk protein and the second highest recorded figure for butterfat.

During the year, 83% of Dale Farm producers’ milk was used in-house by Dale Farm, with milk sold externally to only one outlet.

The base milk price paid to members was relatively consistent, beginning the year with an April price of 25.5ppl. The price fell slightly during the next six months before peaking at 26.25ppl for October, November, and December, when the winter bonus is included. A further softening of the markets in the New Year saw the price ease back to finish at a base price of 23.75ppl in March 2020, when the effects of COVID-19 began to impact the dairy sector.

Thus, over the 2019/20 year, the average base milk price paid by the Cooperative was 25.13ppl. However, the average milk price paid to farmers was 27.26ppl.

This difference of 2.13ppl shows the value of milk quality premiums and bonuses, as well as the benefit received from fixed milk price schemes during the year.

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Encouragingly, the number of positive tanker rejections for antibiotic failures decreased by 40%, following a 30% drop the previous year. This reflects the efforts of our members in addressing this issue.

The Farm Liaison team was delighted to be able to assist 28 new members into dairy production during the 2019/20 year and to welcome three new suppliers from other processors. The team conducted a series of on-farm hygiene workshops in conjunction with Tankcare, Dale Farm’s laboratory manager and Deosan.

Red Tractor accreditation continues to be an essential element of Dale Farm’s strategy to develop our retail sales in GB and to meet the requirements of liquid milk customers locally. The scheme, pioneered by Dale Farm in Northern Ireland, has now become a standard for quality assurance in the local market, as other processors have followed suit in requiring their suppliers to be accredited.

It is important for Dale Farm’s team and members to work together to maintain this accreditation, as customers increasingly look for traceability and compliance right through the supply chain.

Annual Report 2019/20

AG R I - D I V I SI O N

Image: Dale Farm Director Harold Johnston and sons hosted an Agrisearch farm walk, April 2019 The costings programme launched in the 2018/19 year in conjunction with Kingshay Consulting is beginning to yield significant benefits. 160 members now submit monthly figures to receive additional information around farm profitability and financial sustainability. They receive feedback on their annualised figures and can now develop action plans to focus on areas for improvement. When combined with data from Dairy Herd Management, this service provides a powerful benchmarking tool for Dale Farm members. A soil analysis pilot study was rolled out to 33 of these farmers during the winter, with subsequent farm nutrient management plans drawn up and presented to participants.

A new development was the launch of Horizon, a calf to beef scheme in conjunction with ABP. This provides a fully integrated supply chain model from birth to slaughter, with a focus on paying a premium for selectively bred Aberdeen Angus calves from the dairy herd. The target for the first year is to have 2,000 calves within the project and there has already been sufficient interest from around 50 farms to achieve this.

PRODUCER SERVICES Rising milk volumes and a steady stream of new entrants saw another strong year’s trade in the sale of new and second-hand farm milk tanks. Tankcare, in partnership with Flogas, continued to promote the sales of new water heating systems using liquid petroleum gas (LPG). These have proven to be a cost-effective solution for those looking to update their water heating systems and an attractive proposition for many new entrants.

We rolled out a campaign to promote the benefits of the Tankcare maintenance contract, which resulted in new customers. A new management structure within Tankcare has also refocused our emphasis on stock management and system processes, which is already proving valuable.

New members were also attracted to Dairy Herd Management, with farmers keen to acquire management information that will help them improve efficiency.

The increasing need to reduce antibiotics on farms has stimulated demand for regular SCC figures, as farmers aim to incorporate selective dry cow therapy into routine herd management.

Successful advertising campaigns and on-farm fertility workshops have resulted in a significant rise in the number of PregCheck samples undertaken.

Annual Report 2019/20

During the year, Red Tractor announced it will be incorporating a Johne’s risk assessment into their accreditation programme in the latter half of 2020. This has helped increase the demand for Johne’s testing as producers are keen to get information on their current herd status. This can then be used in the one to one discussions with their vet, during the risk assessment, to develop management practices that reduce the spread of the disease and implement control measures to assist with biosecurity.

The use of technology continues to be of increasing importance, particularly to the younger generation of farmers as they seek to find solutions that reduce duplication and assist with herd management. Several well attended IT workshops covering the ‘Your Herd’ programme and ‘Mobile Herd’ App were held during the winter.

SenseHub, the electronic heat detection and cow health monitoring system, continued to be popular for customers looking for an accurate cost-effective solution for day to day fertility and health management. Dairy Herd Management once again recorded strong sales for the Sensehub product across a range of farm types and sizes.

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B U S INE SS R EVIEW

UNITED FEEDS It was a challenging year for United Feeds as demand for ruminant feed in NI fell by 5%. The dry, mild weather from January through to March 2019 left ground in ideal condition with plenty of grass cover. This allowed an early turnout in all areas which significantly reduced feed demand in the first half of the year.

The good spring and summer weather also ensured there were plentiful supplies of high-quality forage on all farms for the winter months. In addition to the early turnout, the poor profitability in the beef sector saw the demand from large beef finishers decline as the year progressed.

Following several years of operating at full capacity, the expansion of the Dungannon mill was completed.

This major investment involved the creation of a new 100 tonnes/hour raw material intake and additional raw material storage bins, the installation of a new grinder and weighers, upgrades to conveyors and elevators, the addition of new finished product bins and a second out loading weighbridge.

This doubles the production and storage capacity of the mill and will underpin growth in the years ahead.

In the Belfast mill, a new grinder was installed which, in conjunction with LEAN projects throughout the year, has resulted in significant improvement in finished product quality.

During 2019/20, United Feeds paid out almost £360,000 through the Milk Cheque rebate and the Member Trading Dividend, which pays a dividend of 1% on the purchases of feed and fertiliser by members. This is similar to the previous year in spite of the fall in feed sales and illustrates the commitment of members to trade with the company.

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Commodity markets started the year with a good harvest in South America, however, the very wet, cold spring experienced in the US saw prices, particularly for maize and a lesser extent soya, rise sharply on fears of reduced production. As the growing season continued, prices eased as crops recovered but remained higher than the previous year.

Locally, prices saw a further spike in March 2020 as logistical issues from the US and South America resulted in a shortage of some materials, and the developing COVID-19 pandemic affected markets. The ongoing trade dispute between the US and China also continued to impact the market.

For a second year running, the NI fertiliser market saw a reduction in demand, in this case by 9%.

However, United Feeds recorded increased sales during the year resulting in our highest year of sales to date. We continue to be market leaders locally, with our protected urea range. These products now have a strong record of delivering performance on farm, while at the same time lessening the environmental impact compared to traditional chemical fertilisers. Price of fertiliser remained firm during the spring and summer of 2019, but weakened during the winter by approximately 15%.

The company’s growth continues to be underpinned by innovation in products, feed analysis and feeding programmes. This work has been keenly supported by our members, with 36 participating in the third phase of a major development project around improving milk protein content at farm level and cheese yield efficiency at factory level. Central to our success in these developments are the skills and knowledge of our people. Ongoing training and development programmes ensure we remain at the forefront of the latest research and technical developments, so we can offer the best advice and assistance to our members.

Annual Report 2019/20

AG R I - D I V I SI O N

Following several years of operating at full capacity, the expansion of the Dungannon mill was completed. This doubles the production and storage capacity of the mill and will underpin growth in the years ahead.

Annual Report 2019/20

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B U S INE SS REVIEW

People & Processes IT 2019/20 saw the successful conclusion of our unified communications project, with the introduction of both Jabber and WebEx meetings. The timely implementation of these tools played a critical role in the Group’s business continuity plan as COVID-19 began to impact.

These platforms facilitated remote working and workplace flexibility, whilst ensuring continued collaboration and effective communication across the business.

We further developed our Warehouse Management Systems (WMS), with the successful implementation of packaging and ingredients stock management in Pennybridge and Dromona. The Dromona site also introduced WMS for bulk and retail inventory, becoming the first site in the Group with full stock management on WMS. We initiated a new project to move users e-mail accounts from on-premise to a cloud-based Exchange. This solution provides scalability, improves disaster recovery contingency and removes the need for future hardware upgrades. The migration of all users within the Group was completed by August 2020.

In addition, the Group took further steps to enhance our disaster recovery capabilities through improved use of new cloud solutions supported by appropriate test plans.

2019/20 also saw the implementation of further functionality within our Enterprise Resource Planning (ERP) system, Microsoft Dynamics NAV, to help with immediate process improvements.

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Top Image: As part of LEAN process, Mullins Team benchmark Dunmanbridge’s daily performance reviews.

Bottom Image: Our 2019 Future Leaders Graduation Day after completing a 10 month leadership programme at the William J Clinton Leadership Institute, Queens University Belfast.

Annual Report 2019/20

PEO P L E & P ROCE SS E S

PEOPLE The talented people throughout our business are the key driver of Dale Farm’s business strategy. We continually invest in critical recruitment and people development to deliver our plans within a positive and progressive working culture.

The total numbers employed across the Group increased from 1,151 in March 2019 to in 1,199 March 2020. The Group has maintained a focus on costs resulting in several restructuring measures being completed in the period. This activity will continue into 2020/21.

assessment of staff engagement.

The survey provided critical insights into engagement levels in all areas of the business and subsequent action plans have been agreed to address these.

‘Connected,’ our employee smartphone App, was successfully launched during the year, allowing communications to reach employees across the Group effectively and quickly.

The App has been well received by our people, with initial high

levels of engagement and will be expanded in the coming year to give employees further access to essential items at their fingertips.

Connected has been critical in delivering clear, consistent messaging to our teams while they have dealt with the challenges of COVID-19.

The Group has continued to further develop ‘Success Factors’, our Human Resources Management Information System, which now provides managers with robust, real-time reporting data dashboards to support timely decision making and action.

2019/20 saw the launch of the Group’s LEAD programme, delivered in partnership with the Irish Management Institute.

The programme is aimed at high performing managers and will develop effective leaders in data and critical analysis, self-awareness, converting ideas into action and holistic communication. These leaders will successfully address and navigate the challenges and opportunities inherent in implementing change within Dale Farm.

We launched our cloudbased ‘MySay’ employee engagement survey tool and initiated our first full company

Annual Report 2019/20

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B U S INE SS REVIEW

People & Processes HEALTH & SAFETY

Environmental

The health, safety and wellbeing of our employees is of utmost priority to Dale Farm, our vision being ‘to create and maintain a safe and healthy working environment for all’. We provide the right leadership to support our safety agenda through appropriate training, risk control, performance management, communication and engagement.

PROSPERITY AGREEMENT

Our safety performance continues to compare favourably with industry benchmarks on health and safety matrices.

The Group has continued to deliver initiatives and training to support our safety plan. In 2019/20, we rolled out the first phase of our new ‘ReWard’ safety training programme aimed at first-line managers. To date, over 40 employees have participated in the programme, and a further 50 will take part in Phase 2. The year saw the completion of several internal training courses including the identification of critical hazards, home working, working at heights, risk assessments and manual handling. Additional safety programmes for technical specialists will conclude in 2020/21.

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Dale Farm and the Northern Ireland Environment Agency (NIEA) formally signed a Prosperity Agreement. This is a voluntary agreement that contains commitments from both Dale Farm and the NIEA, with the aim of delivering environmental benefits beyond legal requirements, developing a more strategic approach between business and regulator, and helping Dale Farm benefit from environmental improvements.

ISO ENVIRONMENTAL ACCREDITATION All Dale Farm NI manufacturing sites were successful in maintaining the industry leading environmental ISO 14001 accreditation standard, with recertification audits being successfully completed.

ENVIRONMENTAL INFRASTRUCTURE IMPROVEMENTS The upgrade at Dromona effluent treatment plant was completed and fully commissioned. This enabled Dromona to maintain discharge consent levels while securing the site’s processing capabilities.

At Dunmanbridge, the boiler gas conversion was successfully completed, reducing the site’s carbon dioxide emissions significantly.

Furthermore, a new high efficiency chiller unit was installed at Dunmanbridge and a new high efficiency boiler was installed at Mullins Ice Cream.

Image: Refurbished effluent plant at our Dromona site.

Annual Report 2019/20

COR P O RAT E SO C I AL R E S P O NS I B I L I T Y

Corporate Social Responsibility Creating and maintaining a positive environment for our colleagues, members and the communities in which we operate, is part of Dale Farm’s responsibility as a large employer.

Throughout the year, employees once again demonstrated their passion to support local communities and causes through a wide range of fundraising and voluntary activities. At Christmas, employees kindly supplied a variety of gifts and donations in support of Cash for Kids, helping children in our communities.

Several fundraising activities were organised in aid of the Welcome Organisation, which helps people who are experiencing, or are at risk of, homelessness. 2019/20 also saw the selection of Cancer Focus as our charity partner for the next two years. Our charity committee will

work with Cancer Focus to deliver employee-focused fundraising activities that will promote engagement and wellbeing.

In response to COVID-19, we increased our efforts to support those in need. We partnered with food redistribution charity FareShare Northern Ireland, to provide milk and butter weekly, for onward distribution through community food banks and charities. This helped provide safe, nutritious dairy to vulnerable members of society.

We are a keen member of Arts & Business NI, which connects the arts and business sectors for mutual benefit and remain a committed Corporate Patron for the Prince’s Trust. Dale Farm is also an active member of Business in the Community (BITC) and we are working towards achieving the BITC CORE standard, NI’s only corporate responsibility accreditation.

We continue to play a role in the Food and Drink Sector Skills Council’s Tasty Careers campaign, with our ambassadors working closely with schools to provide insights into careers within the agri-food sector. We continue to seek out and identify future talent, providing one-year undergraduate work placements for students across the business, from research and development to finance and IT. We also offer short-term work experience opportunities for GCSE and A-level students as part of their early career journey.

Through continued collaboration with our suppliers, Dale Farm is committed to maintaining a high standard across health, safety, environment, ethics and labour.

This commitment is reflected by our internationally recognised Sedex Ethical Trading standard accreditation.

Image: Fundraising initiatives organised by our Charity Committee raised a total of £7,995 during the year, with funds shared between Marie Curie and Air Ambulance NI. Annual Report 2019/20

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Board of Directors The Board of Directors of Dale Farm Cooperative Ltd consists of 12 non-executive Directors. The Board of Directors of Dale Farm Ltd consists of four non-executive Directors, all of whom are also Directors of Dale Farm Cooperative Ltd. The current Group Directors are: FRED ALLEN

DAVID REA

IVOR BROOMFIELD

STEVEN BROWN

Fred Allen is a dairy farmer from Randalstown, Co. Antrim. He was elected as a Director of Dale Farm Cooperative in 2009. He was appointed as Chairman in April 2020.

David Rea is a dairy farmer from Crossgar, Co. Down. He was elected as a Director of Dale Farm Cooperative in 2008. He was appointed as ViceChairman in April 2020.

Ivor Broomfield is a dairy farmer from Armagh, Co. Armagh. He was elected as a Director of Dale Farm Cooperative in April 2020.

Steven Brown is a dairy farmer from Moneymore, Co. Londonderry. He was elected as a Director of Dale Farm Cooperative in 2016 and is also a Director of the Dairy Council for Northern Ireland.

ROBERT BRYSON

ROBERT FYFFE

HAROLD JOHNSTON

JAMES MURPHY

Robert Bryson is a dairy farmer from Banbridge, Co. Down. He was elected as a Director of Dale Farm Cooperative in 2013.

Robert Fyffe is a dairy farmer from Omagh, Co. Tyrone. He was elected as a Director of Dale Farm Cooperative in 2006 and was formerly a member of the Northern Ireland Local Board of the NFU Mutual Insurance Society.

Harold Johnston is a dairy farmer from Ahoghill, Co. Antrim. He was elected as a Director of Dale Farm Cooperative in 2011. He is a past County Chairman of the Ulster Farmers’ Union for Co. Antrim.

James Murphy is a dairy farmer from Tempo, Co. Fermanagh. He was elected as a Director of Dale Farm Cooperative in 2010 and is a former County Chairman of the Ulster Farmers’ Union for Co. Fermanagh.

26

Annual Report 2019/20

BOA RD O F D I RE C TO R S

DAVID ROWE

STEPHEN KINGON CBE

HELEN KIRKPATRICK

David Rowe is a dairy farmer from Armoy, Co. Antrim. He was elected as a Director of Dale Farm Cooperative in 2014.

Stephen Kingon CBE is an appointed Independent Director of Dale Farm Cooperative.

A Fellow of the Institute of Chartered Accountants, he is the Principal of Stephen Kingon Associates.

Currently he is the Chairman of the Centre of Competitiveness and a distinguished fellow of the Global Federation of Competitiveness Councils, Chairman of Lagan Homes UK Limited and Lagan Investments Limited. In addition, he is a non-executive Director of ASG Holdings Limited, Balcas Limited, NI Opera and a Pro Chancellor of Queen’s University Belfast. Since retiring as Managing Partner of PWC in Northern Ireland in 2007, he has held a number of chairmanships and non-executive directorships across a range of sectors as well as the Chairmanship of Invest NI.

Helen Kirkpatrick is an appointed independent Director of Dale Farm Cooperative and a Director of Dale Farm Limited. A Fellow of the Institute of Chartered Accountants in Ireland and a member of the Chartered Institute of Marketing, Helen joined both Boards in 2014.

She is a non-executive Director of the Irish Football Association, Director of Displaynote Technologies Limited and QUBIS Limited, and Chairperson of Neueda.

Helen was formerly a Board member of the International Fund for Ireland, a Director of the Enterprise Equity Venture Capital Group and a non-executive Director of a number of other Northern Ireland charities and companies, including Kingspan Group plc.

NORMAN THOMPSON

Norman Thompson is a dairy farmer from Banbridge, Co. Down. He was elected a Director of Dale Farm Cooperative in 2015 and is also a Director of the Dairy Council for Northern Ireland.

Annual Report 2019/20

Ms Kirkpatrick retired from the Board on 31st March 2020

27

B OARD O F DIRECTOR S

Other Information CHAIRMAN

VICE-CHAIRMAN

Fred Allen (Appointed 1 April 2020)

David Rea (Appointed 1 April 2020)

John Dunlop (Resigned 31 March 2020)

Fred Allen (Resigned 31 March 2020)

CHIEF EXECUTIVE

AUDITORS

Nick Whelan

FINANCIAL DIRECTOR Stephen Elliott

SECRETARY Mike Dawson

Ernst & Young LLP Bedford House 16 Bedford Street Belfast BT2 7DT

BANKERS Ulster Bank 11-16 Donegall Square East Belfast, BT1 5UB Danske Bank Donegall Square West Belfast, BT1 6JS

COMPANY STATUS Dale Farm Cooperative Limited is a members’ voluntary cooperative registered under the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976

REGISTERED OFFICE Dale Farm House 15 Dargan Road Belfast BT3 9LS

28

Annual Report 2019/20

Year in Review

Annual Report 2019/20

29

Corporate Governance The Board is committed to adopting best practice in Corporate Governance as deemed practical and appropriate for a member-owned cooperative.

THE BOARD The Board meets monthly (except for July) with a formal schedule of matters specifically reserved for its decision. Additional meetings are held as required. The Board reviews trading performance, ensures adequate funding, sets and monitors strategy, examines major acquisition opportunities and formulates policy on key issues. To enable the Board to discharge its duties, all members receive appropriate and timely briefing papers. The Group has appropriate insurance cover in place for Board members.

The Board comprised 12 Directors, eight of whom are appointed by the farmer members through Area elections; two are elected by the members’ Area Councils acting collectively; and two Directors are appointed by the elected Directors. The term of office of elected Directors is four years, while appointed Directors are appointed for not more than three years and can only serve a maximum of two terms.

The attendance of Directors at the 11 routine Board meetings in 2019/20 was as follows:

John Dunlop

11

Stephen Brown

11

Fred Allen

11

Helen Kirkpatrick

11

Robert Bryson

11

James Murphy

11

Robert Fyffe

11

David Rea

11

Harold Johnston

11

David Rowe

11

Norman Thompson

11

Stephen Kingon CBE

10

The Chairman and Vice Chairman are both elected annually by the Board.

The remuneration of the Directors of the Society is determined each year by the members at the Annual General Meeting (AGM). All farmer Directors are also suppliers of milk to Dale Farm Cooperative, but they and the appointed Directors are regarded as independent. Induction training is provided for newly elected/appointed Directors and further training is provided as required.

The Board Committees Comprise: AUDIT

NOMINATIONS

Stephen Kingon CBE

Fred Allen

(Chairman from April 2020)

James Murphy

David Rea

(Appointed April 2020)

Harold Johnston

Nick Whelan

David Rowe

John Dunlop

(Appointed April 2020)

(Retired March 2020)

Helen Kirkpatrick

(Retired March 2020)

30

Annual Report 2019/20

COR P O RAT E G OV E R N A N C E

AUDIT COMMITTEE The Audit Committee meets at least twice a year and has specific terms of reference which include responsibility for reviewing the Annual Accounts prior to submission to the Board, monitoring the internal control systems and liaison with both external and internal auditors.

The Committee satisfies itself on the independence of the auditors and monitors the level of nonaudit fees. The internal auditors review key risk areas and relevant controls across the Group and report their findings to the Audit Committee, together with any recommendations for improvement.

NOMINATIONS COMMITTEE The Nominations Committee makes recommendations to the Board on the appointment of ‘non-elected’ Directors to the Boards of the Group subsidiary and associate companies, as well as senior executive appointments.

DIALOGUE WITH SHAREHOLDERS Communication with members is given the highest priority by the Board and the Annual Report gives a comprehensive review of the financial and operating performance of the Group for the year. The Board uses the AGM to have an open dialogue with members and the Group has four Area Councils elected by the membership, which meet approximately four times a year with the elected Directors for their Area to discuss the affairs of the Society.

In addition, open Area Council meetings are held, to which all members in the relevant Area are invited. The Society keeps in touch with members through the issue of the bi-monthly magazine Dale Farm View and via the Group website www.dalefarm.co.uk.

Any member wishing to contact the Company can do so at the registered office of the Company.

MANAGEMENT TEAM The Group Chief Executive and management team, who are responsible for operating decisions and the effective functioning of the main activities in the Group, report to the Board.

Annual Report 2019/20

31

Strategic Report Principal Activities

Risk Management

Dale Farm Cooperative Limited is a members’ voluntary cooperative registered under the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976. The principal activities of the Group include manufacturing an extensive range of dairy products for the retail, food service and food ingredients sectors and marketing and distributing these products to both domestic and international markets. The Group also collects and markets members’ milk, supplies animal feed to farmers, and provides a range of other farm inputs and services.

The Board actively monitors and manages the risks it faces through an appropriate risk policy and risk register. The key risks which management face are detailed as follows:

Financial Performance The key performance indicators (“KPI”s) for the Group are: KPIs

2020 £000

2019 £000

Group turnover

504,528

509,363

Profit before taxation

9,772

12,007

Average milk price paid to members (pence per litre)

27.26

29.00

Group turnover decreased by 0.9%. The Group profit before tax decreased by £2,235k to £9,772k primarily reflecting weather related pressures on the United Feeds and ice cream divisions. The average milk price paid to NI members decreased by 1.74ppl (6%) in 2019/20 reflecting the lower dairy market returns during the year.

Operational Performance MILK SUPPLY

2020 Litres

2019 Litres

Average output per member

676,000

641,000

Sales Development The Group is committed to profitably growing its dairy processing business. Increases in sales volumes and dairy product returns resulted in the following growth in turnover:

TURNOVER GROWTH

2020 %

2019 %

Dale Farm Group

(0.9)

5.6

32

BUSINESS PERFORMANCE RISK The Group faces a number of business performance risks due to internal and external factors including competitive pressures in markets in which it operates. These risks have been identified and are managed through a number of measures: ensuring the appropriate management team is in place; business planning and regular forecasting; financial controls; key performance indicators; monthly reporting and timely corrective action when variances occur.

BUSINESS CONTINUITY RISK While there is a reliance on physical infrastructure, the Group operates 9 geographically autonomous production facilities, which helps mitigate business continuity risks. The Group also ensures that there is adequate knowledge throughout the management team and sufficient IT support and back up capability available should an unforeseen event occur.

Management maintain and regularly update business continuity and IT disaster recovery plans and participate in industry-wide crisis management exercises.

BREXIT The current Brexit position remains uncertain. Where possible, we have taken steps to address any such areas by identifying and implementing solutions as applicable. Our plans are still active as the Brexit situation unfolds.

Annual Report 2019/20

STR AT E G I C REP O RT

HEALTH & SAFETY RISK The Group is committed to ensuring a safe working environment. These risks are managed by the Group through the strong promotion of a best practice health and safety culture, risk management, extensive safety training and well-defined health and safety policies.

MANAGEMENT DEVELOPMENT The long-term success of the business depends on the Group’s ability to attract, retain and develop talent. This risk is managed through succession planning and the pursuit of best practice in HR and Group wide development plans, which are regularly reviewed and updated. These are accompanied by specific policies in areas such as recruitment, training, management development and performance management.

FINANCIAL & BUSINESS CONTROL Strong financial and business controls are necessary to ensure the integrity and reliability of financial and other information on which the Group relies for day-to-day operations, external reporting and for longer term planning. The Group exercises financial and business control through a combination of qualified and experienced financial personnel, performance analysis, budgeting and cash flow forecasting and clearly defined policies and approval limits.

ENVIRONMENTAL RISK The Group is committed to minimising its impact on the environment. It has clearly defined policies and procedures to enable compliance with environmental best practice and legislation.

Annual Report 2019/20

COVID-19

CREDIT RISK

The Group has recognised the impact to operations as a result of the COVID-19 pandemic and has taken mitigating actions to address this based on government advice and scenario planning. The safety and wellbeing of personnel is of paramount importance and required actions have been taken to ensure that all Group sites provide a safe working environment. This is being regularly reviewed. There are increased logistical and operational challenges, and volatility in market prices. The foodservice market has been particularly challenged by COVID-19 due to the interruption of operations for most foodservice customers. The risk around this market is being carefully managed as part of extensive scenario planning across all markets the Group operates in. Other markets, in particular retail, have noted an increase in demand.

Credit risk arises principally on third party derived revenues.

Group policy is aimed at minimising such risk through the application of satisfactory creditworthiness procedures, including where appropriate taking out credit insurance cover. The Group monitors the levels of credit to individual customers within their approved credit limits, so as to ensure the company’s exposure to bad debts is minimised.

Financial Risk Management Policy The Group’s principal financial instruments comprise cash, trade debtors and creditors, bank loans and certain other debtors and accruals. The main risks associated with these financial assets and liabilities are set out below.

FOREIGN CURRENCY RISK The Group’s exposure to foreign currency risk arises primarily from revenues from customers denominated principally in Euro and US Dollars. When customers place major orders of this type, the Group has a policy of immediately entering into a forward currency contract to eliminate this risk.

LIQUIDITY RISK Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group aims to mitigate liquidity risk by managing cash generation by its operations and applying cash collection targets throughout the Group. The Group also manages liquidity risk via revolving credit facilities and long-term debt.

CASH FLOW RISK Cash flow risk is the risk of exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability such as future interest payments on variable rate debt. The Group manages this risk, where significant, by use of derivatives as explained under ‘foreign currency risk’.

By order of the Board Mike Dawson Secretary Date: 6 July 2020

33

Strategic Report

Section 172(1) Statement

OUR STRATEGY

■ The likely consequences of any decision in the long-term;

The long-term strategy of the Group is to pay a competitive milk price and add sustainable value to our members’ milk through supply chain excellence, consumer-led branded and own label innovation and building added value positions in the consumer and nutrition markets. The strategy has been directly developed to align with the interests of the key stakeholders of the Group. The inclusion of milk price and group profitability as key performance metrics and the focus on collaboration with our stakeholders to achieve these metrics underlines the commitment of the Group to delivering for our stakeholders.

■ The interests of the Group’s employees;

BOARD MATTERS

The Directors, having prepared the strategic report, have complied with s414CZA (1) – Section 172(1) statement of the Companies Act 2006 (“The Statement”). The Statement has been prepared for the Group as a whole and provides that a Director must act in a way consistent to promoting the success of the Group while having due regard to the various stakeholder groups engaged. The key factors considered throughout include:

■ The need to foster the Group’s business relationships with suppliers, customer and others; ■ The impact of the Group’s operations on the community and the environment; ■ The desirability of the Group maintaining a reputation for high standards of business conduct; ■ The need to act fairly between members of the Group.

34

The Board charges the Executive Leadership Team with the dayto-day management and decision making of the Group, however the Board retains control over key strategic decision making and considers these at the monthly Board meetings throughout the year. Key decisions in the 2019/20 financial year are summarised, with reference to Section 172(1) as follows:

Annual Report 2019/20

STR AT EG I C REP O RT

KEY DECISION MADE

IMPACT

STAKEHOLDERS AFFECTED

Agreeing the Dale Farm Red Tractor base milk price for milk payments at each Board meeting

The Board makes the ultimate decision on this price as the milk payment is a key element in fostering the Group’s relationship with its main suppliers i.e. the farmer members. The volume and quality of the milk supply is vital to the success of the Group.

Suppliers & Shareholders

Review and approval of capital expenditure projects presented by the Executive Leadership Team at each Board meeting

Board review and approval of these projects is a vital part of the long-term decision-making responsibilities of the Board. This ensures the Board fulfils the requirements of contributing to the short and long-term success of the Group.

A range of stakeholders are affected by this decision making across various projects, including shareholders, customers, suppliers, employees and wider communities

Conducting of an annual review into the banking facilities and loan renewals of the Group

This review by the Board ensured the circumstances of all arrangements were in the interests of each Group company and the Cooperative. The Board also received regular updates on the Group’s banking positions throughout the year, ensuring the long-term funding requirements of the Group were met. This enabled the Group to maintain its reputation for high standards of business conduct.

Indirectly affected all Group stakeholders

Approval of the 2018/19 Annual Report & review, update and approval of the Group risk register through the Audit Committee process

This process and approval by the Board is key in ensuring compliance with the Board’s responsibilities under Section 172(1) of the act. The Annual Report and Group risk review encompass all operations across the Group and, as such, are relevant to each factor the Board is responsible for ensuring.

Some level of impact on all Group stakeholders

The Board also considered, at each of its regular meetings, reports from the Executive Leadership Team on the commercial, financial and operational performance of the Group, as well as applications for new members and various business requiring Board consideration throughout the year

These regular agenda points ensured that the Board considered all relevant matters in the discharge of its duties with regards to all factors of Section 172(1) of the Act.

Some level of impact on all Group stakeholders

The Board also considered the impact of a ‘no deal’ Brexit on both the Group and its farmer members.

These ongoing reviews ensures that proper consideration is given to any risk around Group operations, cashflow and milk price paid to farmer members.

Some level of impact on all Group stakeholders

Annual Report 2019/20

35

Strategic Report Section 172(1) Statement (Continued)

STAKEHOLDER ENGAGEMENT The Group recognises that effective engagement with key stakeholders, including farmer members, suppliers, customers, employees and communities, is vital in achieving the overall Group strategy. The Group has actively engaged with these stakeholders throughout the year across a variety of platforms.

EMPLOYEES The Group identifies that its employees are the keystone of the Group’s strategy and, as such, employee engagement is a key element of successful achievement of this strategy.

Throughout the year, there has been continued rollout of the Group’s employee health and wellbeing programme, Dale Farm ‘Thrive’. This programme is designed to communicate, engage and promote workplace wellbeing in order to support employees’ physical and mental health.

In addition to the Thrive initiatives, in February 2020, ‘Connected’, a Dale Farm App, was launched, with the aim of informing, engaging and connecting with employees across the Group. This App allows messages to reach all employees across the Group, ensuring maximum engagement.

The Group also finalised the rollout of the Human Resources Management Information System ‘Success Factors’ and in this year, ensured all employees participate in continuous performance management discussions, providing increased opportunities for coaching, mentoring and timely feedback.

36

CUSTOMERS Exceeding the expectations of all our customers is key to having a sustainable and profitable business.

To manage this process, the company has categorised its customers into four groups and has developed an appropriate engagement plan for each. The customer groups are strategic customers, key partners, key accounts and trading customers.

The level of engagement and resource is defined for each customer group, including level and frequency of contact, level of account management and planning, the approach to new product development, and risk management.

In addition to current customer engagement and development, there is a programme of new customer and business development to support the growth of the business.

FARMER MEMBERS Effective engagement with our farmer members is key to the successful operation of the Group’s supply chain and achievement of the Group’s strategic objectives.

On a micro level, the Group has a dedicated Producer Services team, who actively engage with the members providing our milk pool on a day-to-day basis, assisting them with milk quality issues, preparing for Red Tractor farm audits, attending member meetings and other general enquiries.

On a macro level, the Board of Directors is largely made up of dairy farmers representing our members who, as such, provide a

vital link for engagement with the wider cooperative membership.

Communication with members is given the highest priority by the Board and the Annual General Meeting is utilised to have open dialogue with members. The Group has four Area Councils elected by the membership, which meet approximately four times a year with the elected Directors for their Area to discuss the affairs of the Society. In addition, open Area Council meetings are held, to which all members in the relevant Area are invited. The Society also keeps in touch with members through the issue of the bi-monthly magazine, Dale Farm View, and via the Group website www.dalefarm.co.uk.

SUPPLIERS With regard to our wider supplier base, these stakeholders are key to the provision of ingredients, packaging, energy and any other required inputs. Dale Farm continues to collaborate with our network of suppliers, ensuring that a high standard is maintained across all areas including health, safety, environment, ethics and labour. We are proud to be accredited with the internationally recognised Sedex Ethical Trading standards.

COMMUNITY As a Group, we are fully committed to ensuring we create a positive environment for the communities in which we operate, both in terms of an environmental and social impact. The Group has continued to undertake various activities to ensure effective engagement with stakeholders from these communities throughout the year 2019/20.

Annual Report 2019/20

STR AT E G I C REP O RT

Our employees have once again shown their commitment to local communities through their participation in a wide range of activities supporting local charities over the year. At Christmas, employees kindly supplied a range of gifts and donations in support of Cash for Kids, which supports the needs of children in our communities. Our employees engaged with several fundraising activities in aid of the Welcome Organisation, which helps people experiencing, or at risk of, homelessness.

We are an active member of Business in the Community and are working towards their CORE standard, which is Northern Ireland’s only corporate responsibility accreditation. We have continued an employersupported volunteering programme, which aims to provide teams of employees with practical opportunities to give back to our communities.

We remain a keen member of Arts & Business NI, which connects the arts and business sectors for mutual benefit. Two of our managers are on the Boards of arts organisations as part of Arts & Business NI’s Young Professionals on Arts Boards Programme, a valuable development opportunity for our people. We also remain a committed Corporate Patron for the Prince’s Trust. Group employees have participated in many of the Trust’s training and support programmes targeting young people across Northern Ireland.

Annual Report 2019/20

Our role in the Food and Drink Sector Skills Council’s Tasty Careers campaign remains an important one. Our trained ambassadors have worked closely with local schools and teachers, providing practical examples and real-life insights into what career opportunities exist within the agri-food sector.

We are extremely proud to work closely in partnership with schools, universities and colleges. As we seek to continually identify and nurture future talent, we have provided several one-year undergraduate work placements for students across a range of functions including laboratory/ development, finance and IT. We have also provided a range of short-term work experience opportunities for GCSE and A-level students.

ENVIRONMENTAL

■ The upgrade of the Dromona effluent treatment plant, enabling Dromona to maintain discharge consent levels while securing the sites processing capabilities.

■ Dunmanbridge boiler gas conversion significantly reducing carbon dioxide emissions per Kw of energy consumed.

■ A new high efficiency chiller unit was installed at Dunmanbridge.

■ A new high efficiency boiler was installed at Mullins Ice Cream.

The Group has also maintained high levels of compliance, including; ■ All of Dale Farm’s manufacturing sites successfully maintaining the industry leading environmental ISO 14001 accreditation standard.

During the year, Dale Farm and the Northern Ireland Environment Agency (NIEA) formally entered into a Prosperity Agreement. This represents a voluntary commitment from both Dale Farm and the NIEA to deliver significant environmental benefits beyond legal requirements, develop a more strategic approach between business and regulator and to help Dale Farm realise environmental gains whilst increasing our competitiveness.

■ The Dunmanbridge site successfully complied with the EU Emissions Trading Scheme (EU ETS).

From an environmental infrastructure perspective, the Group implemented several improvements, including:

By order of the Board

■ All Dale farm sites have successfully met the target for the second reporting year of the climate change agreement.

■ The Energy Savings Opportunity Scheme (ESOS) audits were completed and we are compliant with the scheme.

Mike Dawson Secretary Date: 6 July 2020

37

Directors’ Report The Directors present their report and financial statements for the year ended 31 March 2020.

RESULTS AND DIVIDENDS The Group reported an operating profit of £12,183k, which was a decrease of £2,117k on the previous year. The profit after taxation for the year amounted to £7,138k (2019 – £9,446k) which is to be transferred to reserves. The Directors do not recommend the payment of a dividend (2019 – £NIL).

REVIEW OF 2019/20 YEAR AND FUTURE DEVELOPMENTS

Dale Farm has continued to trade positively in the markets it operates in. The Group made a satisfactory return on its sales during the year with the exception of ice cream and animal feeds which were adversely affected by the weather.

Dairy market returns and farm gate milk prices fell during the year as markets continued to decline.

Export market returns continued to be assisted by the weakness of Sterling versus the Euro and the US dollar as the negotiations surrounding Brexit continue. The farmer base price for Dale Farm Red Tractor milk started the year at 25.50ppl and ended at 23.75ppl.

In the first quarter of 2020/21 some dairy markets have traded downwards due to the COVID-19 pandemic and we await by the end of this calendar year, the final outcome of the Brexit negotiations.

RESEARCH AND DEVELOPMENT The Group maintains an ongoing programme of innovation in added value dairy products and further widened its portfolio of products offered as follows:

PRODUCT DEVELOPMENT

2020

2019

Number of new products launched

32

21

Number of new product variants launched in above

72

56

Number of rejuvenated products launched

21

29

Number of rejuvenated product variants launched in above

90

133

Directors For the year ended 31 March 2020 the Directors of the Society were:

Elected by - Area 1

Fred Allen, Harold Johnston

- Area 2

Robert Bryson, Norman Thompson,

- Area 3

John Dunlop, James Murphy

- Area 4

Robert Fyffe, Steven Brown,

Elected by Conference of Area Councils

David Rea, David Rowe

Appointed

Helen Kirkpatrick, Stephen Kingon

The term of office of one of the elected Directors from each of Area 1 and Area 2 ended on 31 March 2020. Steven Brown was re-elected as Director for Area 4 and Ivor Broomfield was appointed as Director for Area 3.

Effective 1 April 2020, Fred Allen was elected as Chairman and David Rea was elected as Vice Chairman of the Society which was ratified at the Board meeting on 15th April 2020.

FINANCIAL INSTRUMENTS

EMPLOYMENT POLICY

Details of financial instruments are provided in the strategic report on page 33.

The Group fully supports and complies with all the legislation which is designed to promote equality of opportunity.

Safety awareness is promoted and information on pension matters is provided to staff.

38

Annual Report 2019/20

D IREC TORS REP O RT

EMPLOYEE INVOLVEMENT

GOING CONCERN

The Group is committed to involve all employees in the performance and development of the Group.

Employees are encouraged to discuss with management matters of interest to the employee and subjects affecting day to day operations. The policy of employee involvement includes performance improvement groups, personnel surveys and a programme of continuous improvement.

Discussions also take place regularly with trade unions representing employees on a wide range of issues.

The dairy market continues to be challenging due to the recent COVID-19 pandemic. Whilst there are increased logistical and operational challenges and volatility in market prices, the Directors believe that the Group has adequate resources to mitigate these challenges and a strong order book to enable them to continue in operational existence for the foreseeable future. The Group’s financial forecasts and projections show that the Group continues to be cash generative, taking account of the changes in trading performance as a result of COVID-19 including changes in market prices, demand and controllable actions, and it will operate within its banking covenants and meet its obligations as they fall due. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The Group gives full consideration to applications for employment from disabled persons where the candidate’s particular aptitudes and abilities are consistent with adequately meeting the requirements of the job.

Opportunities are available to disabled employees for training, career development and promotion.

Where existing employees become disabled, it is the Group’s policy to provide continuing employment wherever practicable in the same or an alternative position and to provide appropriate training to achieve this aim.

DISCLOSURE OF INFORMATION TO THE AUDITORS The Directors confirm that so far as they are aware, there is no relevant audit information of which the auditor is unaware. The Directors have taken all necessary steps in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

Annual Report 2019/20

SECR (STREAMLINED ENERGY AND CARBON REPORTING).

The following section represents a summary of the Group’s reporting obligations as required under the Companies (Directors report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. Additional details of the SECR report can be obtained on the Group’s website.

In line with SECR requirements, energy consumption data and associated scope 1 and scope 2 emissions were collated for all Dale Farm UK operations and are tabularised below.

SCOPE

ACTIVITY

MWh

tCO2e

1

UK company vehicles

26,423

6,462

1

UK energy use

112,676

23,758

2

UK energy use

48,055

18,325

Total

187,154

48,545

Tonnes CO2e/million £ turnover

96.2

AUDITORS A resolution to re-appoint Ernst & Young LLP as auditors will be put to the members at the Annual General Meeting.

By order of the Board Mike Dawson Secretary Date: 6 July 2020

39

Directors’ Responsibilities Statement The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’. Under company law, the Directors must not approve the financial statements unless they are

40

Annual Report 2019/20

D IREC TORS RES P O NS I B I L I T Y STAT E ME NT

satisfied that they give a true and fair view of the state of affairs of the Group and the company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: ■ Select suitable accounting policies and then apply them consistently; ■ Make judgments and estimates that are reasonable and prudent; ■ State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

Annual Report 2019/20

■ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group’s and the company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

41

Independent Auditors’ Report to the members of Dale Farm Cooperative Ltd

OPINION

BASIS FOR OPINION

We have audited the financial statements of Dale Farm Cooperative Limited (‘the Parent Company’ and “the Society”) and its subsidiaries (‘the Group’) for the year ended 31 March 2020 which comprise the Group Income Statement, Group and Society Statement of Comprehensive Income, Group and Society Statement of Changes in Equity, Group and Society Statement of Financial Position, Group Statement of Cash Flows and the related notes 1 to 30. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs(UK)) and applicable law.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of financial statements section of our report below. We are independent of the Group and Society in accordance with the ethical requirements that are relevant to our audit of the financial statements UK, including the FRC’s Ethical Standard, and we have fulfilled our ethical responsibilities in accordance with these requirements.

In our opinion the financial statements: ■ Give a true and fair view of the state of the Group and Society’s affairs as at 31 March 2020 and of the Group’s profit for the year then ended; ■ Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and ■ Have been prepared in accordance with the requirements of the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976

42

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

CONCLUSIONS RELATING TO GOING CONCERN We have nothing to report in respect of the following matters in relation to which the ISA’s (UK) require us to report to you where: ■ The Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or ■ The Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s or Society’s ability to continue to adopt the going concern basis of accounting for a period of at least 12 months from the date when the financial statements are authorised for issue.

OTHER INFORMATION EMPHASIS OF MATTER We draw attention to note 1 basis of preparation of the financial statements, which describes the economic and social impact the company is facing as a result of COVID-19. Our opinion is not modified in respect of this matter.

The other information comprises the information included in the annual report, other than the financial statements and our auditors’ report thereon. The Directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

Annual Report 2019/20

IND E P E N D E N T AU DI TO R S ’ R E P O RT

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report the fact.

We have nothing to report in this regard.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT

BY EXCEPTION In the light of knowledge and understanding of the Group and the Society and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.

We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976 requires us to report to you if, in our opinion: ■ A satisfactory system of internal control over transactions has not been maintained; or ■ Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or ■ The financial statements are not in agreement with the accounting records and returns; or

RESPONSIBILITIES OF DIRECTORS As explained more fully in the Directors’ responsibilities statement set out on pages 40 and 41, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and for such internal control as Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Society’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Society or to cease operations, or have no realistic alternative but to do so.

AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA’s (UK) will always detect a material

misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at http://www.frc.org. uk/auditorsresponsilibilites. The description forms part of our auditor’s report.

USE OF OUR REPORT This report is made solely to the Society’s members, as a body, in accordance with the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976. Our audit work has been undertaken so that we might state to the Society’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Society and the Society’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Michael Kidd (Senior Statutory Auditor) for and on behalf of: Ernst & Young LLP, Statutory Auditor Belfast Date: 10 July 2020

■ We have not received all the information and explanations we require for our audit.

Annual Report 2019/20

43

FINANCIAL STAT EMENTS

GROUP INCOME STATEMENT FOR THE YEAR ENDED 31ST MARCH 2020

Group turnover

Notes

2020 £000

2019 £000

2

504,528

509,363

(450,473)

(454,481)

54,055

54,882

(26,260)

(25,757)

(15,612)

(14,825)

Cost of sales GROSS PROFIT Selling and distribution costs Operating and administration costs OPERATING PROFIT

3

12,183

14,300

Interest payable and similar charges

6

(2,225)

(2,373)

Net gain/(loss) on financial instruments measured at fair value through the profit and loss account

(186)

80

PROFIT BEFORE TAXATION

9,772

12,007

(2,634)

(2,561)

7,138

9,446

Taxation charge PROFIT RETAINED FOR THE FINANCIAL YEAR

7

The results above relate to continuing operations.

44

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

GROUP & SOCIETY STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST MARCH 2020

Group Statement of Comprehensive Income for the year ended 31 March 2020 2020 £000

2019 £000

7,138

9,446

Foreign exchange movement on retranslation of foreign operations

76

(35)

TOTAL OTHER COMPREHENSIVE INCOME

76

(35)

7,214

9,411

2020 £000

2019 £000

340

558

-

-

340

558

Profit for the financial year

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Society Statement of Comprehensive Income for the year ended 31 March 2020

Profit for the financial year TOTAL OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Annual Report 2019/20

45

FINANCIAL STAT EMENTS

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST MARCH 2020

Called up share capital £000

Profit and loss account £000

Total shareholders’ funds £000

10,097

54,141

64,238

Profit for the financial year

-

9,446

9,446

Other comprehensive income

-

(35)

(35)

Total comprehensive income for the year

-

9,411

9,411

72

-

72

Shares cancelled

(73)

-

(73)

At 31 March 2019

10,096

63,552

73,648

Profit for the financial year

-

7,138

7,138

Other comprehensive income

-

76

76

Total comprehensive income for the year

-

7,214

7,214

90

-

90

Shares cancelled

(202)

-

(202)

AT 31 MARCH 2020

9,984

70,766

80,750

GROUP At 1 April 2018

Ordinary shares issued

Ordinary shares issued

46

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST MARCH 2020

Called up share capital £000

Profit and loss account £000

Total shareholders’ funds £000

10,097

16,227

26,324

Profit for the financial year

-

558

558

Other comprehensive income

-

-

-

Total comprehensive income for the year

-

558

558

72

-

72

Shares cancelled

(73)

-

(73)

At 31 March 2019

10,096

16,785

26,881

Profit for the financial year

-

340

340

Other comprehensive income

-

-

-

Total comprehensive income for the year

-

340

340

90

-

90

Shares cancelled

(202)

-

(202)

AT 31 MARCH 2020

9,984

17,125

27,109

SOCIETY At 1 April 2018

Ordinary shares issued

Ordinary shares issued

Annual Report 2019/20

47

FINANCIAL STAT EMENTS

GROUP STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31ST MARCH 2020

Notes

2020 £000

2019 £000

9

2,111

2,547

10

77,020

73,609

11

14

14

79,145

76,170

FIXED ASSETS Intangible assets Tangible assets Investments

CURRENT ASSETS Stocks

12

59,719

68,303

Debtors

13

67,861

70,743

11,492

11,887

139,072

150,933

Producer accounts

(17,708)

(19,178)

Trade creditors

(31,185)

(37,339)

(71,168)

(78,776)

(2,372)

(921)

(522)

(556)

(122,955)

(136,770)

Cash at bank and in hand

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Other creditors and accruals

14

Corporation tax Share capital repayable on demand

48

22

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

GROUP STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31ST MARCH 2020

Notes Net current assets TOTAL ASSETS LESS CURRENT LIABILITIES

2020 £000

2019 £000

16,117

14,163

95,262

90,333

Creditors: amounts due after more than one year

15

(7,391)

(9,749)

Provisions for liabilities – deferred tax

18

(3,910)

(3,317)

Deferred income – capital grants

19

(3,211)

(3,619)

(14,512)

(16,685)

80,750

73,648

9,984

10,096

Profit and loss account

70,766

63,552

SHAREHOLDERS’ FUNDS

80,750

73,648

NET ASSETS CAPITAL AND RESERVES Called up share capital

20

The financial statements were approved and authorised for issue by the Board of Directors on 6 July 2020 and signed on their behalf by: Fred Allen Chairman David Rea Vice-Chairman Mike Dawson Secretary Date: 6 July 2020

Annual Report 2019/20

49

FINANCIAL STAT EMENTS

SOCIETY STATEMENT OF FINANCIAL POSITION at 31ST MARCH 2020

Notes

2020 £000

2019 £000

9

420

269

10

4,196

4,407

11

13,578

13,578

18,194

18,254

FIXED ASSETS Intangible assets Tangible assets Investments

CURRENT ASSETS Stocks

12

249

295

Debtors

13

41,114

41,080

2,050

2,503

43,413

43,878

Producer accounts

(17,708)

(19,178)

Trade creditors

(3,530)

(4,129)

Corporation tax

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Other creditors and accruals

14

(12,455)

(11,099)

Share capital repayable on demand

22

(522)

(556)

(34,215)

(34,962)

50

Annual Report 2019/20

FINA N C I A L STAT E ME NTS

SOCIETY STATEMENT OF FINANCIAL POSITION at 31ST MARCH 2020

Notes Net current assets TOTAL ASSETS LESS CURRENT LIABILITIES

2020 £000

2019 £000

9,198

8,916

27,392

27,170

Creditors: amounts due after more than one year

15

-

-

Provisions for liabilities and charges – deferred tax

18

(119)

(109)

Deferred income – capital grants

19

(164)

(180)

(283)

(289)

27,109

26,881

9,984

10,096

17,125

16,785

27,109

26,881

NET ASSETS CAPITAL AND RESERVES Called up share capital Profit and loss account SHAREHOLDERS’ FUNDS

20

The financial statements were approved and authorised for issue by the Board of Directors on 6 July 2020 and signed on their behalf by: Fred Allen Chairman David Rea Vice-Chairman Mike Dawson Secretary Date: 6 July 2020

Annual Report 2019/20

51

FINANCIAL STAT EMENTS

GROUP STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST MARCH 2020

Notes

2020 £000

23(a)

24,401

16,551

6

(2,208)

(2,357)

(17)

(16)

(10,335)

(10,901)

(301)

(73)

Receipts from disposals of tangible fixed assets

35

122

Purchase of business and deferred payment for subsidiary undertaking

-

(24)

(12,826)

(13,249)

(2,358)

(2,550)

Net cash inflow from operating activities

2019 £000

INVESTING ACTIVITIES Bank interest paid Preference share interest paid Payments to acquire tangible fixed assets Payments to acquire intangible assets

NET CASH FLOW FROM INVESTING ACTIVITIES Financing activities Repayment of bank loans Issue of share capital repayable on demand

22

25

28

Redemption of share capital repayable on demand

22

(59)

(1)

Repayment of convertible loan stock

16

-

(26)

Repayment of ordinary share capital

20

(202)

(73)

Issue of ordinary share capital

20

90

72

186

(80)

(2,318)

(2,630)

9,257

672

Net gain/(loss) on financial liabilities NET CASH FLOW FROM FINANCING ACTIVITIES INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

52

23(b)

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

GROUP STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST MARCH 2020 Reconciliation of net cash flow to movement in net debt Notes Increase/(decrease) in cash

23(b)

Repayment of bank loans Convertible loan stock repaid/(issued)

16

Issue of share capital repayable on demand Movement in net debt in the year

23(b)

NET DEBT AT 1 APRIL NET DEBT AT 31 MARCH

Annual Report 2019/20

23(b)

2020 £000

2019 £000

9,257

672

2,358

2,550

-

26

34

(27)

11,649

3,221

(63,812)

(67,033)

(52,163)

(63,812)

53

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

1. Accounting policies Definitions I.

II.

54

‘Dale Farm Cooperative Limited’ is a cooperative society incorporated in Northern Ireland. The registered office is Dale Farm House, 15 Dargan Road, Belfast BT3 9LS. Its activities include marketing and transport of milk, sales promotion, laboratory services, and other services to dairy farmers.

‘Dale Farm Limited’ is a private limited liability company which, as a wholly owned subsidiary of Dale Farm Cooperative Limited, carries out manufacturing, processing, distribution and marketing activities. During the year under review it had seven trading subsidiaries, Dale Farm Dairies (Ireland) Limited, which is involved in the sale and distribution of dairy products in the Republic of Ireland, Dale Farm (GB) Limited which produces and markets yogurts, desserts, cottage cheese and related cultured products, Rowan Glen Dairy Products Limited which markets yogurts, desserts, cottage cheese and related dairy products, Ash Manor Cheese Company Limited is involved in the cutting, packing and sale of cheese products and Dale Farm Ice Cream Limited which is involved in the sale and distribution of a range of ice cream and frozen products. Dale Farm Ice Cream (Ireland) Limited, a subsidiary of Dale Farm Ice Cream Limited, is involved in the sale and distribution of a range of ice cream and frozen products in the Republic of Ireland.

Mullins Ice Cream Limited is

a subsidiary of Dale Farm Ice Cream Limited and is involved in the manufacture and sale of ice cream and frozen products.

III. ‘United Feeds Limited’ is a wholly owned subsidiary of Dale Farm Cooperative Limited, which carries out manufacturing, distribution and marketing activities in the animal feed sector.

Basis of preparation The financial statements have been prepared on a going concern basis under the historical cost convention and in accordance with applicable accounting standards.

The dairy market continues to be challenging due to the recent COVID-19 pandemic. There are increased logistical and operational challenges, and volatility in market prices. The foodservice market has been particularly challenged by COVID-19 due to the interruption of operations for most foodservice customers. The risk around this market is being carefully managed as part of extensive scenario planning across all markets the Group operates in. Other markets, in particular retail, have noted an increase in demand.

Whilst there are increased logistical and operational challenges, and volatility in market prices, the Directors believe that the Group has adequate resources to mitigate these challenges and a strong order book to enable them to continue in operational existence for the foreseeable future. The Group’s financial forecasts and projections for the next 12 months show that the Group continues to be cash generative, taking account of the changes in trading performance as a result of COVID-19 including changes in market prices, demand and controllable actions, and it

will operate within its banking facilities and covenants and meet its obligations as they fall due.

Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The accounts are prepared under the Industrial and Provident Societies Acts 1969 and 1976 and where these Acts do not provide relevant guidance the Directors have adopted the requirements of the Companies Act 2006. The financial statements are prepared in Sterling which is the functional currency of the Group and rounded to the nearest £’000.

STATEMENT OF COMPLIANCE The Group’s financial statements have been prepared in compliance with FRS 102 as it applies to the financial statements of the Group for the year ended 31 March 2020.

Basis of consolidation The Group financial statements consolidate the financial statements of Dale Farm Cooperative Limited and all its subsidiary undertakings made up to 31 March each year. No profit and loss account is presented for Dale Farm Cooperative Limited as permitted by the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976.

JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Taxation – Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or the years of the leases where these are shorter.

The carrying values of tangible fixed assets are reviewed for impairment in periods when events or changes in circumstances indicate the carrying value may not be recoverable.

If a subsidiary or a business is subsequently sold or closed, any goodwill arising on acquisition that was written off directly to reserves or that has not been amortised through the profit and loss account is taken into account in determining the profit or loss on sale or closure.

Intangible assets

Goodwill is the difference between the cost of an acquired entity and the aggregate of the fair value of that entity’s identifiable assets and liabilities.

Intangible assets acquired separately from a business are capitalised at cost. Intangible assets acquired as part of an acquisition of a business are capitalised separately from goodwill if the fair value can be measured reliably on initial recognition, subject to the constraint that, unless the asset has a readily ascertainable market value, the fair value is limited to an amount that does not create or increase any negative goodwill arising on the acquisition. Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the year in which it is incurred.

Depreciation is provided on all property, plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset on a systematic basis over its expected useful life.

Positive goodwill is capitalised, classified as an asset on the balance sheet and amortised on a straight line basis over its useful economic life. It is reviewed for impairment at the end of the first full financial year following the acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable.

Subsequent to initial recognition, intangible assets are stated at cost less accumulated amortisation and accumulated impairment. Intangible assets are amortised on a straight line basis over their estimated useful life. The carrying value of intangible assets is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

Rates vary according to the class of asset but are typically:

The useful economic lives of intangible assets are as follows:

Rates vary according to the class of asset but are typically:

Buildings freehold – 50 years

Goodwill –10 years

Goodwill – 10 years

Buildings leasehold – over the period of the lease

Brands –10 years

Brands – 10 years

Software –5 years

Software – 5 years

Negative goodwill is capitalised and released to the profit and loss account as the related assets are realised.

The carrying value of intangible assets is reviewed for impairment at the end of the first full year following acquisition and in other

Stock provision – The Group reviews and considers prevailing market conditions, the levels of stock held and forecast market movements and makes a provision to the carrying value of the stock where necessary.

Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.

Plant and equipment – 3 to 15 years Vehicles and associated equipment – 4 to 10 years Land is not depreciated Annual Report 2019/20

Government grants Capital grants are credited to a deferral account and are released to revenue on the same basis as the related assets are depreciated.

Grants of a revenue nature are credited to income so as to match them with the expenditure to which they relate.

Goodwill

55

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

periods if events or changes in circumstances indicate the carrying value may not be recoverable.

Stocks Stock is valued at the lower of cost or net realisable value. Cost includes an appropriate element of overheads. Net realisable value is based on estimated selling price less further costs expected to be incurred for disposal.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Group relief It is the Group’s policy to pay for Group relief at the fiscal rate of tax on losses utilised during the period.

Deferred taxation

Pensions

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or right to pay less or to receive more, tax with the following exceptions:

The Group operated for the majority of its eligible employees three defined contribution schemes – the Dale Farm Cooperative Group Scheme, the Dale Farm (GB) Limited Scheme, and the United Feeds Limited Scheme.

Contributions to the three defined contribution schemes are charged in the profit and loss account as they become payable in accordance with the rules of the schemes.

Provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, or gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets concerned.

However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold.

Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

56

Research and development Research and development expenditure is written off as incurred.

Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and loss account. The assets and liabilities of non-UK subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. Income and expenses of non-UK subsidiary undertakings are translated an average rate for the year. The exchange difference

arising on the retranslation of opening net assets is taken directly to other comprehensive income.

All other translation differences are taken to the profit and loss account.

Lease commitments Assets held under finance leases, which are those where substantially all the risks and rewards of ownership of the asset have passed to the Group, are capitalised in the balance sheet and are depreciated over their useful lives. The interest element of the rental obligations is charged to the profit and loss account over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding.

Rentals paid under operating leases are charged to income on a straight line basis over the term of the lease.

Capital instruments Ordinary shares are included in shareholders’ funds as any redemption requires the prior consent of the Board. Other instruments such as preference shares are classified as liabilities if they contain an obligation to transfer economic benefits and if not they are included in shareholders’ funds. The finance cost recognised in the profit and loss account in respect of capital instruments other than equity shares is allocated to periods over the term of the instrument at a constant rate on the carrying amount.

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020 Interest-bearing loans and borrowings All interest-bearing loans and borrowings which are basic financial instruments are recognised at the present value of cash payable to the bank (excluding interest).

Provisions for liabilities A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

Provisions for the expected costs of maintenance under guarantees are charged against profits when products have been invoiced. The effect of the time value of money is not material and therefore the provisions are not discounted.

Derivative instruments The Group uses forward foreign currency contracts to reduce exposure to foreign exchange rates.

Derivative financial instruments are initially measured at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value through profit or loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The fair value of the forward currency contracts is calculated by reference to current forward exchange contracts with similar maturity profiles.

The Group does not undertake any hedge accounting transactions.

Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at banks and in hand. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Short-term debtors and creditors Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the income statement in other operating expenses.

Revenue recognition Sale of goods

2. Turnover and segmental reporting Turnover, which is stated net of value added tax, represents the amounts derived from the provision of goods and services which fall within the Group’s ordinary activities. Turnover is attributable to the marketing and transporting of milk, the processing and sale of dairy products and the manufacture and sales of animal feeds. Turnover and operating profit are attributable to continuing activities.

Segmental reporting, by areas of activity and geographical markets, has not been included in these financial statements. Disclosure of such information is not considered relevant and would be seriously prejudicial to the interests of the Group.

Revenue is recognised to the extent that the Group obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. The following criteria must also be met before revenue is recognised: Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Dividends Revenue is recognised when the Group’s right to receive payment is established.

Annual Report 2019/20

57

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020 3. Operating profit (a) This is stated after charging/(crediting):

2020 £000

2019 £000

6,794

6,329

-

119

553

554

35

17

149

104

Capital grant release

(408)

(403)

Revenue grants

(242)

(144)

Research and development costs

519

570

Auditors’ remuneration

– audit services*

100

92

Non-audit services**

– taxation compliance services

50

79

– other audit related services

50

7

144

149

2,983

2,823

(41)

(66)

13

232

Depreciation of owned tangible fixed assets Depreciation of tangible fixed assets held under finance leases Amortisation of goodwill Amortisation of brands Amortisation of software

Operating lease rentals

– land and buildings – plant and equipment

Profit on disposal of fixed assets Foreign exchange loss * £26k (2019 - £24k) of this relates to the Society ** Included in non-audit services is £68k (2019 - £23k) relating to the Society

58

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

4. Directors’ remuneration

Fees and other emoluments

2020 £000

2019 £000

174

167

5. Staff Costs Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

38,432

33,762

8,556

6,500

Social security costs

3,691

3,047

816

580

Other pension costs

1,621

1,346

428

409

43,744

38,155

9,800

7,489

Wages and salaries

Included in the Group other pension costs is £1,621k (2019 – £1,346k) in respect of the defined contribution scheme. Included in the Society other pension costs is £428k (2019 – £409k) in respect of the defined contribution scheme

The average number of Group employees during the year was: Group 2020

Group 2019

Society 2020

Society 2019

665

628

-

-

Selling and distribution

221

224

-

-

Operations and administration

235

190

205

160

51

63

50

63

1,172

1,105

255

223

Processing

Milk recording (part-time)

The number of Group employees at 31 March 2020 was 1,199 (2019 – 1,151). The number of Society employees at 31 March 2020 was 258 (2019 – 264).

Annual Report 2019/20

59

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

6. Interest payable and similar charges 2020 £000

2019 £000

2,208

2,357

Interest on preference shares

17

16

GROUP INTEREST PAYABLE

2,225

2,373

2020 £000

2019 £000

1,863

2,344

174

(38)

TOTAL CURRENT TAX

2,037

2,306

Deferred tax:

2020 £000

2019 £000

385

237

371

-

(159)

18

597

255

2,634

2,561

Bank loans and overdrafts

7. Tax (a) The taxation charge is made up as follows:

Based on profit for the year: Current tax: Corporation tax on profit for the period Adjustments in respect of previous periods

Origination and reversal of timing differences Effect of decreased tax rate Adjustments in respect of previous periods TOTAL DEFERRED TAX TOTAL TAX CHARGE (NOTE 7(B))

60

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020 7. Tax (continued) (b) Factors affecting tax charge for the year The tax assessed on the profit for the period varies from the standard rate of corporation tax in the UK. The differences are explained below:

2020 £000

2019 £000

Profit before tax

9,772

12,007

Profit multiplied by standard rate of corporation tax in the UK of 19% (2018 – 19%)

1,857

2,281

291

291

406

(16)

Losses carried forward

66

24

Adjustment in respect of previous periods

14

(20)

-

1

2,634

2,561

EFFECT OF: Disallowed expenses and non-taxable income Change in tax laws and rates

R&D credits

(c) Factors that may affect future tax charges The reductions in the UK corporation tax rate to 17% with effect from April 2020 was substantively enacted at the balance sheet date and as such, the deferred tax liability at 31 March 2020 has been calculated based on this rate.

On 17th March 2020, HM Treasury substantively enacted a budget resolution to retain the CT rate at 19% from 1 April 2020.

8. Profit attributable to the members of the parent company The profit dealt with in the financial statements of the parent company is £340k (2019 – profit of £558k).

Annual Report 2019/20

61

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

9. Intangible fixed assets Goodwill £000

Brands £000

Software £000

Total £000

9,305

331

1,301

10,937

Additions

-

-

301

301

Release

-

-

-

-

9,305

331

1,602

11,238

7,243

115

1,032

8,390

553

35

149

737

-

-

-

-

7,796

150

1,181

9,127

AT 31 MARCH 2020

1,509

181

421

2,111

AT 1 APRIL 2019

2,062

216

269

2,547

GROUP COST: At 1 April 2019

AT 31 MARCH 2020 AMORTISATION: At 1 April 2019 Provided during the year Release AT 31 MARCH 2020 NET BOOK VALUE:

The net book value at 31 March 2020 is analysed below:

£000

Purchased goodwill Goodwill arising on consolidation

22 1,487 1,509

Goodwill is being amortised over its expected useful life. Negative goodwill is capitalised and released to the profit and loss account as the related assets are realised.

62

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

9. Intangible fixed assets (continued)

SOCIETY

Software £000

COST: At 1 April 2019 Additions AT 31 MARCH 2020

1,301 301 1,602

AMORTISATION: At 1 April 2019 Provided during the year AT 31 MARCH 2020

1,032 150 1,182

NET BOOK VALUE: AT 31 MARCH 2020

420

AT 1 APRIL 2019

269

Annual Report 2019/20

63

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

10. Tangible fixed assets Land and buildings £000

Plant and equipment £000

Vehicles and associated equipment £000

39,011

112,889

1,506

153,406

Additions

222

10,113

-

10,335

Disposals

-

(483)

(2)

(485)

Reclassification

-

(49)

-

(49)

39,233

122,470

1,504

163,207

12,322

65,970

1,505

79,797

1,051

5,743

-

6,794

On disposals

-

(403)

(1)

(404)

Reclassification

-

-

-

-

13,373

71,310

1,504

86,187

AT 31 MARCH 2020

25,860

51,160

-

77,020

AT 1 APRIL 2019

26,689

46,919

1

73,609

GROUP

Total £000

COST: At 1 April 2019

AT 31 MARCH 2020 DEPRECIATION: At 1 April 2019 Provided during the year

AT 31 MARCH 2020 NET BOOK VALUE:

Included in the amounts for plant and machinery and vehicles above are the following amounts relating to leased assets and assets acquired under hire purchase contracts:

64

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

10. Tangible fixed assets (continued) Plant and equipment £000

Vehicles £000

Total £000

4,580

237

4,817

4,580

237

4,817

-

-

-

4,580

237

4,817

AT 31 MARCH 2020

-

-

-

AT 31 MARCH 2019

-

-

-

2020 £000

2019 £000

20,407

21,297

5,454

5,392

25,861

26,689

GROUP COST: At 1 April 2019 and 31 March 2020 DEPRECIATION: At 1 April 2019 Provided during the year AT 31 MARCH 2019 NET BOOK VALUE:

The net book value of land and buildings comprises: Freehold Leasehold

Annual Report 2019/20

65

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

10. Tangible fixed assets (continued) Land and buildings £000

Plant and equipment £000

Vehicles and associated equipment £000

5,555

2,443

1,595

9,593

Additions

-

33

-

33

Disposals

-

-

(2)

(2)

Reclassification

-

(49)

-

(49)

5,555

2,427

1,593

9,575

1,607

1,984

1,595

5,186

116

79

-

195

On disposals

-

-

(2)

(2)

Reclassification

-

-

-

-

1,723

2,063

1,593

5,379

AT 31 MARCH 2020

3,832

364

-

4,196

AT 1 APRIL 2019

3,948

459

-

4,407

SOCIETY

Total £000

COST: At 1 April 2019

AT 31 MARCH 2020 DEPRECIATION: At 1 April 2019 Provided during the year

AT 31 MARCH 2020 NET BOOK VALUE:

The net book value of vehicles and associated equipment includes an amount of £NIL (2019 – £NIL) relating to assets held under finance leases and hire purchase contracts.

The net book value of land and buildings comprises:

2020 £000

2019 £000

LEASEHOLD

3,816

3,931

16

17

3,832

3,948

FREEHOLD

66

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020 11. Investments Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

-

-

13,564

13,564

14

14

14

14

14

14

13,578

13,578

SHARES AT COST: Subsidiary undertakings Trade investment

At 31 March 2020 the principal subsidiary undertakings were:

Subsidiary undertakings

Holding

Proportion of voting rights and shares held

Nature of business

Dale Farm Limited

Ordinary shares

100%*

Manufacture, sale and distribution of milk and a comprehensive range of dairy products

Dale Farm Dairies (Ireland) Limited

Ordinary shares

100%**

Sale and distribution of milk and dairy products

Dale Farm (GB) Limited

Ordinary shares

100%**

Manufacture and sale of yogurts, desserts, cottage cheese and related cultured products

Rowan Glen Dairy Products Limited

Ordinary shares

100%**

Sale of yogurts, cottage cheese, desserts and related dairy product

Ash Manor Cheese Company Limited

Ordinary shares

100%**

Packing, sale and distribution of cheese products

Dale Farm Ice Cream Limited

Ordinary shares

100%**

Sale and distribution of ice cream and frozen products

Dale Farm Ice Cream (Ireland) Limited

Ordinary shares

100%***

Sale and distribution of ice cream and frozen products

Annual Report 2019/20

67

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

11. Investments (continued) Proportion of voting rights and shares held

Subsidiary undertakings

Holding

Mullins Ice Cream Limited

Ordinary shares

100%***

Manufacture and sale of ice cream and frozen products

United Feeds Limited

Ordinary shares

100%*

Manufacture and sale of animal feeds

United Feeds (Ireland) Limited

Ordinary shares

100%****

Manufacture and sale of animal feeds

Dale Farm Dairies Limited

Ordinary shares

100%

Dormant

Dale Farm Ingredients Limited

Ordinary shares

100%

Dormant

Dale Farm Gridco Limited

Ordinary shares

100%**

Dormant

Ash Manor Holdings Limited

Ordinary Shares

100%**

Dormant

Nature of business

* Held by Dale Farm Group Limited. ** Held by Dale Farm Limited. *** Held by Dale Farm Ice Cream Limited. **** Held by United Feeds Limited The above undertakings are incorporated and operate in Northern Ireland, with the exception of Dale Farm (GB) Limited and Ash Manor Cheese Company Limited which are incorporated in England and operate in Great Britain, Rowan Glen Dairy Products Limited which is incorporated and operates in Scotland, and Dale Farm Dairies (Ireland) Limited and Dale Farm Ice Cream (Ireland) Limited which are incorporated and operate in the Republic of Ireland.

68

Annual Report 2019/20

F INA N C I A L STAT E ME NTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020 12. Stocks

Raw materials and consumables Finished goods and goods for resale

Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

7,923

8,015

171

185

51,796

60,288

78

110

59,719

68,303

249

295

The difference between the carrying value of stocks and their replacement cost is not material. Stocks recognised as an expense in the period were £368m (2019: £381m) for the Group and £222m (2019: £228m) for the Society.

Stock with a carrying value of £24m (2019: £32m) is pledged as security for the Group’s banking facilities.

13. Debtors Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

56,449

59,974

125

533

-

-

9,960

10,965

-

-

26,465

24,937

Other debtors

4,622

4,136

3,674

3,821

Prepayments and accrued income

6,790

6,553

740

652

Financial instruments (note 27)

-

80

-

-

Group relief

-

-

150

172

67,861

70,743

41,114

41,080

Trade debtors Amounts due from subsidiary undertakings – loans – trading

Amounts due from Group undertakings are unsecured, interest free and repayable on demand.

Debtors with a carrying value of £20m (2019: £33m) are pledged as security for the Group’s banking facilities.

Annual Report 2019/20

69

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

14. Creditors’ amounts falling due within one year Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

52,947

62,599

4,887

5,499

2,609

2,609

-

-

Other taxes and social security

1,149

1,095

1,050

936

Other creditors

1,084

1,287

878

656

13,007

11,000

5,454

3,822

Loan stock (note 16)

186

186

186

186

Financial instruments (note 27)

186

-

-

-

71,168

78,776

12,455

11,099

Bank overdrafts & other facilities Bank loans (note 17)

Accruals

In addition to the security referred to in stock and debtors, part of the other facilities are secured by a floating charge over a subsidiary company’s stocks.

15. Creditors: amounts due after more than one year

Bank loans (note 17)

70

Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

7,391

9,749

-

-

7.391

9,749

-

-

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

16. Convertible loan stock Group and Society 2020 £000

Group and Society 2019 £000

186

212

Loan stock repaid

-

(26)

Loan stock issued

-

-

186

186

Convertible loan stock: At 1 April

AT 31 MARCH

Loan stock is convertible on the basis of £1 of loan stock to £1 of ordinary shares held, subject to current legal limits on the maximum number of shares being raised.

17. Bank Loans

Wholly repayable within five years

Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

10,000

12,358

-

-

10,000

12,358

-

-

The loans are interest bearing at a variable rate based on LIBOR and are secured by way of unlimited intra-group guarantees.

Annual Report 2019/20

71

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

18. Provisions for liabilities - deferred taxation The movements in deferred taxation during the current year are as follows: At 31 March 2019 Charge in the current year AT 31 MARCH 2020

Deferred taxation provided in the financial statements is as follows:

Group £000

Society £000

3,317

109

593

10

3,910

119

Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

Capital allowances in advance of depreciation

4,146

3,369

141

133

Other timing differences

(236)

(52)

(22)

(24)

3,910

3,317

119

109

There are no amounts unprovided at 31 March 2020 and 31 March 2019. The reductions in the UK corporation tax rate to 17% with effect from April 2020 was substantively enacted at the balance sheet date and as such the deferred tax liability at 31 March 2020 has been calculated based on this rate. On 17 March 2020 HM Treasury substantively enacted a budget resolution to retain the CT rate at 19% from 1 April 2020.

19. Deferred income - capital grants Group £000

Society £000

3,619

180

Release for the year

(408)

(16)

AT 31 MARCH 2020

3,211

164

At 31 March 2019

72

Annual Report 2019/20

F INA N C I A L STAT E ME NTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

20. Issued share capital Group and Society Allotted, called up and fully paid

2020 No.

2019 No.

2020 £000

2019 £000

9,984,000

10,096,406

9,984

10,096

2020 £000

2019 £000

10,096

10,097

90

72

Cancelled during the year

(202)

(73)

AT 31 MARCH

9,984

10,096

Ordinary shares of £1 each

Ordinary shares: At 1 April Issued during the year

Dale Farm Cooperative Limited is a cooperative Society established under the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976. It is governed by its rules which require all members to have a minimum shareholding of 200 £1 ordinary shares, fully paid up.

21. Reserves Called up share capital The balance classified as share capital includes the nominal value of issued company’s share capital.

Profit and loss account The company’s profit and loss account includes the accumulated profits and losses of the company less any dividends declared.

Annual Report 2019/20

73

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

22. Share capital repayable on demand Group and Society Preference shares

2020 £000

At 1 April 2019

556

Issued during the year

25

Cancelled during the year

(59)

AT 31 MARCH 2019

522

During the year, £25k in share capital repayable on demand was issued, in lieu of ordinary shares to members who had retired from milk production. Interest on the preference shares is payable annually at bank base rate less 0.25% or at such higher rate as may be determined by the board: for the year ended 31 March 2020 the rate of interest paid was 2.5%.

23. Notes to the Group statement of cash flows (a) Reconciliation of operating profit to net cash inflows from operating activities:

2020 £000

2019 £000

Operating profit

12,183

14,300

Depreciation of tangible fixed assets

6,794

6,448

737

675

(Increase)/decrease in stocks

8,584

(8,555)

Increase in debtors

2,882

(2,000)

Increase in creditors

(5,185)

7,893

Capital grant release

(408)

(403)

(42)

(66)

76

(39)

Corporation tax paid

(1,220)

(1,702)

NET CASH INFLOW FROM OPERATING ACTIVITIES

24,401

16,551

Amortisation of intangibles

Profit on disposal of fixed assets Foreign exchange movement

74

Annual Report 2019/20

F INA N C I A L STAT E ME NTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

23. Notes to the Group statement of cash flows (continued) (b) Group analysis of net debt

At 31 March 2019 £000

Cash flow £000

At 31 March 2020 £000

11,887

(395)

11,492

(62,599)

9,652

(52,947)

(50,712)

9,257

(41,455)

Loan stock

(186)

-

(186)

Preference shares

(556)

34

(522)

(12,358)

2,358

(10,000)

(63,812)

11,649

(52,163)

Cash at bank and in hand Overdrafts & other facilities

Bank loans

24. Pension scheme information Dale Farm Cooperative Limited, Dale Farm Limited and United Feeds operate one type of pension scheme for the benefit of their employees and the total pension charge to the Group for the period amounted to £1,621k (2019 – £1,346k). The details of these scheme are set out below:

Defined contribution schemes The Group operated for the majority of its eligible employees three defined contribution schemes – the Dale Farm Cooperative Group Scheme, the Dale Farm (GB) Limited Scheme and the United Feeds Limited Scheme.

The assets of the schemes are held in independently administered funds. Contributions to the three defined contribution schemes are charged in the profit and loss account as they become payable in accordance with the rules of the schemes.

The pension costs represent contributions payable by the Group to the schemes and amounted to £1,621k (2019 – £1,346). The unpaid contributions outstanding at the year end, included in ‘Other creditors’, are £148k (2019 – £122k).

Annual Report 2019/20

75

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

25. Future capital commitments At 31 March 2020 the Directors have authorised future capital expenditure which, without taking account of Government grants, amounts to:

Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

297

3,486

-

-

1,038

490

-

-

Contracted Non contracted

26. Other financial commitments At 31 March 2020 the Group and Society’s future minimum rentals payable under non-cancellable operating leases are as follows:

Land and buildings

Plant and equipment

Group Leases expiring:

2020 £000

2019 £000

2020 £000

2098 £000

Within one year

146

149

2,371

2,373

Within two to five years

157

157

4,641

4,176

1,648

1,688

917

631

1,951

1,994

7,929

7,180

After more than five years

Land and buildings

Plant and equipment

Society Leases expiring:

2020 £000

2019 £000

2020 £000

2019 £000

Within one year

-

-

560

594

Within two to five years

-

-

520

857

After more than five years

-

-

-

-

-

-

1,080

1,451

76

Annual Report 2019/20

F INA N C I A L STAT E ME N TS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

27. Financial instruments Group 2020 £000

Group 2019 £000

Society 2020 £000

Society 2019 £000

186

(80)

-

-

Bank overdraft (note 14)

52,947

62,599

4,887

5,499

Loans (note 17)

10,000

12,358

-

-

Financial assets at fair value through income statement Forward foreign currency contracts - Financial liabilities measured at amortised cost

The Group entered into forward foreign currency contracts to manage currency exposure on sales. The fair values of the assets and liabilities held at fair value through income statement at the balance sheet date are determined using quoted prices. The foreign exchange contracts all expire within the next 12 months.

28. Related party transactions The Directors, with the exception of the appointed Directors, are all engaged in dairy farming and supply their milk to Dale Farm Cooperative on the same terms as all other members. They are also entitled to utilise all other services made available by Dale Farm Cooperative on the same terms as other members.

The net value of milk purchased from and services provided to these Directors during the year was £4,928,956 (2019 – £5,026,339).

At 31 March 2020 the net amount owed to the Directors was £453,077 (2019 – £477,699).

Key management personnel All Directors and certain senior employees who have authority and responsibility for planning, directing and controlling the activities of the Group are considered to be key management personnel.

Annual Report 2019/20

77

FINANCIAL STAT EMENTS

NOTES TO THE

FINANCIAL STATEMENTS AT 31ST MARCH 2020

29. Contingent liabilities The Society has provided an unlimited guarantee in favour of the Ulster Bank in respect of Dale Farm Cooperative Group borrowings from Ulster Bank. At 31 March 2020 the Dale Farm Cooperative Group borrowings from Ulster Bank amounted to some £53 million (2019: £63 million).

The banking facilities of the subsidiary, United Feeds Limited, are secured by a floating charge over the company’s assets.

Under the terms of different grant schemes there exists a contingent liability to repay grants received if certain conditions therein are not fulfilled.

Certain other contingent liability claims and guarantees occur in the normal course of business but it is not considered that any material liabilities will arise.

30. Ultimate controlling party The ultimate controlling party is considered to be the members of Dale Farm Cooperative Limited.

78

Annual Report 2019/20

NOTES:

Annual Report 2019/20

79

D A L E F A R M C O O P E R A T I V E LT D

Email: info@dalefarm.co.uk Visit: www.dalefarm.co.uk