Issuu

Annual Report 2020-21

A N N UA L R E P O R T & AC C O U N T S 2020/21

Dale Farm

Annual Report 2020/21

OUR BRANDS

OUR GROUP Dale Farm is a Northern Ireland headquartered dairy cooperative, owned by approximately 1,300 UK farmer members with a turnover in excess of £500m. With an employee base of 1,213 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.

O U R Y E A R I N N U M B ER S GROUP TURNOVER

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.

£523.7M £8.2M NET PROFIT BEFORE TAX

£6.3M CAPEX INVESTMENT

£14M

GROUP OPERATING PROFIT

GROUP EBITDA

£20.8M £50.7M NET DEBT

Dale Farm

Annual Report 2020/21

CO N T EN T S PAG E

A N N UA L R EP O RT Dale Farm Group .................................................................................................................................................. 03 Chairman’s Report ............................................................................................................................................. 06 Chief Executive’s Review .............................................................................................................................. 08 Executive Leadership Team .................................................................................................................... 11 Business Review ..................................................................................................................................................... 12 Board of Directors ............................................................................................................................................... 28 Corporate Governance ................................................................................................................................ 30

F I N A N C I A L S TAT E M EN T S Strategic Report ................................................................................................................................................... 32 Directors’ Report .................................................................................................................................................. 38 Directors’ Responsibilities Statement .......................................................................................... 40 Independent Auditors’ Report .............................................................................................................. 42 Group Income Statement .......................................................................................................................... 46 Group & Society Statement of Comprehensive Income ........................................ 47 Statement of Changes in Equity ........................................................................................................ 48 Group Statement of Financial Position ....................................................................................... 50 Society Statement of Financial Position .................................................................................... 52 Group Statement of Cash Flows ........................................................................................................ 54 Notes to the Financial Statements .................................................................................................. 56

Dale Farm

Chairman’s Report

Annual Report 2020/21

C H A I R M A N ’ S R EP O RT This Annual Report reflects one of the most challenging years we have all faced. It was also my first full year as Dale Farm Chairman. I am extremely grateful for your loyalty to and active involvement in the cooperative throughout this time. From a farming perspective, 2020/21 was a year of two halves. A poor start to the year amidst Covid-19 saw base price fall to a level not seen since 2016.

F R E D A LLE N CHAIRMAN

As the business adjusted to the market shock of the pandemic, prices began to recover from midsummer onwards and finished the year in March 2021 with a base price (including loyalty bonus) of 29.55 ppl. This is the highest March price since 2014 and the increase in price to this point contributed to an average paid out price of 28.32 ppl for the year. This average price is up 3.9% year on year. Growth in milk supply during 2020/21 across NI has continued at pace with 2.47 billion litres produced. This is up 2.7% year on year. The Dale Farm milk pool grew faster than the NI average, rising 3.1% when compared to the previous year. The next major challenge which faces our industry will be addressing issues relating to climate change, whichever climate change bill is enacted through Stormont. As farmers we must embrace this topic and tell our story from a scientific and factual perspective. Let’s not forget as land owners and managers we are

key to a global solution to climate change. However, change is coming and we must be prepared to stand back and view our businesses through the lens of efficiency and ask ourselves, how best do we utilise the inputs we buy on farm in relation to our farm’s outputs? Measuring, monitoring and meeting environmental targets is set to become the new norm. With regards to direct farm support, a move to complying with environmental standards is very much in the spotlight regarding receipt of future payments. With this evolution in how we farm, I am greatly heartened by the array of services Dale Farm can offer in areas such as measuring feed efficiency, soil health, milk recording and disease monitoring, along with the fact that sample carbon footprint measurements to date have highlighted that we are in a better position when compared to UK wide and indeed global figures. I trust this report reaches you and your family well - and that we can begin to look ahead beyond the pandemic, towards a brighter future for all. Indeed, we have entered our new financial year strongly and we expect a solid performance for the year ahead. Whilst we will continue to work our way through market challenges, I am confident in the strength of our cooperative and our Board’s commitment to supporting our membership.

Fred Allen Chairman

Dale Farm

Chief Executive’s Review

Annual Report 2020/21

C H I EF EXEC U T I V E ’ S R E V I E W accordingly and removed significant fixed costs from the business. The ongoing Brexit situation presents challenges through which we are still navigating. Dale Farm is in a good position overall, supplying into both the UK and EU. We will continue to lobby Government on behalf of you, our farmer owners, in relation to issues such as veterinary agreements, trusted trade mechanics on both sides of the supply chain, rules of origin for on-sale and administration costs.

N I C K W H E LA N GROUP CHIEF EXECUTIVE There is no denying this has been a challenging year. It is with great pride therefore, that despite the headwinds we faced, we can report a solid year’s performance for the business for 2020/21. Our hard-working, dedicated team of people right across the business were truly adaptable in the face of adversity - I thank everyone within the Dale Farm Group at every level for their continued tenacity, energy and loyalty. The impact of the pandemic was noteworthy, particularly the damage to sales within foodservice as the sector was ground almost to a standstill and our sales almost halved. That said, we benefited from a 15% uplift in retail sales as consumers changed how they shopped. Restructuring and cost reduction throughout the year was challenging amid the pandemic, particularly with additional costs incurred to protect our people, which will always be our absolute priority. However, we managed this

The average price paid to our Dale Farm producers was 28.32ppl for the 2020/21 year. This is an increase of 1.06 ppl on the previous year. This average milk price includes volume bonuses, winter premium, fixed price payments and quality adjustments. The dairy industry experienced extreme volatility over the year, driven predominately by the pandemic. As mentioned, Dale Farm was particularly exposed to the foodservice market, which affected our branded returns. Markets recovered from the initial shock of Covid-19 allowing us to return an extra 6.5ppl on our base milk price to finish the year at 29.55ppl. It is encouraging to see how milk price recovered during the year as I am acutely aware of cost inflation at farm level, and indeed, across our entire business. I absolutely acknowledge the need for a sustained competitive milk price to be paid to our farmer owners and this will remain a continued focus. A competitive milk price, however, is only part of the solution to operating a sustainable farm business. A focus on measuring and monitoring dairy herd efficiency and how well farm inputs are used will be nonnegotiable going forward. As a dairy industry we must extol the virtues of efficient grassland farming in light of forthcoming climate change legislation, which we will not be

exempt from. I encourage you, our farmer owners, to make use of the various Dale Farm services which will assist in providing valuable business information to help make decisions to improve efficiency and in turn deliver milk to the cooperative with a lower carbon footprint per litre. A strategic review of the Northern Ireland Agricultural Food Sector is currently underway. Early indications are that climate change mitigation with environmental targets set at farm level will be part of the key recommendations. This review will further inform the thinking around DAERA’s Future Agricultural Policy Framework, which has clearly identified that farms must be environmentally sustainable in order to avail of future farm support payments. Given the impact of climate change on the dairy sector, we in Dale Farm have convened a Board Sustainability sub-group to chart the best way forward for the cooperative from farm right through the supply chain to the end customer. We have real belief in our strategy which is clearly working. As we continue to focus on higher margin markets and products, taking out costs across the supply chain and building strategic relationships with selected customers, we can look ahead with confidence. We will also be investing more in processing capacity and value add over the coming years. All in all, I am hugely encouraged by how we collectively responded to the year that was. Thank you for your continued support and commitment throughout what was a most unusual year.

Nick Whelan Group Chief Executive

Dale Farm

Executive Leadership Team

Annual Report 2020/21

EXEC U T I V E LE A D ER S H I P T E A M 2020/21

NICK WHELAN

STEPHEN CAMERON

OLIVER MCALLISTER MIKE DAWSON

Group Chief Executive

Group Commercial Director

Group Chief Financial Officer

K E I T H AG N E W

C H R I S MCA LI N D E N

NASA I R H U S SA I N

Managing Director of Agri Division

Group Operations Director

Managing Director GB & Group Supply Chain and Procurement Director

Group HR & Corporate Services Director

Dale Farm

Annual Report 2020/21

BUSINESS REVIEW P R O D U CT I N N OVAT I O N 2020/21 was undoubtedly a challenging year due to the Covid-19 pandemic. Through the early part of the year, the business focused on maintaining a safe working environment, processing members’ milk and servicing our customers. To assist, the NPD team was temporarily redeployed into site functional roles for five months across the Group central laboratory, Dromona, Mullins and Dunmanbridge sites. Therefore, the levels of product launches were lower than previous years. Despite these challenges, 116 new and rejuvenated products were delivered in 2020/21 across brand and own label. New branded products included a Dromona Low Lactose Mature Cheddar range, Dale Farm Low Lactose Milk and the ever-popular Sukie drink in a 1 litre format. The business also launched 11 new ice cream products which included Rapture variants as well as Mullins tub products. Innovation in own label continued with new products and pack formats introduced in both the fresh and cheese categories.

P R O C ES S I N N OVAT I O N

CO M M E R C I A L & O P E R AT I O N S C H EES E Our cheese business had a good year in terms of performance and investment, despite the unprecedented times we faced. There were pricing challenges during the year which have been addressed. Overall, our sales volume was slightly behind, driven largely by a significant loss in foodservice due to national lockdowns. This flowed into our ingredients channel, where volume was down 16%. However, retail sales increased as inhome consumption grew with strong performances from brands and own label consumer packs, which grew 16.3% and 10.3% respectively. Our retail business continues to benefit from our partnership with key value grocery retailers Lidl and Aldi. Our total volume across both retailers grew by 13.3% in GB, outperforming the total cheddar market at 10.4%. The popularity of cheddar continues across Europe throughout the pandemic, with Lidl launching in two new markets, Estonia and Latvia.

Several initiatives were undertaken in cheddar processing to improve the operational consistency and yield, which led to significant improvements during 2020. Data collection and interpretation played a key part in this and further progress is expected in 2021/22.

Production output was at a record level, growing 9.3% which helped drive yield improvements.

Work is ongoing to minimise the beta-carotene carryover into the whey from red cheddar production. This will improve the functionality of the whey and reduce operational costs.

The programme of LEAN manufacturing improvement continues across both our Ash Manor and Dunmanbridge sites.

Social distancing guidelines employed at factory level resulted in an increase in labour costs and overall production cost per tonne.

For a second year, we have hit a record level of bulk cheese output, achieved strong cheese yield performance and introduced a new coloured reduced fat cheese recipe for Lidl.

Dale Farm

B EVE RAG ES AN D C R EA M Our retail beverages business performed extremely well in a tough market environment. The pandemic impacted significantly on sales volumes through each channel, hitting the foodservice channel significantly and boosting sales volumes in both retail and doorstep. Branded beverages performed well ahead of the previous year thanks to the consumer switch to convenience store shopping, where branded availability is more prevalent. This growth cemented the Dale Farm brand as clear market leader in milk and cream in NI.

Business Review

Lockdown also drove a huge consumer shift towards shopping online, boosting sales through the doorstep channel. After many years of doorstep sales declining, like for like year on year sales in the channel were ahead by almost 25%. Branded and own label consumer cream sales were elevated due to the consumer movement towards scratch cooking and baking at home. A relatively strong performance in foodservice coupled with significant sales growth in retail boosted year on year consumer cream sales by over 90%. Drinks sales in the year saw a major shift in emphasis from impulse sales to take home. Again, lockdown and the sustained closure of schools negatively impacted impulse drinks sales but boosted take home

multipacks. This growth, coupled with a series of new product launches during the year, ensured year on year drinks growth of over 10%. Last year’s investment in the site process and packing capability for custard products provided the capacity to win some new business and improve sales volumes through our current customer base. Thus, year on year custard sales were up by over 40%. Operationally, it was another consistent year. Costs and yields were improved through an effective LEAN programme, continuing to take costs out of the business. Work continued on depot rationalisation, improving site efficiency and boosting overall business unit profitability.

Commercial & Operations

Annual Report 2020/21

B UTTE R S & S PR EAD S

FR ES H PRO D U CTS

Throughout this unusual year, our butter and spreads business performed exceptionally well. Foodservice butter sales were negatively impacted by the closure of the hospitality sector and were behind on the previous year by over 50%.

The fresh business, which includes yogurts, yogurt drinks, cottage cheese, fermented creams and desserts, performed ahead of the prior year. Overall, we achieved top line growth of 9%. Whilst Covid-19 negatively impacted our foodservice customers, this was more than offset by new launches and growth in our retail business.

Conversely, pandemic-related restrictions drove retail butter sales significantly. Year on year volumes grew at almost 30% and were boosted by new own label business gained through a national multiple retailer. Retail branded butter sales increased year on year by almost 20%, which was reflected in market share gains in both volume and value during the year.

Awareness around gut health continues to rise, with consumers increasingly recognising its overall importance for health and wellbeing. Indeed, it is now one of the fastest growing trends in dairy. Whilst all categories performed ahead of the previous year, we saw

an exceptional performance in our fermented and yogurt categories. During the year, we launched several new Kefir based products and reduced sugar and salt across several products. We continue to focus on sustainability and achieved solid progress in improving the recyclability of our products and reducing our overall packaging content. In the previous year, we refreshed our Rowan Glen and Spelga brands. This change was positively received by our consumers and both brands performed ahead of our plans.

Spreads also performed well during the year, elevated by new business gained in the food ingredients sector and a contract packed agreement with a new retail customer. Foodservice sales were negatively impacted by the closure of hospitality and were behind the previous year sales by almost 45%. Retail sales grew ahead of the market, once again enhancing both volume and value market share. Operationally, the site benefited from increased investment during the year. Significant investment in upgrading our evaporator improved overall product quality. Further investment in our butter portion manufacturing capability has set the business up to improve capacity and ultimately improve profitability going forward.

Dale Farm

Business Review

Commercial & Operations

Annual Report 2020/21

WH E Y AN D P OWD E R S The powder and whey markets had a difficult year as Covid-19 negatively impacted shipping, consumption and demand. With the out of home market and gyms closed, EU stocks began to build with EU WPC80 stocks reaching new highs, forcing the market to hit a low in the year of €4,400/T before finishing the year back where it started at €5,000/T. The price declines and stock situation in the US were more pronounced, as strong milk supply and cheese production supported by the government Food Box programme resulted in heavy whey output and ultimately prices momentarily going below €3,000/T.

As the Chinese market recovered very quickly from the pandemic, their imports recovered even quicker as they started a government-encouraged buying spree that has lasted almost six months, with their whey imports seeing double-digit growth. Chinese imports, coupled with the return of US domestic demand entering the market, simultaneously saw US whey prices starting to lift from their lows across January to March 2021, finishing the year just below EU pricing. By February/March 2021, whey prices globally went on the march in line with many other global commodities hitting €6000/T in April, €7,000/T in

May and making new record highs above €8,000/T in June as Chinese demand persisted and the sports nutrition category globally restocked, reacting to the reopening of gyms across the globe. 2021 was a strong year for innovation as we increased volumes of lower protein WPC into Unilever Icecream and into Tate & Lyle. We also completed our preparations to begin a long term supply agreement with Arla Foods Denmark, selling all of our liquid whey protein to Arla from the Dunmanbridge site. This strategic partnership repositions our whey business from commodity powders to added value liquid which will be used as an ingredient in infant formula and consumer health products.

I C E C R EA M The Dale Farm Ice Cream business had a good performance with overall sales increasing by 20% on the previous year. This was driven by growth in the retail sector, where the Dale Farm brand continued to gain market share in both NI and ROI. Dale Farm branded sales grew by 43% in NI and 50% in ROI. Sales in the leisure sector were behind due to lockdown restrictions and this impacted our impulse ice cream sales.

The Mullins Ice Cream business also delivered growth in the retail sector with Mullins becoming the fastest growing brand in the NI market. However, sales to the foodservice channel were of course behind. Sales in scoop ice cream also declined initially, although this sector made a strong recovery at the end of the year. The ice cream business launched six new Dale Farm products in the year - three impulse and three takehome products. We added two new impulse lines to our Rapture range

- Rapture Signature and Rapture Signature White, as well as an addition to our cones portfolio with Vanilla Choconut cone. In our takehome range, we added the Rapture Salted Caramel three pack and a Sukie six pack to our multi-pack listings. A Choc Pop tub was also added to our range of 900ml lines. Operationally, the Mullins site benefited from a new 500ml filler, which has increased our capacity on the site and enabled us to gain incremental business in the retail sector.

Dale Farm

Business Review

AG R I D I V I S I O N

The overall 3.1% increase in milk production from our producers made a large contribution to the increase in the amount of milk produced in NI in 2020/21, which rose to an estimated 2.47 billion litres, up 2.7% from 2.4 billion litres in 2019/20. During the year, 83% of Dale Farm producers’ milk was used in-house by Dale Farm, with milk sold externally to only one outlet.

Annual Report 2020/21

FA R M S ERV I C ES

M I LK S U P P LY Milk supplies from members were ahead of the previous year for each of the 12 months. This signalled the third consecutive year of month -on-month production increases. 18 new entrants and two new suppliers joined the Society, while 31 members retired from production. The average amount of milk produced per member increased by almost 3.6% to 699,960 litres.

Agri Division

The base milk price plus loyalty bonus paid to members began the year at an April price of 23.05ppl. The price stayed at this level in May during the height of the first Covid-19 lockdown, then rose every month until October, when the price was 26.55ppl. The October price was held during November and December when the 2ppl winter premium was paid out. From the commencement of 2021, the market steadily improved and in turn, the price rose 1ppl for each of the next three months, with the price in March 2021 ending the year at 29.55ppl. Thus, over the 2020/21 year, the average base milk price (plus loyalty bonus) paid by the Society was 26.01ppl, with an actual paid out price of 28.32ppl. This increase of 2.31ppl shows the value of milk quality premiums and bonuses along with the benefit received from the fixed milk schemes during the year. Dale Farm milk quality in 2020/21 year was on average seven points higher for butterfat and four points higher for protein than the NI average for the year.

It was another busy year for our Farm Liaison team assisting members with milk quality issues, preparing for Red Tractor farm audits, attending member meetings and handling general queries. Encouragingly, the number of overall antibiotic failures decreased during the year by 12.5%, however, the number of tanker failures increased when compared to the previous year. Both Somatic Cell Count (SCC) and Bactocount rose slightly during the year. Members continue to focus on producing higher quality milk with butterfat and protein percentages both increasing to reach a 26-year high. The Farm Liaison team was delighted to be able to assist 18 new members into dairy production during the 2020/21 year and to welcome two new suppliers joining from other processors. Red Tractor accreditation continues to be an essential element of Dale Farm’s strategy to develop our growing retail sales into GB and meet the requirements of customers locally. The scheme, which was pioneered by Dale Farm in NI, has become a standard for quality assurance locally, as other

processors have followed suit in requiring their suppliers to be accredited. More than ever, it is paramount for staff and members to work together to maintain this accreditation, as customers increasingly look for traceability and compliance throughout the supply chain. Following a change to the rules of Red Tractor from 1st September 2020, Dale Farm moved to a position whereby suspension from the scheme now results in noncollection of milk. The Dale Farm costings programme, operated in conjunction with Kingshay Consulting, is now in its third year. The average herd on the programme has shown improvements in technical efficiency worth an additional 0.80ppl since its inception in 2018. Across the herds taking part, this is an average additional revenue of £60 per cow, which equates to an additional £7,380 per farm. The Dale Farm soil analysis programme was extended to all producers over the winter of 2020, with a further 87 farms taking up the offer to have 10 samples collected and a nutrient management report produced. Further development of this initiative, in conjunction

with Grassland Agro, now offers producers the ability to assess soil structure and soil health. The Horizon calf to beef scheme in conjunction with ABP continues to develop, with a third bespoke rearing unit completed in early 2021. Annually, the Horizon scheme requires approximately 1,750 Aberdeen Angus calves. The scheme provides a fully integrated supply chain model from birth to slaughter, with a premium paid for selectively bred Aberdeen Angus calves from the dairy herd. To achieve the premium, the calves must be bred from select bulls supplied by AI Services and Genus. A carbon footprinting pilot programme was launched this year to gain an understanding of the carbon intensity of various dairy production systems within our supply pool. The systems ranged from spring calving low input grazing, high input grazing and partial and fully housed systems. It is pleasing to report that the average of the farms was 1,130g CO2e/kgFPCM, which is well below the UK average figure. This pilot scheme has provided initial information which will be further developed through the Sustainability Sub Committee recently formed.

Dale Farm

Business Review

Agri Division

Annual Report 2020/21

P R O D U C ER S ERV I C ES Rising milk volumes, a steady stream of new entrants and a wider range of tanks saw sales of both new and second-hand farm milk tanks rising significantly from a solid base the year before. Tankcare, in partnership with Flogas, continued sales of new water heating systems using LPG. These have shown to be a cost-effective solution for those seeking to update their water heating systems and an attractive proposition for many new entrants. Further promotion of the Tankcare contract and its benefits resulted in a considerable number of new customers being attracted into Tankcare. The new management structure within Tankcare has also resulted in an increased emphasis on stock management and system processes, with resulting improvements in efficiency and cost savings. The pandemic impacted Dairy Herd Management quite severely in the early part of the year as milk recorders were taken off farm to protect staff and members. Thanks must go to our members who adjusted very well to DIY recording until milk recorders returned to farms in June with additional safety measures in place.

Despite the disruption, Dairy Herd Management had a very successful year and attracted large numbers of new members. This was helped in part by the launch of a new service in the early summer aimed at non-recording customers, which provides milk quality and health results without yields. Additional service offerings in the form of Johne’s and PregCheck have continued to gain traction during the year, while impending changes to Red Tractor requirements look set to increase the demand for Johne’s testing further in the months to come. The use of technology continues to be of increasing importance, particularly to the younger generation of farmers, as they seek to find solutions to reduce duplication and assist herd management. The Mobile Herd app continues to prove popular, with customers keen to make better use of the wealth of technology available. SenseHub, the electronic heat detection and cow health monitoring system, proved very popular for customers looking for an accurate, cost-effective solution for day-to-day fertility and health management. Once again, Dairy Herd Management recorded strong sales of the product across a range of farm types and sizes.

Dale Farm

Business Review

Agri Division

Annual Report 2020/21

U N I T ED F EED S This was a successful year for United Feeds as sales of feed grew by 9%, almost double the growth in the NI ruminant sector. This was a strong result given that the sales and advisory teams were restricted from visiting farms for almost half the year. Within our mills, working practices were altered to ensure staff, drivers and customers were protected, whilst still enabling feed production and deliveries to continue. The year started with warm, dry weather through April, May and June, which allowed an early turnout and plentiful quantities of high-quality silage to be made. Following an initial fall in milk prices due to Covid-19, the price for milk, beef and lamb improved over the remainder of the year and helped to stimulate demand for feed, although rising feed costs during the winter dampened this. A mild winter saw the ground in good condition in February, but a very wet March saw the hopes of an early turnout, for the third year in a row, ruined. Commodity markets rose dramatically over the year, particularly from September onwards. Dry, hot conditions in Europe saw the cereal harvest reduced, which put a greater reliance on US maize imports to meet growing demand. In addition, a La Nina weather event developed in South America, which impacted Brazilian maize production and the soya crop in Argentina. However, the main driver for the rising commodity prices was increased Chinese demand. Following several years of lower demand, China imported record levels of soyabeans and maize as they built stocks and their pig herd recovered from African

Swine Flu. This increased demand and reduced supply resulted in commodity prices hitting a sevenyear high and led to feed prices increasing substantially over the winter period. In spite of supply issues in the fertiliser market during the year, sales increased by 6%. Supplies of specific fertiliser products were tight through Spring 2020 following the closure of two significant fertiliser factories. However, as the season progressed, supply issues eased and prices decreased by approximately 10%, remaining at this lower level throughout 2020 with reduced demand due to the dry summer weather. January 2021 saw sharp rises in fertiliser prices due to increased gas costs and higher global demand from increased cereal planting outstripping supply. This continued to drive prices up in the following months, with prices for some nutrients reaching their highest levels in recent years. During the year, United Feeds paid out almost £400,000 through their 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 an increase of 11% on the previous year and illustrates the commitment of members to trade with the company. The company’s growth continues to be underpinned by innovation in products, feed analysis and feeding programmes. Key to our success in these developments are the skills and knowledge of our people. Given the restrictions on staff visiting farms, more time was spent on technical training. This continuous development ensures we stay at the forefront of the latest research and technical trends, so we can offer the advice and assistance our members require.

Dale Farm

People & Processes

P EO P L E & PROCESSES

P EO P L E

IT A successful Covid-19 IT contingency plan was rolled out to address the evolving challenges presented by the pandemic throughout the year. There has been a continued focus on ensuring employees across the Group could work remotely as required and a suite of additional software solutions and additional investment in hardware helped facilitate this. The Group continued to address our disaster recovery capability by successfully implementing new solutions to support our evolving disaster recovery plans. 2020/21 saw the new Storage Area Network (SAN) hardware supporting all central applications successfully. The old SAN was decommissioned and redeployed to support site manufacturing. We brought together a crossfunctional team to review the current and future operational requirements for our Enterprise Resource Planning (ERP) system. The upgrade will formally commence in Spring 2022. The Group concluded several system upgrades in the period, including CORE (our member milk supplier system), our time and attendance system and our payroll system, resulting in significant efficiencies. Towards the end of 2020/21, the Group commenced work on upgrading the LIMS quality management system.

Annual Report 2020/21

In 2020/21, our people strategy focused on keeping our people safe during the pandemic while enabling them to continue to effectively do their jobs, whether that was in our factories or in remote working environments. The total numbers employed across the Group, including temporary and agency workers, increased from 1318.5 in March 2020 to 1384 in March 2021. This increase was predominantly driven by an increase in the agency personnel required to maintain business levels during the pandemic. At the end of the year, the Group concluded a restructuring exercise, which resulted in a reduction of over 25 management and support personnel. 2020/21 saw the conclusion of our High Potential LEAD programme, run in partnership with the Irish Management Institute. Several participants in the programme have been promoted to new roles thanks to the programme and their overall performance. Our employee communications app, Connected, played a vital role in delivering key messages to our employees during the pandemic. Connected proved to be an invaluable tool, enabling us to share video messages with employees as well as key business and safety messages. Employee engagement with the app increased significantly over the period, providing us with a solid foundation upon which to enhance communications across the Group. The Group concluded its second annual MySay employee engagement survey. This year saw an increase of 18% in our participation rate and improved our overall engagement score from 69% in 2019 to 73% in 2021. It was pleasing to note that this score was 5% higher than industry benchmarks.

Dale Farm

Business Review

H EALTH AN D SAFE TY

E NVI RO N M E NTAL

We always endeavour to provide a safe, healthy and sustainable working environment for our people. We aim to be an employer and partner of choice and this goal has continued to be a key focus, along with our planning, implementation, and management of Covid-19 during a challenging time for all.

Dale Farm continues to engage with the Northern Ireland Environment Agency (NIEA) through the voluntary prosperity agreement. Agreed in 2019, the agreement contains commitments from both Dale Farm and the NIEA, with the aim of improving the environment while supporting business competitiveness. We will continue to develop this partnership, with the objective of delivering environmental benefits beyond legal requirements.

In Autumn 2020, we brought new leadership and resource into the Health and Safety function to develop Health and Safety excellence across the group. This resource also enabled us to provide additional pandemic-focused support to deliver the required protocols, therefore keeping employees as safe as possible.

We introduced Covid-19 toolbox talks, videos, track and trace systems, audits, alerts, signage and changing workplaces/patterns to educate our teams and control Covid-19. We continue to support all of our employees and sites with robust and up to date Covid-19 control measures. The Group has continued to deliver initiatives and training to support our safety plan. We completed extensive training, with a shift to online training platforms to suit the evolving circumstances. We placed greater focus on proactive assessments, leading the way to positive safety engagement. Our safety performance continues to compare favourably with industry benchmarks on health and safety matrices. A renewed strategy focusing on health and safety systems, Covid-19 and incident management, education, and sustainable improvement remains the future focus.

The Group has undergone several environmental infrastructure improvements over the past year. At United Feeds Dungannon, the steam boiler was converted from oil to natural gas, resulting in reduced carbon dioxide emissions.

People & Processes

C O R P O R AT E S O C I A L R ES P O N S I B I LI T Y The pandemic has significantly impacted our ability to undertake our normal CSR activities, but we managed to engage with several partners throughout the year despite these challenges. We continued our partnership with FareShare NI, providing milk and butter for distribution through community food banks and charities across the country.

Annual Report 2020/21

We have worked with Arts & Business NI, who have provided us with a range of team building and well-being initiatives to help support employees throughout the pandemic. Once again, a number of our employees participated in the Arts & Business NI Board Matching Programme, and we remain a member of Business in the Community, through which we will restart our work towards their CORE standard as the pandemic position improves.

The Group continues to collaborate with all suppliers to ensure that a high standard is maintained for health, safety, environment, ethics and labour. The Group is accredited with the internationally recognised Sedex Ethical Trading standard.

At Dunmanbridge, the water efficiency project was completed. This ensures all water streams from processes on site can be reused, thus reducing the need for mains water. Also installed at Dunmanbridge was an additional new high efficiency chiller unit. All of Dale Farm’s NI manufacturing sites were again successful in maintaining the industry leading 14001 accreditation standard.

C OM PLIAN C E S C H EM ES All Dale Farm sites have successfully met and exceeded the targets of the climate change agreement.

I M PROVE D B I O D IVE R S ITY Dale Farm has signed up to the AllIreland Pollinator Plan and planted alder trees along the bank of the Lissan River at the Dunmanbridge site. A similar plan is being developed for the Dromona site.

Dale Farm

Board of Directors

Annual Report 2020/21

B OA R D O F D I R EC TO R S The Board of Directors of Dale Farm Cooperative consists of 13 non-executive Directors. The Board of Directors of Dale Farm Limited consists of five non-executive Directors, all of whom are also Directors of Dale Farm Cooperative.

TH E C U R R E NT G RO U P D I R ECTO R S AR E : FR E D ALLE N

DAV I D R EA

I VO R B R O OM FI E LD

ST E V E N B R OW N

NORMAN THOMPSON

STEPHEN KINGON CBE

ELLVENA GRAHAM OBE

E U G E N E LY N C H

Fred Allen is a dairy farmer from Randalstown, Co. Antrim. He was elected as a Director of Dale Farm Cooperative in 2009. He was re-appointed as Chairman in April 2021.

David Rea is a dairy farmer from Crossgar, Co. Down. He was elected as a Director of Dale Farm Cooperative in 2008. He was re-appointed as ViceChairman in April 2021.

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.

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.

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

R O B E RT B RY S O N

R O B E RT F Y FFE

HA R O LD J O H N STO N

JA M ES M U R P HY

DAV I D R OW E

Ellvena Graham OBE is an appointed Independent Director of Dale Farm Cooperative. Ellvena joined the Board in April 2020. She is an experienced Chairman and nonexecutive Director, working across several different sectors. Her business portfolio includes being Chairman of the NI Economic Advisory Group, Chairman of Catalyst, a company supporting tech entrepreneurs based in NI and Chairman of Belfast Waterfront & Ulster Hall. She is also a member of Queen’s University Senate, in addition to several other directorships. Ellvena, latterly the Head of Ulster Bank in NI, had a long career working in the financial services industry, in UK, Ireland and in EMEA.

Eugene Lynch is an appointed Independent Director of Dale Farm Cooperative. Eugene joined the Board in April 2020. Eugene is a Chartered Accountant who has held several senior leadership roles including Managing Director of Hughes Christensen, Group Operations Director of JP Corry Group Ltd and latterly CEO of The McAvoy Group Ltd.

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.

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

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. He is a Pro Chancellor of Queen’s University, Belfast and the Chair of Senate. In addition, he is a nonexecutive director of ASG Holdings Limited, Balcas Limited, Collinbridge Limited, Lagan Homes UK Limited and NI Opera. 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.

Dale Farm

Corporate Governance

Annual Report 2020/21

CO R P O R AT E G OV ER N A N C E The Board is committed to adopting best practice in Corporate Governance as deemed practical and appropriate for a member owned cooperative.

TH E BOAR D

AU D IT C OM M ITTE E

The Board meet 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 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 non-audit 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.

The Board comprises 13 Directors, eight of whom are appointed by the farmer members through Area elections; two are elected by the members’ Area Councils acting collectively; and three 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 eleven routine Board meetings in 2020/21 was as follows:

Fred Allen

Harold Johnston

David Rea

Stephen Kingon

Ivor Broomfield

Eugene Lynch

Stephen Brown

James Murphy

Robert Bryson

David Rowe

Robert Fyffe

Norman Thompson

Ellvena Graham

N OM I NATI O N S C OM M ITTE E 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.

D IALO G U E WITH S HAR E H O LD E R S 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 about 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 monthly magazine “Dale Farm View” and via the Group website www.dalefarm.com. Any member wishing to contact the Company can do so at the registered office of the Company.

MANAG EM E NT TEA M 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. 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 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.

TH E BOAR D C OM M ITTE ES C OM PR I S E : AUDIT

NOMINATIONS

Eugene Lynch

Fred Allen

(Chairman from July 2020)

Stephen Kingon James Murphy

David Rea Nick Whelan

Harold Johnston David Rowe Ellvena Graham

Dale Farm

Strategic Report

Annual Report 2020/21

S T R AT EG I C R EP O RT PR I N C I PAL ACTIVITI ES

B R EXIT

E NVI RO N M E NTAL R I S K

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.

We have taken appropriate steps to address any risk associated with Brexit and, specifically, we have implemented procedures to manage issues associated with the NI protocol. Our plans are still active as the Brexit situation unfolds.

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.

H EALTH AN D SAFE TY R I S K

FI NAN C IAL PE R FO R MAN C E

R I S K MANAG E M E NT

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

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:

2021 / £000

2020 / £000

523,710

504,528

Profit before taxation

8,241

9,772

Average milk price paid to members (pence per litre)

28.32

27.26

KPIs Group turnover

Group turnover increased by 3.8% and the Group profit before tax decreased by £1,531k to £8,241k. The profit variance primarily reflects: •e xceptional cost items being incurred during the year, relating to a reduction in the carrying value of certain assets within the Group (which is a non-cash cost), and redundancy costs following a review and restructure of our cost base; • margin pressure in retail sales, which we continue to proactively address; and • t he impact of Covid-19 relating to lower foodservice volumes and higher operational costs. Despite some challenges during 2020/21, we stepped up our focus during the year to maximise the return on our members milk supply, through successful innovation, value added sales streams, proactive margin improvement and continuous cost control, all of which will stand us in good stead as we move forward. The average milk price paid to NI members during the year increased by 1.06ppl (4%) in 2020/21 reflecting the higher dairy market returns during the year.

O PE RATI O NAL PE R FO R MAN C E The key performance indicators (“KPI”s) for the Group are:

MILK SUPPLY Average output per member

2021 / Litres

2020 / Litres

699,960

676,000

SALES D EVE LO P M E NT 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 Dale Farm Group

2021 / %

2020 / %

3.8%

(0.9%)

B U S I N ES S PE R FO R MAN C E R I S K 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.

B U S I N ES S C O NTI N U ITY R I S K While there is a reliance on physical infrastructure, the Group operates nine 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.

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.

MANAG EM E NT D EVE LO P M E NT 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.

FI NAN C IAL AN D B U S I N ES S C O NTRO L 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.

C OVI D - 1 9 The Covid-19 pandemic has had an ongoing impact on the Group both in terms of operational activities and sales. With regard to operational activities, the safety and wellbeing of personnel is of paramount importance and required actions have been taken, at an additional cost to the Group, to ensure that all Group sites provide a safe working environment. This is being regularly reviewed. With regard to sales, the foodservice market has been particularly challenged by Covid-19, however the retail market has recorded stronger volumes. The Directors are confident that the Group is well placed to continue to meet the challenges posed by the Covid-19 pandemic.

C R E D IT R I S K 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.

LI Q U I D ITY R I S K 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.

CAS H FLOW R I S K FI NA N C IA L R I S K MA NAG E M E NT P O LI C Y 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.

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’.

FO R E I G N 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.

Dale Farm

S ECTI O N 1 72 ( 1 ) STATEM E NT 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: • t he likely consequences of any decision in the long term; • the interests of the Group’s employees; • the need to foster the Group’s business relationships with suppliers, customer and others; • t h e impact of the Group’s operations on the community and the environment; • t he desirability of the Group maintaining a reputation for high standards of business conduct; • t he need to act fairly between members of the Group.

Strategic Report

Annual Report 2020/21

O U R STRATEGY 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.

BOAR D MATTE R S The Board charges the Executive Leadership Team with the day-to-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 2020/21 financial year are summarised, with reference to Section 172(1) as follows:

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 Groups 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 fulfil 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 Groups 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 Annual Report & review, update and approval of the Group risk register through the Audit Committee processes

This process and approval by the Board is key in ensuring compliance with the Boards 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 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

Dale Farm

Strategic Report

Annual Report 2020/21

Section 172(1) Statement (Continued) S TA KEH O LD ER EN G AG E M EN T 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.

E M P LOY EES 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. The Group operates an employee health and well-being programme, Dale Farm Thrive. This programme is designed to communicate, engage and promote workplace well-being in order to support employees physical and mental health. In addition to the Thrive initiatives, Connected, a Dale Farm app, is in place 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 has in place a Human Resources Management Information System, Success Factors, which ensures that all employees participate in continuous performance management discussions, providing increased opportunities for coaching, mentoring and timely feedback.

C U STOM E R S 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 group of customers. 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 program of new customer and business development to support the growth of the business.

FAR M E R M EM B E R S Effective engagement with our farmer members is key to the successful operation of the Groups supply chain and achievement of the Groups strategic objectives. On a micro level, the Group has a dedicated Producer Services team who actively engage with the members on a day-to-day basis assisting 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, and as such provide a vital link for engagement with the

EN V I R O N M EN TA L wider cooperative membership. Communication with the 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. During the Covid-19 pandemic, all meetings took place as normal, albeit virtually. The Society also keeps in touch with members through the issue of the monthly magazine, Dale Farm View, and via the Group website www.dalefarm.com.

S U P P LI ER S With regard to our wider supplier base, these suppliers 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.

C OM M U N ITY As a Group, we are fully committed to ensuring we create a positive environment for communities in which we operate, both from an environmental and a social impact. The Group has continued to undertake various activities to ensure effective engagement with stakeholders from these communities throughout the year 2020/21.

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

During the year Dale Farm continued to engage with the NIEA through the voluntary prosperity agreement that contains commitments from both Dale Farm and the NIEA. We continue to work in partnership with the objective of delivering environmental benefits beyond legal requirements.

EN V I R O N M EN TA L I N F R A S T R U CT U R E I M P R OV E M EN T S

I M P R OV ED B I O D I V ER S I T Y Dale Farm have signed up to the All-Ireland pollinator plan and have planted alder trees along the bank of the Lissan River at the Dunmanbridge site. A similar plan is being developed for the Dromona site. By order of the Board Mike Dawson Secretary Date: 18 June 2021

At United Feeds Dungannon the steam boiler was converted from oil to natural gas resulting in reduced carbon dioxide emissions.

We remain a keen member of Arts & Business NI, which connects the arts and business sectors for mutual benefit. 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 NI.

At Dunmanbridge a water efficiency project was completed ensuring all water streams from processes on site can be reused thus reducing the need for mains water.

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 oneyear 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.

I S O EN V I R O N M EN TA L AC C R ED I TAT I O N

An additional new high efficiency chiller unit was also installed at Dunmanbridge.

During the year all of Dale Farm’s NI manufacturing sites were successful in maintaining the industry leading environmental ISO 14001 accreditation standard.

C O M P LI A N C E S C H E M ES All Dale Farm sites have successfully met and exceeded the targets of the climate change agreement.

Dale Farm

Directors’ Report

Annual Report 2020/21

D I R EC TO R S ’ R EP O RT The Directors present their report and financial statements for the year ended 31 March 2021.

However, dairy market returns and farm gate milk prices recovered during the year with the base price for Dale Farm Red Tractor milk starting the year at 23.05ppl and ending at 29.55ppl. In addition, we stepped up our focus during the year to maximise the return on our members milk supply, through successful innovation, value added sales streams, proactive margin improvement and continuous cost control, all of which will stand us in good stead as we move forward.

R ES U LTS AN D D IVI D E N D S

In the first quarter to 2021/22, dairy markets continue to trade positively and the Dale Farm financial performance continues to be satisfactory and in line with expectations.

The Group reported an operating profit of £13,963k, which was an increase of £1,780k on the previous year. The profit after taxation for the year decreased by £872k to £6,266k which is to be transferred to reserves. The Directors do not recommend the payment of a dividend (2020 - £NIL).

R EVI EW O F 2020/21 YEAR AN D F UT U R E D EVE LO P M E NTS Dale Farm has continued to trade positively in the markets it operates in and the Group made a satisfactory return on its sales during the year. The net profit variance in the year primarily reflects: • exceptional cost items being incurred, relating to a reduction in the carrying value of certain assets within the group (which is a non-cash cost), and redundancy costs following a review and restructure of our cost base; •m argin pressure in retail sales, which continue to be proactively addressed; and • the impact of Covid-19 relating to lower foodservice volumes and higher operational costs.

R ES EARC H AN D D EVE LO P M E NT 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

2021

2020

Number of new products launched

Number of new product variants launched in above

Number of rejuvenated products launched

Number of rejuvenated product variants launched in above

D I R ECTO R S For the year ended 31 March 2021 the Directors of the society were Elected by - Area 1 - Area 2

Fred Allen, Harold Johnston Robert Bryson, Norman Thompson

- Area 3

Ivor Broomfield, James Murphy

- Area 4

Steven Brown, Robert Fyffe

Elected by Conference of Area Councils

David Rea, David Rowe

Appointed

Ellvena Graham, Stephen Kingon, Eugene Lynch

The term of office of one of the elected directors from each of Area 1 and Area 2 ended on 31 March 2021. Fred Allen was re-elected as Director for Area 1 and Robert Bryson was re-elected as a Director for Area 2. Effective 1 April 2021, Fred Allen was re-elected as Chairman and David Rea was re-elected as Vice Chairman of the Society which was ratified at the Board meeting on 14th April 2021.

FI NAN C IAL I N STRUM E NTS Details of financial instruments are provided in the strategic report on page 33.

EM PLOY M E NT P O LI C Y 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.

E M P LOY EE I N VO LV E M EN T 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 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.

D I S C LO S U R E O F I N FO R M AT I O N TO T H E AU D I TO R S 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.

G O I N G C O N C ER N Whilst the challenges of Covid-19 and Brexit remain, the Directors believe good progress has been made in recent months and that the Group has adequate resources to mitigate these challenges and a strong order book to enable them to trade positively going forward. The Group’s financial forecasts and projections show that the Group continues to be cash generative and that 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.

S EC R ( STR EA M LI N E D E N E RGY AN D CAR BO N R E P O RTI N G ) 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. For the year ended 31 March 2021

FY 2020/21 SCOPE

ACTIVITY

MWh

tCO2e

Dale Farm Gas and Transport Energy Use

143,699

27,908

UK Electricity

50,587

16,351

Grey Fleet Mileage

TOTAL

357

194,643

44,350

Tonnes CO2e/million £ turnover (Intensity Ratio)

84.7

For the year ended 31 March 2020

FY 2019/20 TURNOVER

FY2019/20 GHG Emissions (tCO2e)

Intensity Ratio (tCO2e/ £ million financial turnover)

48,545

96.2

£504,528k

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: 18 June 2021

Dale Farm

Directors’ Responsibilities Statement

Annual Report 2020/21

D I R EC TO R S ’ R E S P O N S I B I LI T I E S S TAT E M EN T 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 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:

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.

• s elect suitable accounting policies and then apply them consistently; •m ake 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 •p repare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

Dale Farm

Independent Auditors’ Report

Annual Report 2020/21

I N D EP EN D EN T AU D I TO R S ’ R EP O RT TO T H E M E M B E R S O F DA LE FA R M C O O P E RAT I V E LT D OPINION

BA S I S FO R O P I N I O N

OT H ER I N FO R M AT I O N

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 2021 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 31, including a summary of significant accounting policies. 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 the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

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

In our opinion, the financial statements: •g ive a true and fair view of the Group’s and Society’s affairs as at 31 March 2021 and of the Group’s profit for the year then ended; •h ave been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and •h ave been prepared in accordance with the requirements of the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976

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

C O N C LU S I O N S R E LATI N G TO GOING CONCERN In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Society’s ability to continue as a going concern for a period of 21 months from when the financial statements are authorised for issue.

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. 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 course of the audit or otherwise appears to be materially misstated. 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 themselves. 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 that fact.

M AT T ER S O N W H I C H W E A R E R EQ U I R ED TO R EP O RT BY EXC EPT I O N In the light of the 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 directors’ report. We have nothing to report in respect of the following matters in relation to which the Industrial and Provident Societies Act (Northern Ireland) 1969 and 1976 requires us to report to you if, in our opinion: •a dequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • t he Society financial statements are not in agreement with the accounting records and returns; or •c ertain disclosures of Directors’ remuneration specified by law are not made; or

R ES P O N S I B I LI T I ES O F D I R ECTO R S As explained more fully in the Directors’ Responsibility Statement set out on page 40, 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 the 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.

AU D I TO R S ’ R ES P O N S I B I LI T I ES FO R T H E AU D I T O F T H E F I N A N C I A L S TAT E M EN T S 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 ISAs (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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

•w e have not received all the information and explanations we require for our audit

We have nothing to report in this regard.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern.

Dale Farm

Independent Auditors’ Report

Annual Report 2020/21

I N D EP EN D EN T AU D I TO R S ’ R EP O RT TO T H E M E M B E R S O F DA LE FA R M C O O P E RAT I V E LT D EXP L A N AT I O N A S TO W H AT EX T EN T T H E AU D I T WA S C O N S I D ER ED CA PA B LE O F D E T ECT I N G I R R EG U L A R I T I ES , I N C LU D I N G F R AU D Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. Our approach was as follows: •W e obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant are the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976, the reporting framework FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, the Bribery Act 2010, Money Laundering Regulations and UK Tax Legislation. •W e understood how Dale Farm Cooperative Limited is complying with those frameworks by making enquiries of senior management, those charged with governance and those responsible for legal and compliance procedures. We corroborated our enquiries through review of the following documentation or performance of the following procedures: - obtaining an understanding of entity-level controls and considering the influence of the control environment; - obtaining an understanding of policies and procedures in place regarding compliance with laws and regulations, including how compliance with such policies is monitored and enforced; obtaining an understanding of management’s process for identifying and responding to fraud risks, including programs and controls established to address risks identified, or otherwise

prevent, deter and detect fraud, and how senior management monitors those programs and controls; - issuing confirmation letters to all known legal counsel in the year and reviewing responses for instances of non-compliance - review of board meeting minutes in the year and to date of signing; •W e assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur through discussion within the audit team which included: - identification of related parties, including circumstances related to the existence of a related party with dominant influence; - understanding the company’s business and entity-level controls and considering the influence of the control environment; and - considering the nature of the account and our assessment of inherent risk for relevant assertions of significant accounts.

our defined risk criteria based on our understanding of the business; reviewing accounting estimates for evidence of management bias; enquiring of members of senior management and those charged with governance regarding their knowledge of any non-compliance or potential non-compliance with laws and regulations that could affect the financial statements; and inspecting correspondence, if any, with the relevant licensing or regulatory authorities. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report.

U S E O F O U R R EP O RT This report is made solely to the company’s members, as a body, in accordance with the Industrial and Provident Societies Act (Northern Ireland) 1969 and 1976. Our audit work has been undertaken so that we might state to the company’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 company and the company’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: 18 June 2021

•B ased on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved testing of journal entries, with focus on manual journals, large or unusual transactions, or journals meeting

Dale Farm

Financial Statements

G R O U P I N COM E S TAT E M EN T

Financial Statements

Annual Report 2020/21

G R O U P & S O C I E T Y S TAT E M EN T O F COM P R EH EN S I V E I N COM E

FO R T H E Y EA R E N D E D 31 ST MA R C H 2021

FO R T H E Y EAR E N D E D 31 ST MAR C H 2021

Group turnover

Notes

2021 / £000

2020 / £000

523,710

504,528

(474,647)

(450,473)

49,063

54,055

(25,557)

(26,260)

(9,543)

(15,612)

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

13,963

12,183

Exceptional items

(4,046)

9,917

12,183

(1,624)

(2,225)

(52)

(186)

8,241

9,772

(1,975)

(2,634)

6,266

7,138

OPERATING PROFIT AFTER EXCEPTIONAL ITEMS Interest payable and similar charges

Net gain/(loss) on financial instruments measured at fair value through the profit and loss account PROFIT BEFORE TAXATION Taxation charge PROFIT RETAINED FOR THE FINANCIAL YEAR

G R O U P S TAT E M E N T O F CO M P R E H E N S I V E I N CO M E FO R T H E Y E A R EN D ED 3 1 M A R C H 2021 2021 / £000

2020 / £000

6,266

7,138

Foreign exchange movement on retranslation of foreign operations

(52)

TOTAL OTHER COMPREHENSIVE INCOME

(52)

6,214

7,214

2021 / £000

2020 / £000

2,806

340

2,806

340

Profit for the financial year

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

S O C I E T Y S TAT E M E N T O F CO M P R E H E N S I V E I N CO M E FO R T H E Y E A R EN D ED 3 1 M A R C H 2021

Profit for the financial year TOTAL OTHER COMPREHENSIVE INCOME

The results above relate to continuing operations.

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Dale Farm

Financial Statements

Annual Report 2020/21

STATEMENT O F CHAN G ES I N EQ U IT Y

STATEMENT O F CHAN G ES I N EQU IT Y

FO R T H E Y EA R E N D E D 31 ST MA R C H 2021

FO R T H E Y EAR E N D E D 31 ST MAR C H 2021

Called up share capital £000

Profit and loss account £000

Total shareholders’ funds £000

10,096

63,552

73,648

Profit for the financial year

7,138

Other comprehensive income

Total comprehensive income for the year

7,214

Shares cancelled

(202)

At 31 March 2020

9,984

70,766

80,750

Profit for the financial year

6,266

Other comprehensive income

(52)

Total comprehensive income for the year

6,214

113

Shares cancelled

(74)

AT 31 MARCH 2021

10,023

76,980

87,003

GROUP At 1 April 2019

Ordinary shares issued

Called up share capital £000

Profit and loss account £000

Total shareholders’ funds £000

10,096

16,785

26,881

Profit for the financial year

340

Other comprehensive income

Total comprehensive income for the year

340

Shares cancelled

(202)

At 31 March 2020

9,984

17,125

27,109

Profit for the financial year

2,806

Other comprehensive income

Total comprehensive income for the year

2,806

113

Shares cancelled

(74)

AT 31 MARCH 2021

10,023

19,931

29,954

SOCIETY At 1 April 2019

Ordinary shares issued

Dale Farm

Financial Statements

Annual Report 2020/21

G RO U P STATEMENT O F FI NAN CIAL POSITI O N

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

Notes

2021 / £000

2020 / £000

FIXED ASSETS Intangible assets

1,389

2,111

Tangible assets

71,714

77,020

Investments

73,117

79,145

Notes

2021 / £000

2020 / £000

Creditors: amounts due after more than one year

(5,075)

(7,391)

Provisions for liabilities - deferred tax

(3,621)

(3,910)

Deferred income - capital grants

(2,880)

(3,211)

(11,576)

(14,512)

87,003

80,750

10,023

9,984

Profit and loss account

76,980

70,766

SHAREHOLDERS’ FUNDS

87,003

80,750

NET ASSETS CURRENT ASSETS Stocks

71,113

59,719

Debtors

73,415

67,861

12,904

11,492

157,432

139,072

Cash at bank and in hand

Producer accounts

(22,744)

(17,708)

(34,163)

(31,185)

(73,972)

(71,168)

(585)

(2,372)

(506)

(522)

(131,970)

(122,955)

Net current assets

25,462

16,117

TOTAL ASSETS LESS CURRENT LIABILITIES

98,579

95,262

Trade creditors 15

Corporation tax Share capital repayable on demand

Called up share capital

The financial statements were approved and authorised for issue by the Board of Directors on 18 June 2021 and signed on their behalf by:

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Other creditors and accruals

CAPITAL AND RESERVES

Fred Allen Chairman

David Rea Vice-Chairman

Mike Dawson Secretary

Date: 18 June 2021

Dale Farm

Financial Statements

Annual Report 2020/21

SOCI ET Y STATEMENT O F FI NAN CIAL POSITI O N

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

Notes

2021 / £000

2020 / £000

FIXED ASSETS Intangible assets

257

420

Tangible assets

3,978

4,196

Investments

13,578

17,813

18,194

Notes

2021 / £000

2020 / £000

Provisions for liabilities and charges - deferred tax

(85)

(119)

Deferred income - capital grants

(148)

(164)

(233)

(283)

29,954

27,109

10,023

9,984

Profit and loss account

19,931

17,125

SHAREHOLDERS’ FUNDS

29,954

27,109

NET ASSETS CAPITAL AND RESERVES

CURRENT ASSETS Stocks

300

249

Debtors

62,220

41,114

467

2,050

62,987

43,413

Corporation tax

Called up share capital

The financial statements were approved and authorised for issue by the Board of Directors on 18 June 2021 and signed on their behalf by:

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Producer accounts Trade creditors

(22,744)

(17,708)

(7,393)

(3,530)

Other creditors and accruals

(19,970)

(12,455)

Share capital repayable on demand

(506)

(522)

(50,613)

(34,215)

Net current assets

12,374

9,198

TOTAL ASSETS LESS CURRENT LIABILITIES

30,187

27,392

Fred Allen Chairman

David Rea Vice-Chairman

Mike Dawson Secretary

Date: 18 June 2021

Dale Farm

Financial Statements

Annual Report 2020/21

G RO U P STATEMENT O F CASH FLOWS

FO R T H E Y EA R E N D E D 31 ST MA R C H 2021

FO R T H E Y EAR E N D E D 31 ST MAR C H 2021

Notes Net cash inflow from operating activities

2021 / £000

2020 / £000

24(a)

9,414

24,401

Bank interest paid

(1,587)

(2,208)

Preference share interest paid

(37)

(17)

(6,266)

(10,335)

Payments to acquire intangible assets

(301)

Receipts from disposals of tangible fixed assets

(7,890)

(12,826)

(2,316)

(2,358)

INVESTING ACTIVITIES

R ECO N C I L I AT I O N O F N E T C A S H F LOW TO M OV E M E N T I N N E T D E B T Notes Increase/(decrease) in cash

Payments to acquire tangible fixed assets

NET CASH FLOW FROM INVESTING ACTIVITIES

24(b)

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

24(b)

NET DEBT AT 1 APRIL 2020 NET DEBT AT 31 MARCH 2021

24(b)

2021 / £000

2020 / £000

(821)

9,257

2,316

2,358

1,511

11,649

(52,163)

(63,812)

(50,652)

(52,163)

Financing activities Repayment of bank loans Issue of share capital repayable on demand

Redemption of share capital repayable on demand

(27)

(59)

Repayment of ordinary share capital

(74)

(202)

Issue of ordinary share capital

113

(52)

186

(2,345)

(2,318)

(821)

9,257

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

24(b)

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

1 . AC C O U N T I N G P O LI C I ES DEFINITIONS I ‘ 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. II ‘ 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.

B A S I S O F P R E PA R AT I O N 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 COVID19 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 (Northern Ireland) 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.

S TAT E M E N T O F C O M P L I A N C E 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 2021.

B A S I S O F C O N S O L I DAT I O N 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 S O U R C E S O F E S T I M AT I O N U N C E R TA I N T Y 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 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.

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.

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.

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

P R O P E R T Y, P L A N T AN D EQ U I PM E NT 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. 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. Rates vary according to the class of asset but are typically: Buildings freehold - 50 years Buildings leasehold - over the period of the lease Plant and equipment - 3 to 15 years Vehicles and associated equipment. - 4 to 10 years Land is not depreciated 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.

G OV E R N M E N T G R A N T S

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

G O O DW I L L 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. 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. Negative goodwill is capitalised and released to the profit and loss account as the related assets are realised. 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.

I N TA N G I B L E A S S E T S 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. 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: Goodwill - 10 years Brands - 10 years Software - 5 years The carrying value of intangible assets is reviewed for impairment at the end of the first full year following acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be recoverable.

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

1 . AC C O U N T I N G P O LI C I ES (C O N T.) S T O C KS 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.

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.

I N T E R E S T- B E A R I N G L OA N S AN D BO R ROWI N GS

CASH AN D CASH E Q U I VA L E N T S

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).

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.

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.

D E F E R R E D TA X AT I O N 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:

Income and expenses of non UK subsidiary undertakings are translated at 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.

PENSIONS 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.

RESEARCH AND D EV E LO PM E NT Research and development expenditure is written off as incurred.

FOREIG N CU RRENCI ES 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.

L E A S E C O M M I TM E N T S 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.

C A P I TA L I N S T R U M E N T S 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.

P R OV I S I O N S F O R L I A B I L I T I E S 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.

S H O R T-T E R M D E B T O R S AN D CR ED ITO RS 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.

REVEN U E RECOG N ITION SALE OF GOODS

D E R I VAT I V E I N S T R U M E N T S 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.

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. DIVI DEN DS Revenue is recognised when the Group’s right to receive payment is established.

2 . T U R N OV ER A N D S EG M EN TA L R EP O RT I N G 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 sale 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.

The group does not undertake any hedge accounting transactions.

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

3 . O P ER AT I N G P R O F I T

4 . D I R ECTO R S ’ R E M U N ER AT I O N

(a) This is stated after charging/(crediting):

2021 / £000

2020 / £000

10,714

6,794

Amortisation of goodwill

510

553

Amortisation of brands

164

149

Capital grant release

(331)

(408)

Revenue grants

(100)

(242)

616

519

100

Depreciation of owned tangible fixed assets

Amortisation of software

Research and development costs Auditors’ remuneration

- audit services*

Non-audit services**

- taxation compliance services

- other audit related services

112

- land and buildings

144

2,241

2,983

Loss/(Profit) on disposal of fixed assets

764

(41)

Foreign exchange loss

623

Operating lease rentals

- plant and equipment

Fees and other emoluments

2020 / £000

187

174

5 . S TA F F C O S T S Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

Wages and salaries

40,597

38,432

9,238

8,556

Social security costs

3,905

3,691

851

816

Other pension costs

1,629

1,621

373

428

46,131

43,744

10,462

9,800

Included in the Group other pension costs is £1,629k (2020 - £1,621k) in respect of the defined contribution scheme. Included in the Society other pension costs is £373k (2020 - £428k) in respect of the defined contribution scheme.

E M P LOY EE N U M B ER S

*£26k (2020 - £26k) of this relates to the Society ** Included in non audit services is £130k (2020 - £68k) relating to the Society

2021 / £000

Processing Selling and distribution Operations and administration Milk recording (part-time)

Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

705

665

211

221

243

235

216

205

1,212

1,172

269

255

The number of Group employees at 31 March 2021 was 1,218 (2020 - 1,199). The number of Society employees at 31 March 2021 was 266 (2020 - 258).

Dale Farm

Financial Statements

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

6 . EXC EPT I O N A L I T E M S

8 . TA X (C O N T I N U ED)

Annual Report 2020/21

(b) Factors affecting tax charge for the year

Exceptional items

2021 / £000

2020 / £000

4,046

Exceptional items of £4,046k (2020 - £nil) were incurred during the year. £3,569k relates to a reduction in the carrying value of certain assets within the group, following an internal review. This cost, which is non-cash, reflects the appropriate accounting treatment of these assets. In addition, redundancy costs of £477k were incurred during the year following a review and restructure of our cost base.

7. I N T ER ES T PAYA B LE A N D S I M I L A R C H A R G ES

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:

2021 / £000

2020 / £000

Profit before tax

8,241

9,772

Profit multiplied by standard rate of corporation tax in the UK of 19% (2020 - 19%)

1,566

1,857

(322)

291

406

659

1,975

2,634

EFFECT OF: Disallowed expenses and non-taxable income

Bank loans and overdrafts Interest on preference shares GROUP INTEREST PAYABLE

2021 / £000

2020 / £000

1,587

2,208

1,624

2,225

Change in tax laws and rates Losses carried forward Adjustment in respect of previous periods

8 . TA X

The Finance Bill 2020 confirmed that the rate of corporation tax would remain at the rate of 19% from 1 April 2020 this is the rate at which deferred tax has been provided. The Finance Bill 2021 announced an increase in the rate of corporation tax from April 2023 to 25%. The Finance Bill was substantively enacted on 24 May 2021 and does not impact these accounts as this was post the balance sheet date.

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

Based on profit for the year: Current tax:

2021 / £000

2020 / £000

1,796

1,863

469

174

2,265

2,037

2021 / £000

2020 / £000

(480)

385

371

190

(159)

TOTAL DEFERRED TAX

(290)

597

TOTAL TAX CHARGE (NOTE 8(B))

1,975

2,634

Corporation tax on profit for the period Adjustments in respect of previous periods TOTAL CURRENT TAX

Deferred tax: Origination and reversal of timing differences Effect of decreased tax rate Adjustments in respect of previous periods

9 . P R O F I T AT T R I B U TA B LE TO T H E M E M B ER S O F T H E PA R EN T C O M PA N Y The profit dealt with in the financial statements of the parent company is £2,806k (2020 - profit of £340k).

Dale Farm

Financial Statements

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

1 0 . I N TA N G I B LE F IXED A S S E T S

1 0 . I N TA N G I B LE F IXED A S S E T S (C O N T I N U ED)

GROUP

Goodwill £000

Brands £000

Software £000

Total £000

COST: At 1 April 2020

SOCIETY At 1 April 2020

331

1,602

11,238

Additions

Release

AT 31 MARCH 2021

9,305

331

1,602

11,238

Provided during the year Release AT 31 MARCH 2021

AT 1 APRIL 2020

Goodwill arising on consolidation

1,602

Provided during the year

1,182 163

150

1,181

9,127

510

164

722

AT 31 MARCH 2021

NET BOOK VALUE:

8,306

198

1,345

9,849

AT 31 MARCH 2021

257

AT 1 APRIL 2020

420

999

133

257

1,389

1,509

181

421

2,111

The net book value at 31 March 2021 is analysed below: Purchased goodwill

7,796

NET BOOK VALUE: AT 31 MARCH 2021

1,602

AMORTISATION: At 1 April 2020

Software £000

COST: 9,305

AT 31 MARCH 2021

Annual Report 2020/21

1,345

£000 999 999

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.

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

1 1 . TA N G I B LE F IXED A S S E T S

1 1 . TA N G I B LE F IXED A S S E T S (C O N T I N U ED)

GROUP

Land and buildings £000

Plant and equipment £000

Vehicles and associated equipment £000

Total £000

COST: At 1 April 2020

SOCIETY

Land and buildings £000

Plant and equipment £000

Vehicles and associated equipment £000

Total £000

5,555

2,427

1,593

9,575

COST: 39,233

122,470

1,504

163,207

Additions

154

6,112

6,266

Additions

168

Disposals

(535)

(1,603)

(255)

(2,393)

Disposals

(39)

(255)

(294)

38,852

126,979

1,249

167,080

Reclassification

5,555

2,556

1,338

9,449

AT 31 MARCH 2021 DEPRECIATION:

At 1 April 2020

AT 31 MARCH 2021 13,373

71,310

1,504

86,187

DEPRECIATION:

Provided during the year

1,512

9,202

10,714

At 1 April 2020

1,723

2,063

1,593

5,379

On disposals

(218)

(1,062)

(255)

(1,535)

Provided during the year

264

354

14,667

79,450

1,249

95,366

On disposals

(7)

(255)

(262)

Reclassification

1,987

2,146

1,338

5,471

AT 31 MARCH 2021

3,568

410

3,978

AT 1 APRIL 2020

3,832

364

4,196

At 1 April 2020

AT 31 MARCH 2021 NET BOOK VALUE: AT 31 MARCH 2021 AT 1 APRIL 2020

24,185

47,529

71,714

AT 31 MARCH 2021

25,860

51,160

77,020

NET BOOK VALUE:

2021 / £000

2020 / £000

Freehold

19,188

20,407

Leasehold

4,997

5,454

24,185

25,861

The net book value of land and buildings comprises:

The net book value of vehicles and associated equipment includes an amount of £NIL (2020 - £NIL) relating to assets held under finance leases and hire purchase contracts.

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

2021 / £000

2020 / £000

3,552

3,816

3,568

3,832

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

12 . I N V ES TM EN T S

12 . I N V ES TM EN T S (C O N T I N U ED) Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

SHARES AT COST: Subsidiary undertakings Trade investment

13,564

13,578

At 31 March 2021 the principal subsidiary undertakings were:

Subsidiary undertakings Dale Farm Limited

Holding

Proportion of voting rights and shares held

Nature of business

Ordinary shares

100%*

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

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

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%****

Dormant

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 Cooperative 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.

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

1 3 . S TO C KS

1 5 . C R ED I TO R S ’ A M O U N T S FA LLI N G D U E W I T H I N O N E Y E A R

Raw materials and consumables Finished goods and goods for resale

Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

7,373

7,923

203

171

63,740

51,796

71,113

59,719

300

249

The difference between the carrying value of stocks and their replacement cost is not material. Stocks recognised as an expense in the period were £385m (2020: £368m) for the group and £241m (2020: £222m) for the society. Stock with a carrying value of £15m (2020: £24m) is pledged as security for the Group’s banking facilities.

Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

Bank overdrafts & other facilities

55,180

52,947

9,983

4,887

Bank loans (note 18)

2,609

Other taxes and social security

1,274

1,149

964

1,050

Other creditors

3,597

1,084

3,150

878

Accruals

11,074

13,007

5,687

5,454

186

73,972

71,168

19,970

12,455

Loan stock (note 17) Financial instruments (note 28)

14 . D EBTO R S Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

63,391

56,449

364

125

29,226

9,960

28,452

26,465

1,500

Other debtors

2,487

4,622

1,894

3,674

Prepayments and accrued income

7,537

6,790

784

740

150

73,415

67,861

62,220

41,114

Trade debtors Amounts due from subsidiary undertakings - loans - trading Amounts due from subsidiary

Group relief

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.

1 6 . C R ED I TO R S : A M O U N T S D U E A F T ER M O R E T H A N O N E Y E A R

Bank loans (note 18)

Group 2021 / £000

Group 2020 / £000

5,075

7,391

5,075

7,391

Amounts due from group undertakings are unsecured, interest free and repayable on demand. Debtors with a carrying value of £32m (2020: £20m) are pledged as security for the Group’s banking facilities.

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

17. C O N V ERT I B LE LOA N S TO C K

1 9 . D EF ER R ED TA X AT I O N

Convertible loan stock: At 1 April 2020 and 31 March 2021

Group and Society 2021 / £000

Group and Society 2020 / £000

186

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.

1 8 . BA N K LOA N S

Wholly repayable within five years

Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

7,684

10,000

7,684

10,000

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

The movements in deferred taxation during the current year are as follows:

Group £000

Society £000

At 31 March 2020

3,910

119

Charge in the current year

(289)

(34)

AT 31 MARCH 2021

3,621

Deferred taxation provided in the financial statements is as follows: Capital allowances in advance of depreciation Other timing differences

Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

3,681

4,146

112

141

(60)

(236)

(27)

(22)

3,621

3,910

119

There are no amounts unprovided at 31 March 2021 and 31 March 2020. The Finance Bill 2020 confirmed that the rate of corporation tax would remain at the rate of 19% from 1 April 2020 this is the rate at which deferred tax has been provided. The Finance Bill 2021 announced an increase in the rate of corporation tax from April 2023 to 25%. The Finance Bill was substantively enacted on 24 May 2021 and does not impact these accounts as this was post the balance sheet date.

20 . D EF ER R ED I N C O M E - CA P I TA L G R A N T S

At 31 March 2020 Arising on new capital grants Release for the year AT 31 MARCH 2021

Group £000

Society £000

3,211

164

(331)

(16)

2,880

148

Dale Farm

Financial Statements

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

21 . I S S U ED S H A R E CA P I TA L

23 . S H A R E CA P I TA L R EPAYA B LE O N D E M A N D

GROUP AND SOCIETY

Allotted, called up and fully paid Ordinary shares of £1 each

2021 No.

2020 No.

2021 / £000

2020 / £000

10,023,000

9,984,000

10,023

9,984

Annual Report 2020/21

£000

Preference shares At 1 April 2020

522

Issued during the year Ordinary shares: At 1 April Issued during the year Cancelled during the year AT 31 MARCH

2021 / £000

2020 / £000

9,984

10,096

113

(74)

(202)

10,023

9,984

Dale Farm Cooperative Limited is a co-operative 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.

Cancelled during the year

(27)

AT 31 MARCH 2021

506

During the year £11k 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 2021 the rate of interest paid was 2.5%.

24 . N OT ES TO T H E G R O U P S TAT E M EN T O F CA S H F LOW S (a) Reconciliation of operating profit to net cash inflows from operating activities:

22 . R ES ERV ES

2021 / £000

2020 / £000

9,917

12,183

10,714

6,794

722

737

Called up share capital

Operating profit

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

Depreciation of tangible fixed assets

Profit and loss account

Amortisation of intangibles

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

(Increase)/decrease in stocks

(11,394)

8,584

(Increase)/decrease in debtors

(5,554)

2,882

4,074

(5,185)

Capital grant release

(331)

(408)

Loss/(Profit) on disposal of fixed assets

764

(42)

450

(1,220)

9,414

24,401

Increase/(decrease) in creditors

Foreign exchange movement Corporation tax paid NET CASH INFLOW FROM OPERATING ACTIVITIES

Dale Farm

Financial Statements

Annual Report 2020/21

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

24 . N OT ES TO T H E G R O U P S TAT E M EN T O F CA S H F LOW S (C O N T I N U ED)

26 . F U T U R E CA P I TA L C O M M I TM EN T S

(b) Group analysis of net debt

At 31 March 2021 the Directors have authorised future capital expenditure which, without taking account of government grants, amounts to:

At 31 March 2020 / £000

Cash flow / £000

At 31 March 2021 / £000

11,492

1,412

12,904

(52,947)

(2,233)

(55,180)

(41,455)

(821)

(42,276)

Loan stock

(186)

Preference shares

(522)

(506)

(10,000)

2,316

(7,684)

(52,163)

1,511

(50,652)

Cash at bank and in hand Overdrafts & other facilities

Bank loans

Contracted Non contracted

Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

2,214

297

1,038

27. OT H ER F I N A N C I A L C O M M I TM EN T S At 31 March 2021 the Group and Society’s future minimum rentals payable under non-cancellable operating leases are as follows:

GROUP Land and buildings

25 . P EN S I O N S C H E M E I N FO R M AT I O N

Plant and equipment

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 £1,683k (2020 - £1,621k). The details of these schemes are set out below:

Leases expiring:

2021 / £000

2020 / £000

2021 / £000

2020 / £000

Within one year

146

2,552

2,371

Defined contribution schemes

Within two to five years

157

5,832

4,641

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.

After more than five years

1,609

1,648

988

917

1,805

1,951

9,372

7,929

The pension costs represent contributions payable by the Group to the schemes and amounted to £1,683k (2020 £1,621k). The unpaid contributions outstanding at the year end, included in ‘Other creditors’, are £143k (2020 - £148k).

SOCIETY Land and buildings

Plant and equipment

Leases expiring:

2021 / £000

2020 / £000

2021 / £000

2020 / £000

Within one year

771

560

Within two to five years

1,415

520

After more than five years

147

2,333

1,080

Dale Farm

Financial Statements

N OTES TO TH E FI NAN CIAL STATEMENTS

AT 31 ST MA R C H 2021

AT 31 ST MAR C H 2021

28 . F I N A N C I A L I N S T R U M EN T S

3 0 . C O N T I N G EN T LI A B I LI T I ES

Financial assets at fair value through income statement Forward foreign currency contracts

Group 2021 / £000

Group 2020 / £000

Society 2021 / £000

Society 2020 / £000

186

Loans (note 18)

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 2021 the Dale Farm Cooperative Group borrowings from Ulster Bank amounted to some £55 million (2020 - £53 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.

Financial liabilities measured at amortised cost Bank overdraft (note 15)

Annual Report 2020/21

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.

55,180

52,947

9,983

4,887

7,684

10,000

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.

3 1 . U LT I M AT E C O N T R O LLI N G PA RT Y The ultimate controlling party is considered to be the members of Dale Farm Cooperative Limited.

29 . R EL AT ED PA RT Y T R A N SACT I O N S 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 £4,776,041 (2020 - £4,928,956). At 31 March 2021 the net amount owed to the directors was £516,253 (2020 - £453,077). 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.

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