Company Review: Milk Link. A guide to your milk buyer

Transcription

1 Company Review: Milk Link A guide to your milk buyer January 2012

2 Milk Link Company profile Milk Link is a farmer owned co-operative with over 1,600 members and around 400 direct supply farmers. It is involved in the processing of a range of dairy products including cheese, long life and flavoured milks, butter and other ingredients and the brokering of milk to third party processors. However, its core business is cheese and Milk Link considers itself to be a specialist in customer branded or own-label cheese. Milk Link s aim is to run and develop a business which adds value to its milk in order to obtain the best return from the market for its Members while operating in an efficient, cost-effective manner or to add value efficiently. Its strategy is to maintain a strong position in a range of market segments with a balanced portfolio of customers and working across a range of channels. Milk Link has seen strong business growth over the last few years and has made several acquisitions including the purchase of Cornish Country Larder in January Milk Link has also entered into a joint venture with Volac, a leading dairy nutrition company, to develop a new added value whey processing facility at its Taw Valley Creamery. In October 2011, it announced that it would be investing 20m in a major expansion to its Lockerbie creamery, which would increase the cheese production capacity at the facility to 37,000 tonnes. As part of its management structure, Milk Link operates a Strategic Market Team which meets at least four times per year to formulate and develop detailed three-year plans for the sales and marketing activity of the business. The plans are focused on its main product categories, sales channels and key customers within each of these channels. Milk Link has restructured into two core business units; Milk Link Cheese and Milk Link Milk, which will allow it to improve focus on each segment and develop appropriate management strategies for the two markets. As Milk Link operates across a spectrum of products, it competes with a variety of companies across its main markets. In the long life and flavoured milk markets, the company faces competition from Arla, Dairy Crest and European imports. In the cheese market, it produces both branded and customer-branded cheese, facing competition from other large cheese producers such as First Milk and Adams (Irish Dairy Board), Dairy Crest and Lactalis. The ingredients market is much more commodity based and competition comes from both domestic suppliers such as First Milk and Meadow Foods and from suppliers from other major exporters to the world market. Milk Link has strong long term relationships with some of the liquid milk processors such as Robert Wiseman Dairies and Arla, as well as other fresh dairy and food processors such as Cadbury s 1, Yeo Valley, Andros and Rodda. While the majority of liquid processors are seeking to increase the proportion of milk supplied from directly contracted farmers as a means of ensuring sufficient raw milk supplies, Milk Link have indicated this is unlikely to impact demand for brokered milk from its customer base as two of its largest customers for brokered milk may increase the volumes purchased through third party suppliers in the short term. 1 Now owned by Kraft. 2

3 Current position Has a growing membership base, which, along with above average production growth from its Members, increased Milk Link s milk pool by around 4%-5% in the 2010/11 milk year. As of November 2011, it has recruited an additional 50 million litres as part of the current recruitment drive to supply the 20m expansion at its Lockerbie creamery. Has entered into a joint venture with Volac in whey processing at Taw Valley, which provides Milk Link with access to the growing, high-value protein market and allows for more efficient use of the facility. Has a wide mix of products, customers and channels to market, allowing it to align production to the most profitable sectors. Its customer base includes major retailers, food service organisations and food processors. Was able to capitalise on buoyant commodity markets during the financial year. Operates in the highly competitive cheese market, primarily supplying own-label products although developing its brands. Provides tailored services to its customers to meet different needs of the various sectors it supplies to, allowing it to retain long-term relationships with its varied customer base. Is committed to providing farmer Members with a competitive and sustainable milk price and to delivering an attractive return on their capital investment in the co-operative. Has improved its position on the DairyCo milk price league table as it has passed on improved returns to its Members through increased milk prices. Expanding capacity at current facilities for both near-term and medium-term growth. Future challenges and opportunities Recent acquisition of Cornish Cheese Larder brings the opportunity of entering the soft cheese market, giving further potential to increase returns. Increasing involvement in the competitive own-label cheddar category will require the continued development of strong servicing models for individual customers. May benefit from the reduced cheese cutting and packing capacity arising from the closure of Adam Food s Wincanton facility. Joint venture with Volac provides Milk Link entry in growing high-value ingredients market. Aims to further increase branded cheese sales in the North American market to capitalise on the growing demand for British cheese, although volumes traded remain relatively low. To retain competitiveness over a large range of products and markets, Milk Link will need to continue with its targeted investment and management strategy. 3

4 Demand for brokered milk from major liquid processors may decline in the long term as they seek to increase the proportion of milk supplied from directly contracted farmers unless there is sufficient growth in market demand for milk and milk products. 4

5 Milk Link Procurement analysis Milk purchases The table below gives details of Milk Link s milk supply base for the 2010/11 milk year. Direct supplies Members Nonmembers Third party supplies Co-operatives and brokers Total Change from previous year Million litres 1, , % Numbers 1, ,000 n.c. Source: Milk Link, AHDB estimates. Milk Link increased the volume of milk it handled to over 1,500m litres between 2010 and 2011, an increase of approximately 80m litres. The increase resulted primarily from production growth from current suppliers, who delivered on average 3.6% more milk during 2010/11 2 compared to the previous year and an increase in the number of suppliers. In the six months to September 2011, Milk Link suppliers have increased deliveries a further 0.7%, compared to the 0.5% average increase in deliveries for GB as a whole. Approximately 225 direct suppliers became full Members during the year, although with new recruits and retiring suppliers, the total number of direct suppliers did not change from the previous year. The amount of milk purchased from third parties fell by around 45m litres, replaced by increased volumes from Members and direct suppliers. Recruitment Milk Link recruited around 300 new Members during the 2010/11 financial year, of which 225 were previously on direct supply contracts. Its plans to expand capacity at the Lockerbie creamery to over 37,000 tonnes of cheese will mean that the co-operative will need to recruit in the region of 120m additional litres of milk per annum to service the increased production capacity. Recruitment is mainly concentrated in the South West of Scotland, the North of England, the South West and South of England and the Midlands. However, new suppliers from throughout its milk field will be considered. In its half year Trading Update, Milk Link reported that it had recruited over 70m litres of new milk supply, in part derived from its recruitment drive to supply the Lockerbie expansion. The majority of these additional volumes are from new suppliers joining as new Members from other milk processors. A further 140m litres has been transferred across from direct supply contracts to full Member status, increasing the number of members to over 1, Milk Link annual accounts. 5

6 Contracts The table below summarises the main features of the supply pools operated by Milk Link. Milk Pools Liquid Manufacturing Million litres Producer numbers End use Catchment area Annual average price 2010/11* Annual average price as of Sep 11* Reason for price changes Liquid Southern England Cheese & ingredients National Northern Manufacturing Expansion 1,520 2,000 Cheese & ingredients Scotland, Northern England Cumbrian Direct Cheese Cumbria Llandyrnog Cheese Llandyrnog area 24.68ppl 24.32ppl** 24.43ppl** 24.55ppl 25.13ppl** 27.64ppl 27.30ppl 27.40ppl 26.97ppl 27.10ppl Market returns and co-operative profitability Figures relate to the milk year 2010/11. Contract no longer available to new suppliers. * Based on DairyCo standard litre (see for further details). ** Average of A&B and Seasonal profiles. based on seven month average from September 10- March 2011 (may be slightly inflated as spring seasonal reductions not included in average). Milk Link simplified its contracts in 2011 and now offers four pricing schedules based on the end use of the milk, these are; Membership Liquid, Membership Manufacturing, Direct Liquid and Direct Manufacturing. While some suppliers remain on the geographically based pricing schedules, such as Cumbrian Direct and Llandyrnog, these remain the minority. Historically, the Cumbrian Direct contract was established as a means to sign up non-member direct suppliers in Cumbria to source milk for its Lockerbie and Kirkcudbright factories. There are less than 20 direct suppliers supplying on the contract, after the majority transferred to full membership in early Similarly, the Llandyrnog direct contract was established for farmers supplying milk to the Llandyrnog factory when Milk Link took over ownership. The Tuxford & Tebbutt direct contract is specific to the Melton Mowbray area and is for milk used in the production of Stilton cheese. All Milk Link Member suppliers were required to pay a 0.5ppl contribution to the co-operative which is used to raise capital for investment. This requirement was waived for existing Members from 1 April 2011, although new Members will be subject to it for a minimum three year period to build up their invested capital. In return for loan capital, Members receive a Processing Interest Payment (PIP) which is set 6

7 annually based on profits. In the 2010/11 financial year, this payment amounted to 4.0 million, representing a 9.25% return on Members Qualifying Loans, equivalent to 0.41ppl (0.35ppl in 2009/10). In its 2011/12 half year Trading Update, Milk Link announced that the PIP is being accrued at a rate in excess of this, giving an indication that the business is generating strong returns despite the competitive nature of the market. Price Review Farmgate milk prices are set by the Milk Link Board, which is comprised of Executive, Non- Executive and Farmer Elected Directors, of which the latter are in the majority. Price changes are primarily based on market returns and the profitability of the co-operative and are tracked against the Defra average farmgate price to ensure they are competitive relative to the market. Suppliers are given one months notice of an agreed price. Since the end of the 2010/11 financial year, Milk Link Members have received three price increases, announced in April, September and November In total, the milk price increased by 2.5ppl for producers supplying milk for manufacturing, liquid and cheese production. These price increases have moved Milk Link up the DairyCo league table and it was the first of the major buyers to increase milk prices in In light of market speculation of a cut to milk prices in January 2012, Milk Link issued a statement in mid-december 2011 informing its Members that it expects to hold milk prices at the same level until at least 1 April The view of the Milk Link Board was that current performance of the business, along with dairy market prospects for the upcoming year, would enable it to achieve its targets and maintain milk prices. Exit Policy As a co-operative, Milk Link offers an Evergreen contract, meaning that it cannot give notice to a Member and must honour the contract for as long as the Member wishes to remain. Members are required to give 12 months notice if they want to leave. Supplier benefits Milk Link offers farmer services through its Member website and engages with outside agencies to offer Members support. This is offered through technical advice pages, business data tools, monthly technical supplements, discussion groups, testing services and farmer workshops. Most recently, a series of workshops on Johne s disease were organised. Milk Link also has an in-house field team who visit farms to help with specific problems. 7

8 Highlights... Milk Link s prices have moved up the DairyCo league table as a result of price increases made during As of September 2011, it was paying one of the highest milk prices for a non-aligned liquid contract. Has increased membership and direct supply volumes during the year, with a large number of direct suppliers becoming full Members. Over 90% of its total milk pool is now supplied by Members and direct suppliers. Milk Link tracks its price against the Defra farmgate price which has tracked well although remains slightly below it, due to high prices experienced in Northern Ireland. Is actively recruiting to fulfil extra milk demand generated from expansion at its Lockerbie creamery. Both membership and direct supply contracts will be issued, although the focus will be on recruiting new Members. Has simplified its pricing schedules, linking them to membership status and the end use of the milk. Ability to pay increased milk prices generated from improved whey values, investments in marketing and innovation, improved efficiencies and balancing production to high-return market segments. 8

9 Milk Link Production analysis Product portfolio Total milk processed 1,520m litres 43% Cheese and Whey 654m litres 50% Liquid 760m litres 7% Manufacturing 106m litres 20% Branded 17% Liquid milk (long life & flavoured) 80% Own-label 83% Brokered Dairy ingredients Milk Link is involved in the production of cheese, whey, long life and flavoured milks, butter and other ingredients and the brokering of milk to third party processors. A small proportion of its 9

10 production is sold as branded products, with some of these under licence agreements. During the 2010/11 year it processed 58% of its total milk purchases, up from 54% in the previous year, which translates to an increase of volumes processed of around 100m litres 3. Cheese also accounted for the majority of its production volumes, with most sold as retailer ownlabel products, including named creamery own label. Its two main branded Cheddar products, Tickler and Taw Valley, have been successful in growing sales during the year. Its biggest market outlet for own-label cheese is with Sainsbury s, followed by Waitrose. In the liquid milk market, Milk Link s main activity is the brokering of milk, which accounts for approximately 40% of its total milk supply. The remainder of its involvement in the liquid milk market is in the production of long life and flavoured milk, sold both as retailer own-label, under the Moo brand and under brand licences including Mars, Galaxy, Flora pro.activ and Charlie & Lola Pink Milk. Milk Link was the largest GB cheese manufacturer in 2010/11, producing over 70,000 tonnes of cheeses, including Cheddars, Blue Stilton and British regional cheeses. Its acquisition of Cornish Country Larder in January 2011 enabled it to extend its range into soft cheeses. Milk Link s cheeses are supplied to the retail, foodservice and ingredients sectors in the UK and exported to over 25 countries internationally. Milk Link also produces a range of branded dairy products for the food service industry under the brand Bladen Just-food interview (June 2011).

11 Production facilities Lockerbie Creamery (250m litres*) Facility type Liquid milk Cheese Ingredients/other Llandyrnog Creamery (270m litres) Reece s Creamery (50m litres) Tuxford and Tebbut Creamery (25m litres) Approximation of milk field Taw Valley Creamery (350m litres) Crediton Dairy (200m litres) Trevarrian Creamery (CCL) (20m litres) Westbury Dairies (800m litres) * to increase to 370m litres following investment. Milk Link operated seven creameries in 2010/11 producing a range of cheeses, butter and long life and flavoured milk products. In addition, they have a cheese cutting and packing plant at Oswestry with the capacity to cut and pack 65,000 tonnes of cheese a year, a Specialist cheese cutting and packing plant at its Reece s Creamery site in Cheshire and operate an Innovation Centre based at the Taw Valley Creamery. Milk Link has a part share in the facility at Westbury, which is used for butter and powder production. In September 2010, Arla Foods UK plc became a shareholder in Westbury Dairies Limited, reducing Milk Link s share of costs associated with operating the facility. In the 2010/11 financial year, Milk Link invested in the region of 5.5m on various capital expenditure projects. In December 2010, it entered into a joint venture with Volac to develop a 11

12 new added value whey processing facility at its Taw Valley facility. The 12m joint venture (MV Ingredients) will utilise new technology to produce a high quality whey permeate which will be branded Volactose Taw. The new product was launched at a European level in November In addition, there will be further processing of the whey at Volac s Felinfach facility in West Wales to produce a whey protein isolate targeted towards the nutrition, weight management and animal nutrition market sectors. These new products will provide the co-operative with the ability to add value to the whey obtained from the cheese manufacture process. Datamonitor expect that the nutritional market is likely to grow to the value of US$3.6bn by 2013 on a European basis 4. In January 2011, Milk Link acquired the Cornish Country Larder cheese business for a total consideration of 7.1m, providing it with the ability to further develop its range of cheeses, which will provide access to a wider market. A 4m development at the Trevarrian Creamery was implemented during the year, which will double its capacity to 20m litres. There has also been the installation of a new bulk butter production line at Lockerbie which will both extend the production capacity and also the range of products it can offer its customers. Further to this investment, Milk Link has announced plans for a 20m investment at Lockerbie. Upon completion of the investment at the end of 2012, the cheese production capacity of the site will increase to over 37,000 tonnes per annum. Markets Milk Link has a broad mix of products which provides the co-operative with some protection against downturns in any one segment of the market for dairy products. In the liquid milk market its main product is long-life milk, which is sold both as retailer own-label and under its Moo brand. The long-life segment of the milk market has seen a 6% decline in volume sales in the year ending March and a 5% decrease in value of sales. Total volume sales of the portfolio of Moo branded products over the same period has shown strong growth in both volume and value terms. The positive performance is primarily the result of increased sales of Moo flavoured milks and in particular Charlie and Lola s Pink Milk, which is produced under licence from the BBC and showed a 122% like-for-like increase in volume in the year 6 versus the equivalent product Moo Strawberry Sundae. Sales of Moo Organic also grew ahead of the market as a result of marketing and promotional support According to Kantar Worldpanel, retail Cheddar markets showed moderate growth in the 2010/11 milk year, with volume sales increasing by just under 2%, while the value of sales rose by almost 4%. The relatively higher value growth was in part the result of a reduction in promotional activity on Cheddar cheese products leading to higher per unit sales value, and partly due to strong wholesale markets increasing the processors selling price. Milk Link has a large involvement in the own-label cheese market segment, supplying to all the major multiples, including Sainsbury s, Waitrose, Tesco, Marks & Spencer and The Co-operative. It has extended its presence within these outlets through increased sales of named creamery cheeses 7 such as Taw Valley and the development of own-label lighter varieties of cheese. Named creamery 4 NutraIngredients.com. Sports nutrition market driven by non-sporty consumers (June 2010). 5 Kantar Worldpanel data for 52 weeks ending 20 March 2011 and 52 weeks ending 21 March As reported in the 2011 Milk Link annual report. 7 Creamery products are those where the location of the creamery is named on the pack. 12

13 products (such as Taw Valley Cheddar) are becoming more important at the retail level and in the foodservice industry, which, although not classical brands, do create a link to the creameries and are the first step in developing brand awareness. Enhanced product recognition allows Milk Link to differentiate from other suppliers and potentially generate higher returns for Members. Milk Link also has a small but growing portfolio of branded cheeses, including Tickler and I Can t Believe It s Not Cheddar. Promotional support and new distribution channels for Tickler resulted in growth of 32% in volume sales over the year, while its portfolio of retail and foodservice lighter cheese products grew by 54%, driven primarily by new product listings at the major retailers. In addition to the sales at the retail level, Milk Link has a Foodservice division which supplies a range of dairy products, including cheese, butter, milk and cream (including its Bladen branded range) to a large number of major clients in the foodservice market. Major customers include Wetherspoons, Green King, Brakes, Booker and During the 2010/11 year, it increased sales by over 6% 8 due to improved sales to key customers and gaining additional business. Export sales are currently modest in scale, accounting for around 18m of total turnover (3%). Highlights... Has a broad mix of products and channels to market, providing the business with protection against fluctuations in margins in any one part of its portfolio. Has a strong range of branded long-life liquid milk products, which outperformed the market in the 2010/11 financial year. Has seen positive growth in its branded cheeses, growing both volume and value on the back of promotional support to grow demand and increase availability. Is investing in additional processing capacity at its Lockerbie and Trevarrian creameries to provide production efficiencies and support growth in turnover and profitability. Is the largest producer of British cheese and a major supplier of own-label Cheddar to most of the major multiple retailers and foodservice operators Milk Link annual accounts. 13

14 Milk Link Financial analysis Headline figures Headline financial figures and ratios have been calculated from the most recent full set of accounts for Milk Link for the year ending 02 April Operating Profit figures do not include gains or losses from exceptional items. The definitions of the financial figures and ratios are available in the Appendix at the end of the report. Operating profit... Profit before tax... Total member reserves % 43.1% 14.3% 25.0 million year end 02/04/ million year end 02/04/ million year end 02/04/11 Cash flow... Cash in: 27.9m Cash out: 12.4m investments 5.6m finance 9.9m from previous year Operating profits (excluding exceptional items) increased significantly during the year. Although volumes processed increased, total operating costs were relatively unchanged, providing improved net returns. Turnover increased in the year to April 2011 as a result of increased volumes, improved sales of branded cheese and the general increase in the prices achieved for dairy commodities. Half year results to end September 2011 have seen a further increase in turnover despite difficult economic and trading conditions. In terms of its annual turnover, cheese and whey accounted for around 54%, liquid milk sales contributed 39% (despite accounting for 50% of raw milk utilisation) and ingredients, including powders, accounted for the remaining 7%. Cost of sales were higher, on increased volumes. On a per litre basis, they increased by 1.5% but at the same time Member milk prices increased on average by 5.5% indicating an overall improvement in operational efficiencies. 14

15 Profits before tax increased by 4.5m (43.1%) despite higher finance costs. On a pence per litre basis, profits before tax increased by 0.27ppl to 1.00ppl compared to the previous year figure of 0.73ppl. Total Member Reserves increased in part due to an increase in the number of members (which more than compensated for payments made to resigned and retired Members) and in part due to enhanced profitability during the year. Cash inflow from operating activities was down compared to 2010, however, reduced investment and finance costs improved the cash flow situation, resulting in an increase in net cash inflow of 9.9m, despite the purchase of the Trevarrian creamery. Financial Ratios Profitability ratios Gross margin 17.9% No real change on 2009/10 gross margin of 18.0%. This ratio is at a comparable level to other businesses with a similar product mix. This ratio needs to be considered in conjunction with the improved milk price which has been paid during the financial year. Pre-tax profit margin 2.6% When excluding exceptional items, this is unchanged from last year. Including exceptional items, the pre-tax profit margin has increased from 2009/10 when it was 1.9%. Return on capital employed (ROCE) 23.7% The return on capital employed has improved for the second consecutive year ( %). Indicates good performance and improved efficiencies from recent investments. High commodity prices for ingredients along with improved operating profits will have contributed to the higher ROCE. 15

16 Debt ratios Quick ratio 0.54 Quick ratio is low but similar to the previous year (0.51). Milk Link will have a higher level of assets held in the form of cheese, butter and powder stocks, which due to increased values, will have impacted the quick ratio. Current ratio 1.31 No real change from previous year (1.30). Shows that Milk Link can satisfy short term liabilities. Gearing 35.6% Gearing has dropped for second year from a 48.8% level in Improved financial situation and reduced debt have improved gearing ratio. Efficiency ratios Debtor days 31.3 Up by 1 day compared to the previous year, but at an acceptable level. Suggestion of tight control on credit terms and improved cash collection. Creditor days 35.2 Increased from the previous year (30.3). Including accruals (for milk purchases not yet invoiced), creditor days is 56.9 days for 2010/11 compared to 52.0 in the previous year. While cost of sales increased from higher volumes processed the relatively larger growth in the value of trade liabilities has increased the ratio. The increase is largely driven by increased milk prices paid to Members. Return on total assets 10.3 Down from 8.8in 2009/10 financial year. Indicates that assets are generating solid returns, with in operating revenues generated for every 1 invested in the company. Ratio has been impacted by increased investments during the financial year. 16

17 Highlights... Improved performance from previous year despite difficult trading conditions, driven primarily from increased volume sales, improved selling prices on some products and realisation of production efficiencies. Cost reduction programmes have translated into a reduction in cost of sales per litre sold, when cost of raw milk is excluded. Total Member Reserves in the business increased with the addition of new Members. The capital levy for founding Members ended from 1 April Milk Link Board announced the end of the Member Contingent Liability Guarantee from November 2010 indicating that the co-operative has achieved a sufficiently strong financial position with lenders. 17

18 Annex 1 - Financial ratio calculations. Financial headline figures and ratios Calculation Description Interpretation Operating Profit Turnover less cost of sales (including overhead costs). NOT including exceptional or non-recurring items. Profit after cost of sales and overhead expenses (not including exceptional items) but before interest and tax. Pre-tax Profit Profit before tax. Profit after all costs, including finance costs, exceptional and nonrecurring items, but before taxes and not accounting for actuarial gains/losses from pensions. Total Equity/ Member Reserves Gross margin Pre-tax profit margin Return on capital employed (ROCE) Issued capital plus reserves and revenue reserves. (Gross profit* (Turnover less cost of sales)/ Turnover) x 100 (Pre-tax Profit/Turnover) x 100 Operating profit (as above)/capital Employed (equity** plus long term loans) Quick Ratio (Current Assets Inventories)/Current Liabilities Current Ratio Gearing Debtor Days Current Assets/Current Liabilities Long term loans/capital Employed (equity** plus long term loans) Trade Receivables x 365/Turnover Creditor Days Trade Payables x 365/ Cost of Sales Return on total assets Operating profit x 100/ Fixed assets + Current assets Shareholders or members funds. Shows how much it costs to get goods and services ready for sale. Shows how efficient the company is at generating profits from sales. Measures performance as a whole, taking into account all sources of funding. Similar to Current Ratio but with stocks removed (stocks are traditionally less liquid). Indication of business liquidity. Measures how long, on average, it takes for the company to collect its debts. Measures how long, on average, it takes for the company to pay its creditors. Measures how efficient the company is at generating revenues from its assets. Indicates the efficiency to which a company generates profits from operating activities. The profits available to be disbursed to shareholders or added to reserves (before tax). Needs to be examined in light of the direction of change over the past two to three years. Indicates the amount of money the company has available for overheads from its turnover. Indicates the amount of money the company has available for purposes of taxes and dividends, and also for re-investing in the company. Considered a good measure of efficiency. As per Current Ratio. Can vary due to nature of inventories as some are more available for sale than other (i.e. butter v. Cheese). Values greater than one indicate sufficient liquidity to meet current liabilities. Large businesses can operate at lower levels than smaller businesses. Generally should be lower than creditor days. If it is rising, raises questions about the company s ability to collect money and may induce cash flow problems. Generally should be higher than debtor days. If there is a large gap between Return on assets and Return on capital employed, this can indicate that assets are run down. Should be assessed in terms of how it has changed over time; should be increasing as assets should not be held if they do not generate revenue. New assets will cause ratio to fluctuate. 18 * Not including distribution and administration costs. **For co-operatives, equity is equivalent to member reserves.

19 While the Agriculture and Horticulture Development Board, operating through its DairyCo division, seeks to ensure that the information contained within this document is accurate at the time of printing, no warranty is given in respect thereof and, to the maximum extent permitted by law, the Agriculture and Horticulture Development Board accepts no liability for loss, damage or injury howsoever caused (including that caused by negligence) or suffered directly or indirectly in relation to information and opinions contained in or omitted from this document. Copyright, Agriculture and Horticulture Development Board No part of this publication may be reproduced in any material form (including by photocopy or storage in any medium by electronic means) or any copy or adaptation stored, published or distributed (by physical, electronic or other means) without the prior permission in writing of the Agriculture and Horticulture Development Board, other than by reproduction in an unmodified form for the sole purpose of use as an information resource when DairyCo is clearly acknowledged as the source, or in accordance with the provisions of the Copyright, Designs and Patents Act All rights reserved. AHDB is a registered trademark of the Agriculture and Horticulture Development Board. DairyCo is a registered trademark of the Agriculture and Horticulture Development Board, for use by its DairyCo division. All other trademarks, logos and brand names contained in this publication are the trademarks of their respective holders. No rights are granted without the prior written permission of the relevant owners. 19

20 Agriculture and Horticulture Development Board Stoneleigh Park Kenilworth Warwickshire CV8 2TL T: E: DairyCo is a division of the Agriculture and Horticulture Development Board