17 November 2009 - Today Milk Link published its 2009 half year trading update, which reported that the business performed satisfactorily in the first six months of the financial year despite a very challenging economic and trading environment. Looking forward, full year profits for 2009/10 are expected be broadly in line with last year.

Milk Link's financial performance in the first half of the year reflected its emphasis on maximising Member returns at a time of downturn in dairy commodity prices, the import of 'cheap' cheese and unprecedented levels of branded cheese promotions, which have stripped value from the market.

Financial and trading highlights are as follows:

Milk Link's Member milk price improved relative to the market year-on-year by c. 1ppl in comparison to the DEFRA UK farmgate average. By the end of September Milk Link's average actual price paid to Members was c.0.18ppl ahead of the DEFRA average.

Group turnover was slightly down to £271 million (08/09 H1 c. £278 million).

Profit before tax was £4.9 million (08/09 H1 c.£1.4 million). This reflects the fact that last year Milk Link bore exceptional costs in relation to the disposal of its Staplemead creamery, whereas this year there are no exceptional costs in H1.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), reduced from £17.5 million in 2008 to £12.5 million. This reflected the higher relative milk price paid to Members (equivalent to c. £5 million in H1), the reversal of cheese stock profits and slightly lower cheese sales as a result of the high level of branded promotions and substitution of cheaper imported cheese in certain customers.

Group borrowings (before the acquisition of the Llandyrnog creamery) fell from £92.7 million to £76.6 million. Including the acquisition Group debt increased to £101.7 million.

Member funds increased to £64.4 million with Group gearing standing at 1.58 (08/09 H1 1.89).

At the end of May, Milk Link also paid a Processing Interest Payment of £4.1 million to its Members, which equated to a 10.8% return on their investment in the business. During the current year we are accruing a Processing Interest Payment at a rate which we believe will again represent an attractive return on our Members' investment.

Milk Link undertook a number of key business developments during the first half of the financial year which further strengthened the business structurally, operationally and financially. These include:

The acquisition of the Llandyrnog creamery in North Wales - Milk Link now owns the leading cheddar cheese creameries in England, Scotland and Wales.

Over 500 additional new Members and direct supply farmers were recruited for value added processing operations and third party milk customers. While Milk Link's Member milk production increased year on year by 4%. Milk Link now handles c. 1.3 billion litres of milk per annum, some 12% of the total GB milk supply.

Milk Link brands including Tickler® extra mature cheddar; Moo® flavoured and long life milks; Mars® milk and Flora pro-activ® milk recorded strong growth in sales and distribution.

Milk Link's new Speciality Cheese Packing facility located at its Reece's creamery in Malpas, Cheshire became operational.

Major new contracts went live with Milk Link now supplying all of Waitrose's core own label cheddar range.

Milk Link's Innovation Centre officially opened with new products and developments coming on stream.

In May Milk Link announced details of its proposed strategic refocusing of its long life milk & cream and flavoured milk business. Integral to this will be the closure of the Kirkcudbright dairy to consolidate all milk production into our Crediton dairy which is currently benefiting from a further major capital investment programme.

Neil Kennedy, Milk Link Chief Executive commented:

"I am pleased to be able to report that Milk Link performed satisfactorily in the first half of the current financial year despite the backdrop of a very challenging economic and trading environment. Although we regrettably had to reduce our milk price, we have done so both later and by less than many of our competitors and in relative terms our Member milk price continues to improve versus the market. At the end of September our average actual Member milk price was 0.18ppl above the DEFRA UK farmgate average and in comparison to the same period 12 months previously we have improved our relative milk price by 1ppl.

"In the first half of the current financial year, in response to the highly challenging trading environment, we have taken and implemented a further series of difficult decisions to drive out costs from the business and improve our operational performance. This activity is ongoing in many instances but we will start seeing the benefit of them in the second half of the year.

"At the same time, we continued our commitment to adding value to our Members' milk through investing in innovation and marketing and delivering service excellence to our customers. As a result, we have continued to strengthen as a business both structurally and commercially and we are confident that we are well positioned to handle the volatility and pressures within the dairy market."

He went on to add:

"We expect full year profits to be broadly in line with last year and, despite the difficult trading conditions, we believe we are well placed to strengthen our overall position within the market."