Business Review - United Dairy Farmers · Ireland in 2006, with a new, more contemporary pack ... Annual Report & Accounts 2006-07 ... Nestle and Cadbury

Business Review

Product & Process Development

The organic sales growth achieved in 2006-07 was in large part the result of market led product and process development and innovation, and this continues to be a major focus for the Group.

Compared to the previous year there were fewer new branded products and variants launched; however the number of product rejuvenations showed a marked increase. Over the course of the year, a total of 11 new products were launched, comprising 20 individual product variants. In addition, there were 11 product rejuvenations in which a total of 38 different product variants were changed.

In keeping with our strategy to grow our branded business, new ranges of layered yogurts and cottage cheeses were launched under the Loseley brand and a new Fat Free range of yogurts and In -Tune probiotic drinks were launched under the Rowan Glen brand.

Early in the year the Spelga yogurt range benefited from a complete package re-design. The Dale Farm flavoured milk range was re-branded as Shakie.

Looking forward, a number of research opportunities are being explored in association with various University and Research Centres of Excellence, with the objective of developing new and novel products and process technologies.

Fresh Milk and Cream

Dale Farm’s fresh milk business showed significant year-on-year growth in sales and profit, maintaining its leadership position in the Northern Ireland market. The increase in sales reflected continued growth in added value milk products and in the foodservice sector in addition to new retail contracts particularly in the GB and Republic of Ireland markets. The home delivery sector continued to make a valuable contribution to sales and profit, albeit sales continued to decline in line with recognised trends throughout the UK and Ireland.

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United Dairy FarmersAnnual Report & Accounts 2006-07

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Sales of the Dale Farm ‘One %’ showed further strong growth on the back of significant additional distribution and the product’s share of the liquid market continues to build. Sales of Dale Farm Organic Milk also showed impressive growth, backed by increasing consumer demand and strong distribution. Organic sales were further boosted by a significant GB own brand supply contract which was secured during the year. Dale Farm Fresh Flavoured Milk, which had been introduced in 2005, was relaunched as Shakie and, backed by strong marketing and sampling initiatives and increased in-store presence, sales more than doubled.

The Dale Farm cream range consolidated its leadership position in the Northern Ireland market, showing further sales growth. Sukie juice products had another year of excellent growth benefiting from increased distribution in multiple outlets.

At Pennybridge work continued to deliver cost savings and offset the rising costs faced within the business. A culture of continuous improvement and a ‘can do’ approach has been fostered and developed across the operation. One outcome has been that service levels to customers have been excellent and the site is now firmly established as a market leader on this front.

Yogurt and Desserts

The Yogurt and Desserts category continues to be one of the most dynamic in the UK food industry, showing continued growth and range diversification: it also remains extremely crowded and competitive. Against this background, the Group continued to make strong progress, realising double digit growth in sales.

Dale Farm GB had an excellent first year with both Kendal and Rowan Glen businesses showing improved performance. The consolidation of the two businesses helped realise savings in distribution, operations and administration. Branded sales were boosted by a number of new product launches and new listings. Multiple own label sales of probiotic drinks and yogurts continued to perform well. The integrated management team made excellent progress in reducing costs and improving operational performance.

The year saw major progress in the development of Loseley as a premium flagship brand operating on a national UK basis. The quality of the Loseley yoghourt range was recognised when it won the Long Clawson award at the 2006 Nantwich cheese show. In early 2007 the Loseley range was extended with the addition of


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Loseley Cottage Cheese and Loseley Layered yoghourts, a premium quality Channel Island yoghourt over a layer of fruit. The progress of these new products has been very encouraging and this range extension, together with significant distribution gains, has resulted in a three fold increase in Loseley sales. The Loseley brand is now listed nationally by major multiples, and is stocked by top quality independent retailers, hotels and foodservice accounts.

The Rowan Glen business had an excellent year with strong growth in sales and profits. Branded yogurts continued to increase their market share in Scotland, assisted by numerous new listings within the retail, wholesale and foodservice sectors. Several new lines were added including a new Fat Free yogurt range and a Rowan Glen branded In Tune probiotic drink was launched in early 2007. Supported by dedicated


Scottish PR, in-store sampling, and other promotional activity, the range was marketed strongly to promote its unique Scottish authenticity.

The Spelga brand was re-launched in Northern Ireland in 2006, with a new, more contemporary pack design for the Low Fat Bio single pot and multi-pack range, and the Spelga Fat Free range was also re-launched with new flavours and a new multi-pack format. Supported by ‘The Big Taste’ television advertising campaign, together with outdoor media, in-store support and sampling activity, total Spelga sales volume grew with the multi-packs performing very strongly. Within the range sales of Spelga Crumble grew strongly and the newly launched Spelga Greek Style yogurt won a Silver medal at the Great Taste Awards.

Dale Farm Cheesecakes had another successful year with sales doubling, driven by increased distribution.

Butters and Spreads

The butter and spreads business had a difficult year with sales turnover and margins adversely affected by lower commodity prices for bulk butter. The main focus in the year was on the retail, food service and ingredients markets. Towards the end of the financial year increasing returns, particularly for skimmed milk powder, made bulk butter production more viable and

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In the Republic of Ireland sales of butters and spreads continue to grow strongly, with new customers gained, especially in the foodservice sector. In Scotland the Rowan Glen range of butters and spreads saw good growth with increased distribution, particularly for the spreads range; and GB foodservice sales have continued to build with 250g Dale Farm branded parchment butter performing particularly well.

Cheese

Developing Dale Farm’s cheese business as a viable outlet for members’ milk is a key strategic objective for the Group. During the year bulk and packed cheese output continued to show good growth supported by investment in automated grating, cutting and packing lines at Dunmanbridge which were officially opened in December 2006. In addition, with further financial assistance from Invest NI and DARD, the throughput of the cheese making plant was increased by 60%, this additional capacity coming on line in the last quarter of the 2006-07 financial year and in time for the peak production of 2007.

Boosted by the addition of a novel new product, Dromona Probiotic cheddar, Northern Ireland sales of Dromona branded cheese enjoyed another year of growth. Sales of Rowan Glen branded Scottish Cheddar also saw significant growth, driven by increased distribution and marketing activity. To maintain this sales impetus, plans are well advanced for a re-launch of the Rowan Glen range in the first quarter of 2007-08. A wider UK distribution network helped drive increased sales into the important and growing food service market.

offered improved prospects for the year ahead. The evaporation plant operated throughout the summer months, facilitating the spreadable butter production programme which continues to grow strongly.

The butters and spreads consumer products market remains extremely competitive with sustained deep cut price promotion activity underlining the competition for shelf space. During the year the packing operation for butter and spreads continued to benefit from the recent investment in state of the art processing and packing facilities and ongoing growth in the volumes being packed. Dromona branded butter maintained its market leadership in the Northern Ireland market, with further significant growth in sales, especially in Pure Butter. Branded spreads sales were also encouraging with Country Gold performing well after its re-launch with an improved product and premium pack design, and sales of Dromona Half Fat Butter and Dromona Crown also showing good growth.


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A key element contributing to the profitability of cheese production is the processing and sale of whey products. Buoyant international markets in 2006-07 for whey products resulted in an improved overall return from the bulk cheese operation in Dunmanbridge. As part of the upgrade in the bulk cheese operation, whey processing capability was extended in early 2007 with improved clarification, separation and concentration facilities provided.

Ice Cream

Ice Cream had a record year in 2006-07 with sales and profits boosted by the excellent summer weather in 2006. Supported by new product launches, overall sales growth was well ahead of the market allowing the company to strengthen its position as market leader in Northern Ireland and an emerging contender in the Republic of Ireland.

A key market objective for Dale Farm Ice Cream is to penetrate the adult impulse market. The launch in 2006 of Dale Farm Rapture, a premium quality vanilla ice cream covered in real Belgian Chocolate, has helped

deliver on this objective. Building on the success of the Suki range of juice drinks, a Sukie ice lolly was also introduced for the 2006 season. Complimenting these impulse product launches, a number of new take-home products were launched including Choc Pop 1 Litre and an Ice Cream Roll, giving Dale Farm the most comprehensive range of ice creams and lollies in the Irish market.

The Dale Farm range is complimented by the company’s distribution of Mars, Nestle and Cadbury branded products, and these also saw significant sales growth throughout Ireland, North and South.

Powder

The Dunmanbridge powder operation had another difficult year, incurring increased losses as a result of depressed markets, falling returns and substantial increases in energy costs. EU supports were further reduced during the year, with the total removal of powder export refunds and a further cut in intervention support for skimmed milk powder and butter.

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Powder production remains a core activity for the Group and an important outlet for members’ milk especially during the peak milk supply period. To minimise the losses incurred production was mainly curtailed to the high supply spring/summer months with a cessation of production in the autumn/winter when milk availability was lower and milk prices were higher. Over the year powder production was 10% lower than in 2005-06. However, in the last quarter of 2006-07 firming international markets gave a renewed impetus to powder production, and the year ended with both dryers at Dunmanbridge operating at full capacity. Costs were tightly controlled with the benefits from the prior year investment in the new packing line and boiler house making a valuable contribution.

Ingredients

Dale Farm’s ingredients business continued to make strong progress in 2006-07 with increased sales of cheese, powders, liquids and yogurts all contributing to a 35% increase in total sales volumes.

Business continued with established customers across the British Isles market, as well as new ingredients “end users” in the bakery, ready meal and ice-cream sectors, several of whom are in mainland Europe. In tandem with the increased manufacture of cheese at Dunmanbridge, new outlets were developed for 20kg bulk cheese blocks, including 2 major cheese further processors. Increased customer contacts, leading to a better understanding of their requirements, has resulted in improved knowledge and expertise that will support the future development of this market sector.

Commodities

In contrast to the increasing sales of consumer products and food ingredients, the commodity sector saw a 7% decrease in sales turnover compared to 2005-06, mainly due to falling market realisations. As a result commodity sales fell to 25% of total Dale Farm sales – the lowest


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Milk Purchasedby UnitedMillion Litres

1100

1075

1050

1025

1000

975

950

925

900

02-03 03-04 04-05 05-06 06-07

United Average BaseMilk PricePence Per Litre

20

19

18

17

16

15

14

13

12

02-03 03-04 04-05 05-06 06-07

ever level. Wholemilk powder continued to be the main commodity product sold, but sales volume was almost 20% down on the previous year. The reduction in powder sales was partly offset by increased sales of cheese and other products.

The third tranche of the CAP reform programme was implemented on 1 July 2006, with a further 7% cut in the intervention price for butter and 5% for skimmed milk powder. Export refunds continued to be eroded, with skim milk powder subsidies being zeroed in mid 2006 and full cream powder in early 2007. In addition there were also major reductions in support payments for both butter and cheese. While the butter market followed the downward move in intervention prices, several independent factors combined to bring a gradual change in the market for milk powders in the final months of the financial year. Strong international demand coincided with a weather related drop in the availability of dairy products for export, most notably in Australia. Supplies were also affected by the increased focus on bio- fuels, particularly in the USA, and national restrictions imposed on dairy exports from Argentina and India.

In spite of a weak dollar, international powder markets have continued to firm in the first quarter of 2007-08, with butter prices moving forward and early indications that cheese prices are also starting to lift. Continued strong demand looks certain to ensure buoyant commodity prices through the first half of 2007-08.

Milk Sales and Logistics

In 2006-07 members supplied 1.053 billion litres of milk to United; 1.4% ahead of the previous year and a record level for the Society. Supplies were boosted by good summer weather and the strong growth trend continued through the winter months as it became increasingly apparent that there would again be no quota levy on UK wholesale milk supplies. With increased autumn supplies, the seasonal profile of milk deliveries was flatter than ever before, with the peak to trough monthly supply ratio dropping below 1.5 to 1 for the first time.

Through the first half of the year the prices in United’s milk auctions reflected the depressed conditions in dairy markets, with monthly average prices 2 to 3 pence behind the previous year levels. Thereafter prices were generally similar to previous year levels, with the improvement in market returns lifting the March auction to 17.30ppl, over 1ppl ahead of the previous year and the highest March price achieved for four years. Over the year prices varied from 16.4ppl in the April auction to 19.86ppl in the November auction.

The milk selling arrangements were changed for 2006-07. The loyalty bonus previously paid to processors on all milk purchased from United over the peak supply period was removed, with the entitlement to option milk in the winter months linked to processors’ purchases of option milk over the peak period.

A wide ranging initiative to reduce milk collection costs was launched in 2005. This was pursued with vigour, and yielded annualised savings totalling £1.6m by the end of the financial year, with further savings to follow in 2007-08. As part of this initiative, a number of smaller collection vehicles were replaced by 26,000

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litre capacity tankers utilizing high speed pumping systems and a joint milk collection service with Glanbia commenced in December 2006 for milk producers in County Fermanagh, reducing costs and eliminating duplication of resources. With the assistance of members, continued progress was also made on the growth of alternate day collection, with record levels being achieved. To maintain this progress and encourage farmers to invest in additional on-farm storage capacity, an every day collection charge was introduced in February 2007. Milk collection is one of the largest cost centres within the Group and these developments are essential to minimise the impact of on-going increases in fuel, labour and other costs.

Producer Services

The past year was an exceptionally busy one for the Group’s Producer Services, with the continued development of the milk recording service and a high demand for larger on-farm milk storage tanks.

United Milk Records completed the roll out of its new milk recording service, which is now available to all farmers throughout Northern Ireland. The farmers involved can now access all their recording reports


online. The online service is interactive and allows each farmer to create their own personalised reports and interrogate the extensive bank of data about their herd.

The service provides not only comprehensive milk recording information, but also a farm management service that supports the farmer and simplifies the day to day management of his herd. The interactive facility provides the ability to input data on animal events, giving an up-to-date record of calvings, inseminations, etc. Fertility reports can be generated, providing analysis on a monthly and yearly basis to give producers a useful herd fertility monitor. The registration of animals can also be organised through United Milk Records, reducing farm administration and cost.

Tankcare had an exceptionally busy year with strong demand for larger on-farm milk storage tanks. This was in response to increased milk output on individual farms and the reduced milk transport charges available through alternate day collection. Installations of new tanks were up 15% on the previous year and demand is ongoing. The high temperatures in the summer of 2006 also resulted in an increased workload for the Tankcare team. Coupled with higher supply volumes, the good weather exposed weaknesses in many milk cooling

systems, leading to an overall increase of 8% in the number of tank breakdowns over the course of the year, despite a fall in producer numbers. Demand has also continued for the installation of new condensing units to replace the older R12 units which are no longer energy efficient; and there has been steady demand for plate exchange units specifically designed to maximise the energy savings on individual farms from the use of bore hole water.

By comparison, United Quotas had a relatively quiet year. Most transactions completed were for the permanent transfer of quota by producers seeking to re-align their quota with their expanding milk supply. However, with little prospect of a quota levy, the volume of trade fell as farmers opted not to fully cover their supplies and by the year-end quota prices had dropped to an all time low.

Field staff provided assistance to members across a wide range of disciplines with a view to improving the overall quality of United’s milk supply and reducing production and collection costs. Staff encouraged

producers to regularly test the milk supply of individual cows for Somatic Cell Count levels as part of a programme to maintain udder health, with milk recording an ideal vehicle for providing this vital information. Where appropriate, members were also encouraged to transfer to Alternate Day Collection to reduce not only their own costs, but also the overall cost of milk collection. And, with continued expansion in the market for “Pure Butter”, an increased number of members were recruited to participate in the special feeding programme which supports this added-value product.

United Feeds

United Feeds performed well delivering increased sales turnover and profits. Operating profit increased from £558,000 to £586,000. Overall sales turnover increased by 1.5% and the company recorded a 9% increase in sales in the key dairy feed sector. This was driven by the continued focus on delivering rations that improve both milk yield and milk quality.

Building on the success of the Cream Maker range, and following extensive research on commercial farms

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across Northern Ireland, a new Protein Maker range of rations was launched at the end of 2006. The impressive research results which underpinned the launch were validated as farmers using the new range of rations saw substantial improvements in the protein content of milk during the critical final months of the winter feeding period.

The successful trading performance was also underpinned by productivity increases in all parts of the business resulting from targeted capital investment, including new fully integrated process control software in the Belfast site, and continuous improvement activity. United Feeds paid £150,000 to United Dairy Farmers Limited by redeeming preference shares that were issued when the joint venture was established in 2000.

People

In a period of continued change and competitive pressure the heartbeat of the business remains the drive, energy and commitment of all those who work in the Group.

2006-07 saw a continuation of the strategy to improve performance through the introduction of new

structures and better working practices. Initiatives included a new quality management structure in Kendal, new cheese making roles in Dunman, the introduction of van sales drivers in Northern Ireland, an integrated

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producer services help desk and the creation of a central customer services function at head office to support group wide consumer product sales.

The investment in training to deliver enhanced skills and performance improvement continued throughout the year with the support of Invest NI. In Dunman a major training exercise in cheese production was conducted by Loughry College; whilst in Rowan Glen a management skills programme was implemented to support the growing throughput of the plant.

Attitude surveys and team meetings have continued to play an important role in enhancing communication with staff and further positive trends were evident in key areas including labour turnover, absence, accidents and insurance costs.

Average employment numbers in the group fell from 860 in March 2006 to 803 in March 2007, reflecting on-going productivity improvements and a small number of redundancies, mainly in milk collection and the central support functions. Whilst numbers have fallen, the group management team has been strengthened with key appointments in the commercial, engineering, production and technical functions.

Health & Safety

The improvement in Health and Safety performance evident in recent years continued in 2006-07. The total number of accidents per 100 employees dropped by 21% and the number of RIDDOR reportable accidents fell by 47%. Further progress in assessing risk areas across all aspects of the Group operations, improved health and safety induction training for new employees, and measures to increase the health and safety awareness of all employees have contributed to this improved performance.

IT

The Group strategy of streamlining the number of legacy systems took a significant step forward with the implementation of a new producer payment system in late 2006. The new packaged system is widely used in the industry and integrates the administration of a number of key producer services including milk collection; quota management and reporting; milk quality; contract management and producer payments

and also interfaces with the internal Laboratory Information Management System and management accounting functions.

By centralising all producer related information, the system has improved data integrity and visibility, and enabled the establishment of a comprehensive Producer Help Desk. The new system has also provided United members with improved access to data via a secure internet web portal which includes graphical trend analysis of milk supply and quality data as well as benchmark comparisons of their individual farm results versus company averages. The laboratory service has also been extended to include texting of all routine quality test results to members in relation to their individual milk supplies.

The use of the Group ERP system (Navision) was extended during the year to include Dale Farm Ice Cream, completing the rollout of ERP to every business activity within the Group. In addition the development of electronic processing of van sales data took a further step forward with the rollout of a new hand held system including the bluetooth printing of customer delivery paperwork. Taking advantage of changes in technology now available and the opportunity for cost reductions, the Group negotiated new contracts for mobile phones and the Wide Area Network connecting all of our remote sites to the Group’s IT systems.

As part of the Group’s programme to encourage e-business and marketing, the Group web sites were significantly enhanced during the year. The Dale Farm site was re-developed to reflect the changing structure

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of the business, its markets and growing portfolio of brands and products. The United Dairy Farmers site was also re-designed to incorporate the new web portal and improve the visibility of up-to-date information on our services.

Environment

One of the Group’s primary objectives is to manage its businesses in an environmentally responsible manner. We are committed to reducing our environmental footprint and carbon emissions where practical and to deliver sustainable growth in harmony with the environment in which we operate.

In 2006 the progress in the Group’s environmental performance was recognised by an Arena Network Award for achieving a top quintile score in the annual survey of Environment Management conducted among the top 100 businesses in Northern Ireland.

Environmental legislation and the growing pressure on conserving natural resources are increasingly impacting on all aspects of the Group business. During the year the Group’s unit energy costs rose sharply. Such increases serve to renew the Group focus on driving down energy consumption and work is in progress to define our energy strategy for the future, including the options of using renewable energy sources, bio-fuels and natural gas.

As the implementation of the EU nitrates directive is rolled out, it will be necessary to have exemptions in place by November 2007 to enable the continued land spreading of sludge from our effluent plants. Some sludge is currently used for composting and the wider potential for using this sludge as an energy source is also being examined.

As part of the Group’s commitment to environmental best practice it publishes annually in this report details of progress made. Some of the activities and achievements in 2006-07 were:

• The Group’s 3 Northern Ireland processing sites obtained Pollution Prevention Control permits. These were issued following the submission of detailed applications which included the identification of all waste streams, environmental assessments of air, noise, odour and water emissions, and reviews of all process controls.

• Further energy audits have been undertaken in association with the Carbon Trust, who also provided an interest free loan for a new chilled water system at Dunmanbridge.

• A new belt press and filtrate treatment system was installed in Dromona to treat effluent sludge, improving the disposal options for the resulting sludge cake.

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• Surveys are currently underway on the effluent plants at Dunman and Dromona to ensure we have the most effective option for each site. In addition, we are reviewing the opportunities for reductions in the volume of effluent generated.

• A new waste management strategy at Pennybridge has resulted in a reduction in the overall level of waste and a substantial increase in the proportion of waste that is recycled.

• Significant progress has been made in the volume and weight of packaging used, with both environmental and cost benefits. The challenge to further reduce packaging has been issued by our major supermarket customers with targets set for each year up to 2010.

• Following a project evaluation, a new DAF effluent plant was installed and is now operational at Kendal, improving the treatment of effluent from the plant and delivering the projected cost savings.

• A new, more energy efficient, pasteuriser was installed in Pennybridge and the technical team is exploring further opportunities to reduce energy use and cost such as the use of variable speed drives.

• Grant assistance has been obtained to help those farmers still using ozone depleting R12 refrigerant gas to upgrade their milk cooling systems, with an associated change of refrigerant and improved efficiency.

• The addition of further new large milk collection vehicles and the re-organisation of milk collection in Co. Fermanagh have enabled a reduction in the number of miles travelled in collecting milk supplies.

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Board of Directors

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The Board of Directors of United Dairy Farmers consists of 12 non-executive Directors. The Board of Directors of Dale Farm Limited consists of 5 non-executive Directors, 4 of whom are also Directors of United Dairy Farmers.

The current Group Directors are:

1. Harold Hamilton CBE, Chairman, is a dairy farmer from Kesh, Co Fermanagh. He was elected to the Milk Marketing Board for Northern Ireland in 1990 and was a founding Director of United Dairy Farmers. Harold was appointed Chairman of the Society in 1998. He is a Director of United Feeds, a member of the Farmer Forum of Dairy UK and Chairman of the Ulster Grassland Society; and was formerly President of the Ulster Farmers Union and Chairman of the UK Dairy Association.

2. James Walker, Vice Chairman, is a dairy farmer from Randalstown, Co. Antrim. He was also a founding Director of United Dairy Farmers, having been elected to the Milk Marketing Board for Northern Ireland in 1984. James was elected Vice Chairman of the Society in 1998 and is also a Director of Dale Farm Limited and Vice-Chairman of the Northern Ireland Board of Dairy UK. He is a Past President of the Northern Ireland Holstein Friesian Breeders Club.

3. John Dunlop is a dairy farmer from Portadown, Co. Armagh. He was elected as a Director of United Dairy Farmers in 1998 and is a Director of United Feeds. He is also a Director of Craigavon & Armagh Rural Development Ltd.

4. Robert Fyffe is a dairy farmer from Omagh in Co. Tyrone and was elected as a Director of United Dairy Farmers in 2006. He is also a member of the Northern Ireland Local Board of the NFU Mutual Insurance Society.

5. Bertie Kelso is a dairy farmer from Dungannon, Co. Tyrone. He was elected as a Director of United Dairy Farmers in 1996 and is also a Director of AI Services Limited.

6. William Hanna is a dairy farmer from Rathfriland, Co. Down. He was elected as a Director of United Dairy Farmers in 2003 and is also a Director of the Dairy Council for Northern Ireland.

7. Brian McCracken is a dairy farmer from Newtownards, Co. Down. He was elected as a Director of United Dairy Farmers in 2003 and is also a Director of the Dairy Council for Northern Ireland.

8. David McNeill is a dairy farmer from Broughshane in Co. Antrim. He was elected as a Director of United Dairy Farmers in 1999 and is also Chairman of the Dairy Council for Northern Ireland.

9. Billy Morton is a dairy farmer from Armagh. He was elected as a Director of United Dairy Farmers in 1998 and is also a Director of Dale Farm Limited.

10. Will Taylor OBE, is a dairy farmer from Kirkcubbin in Co. Down. He was elected as a Director of United Dairy Farmers in 2000. A Nuffield Farming Scholar, Will is also a member of the General Consumer Council for Northern Ireland and was formerly President of the Ulster Farmers Union, President of the British Grassland Society, Chairman of the EU Advisory Committee on Livestock, and a member of the Food Standards Agency Committee for Northern Ireland.

11. John B. McGuckian is an appointed independent Director of United Dairy Farmers and Chairman of Dale Farm Limited. He joined the United Board in 2003. An industrialist, John is Chairman of Ulster Television plc and Irish Continental Group plc; and he is also a Director of Coneeen Textiles Ltd and TVC plc. He was formerly Chairman of the Industrial Development Board for Northern Ireland and First Trust Bank.

12. Ian Doherty is an appointed independent Director of United Dairy Farmers and a Director of Dale Farm Limited. Ian joined the Board of United Dairy Farmers in 2005 and has been a Director of Dale Farm since 1995. He is a Director of James Doherty Meats Ltd and the Progressive Building Society.

13. George Harkness is an appointed Director of Dale Farm Limited. A chartered accountant, George joined the Board of Dale Farm in 1999. He is a member of the Council of the University of Ulster, and Chairman of Habinteg Housing Association, Ulster and Abbeyfield Belfast Society Limited. He was formerly a partner in Price Waterhouse Coopers and a Director of the Northern Bank.


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Chairman Harold Hamilton MBE

Vice-Chairman James Walker

Directors Ian Doherty John Dunlop Robert Fyffe William Hanna

Bertie Kelso Brian McCracken John B McGuckian David McNeill Billy Morton Will Taylor OBE Chief Executive David Dobbin CBE

Financial Director Danny McAleese

Secretary Euel Agnew

Bankers Ulster Bank 11-16 Donegal Square East Belfast BT1 5UB

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

Company status United Dairy Farmers Limited is a members’ voluntary co-operative registered under the Industrial and Provident Societies Acts (Northern Ireland) 1969 and 1976

Registered office Dale Farm House 15 Dargan Road Belfast BT3 9LS

Telephone: 028 9037 2237 Fax: 028 9037 2222 E-Mail: [email protected] Website: www.utdni.co.uk

Corporate Governance

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

The Board

The Board routinely 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 Board comprises 12 non-executive Directors, 8 of whom are appointed by the farmer members through Area elections; 2 are elected by the members’ Area Councils acting collectively and 2 Directors are appointed by the elected Directors. The term of office of elected Directors is 4 years while appointed Directors are appointed for not more than 3 years and can only serve a maximum of two terms.

The attendance of Directors at the eleven Board meetings in 2006-07 was as follows:

Harold Hamilton 1 1 Bertie Kelso 9

James Walker 1 1 Brian McCracken 10

Ian Doherty 9 John B McGuckian 7

John Dunlop 10 David McNeill 1 1

Robert Fyffe 1 1 Billy Morton 1 1

William Hanna 1 1 Will Taylor 1 1

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 United Dairy Farmers, but they and the appointed directors are regarded as independent. Induction training is provided for newly elected/appointed Directors and further training is provided as required.

The Board Committees Comprise

Audit Nominations Ian Doherty Harold Hamilton (Chairman) (Chairman)

Will Taylor James Walker

George Harkness* David Dobbin

* Dale Farm Limited Board representative

The Audit Committee

The Audit Committee meets at least twice a year and has specific terms of reference which include responsibility for reviewing the Annual Accounts prior to submission to the Board, monitoring the internal control systems and liaison with external auditors. The Committee reviews on an annual basis the need for an internal audit function and also satisfies itself on the independence of the auditors and monitors the level of non-audit fees.

The Nominations Committee

The Nominations Committee makes recommendations to the Board on the appointment of “non elected” directors to the Boards of the Group, subsidiary and associate companies, as well as senior executive appointments.

The Management Team

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

Dialogue with Shareholders

Communication with members is given the highest priority by the Board and the Annual Report gives a comprehensive review of the financial and operating performance of the Group for the year. The Board uses the AGM to have an open dialogue with members. The Group has 4 Area Councils elected by the membership, which meet about 6 times a year with the elected Directors for their Area to discuss the affairs of the Society. The Society also keeps in touch with members with the issue of the monthly magazine “United News” and via the Group web site www.utdni.co.uk. Any member wishing to contact the Chairman or Chief Executive can do so at the registered office of the Company.


Business Review - United Dairy Farmers · Ireland in 2006, with a new, more contemporary pack ... Annual Report & Accounts 2006-07 ... Nestle and Cadbury

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