Dairy Farmers of Britain (Receivers and Managers Appointed) - Transcript

Hi, my name is Stephen Oldfield, I am a partner at PwC in the Advisory practice and I am the Agri-Food leader for PwC across the UK. I have just been appointed receiver and manager of Dairy Farmers of Britain the Co-Operative. The business operates dairies in Blayden in the North East, in Lincoln and in Bridgend down in South Wales. It also operates a hard cheese factory in Llandrynog in North Wales and a milk supply business dealing with a billion litres of milk across mainly the west side of the country where the dairy cows are. Overall there are nearly 2000 employees involved in Dairy Farmers of Britain and these are spread around those businesses with particularly employment hot spots in both the North East and the South West. Dairy Farmers of Britain has gone into receivership as a result of significant trading losses in its liquids division that is the dairies in Bridgend, Blayden and Lincoln and previously diaries which have been closed in the last six months in Fole and in Portsmouth.

Those losses in the liquids business has meant that the Co-Operative have not been able to pass on a competitive milk price to its members. Out of the total membership of a billion litres of milk over half the members have already tendered their resignation. So as a consequence of the losses and of the loss of the number of members in the milk field the Directors have invited my appointment as receiver and manager. It is no accident that my appointment has happened after the Spring flush, that is when the UK is flushed full of milk and as a consequence of delaying the timing of the appointment until now provides the best chance of finding a safe home for farmers milk and through the supply chain to end customers.

Back in March of this year at the beginning of the Spring flush which is when the UK has the most milk to deal with, the Board, supported by its bankers, where able to obtain more money from HSBC, the groups bankers, to see it through the Spring flush and avoid my appointment at that time. This has meant that now that the farmers out there supplying up to a billions litres of milk have the best chance to be able to find safe homes for their milk so it is no accident that I have been appointed in June as to opposed to in March.

As I mentioned the Board and HSBC have been working closely together and my appointment was invited by the Board of Directors and supported by HSBC. I am now in a position where I need to embark on a strategy of trying to find buyers for the businesses as going concerns that is the businesses based in Blayden, Bridgend, Blayden and Llandrynog in North Wales and the milks supplies business which is looked after in Nantwich in Cheshire but is across the whole of the country down the west side. So before I go onto my strategy I just would like to explain what my appointment means for customers, employees and creditors.

First of all for customers, my team will be wanting to talk to you urgently about continuing supply we will be looking for your support in order to continue the businesses as far as possible business is as normal. And looking to be able to take the prices that you pay for the milk and pass those back down to the farmer and that then leads onto suppliers.

I am looking for support from suppliers so we can keep these businesses running in order to be able to find a buyer for the businesses. In relation to employees clearly I need the support of the employees to continue to trade the businesses whilst I seek to find a buyer. All of this means a degree of uncertainty for everybody but I need everybody’s help in trying to save these businesses as far as possible by finding safe homes for them and buyers for those business. Just a word in relation to people who are owed money the debts of the business.

Approximately £100m is owed by Dairy Farmers of Britain to its creditors, a substantial amount is owed to HSBC bank and it is unlikely to see all of its money back. As the bank is the secured creditor, what that means for everybody else that is owned money including the farmers for the milk that was delivered up to the date of my appointment is that those debts are unsecured debts, unsecured creditors and being very frank and being very open I think it is highly unlikely that any of the unsecured creditors are going to receive a dividend on that debt in other words it is a bad debt and the best advice I can give to prudent accountants looking after the businesses affected is to write it off.

In relation to my strategy I have already described what I am looking to do which is to sell the businesses as going concerns, absolutely fundamental is to keep the milk flowing. The milk needs to flow because I need to collect it from farmers after they have milked the cows. The cows will not stop producing the milk and I simply have to collect it and take it down the supply chain through the Dairy Farmers of Britain processing units and out to customers and that is why I need support from the suppliers from the employees and of course member farmers that produce the milk.

I will be paying for all supplies including the milk from the date of my appointment that come under an order from the receiver and manager, a purchase order from the receiver and manager and my team will be communicating that to all of you over the next few hours and days. So what is in it for the people that are owned money if my objective is to sell the businesses as we say as going concerns.

Well what is in it is continuing customs, continuing customs to those suppliers who will get continuing orders from the new owners of the business. So clearly I am looking to try and find those buyers. And there is some interest it is common knowledge that this business has been for sale for some time and as a consequence of that I have a number of interested parties, interested in the businesses that I have described earlier and I will be looking to have urgent talk with those interested parties with a view of trying to get deals concluded just as soon as I can. Communication is going to be very important in this appointment as receiver and manager. Because we are dealing with fresh milk there are hour by hour and day by day decisions to make and communications is going to be really important.

I will be looking to communicate with the farmer members, the suppliers of the milk, very urgently. I have already met with the counsel members and explained my strategy in some detail I will further be communicating at three regional meetings I am going to hold for all supplying members. Those meetings will be in Cumbria, mid Yorkshire and just South of Nanwitch in Cheshire and I will be holding those as soon as I can in order to better communicate my strategy to the supplying members. In addition I have agreed with the Chairman of Council of members to meet with DEFRA the National Farmers Union in order to communicate further my strategy.

I will also be using this website to update you all in relation to the strategy as it unfolds and use this as an opportunity to regularly update everybody. I recognised that particularly for the supplier farmers this is going to be difficult because they have lost a milk cheque. They have lost one milk cheque which is in many cases a whole years profit. As a result of that some farmers out there will be undergoing a degree of financial hardship and concern. We have been talking to the Royal Agricultural Benevolent Institution or RABI who have a confidential helpline available for those that most need it and I would encourage farmers that find themselves in a very difficult situation to use the link on the website to contact RABI. In recognition of the difficulties that some farmers will face we will be talking to RABI about ways in which we can try and help any farmers out there that are enduring significant hardship.

So in conclusion my job is to try and find a sale of these businesses are going concerns and to find safe home for the milk. In order to do that I am going to need help from the employees from the employees of Dairy Farmers of Britain from our customers and from our suppliers to keep the milk flowing and that includes our farmer members in the supply of milk. I will be updating everyone in relation to my progress by use of this website and after I have had meetings with the supplying farmer members over the next 3 or so days I will be looking to update you all on the progress of my receivership. Thank you for listening.