Wells Farm Dairy Limited - Limited company accounts 23.2

REGISTERED NUMBER: 04859976 (England and Wales)

WELLS FARM DAIRY LIMITED

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023

Page

Company Information

1

Strategic Report

2

Report of the Directors

6

Report of the Independent Auditors

8

Profit and Loss Account

11

Other Comprehensive Income

12

Balance Sheet

13

Statement of Changes in Equity

14

Cash Flow Statement

15

Notes to the Cash Flow Statement

16

Notes to the Financial Statements

18

DIRECTORS:

P A Holt

M C Holt

L E Holt

SECRETARY:

L J Holt

REGISTERED OFFICE:

Wells Farm

Bradley

Stafford

Staffordshire

ST18 9EE

REGISTERED NUMBER:

04859976 (England and Wales)

The directors present their strategic report for the year ended 31 March 2023.

REVIEW OF BUSINESS

Strategic Management

The company continues its core activity of processing and packaging of liquid milk and cream production, distributing to the wholesale, retail, education, care and hospitality sectors and consumer milk delivery businesses. The company continues to have its own domestic delivery business in Greater London and expanding in its local region. The company's strategy of supporting consumer demand for reducing single use plastics continues with increasing volume of its milk and fruit juices supplied in reusable glass bottles. The product range is supplemented by morning goods and food staples as part of the company's drive to support a more sustainable lifestyle for its ultimate customers.

Strategy is focused on achieving sustainable, long term success for the Company, balancing shareholder and stakeholder objectives and supporting the viability of the UK farming and food supply chain. The Board is increasingly focused on carbon reduction across the business processes and reducing fleet emissions as well as improving operational efficiency and productivity to counteract specific input inflation and wider inflation and interest rate rises affecting suppliers and customers.

The Board is supported by processes which ensure access to timely and detailed management information and a compact management structure to enable rapid review and decision making of key matters. The board is accessible to and invested in its relationships with key suppliers and customers as well as to company staff. It seeks to improve the reward for staff and producers whilst providing value for money products and reliable 6 days a week service to its customer base.

Business Environment

The UK economy continues to experience very high inflation and during the year to March 2023, this impacted heavily in the dairy sector across the input range. The average farm gate liquid processing litre price in the trading year increased by 43% over the prior 9 month trading period which had already experienced 19% price inflation in the prior period due to tightening supply conditions. Spot milk prices exceeded 50ppl for much of the reported period.

The farm gate price increase has driven the change in turnover, along with other rising input costs particularly vehicle fuel, power, staff remuneration and packaging costs. The wider range of morning goods also saw sudden and steep rises and at some points, challenges in obtaining supply. As an indicative measure of the impact of inflation and the extent to which the Board has been able to moderate by cream profit, absorption and efficiency investments, the underlying volume of processed milk products was static on the prior year but sales of processed milk products rose by 31%.

Whilst the rate of inflation has slowed since the year end by which time farm gate and spot prices had reduced slightly, the Board is focused on continuing its investment strategy in production and logistics efficiencies and general productivity to support its producer and customer base in an ongoing challenging environment.

Business Performance and KPIs

Turnover increased to £49.5m from £27.6m in the prior 9 month trading period, a 34.4% growth rate pro rata. Growth in sales volumes remains a core KPI however in the reported year, growth in sales has been value driven due to inflation. Related KPIs are focused on profitable customer retention with ongoing selective attrition, profitable product lines and sales that add to working capital and distribution efficiency.

Profit KPIs focus on processed milk margin, production margin and operating margins from core product activity with costs tracked by processing volume. All these key margins fell in the year reported compared to prior year as some inflationary cost could not be offset in efficiency or were absorbed. Cream premiums and trading in periodically surplus milk minimized the impact on the reported gross profit to c1%.

The business tracks and investigates a variety of other performance KPIs including logistics costs per kilometer, sales per kilometer, production cost and wages ratio to sales to assist in identifying opportunity for efficiency. A key issue in the reported year was the average power costs which rose by over 50% pro rata on prior year despite some government support for manufacturing bills. Reducing energy costs has been a key driver for introducing more efficient handling systems and planning for future investment in renewable energy sources.

A long running KPI for sustainability relates to producers as the board adheres to its policy of being an upper quartile payer for liquid milk within its market segment.

Profit before tax of £0.64m was achieved in the year, up from £0.3m for the prior 9-month period achieved from tightening cost control and administrative efficiency.

The investment programme has continued to ensure between repairs, renewals and capital expenditure, the processing and fleet management abilities of the business continue to improve as a necessary driver of productivity and defense against inflation. Capital expenditure of £0.7m included improving heat processing, water usage and robotic systems for previously manual systems as part of the ongoing sustainability project. Further investment is planned in increased access to renewable energy, packaging systems for non polymer products and in house fleet maintenance. The expenditure in the year benefits from the enhanced capital allowances for new equipment from HMRC, reducing the cash impact of the investment.

PRINCIPAL RISKS AND UNCERTAINTIES

The company faces risks common to all industry operators of which the inherent and long running key risks are the fluctuation in price of uncontracted raw milk and maintaining a contracted milk field with an appropriate volume range to meet demand. We continue to work with our producer base to keep a balanced milk field and welcome new producers to the business.

The direct risks from Covid and Brexit have now passed leaving an ongoing legacy of hybrid working patterns continue to have an impact on city centre providers of hospitality or snack/coffee services which are also affected by the rise in the cost of living and interest rates.

Changing consumer tastes are monitored however sales data indicates that cows' milk remains an essential product and demand holds for the basic product and increases for product in recyclable packaging. The product range continues to provide plant based alternatives however there is no evidence of underlying decline in demand for cows milk across the customer base.

Wage inflation is absorbed as the business chose to pay ahead of minimum wage movements and level during 2022 and 2023 recognizing its essential team were facing challenges with their own budgets. Whilst real wage gaps have not been eradicated from the economy, the Company is not a minimum wage payer.

The business does not operate outside of the UK and has no direct exposure to foreign exchange risk however this does impact the cost of imported machinery, polymers and glass.

Credit risk in the customer base is under continual monitoring. The company continues to have credit insurance and uses the rating agency CreditSafe to remain fully informed on credit choices across a diverse customer base. Debtors days remain steady overall with low other bad debt however it is expected that inflation and interest rate rises will be challenging for some customers to manage.

Liquidity risk is controlled and monitored by the use of daily cash flow forecasting for a minimum of a 6 month period, cash flow statement reporting within monthly management accounts and fully integrated trading projections including balance sheet and cash flow statement forecasts for an 18m outlook at all times. The invoice financing facilities provide ample working capital for the needs of the business.

ON BEHALF OF THE BOARD:

P A Holt - Director

12 October 2023

The directors present their report with the financial statements of the company for the year ended 31 March 2023.

DIVIDENDS

During the year interim dividends of £42,400 were declared. The directors recommend that a final dividend of £85,000 is paid.

RESEARCH AND DEVELOPMENT

The research and development costs made during the year relate to advances and improvements to production equipment and processes to both increase capacity and efficiency, as well as enabling the dairy to meet more stringent regulatory requirements demanded by customers and potential customers.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 April 2022 to the date of this report.

P A Holt

M C Holt

L E Holt

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors 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). 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 company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of 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 company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Deans, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

P A Holt - Director

12 October 2023

Opinion

We have audited the financial statements of Wells Farm Dairy Limited (the 'company') for the year ended 31 March 2023 which comprise the Profit and Loss Account, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, 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 Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 March 2023 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating 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 company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to 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 this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page six, 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 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 company'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 company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

- Communication with management before, during and after the audit fieldwork commences to confirm instances of non-compliance;

- Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluation of the business rationale of significant transactions outside the normal course of business;

- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.

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 Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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 a Report of the Auditors 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.

Richard Stonier (Senior Statutory Auditor)

for and on behalf of Deans

Chartered Accountants, Statutory Auditor

Gibson House

Hurricane Court, Hurricane Close

Stafford

ST16 1GZ

3 November 2023

TURNOVER

3

49,501,581

27,625,085

Cost of sales

(45,892,534

)

(25,567,678

)

GROSS PROFIT

3,609,047

2,057,407

Administrative expenses

(2,779,587

)

(1,682,985

)

829,460

374,422

Other operating income

45,099

41,482

OPERATING PROFIT

5

874,559

415,904

Interest receivable and similar income

2,106

834

Interest payable and similar expenses

7

(240,917

)

(101,285

)

PROFIT BEFORE TAXATION

635,748

315,453

Tax on profit

8

(115,754

)

(238,930

)

PROFIT FOR THE FINANCIAL YEAR

519,994

76,523

PROFIT FOR THE YEAR

519,994

76,523

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

519,994

76,523

FIXED ASSETS

Intangible assets

10

30,000

-

Tangible assets

11

3,053,609

2,936,914

3,083,609

2,936,914

CURRENT ASSETS

Stocks

12

619,568

593,586

Debtors

13

6,566,884

6,082,955

Cash at bank and in hand

122,567

85,420

7,309,019

6,761,961

CREDITORS

Amounts falling due within one year

14

(7,287,494

)

(7,050,868

)

NET CURRENT ASSETS/(LIABILITIES)

21,525

(288,907

)

TOTAL ASSETS LESS CURRENT LIABILITIES

3,105,134

2,648,007

CREDITORS

Amounts falling due after more than one year

15

(479,514

)

(501,920

)

PROVISIONS FOR LIABILITIES

19

(582,793

)

(495,854

)

NET ASSETS

2,042,827

1,650,233

CAPITAL AND RESERVES

Called up share capital

20

100

100

Retained earnings

21

2,042,727

1,650,133

SHAREHOLDERS' FUNDS

2,042,827

1,650,233

The financial statements were approved by the Board of Directors and authorised for issue on 12 October 2023 and were signed on its behalf by:

P A Holt - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 July 2021

3

1,604,810

1,604,813

Changes in equity

Issue of share capital

97

-

97

Dividends

-

(31,200

)

(31,200

)

Total comprehensive income

-

76,523

76,523

Balance at 31 March 2022

100

1,650,133

1,650,233

Changes in equity

Dividends

-

(127,400

)

(127,400

)

Total comprehensive income

-

519,994

519,994

Balance at 31 March 2023

100

2,042,727

2,042,827

Cash flows from operating activities

Cash generated from operations

1

932,690

99,396

Interest paid

(213,465

)

(83,880

)

Interest element of hire purchase payments paid

(27,452

)

(17,405

)

Tax paid

412

-

Net cash from operating activities

692,185

(1,889

)

Cash flows from investing activities

Purchase of intangible fixed assets

(30,000

)

-

Purchase of tangible fixed assets

(727,784

)

(430,533

)

Sale of tangible fixed assets

59,780

21,501

Interest received

2,106

834

Net cash from investing activities

(695,898

)

(408,198

)

Cash flows from financing activities

Loan repayments in year

(144,797

)

(92,084

)

Loans to/from associates

(21,903

)

(128,845

)

Invoice financing

257,792

793,653

HP capital repayments in the year

(284,303

)

(187,856

)

Amount introduced by directors

90,885

8,970

Amount withdrawn by directors

(181,062

)

(85,792

)

Share issue

-

97

New HP funding

451,648

221,193

Equity dividends paid

(127,400

)

(31,200

)

Net cash from financing activities

40,860

498,136

Increase in cash and cash equivalents

37,147

88,049

Cash and cash equivalents at beginning of year

2

85,420

(2,629

)

Cash and cash equivalents at end of year

2

122,567

85,420

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

period

1.7.21

year ended

to

31.3.23

31.3.22

£

£

Profit before taxation

635,748

315,453

Depreciation charges

574,660

409,151

(Profit)/loss on disposal of fixed assets

(23,356

)

4,492

Finance costs

240,917

101,285

Finance income

(2,106

)

(834

)

1,425,863

829,547

Increase in stocks

(25,982

)

(213,184

)

Increase in trade and other debtors

(517,416

)

(1,434,389

)

Increase in trade and other creditors

50,225

917,422

Cash generated from operations

932,690

99,396

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 March 2023

31.3.23

1.4.22

£

£

Cash and cash equivalents

122,567

85,420

Period ended 31 March 2022

31.3.22

1.7.21

£

£

Cash and cash equivalents

85,420

170

Bank overdrafts

-

(2,799

)

85,420

(2,629

)

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1.4.22

Cash flow

At 31.3.23

£

£

£

Net cash

Cash at bank and in hand

85,420

37,147

122,567

85,420

37,147

122,567

Debt

Finance leases

(455,798

)

(167,345

)

(623,143

)

Debts falling due within 1 year

(2,204,519

)

(255,844

)

(2,460,363

)

Debts falling due after 1 year

(273,806

)

142,854

(130,952

)

(2,934,123

)

(280,335

)

(3,214,458

)

Total

(2,848,703

)

(243,188

)

(3,091,891

)

1.	STATUTORY INFORMATION

Wells Farm Dairy Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

The financial statements are presented in sterling which is the functional currency of the company and rounded to the nearest £.

The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.

Turnover

Turnover is measured at the fair value of the consideration received or receivable net of VAT and trade discounts. The policies adopted for the recognition of turnover are as follows:

Sale of goods

Turnover from the sale of milk and other goods is recognised when significant risks and rewards of ownership of the goods have transferred to the buyer, the amount of turnover can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. This is usually on dispatch of the goods.

Rental income

Rental income from operating leases is recognised on a straight-line basis over the lease term.

Interest receivable

Interest income is recognised using the effective interest method.

Goodwill

Goodwill, being the amount paid in connection with the transfer of a business in 2023, this will be amortised evenly over it's estimated useful life from 2024. Goodwill acquired on the acquisition of milk rounds has been fully amortised over a three year period.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Plant and machinery

-

15% on reducing balance

Fixtures and fittings

-

15% on reducing balance

Motor vehicles

-

25% on reducing balance

Tangible fixed assets are stated at cost (or deemed cost) or valuation less accumulated depreciation and accumulated impairment losses. Cost includes costs directly attributable to making the asset capable of operating as intended.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing stock to its present location and condition. Cost is calculated using the first-in, first-out formula. Provision is made for damaged, obsolete and slow-moving stock where appropriate.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Profit and Loss Account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. Current or deferred taxation assets and liabilities are not discounted. Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Leases

Employee benefits

When employees have rendered service to the company, short-term employee benefits to which the employees are entitled are recognised at the undiscounted amount expected to be paid in exchange for that service. The company operates a defined contribution plan for the benefit of its employees. Contributions are expensed as they become payable.

Debtors and creditors receivable / payable within one year

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 profit and loss account in other administrative expenses.

3.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

period

1.7.21

year ended

to

31.3.23

31.3.22

£

£

Sales of goods

49,501,581

27,625,085

49,501,581

27,625,085

An analysis of turnover by geographical market is given below:

period

1.7.21

year ended

to

31.3.23

31.3.22

£

£

United Kingdom

49,501,581

27,625,085

49,501,581

27,625,085

4.	EMPLOYEES AND DIRECTORS

period

1.7.21

year ended

to

31.3.23

31.3.22

£

£

Wages and salaries

4,456,482

3,008,980

Social security costs

398,516

238,026

Other pension costs

64,776

49,349

4,919,774

3,296,355

The average number of employees during the year was as follows:

period

1.7.21

year ended

to

31.3.23

31.3.22

Production and distribution

112

107

Administration and finance

18

18

130

125