Dairy processor Freshways has seen turnover cut by more than half as its main customers in the food service and hospitality sectors were forced to close in last year’s lockdowns.
Turnover fell to £7.24m in the year to 2 January 2021, compared with £15.84m the previous year. However, higher margins brought a pre-tax profit of £382,000 compared with a loss of almost £703,000 in 2019.
The start of the lockdowns saw the company’s milk price to farmers slashed, some milk had to be dumped on farm and the firm was forced to turn to a plummeting spot market to offload supplies.
Creditors fell by more than £1m to £2.2m and the balance sheet shows net current liabilities also down, at £2.1m against £2.65m the previous year.
The net current liabilities gave rise to an auditor’s comment in the company’s annual report and accounts that this sum may cast a significant doubt on the entity’s ability to continue as a going concern.
“The company is heavily reliant on the support of group companies and bank facilities,” said the auditors, noting additional uncertainty created by the ongoing Covid situation and the merger negotiations.
The directors’ report said that this had been a tough business period with extremely competitive market conditions, often with resistance from customers to price increases. A strategy had been implemented to address these issues, including cost cuts and regular price reviews.
The board expects the company to remain profitable in the current year and anticipates a recovery in the following years.
Freshways is based at Acton in West London and earlier this year agreed a merger with Medina Dairy. This is currently being examined by the Competition and Markets Authority.
Just days before the merger talks announcement, a charge was lodged by Medina Dairy at Companies House, giving Freshways security over property and land owned by Medina and associated companies at Southall, Worthing, Windsor and Luton.