Prudent farmers make every penny count

20 August 1999

Dairy Crest fat cats line up for £4m

By Robert Harris

DIRECTORS of Dairy Crest are eligible for a £4m share options windfall three years after the company, the processing arm of the old Milk Marketing Board, was floated on the stock market.

But the figures should not come as a shock to hard-pressed dairy farmers, says a company spokesman. "The remuneration packages were clearly laid out from the start, and thereafter set out in the prospectus."

Chief executive John Houliston, who earned about £410,000 last year including a one-off pension payment of £120,000, would gain about £1.17m from his total options and share package.

Ian Laurie, finance director, had options and shares worth £846,000, as did Drummond Hall, executive managing director. Chairman Mike Dowdall is entitled to a £390,000 payout.

In the past three years, Dairy Crest pre-tax profits have shown an average annual gain of 15%, and hit £46.1m in the year to March 1999.

Earnings a share rose 28% since 1996, comfortably exceeding the annual retail price index + 6% target that triggered the share option payments.

In stark contrast, in the three years since flotation, farmers, who own about 45% of Dairy Crest shares, have seen milk prices fall by 25%. In round figures, a farmer milking 100 average yielding cows has lost over £40,000 in that time.

Over the same period, the near doubling in Dairy Crest share value plus dividends would have seen a farmer with 2500 shares gain about £3600.

David Parker, former secretary of the Dairy Crest Shareholders Association, is disgusted. "It was always on the cards that directors would cream off the capital investment. While there is no doubting their entrepreneurial skills, they have not done well by their dairy farmer investors. It is the money culture gone mad, and farmers have to lie down and take it." &#42

Prudent farmers make every penny count

AGRICULTURAL borrowing rose by just £200m in the second quarter of the year, mirroring the increase seen 12 months ago, according to the latest Bank of England figures.

Banks are now lending £7.3bn to farmers, compared with £6.9bn at the end of June 1998.

Savings slipped slightly compared with the first quarter, but at £2.8bn are unchanged on the year.

"Agricultural businesses are doing absolutely superbly," enthuses Brian Montgomery, head of agriculture at NatWest bank. "The level of overall business management has risen tremendously – it augers well for the future."

Sorting it out

While some farmers are in financial trouble, they are, he says, sorting out their own troubles, through share arrangement, contracting agreements or selling livestock and letting out land. "This time last year people were forecasting high levels of bankruptcy. Its just not happening."

John Page, managing director of Barclays Agriculture, agrees. "Borrowing has risen by a very modest amount, and people are hanging on to their credit balances very well. Farmers are being very prudent, and are not spending money when they dont have to."

Latest figures for Scotland show borrowing at the end of April was down £8m on the year at £1,058,000. After allowing for inflation, the fall was about 2%.

Scottish farm minister Ross Finnie described the news as "helpful" and pointed out that interest charges had fallen by more than £24m in the past year.

But Scottish NFU president Jim Walker claimed the drop in borrowing was insignificant and said he was astonished that the minister could describe it as helpful.

"Farmers still owe the banks more than £1bn and they are borrowing to live rather than to invest. Our farmers are having to work with interest rates double those of their European competitors. The 2.5% interest rate difference is costing us an extra £26.5 million a year," said Mr Walker. &#42

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