Memorandum submitted by J D Kinsey (DFoB
14)
As a past Director of The Milk Group and DFOB,
the demise of the company causes much concern. A milk trading/processing
company with a steady and secure cash flow with good governance
should NOT find itself in this position, let alone losing all
capital invested on members' behalf to be returned to them in
future years, in many cases to supply a pension for retirement.
After stepping down on the retirement of David
Stern (Chairman) I have viewed the activities of the company which
was then run by Malcolm Smith (CEO) and Robert Knight (Chairman)
with interest. Firstly, I left a strong Board which was in the
later stages of securing a supply and acquisition deal with Mr
Martin Beaumont of the Co-Op Group. There was a price to be paid
plus a contract to supply milk exclusively for three years to
his outlets, and a road map of cost cutting and modernisation.
The final price paid and extra costs associated with the final
deal could be of interest. This deal and non implications of the
road map for saving and cost cutting within the three years of
secure supply will interest me, as I am sure it will prove to
be one of the nails in the DFOB coffin.
Secondly the governance employed under a new
board of selected members to suit Robert Knight's style, which
then included the dismissal of the CEO and the appointment of
the Chairman also as CEO of the company, giving the major powers
to this one individual. The board and senior officers were of
a mind to agree or be demoted/not promoted. Expenses drawn by
the senior group in my opinion were extravagant in the extreme
when compared with other companies of this size (drawn from published
accounts NOT using reliable hearsay to embellish).
Governance again, the power divested in the
Chairman of Council (a Mr Lofthouse and a Mr Yates) left them
second only to the now combined Chairman & CEO in pushing
the company in the direction that caused the demise of DFOB. Their
skills were never in the running of a company but running small
family farms. This is a risk that other co-ops have suffered (amongst
many failures look at grain marketing co-ops, meat marketing co-ops,
etc). The risk is still there for future co-ops. These people
are looking after millions of pounds belonging to others (heard
that before).
Managing Covenant & Liabilities—the
Board had neither the skills or information to address these issues.
When I asked the new vice chairman of the company (Mr Wilkinson)
at the time the company wanted to convert my loan account, and
others, to a 10p share, the question "What is the company's
pension deficit (on March 2009 valuations)?" he said
in the region of £1 million. Continually pursuing this
number, the company accountant wrote to me stating the deficit
was £17 million at least. How can Bank Covenants in
a well informed and knowledgeable Board be allowed to come to
such a state that when the receivers came to examine the company's
financial position, it was so dire. As a past Director, I can
confirm these financial issues were always high on the main Board
agenda, at all main Board meetings. Was it on theirs?
Conversion of Loan Stock—there was no
honesty with regard to these monies, at the time (April 2009)
of this proposed conversion, the demise would have been obvious.
It would have been a likelihood for the previous 12/18 months.
I would like to know from those in authority, of the present Board
and previous Board members with loan stock to their name, how
many used this information to sell their investment for more money
than me (£0).
I cannot find the deal where the previous site
of "Lubborn Cheese" was sold, which was in hand on my
stepping down from the Board . This was a redevelopment site and
worth a substantial amount of money I do remember.
J D Kinsey
September 2009
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