Dairy Farmers of Britain - Environment, Food and Rural Affairs Committee Contents


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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