Henden Manor Estates A milk producing business The opportuni5es and - PowerPoint PPT Presentation

Henden Manor Estates A milk producing business The opportuni5es and challenges January, 2016 1

Overview Henden is ~500 acres (~370 acres arable & grazing), the land being undula5ng clay • The strategy is to produce high quality milk over the long term with regard to: • – High standards of both staff and animal welfare and safety – Working well within all regula8ons imposed, including caring for the environment – Being transparent in all that we do – Being financially sustainable Henden is not an organic farm, although it puts all organic waste back into the ground • In 2015/16, we will average some 470 livestock in a closed farm: • – 260 cows in the herd (vs. 140 as a UK average), of which 230 are milked twice daily – 210 “followers” – We calve through the year to try and achieve level produc8on; we do not “block” calve We will produce 2.574 mm litres of milk for sale this year (7,032 litres per day) • – Yield per cow in milk should average some 31.4 litres per day (~10,100 litres per cow per year) M&S is the exclusive buyer of our raw milk, pick up being every other day • Our herd will consume 4,700 (wet) tonnes of feed this year (1.84kg per litre of milk sold) : • – 1,440 tonnes of concentrates & minerals (0.56kg per litre) – 3,300 tonnes of bulk feed (1.28kg per litre) We employ six and a half people on the estate: • – 4.7 work exclusively for the dairy business – 1.3 work on the estate – 0.5 provides the administra8ve support needed 2

Henden Manor Dairy Farm Parlour & N milk tank 19,000 litres capacity Dry food store Bulk Feed clamps Offices (grass & maize silage and wholecrop) Heifers & calves area Hospital Cow barns Straw & Sand 86 stalls storage 88 80 Solid stalls waste 84 stalls Separator Liquid waste (slurry) >5mm litres capacity Se^lement Reservoir ponds Dirty water tank 3

Land use & drainage pa^erns N Ground is undula5ng clay - rock hard in dry months Reservoir - very so\ in wet months Key: Approx estate boundary Drainage direc8on Approx main courses Approx other courses Underground courses Farm Main feed growing areas Reservoir Grazing areas (summer) We prac5ce crop rota5on Note: Henden also owns 18 acres of arable land over two fields a quarter of a mile to the east of its boundary 4

Focus on milk quality & herd health Herd size 260 140 = na5onal average * Average yield per cow in the year 10,100 litres 7,870 = na5onal average Average bu^erfat 3.85% 4.0% = na5onal average Average Protein 3.35% 3.3% = na5onal average Bacteria Count (BAC) 6 24 = na5onal average Soma5c Cell Count (SCC) 133 165 = na5onal average Water 518 Saturated Fat Analysis 68 Fresh cows & cows with mas55s ~2.7% of cows milked (had a bad year, but good now) Mobility Score 88% Score 0 & 1 10% Score 2 <2% Score 3 (“lameness” at Henden = 12%; na5onal average = ~36%) Bovine Viral Diarrhea Virus free through vaccina5on – always being monitored Infec5ous Bovine Rhinotrachei5s free through vaccina5on – always being monitored Johne’s disease very low levels – aiming to be free within two years Leptospirosis free through vaccina5on – always being monitored TB free 5 * England

Investment has been key to Henden farm years Pre 1990 1998-2006 2007-2009 2010 2011 2012 2013 2014 2015 2016 Parlour Milk Tank Cow barns & aprons Lighting & fans Heifer barns Calving barns Bulk feed clamps Dry food store General storage barns Drainage in farm yard Solid waste area Liquid waste area Reservoir Land drainage Office Equipment (£'000) Property £183 £395 £185 £852 £682 £118 £155 £19 £225 Equipment £159 £224 £323 £139 £193 £157 £217 £74 £35 Total Investment £342 £619 £508 £991 £875 £275 £372 £93 £260 • £4.335 million has been invested on Property (65%) and Equipment (35%) (Losses not included) • For the next few years there will largely be an investment freeze on property: - Farm is now in reasonably good shape 6 - Economics don’t jus8fy more investment (e.g. robots replace parlour, heifers/calves housing renewed)

Illustra5ve dairy economics in 2015/16 Henden * UK Sample ** ppl ppl Henden’s costs Milk sales 32.18 23.89 Livestock sales 2.54 2.15 ppl 37% 17% 14% 8% 6% 5% 4% 4% 3% 2% Total Dairy Income 34.72 26.04 14 Purchased feed -9.02 -7.60 12 Bulk feed -3.26 -2.02 10 Bedding -1.34 -0.84 8 AI/ Semen -0.59 -0.52 6 Vet & Medicines -1.52 -1.34 4 Other Dairy costs -4.73 -6.65 2 Total Dairy costs -20.46 -18.97 0 Labour & "Drawings" -5.54 -5.22 d r y y e s g s n n u e e e r t c n i e m o i r n B e n i m a e d Utilities -1.16 -1.29 b a i i F D d p c l d e a n B i A o d e S L r e U e r / / e B t P e Property -2.71 -0.80 h I n M A c t i a ffi O & M O Machinery/Maintenance -2.08 -1.18 t e V Office/Administration -0.95 -0.89 Total non Dairy costs -12.44 -9.38 Notes: Total costs -32.91 -28.35 < Most farms are losing money at the opera5ng level Operating cash flow 1.81 -2.31 Depreciation -6.37 -1.69 < Most farms have not invested in property & equipment Operating loss before ROC -4.55 -4.00 * Es5mated for the year 2015/16 (revenue and costs do not include Estate management ac5vi5es and related income) ** Sample guided from data for 2014/15 provided by an outside source, but updated by Henden for 2015/16 using Farmgate price for milk sales and hopefully educated guesswork for costs 7

SWOT review of Henden’s business Weaknesses: Strengths: • Loca5on in country (close to most consumers) * • Loca5on in country (expensive region) • Quality of infrastructure • Quality of land • Young farm manager • Could do with extra 50-80 acres of arable land (needs to close by, ideally adjacent) • Quality & welfare of closed herd * • Largely untested team under the Manager • Welfare and safety of staff * • Business management not farmers • Proper, long term business focus * (s5ll learning!) • M&S contract * • Needs to start returning capital to owners * • Valuable Estate - compact, pre^y, well located (no money has been taken out to date) Threats: Opportuni5es: (we are s(ll on a journey to improve) • Milk price vola5lity * • Expand milkers by 10 head (4%) (115,000 litres pa) * • Financial viability of suppliers • Increase cow yields to ~33 litres pd (140,000 l.p.a) * • Tax changes that could impact investment * • Team improvement: – Improve aden8on to detail • Biological risks * – Think outside one’s own main role on the farm • Extreme weather condi5ons * • Improve land management to increase crop yields • Stores being too short term in their outlook * • Improve food buying prac5ces to reduce costs • Lack of effec5ve marke5ng of dairy products * • Be more focused on cash flow management • Increasing influence of unrealis5c NGOs * • Go “downstream”? • Geopoli5cal events (e.g. Russia sanc5ons) * (would be a new business) 8 * Of relevance to buyers of milk

Dairy farming is under severe pressure 1. Milk supply is outstripping demand: • Insufficient, effec8ve marke8ng of what are a sound, healthy food and related products • Too many farmers are producing and cow yields con8nue to improve • Exchange rate pressures impact food and other costs as well as scale of imports • Russia’s ban on impor8ng European dairy products has increased dairy products available for UK 2. The public and the consumer want different things: • The public and some NGOs want “black and white fluffy things” prancing around the fields; • The consumer wants to pay for food, which typically only “factory” condi8ons can provide 3. Supermarkets, under pressure to achieve high margins, can forget producers needs 4. There’s been a fundamental lack of investment in infrastructure & equipment on farms 5. There is a wholesale lack of transparency in farming 6. Occasionally one hears of examples of a lack of integrity in farming opera5ons 7. The UK is one of the highest cost na5ons in the world with regard to employment 8. The scale and breadth of regula5ons have significantly increased man hours and costs • Their evolu8on has some8mes not been intelligent Farmers & Stores need to work more intelligently and in partnership 9

Henden Manor Estates LLP Address: Henden Manor Estates Ide Hill Sevenoaks Kent TN14 6LA Telephone: +44 (0) 1732 750 758 Managing Partner: Mar8n Lovegrove Partner: Roni Lovegrove Dairy Manager: Diana Guitane Assistant: Jenny Stevens Contact: info@hendenmanor.com Website: www.hendenmanor.com 10