The last two years have seen significant challenges and changes within Fane Valley Group, which are reflected in their latest annual report covering the year up to the end of September 2016.

During that period, the group recorded losses of £1.91m, down from a loss of £4.96m for the period to September 2015. However, that 2015 figure is not what was reported in the accounts last year, which showed a profit of £2.15m.

The difference is due to a new financial accounting standard, FRS102, being applied to 2015 and 2016, which brings with it some changes in how financial information is reported, including to the figures for 2015.

While the losses were reduced in the last financial year, the accounts cover the period when Fane Valley Group sold a significant part of their business, Armaghdown Creameries in Banbridge, to Lakeland Dairies. In its most recent set of accounts, Lakeland indicated that it paid an initial cash price of €11.24m for Armaghdown in May 2016.

However, the Fane Valley results record the profit on disposal of the business at £1.79m. In his report, chief executive Trevor Lockhart makes reference to the “positive performance of continuing operations offset by a significant trading loss at Armaghdown Creameries”.

With the dairy business gone, it means overall group turnover will be significantly less than it was in the past. Turnover at Armaghdown was £106m in 2014, and historically milk drying generated a lot of cash for the wider business.

In 2014, total group turnover (not including the 50% share in Slaney Foods in the Republic of Ireland) was £429.6m, falling to £357.3m in 2015 and down another 10% to £321m in 2016, which included £37.3m of dairy product sales (seven months of Armaghdown Creameries). Taking that out, it leaves turnover below £300m. A significant chunk of that (around £182m) is from meat processing at Linden Foods, of which Fane Valley is the major shareholder.

Joint venture

Not included in the group turnover is the Linden Foods joint venture in Slaney Foods in the Republic of Ireland, which would add around £123.7m to turnover. It also brings about £2m of profit (which is included in the overall Fane Valley group performance).

Since 2000, that joint venture in Slaney has been with the Allen family, but in December 2015 it decided to sell to ABP Food Group, leaving Linden/Fane Valley with a new partner.

That deal, plus the decision to sell the dairy business to Lakeland, resulted in a significant hike in administration costs for Fane Valley, which increased by £3.5m to £24.26m to September 2016.

Assuming those costs return to more typical levels in 2017, and with the loss making dairy business gone, and net debt down from £50.5m to £33.3m, Fane Valley should be in a better position to record a profit to September 2017. While the meat business traditionally delivers high turnover, but small profit margins, the Fane Valley Feeds and Stores business is much smaller, but generally with higher percentage returns. Other businesses within the Fane Valley Group include Whites, Duncrue Food Processors and Hilton Meat Products.

In this report, Fane Valley chair William McConnell acknowledged that while financial performance declined during the year, the final position should still be regarded as a “credible result” given market challenges and changes within the business.