Profitability & Return:

For our dairy business, excluding the income and costs related to estate management and assuming no changes in the milk price from hereon, we are budgeting in 2018/19 an operating profit of £36,000 before depreciation applicable to the  business of some £133,000.  This £36,000 is the equivalent to 3.5% of the total income or turnover of the business - the operating margin.  To sustain a business one needs to invest and it is necessary to recognise the importance of depreciation as a real cost of production.  If one accounts for our depreciation charge then we will see a loss of £97,000.  Our dairy budget can be summarised as follows:

 

 

Income £'000 ppl
Milk sales 961 30.50
Sale of livestock & Other 57 1.82
Total 1,019 32.31

 

Costs £'000 ppl
Labour -214 -6.78
Feed & Crops -470 -14.90
Bedding -45 -1.43
Vet, AI, etc. -62 -1.96
Dairy Chemicals & Other -32 -1.00
Livestock contract costs -6 -0.19
Machinery -72 -2.27
Property -28 -0.88
Utility -38 -1.21
Admin -17 -0.54
Total -983 -31.17

 

  £'000 ppl
Operating Profit                36 1.15
Depreciation -133 -4.21
Operating loss -97 -3.06

As the results show our investment in the new farm infrastructure is not being covered let alone covering any return required to justify such investment.