FOR any business, the publication of its annual report and accounts is always an important opportunity to take stock of what has been achieved over the year and look ahead to the coming months and the fresh challenges they will bring.

The last 12 months for Milk Link resulted in significant development and delivery and this has left us well placed to secure a long term sustainable future for our dairy farmer members.

Despite continuing downward market pressures and significant change across the dairy industry, Milk Link increased its profit before tax by 98% to £15 million, reduced its third party debt by £17.2 million and drove group operational costs down by 14%. As such our members' business ended the year financially, structurally and commercially stronger.

However, in my mind probably the most important financial highlight was the making of our first processing interest payment to members. The figure of £2.4 million represented a return of around 7% on members' qualifying loans and we were the first major British dairy co-operative to have made a return of this kind. This demonstrates that our members' strategy to invest in value added processing is starting to be vindicated.

The group is financially stronger than ever before. Over the year we successfully refinanced our cheese business, reduced our gearing and have gone a long way to reducing the reserves deficit in our balance sheet. We were also able to halve our members' investment levy from 1ppl to 0.5ppl and repay £5.7 million to them in relation to their initial investment in Milk Link.

In addition, our acquisition of the final 25 per cent of The Cheese Company from Glanbia plc means that we now have total ownership and control over the UK's largest cheese producer and have completed the first phase of our strategy of acquiring the necessary processing capacity to add value to our members' milk.

We are making strong progress in the current financial year. Highlights to date include an increase in member milk prices by on average 1.25ppl; the winning of a major cheese contract with Sainsbury's; the successful launch and strong growth of new products such as our Tickler extra mature cheddar made at Taw Valley; and strategic partnerships with Yeo Valley and OMSCo. In addition, our chief executive Barry Nicholls has also given a positive assessment of the current strength of the commodity dairy markets and reiterated the Board's aim to deliver at least a 10% return on qualifying loans from revenues generated in 2007/08.

I believe that already we can see that the hard work and development activity undertaken during 2006/07 is paying dividends. We have established a strong financial and commercial platform and we are on track to achieve our mission of increasing the overall return to our members, whilst at the same time providing them with a secure market for their milk.

Undoubtedly, the dairy industry will continue to experience considerable change and Milk Link, and indeed the wider industry, will need to continue to evolve to effectively meet the resulting challenges and opportunities. We have made important steps forward but we are acutely conscious of the continuing financial pressures impacting on our dairy farmers and as such there is still a long way to go and much work to be done.