Quality Meat Scotland began it’s last financial year with the aim of operating on a “break-even budget” but ended with a bottom line surplus of more than £77,000.
According to chief executive Uel Morton, the healthy figures reflect a year focused sharply on industry development work as well as money saved following a decision not to commission scientific research.
The year ended March 31, 2014, saw the organisation’s total income hit £7.25million, up from a figure closer to £6.9m the year before.
But the financial figures also follow a year dogged by continued levy income decline – courtesy of both a diminishing number of animals being produced in Scotland and an increase in the number of animals being slaughtered south of the border.
During the year, QMS received more than £4.09million (down from £4.43million in 2012/13) in statutory red meat levy (down from £4.43million in 2012/13 and a reduction yet further from £4.9million in 2011/12).
According to Mr Morton, all three red meat species are guilty for the shortfall against last year’s levy income.
“It’s not just one species to blame for the fall,” he said.
The biggest levy shortfall, however, is evident from Scotland’s pig sector where levy fell down by £254,000 – equivalent to a hefty 40% decline.
Sheep levy fell by just 3%, or £33,000, whilst cattle levy dropped by only 2% or £53,000.
“Looking forward, the changes to the footprint of abattoirs here in Scotland – in the Orkney Meats and Galashiels abattoirs in the 11/12 year and then in 12/13 through the merger of Scotch Premier and Mathers of Inverurie and the closure of Vion Halls at Broxburn – has seen a gradual concentration of abattoir capacity, in fewer hands,” said Mr Morton.
“It is therefore very encouraging to see the Brechin abattoir coming into new ownership as this sends a very positive message to producers in Scotland as well as having a future positive impact upon industry pig levies.”
He said this will allow QMS to carry out increased promotion of the ‘Specially Selected’ Pork brand.
“The decreases in Scottish kill numbers in the 2013/14 year reflects the double edged sword of reducing numbers of livestock being produced in Scotland and increasing numbers of Scottish livestock, sheep and pigs, being slaughtered south of the border.”
Elaborating on the perennial problem of the leakage of levies out of Scotland, Mr Morton said focusing on species the investment at Brechin should help to claw back quite a significant amount of the pig levy which is currently drifting south.
In terms of sheep, he said: “Scotland currently slaughters only around half of our production, so that has always traditionally presented a levy challenge.
“On the beef side, part of the answer lies with the Beef 2020 report and clearly there are targets set for production to increase to allow Scotland to have sufficient supply to meet the increasing demand for the Scotch beef brand.
“The answer to all of this is to slaughter and process more animals in Scotland,” he said.
However, he felt a “step forward had been made” because a recent board meeting of the AHDB recognised the current system of distribution of levies is “unfair” and does not truly reflect the livestock production capacity of the three home countries – England, Scotland and Wales.
“QMS is currently involved in discussions to take this forward,” Mr Morton added.
According to QMS, ballpark figures currently show around £1m of lamb levy and £500,000 of pig levy are lost south of the border. Lost beef levy comes in below a six figure sum.
Examining the operating costs and financial position of the board, Mr Morton said the review of industry development function allowed QMS to “cease expenditure on commissioning scientific research” and in turn focus greater effort and resource on activitis driven towards industry efficiency improvements.
“That has involved some changes to personnel and that inevitably introduces a time lag to project delivery and therefore the timing of expenditure,” he explained.
The surplus of £77,139 accounts for just 1% of the total levy board’s income.
Facts and figures
QMS received an income of £1.41m in fees from consumer assurance schemes (a minor rise from £1.40m in 2012/13), as well as £1.7m in grants (up from £1.035m in 2012/13).
In total, the red meat levy board took receipt of 20 grants from the Scottish Government.
“To put this £1.7m in context, grant income has risen £665,000 on the year and continues on a rising plane from £880,000 from the year before that. The teams are working very hard to pull in grant income,” said Mr Morton.
“Those grants are mainly sourced from the Scottish Government and the European Commission.”
EU grants are predominantly available for marketing – including a three-year, five million euro ‘quality promotion programme’ for PGI which includes match funding.
Four of these grants were received under the Marketing Development Scheme – of which three were used to assist with the continued employment of Market Development Managers in the Nordic countries, Germany, France and the Benelux countries as well as the continued development of lamb markets in Italy.
“The balance of grant income of just under £1m came from Scottish Government funding for a range of activities, some of which also supports export development work,” explained Mr Morton.
In terms of the board’s expenditure, ‘other operating costs’ were reduced by £57,000 to £6.19m for the year.
Staff employment and board costs for the 2013/14 year stood in round numbers at £975,000 – up from £931,000 the previous year and £925,000 the year before that.
Office admin costs were £172,000 – £7,000 below budget.
o The full annual report and accounts for the latest financial year is available on the QMS website at www.qmscotland.co.uk or by telephoning 0131 472 4040 to request a copy.