Orkney Cheese Company Limited

	Page
Balance Sheet	1—2
Notes to the Financial Statements	3—11

1. General Information

Orkney Cheese Company Limited is a private company, limited by shares, incorporated in Scotland, registered number SC196090 . The registered office is Crowness Road, Hatston Industrial Estate, Kirkwall, Orkney, KW15 1RG.

2. Accounting Policies

2.1. Basis of Preparation of Financial Statements

The financial statements have been prepared under the historical cost convention and in accordance with Financial Reporting Standard 102 section 1A Small Entities "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements are prepared in sterling, which is the functional currency of the entity. Monetary amounts are rounded to the nearest £.

2.2. Turnover

Turnover is measured at the fair value of the consideration received or receivable, net of discounts and value added taxes. Turnover includes revenue earned from the sale of goods. Turnover is reduced for estimated customer returns, rebates and other similar allowances.

Sale of goods

Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods has transferred to the buyer. This is usually at the point that the customer has signed for the delivery of the goods.

2.3. Tangible Fixed Assets and Depreciation

Tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided at rates calculated to write off the cost of the fixed assets, less their estimated residual value, over their expected useful lives on the following bases:

Freehold	4% on cost
Leasehold	in accordance with the lease.
Plant & Machinery	10% reducing balance
Motor Vehicles	10% reducing balance
Fixtures & Fittings	20% reducing balance
Computer Equipment	25% on cost

2.4. Leasing and Hire Purchase Contracts

Assets obtained under finance leases are capitalised as tangible fixed assets. Assets acquired under finance leases are depreciated over the shorter of the lease term and their useful lives. Assets acquired under hire purchase contracts are depreciated over their useful lives. Finance leases are those where substantially all of the benefits and risks of ownership are assumed by the company. Obligations under such agreements are included in the creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the profit and loss account so as to produce a constant periodic rate of charge on the net obligation outstanding in each period.

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged to the profit and loss account as incurred.

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

2.5. Stocks and Work in Progress

Stocks are stated at the lower of cost and net realisable value on a consistent basis year by year. The cost of finished goods includes production overheads together with an appropriate proportion of indirect overheads. Net realisable value is calculated as the estimated selling price less costs to complete and sell.

At the end of each reporting period inventories are assessed for impairment. If an item of stock is impaired, the identified stock is reduced to its selling price less costs to complete and sell and an impairment charge is recognised in the profit and loss account. Where a reversal of the impairment is recognised the impairment charge is reversed, up to the original impairment loss, and is recognised as a credit in the profit and loss account.

2.6. Financial Instruments

The company has elected to apply the provisions of Section 11 'Basic Financial Instruments' of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors re initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

2.7. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on timing differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable timing differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible timing differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. The measurement of deferred tax liabilities and assets reflect the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss for the year, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case current and deferred tax are recognised in other comprehensive income or directly in equity respectively.

2.8. Pensions

The company operates a defined pension contribution scheme. Contributions are charged to the profit and loss account as they become payable in accordance with the rules of the scheme.

2.9. Government Grant

Government grants are recognised in the profit and loss account in an appropriate manner that matches them with the expenditure towards which they are intended to contribute.

Grants for immediate financial support or to cover costs already incurred are recognised immediately in the profit and loss account. Grants towards general activities of the entity over a specific period are recognised in the profit and loss account over that period.

Grants towards fixed assets are recognised over the expected useful lives of the related assets and are treated as deferred income and released to the profit and loss account over the useful life of the asset concerned.

All grants in the profit and loss account are recognised when all conditions for receipt have been complied with.

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

2.10. Impairment of non-financial assets

At each reporting period date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

At each balance sheet date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets may have suffered an impairment loss. If there is such an indication the recoverable amount of the asset (or asset's cash generating unit) is compared to the carrying amount of the asset (or asset's cash generating unit).

The recoverable amount of the asset (or asset's cash generating unit) is the higher of the fair value less costs to sell and value in use. Value in use is defined as the present value of the future cash flows before interest and tax obtainable as a result of the asset's (or asset's cash generating unit's) continued use. These cash flows are discounted using a pre-tax discount rate that represents the current market risk-free rate and the risks inherent in the asset.

If the recoverable amount of the asset (or asset's cash generating unit) is estimated to be lower than the carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised in the profit and loss account, unless the asset has been revalued when the amount is recognised in other comprehensive income to the extent of any previously recognised revaluation.

Thereafter any excess is recognised in profit or loss.

If an impairment loss is subsequently reversed, the carrying amount of the asset (or asset's cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the profit and loss account.

3. Average Number of Employees

Average number of employees, including directors, during the year was: 24 (2025: 23)

4. Prior Period Adjustment

In prior periods the company recognised Other Creditors, which arose in the years ended 31 March 2018 and 31 March 2019 when amounts were charged to the profit and loss account as marketing expenditure with a corresponding credit recorded as a liability. Marketing costs incurred in subsequent periods were set against that liability rather than being charged to the profit and loss account.

The directors have reassessed the balance and have concluded that no present legal or constructive obligation existed at any reporting date in respect of the amounts carried forward, and that the recognition criteria in Section 21 of FRS 102 were therefore not met. The offsetting of subsequent marketing costs against the liability was also not permitted by Section 2 of FRS 102.

This constitutes a prior period error, which has been corrected retrospectively in accordance with Section 10 of FRS 102. The opening balance of retained earnings has been adjusted to reflect this.

• Impact on the Opening Balance Sheet (as at 1 April 2024):

• Decrease in Creditors / Accruals (Liability): £120,745

• Increase in Retained Earnings (Opening Reserves): £120,745

• Impact on the Comparative Profit and Loss Account (Year Ended 31 March 2025):

• Increase in Administrative Expenses (Marketing Cost): £8,398

• Decrease in Profit for the Financial Year: (£8,398)

• Net Impact on the Closing Comparative Balance Sheet (as at 31 March 2025):

• Decrease in Creditors / Accruals (Liability): £112,348

...CONTINUED

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

4. Prior Period Adjustment - continued

• Increase in Retained Earnings (Closing Reserves): £112,348

5. Tangible Assets

	Land & Property
	Freehold	Leasehold	Plant & Machinery	Motor Vehicles
	£	£	£	£
Cost
As at 1 April 2025	42,699	13,181	3,025,804	120,888
Additions	-	-	103,077	-

As at 31 March 2026	42,699	13,181	3,128,881	120,888

Depreciation
As at 1 April 2025	31,459	13,181	1,861,215	109,567
Provided during the period	1,708	-	127,012	1,198

As at 31 March 2026	33,167	13,181	1,988,227	110,765

Net Book Value
As at 31 March 2026	9,532	-	1,140,654	10,123

As at 1 April 2025	11,240	-	1,164,589	11,321


	Computer Equipment	Total
	£	£
Cost
As at 1 April 2025	41,266	3,243,838
Additions	1,612	104,689

As at 31 March 2026	42,878	3,348,527

Depreciation
As at 1 April 2025	35,131	2,050,553
Provided during the period	1,446	131,364

As at 31 March 2026	36,577	2,181,917

Net Book Value
As at 31 March 2026	6,301	1,166,610

As at 1 April 2025	6,135	1,193,285

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

6. Investments

	Unlisted
	£
Cost or Valuation
As at 1 April 2025	75

As at 31 March 2026	75

Provision
As at 1 April 2025	-

As at 31 March 2026	-

Net Book Value
As at 31 March 2026	75

As at 1 April 2025	75

7. Stocks

	2026	2025
	£	£
Stock	3,341,115	2,391,887
Consumables	122,638	102,689

	3,463,753	2,494,576

8. Debtors

	2026	2025
	£	£
Due within one year
Trade debtors	404,610	1,266,734
Prepayments and accrued income	4,025	6,399
Other debtors	35,292	33,606

	443,927	1,306,739
Due after more than one year
Deferred tax current asset	8,816	-

	452,743	1,306,739

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

9. Creditors: Amounts Falling Due Within One Year

	2026	2025
	£	£
Trade creditors	88,836	80,464
Orkney Islands Council Reserve Fund Loan	38,721	72,000
Other taxes and social security	15,553	17,205
Other creditors	69,971	69,214
Accruals and deferred income	26,479	40,133
Government grants within one year	38,474	39,331
Amounts owed to parent undertaking	446,064	565,040

	724,098	883,387

10. Creditors: Amounts Falling Due After More Than One Year

	2026	2025
	£	£
Orkney Islands Council	-	38,721
Deferred Government grants	302,201	322,579

	302,201	361,300

The comparative figures for creditors have been reclassified to present the element of deferred government grant income falling due for release within one year separately from that falling due after more than one year. The reclassification has no effect on net assets, reserves or the result for either period.

11. Secured Creditors

Of the creditors the following amounts are secured.

The loans from Orkney Islands Council are secured by a Standard Security over the assets of the company.

	2026		2025
	£		£
Other Creditors	38,721		110,721

12. Deferred Taxation

A deferred tax asset of £8,816 has been recognised in respect of timing differences and trading losses carried forward, to the extent that recovery is considered probable on the basis of management's forecasts to 31 March 2028. A further deferred tax asset of £94,403 has not been recognised, as there is insufficient evidence of taxable profits arising in the short term.

	2026	2025
	£	£
Other timing differences	-	87,660

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

13. Share Capital

	2026	2025
	£	£
Allotted, Called up and fully paid	1,000,000	1,000,000

14. Other Commitments

The total of future minimum lease payments under non-cancellable operating leases are as following:

	2026	2025
	£	£
Not later than one year	36,376	36,376
Later than one year and not later than five years	21,463	57,840

	57,839	94,216

15. Related Party Transactions

Lactalis McLelland Ltd
An associated company holding 20% of the share capital.
Sales totalling £4,568,498 (2025: £5,774,997) were made during the year.
Marketing services totalling £29,387 (2025: £8,398) were incurred during the year. As detailed in note 5 (Prior Period Adjustment), the directors have restated historical balances to remove a legacy credit balance of £112,348 previously held against this party, which did not meet the recognition criteria of a liability. At the balance sheet date, the balance due to this related party in respect of verified marketing services received but not yet invoiced was £17,505 (2025: £0). This balance is accurately included within current liabilities as an accrual.
	2026	2025
	£	£
Amount due from related party at the balance sheet date	206,509	1,064,203
Amount due to related party at the balance sheet date	17,505	-


Orkney Milk Limited
Parent company holding 70% of share capital.
Sales totalling £138,028 (2025: £132,011) were made during the year.
Purchases of milk totalling £5,122,630 (2025: £4,782,109) were received during the year.
	2026	2025
	£	£
Amount due to related party at the balance sheet date	446,064	565,040

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Orkney Cheese Company Limited

Notes to the Financial Statements (continued)

For The Year Ended 31 March 2026

16. Controlling Party

The company is a 70% subsidiary of Orkney Milk Limited, a community benefit society registered in Scotland with the Financial Conduct Authority under the Co-operative and Community Benefit Societies Act 2014 (registration number 002556RS), whose registered office is Crowness Road, Hatston Industrial Estate, Kirkwall, Orkney, KW15 1RG. Orkney Milk Limited is the parent undertaking of the only group for which the company is a member.

17. Audit Information

The auditor's report on the accounts of Orkney Cheese Company Limited for the year ended 31 March 2026 was unqualified.

The auditor's report was signed by Thomas William McManners BSc ACA (Senior Statutory Auditor) for and on behalf of TTCA Ltd , Statutory Auditor.

TTCA Ltd

Chartered Accountants & Statutory Auditors

269 Farnborough Road

Farnborough

Hants

GU14 7LY

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		2026		2025
	Notes	£	£	£	£
FIXED ASSETS
Tangible Assets	5		1,166,610		1,193,285
Investments	6		75		75

			1,166,685		1,193,360
CURRENT ASSETS
Stocks	7	3,463,753		2,494,576
Debtors	8	452,743		1,306,739
Cash at bank and in hand		413,208		1,214,262

		4,329,704		5,015,577
Creditors: Amounts Falling Due Within One Year	9	(724,098 )		(883,387 )

NET CURRENT ASSETS (LIABILITIES)			3,605,606		4,132,190

TOTAL ASSETS LESS CURRENT LIABILITIES			4,772,291		5,325,550

Creditors: Amounts Falling Due After More Than One Year	10		(302,201 )		(361,300 )

PROVISIONS FOR LIABILITIES
Deferred Taxation	12		-		(87,660 )

NET ASSETS			4,470,090		4,876,590

CAPITAL AND RESERVES
Called up share capital	13		1,000,000		1,000,000
Share premium account			1,098,306		1,098,306
Profit and Loss Account			2,371,784		2,778,284

SHAREHOLDERS' FUNDS			4,470,090		4,876,590