1

Dairy Crest Group plcAnnual Results 201224 May 2012

DOING THE

RIGHT

THING

Preliminary Results

For the year ended 31 March 2012

24 May 2012

DAIRY CREST GROUP plc

Agenda

20011/12 Mark Allen, Chief Executive

Financial Review Alastair Murray, Finance Director

Looking Forward Mark Allen, Chief Executive

DAIRY CREST GROUP plc

Mark Allen

Chief Executive

2011/12

5

Strong growth in Foods, continuing progress with key brands – Revenue +10%

Decisive action in Dairies – restore profitability in medium term – Revenue -2%

Adjusted profit before tax maintained at £87.4m (2011: £87.6m)

Increased shareholder returns – dividend up 4% to 20.4p per share

Good performance in challenging trading conditions

Sales up – adjusted profits stable – dividend up

6

Our broadly based business provides stability

08/09 09/10 10/11 11/120

20

40

60

80

100

120

60 54 5363

34

1728

36

835

2710

Operating Profit by Segment

Dairies

Cheese

Spreads

102106 108 109

Strong performances from Spreads and Cheese have compensated

for a difficult year in Dairies

7

Despite an even more challenging year for consumers, retailers and dairy processors alike

For consumers Who faced real increases in food prices

For retailers Intense competitionFalling consumption

For dairy processors Increasing commodity costsFalling returns from dairy commodity markets

FOOD INFLATION

+5%

DAIRY CREST:COMMODITY COSTS+£80 MILLION YOY

PRICE WARS

RETAIL MILK PRICEApril 2011 £1.25 / 4 pts

March 2012 £1.18 / 4 pts

BULK CREAM PRICESMarch 2011: £1.55/litreJune 2011: £1.85/litre

March 2012: £1.08/litre

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Against this background Dairy Crest maintained adjusted profit at £87.4 million

Our consistent strategy proves its worth

Build market leading positions in branded and added value markets

11% increase in sales of key brands

10% increase Foods revenues

milk&more weekly sales > £1.2 million

Focus on cost reduction and efficiency improvements

Efficiency projects have delivered £22 million

Further £20 million in pipeline for 2012/13

Plans to close two non-core Dairies

Improve quality of earnings and reduce commodity risk

Foods Revenues up to 34% of Group

(2007: 29%)

Successful innovation: 10% of sales from products and services <3 years old

Generate growth and focus thebusiness through acquisition& disposals

Strategic Review of St Hubert

Purchase of MH Foods

9

Key brands: another year of strong growth

* DC value sales 12 months to 31 March 2012v 12 months to 31 March 2011 ** Nielsen, IRI data 52 weeks to 31 March 2012*** DC value sales 12 months to 31 March 2012 v 12 months to 31 March 2007

12%

16%

-1%

19%

4%

27%

1%12%

12%

7%

0%

100%

35%

1%60%

54%

84%0%6%6%

2.5

0.1

1.3

0%0%6%0.3

1.3

Core Brand

Market Brand Growth11/12*

Market Size(£bn)

Market Growth11/12**

5 Year Brand Growth 11/12 v

06/07 ***

UK Cheese

UK Butter Spreads

Margarine

UK Butter Spreads

Margarine

French Non-Butter

Spread

Fresh Flavoured

Milk

Achieved target to have 10% of sales from products and services launched within the last three years

Recent innovation: milk&more, Jugit and ‘lighter’ products have provided a strong base…

…that exciting new products launched in 2011/12 have built on

10

Innovation: delivering for consumers and retailers

11

Ongoing focus on cost reduction has contributed to a solid year and allowed increased marketing investment

Cost reduction – an essential part of the mix

£million 10/11 11/12 12/13

Production efficiencies 5 7

Overheads 5 3

Purchasing 5 9

Distribution 5 3

Total 20 22 20 (minimum)

£75 million three year investment programme for liquid dairies on track

Consultations on closures of Aintree and Fenstanton underway

12

Strategic review of French spreads business progressing to plan

- A successful business but Dairy Crest was unable to make further synergistic acquisitions as envisaged in 2007

Strength of St Hubert confirmed during the year ended 31 March 2012

- Record high profits

- Record market share

Disposal would reduce debt and provide alternatives

- Releasing some proceeds to shareholders

- Investing in core business

- Making strategic UK branded chilled and dairy acquisitions

St Hubert – review progressing to plan

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Continue to make progress with Corporate Responsibility

- 40 pledges developed during the year to add transparency and aid reporting

- Highlights include a reduction in workplace accidents and a significant reduction in carbon footprint

Take practical approach and align with commercial strategy

- Environmental savings improve profits

- Increase number of women by targeting return to work after maternity leave

Acting responsibly across the supply chain

BITC – Gold Award – highest new entry in BITC Index 2012

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Working with dairy farmers

Strengthened support package

- Water conservation

- Herd health improvements

Increasing amount of milk bought direct

Introducing flexible new contracts

- Fixed price

- ‘Farm business’

Paying fair, market-related milk prices

- Milk prices have increased steadily during the last two years

- Recent cuts disappointing but unavoidable given weak markets since year-end

Alastair Murray

Finance Director

Financial Review

16

Adjusted profit before tax* maintained at £87.4m (2011: £87.6m)

Adjusted earnings per share* up 5% to 49.4p (2011: 47.1p)

Exceptional non-cash impairment charges in Dairies lead to reported loss

Final dividend up 4% to 14.7p (2011: 14.2p) – total dividend 20.4p (2011: 19.7p)

Net debt increased by £24.8m to £336.4m (2011: £311.6m)

Financial highlights

* Before exceptional items, amortisation of acquired intangibles and pension interest.

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Income Statement

* Before exceptional items and amortisation of acquired intangibles

£m 2011/12 2010/11

Profit on operations* 108.7 108.4

Finance costs (21.0) (20.6)

Share of associate net loss (0.3) (0.2)

Adjusted profit before tax* 87.4 87.6

Other finance income - pensions 5.5 -

Exceptional items (93.9) (1.1)

Amortisation of acquired intangibles (9.1) (8.7)

(Loss)/Profit before tax (10.1) 77.8

Taxation (7.0) (20.3)

(Loss)/Profit after tax (17.1) 57.5

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Segmental analysis – Cheese

Volume growth despite pack size reduction

Revenues up - comparative includes three months of Wexford

Cathedral City clear leader in the branded everyday cheese category

New Davidstow cheddar brand growing

Chedds launch and strong NPD pipeline

Improved efficiencies at Davidstow and Nuneaton

£m 2011/12 2010/11

Revenue 229.6 223.1

Profit 35.5 28.0

Margin 15.5% 12.6%

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Strong sales growth for St Hubert Omega 3 and Clover

Successful launch of two new products in France

Continued efficiency improvements delivered with more to come

Strong profit delivery and increased A&P

£m 2011/12 2010/11

Revenue 328.7 285.5

Profit 63.0 53.3

Margin 19.2% 18.7%

Segmental analysis – Spreads

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Segmental analysis – Dairies

Tough trading conditions exacerbated in H2 by falling cream realisations

Continue to focus on cost, quality and service

Increased sales of new products – milk&more, FRijj The Incredible and 1%milk

Action taken to restore Dairies’ margins by increasing efficiency and capacity utilisation

Significant exceptional impairment of fixed assets and goodwill

£m 2011/12 2010/11

Revenue 1,069.0 1,089.8

Profit 10.2 27.1

Margin 1.0% 2.5%

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Exceptional Items

£m P&L Charge Cash Impact

Depot rationalisation costs (5.3) (5.3)

Impairment of Dairies assets and goodwill (81.7) -

Clover rationalisation costs (2.6) (0.2)

Bad debt provision (4.3) -

OFT settlement (incl costs) - (7.3)

Wexford onerous contract costs - (0.9)

Total (93.9) (13.7)

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£m Mar-12 Mar-11 Change

Fixed assets, goodwill & intangibles 713.4 799.6 (86.2)

Inventories 187.8 164.5 23.3

Debtors less creditors (134.9) (124.2) (10.7)

Pension deficit (79.8) (60.1) (19.7)

Deferred tax (69.4) (86.3) 16.9

Net debt (336.4) (311.6) (24.8)

Other (6.4) (16.4) 10.0

Net assets 274.3 365.5 (91.2)

Balance Sheet

Pensions

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IAS-19 deficit as of March 2012 - £79.8m (2011: £60.1m)

Annual contributions of £20m agreed for 2010-2013

Benefits from asset outperformance and cash contributions offset by reduced discount rate for calculating liabilities

Continued work on de-risking the Scheme

- ETV exercise removed £14.6m of liabilities

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* Before exceptional items, amortisation of acquired intangibles and share of associates** Including amortisation of grants*** Share based payments and profits on asset disposals

£m 2011/12 2010/11

Adjusted profit on operations* 108.7 108.4

Depreciation & amortisation** 33.5 33.9

Exceptional Items (13.7) (3.7)

Pensions (21.0) (21.7)

Other*** (2.4) (0.5)

Working capital (20.6) 11.7

Cash generated from operations 84.5 128.1

Capital expenditure (net of grants) (53.1) (48.5)

Operating cash flow 31.4 79.6

Operating Cash Flow

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£m 2011/12 2010/11

Operating cash flow 31.4 79.6

Interest (23.6) (19.8)

Tax (14.1) (16.1)

(6.3) 43.7

Dividends paid (26.5) (25.4)

Proceeds from disposal of assets 12.6 2.5

Acquisition/disposal of businesses

Other

(12.3)

0.1

3.9

(0.1)

Net cash flow (32.4) 24.6

Foreign exchange movements 7.6 1.0

Movement in net debt (24.8) 25.6

Opening net debt (311.6) (337.2)

Closing net debt (336.4) (311.6)

Net Cash Flow

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Net Debt history

Mar 08 Sep 08 Mar 09 Sep 09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12200

250

300

350

400

450

500

550

2

2.2

2.4

2.6

2.8

3

3.2

475

491

416

380

337 335

312

365

336

Net debt history

Net debt

Net debt / EBITDA

£m

Summary

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Adjusted profit before tax maintained in a tough year

Pre-tax loss mainly caused by non-cash goodwill impairment

Small increase in IAS-19 pension deficit

Good year-end net debt position despite cash outflows for

- 2nd year of Dairies investment

- Acquisition of MH Foods

- Additional cheese stock to allow further growth- OFT fine

Business has renewed long term facilities and has 1.3 turns of headroom in important net debt: EBITDA covenant

Mark Allen

Chief Executive

Looking Forward

- Restoring Dairies- Building on UK Foods

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Focus on cost reduction and efficiency improvements

Improve quality of earnings and reduce commodity risk

Generate growth and focus the business through acquisitions and disposals

Build market leading positions in branded and added value markets

Looking forward

We will continue with consistent strategy

We plan to restore our Dairies business to a satisfactory level of profitability in the medium term

And build on the strength of our Foods business

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Restoring Dairies – a clear plan in a market with potential

UK liquid milk – a large, complex, cyclical market that Dairy Crest can benefit from

- 6 billion litres of milk consumed each year

- Annual retail milk sales alone over £3 billion

- A multi-layered supply chain where expertise counts

Dairy Crest has around 25% market share

Dairy Crest has a clear vision of success

- Strategy driven by profitability

- Right volumes at right price

Decisive action since year end to build on ongoing operational improvements

- Two dairies to close (subject to consultation)

- Depot closures

- Head Office reorganisation

- Reduced milk purchase prices

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A clear vision of where we want to go

Focused well invested dairies supplying major retailers, residential customers and selective ‘middle ground’ customers

Efficient distribution from the right dairy and depot network

Leaders in flavoured milk – FRijj and retailer own brand

Grow milk&more

With a strong, profitable farmer supply base

And what we have to do to get there

Ongoing drive for efficiencies

Complete our three year, £75 million investment programme

Use depot network to minimise distribution costs

Grow our brands and innovation

Focus on key customers

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Operational Improvements

We have driven significant improvements in our Dairies operations over recent years

08/09 09/10 10/11 11/12

61.60%

62.60%

64.40%

65.50%

Dairies efficiencies (OEE)

08/09 09/10 10/11 11/12

4,675

2,575

1,4521,035

Accident rates (per 100,000 employees)

08/09 09/10 10/11 11/12

263297

331 332

Milk processed per employee (‘000 litres)

08/09 09/10 10/11 11/12

15.8

15.015.2

13.9

Depot costs (ppl)

33

Dairies processing – a balanced footprint….

We compete on cost, quality and service

Our focus is on 3 core well-positioned, well invested liquid dairies

Processing milk with the same equipment operated by our competitors

Backed up by specialist cream and glass bottling dairies

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With market-leading distribution….

Focus and transparency improved by organisational changes

Annual cost of milk collection and distribution > £120 million

Projects underway to implement advanced planning tools

Collaboration with key customers to tackle higher costs

Extensive depot network makes Dairy Crest different

Ongoing projects to reduce cost of operating depots

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And with 2 strong branded propositions….

FRijj

The UK’s leading flavoured milk brand with retail sales c. £50 million

In strong growth after investment in capacity

With more innovation coming soon

milk&more

Continuing to grow despite challenging economic environment

>200,000 active customers generating weekly sales consistently over £1.2 million

Focus on customer service

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Restoring Dairies – summary

This business operates in a large market with potential

It has a good market share and brings critical mass to Dairy Crest

We have a well-invested solid base and strong brands to build on

With a track record of driving operational improvements

Short-term market weakness has resulted in unsatisfactory profits

We have a clear plan to remedy this

We will continue to manage the business to make progress in challenging markets

Aiming to achieve 3% on sales

Our target is to be able to restore Dairies to a satisfactorylevel of profits in the medium term

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Building on UK Foods

We have created the UK’s leading portfolio of dairy brands in large, mature markets

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Investment in consumer understanding leads our decision making

- Promotional background

- Smaller packs v higher prices

Ongoing communication with consumers

- TV advertising core

- Supplemented by other media

- Promotions

Continuous new product development

- Cathedral City big slice

- Clover seedburst

- Selections

Our focus is on the consumer

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“We want to earn consumers’ loyalty by providing healthy

enjoyable, convenient products. We aim to meet consumers’ needs

and go where this takes us” Dairy Crest Vision

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It is not just about marketing ..... success requires continuous investment in supply chain

- Consistent quality

- Record packing speeds and efficiencies at Nuneaton

- Increased flexibility at Frome

- Investment in modern tools to help sales force

- Packaging innovation – for example single spreads tubs

Supported by a well invested strong supply chain

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MAT WE 19.04.08 MAT WE 18.04.09 MAT WE 17.04.10 MAT WE 02.04.11 MAT WE 31.03.120

50

100

150

200

250

300

350

400

Cathederal City Clover Country Life

Source: Nielsen. 31 March 2012

Resulting in strong growth in sales of key brands

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266

401

Val

ue

Sal

es (

£m)

Retail sales of Dairy Crest’s 3 key UK foods brands have increased by 51%From £266 million to £401 million in 4 years of unbroken growth

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• Virtuous circle of growth and investment

• Skillful execution of a well-established strategy

• Strong key brands

• Wide customer base

• We expect to achieve market leading growth and long term margin improvement

We will keep building on our UK Foods success

Our proven ability to develop brands in mature markets leavesus well set for further profitable growth in our foods businesses

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Summary and current year outlook

Summary

Sales up – adjusted profits stable – dividend up

Strategic review of French spreads business

Clear plan for Dairies

Build on UK Foods

Current year outlook

Continued cost discipline

Strong momentum in our branded Foods businesses

Expect Dairies to benefit from decisive actions

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Questions

A video interview with Mark Allen, Group Chief Executive is available at www.dairycrest.co.uk & www.cantos.com