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Preliminary Results For the year ended 31 March 2011 19 May 2011

Preliminary Results For the year ended 31 March 2011 19 May 2011. DAIRY CREST GROUP plc. DAIRY CREST GROUP plc. Agenda 20010/11 Mark Allen, Chief Executive Financial Review Alastair Murray, Finance Director Innovation Mark Allen, Chief Executive

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Preliminary Results For the year ended 31 March 2011 19 May 2011

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  1. Preliminary Results For the year ended 31 March 2011 19 May 2011 DAIRY CREST GROUP plc

  2. DAIRY CREST GROUP plc Agenda 20010/11 Mark Allen, Chief Executive Financial Review Alastair Murray, Finance Director Innovation Mark Allen, Chief Executive Looking Forward Mark Allen, Chief Executive

  3. 2010/11 Mark Allen Chief Executive

  4. Another year of delivery against strategy • Adjusted profit before tax up 5% to £87.6 million • Year end net debt down £25 million to £312 million 4% dividend increase

  5. Benefiting from being a broadly based business Strong performance from Cheese Ongoing delivery from Spreads Tougher trading in Dairies 108 106 105 102 27

  6. Key brands continue to outperform the market 79% 2% 6% 1% 1% 38% 9% 8% 57% 9% 8% 0% 54% 0% 10% 0% 26% 8% 3% * DC value sales 12 months to 31 March 2011 v 12 months to 31 March 2010 ** ACN, IRI, TNS data 52 weeks to 19 March 2011 *** DC value sales 12 months to 31 March 2011 v 12 months to 31 March 2007

  7. Improving quality of earnings • Strong growth in 5 key brands (sales up 57% over 4 years) • Innovative new products & services (9% turnover from products and services < 3 years old) • Milk sales to major retailers increase

  8. Improving quality of earnings (continued) • Wexford Creamery stake reduced to 30% from June 2010 • Ongoing reduction in retailer brand cheese • Reduced exposure to commodity markets • restrict volumes • match stocks with sales • longer term selling contracts • Increasingly selective regarding middle ground customers

  9. Acting responsibly • Dairy Crest is a responsible business • We aim to align corporate responsibility with commercial strategies

  10. Financial Review Alastair Murray Finance Director

  11. Financial highlights • Adjusted profit before tax* up 5% to £87.6m (2010: £83.5m) • Adjusted earnings per share* up 6% to 47.1p (2010: 44.5p) • Final dividend up 4% to 14.2p (2010:13.6p) • Net debt reduced by £25.6m to £311.6m (2010: £337.2m) * Before exceptional items, amortisation of acquired intangibles and pension interest costs/income

  12. Income Statement * Before exceptional items and amortisation of acquired intangibles

  13. Segmental analysis - Cheese Revenue down due to disposal of Wexford in June 2010 Cathedral City has 9% share of total retail cheese market – still larger than next 3 cheddar brands combined Improved whey returns as commodity markets remained strong

  14. Segmental analysis - Spreads Good performance from key brands Significant increases in input costs – vegetable oils and cream Margins broadly maintained Small adverse exchange impact arising from translation of St Hubert results of circa £1m

  15. Segmental analysis - Dairies Strong volumes in retail milk and successful renewal of key agreements Improved ingredients realisations Margins in retail milk lower in second half Doorstep volume declined although milk&more continues to grow A competitive year in the middle ground

  16. Balance Sheet

  17. Pensions • Actuarial valuation as of March 2010 resulted in funding deficit of £137 million • Annual contributions of £20m agreed for 2010-2013 • IAS-19 deficit as of March 2011 - £60.1m (before tax) • Further risk mitigation projects in hand

  18. Operating Cash Flow * Before exceptional items and amortisation of acquired intangibles ** Share based payments and property profits

  19. Net Cash Flow

  20. Net Debt history Covenant – net debt / EBITDA < 3.5 x

  21. Innovation Mark Allen Chief Executive

  22. Innovation – core to Dairy Crest • Building added value sales • Lighter variants of key brands • 1% fat milk • milk&more • Jugit • Target 10 % of sales from innovation < 3 years old • 2009/10 - 7% • 20010/11 – 9% • Driving efficiencies • Packaging • Biomass boilers • Milk purchasing contracts • Strong pipeline for 2011/12

  23. InnovationExample 1 – lighter products • Our research shows that consumers want to cut down on saturated fat without compromising on taste • This has created a strong market for low fat brands • Over the past 5 years we have launched ‘lighter’ variants of our 3 key UK Foods brands

  24. Our ‘lighter’ brands are performing well and contributing to total brand strength In France consumers believe in Omega 3 for better heart health and St Hubert Omega 3 sales up 54% in 4 years Our sales of 1% fat milk have grown 35% year on year

  25. InnovationExample 2 - milk&more • The only top up shop delivery service – ‘Little Store at your Door’ • Compliments rather than competes with main store shopping missions • Planned top up, emergency top up, bulky and heavy items • Breakfast and lunch box meal occasions as well as bulky or “hassle” items such as bottled water, soft drinks and garden supplies • Unique features of milk&more online: • Free delivery every delivery with no minimum order • Order on line up to 9pm the evening before delivery • No booking a slot and no need to sign for the order • Environmentally friendly – fewer car trips, electric vehicles, glass bottles • Personalised service – your own milk&more milkman • Strong customer numbers Source: DC estimates

  26. Switchers (125k active customers) My milkman is now more than just milk Average weekly basket £5.70 Milk £4.60 Products £1.10 Drive Product Penetration Offline (1million active customers) My milkman is my milkman • Average weekly basket £4.69 • Milk £4.13 • Products £0.56 • Switch to Online • New Customers • (55k customers) • I buy what I need when • I need it • Average weekly basket £10.30 • Milk £3.66 • Products £6.47 • Retain and drive Regular Order Comparing customers New customers are greatest incremental value potential to milk&more buying 81% more than Switchers Source: Average weekly trading, April 2011

  27. milk&more advert will run

  28. milk&more - looking forward Starting from a good base………… • Critical mass of customers and weekly turnover above £1 million • milk&more on television for the first time • New customers are buying into the proposition of the top-up shop shopping across the product range and spending 80% more than a customer switching from the offline service But more opportunities………… • To recruit new customers faster • To switch offline customers to milk&more • To drive basket size through targeted promotions To stabilise residential margins • In summary our forecasts show milk&more has the potential to stabilise residential margins and milk&more will account for 40% of total residential margin by H2 2012/13

  29. Looking Forward Mark Allen Chief Executive

  30. Dairy Crest today Dairy Crest is a UK based dairy food company with a significant profit stream from continental Europe Reduced exposure to commodities Strong and growing brands, a world class cheese supply chain, cost-efficient dairies, sound finances Benefits from being broadly based

  31. Looking forward …we will continue to pursue the same strategy Build market leading positions in branded and added value markets 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

  32. Key priorities • Keep driving cheese sales • Increase market share of Cathedral City(currently 9% of total retail cheese) • Launch relevant new products • Drive efficiencies in Spreads • Continue to grow milk sales to major retailers and reduce exposure to middle ground • Grow milk&more sales • Deal with inflation Acquisitions to accelerate growth and bring synergies

  33. Dealing with inflation • Broadly based business • Cheese benefits when milk prices increase • Customer Direct benefits when milk prices fall • Milk price increases of around £40 million offset by ‘pass through’ and cheese delay • Other commodity cost + 10% (£25 million) • Offset by ongoing cost reduction programme (£20 million pa) • Strong relationship with retailers

  34. A real ongoing focus on costs Cost savings are essential to deliver value to customers and consumers £800 million cost base (excluding milk and commodity ingredients) Target £20 million (2½%) each year

  35. Current year outlook • Markets are tough and consumers are under increasing pressure • Commodity input costs have increased – we have a track record of being able to deal with this • We will continue doing the things that have contributed to recent success - innovation - investment in brands - strong promotional programme - further efficiency improvements • Trading at start of the year is in line with expectations and we are soundly positioned for the year as a whole

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

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