Preliminary Results for the Year Ended 1st April 2006

1
Preliminary Results for the Year Ended 1st April
2006
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Contents

• Operating Review
• Financial Results
• Market Overview
• Summary Outlook

3
Operating Review
4
Sales - Volumes

• Record volumes with sales of 1.38 billion litres
• Second half volumes of 690 million litres
• Increased Sainsbury and Tesco volume offset
  Morrison loss
• New volumes to over 500 One Stop convenience
  stores
• Additional Somerfield volumes allocated in the
  period
• Sole supply status granted for Bestway/Batleys
  Group

5
Sales Split
Total
England and Wales
Scotland
Note - multiples reflect all multiple retailers
not just supermarkets
6
Sales Products

• Look to innovative packaging and products
• Substantial investment in recent years
• the One continues to develop satisfactorily
• Tesco Pure product well established
• Launched Disney snack pack milk
• Puriti brand being launched Summer 2006
• FreshNLo celebrates 25th anniversary this year

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Sales - Other

• Increased selling prices in January 2006
• Price increase necessary given previously
  incurred additional costs
• Bulk cream prices weak in second half compared to
  first
• Expect further reductions in line with CAP reform
• Middle ground remains competitive with gains and
  losses
• Substantial growth in demand for organic milk
• OMSCO supply contract renegotiated to accommodate
  future growth

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Definitely Devon

• Acquired trade and assets of milk business on
  11th March
• Total cost of 0.8 million
• Additional volumes of 20 million litres per annum
• Approximately 75 of volumes with CWS
• Acquired assets and leasing dairy in Torrington,
  Devon
• Produce clotted cream for Definitely Devon whilst
  operating from dairy
• Complements presence in South West

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Existing Dairies

• Dairies running at record production levels
• Efficiencies improved by 10 in the last year
• Significant volume increases in English dairies
• Processed 940 million litre, a 25 increase
• Scottish dairies processed down 5 to 410 million
  litres
• Cost base reduced at Aberdeen
• Consider dairies to be the countrys most
  efficient
• Recovered higher costs but oil price remains a
  concern

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New Dairy

• Pushing ahead with development plans
• Site located at Bridgwater, Somerset
• Planning permission granted on 9th May 2006
• Strong volumes growth across the business
• South West depots now service approximately 200
  million litres per annum
• Additional volumes with Definitely Devon
  acquisition

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New Dairy

• Confident that capacity will be utilised
• Release capacity throughout the Group for further
  growth
• Proposed completion in Autumn 2007
• Orders placed for processing and filling
  equipment
• Initial capacity of 200 million litres per annum
• Initial cost of 46 million
• Building larger than previously envisaged
  increasing future flexibility

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Facilities
New Depot
New Dual Production/Distribution Site
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Distribution

• Northampton depot opened in November 2005
• Delivered on time and on budget
• Considerable volumes transferred into depot
• Large volume increases serviced to usual high
  standards
• Volume increases of over 100 in South West
• Volume reductions in Scotland managed effectively
• Reviewing utilisation of handheld technology for
  deliveries
• RFID trial being conducted with Tesco

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Milk Procurement

• Proud of our record on price paid for milk
  supplies
• Premium of over 0.5ppl paid in last year compared
  to major competitors
• Reduced price paid for milk by 0.65ppl in March
• Reducing premium with competitors accounted for
  0.30ppl of this reduction
• Balance of reduction reflected lower bulk cream
  returns

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Farm Gate Prices
Source Liquid Contract prices per
Milkprice.com. Represents price paid for direct
supplies only based on 1 million litre per annum
producer with milk of 3.85 butterfat, 3
protein, SCCs of 150,000/ml and Bactoscans of
30,000/ml and Every Other Day Collection
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Farm Gate Prices April 2006
- Relates to our estimates for standard litre
prices from Milk Development Council and
Milkprices.com
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Milk Procurement

• Regular dialogue with NFU and NFUS
• Reviewing contract terms with direct farms
• Review is consistent with NFU Vision Document
• Improving relationships with other suppliers
• Recently increased volumes acquired from First
  Milk
• Reviewing potential benefits of rationalisation
  of ex farm transport with First Milk
• 5 million Market Drayton depot to be operational
  October 2006

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Financial Results
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Financial Reporting

• International Reporting Standards adopted for
  first time
• Full details of adjustments arising previously
  published
• No material ongoing impact
• Full details available on website

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Reported Income Statement
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Underlying Income Statement
Adjusted to remove non-recurring tax credit and
impact on interest payable in 2004/2005
22
Comparison of First and Second Half
Adjusted to remove non-recurring tax credit and
impact on interest payable in 2004/2005
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Balance Sheet
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Capital Expenditure
25
Cash Flow Review
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Pensions

• Group operates a Group Personal Pension Plan
• Only defined benefit scheme came via an
  acquisition
• Changing mortality and discount rates increased
  liability
• Group decided to make a one off 0.9 million
  contribution
• Deficit at year end is 0.5 million before the
  related deferred tax asset
• Ongoing contributions increased from 185,000 to
  240,000 per annum

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Market Overview
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GB Liquid Milk Market
Source Dairy Industry Newsletter, Oriel
Securities and Wiseman estimates
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Market Shares By Sector
Source Dairy Industry Newsletter, Oriel
Securities and Wiseman estimates
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Summary Outlook
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Summary Outlook

• Volume and turnover at new record levels in first
  half
• Margins improved in second half
• Oil related costs remain a concern
• Strong organic growth from major supermarket
  accounts
• Construction of new dairy to commence early June
• Confident new dairy will be profitably utilised
• Low gearing supports proposed capital expenditure
• Well positioned for long term development

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Preliminary Results for the Year Ended 1st April
2006