DAIRY CREST GROUP PLC

1
DAIRY CREST GROUP PLC PRELIMINARY RESULTS For
the year ended 31 March 2005
2
Highlights

• Turnover (including share of joint ventures)
  1.35bn (2004 1.36bn)
• Adjusted profit before tax 84.2m (2004 85.1m)
  
• Reported profit before tax up 46 to 66.7m
  (2004 45.6m)
• Adjusted earnings per share 49.3 pence (2004
  50.0 pence)
• Full year dividend up 7 to 20.2 pence
• Strong cash generation delivers 52m reduction in
  net debt

profit before exceptional items and goodwill
amortisation
3
Highlights

• Encouraging progress from brand portfolio with
  particularly strong performance from Cathedral
  City
• Acquired 100 ownership of Country Life brand
  with new marketing campaign planned
• Own label cheese supply gains with ASDA and
  Morrisons
• Own label fresh milk supply gains with Morrisons
  and Sainsburys following loss of Tesco and ASDA
• Strategic acquisitions of Midlands Co-op Dairies
  and Starcross Foods to strengthen Dairies
  business
• Launch of St. Ivel advance innovative branded
  fresh milk enriched with Omega-3

4
Financial Review Alastair Murray

5
Profit and Loss
6
Earnings and Dividends
7
Operating Results
operating profit before exceptional items and
goodwill amortisation
8
Operating Margin
Based on operating profit before exceptional
items and goodwill amortisation
9
Balance Sheet
10
Operating Cash Flow
Based on operating profit before exceptional
items and goodwill amortisation
11
Cash Flow
12
Group Stocks Movement

• Significant reduction in group stocks benefits
  cashflow
• - strategy to reduce cheese stocks pre CAP
  reform
• - reduced ingredients stocks following
  downsizing of business in 2003

13
Pensions Summary

• Actuarial valuation as at 31 March 2004 completed
  during the year indicated surplus under SSAP24 of
  30m
• FRS 17 gross deficit at 31 March 2005 of 104.4m
  (200495.2m)
• better investment returns of c.20m
• decrease in AA corporate bond yield and
  inflation/salary increases totalling c.20m
• shortfall in contributions on FRS17 basis of
  c.8m
• Employer contributions to increase by 3.5
  (c.3m) to 11.4 from 2005/06
• no impact on PL charge under IFRS
• Reviewing implications of new pensions legislation

14
IFRS Current Position

• Restatement of opening balance sheet at 31 March
  2004 completed
• Restatement of profit and loss account for
  2004/05 and balance sheet at 31 March 2005
  completed
• Numbers are unaudited estimates based on current
  understanding of IFRS
• Numbers will not be audited until May 2006
• Further changes may be required if additional
  standards issued or interpretation amended

15
IFRS Overview

• IFRS does not alter cash flows of the Group
• No impact on operations solely an accounting
  matter
• Major changes are in accounting for pensions,
  share based payments, goodwill and dividends.
  Other minor changes
• Adjustments are in line with expectations
• Net assets at 31 March 2004 reduced by 56.7m and
  normalised PBT for 2004/05 by 8.9m. Change to
  pensions represents 70.3m and 7.6m of these
  adjustments respectively and change to dividends
  increases net assets by 16.5m
• Net assets at 31 March 2005 reduced by 50.7m.
  Pensions represent 76.8m of this adjustment
  offset by change to dividends, 17.7m and
  reversal of goodwill amortisation, 10.6m (after
  tax)

16
Business Operations Drummond Hall

17
Spreads

• Good progress by spreads business with increased
  profitability
• biggest Dairy Crest profit centre
• Increased investment in marketing primarily media
• Portfolio approach to managing brands
• Price increases achieved from August 2004
• Clover and Utterly Butterly grew sales by 2 and
  1
• - increased share of dairy spreads sector

18
Spreads

• Continued improvement in St Ivel Gold
• - underlying off promotion growth
• - new Gold Lowest successfully
• launched in January 2005
• Good growth in Country Life with Dairy Crest
  sales of packet and spreadable up 26 and 27
  respectively
• - acquisition of 100 ownership of Country Life
  brand
• - new marketing campaign
• late Summer 2005
• - national TV advertising

19
Cathedral City

• Strong performance from Cathedral City
• - both volume and value growth over 20
• - brand now worth approximately 90m at retail
  value
• Increased marketing and promotional activity
• - national TV advertising campaign during year
• Successful New Product Development focused on
  convenience
• Grated launched Sept 2004
• second format of DipGo! launched April 2005
• new Lunch Pack launched April 2005
• Davidstow creamery successfully commissioned

20
Cheese

• Improved cheese prices maintained throughout
  2004/05
• - seasonally adjusted cheese stocks have fallen
  for 29 consecutive months to March 2005
• Overall cheese sales up 2 by volume and 5 by
  value
• Asda new supply agreement for all own-label
  cheddar and other British cheeses
• commences Summer 2005
• manufacture at Aspatria creamery
• Morrisons new supply agreement for majority of
  own-label cheddar
• - additional 8,000 tonnes per annum
• - manufacture at Haverfordwest creamery
• Cost based price increases under negotiation

21
Fresh Dairy Products

• YDC brands continue to perform well with strong
  growth
• - Petits Filous sales value up by 14
• - Frubes sales value up by 11
• - YOP sales value up by 35
• - Wildlife sales value up by 21
• - Weight Watchers sales value up by 14
• New Product Development
• Weight Watchers range continues to expand
• Petits Filous yogurt recently launched
• YDC to focus future development on brands
• - retailer brand yogurt and desserts market
  challenging
• - Enfield and Yeovil to close by summer 2005

22
Retail Milk

• Overall fresh milk volumes up 5
• Performance and volumes impacted in H2
• - loss of Asda volume from November 2004
• - higher energy and packaging costs
• Price increases achieved from March 2005
  reflecting higher industry costs
• Tesco volume ceased in April 2005
• Strong customer base
• - 50 share of Sainsburys and Morrisons
• - 100 of Waitrose and Marks Spencer
• Strategic acquisitions to strengthen Dairies
  business
• - Starcross Foods dairy in Derbyshire
• - Midlands Co-op Dairies

23
Starcross acquisition

• Announced acquisition of Starcross Foods on 5 May
  2005
• Foston, Derbyshire
• total consideration 16.9m
• current capacity 100ml of milk pa
• Extends geographical footprint across England and
  Wales to cover most of the major northern
  conurbations

Northern distribution limit
Starcross
Fenstanton
Severnside
Chadwell Heath
NRC Dairies
Totnes
24
Midland Co-op Dairies acquisition

• Announced acquisition on 16 May 2005
• - 20m cash consideration
• Midland Co-op Dairies is the largest regional
  dairy
• - sales of approximately 200ml of milk pa
• - mixture of retail, wholesale and doorstep
  customers
• - 4 year contract to supply Co-op stores in
  Midlands region
• Integration into existing Dairies business
  underway
• proposed closure of Birmingham dairy and three
  depots
• cash exceptional charge of c. 9m in current year
• Acquisitions of Midlands Co-op Dairies and
  Starcross, together with recent business wins,
  expected to benefit Group profitability by
  approximately 4m in 2006/07

25
Other Liquid Products

• Continued improvement in organic milk
• - own brand sales value up 38
• - Rachels brand sales value up 22
• FRijj maintained market leading position
• Improved performance in potted cream with better
  business mix
• - increase in proportion of added value creams
• - new Waitrose Select Farm cream performing
  well
• New investment at Chard to create centre of
  excellence for speciality creams
• - Marks Spencer creams to move to Chard from
  YDC Enfield

26
St. Ivel advance

• New branded fresh milk enriched with Omega-3
• whole and semi skimmed
• 1 and 2 litre bottles
• Studies show that increased Omega-3 consumption
• - may enhance learning and concentration in some
  people
• also helps to maintain a healthy heart
• brand positioned to appeal to mums with young
  children
• Launched May 2005 with strong marketing support
• Initial national distribution in Waitrose and
  Tesco

27
Household

• Strong contribution to Groups profit and
  cashflow
• Overall household volumes and turnover up year on
  year
• - volume gained in middle ground
• Doorstep price increase from October 2004 of 1
  penny per pint
• Underlying doorstep decline now down to 8
• - increased investment in canvassing
• - first class service initiatives
• Non-milk product sales up over 8
• Continued infill acquisitions

28
Ingredients

• Ingredients volumes down following closure of
  butter powder facility in July 2003
• Good performance with strong markets for
  commodities
• Continued uncertainty over impact of CAP reform

29
Milk Procurement

• Developed stronger working relationship with
  Dairy Crest Direct
• Over two thirds of raw milk sourced from Dairy
  Crest Direct
• DC increased average prices for its liquid milk
  by 0.4ppl in March and a further 0.35ppl in April
• - following price increases achieved with
  retailers
• Possible price rise for milk suppliers on cheese
  contracts

30
Outlook

• Dairies business materially strengthened
• - integration of Midland Co-op Dairies and
  Starcross
• - Morrisons fresh milk gain will benefit H2
• Significant brand initiatives in H1
• new marketing campaign for Country Life
• launch of St Ivel advance
• Group continues to be cash generative
• Trading at the start of the year in line with our
  expectations

31
DAIRY CREST GROUP PLC PRELIMINARY RESULTS For
the year ended 31 March 2005