Preliminary Results for the Year Ended 2nd April 2005

1
Preliminary Results for the Year Ended 2nd April
2005
2
Contents

• Board Changes
• Highlights
• Operating Review
• Financial Results
• Market Overview
• Summary Outlook

3
Board Changes

• Alan Wiseman has adopted a Non Executive Chairman
  role
• Robert Wiseman appointed Chief Executive
• David Dobbins, Commercial Director, appointed
• Martyn Mulcahy, Operations Director, appointed
• First Milk finalising non executive appointment
• Will be five non executive directors
• Fully compliant with Combined Code

- with effect from 1 July 2005
4
Financial Highlights

• Volumes up 2.2 to 1.21 billion litres
• Turnover up 3.1 to 489.2 million
• Operating profit down 19.5 to 24.6 million
• Pre-tax profit down 15.3 to 24.7 million
• Post-tax profit up 3.8 to 20.9 million
• Earnings per share up 6.9 to 27.57 pence
• Dividend up 10.3 to 8.00 pence per share
• Cash generated from operations of 38.5 million

5
Operational Highlights

• Increased supplies with Sainsbury and Tesco
• Sales of the One growing satisfactorily
• Droitwich Spa dairy annualised production over
  500 million litres
• Northampton depot to be operational November 2005
• On track for new South West dairy for late 2006
• Price to direct suppliers of milk over 20 pence
  per litre
• Extended Shelf Life (ESL) milk product to be
  launched with Tesco in June 2005

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Operating Review
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Sales - Summary

• Record volumes with sales of 1.21 billion litres
• Annualised current volumes in excess of 1.35
  billion litres
• Sales post October circa 1.25 billion litres
• England and Wales currently account for 74 of
  sales by volume, and will be 75 post October
• Market share in Scotland post October circa 54

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Sales - Changes

• Ceased supplying Asda in November and January
• Started supplying additional Sainsbury stores in
  January
• Started supplying additional CWS stores in
  January
• Started supplying additional Tesco stores in
  April
• Will cease supplies to Morrisons in October
• Somerfield arrangements extended to September
  2006
• Strong sales performance across multiple retail
  customers
• Stability in customer base for next year

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Gains and Losses
Source Dairy Industry Newsletter
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Sales Post Morrison
320m litres
1,250m litres
930m litres
Note - multiples reflect all multiple retailers
not just supermarkets
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Sales - Other

• Increase in customer prices in March 2005
• Led to increased payments for milk and margin
  recovery
• Decline in bulk cream prices continued from last
  year into recent weeks
• Pot cream sales shifted in line with milk changes
• Pleased with growth of the One
• Continue to review national roll out
• ESL milk product to be launched in June 2005,
  with Tesco

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Existing Dairies

• Significant volume increases in English dairies
• Now operating at record levels of volumes and
  efficiencies
• Droitwich Spa dairy weekly volumes over 10
  million litres
• Introduced South West and Welsh milk products
• Total plant investment for ESL of 7million
• Packaging costs up 3 million in second half, now
  stable
• Nampak managing plastic bottle hole-in-the wall
  facilities at Bellshill and Manchester

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New Dairy

• Morrisons serviced from Northern dairies
• Utilisation at dairies will remain high post
  October
• Business in South West has doubled recently
• Volumes in this area justify a new dairy
• Initial capacity of 200 million litres per annum
• Cost of initial capacity of 30 million
• Ultimate capacity of 300 million litres per annum
• Choice between preferred sites being made

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Facilities
New Depot
New Dual Production/Distribution Site
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Distribution

• Northampton depot to be operational November 2005
  
• Temporary Peterborough depot operating well
• New depot facility to be attached to new dairy in
  the South West
• Spend of 11.2 million on vehicles in year
• Closed Edinburgh depot in March
• Loss of 44 jobs and a 0.2 million cost
• Reviewing impact of Morrisons loss on depots

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Milk Procurement

• Prices to farmers increased 1ppl since February
• Highest price for raw milk supplies of major
  processors
• Price guaranteed until July 2005
• Uncompetitive differential cannot be maintained
• Unified Wiseman Partnership Board created
• 3 million milk reload facility to be built in
  Market Drayton to assist milk costs and balancing
  in England

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Milk Price Table - Liquid Contracts
Operating Review
Source - Milkprice.com Represents price paid for
direct supplies only
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Working Time Directive

• Introduced March 2005 for drivers
• Maximum of 48 hours to be worked on average
• Resulted in increase in wage rates
• Resulted in alterations to working arrangements
• Resulted in an increase in number of drivers
  employed
• Estimated cost of 1.8 million per annum

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Financial Results
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Underlying Profit and Loss
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Reported Profit and Loss
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Tax Credit

• Tax credit of 3.9 million relates to matters
  arising in financial years 2000 to 2004
• Future tax deductions in relation to these
  matters subject to separate negotiations
• Possible total future reduction of 1.5 million
  to tax charge between 2005 and 2009
• Will not recognise any benefit in tax charge
  until matters are agreed

23
One Off Charges
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Like for Like Comparisons
Underlying results adjusted to eliminate 53rd week
25
Balance Sheet Review
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Capital Expenditure
- total expenditure of 30 million over two
years
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Cash Flow Review
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Financial Reporting

• International Accounting Standards effective for
  next year
• Restate 2005 comparatives in 2006 results
• Impact assessed and quantified
• No significant amendments required
• Do not anticipate any material ongoing impact
• Pension liabilities limited to 0.7 million, net
  of tax

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First Milk Investment

• First Milk acquired 15 of Company through a
  tender
• New non executive director not yet appointed
• Wiseman family retains 48 of shares
• Developing closer working relationship and common
  interests
• Costs of 0.3 million associated with tender and
  whitewash

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Office of Fair Trading

• Arla lodged appeal against OFT on Chapter II
  decision
• Decision awaited from Competition Appeals
  Tribunal hearing held in January 2005
• We intervened in the appeal to defend our
  position
• Cost of appeal to us of 0.6 million
• Chapter I case reopened in August 2003
• Await developments as to whether case is to be
  closed or pursued

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Market Overview
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GB Liquid Milk Market
Source Dairy Industry Newsletter and Wiseman
estimates (Wiseman estimated October sales
annualised)
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Market Shares By Sector
Source Dairy Industry Newsletter and Wiseman
estimates for post October 2005 Supermarkets
include Tesco, Sainsbury, Asda, Safeway,
Somerfield, Morrison, Waitrose and MS
34
Market Shares
Source Dairy Industry Newsletter and Wiseman
estimates for post October 2005
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Summary Outlook
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Summary Outlook

• Volume and turnover at new record levels in first
  half
• Gains from Tesco and Sainsbury more than offset
  losses
• News regarding Morrison disappointing
• Organic growth from major supermarket accounts
• Facilities will remain highly utilised and
  efficient
• New dairy to commence construction in next year
• Will improve costs and allow for growth in South
  of England
• Well positioned for long term development

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Preliminary Results for the Year Ended 2nd April
2005