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Dairy Crest Group plc

Annual Report 2013


Report of the Directors
Notice : Limitations on Director liability
Pages 2 to 56 inclusive of this document comprise
the Report of the Directors which has been prepared
and presented in accordance with and in reliance
upon English company law and liabilities of the
Directors in connection with that report shall be
subject to the limitations and restrictions provided by
such law. English company law also provides a safe
harbour limiting the liability of Directors in respect of
statements in and omissions from the Report of the
Directors contained on pages 2 to 56. The purpose
of the Annual Report and the Report of the Directors
contained in it is to provide information to members
of the Company. The Company, its Directors,
employees, agents and advisers do not accept or
assume responsibility to any other person to whom
this document is shown or into whose hands it
may come and any such responsibility or liability is
expressly disclaimed.
Cautionary statement regarding forward
looking statements The Groups reports including
this document and written information released or
oral statements made to the public in future, by or
on behalf of the Group, may contain forward-looking
statements. By their nature, these statements involve
uncertainty since future events and circumstances
can cause results to differ materially from those
anticipated. The forward-looking statements reflect
knowledge and information available at the time of
their preparation and, except to the extent required
by applicable regulations or by law, the Group
undertakes no obligation to update these forward-
looking statements. Nothing in this Annual Report
should be construed as a profit forecast.
Dairy Crest Annual Report 2013 1
Contents
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THE NUMBERS
57 Independent auditors report
58 Consolidated income statement
59 Consolidated statement
of comprehensive income
60 Consolidated and Parent
Company balance sheets
61 Consolidated statement
of changes in equity
62 Parent Company statement
of changes in equity
63 Consolidated and Parent
Company statement of cash flows
64 Accounting policies
70 Notes to the financial statements
113 Group financial history
114 Shareholders information
OVERVIEW
Who we are and what we do
2 At a glance
4 Our vision, values and measures
6 Going where consumers take us
8 Our people
10 The Directors
12 Management team
13 Chairmans statement
14 Chief Executives review
16 Principal risks and uncertainties
BUSINESS REVIEW
The business in detail
18 Spreads
20 Cheese
22 Dairies
24 Milk Procurement
26 Corporate Responsibility
30 Financial review
GOVERNANCE
34 Corporate governance
41 Directors remuneration report
53 Additional statutory information
56 Statement of Directors
responsibilities
Good through & through
Dairy Crest Group plc is the largest UK-owned dairy food
company. We process and market nutritious fresh milk and
branded dairy products. The Company has a clear strategy,
a strong vision, robust values and good people.
In a transformational year we have sold our French spreads
business to focus on the UK; rationalised our Dairies business;
introduced an innovative new milk purchase contract for our
farmers that provides greater transparency and reduces
volatility and initiated a process to move to one business
structure focusing on consumer driven growth and an
integrated supply chain.
We are a responsible business and have been shortlisted
to be Business in the Communitys Company of the Year 2013.
Dairy Crest is well positioned to generate growth which will
benefit everyone associated with the business.
2 Dairy Crest Annual Report 2013
Report of the Directors
At a glance
Divisions
Spreads revenue
14% 37%
Spreads prot
48% 17%
Cheese revenue Cheese prot
69% 15%
Dairies revenue Dairies prot
*% of total Group (excluding associates
and other revenue)
Dairy Crest produces leading
spreads and butter brands at two
factories in the UK. These brands
have strong distribution through
retailers. We focus on two key
brands Clover and Country Life.
% of total Group
(excluding associates and other revenue)
Dairy Crest has the leading cheese
brand in the UK, Cathedral City,
and a world-class cheese supply
chain. Cathedral City is made at our
Davidstow creamery in Cornwall from
milk supplied by local dairy farmers.
The cheese is matured, cut and
wrapped at our purpose-built facility
in Nuneaton from where it is
despatched to retailers. We also have
a smaller cheese packing facility at
Frome, Somerset which provides the
business with additional flexibility.
We process and deliver fresh
conventional, organic and flavoured
milk to major retailers, middle ground
customers including smaller retailers,
coffee shops and hospitals and
residential customers.
We also manufacture and sell FRijj,
the leading fresh flavoured milk brand,
cream and milk powders.
Vision
We are proud of our links to the countryside, our dairy heritage
and the part they play in everyday life
We want to earn the right to consumers loyalty by providing
healthy, enjoyable, convenient products
We aim to meet consumers needs and go where this takes us
As we grow, we will look after our people and the communities
where we work
Dairy Crest is the largest UK-owned dairy company, processing
and selling fresh milk and branded dairy products in the UK
Strategy
To build market-leading positions in branded and added
value markets
To focus on cost reduction and efficiency improvements
To improve quality of earnings and reduce risk
To generate organic growth and to make acquisitions and
disposals where they will generate value

On-going growth for Cathedral City
ahead of market

Recent innovation, Chedds and
Selections, delivering growth
and widening appeal

Good progress with premium
Davidstow brand

Improved second half margins from
actions taken to restore profitability

FRijj sales up 5% in strongly
growing market

Cost savings will contribute
to future profit growth

Clover and Country Life, our two
key brands in this sector, both
increased value and volume share

MH Foods, maker of Frylight
one-cal cooking spray, purchased
in 2011, is making good progress

Efficiency improvements
Production of Clover moved from
Crudgington to Kirkby in the year
and project underway to close
Crudgington in 2014
Highlights
Spreads Cheese Dairies
Contribution to Group
Who we are
72236_Glasshouse_p01-p17.indd 2 05/06/2013 10:35
Dairy Crest Annual Report 2013 3
09 10 11 12 13
Segment prot**
(m)
Revenue
(m)
4
1
5
.
8
3
3
7
.
2
3
1
1
.
6
3
3
6
.
4
5
9
.
7
Net debt
(m)
09 10 11 12 13
1
,
5
5
5
.
5
1
,
5
3
0
.
6
1
,
5
0
2
.
2
1
,
5
1
4
.
7
1
,
3
8
1
.
6
09 10 11 12 13
7
9
.
0
7
1
.
4
7
3
.
5
6
8
.
6
6
9
.
3
Dairy is one of the
largest food categories
worth 10bn
*
**
Before exceptionals
and amortisation of
acquired intangibles
Total grocery 98bn
Dairy
10bn
*
From Kantar
52 weeks ended
24 March 2013
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Chard
Severnside
Chadwell Heath
Hanworth
Foston
Crewe
Whitland
Nuneaton
Frome
Davidstow
Kirkby
Crudgington
Erith
Key
Spreads
Cheese
Dairies
No1 UK
dairy spread
No1 UK
branded cheese
Production sites
Country Life milk Fresh milk to
retailers
Doorstep delivery
milk&more
No1 flavoured
milk drink
Spreads
Cheese
Dairies
Markets Financial highlights
Dairy Crest has consolidated
its organisation into a
single structure focused on
consumer driven growth with
an integrated supply chain
4 Dairy Crest Annual Report 2013
Report of the Directors
Our vision, values and measures
Our values Value measures
Improve our employee
survey results
Our prot will grow every year
10% of our annual turnover will
come from consumer innovation.
Internal innovation will reduce our
cost base every year
Improve our Corporate
Responsibility survey results
WE RESPECT
We value our people and are
stronger together
WE LISTEN
Consumers are at the heart of
our business
WE LEAD
We value success and strive
to be the best
WE CREATE
We constantly look for new and
better ways of doing things
WE CARE
We act responsibly with a
passion to do the right thing
Grow share of our consumers
purse and be Number 1 or 2 in
the markets we serve
We have created a strong vision and
robust values for the business.
We have value measures supported
by key performance indicators that
give a clear indication of progress
We do not expect to achieve every
value measure every year, but by
making it clear what our targets are we
believe that we have set a framework
that will help us deliver continuous
improvements in performance
Dairy Crest Annual Report 2013 5
Report of the Directors
Key brand Market
Market
rank
Brand
growth
2012/13*
Market
growth
2012/13*
Cathedral City UK Cheese No1 branded cheese 5% 2%
Clover UK Butter, Spreads, Margarine No1 dairy spread -1% -3%
Country Life UK Butter, Spreads, Margarine No3 UK butter 1% -3%
FRijj Flavoured milk No1 flavoured milk drink 5% 10%
*Nielsen data 52 weeks to 30/03/13
Our vision, values and measures
Key performance indicators
For further
information
Employee
survey results*:
Our people p8
Business review
p18
Financial review
p30
368
343
Milk processed per employee
(000 litres)
47.5
50.6
Adjusted prot
before tax (m)
13
12
13
12
Business review
p18
368
343
Milk processed per employee
(000 litres)
47.5
50.6
Adjusted prot
before tax (m)
13
12
13
12
5% of total
2012/13 revenue
from innovation in
the last three years
9% of 2012/13
key brand revenue
from innovation in
the last three years
Cost base new
initiatives in 2012/13
delivered 23m
annualised savings
Corporate
Responsibility
report p26
Received a BITC Platinum
Big Tick Award in
2013 and shortlisted to be BITCs
Company of the Year 2013
Overall employee engagement score
56%.
Compares to UK-wide average engagement
decrease of three points to 48%
Response rate
88%
* Next survey due in
September 2013
2013 Corporate
Responsibility
survey results:
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We are proud of
our links to the
countryside, our
dairy heritage and
the part these play
in everyday life
We want to earn
consumers loyalty
by providing
healthy, enjoyable,
convenient
products
We aim to meet
consumers needs
and go where this
takes us
As we grow, we
look after our
people and the
communities in
which we work
Our vision
72236_Glasshouse_p01-p17.indd 5 04/06/2013 02:19
A key part of our Vision is that we listen to consumers and react as their needs change.
We have recently completed a project to gain a deeper understanding of the dairy category
in UK supermarkets which accounts for over
10 billion of shopper purchases each year.
To do this we have analysed market data, interviewed shoppers at the point of purchase and
held discussion groups to refine findings and recommendations.
Dairy products are consumed by 99% of all UK households which each spend 386 per year
on them.
Going where consumers take us
14 million litres of
milk are sold in the
UK every day
Cheese features in
over 5.5 billion meals
in the UK every year
The average
household in the UK
buys cream 12 times
a year
29 packs of butter
and spreads are
bought in the UK
every second
Report of the Directors
6 Dairy Crest Annual Report 2013
Bringing dairy to life from a shoppers perspective
We have known for some time that
consumers want us to help them:
Our recent work has led us to add a fourth
driver in response to growing eco-ethical
issues. Consumers also want us to help them:
lead a healthier life through the diet
they eat (healthy life)
nd enjoyment and pleasure from
their food (pleasure)
create wholesome tasty meals and
snacks (making life easier)
to be more eco-ethically responsible
(responsible consumption)
What shoppers also told us is that there is a
disconnect between the pleasure of
consuming dairy and the chore of shopping
for it. Dairy lives in the field, the farm and the
home but not in supermarkets. We have
made recommendations that we believe will
change this and help the dairy category
realise its full potential.
A summary of these are:
Shoppers understand and believe in the
inherent goodness of dairy products. We
should accentuate the positive messages and
defend against negative perspectives in a
more confident manner.
People love to consume dairy products.
We need to remind them of this while they
are shopping by using emotive imagery
and descriptions. Product tasting and
trial opportunities are also a good way of
doing this.
Shoppers are hungry for advice and
information. We need to provide product
information in shops and on packs as well
as quick and easy recipe suggestions and
usage advice.
Many shoppers want to try something new
and different but are wary about doing so.
We need to provide opportunities for
shoppers to become more adventurous
while at the same time minimising the risk
for them when they try something new.
Milk is happily seen as a planned top-up item
because it is available everywhere.
Cheese is generally recognised as being
good value despite it being one of the most
expensive items in most shopping trolleys.
Spreads shoppers generally have a favourite
brand and most have alternative brands that
they will buy more reluctantly.
Some mums see flavoured milk as a slightly
better for you treat.
Consumers are at the
heart of our business
Report of the Directors
Dairy Crest Annual Report 2013 7
Get the taste buds working
for shoppers
Celebrate dairy
Encourage experimentation
What do shoppers think about
shopping for milk and dairy
products?
Engage and educate shoppers
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Our people
We organised workshops for unemployed youngsters at two
of our sites, outlining the types of careers available in the dairy
industry, alongside some practice and coaching on how to
perform best at selection interviews.
It has, however, also been a challenging year for many
Dairy Crest staff. Over the course of the last 12 months we have
restructured our business to ensure we are better placed to
drive growth and create a more integrated, efficient supply chain.
Where these changes have resulted in the reduction of roles or
the closure of factories, we have supported staff with a range of
tools and services which have helped them find alternative roles
inside and outside of Dairy Crest.
Diversity
We are committed to providing an inclusive working environment
where everyone feels valued and respected. We recognise that
people from different backgrounds, experiences and abilities
can bring fresh ideas and innovations to improve our working
practices and business, delivering commercial benefit and
ultimately, shareholder value.
We believe that for people to be the most productive they
need to achieve an appropriate work-life balance and we believe
any employee, regardless of their position, location, role or length
of service should feel that they are treated flexibly in their ways
of working.
Our aim is to have a fully diverse workforce that reflects the
communities where we operate. Employees are encouraged to
reach their full potential regardless of their age, gender, marital
status (including civil partnerships), disability, nationality, colour,
ethnic origin, sexual orientation or religious affiliation. Dairy Crest
does not tolerate discrimination or harassment on any of these
grounds. As a major food business we believe that having a
diverse workforce is advantageous as it ensures we are well
placed to understand the diverse group of people that consume
our products, and grow a more talented workforce.
To help us achieve these aims we have in place maternity,
paternity and adoption leave policies and benefits that are above
the statutory norm; we actively promote our flexible working
policy and we give staff the opportunity of taking sabbaticals,
secondments and to participate in community volunteering. To
ensure that our employees are kept up to date with our Diversity
work, we have pages dedicated to this on our employee intranet,
which includes monthly updates on our employee statistics on
gender, age and working patterns.
Helping staff reach their potential
Attracting and retaining a talented workforce is vital to our future
success. To achieve this we offer staff a wide range of training and
development opportunities that reach out to all levels and teams.
Highlights in 2012 included the introduction of an engineering
apprenticeship scheme which complements our food technologist
apprenticeship programme and the formal processing and
manufacturing qualification delivered by Reaseheath College. In
addition, we developed an online assessment tool to enhance the
development of our depot managers, which allowed us to target
our development in the right areas.
With so many staff not office or factory based and often
working different shift patterns, online development plays a key
part in our learning offerings. Our online learning facility, my
e-learning, gives everyone within Dairy Crest access to over
100 training courses at any time of the day. Through this portal
employees can access subjects such as customer care, health
& safety, Microsoft Office, pre-retirement and finance. To date, the
courses have been accessed by 2,017 people.
2,017
employees have accessed the new
e-learning portal
Personal development plans are in place throughout the
Company, and since 2011 the vast majority of staff benefit from
being part of a bonus scheme that is linked to their performance,
our values and the results of the business.
We continue to invest in succession planning and through
our talent management processes we have identified employees
who have the potential to do bigger or different jobs. We have
established an internal mentoring programme to support our
high potential population and maintain an on-going focus on their
career plans. In addition, we have created career maps for the
business to help people with their career choices.
As well as investing in our employees, we also played a central
role in delivering the IGDs Feeding Britains Future programme,
the objective of which was to provide skills training to young
people so as to enhance their prospects of gaining employment
and to promote the benefits of a career in the food industry.
We value our people
and are stronger together
8 Dairy Crest Annual Report 2013
Report of the Directors
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Listening to staff
Through our employee survey we gather the views of our staff
on a range of areas including: strategy and leadership; values
and corporate responsibility; customers and quality; learning,
development and teamwork; wellbeing and recognition; and
workplace environment.
The latest employee survey carried out in January 2012
resulted in a 2% increase in employee engagement with 88%
of staff participating in the survey. The results of the survey
have been used to create action plans that have been rolled out
across the business. The next staff survey will take place
in September 2013.
We are committed to ensuring that staff dont just know
what is happening across our business but that they are the first
to know what is happening across our business.
To achieve this, we have in place tailored staff briefings called
Team Talk that regularly take place at each of our places of work.
We publish a weekly Comms Round Up, a quarterly business
briefing which highlights our financial performance and we
continue to develop and expand our staff website, The Gardens,
which is accessible at work either through employees computers
or in the case of our factories, via a free internet cafe. Staff can
also access The Gardens from home through their private
internet connection. CEO Mark Allen regularly visits manufacturing
sites and depots, hosting employee Q&A sessions and all staff are
able to email Mark via a specially set up email address.
Road shows 2012
The key messages that came out of the staff survey we carried
out in 2012 were that employees wanted to know more about
what our business strategy is, how Dairy Crest is performing
in the challenging economic environment and the role that
staff have in achieving that strategy. To ensure we successfully
answered these questions, our most senior business managers
carried out 263 road shows which every member of staff was
invited to attend. The results of the road shows were very
positive with the vast majority of staff taking up the invitation
and almost two thirds of attendees saying that they would work
differently as a result of them. Overall satisfaction rates were high
with 73% rating the sessions as either excellent or very good.
Whistle blowing hotline
We have a confidential whistleblower hotline, which provides a
mechanism for the reporting of illegal activity or the misuse of
Dairy Crest assets, while protecting the staff that make such
reports from retaliation.
Reward and recognition
We believe an engaged staff is directly linked to being a
successful and productive company. For this reason, we are
delighted to report that through our reward and recognition
scheme, last year 595 members of staff were nominated by their
colleagues for a recognition award and that 26% of employees
chose to participate in our latest Sharesave Scheme.
595
staff nominated by colleagues for a
recognition award
During 2012 we successfully re-launched our voluntary benefits
program, MyRewards with our partners, the Personal Group.
Supported by a dedicated and Dairy Crest branded website,
over a third of our employees regularly use the site and have
saved themselves over 12,000 on purchases, ranging from their
weekly shop to a foreign holiday. The re-launch also includes
access to an innovative and leading edge second opinion
welfare benefit with Best Doctors.
2012/13 has seen some major changes in the provision
of pension benefits with the introduction of auto-enrolment.
Dairy Crest has been working collaboratively with its Pensions
Communication and Consultation Forum (PCCF) to comply
with the new responsibilities under Workplace Pension Auto-
enrolment legislation and, as a consequence, over half our
employees have been entered into a new section of our
Stakeholder scheme to meet the statutory obligations and to
help them build for their future.
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Dairy Crest Annual Report 2013 9
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Dairy Crest
is proud to
support skills
for work week
Dairy Crest Group plc
Claygate House
Littleworth Road
Esher
Surrey KT10 9PN
Company No: 3162897
www.dairycrest.co.uk
10 Dairy Crest Annual Report 2013
Report of the Directors
Executive Directors
4
Dairy Crest is led by an experienced Board of Directors,
which today comprises three Executive Directors, one
Non-executive Chairman and four independent Non-
executive Directors. Together the Executive Directors
have over 30 years experience of the business.
The Board sets strategy and monitors progress.
Day-to-day matters are the responsibility of the
Management Board, which today comprises the three
Executive Directors, the Company Secretary & General
Counsel and five other senior managers.
*
Audit Committee Member
Remuneration Committee Member
Nomination Committee Member
Corporate Responsibility
Committee Member
Management Board Member
# Not a Board Member
1. Mark Allen
Chief Executive
Appointed a Director in 2002 and became Chief
Executive in January 2007. He joined Dairy Crest in
August 1991. He was formerly with Shell UK Ltd. He
is Chairman of The Princes Rural Action Programme
and a Trustee for The Princes Countryside Fund. He
is Vice Chairman of Dairy UK and a Non-executive
Director of Howdens Joinery Plc.
2. Alastair Murray
Finance Director (Up to 23/5/13)
Appointed in September 2003. He was Finance
Director of The Body Shop International plc from
January 1999 and was previously Finance Director
of Dalgety Food Ingredients Limited. He steps down
from the Board on 23 May 2013.
3. Tom Atherton
Finance Director (From 23/5/13)
Appointed from 23 May 2013. A Chartered
Accountant who has worked for Dairy Crest for over
7 years, the last 4 as Director of Financial Control. He
has previously held senior finance positions in Logica
plc and Thorn plc.
4. Martyn Wilks
Executive Managing Director
Appointed in January 2008. He was President of
the Snackfood Division of Mars USA, and has held
other senior management positions within Mars
Incorporated including Managing Director of Mars,
France, and Global Vice President for Sales and
Marketing. Martyn is also currently an Appointed Non-
executive Director of England Netball, the governing
body for the sport.
3
2
1
Dairy Crest Annual Report 2013 11
Non-Executive Directors and Advisers
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8 9 10
5 6 7
Auditor
Ernst & Young LLP
Solicitors
Eversheds LLP
Principal Bankers
The Royal Bank
of Scotland plc
Rabobank
International,
London Branch
Lloyds TSB plc
Santander UK plc
Corporate Brokers
J. P. Morgan
Cazenove
Jefferies Hoare
Govett
Registered Office
Claygate House,
Littleworth Road,
Esher, Surrey
KT10 9PN
Registered in
England
No. 3162897
Board and main Committee meetings
The following Directors held office during the year. The number of Board and Committee meetings
attended by Directors in the year is shown in the table below. The numbers in brackets show the
maximum number of meetings Directors could have attended during 2012/13.
1 Stephen Alexander was appointed chairman of the Remuneration
Committee on 18 May 2012.
2 Sue Farr was appointed a member of the Remuneration and
Corporate Responsibility Committees on 18 May 2012.
3 Richard Macdonald was appointed Senior Independent Director
on 18 May 2012.
4 Howard Mann stood down from the Board and all Committees
on 18 May 2012.
Board Audit Remuneration Nomination CR Management Board
Mr A Fry 15(15) 2(2)
Mr M Allen 15(15) 3(3) 37(39)
Mr A Murray 13(15) 3(3) 36(39)
Mr M Wilks 15(15) 3(3) 36(39)
Mr S Alexander
1
15(15) 4(4) 6(6) 2(2)
Mr A Carr-Locke 14(15) 4(4) 6(6) 2(2)
Ms S Farr
2
11(15) 4(5) 2(3)
Mr R Macdonald
3
14(15) 3(3) 3(3)
Mr H Mann
4
3(4) 1(1) 1(1)
5. Anthony Fry
Chairman
Appointed as a Non-executive Director in July 2007,
as Chairman on 1 January 2010 and as chairman of
the Nomination Committee in May 2011. Until March
2011 he was Senior Adviser of Evercore Partners in
the firms London office. He has previously held senior
appointments at Lehman Brothers, Credit Suisse and
the Rothschild Group in a career in merchant banking
which has spanned more than 30 years. In November
2010 he was appointed Chairman of Cala Group
Limited and in November 2012 he was appointed
Senior Adviser to the Board of Espirito Santo Investment
Bank. He will become Chairman of the Premier League
on 1 June 2013 and is a Non-executive Director of
Control Risks, Twig Europe and the BBC Trust, from
which he will shortly be retiring. He is on a number
of advisory boards and has served on the boards of
Mowlem, The British Standards Institution and Southern
Water as well as numerous not-for-profit organisations.
8. Sue Farr
Non-Executive Director
Appointed as a Non-executive Director in November
2011. She is a member of the Executive Management
Team of Chime Communications PLC, a position she
has held since 2003. She has extensive marketing
communications experience, having served as
Marketing Director of the BBC for 7 years, Director
of Corporate Affairs, Thames Television for 3 years
and Director of Corporate Communications, Vauxhall
Motors. She is a Trustee of the Historic Royal Palaces
and a Non-executive Director of Motivcom plc.
6. Stephen Alexander
Non-Executive Director
*

Appointed as a Non-executive Director in January
2011 and chairman of the Remuneration Committee
in May 2012. He is Chairman of Immediate Media
Company Ltd, an Operating Partner at OpCapita
LLP and Chairman of Look Ahead Housing and
Care. Previously Chairman of Maltby Capital Ltd
(parent company of EMI Group), Chairman of Odeon
Cinemas, Chief Executive of Hillsdown Holdings Ltd
and held senior positions with Allied Domecq PLC
and Imperial Foods. He was also Senior Independent
Director at Devro plc.
9. Richard Macdonald
Non-Executive Director
*

Appointed as a Non-executive Director in November
2010, chairman of the Corporate Responsibility
Committee in May 2011 and Senior Independent
Director in May 2012. He had a 30 year career with
the National Farmers Union, serving as Director
General for 13 years. He is a Non-executive Director
of Moy Park Limited and Chairman of DEFRAs Better
Regulation Task Force. He is also a Governor of The
Royal Agricultural College Cirencester, Vice Chairman
of the National Institute of Agricultural Botany and will
become Chairman of Farm Africa on 26 June 2013.
7. Andrew Carr-Locke
Non-Executive Director
*

Appointed as a Non-executive Director and chairman
of the Audit Committee in August 2009. A Fellow of
the Chartered Institute of Management Accountants,
he has previously held senior finance positions at
Courtaulds Textiles, Diageo, Bowater Scott and
Kodak and was Group Finance Director at George
Wimpey plc until 2007. He has previously held
non-executive directorships at Royal Mail Holdings,
Venture Production and AWG. In April 2010 he
was appointed Executive Chairman of Countryside
Properties PLC.
10. Robin Miller
Company Secretary & General
Counsel #
Appointed in April 2008. He is a solicitor having
worked in private practice and in-house in both retail
and international manufacturing, latterly with Gallaher
Group Plc.
12 Dairy Crest Annual Report 2013
Report of the Directors
Management Board
13
12
11
Day-to-day matters are the
responsibility of the Management
Board, which currently comprises
the three Executive Directors, the
Company Secretary, the Group
Procurement Director, the Group
Supply Chain Director and the
Group HR Director. Other senior
managers attend by invitation.
The Management Board normally
meets weekly.
Corporate Responsibility
Committee Member
Management Board Member
11. Mike Sheldon
Group Procurement Director
Mike joined Dairy Crest from PepsiCo 20 years ago.
He has held several senior management positions
within the business including, most recently, Managing
Director of the Customer Direct division. He took up
his current role in 2012.
12. Mike Barrington
Group Supply Chain Director
Before joining Dairy Crest in 2011, Mike held senior
management positions with Cadbury Schweppes
and Kraft Foods, latterly Manufacturing Director for
Cadbury in the UK & Ireland. Mike joined Dairy Crest
as Supply Chain Director, Dairies and was appointed
to his current role in April 2013.
13. Robert Willock
Group HR Director
Robert joined Dairy Crest 7 years ago as HR Director,
Dairies from The Maersk Company where he was
Director of Human Resources. He was appointed to
his current role in April 2013.
Dairy Crest Annual Report 2013 13
Chairmans statement
we operate. Balancing these groups different
interests is never easy, especially at times
when the need to make change is at its
greatest, but the clarity provided by our Vision
and Values helps us make the right decisions.
Corporate responsibility
Dairy Crest is a responsible business and has
demonstrated its commitment to corporate
responsibility by improving its Business in
the Community rating from Gold to Platinum
Big Tick in the year, the only food business
to achieve this prestigious ranking. We are
also delighted to have been shortlisted to
be Business in the Communitys Company
of the Year 2013. During the year we
have focused our corporate responsibility
commitments on 40 pledges, making it
easier to align our corporate responsibility
and commercial strategies.
Employee, Board and other senior
management changes
The transformation overseen by the Board
has resulted in a smaller workforce which
has reduced by around 20% over the
year. As a responsible employer, we have
endeavoured to support people who have
left the business as best we can. On behalf
of the Board I would like to thank all of them
and all of the people who continue to work
for Dairy Crest directly or indirectly for the
contribution they have made to the success
of the Group.
On 23 May 2013, after nearly ten years
as Finance Director, Alastair Murray will
leave to pursue other business interests. In
his time with Dairy Crest, Alastair has been
a Finance Director of the highest quality
with an excellent reputation both within the
business and outside. He leaves Dairy Crest
with our very best wishes for the future.
Alastairs successor as Finance Director
is Tom Atherton who has been Dairy Crests
Director of Financial Control for the past four
Against the background of a trading
environment which remained extremely
challenging, this was a transformational year
for Dairy Crest. The Board has overseen
the sale of our French spreads business,
St Hubert; a rationalisation of our Dairies
business; a reorganisation of our head office
and support functions; and the introduction
of a ground-breaking milk supply contract
which initiated a new relationship between
the business and its supplying dairy farmers.
At the same time, in line with our
established long-term strategy, we have
continued to support our key brands and
drive costs out of the business.
We finish the year in a much improved
financial position and with a clear plan
for growth which will benefit everyone
associated with the business.
Well-established Vision and Values
The Groups well-established Vision and
Values continue to provide the Board with a
framework in which to operate. They reflect
the fact that consumers come first for Dairy
Crest and that we are well aware of our
links to rural Britain and the responsibility
we have to our farmers, our employees, our
franchisees and the communities in which
years and has worked for Dairy Crest for
over seven years in total.
In addition, Toby Brinsmead, who was
Managing Director of the Dairies business
before we reorganised into a unified
structure, left the business earlier this month.
I thank him for all he has done, in particular
for his important work in creating a more
focused Dairies business.
Increased dividend recommended
The Board is recommending a final dividend
of 15.0 pence per share, making a full year
dividend of 20.7 pence, up 1.5% from last
year. This dividend is covered 1.4 times by
adjusted basic earnings per share.
The reorganisation of our balance
sheet since the year end will lower interest
charges and result in an improved dividend
cover in the future. The Board has reviewed
its dividend policy and, given the Groups
improved cash position, is of the view that,
going forward, the current progressive
dividend policy should be maintained and the
target cover range should be 1.5 to 2.5 times.
Summary
We have made significant progress this
year through disciplined execution of our
strategy. Dairy Crest is now a simpler, more
focused business which is well positioned
to generate growth and good returns for
shareholders.
Anthony Fry Chairman
22 May 2013
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Ongoing growth for Cathedral City
ahead of market
Clover and Country Life both gained
market share
Innovation driving added value sales:
5% of total revenue and 9% of key
brand revenue generated from products
introduced in the last three years
Continued focus on costs: 23 million
annualised cost savings delivered in
2012/13, with a further 20 million
identified for 2013/14
BITC Platinum Big Tick Award reflects
ongoing strong Corporate Responsibility
commitment
Adjusted profit before tax is up 7%
to 50.6 million
Year end net debt is down 82%
to 60 million
Post year end restructuring of
balance sheet reduces future
interest charges
Post year end additional 40 million
cash contribution to the pension
fund reduces exposure
Proposed final dividend is up 2%
Successful sale of St Hubert
has refocused the business
on the UK
Process is underway to move
to one business structure
focusing on consumer driven
growth and an integrated
supply chain
Innovative new milk price
formula introduced to
help farmers and sustain
milk supply
Operating highlights Financial highlights Strategic highlights
14 Dairy Crest Annual Report 2013
Report of the Directors
extended our major liquid milk contract with
Sainsburys through to 2017 and reduced our
exposure to less profitable contracts.
Last year we set a medium-term target
of a 3% return on sales for this business.
Despite the additional support we provided
to our farmers in the year, we have made
some progress towards our target. Second
half margins, which are usually higher than
those in the first half, rose to 1.7%.
St Hubert
It was not an easy decision to sell St
Hubert. This was a strong business that
had performed extremely well under
Dairy Crests ownership and had made a
significant contribution to the profitability of
the business. However it did not provide
the platform for further expansion into
continental Europe that we anticipated.
The successful disposal of St Hubert
has reduced significantly the Groups
gearing. Following the sale, our year end net
debt is at its lowest level since 2000. This
strong position has allowed us to reduce our
exposure to the pension fund by making a
one-off contribution of 40 million subsequent
to the year end and provides us with exciting
opportunities to invest for growth.
Market background
The year has seen generally lower food
consumption reflecting fragile consumer
confidence.
Changes elsewhere in the market place
have left us as the largest UK-owned dairy
foods company. We are proud to be in this
position and recognise the onus it places
on us to provide leadership to the UK dairy
sector. We have fulfilled this role by being the
first major milk buyer to fully implement the
Governments voluntary code of practice for
milk supply contracts and by introducing a
formula based milk purchasing contract. We
Chief Executives review
Summary
This has been an important
year in the history of Dairy
Crest. The transformational sale
of our French spreads
business, St Hubert, resulted in
proceeds of 341 million and
generated a post-tax profit of
47.7 million. This sale and
subsequent reorganisation of
our balance sheet leaves us
well placed to meet the
challenges of the tough
consumer environment and to
invest in growth in the UK.
Taken together our four key brands have
increased their value market share. This
is a solid performance and reflects our
consistent strategic focus on brand equity
and innovation.
A sustainable supply of milk is of vital
importance to Dairy Crest. In the face of
some of the most challenging weather
ever experienced by our farmers, and
higher feed costs that have put pressure
on their businesses, we were first to adopt
a government-sponsored voluntary code
of practice. In addition, we increased
the milk prices we paid to farmers and
introduced a ground-breaking contract
which allowed them to opt for a formulaic
milk price mechanism that provides greater
transparency and reduces volatility.
Higher farmgate milk prices have
put pressure on our Dairies business.
Nevertheless we have made progress in
rebuilding profitability. We have completed our
three-year 75 million investment programme;
closed two dairies; driven down costs;
are also taking the lead in calling for clearer
country of origin labelling for dairy products
so that British consumers can support
British farmers.
Looking forward we are hoping for a
more benign climate for farming. However
we expect consumers to remain cautious
and demand to remain subdued.
Long-term strategy
We remain clear that our long-
term strategy to grow branded
and added value sales, become
more efficient, reduce risk and
improve the quality of our
earnings and make value-
enhancing acquisitions and
disposals is the right one for the
business. We have made good
progress with the execution of
this strategy during the last year.
The rationalisation of our Dairies business,
which has involved a three year programme
of investment in three key dairies and the
closure of the Fenstanton and Aintree
dairies as well as 28 distribution depots,
demonstrates our determination to create
a sustainable business. We retained
our contract to supply liquid milk to
Sainsburys through to 2017 in the face
of fierce competition and new processing
capacity coming on stream elsewhere in
the dairy sector. This was a good result and
vindicates the difficult decisions we have
made in this part of our business.
The work we have done over recent
years to focus the business and remove
complexity has allowed us to initiate a
reorganisation into one management and
operating structure. The new structure is
focused on consumer-driven growth with
an integrated supply chain and is consistent
with our long-term strategy to build added
value sales and drive efficiencies.
Cutting costs is an embedded part of
our strategy and cost reductions have been
important in achieving our targets this year.
We maintained our record of implementing
cost saving initiatives of at least 20 million
per annum, achieving 23 million in the year.
Our employees, including Board members
and senior management, have contributed
by accepting below-inflation pay increases.
In addition to the initiatives in our Dairies
business and our reorganisation into one
structure, we are also consolidating our two
British spreads manufacturing facilities onto
one site as we target a further 20 million
of savings in the new financial year. These
efficiency measures help us to support our
key brands, meet profit expectations and
pay our farmers more.
Dairy Crest Annual Report 2013 15
Trading performance and
financial summary
A solid performance from our
four key brands, Cathedral City,
Clover, Country Life and FRijj,
particularly in the first half of the
year, coupled with an
accelerated programme of
efficiency measures, resulted in
a strong trading performance
and we delivered results for the
year in line with our expectations.
As the table above shows, total revenue
from our four key brands is flat year on
year with Cathedral City and FRijj growth
being offset by lower Clover and Country
Life sales. Retail sales of these brands as
measured by Nielsen have grown in total
by 3% and Cathedral City, Clover and
Country Life have all grown market share.
Although FRijj has lost market share in the
face of strong competition from new brands
introduced by competitors, its own growth
reflects the expansion of the overall market.
We continue to invest behind our key
brands and are committed to their ongoing
success. Our market-leading cheddar
brand, Cathedral City, goes from strength
to strength and has become one of the
UKs major food brands. In 2012 it was
the only food brand voted into the top ten
of YouGovs Brand Index, alongside BBC
iPlayer, John Lewis and Amazon.
New products launched in the last few
years such as FRijj The Incredible, Chedds
and Cathedral City Selections contributed to
this performance and we continue to focus
on bringing new products to the market.
This year around 5% of our total revenue
and 9% of our key brand revenue has come
from products introduced in the last three
years. We have an ambitious target of 10%
for such sales which we achieved last year
but have missed this year as new products
introduced three years ago dropped out of
the calculation.
Adjusted Group profit before tax
increased by 7% to 50.6 million (2012:
47.5 million). Adjusted basic earnings per
share increased by 3% to 29.9 pence (2012:
28.9 pence).
Group net debt at 31 March 2013 was
60 million (2012: 336 million), principally
reflecting the proceeds from the sale of
St Hubert.
Future prospects
We believe that we can generate profit
growth in all three of our product categories
over the medium term. We believe we can
continue to grow sales and profits in our
cheese business; that the consolidation of
our spreads manufacturing footprint onto
one site will improve the profitability of that
business; and that our Dairies business will
continue to benefit from the work we are
doing to move towards our medium-term
target of 3% return on sales.
In addition, the post year end debt
restructure will result in lower interest
charges in the future.
We are focused on generating cash
from the business as well as growing profits,
albeit we expect net debt to rise in the year
ending 31 March 2014 as a result of our
one-off cash contribution to the pension
fund and investment in our new Spreads
manufacturing facility.
Once the Spreads project is completed
we will have well-invested, modern facilities
across our business and we would expect
capital expenditure in the existing business
to fall back towards the level of annual
depreciation. We will also continue to sell
properties we no longer require and, in the
absence of acquisitions or internal investment
in new growth opportunities, would expect
net debt to fall after 2013/14.
Our strong financial position and our
confidence that we can generate cash from
our existing product categories means we
have the capability to invest in attractive
growth opportunities, either internally or
through acquisition.
We are excited about an opportunity
to increase profits from whey, a by-product
of the cheese manufacturing process. At
present we manufacture whey powder which
is mainly sold to food manufacturers, but we
believe there now may be an opportunity to
add greater value to our high quality whey
stream and enter other, more attractive
markets. A project is underway to scope
the opportunity.
Current trading
The current financial year has started in line
with our expectations. We have announced
higher milk prices for our farmers but have
demonstrated in the past that we can do
this without damaging profitability. Key to
achieving this is the ongoing implementation
of our strategy to reduce controllable costs
and we are again on track to meet our
targeted 20 million saving during the year.
Mark Allen Chief Executive
22 May 2013
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Brand Market Dairy Crest
sales growth*
Market statistics**
Brand growth Market growth
UK cheese +3% +5% +2%
UK butter,
spreads, margarine
-5% -1% -3%
UK butter,
spreads, margarine
-3% +1% -3%
Flavoured milk +5% +5% +10%
Total % +3%
* Dairy Crest sales 12 months to 31 March 2013 v 12 months to 31 March 2012 ** Nielsen data 52 weeks to 30 March 2013
16 Dairy Crest Annual Report 2013
Report of the Directors
We manage risk to help us achieve our strategic objectives
and protect our reputation
The Audit Committee is responsible for overseeing the Groups
risk management processes and the Board is responsible for the
appropriate identification of risks and the effective implementation of
mitigating activities.
Internal Audit provides independent assurance to management
and the Audit Committee as to the effectiveness of mechanisms
put in place to mitigate risks. This process explicitly recognises the
relationship between Internal Audit and Risk Management. The
Audit Committee is satisfied that the processes are adequate and
appropriate. Further details are set out in the Corporate Governance
Report on pages 34 to 40.
The Groups Risk Register is compiled by the Management
Board. Each member of the Management Board individually sets out
risks, the likelihood and consequence of crystallisation and mitigating
controls for his area of responsibility. These are then reviewed by
the Management Board as a whole and the Group Risk Register is
created. The Board formally reviews the Group Risk Register when
the annual budget is set and at each of the two forecast reviews
throughout the year. The Company Secretary and General Counsel is
responsible for highlighting to the Board any changes to the Groups
Risk Register identified during the intervening periods.
The principal risks and uncertainties facing the Group are set out
in the table below. This is not intended to be an exhaustive analysis of
all risks facing the Group.
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Risk register
Group board
Management board
Commercial risks
Reduced profitability
Risk area and potential impact
We operate in extremely competitive markets. If we fail to compete effectively
or are subject to higher input prices that cannot be recovered by raising selling
prices without losing volumes we could lose sales and profits.
Mitigating controls
We set ourselves the target of continually reducing our cost base and are able
to invest in our supply chain to help achieve this.
No one customer accounts for more than 15% of total revenues and we
continually strive to widen our customer base. Despite challenging trading
conditions we have maintained investment in marketing our branded products.
Our innovation programme continues to generate new products that reinforce
our appeal to customers. We recognise the importance of strong customer
relationships and the executive team plays an active part in maintaining and
developing these. They are also involved in major customer negotiations.
We conduct customer surveys to benchmark our performance and we
continuously monitor the service and quality levels provided to our customers
and consumers, and have procedures in place to react quickly to any issues.
Our commitment to corporate responsibility remains a key part of our business
strategy and is an important part of our overall proposition to some customers.
Reduced demand from consumers
Risk area and potential impact
Consumers could move away from dairy products for economic, health,
ethical, or other reasons leading to lower sales and profits.
Mitigating controls
Consumers are at the heart of our business and we regularly monitor
consumer trends. We continue to promote the health benefits provided
by dairy products and develop healthier products. We also continue to
maintain our focus on developing a compelling new product development
pipeline, enabling us to react to consumer trends, for example with more
environmentally-friendly packaging, and healthier variants of branded goods.
We have increased our direct involvement with government to understand and
influence future legislation that could affect future consumer demand.
Input cost volatility
Risk area and potential impact
Volatile milk and non-milk costs (vegetable oils, diesel, electricity, gas and
packaging) could reduce margins unless we can manage cost risk, find other
cost efficiencies elsewhere or increase selling prices.
Mitigating controls
This area is closely reviewed by the Management Board which has established
a risk committee to monitor and hedge forward non-milk commodity prices as
appropriate. The risks associated with purchasing large volumes of milk have
been reduced by establishing milk pools linked to major customers. We seek
to absorb short term cost movements through supply chain efficiencies. Our
purchasing and commercial teams have clear lines of communication between
them to ensure customers are kept aware of changes to our cost base and
requests for price increases can be fully justified.
Operational risks
Inability to source milk
Risk area and potential impact
Without milk we would not have a business. Restricted milk supply due
to economic factors, weather, fuel availability or an epidemic which affects
dairy cows could restrict milk supply. This in turn could lead to lower sales
and profits. Consumer confidence in dairy products could also be adversely
affected.
Mitigating controls
We invest significant resources in maintaining strong relationships with our milk
suppliers by attending forums and discussing current issues and pressures
that affect both the farms and our business. The majority of our milk comes
directly from farms on contracts that include a notice period of at least one
year. Our experienced milk procurement team understand milk production and
are alert to changes in supply. We aim to pay a fair, market related milk price
and closely monitor the milk price we pay to suppliers in order to ensure we
can purchase the right quantity of milk to meet demand forecasts and have
established procedures for allocating milk between our businesses if a short-
term shortfall in supply does arise. We have contingency plans established for
major incidents and work closely with DEFRA and industry bodies to ensure
these are appropriate. These plans are regularly tested and reviewed with the
Management Board.
Principal risks and uncertainties
72236_Glasshouse_p01-p17.indd 16 04/06/2013 02:59
Dairy Crest Annual Report 2013 17
Report of the Directors
Failure of a key supplier
Risk area and potential impact
We are dependent on key suppliers and could lose sales and face financial
penalties from customers if suppliers failure leaves us unable to supply. Failure
of key information technology suppliers could adversely affect our financial
systems.
Mitigating controls
Our purchasing team regularly monitors suppliers ability to supply and puts
in place alternative arrangements, including dual purchasing, if appropriate.
We have taken specific actions to reduce our dependency on information
technology suppliers.
Other operational risks
Risk area and potential impact
An accident, product contamination, the failure of equipment or systems or
deliberate act could disrupt production, affect food safety, cause injury, and/
or cause reputational damage with adverse consequences. We are also reliant
on information technology and exposed to losses in the event that systems
fail.
Mitigating controls
Dairy Crest takes product quality very seriously and has rigorous quality
controls in place to minimise potential risks. Plans are maintained to respond
quickly to any product quality concerns and minimise any impact to the
Group. Our business is also committed to the health and safety of all our
employees and maintains systems aimed at ensuring everyone is able to
complete their work safely. All of our manufacturing sites have a trained
engineering resource, are supported by our major equipment suppliers and
hold appropriate stocks of spare parts. They also all have fire protection
systems and regular fire drills. Our information technology systems are
regularly backed up and duplicated in the majority of areas. We have
procedures in place to help us deal with major incidents and insurance cover
for property damage and business interruption risks.
People risks
Disease epidemic
Risk area and potential impact
A disease epidemic such as swine flu could adversely affect the health of our
employees and prevent them working, leaving us unable to service customers.
Mitigating controls
Contingency plans which include working with industry bodies are in place for
known epidemic risks.
Recruitment and retention
Risk area and potential impact
We need to retain high quality employees to provide customers and
consumers with safe, high quality products and services.
Mitigating controls
We carry out rigorous selection procedures and benchmark pay and benefits
to ensure we can attract and retain the best people. We have a wide bonus
scheme and a range of other incentives to reward good performance. We
have proposed changes to our long-term share option scheme better to align
the interests of management to shareholders and improve its effectiveness in
delivering retention. There is a performance review and talent management
scheme to identify and develop our own people. We undertake regular
surveys to monitor the relationship with our employees and their engagement.
Financial risks
Pension scheme
Risk area and potential impact
Despite the action we have taken to reduce the risks associated with our
pension scheme, including closing the scheme to future accrual in 2010 and
buying insurance to meet the liabilities associated with many of our retired
members in 2008 and 2009, the deficit could continue to increase and we
may then have to increase our contributions.
Mitigating controls
We continue to work closely with the Trustee of the Pension Fund to improve
the Funds financial position at an acceptable cash cost to the business. Our
recent one-off cash contribution of 40 million to the Pension Fund reduces
the risk of the deficit increasing.
Legal and compliance risks
Risk area and potential impact
Our sector is subject to a number of complex statutory requirements. There is
a risk of fines or lawsuits and reputational damage if we fail to comply.
Mitigating controls
We have a strong in-house legal function supported by external advisers.
We have undertaken Group-wide training in respect of competition law and
actively monitor and adjust to on-going legal and regulatory changes. We
have a Business Conduct Policy, and a programme designed to ensure that
all relevant employees understand what is and is not permissible under the UK
Bribery Act.
Major project risk
Risk area and potential impact
To remain competitive we periodically undertake major transformational
projects following strategic reviews. Successful execution of these projects
is often key to delivering strategic objectives. At the same time we have to
ensure that major projects do not divert from the on-going day-to-day delivery
of products and services to our customers.
Mitigating controls
We have a good track record of managing projects and use experienced and
appropriately skilled senior managers to lead these. Supervisory governance
structures are also put in place to help successful delivery. We are aware that
too much change concentrated in too short a timescale can be detrimental
and manage this by ensuring key project resource is full time with appropriate
backfilling and use of third parties.
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72236_Glasshouse_p01-p17.indd 17 04/06/2013 18:48
Report of the Directors
We constantly look
for new and better
ways of doing things
Business review
million 2012/13 2011/12
Revenue 194.5 211.3
Profit 25.7 23.2
Margin 13.2% 11.0%
Dairy Crest
Unilever 28%
Arla 32%
Private
label
15%
Other 7%
Source: Nielsen 52 w/e 30 March 2013
Share of UK retail butter and
spreads market by value
18%
We make and sell butter and
spreads at two locations in the
UK, but are currently in the
process of consolidating
manufacturing onto one of our
existing sites at Kirkby,
Merseyside.
The UK butter and spreads market declined
during the year with values around 3%
lower and volumes around 2% lower
overall. Clover and Country Life, our two
key brands in this sector, both increased
value and volume share. Promotions are at a
historically high level across the category but
are not driving category growth.
Looking forward we expect the trading
environment for butter and spreads to
remain challenging. The work we are doing
to rationalise our manufacturing capability
will make us more efficient and allow us to
continue to compete strongly.
Spreads Spreads
18 Dairy Crest Annual Report 2013
Report of the Directors
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11%
segment prot
increase
planned for the Clover brand.
Country Life is the leading British butter
brand. Sales volumes remained broadly flat
year-on-year, although a reduction in price,
reflecting lower input costs, primarily cream,
resulted in sales values falling by 3%.
Our other spreads brands, Utterly Butterly,
Vitalite and Willow, experienced small
reductions in volume and value shares.
Our Spreads business is also home to
MH Foods which we purchased in 2011.
This business manufactures and markets
one cal spray cooking oils. Under our
ownership the business has rationalised its
product range and improved manufacturing
efficiencies and is making good progress.
MH Foods demonstrates the contribution
that small acquisitions can make over time
to the profitability and growth of the Group.
During the year we moved production
of Clover from our factory in Crudgington,
Shropshire to Kirkby, Merseyside and
also commenced a project that will see
Crudgington close completely in 2014 with
Reported revenue for the year
ended 31 March 2013 fell by
8% to 194.5 million. Segment
profits increased 11% to 25.7
million, resulting in a segment
margin of 13% (2012: profit
23.2 million, margin 11%).
Two of Dairy Crests four key brands operate
in the butter and spreads product category.
Clover, our main spreads brand,
saw a small increase in volume but a 5%
reduction in value sales. It remains the UKs
leading dairy spread. Previously introduced
innovation such as Clover Lighter continues
to boost the brands performance. Towards
the end of the year we introduced a brand
new product, Clover Seedburst, into the
market. This is a spread containing a blend
of seven healthy seeds and whole grains
and is targeted at more health-focused
consumers. We have more innovation
Dairy Crest Annual Report 2013 19
all production being moved to Kirkby. This
38 million project has attracted a 5 million
grant from the Regional Growth Fund.
Looking forward we expect the profits
of this business to benefit from the cost
savings that will arise from a more efficient
supply chain.
72236_Glasshouse_p18-p25.indd 19 04/06/2013 03:05
20 Dairy Crest Annual Report 2013
Report of the Directors
Business review continued
UK after it again won the Danisco Grand Prix
trophy for consistently topping the judges
lists at cheese shows around the country.
Consumer-led marketing, including
innovation in the form of new products
and range extensions has led to significant
growth in our branded cheese sales in
recent years.
Reported revenue for the year
ended 31 March 2013 grew by
1% to 231.3 million. Segment
profits fell 6% to 33.3 million
(as stock profits recorded last
year were not repeated),
resulting in a segment margin
of 14% (2012: profit 35.5
million, margin 15%).
UK retail cheese market volumes fell by 2%
in the year with values increasing by 2%
to 2.6 billion. Cathedral City sales grew
Dairy Crest produces and
markets the UKs leading
cheese brand, Cathedral City.
Named in an independent
survey as one of the UKs top
ten positively viewed brands,
the only food brand to achieve
this standing, Cathedral City is
made at our Davidstow
creamery in Cornwall from milk
supplied by around 450 local
dairy farmers before being
matured in Nuneaton and cut
and wrapped at either our
state of the art facility there or
our highly flexible site in Frome.
We also make and sell the premium
Davidstow brand cheddar, which can
justifiably claim to be the best cheddar in the
Source: Nielsen 52 w/e 30 March 2013
Other 90%
Share of the total UK retail
cheese market by value
10%
Cathedral
City
Cheese
million 2012/13 2011/12
Revenue 231.3 229.6
Profit 33.3 35.5
Margin 14.4% 15.5%
Dairy Crest Annual Report 2013 21
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by 3%, with volumes up 1%. It has again
increased its market share and remains by
far the largest brand in the total everyday
cheese sector, although its sales account
for only 16% of this sector, reflecting the
dominance of retailer own label.
Over recent years we have widened the
appeal of Cathedral City and now have four
taste variants (mild, mature, extra mature
and vintage) as well as Lighter (reduced fat)
Cathedral City, and Chedds, a snack brand
for children. Chedds was launched in 2011
and has made a significant impact in the
childrens cheese market.
Innovative packaging continues to be
important to the brands growth and the
launch of Cathedral City Selections, packs
containing bite-sized pieces of cheese,
has been extremely successful, bringing
new consumers to the cheese market,
boosting sales in its own right and giving
consumers an opportunity to sample the
range of taste variants.
The long-established mature variant
accounted for 57% of total Cathedral City
sales, down from 65% last year, reflecting
the progress we have made in broadening
the range.
We have continued to advertise and
promote Cathedral City strongly and have
worked with key retailers to increase the
brands in-store presence. For example,
working with Tesco, we set up a trial in
36 of their stores. A whole bay of the
cheese fixture was dedicated to Cathedral
City, ensuring the full range was on offer to
consumers and allowing increased in-store
branding. The trial was successful and
Cathedral City bays will be rolled out to
more Tesco stores in the year ending 31
March 2014.
The strong performance of Cathedral
City has been acknowledged externally. The
Grocer has placed it as Britains 15th biggest
grocery brand (up from 21st last year) and
in a recent YouGov poll Cathedral City was
ranked as Britains tenth most positively
viewed brand and was the only food brand
in the top ten.
In addition to the performance of
Cathedral City we have made good progress
with our premium Davidstow brand. We
continue to widen distribution, replacing
Davidstow products that have carried
the name of specific retailers. This has
encouraged us to increase the investment
behind this brand and we expect to see
further progress going forward.
We also continue to achieve increased
efficiencies throughout the supply chain and
have reduced packing costs during the year.
The growth in our cheese sales has
encouraged us to expand Davidstows
production capacity in the year and we have
further plans for expansion in the future.
Profits in this business have been
supported by strong returns from whey
the by-product of cheese manufacture. The
whey stream at Davidstow is particularly
valuable because of its size and quality and
because it contains no colouring. We are
excited about an opportunity to increase
whey profits by extending manufacturing into
higher value products which are in demand
world-wide and have initiated a project to
scope this opportunity.
The farmers supplying their milk to our
cheese business have shared in its improved
performance through higher milk prices. We
are happy to continue to pay a premium for
our milk at Davidstow to ensure we get a
top-quality supply and since the year end
have announced a further increase in the
price we pay.
Looking forward we are well positioned
to increase market share and profits from
cheese sales. The opportunity to boost
returns from whey only adds to the future
prospects of this product category.
Report of the Directors
Business review continued
have developed a new long life product
which will allow us to push the brand into
convenience and other outlets where
refrigerated storage is less available.
The flavoured milk category is growing
strongly. Total sales are up 5% in volume
and 10% in value. Fresh flavoured milk sales
are up 8% in volume and 16% in value as
new brands introduced by competitors have
proved popular.
FRijj sales grew by 5% in value in the
year, boosted by the innovative FRijj The
Incredible premium range of flavours but
declined 2% in volume.
We advertised FRijj on television with
encouraging results, although we expect
to continue to use social media and other
alternative forms of marketing to support this
brand going forward, reflecting the age of its
target consumer.
We expect to see further material growth
in this brand in the future and are continuing
to invest at our Severnside production facility
to ensure there is sufficient headroom to
allow unfettered growth.
A clear plan to restore Dairies
profitability
2012/13 was another tough year for the
Dairies business. Following the drop in
profits in 2011/12 we have created and
started to implement a plan to restore the
returns from our Dairies business to an
acceptable level. We believe this business
can deliver a 3% return on sales and have
set this as a medium-term target.
Returns in the second half of the year
increased to 1.7% compared to 0.4% in the
first half reflecting both the usual seasonal
factors and initial results from the actions we
have taken.
Profits will be increased by a
combination of higher FRijj and other added
value sales, reduced costs and a greater
willingness to only supply those customers
who will pay a fair price.
We expect that our actions will lead to
higher margins to offset cost inflation and
lower residential sales that command an
above average margin.
At the same time we will continue to pay
a fair milk price to the farmers who supply
their milk to us and provide high quality
products and cost efficient services to our
customers.
FRijj one of the drivers behind the plan
FRijj operates in the flavoured milk product
category. This comprises fresh flavoured
milk and long life flavoured milk. FRijj is
predominately in the fresh category but we
The Dairies business
processes and delivers fresh
conventional, organic and
flavoured milk to major
retailers, middle ground
customers (including, for
example, smaller retailers,
coffee shops and hospitals)
and residential customers.
We also manufacture and
sell FRijj, the leading fresh
flavoured milk brand, cream
and milk powders.
Reported revenue fell by
11% to 951.6 million (2012:
1,069 million). Segment profit
rose slightly to 10.3 million
(2012: 10.2 million), resulting in
a margin of 1.1% (2012: 1.0%).
Dairies
22 Dairy Crest Annual Report 2013
million 2012/13 2011/12
Revenue 951.6 1,069.0
Profit 10.3 10.2
Margin 1.1% 1.0%
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Efficiency improvements and cost
reductions are also key
During the year we have completed the three
year 75 million investment programme. As
anticipated, the investment has allowed us to
pack milk more efficiently and has provided
an opportunity to focus polybottle production
at three sites and glass bottling on one
site. As a result we closed the Aintree and
Fenstanton dairies during the year with the
regrettable loss of 450 jobs. We expect the
resultant full-year cost savings to contribute
to future profit growth.
We have made further efficiencies
including introducing a new design of
polybottle in partnership with our supplier
Nampak. This uses up to 15% less
plastic good for costs and good for the
environment.
Our Dairies business also benefits from
our on-going company-wide cost saving
projects. As the largest of our businesses
it covers the highest proportion of central
overheads and the decision to move to one
business, which is anticipated to save over
5 million annually, will contribute to the
restoration of profitability in this area.
Getting the right customer mix
During the year we retained our contract
to supply liquid milk to Sainsburys - one of
our largest customers - and now have an
agreement to supply them through to 2017.
We also strengthened our offering
to retailers by buying Proper Welsh Milk,
a small dairy business that packs Welsh
milk in Wales. Several key retailers are
customers of this business which we will
look to expand.
We had to negotiate higher milk prices
with customers so that we could pay our
farmers more and compensate them for
the difficulties they faced from the poor
weather and higher animal feed costs. We
also need to make an acceptable return
for ourselves. Many of our customers
were willing to pay higher but fair prices.
However, we chose to stop supplying
some smaller customers who were not
prepared to do so. Going forward we
will continue to review our customer mix,
particularly in the middle ground.
Residential sales still important
Delivering milk to customers doorsteps
remains a key part of our business. We
have 850,000 residential customers and
have a network of 1,800 milkmen delivering
to them. However, sales in this area
continue to fall as financial pressures lead
to customers choosing to buy their milk from
shops rather than have it delivered. The rate
of decline was lower amongst customers
who use our internet doorstep delivery
proposition, milk&more, where we have
maintained over 200,000 customers who
use the service every week. However, overall
residential volume sales of milk fell 12%
compared to last year. As a result we closed
28 local depots, finishing the year with
92. We also closed our residential delivery
product distribution centre in Sunbury
during the year, moving this operation to our
National Distribution Centre in Nuneaton.
Profits from the sale of depots closed in
earlier years as well as 2012/13 were 7.7
million. We anticipate that property profits
from the sales of depots will continue into
the future and contribute to our medium-
term target of 3% margin.
Ingredients
Our ingredients operation continues to
provide us with a valuable balancing solution
for seasonal raw milk supplies and cream.
We aim to minimise throughput in
this business to reduce our exposure
as far as possible to dairy commodity
markets. However, our Dairies business
generates more cream than that required
by our Spreads business. Prices for dairy
ingredients were low during the early months
of the year then rose towards the middle of
the range seen in recent years. Since the
year end they have increased further.
Dairy Crest Annual Report 2013 23
24 Dairy Crest Annual Report 2013
Report of the Directors
Business review continued
incentive scheme was also introduced for
cheese contracts, similar to the initiative for
liquid contracts, to support farmers who
were able to increase milk production.
Secondly, following the establishment
of the Defra voluntary code, Dairy Crest
became the first milk processor to sign
up to the key principles in advance of the
code being signed. In early summer we
gave a commitment to our farmers that
30 days notice would be provided for any
price reduction and that farmers could
give three months notice to cease supplying
their milk to us if they did not agree with a
change to their milk price. Since then we
have continued fully to support the code
and have committed to incorporate its terms
within our farmer contracts.
Thirdly, together with Dairy Crest
Direct (DCD), the independent organisation
representing our farmers, we commissioned
a renowned, independent consultant to
develop a more transparent formula method
of milk pricing. The result was that Dairy
Crest became the first processor to develop
a milk price formula for farmers on standard
liquid contracts. Launched with effect from
April 2013, this has been a great success
with 175 of our farmers applying to place
all or part of their milk supply on the new
formula contract.
Looking forward we are determined to
maintain our leading position and develop
innovative ways of delivering a sustainable
supply of milk.
Future supplies
National milk supply is below the level seen
last year and supply is expected to take time
to recover. Weather, with the consequent
impact on grass growth, will play a key
part in production levels. So too will the
long-term decline in dairy farmer numbers.
It is recognised that the average farm size
is likely to increase. We all therefore have
a part to play in ensuring consumers are
well informed about how the milk they buy
is produced on modern dairy farms, and
the important factors that affect the level of
quality and animal welfare.
The market for milk supply is increasingly
competitive as milk processors seek to
attract new farmer suppliers. Milk contracts
need to reflect the external environment
and challenges. We believe the Dairy Crest
package is very competitive, offering a range
of contract options to enable farmers to
choose how they work with us. We continue
to invest in our farmer base by offering
additional benefits, including the unique
White Gold advisory service. This helps our
farmers achieve the highest standards and
comply with current dairy legislation in an
efficient way. Our long standing reputation
for this higher level of farmer support
together with secure payment for milk is
seen as a key benefit.
A particular area of focus is for our
farmers to be able to access up to date
information and news about Dairy Crest.
This is important for the decision-making
process on farm. Investment in a new farmer
website, Farm Connect, delivers this and has
been welcomed by our farmers. The website
and the upgrade of our systems to support
this innovative, interactive management tool
is part of our continued drive to improve
efficiency.
Summary
Our supplying farmers play a key role within
our business as they do within their
local communities. We are committed to
doing the right thing and supporting them to
produce high quality milk in a way that will
support our respective businesses, as well
as enhancing the rural economy and British
countryside.
Working with our farmers
to deliver a sustainable supply
of milk.
79% of the milk that Dairy Crest sources,
comes direct from farms located
throughout England and South Wales.
Milk from direct supply is a key part of our
added value strategy and we are actively
working to increase this proportion. We
value the relationship we have with our
1,250 dairy farmers who supply their milk
to us. It provides the opportunity to work
together to generate greater efficiencies,
by sharing information and knowledge,
and delivers security for both our farmers
and Dairy Crest.

Challenging year
2012 was a particularly challenging year for
agriculture and dairy farming in particular.
Adverse weather conditions persisted
throughout the year and will have a longer
term impact on milk production than is
normally seen.
The combined effect of the weather
together with high input costs and milk
price reductions in the spring put the dairy
sector under the spotlight. Dairy farmers
were clearly frustrated at the situation they
found themselves in with their margins being
squeezed. At the same time processors
had to respond to falling market values,
whilst acknowledging that consumers
continued to look for value as household
budgets tightened.
Relationships have been tested and as
a result the industry questioned if the sector
was operating effectively and what steps
could be taken to improve the milk pricing
process in order to build trust. One of the
outcomes was the development of the Defra
voluntary code for milk supply contracts.
Dairy Crest response
Dairy Crests response to the challenges of
the past year can be summarised with three
distinct actions:
Firstly, following the spring milk price
reduction for liquid contracts, the plans
for further milk price reductions were set
aside. A series of milk price increases then
followed, starting in the autumn. A volume
1,250
dairy farmers supply
their milk directly to us
Milk Procurement
72236_Glasshouse_p18-p25.indd 24 05/06/2013 06:27
Dairy Crest Annual Report 2013 25
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We act responsibly
with a passion
to do the right thing
26 Dairy Crest Annual Report 2013
Report of the Directors
Environment
We know we have an
important role to play when
it comes to tackling climate
change, reducing waste and
looking after Britains natural
resources.
Reducing emissions
At Dairy Crest we are
committed to reducing our
carbon footprint by constantly
looking at how we can make
best use of the energy we use
in our manufacturing, storage
and transport processes
and by taking advantage of
more environmentally-friendly
technology.
Given this commitment we are pleased
to report that we have continued to make
good progress against our pledge of
reducing our carbon emissions by 30%
by 2020 against 2007 levels and by March
2013 we had achieved a carbon equivalent
reduction of 22.4% with much of this
coming from two biomass boilers at our
Davidstow creamery. In 2012/13 Davidstow
reduced its carbon emissions by 13,900
tonnes in comparison to its emissions in
2007/8.
As well as investing in new, greener
vehicles and making use of telematics
systems in our trucks we continue to
operate a fleet of over 900 electric vehicles
and we also train our drivers to be more
energy efficient.
Other factors that have helped reduce
our on-site carbon footprint include
changing the lighting used in many of our
sites and warehouses to LED alternatives
and ensuring we use chilling systems
based on ammonia and glycol (which are
more environmentally friendly) rather than
HCFCs - we have plans in place to replace
the few smaller remaining systems that run
on HCFCs by 2015.
Our award winning carbon toolkit
created in partnership with our independent
farmer representative body and fully
accredited by the Carbon Trust continues
to help dairy farmers measure accurately
and compare their greenhouse gas
emissions against others, it shows them
where they can reduce their energy
consumption and it enables them to identify
and prioritise the improvements they need
to make to reduce their on farm emissions.
Following its successful trial the toolkit has
been adopted by three leading retailers.
Aligning corporate responsibility
and commercial strategies.
Our future success depends
on our ability to meet a range
of pressing environmental and
social needs that is why
thinking and acting sustainably
is so important and why we
treat corporate responsibility as
mainstream to our business.
At Dairy Crest we want our
corporate responsibility
commitments to benefit our
business. This drives better
behaviour and means we dont
just make promises which
sound good or are in fashion.
In short, corporate responsibility
matters because it is good for
Dairy Crest.
Business review continued
Corporate Responsibility
Over the last three years we have doubled
our efforts to make sure that sustainability is
fully integrated into the way we do business
and in 2012 we were confident enough to
launch 40 public corporate responsibility
pledges which we could be measured and
judged against. An update on progress
against our 40 pledges can be found in our
online Corporate Responsibility report.
We were especially proud that this
year Dairy Crest was one of only five
companies shortlisted for the Business in
the Community (BITC) Responsible Business
of the Year Award 2013. The nomination
has come on the back of attaining 98% and
a Platinum Big Tick the highest ranking
possible in their annual CR Index and
demonstrates our commitment to put our
words into action.
Of course, we know that our journey
towards being a sustainable business will
not be easy. We know we will face difficult
choices along the way. But we also know
we are heading in the right direction and
that our approach to corporate responsibility
will ultimately benefit our business, the
environment and society.
More information can be found in our
online Corporate Responsibility report.
0
10
20
30
40
50
60
70
Bonus
Pension
Benefits
Base salary
M Wilks A Murray M Allen
2008 2011 2012 2013
98
94
87
57
Since 2007
our carbon
equivalent
emissions are
down
22.4%
8%
Waste sent to landfill
2010 2013
0
20
40
60
80
100
52%
Since 2007 our
carbon equivalent
emissions are down
22.4%
We are on target
to achieve 30%
by 2020
Since 2007
we have
reduced our
water usage by
15.7%
We are on
target to
achieve 20%
by 2015
0
10
20
30
40
50
60
70
Bonus
Pension
Benefits
Base salary
M Wilks A Murray M Allen
2008 2011 2012 2013
98
94
87
57
Since 2007
our carbon
equivalent
emissions are
down
22.4%
8%
Waste sent to landfill
2010 2013
0
20
40
60
80
100
52%
Since 2007 our
carbon equivalent
emissions are down
22.4%
We are on target
to achieve 30%
by 2020
Since 2007
we have
reduced our
water usage by
15.7%
We are on
target to
achieve 20%
by 2015
Dairy Crest Annual Report 2013 27
Report of the Directors
Reducing waste
Our aim is to adopt a
comprehensive approach to
waste to ensure the
environmental impact we make
through our manufacturing and
distribution processes is kept to
a minimum. We also know that
we have a role to play in the
homes of our consumers where
there is a growing desire to
reduce packing and food waste.
Our overall aim is zero waste to landfill by
2015 (except where it is not environmentally
beneficial to do so). Last year our
manufacturing sites avoided sending 92%
of waste to landfill, up from 88% in 2011/12.
This was achieved through working with
our waste broker, 707, and staff who
identified alternative ways in which we can
recycle waste.
In 2012/13 we completed the
introduction of new spreads tubs across
all of our brands. The new tubs make
more efficient use of materials and allow
for more efficient transportation. This year
we also put on-pack recycling information
on our branded products. We have also
continued to roll out an innovative new
plastic milk bottle, designed in partnership
with Nampak. It uses about 15 per cent
less plastic than its standard equivalent and
is made with up to 15% recycled plastic.
Our goal remains to increase the
amount of recycled plastic used in our
polybottles from the current 15% to 30%
by 2015, and despite the current lack
of recycled material available within the
UK, we are working with WRAP to find a
solution. Through our doorstep delivery
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Although dairy products are an excellent
source of protein, vitamins and minerals,
especially calcium which is essential for
healthy bones and teeth, we also recognise
that many consumers want to reduce
the amount of saturated fat in their diet.
To help them achieve this, and without
compromising on taste, we have created
lower fat variants of our main brands,
namely Cathedral City, Clover, Country Life
Spreadable and in 2013 we launched Utterly
Butterly Lightly to join the Utterly Butterly
family. We also supply 1% fat milk to many
of our customers.
The investments in our lighter range,
through both advertising and promotions,
have resulted in impressive growth rates.
Today annual retail sales of these products
total 68 million and have grown over the
past year by over 10%. The two biggest
drivers behind this are Cathedral City Lighter
which now has a retail sales value of nearly
40 million and has grown by 21% since last
year and Clover Lighter which is now worth
over 18 million, up 9% compared to 2011/12.
Coupled with the investment in our
lower fat variants we have introduced
Clover Seedburst, the UKs first spread with
added seeds and whole grains. Blended
with Clover Lighter, the product provides
consumers with a natural source of vitamin
E and beneficial oils.
Aware that portion control is a key way
of helping consumers maintain or reduce
their weight we launched Cathedral City
Selections which are individually wrapped,
calorie controlled portions of cheddar that
make it easier for consumers to have a little
of what they want, when they want it. In
service we continue to sell milk in glass
bottles which are, on average, reused
20 times.
Milk is valuable and precious dairy
farmers work extremely hard to produce it
and although some milk loss is inevitable
during processing we have continued to
make good progress with a 7% reduction
in losses in comparison to 2007.
In early 2013 we publicly committed
ourselves to the third phase of WRAPs
Courtauld Commitment which includes a
commitment to helping consumers reduce
the amount of food they waste at home
by extending where possible the shelf life
of the products we make, offering them a
greater range of portion sizes and giving
them advice on what they can do with their
left overs.
Reducing water usage
Over the course of 2012/13 we
have continued to focus on our
levels of water efficiency at our
manufacturing sites and are
confident we will achieve our
target of reducing water usage
by 20% by 2015 against 2007
levels. At present we have
reduced it by 15.7%.
With an increasing focus on water as a
limited resource, in the autumn of 2011,
we launched WaterWell, an innovative
water auditing programme for farmers
which enables them to share best practice
and to benchmark their results against
sector wide data.
Our farmer suppliers also play a vital
role in conserving the countryside and
many of their activities have a positive
impact on biodiversity. Getting the balance
right between milk production and helping
wildlife is a challenge. We have in place
several initiatives with some of the UKs
leading retailers. Working with Waitrose and
AB Sustain, Dairy Crest helped set up and
fund an extensive biodiversity programme
whereby dairy farmers are paid to leave at
least 10% of their land free for wildlife to
flourish. As of 2012 the average amount of
land given over to wildlife is about 25% -
the equivalent of 18 times Londons Hyde
Park. Farmers involved in the scheme
leave hedgerows to grow, blossom and
fruit and maintain wide field margins where
wild flowers provide food and egg-laying
areas for butterflies. Other initiatives include
the introduction of ponds, ditches, beetle
banks, skylark scrapes, barn own boxes,
wetland and overwintered stubble. As a
result of the programme it was found that
wildlife has increased by 19% and sightings
of birdlife considered to be in decline were
up 47%.
Marketplace
We are committed to
creating healthy, tasty
enjoyable products, making
it easier for consumers to
choose healthier foods and
to play our part in helping to
tackle obesity.
0
10
20
30
40
50
60
70
Bonus
Pension
Benefits
Base salary
M Wilks A Murray M Allen
2008 2011 2012 2013
98
94
87
57
Since 2007
our carbon
equivalent
emissions are
down
22.4%
8%
Waste sent to landfill
2010 2013
0
20
40
60
80
100
52%
Since 2007 our
carbon equivalent
emissions are down
22.4%
We are on target
to achieve 30%
by 2020
Since 2007
we have
reduced our
water usage by
15.7%
We are on
target to
achieve 20%
by 2015
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28 Dairy Crest Annual Report 2013
Report of the Directors
Business review | Corporate Responsibility continued
Safety at work
The safety and well-being
of people connected with
Dairy Crest could not be
more important. We aim
to have no accidents in
the workplace and consider
one accident to be one
too many.
Our safety at work objective is simple; we
want everyone who works for us, and with
us, to go home to his or her family at the end
of their working day without any injury or
occupational ill health.
To achieve this objective we have
in place a number of training, employee
engagement and behavioural safety
programmes all of which have helped further
reduce the number of accidents across our
sites and, although our target is always to
have no accidents in the workplace, the
number fell from 76 last year to 56 this year.
One of the highlights of the year was a
childrens poster competition themed around
the subject My mummy/daddy works
safely. Although the poster competition was
Workplace
early 2013 when we became the first dairy
company to sign up to the Department of
Healths Responsibility Deal which includes a
commitment on calorie reduction.
We recognise that food safety is non-
negotiable and the quality of our products
underpins our success. We have to ensure
the food we produce is safe to eat and
drink and we have well-proven quality
management procedures in place to
manage and control the safety and quality
of our products throughout the supply chain
including the traceability of the ingredients
we purchase. Over the course of the last
year we are pleased to report that we have
not had to make any product recalls.
As the largest UK-owned dairy company,
Dairy Crest is committed to supporting
and working closely with our 1,250 dairy
farmers. That means paying a fair, market-
related price for milk, which recognises
the tough conditions our farmers continue
to face and committing ourselves to only
buying fresh milk from British farms. During
the year we were the first milk processor to
adopt the Governments voluntary code of
practice on milk contracts and have recently
offered a ground-breaking contract which
allows some supplying farmers to opt for
a formulaic milk price mechanism that
provides greater transparency and reduces
volatility. More information can be found in
the milk procurement section page 24.
Dairy Crest also works collaboratively
with non-farmer suppliers to ensure
compliance with our supplier corporate
responsibility policy. Introduced in 2011,
the policy sets out the minimum standards
expected from our suppliers and this year
we enhanced it to cover a global zero
tolerance on bribery and corruption.
just 30 weeks since launch, Cathedral City
Selections have achieved over
2 million of sales. This range of adult
snacking complements our childrens
cheese brand Chedds, which is made from
100% pure mild cheddar cheese and is
packed in child size portions.
Since purchasing the Frylight brand in
2011, the one calorie cooking oil spray has
gone from strength-to-strength and in 2013
we initiated the brands first ever advertising
campaign on primetime television.
Our overall commitment to leading the
lower fat dairy agenda was highlighted in
2,000
employees, about 40%
of staff, have received a
health check through our
healthier lives drive
good fun and resulted in many entries from
all areas of the business it had the important
effect of increasing awareness of a very
important issue, safety.
Understanding why accidents happen is
vital to reducing them. To ensure we are well
placed to do this we actively encourage staff
to report near misses without fear of reprisal.
This open and honest approach has resulted
in 9,349 near misses being reported last
year an increase of 271 on the previous year.
As part of our drive to help staff live
healthier lives we introduced free health
checks which are carried out by our team
of occupational health advisers. These
checkups allow staff to get tailored advice
on how they can improve their lifestyles and
they include a cholesterol check, a BMI test
and a blood pressure check. In addition
to offering staff free health checks we also
ran health awareness campaigns during
the year that focused on key health issues.
These have included diabetes, hypertension
and alcohol misuse. Together this approach
resulted in over 2,000 employees about
40% of our staff having a health check.
As well as health hubs at each of our
manufacturing sites the occupational health
team also run a bespoke health website that
staff can access both at home and at work.
These actions have helped us keep absence
rates below 3%.
The work we have done to increase staff
health and awareness and the work we have
done to reduce accidents in the workplace
has helped result in fewer days lost from
accident or ill health from 1,998 days in
2011/12 to 1,531 days in 2012/13.
Dairy Crest Annual Report 2013 29
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We know that the actions
we take can have a
significant influence on the
communities where we are
based, and as the main
employer in many areas we
believe we have a unique
opportunity to play a positive
role in supporting projects at
a local and national level.
To ensure the work we do in our local
communities adds real value to society we
focus on supporting issues and projects that
make best use of our expertise and
knowledge, provide a legacy and fit with our
vision and business strategy. For this reason
our community programme is based around
supporting the countryside, the environment,
education and health.
Countryside and environment
The rural economy is hugely important to the
UK, turning over 300 billion and employing
5.5 million people. We want it to remain
that way, so as well as supporting our dairy
suppliers we also want to support struggling
smaller farmers some of whom may not be
in the dairy sector.
To help us achieve this Mark Allen, our
Chief Executive, is Chairman of the Princes
Rural Action Programme and is a Trustee
of the Countryside Fund and Lyndsay
Chapman our Director of Agriculture and
Farming Communications is Chairman of the
Princes Dairy Initiative. We are also a major
supporter of Pub is the Hub, a charity that
helps isolated, rural pubs diversify to the
benefit of the entire local community.
Helping Britains most vulnerable dairy
farms (Case study)
In 2011, working alongside Business in the
Community and other dairy businesses, we
helped set up the Princes Dairy Initiative,
a programme designed to help small
dairy farms that dont have contracts with
processors. Initially involving 74 economically
vulnerable dairy farms in five regions across
the UK, we found that by offering them a
range of financial tools and by helping them
create a networking forum, we were able
to boost their confidence and increase the
efficiency of their farms. On the back of this
successful pilot programme our aim is to roll
out the initiative to another 300 dairy farmers
over the next three years. The programme
will continue to be led by Lyndsay Chapman,
Dairy Crests Director of Agriculture and
Farming Communications.
Healthy living
In tandem with our strategy of increasing
sales of healthier variants of our products,
our aim is to use our community programme
to encourage staff and consumers to live
healthier lifestyles. To help achieve this we
have been working in partnership with the
British Heart Foundation, the UKs leading
heart charity, to promote awareness of the
charitys activities to our doorstep customers
and staff. We have also made use of the
British Heart Foundations resources and
experience to support our staff wellbeing
campaign. Over the course of the two year
partnership, staff have raised over 390,000
for the charity.
In 2012 Dairy Crest also became a key
supporter of BBC2s Hairy Bikers Meals
on Wheels campaign, with staff taking
advantage of our volunteering policy to
deliver healthy, homemade meals to people
who need them. Our aim for the coming
years is to not just support more Meals on
Wheels programmes but to also play our
part in getting more people and companies
to support the programme.
Education
In the UK food industry and dairy sector as
a whole there is a severe shortage of food
scientists, engineers and young people
starting a career in agriculture. For these
reasons education is an important part of
our community programme.
Community
Over the course of the last year we
played a leading role in the IGDs Feeding
Britains Future programme which saw
Dairy Crest, alongside other retailers and
food manufacturers, open their doors to
unemployed youngsters to help them get
a job and to showcase the huge variety of
roles in the food sector. Dairy Crests focus
was very much centred on helping rural
communities and included a visit to the
Duchy College Farm in Cornwall and days
at our Davidstow creamery and Nuneaton
distribution centre. We will again be playing a
leading role in the initiative in 2013.
We also encourage young people to
consider a career in food manufacturing
and engineering through our sponsorship
of the University Food Science Summer
School courses at Nottingham and Reading
Universities and events such as the Festival
of Manufacturing and Engineering held in
Stonehouse, Gloucestershire.
Engaging with local communities
Our local community committees make
up the fourth strand of our community
programme and, in keeping with the overall
strategy, they support:
Local good causes that make a positive
and direct contribution to the communities
where our workplaces are based.
Good causes that improve health,
education, the environment or countryside.
Over the course of the year staff have
supported over a hundred good causes
though volunteering, donations of products
and donations of money.
30 Dairy Crest Annual Report 2013
Report of the Directors
Business review continued
09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13

1
,
5
5
5
.
4


1
,
5
3
0
.
6


1
,
5
0
2
.
2


1
,
5
1
4
.
7


1
,
3
8
1
.
6

Cash generated
from operations
(m)
Revenue
(m)
2
0
.
1
1
8
.
9
1
9
.
7
2
0
.
4
Adjusted earnings
per share
(pence)
3
0
.
0
2
7
.
4
2
9
.
9
2
8
.
9
2
9
.
9
Segment prot
(m)
7
1
.
7
7
1
.
3

7
3
.
7


6
8
.
9


6
9
.
3

1
2
9
.
1
1
4
5
.
9
1
2
8
.
1
8
4
.
5
1
9
.
1
1
1
6
1
1
5
8
5
1
2
3
1
9
2
0
.
7
Total dividends
per share
(pence)
Gearing
(%)
Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12
3.0
2.5
2.0
1.5
1.0
0.5
0
500
450
400
350
300
250
200
150
100
50
0
Net debt
Net debt (m left scale)
Net debt / EBITDA
(multiples right scale)
475 491 416 380 337 335 312 365 336
Sep 12 Mar 13
76 60
Before exceptional items
and amortisation of
acquired intangibles;
excludes associates
Before exceptional items,
amortisation of acquired
intangibles and pension
interest charges / income
Overview
The successful sale of St Hubert in August 2012
has significantly strengthened the Companys
financial position. The Group received cash
consideration of 341.1 million and net debt
at 31 March 2013 of 59.7 million is the lowest
since 2000. Since 31 March 2013, the Group
has restructured its debt facilities, repaying
100 million of loan notes early and has also
made a one-off cash contribution to the
pension fund of 40 million.
These actions leave the Group well placed to
fund growth in its core UK market. Key projects
for 2013/14 include the on-going major 38 million
investment in consolidating UK spreads
production onto one site in Kirkby, Merseyside.
Financial review
72236_Glasshouse_p26-p33.indd 30 04/06/2013 03:45
Dairy Crest Annual Report 2013 31
Report of the Directors
Segment revenue
2013 2012 Change Change
m m m %
Cheese 231.3 229.6 1.7 0.7
Spreads 194.5 211.3 (16.8) (8.0)
Dairies 951.6 1,069.0 (117.4) (11.0)
Other 4.2 4.8 (0.6) (12.5)
Total segment revenue 1,381.6 1,514.7 (133.1) (8.8)
Group revenue excluding St Hubert decreased by 8.8% to 1,381.6
million, predominantly as a result of lower revenues in the Dairies
business. These lower revenues reflect the decision to reduce sales
in the middle ground following the closure of the Fenstanton and
Liverpool dairies, and also the on-going reduction in residential
sales. Spreads revenue also decreased by 16.8 million due to lower
average realisations on Clover and butter (following a reduction in
vegetable oil and cream costs) and reduced sales of Utterly Butterly.
Cheese revenues increased slightly.
Segment operating profit
2013 2012 Change Change
m m m %
Cheese 33.3 35.5 (2.2) (6.2)
Spreads 25.7 23.2 2.5 10.8
Dairies 10.3 10.2 0.1 1.0
Share of associates (0.3) 0.3 n/a
Total segment profit 69.3 68.6 0.7 1.0
Remove share of
associates 0.3 (0.3) n/a
Acquired intangible
amortisation (0.4) (0.8) 0.4 50.0
Group profit on
operations (pre-
exceptionals) 68.9 68.1 0.8 1.2
Segment profit excluding St Hubert increased by 0.7 million to 69.3
million. Cheese profits recorded a small decrease to 33.3 million,
reflecting increased costs of milk in 2011/12 translating into higher
cost of sales in 2012/13. Spreads profits increased by 2.5 million to
25.7 million due to the benefit of cost savings initiatives and lower
vegetable oil costs. Dairies profits of 10.3 million were effectively flat
year-on-year, with the benefit of on-going cost savings being offset
by the impact of residential decline and the higher cost of raw milk.
Within Dairies, property profits were 7.7 million (2012: 4.6 million).
Sale of St Hubert
In August 2012 the St Hubert business was sold for cash
consideration of 341.1 million, resulting in a profit on disposal of
47.7 million after fees and estimated tax costs. This profit has
been classified within discontinued operations as exceptional. The
results of St Hubert until the date of sale have also been disclosed
as discontinued operations and prior year comparatives have been
restated accordingly.
The sale of St Hubert has resulted in a UK focused business which
has subsequently been reinforced by a reorganisation resulting in the
removal of divisional operating and management structures. The cash
proceeds have allowed the Group to restructure its debt after the
year end and make a one-off contribution to the pension fund as well
as retain capacity for future investment in the UK business.
Exceptional Items
Pre-tax exceptional charges of 56.5 million have been recorded in
the year (2012: 93.9 million).
In September 2012 we announced the potential closure of the
Crudgington site with production moving to Kirkby. This project, now
confirmed, will give significant savings in future years. Exceptional
costs of 13.8 million have been recorded in the year, the majority of
which are non-cash asset write-downs. Cash expenditure in the year
was 2.6 million.
In April 2012 we also announced a major restructuring of Dairies
manufacturing, which ultimately led to closure of the Fenstanton
and Aintree dairies. An exceptional cost of 21.3 million has been
recorded against this project, of which 9.0 million represents
redundancy costs. Cash expenditure in the year was 17.8 million
and the project is now complete.
During the year we completed the restructuring of depot
administration activities in the Dairies division. This project has
delivered more streamlined and centralised back-office support
functions and generated significant cost savings. Exceptional costs
in the period were 9.2 million (predominantly redundancy) with a
cash expenditure in the year of 8.5 million.
In February 2013 the Company announced a management
restructure, leading to a unified business. Exceptional costs of 3.5
million have been charged in the year being accruals for redundancy
costs. Some further exceptional costs will be incurred in 2013/14 as
the reorganisation is completed.
On 18 April 2013 the Company repaid 100 million of loan notes
ahead of their normal maturity date and reduced its revolving credit
facility (RCF) by 60 million. The associated costs (primarily make-
whole premium payable to noteholders) resulted in an exceptional
charge of 8.7 million in the year to 31 March 2013 and the cash
impact will be reflected in 2013/14. These costs are considered
exceptional due to their size and nature, and were charged in 2012/13
because having given notice of repayment to noteholders in March
2013, the Group was irrevocably committed to repaying the loan
notes at the year end.
Finance costs
Finance costs have reduced by 2.4 million to 18.7 million. This
primarily reflects the reduction in net debt following the sale of
St Hubert in August 2012 at which point all borrowings under the
revolving credit facility were repaid. The balance of the St Hubert
proceeds were largely held on short-term cash deposit prior to the
loan note repayments noted in the Borrowing Facilities section
below. The quantum of the interest reduction during the year was
limited due to the very low interest rates available on sterling and euro
deposits.
Other finance income of 5.9 million (2012: 5.5 million) comprises
the net expected return on pension scheme assets after deducting
the interest cost on the defined benefit obligation. This is based on
assumptions made at the start of the financial year. This amount can
be highly volatile year-on-year as it comprises the net of expected
returns and interest costs, both of which are dependent upon
financial market conditions at 31 March each year. We therefore
exclude this item from headline adjusted profit before tax.
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32 Dairy Crest Annual Report 2013
Report of the Directors
Following the sale of St Hubert, the Group entered into discussions
with the Pension Fund Trustee about the impact of this transaction
on the employer covenant. Consequently, on 18 April 2013 the Group
made an additional one-off contribution to the Fund of 40 million.
At the same time the Group granted the Trustee a floating charge
over maturing cheese inventories, with a maximum realisable value of
60 million. This charge was put in place to protect the Fund in the
unlikely event of an insolvency of Dairy Crest Limited.
The reported IAS19 pension liability at 31 March 2013 was
67.2 million comprising an IAS 19 deficit of 56.3 million and a
10.9 million additional liability reflecting an unrecoverable notional
surplus. The reported deficit at 31 March 2012 was 79.8 million.
Asset returns were strong during the year; however bond yields
declined again increasing the discounted level of pension liabilities.
Cash flow
Cash generated from operations was 19.1 million in the year
(2012: 84.5 million). This includes a working capital outflow of
40.0 million (2012: 20.6 million outflow) due mainly to the higher
value of cheese stocks compared to March 2012 - 155.5 million in
March 2013 versus 129.8 million last year. Stock value increases
are a result of increased manufacturing to support future volume
growth and milk cost increases during 2012. As was the case last
year, we received some early settlement of invoices from customers
at March 2013.
Capital expenditure of 50.9 million was 2.4 million below last year
(2012: 53.3 million). Significant investment continued across our
core milk processing sites, Severnside, Chadwell Heath and Foston.
The investment has allowed these sites to absorb volume from
the Liverpool and Fenstanton dairies, which have now closed. We
now operate as a smaller, well invested Dairies manufacturing base
with improved efficiencies and higher levels of capacity utilisation.
In February 2013, we received a grant of 5.3 million from The
Department for Communities and Local Government to be applied
towards capacity expansion at our spreads site at Kirkby. Proceeds
from the sale of closed depots amounted to 10.1 million.
Cash interest and tax payments amounted to 18.0 million and
4.7 million respectively. (2012: 23.6 million and 14.1 million).
Interest payments are 5.6 million lower as net debt reduced
following the sale of St Hubert in August 2012, at which point,
all borrowings under the revolving credit facility were repaid.
Furthermore, upfront fees in relation to the renewal of the revolving
credit facility were paid in the prior year.
Net debt
Following the sale of St Hubert, net debt decreased by 276.7 million
to 59.7 million at the end of the year. Net debt as defined includes
the fixed Sterling equivalent of foreign currency loan notes subject
to swaps and excludes unamortised facility fees. At 31 March 2013,
gearing (being the ratio of net debt to shareholders funds) was 19%
(2012: 123%).
Borrowing facilities
At the start of the financial year, the Groups borrowing facilities
comprised: 337 million of loan notes (at the effective swapped
exchange rate) maturing between April 2013 and November 2021,
and a 170 million plus 150 million revolving credit facility expiring
in October 2016.
Interest cover excluding pension interest, calculated on total segment
profit, remains comfortable, at 3.7 times (2012: 3.3 times).
Profit before tax
2013 2012 Change Change
m m m %
Total segment profit 69.3 68.6 0.7 1.0
Finance costs (18.7) (21.1) 2.4 11.4
Adjusted profit before tax 50.6 47.5 3.1 6.5
Amortisation of acquired
intangibles (0.4) (0.8) 0.4 50.0
Exceptional items (56.5) (93.9) 37.4 39.8
Other finance income
pensions 5.9 5.5 0.4 7.3
Reported loss
before tax (0.4) (41.7) 41.3 n/a
Adjusted profit before tax (before exceptional items and amortisation
of acquired goodwill) increased by 6.5% to 50.6 million. This
is managements key Group profit measure. The reported profit
before tax was a loss of 0.4 million as a result of exceptional items.
However, this measure excludes the exceptional pre-tax profit of
51.4 million recorded on the sale of St Hubert, and the pre-tax
profits from St Hubert up to the date of its disposal (11.3 million).
Taxation
The Groups effective tax rate on profits from continuing operations
(excluding exceptional items) was 20.7% (2012: 19.5%). The effective
tax rate continues to be kept below the corporation tax rate by profits
from property disposals, on which the tax charges are sheltered
by brought forward capital losses or roll over relief. We expect the
effective tax rate to decrease next year in line with the reduction in the
rate of UK corporation tax.
Group result for the year
The reported Group profit for the year amounted to 54.5 million
(2012: 17.1 million loss) reflecting the profit on sale of St Hubert.
Earnings per share
The Groups adjusted basic earnings per share increased by 3% to
29.9 pence per share (2012: 28.9 pence per share).
Basic earnings per share from continuing operations, which includes
the impact of exceptional items, pension interest income and the
amortisation of acquired intangibles, amounted to nil pence per share
(2012: 29.1 pence loss per share).
Dividends
The proposed final dividend of 15.0 pence per share represents a
0.3 pence per share increase compared to last year. Together with
the interim dividend of 5.7 pence per share this brings the total
dividend to 20.7 pence per share for the full year, 1.5% higher than
last year (2012: 20.4 pence per share). The final dividend will be paid
on 1 August 2013 to shareholders on the register on 28 June 2013.
Comments on dividend policy going forward are provided in the
Chairmans statement on page 13.
Pensions
During the year, the Group paid 20 million into the (closed) defined
benefit scheme in line with the schedule of contributions agreed
in June 2011. Contributions at this rate will continue until a new
agreement is reached following the actuarial valuation due as of
31 March 2013.
Business review | Financial review continued
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Dairy Crest Annual Report 2013 33
Report of the Directors
In November 2012, 7.5 million of notes were voluntarily redeemed
at par by investors. Facilities at 31 March 2013 therefore comprised
330 million of loan notes and a 170 million plus 150 million
revolving credit facility.
On 4 April 2013, 60 million of notes from the 2006 series which had
reached their maturity were repaid.
On 18 April 2013, a further 100 million of loan notes were repaid
from the 2007 series. Of these notes, the majority (69 million) were
due for repayment in April 2014 with the balance due in April 2017.
This will reduce the Groups interest payments going forward. The
repayment was effected by exercising the Groups right to early
redemption on payment of a make whole premium.
Following these repayments, the Group has 170 million of notes
outstanding which mature between 2014 and 2021.
On 18 April 2013 the Group also reduced its revolving credit facility
by 60 million to 170 million plus 90 million (approximately 246
million).
Borrowing facilities are subject to covenants which specify a
maximum ratio of net debt to EBITDA of 3.5 times and a minimum
interest cover ratio of 3.0 times. The Group remains very comfortably
within its covenants with a net debt to EBITDA ratio of 0.6 times as of
31 March 2013 (March 2012: 2.2 times).
Treasury policies
The Group operates a centralised treasury function, which controls
cash management and borrowings and the Groups financial risks.
The main treasury risks faced by the Group are liquidity, interest rates
and foreign currency. The Group only uses derivatives to manage
its foreign currency and interest rate risks arising from underlying
business and financing activities. Transactions of a speculative
nature are prohibited. The Groups treasury activities are governed
by policies approved and monitored by the Board. These policies are
summarised in Note 30 to the financial statements.
Going concern
The financial statements have been prepared on a going concern
basis as the Directors are satisfied that the Group has adequate
financial resources to continue its operations for the foreseeable
future. In making this statement, the Groups Directors have: reviewed
the Group budget, strategic plans and available facilities; have made
such other enquiries as they considered appropriate; and have
taken into account Going Concern and Liquidity Risk: Guidance
for Directors of UK Companies 2009 published by the Financial
Reporting Council in October 2009. Further information is presented
on page 53.
Alastair Murray Finance Director
22 May 2013
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34 Dairy Crest Annual Report 2013
Report of the Directors
The Board recognises its collective responsibility for the governance
of the Company and the Companys strong governance framework
is supported by a combination of clear values, appropriate policy
and an environment of transparency and accountability.
Ensuring the effective performance of the Board is one of my main
responsibilities as Chairman and my aim is to ensure that it
comprises individuals with a varied mix of backgrounds, skills and
experience who are able to challenge each other appropriately, work
in a collegiate manner and do the right thing for Dairy Crest. In
managing the changes to the Board since 2010 I have sought to
ensure that we have in place a strong Board with not only the
appropriate technical, nancial and other business skills required to
provide the best leadership for the Company, but also that we have
a group of people who demonstrate the values necessary to be
effective stewards of the Company. My focus will remain on ensuring
that the composition of the Board continues to evolve and that we
maintain an appropriate mix of experience and skills through careful
succession planning.
Dairy Crest has a clearly dened set of values which are
communicated throughout the Group. Those values are supported
by a range of procedures and guidelines which help to give
employees an appropriate roadmap for behaviours. Together with
external governance codes, they set the framework for the
Companys standards and governance. The Company strives to
ensure the highest standards of corporate governance in all areas of
its business. Throughout the 2012/13 nancial year, the Company
was in full compliance with the UK Corporate Governance Code
2010 (2010 Code) against which this Report is prepared, apart from
in relation to Board evaluation, details of which are set out at page
36. Although the 2012 edition of the UK Corporate Governance
Code (2012 Code) does not apply to the Companys 2012/13
nancial year, where appropriate, and as encouraged in the 2012
Code, this Report complies with it. We aim to achieve full
compliance with the 2012 Code when we report our 2013/14
nancial year and will continue closely to monitor developments in
corporate governance practice. The 2010 Code is publicly available
from the website of the Financial Reporting Council (FRC) at
www.frc.org.uk.
Anthony Fry Chairman
22 May 2013
Chairmans Introduction
A great deal of change has occurred at Dairy Crest and in the
wider corporate world since January 2010 when I was
appointed Chairman. Corporate governance is continually
evolving and the pace of that evolution has increased since my
appointment. It is right that boards give appropriate
consideration to the broad range of issues affecting the
businesses they lead. Focusing on just delivering good
nancial results is not enough; diversity, social and
environmental impact, long-term legacy and sustainability, to
name but a few, are all matters which boards must consider.
The right approach to corporate governance helps to ensure
that businesses are able to deliver long-term value for all of
their stakeholders in the right way and an appropriate
governance framework fulls an essential role, providing a
system for the direction and control of businesses.
Corporate governance
Governance framework
The Groups business has become more focused and less complex
over recent years with the sale of its stake in Yoplait Dairy Crest in
2009, the creation of a unied Dairies business and the subsequent
sale of its French subsidiary St Hubert in August 2012. Moreover,
since its last Report, the Company has undertaken a signicant
reorganisation. As a result, from the start of the current nancial year,
the Company consolidated its organisation into a single structure
focused on customer driven growth with an integrated supply chain.
The simplied structure in place as at the date of this Report (see
diagram above) also enables simplied governance.
The Board
The Board leads and controls the Company in the delivery of
long-term success and the discharge of the Companys obligations
to its shareholders and other stakeholders. It is collectively
responsible for the Groups strategy, values and governance and
ensuring that the resources required to meet the Groups objectives
are available within a framework of prudent controls. Certain matters
have been reserved to the Board. The Boards principal
responsibilities include:
Approval of the Groups long-term objectives and business
strategy.
Approval of the annual operating and capital expenditure budgets.
Approval of the Companys Interim and Preliminary Results
Announcements and Annual Report and Accounts.
Declaration of interim dividends and the recommendation of a nal
dividend.
Ensuring the maintenance of a sound system of internal control
and risk management.
Approval of the Companys governance framework, including key
Group policies, for example Health and Safety and Business
Conduct.
Approval of resolutions to be put to shareholders at the Annual
General Meeting (AGM).
Each Director is aware of his/her responsibilities, individually and
collectively, to promote the long-term success of the Company.
Details of the frequency of Board meetings during the year together
with Directors attendance are set out in the table at page 11.
Changes to the membership of the Board and its Committees
during 2012/13 are set out in the notes to the table on page 11.
Committees
There are ve Committees of the Board: Audit; Remuneration;
Nomination; Corporate Responsibility and the Management Board,
to which the Board has delegated specic responsibilities. Each of
the Boards Committees terms of reference are published on the
Remuneration
Committee
Audit
Committee
Group
Board
Nomination
Committee
CR
Committee
Cheese
Demand HR Finance Legal
Spreads Dairies
Management
Board
Procurement Supply
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Groups website and to the extent required, they comply with the
2010 Code. Separate reports from each of the chairmen of the Audit
(pages 37 to 38), Nomination (pages 38 to 39), Corporate
Responsibility (pages 26 to 29 and 39) and Remuneration (pages 41
to 52) Committees are included in this Report.
Board balance and independence
At the date of this Report, the Board has eight Directors (three
Executive, a Non-executive Chairman (who was independent on
appointment) and four independent Non-executive Directors). Their
biographies, responsibilities and Committee memberships are set
out on pages 10 to 11. No Non-executive Director or the Chairman
has any business or other relationship with the Group which may
inuence their independence or judgement and the Board believes
them to be independent of management.
The Board believes that it has an appropriate balance of Executive
and Non-executive Directors with a suitable breadth of experience
and backgrounds to provide effective leadership for the Group.
A highly proactive approach to the management of the Board is
maintained to ensure that all Board appointments continue to
reect diversity. Further detail on the Boards approach to diversity
and the work undertaken to ensure balance and appropriate
refreshment of the Board is given in the Nomination Committees
report at pages 38 to 39.
Chairman and Chief Executive
The division of responsibility between the Chairman and Chief
Executive is set out in writing and has been approved by the Board.
Anthony Fry leads the Board and is accountable for ensuring the
Boards effectiveness in discharging its responsibilities, including
safeguarding shareholder and other stakeholder interests and
ensuring effective communication with shareholders. In conjunction
with the Chief Executive he sets the agenda for Board meetings
ensuring that adequate time is available for all agenda items, in
particular, strategic issues, and facilitates the effective contribution of
all Directors. He promotes a culture of openness among the Board
and ensures constructive relations between Executive and Non-
executive Directors. He is supported by the Company Secretary in
the discharge of his duties. Mark Allen has overall responsibility for
the effective implementation of the strategy approved by the Board,
for the Groups business performance and day-to-day management
of the Groups operations, and for the effective management of the
Groups people and assets.
Appointment and re-election
The articles of association of the Company ('Articles') provide that
the Directors or the members, by ordinary resolution, may appoint a
Director either to ll a vacancy or as an additional director. A Director
appointed by the Directors shall retire at the next AGM following
appointment and shall be eligible for election by the members. The
Articles require all Directors to be elected annually. All Directors will
stand for re-election at the Companys 2013 AGM, except for Tom
Atherton, who consistent with the Articles, will stand for election
having been appointed since the last AGM. Having regard to the
roles performed by each of the Directors, the individual input and
contribution they make and their individual expertise and experience,
the Board is satised that each candidates performance justies
nomination for election or re-election by shareholders. The contracts
of employment of Executive Directors and the letters of appointment
of Non-executive Directors are available for inspection by any person
at the Companys registered ofce during normal ofce hours and
will also be available at the 2013 AGM for 15 minutes before and
throughout the meeting.
Non-executive Directors
All Non-executive Directors (including the Chairman) conrmed on
appointment that they had sufcient time available to full their
obligations as Directors and that they would inform the Board should
the position change. Details of the Chairmans other signicant
professional commitments are included in his biography (page 11).
The Chairman will take up his appointment as chairman of the
Premier League on 1 June 2013. He will shortly step down from his
role as a member of the BBC Trust and has altered a number of his
other commitments. The Board is satised that he continues to have
sufcient time available to full his obligations as a Director and
Chairman. All signicant commitments of Non-executive Directors
were disclosed to the Board prior to their appointment and the
Board was informed of subsequent changes.
As members of a unitary board, the Non-executive Directors
scrutinise managements performance in meeting agreed goals and
objectives. The Board as a whole monitors the reporting of
performance. The Chief Executives objectives, achievement of
which inuences his remuneration, are agreed with the
Remuneration Committee following initial discussion with the
Chairman. Performance against those objectives is scrutinised by
the Remuneration Committee. The Audit Committee monitors and
scrutinises the integrity of nancial information as well as the
robustness and defensibility of nancial controls and systems of risk
management. The Remuneration Committee is responsible for
determining appropriate levels of remuneration for Executive
Directors. The Nomination Committee has a prime role in selecting
and appointing Directors and in succession planning. The
appointment of Directors to or the removal of Directors from the
Board is a matter reserved to the Board as a whole.
The Chairman periodically meets individually or collectively with the
Non-executive Directors in the absence of the Executive Directors.
The process for appraising the Chairmans performance is set out
on page 36. Were Directors to have unresolved concerns about the
running of the Company or a proposed action, they would be
recorded in the Board minutes. The Non-executive Directors
recognise the principle that if on resignation from the Board a
Director has unresolved concerns, that Director should provide a
written statement to the Chairman for circulation to the Board.
The concept that Non-executive Directors are free to question any
executive decision of the Company is enshrined in the engagement
letter of each Non-executive Director.
Induction and development
The Company Secretary ensures that Directors undergo a
comprehensive induction programme on appointment. Directors
variously receive independent training on technical accounting and
other governance related matters from professional service
providers and institutions and bulletins from the Group on
developments in the dairy sector generally. The Directors keep
abreast with the Groups business through meetings and
presentations by management below Board level and visits to
operational sites.
Information and support
Under the Chairmans stewardship, the Company Secretary advises
the Board on all governance matters and ensures Board procedures
are followed and applicable rules and regulations complied with.
He ensures that the Board is supplied in a timely manner with
information in a form and of a quality appropriate to enable the
Board to discharge its duties.
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Corporate governance continued
Risk management and internal control
The Board conrms that in accordance with principle C.2 of the
2010 Code, it has established and has maintained sound systems of
risk management and internal control throughout the year and up to
the date of this Report. It has periodically reviewed those systems
during the year and has satised itself that they accord with the
FRCs Guidance on Internal Control (revised October 2005). It is not
possible entirely to eliminate risk, accordingly, although the systems
are designed to manage risks they cannot provide absolute
assurance against material misstatement or loss. They provide
reasonable assurance that potential issues can be identied
promptly and remedied appropriately.
The key components of the risk management and internal control
systems include:
The reservation to the Board of control of, amongst other matters,
all signicant strategic, nancial and organisational risks.
A management structure which includes clear lines of
responsibility and documented delegations of authority with
appropriate policies, levels and rules for, amongst other matters,
incurring capital expenditure or divesting of the Groups assets.
The operation of comprehensive nancial and strategic planning,
forecasting and review processes.
Exercise of oversight by the Audit Committee, with input from the
Groups Head of Internal Audit, over the Groups control processes
designed to ensure the integrity of internal and external nancial
reporting.
The preparation of monthly management accounts packs for the
business, including KPI dashboards for each constituent part of
the Groups business, trading results, balance sheet and cash ow
information with comparison against prior year and budget, all of
which are reviewed by the Management Board and the Board.
Monthly scrutiny of performance against budget (including
analysis of key trends, variances and key risks and plans for
mitigation as well as the continued appropriateness of those risks)
in meetings known internally as Accounts Reviews where each
key constituent part of the Group and key departments report
performance year-to-date and forecast against budget to a panel
comprising the Management Board and other senior executives.
Formal documented nancial controls and procedures including
specic procedures for treasury transactions and the approval of
signicant contracts.
Quarterly completion by each key constituent part of the Group of
a self-assessment controls questionnaire that requires the
approval of business unit management.
Preparation and refreshment of risk registers which are reviewed
by senior management, the Management Board and the Board
with the assignment of individual responsibility for the ownership
and mitigation of signicant risks to members of the Management
Board and independent assurance over the appropriate
implementation and operation of mitigating activities provided by
the Groups Internal Audit function.
Review by the Audit Committee of the Groups risk register
processes.
Review and approval of the audit plan for the Groups Internal
Audit function together with progress against and revision of the
plan as appropriate, throughout the year.
Receipt by the Audit Committee and the Management Board of all
Group Internal Audit reports detailing audit issues noted,
corrective action plans and progress against those plans.
All Directors individually, the Board and each of the Board
Committees, have access to the advice and services of the
Company Secretary. He provides the Board with regular reports on
corporate governance issues. Procedures exist enabling Directors to
seek independent professional advice at the Companys expense to
assist them in the discharge of their duties.
Evaluation
An external evaluation of the Board and its effectiveness was
conducted in the prior nancial year. As Anthony Fry had been
Chairman for only a year at the time, his performance was a key part
of the evaluation, the aim being to identify from the outset of his
Chairmanship areas of focus which the Board felt would add most
value to its own performance. Whilst the Chairman and the Board
received a very favourable evaluation, nonetheless the Directors
have been striving individually and collectively to enhance their
overall contribution to the Group. This years evaluation has
commenced initially using questionnaires which have been followed
up with individual interviews of all members of the Board by an
external facilitator. The evaluation exercise has not yet been
concluded; in due course a report on it will be published in the
Corporate Governance section of the Companys website. In
recognition of the need identied in the previous years evaluation for
the Board to be more visible within the wider business, Board
meetings have been held at the Groups Kirkby and Severnside sites
and a far wider range of the Groups management has been invited
to attend and present at relevant parts of Board meetings.
The performance of the Executive Directors in the context of their
management and operational responsibilities was appraised in the
normal way, in accordance with the Groups performance and
development review process which applies to all management grade
employees in the Group, irrespective of seniority. Under that
process, the Chairman appraises the performance of the Chief
Executive and the Chief Executive appraises the performance of the
other Executive Directors. The outcome of the reviews of
performance of all of the Executive Directors was scrutinised by the
Remuneration Committee.
The Boards Committees have considered their performance and
such actions as are considered appropriate for further enhancement
of their effective operation.
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Audit Committee Report
I am pleased to present to you my report on the work of the
Audit Committee during the 2012/13 nancial year. The
Committee plays an important part in the governance of the
Company. Its principal objectives are to provide effective
oversight and review of the Groups nancial reporting
processes, the system of internal control and management of
risk, the internal and external audit processes and their
effectiveness and the Groups processes for monitoring
compliance with laws and external regulations.
The Board considers that I have recent and relevant nancial
experience for the purposes of the 2010 Code. The other members
of the Committee are Stephen Alexander and Richard Macdonald
both of whom are independent Non-executive Directors. A standing
invitation has been made by the Committee to all Non-executive
Directors to attend the Committees meetings. The number of
Committee meetings and attendance at them is shown in the table
on page 11. The Chairman of the Board, Chief Executive, Group
Finance Director, Director of Financial Control, Head of Internal Audit
and representatives of the External Auditor attend meetings at the
invitation of the Committee. During 2012/13 the External and Internal
Auditors attended all meetings and met privately with the
Committee. I provide the Board with a report on the work of the
Committee after each of its meetings.
Andrew Carr-Locke Chairman of the Audit Committee
22 May 2013
Terms of reference
The Committee reviews its terms of reference at least annually,
having regard, amongst other matters, to their continued compliance
with the requirements of the Code, the FRCs Guidance on Internal
Control (revised October 2005) and the Guidance on Audit
Committees (December 2010). Under its terms of reference, the
Committee is responsible for providing advice to the Board on the
Groups Interim and Preliminary Results Announcements and Annual
Report and Accounts; on accounting policies and on the control of
its nancial and business risks as well as reviewing the work of the
Internal and External Auditors.
Audit Committee activity
In carrying out its work, the Committee embraced the requirements of
provision C.3.2 of the 2010 Code and followed an annual work plan
covering its principal responsibilities under its terms of reference.
During 2012/13 and up to the date of this Report, amongst other
matters, the Committee undertook the following work:
Monitored the integrity of the Groups nancial statements which it
reviewed prior to their submission to the Board.
Monitored the Groups nancial management and reporting
systems together with the Groups risk management processes
and controls; and satised itself of the integrity and their
effectiveness. It reviewed any areas of control weakness identied
by the Internal or External Auditors and monitored their mitigation
and remediation.
Reviewed signicant accounting policies and tested the
appropriateness of any proposed changes to those policies.
Approved the external audit plan (including, scope, level of
materiality, resources dedicated to the audit and the seniority,
expertise and experience of the engagement team), the fee for
delivering the audit and satised itself that the External Auditor
would be able to conduct an effective audit for such fee which it
recommended to the Board for approval.
Satised itself as to the effectiveness of the audit, reviewed the
ndings of the audit, evaluated the performance, independence
and objectivity of the External Auditor and the quantum and ratio
of audit and non-audit fees.
Approved the annual internal audit plan and progress against it
throughout the year. It reviewed all reports on the Group from
Internal Audit and review the interaction between the Internal Audit
function and the External Auditor to ensure that the two worked
well together and their activities complemented each other. Where
the Internal Audit function identied action is required by
management, the Committee reviewed and monitored
managements responsiveness and progress in implementing
appropriate recommendations from the Internal Audit function. It
reviewed Group Internal Audits charter. The Committee was
satised as to the quality of the work of the Internal Audit function
and that it was appropriately assisted in its work by management.
In addition to the Committees primary accountabilities related to the
Groups annual nancial reporting cycle and associated audit, the
Committee has other responsibilities including overseeing and
reviewing the Companys process for monitoring compliance with
laws and regulations. During the year it reviewed the effectiveness of
the Groups compliance and whistleblowing procedures and was
satised that they allow for appropriate investigation and suitable
follow-up actions. The Committee undertakes an annual
effectiveness review.
All outstanding matters related to the Committees 2012/13 work
plan were completed at the Committees meeting on 13 May 2013.
External Auditor objectivity and independence
The objectivity and independence of the External Auditor is critical to
the integrity of the audit. During the year the Committee reviewed the
External Auditors own policies and procedures for safeguarding its
objectivity and independence. The audit engagement partner gave
representations as to the External Auditors independence and
conrmed that the External Auditors reward and remuneration
structure includes no incentives for audit engagement partners to
cross sell non-audit services to audit clients.
The Committees assessment is underpinned by the Groups policy
on the engagement of the External Auditor for the provision of
non-audit services, which was revised and signicantly strengthened
in the prior year. The Committee conducted a review of the policy
during the 2012/13 year and was satised that it continued to be
appropriate. The policy contains a presumption against the use of
the External Auditor for non-audit services. The External Auditor may
only be engaged for the provision of non-audit services in
contravention of that presumption where those services are
expressly permitted under the policy; and where there is a
demonstrable efciency, audit enhancement or cost benet resulting
from the engagement of the External Auditor. Furthermore, before it
may be engaged for the provision of such non-audit services,
alternative providers must have been considered and discounted.
Services which the External Auditor is prohibited from providing to
the Group include, amongst others:
Bookkeeping services and preparation of nancial information.
The design, supply or implementation of nancial information
systems.
Appraisal or valuation services.
Internal audit services.
Actuarial services.
Executive management services including the secondment of staff
to perform management functions, recruitment services or other
human resources functions, legal, broker, investment or banking
services.
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Corporate governance continued
External Auditors fees
Details of fees paid to the External Auditor for audit services, audit
related services and other non-audit services may be found at Note
2 to the Accounts on page 74.
Re-appointment of Ernst & Young LLP (Ernst & Young)
Ernst & Young was rst appointed as External Auditor to the
Company in 1996. There are no contractual restrictions on the
Company with regard to its appointment. The Audit Committee has
not considered it necessary since its initial appointment to require
the rm to tender competitively for the audit work. In the light of the
assessments and review undertaken and having considered a
recommendation of the Committee to re-appoint Ernst & Young as
the Companys and Groups External Auditor, the Board endorsed
the Committees recommendation which was approved by
shareholders in July 2012.
At its meeting in May 2013, the Audit Committee considered the
appropriateness of the re-appointment of Ernst & Young as the
Groups External Auditor for the 2013/14 year. In doing so it took
account of the Committees review of the External Auditors
independence and objectivity, the ratio of audit to non-audit fees and
the effectiveness of the audit process together with other relevant
review processes conducted throughout the year.
The Committee is conscious of provisions of the 2012 Code, against
which the Company shall formally report in its next reporting cycle,
in particular, provision C.3.7 which recommends FTSE 350
companies should put their audit contract out to tender at least
every ten years. The Committee does not currently have a formal
policy dealing with the frequency with which the contract for the
external audit should be tendered, or the tenure of the External
Auditor. The 2012/13 audit was led by a new Audit Engagement
Partner who assumed responsibility for the audit under the External
Auditors normal rotation policy and the Committee remained
satised as to the External Auditors independence. Nevertheless,
the Committee shall continue to monitor best practice developments
in the UK and EU and take an appropriate time in which to formulate
a suitable policy.
Following its review, the Committee was satised that it should
recommend to the Board the re-appointment of Ernst & Young as the
Companys and Groups External Auditor at the AGM on 16 July 2013.
During the last two nancial years, the Committee was focused on
Board succession planning and successfully dealt with a number of
changes to the composition of the Board, resulting in the
appointment of Richard Macdonald, Stephen Alexander and Sue
Farr. All of those appointments were achieved following preparation
of outlines of the roles and capabilities required for the appointments
and with the use of an external search consultancy. I am very
pleased with the way the Board is working following all of the change
which has occurred over the last two years. We have an excellent
mix of styles and personalities amongst the Directors with an
impressive range of backgrounds and business and other
experience. Directors interact in a way which is thoughtful,
challenging, supportive and intended to do the very best for Dairy
Crest, its shareholders, employees and other stakeholders.
The Committees work on succession planning continued during
2012/13. The Nomination Committee was closely involved in the
consideration and planning of the changes which the Group has
made during the year to its structure and the impact of those
changes not only on the Board, but also at the senior executive level
below the Board. Succession planning remains a focus into the
future and the Committee continues to maintain a watching brief for
additional candidates who might improve further the balance of
skills, backgrounds, experience, knowledge and diversity amongst
the Board. The Committee is satised that the complementary
balance of skills and experience which we have amongst the
Directors means that there is resilience around the Board table. The
Committee would nonetheless expect that when the Board next
decides it would be appropriate to recruit a further Non-executive
Director, experience which would enable candidates to chair the
Audit Committee is likely to be a prerequisite.
The Committees work programme during the year included a review
of its terms of reference, which it updated formally to include the
Groups policy to diversity. Consistent with the recommendations of
the Davies Report Women on Boards, I published a statement on
diversity for the Group (which can be found on the Companys
website www.dairycrest.co.uk) in October 2010. The Group has not
adopted targets for female representation amongst the Directors.
The Company interprets diversity in its widest sense and aims to
achieve the best possible leadership for the Group by ensuring an
appropriate balance of skills, backgrounds, experience and
knowledge amongst its Directors, senior managers and other
employees. The Committee and the Board recognise that there is a
Nomination Committee report
I am pleased to present to shareholders my report on the work
of the Nomination Committee during the 2012/13 nancial year.
Details of the membership of the Committee and the
attendance of members at Committee meetings during the
year are set out on page 11. My role as Chairman of the
Nomination Committee complements one of my key
responsibilities as Chairman of the Board to ensure the
effective performance of the Board by ensuring it comprises
individuals with a varied mix of backgrounds, skills and
experience. Succession for the Board is a key focus for the
Committee which also pays close attention to succession
planning at senior executive level and more widely within the
Group. The Committee is responsible for overseeing the
selection and appointment of Directors and making its
recommendations to the Board. In conjunction with the
Chairman, it also evaluates the commitments of individual
Directors and ensures that the membership of the Board and
its principal committees are refreshed periodically.
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paucity of females amongst the senior management population of
the Group, reecting the food manufacturing industry generally but
that improving female representation amongst that constituency
would be advantageous. However, the Committee considers that,
rst and foremost, appointments must be made based on an
objective assessment of who is the best person to ll a role, and that
assessment must take into account the broadest possible
assessment of candidates skills and backgrounds. The Group will
continue to operate policies giving equal opportunities to all,
irrespective of age, gender, marital status, disability, nationality,
colour, ethnic origin, sexual orientation or religious afliation.
The Committee reviewed the commitments of the Non-executive
Directors and any changes which occurred to their commitments
during the year. When the Committee considered my appointment
to the Chairmanship of the Premier League, I took no part in its
deliberations. The Committee was satised that all Non-executives
continued to be in a position to devote sufcient time to the fullment
of their duties as Directors.
The Committee was satised that given the performance of each of
the Directors, their input, contribution, expertise and experience, it
should recommend to the Board that they be nominated for election
or re-election (as applicable) at this years AGM.
During the year, the Committee reviewed its own performance, one
of the outputs of which was the formal review of its terms of
reference. The Committee was satised with its performance and
the contribution of its members.
Anthony Fry Chairman of the Nomination Committee
22 May 2013
The Committee believes that the Groups employees should be
proud of their commitment to corporate responsibility, in particular
the achievement, through their commitment to the corporate
responsibility principles which the Group has adopted, of a platinum
rating in the BITC corporate responsibility audit this year. They
should be particularly proud of that achievement given that this is
only the second year in which the Group has undertaken the BITC
audit. The progress which the Group has made with corporate
responsibility during the year is further exemplied by it being
shortlisted for BITCs company of the year award.
The Groups achievements do not begin and end with awards. It is a
basic tenet of the Committees approach that the Groups corporate
responsibility programme delivers not only, amongst other things,
ethical, behavioural and community benets, but must also deliver
tangible benets to the Groups businesses. Once again, the Group
has succeeded in that aim by, amongst other things, delivering
nancial as well as environmental benets by reducing its carbon
footprint and by delivering nancial and human benets by reducing
the Groups accident and incident rate through its continued focus
on improving health and safety.
As you will see from the Corporate Responsibility report at pages
26 to 29, Dairy Crest is a business committed to corporate
responsibility.
Richard Macdonald Chairman of the
Corporate Responsibility Committee
22 May 2013
Management Board
The Chief Executive chairs the Management Board which comprises
the other Executive Directors and senior members of the Groups
executive team. Details of the members of the Management Board
can be found at pages 10 to 12. The Management Board is
responsible, amongst other matters, for implementing the Groups
strategic direction and monitoring the performance of the business
and its control procedures on a day-to-day basis, as well as the
day-to-day operations of the Groups business, its performance
against forecasts and budgets and protability. The Management
Board normally meets weekly.
Dialogue with shareholders
The Board believes in the importance of an on-going relationship
with its shareholders. It fully supports the principles encouraging
dialogue between companies and their shareholders in the UK
Corporate Governance Code and the UK Stewardship Code. The
Chief Executive and Group Finance Director have primary
responsibility for investor relations. They are supported by the
Groups Corporate Affairs Director who, amongst other matters,
Corporate Responsibility Committee report
I am pleased as Chairman of the Corporate Responsibility
Committee to present the Groups Corporate Responsibility
Report to shareholders for the nancial year 2012/13 at pages
26 to 29. The Committee oversees the Groups corporate
responsibility programme and ensures that key social, ethical
and environmental risks are identied, assessed and prioritised.
Sue Farr, each of the Executive Directors, the Company
Secretary, the Group HR Director and the Corporate Affairs
Director are the other members of the Committee. The
frequency of the Committees meetings and attendance of Board
members at those meetings is set out in the table at page 11.
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Report of the Directors
Corporate governance continued
organises presentations for analysts and institutional investors and
holds meetings with key institutional shareholders to discuss
strategy, nancial performance and investment activities immediately
after the Interim and Preliminary Results Announcements. Slide
presentations made to institutional shareholders are made available
on the Companys website along with annual and interim reports,
interim management statements, trading updates and company
announcements. Announcements are made as appropriate and
required through a Regulatory Information Service.
All the Non-executive Directors, and, in particular, the Chairman and
Senior Independent Director, are available to meet with
shareholders. Feedback from meetings with shareholders is
provided to the Board to ensure that all Directors have a balanced
understanding of the issues and concerns of shareholders. The
Board receives feedback from the Chief Executive and the Group
Finance Director on their meetings with shareholders, periodic
reports on investor relations and independent feedback from the
Companys brokers on the views of major shareholders. The
Chairman of the Board together with the Chairman of the
Remuneration Committee has met with a number of shareholders
during the year to consult on proposals for a new long-term incentive
plan for the Group.
The notice of each AGM together with other related papers is
dispatched to shareholders at least 20 working days before the
meeting. All Directors attend the AGM and are available to answer
shareholder questions before, during and after the meeting. The
Chairman of the Board provides the meeting with an update on the
progress and performance of the Group before the formal business
of each AGM is addressed and a resolution is proposed relating to
the Annual Report and Accounts. Details of the proxy voting on each
resolution are announced at the AGM including the level of votes for
and against resolutions and abstentions, and are posted on the
Companys website following the conclusion of the meeting. At the
2013 AGM, consistent with corporate governance best practice,
voting at the AGM will be conducted on a poll and the result
published on the Company's website after the meeting.
Financial and business reporting
The Directors recognise their responsibility to present a balanced
and understandable assessment of the Companys position and
prospects. Their responsibility statement can be found at page 56.
An explanation of the Companys business model can be found
under Long-term strategy in the Chief Executives review at page 14
and at pages 18 to 33. The Directors make appropriate going
concern statements in the Interim and Preliminary Results
Announcements and the Annual Report and Accounts. The
statement in this Report and Accounts can be found at page 53.
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Key developments
2012/13
2012/13 has been a year of progress for Dairy Crest in which we
have continued to deliver against our strategy despite challenging
trading conditions. The detail of this is covered in the Chairmans
statement and the Chief Executives review.
Payment of annual bonus is subject to achieving demanding
short-term nancial targets and personal objectives. The stretching
nancial targets were partly met in the year. Combined with their
achievements against their personal objectives this has resulted in
bonus payouts for the 2012/13 performance year of 52.5% of salary
for Mark Allen and 49.4% of salary for Alastair Murray and Martyn
Wilks.
Awards under the Long Term Incentive Share Plan (LTISP) 2010
had a three-year vesting period to March 2013. 40% of the total
award was based on the Groups adjusted basic earnings per share
(Adjusted EPS) and 60% was measured against the Total
Shareholder Return (TSR) performance of the FTSE 250 (excluding
nancial services companies, real estate companies and investment
trusts). The Company did not achieve the minimum Adjusted EPS
target threshold or the TSR target threshold and therefore none of
the awards will be released and all June 2010 share options have
lapsed at 31 March 2013.
Further details on bonus and LTISP outcomes are given later in the
Report.
Based on 31 March 2013 data and forecasts, awards under the
2011 and 2012 LTISPs look unlikely to vest in future years with
regard to Adjusted EPS targets, however, currently their TSR
performance is tracking above the vesting threshold.
Directors remuneration report
Dear Shareholder
As Chairman of the Remuneration Committee I am pleased to
present my report on the work of the Committee during the
2012/13 nancial year. Our remuneration policy continues to aim
to encourage a performance based culture, to attract and retain
high calibre personnel and align executives and shareholders
interests. During the year the Committee has reviewed the
components of executive remuneration in order to ensure that it
remains appropriate in the context of the Groups new structure
following the reorganisation and that it meets these aims.
The Remuneration Committees review process identied that in
general Executive Directors salaries are broadly in line with
median market rates for FTSE 250 companies (excluding nancial
services) and that annual bonus rates were at the lower quartile
level. Long-term incentives fell well below Dairy Crests peer
group despite relatively good Company performance over recent
years. The review also highlighted other challenges with the
current long-term incentives which therefore led to a desire to
change the structure to support better the strategy and objectives
of the Company.
The proposed plan has been developed from rst principles to
focus the management team on the evolution and development of
Dairy Crest over the longer term whilst ensuring strong alignment
with shareholders. In developing an appropriate plan the
Remuneration Committee identied a balanced scorecard of
measures which together would generate increased value in the
business, support the delivery of long-term success and promote
the desired corporate culture. The Remuneration Committee has
also sought to identify metrics against which performance may be
judged which are, in so far as is possible, objective and
measurable.
In arriving at the new Long Term Alignment Plan (LTAP) (full
details of which are set out in the Remuneration Report at pages
43 to 45) which shareholders will be asked to approve at the
forthcoming AGM on 16 July 2013, the Chairman of the Board
and I met with a number of larger shareholders and shareholder
representative bodies to consult on the detailed design of a plan
which would achieve the Remuneration Committees aims and
which shareholders would be condent would align executives
interests with theirs.
The Remuneration Committee believes that the plan on which it
has settled and which the Board has approved for proposal to
shareholders at this years AGM, will help to attract and retain high
calibre personnel, incentivise executives and will ensure alignment
of executives and shareholders interests. For those reasons, the
Remuneration Committee and the Board commend it to
shareholders for approval at the AGM.
The Remuneration Report at pages 41 to 52 has been approved
by the Board and also contains details of the other work
undertaken by the Remuneration Committee during the year.
2013/14
2013/14 is expected to be another challenging year in light of the
current economic environment. Our focus will continue to be on
investment in brands and innovation, reductions in our cost base
and improving the quality of earnings.
The Remuneration Committee has focused on the development of
new long-term incentive arrangements, the LTAP (pages 43 to 45)
and will be seeking shareholder approval at the forthcoming AGM. It
is the belief of the Committee and the Board that this plan will attract
and retain senior management talent for the benet of the Company
and its shareholders.
Mark Allen and Martyn Wilks have elected to forgo any inationary
salary increases this year reecting the current economic
environment. Consequently, there will be no base salary increases
for these Executive Directors in 2013/14.
The Group has entered into an internal restructure that will be nalised
during 2013/14. Alongside cost savings, better shared learning and
greater customer and consumer focus, these changes see some new
appointments at senior levels within the business, promoting talent
from within and building human capital for the Groups future. As part
of these changes Tom Atherton succeeds Alastair Murray as Group
Finance Director from 23 May 2013. Tom has been with the Group for
seven years, having previously been in the role of Director of Financial
Control. The promotion of Tom to the main Board recognises his
success in previous roles and the efforts of the Company in planning
succession for senior management positions. Tom Athertons initial
salary as Group Finance Director of 200,000 p.a. is signicantly
below that of his predecessor and market rates. We would expect to
see Toms salary increase over time towards market norms as he
gains experience in the role.
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42 Dairy Crest Annual Report 2013
Report of the Directors
Key elements of pay
The remuneration structure and underlying principles on which the package is based, reecting recent changes, are shown below. This policy
also applies to 2012/13 unless otherwise stated.
Strategic objectives Operation and performance measures Quantum
Base salary Reect assessment of market
practice based on role and
experience.
Benchmarked against executives with similar
responsibilities in companies of comparable size
and complexity.
There were no salary increases for Executive
Directors in 2012/13.
At 1 April 2013:
Mark Allen: 517,625
Alastair Murray*: 344,597
Martyn Wilks: 346,270
Tom Atherton*: 200,000
Non-executive
Directors fees
Remunerate Non-executive
Directors.
The remuneration of the Non-executive Chairman is
determined by the Board following a recommendation
by the Chief Executive and the Remuneration
Committee Chairman in consultation with PwC. The
remuneration of Non-executive Directors is determined
by the Board, also in consultation with PwC.
The total fees for Non-executive Directors remain
within the limit of 600,000 set out in the Articles.
There are no pre-determined special provisions for
Non-executive Directors with regard to compensation
in the event of loss of ofce.
At 1 April 2013:
Role Fee p.a.
Non-executive Chairman 155,000
Non-executive Director (base) 38,000
Audit Committee Chair +5,000
Corporate Responsibility Chair +5,000
Remuneration Committee Chair +5,000
Senior Independent Director +5,000
There were no increases in fees in 2012/13
Pension Provide a market competitive
level of provision with
appropriate exibility whilst
minimising risk to the Group.
No further service accrual under nal salary pension
scheme from 1 April 2010 replacement is the dened
contribution scheme and/or salary supplement.
Mark Allen, Alastair Murray and Tom Atherton
employer contributions up to Annual
Allowance plus cash supplements. Total
benet will not exceed 23% of salary.
Martyn Wilks cash supplement of 23% of
salary.
Benets Provide market competitive
benets including company
car benet, life assurance
cover and medical insurance.
Operated in line with normal benets. All Executives receive a company car/car
allowance and private medical insurance.
Mark Allen, Alastair Murray and Tom Atherton
receive life insurance cover up to 7 x annual
salary. Martyn Wilks receives life insurance
cover to 4 x annual salary.
Directors remuneration report continued
The 2012/13 report
The UK Government Department for Business, Innovation and Skills
(BIS) is currently proposing changes to the layout and information
required in Directors remuneration reports. In order to align with the
emerging requirements of shareholders and move towards a more
transparent approach to remuneration, Dairy Crest has chosen to
adopt some of these principles early, where appropriate. As such,
this report is split into two sections. The rst section focuses on the
policy set for 2013/14, including the objectives and operation of each
element of pay, the context in which decisions for this policy were
made and service contract details. The second gives a summary of
the 2012/13 remuneration outcomes, including the total
remuneration of the Directors and variable pay awarded in the year.
Approved by the Board and signed on its behalf by
Stephen Alexander Chairman of the Remuneration Committee
This report covers the reporting period from 1 April 2012 to 31
March 2013 and provides details of the Remuneration Committee
and remuneration policy for the Company.
BIS is currently proposing changes to the layout and information
required in Directors Remuneration Reports. In order to align with
their current requirements, the Remuneration Committee has
chosen to adopt early some of these principles, where appropriate.
These regulations will apply to all UK companies listed on a major
stock exchange with nancial years ending on or after 30
September 2013, and so the early adoption of certain aspects of
these regulations in this Report is on a voluntary basis.
This Report complies with the requirements of the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008. The elements of the Report that are auditable
under these regulations are highlighted throughout. Throughout the
year ended 31 March 2013, the Company applied the provisions of
the UK Corporate Governance Code relating to remuneration. This
Report and the recommendations of the Remuneration Committee
were approved by the Board on 22 May 2013 as recommended by
the Remuneration Committee on 13 May 2013 and will be
submitted to shareholders for approval at the 2013 AGM
on 16 July 2013.
Summary of remuneration policy for 2013/14
We seek to ensure that remuneration packages contribute to the
delivery of long-term shareholder value. This is reected in the
Companys annual bonus scheme and other incentive awards
which are explained in more detail below.
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Strategic objectives Operation and performance measures Quantum
Bonus Ensure that annual reward is
consistent with successfully
achieving the short-term
nancial targets and strategic
objectives of the Group.
Annual performance period.
75% relevant nancial targets (including prot and
cash targets) and 25% personal objectives linked to
operational and strategic goals.
To deliver an appropriate balance between long-term
and short-term reward, any bonus earned over 50% of
annual salary is paid in the Companys shares and
deferred as below.
On target performance 50% of salary.
Maximum opportunity 100% of salary.
Deferred bonus Deliver appropriate balance
between long-term and
short-term reward and to build
up Directors shareholdings in
line with policy.
Deferred for three years, conditional on continued
employment until vesting date.
Delivered in shares.
Any bonus over 50% of annual salary is
deferred.
Long Term
Incentive Share
Plan
(to 2012/13
proposed to be
replaced by the
LTAP for future
years)
Encourage and reward
continuing improvement in
Groups performance over the
longer term.
Alignment of interest between
participants and shareholders.

Three-year performance period.
Payable in shares.
60% subject to relative TSR performance against a
comparator group comprising FTSE 250 constituents (as
at the grant date) excluding nancial service companies,
real estate companies and investment trusts.
40% subject to Adjusted EPS growth targets.
Where possible, awards under the LTISP are granted
under an HMRC-approved Executive Share Option
Scheme arrangement. At 31 March 2013, there were
417,708 outstanding options under this scheme which
were awarded as part of the 2011 and 2012 LTISP (2012:
141,826 awarded as part of the 2010 and 2011 LTISP).
Annual limit 150% of salary.
Performance targets for all outstanding
awards (i.e. the 2011 and 2012 grants).
TSR:
18% vesting for median performance.
60% vesting for upper quartile.
Adjusted EPS:
12% vesting for growth at RPI + 3% over the
three year performance period.
40% vesting for growth at RPI + 15% over the
three year performance period.
Long Term
Alignment Plan
(proposed from
2013/14)
Encourage and reward
continuing improvement in
Groups performance over the
longer term.
Alignment of interest between
participants and shareholders.
Additional details of the
rationale and structure of the
new arrangement is provided
under Note 2 below.
An award is granted based on the achievements over
the prior year against the pre-grant performance
scorecard, comprising of measures aligned to Dairy
Crests strategic priorities.
Awards will be subject to a dividend underpin over the
rst three years of the vesting period.
Awards will be subject to a phased vesting requirement,
with 50% of the award vesting in year 4 and 50% in year
5 following grant.
Award levels 50-90% of salary for Executive
Directors dependent on the assessment of
performance against the scorecard.
If performance falls below a minimum level
against the scorecard no award will be made.
Shareholding
requirement
Alignment of interest between
participants and shareholders.
The shareholding requirement for Executive Directors is
100% of salary.
This will be increased to 200% of salary subject to
approval of the LTAP.
* Alastair Murray will be succeeded by Tom Atherton, Dairy Crests Director of Financial Control, on 23 May 2013. Further details are contained in the section Executive
changes in the year on page 49.
Notes on policy table and components of remuneration
1) Remuneration below board level
The majority of employees participate in a bonus plan. The size of award and the weighting of performance conditions vary by level, with
specic measures incorporated where relevant.
All members of the senior management team have historically participated in the LTISP arrangement and from 2013 a smaller group of senior
management will participate in the LTAP, in line with the Executive Directors.
2) The new Long Term Alignment Plan
As set out in the Chairmans introductory letter, a new long term incentive plan, the Long Term Alignment Plan, is planned to be introduced for
Executive Directors to replace the current LTISP.
In the context of recent organisational changes, the Companys strategic objectives and the current challenging external environment, the
Committee carried out a review of Dairy Crests incentive arrangements and concluded that the LTISP should be replaced with a plan which
aligns to the Companys forward-looking strategy.
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44 Dairy Crest Annual Report 2013
Report of the Directors
The proposed arrangement is intended to provide improved alignment with our stated strategic objectives. These are to build market leading
positions in branded and added value markets, to focus on cost reduction and efciency improvements, to reduce commodity risk in order to
improve the quality of earnings and to generate growth in the business through acquisitions and disposals. The proposed design is also
intended to recognise our position as a dividend stock which seeks to maintain delivery of value to shareholders by pursuing a progressive
dividend policy.
The Board incorporated some changes to the LTAP following consultation with major shareholders. The LTAP has now been proposed for
adoption for the 2013/14 nancial year, and will be subject to a shareholder vote at the 2013 AGM.
Details of the proposed Long Term Alignment Plan
The proposed LTAP will operate as follows:
1. Pre-grant performance scorecard
Pre-grant performance conditions will be used to determine the level of the award based on a scorecard of measures aligned to Dairy Crests
strategic priorities. The scorecard will be reviewed annually and amended as the Committee deems appropriate, with the scorecard to apply
for the next grant usually determined in May of each year. The scorecard will always be weighted to ensure that at least 60% of the assessment
reects nancial measures, and the make-up of the scorecard will reect the strategic priorities deemed critical to the future of the Company.
Detailed disclosure will be given in the Remuneration Report each year in relation to the scorecard used to determine the next years grant,
along with the Key Performance Indicators (KPIs) which will support each element and their respective weightings.
Detailed retrospective disclosure will also be provided, detailing how the grant level was decided based both on outcomes against the targets
set and the context in which the grant decision was made.
The proposed scorecard for the initial grants under the award is provided below.
2. Award level
Award levels under the plan will be between 50% to 90% of salary for Executive Directors dependent on the assessment of performance
against the scorecard. If performance falls below a minimum level against the scorecard no award will be made.
3. Vesting period
Awards will be subject to a phased vesting requirement, with 50% of the award vesting in year 4 and 50% in year 5 following grant.
Awards will be subject to an additional dividend underpin over the rst three years of the vesting period.
Under this element dividend progression will be measured on a spot to spot basis. Clawback will apply in the event that the dividend declines
over the three year period. An amount of the award proportional to the percentage decrease in dividend will be clawed back in this case up to
a decline of 50%. For any dividend decline over this amount the Remuneration Committee will retain the discretion to determine the amount of
appropriate clawback. The clawback applied in this case will be not less than 50% and up to 100% of the initial award, taking into account the
circumstances at the time.
Furthermore, dividend cover must be maintained in the 1.5 to 2.5 times range over the three-year measurement period. In the event dividend
cover is outside this range the Remuneration Committee will retain the discretion to apply additional clawback to awards as appropriate.
4. Shareholding requirement
The shareholding requirement for Executive Directors will be increased to 200% of salary from 100%.
Directors remuneration report continued
Dividend
underpin
Years +3 +4 +5
Award
based on
pre-grant
criteria
5090%
of salary
50%
vesting
50%
vesting
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Pre-grant performance scorecard for initial grants
Measure KPI Alignment with strategy Weighting
Prot Adjusted EBITDA target each year. Delivery of prot is core to the business and supports
the progressive dividend policy.
30%
Balance sheet
efciency
ROCE target each year whilst maintaining net debt /
EBITDA in the 1.0-2.0 x range.
Ensuring acceptable return on investment within a
sustainable level of gearing.
20%
Corporate activity
and efciencies
Delivery of annual cost savings targets.
Delivery of synergies and return on investment following
acquisitions or successful divestments (when relevant).
Ensuring cost savings are delivered on an on-going
basis.
Ensuring that major acquisitions/ divestments deliver
against relevant synergy and return targets.
15%
Brand growth Key brand value growth over one and three years versus
markets in which they operate.
Brand growth is key to longer term business growth. 15%
Innovation Achieve each year the targeted proportion of revenue from
innovation in previous three years.
Innovation is a key driver of productivity and growth. 10%
Corporate
responsibility
A range of metrics including improvements in accident
incident rates, reduced CO
2
emissions & improved
employee engagement.
Delivering results in a sustainable way which
enhances reputation and stakeholder engagement.
10%
Dividend underpin To increase the dividend over the three years post-grant in
line with progressive dividend policy whilst maintaining
dividend cover within 1.5-2.5 x range for the three years
post-grant.
Delivery of progressive dividend policy.
Service contracts & termination payments policy
The service contracts and letters of appointment include the following terms
Executive Director Date of contract Notice period
M Allen 18 July 2002 12 months
A Murray* 20 June 2003 12 months
M Wilks 7 January 2008 12 months
T Atherton* 23 May 2013 12 months
Non-executive Director Letters of appointment Notice period
A Fry 15 July 2009 3 months
A Carr-Locke 15 July 2009 3 months
R Macdonald 4 October 2010 3 months
S Alexander 4 October 2010 3 months
S Farr 6 October 2011 3 months
* Alastair Murray will be succeeded by Tom Atherton, Dairy Crests Director of Financial Control, on 23 May 2013. Further details are contained in the section Executive
changes in the year on page 49.
Letters of appointment for all Non-executive Directors include a three month notice period. It is the Companys policy that Non-executive
Directors should not normally serve for more than nine years. A summary of the terms of appointment of Non-executive Directors is available
on the Companys website.
Details of the Directors offering themselves for election and re-election at the forthcoming AGM are set out on page 35 (with biographical
details at pages 10 to 11).
In accordance with best practice as set out in the Code, all Executive Directors have a notice period not exceeding one year. All such
Directors service contracts provide explicitly for termination payments in the event of termination by the Company other than on grounds of
incapacity or in circumstances justifying summary termination.
For Mark Allen, payments on termination are calculated as 90% of the value of annual salary, benets, pension and bonus for the notice period.
For Martyn Wilks and Tom Atherton and for future appointments, payments on termination are calculated as the value of annual salary,
benets and pension for the notice period. There is a mitigation clause in the service contract with respect to termination payments such that
certain compensation payments are deferred.
A summary of the service agreements of the Executive Directors is available on the Companys website, www.dairycrest.co.uk
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46 Dairy Crest Annual Report 2013
Report of the Directors
Directors remuneration report continued
Remuneration scenarios
A signicant proportion of a Directors total remuneration package is variable, being subject to the achievement of specied short-term and
long-term business objectives. The charts below show the composition of total remuneration at minimum, target and maximum performance
scenarios for the Executive Directors, based on the proposed LTAP.
Director Value of package (000s) Composition of package (%)
M Allen
A Murray*
M Wilks
T Atherton*
* Alastair Murray will be succeeded by Tom Atherton, Dairy Crests Director of Financial Control, on 23 May 2013. Further details are contained in the section Executive
changes in the year on page 49.
Notes to the scenarios
Fixed Remuneration: This element comprises salary as at 1 April 2013, pension benets (including salary supplement) and other xed
benets (company car, etc). As these are based on previous emoluments, this gure for the new Board member, Tom Atherton, comprises
salary only.
Annual Variable Remuneration: This element shows annual bonus (including any amount deferred), at 100% of salary in the maximum
scenario and 50% of salary in the target scenario.
Long-term Variable Remuneration: This element shows remuneration in respect of the LTAP, at 90% of salary in the maximum scenario
and 70% of salary in the target scenario. No allowance is made for share price growth.
Statement of consideration of remuneration elsewhere in the Company
The Remuneration Committee has oversight on remuneration matters of the broader senior management group beyond Executive Directors.
Statement of consideration of shareholder views
As set out in the details surrounding the operation of the new LTAP, the Board consulted with several larger shareholders on the proposal to
replace the current LTISP.
In keeping with continuing dialogue with shareholders, the Remuneration Committee Chairman, along with the Company Chairman, met with
a number of our large shareholders as part of a detailed consultation process. The principles and rationale for change and a high level
framework for the new plan were discussed.
After this initial stage, the Remuneration Committee and the Board considered the feedback received and consulted those shareholders with
the nal proposed plan. The plan has now been proposed for adoption for the 2013/14 nancial year, and will be subject to a shareholder vote
at the 2013 AGM.
0 500 1000 1500 1750 1250 750 250 0 40 80 100 60 20
Maximum
Target
Minimum (Fixed)
Key: Fixed Remuneration Annual Variable Remuneration Long-term Variable Remuneration
0 200 400 600 800 1000 1200
Maximum
Target
Minimum (Fixed)
0 40 80 100 60 20
0 200 400 600 800 1000 1200
Maximum
Target
Minimum (Fixed)
0 40 80 100 60 20
0 100 200 300 400 500 600
Maximum
Target
Minimum (Fixed)
0 40 80 100 60 20
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Summary of 2012/13 remuneration outcomes
Total remuneration for each Director audited
The table below sets out the analysis of total remuneration for each Director. An explanation of how the gures are calculated follows the table.
The total remuneration for each Director reects the performance of the Company and the contribution each individual has made to the
on-going success of the Company.
Base Long term Employers Total
Director salary/ Cash allowances Taxable Total emoluments incentive pension remuneration
(000s) fees Pension Other benets Bonus 2012/13 2011/12 vesting contributions 2012/13
Non-executive
Chairman
A Fry 155 155 155 155
Executive Directors
M Allen 518 110 28 272 928 904 9 937
A Murray 345 58 1 21 170 595 603 22 617
M Wilks 346 80 21 171 618 606 618
Subtotal 1,209 248 1 70 613 2,141 2,113 31 2,172
Non-executive
Directors
H Mann
(resigned 18 May 2012) 6 6 48 6
A Carr-Locke 43 43 43 43
R Macdonald 47 47 43 47
S Alexander 42 42 38 42
S Farr 38 38 16 38
Subtotal 176 176 188 176
Total 1,540 248 1 70 613 2,472 2,456 31 2,503
Notes
Basic salary, benets, bonus and long term incentives are dened on pages 42 to 43. Bonuses detailed above include the full value of bonus
entitlement including bonus to be deferred in shares being 12,941 for Mark Allen and nil for Martyn Wilks and Alastair Murray. (There were no
deferred bonuses in 2011/12).
Cash allowances principally comprise pension related salary supplements. Mark Allen and Alastair Murray were members of the dened
contribution scheme throughout 2012/13. The Company made contributions up to the 50,000 limit for employee and employer contributions.
Further cash supplements were paid such that the total of cash supplements and employer contributions amounted to 23% of basic salary.
Martyn Wilks was not a member of any Company pension scheme in the year ended 31 March 2013 and received a salary supplement of
23% of basic salary.
Bonus
Payment of the bonus is subject to the achievement of demanding short-term nancial targets and personal objectives. To ensure that an
appropriate balance is maintained between long-term and short-term reward, any bonus earned over 50% of annual salary is paid in the
Companys shares and deferred for a three-year period subject to continued employment.
Stretching nancial targets (encompassing adjusted operating prot and net cash generation) were partly met in the year (26% and 100% of
maximum payout for these elements respectively). Combined with their personal objectives this has resulted in bonus payouts for the 2012/13
performance year of 52.5% for Mark Allen and 49.4% for Alastair Murray and Martyn Wilks.
Long Term Incentive Share Plan 2010
Awards under the LTISP 2010 had a three-year vesting period to 31 March 2013. 40% of the total award was based on the Groups Adjusted
EPS and 60% was measured against the TSR performance of the FTSE 250 (excluding nancial services companies, real estate companies
and investment trusts). The Group did not achieve the minimum Adjusted EPS target threshold or the TSR target threshold and therefore none
of the awards will be released.
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48 Dairy Crest Annual Report 2013
Report of the Directors
Measure Threshold Maximum Outcome
Vesting
(as % award granted in 2010)
TSR performance against
FTSE 250 constituents
(60% of total LTISP award)
Median
(30% of TSR award vests)
Upper quartile or above
(100% of TSR award vests)
Below median 0%
Adjusted EPS target
(40% of total LTISP award)
RPI + 9% over the three year
performance period
(30% of Adjusted EPS award
vests)
RPI + 24% over the three year
performance period
(100% of Adjusted EPS award
vests)
Less than RPI + 9% 0%
Overall outcome 0%
Total pension entitlements audited
The pension entitlements of the Directors from the Dairy Crest Group Pension Fund, a dened benets scheme, were as follows:
Age
Length of
pensionable
service
Years
Accumulated
total accrued
pension at
31 March 2013
000
Accumulated
total accrued
pension at
31 March 2012
000
Increase in
accrued
pension during
the year*
000
Transfer value
of increase
in accrued
pension
000
M Allen 53 19.3 37 36
A Murray 52 7.2 32 31
* Excluding ination
The transfer value of each Directors accrued benets at the end of the nancial year is set out below. The transfer values shown in the table
have been calculated in accordance with actuarial guidance note GN11. Transfer values are determined based on nancial conditions at the
date of calculation including stock market values and bond yields. Following the closure of the pension scheme to future accruals, there is no
increase in accrued pension during the year other than inationary increases.
Total increase
in accrued
pension during
the year
000
As at
31 March 2013
000
As at
31 March 2012
000
Directors
contributions
in the year
000
Movement less
Directors
contributions
000
M Allen 1 1,202 1,278 (76)
A Murray 1 541 557 (16)
Notes
The scheme closed to future accrual at 31 March 2010 and length of pensionable service is unchanged from then.
Mark Allen decided to draw benets from 31 March 2010 and receives an annual pension and received a cash lump sum of 221,510 in
2010/11. Mark Allens accrued pension immediately before electing to draw it early was 63,931 per annum (including seven months
additional pension service). The future pension payable at March 2011 was less than 63,931 per annum due to the application of an early
retirement reduction and because some pension was exchanged for a lump sum cash payment. Benet accrual ceased on 31 March 2010
and Mark Allen and Alastair Murray are no longer paying contributions into the scheme.
The decrease in transfer value in the year is a result of an increase in the post-retirement discount rate assumption at March 2013 compared
to March 2012.
Variable pay awarded during the nancial year
Long Term Incentive Share Plan 2012
The award made under the LTISP 2012 was made on the same basis as the awards made in 2010 and 2011, i.e. with 40% of the total award
based on Adjusted EPS growth and 60% of the total award based on TSR performance against the FTSE 250 (excluding nancial service
companies, real estate companies and investment trusts). Performance against both Adjusted EPS and TSR is measured over a three-year
period.
Directors remuneration report continued
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Details of the LTISP 2012 award are set out in the table below:
LTISP 2012 operation
Type of award Shares
Face value awarded (% of salary) 100%
Performance period 1 April 2012 31 March 2015
Performance conditions Adjusted EPS performance targets TSR performance compared to the FTSE 250
(excluding nancial services companies, real estate
companies and investment trusts)
Weighting 40% 60%
Threshold Adjusted EPS growth at RPI + 3% over the three year
performance period
30% of Adjusted EPS award vests
Dairy Crest ranked at median
30% of TSR award vests
Maximum Adjusted EPS growth at or above RPI + 15% over the
three year performance period
100% of Adjusted EPS award vests
Dairy Crest ranked at or above upper quartile
100% of TSR award vests
External appointments
Executive Directors may be invited to become Non-executive Directors of other companies and it is recognised that exposure to such duties
can broaden their experience and skills which will benet the Company. External appointments are subject to agreement by the Chairman and
reported to the Board. Any external appointment must not conict with a Directors duties and commitments to Dairy Crest.
During the year, Mark Allen held the position of Non-executive Director including Audit Committee member and Remuneration Committee
member at Howdens Joinery Group plc, with fees in association with this work totalling 40,000 (2012: 23,000).
Remuneration of employees
For 2012/13 there was a 1% increase in salaries for administrative and operative level employees that was deferred by nine months from the
normal review date. The Directors and management group did not receive an increase.
Executive changes in the year
Alastair Murray will leave the Board on 23 May 2013, following the announcement of the Groups preliminary results. He will be succeeded by
Tom Atherton, who currently holds the position of Director of Financial Control.
The termination payment to Alastair Murray on leaving employment will be 553,220. Other emoluments made in connection with Alastair
Murrays departure will include the release of deferred bonus shares and pro-rated release of outstanding LTISP awards that meet the
required performance conditions at the end of the relevant performance periods.
The termination payment level calculated in accordance with the provisions of Alastair Murrays service contract, which entitles him to an
amount based on his salary, non-cash benets, pension benets and 50% of the maximum annual bonus potentially payable in the nancial
year of his departure. This amount is pro-rated by a factor of 0.9 for accelerated payment under a contractual formula.
On appointment to the role of Finance Director, Tom Athertons remuneration will comprise an annual base salary of 200,000. This is below
the current incumbents salary and the market practice for comparable roles in relevant comparator companies, and is reective of his
experience at the present time. In line with our remuneration policy, his salary will be moved towards the median for comparable roles over
time and is therefore expected to progress signicantly ahead of market inationary increases, subject to satisfactory performance and
reecting his development and increasing experience in the role.
Tom Athertons bonus opportunity for 2013/14 will be 100% of salary at maximum and 50% of salary for on target performance, with any
bonus over 50% of annual salary deferred in Company shares in line with current Executive Director arrangements. The long-term incentive
award to be made in 2013/14 will be consistent with the policy for Executive Directors in respect of both quantum and performance
conditions. Tom Atherton will also be expected to build up a shareholding of 100% of salary (increasing to 200% of salary on approval of the
LTAP), over a reasonable period of time in line with Dairy Crests remuneration policy, and will also be eligible for pension and other benets
consistent with his role.
Composition of the Remuneration Committee
The Board has appointed a Remuneration Committee of Non-executive Directors of the Company. During the year the Committee consisted of:
Howard Mann (Chairman until 18 May 2012);
Stephen Alexander (Chairman from 18 May 2012);
Andrew Carr-Locke; and
Sue Farr (from 18 May 2012).
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50 Dairy Crest Annual Report 2013
Report of the Directors
In March 2012, Howard Mann announced his intention not to seek re-appointment as a Non-executive Director having completed nine years
service with the Company. He stepped down as a Director of the Company and as Chairman of the Remuneration Committee on 18 May
2012. Stephen Alexander became Chairman of the Remuneration Committee from that date.
Anthony Fry attends the Remuneration Committee by invitation. Members of the Remuneration Committee have no potential conicts of
interest arising from cross-directorships and they are not involved in the day-to-day running of the Company. The Committee also received
materials, assistance and advice on remuneration policy from Rob Tansey (HR Director until his resignation in July 2012), Gareth Hopkins
(Interim HR Director) and Robert Willock (appointed HR Director on 1 April 2013). The Remuneration Committee has appointed
PricewaterhouseCoopers LLP (PwC) to provide advice on executive remuneration. During the year, PwC also provided other consultancy
services to the Group.
The Chief Executive attends all meetings by invitation, but is not present at any discussions relating specically to his own remuneration.
Role of the Remuneration Committee
The Remuneration Committee is responsible for the broad policy with respect to senior executives salary and other remuneration. It
specically determines, within remuneration principles agreed with the Board, the total remuneration package of each Executive Director and
reviews with the Chief Executive, the remuneration packages for other senior executives. A copy of the terms of reference of the Committee
can be found on the Companys website.
In 2012/13, the Committee met six times. Details of attendance are shown on page 11 and the Committee discussed, amongst others, the
following matters:
Meeting Agenda items discussed
April Implications of BIS reporting requirements
Review of operations of incentive structures
May Approval of 2011/12 Bonus and LTISP outcomes
Approval of 2012/13 Bonus Rules and Targets and grant for 2012/13 LTISP
Approval of Directors Remuneration Report
November BIS reporting requirements
December Review of long-term incentive structures
January Further review of long-term incentive structures
March Review of projected 2012/13 Annual Bonus and LTISP outcomes
Succession planning
Proposed LTAP arrangement
Statement of shareholder voting
The table below shows the advisory vote on the 2011/12 remuneration report at the 2012 AGM.
Number of votes cast For Against Abstentions
64,984,337 63,230,986
(97.3%)
203,795
(0.3%)
1,549,556
(2.4%)
The Committee believes the 97.3% votes in favour of the remuneration report shows very strong shareholder support for the Groups
approach to remuneration.
Additional information audited
Total shareholdings of Directors
Directors are encouraged to build a shareholding in the Company equivalent to 100% of salary (increasing to 200% of salary on approval of
the LTAP) and to this end would normally retain 50% of net proceeds from share plans and deferred bonus share awards until that
shareholding is achieved.
Directors remuneration report continued
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Dairy Crest Annual Report 2013 51
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The interests of the Directors at the end of the year in the ordinary share capital of the Company were as follows:
As at 31 March 2013
Resignation/ benecial
As at 31 March 2012
Benecial
As at 31 March 2013
Deferred shares*
As at 31 March 2012
Deferred shares*
A Fry 3,000 3,000
M Allen 143,798 139,801 52,704 52,704
A Murray 154,018 150,021 36,571 36,571
M Wilks 22,497 18,500 36,748 36,748
A Carr-Locke 2,000 2,000
R Macdonald 1,000 1,000
S Alexander 1,000 1,000
S Farr 4,465 4,465
H Mann** 20,000 20,000
* This analysis excludes shares resulting from reinvested dividends on deferred shares, as Directors have no legal or benecial interest in such shares until, and if, the
Remuneration Committee exercises its discretion to award such shares at the end of the vesting period.
** Holding at date of resignation.
Shareholdings above exclude options under the LTISP scheme and deferred shares for Executive Directors as part payment of bonuses which
are shown in a separate column. These deferred shares are released three years after the year in which the bonus was earned.
Further details on shares held under option by Directors are set out in the table below. There was no movement in deferred bonus shares or
deferred bonus share options during the year:
(Audited table) Bonus year
Year of
award
Balance at
1 April 2012 Awarded
Dividend
reinvestment Issued
Balance at
31 March 2013
Mark Allen 2009/10 2010 52,704 52,704
2010/11 2011 5,070 5,070
Alastair Murray 2009/10 2010 36,571 36,571
2010/11 2011 3,409 3,409
Martyn Wilks 2009/10 2010 36,748 36,748
2010/11 2011 3,426 3,426
The share prices at the date of award for 2010 and 2011 were 395 pence and 368 pence respectively. (Note that 2011 deferred bonuses were
granted as options rather than as deferred shares. These will be exercisable for up to ten years from the award date). No Director holds a
non-benecial interest in the Companys share capital. There have been no changes in Directors shareholdings between 31 March 2013 and
22 May 2013.
Shares under LTISP Awards
Actual and potential awards held by Executive Directors under LTISP at the beginning and end of the year, details of actual awards, awards
vested during the year and their value, are as follows:
(Audited table)
Year of
award
Balance at
1 April 2012 Awarded
Exercised
retained
Exercised
sold Lapsed
Balance at
31 March
2013
Market price
at original
award
M Allen 2010
2011
2012
129,721
140,149

9,956
10,755
160,097

(139,677)

150,904
160,097
398.9p
368.0p
329.0p
A Murray 2010
2011
2012
90,012
93,302

6,908
7,160
106,581

(96,920)

100,462
106,581
398.9p
368.0p
329.0p
M Wilks 2010
2011
2012
90,449
93,754

6,941
7,195
107,098

(97,390)

100,949
107,098
398.9p
368.0p
329.0p
Notes to the LTISP table:
Awarded shares include reinvestment of dividends.
The above table includes options granted under the ESOS.
For the 2010, 2011 and 2012 awards, 60% of the award is subject to relative TSR performance against a comparator group comprising
FTSE 250 constituents (excluding nancial service companies, real estate companies and investment trusts) and 40% is subject to
Adjusted EPS growth targets.
The 2010 awards vested at 0%
LTISP 2011 and LTISP 2012 performance measurement and vesting periods end on 31 March 2014 and 31 March 2015 respectively.
Options will be exercisable from 1 July 2014 and 3 July 2015 respectively.
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Report of the Directors
The closing share price on 31 March 2013 was 429 pence (31 March 2012: 333 pence).
There were no LTISP awards or exercises between 31 March 2013 and 22 May 2013.
Performance graph
The graph below sets out for the ve years ended 31 March 2013 the total shareholder return of Dairy Crest Group plc and of the FTSE 250
index (excluding investment companies) of which the Company is a constituent member.
Executive Share Option Scheme
The Dairy Crest Executive Share Option Scheme (ESOS) was established on 30 July 1996 for Directors and certain senior management and
expired in July 2006. A new ESOS was adopted at the AGM 2006 (ESOS 2006). Part A is approved by the Inland Revenue and Part B is an
unapproved scheme. Options are granted to participants at prices determined by the Remuneration Committee which may not be less than
the market price of the shares as derived from the London Stock Exchange Daily Ofcial List at the time of grant. At 31 March 2013, there
were 417,708 outstanding options under this scheme which were awarded as part of the 2011 and 2012 LTISP (2012: 141,826 awarded as part
of the 2010 and 2011 LTISP).
Sharesave Scheme
The Dairy Crest Sharesave Scheme was rst established on 30 July 1996 and there have been nine grant phases since that date. The life of the
Sharesave Scheme was extended in August 2006 to allow options to be granted until the twentieth anniversary of otation, being August 2016.
The Sharesave Scheme is open to all eligible employees and full time Directors. Employees enter into an approved savings contract over a
three year term to make monthly contributions up to an overall maximum of 250 per month. At the end of the term, members have the right
to buy ordinary shares in the Company at a price xed at the time of the option grant. The price at which the options may be offered may not
be less than 80% of the market price at the time of option grant.
A Sharesave grant was made in December 2012 at 281 pence per share in which 1,312 employees participated. We intend to make a further
grant in 2014/15.
Directors Sharesave options
At 31 March 2013 the Directors held the following share options under the Sharesave Scheme.

At 31 March
2012
Granted
in year
Exercised
in year
At 31 March
2013
Exercise
price Exercise period
M Allen 3,997 3,202 (3,997) 3,202 281p 3/2016 9/2016
A Murray 3,997 3,202 (3,997) 3,202 281p 3/2016 9/2016
M Wilks 3,997 3,202 (3,997) 3,202 281p 3/2016 9/2016
The share options in the above table at 31 March 2013 represent the total awards made in 2012/13 under the 2012 Sharesave Scheme at
281 pence per share assuming participants continue to save throughout the three year life of the Scheme.
On 1 October 2012 Mark Allen, Alastair Murray and Martyn Wilks each exercised Sharesave Scheme options over 3,997 shares and retained
the shares. The unrealised gain on their exercise of the Sharesave Scheme options was 4,645 for each.
The mid-market price of the above shares as at the close of business on 31 March 2013 was 429 pence per share. During the year between
1 April 2012 and 31 March 2013 the mid-market closing price ranged from 290 pence per share to 444 pence per share.
Stephen Alexander Chairman of the Remuneration Committee
22 May 2013
Directors remuneration report continued
Dairy Crest Relative Total Shareholder Return over ve years
FTSE 250 (excluding
investment companies)
Dairy Crest Group plc
March 08 March 09 March 10 March 11 March 12 March 13
40
60
80
100
120
140
160
180
72236_Glasshouse_p41-p55.indd 52 04/06/2013 05:32
Dairy Crest Annual Report 2013 53
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Principal activities
The principal activities of the Group are the manufacture, processing
and distribution of milk and dairy products. Further information can
be found within the Business review section at pages 18 to 33.
Going concern
The Group and Companys business activities, together with factors
likely to affect future development, performance and position are set
out in the Chief Executives review on pages 14 to 15, the Business
review on pages 18 to 33 and the review of principal risks and
uncertainties on pages 16 to 17. The nancial position, cash ows,
liquidity position and borrowing facilities are described in the
Financial review on pages 30 to 33. In addition, Notes 30 and 31 to
the Accounts include the Group and Companys objectives, policies
and processes for managing its capital; its nancial risk
management objectives; details of its nancial instruments and
hedging activities; and its exposures to credit risk and liquidity risk.
As highlighted in Note 30, the Company and Group meet day-to-day
working capital requirements through syndicated revolving credit
facilities and cash to ensure that forecast net borrowings plus a
reasonable operating headroom are covered by committed facilities
which mature at least 12 months after the year end. At 31 March
2013, effective headroom was 573.1 million. Since 31 March 2013
the Group has repaid certain private placement notes details of which
are set out in Note 34 Post balance sheet events on page 112.
There were no breaches of bank covenants in the year ended
31 March 2013 and projections do not indicate any breaches in the
foreseeable future. Since the sale of St Hubert in August 2012,
exchange rate uctuations no longer materially impact our bank
covenant tests.
Forecasts and projections, taking into account reasonably possible
changes in trading performance, show that the Company and Group
will be able to operate within the level of current facilities.
Having reviewed and taken into account Going Concern and
Liquidity Risk: Guidance for Directors of UK Companies 2009,
published by the Financial Reporting Council in October 2009, the
Directors are satised that the Company and the Group have
adequate resources to continue operating for the foreseeable future.
For this reason they continue to adopt the going concern basis in
preparing the nancial statements.
Business review
The information satisfying the Business review requirements of s417
of the Companies Act 2006 is set out in the Corporate governance
section of the Annual Report; the Chairmans Statement on page 13;
the Chief Executives review on pages 14 to 15; the Business review
on pages 18 to 33; the review of the principal risks and uncertainties
on pages 16 to 17; and the Group Key Performance Indicators on
page 5.
Group results
The Groups consolidated income statement set out on page 58
shows a prot for the nancial year of 54.5 million compared with
17.1 million loss in 2011/12.
Post balance sheet events
On 18 April 2013 the Group repaid 106.9 million (92.7 million) and
7.2 million of 2007 notes as a premium of 8.7 million. 69.2 million
of these notes were due for repayment in April 2014 and 30.7
million were due for repayment in April 2017. On the same date, the
Group also paid 40 million to the Dairy Crest Group Pension Fund
and it granted the Fund a oating charge over maturing cheese
inventories with a maximum realisable value of 60 million.
Dividends
The Directors are recommending a nal dividend of 15.0 pence
(2011/12: 14.7 pence) per ordinary share, which if approved, will be
paid to members on the register at the close of business on 28 June
2013. Together, the nal dividend and interim dividend (5.7 pence
per ordinary share paid on 24 January 2013) make total dividends for
the year of 20.7 pence per ordinary share (2011/12: 20.4 pence).
Share capital
The authorised and issued share capital of the Company together
with details of movements in the Companys issued share capital
during 2012/13 are shown in Note 24 to the nancial statements.
As at the date of this report, 136,608,131 million ordinary 25p shares
were in issue and fully paid with an aggregate nominal value of
34.2 million.
Rights and obligations attaching to shares
The holders of ordinary shares are entitled to receive the Companys
Reports and Accounts; to attend and speak at General Meetings of
the Company; to appoint proxies and to exercise voting rights. To be
effective, electronic and paper proxy appointments and voting
instructions must be received at the Companys registered ofce, or
such other place in the United Kingdom specied in the relevant
notice of meeting, not later than 48 hours before a General Meeting.
None of the shares carry any special rights with regard to control of
the Company. There are no known arrangements under which
nancial rights are held by a person other than the holder of the
shares and no known agreements on restrictions on share transfers
or on voting rights. Shares acquired through Company share
schemes and plans rank pari passu with the shares in issue and
have no special rights.
Transfer of shares
Subject to applicable statutes and regulations, there are no
restrictions on transfer or limitations on the holding of any class of
shares and no requirements for prior approval of any transfers.
Shareholder waiver of dividends
The Company established an employee benet trust in 1996 which
in certain circumstances holds shares in connection with the
Groups employee share incentive plans. As the registered holder,
the voting rights in the shares are exercisable by the trustee.
However, the trustee does not ordinarily exercise those rights and
waives its entitlement to dividends.
Articles of association
Changes to the Articles must be approved by the shareholders in
accordance with the legislation in force from time to time.
No compensation for loss of ofce
The Company does not have agreements with any Director or
employee that would provide compensation for loss of ofce or
employment resulting from a takeover, except that provisions of the
Companys share schemes and plans may cause options and
awards granted to employees under such schemes and plans to
vest on a takeover.
Additional statutory information
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54 Dairy Crest Annual Report 2013
Report of the Directors
Issue of shares
At the AGM on 17 July 2012, shareholders renewed the authority for
the Board under the Articles to exercise all powers of the Company
to allot relevant securities up to an aggregate nominal amount of
22,226,726.
Purchase of own shares
At the AGM on 17 July 2012, shareholders granted the Company
authority to make market purchases of up to 13,336,036 of its
issued ordinary shares of 25 pence each, provided that: the
minimum price which may be paid for any such ordinary share is
25 pence (exclusive of expenses and appropriate taxes); the
maximum price (exclusive of expenses and appropriate taxes) which
may be paid for any such ordinary share shall be not more than 5%
above the average of the middle market prices for an ordinary share
in the Company, as taken from the London Stock Exchange Daily
Ofcial List for the ve business days immediately preceding the
date of purchase. The Company did not exercise this authority
during the year and made no market purchases. Except in relation
to a purchase of ordinary shares, the contract for which was
concluded before this authority expires and which will or may be
executed wholly or partly after such expiry, the authority granted
shall expire at the conclusion of this years AGM.
The Directors believe it advisable to seek renewal of both of the
above-mentioned authorities or replacement of them with suitable
alternatives, annually at the AGM. Approval will be sought from the
shareholders at this years AGM to renew the authorities for a
further year.
Pensions
On 31 March 2010 the Groups dened benet pension fund was
closed to future accrual. Accordingly, the fund is now in run-off. It
remains under the control of a corporate trustee, Dairy Crest Pension
Trustees Limited, the board of which comprises four directors
nominated by Dairy Crest Limited and three directors elected by all
members. The pension funds assets are held separately from those
of the Group and can only be used in accordance with the rules of the
pension fund. Pension provision for employees is now made through
a dened contribution pension scheme.
Signicant agreements change of control
A change of control of the Company following a takeover bid may
cause a number of agreements to which the Company or its
subsidiaries are party, to take effect, alter or terminate. The
agreements that are considered signicant are as follows:
Borrowing facilities
Non-compliance with the change of control clauses in the Groups
funding arrangements, or failure to reach agreement with the parties
on revised terms, would require any acquirer to put in place
replacement facilities.
Supply agreements
Certain supply agreements contain provisions whereby on a change
of control of the Group, they may be terminable. Accordingly, a
change of control of the Group could result in the need for the Group
to source alternative supply for certain materials.
Essential contracts
It is vital that the Group is able to source high quality raw milk at the
most competitive prices. To that end, the Group has numerous
contracts for its supply. While these contracts are collectively
essential to the business, no single contract nor any single supplier
of raw milk is critical to the Companys business.
The Company also has strong relationships with certain major
retailers to supply them with liquid milk and other branded products.
Individually these contracts are important to the business but not
essential.
Substantial shareholdings
During the period and up to 22 May 2013, the Company has been
notied in accordance with the Disclosure and Transparency Rules
issued by the Financial Services Authority of the following interests of
3% or more in the Companys existing issued ordinary share capital.
Notified
No. of shares
Notified
percentage
of issued
share capital
Legal & General Group plc (L&G) < 3%
No notications have been received in the period from 1 April 2013
to 22 May 2013.
Directors interests
Details of the interests in the shares of the Company of the Directors
holding ofce as at the date of this Report, along with those of the
Directors who held ofce during the year but retired or resigned from
ofce, and their immediate families appear in the Remuneration
Report on page 51.
Details of the Directors service contracts and letters of appointment
appear in the Remuneration Report on page 45.
No Director had a material interest in any signicant contract with the
Company or any of its subsidiaries during the year. Procedures for
dealing with Directors conicts of interest are in place and are
operating effectively.
Directors and Ofcers indemnities and insurance
The Company maintains liability insurance for its Directors and
Ofcers and those of its subsidiaries. The Directors, Company
Secretary and other Ofcers of the Company and those of its
subsidiaries are indemnied by the Company to the extent permitted
by company law. That indemnity provision has been in place during
the year and remains in force.
Employees
At the end of March 2013, the Group employed approximately 4,900
people. It depends on the skills and commitment of its employees in
order to achieve its objectives. Personnel at every level are
encouraged to make their fullest possible contribution to Dairy
Crests success.
Employees are kept regularly informed on matters affecting them
and on issues affecting the Groups performance through a variety
of communication tools, including the Group intranet.
The Group has well-established consultation and negotiating
arrangements with established trade unions.
Employees are encouraged to acquire shares in the Group through
participation in the savings-related share option scheme (Sharesave
Scheme). Details of the Scheme are set out in Note 26 to the nancial
statements and at page 52 of the Directors Remuneration Report.
Additional statutory information continued
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In recognition of the key part played by employee engagement in the
Groups long-term success, the Group has established a wide
ranging programme aimed at promoting and enhancing employee
engagement. The programme includes regular surveys in which all
employees are invited to participate, to gauge the level of employee
engagement within the Group. Once the outcome of the survey has
been fed back to the Divisions, business units and departments,
plans designed to maintain and improve employee engagement are
prepared and implemented.
The Board is committed to ensuring that a culture, free from both
discrimination and harassment, remains embedded within the Group.
Discrimination of any sort is not tolerated. Proper consideration is
given to applications for employment from disabled people who are
employed whenever suitable vacancies arise. Wherever practicable,
staff who become disabled during employment are retained. The
Group practices equality of opportunity for all employees,
irrespective of ethnic origin, religion, political opinion, gender, marital
status, disability, age or sexual orientation.
Research and development
The Group has adopted a target of delivering 10% of its annual
turnover through new product development. Focus continues to be
on offering consumers a wide product mix, and especially the
development of lower fat variants of existing products. Dairy Crest
remains at the forefront of dairy industry developments to reduce
packaging waste through innovation.
Land and buildings
Having obtained an informal valuation of certain of the Groups land
and buildings, the Directors are of the opinion that the current
market value in existing use of the Groups land and buildings slightly
exceeds their book value.
Supplier payment policy
The Company is a holding company and had no amounts owing to
trade creditors at 31 March 2013 (2011/12: nil). The Groups creditor
days outstanding at 31 March 2013 were 24.3 (2011/12: 23.6 days) of
purchases. With the exception of milk suppliers, the Group has
standard payment terms of 60 days from invoice date. Payment
terms for purchases under major contracts are agreed as part of the
contract negotiations.
Financial instruments
Details of the use by the Company and its subsidiaries of nancial
instruments and any related risk management objectives and
policies (including hedging policy) and exposure, including to price
risk, credit risk, liquidity risk and cash ow risk (of the Company in
connection with such nancial instruments) can be found at Note 30
to the nancial statements.
Charitable and political donations
No political donations or expenditures were made or incurred during
the year. Charitable donations amounted to 0.1 million (2011/12:
0.1 million). The Corporate Responsibility section of the Business
review at pages 26 to 29 provides additional detail on the charitable
activities of the Group and its employees.
Disclosure of information to the Auditor
So far as each Director in ofce at the date of approval of this Report
is aware, there is no relevant audit information of which the
Companys External Auditor, Ernst & Young is unaware. Each of the
Directors has taken all steps that they might reasonably be expected
to have taken in order to (i) make themselves aware of any relevant
audit information and (ii) establish that the External Auditor is aware
of such information.
For the purposes of this statement on disclosure of information to
the External Auditor, relevant audit information is the information
needed by the Companys External Auditor in connection with the
preparation of its report at page 57.
Directors responsibility statements
The responsibility statements required under Disclosure and
Transparency Rule 4.1 are set out on page 56.
Annual general meeting
The AGM will be held at Eversheds LLP, One Wood Street, London,
EC2V 7WS on Tuesday, 16 July 2013 at 12.00 pm. The Notice
convening the meeting will be issued separately, together with
details of the business to be considered and explanatory notes
relating to each of the resolutions being proposed.
Auditor
Ernst & Young has expressed its willingness to continue as Auditor
of the Company. A resolution to reappoint Ernst & Young as the
Companys Auditor will be put to the forthcoming AGM.
By order of the Board
Robin Miller Company Secretary
22 May 2013
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56 Dairy Crest Annual Report 2013
Report of the Directors
The Directors are responsible for preparing the Annual Report and
the Group and Companys nancial statements in accordance with
applicable United Kingdom law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Under company law the Directors must not approve the Group and
Companys nancial statements unless they are satised that they
give a true and fair view of the state of affairs of the Group and
Company and of the prot or loss of the Group and Company for
that period. In preparing the nancial statements the Directors are
required to:
present fairly the nancial position, nancial performance and cash
ows of the Group and Company;
select suitable accounting policies in accordance with IAS 8,
Accounting Policies, Changes in Accounting Estimates and
Errors and then apply them consistently;
present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
provide additional disclosures when compliance with the specic
requirements in IFRSs as adopted by the European Union is
insufcient to enable users to understand the impact of particular
transactions, other events and conditions on the nancial position
of the Group and Company and performance of the Group;
state that the Group and Company has complied with IFRSs,
subject to any material departures disclosed and explained in the
nancial statements; and
make judgements and estimates that are responsible and prudent.
The Directors are responsible for keeping adequate accounting
records that are sufcient to show and explain the Groups and
Companys transactions and disclose with reasonable accuracy at
any time the nancial position of the Group and of the Company and
enable them to ensure that the nancial statements comply with the
Companies Act 2006 and Article 4 of the IAS Regulation. They are
also responsible for safeguarding the assets of the Group and of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud or other irregularities.
The Directors are responsible for preparing the Directors Report,
the Directors Remuneration Report and the Corporate Governance
Statement in accordance with the Companies Act 2006 and
applicable regulations, including the requirements of the Listing
Rules and the Disclosure and Transparency Rules.
The Directors are also responsible for the maintenance and integrity
of the corporate and nancial information included on the Groups
website. Legislation in the United Kingdom governing the
preparation and dissemination of nancial statements may differ
from legislation in other jurisdictions.
DTR 4.1 Statement
Each of the Directors, the names and functions of whom are set out
on pages 10 to 11 conrms that to the best of his knowledge, they
have complied with the above requirements in preparing the Group
and Companys nancial statements in accordance with applicable
accounting standards and that the nancial statements give a true
and fair view of the assets, liabilities and nancial position of the
Group and Company and of the Groups income statement and the
Companys prot for that period. In addition, each of the Directors
conrms that the management report represented by the Directors
Report includes a fair review of the development and performance
of the business and the position of the Group and Company,
together with a description of the principal risks and uncertainties
that it faces.
On behalf of the Board
Mark Allen Chief Executive
Alastair Murray Finance Director
The Report of the Directors from pages 2 to 56 inclusive was
approved by the Board on 22 May 2013 and is signed on its
behalf by:
Robin Miller Company Secretary
Dairy Crest Group plc
Claygate House
Littleworth Road
Esher
Surrey KT10 9PN
Registered in England and Wales No. 3162897
22 May 2013
Statement of Directors responsibilities in relation
to the Group and Company financial statements
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Dairy Crest Annual Report 2013 57
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Independent auditors report to the members of Dairy Crest Group plc
We have audited the nancial statements of Dairy Crest Group plc
for the year ended 31 March 2013 which comprise the Consolidated
income statement, Consolidated statement of comprehensive
income, Consolidated and Parent Company balance sheets,
Consolidated statement of changes in equity, Parent Company
statement of changes in equity and the Consolidated and Parent
Company statement of cash ows and the related notes 1 to 35.
The nancial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as
regards the parent company nancial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the Companys members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state
to the Companys members those matters we are required to state
to them in an auditors report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Companys members
as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors Responsibilities Statement
set out on page 56, the Directors are responsible for the preparation
of the nancial statements and for being satised that they give a
true and fair view. Our responsibility is to audit and express an
opinion on the nancial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Boards
Ethical Standards for Auditors.
Scope of the audit of the nancial statements
An audit involves obtaining evidence about the amounts and
disclosures in the nancial statements sufcient to give reasonable
assurance that the nancial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Companys circumstances and have been consistently applied
and adequately disclosed; the reasonableness of signicant
accounting estimates made by the Directors; and the overall
presentation of the nancial statements. In addition, we read all the
nancial and non-nancial information in the Annual Report to
identify material inconsistencies with the audited nancial
statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on nancial statements
In our opinion:
the nancial statements give a true and fair view of the state of the
Groups and of the parent companys affairs as at 31 March 2013
and of the Groups prot for the year then ended;
the Group nancial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
the parent company nancial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the
Companies Act 2006; and
the nancial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
Group nancial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
the part of the Directors Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act
2006; and
the information given in the Directors Report for the nancial year
for which the nancial statements are prepared is consistent with
the nancial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to
you if, in our opinion:
adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
the nancial statements and the part of the Directors
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
certain disclosures of Directors remuneration specied by law are
not made; or
we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
the Directors statement, set out on page 53, in relation to going
concern;
the part of the Corporate Governance Statement relating to the
Companys compliance with the nine provisions of the UK
Corporate Governance Code specied for our review; and
certain elements of the report to the shareholders by the Board on
Directors remuneration.
Alison Duncan (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
22 May 2013
Notes:
1. The maintenance and integrity of the Dairy Crest Group plc website is the
responsibility of the Directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the nancial
statements since they were initially presented on the website.
2. Legislation in the United Kingdom governing the preparation and dissemination
of nancial statements may differ from legislation in other jurisdictions.
72236_Glasshouse_p57.indd 57 05/06/2013 06:32
58 Dairy Crest Annual Report 2013
Consolidated income statement
Year ended 31 March 2013

2013 2012
Earnings per share

Basic earnings/(loss) per share from


continuing operations (pence) 8 (29.1)

Diluted earnings/(loss) per share from


continuing operations (pence) 8 (29.1)

Adjusted basic earnings per share from


continuing operations (pence) * 8 29.9 28.9

Adjusted diluted earnings per share from


continuing operations (pence) * 8 29.5 28.4

Basic earnings per share from discontinued


operations (pence) 8 40.5 16.3

Diluted earnings per share from discontinued


operations (pence) 8 39.9 16.0

Basic earnings/(loss) per share on prot/(loss)


for the year 8 40.5 (12.8)

Diluted earnings/(loss) per share on


prot/(loss) for the year 8 39.9 (12.8)

2013 2012
Dividends
Proposed nal dividend (m) 7 20.5 19.6
Interim dividend paid (m) 7 7.8 7.6
Proposed nal dividend (pence) 7 15.0 14.7
Interim dividend paid (pence) 7 5.7 5.7
2013 2012
Note
Before
exceptional
items
m
Exceptional
items
m
Total
m
Before
exceptional
items
m
Exceptional
items
m
Total
m
Group revenue 1 1,381.6 1,381.6 1,514.7 1,514.7
Operating costs 2,3,4 (1,320.4) (47.8) (1,368.2) (1,451.2) (93.9) (1,545.1)
Other income property 3 7.7 7.7 4.6 4.6
Prot/(loss) on operations 68.9 (47.8) 21.1 68.1 (93.9) (25.8)
Finance costs 5 (18.7) (8.7) (27.4) (21.1) (21.1)
Other nance income pensions 5 5.9 5.9 5.5 5.5
Share of associate's net loss 14 (0.3) (0.3)
Prot/(loss) before tax 56.1 (56.5) (0.4) 52.2 (93.9) (41.7)
Tax (expense)/credit 6 (11.6) 12.0 0.4 (10.2) 13.1 2.9
Prot/(loss) from continuing operations 44.5 (44.5) 42.0 (80.8) (38.8)
Prot from discontinued operations 29 6.8 47.7 54.5 21.7 21.7
Prot/(loss) for the year attributable to
equity shareholders 51.3 3.2 54.5 63.7 (80.8) (17.1)
As a result of its disposal in August 2012, the results of the St Hubert business have been classied as discontinued operations and prior
period comparatives have been restated accordingly. The posttax prot relating to discontinued activities is further analysed in Note 29.
* Adjusted earnings per share calculations are presented to give an indication of the underlying operational performance of the Group. The calculations exclude
exceptional items, amortisation of acquired intangibles and pension interest in relation to the Groups dened benet pension scheme, the latter being highly
dependent upon market assumptions at 31 March each year.
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Dairy Crest Annual Report 2013 59
Note
2013
m
2012
m
Prot/(loss) for the year 54.5 (17.1)
Net investment hedges:
Exchange differences on foreign currency net investments (15.3) (19.3)
Exchange differences on foreign currency borrowings designated as net investment hedges 6.0 7.7
(9.3) (11.6)
Exchange differences reclassied to income statement on sale of subsidiary 11.4
Actuarial losses and recognition of liabilities for unrecoverable notional surpluses 20 (13.5) (46.2)
Cash ow hedges reclassication adjustment for gains in income statement (9.5) 4.3
Cash ow hedges gains/(losses) recognised in other comprehensive income 10.0 (8.3)
Exchange difference on investment in associate (0.2)
Tax relating to components of other comprehensive income 6 7.6 11.9
Other comprehensive loss for the year, net of tax (3.3) (50.1)
Total comprehensive gain/(loss) for the year, net of tax 51.2 (67.2)
All amounts are attributable to owners of the parent
Consolidated statement of comprehensive income
Year ended 31 March 2013
60 Dairy Crest Annual Report 2013
Consolidated Parent Company
Note
2013
m
2012
m
2013
m
2012
m
Assets
Non-current assets
Property, plant and equipment 10 270.3 282.9
Goodwill 11 74.3 260.0
Intangible assets 12 30.5 170.5
Investments 13 0.3 480.9 479.5
Investment in associate using equity method 14 0.5 0.5
Deferred consideration 1.4 1.3
Deferred tax asset 6 0.4 0.7
Financial assets Derivative nancial instruments 17 14.5 16.6 12.9 15.0
391.8 731.8 494.2 495.2
Current assets
Inventories 15 208.2 187.8
Trade and other receivables 16 98.8 131.5 170.7 219.8
Financial assets Derivative nancial instruments 17 9.6 0.3 9.6
Cash and shortterm deposits 18 276.1 79.4 14.8
592.7 399.0 195.1 219.8
Total assets 1 984.5 1,130.8 689.3 715.0

Equity and Liabilities


Non-current liabilities
Financial liabilities Long-term borrowings 19 (184.3) (419.7) (182.4) (407.2)
Derivative nancial instruments 19 (3.9) (8.7) (3.9) (8.7)
Retirement benet obligations 20 (67.2) (79.8)
Deferred tax liability 6 (14.6) (69.4)
Deferred income 22 (9.6) (6.9)
(279.6) (584.5) (186.3) (415.9)
Current liabilities
Trade and other payables 21 (221.8) (266.4) (16.9) (8.0)
Financial liabilities Short-term borrowings 19 (167.5) (2.0) (165.7)
Derivative nancial instruments 19 (2.3) (2.2)
Current tax liability (2.6) (0.7)
Deferred income 22 (1.6) (0.6)
Provisions 23 (1.7) (2.3)
(397.5) (272.0) (184.8) (8.0)
Total liabilities (677.1) (856.5) (371.1) (423.9)

Shareholders equity
Ordinary shares 24 (34.1) (33.3) (34.1) (33.3)
Share premium (77.5) (70.9) (77.5) (70.9)
Interest in ESOP 0.6 0.6
Other reserves 25 (51.4) (49.0) (154.4) (152.2)
Retained earnings (145.0) (121.7) (52.2) (34.7)
Total shareholders equity (307.4) (274.3) (318.2) (291.1)
Total equity and liabilities (984.5) (1,130.8) (689.3) (715.0)
Mark Allen Chief Executive
Alastair Murray Finance Director
The nancial statements were approved by the directors on 22 May 2013
Consolidated and Parent Company balance sheets
At 31 March 2013
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Dairy Crest Annual Report 2013 61
Attributable to owners of the parent
2013
Ordinary
shares
m
Share
premium
m
Interest
in ESOP
m
Other
reserves*
m
Retained
earnings
m
Total
Equity
m
At 31 March 2012 33.3 70.9 (0.6) 49.0 121.7 274.3
Prot for the year 54.5 54.5
Other comprehensive gain/(loss):
Net investment hedges (9.3) (9.3)
Exchange differences reclassied to income
statement on sale of subsidiary
11.4 11.4
Cash ow hedges 0.5 0.5
Actuarial losses (13.5) (13.5)
Tax on components of other
comprehensive income (0.2) 7.8 7.6
Other comprehensive gain/(loss) 2.4 (5.7) (3.3)
Total comprehensive gain 2.4 48.8 51.2
Issue of share capital 0.8 6.6 7.4
Share based payments 1.9 1.9
Equity dividends (27.4) (27.4)
At 31 March 2013 34.1 77.5 (0.6) 51.4 145.0 307.4

2012
At 31 March 2011 33.3 70.8 (0.6) 64.1 197.9 365.5
Loss for the year (17.1) (17.1)
Other comprehensive gain/(loss):
Net investment hedges (11.6) (11.6)
Cash ow hedges (4.0) (4.0)
Actuarial losses (46.2) (46.2)
Exchange difference on investment
in associate (0.2) (0.2)
Tax on components of other
comprehensive income 0.7 11.2 11.9
Other comprehensive loss (15.1) (35.0) (50.1)
Total comprehensive loss (15.1) (52.1) (67.2)
Issue of share capital 0.1 0.1
Share based payments 2.4 2.4
Equity dividends (26.5) (26.5)
At 31 March 2012 33.3 70.9 (0.6) 49.0 121.7 274.3
Consolidated statement of changes in equity
Year ended 31 March 2013
* Further details are provided in Note 25
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62 Dairy Crest Annual Report 2013
2013
Ordinary
shares
m
Share
premium
m
Capital
reserve
m
Hedging
reserve
m
Other
reserve*
m
Retained
earnings
m
Total
m
At 31 March 2012 33.3 70.9 142.7 (1.9) 11.4 34.7 291.1
Prot for the year 44.4 44.4
Other comprehensive loss:
Cash ow hedges 1.2 1.2
Related tax (0.4) (0.4)
Other comprehensive gain 0.8 0.8
Total comprehensive gain 0.8 44.4 45.2
Issue of share capital 0.8 6.6 7.4
Share based payments 1.4 0.5 1.9
Equity dividends (27.4) (27.4)
At 31 March 2013 34.1 77.5 142.7 (1.1) 12.8 52.2 318.2

2012
At 31 March 2011 33.3 70.8 142.7 1.0 9.7 20.1 277.6
Prot for the year 40.4 40.4
Other comprehensive loss:
Cash ow hedges (3.8) (3.8)
Related tax 0.9 0.9
Other comprehensive loss (2.9) (2.9)
Total comprehensive gain/(loss) (2.9) 40.4 37.5
Issue of share capital 0.1 0.1
Share based payments 1.7 0.7 2.4
Equity dividends (26.5) (26.5)
At 31 March 2012 33.3 70.9 142.7 (1.9) 11.4 34.7 291.1
Parent Company statement of changes in equity
Year ended 31 March 2013
* Other reserve represents the share based payment credit in respect of amounts capitalised as investments (see Note 13).
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Dairy Crest Annual Report 2013 63
Consolidated Parent Company
Note
2013
m
2012
m
2013
m
2012
m
Cash generated from operations 32 19.1 84.5
Interest paid (18.0) (23.6)
Taxation paid (4.7) (14.1)
Net cash (outow)/inow from operating activities (3.6) 46.8
Cash ow from investing activities
Capital expenditure (50.9) (53.3)
Grants received 22 5.3 0.2
Grants repaid (0.4)
Proceeds from disposal of property, plant and equipment 10.1 12.6
Purchase of businesses and investments 29 (0.6) (12.3)
Sale of discontinued operation (net of cash disposed of and fees) 29 330.8
Amounts (paid to)/received from subsidiaries 97.1 (28.0)
Net cash generated from/(used in) investing activities 294.3 (52.8) 97.1 (28.0)
Cash ow from nancing activities
Repayment and cancellation of bank facilities and loan notes (7.5) (155.2) (7.5) (65.2)
New bank facilities advanced 165.2 65.2
Proceeds from issuance of loan notes 54.5 54.5
Net repayment of borrowings under revolving credit facilities (68.7) (0.1) (55.9)
Dividends paid 7 (27.4) (26.5) (27.4) (26.5)
Proceeds from issue of shares 24 7.4 0.1 7.4
Finance lease repayments 33 (1.7) (2.4)
Net cash (used in)/generated from nancing activities (97.9) 35.6 (83.4) 28.0
Net increase in cash and cash equivalents 192.8 29.6 13.7
Cash and cash equivalents at beginning of year 33 79.4 49.9
Exchange impact on cash and cash equivalents 33 3.9 (0.1) 1.1
Cash and cash equivalents at end of year 33 276.1 79.4 14.8
Memo: Net debt at end of year 33 (59.7) (336.4) (315.5) (398.6)
Consolidated and Parent Company statement of cash ows
Year ended 31 March 2013
64 Dairy Crest Annual Report 2013
Basis of preparation
The consolidated and Company nancial statements are presented
in sterling and all values are rounded to the nearest 0.1 million
( million) except where otherwise indicated.
The consolidated nancial statements of Dairy Crest Group plc have
been prepared in accordance with IFRSs as adopted by the
European Union. The separate Company nancial statements have
been prepared in accordance with IFRSs as adopted by the EU and
as applied in accordance with the provisions of the Companies Act
2006. The Company has taken advantage of the exemption
provided under section 408 of the Companies Act 2006 not to
publish its individual income statement and related notes.
Having reviewed and taken into account Going Concern and
Liquidity Risk: Guidance for Directors of UK Companies 2009,
published by the Financial Reporting Council in October 2009, the
Directors are satised that the Company and the Group have
adequate resources to continue operating for the foreseeable future.
For this reason they continue to adopt the going concern basis in
preparing the nancial statements. See the Going Concern
Statement on page 53.
The key sources of estimation uncertainty that have a signicant risk
of causing material adjustments to the carrying amounts of assets
and liabilities within the next nancial year are (i) the measurement of
the impairment of goodwill, intangible assets and property, plant and
equipment (ii) the measurement of dened benet pension scheme
assets and obligations (iii) the estimation of tax costs in France in
relation to the sale of St Hubert.
(i) The Group determines whether goodwill is impaired on an annual
basis and this requires an estimation of the value in use of the
cash-generating units to which goodwill is allocated. The
assessment of value in use is compared to the carrying value of
goodwill. This requires estimation of future cash ows and the
selection of a suitable discount rate. Goodwill in Dairies was fully
impaired in the year ended 31 March 2012.
The Group tests whether intangible assets, property, plant and
equipment are impaired where there are indications that there is a
risk of impairment. This requires an estimation of the value in use of
the cash-generating units in which these assets reside. The
assessment of value in use is compared to the carrying value of
assets. This requires estimation of future cash ows and the
selection of a suitable discount rate.
(ii) Measurement of dened benet pension obligations requires
estimation of future changes in ination, mortality rates, the expected
return on plan assets and the choice of a suitable discount rate.
(iii) The sale of the St Hubert business will result in tax payable in
France both on the chargeable gain on disposal and on dividend
payments made to the UK parent between 31 March 2012 and the
date of disposal in August 2012. An estimate has been made of the
likely tax costs resulting from these transactions. However, the nal
assessment has yet to be agreed with the French tax authorities
which may result in a change to the level of tax provisioning.
Further analysis of the key sources of estimation uncertainty and
sensitivities are included in the relevant notes to the accounts.
The key judgements made by management in the process of
applying the Group accounting policies are those used to determine
whether certain individual operating segments meet all of the
aggregation criteria set out in IFRS 8 when aggregated for external
reporting purposes. Those segments that have been aggregated
and a description of the key judgements made in reaching that
conclusion are set out in Note 1 of the accounts.
Changes in accounting policies
The following accounting standards and interpretations became
effective for the current reporting period:
International Accounting Standards (IAS/IFRSs)
IFRS 7 Amendments to IFRS 7: Disclosures Transfers of
Financial Assets.
IAS 12 Amendments to IAS 12 Income Taxes deferred tax:
recovery of underlying assets.
The application of these standards has had no impact on the net
assets, results and disclosures of the Group in the year ended
31 March 2013.
The IASB and IFRIC have issued the following standards (with an
effective date after the date of these accounts) and interpretations:
International Accounting Standards (IAS/IFRSs)
IFRS 9 Financial Instruments: Classication and Measurement
(effective from 1 January 2015)
IFRS 10 Consolidated Financial Statements (effective from
1 January 2013)
IFRS 11 Joint Arrangements (effective from 1 January 2013)
IFRS 12 Disclosures of Interests in Other Entities (effective from
1 January 2013)
IFRS 13 Fair Value Measurement (effective from 1 January 2013)
IAS 1 Amendments to IAS 1: Presentation of Financial Statements
(effective from 1 July 2012)
IAS 19 Amendments to IAS 19: Employee Benets (effective from
1 January 2013)
IAS 27 Separate Financial Statements (effective from 1 January
2013)
IAS 28 Investments in Associates and Joint Ventures (effective
from 1 January 2013)
IAS 32 Amendments to IAS 32: Financial Instruments
Presentation (effective from 1 January 2014)
International Financial Reporting Interpretations Committee
(IFRIC)
IFRIC 20 Stripping Costs in the Production Phase of a Surface
Mine (effective from 1 January 2013)
The Directors do not anticipate that the adoption of these standards
and interpretations will have a material impact on the Groups
nancial statements in the period of initial application with the
exception of the amendments to IAS 19 Employee Benets. The
principal impact on the Group of the application of this standard will
be the requirement to use the discount rate when calculating
expected returns on the asset component of pension cost. We
currently calculate expected returns based on return assumptions
on the actual classes of asset held. This change is likely to result in
higher charges to the Consolidated Income Statement for the
pension interest cost. There is no material impact on the reported
pension liabilities each year end as the impact in the Consolidated
Income Statement is mitigated by an offsetting change in the
calculation of actuarial gains and losses in the Statement of
Comprehensive Income namely the difference between actual and
expected asset returns will increase.
Further details are included in Note 20 to the accounts.
Accounting policies
Year ended 31 March 2013
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Dairy Crest Annual Report 2013 65
Consolidation
The Group nancial statements consolidate the accounts of Dairy
Crest Group plc and its subsidiaries drawn up to 31 March each
year using consistent accounting policies. All intercompany balances
and transactions, including unrealised prots and losses arising from
intra-group transactions, have been eliminated in full.
Subsidiaries acquired during the year are consolidated from the date
on which control is transferred to the Group. Subsidiaries continue
to be consolidated until the date that control ceases.
Where the Group ceases to control a subsidiary, it (i) derecognises
the assets (including goodwill) and liabilities of the subsidiary; (ii)
derecognises the carrying amount of any non-controlling interest; (iii)
derecognises the cumulative translation differences on net assets
and borrowings designated as net investment hedges, previously
recorded in other comprehensive income; (iv) recognises the fair
value of any investment or associate retained; and (v) recognises any
surplus or decit in the consolidated income statement, and (vi)
reclassies the parents share of components previously recognised
in other comprehensive income or retained earnings as appropriate.
Interest in associates
The Groups investments in associates are accounted for under the
equity method of accounting. Associates are entities over which the
Group exerts signicant inuence. The Company and its associates
use consistent accounting policies. The investment in associates are
carried in the balance sheet at initial fair value plus post-acquisition
changes in the Groups share of net assets, less any impairment in
value and any distributions received. The consolidated income
statement reects the share of the post-tax results of associates.
Where there has been a change recognised directly in the
associates other comprehensive income, the Group recognises its
share of such changes and discloses this, where applicable in other
comprehensive income.
Foreign currency translation
The functional and presentational currency of Dairy Crest Group plc
and its United Kingdom (UK) subsidiaries is Sterling ().
Transactions in foreign currency are initially recorded in the functional
currency rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated into
Sterling at the balance sheet date. Exchange differences on
monetary items are taken to the income statement, except where
recognised in other comprehensive income as qualifying cash ow
hedges and qualifying net investment hedges.
On consolidation, assets and liabilities of foreign subsidiaries are
translated into sterling at year end exchange rates. The results of
foreign subsidiaries are translated into sterling at average rates of
exchange for the year (being an approximation of actual exchange
rates). Exchange differences arising from the retranslation of the net
investment in foreign subsidiaries at year end exchange rates, less
exchange differences on borrowings, which nance or provide a
hedge against those undertakings are taken to a separate
component of equity as long as IFRS hedge accounting conditions
are met. Exchange differences relating to foreign currency
borrowings that provide a hedge against a net investment in a
foreign entity remain in equity until the disposal of the net investment,
at which time they are recognised in the consolidated income
statement.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any impairment losses. Cost comprises the
purchase price and any costs directly attributable to bringing the
asset to the location and condition necessary for it to be capable of
operating in the manner intended by management. Depreciation is
calculated to write off the cost (less residual value) of property, plant
and equipment, excluding freehold land, on a straight-line basis over
the estimated useful lives of the assets as follows:
Freehold buildings: 25 years
Leasehold land and buildings: 25 years or, if shorter, the period
of the lease
Ofce equipment: 4 to 6 years
Factory plant and equipment: 6 to 20 years
Vehicles: 4 to 10 years
The carrying value of property, plant and equipment is reviewed for
impairment when events or changes in circumstances indicate that
the carrying value may not be recoverable. If the carrying value
exceeds the estimated recoverable value, the asset is written down
to its recoverable amount. The recoverable amount of plant and
equipment is the greater of the fair value less costs to sell or value in
use. In assessing value in use, the estimated future cash ows are
discounted to their present value using a pre-tax discount rate that
reects current market assessments of the time value of money and
the risks specic to the asset. For an asset that does not generate
largely independent cash ows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
Impairment losses are charged to the consolidated income
statement.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benets are expected to arise
from the continued use of the asset. Any gain or loss arising on
derecognition of the asset is included in the consolidated income
statement in the year that it is derecognised.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use are capitalised as part of the
cost of the respective assets. All other borrowing costs are
recognised as an expense in the period they occur.
Investments
The Company recognises its investments in subsidiaries at cost
being the fair value of consideration paid, less provisions for
impairment where appropriate.
Business combinations and Goodwill
Business combinations from 1 April 2010 are accounted for using
the acquisition method (previously used the purchase method). The
cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value,
and the amount of any non-controlling interest in the acquiree. The
choice of measurement of non-controlling interest, either at fair value
or at the proportionate share of acquirees identiable net assets will
be determined on a transaction by transaction basis. Acquisition
costs incurred are expensed to prot and loss.
Goodwill on acquisition is initially measured at cost being the cost of
the acquisition (see above) less net identiable amounts of the assets
acquired and the liabilities assumed in exchange for the business
combination.
Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is reviewed for impairment
annually, or more frequently if events or changes in circumstances
72236_Glasshouse_p64_p69.indd 65 04/06/2013 05:55
66 Dairy Crest Annual Report 2013
annually, or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. All goodwill was
tested for impairment at the time of transition to IFRS and no
impairment was identied.
Goodwill recognised under UK GAAP prior to the date of transition
to IFRS is stated at the net book value as at this date and is not
subsequently amortised.
As at the acquisition date, any goodwill acquired is allocated to the
cash-generating unit or groups of cash-generating units expected to
benet from the combinations synergies. Impairment is determined
by assessing the recoverable amount of the cash-generating unit to
which the goodwill relates. Where the recoverable amount of the
cash-generating unit is less than the carrying amount, an impairment
loss is recognised. Where goodwill forms part of a cash generating
unit and part of the operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the
carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this
circumstance is measured on the basis of the relative values of the
operation disposed of and the portion of the cash-generating unit
retained.
The Groups cash-generating units, for the purpose of considering
goodwill, are Dairies, Spreads, MH Foods and Cheese. These
represent the lowest level at which goodwill is monitored for
management purposes and are no larger than the Groups operating
segments.
Goodwill arising on acquisitions before 1 April 1998 has been
charged against the merger reserve and will remain set off against
reserves even if the related investment becomes impaired or the
business sold.
The Group has not restated business combinations prior to the
transition date of 1 April 2004. Acquisitions prior to this date are
recorded under previous accounting rules.
Intangible assets
Intangible assets acquired as part of an acquisition of a business are
capitalised at fair value separately from goodwill if the fair value can
be measured reliably on initial recognition and the future expected
economic benets ow to the Group. Following initial recognition, the
carrying amount of an intangible asset is its cost less any
accumulated amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be either nite
or indenite. Currently, all the Groups intangible assets have nite
useful lives and are amortised over 3 to 15 years. Acquired intangible
assets principally comprise acquired brands and, following the sale
of St Hubert, principally the FryLight brand which was considered to
have a useful life of 15 years at the date of acquisition.
Useful lives are also examined on an annual basis and adjustments,
where applicable, are made on a prospective basis.
Intangible assets generated internally comprise software
development expenditure. Software development is carried at cost
less accumulated amortisation and is amortised over four to seven
years. Internally generated intangible assets that are not yet available
for use are tested for impairment annually either individually or at the
cash-generating unit level or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
Research and development
Expenditure on research is written off as incurred. Development
expenditure is also written off as incurred unless the future
recoverability of this expenditure can reasonably be assured as
required by IAS 38: Intangible Assets.
Recoverable amount of non-current assets
At each reporting date, the Group assesses whether there is any
indication that an asset may be impaired. Where an indicator of
impairment exists, the Group makes a formal estimate of recoverable
amount. Where the carrying amount of an asset exceeds its
recoverable amount the asset is considered impaired and is written
down to its recoverable amount. The recoverable amount is the
higher of an assets or cash-generating units fair value less costs to
sell and its value in use and is determined for an individual asset,
unless the asset does not generate cash inows that are largely
independent of those from other assets or groups of assets.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost includes the purchase price of raw materials (on a rst in rst
out basis), direct labour and a proportion of manufacturing
overheads based on normal operating capacity incurred in bringing
each product to its present location and condition. Net realisable
value is the estimated selling price in the ordinary course of business
less estimated costs of completion and selling costs.
Trade and other receivables
Trade and other receivables are recognised and carried at original
invoice amount less an allowance for any uncollectable amounts.
An estimate for doubtful debts is made when collection of the full
amount is no longer probable. Bad debts are written off when
identied.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
short-term deposits with an original maturity of three months or less.
For the purposes of the Consolidated cash ow statement, cash and
cash equivalents consist of cash and cash equivalents as dened
above, net of bank overdrafts.
Interest bearing loans
All loans and borrowings are initially recognised at the fair value of
the consideration received net of issue costs associated with the
borrowing. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the
effective interest method. Amortised cost is calculated by taking into
account any issue costs, and any discount or premium on
settlement. Gains and losses are recognised in the Consolidated
Income Statement when the liabilities are derecognised.
Net debt
The Group and Company dene net debt as cash and cash
equivalents, interest bearing loans and nance leases. The
calculation of net debt excludes the fair value of derivative nancial
instruments with the exception of cross currency swaps to x foreign
currency debt in Sterling where they are designated as cash ow
hedges. In this case the xed Sterling debt, not the underlying
foreign currency debt retranslated, is included in net debt. It includes
any cash or borrowings included within disposal groups classied as
held for sale and excludes unamortised upfront facility fees.
Retirement benet obligations
The asset or liability in respect of dened benet schemes is the
present value of the relevant dened benet obligation at the balance
sheet date less the fair value of plan assets and an adjustment for
Accounting policies continued
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past service costs not yet vested. The independent actuary
completes a full actuarial valuation of the Dairy Crest Group pension
fund triennially. The obligation is updated annually for nancial
reporting purposes by the actuary using the projected unit credit
method. The present value of the obligation is determined by
discounting the estimated future cash outows using interest rates of
high quality corporate bonds, which have terms to maturity
approximating the terms of the related liability.
The current service costs, settlement gains or losses and any
curtailment gains are recognised in operating costs in the
Consolidated Income Statement, classied as cost of sales,
distribution costs or administrative expenses depending upon which
area of the business active members are employed in. Past service
costs are included in operating costs where the benets have
vested, otherwise they are amortised on a straight-line basis over the
vesting period. The expected return on assets of funded dened
benet schemes and the interest on pension scheme liabilities
comprise the nance element of the pension cost and the difference
between these amounts are included in other nance income or
costs. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are recognised in
full and are charged or credited to other comprehensive income in
the period in which they arise.
The recognition of any future retirement benet surplus as calculated
by the actuary as part of the annual update for reporting purposes,
is limited to the present value, using an appropriate discount rate, of
any real cash benet the Company will obtain in the future through
cash (net of taxes or costs) on a winding up of the scheme. In order
to calculate the potential future benets, or to establish whether a
liability needs to be established under IFRIC 14, consideration is
given to any minimum funding requirements agreed between the
Company and the Pension Trustee.
Contributions to the Dairy Crest dened contribution pension
scheme are charged as an expense as they fall due. Any
contributions unpaid at the balance sheet date are included as an
accrual at that date. The Group has no further payment obligations
once contributions have been settled.
Share based payments
Equity based performance payments
The Group and Company has issued equity-settled share based
payment schemes for which they receive services from employees
in consideration for the equity instrument. Equity-settled share
based payment schemes are measured at fair value at the grant
date by an external valuer using an appropriate pricing model. In
valuing equity-settled transactions, no account is taken of any
service and performance (vesting conditions), other than
performance conditions linked to the price of the shares of the
Company (market conditions). Any other conditions which are
required to be met in order for an employee to become fully entitled
to an award are considered to be non-vesting conditions. Like
market performance conditions, non-vesting conditions are taken
into account in determining the grant date fair value.
The cost of equity settled transactions with employees is measured
by reference to the fair value and is recognised as an expense over
the vesting period, which ends on the date on which the relevant
employees became fully entitled to the award. At each balance sheet
date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and
managements best estimate of the number of equity instruments
that will ultimately vest. The movement in cumulative expense since
the previous balance sheet date is recognised in the income
statement, with a corresponding entry in equity.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market or
non-vesting condition, which are treated as vesting irrespective of
whether or not the market or non-vesting condition is satised,
provided that all other performance or service conditions are
satised.
Where an equity-settled award is cancelled (including when a
non-vesting condition within the control of the entity or employee is
not met), it is treated as if it had vested on the date of cancellation,
and any cost not yet recognised in the income statement for the
award is expensed immediately.
Rights granted to employees of subsidiary undertakings over equity
instruments of the Company are treated as an investment in the
Companys balance sheet.
Employees Share Ownership Plan (ESOP)
The shares in the Company held by the Dairy Crest Employees
Share Ownership Plan Trust to satisfy Long Term Incentive Share
Plan awards are presented as a deduction from equity in arriving at
shareholders equity. Consideration received from the sale of such
shares is also recognised in equity with no gain or loss recognised
in the Consolidated Income Statement.
The Group and Company have not adopted the exemption to
apply IFRS 2 Share-based payments only to awards made after
7 November 2002.
Leased assets
Assets acquired under nance leases, which transfer to the Group
substantially all the risks and benets incidental to ownership of the
leased item, are capitalised at the inception of the lease at fair value
of the leased asset or, if lower, the present value of the minimum
lease payments. The net present value of future lease rentals is
included as a liability on the balance sheet. The interest element of
lease rentals is charged to the Consolidated Income Statement in
the year. Leases where the lessor retains substantially all the risks
and benets of ownership of the asset are classied as operating
leases. Operating lease rentals are charged to the Consolidated
Income Statement on a straight-line basis over the lease term.
Revenue
Revenue on sale of food and dairy products is recognised on
delivery. Revenue comprises the invoiced value for the sale of goods
net of value added tax, rebates and discounts and after eliminating
sales within the Group.
Dividend income is recognised when the Companys right to receive
payment is established.
Other income
Other income comprises the prot on disposal of closed depots.
Exceptional items
Certain items are recorded separately in the Consolidated Income
Statement as exceptional. Only items of a material, one-off nature,
which result from a restructuring of the business or some other event
or circumstance are disclosed in this manner in order to give a better
understanding of the underlying operational performance of the
Group. The prots arising on disposal of closed sites, other than as a
result of depot rationalisation, are reported within exceptional items.
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68 Dairy Crest Annual Report 2013
Government and other grants
Government grants are initially recognised at their fair value where
there is reasonable assurance that the grant will be received and all
attaching conditions will be complied with. When the grant relates to
an expense item, it is recognised as income over the periods
necessary to match the grant on a systematic basis to the costs that
it is intended to compensate. Where the grant relates to an asset,
the fair value is credited to a deferred income account and is
released to the Consolidated Income Statement over the expected
useful life of the relevant asset in equal annual instalments.
Income tax
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively
enacted at the balance sheet date.
Deferred income tax is provided on all temporary differences at the
balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for nancial reporting purposes, except
as indicated below.
Deferred income tax liabilities are recognised for all taxable
temporary differences except:
where the deferred income tax liability arises from initial
recognition of goodwill or the initial recognition of an asset or
liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting prot
nor taxable prot or loss; and
in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable prot
will be available against which the deductible temporary differences,
the carry-forward of unused tax assets and unused tax losses can
be utilised except:
where the deferred income tax asset relating to the deductible
temporary difference arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting prot
nor taxable prot or loss; and
in respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are only recognised to the extent
that it is probable that the temporary differences will reverse in the
foreseeable future and taxable prot will be available against
which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at
each balance sheet date and reduced to the extent that it is no
longer probable that sufcient taxable prot will be available to allow
all or part of the deferred income tax asset to be utilised. Deferred
income tax assets and liabilities are measured at the tax rates that
are expected to apply in the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date.
Deferred income tax assets and liabilities are offset only if a legal
enforcement right exists to set off current tax assets against current
tax liabilities, the deferred income taxes relate to the same taxation
authority and that authority permits the group to make a single
net payment.
Income tax is charged or credited to Other Comprehensive Income
if it relates to items that are charged or credited to Other
Comprehensive Income. Similarly, income tax is charged or credited
directly to equity if it relates to items that are credited or charged
directly to equity. Otherwise income tax is recognised in the
Consolidated Income Statement.
Financial assets
The Group and Company classies nancial assets that are within
the scope of IAS 39 as:
nancial assets at fair value through prot and loss;
loans and receivables;
held-to-maturity investments; or
available-for-sale nancial assets, as appropriate.
The Group and Company determines the classication of nancial
assets at initial recognition and re-evaluates this designation at each
nancial year-end. When nancial assets are recognised initially, they
are measured at fair value. The Group and Company currently hold
only loans and receivables.
Derivative instruments
The Group and Company use derivative nancial instruments such
as forward currency contracts, cross-currency swaps and interest
rate swaps to hedge its risks associated with interest rate and
foreign currency uctuations. Such derivative nancial instruments
are initially recognised at fair value and subsequently re-measured to
fair value at each balance sheet date.
The fair value of forward currency contracts is calculated by
reference to current forward exchange rates for contracts with
similar maturity proles. The fair value of interest rate swap and
cross-currency swap contracts is determined by reference to market
values for similar instruments and specic valuations performed by
counterparties at the balance sheet date.
For the purpose of hedge accounting, hedges are classied as
either:
fair value hedges where they hedge the exposure to changes in
the fair value of a recognised asset or liability;
cash ow hedges where they hedge exposure to variability in cash
ows that is either attributable to a particular risk associated with
a recognised asset or liability or a highly probable forecast
transaction, or a rm commitment in relation to foreign exchange
exposure; or
net investment hedges where they hedge the exposure to
variability in the translated net assets of an overseas operation.
Neither the Group nor the Company has entered into any fair value
hedges during the year.
Cash ow hedges
In relation to cash ow hedges which meet the conditions for hedge
accounting, the portion of the gain or loss on the hedging instrument
that is determined to be an effective hedge is recognised directly in
Other Comprehensive Income and the ineffective portion is
recognised in the Consolidated Income Statement.
When the hedged rm commitment (in relation to foreign exchange
exposure) or the highly probable forecast transactions results in the
recognition of a non-monetary asset or a liability, then, at the time
the asset or liability is recognised, the associated gains or losses
that had previously been recognised in Other Comprehensive
Income are included in the initial measurement of the acquisition
cost or other carrying amount of the asset or liability. For all other
cash ow hedges, the gains or losses that are recognised in Other
Accounting policies continued
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Comprehensive Income are transferred to the Consolidated Income
Statement in the same year in which the hedged item affects the net
prot and loss, for example when the future sale actually occurs,
interest payments are made or when debt matures. For derivatives
that do not qualify for hedge accounting, any gains or losses arising
from changes in fair value are taken directly to the Consolidated
Income Statement for the year.
Hedges of net investments in foreign operations
Where the Group hedges net investments in overseas entities
through currency borrowings, the gains and losses on retranslation
of those borrowings are recognised in Other Comprehensive
Income. If the Group uses derivatives as the hedging instrument,
the effective portion of the hedge is recognised in Other
Comprehensive Income, with any ineffective portion being
recognised in the Consolidated Income Statement whenever
applicable. Gains and losses accumulated in Other Comprehensive
Income are reclassied to the Consolidated Income Statement on
disposal of the foreign entity.
In order to satisfy hedge accounting, the Group (or Company)
documents in advance the relationship between the item being
hedged and the hedging instrument. The Group (or Company) also
documents and demonstrates an assessment of the relationship
between the hedged item and the hedging instrument, which shows
that the hedge has been and will be highly effective on an ongoing
basis. The effectiveness testing is re-performed on a regular basis
(being at least half-yearly) to ensure that the hedge remains highly
effective.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, exercised, or no longer qualies for
hedge accounting. At that time, any cumulative gain or loss on the
hedging instrument recognised in Other Comprehensive Income is
retained in Other Comprehensive Income until the highly probable
forecasted transaction occurs. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised in
Other Comprehensive Income is transferred to the Consolidated
Income Statement for the period.
Derivatives embedded in other nancial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts, and
the host contracts are not carried at fair value with unrealised gains
or losses reported in the Consolidated Income Statement. When the
contracts are closely related and hedge accounting is adopted, they
are designated at inception and treated as described above.
70 Dairy Crest Annual Report 2013
1 Segmental analysis
IFRS 8 requires operating segments to be determined based on the Groups internal reporting to the Chief Operating Decision Maker
(CODM). The CODM has been determined to be the Companys Board members as they are primarily responsible for the allocation of
resources to segments and the assessment of performance of the segments.
The CODM uses trading prot, as reviewed at monthly business review meetings, as the key measure of the segments results as it reects the
segments underlying trading performance for the period under evaluation. Trading prot is a consistent measure within the Group and the
reporting of this measure at the monthly business review meetings, which are organised according to the product types, has been used to
identify and determine the Groups operating segments. Trading prot is dened as prot on operations before exceptional items and
amortisation of acquired intangible assets, but includes the Group share of post-tax results of associates.
The Groups operating segments at 31 March 2013 were Cheese, Spreads, MH Foods, Dairies, Share of Associates and Other. Certain
of these operating segments have been aggregated and the Group reports on ve continuing segments within the business: Cheese,
Spreads, Dairies, Share of Associates and Other. At 31 March 2012 St Hubert was an operating segment which was aggregated into the
Spreads segment. St Hubert was sold in August 2012 and therefore St Hubert has now been disclosed as a Discontinued Operation for 2012
and 2013.
In years up to 2011, the Liquid Products and Customer Direct segments were aggregated into one reportable segment being Dairies. During
the year ended 31 March 2012, these two businesses were merged with one senior management team responsible for the whole of the
Dairies segment. Since the restructuring, discrete nancial information for the former Liquid Products and Customer Direct divisions is no
longer available or reviewed by either the Dairies senior management team or the CODM (in the past, segment information was based on
allocations of the combined cost base which is not now necessary). The Dairies segment principally comprises the sale of non-branded fresh
milk in the UK to a number of customers including major retail, foodservice and residential customers. The segment is managed on a
combined basis including milk sourcing, production volumes, demand planning, technical, quality and distribution. The factories process and
pack milk for a mix of customers which varies depending on customer and demand mix. Having considered these factors, management has
judged that this business now comprises one operating segment under IFRS 8.
The Spreads segment incorporates the MH Foods business acquired in June 2011. This business is branded, has similar end-customers as
Spreads and shares the same input cost risks. Therefore management judges that this meets the IFRS 8 aggregation criteria. Furthermore, its
revenue, result and assets do not represent more than 10% of the Group so the quantitative criteria for a reportable segment are not met.
The Cheese segment has not been aggregated with any other segment. This business manufactures predominantly branded cheese in the
UK and sells mainly to retail customers.
Share of Associates forms a separate segment whose results are reviewed on a post-tax basis.
The Other segment comprises revenue earned from distributing product for third parties and certain central costs net of recharges to the
operating segments. Generally, all central costs less external other revenue are recharged to the operating segments such that their result
reects the total cost base of the Group. Other segment prot therefore is nil.
Notes to the nancial statements
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1 Segmental analysis continued
The segment results for the year ended 31 March 2013 and for the year ended 31 March 2012 and the reconciliation of segment measures to
the respective statutory items included in the nancial statements are as follows:
Year ended 31 March
Note
2013
m
2012
m
Segment external revenue
Cheese 231.3 229.6
Spreads 194.5 211.3
Dairies 951.6 1,069.0
Other 4.2 4.8
Total segment external revenue 1,381.6 1,514.7

Segment prot
Cheese 33.3 35.5
Spreads 25.7 23.2
Dairies 10.3 10.2
Share of associates net loss 14 (0.3)
Total segment prot 69.3 68.6
Finance costs 5 (18.7) (21.1)
Adjusted prot before tax 50.6 47.5
Acquired intangible amortisation 3 (0.4) (0.8)
Exceptional items 4 (56.5) (93.9)
Other nance income pensions 5 5.9 5.5
Group loss before tax (0.4) (41.7)

Segment total assets
Cheese 237.7 216.2
Spreads 138.0 136.5
Dairies 268.1 279.0
Investment and share of associate 2.2 1.8
Other 38.3 39.5
684.3 673.0
Discontinued operations 361.5
Unsegmented assets 300.2 96.3
Total assets 984.5 1,130.8

Inter-segment revenue
Cheese 11.3 9.9
Spreads 2.8 4.7
Elimination (14.1) (14.6)
Total
Notes to the nancial statements continued
72 Dairy Crest Annual Report 2013
1 Segmental analysis continued
Year ended 31 March
Note
2013
m
2012
m
Segment depreciation and amortisation (excluding amortisation of acquired intangible assets)
Cheese 6.7 6.0
Spreads 3.2 4.2
Dairies 17.2 19.4
Other 4.5 2.5
Continuing operations 31.6 32.1
Discontinued operations 0.8 2.0
Total 32.4 34.1

Segment additions to non-current assets
Cheese 6.9 5.5
Spreads 12.5 25.5
Dairies 23.7 30.5
Other 4.8 3.1
47.9 64.6
Discontinued operations 1.1 3.3
Total 49.0 67.9

Segment exceptional items
Cheese
Spreads (13.8) (2.6)
Dairies (30.5) (91.3)
Unsegmented (3.5)
Total exceptional operating costs 4 (47.8) (93.9)
Interest income and expense are not included in the measure of segment prot reviewed by the CODM. Group treasury is centrally managed
and external interest income and expense is all incurred in the UK following the sale of St Hubert and is not allocated to segments. Where
interest is reviewed by the CODM it is done so on a net basis. Further analysis of the Group interest expense is provided in Note 5.
Tax costs are not included in the measure of segment prot reviewed by the CODM. Tax is centrally managed and the group effective tax rate,
not individual segment tax rates, is reported.
Segment assets comprise property, plant and equipment, goodwill, intangible assets, inventories, receivables, assets in disposal group held
for sale and investments in associates and joint ventures using the equity method and deferred consideration but exclude cash and cash
equivalents, derivative nancial assets and deferred tax assets as these items are managed on a Group basis. Other segment assets
comprise certain property, plant and equipment that is not reported in the segments. Total segment liabilities have not been presented as this
measure is not regularly reviewed by or provided to the CODM.
Inter-segment revenue comprises the sale of nished Cheese and Spreads products to the Dairies segment on a cost plus basis and is
included in the segment result. Other Inter-segment transactions principally comprise sales of cream from the Dairies segment to the Spreads
segment for the manufacture of butters. Cream sold into Spreads is priced by reference to external commodity markets and is adjusted
regularly so as to reect the costs that the Spreads segment would incur if it were a stand alone entity. Revenue from Inter-segment cream
sales is not reported as revenue to the CODM but as a reduction to the Dairies segments input costs.
Segment depreciation and amortisation excludes amortisation of acquired intangible assets of 0.4 million (2012: 0.8 million) as these costs
are not charged in the segment result.
Segment additions to non-current assets comprise additions to goodwill, intangible assets and property, plant and equipment through capital
expenditure and acquisition of businesses.
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Dairy Crest Annual Report 2013 73
1 Segmental analysis continued
Geographical information continuing operations Year ended 31 March
External revenue attributed on basis of customer location
2013
m
2012
m
UK 1,336.3 1,450.1
Rest of world 45.3 64.6
Total segment revenue (excluding joint ventures) 1,381.6 1,514.7

Non-current assets* based on location


UK 375.1 370.5
France 338.0
Rest of world 0.8 5.4
Total 375.9 713.9
* Comprises property, plant and equipment, goodwill, intangible assets, investments and investment in associate.
The Group has two customers which individually represent more than 10% of revenue from continuing operations in the year ended 31 March
2013 (2012: one). These customers account for 327.1 million (2012: 175.7 million) of revenue from continuing operations being 23.7% (2012:
11.6%).
The business segmentation above is based upon similar product groupings, namely Cheese, Spreads and Dairies, and therefore the analysis
of Group revenue by product and services is consistent with the revenue analysis presented above with the exception of non-milk product
sales in the Dairies segment, which amounted to 81.3 million (2012: 100.1 million).
2 Operating costs continuing operations
Year ended 31 March 2013 Year ended 31 March 2012

Before
exceptional
items
m

Exceptional
items
m

Total
m
Before
exceptional
items
m

Exceptional
items
m

Total
m
Cost of sales 1,008.2 44.3 1,052.5 1,106.5 13.6 1,120.1
Distribution costs 229.1 229.1 259.0 259.0
Administrative expenses 83.1 3.5 86.6 85.7 80.3 166.0
1,320.4 47.8 1,368.2 1,451.2 93.9 1,545.1
Prot on operations from continuing operations before exceptional items
is stated after (charging)/crediting
Year ended
31 March
2013
m
Year ended
31 March
2012
m
Release of grants 0.9 0.6
Depreciation (28.2) (29.2)
Amortisation of intangibles acquired (0.4) (0.8)
Amortisation of intangibles internally generated (3.4) (2.9)
Operating lease rentals (29.2) (31.0)
Research and development expenditure (3.3) (2.8)
Cost of inventories recognised as an expense (1,008.2) (1,106.5)
Including: Write-down of inventories recognised as an expense (1.2) (1.0)
The comparative amounts for 2012 have been amended to exclude amounts relating to St Hubert which has been disclosed as a
Discontinued Operation.
Notes to the nancial statements continued
74 Dairy Crest Annual Report 2013
2 Operating costs continuing operations continued
Remuneration paid to auditors
Year ended
31 March
2013
m
Year ended
31 March
2012
m
Fees payable to the Companys auditors audit of Companys annual accounts* 0.1 0.1
Fees payable to the Companys auditors and its associates for other services:
audit of the Companys subsidiaries pursuant to legislation 0.3 0.3
taxation services 0.1 0.2
corporate nance services 0.2
governance assurance services 0.1
0.7 0.7
* 10,000 (2012: 10,000) of this relates to the Company.
Other services in the year ended 31 March 2013 comprised reporting accountant work in relation to the disposal of St Hubert (2012:
governance assurance services for an IT systems project).
Fees paid to Ernst & Young LLP and its associates for non-audit services to the Company itself are not disclosed in the individual accounts of
the Company because Group nancial statements are prepared which are required to disclose such fees on a consolidated basis.
Ernst & Young LLP are auditors of the Dairy Crest Group Pension Scheme. Fees paid by the pension scheme for audit services are not
included in the above table.
3 Other income property
Year ended 31 March 2013 Year ended 31 March 2012

Before
exceptional
items
m

Exceptional
items
m

Total
m
Before
exceptional
items
m

Exceptional
items
m

Total
m
Prot on disposal of depots 7.7 7.7 4.6 4.6
The Group continues to rationalise its Dairies operations as a result of the ongoing decline in doorstep volumes. This rationalisation includes
the closure of certain depots (the prot on which is shown above) and rationalisation of the ongoing Dairies operations. These activities
represent a fundamental part of the ongoing ordinary activities of the Dairies operations.
4 Exceptional items
Exceptional items comprise those items that are material and one-off in nature that the Group believes should be separately disclosed to
assist in the understanding of the underlying nancial performance of the Group.


Operating costs



Year ended
31 March
2013
m



Year ended
31 March
2012
m
Depot administration restructuring costs (Dairies) (9.2) (5.3)
Costs associated with closure of Dairy processing sites (Dairies) (21.3)
Spreads restructuring costs (Spreads) (13.8) (2.6)
Business reorganisation (3.5)
Impairment of goodwill, property, plant and equipment (Dairies) (81.7)
Provision for bad debts (Dairies) (4.3)
(47.8) (93.9)
Finance costs
Repayment of loan notes and associated costs (Note 5) (8.7)
(56.5) (93.9)
Tax relief on exceptional items 12.0 13.1
(44.5) (80.8)
Post-tax gain on disposal of St Hubert (Discontinued operations Note 29) 47.7
3.2 (80.8)
72236_Glasshouse_p70_p113.indd 74 04/06/2013 06:06
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Dairy Crest Annual Report 2013 75
Exceptional items in the year ended 31 March 2013 comprise:
9.2 million of costs associated with the rationalisation of administrative activities and other structural changes in the Dairies depot
network. This restructuring results in centralisation of back ofce activities supporting the depot network. These costs relate to
redundancies (7.4 million), incremental operating costs associated with delivery of the project (1.1 million) and write downs of property,
plant and equipment (0.7 million). The project has now completed.
During the year the Group has closed two processing sites at Aintree in Liverpool and Fenstanton in Cambridgeshire. The closure of the
sites and resultant changes in the supply chain, volume requirements and customer channels has resulted in exceptional costs of 21.3
million. These costs relate to redundancies (9.0 million), duplicate running costs (6.2 million), asset write downs (0.7 million) and other
costs (5.4 million) including stock write offs and duplicate running costs.
In September 2012 the Group announced that it was to consult with employees on plans to consolidate spreads production into a single
UK location at its site in Kirkby, Liverpool. As a result of this consolidation the site at Crudgington, Shropshire will close in 2014. Following
the transfer of Clover manufacture to Kirkby in the rst half of 2012, the Crudgington cash generating unit (CGU) does not generate
material cash ows from the remaining site production. Subsequent to this decision, value in use calculations have been prepared to 2014
rather than in perpetuity using a discount rate of 8.7%. As a result we have impaired the carrying value of property, plant and equipment
by 12.3 million. This impairment has resulted in a carrying value of nil for plant and equipment and 1.0 million for land and buildings. The
relevant CGU for goodwill testing purposes is Spreads which encompases both the Crudgington and Kirkby sites. This restructure will
result in a more efcient Spreads supply chain and Spreads goodwill has not been impaired.
In addition to the impairment of property, plant and equipment, 1.5 million of costs were incurred during the year both to complete
the transfer of Clover manufacture from Crudgington to Kirkby and to commence the project that will result in the closure of the
Crudgington site.
In February 2013 the Group announced plans to reorganise the business into a single management and operational structure from
1 April 2013. This is replacing the divisional structures that previously existed and will lead to a more efcient and simplied organisation.
This reorganisation has resulted in exceptional costs in the year ended 31 March 2013 of 3.5 million comprising predominantly
redundancy costs. Further costs will be incurred in 2013/14 as the project is conmpleted.
In March 2013 the Group gave notice to the holders of its 2007 private placement loan notes that it would repay 100 million of principal in
April 2013. The costs of early repayment have been accrued at 31 March 2013 as the Group was irrevocably committed to the repayment
at that date. Costs of 8.7 million predominantly comprise make whole penalties which are calculated based on the discounted future
coupons between repayment date and original note maturity.
Exceptional items in the year ended 31 March 2012 comprised:
5.3 million of costs associated with the rationalisation of administrative activities and other structural changes in the Dairies depot
network. This restructuring resulted in centralisation of back ofce activities supporting the depot network. The majority of costs related to
redundancies (2.2 million) and other incremental operating costs associated with delivery of the project (3.1 million).
Trading in the Dairies segment was was adversely impacted in 2011/12 by increased costs of milk, the ongoing level of competition in the
sector and in the second half by signicant falls in the value of cream. Furthermore, volume declines in doorstep deliveries continued
despite the growth of our milk&more business. A range of actions was taken in order to restore margins within Dairies to an acceptable
level in the medium term and create a cost-efcient, sustainable dairies business. These included the expected closure of sites referred to
below (subject to consultation). However, the outlook for Dairies was weaker and more uncertain than it was in 2011. This, combined with
the volatility of assumptions in forecasting future cash ows due to the commoditised nature of the business and the competitive
environment, led management to conclude that the total carrying amount of Dairies goodwill of 70.7 million should be impaired as it
could not be supported on a value in use basis. This impairment reduced the carrying value of goodwill in this segment to nil. Further
details are provided in Note 11.
Furthermore, the Group has announced a major restructuring of its Dairies operations with the expected closure of two processing sites
at Aintree in Liverpool and Fenstanton in Cambridgeshire subject to consultation. These closures were expected to be completed in
2012/13. As a result of the anticipated closures, the carrying value of property, plant and equipment at these sites could no longer be
supported by a value in use calculation based upon future cash ows generated by these assets. Consequently, the carrying value of
property, plant and equipment was impaired by 9.8 million at 31 March 2012. Further details are provided in Note 10. In addition, an
impairment of 0.4 million was recorded against intangible assets (see Note 12) and 0.8 million of inventories of engineering spares and
packaging were written off (see Note 15).
At 31 March 2012, following the impairments of goodwill, property, plant and equipment and intangibles, there remained property, plant
and equipment and intangibles with a carrying value of 161.6 million in the Dairies segment.
On 13 February 2012, the Group announced that a customer, Quadra Foods Limited (Quadra) had gone into administration. As a result a
bad debt provision of 4.3 million was charged representing the entire amount owing from this customer. Bad debt write-offs of this size
are extremely rare and management considered this a one-off incident which, due to its material size, has been classied as exceptional.
The Group previously purchased fresh milk from Farmright Limited (Farmright), a member of the same group as Quadra, which also
went into administration. In the opinion of management, set-off arrangements were agreed and in place between Dairy Crest Limited and
Quadra/Farmright at the date of them going into administration, however this is being challenged in the administration process. Under
IFRS, the recognition criterion threshold for a contingent asset is higher than that required for a contingent liability and therefore, although
a provision has been recorded against amounts due from Quadra, no exceptional gain was recognised in the year ended 31 March 2012
in relation to amounts owed to Farmright as the outcome was not yet virtually certain.

72236_Glasshouse_p70_p113.indd 75 04/06/2013 06:06
Notes to the nancial statements continued
76 Dairy Crest Annual Report 2013
4 Exceptional items continued
On 17 May 2011, the Group announced that, subject to a consultation process, production of its leading dairy spread brand, Clover,
would be consolidated into its site in Kirkby, Liverpool. The Clover manufacturing process was split between Kirkby, Liverpool and
Crudgington, Shropshire. This consolidation would result in approximately 90 redundancies at Crudgington and the creation of
approximately 45 jobs at Kirkby. The consolidation would be completed in 2012/13, however exceptional costs of 2.6 million were
incurred in the year ending 31 March 2012. These predominantly comprised redundancy costs (1.2 million) and the impairment of
property, plant and equipment impacted by the restructured operations (1.0 million). This impairment reduced the carrying value of
equipment made redundant by this processing change to managements best estimate of its fair value less costs to sell (see Note 10).
In addition, inventories of engineering spares of 0.2 million were written off (see Note 15) and other project costs of 0.2 million
were incurred.
5 Finance costs and other nance income
Finance costs
Year ended
31 March
2013
m
Year ended
31 March
2012
m
Bank loans and overdrafts (at amortised cost) (19.6) (20.5)
Unwind of discount on provisions (Note 23) (0.2) (0.2)
Finance charges on nance leases (0.3) (0.5)
Pre-exceptional nance costs continuing operations (20.1) (21.2)
Finance income on cash balances (nancial assets not at fair value through prot and loss) 1.4 0.1
Pre-exceptional net nance costs continuing operations (18.7) (21.1)
Exceptional cost of repayment of loan notes (Note 4) (8.7)
Total net nance costs continuing operations (27.4) (21.1)
Other nance income pensions
Year ended
31 March
2013
m
Year ended
31 March
2012
m
Expected return on dened benet plan assets (Note 20) 47.4 49.0
Interest cost on dened benet obligation (Note 20) (41.5) (43.5)
5.9 5.5
6 Tax expense
The major components of income tax expense for the years ended 31 March 2013 and 2012 are:
Consolidated income statement
2013
m
2012
m
Current income tax
Current income tax charge at 24% (2012: 26%)
Adjustments in respect of previous years current tax (1.1)
transfer from deferred tax (2.8) (1.1)
(2.8) (2.2)
Deferred income tax
Relating to origination and reversal of temporary differences (1.8) (1.4)
Adjustment in respect of previous years deferred tax 1.4 (0.4)
transfer to current tax 2.8 1.1
(0.4) (2.9)
Analysed: Before exceptional items 11.6 10.2
Exceptional items (12.0) (13.1)
(0.4) (2.9)
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Dairy Crest Annual Report 2013 77
6 Tax expense continued
Reconciliation between tax credit and the loss before tax multiplied by the standard rate of corporation tax in the UK:

2013
m
2012
m
Loss before tax (0.4) (41.7)
Tax at UK statutory corporation tax rate of 24% (2012: 26%) (0.1) (10.8)
Adjustments in respect of previous years 1.4 (1.5)
Adjustment in respect of associates losses 0.1
Deferred tax adjustment for change in UK corporation tax rate (24% to 23%; 2012: 26% to 24%) (0.9) (2.6)
Non-deductible expenses 1.5 14.3
Prots offset by available tax relief (2.3) (2.4)
(0.4) (2.9)
The effective pre-exceptional rate of tax on Group prot before tax is 20.7% (2012: 19.5%).
The UK corporation tax rate reduced to 23% from April 2013. A further 2% reduction was proposed in the December 2012 Autumn Statement,
taking the rate to 21% by April 2014. An additional 1% reduction was then proposed in the March 2013 Budget, taking the rate to 20% by April
2015.
At the balance sheet date, only the 23% rate had been substantively enacted and therefore it is only the impact of this reduction that has been
reected in the Groups nancial statements as at 31 March 2013. We estimate the effect of the reduction in the tax rate to 20% to be a
reduction in the deferred tax liability of 2.2 million.
The effect on the Group of the further proposed reductions in the UK corporation tax rate will be reected in the Groups nancial statements
in future years, as appropriate, once the proposals have been substantively enacted.
Consolidated other comprehensive income
2013
m
2012
m
Deferred income tax related to items charged to other comprehensive income
Tax relief on actuarial losses (7.8) (11.2)
Valuation of nancial instruments 0.2 (0.7)
Tax credit (7.6) (11.9)
There were no income tax or deferred tax amounts charged to changes in equity in the year ended 31 March 2013 (2012: nil).
Deferred income tax
Deferred income tax at 31 March 2013 and 2012 relates to the following:
Deferred tax liability
2013
m
2012
m
Accelerated depreciation for tax purposes (31.7) (37.4)
Goodwill and intangible assets (9.2) (55.4)
(40.9) (92.8)

Deferred tax asset
Government grants 3.0 1.8
Share based payments 0.1 0.4
Pensions 17.1 15.8
Financial instruments valuation 0.2 0.3
Other 5.9 5.1
26.3 23.4

Net deferred tax liability (14.6) (69.4)
The Company has a deferred tax asset of 0.4 million at 31 March 2013 (2012: 0.7 million asset). This relates to temporary differences in
respect of nancial instruments valuations.
72236_Glasshouse_p70_p113.indd 77 04/06/2013 17:40
Notes to the nancial statements continued
78 Dairy Crest Annual Report 2013
6 Tax expense continued
The movement on the net deferred tax balance is shown below:
2013
m
2012
m
Opening net deferred tax liability (69.4) (86.3)
(Charge)/credit to income statement (2.4) 3.3
Credit to other comprehensive income 7.6 11.9
Disposal/(acquisition) of businesses 47.3 (1.6)
Exchange impact 2.3 3.3
Closing net deferred tax liability (14.6) (69.4)
The movement on the deferred tax liability is shown below:
Deferred tax asset/(liability)

Goodwill and
intangible
assets
m
Pensions
m
Accelerated
tax
depreciation
m
Other
timing
differences
m
Total
m
Balances at 31 March 2012 (55.4) 15.8 (37.4) 7.6 (69.4)
(Charge)/credit to income statement: continuing operations (0.9) (6.5) 3.2 1.8 (2.4)
Credit/(charge) to other comprehensive income 7.8 (0.2) 7.6
Disposal of businesses 44.8 2.5 47.3
Exchange impact 2.3 2.3
Balances at 31 March 2013 (9.2) 17.1 (31.7) 9.2 (14.6)
Balances at 31 March 2011 (63.4) 15.6 (41.3) 2.8 (86.3)
Credit/(charge) to income statement: continuing operations 6.3 (11.0) 3.9 4.1 3.3
Credit to other comprehensive income 11.2 0.7 11.9
Acquisition of businesses (1.5) (0.1) (1.6)
Exchange impact 3.2 0.1 3.3
Balances at 31 March 2012 (55.4) 15.8 (37.4) 7.6 (69.4)
The Group has capital losses which arose in the UK of 56.3 million (2012: 63.8 million) that are available indenitely for offset against future
taxable gains. Deferred tax has not been recognised in respect of these losses as there is no foreseeable prospect of their being utilised. The
Group has realised capital gains amounting to 36.9 million (2012: 39.7 million) for which rollover relief claims have been or are intended to
be made.
7 Dividends paid and proposed
Declared and paid during the year
2013
m
2012
m
Equity dividends on ordinary shares:
Final dividend for 2012: 14.7 pence (2011: 14.2 pence) 19.6 18.9
Interim dividend for 2013: 5.7 pence (2012: 5.7 pence) 7.8 7.6
27.4 26.5

Proposed for approval at AGM (not recognised as a liability at 31 March)
Equity dividends on ordinary shares:
Final dividend for 2013: 15.0 pence (2012: 14.7 pence) 20.5 19.6
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Dairy Crest Annual Report 2013 79
8 Earnings per share
Basic earnings/losses per share (EPS) on prot/(loss) for the year from continuing operations is calculated by dividing prot/(loss) from
continuing operations by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the prot/(loss) from continuing operations by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares. Note that in the circumstances where there is a basic loss per share, share options are
anti-dilutive and therefore are not included in the calculation of diluted losses per share.
The shares held by the Dairy Crest Employees Share Ownership Plan Trust (ESOP) are excluded from the weighted average number of
shares in issue used in the calculation of earnings and diluted earnings per share.
To show earnings per share on a consistent basis, which in the Directors opinion reects the ongoing performance of the business more
appropriately, adjusted earnings per share has been calculated. The computation for basic and diluted earnings per share (including adjusted
earnings per share) is as follows:
Year ended 31 March 2013 Year ended 31 March 2012

Earnings
m
Weighted
average
no of
shares
million
Per share
amount
pence
Earnings
m
Weighted
average
no of
shares
million
Per share
amount
pence
Basic EPS from continuing operations 134.7 (38.8) 133.2 (29.1)
Effect of dilutive securities:
Share options 1.9
Diluted EPS from continuing operations 136.6 (38.8) 133.2 (29.1)
Adjusted EPS from continuing operations
Prot/(loss) from continuing operations 134.7 (38.8) 133.2 (29.1)
Exceptional items (net of tax) 44.5 33.0 80.8 60.7
Amortisation of acquired intangible assets (net of tax) 0.3 0.2 0.6 0.4
Pension interest income (net of tax) (4.5) (3.3) (4.1) (3.1)
Adjusted basic EPS from continuing operations 40.3 134.7 29.9 38.5 133.2 28.9
Effect of dilutive securities:
Share options 1.9 (0.4) 2.5 (0.5)
Adjusted diluted EPS from continuing operations 40.3 136.6 29.5 38.5 135.7 28.4

Basic EPS from discontinued operations 54.5 134.7 40.5 21.7 133.2 16.3
Effect of dilutive securities:
Share options 1.9 (0.6) 2.5 (0.3)
Diluted EPS from discontinued operations 54.5 136.6 39.9 21.7 135.7 16.0

Basic EPS on prot/(loss) for the year 54.5 134.7 40.5 (17.1) 133.2 (12.8)
Effect of dilutive securities:
Share options 1.9 (0.6)
Diluted EPS on prot/(loss) for the year 54.5 136.6 39.9 (17.1) 133.2 (12.8)
There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of signing of
these nancial statements.
72236_Glasshouse_p70_p113.indd 79 04/06/2013 11:19
Notes to the nancial statements continued
80 Dairy Crest Annual Report 2013
9 Remuneration of employees and key management personnel
Number of employees (continuing operations) Group
Year ended
31 March
2013
number
Year ended
31 March
2012
number
Average number of employees:
Production 2,036 2,221
Sales, distribution and administration 3,247 3,757
Total employees 5,283 5,978

Remuneration of employees, including key management personnel (continuing operations)
Year ended
31 March
2013
m
Year ended
31 March
2012
m
Wages and salaries 176.5 189.5
Social security costs 17.2 19.0
Equity settled share based payments expense (Note 26) 1.9 2.4
Pension costs (Note 20) 7.1 7.9
202.7 218.8
The above costs are from continuing operations and include amounts paid to the Companys Executive and Non-executive Directors.
Further analysis is as follows:
Directors
Year ended
31 March
2013
000
Year ended
31 March
2012
000
Salaries and benets 1,528 1,515
Bonuses 613 598
Fees to non-executive directors 331 343
Emoluments 2,472 2,456
Employer payments to dened contribution pension scheme 31 18
Gain on exercise of sharesave options 15
Highest paid director
Salary and benets 656 648
Bonus 272 259
Emoluments 928 907
Employer payments to dened contribution pension scheme 9 9
Gain on exercise of sharesave options 5
Further information relating to directors remuneration for the year ended 31 March 2013 is provided in the Directors Remuneration Report on
pages 41 to 52.
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Dairy Crest Annual Report 2013 81
10 Property, plant and equipment
Consolidated 2013
Land and
buildings
m
Vehicles,
plant and
equipment
m
Assets in
the course of
construction
m
Total
m
Cost
At 1 April 2012 192.6 303.0 29.0 524.6
Additions 3.5 18.0 21.3 42.8
Acquisition of businesses 0.5 0.5
Disposals (4.2) (22.8) (0.5) (27.5)
Disposal of St Hubert (8.7) (15.7) (1.2) (25.6)
Transfers and reclassications 0.6 24.3 (24.9)
Exchange (0.4) (0.8) (0.1) (1.3)
At 31 March 2013 183.4 306.5 23.6 513.5
Accumulated depreciation
At 1 April 2012 64.8 176.9 241.7
Charge for the year 5.9 23.1 29.0
Asset impairments 1.4 12.3 13.7
Disposals (2.3) (22.8) (25.1)
Disposal of St Hubert (5.2) (10.1) (15.3)
Exchange (0.2) (0.6) (0.8)
At 31 March 2013 64.4 178.8 243.2
Net book amount at 31 March 2013 119.0 127.7 23.6 270.3

Consolidated 2012
Cost
At 1 April 2011 187.9 285.3 22.2 495.4
Additions 4.6 16.0 27.5 48.1
Acquisition of businesses 0.1 0.4 0.5
Disposals (2.5) (10.5) (5.0) (18.0)
Transfers and reclassications 3.1 12.6 (15.7)
Exchange (0.6) (0.8) (1.4)
At 31 March 2012 192.6 303.0 29.0 524.6
Accumulated depreciation
At 1 April 2011 57.8 153.3 211.1
Charge for the year 6.9 24.0 30.9
Asset impairments 2.1 8.7 10.8
Disposals (1.7) (8.5) (10.2)
Exchange (0.3) (0.6) (0.9)
At 31 March 2012 64.8 176.9 241.7
Net book amount at 31 March 2012 127.8 126.1 29.0 282.9
Depreciation of property, plant and equipment relating to the discontinued St Hubert business, included in the table above amounted to 0.8
million in the year ended 31 March 2013 (2012: 1.7 million).
2012/13
Following the decision in 2011 to transfer all Clover manufacture from Crudgington, Shropshire to Kirkby, Liverpool, in September 2012 the
Group announced plans to consolidate all spreads production into a single UK location at its site in Kirkby. Subject to consultation, this
decision will result in the closure of the site at Crudgington in 2014. As a result of this decision 11.4 million of plant and equipment at the sites
have been impaired to nil net book value (representing managements best estimate of resale value net of costs of sale). In addition, the land
and buildings at Crudgington were impaired by 0.9 million. See Note 4.
The culmination of the centralisation of administrative activity in the Dairies depot network along with the closures of milk processing sites at
Fenstanton, Cambridgeshire and Aintree, Liverpool resulted in impairments of 0.5 million to land and buildings and 0.9 million to plant and
equipment. See Note 4.
The carrying value of property, plant and equipment within each cash generating unit (CGU) is reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recoverable. With regard to the Dairies CGU, goodwill was fully impaired
Notes to the nancial statements continued
82 Dairy Crest Annual Report 2013
10 Property, plant and equipment continued
in 2011/12 however given the low margins in this business and large movements in milk input costs during 2012/13, the carrying value of
property, plant and equipment within this CGU has been reviewed along with its value in use. The impairment methodology and key inputs are
as set out in Note 11. The discount rate applied to the value in use calculation was 8.7% and cash ows are forecast to year ve with no
growth assumed thereafter. The impairment review has not indicated any required write down of the carrying value of property, plant and
equipment in the year ended 31 March 2013, however management believes that there are changes in key assumptions that could result in
impairments. The key assumptions are discount rates and margins. A 1.0% increase in the discount rate applied, with all other assumptions
unchanged, would result in a carrying amount equal to value in use. A margin of 2% versus the assumption of 2.5% in perpetuity from year ve
with all other assumptions unchanged, would result in a carrying value equal to value in use.
2011/12
Following the decision to close, subject to consultation, two Dairies processing sites at Fenstanton, Cambridgeshire and Aintree, Liverpool in
2012/13, the assets within these cash generating units and other assets in the Dairies supply chain were reviewed for evidence of impairment.
The carrying value of property, plant and equipment at these sites and certain plant and equipment at our site in Foston, Derbyshire could no
longer be supported by value in use and an impairment was recorded to reduce the carrying value to managements best estimate of fair
value less costs to sell. Land and buildings at Aintree and Fenstanton were impaired by 2.1 million resulting in a carrying value of 4.5 million
reecting the best estimate of resale value of these sites, both of which were owned. Plant and equipment at Aintree, Fenstanton and Foston
were impaired by 7.7 million resulting in a carrying value of 0.2 million reecting the best estimate of resale value less costs of sale or
disposal at that time. All of these impairments were recorded as exceptional items in the Dairies segment (see Note 4). At 31 March 2012, there
remained property, plant and equipment with a carrying value of 142.1 million in the Dairies segment after these impairments.
Following the decision in 2011 to transfer all Clover manufacture from Crudgington, Shropshire to Kirkby, Liverpool certain assets at Kirkby
became obsolete as future plans for the utilisation of these assets had changed. Obsolete assets with a carrying value of 1.0 million were
identied and these assets were impaired to nil value reecting managements best view as to their fair value less costs of removal and sale.
This impairment was recorded as an exceptional item in the Spreads segment (see Note 4).
Capitalised leases included in vehicles, plant and equipment comprise:
2013
m
2012
m
Cost 32.1 32.2
Accumulated depreciation (22.9) (21.5)
Net book amount 9.2 10.7
11 Goodwill
m
Cost
At 31 March 2011 337.8
Additions (Note 29) 6.7
Exchange (11.5)
At 31 March 2012 333.0
Disposal (Note 29) (176.4)
Exchange (9.3)
At 31 March 2013 147.3
Accumulated impairment
At 31 March 2011 (2.3)
Impairments in year ended 31 March 2012 (Dairies) (70.7)
At 31 March 2012 (73.0)
At 31 March 2013 (73.0)
Net book amount at 31 March 2013 74.3
Net book amount at 31 March 2012 260.0
Impairment testing of goodwill
Acquired goodwill has been allocated for impairment testing purposes to four groups of cash generating units (CGUs): Dairies, Spreads, MH
Foods and Cheese. At March 2012 goodwill in relation to the Dairies CGU was fully impaired and the carrying value of goodwill for this CGU at
31 March 2013 is nil.
All groups of CGUs with goodwill are tested for impairment annually by comparing the carrying amount of that CGU with its recoverable
amount. Recoverable amount is determined based on a value-in-use calculation using cash ow projections based on nancial budgets and
strategic plans approved by senior management covering a three-year period and appropriate growth rates beyond that other than for Dairies
where a ve-year period was forecast with appropriate growth rates beyond that. The discount rate applied to the projections is 8.7% for
Spreads, MH Foods and Cheese (2012: 8.4% and Dairies 9.4%).
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11 Goodwill continued
Discount rates are pre-tax and calculated by reference to average industry gearing levels, the cost of debt and the cost of equity based on the
capital asset pricing model and CGU-specic risk factors. Discount rates have not changed signicantly since March 2012.
The growth rate used to extrapolate cash ows beyond the three-year period for Spreads, MH Foods and Cheese is 2.0% per annum (being
the estimated UK long-term growth rate adjusted for industry growth rates and extrapolation risks) (2012: 2.0% per annum beyond year three).
The growth rate used to extrapolate cash ows beyond a ve-year period for the Dairies CGU was 0% at March 2012 with cash ows in the
rst ve years being based on extended strategic plans for that business.
The carrying amount of goodwill allocated to groups of CGUs at 31 March 2013 is:
Dairies Nil (2012: nil)
MH Foods 6.7 million (2012: 6.7 million)
Spreads 65.5 million (2012: 65.5 million)
St Hubert n/a (2012: 185.7 million)
Cheese 2.1 million (2012: 2.1 million)
Gross margin budgeted gross margins are based initially on actual margins achieved in the preceding year further adjusted for projected
input and output price changes, volume changes, initiatives implemented and associated efciency improvements. The budgeted margins
form the basis for strategic plans, which incorporate longer-term market trends.
Discount rates reect managements estimate of the risk-adjusted weighted average cost of capital for each CGU.
Raw materials prices budgets are prepared using the most up to date price and forecast price data available. This is based on forward
prices in the market place adjusted for any contracted prices at the time of forecast. The key resources are milk, vegetable oils, fuel oil, diesel,
gas and electricity and packaging costs.
Growth rate estimates for periods beyond the length of the strategic plans, growth estimates are based upon published industry research
adjusted downwards to reect the risk of extrapolating growth beyond a three year time frame. For the residential business, long-term rates of
market decline as seen over recent years have been extrapolated forward offset by growth assumptions for milk&more, FRijj and the liquid
milk business.
The Directors consider the assumptions used to be consistent with the historical performance of each CGU where appropriate and to be
realistically achievable in the light of economic and industry measures and forecasts.
2012/13
Sensitivity to changes in assumptions
With regard to the assessment of value in use of the UK Spreads, MH Foods and Cheese CGUs, management believes that no reasonably
possible change in the above key assumptions would cause the carrying value of those units to exceed their recoverable amount.
2011/12
Dairies CGU impairment of goodwill
Dairies margins were impacted in 2011/12 by a number of factors including higher input costs, falling realisations for cream (a by-product of
milk production), the ongoing decline of residential sales and high levels of competition in the sector. Furthermore, weak UK consumer
demand and a very competitive landscape had adversely impacted the Groups expectations regarding the speed of recovery in future Dairies
margins. In 2011 we highlighted that changes in key assumptions could cause the carrying value of the then Liquid Products and Customer
Direct CGUs to exceed their recoverable amount. As described in Note 4, management has taken action to close certain sites in order to
underpin factory utilisation and improve operating efciencies. This combined with other activities will, in the opinion of management, restore
margins to an acceptable level in the medium term. However, the outlook is signicantly weaker than it was in 2011 and margin recovery will
take longer than previously anticipated. Given the inherent uncertainties of cash ow forecasts in what is a predominantly commodity business
in a competitive sector especially given the sensitivity of low absolute margins, management has concluded that it is appropriate to fully impair
the carrying amount of Dairies goodwill as there is no assurance that it can be supported on a value in use basis, excluding the impact of
restructuring activities.
Therefore, management has concluded that it is appropriate to fully impair the carrying value of Dairies goodwill resulting in an exceptional
charge of 70.7 million recorded in the year ended 31 March 2012. After fully impairing goodwill and impairing certain other property, plant,
equipment and intangible assets, the remaining carrying value of these items at 31 March 2012 was 161.6 million. As goodwill has been fully
impaired, there is no headroom and any future adverse change in key assumptions would lead to further impairment against these assets.
There are changes in key assumptions in the calculation of Dairies CGU value in use that could result in further impairments. The key
assumptions are discount rates and annual cash ows. A 1% increase in the discount rate applied, with all other assumptions unchanged,
would result in a further impairment of approximately 20 million. A reduction in cash ows of 2 million per annum in perpetuity, representing
approximately 2% margin, with all other assumptions unchanged, would result in a further impairment of 22 million.
Other CGUs Sensitivity to changes in assumptions
With regard to the assessment of value in use of the UK Spreads, St Hubert, MH Foods and Cheese CGUs, management believes that no
reasonably possible change in the above key assumptions would cause the carrying value of the unit to exceed its recoverable amount.
Notes to the nancial statements continued
84 Dairy Crest Annual Report 2013
12 Intangible assets

Assets in
the course of
construction
m
Internally
generated
m
Acquired
intangibles
m
Total
m
Cost
At 31 March 2011 5.4 24.5 197.0 226.9
Additions 6.4 0.2 6.6
Acquisitions 6.0 6.0
Transfers and reclassications (2.0) 2.0
Exchange (11.8) (11.8)
At 31 March 2012 9.8 26.7 191.2 227.7
Additions 5.7 5.7
Disposal (7.2) (173.5) (180.7)
Transfers and reclassications (7.2) 7.2
Exchange (0.4) (9.0) (9.4)
At 31 March 2013 8.3 26.3 8.7 43.3
Accumulated amortisation
At 31 March 2011 9.8 37.3 47.1
Impairments 0.4 0.4
Amortisation for the year 3.2 9.1 12.3
Exchange (2.6) (2.6)
At 31 March 2012 13.4 43.8 57.2
Disposal (6.8) (42.4) (49.2)
Amortisation for the year 3.4 3.4 6.8
Impairments 0.2 0.2
Exchange (0.3) (1.9) (2.2)
At 31 March 2013 9.7 3.1 12.8
Net book amount at 31 March 2013 8.3 16.6 5.6 30.5
Net book amount at 31 March 2012 9.8 13.3 147.4 170.5
Amortisation of acquired intangible assets relating to the discontinued St Hubert business, included in the table above amounted to
3.0 million in the year ended 31 March 2013 (2012: 8.3 million).
Internally generated intangible assets comprise software development and implementation costs across manufacturing sites, the milk&more
business and Head Ofce. Acquired intangibles comprise predominantly brands acquired with the acquisition of businesses. The largest
component within acquired intangibles is the Frylight brand acquired with the acquisition of Morehands Limited (MH Foods) in June 2011.
A useful life of 15 years has been assumed for this brand.
The remaining useful lives at 31 March 2013 for signicant intangible assets are as follows:
Acquired Frylight brand: 13 years
The carrying value of the Frylight brand at 31 March 2013 is 5.3 million (2012: 5.7 million).
2013
Disposal in the year relates to the sale of St Hubert see Note 29.
2012
Additions in the year relate to the acquisition of Morehands Limited (see above and Note 29) and computer software development for the UK
Group.
Following the decision to close, subject to consultation, two Dairies sites, certain capitalised software development costs have been impaired
by 0.4 million (see also Note 4 and Note 10).
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13 Investments
Group
During the year ended 31 March 2013, the Group acquired 7% of the share capital of HIECO Limited for a consideration of 0.3 million.
Company
Share grants
awarded
in subsidiaries
m
Shares in
subsidiary
undertakings
m
Total
m
Cost
At 1 April 2011 9.7 468.1 477.8
Share based payment charge in subsidiary companies 1.7 1.7
At 31 March 2012 11.4 468.1 479.5
Share based payment charge in subsidiary companies 1.4 1.4
At 31 March 2013 12.8 468.1 480.9
Shares in subsidiary undertakings comprise an investment in Dairy Crest Limited of 239.2 million and an investment of 228.9 million in Dairy
Crest UK Limited.
Share grants awarded in subsidiaries represents the cumulative cost of the Companys grant of equity instruments, under share based
payment awards, to employees of subsidiary undertakings.
At 31 March 2013 the principal subsidiary undertakings and other associates were:
Business
Percentage of
ordinary share
capital held
Subsidiary undertakings and associates:
Dairy Crest Limited Manufacture of dairy products 100%
Philpot Dairy Products Limited* Trading in dairy products 100%
Fayreeld Foodtec Limited* Manufacture and trading in dairy products and ingredients 100%
Morehands Limited* Manufacture of cooking oils 100%
Wexford Creamery Limited Manufacture of dairy products 30%
* Investments are held by Dairy Crest Limited
The principal place of operation and country of incorporation of all subsidiary undertakings and associates is England and Wales except for
Wexford Creamery Limited which is in Ireland.
14 Investment in associates and joint ventures using equity method
The investment in associates using the equity method at 31 March 2013 is represented predominantly by a 20% interest in Wexford Creamery
Limited (WCL) which is involved in the manufacture of cheese in the Republic of Ireland. Following the sale of 50% of the ordinary shares of
WCL in June 2010, the Group equity accounts for a 20% shareholding in that company. The Group holds a further 10% of the issued share
capital of WCL however, due to the existence of xed-price put and call options in relation to this additional holding, it is considered deferred
consideration and is not equity accounted.
The share of the assets, liabilities, income and expenses of associates at 31 March and for the years then ended, which are equity accounted
for in the consolidated nancial statements, are as follows:

2013
m
2012
m
Current assets 1.7 2.3
Current liabilities (1.2) (1.5)
Non-current liabilities (0.3)
(1.2) (1.8)
Share of net assets 0.5 0.5

Revenue 10.3 14.4
Operating costs (10.3) (14.6)
Finance costs (0.1)
Loss before tax (0.3)
Tax expense
Share of net loss (0.3)
Notes to the nancial statements continued
86 Dairy Crest Annual Report 2013
15 Inventories
Consolidated


2013
m
2012
m
Raw materials and consumables 33.2 35.8
Finished goods 175.0 152.0
208.2 187.8
Cheese inventories at 31 March 2013 totalled 155.5 million (2012: 129.8 million).
During the year ended 31 March 2013, 1.2 million of engineering and packaging inventories were written off comprising 1.0 million of
inventories in Dairies and 0.2 million of inventories in Spreads. These write offs were necessitated by the closure of two Dairies sites and the
consolidation of Clover manufacture into one site. See also Note 4.
In April 2013 the Group granted the Trustee of the Dairy Crest Group Pension Fund a oating charge over maturing cheese inventories with a
maximum realisable value of 60 million.
16 Trade and other receivables
Consolidated Parent Company


2013
m
2012
m
2013
m
2012
m
Trade receivables 83.3 115.2
Amounts owed by subsidiary undertakings 169.3 218.8
Other receivables 10.6 10.7 1.4 1.0
Prepayments and accrued income 4.9 5.6
98.8 131.5 170.7 219.8
All amounts above, with the exception of prepayments and accrued income, are nancial assets.
Trade receivables are denominated in the following currencies:

Consolidated

2013
m
2012
m
Sterling 79.9 98.5
Euro 0.6 15.0
Dollars 2.8 1.7
83.3 115.2
There are no material concentrations of credit risk.
Trade receivables are non interest bearing and are generally on 3090 days terms and are shown net of a provision for impairment.
As at 31 March 2013, trade receivables at nominal value of 7.0 million (2012: 8.3 million) were impaired and provided for. Movements in the
provision for impairment of receivables were as follows:
Consolidated

2013
m
2012
m
At 1 April 8.3 5.3
Charge for the year operating 0.9 1.1
Charge for the year operating (exceptional see Note 4) 4.3
Amounts written off (2.2) (2.4)
At 31 March 7.0 8.3
Bad debt provisions are principally in the Dairies residential and mid sized commercial channels on debt over 90 days. These businesses sell
product on the doorstep and to middle ground and foodservice customers. The Group has no history of bad debt with regard to sales to large
multiple retailers. There were no impairment provisions on any other class of receivables at 31 March 2013 or 2012.
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16 Trade and other receivables continued
At 31 March, the analysis of trade receivables that were past due but not impaired is as follows:
Past due, not impaired

Total
m
Neither past
due nor
impaired
m
30 60 days
m
60 90 days
m
> 90 days
m
31 March 2013 83.3 72.1 6.7 3.0 1.5
31 March 2012 115.2 103.3 9.4 2.5
The credit quality of trade receivables is assessed by reference to external credit ratings where available, otherwise historical information
relating to counterparty default rates is used.
17 Financial assets
Derivative nancial instruments
Consolidated

Note
2013
m
2012
m
Current
Cross currency swaps (cash ow hedges) 9.6
Forward currency contracts (cash ow hedges) 31 0.3
9.6 0.3
Non-current
Option to sell 20% holding in Wexford Creamery Limited 31 1.6 1.6
Cross currency swaps (cash ow hedges) 31 12.9 15.0
14.5 16.6

Company

2013
m
2012
m
Current
Cross currency swaps (cash ow hedges) 31 9.6
Non-current
Cross currency swaps (cash ow hedges) 31 12.9 15.0
All derivative nancial instruments are fair valued at each balance sheet date and all, with the exception of the option to sell a 20% holding in
Wexford Creamery Limited (WCL), comprise Level 2 valuations under IFRS 7: Financial Instruments Disclosures, namely, that they are based
on inputs observable directly (from prices) or indirectly (derived from prices).
The WCL options comprise call and put options over 20% of the company for a price of 3.6 million adjusted for 20% of WCLs post-tax
prots/losses from June 2010 until the date of exercise. This comprises a Level 3 valuation, namely that it is not based on inputs observable
directly or indirectly. Management has valued this option by comparing the current equity accounted carrying value of the 20% holding with
the estimated present value of consideration received from the exercise of the option. The difference between these amounts comprises the
option value of 1.6 million at 31 March 2013. The principal input assumptions in valuing these options are (i) estimated future prots of WCL
which have been based upon best available budgets and forecasts (ii) an appropriate post-tax discount rate of 6% and (iii) an option exercise
date of 2018. Over the period until exercise of these options, any movement in the fair value of these instruments is charged/credited to the
income statement.
There has been no material movement in the fair value of the WCL options between recognition in June 2010 and 31 March 2013.
72236_Glasshouse_p70_p113.indd 87 04/06/2013 17:52
Notes to the nancial statements continued
88 Dairy Crest Annual Report 2013
18 Cash and short-term deposits
Consolidated Parent Company

2013
m
2012
m
2013
m
2012
m
Cash and short-term deposits 276.1 79.4 14.8
Cash at bank earns interest at oating rates based on daily bank deposit rates.
Following the sale of St Hubert, signicant amounts of cash were placed on deposit resulting in concentrations of credit until the repayment of
loan notes and the one-off contribution to the pension scheme in April 2013. Counterparty risk and the Groups policy for managing deposits
are described in Note 30.
19 Financial Liabilities
Group Note
2013
m
2012
m
Current
Obligations under nance leases 31 2.4 2.7
Loan notes (at amortised cost) 165.7
Debt issuance costs (0.6) (0.7)
Financial liabilities Borrowings 167.5 2.0
Cross currency swaps (cash ow hedges) 2.2
Forward currency contracts (at fair value: cash ow hedge) 31 0.1
Financial liabilities Derivative nancial instruments 2.3
Current nancial liabilities 169.8 2.0
Non-current
Obligations under nance leases 31 3.1 4.5
Loan notes (at amortised cost) 31 182.4 345.5
Bank loans (at amortised cost) 31 71.7
Debt issuance costs (1.2) (2.0)
Financial liabilities Borrowings 184.3 419.7
Cross currency swaps (cash ow hedges) 3.9 8.7
Financial liabilities Derivative nancial instruments 3.9 8.7
Non-current nancial liabilities 188.2 428.4
All derivative nancial instruments are fair valued at each balance sheet date and all comprise Level 2 valuations under IFRS 7:
Financial Instruments Disclosures, namely, that they are based on inputs observable directly (from prices) or indirectly (derived from prices).
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19 Financial Liabilities continued
Interest bearing loans and borrowings
The effective interest rates on loans and borrowings at the balance sheet date were as follows:

Maturity
2013
m
Effective
Interest rate
at March 2013
2012
m
Effective
Interest rate
at March 2012
Current
Loan notes
US$ swapped into April 2013 68.7 5.32%
Euro April 2014 (repaid April 2013) 21.0 4.74%
Euro April 2017 (repaid April 2013) 23.2 4.85%
Euro swapped into April 2014 (repaid April 2013) 45.6 5.04%
Sterling April 2017 (repaid April 2013) 7.2 5.84%
Finance leases 2.4 5.18% 2.7 5.18%
Debt issuance costs (0.6) (0.7)
167.5 2.0
Non-current
Multi-currency revolving credit facilities:
Euro oating October 2016 61.7 EURIBOR + 135bps
Sterling oating October 2016 10.0 LIBOR + 135bps
Loan notes:
US$ swapped into April 2013 68.1 5.32%
US$ swapped into April 2016 81.0 5.31% 78.8 5.31%
Sterling April 2016 10.0 5.27% 10.0 5.27%
Euro April 2014 8.2 4.74% 29.8 4.74%
Euro April 2017 9.0 4.85% 32.7 4.85%
Euro swapped into April 2014 17.8 5.04% 62.5 5.04%
Sterling April 2017 2.8 5.84% 10.0 5.84%
US$ swapped into November 2018 16.5 3.87% 15.8 3.87%
US$ swapped into November 2021 37.1 4.52% 37.8 4.52%
Finance Leases 3.1 5.18% 4.5 5.18%
Debt issuance costs (1.2) (2.0)
184.3 419.7
On 2 November 2012, following the disposal of St Hubert, the Group repaid 7.5 million of loan notes at par comprising: $5.6 million (3.2
million) of 2006 notes, 2.4 million (2.0 million) of 2007 notes and $3.7 million (2.3 million) of 2011 notes.
In March 2013, the Group gave irrevocable notice to holders of the loan notes maturing in 2014 and 2017, that 72% of the principal plus any
make whole penalties would be repaid in April 2013. Those notes repaid in April have therefore been classied as current liabilities at 31 March
2013, along with any cross currency swaps that were designated as cash ow hedges against those notes. Furthermore, in March 2013, 0.3
million of unamortised debt issuance costs were written off representing approximately one sixth of the unamortised amount. This write down
resulted from a proportionate reduction in the revolving credit facility that was completed in April 2013. See Note 34.
On 12 October 2011, the Group entered into a new ve year revolving credit facility of 170 million plus 150 million with a syndicate of ve
banks. The existing 100 million and 85 million plus 175 million revolving credit facilities (maturing in November 2011 and July 2013
respectively) were cancelled and repaid on 19 October 2011 using funds drawn under the new facility. Upfront debt issuance costs amounted
to 3.0 million and these are charged to the consolidated income statement over four years being the expected life of the new facility before it
is replaced. Unamortised debt issuance costs at 31 March 2013 amounted to 1.8 million (2012: 2.7 million) of which 0.6 million (2012: 0.7
million) will amortise within 12 months.
The Group raised $85 million (54.5 million) by way of a debt private placement with US investors on 30 November 2011. These notes were a
mix of seven-year ($25 million) and ten-year ($60 million) maturities. All principal and interest cash ows have been swapped into Sterling at an
exchange rate of 1.56 and interest rates of 3.87% and 4.52% on the seven and ten year notes respectively.
The Group is subject to a number of covenants in relation to its borrowing facilities which, if contravened, would result in its loans becoming
immediately repayable. These covenants specify a maximum net debt to EBITDA ratio of 3.5 times, and minimum interest cover ratio of 3.0
times. No covenants were contravened in the year ended 31 March 2013 (2012: None). Key covenants under the 2011 revolving credit facility
and debt private placement were unchanged from existing covenants.
Details of the Groups interest rate management strategy and interest rate swaps are included in notes 30 and 31.
Notes to the nancial statements continued
90 Dairy Crest Annual Report 2013
19 Financial Liabilities continued
Company
2013
m
2012
m
Current
Loan notes (at amortised cost) 165.7
Financial liabilities Borrowings 165.7
Cross currency swaps (cash ow hedges) 2.2
Financial liabilities Derivative nancial instruments 2.2
Current nancial liabilities 167.9
Non-current
Loan notes (at amortised cost) 182.4 345.5
Bank loans (at amortised cost) 61.7
Financial liabilities Borrowings 182.4 407.2
Cross currency swaps (cash ow hedges) 3.9 8.7
Financial liabilities Derivative nancial instruments 3.9 8.7
Non-current nancial liabilities 186.3 415.9
All derivative nancial instruments are fair valued at each balance sheet date and all comprise Level 2 valuations under IFRS 7:
Financial Instruments Disclosures, namely, that they are based on inputs observable directly (from prices) or indirectly (derived from prices).
Interest bearing loans and borrowings
The effective interest rates on loans and borrowings at the balance sheet date were as follows:

Maturity
2013
m
Effective
Interest rate
at March 2013
2012
m
Effective
Interest rate
at March 2012
Current
Loan notes
US$ swapped into April 2013 68.7 5.32%
Euro April 2014 (repaid April 2013) 21.0 4.74%
Euro April 2017 (repaid April 2013) 23.2 4.85%
Euro swapped into April 2014 (repaid April 2013) 45.6 5.04%
Sterling April 2017 (repaid April 2013) 7.2 5.84%
165.7
Noncurrent
Multi-currency revolving credit facilities:
Euro oating October 2016 61.7 EURIBOR + 135bps
Loan notes:
US$ swapped into April 2013 68.1 5.32%
US$ swapped into April 2016 81.0 5.31% 78.8 5.31%
Sterling April 2016 10.0 5.27% 10.0 5.27%
Euro April 2014 8.2 4.74% 29.8 4.74%
Euro April 2017 9.0 4.85% 32.7 4.85%
Euro swapped into April 2014 17.8 5.04% 62.5 5.04%
Sterling April 2017 2.8 5.84% 10.0 5.84%
US$ swapped into November 2018 16.5 3.87% 15.8 3.87%
US$ swapped into November 2021 37.1 4.52% 37.8 4.52%
182.4 407.2
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Dairy Crest Annual Report 2013 91
20 Retirement benet obligations
The Group has one dened benet pension scheme in the UK which was closed to future service accrual from 1 April 2010. This pension
scheme is a nal salary scheme that had previously been closed to new employees joining after 30 June 2006. Employees joining after this
date and those members of the dened benet pension scheme on its closure to future service accrual were invited to join the Dairy Crest
Group dened contribution plan.
The most recent full actuarial valuation of the Dairy Crest Group Pension Fund was carried out as at 31 March 2010 by the funds independent
actuary using the projected unit credit method. Full actuarial valuations are carried out triennially. This valuation resulted in a decit of 137
million compared to the IAS19 decit of 142.4 million reported at that date. The next full actuarial valuation will be carried out in 2013/14 on
the 31 March 2013 position.
The following tables summarise the components of net benet expense recognised in the consolidated income statement and the funded
status and amounts recognised in the consolidated balance sheet for the dened benet pension scheme.
Dairy Crest Group
Pension Fund
Net benet income recognised in the consolidated income statement
2013
m
2012
m
Gain on settlement (see below) (0.3)
Interest cost on benet obligation 41.5 43.5
Expected return on scheme assets (47.4) (49.0)
Net benet income (5.9) (5.8)

Net actuarial loss recognised in other comprehensive income


Actual return less expected return on pension scheme assets 69.4 21.9
Experience gains/(losses) arising on scheme liabilities 0.8 (6.5)
Loss arising from changes in assumptions underlying the present value of scheme liabilities (72.8) (61.6)
Net actuarial loss (2.6) (46.2)
Recognition of liability for unrecoverable notional surplus (10.9)
Recognised in other comprehensive income (13.5) (46.2)
Related tax 7.8 11.2
Net actuarial loss recognised in other comprehensive income (5.7) (35.0)
Actual returns on plan assets were 116.8 million (2012: 70.9 million).
Dened benet obligation
Fair value of scheme assets: Equities 84.3 72.7
Bonds and cash 393.4 293.2
Equity return swaps valuation 42.9 61.8
Property and other 62.5 58.8
Insured retirement obligations 286.3 279.6
869.4 766.1
Dened benet obligation: Uninsured retirement obligations (639.4) (566.3)
Insured retirement obligations (286.3) (279.6)
Total dened benet obligation (925.7) (845.9)
Recognition of liability for unrecoverable notional surplus (10.9)
(936.6) (845.9)
Net liability recognised in the balance sheet (67.2) (79.8)
Related deferred tax asset 17.1 15.8
Net pension liability (50.1) (64.0)
From October 2009, the Group has been making additional funding contributions to the scheme of 20 million per annum. The level of cash
contributions will continue at this level until March 2018 based on the latest schedule of contributions which was signed in June 2011. However
a new schedule of contributions will be agreed with the Trustee following the next full actuarial review at 31 March 2013. The 20 million per
annum amount includes 2.8 million per annum of rental payments for land and buildings that are subject to a sale and leaseback agreement
between the Group and the scheme as part of the nal schedule of contributions. The land and buildings included in these arrangements are
subject to long term leases and the Group will continue to benet from substantially all of the risks and rewards of ownership. On this basis,
under IFRS, these land and buildings continue to be recognised in property, plant and equipment and rental payments of 2.8 million per
annum are treated as cash contributions, reecting the substance of the arrangements.
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Notes to the nancial statements continued
92 Dairy Crest Annual Report 2013
20 Retirement benet obligations continued
The Group is entitled to any surplus on winding up of the pension scheme albeit refunds are subject to tax deductions of 35% at source.
Based on the present value of committed cash contributions at 31 March 2013 and the IAS 19 valuation at that date of 56.3 million,
10.9 million would be deducted from any notional surplus returned to the Group and this has been recognised as an additional liability in
accordance with IFRIC 14. However, it should be noted that cash contributions are determined by reference to the triennial actuarial valuation,
not the IAS 19 valuation. The actuarial decit is greater than that recognised under IAS 19 since liabilities are discounted at gilt yields rather
than high quality corporate bond yields.
In December 2008, certain obligations relating to retired members were hedged by the purchase of an insurance contract. A further insurance
contract for retired members was purchased in June 2009 resulting in coverage for all members who retired up to August 2008. These
contracts are included within scheme assets and their value will always be equal to the obligation as calculated under IAS 19 for those
members covered.
The purchase of the second insurance contract in June 2009 was funded by the sale of equities. Subsequently, in order to re-establish an
appropriate equity weighting of scheme assets, the Fund purchased equity total return swaps (synthetic equity). These instruments comprise
an asset leg and a liability leg. The asset leg generates a return based on UK and overseas equity indices and the liability leg incurs a cost
based on LIBOR plus margin. Credit risk is minimised since collateral is provided by the counterparties to the benet of the Fund when the
instruments are in the money. At 31 March 2013, the valuation of the above comprises a positive equity exposure of 276.8 million and a
negative LIBOR exposure of 233.9 million (2012: equity exposure of 226.4 million and LIBOR exposure of 164.6 million).
An Enhanced Transfer Value (ETV) exercise took place during the year ended 31 March 2012 which resulted in approximately 220 members
transferring a total of 14.3 million in ETVs out of the Fund. The net gain as a result of this settlement of 0.3 million represents the difference
between the 14.3 million transferred out and the corresponding liabilities, measured on an IAS 19 basis, at the date that the settlement
became binding.
Scheme assets are stated at their market values at the respective balance sheet dates with the exception of the insured retirement obligations
which equal the IAS 19 valuation of obligations which they cover. The Group will adopt amendments to IAS 19R in the year ending March
2014. These amendments will result in the return on assets being calculated by reference to the discount rate assumption and not return
assumptions for individual asset classes. Had IAS 19R been adopted in the year ended 31 March 2013, the expected return on scheme
assets in the table above would have amounted to 38.0 million, resulting in an overall net cost of 3.5 million being charged to the
consolidated income statement. Under the revised IAS 19, the net pension liability of 56.3 million would be unchanged. Furthermore under
changes to IAS 19, future scheme administrative expenses will be charged as operating costs in the consolidated income statement. Had this
been effective for the year ended 31 March 2013, the Group would have charged 0.7 million to operating costs.
The average duration of scheme liabilities is approximately 18 years (2012: 19 years). Discount rate assumptions for each reporting period are
based upon quoted AA-rated corporate bond indices, excluding collateralised bonds, with maturities matching the Schemes expected benet
payments.
The RPI ination assumptions are determined by adopting a yield curve approach, based on the break-even rate of ination implied by xed
interest gilt yields and index-linked yields. Applying this approach to the Schemes projected benet payments gives an average break-even
ination assumption of 3.5% (2012: 3.4%). The CPI ination assumption is determined by reference to adjusted RPI rather than by reference to
CPI-linked investments where the market is small and illiquid. The principal differences between RPI and CPI are (i) the formula effect due to
RPI using arithmetic means and CPI geometric means, and (ii) the bundles of goods considered CPI excludes mortgage payments and other
housing costs. The assumption used at 31 March 2013 is that CPI ination will track 1.0% points below RPI ination in the long term (2012: 1%)
and is therefore set at 2.5% (2012: 2.4%). Pension increase assumptions are based on RPI with an adjustment to reect caps within the
Scheme rules.
Mortality assumptions were updated in the year ended 31 March 2011 based on analysis of the membership data performed as part of the
March 2010 full actuarial valuation. The result was an increase in life expectancy assumptions of approximately 1.7 years. Broadly the same
mortality input assumptions have been used for March 2012 and 2013 with no material resultant change in life expectancies.
The Scheme decit is highly dependent upon these input assumptions which are set at the reporting period end dates. A 0.1% decrease in the
discount rate assumption would increase the Scheme obligation by approximately 19 million (2012: 17 million). A 0.1% increase in the
ination assumption would increase the Scheme obligation by approximately 14 million (2012: 16 million). An increase in life expectancy
across all members of one year would increase the scheme obligation by approximately 37 million (2012: 43 million).
72236_Glasshouse_p70_p113.indd 92 04/06/2013 07:42
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20 Retirement benet obligations continued
Dairy Crest Group
Pension Fund
Movement in the present value of the dened benet obligations are as follows:
2013
m
2012
m
Opening dened benet obligation (845.9) (778.7)
Settlement gains 0.3
Interest cost (41.5) (43.5)
Actuarial losses (72.0) (68.1)
Benets paid 33.7 44.1
Closing dened benet obligation (925.7) (845.9)
Movement in the fair value of plan assets are as follows:
Opening fair value of scheme assets 766.1 718.6
Expected return 47.4 49.0
Actual less expected return 69.4 21.9
Contributions by employer 20.2 20.7
Benets paid (33.7) (44.1)
Closing fair value of plan assets 869.4 766.1
The principal assumptions used in determining retirement benet obligations for the Dairy Crest Group Pension Fund are shown below:

2013
%
2012
%
Key assumptions:
Price ination (RPI) 3.5 3.4
Price ination (CPI) 2.5 2.4
Average expected remaining life of a 65 year old non-retired male (years) 22.6 22.5
Average expected remaining life of a 65 year old retired male (years) 21.7 21.6
Average expected remaining life of a 65 year old non-retired female (years) 25.3 25.2
Average expected remaining life of a 65 year old retired female (years) 24.1 24.0
Discount rate 4.6 5.0
Expected return: Equities 8.0 8.0
Gilts and bonds 4.3 4.3
Synthetic equity exposure on equity swap contracts 8.0 8.0
LIBOR exposure on equity swap contracts 3.2 3.3
Property and other 7.0 7.0
Insured retirement obligations 4.6 5.0
History of experience gains and losses:
2009
m
2010
m
2011
m
2012
m
2013
m
Fair value of scheme assets 513.0 680.1 718.6 766.1 869.4
Present value of dened benet obligation (576.3) (822.5) (778.7) (845.9) (936.6)
Net decit (63.3) (142.4) (60.1) (79.8) (67.2)
Experience adjustments arising on scheme liabilities 6.8 7.9 16.4 (6.5) 0.8
Adjustments arising from changes in underlying assumptions 106.2 (259.8) 21.7 (61.6) (72.8)
Experience adjustments arising on scheme assets (231.1) 134.2 22.5 21.9 69.4
Recognition of liability for unrecoverable notional surplus. (10.9)
Net actuarial gain/(loss) (118.1) (117.7) 60.6 (46.2) (13.5)
The cumulative amount of actuarial losses recognised in the statement of other comprehensive income since 1 April 2004 is 145.6 million
(2012: 143.0 million) and in the Company statement of other recognised income and expense is nil (2012: nil).
The directors are unable to determine how much of the pension scheme decit recognised on transition to IFRS, and taken directly to equity
of 93.2 million, is attributable to actuarial gains and losses since inception of those pension schemes. Consequently, the directors are unable
to determine the amount of actuarial gains and losses that would have been recognised in the Group statement of other recognised income
and expense before 1 April 2004.
Notes to the nancial statements continued
94 Dairy Crest Annual Report 2013
20 Retirement benet obligations continued
The Company recognises no liabilities on its balance sheet, or charges or credits in its income statement or statement of recognised income
and expense in relation to the Group pension plans. The legal sponsor of the Dairy Crest Group Pension Fund is Dairy Crest Limited.
The Group has charged 7.1 million in respect of the Dairy Crest Group dened contribution scheme in the year ended 31 March 2013 (2012:
7.9 million). The Company has made no charge in repect of the Dairy Crest Group dened contribution scheme in the year ended 31 March
2013 (2012: nil).
21 Trade and other payables
Consolidated Parent Company

2013
m
2012
m
2013
m
2012
m
Trade payables* 109.9 146.0
Other tax and social security 4.7 7.8
Other creditors* 13.6 15.7
Accruals* 93.6 96.9 16.9 8.0
221.8 266.4 16.9 8.0
* Financial liabilities at amortised cost.
22 Deferred income
Current
2013
m
2012
m
Grants 1.6 0.5
Other 0.1
1.6 0.6

Non-current
Grants 9.6 6.9
In 2010/11 two new biomass boilers were installed at the Davidstow cheese manufacturing site. Capital expenditure amounted to 3.9 million
and we received cash grants of 0.8 million during the year ended 31 March 2011 and 0.2 million during the year ended 31 March 2012 from
the South West of England Regional Development Agency. This grant is conditional upon certain conditions principally regarding continued
use and ownership of the boilers until 29 November 2014. In the year ended 31 March 2013, 0.4 million of this grant was voluntarily repaid in
order to receive annual renewable heat incentives. The conditions concerning the remaining outstanding grant are unchanged.
In 2012/13 the Group announced that it was consolidating its spreads manufacturing in a single site at Kirkby, Liverpool. During the year the
Group received a grant of 5.3 million under the Regional Growth Fund from the Department of Business, Innovation and Skills in relation to
this project. This grant is conditional upon certain conditions over a ve year term, principally the project being completed and creating or
safeguarding the agreed number of jobs.
A grant of 0.3 million in relation to the Crudgington site was written off to exceptional items in the year ended 31 March 2013 following the
write down of property, plant and equipment at that site following the announced closure plans. All conditions on this grant had been met and
no repayment was required.
With the exception of the grants relating to the biomass boiler at Davidstow and the Kirkby job creation, the Group has met all applicable
conditions attaching to grants at 31 March 2013 and all previously received grants were unconditional at that date.
23 Provisions

OFT
provision
(including
legal fees)
m
Onerous
contracts
m
Total
m
At 31 March 2011 Current 7.3 3.0 10.3
Utilised (7.3) (0.9) (8.2)
Discount unwind 0.2 0.2
At 31 March 2012 Current 2.3 2.3
Utilised (0.8) (0.8)
Discount unwind 0.2 0.2
At 31 March 2013 current 1.7 1.7
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23 Provisions continued
Ofce of Fair Trading (OFT)
An exceptional provision was charged in 2007/08 in relation to the settlement of the OFT investigation into milk price initiatives (including legal
costs). The amount of the ne provided was 9.4 million plus legal fees and reected the early resolution agreement that was reached with the
OFT in December 2007. In April 2010, the OFT announced that parties to the 2007 Statement of Objections will get a penalty reduction
provided each company continues to co-operate with the OFT. Accordingly, the provision was reduced to reect our best estimate of the
penalty ultimately payable (7.1 million) plus legal fees expected to be incurred (0.2 million). The penalty was settled on 11 October 2011.
Onerous contract
In June 2010, the Group disposed of 50% of the share capital of Wexford Creamery Limited (WCL). As part of the disposal, the Group
entered into an agreement to purchase guaranteed minimum volumes of cheese from WCL for a period of ve years from the date of disposal.
The price paid by the Group for that cheese is determined by reference to cost plus margin. Realisations for commodity cheese uctuate and
at the date of disposal a provision of 3.6 million was charged in order to provide for the cost of the cheese purchase arrangements. At 31
March 2013 the provision amounted to 1.7 million (2012: 2.3 million).
24 Share capital
Authorised
2013
Thousands
2012
Thousands
Ordinary shares of 25 pence each 240,000 240,000
Issued and fully paid Thousands m
At 31 March 2011 133,306 33.3
Issued for cash on exercise of share options 45
At 31 March 2012 133,351 33.3
Issued for cash on exercise of share options 3,245 0.8
At 31 March 2013 136,596 34.1
During the year ended 31 March 2013 3,244,954 shares were issued at a premium of 6.6 million for an aggregate consideration of 7.4 million
(2012: 45,195 shares at a premium of 0.1 million for an aggregate consideration of 0.1 million). Exercises of LTISP options and vesting of
deferred bonus shares are fullled by the issue of existing shares from the Dairy Crest Employees Share Ownership Plan (ESOP) see Note 25.
25 Notes to statement of changes in equity
Consolidated
The shares held by the ESOP are available to satisfy awards under LTISP (see Note 26)
At 31 March 2013 the ESOP held 127,939 shares (2012: 127,939 shares) in the Company at a cost of 0.6 million (2012: 0.6 million). The
ESOP was established in August 1996 to purchase shares in the Company in order to hedge certain future obligations of the Group including
shares awarded under the LTISP, ESOS and the deferred bonus plan. During the year the Trustee of the ESOP issued no shares (2012: 6,891)
following exercises of LTISP options and deferred bonuses.
The market value of the shares held by the ESOP, which are listed on the London Stock Exchange was 0.5 million at 31 March 2013
(2012: 0.4 million).
Other reserves Consolidated
Merger
reserve
m
Hedging
reserve
m
Translation
reserve
m
Other
reserves
m
At 31 March 2012 55.9 (3.3) (3.6) 49.0
Total recognised in other comprehensive income 0.3 2.1 2.4
At 31 March 2013 55.9 (3.0) (1.5) 51.4
At 31 March 2011 55.9 8.2 64.1
Total recognised in other comprehensive income (3.3) (11.8) (15.1)
At 31 March 2012 55.9 (3.3) (3.6) 49.0
The merger reserve includes the premium on shares issued to satisfy the purchase of Dairy Crest Limited in 1996. The cumulative amount of
goodwill charged against the merger reserve is 86.8 million (2012: 86.8 million). The reserve is not distributable.
The hedging reserve records the gains and losses on hedging instruments, to the extent that they are effective cash ow hedges. Any gains and
losses previously recorded in the hedging reserve are reclassied in prot and loss when the underlying hedged item affects prot and loss.
The translation reserve records exchange differences arising from the translation of the accounts of foreign currency denominated subsidiaries
offset by the movements on loans and derivatives designated to hedge the net investment in foreign subsidiaries.
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Notes to the nancial statements continued
96 Dairy Crest Annual Report 2013
25 Notes to statement of changes in equity continued
Parent Company
As permitted by section 408 of the Companies Act 2006, no separate prot and loss account is presented for the Company. The prot for the
year dealt with in the accounts of the Company is 44.4 million (2012: 40.4 million) including dividends received from subsidiary companies of
51.5 million (2012: 46.8 million). Dividends paid amounted to 27.4 million (2012: 26.5 million) which, along with a credit for share based
payments of 0.5 million (2012: 0.7 million) resulted in a 17.5 million increase in retained earnings (2012: 14.6 million increase).
In 1996 the Company acquired the entire issued share capital of Dairy Crest Limited. Consideration was in the form of cash and the issue of
109.8 million ordinary shares of 25 pence each. The fair value of the shares issued was estimated as 170.2 million. The capital reserve of
142.7 million, shown in the statement of changes in equity, represents the difference between the fair value of shares issued and their
nominal value of 27.5 million.
26 Share based payment plans
Group
The Group has three share option schemes in operation.
The Dairy Crest Long Term Incentive Share Plan (LTISP)
This is a long-term incentive scheme under which awards are made to directors and senior managers consisting of the right to acquire shares
for a nominal price subject to the achievement of nancial targets based on (i) total shareholder return (TSR) over a three year period versus
comparator companies and (ii) growth in adjusted basic earnings per share. From 2009, the TSR element was increased from 50% to 60% of
the awards granted. The vesting period for grants made under this scheme is 3 years with an exercise period of 7 years. In June and July
2012, a total of 1,094,734 options was granted under the LTISP scheme (July 2011: 995,183). There are no cash settlement alternatives.
Dairy Crest Sharesave Scheme
All employees are eligible to join the Dairy Crest Sharesave Scheme, which allows employees to use regular monthly savings to purchase
shares. Options are granted at a discount of up to 20% of the market value of the shares. No nancial performance criteria are attached to
these options and they vest three years from the date of grant with an exercise period of six months. On 14 December 2012 2,390,456 options
were granted under the Dairy Crest Sharesave Scheme at a grant price of 281 pence (December 2011: 1,145,978 options at a grant price of
265 pence). There are no cash settlement alternatives.
Deferred bonus scheme
From 2005/06, bonuses earned that are in excess of 50% of basic salary are deferred in shares (and from 2011 in share options) with a
vesting period of three years. The only vesting condition is continuing employment. The cost of these shares is charged over four years (being
the year the bonus was earned and the three-year vesting period) and is based on the number of shares issued (or from 2011 over which nil
cost options are granted) and the share price at the date of issue. No deferred shares were awarded or issued in relation to the year ended
31 March 2013 (2012: nil).
The number of share options and weighted average exercise price for each of the principal schemes is set out as follows:
LTISP* Sharesave Scheme
number number
weighted
average
exercise
price
(pence)
Options outstanding at 1 April 2012 1,860,408 4,768,410 238.4
Options granted during the year 1,094,734 2,390,456 281.0
Reinvested dividends 154,244
Options exercised during the year (3,244,954) 227.2
Options forfeited during the year (1,108,586) (387,864) 259.3
Options outstanding at 31 March 2013 2,000,800 3,526,048 275.4
Exercisable at 31 March 2013 24,978 34,459 227.0

Options outstanding at 1 April 2011 1,957,774 3,855,782 237.8


Options granted during the year 995,183 1,445,978 265.0
Reinvested dividends 158,226
Options exercised during the year (3,252) (45,195) 227.0
Options forfeited during the year (1,247,523) (488,155) 313.4
Options outstanding at 31 March 2012 1,860,408 4,768,410 238.4
Exercisable at 31 March 2012 25,563
* The weighted average exercise price for LTISP options is nil.
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26 Share based payment plans continued
Sharesave scheme options are exercisable up to September 2016 at prices ranging from 227p to 281p (March 2012: exercisable up to
September 2015 at prices ranging from 227p to 265p). LTISP options are exercisable at varying dates up to July 2022 (March 2012: July 2021).
The remaining weighted average contractual life of options outstanding at 31 March 2013 is 8.7 years for the LTISP and 3.1 years for the
Sharesave Scheme (2012: 8.71 years and 1.67 years respectively). The weighted average share price on exercise of Sharesave options was
3.53 (2012: 3.47).
The fair value factor of the Sharesave Scheme options issued in December 2012 is 20.7% (December 2011: 22%) giving a fair value of 0.81
(December 2011: 0.58) per option granted. This has been computed using a Black-Scholes option pricing model. The key assumptions used
in the valuation model for the December 2012 grant were: Expected share price volatility 22% (December 2011: 38%), risk free rate of interest
0.5% (December 2011: 0.5%) and dividend yield 5.22% (December 2011: 6.2%). The volatility assumption is based on the historical volatility of
the Dairy Crest Group plc share price over a period commensurate with the expected option life, ending on the grant date of the option.
The LTISP has market and non-market based performance conditions. The fair value of the market performance element of the LTISP awards
is calculated using a Monte Carlo option pricing model. The fair value factor for the award made in July 2012 is 65% for the TSR element and
100% for the EPS element (July 2011: 65% TSR and 100% EPS) giving a fair value of 2.75 per option granted (2011: 2.91). The share price
on granting 2012 awards was 3.34 (2011: 3.68). The non-market performance element of the LTISP is based on EPS and the charge for this
is the value of shares expected to vest calculated by reference to the share price at the date of grant. Volatility assumptions are made for Dairy
Crest Group plc and comparator companies based on historical volatility of share prices over a period commensurate with the option life.
The input assumptions for the LTISP grant in the year ended 31 March 2013 were as follows:
Term 3 years (2012: 3 years)
Volatility 23% (2012: 40%)
Risk free rate 0.4% (2012: 1.3%)
Average volatility of comparator TSR 36% (2012: 44%)
TSR correlation (Dairy Crest vs comparators) 22% (2012: 22%)
The expected life of the LTISP options is assumed to be equal to the vesting period, being three years.
The Group expense arising from share option plans for the year ended 31 March 2013 is 1.9 million (2012: 2.4 million) (See Note 9).
Company
The number of share options and weighted average exercise price for each of the schemes for employees of the Company is set out as
follows:
LTISP Sharesave Scheme
number number
weighted
average
exercise
price
(pence)
Options outstanding at 1 April 2012 683,272 15,988 227.0
Options granted during the year 393,540 12,808 281.0
Reinvested dividends 59,351
Options exercised during the year (15,988) 227.0
Options forfeited during the year (358,247)
Options outstanding at 31 March 2013 777,916 12,808 281.0
Exercisable at 31 March 2013

Options outstanding at 1 April 2011 728,972 15,988 227.0


Options granted during the year 343,252
Reinvested dividends 58,852
Options exercised during the year
Options forfeited during the year (447,804)
Options outstanding at 31 March 2012 683,272 15,988 227.0
Exercisable at 31 March 2012
Sharesave Scheme options are exercisable up to September 2016 at a price of 281p (March 2012: up to March 2013 at a price of 227p). LTISP
options are exercisable at varying dates up to July 2022 (2012: July 2021). The remaining average weighted average contractual life of options
outstanding at 31 March 2013 is 8.8 years for the LTISP and 3.4 years for the Sharesave Scheme (2012: 8.76 years and 0.92 years
respectively). There were no exercises of LTISP options in the year ended 31 March 2013 (2012: nil).
The Company expense arising from share option plans for the year ended 31 March 2013 was 0.5 million (2012: 0.7 million).
72236_Glasshouse_p70_p113.indd 97 04/06/2013 18:05
Notes to the nancial statements continued
98 Dairy Crest Annual Report 2013
27 Commitments and contingencies
The Group has entered into commercial leases on certain land and buildings, vehicles and equipment. There are no material renewal options,
escalation clauses or purchase options included in the lease contracts. There are no contingent rentals or operating leases or material
sub-leases. There are no signicant restrictions placed upon the lessee by entering into these leases. Excluding land and buildings, these
leases have an average life of between three and seven years.
During the year ended 31 March 2012, certain assets at our Severnside facility were sold for cash consideration of 6.8 million. This
equipment has been leased back under an operating lease with a six year term. The assets subject to the operating lease have an average
useful economic life of approximately ten years. There are no purchase option clauses or any contingent lease rentals.
Future minimum rentals payable under non-cancellable operating leases as at 31 March are as follows:

2013
m
2012
m
Within one year 23.6 26.0
After one year but not more than ve years 43.8 49.6
More than ve years 14.5 17.2
Finance leases
The Group nance leases principally comprise certain items of plant and equipment at the Davidstow site. The initial lease term is for 10 years
with a further renewal term of 7 years. There are no purchase options and escalation clauses and there is no sub-leasing of the assets or
contingent rentals. Future minimum payments under nance leases together with the present value of the net minimum lease payments are
as follows:
2013 2012


Minimum
payments
m
Present
value
of
payments
m
Minimum
payments
m
Present
value
of payments
m
Within one year 2.5 2.4 2.9 2.7
After one year but not more than two years 3.2 3.1 3.3 3.2
After two years but not more than ve years 1.3 1.3
After more than ve years
Total minimum lease payments 5.7 5.5 7.5 7.2
Less: amounts representing nance charges (0.2) (0.3)
Present value of minimum lease payments 5.5 5.5 7.2 7.2
Trading guarantees
The Group has provided guarantees and counter-indemnities which totalled 4.1 million at 31 March 2013 (2012: 3.4 million). These
guarantees are made principally by Philpot Dairy Products Limited, a subsidiary company, to customers as performance bonds and to the
Rural Payment Agency in relation to EU subsidies claimed.
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28 Related party transactions
In June 2010, the Group disposed of its controlling interest in Wexford Creamery Limited (WCL). WCL has been treated as an equity
accounted associate from June 2010 to 31 March 2013. On disposal, the Group contracted to purchase guaranteed minimum volumes of
cheese from WCL for a period of ve years from the date of disposal. In the year ended 31 March 2013 the cost of cheese purchased was
7.5 million (2012: 8.9 million).
Compensation of key management personnel of the Group and Company
2013
m
2012
m
Short-term employee benets 2.8 2.8
Share-based payments 0.5 0.7
Total compensation paid to key management personnel* 3.3 3.5
* Further details relating to compensation of key management personnel are set out in the Directors Remuneration Report. This includes a description of pension
arrangements and any cash supplements paid.
Key management personnel comprise Executive and Non-executive Board members of Dairy Crest Group plc. The senior management team
is small and all key decisions are made by either the three Executive directors in the Executive Management Committee or by the Group
Board which meets regularly.
Dairy Crest Limited, a subsidiary company, incurred costs of 2.8 million (2012: 2.4 million) from the Company for the provision of
management and administrative services carried out on its behalf. Dairy Crest Limited received 2.1 million (2012: 2.1 million) for the
remuneration of the Companys employees which had been paid by Dairy Crest Limited.
Interest charges of 0.2 million (2012: 0.2 million) were incurred by the Company from Dairy Crest Limited on a loan reecting an interest rate
of LIBOR+100 basis points. Interest income of 12.1 million (2012: 11.4 million) was received by the Company from Dairy Crest Limited on a
loan reecting an interest rate of 5.3% (2012: 5.3%) and a further 0.3 million was received by the Company from Dairy Crest Limited on
oating rate loans paying LIBOR plus margin (2012: 0.3 million). The Company paid no interest (2012: 0.4 million) to Dairy Crest Limited on
cross-currency swaps paying LIBOR and receiving EURIBOR.
29 Business combinations and disposals
Year ended 31 March 2013
Disposal of Discontinued Operation
Following a strategic review of the Groups overseas operations in the light of the inability to undertake synergistic acquisitions, on 28 August
2012 the Group completed the disposal of St Hubert SAS (St Hubert) for a cash consideration of 341.1 million (430.5 million). St Hubert
formed part of the Spreads reportable segment. Cash held in the disposed business at that date amounted to 4.1 million, resulting in a net
cash inow to the Group of 337.0 million. This amount has been reduced by fees of 6.2 million. The disposal resulted in a post-tax prot of
47.7 million which can be analysed as follows:
m m
Sales proceeds cash consideration 341.1
Book value of assets disposed of:
Property, plant and equipment 10.3
Goodwill 176.4
Intangible assets 131.5
Inventories 3.3
Trade and other receivables 14.9
Cash and short-term deposits 4.1
Trade and other payables (18.4)
Current tax (5.5)
Deferred tax (44.5) (272.1)
Gain on disposal before fees and recycling of exchange differences 69.0
Fees (6.2)
Amounts reclassied to prot and loss (11.4)
Pre-tax gain on disposal 51.4
Expected tax charge (3.7)
Post-tax gain on disposal of Discontinued Operation 47.7
The expected tax charge principally comprises capital gains taxes resulting from the disposal as well as expected taxation on 74million of
dividends paid in the period up to the date of disposal. These taxes were crystallised as a result of the divestment and as a consequence the
breaking of the St Hubert tax group. An estimate has been made of the likely tax costs resulting from these transactions however the nal
assessment has yet to be agreed with the French tax authorities which may result in a change to the level of tax provisioning.
72236_Glasshouse_p70_p113.indd 99 04/06/2013 18:31
Notes to the nancial statements continued
100 Dairy Crest Annual Report 2013
29 Business combinations and disposals continued
As a result of the disposal the St Hubert business has been classied as discontinued operations and prior period comparatives have been
adjusted accordingly. The post-tax prot of discontinued activities can be analysed as follows:
Year ended
31 March
2013
m
Year ended
31 March
2012
m
Revenue 41.7 117.4
Operating costs before amortisation of acquired intangibles (27.5) (77.6)
Trading prot 14.2 39.8
Amortisation of acquired intangibles (3.0) (8.3)
Prot on operations 11.2 31.5
Finance income 0.1 0.1
Prot before tax 11.3 31.6
Tax expense (4.5) (9.9)
Prot for the year from Discontinued Operation 6.8 21.7
The cash ows of the St Hubert business in the period to the date of disposal and in the prior year can be analysed as follows:
Cash ow from operating activities 0.3 32.2
Cash used in investing activities (0.6) (2.3)
Cash generated from nancing activities 0.1 0.1
Net movement in cash and cash equivalents (0.2) 30.0
Aquisitions
On 1 March 2013, the Group acquired the business and certain assets of Proper Welsh Milk Company Limited from the administrators BDO
LLP for 0.3 million. The fair value of the net assets acquired was 0.3 million, comprising property, plant and equipment of 0.5 million less
statutory and other liabilities taken over of 0.2 million, resulting in goodwill on acquisition of nil.
During the year ended 31 March 2013, the Group acquired 7% of the share capital of HIECO Limited for a consideration of 0.3 million.
Year ended 31 March 2012
Acquisition
On 30 June 2011, the Group acquired 100% of the issued share capital of Morehands Limited (trading as MH Foods Limited), a manufacturer
of branded low calorie spray oils and salad dressings. Initial cash consideration was 11.9 million, with further consideration of 1.6 million paid
in October 2011. The nal fair value of the identiable assets and liabilities of the business at the date of acquisition was:

Fair value
to Group
m
Book
value
m
Property, plant and equipment 0.5 0.5
Intangible asset Frylight brand 6.0
Inventories 0.6 0.6
Receivables 1.5 1.5
Cash 1.2 1.2
Payables (0.9) (0.9)
Current tax (0.5) (0.5)
Deferred tax (1.6) (0.1)
Net assets 6.8 2.3
Goodwill 6.7
13.5
Comprising:
Cash consideration 13.5
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29 Business combinations and disposals continued
The Frylight brand is estimated to have a useful economic life of 15 years and the amount capitalised as an intangible asset and related
deferred tax will be amortised over this period. This life is consistent with the 1525 year useful economic lives assumed on the acquisition of
St Hubert. Goodwill, representing the cost of acquisition less net identiable assets and liabilities assumed on acquisition, arises on
consolidation only and there is no amortisation or related tax deduction in the accounts of Dairy Crest Limited, the acquiring entity. Group
reported revenue and result would not be materially different had the acquisition occurred on 1 April 2011. Revenue and prot from the date of
acquisition to 31 March 2012 were 5.8 million and 1.3 million respectively. The Group incurred fees of 0.3 million in relation to this
acquisition which have been charged to administrative expenses in the income statement in the year ended 31 March 2012.
Goodwill of 6.7 million comprises certain intangible benets of the acquisition that could not be individually separated and reliably measured
due to their nature. These include the synergistic benets resulting from access to the wider groups sales channels, marketing expertise and
product development pipeline.
30 Financial risk management objectives and policies
The objective of the treasury function, which is accountable to the Board, is to manage the Groups and Companys nancial risk, secure
cost-effective funding for the Groups operations and to minimise the effects of uctuations in interest rates and exchange rates on the value of
the Groups and Companys nancial assets and liabilities, on reported protability and on cash ows.
The Groups principal nancial instruments comprise bank loans and overdrafts, loan notes, nance leases and cash and short-term deposits.
The main purpose of these nancial instruments is to raise nance for the Groups operations. The Group has various other nancial assets
and liabilities such as trade receivables and trade payables, which arise directly from its operations.
The Group also enters into derivative transactions; principally cross currency swaps and forward currency contracts. The purpose is to
manage the interest rate and currency risks arising from the Groups operations and its sources of nance. It is, and has been throughout 2012
and 2013, the Groups policy that no trading in nancial instruments shall be undertaken.
The main risks arising from the Groups nancial instruments are liquidity risk, interest rate risk, foreign currency risk, price risk and credit risk.
Information on how these risks arise is set out below, as are the objectives, policies and processes agreed by the Board for their management
and the methods used to measure each risk. Derivative instruments are used to change the economic characteristics of nancial instruments
in accordance with the Groups treasury policies. The Groups accounting policies in relation to derivatives are set out in the Accounting
Policies note.
Liquidity risk
The Groups objectives are:
to ensure that forecast peak net borrowings, plus a prudent operating headroom are covered by committed facilities which mature after
at least 12 months;
to ensure that prudent headroom versus bank and loan note covenant ratios are forecast for the next three years;
to maintain exibility of funding by employing diverse sources of funds (eg use of non-bank markets such as private placements); and
to avoid a concentration of facility maturities in any particular year.
The maturity analysis of Group borrowings is set out in Note 19. At 31 March 2013 the Groups total credit facilities amounted to 627.3 million
(2012: 640.5 million) excluding nance leases of 5.5 million (2012: 7.2 million) and the impact of cross-currency swaps on US Dollar and
Euro loan notes of 17.8 million (2012: 8.6 million). The facilities at 31 March 2013 and 2012 consisted of:
March 2013
170 million plus 150 million multi-currency revolving credit facility repayable at maturity in October 2016; and
loan notes totalling 330.4 million repayable between April 2013 and November 2021.
March 2012
170 million plus 150 million multi-currency revolving credit facility repayable at maturity in October 2016; and
loan notes totalling 345.5 million repayable between April 2013 and November 2021.
Undrawn revolving credit facilities at 31 March 2013 amounted to 297 million (2012: 223.8 million). Effective headroom including cash and
short term deposits amounted to 573.1 million (2012: 303.2 million).
On 4 April 2013 60 million of loan notes matured and on 18 April 2013 100 million of loan notes were repaid early. This reduced the loan
notes outstanding to 170 million. At the same time, the revolving credit facility was reduced by 60 million (51 million). Therefore total facilities
at 18 April 2013 amounted to 416 million.
The Group aims to mitigate liquidity risk by closely managing cash generation by its operating businesses and by monitoring performance to
budgets and forecasts. Capital investment is carefully controlled, with detailed authorisation limits in place up to Executive level and cash
payback criteria considered as part of the investment appraisal process. Short-term and long-term cash and debt forecasts are constantly
reviewed and there are regular treasury updates to the Executive highlighting facility headroom and net debt performance.
Day-to-day cash management utilises undrawn revolving credit facilities, overdraft facilities and occasionally short-term money market
deposits if there is excess cash.
Notes to the nancial statements continued
102 Dairy Crest Annual Report 2013
30 Financial risk management objectives and policies continued
Interest rate risk
The Groups exposure to the risk for changes in market interest rates relate primarily to the Groups long-term debt obligations with a oating
interest rate.
The Groups policy is to manage its interest cost using a mix of xed and variable rate debt. The Groups long-term strategy is to keep
between one third and three quarters of its borrowings at xed rates of interest in the medium term. To manage this mix in a cost-efcient
manner, the Group has issued xed coupon loan notes and also enters into interest rate swaps from time to time on a portion of its oating
bank borrowings, in which the Group agrees to exchange, at specied intervals, the difference between xed and variable rate interest
amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlying debt interest
cash ow obligations. In the short-term the proportion of xed and oating rate borrowings can go outside the long-term range.
At 31 March 2013, 100% of the Groups borrowings were at a xed rate of interest (2012: 83%). The proportion of xed interest borrowings is
higher than our long-term target, however following the maturity and repayment of loan notes referred to above, amounts drawn under
revolving credit facilities will increase in 2013/14 and the xed rate percentage of borrowings will fall. In the medium term we expect the xed
proportion of borrowings to return to the target range.
The Groups borrowing facilities require minimum interest cover of 3.0 times.
The Groups exposure to interest rate risk is shown (by way of a sensitivity analysis) in Note 31.
Foreign currency risk
Following the sale of St Hubert SAS, the Group has no signicant operations outside the UK. However it buys and sells a small amount of
goods in currencies other than Sterling. As a result the value of the Groups non-Sterling revenues, purchases, assets, liabilities and cash ows
can be affected by movements in exchange rates predominantly Euro/Sterling.
When the Group owned St Hubert, a Euro-denominated subsidiary, it mitigated the effect of its structural currency exposures by borrowing to
some extent in the same functional currency as the foreign operation into which it invested. Our policy was to hedge 100% of the inventories
and tangible xed assets and 33% of goodwill and intangible assets exposure through borrowings and/or cross-currency swaps in Euros. At
31 March 2012, all borrowings designated as a net investment hedge were done so on a pre-tax basis and no cross currency swaps were
utilised as part of the hedging relationship.
The majority of the Groups transactions are carried out in the relevant entitys functional currency and therefore transaction exposures are
limited. It can be seen in Note 16 that the only signicant non-Sterling debtors are in Dollars. The Group trades skimmed milk products and
bulk butter mainly to customers in Europe and Central and South America. The Group also exports its own skimmed milk products, bulk
butter and other branded products. The Groups policy requires foreign currency sales and purchases through Philpot Dairy Products Limited,
a subsidiary company, to be hedged by foreign exchange contracts once the transaction is committed so that the margin on the transaction
can be xed.
Currency exposures on other transactions, such as certain capital expenditure denominated in a foreign currency, are hedged following
approval of the project using forward foreign exchange contracts.
In 2006 and November 2011, the Group issued loan notes denominated in $US. At the same time, cross-currency swaps were implemented
to hedge the interest and principal repayment cash ows. These have the effect of xing the liability and coupon in Sterling. The principal
amount and interest and principal payment dates on these swaps match those on the loan notes exactly and all swaps are with counterparties
with strong credit ratings. There is no prot and loss exposure in relation to $US debts as any retranslation impact on the prot and loss
account is offset by reclassication of amounts from other comprehensive income into prot and loss.
In 2009, the Group entered into cross-currency swaps on 75 million of its loan notes denominated in Euros in order to hedge the future
interest and principal repayment cash ows. This has the effect of xing the liability and coupon on those notes in Sterling. The principal
amount and interest and principal payment dates on these swaps match those on the loan notes exactly and all swaps are with counterparties
with strong credit ratings. There is no prot and loss exposure in relation to this 75 million of debt as any retranslation impact on the prot and
loss account is offset by reclassication of amounts from other comprehensive income into prot and loss.
Price risk
The Group is exposed to price risk related to certain commodities and their by-products used by the Groups businesses. The principal
non-milk commodities that affect input prices for the Group are vegetable oils, gas, electricity, diesel, heavy fuel oil and crude oil by-products
(used in packaging).
The Group monitors prices on an ongoing basis in order to assess the impact that movements have on protability and to assess whether the
amount of forward cover is appropriate. This includes vegetable oil contracts and energy, which is generally contracted one season in
advance for both Summer and Winter energy but with some requirement contracted at more regular intervals.
The Group regularly reviews relevant commodity markets and levels of future cover. Fixed price contracts are only entered into with the
approval of the Commodity Risk Committee comprising senior operational and nance management and external advisers.
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Dairy Crest Annual Report 2013 103
30 Financial risk management objectives and policies continued
Credit risk
It is the Groups policy that all customers who wish to trade on credit terms are subject to credit verication procedures. The Group only offers
these terms to recognised, creditworthy third parties. In addition, receivables balances are monitored on an ongoing basis with the result that
the Groups history of bad debt losses is not signicant. In the year ended 31 March 2012 one customer, Quadra Foods Limited, went into
administration and the outstanding balance of 4.3 million was fully provided.
The Dairies doorstep business trades with individuals and receives cash payments on a weekly basis. Cash and debt management is a crucial
part of this business and cash collection and balances due are closely monitored to ensure write-downs are minimised.
Debtor days outstanding are closely monitored throughout the year and action is taken promptly when payment terms are breached.
With respect to credit risk arising from the other nancial assets of the Group, which comprise cash and cash equivalents, trade and other
debtors (excludes prepayments) and certain derivative instruments, the Groups exposure to credit risk arises from default of the counterparty.
The maximum exposure for the Group is equal to the carrying amount of these nancial assets of 395.5 million (2012: 223.5 million).
Following the sale of St Hubert the Group had signicant cash deposits and until those funds were utilised to repay loan notes and provide
one-off funding to the pension scheme in April 2013, no one nancial institution had deposits in excess of 60 million and all institutions
holding deposits were required to be rated A or above.
All borrowings are through banks with long-term credit ratings of A or above. Funds temporarily surplus to business requirements are invested
overnight through deposit accounts with mainstream UK commercial banks with a credit rating of A or better. The Group currently has no
requirement to place deposits for a longer period, accordingly counterparty risk is considered to be acceptable. Derivative nancial
instruments are contracted with a range of banks with long-term credit ratings of A or above to avoid excessive concentration of nancial
instruments with one counterparty.
Capital management
The primary objective of the Groups capital management is to ensure that it maintains an appropriate level of gearing in order to support its
business and maximise shareholder value. In addition, the Group monitors its forecast net debt to EBITDA ratios in order that they are
comfortably within its banking covenant requirements. The maximum net debt to EBITDA ratio for the purposes of bank covenants is 3.5
times. At 31 March 2013 the ratio of net debt to EBITDA was 0.6 times (March 2012: 2.2 times).
The Group monitors its capital structure and makes adjustments to it in the light of changes in economic conditions or changes in Group
structure. Possible mechanisms for changing capital structure include adjusting the level of dividends, issuance of new shares or returning
capital to shareholders. No signicant changes in capital structure have been implemented in the year ended 31 March 2013 or 2012.
The Group monitors capital using a gearing ratio, which is net debt divided by shareholders funds. The analysis of net debt is included in Note
33. The gearing ratio at March 2013 and 2012 can be analysed as follows:


2013
m
2012
m
Net debt 59.7 336.4
Shareholders funds 307.4 274.3
Gearing ratio 19% 123%
Dividends
Details of dividends paid and proposed during the year are given in Note 7. The dividend policy following the sale of St Hubert is to maintain a
progressive dividend whilst seeking to maintain a level of dividend cover between 1.5 and 2.5 times. The nal proposed dividend for 2012/13 is
15.0 pence up 0.3 pence from last year (2012: 14.7 pence). Total dividends paid and proposed in respect of the year ended 31 March 2013
amount to 20.7 pence (2012: 20.4 pence).
72236_Glasshouse_p70_p113.indd 103 04/06/2013 18:26
Notes to the nancial statements continued
104 Dairy Crest Annual Report 2013
31 Financial instruments
An explanation of the Groups nancial instrument risk management objectives, policies and strategies are set out in the discussion of Treasury
policies in Note 30.
Consolidated
Interest rate maturity prole of nancial assets and liabilities
The following table sets out the carrying amount, by maturity of the Groups nancial assets and liabilities that are exposed to interest rate risk.
No other nancial assets and liabilities, other than those shown below, are exposed directly to interest rate risk.
At 31 March 2013
< 1 year
m
>1 <2 years
m
>2 <3 years
m
>3 <4 years
m
>4 <5 years
m
> 5 years
m
Total
m
Fixed rate
Loan notes* (165.7) (26.0) (91.0) (11.8) (53.6) (348.1)
Finance leases (2.4) (3.1) (5.5)
Forward currency contracts (0.1) (0.1)
Deferred consideration 1.4 1.4
Cross currency swaps 7.4 12.9 (3.9) 16.4
Floating rate
Option to sell 20% holding in WCL 1.6 1.6
Cash at bank and in hand 276.1 276.1

At 31 March 2012
Fixed rate
Loan notes* (68.1) (92.3) (88.8) (96.3) (345.5)
Finance leases (2.7) (3.2) (1.3) (7.2)
Forward currency contracts 0.3 0.3
Deferred consideration 1.3 1.3
Cross currency swaps 5.9 (4.8) 9.1 (3.9) 6.3
Floating rate
Bank loans (71.7) (71.7)
Option to sell 20% holding in WCL 1.6 1.6
Cash at bank and in hand 79.4 79.4
* Classied as xed rate after taking into account the effect of interest rate swaps.
Interest on nancial instruments classied as oating rate is repriced at intervals of less than one year. Interest on nancial instruments
classied as xed rate is xed until the maturity of the instrument.
Interest rate risk
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the
Groups prot before tax through the impact on oating rate borrowings. There is no impact on the Groups equity resulting from movements
in interest rates other than in relation to the $US/GBP and EUR/GBP cross-currency swaps used as a cash ow hedge on $US and EUR loan
notes. The impact on equity is nil over the life of the instruments as these swaps comprise an effective hedge. At 31 March 2013 100% of
Group borrowings were at xed rates of interest (2012: 83%) (see Note 30).
The sensitivity analysis excludes all non-derivative xed rate nancial instruments carried at amortised cost but includes non-derivative oating
rate nancial instruments except those where interest rate swaps have been used as cash ow hedges. This is due to the fact that gains and
losses on the hedging instrument offset losses and gains on the non-derivative oating rate nancial instrument which are subject to the
hedge and are matched in both prot and loss and cash terms. No non-derivative xed rate nancial instruments have prot and loss exposure
due to oating rates as a result of interest rate swaps.
72236_Glasshouse_p70_p113.indd 104 04/06/2013 18:15
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Dairy Crest Annual Report 2013 105
31 Financial instruments continued
The 2013 analysis below reects lower reasonably possible changes in interest rates to 2012 upside LIBOR expectations assumed last year
were not realised and the assumption is that base rates will increase less than anticipated at March 2012.


Increase/
decrease in
basis points
Effect on
prot before
tax
m
Effect on
equity
m
2013
Sterling + 50
Dollar + 50
Sterling 50
Dollar 50
2012
Sterling + 200 1.0 1.3
Euro + 200 (0.8) 6.8
Dollar + 200 14.9
Sterling 50 (0.2) (0.3)
Euro 50 0.2 (1.7)
Dollar 50 (4.1)
Equity price risk
The Group holds no listed equity investments and is not subject to equity price risk other than through the pension scheme (Note 20).
Credit risk
There are no signicant concentrations of credit risk within the Group unless otherwise disclosed. The maximum credit risk exposure relating
to nancial assets is represented by carrying value as at the balance sheet date (see Note 30).
Foreign currency risk
Following the sale of St Hubert, the Group has no signicant foreign currency risk. In 2012 it had a foreign currency risk with Euros. The table
below demonstrates the sensitivity in 2012 to a reasonably possible change in Sterling/Euro exchange rate with all other variables held
constant, of the Groups prot before tax and the Groups equity.

Increase/
decrease in
Sterling/Euro rate
Effect on
prot before
tax
m
Effect on
equity*
m
2012
Euro Sterling depreciation 10% (0.5) (13.8)
Sterling appreciation + 10% 0.4 11.3
* Equity exposure resulted from the Groups net investment hedging arrangements (see Note 30).
Notes to the nancial statements continued
106 Dairy Crest Annual Report 2013
31 Financial instruments continued
Liquidity risk
The Groups policy on managing its liquidity risk is set out in Note 30.
The table below summarises the maturity prole of the Groups nancial liabilities at 31 March 2013 and 2012 based on contractual
undiscounted payments of interest and principal.
At 31 March 2013
< 1 year
m
>1 <2 years
m
>2 <3 years
m
>3 <4 years
m
>4 <5 years
m
> 5 years
m
Total
m
Loan Notes (174.7) (33.8) (7.9) (93.6) (13.8) (59.4) (383.2)
Cross-currency swaps (on loan notes):
payment leg (106.6) (33.3) (6.0) (72.6) (2.3) (60.5) (281.3)
receipt leg 114.2 32.7 6.7 83.0 2.0 59.4 298.0
Finance leases (2.5) (3.2) (5.7)
At 31 March 2012
Loan Notes (17.6) (81.8) (101.6) (9.4) (93.1) (104.2) (407.7)
Cross-currency swaps (on loan notes):
payment leg (12.8) (71.2) (6.1) (6.1) (73.7) (63.6) (233.5)
receipt leg 13.5 77.7 6.7 6.7 80.9 61.5 247.0
Bank loans (71.7) (71.7)
Finance leases (2.9) (3.3) (1.3) (7.5)
Forward currency contracts, and short-term payables all mature within one year.
Fair values of nancial assets and nancial liabilities
Set out below is a comparison by category of carrying amounts and fair values of all of the Groups nancial instruments that are carried in the
nancial statements.
Carrying amount Fair value

2013
m
2012
m
2013
m
2012
m
Financial assets
Current
Cash and cash equivalents (Note 18) 276.1 79.4 276.1 79.4
Forward currency contracts (Note 17) 0.3 0.3
Cross currency swaps (Note 17) 9.6 9.6
Non-current
Deferred consideration 1.4 1.3 1.4 1.3
Wexford Creamery Limited option (Note 17) 1.6 1.6 1.6 1.6
Cross currency swaps (Note 17) 12.9 15.0 12.9 15.0
Financial liabilities
Current
Current obligations under nance leases (Note 19) (2.4) (2.7) (2.4) (2.7)
Forward currency contracts (Note 19) (0.1) (0.1)
Cross currency swaps (Note 19) (2.2) (2.2)
Non-current
Non-current obligations under nance leases (Note 19) (3.1) (4.5) (3.1) (4.5)
Non-current instalments due on bank loans (Note 19) (71.7) (71.7)
Loan notes (Note 19) (348.1) (345.5) (355.2) (355.8)
Cross currency swaps (Note 19) (3.9) (8.7) (3.9) (8.7)
The above table excludes trade and other receivables and payables as their fair value approximates carrying value. The fair value of interest
rate swaps and forward currency contracts has been determined by the third party nancial institution with whom the Group holds the
instrument, in line with the market value of similar instruments. The fair value of borrowings has been calculated by discounting the expected
future cash ows at prevailing interest rates.
72236_Glasshouse_p70_p113.indd 106 04/06/2013 18:21
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Dairy Crest Annual Report 2013 107
31 Financial instruments continued
Cross currency swaps
The notional principal amount of the outstanding USD/GBP cross currency swap contracts at 31 March 2013 was $308.7 million (181.9
million) (2012: $318.0 million, 187.5 million). These cross currency swaps have both legs at xed interest rates, are designated as cash ow
hedges and meet the criteria for hedge accounting. At 31 March 2013 the xed interest rates varied from 3.863% to 5.315% (2012: 3.863% to
5.315%). The gain deferred in equity will reverse in the income statement (nance costs) during the next one to nine years (being the life of the
swaps).
The notional principal amount of the outstanding EUR/GBP cross currency swap contracts at 31 March 2013 was 75.0 million (67.0 million)
(2012: 75.0 million, 67.0 million). These cross currency swaps have both legs at xed interest rates, are designated as cash ow hedges and
meet the criteria for hedge accounting. At 31 March 2013 and 2012 the xed interest rates varied from 4.955% to 5.180%. The loss deferred in
equity will reverse in the income statement (nance costs) during the next year (being the life of the swaps).
Hedge of net investment in foreign entities
Until 28 August 2012, the Group had Euro denominated borrowings which it designated as a hedge of the net asset investment in St Hubert SAS,
its subsidiary in France. The fair value of the Euro borrowings at 31 March 2012 was 124.2 million. A foreign exchange gain of 6.0 million (2012:
7.7 million) on translation of the borrowings into Sterling to 28 August 2012 has been recognised in other comprehensive income.
Forward currency contracts
The Group has entered into certain forward currency contracts in order to hedge the Sterling cost of currency-denominated future purchases
and receipts. These forward currency purchases have been designated cash ow hedges and meet the criteria for hedge accounting. They all
have a duration of less than one year and any gains or losses deferred will then be reclassied to the income statement (operating costs).
Borrowing facilities
The Group has undrawn committed long-term borrowing facilities available at 31 March 2013 of 297 million (2012: 223.8 million) in respect
of which all conditions precedent had been met at that date. In April 2013, 51 million of the facilities were cancelled (see Note 34). Undrawn
facilities expire in October 2016.
Company
Interest rate maturity prole of nancial assets and liabilities
The following table sets out the carrying amount, by maturity of the Companys nancial assets and liabilities that are exposed to interest rate
risk. No other nancial assets and liabilities, other than those shown below, are exposed directly to interest rate risk.
At 31 March 2013
< 1 year
m
>1 <2 years
m
>2 <3 years
m
>3 <4 years
m
>4 <5 years
m
> 5 years
m
Total
m
Fixed rate
Loan notes (165.7) (26.0) (91.0) (11.8) (53.6) (348.1)
Intercompany receivables 218.7 218.7
Cross currency swaps 7.4 12.9 (3.9) 16.4
Floating rate
Cash at bank and in hand 14.8 14.8
Intercompany payables (49.4) (49.4)

At 31 March 2012
Fixed rate
Loan notes (68.1) (92.3) (88.8) (96.3) (345.5)
Intercompany receivables 268.0 268.0
Cross currency swaps 5.9 (4.8) 9.1 (3.9) 6.3
Floating rate
Bank loans (61.7) (61.7)
Intercompany payables (49.2) (49.2)
Interest rate risk
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the
Companys prot before tax through the impact on oating rate borrowings. There is no impact on the Companys equity resulting from
movements in interest rates other than in relation to the $US/GBP and EUR/GBP cross-currency swaps used as a cash ow hedge on $US
and EUR loan notes. The impact on equity is nil over the life of the instruments as these swaps comprise an effective hedge.
72236_Glasshouse_p70_p113.indd 107 04/06/2013 18:25
Notes to the nancial statements continued
108 Dairy Crest Annual Report 2013
31 Financial instruments continued
The sensitivity analysis excludes all non-derivative xed rate nancial instruments carried at amortised cost but includes non-derivative oating
rate nancial instruments except those where interest rate swaps have been used as cash ow hedges. This is due to the fact that gains and
losses on the hedging instrument offset losses and gains on the non-derivative oating rate nancial instrument which are subject to the
hedge are matched in both prot and loss and cash terms. No non-derivative xed rate nancial instruments have prot and loss exposure
due to oating rates as a result of interest rate swaps.
The 2013 analysis below reects lower reasonably possible changes in interest rates to 2012 upside LIBOR expectations assumed last year
were not realised and the assumption is that base rates will increase less than anticipated at March 2012.

Increase/
decrease in
basis points
Effect on
equity
m
2013
Sterling + 50
Dollar + 50
Sterling 50
Dollar 50
2012
Sterling + 200 1.3
Euro + 200 6.8
Dollar + 200 14.9
Sterling 50 (0.3)
Euro 50 (1.7)
Dollar 50 (4.1)
Equity price risk
The Company holds no listed equity investments and is not subject to equity price risk.
Credit risk
The maximum exposure to credit risk is the carrying amount of nancial assets.
Foreign currency risk
The following table demonstrates the sensitivity to a reasonably possible change in Sterling/Euro exchange rate with all other variables held
constant, of the Companys prot before tax and the Companys equity.

Increase/
decrease in
Euro rate
Effect on
prot before
tax
Effect on
equity
m
2013
Euro Sterling depreciation 10%
Sterling appreciation + 10%
2012
Euro Sterling depreciation 10%
Sterling appreciation + 10%
The Company has no signicant foreign currency liabilities other than Euros. Euro borrowings are matched by inter-company cross currency
swaps with no resultant prot before tax or equity exposure for the Company.
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Dairy Crest Annual Report 2013 109
31 Financial instruments continued
Liquidity risk
The Companys policy on managing its liquidity risk is set out in Note 30.
The table below summarises the maturity prole of the Companys nancial liabilities at 31 March 2013 and 2012 based on contractual
undiscounted payments of interest and principal.
At 31 March 2013
< 1 year
m
>1 <2 years
m
>2 <3 years
m
>3 <4 years
m
>4 <5 years
m
> 5 years
m
Total
m
Loan Notes (174.7) (33.8) (7.9) (93.6) (13.8) (59.4) (383.2)
Cross-currency swaps (on loan notes):
payment leg (106.6) (33.3) (6.0) (72.6) (2.3) (60.5) (281.3)
receipt leg 114.2 32.7 6.7 83.0 2.0 59.4 298.0
At 31 March 2012
Loan Notes (17.6) (81.8) (101.6) (9.4) (93.1) (104.2) (407.7)
Cross-currency swaps (on loan notes):
payment leg (12.8) (71.2) (6.1) (6.1) (73.7) (63.6) (233.5)
receipt leg 13.5 77.7 6.7 6.7 80.9 61.5 247.0
Intra-group cross currency swaps:
payment leg (126.3) (126.3)
receipt leg 126.3 126.3
Bank loans (61.7) (61.7)
Forward currency contracts, and short-term payables and accruals all mature within one year.
Fair values of nancial assets and nancial liabilities
Set out below is a comparison by category of carrying amounts and fair values of all of the Companys nancial instruments that are carried in
the nancial statements.
Carrying amount Fair value

2013
m
2012
m
2013
m
2012
m
Financial assets
Current
Cash and cash equivalents (Note 18) 14.8 14.8
Other receivables (Note 16) 169.3 218.8 169.3 218.8
External cross currency swaps (Note 17) 9.6 9.6
Non-current
External cross currency swaps (Note 17) 12.9 15.0 12.9 15.0
Financial liabilities
Current
External cross currency swaps (Note 19) (2.2) (2.2)
Non-current
Non-current instalments due on bank loans (Note 19) (61.7) (61.7)
Loan notes (Note 19) (348.1) (345.5) (355.2) (355.8)
External cross currency swaps (Note 19) (3.9) (8.7) (3.9) (8.7)
No other nancial assets and liabilities are exposed directly to interest rate risk
Other receivables comprise the net of all intercompany balances with Dairy Crest Limited. All intercompany balances are repayable on
demand and are subject to interest based on LIBOR plus a margin with the exception of one intercompany receivable from Dairy Crest Limited
of 277.1 million (2012: 263.6 million) on which interest is receivable at 5.0% (2012: 5.0%).
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Notes to the nancial statements continued
110 Dairy Crest Annual Report 2013
31 Financial instruments continued
Cross currency swaps
External
The notional principal amount of the outstanding USD/GBP cross currency swap contracts at 31 March 2013 was $308.7 million (181.9 million)
(2012: $318.0 million, 187.5 million). These cross currency swaps have both legs at xed interest rates, are designated as cash ow hedges and
meet the criteria for hedge accounting. At 31 March 2013 the xed interest rates varied from 3.863% to 5.315% (2012: 3.863% to 5.315%). The
gain deferred in equity will reverse in the income statement (nance costs) during the next one to nine years (being the life of the swaps).
The notional principal amount of the outstanding EUR/GBP cross currency swap contracts at 31 March 2013 was 75.0 million (67.0 million)
(2012: 75.0 million, 67.0 million). These cross currency swaps have both legs at xed interest rates, are designated as cash ow hedges and
meet the criteria for hedge accounting. At 31 March 2013 and 2012 the xed interest rates varied from 4.955% to 5.180%. The loss deferred in
equity will reverse in the income statement (nance costs) during the next year (being the life of the swaps).
Intercompany
The notional principal amount of the outstanding EUR/GBP oating rate cross currency swap contracts at 31 March 2013 with Group
companies was nil (nil) (2012: 150.0 million (125.0 million)). The Company received EURIBOR and pays LIBOR. Intercompany cross
currency swaps were not designated as cash ow hedges and any gain or loss arising on revaluation was credited or charged to the income
statement. These swaps were used in order to minimise currency exchange risk in the Company and match the external Euro-denominated
borrowings at 31 March 2012 of 149 million.
Borrowing facilities
The Company has undrawn committed long-term borrowing facilities available at 31 March 2013 of 297 million (2012: 224 million) in respect
of which all conditions precedent had been met at that date. These undrawn facilities expire in October 2016
32 Cash ow from operating activities

Year ended
31 March
2013
m
Year ended
31 March
2012
m
Loss before taxation continuing operations (0.4) (41.7)
Prot before taxation discontinued operations 62.7 31.6
Remove pre-tax prot on disposal of business (51.4)
Finance costs and other nance income continuing operations 21.5 15.6
Finance costs and other nance income discontinued operations (0.1) (0.1)
Share of associates net loss 0.3
Prot on operations 32.3 5.7
Depreciation 29.0 30.9
Amortisation of internally generated intangible assets 3.4 3.2
Amortisation of acquired intangible assets 3.4 9.1
Exceptional items 17.9 80.2
Release of grants (0.9) (0.6)
Share based payments 1.9 2.4
Prot on disposal of depots (7.7) (4.6)
Prot on disposal of plant and equipment (0.2)
Difference between pension contributions paid and amounts recognised in the income statement (20.2) (21.0)
Increase in inventories (25.0) (23.9)
Decrease in receivables 18.7 9.4
Decrease in payables (33.7) (6.1)
Cash generated from operations 19.1 84.5
No cash was generated from operations for the Company in the year ended 31 March 2013 (2012: nil).
72236_Glasshouse_p70_p113.indd 110 04/06/2013 18:26
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33 Analysis of net debt
Group

At 1 April
2012
m
Cash
ow
m
Non-cash
movement
m
Exchange
movement
m
At 31 March
2013
m
Cash and cash equivalents 79.4 192.8 3.9 276.1
Borrowings (current) (165.7) (165.7)
Borrowings (non-current) (417.2) 76.2 165.7 (7.1) (182.4)
Finance leases (7.2) 1.7 (5.5)
Debt issuance costs 2.7 (0.9) 1.8
(342.3) 270.7 (0.9) (3.2) (75.7)
Debt issuance costs excluded (2.7) 0.9 (1.8)
Impact of cross-currency swaps * 8.6 9.2 17.8
Net debt (336.4) 270.7 6.0 (59.7)

At 1 April
2011
m
Cash
ow
m
Non-cash
movement
m
Exchange
movement
m
At 31 March
2012
m
Cash and cash equivalents 49.9 29.6 (0.1) 79.4
Borrowings (current) (65.5) 63.7 1.8
Borrowings (non-current) (298.2) (128.1) 9.1 (417.2)
Finance leases (9.6) 2.4 (7.2)
Debt issuance costs 3.0 (0.3) 2.7
(323.4) (29.4) (0.3) 10.8 (342.3)
Debt issuance costs excluded (3.0) 0.3 (2.7)
Impact of cross-currency swaps * 11.8 (3.2) 8.6
Net debt (311.6) (32.4) 7.6 (336.4)
* The Group and Company have $308.2 million and 75 million of loan notes against which cross-currency swaps have been put in place to x interest and principal
repayments in Sterling (2012: $318 million and 75 million). Under IFRS, currency borrowings are retranslated into Sterling at year end exchange rates. The cross-
currency swaps are recorded at fair value (Note 31) and incorporate movements in both market exchange rates and interest rates. The Group denes net debt so as
to include the effective Sterling liability where cross-currency swaps have been used to convert foreign currency borrowings into Sterling. The 17.8 million adjustment
included above (2012: 8.6 million) converts the Sterling equivalent of Dollar and Euro loan notes from year end exchange rates (266.7 million (2012: 263.1 million)) to
the xed Sterling liability (248.9 million (2012: 254.5 million)).
Company
At 1 April
2012
m
Cash
ow
m
Exchange
movement
m
At 31 March
2013
m
Cash and cash equivalents 13.7 1.1 14.8
Borrowings (current) (165.7) (165.7)
Borrowings (non-current) (407.2) 229.1 (4.3) (182.4)
(407.2) 77.1 (3.2) (333.3)
Borrowings (non-current) impact of cross-currency swaps 8.6 9.2 17.8
(398.6) 77.1 6.0 (315.5)

At 1 April
2011
m
Cash
ow
m
Exchange
movement
m
At 31 March
2012
m
Borrowings (current) (65.5) 63.7 1.8
Borrowings (non-current) (298.2) (118.1) 9.1 (407.2)
(363.7) (54.4) 10.9 (407.2)
Borrowings (non-current) impact of cross-currency swaps 11.8 (3.2) 8.6
(351.9) (54.4) 7.7 (398.6)
72236_Glasshouse_p70_p113.indd 111 04/06/2013 18:36
Notes to the nancial statements continued
112 Dairy Crest Annual Report 2013
34 Post balance sheet events
On 18 April 2013 the Group repaid 106.9 million (92.7 million) and 7.2 million of 2007 notes at a premium of 8.7 million. 69.2 million of
these notes were due for repayment in April 2014 and 30.7 million were due for repayment in April 2017. On this date the Group paid 40.0
million to the Dairy Crest Group Pension Fund and it granted the Trustee of the Fund a oating charge over maturing cheese inventories with a
maximum realisable value of 60 million. Furthermore the ve-year multi-currency revolving credit facility dated October 2011 was reduced by
60 million (51 million).
35 Corporate information
The consolidated accounts of Dairy Crest Group plc for the year ended 31 March 2013 were authorised for issue in accordance with a
resolution of the Directors on 22 May 2013 and the consolidated and Company balance sheets were signed on the Boards behalf by
Mr M Allen and Mr A Murray. Dairy Crest Group plc is a limited company incorporated in England and Wales and domiciled in the
United Kingdom whose shares are publicly traded on the London Stock Exchange.
72236_Glasshouse_p70_p113.indd 112 04/06/2013 18:14
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Consolidated income statement summary continuing operations
2009
m
2010
m
2011
m
2012
m
2013
m
Segment revenue
Cheese 244.2 260.0 223.1 229.6 231.3
Spreads 192.0 178.6 183.2 211.3 194.5
Dairies 1,108.2 1,081.2 1,089.8 1,069.0 951.6
Other 11.0 10.8 6.1 4.8 4.2
Group 1,555.4 1,530.6 1,502.2 1,514.7 1,381.6
Segment prot
Cheese 34.3 16.9 28.0 35.5 33.3
Spreads 29.5 19.5 18.6 23.2 25.7
Dairies 7.9 34.9 27.1 10.2 10.3
Associates & joint ventures 7.3 0.1 (0.2) (0.3)
Group including share of joint ventures 79.0 71.4 73.5 68.6 69.3
Less: share of associates & joint ventures (7.3) (0.1) 0.2 0.3
Group 71.7 71.3 73.7 68.9 69.3
Amortisation of acquired intangibles (1.6) (0.8) (0.3) (0.8) (0.4)
Exceptional items (24.0) 2.0 (1.1) (93.9) (56.5)
Prot on disposal of joint venture 50.4 2.0
Finance costs (29.5) (22.4) (20.6) (21.1) (18.7)
Other nance income/(charges) pensions 6.9 (0.5) 5.5 5.9
Share of associates and joint ventures net prot/(loss) 7.3 0.1 (0.2) (0.3)
Prot/(loss) before tax 81.2 51.7 51.5 (41.7) (0.4)
Adjusted prot before tax 49.5 49.0 52.9 47.5 50.6
Balance sheet summary
Property, plant & equipment, goodwill and intangibles, investments 837.1 794.4 800.6 713.9 375.9
Inventories, receivables, payables, deferred income and provisions 86.8 43.7 21.9 45.8 74.1
Total operating assets 923.9 838.1 822.5 759.7 450.0
Financial instruments excluding amounts included in net debt 4.2 0.9 5.0 0.9 1.5
Tax (92.0) (70.3) (90.3) (70.1) (17.2)
Retirement obligations (63.3) (142.4) (60.1) (79.8) (67.2)
Disposal group held for sale (excluding cash) 3.7
Net debt (415.8) (337.2) (311.6) (336.4) (59.7)
Net assets 357.0 292.8 365.5 274.3 307.4
Non-controlling interests (4.7) (3.0)
Shareholders equity 352.3 289.8 365.5 274.3 307.4
Cash ow summary
Generated from operating activities 129.1 145.9 128.1 84.5 19.1
Dividends from joint ventures 2.9 0.1
Fixed asset investments (net of grants) (49.3) (26.9) (48.5) (53.1) (46.0)
82.7 119.1 79.6 31.4 (26.9)
Interest paid (30.3) (22.1) (19.8) (23.6) (18.0)
Taxation paid (9.2) (10.5) (16.1) (14.1) (4.7)
Dividends paid (32.3) (24.3) (25.4) (26.5) (27.4)
Purchase of businesses (1.3) (1.9) (0.1) (12.3) (0.6)
Other items (principally asset disposals) 49.4 18.3 7.4 20.3 354.3
Movement in net debt 59.0 78.6 25.6 (24.8) 276.7
Basic earnings/(loss) per share from continuing operations (pence) 45.9 27.7 30.1 (29.1)
Adjusted basic earnings per share from continuing operations (pence)* 30.0 27.4 29.9 28.9 29.9
* Adjusted basic earnings per share excludes exceptional items, amortisation of acquired intangibles and pension interest
Group nancial history
114 Dairy Crest Annual Report 2013
Shareholders information
Company Registrar and shareholder enquiries
If you have administrative enquiries concerning your shareholdings
in the Company, such as the loss of share certicates, change of
address, dividend payment arrangements, amalgamation of
accounts, please contact the Companys registrar by writing to,
Capita Registrars, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU or by telephone on (UK) 0871 664 9266.
(Calls cost 10p per minute plus network extras). Lines are open
9.00am to 5.30pm Monday to Friday. From overseas please call
+44 800 181 4706.
Capita also provides online facilities for shareholders to check their
holdings and update their details. Registering is easy, and there is no
fee involved, simply access www.dairycrestshares.com
Payment of dividends
Shareholders may arrange to have their dividends paid directly into a
bank or building society account using the Bankers Automated
Clearing System (BACS). Bank mandate forms are available from
Capita whose details appear above or you can register your
mandate details online at www.dairycrestshares.com
Low cost share dealing service
If you do not have share dealing arrangements in place, Dairy Crest
has a low cost share dealing service arranged by Capita Share
Dealing Services. Shareholders wishing to use the service should
either visit the Capita Share Dealing website at www.capitadeal.com
or call 0871 664 0445. (Calls cost 10p per minute plus network
extras). From overseas please call +44 203 367 2686. Lines are
open 8.00am to 4.30pm Monday to Friday.
Gifting shares to charity
Shareholders who have a small holding of shares on the register
whereby their value makes them uneconomic to sell, may donate
these shares to charity under the Sharegift Scheme administered
by the Orr Mackintosh Foundation a registered charity. Information
can be found at www.sharegift.org Telephone: 020 7930 3737.
General information
General information about Dairy Crest can be found on our
corporate website, www.dairycrest.co.uk
Investors who have questions relating to the Groups business
activities should contact:
Investor Relations, Dairy Crest Group plc, Claygate House,
Littleworth Road, Esher, Surrey KT10 9PN.
Telephone: 01372 472200
e-mail: investorrelations@dairycrest.co.uk
Financial calendar
Dividends Final
Ex-dividend Wednesday 26 June 2013
Record date Friday 28 June 2013
Payment date Thursday 1 August 2013
Group results (Anticipated)
Half Year (Interims) November 2013
Preliminary Announcement
of 2013/14 results May 2014
2013/14 Report and Accounts
circulation June 2014
Analysis of ordinary shareholders at 21 May 2013
Holders
Number % Shares %
Category
Individuals and other holders 18,117 87.50 30,415,305 22.26
Insurance companies, pension funds, banks,
nominees and limited companies 2,589 12.50 106,192,826 77.74
20,706 100.00 136,608,131 100.00
Size of holdings
Up to 5,000 shares 19,105 92.27 25,964,287 19.01
5,001 20,000 shares 1,351 6.52 10,175,572 7.45
20,001 100,000 shares 133 0.64 5,881,588 4.30
Over 100,000 shares 117 0.57 94,586,684 69.24
20,706 100.00 136,608,131 100.00
72236_Glasshouse_p114.indd 114 04/06/2013 18:33
This report is printed on Hello Silk paper.
This paper has been independently certified as meeting
the standards of the Forest Stewardship Council

(FSC)
and was manufactured at a mill that is certified to the
ISO14001 and EMAS environmental standards.
The inks used are all vegetable based.
Printed at Pureprint.
Designed and produced by Tor Pettersen & Partners.
Photographic direction by Hudson Wright Associates.
Board photography by Ed Hill.
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Dairy Crest Group plc
Annual Report 2013
Dairy Crest Group plc
Claygate House
Littleworth Road
Esher
Surrey KT10 9PN
Company No: 3162897
Visit our website at
www.dairycrest.co.uk
http://www.dairycrest.co.uk/investors/
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