Dairy Crest Group plc Preliminary Results 2001
Audited results for the year ended 31 March 2001

Chief Executive's review

I am also pleased to confirm that we are on target to achieve the identified £11 million synergies in 2001/02 and the annual £25 million from 2002/03 identified at the time of the acquisition.

Our strategy to establish Dairy Crest as the UK's leading branded and added value dairy company, whilst being the lowest cost operator in commodity processing, continues to generate attractive growth and provides confidence for future development. During the year the Group's brands, Clover, Cathedral City, Frijj and the Yoplait brands have all strengthened their position as leading brands performing ahead of their market sectors.

The operating financial results for the year to March 2001 reflect the material impact of the acquisition of Unigate's dairy and cheese business in July 2000. Group turnover, including the share of the joint ventures' turnover, has increased by 65% to £1.3 billion and Group operating profit, before operating exceptional items and goodwill amortisation, has increased by 57% to £73.8 million.

The Group's adjusted profit before tax was £57.0 million compared with £44.3 million last year and adjusted earnings per share increased to 35.4 pence from 29.1 pence. The directors recommend a final dividend of 9.6 pence increasing the total dividend for the year by over 8% to 14.1 pence.

The acquisition of Unigate's dairy and cheese business has enabled Dairy Crest to pursue aggressively its objective to achieve sustainable competitive advantage and industry leading efficiency standards across its operations. Our commitment to achieve the highest levels of efficiency is underlined by our £54 million investment to create what we believe will be the two largest and most efficient "super dairies" in the UK, at Severnside (£39 million) and Chadwell Heath (£15 million).

The breadth of Dairy Crest's activities has been fundamental to helping the Group deliver these results against a backdrop where the dairy sector has seen the impact of excess competitive capacity in liquid milk as the industry enters the final phase of reconstruction. Inevitably trading conditions in individual markets become increasingly challenging, but our confidence in the business is underpinned by the fact that Dairy Crest is a broadly based dairy company with leading positions in every dairy sector - cheese, fresh dairy products, ingredients, liquid milk and spreads - and has important partnerships with all major retailers.

The year 2000/01 has been the first year since industry deregulation that the UK raw milk production has been below quota. Appreciating the considerable difficulties this has brought to dairy farmers and acknowledging the critical role that milk producers have to play to help to deliver a profitable and healthy future for the industry, prices to farmers have increased significantly since October 2000. We are working increasingly closely with our direct milk producers and the leading dairy co-ops to identify areas such as the reduction in milk collection costs, which will help to deliver much needed enhanced returns. As a result of recent difficulties, we anticipate that milk supply in 2001/02 may again fall short of quota. However, we believe Dairy Crest will secure sufficient milk to serve its customers in its chosen markets as well as deliver its financial objectives.

Prospects

Our leading brands continue to perform well and we derive material competitive advantage from our position as the UK's only broadly based dairy company. The synergies arising from the Unigate acquisition are being delivered in full and on time. We have made a good start to the year and we remain confident that Dairy Crest will continue to deliver the expected attractive financial performance necessary to drive enhanced shareholder returns.