11 November 2010
Dairy Crest Group plc (“Dairy Crest”)
Interim Results Announcement
Dairy Crest, the UK’s leading dairy company, today announces its unaudited results for the six months ended 30 September 2010:
Half year ended 30 September
Financial Highlights:
Revenue:
Profit before tax:
Adjusted profit before tax *:
2010
£776.9m
£36.1m
£40.1m
2009
£803.7m
£34.0m
£38.1m
Basic earnings per share:
Adjusted basic earnings per share *:
19.8p
21.4p
£335.5m
18.6p
20.1p
£380.4m
Half year net debt:
Interim dividend: 5.5p 5.3p
* before exceptional items, amortisation of acquired intangibles and pension interest.
A good first half
Change
-3%
+6%
+5%
+6%
+6%
-12%
+4%

Increased first half profits - benefiting from being a broadly based business
adjusted profit before tax up 5%
higher profits in Cheese more than offset anticipated reduced profits in Dairies

Ongoing brand sales growth
key brands up 5%
lighter variants up 13%

Increased sales of fresh milk to major retailers
new contracts secured despite competitive market
these reflect continued improvements in quality, service and cost base

Reduced debt
ongoing strong cashflow – cash generated from operations £51.8 million
net debt down £155 million in two years

Mark Allen, Chief Executive, said:
“Dairy Crest has enjoyed another good six months. In line with our strategy, we have continued to grow our brands, reduce our costs and control our debt. At the same time the improvements we have made to our quality, service and cost base have paid off with new contracts to supply fresh milk to major retailers.
Our strategy has proved successful in the challenging economic environment and positions us to deliver further value going forward. With operational efficiencies and selling price increases in certain categories limiting the impact of higher input costs, we are confident that we can continue to deliver profits in line with our expectations.”
For further information:
Dairy Crest Group plc
Arthur Reeves
Brunswick
Simon Sporborg
01372 472236
020 7404 5959
There will be a presentation for analysts at 09.30 am today (11 th November 2010) at The Lincoln Centre, 18
Lincoln’s Inn Fields, London WC2A 3ED.

Overview
Dairy Crest has performed well during the first six months of the year. This performance demonstrates the benefits of being a broadly based dairy business with strong brands.
Higher sales of our five key brands and of milk to major retailers have been offset by lower sales of milk to the doorstep and middle ground. Excluding the effects of the disposal of our majority stake in Wexford
Creamery Limited, Group revenue was broadly unchanged. The Group reported half-year revenue of
£776.9 million, down 3% on £803.7 million in the comparable period last year.
Adjusted profit before tax (before exceptional items, amortisation of acquired intangibles and pension interest) was up 5% to £40.1 million from £38.1 million in the comparable period last year. Reported profit before tax was up 6% to £36.1 million from £34.0 million.
Half year net debt fell by 12% to £335.5 million compared to 30 September 2009 and was lower than at 31
March 2010 despite the usual seasonal working capital outflow as cheese stocks increase.
The Group’s five key brands (Cathedral City, Country Life, St Hubert Omega 3, Clover and FRijj) have grown sales by 5% compared to the first half of last year.
In the competitive liquid milk market, improvements that we have made to our quality, service and cost base have allowed us to increase our sales of fresh milk to major retailers.
We have continued to deliver operational efficiencies in line with our expectations and have achieved selling price increases in certain categories to limit the impact of higher input costs.
Operating Review
Vision and Strategy
Dairy Crest is a broadly based dairy business. We have a strong vision based around pride in our heritage and links to the countryside; understanding the consumer; innovation; and a commitment to act responsibly.
Our strategy is to grow added value sales, reduce our costs, minimise risk and progressively strengthen the balance sheet.

Growing added value sales- continuing growth of our five key brands
In total our key brands have grown sales in the period by 5% against challenging comparatives, despite FRijj slipping back slightly. Details are as follows:
Brand
(market)
Dairy Crest
Growth
(1)
Market
Growth
(2)
Highlights
Cathedral City
(UK retail cheese)
+4% +1% Strong growth in volumes of Extra
Mature and Mild variants
Clover
(UK retail butter, spreads and margarine)
Country Life
(UK retail butter, spreads and margarine)
+10%
+2%
+5% Strong volume growth
+5% Significant price increases held back volumes in Q1, but stronger Q2 performance
St Hubert Omega 3
(French retail non-butter spreads)
FRijj
(UK retail fresh flavoured milk)
+7%
-1%
0% A strong H1, increasing market share
+2% Volumes held back during commissioning of new production equipment
1.
Dairy Crest (value) sales 6 months to 30 September 2010 compared to 6 months to 30 September 2009.
2. AC Nielsen and TNS data for 26 weeks to 2 October 2010 v 26 weeks to 3 October 2009, IRI data 26 weeks to 17
October 2010 v 26 weeks to 17 October 2009.
In line with our strategy to provide consistent support to our key brands, we increased media expenditure compared to the first half of 2009/10. Sales on promotion have also remained high in the period, although slightly below those seen in the comparable period last year.
Growing added value sales - higher fresh milk sales to major retailers
In a challenging liquid milk market, Dairy Crest has gained volumes as a result of changes in the supply arrangements of fresh milk to the major retailers. As previously announced, Dairy Crest has renewed long term contracts with Sainsbur y’s and Morrisons. We have also been successful in gaining a share of Tesco’s fresh milk business, with supply commencing in December 2010. We now have agreements to supply fresh milk in polybottles to six out of the seven major UK retailers, reflecting the improvements we have made to our quality, service and cost base. Our innovative patented milk jug, Jugit, continues to gain distribution.
However, increased national milk supply in the period has resulted in a more difficult middle ground sector and we have reduced sales in this area as customer profitability has declined.

Growing added value sales – further progress with milk&more
We continue to make progress with milk&more. Important improvements to our systems which will increase customer capacity, enhance our promotional capability and deliver consumer behavioural analysis, are now almost complete. Average weekly milk&more sales in September 2010, less than a year since the service was launched nationally, were close to £800k. Although overall doorstep milk sales declined by 7% in the six month period compared to the six months ended 30 September 2009, the progress made with milk&more resulted in twelve of our 123 depots recording higher total doorstep sales in September 2010 than in September 2009, with a further twenty showing decline in total sales of less than 2%.
Cutting costs – delivering efficiency improvements
We are making good progress with the major project to simplify and centralise the administration in our depot network. This project will provide substantial savings going forward but will result in some exceptional costs in this year and next. Other cost reduction initiatives, including cost savings at our UK Spreads manufacturing sites, are progressing to plan.
We continue to expect to deliver annual cost savings of around £20 million this year.
The planned investment in our liquid milk dairies is also progressing well and should deliver benefits in line with our expectations.
Some of the savings that we are generating will help offset higher milk and other input costs. For example we have increased the price we pay our direct milk suppliers by between 0.4ppl and 1.25ppl since 1 April
2010. We have also been successful in achieving selling price increases in certain categories to limit the impact of higher input costs.
We remain committed to reducing our costs further next year and plans to do this are in hand.
Acting responsibly
Dairy Crest is a responsible business and we continue to demonstrate our commitment to Corporate
Responsibility. Notable successes in the period came from increased sales of lighter (reduced fat) brands and Jugit, our environmentally friendly milk jug. We were also delighted to be the first UK dairy company to be named in the prestigious Carbon Disclosure Leadership Index and to be ranked as the 4th best company in the Consumer Staples category behind three FTSE 100 companies. Looking forward, the new biomass boilers that we are installing at our Davidstow creamery will reduce carbon emissions significantly next year.

Financial Review
The Group achieved halfyear revenue of £776.9 million, down 3% on the comparable period last year.
Increased sales of our five key brands have been offset by lower sales of doorstep and middle ground milk and lower revenues following the sale of our controlling interest in Wexford Creamery Limited.
Reported profit on operations (before exceptional items) increased 4% to £46.3 million (2009: £44.5 million).
Exceptional costs included in profit on operations amounted to £1.6 million (2009: £0.5 million) and represent costs associated with the rationalisation of administration in our depot network. Reported profit on operations as up 2% at £44.7 million.
Summarised Segmental Performance
6 months ended 30 September
Cheese
2010
Revenue
£m
108.9
2009
Revenue
£m
131.8
2010
Profit*
£m
12.5
2009
Profit*
£m
7.9
Spreads
Dairies
Other/Associates/Joint Ventures
134.7
529.7
3.6
137.9
528.7
5.3
27.2
10.9
-
27.0
14.3
0.1
Total 776.9 803.7 50.6 49.3
*Profit on operations plus share of associates and joint ventures, before amortisation of acquired intangibles of £4.3 million (2009: £4.7 million) and exceptional items.
Cheese
Revenues of £108.9 million are £22.9 million below last year albeit this is principally due to the sale of our controlling interest in Wexford Creamery Limited on 12 June 2010. From this date our remaining 30% stake in this business is no longer fully consolidated in the Group’s financial statements. Profits have increased by
£4.6 million to £12.5 million driven by robust Cathedral City volumes and improved whey realisations.
Spreads
Revenues of £134.7 million have remained broadly stable with strong performances from our three key brands Clover, St Hubert Omega 3 and Country Life being offset by weaker Utterly Butterly volumes and revenues following distribution losses last year. Profits are marginally higher, up £0.2 million at £27.2 million, as we have succeeded in reducing our cost base and recovering inflation across cream and vegetable oils in the marketplace. We remain particularly pleased that our French business St Hubert continues to perform ahead of our expectations.

Dairies
Dairies revenues of £529.7 million are broadly in line with last year as volume gains with major retail have been offset by revenue declines in the competitive middle ground sector and ongoing doorstep decline.
Profits of £10.9 million are £3.4 million below last year although there were no property profits from the sale of depots in the first half (2009: £2.3 million). Underlying margins are down as a result of increased milk and other input costs and competitive pressure on realisations; however we continue to focus on cost efficiencies and have increased capital investment in infrastructure to reduce processing costs further in the future.
Finance costs of £10.5 million were down 6% on the comparable period in 2009 reflecting lower borrowing levels. Other finance expense from the Group’s pension scheme under IAS19 was £nil (2009: £0.2 million) reflecting the position of the scheme and financial assumptions at the beginning of the financial year.
Group adjusted profit before tax (before exceptional items, amortisation of acquired intangibles and pension interest) was £40.1 million (2009: £38.1 million).
Th e Group has recorded an exceptional gain of £1.9 million on the sale of its controlling interest in Wexford
Creamery Limited. The assets of this business had previously been impaired to reflect their fair value.
The pre-exceptional income tax expense o f £10.2 million represents an effective tax rate of 28.5%. This is a marginal increase compared to the 2009/10 full year effective rate of 28.3% and results mainly from the bigger proportion of French pre-tax profits subject to a higher rate of corporation tax and the lack of tax free property disposal profits this period. The tax credit on exceptional costs amounts to £0.4 million.
Basic earnings per share were up 6% at 19.8 pence (2009: 18.6 pence). Adjusted earnings per share were up 6% at 21.4 pence compared to 20.1 pence last year.
The directors have declared an interim dividend of 5.5 pence per share (2009: 5.3 pence per share), a 4% increase.
Group net debt amounted to £335.5 million as at 30 September 2010, a decrease of £1.7 million from 31
March 2010 and £44.9 million from 30 September 2009. Cash generated from operations totalled £51.8 million (2009: £70.5 million) with the first half seeing the normal seasonal increase in working capital, exaggerated by higher milk costs for cheese. Capi tal expenditure of £21.5 million is £9.6 million above the comparable period last year, reflecting the ongoing and significant planned investment in liquid milk processing.

The reported pension scheme deficit under IAS19 has decreased by £5.2 million in the six months to
September 2010 to £137.2 million (gross of deferred tax), reflecting ongoing annual funding contributions of
£20 million. The impact of falling bond yields on fund liabilities has been broadly offset by lower inflation assumptions. The triennial actuarial valuation as of March 2010 is currently in progress.
Other Information
The principal risks and uncertainties affecting the Group are set out below the statement of directors’ responsibilities and further details are disclosed on pages 16-17 of the 2010 Annual Report and Accounts.
Related party disclosures are given in note 13 to the consolidated financial information.
Summary and outlook
Dairy Crest has enjoyed another good six months. In line with our strategy, we have continued to grow our brands, reduce our costs and control our debt. At the same time the improvements we have made to our quality, service and cost base have paid off with new contracts to supply fresh milk to major retailers.
Our strategy has proved successful in the challenging economic environment and positions us to deliver further value going forward. With operational efficiencies and selling price increases in certain categories limiting the impact of higher input costs, we are confident that we can continue to deliver profits in line with our expectations.
Mark Allen
Chief Executive
11 November 2010

Consolidated income statement
(unaudited)
Year ended
31 March 2010
£m
1,629.7 Group revenue
(1,535.8) Operating costs
16.3 Other income - pensions
4.4 Other income - property
Half year ended 30 September 2010 Half year ended 30 September 2009
Before exceptional Exceptional
Note items
£m items
£m
114.6 Profit on operations
Impairment of assets on creation of disposal group
(16.0) held for sale
(22.4) Finance costs
(0.5) Other finance expense - pensions
0.1 Share of associates and joint ventures' net profit
- Profit on sale of controlling interest 5, 9
2.0 Profit on disposal of joint venture
4 776.9
(730.6)
-
-
46.3
-
(10.5)
-
-
-
-
-
(1.6)
-
-
(1.6)
-
-
-
-
1.9
-
1.9
Before exceptional Exceptional
Total
£m
776.9
(732.2)
-
-
44.7
-
(10.5)
-
-
- items
£m
803.7
(761.5)
-
2.3
44.5
-
(11.2)
(0.2)
0.1
-
- items
£m
-
(1.5) (763.0)
- -
1.0
(0.5)
-
-
-
-
-
1.3
Total
£m
803.7
3.3
44.0
-
(11.2)
(0.2)
0.1
-
1.3
77.8 Profit before tax
(25.3) Tax expense
52.5 Profit for the period
4
6
35.8
(10.2)
25.6
0.3
0.4
0.7
36.1
(9.8)
26.3
33.2
(9.5)
23.7
0.8
0.4
1.2
34.0
(9.1)
24.9
54.0 Profit attributable to equity shareholders
(1.5) Profit attributable to non-controlling interests
52.5 Profit for the period
25.6
-
25.6
0.7
-
0.7
26.3
-
26.3
23.5
0.2
23.7
1.2
-
1.2
24.7
0.2
24.9
The consolidated income statement relates entirely to continuing operations.
Year ended
31 March 2010 Earnings per share
40.6 Basic earnings per share (pence)
40.2 Diluted earnings per share (pence)
44.5 Adjusted basic earnings per share (pence) *
44.0 Adjusted diluted earnings per share (pence) *
8
8
8
8
Half year ended 30 September 2010
19.8
19.2
21.4
20.9
Half year ended 30 September 2009
18.6
18.3
20.1
19.8
* Adjusted earnings per share calculations exclude exceptional items, amortisation of acquired intangibles and the pension interest in relation to the defined benefit pension scheme.
A final dividend of £18.1 million (13.6 pence per share) was paid in the period to 30 September 2010 (2009: £17.3 million; 13.0 pence per share). A dividend of £7.3 million (5.5 pence per share) was approved by the Board on 10 November 2010 for payment on 27
January 2011 (2009: £7.0 million; 5.3 pence per share). See Note 7.
Consolidated statement of comprehensive income
(Unaudited)
Note
9
11
Half year ended
30 September
2010
£m
26.3
2009
£m
24.9
(10.3)
4.5
(5.8)
(1.7)
(6.2)
7.6
(5.4)
1.2
(10.3)
16.0
16.2
(0.2)
(66.4)
0.2
(4.3)
1.8
(2.5)
-
(122.6)
17.7
(18.2)
34.5
(91.1)
(66.2)
Year ended
31 March
2010
£m
52.5 Profit for the period
Net investment hedges:
(13.9) Exchange differences on foreign currency net investments
Exchange differences on foreign currency borrowings designated as net
6.0 investment hedges
(7.9)
- Amounts reclassified to profit and loss on sale of controlling interest
(117.7) Actuarial losses
10.6 Cash flow hedges - reclassification adjustment for gains / (losses) in income statement
(14.2) Cash flow hedges - losses recognised in other comprehensive income
34.3 Tax relating to components of other comprehensive income
(94.9) Other comprehensive loss for the period, net of tax
(42.4) Total comprehensive income / (loss) for the period, net of tax
(40.7) Attributable to equity shareholders of the parent
(1.7) Attributable to non-controlling interests

Consolidated balance sheet
(Unaudited)
31 March
2010
£m
Assets
Non-current assets
271.6 Property, plant and equipment
336.8 Goodwill
186.0 Intangible assets
- Investment in associates using equity method
- Deferred consideration
- Deferred tax asset
25.4 Financial assets - Derivative financial instruments
819.8
Current assets
153.7 Inventories
135.5 Trade and other receivables
0.1 Financial assets - Derivative financial instruments
20.0 Cash and short-term deposits
309.3
18.8 Assets in disposal group held for sale
1,147.9 Total assets
(382.9) Financial liabilities
(3.7)
Equity and liabilities
Non-current liabilities
(142.4) Retirement benefit obligations
(65.8) Deferred tax liability
- Long-term borrowings
- Derivative financial instruments
(7.3) Deferred income
(602.1)
Current liabilities
(230.3) Trade and other payables
(2.3) Financial liabilities
(0.4)
(4.5) Current tax liability
(0.6) Deferred income
(7.3) Provisions
(245.4)
- Short-term borrowings
- Derivative financial instruments
(7.6) Liabilities associated with disposal group held for sale
(855.1) Total liabilities
Shareholders' equity
(33.3) Ordinary shares
(70.7) Share premium
0.7 Interest in ESOP
(66.4) Other reserves
(120.1) Retained earnings
(289.8) Total shareholders' equity
(3.0) Non-controlling interests
(292.8) Total equity
(1,147.9) Total equity and liabilities
The interim results were approved by the Board of Directors on 10 November 2010.
10
11
10
Note
9
9
10
4
(370.4)
(5.3)
(137.2)
(65.9)
(6.9)
(585.7)
(249.1)
(2.3)
(0.2)
(2.6)
(0.7)
(10.7)
(265.6)
-
(851.3)
(33.3)
(70.7)
0.6
(60.8)
(124.2)
(288.4)
-
(288.4)
(1,139.7)
30 September
2010
£m
275.0
331.2
175.2
1.1
1.3
-
22.9
2009
£m
276.5
341.8
194.4
-
-
0.4
21.7
806.7
167.1
141.3
0.3
24.3
333.0
-
1,139.7
834.8
195.8
153.8
0.6
23.5
373.7
1,208.5
(416.0)
(4.0)
(178.0)
(58.8)
(8.1)
(664.9)
(252.9)
(2.1)
(0.1)
(3.7)
(0.8)
(9.5)
(269.1)
-
(934.0)
(33.3)
(70.7)
1.0
(74.5)
(92.1)
(269.6)
(4.9)
(274.5)
(1,208.5)

Consolidated statement of changes in equity
(Unaudited)
Attributable to equity shareholders of the parent
Half year ended 30 September 2010
At 31 March 2010
Profit for the period
Other comprehensive income / (loss):
Net investment hedges
Cash flow hedges
Amounts reclassified to profit and loss
on sale of controlling interest (Note 9)
Actuarial losses
Tax on components of other
comprehensive income
Other comprehensive loss
Total comprehensive (loss)/income
Ordinary Share Interest shares premium in ESOP
£m £m £m
Other Retained reserves
£m earnings
£m
33.3
-
70.7
-
(0.7)
-
66.4
-
120.1
26.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5.6)
2.2
(1.7)
-
(0.5)
(5.6)
(5.6)
-
-
-
(6.2)
1.7
(4.5)
21.8
Disposal of non-controlling interest
Gift to ESOP
Exercise of options
Share based payments
Equity dividends
At 30 September 2010
-
-
-
-
-
33.3
-
-
-
-
-
70.7
-
(0.2)
0.3
-
-
(0.6)
-
-
-
-
-
60.8
-
-
(0.3)
0.7
(18.1)
124.2
Half year ended 30 September 2009
At 31 March 2009
Profit for the period
Other comprehensive income / (loss):
Net investment hedges
Cash flow hedges
Actuarial losses
Tax on components of other
comprehensive income
Other comprehensive loss
Total comprehensive (loss)/income
Exercise of options
Share based payments
33.3
-
-
-
-
-
-
-
-
-
70.7
-
-
-
-
-
-
-
-
-
(1.9)
-
-
-
-
-
-
-
0.9
-
76.5
-
(2.5)
(0.5)
-
0.1
(2.9)
(2.9)
-
-
173.7
24.7
-
-
(122.6)
34.4
(88.2)
(63.5)
(0.9)
1.0
Equity dividends
At 30 September 2009
Year ended 31 March 2010
At 31 March 2009
Profit for the year
Other comprehensive income / (loss):
Net investment hedges
Cash flow hedges
Actuarial losses
Tax on components of other
comprehensive income
Other comprehensive loss
Total comprehensive loss
Exercise of options
Share based payments
Tax on share based payments
Equity dividends
At 31 March 2010
-
33.3
33.3
-
-
-
-
-
-
-
-
-
-
-
33.3
-
70.7
70.7
-
-
-
-
-
-
-
-
-
-
-
70.7
-
(1.0)
(1.9)
-
-
-
-
-
1.2
-
-
-
(0.7)
-
-
-
73.6
76.5
-
(7.5)
(3.6)
-
1.0
(10.1)
(10.1)
-
-
-
-
66.4
(17.3)
93.0
173.7
54.0
-
-
(117.9)
33.3
(84.6)
(30.6)
(1.2)
2.4
0.1
(24.3)
120.1
(2.5)
(0.5)
(122.6)
34.5
(91.1)
(66.4)
-
1.0
(17.3)
269.6
(1.7)
(6.2)
1.2
(10.1)
16.2
-
(0.2)
-
0.7
(18.1)
Noncontrolling
Total interests
£m £m
289.8
26.3
3.0
-
(5.6)
2.2
(0.2)
-
-
-
-
(0.2)
(0.2)
(2.8)
-
-
-
-
- 288.4
352.3
24.7
4.7
0.2
-
-
-
-
-
0.2
-
-
352.3
54.0
-
4.9
4.7
(1.5)
(7.5)
(3.6)
(117.9)
34.3
(94.7)
(40.7)
-
2.4
0.1
(24.3)
289.8
(0.4)
-
0.2
-
(0.2)
(1.7)
-
-
-
-
3.0
357.0
52.5
(7.9)
(3.6)
(117.7)
34.3
(94.9)
(42.4)
-
2.4
0.1
(24.3)
292.8
357.0
24.9
(2.5)
(0.5)
(122.6)
34.5
(91.1)
(66.2)
-
1.0
(17.3)
274.5
Total equity
£m
292.8
26.3
(5.8)
2.2
(1.7)
(6.2)
1.2
(10.3)
16.0
(2.8)
(0.2)
-
0.7
(18.1)
288.4

Year ended
31 March
2010
£m
Consolidated cash flow statement
(Unaudited)
145.9 Cash generated from operations
0.1 Dividends received from joint venture
(22.1) Interest paid
(10.5) Tax paid
113.4 Net cash flow from operating activities
Cash flow from investing activities
(26.9) Capital expenditure
10.2 Proceeds from disposal of property, plant and equipment
(1.9) Purchase of businesses (net of cash and debt acquired)
1.2 Sale of business (net of fees and costs)
1.2 Sale of investment in joint venture
(16.2) Net cash used in investing activities
Cash flow from financing activities
(150.6) Net drawdown / (repayment) under revolving credit facilities
(24.3) Dividends paid
(2.0) Finance lease repayments
(176.9) Net cash used in financing activities
(79.7) Net decrease in cash and cash equivalents
107.5 Cash and cash equivalents at beginning of period
(0.3) Exchange impact on cash and cash equivalents
27.5 Cash and cash equivalents at end of period
20.0 Analysed: Reported as cash and cash equivalents
7.5 Reported as part of disposal group
(337.2) Memo: Net debt at end of period
10
10
10
10
9
10
51.8
-
(9.9)
(8.9)
33.0
(21.5)
0.1
-
4.0
-
(17.4)
0.6
(18.1)
(1.0)
(18.5)
(2.9)
27.5
(0.3)
24.3
44.7
15.3
1.8
4.3
(0.2)
(0.3)
0.7
-
(11.4)
(3.1)
2010
£m
36.1
10.5
-
-
(1.9)
-
Half year ended
30 September
2009
£m
-
(0.1)
-
(1.3)
34.0
11.4
44.0
18.7
1.3
4.7
(1.6)
(0.3)
1.0
(2.3)
(8.1)
13.1
70.5
0.1
(11.7)
(3.8)
55.1
(11.9)
8.1
(1.8)
1.2
0.3
(4.1)
(116.7)
(17.3)
(0.9)
(134.9)
(83.9)
107.5
(0.1)
23.5
24.3
-
(335.5)
23.5
-
(380.4)

Notes to the interim financial statements
( Unaudited )
1 General information
Dairy Crest Group plc (the “Company”) is a public limited company incorporated in the United Kingdom under the
Companies Act 1985. The address of the registered office and principal place of business is Claygate House, Littleworth
Road, Esh er, Surrey, KT10 9PN. The principal activity of the Company and its subsidiaries (the “Group”) is the processing, manufacture and sale of fresh milk and branded dairy products in the UK and Europe as described in the Group’s annual financial statements for the year ended 31 March 2010.
2 Significant accounting policies
Basis of preparation
This condensed interim financial information comprises the balance sheet as at 30 September 2010 and related income statement, statement of comprehensive income, statement of cash flows, statement of changes in equity and supporting notes (hereinafter referred to as “financial information”).
The financial information is not audited and does not constitute statutory financial statements as defined in section 435 of the Companies Act 2006. Comparative figures for the year ended 31 March 2010 have been extracted from the Group’s
2010 statutory accounts, on which the auditors gave an unqualified opinion, did not include an emphasis of matter reference and did not include a statement under section 498(2) or (3) of the Companies Act 2006. These sections address whether adequate accounting records have been kept, whether the Company’s financial statements are in agreement with those records and whether the auditors have obtained all the information and explanations necessary for the purposes of the audit. The Group financial statements for the year ended 31 March 2010 have been filed with the Registrar of
Companies.
The financial information can be found on our corporate website, www.dairycrest.co.uk
.
The financial information for the period ended 30 September 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Servi ces Authority and with IAS 34, “Interim Financial Reporting” as adopted by the European Union. The financial information should be read in conjunction with the Group’s financial statements for the year ended 31 March 2010, which have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union. The accounting policies and methods of computation used to prepare the financial information for the period ended 30 September 2010 are the same as those used for the Group's financial statements for the year ended 31 March 2010 except for the adoption of the new standards and interpretations that came into effect in the period (see below).
The results for operations for the half year are not necessarily indicative of the results expected for the full year.
This financial information was approved for issue on 10 November 2010. annual earnings for the full year in each tax jurisdiction.
Taxes on income in the interim periods are accrued using the tax rate that would be expected to be applicable to total
The following accounting standards and interpretations became effective for the current reporting period:
International Accounting Standards (IAS/IFRSs)
IFRS 1 – First Time Adoption of International Reporting Standards (effective from 1 July 2009)
IFRS 1
– Amendments to IFRS 1 – Limited Exemption for First-time Adopters (effective from 1 January 2010)
IFRS 2 – Amendments to IFRS 2 – Group Cash-settled Share-based Payment Transactions (effective from 1 January
2010)
IFRS 3 – Business Combinations (revised January 2008) (effective from 1 July 2009)
IAS 27
– Consolidated and Separate Financial Statements (revised January 2008) (effective from 1 July 2009)
IAS 32 – Amendment to IAS 32: Classification of Rights Issues (effective from 1 February 2010)
IAS 39 – Eligible Hedged Items (effective from 1 July 2009)
Improvements to IFRS (issued April 2009)
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 17 – Distributions of Non-Cash Assets to Owners (effective from 1 July 2009)
IFRIC 18
– Transfer of Assets from Customers (effective from 1 July 2009)
The application of these standards and interpretations has not had a material effect on the net assets, result and disclosures of the Group in the six months ended 30 September 2010.
Potentially, the most significant change for the Group in future will be the application of IFRS3 (revised).
The key features of the revised IFRS 3 include a requirement for acquisition-related costs to be expensed and not included in the purchase price and for contingent consideration to be recognised at fair value on the acquisition date (with subsequent changes recognised in the income statement and not as a change to goodwill). The standard also changes the treatment of non-controlling interests with an option to recognise these at full fair value as at the acquisition date and a

requirement for previously held non-controlling interests to be fair valued as at the date control is obtained, with gains and losses recognised in the income statement.
IAS 27 (revised) no longer restricts the allocation to non-controlling interest of losses incurred by a subsidiary to the amount of the minority equity investment in the subsidiary.
Any future partial disposal of an equity interest in a subsidiary that does not result in a loss of control will be accounted for as an equity transaction and will have no impact on goodwill, nor will it give rise to any gain or loss. Where there is loss of control of a subsidiary, any retained interest will have to be re-measured to fair value, which will impact the gain or loss recognised on disposal.
3 Critical accounting estimates and judgements
The following are areas of particular significance to the Group’s financial information and include the application of judgement, which is fundamental to the completion of a set of condensed consolidated interim financial information.
Pensions
The present value of the Group’s pension obligations and the pension interest charge in each period depends on a number of actuarial assumptions. The primary assumptions used include the expected long-term rate of return on invested funds, the discount rate applicable to scheme liabilities, the long-term rate of inflation and estimates of the mortality applicable to scheme members.
At each reporting date, and on a continuing basis, the Group reviews the macro-economic, Company and scheme specific factors influencing each of these assumptions, using professional advice, in order to record the Group’s ongoing commitment and obligation to its defined benefit pension scheme in accordance with IFRS. Further details of the underlying assumptions are set out in Note 11.
Goodwill and other intangible assets
Impairment reviews in respect of goodwill are performed annually unless an event indicates that an impairment review is necessary. Impairment reviews in respect of intangible assets are performed when an event indicates that an impairment review is necessary. Examples of such triggering events include a significant planned restructuring, a major change in market conditions or technology, expectations of future operating losses, or a significant reduction in cash flows. The recoverable amounts of cash-generating units are determined based on the higher of realisable value and value-in-use calculations. These calculations require the use of estimates of future cash flows and are sensitive to the discount rate used.
Acquired brands and similar assets are considered to have finite lives. The determination of the useful lives takes into account certain quantitative factors such as sales expectations and growth prospects, and also many qualitative factors such as history and heritage, and market positioning, hence the determination of useful lives is subject to estimates and judgement.
Exceptional items
Certain items are recorded separately in the Consolidated income statement as exceptional. Only items of a material, oneoff 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 profits arising on disposal of closed sites, other than as a result of depot rationalisation, are reported within exceptional items.
Exceptional items are not excluded from the basic earnings per share calculation but are excluded from the adjusted basic earnings per share calculation.
4 Segmental analysis
IFRS 8 requires operating segments to be determined based on the Group’s internal reporting to the Chief Operating
Decision Maker (“CODM”). The CODM has been determined to be the Company's Board members as they are primarily responsible for the allocation of resources to segments and the assessment of performance of the segments.
The CO DM uses trading profit, as reviewed at monthly business review meetings, as the key measure of the segments’ results as it reflects the segments’ underlying trading performance for the period under evaluation. Trading profit 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 Group’s operating segments.
Trading profit is defined as profit on operations before exceptional items and amortisation of acquired intangible assets, but includes the Group share of post-tax profit of joint ventures and associates.
The Group’s operating segments are ‘Cheese’, ‘UK Spreads’, ‘St Hubert’, ‘Liquid Products’, ‘Household’, ‘Share of Joint
Ventures and Associates’ and ‘Other’. Certain of these operating segments have been aggregated and the Group reports on five continuing segments within the business: ‘Cheese’, ‘Spreads’, ‘Dairies’, ‘Share of Joint Ventures and Associates’ and ‘Other’.
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.
The ‘UK Spreads’ and ‘St Hubert’ segments have been aggregated into one reportable segment being ‘Spreads’. Both of these segments operate within the European Union and manufacture branded dairy spreads, using similar production methods. Products are sold to similar end-consumers in similar economic environments. Distribution methods are similar

and in both businesses customers are major retailers.
The ‘Liquid Products’ and ‘Household’ segments have been aggregated into one reportable segment being ‘Dairies’. The
‘Liquid Products’ and ‘Household’ businesses both operate in the UK and predominantly sell fresh milk to a similar class of customer. The milk processing sites, included in the 'Liquid Products' segment, pack milk for both businesses.
‘Share of Joint Ventures and Associates’ forms a separate segment whose results are reviewed on a post-tax basis consistent with IFRS. Share of Joint Ventures and associate revenue is no longer reviewed by the CODM and the segment revenue analysis below has been amended accordingly.
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 back into
Year ended
31 March operating segments such that their result reflects the total cost base of the Group. Other operating profit therefore is nil.
The segment results for the period to 30 September 2010 and 30 September 2009 and for the year ended 31 March 2010 and the reconciliation of segment measures to the respective statutory items included in the financial information are as follows:
Half year ended
30 September
2010
£m
Segment external revenue
260.0 Cheese
277.7 Spreads
1,081.2 Dairies
10.8 Other
1,629.7 Total segment external revenue
2010
£m
108.9
134.7
529.7
3.6
105.9
83.5
Segment profit
16.9 Cheese
54.0 Spreads
34.9 Dairies
0.1 Share of associate / joint venture net profit
Total segment profit
(22.4) Finance costs
Adjusted profit before tax
(9.2) Acquired intangible amortisation
4.0 Exceptional items (see Note 5)
(0.5) Other finance expense - pensions
77.8 Profit before tax
776.9
12.5
27.2
10.9
-
50.6
(10.5)
40.1
(4.3)
0.3
-
36.1
2009
£m
131.8
137.9
528.7
5.3
803.7
7.9
27.0
14.3
0.1
49.3
(11.2)
38.1
(4.7)
0.8
(0.2)
34.0
Segment total assets
211.8 Cheese
511.8 Spreads
347.2 Dairies
- Share of associate / joint venture
31.6 Other
194.6
498.3
356.8
2.4
40.1
1,092.2
47.5
1,139.7
-
242.0
521.4
364.2
34.7
1,102.4 Group
45.5 Unsegmented assets
1,147.9 Total assets
1,162.3
46.2
1,208.5
Interest income and expense are not included in the measure of segment profit reviewed by the CODM. Group treasury is centrally managed and external interest income and expense is all incurred in the UK and is not allocated to segments.
Where interest is reviewed by the CODM it is done so on a net basis.
Tax costs are not included in the measure of segment profit reviewed by the CODM. Group 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 joint ventures and associates using the equity method and deferred consideration but exclude cash and cash equivalents, derivative financial 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 finished 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 reflect 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 segment's input costs.

Seasonality of results
Consumer demand for our products tends to be lower during the summer months as it is impacted by warm weather and school holidays. Certain cream and non-milk products experience increased sales in the run up to Christmas. Working capital normally increases in the first six months of the year as milk production is higher during the spring and summer, however this impact can be offset by other factors including levels of cheese sales volumes, promotional activity and milk cost movements.
5 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 financial performance of the Group.
Year ended
31 March
2010
£m
- Restructuring costs (Dairies)
(1.5) Duplicate running costs at National Distribution Centre (Cheese)
1.0 Profit on sale of closed Nottingham site (Dairies)
2.2 Reduction in estimated Office of Fair Trading ('OFT') settlement
16.3 Curtailment gain in UK defined benefit pension scheme
18.0
- Profit on disposal of controlling interest in Wexford Creamery Limited
2.0 Profit on disposal of investment in Yoplait Dairy Crest Limited joint venture
(16.0) Impairment of disposal group held for sale
4.0
(4.4) Tax relief / (charge) on exceptional items
(0.4)
2010
£m
(1.6)
-
-
-
-
(1.6)
1.9
-
-
0.3
0.4
0.7
Half year ended
30 September
2009
£m
-
(1.5)
1.0
-
-
(0.5)
-
1.3
-
0.8
0.4
1.2
Exceptional items in the six months ended 30 September 2010 comprise:
-
£1.6 million of costs associated with the rationalisation of administration activities in the depot network. This restructuring will result in more centralised back office activities supporting the depot network and generate significant savings in future years. Most of the cost relates to redundancies (£1.4 million), but certain incremental running costs are being incurred (£0.2 million). Exceptional expenditure on this project is expected to total approximately £4 million in the year ending 31 March
2011.
-
On 12 June 2010 the Group sold 50% of the shares in Wexford Creamery Limited ('WCL') for cash proceeds of €9 million, resulting in a 30% shareholding post-disposal and a loss of controlling interest to Wexford Milk Producers ('WMP'). At 31
March 2010, the assets and liabilities of WCL were disclosed as a disposal group held for sale and the carrying value of assets was impaired to reflect the estimat ed fair value less costs to sell. The final gain on disposal of £1.9 million includes the reclassification to profit and loss of certain items previously taken to other comprehensive income and is further analysed in Note 9.
Exceptional items in the year ended 31 March 2010 comprise:
- Our new cheese cutting and packing operation in Nuneaton became fully operational in the first half of that year. In
2008/09 and during the first half of 2009/10, volumes were being ramped up with additional packing being carried out by a third party. We incurred duplicate running costs during this time until the Nuneaton site was running at full capacity. In
2009/10 these costs amounted to £1.5 million.
- Having closed our Nottingham dairy in 20 08/09, the site was sold during the year for cash proceeds of £2.5 million resulting in an exceptional profit of £1.0 million.
-
On 30 April 2010, the Office of Fair Trading (‘OFT’) announced that the parties to the 2007 Statement of Objections will get a penalty reduction provided each company continues to cooperate with the OFT. The OFT expects to conclude and issue its decision in 2010/11. Accordingly, the provision has been reduced to reflect our best estimate of the penalty ultimately payable along with any further professional fees. This has resulted in an exceptional release of £2.2 million. This penalty is expected to be settled in the second half of 2010/11.
- During the year, having consulted with employees, we closed the Dairy Crest defined benefit pension scheme to future service accrual with an effective date of April 2010. The closure of the scheme to future service accrual resulted in an exceptional curtailment gain of £16.9 million and significantly reduces future pension risks. Fees of £0.6 million were incurred resulting in a net exceptional credit of £16.3 million.
- On disposal of our 49% share of Yoplait Dairy Crest ('YDC') in March 2009, the Group placed cash in an escrow account to cover the cost of closing the YDC defined benefit pension scheme. The final cost of closure was lower than anticipated and the Group received £2.0 million back from escrow (net of fees) during the year. The cash inflow of £1.2 million reflects professional fees and costs accrued at 31 March 2009 but not settled until 2009/10.

- We announced on 2 February 2010 our intention to sell a majority share of our investment in WCL, a cheese manufacturing business in Ireland. The sale had not been completed at 31 March 2010, however the assets and liabilities of WCL represent a disposal group held for sale at that date. The carrying value of WCL assets was impaired by £16.0 million to management’s best estimate of the business’s fair value less costs to sell.
6 Tax expense
The tax expense for the half year ended 30 September 2010 has been calculated on the basis of the estimated effective tax rate on profit for the full year of 28.5% (September 2009: 28.6%; March 2010: 28.3%). Tax relief on exceptional costs for the half year ended 30 September 2010 was £0.4 million (September 2009: £0.4 million; year ended 31 March 2010:
£4.4 million charge).
As a result of the Finance Act in July 2010, the decrease in the UK corporation tax rate from 28% to 27% from April 2011 has been ‘enacted’ under IFRS. Consequently, UK deferred tax balances that reverse after 31 March 2011 have been calculated using a corporation tax rate of 27%. The impact of this change is insignificant as the large deferred tax creditor in the consolidated group balance sheet is largely deferred tax on capitalised St Hubert brands, which is calculated by reference to the French rate of corporation tax.
7 Dividends
A dividend of £7.3 million (5.5 pence per share) (2009: £7.0 million; 5.3 pence per share) will be payable on 27 January
2011 to shareholders on the register on 7 January 2011. This dividend is not recorded in the balance sheet as a liability at
30 September 2010.
8 Earnings per share
Basic earnings per share for the period has been calculated on the basis of profit attributable to equity shareholders of
£26.3 million (September 2009: £24.7 million; March 2010: £54.0 million) and the weighted average number of shares in issue during the period, excluding those held by the Dairy Crest Employees’ Share Ownership Plan Trust and held as treasury shares which are treated as cancelled, totalled 133.151 million (September 2009: 132.913 million; March 2010:
133.023 million).
Year ended
31 March
To show earnings per share on a consistent basis, which in the directors’ opinion reflects the underlying performance of the
Group more appropriately, adjusted earnings per share has been calculated as follows:
Half year ended
2010
£m
52.5 Profit for the period
1.5 Non-controlling interest
30 September
2010
£m
2009
£m
26.3
-
24.9
(0.2)
54.0 Profit attributable to equity shareholders
(1.4) Exceptional items (excluding minority interests), and sale of joint ventures (net of tax)
6.2 Amortisation of acquired intangible assets (net of tax)
0.4 Pension interest charge (net of tax)
59.2 Adjusted earnings
44.5 Adjusted basic earnings per share (pence)
40.6 Basic earnings per share (pence)
26.3
(0.7)
2.9
-
28.5
21.4
24.7
(1.2)
3.1
0.1
26.7
20.1
18.6
44.0 Adjusted diluted earnings per share (pence)
40.2 Diluted earnings per share (pence)
19.8
20.9
19.2
19.8
18.3
The exceptional item adjustment for the year ended 31 March 2010 of £(1.4) million excludes the post-tax exceptional cost attributable to minority interests (£1.8 million) which is already added back above as ‘non-controlling interest’.
Diluted earnings per share has been calculated on the basis of a diluted number of shares of 136.642 million (September
2009: 135.167 million; March 2010: 134.410 million). This reflects the dilutive impact of share options exercisable under the
Dairy Crest Long Term Incentive Share Plan and Sharesave schemes.

9 Business combinations and disposals
2010/11
On 12 June 2010 the Group sold 50% of the shares in Wexford Creamery Limited ('W
CL') for cash proceeds of €9 million.
This disposal was affected by way of a share repurchase by WCL. At the same time, the Group entered into two option agreements over its remaining 30% ownership.
The first option agreement granted a 5 year call option to the majority shareholder, being Wexford Milk Producers ('WMP'), over 10% of WCL share capital for a fixed price of €1.8 million. After five years the Group will have the right to exercise a put option at a fixed price of €1.8 million. The combination of put and call options give rise to near certainty of exercise and, along with the fixed option price, provides evidence that this option in substance comprises deferred consideration on a further 10% of the ordinary shares of WCL. In substance the Group has effected a disposal of 60% of the shares of WCL with 10% of the consideration being deferred. The amount of deferred consideration recorded at 12 June 2010 and at 30
September 2010, after conversion into Sterling and appropriate discountin g is £1.3 million.
The second option agreement granted an eight year call option to WMP over 20% of the WCL share capital for a price of
€3.6 million adjusted for 20% of post-tax profits, excluding WCL share buy-back financing costs. After eight years the
Group will have the right to exercise a put option based on the same pricing formula. The option was initially valued at £1.6 million and the valuation at 30 September 2010 is immaterially different to that at June 2010.
The equity accounted associat e was initially valued at £1.1 million reflecting the fair value of the underlying assets post the transaction. This valuation includes borrowings in WCL resulting from the share repurchase.
The completion arrangements included a five year cheese supply agreement with the Group agreeing to buy minimum guaranteed cheese volumes based on a cost plus margin formula. Volumes decrease over the five year agreement. At the transaction date, £3.6 million was charged by the Group in order to provide for the cost of the cheese purchase arrangements. The balance of this provision at 30 September 2010 was £3.4 million.
The disposal resulted in the release of noncontrolling interests in WCL (£2.8 million) and in the reclassification to profit and loss of net investment hedges previously taken to other comprehensive income (£1.7 million). Furthermore the Group incurred £0.2 million on legal and professional fees in relation to this disposal.
The final gain on disposal can be analysed as follows and is recorded as an exceptional item in the six months ended 30
September 2010.
Sales proceeds - cash consideration
£m
7.5
Sales proceeds - deferred consideration
Book value of assets disposed (see below)
Recognition of initial fair value of 20% shareholding - equity accounted associate
Recognition of initial fair value of option over 20% shareholding
Provision for future cheese costs
Derecognition of non-controlling interest
Other fees and costs
1.3
(10.3)
1.1
1.6
(3.6)
2.8
(0.2)
Gain on disposal of controlling interest before recycling
Amounts reclassified to profit and loss
Final gain on disposal of controlling interest
0.2
1.7
1.9
Book value of assets disposed:
Investments
Deferred tax asset
Inventories
Trade and other receivables
Cash and short-term deposits
Trade and other payables
Retirement benefit obligations
Deferred income
Current tax liability
31 March 2010 12 June 2010
£m £m
0.6
0.3
4.6
0.5
0.2
8.7
5.8
7.5
(4.7)
8.3
3.3
(8.1)
(2.0)
(0.6)
(0.3)
(1.9)
(0.5)
(0.2)
11.2 10.3
Of the decrease of £0.9 million in net asset value in the period to disposal, £0.7 million was a result of translation differences due to Sterling strengthening against the Euro. The initial equity accounted fair value of our 20% shareholding includes additional share buy-back related borrowings in WCL post disposal.
Cash impact of disposal:
7.5 Cash proceeds
Cash and short-term deposits sold with WCL
Other fees and costs
(3.3)
(0.2)
4.0

2009/10
On 20 June 2009 the Group completed the sale of 16 depots to Medina Dairy Limited. The Group retained supply of packed milk into these depots and ownership of land and buildings where relevant. Proceeds amounted to £1.4 million and the Group incurred fees and other costs of £0.2 million resulting in a net cash inflow of £1.2 million. The loss on disposal amounted to £0.4 million and can be analysed as follows:
£m
Proceeds
Book value of inventories
Book value of trade receivables
Book value of trade and other creditors
Other fees and costs
1.4
(0.1)
(1.6)
0.1
(0.2)
Loss on disposal (0.4)
In June 2009 the Group acquired the remaining 50% of the ordinary share capital of Fayrefield Foodtec Limited for gross consideration of £2.5 million. The fair value of the identifiable assets and liabilities of the business at the date of acquisition was as follows:
Fair value to Group
£m
Book value
£m
0.8 Property, plant and equipment
Inventories
Receivables
Cash
Payables
0.8
1.2
1.3
0.8
(1.1)
1.2
1.3
0.8
(1.1)
Net assets
Goodwill
3.0
1.7
3.0
4.7
Comprising: Cash consideration in December 2007
Cash consideration in June 2009
2.0
2.5
0.2 Fees and other
No material fair value adjustments were made to the book value of assets acquired as accounting policies were consistent with Group policies and no further recognisable intangible assets were identified.
10 Analysis of net debt
Year Closing net debt ended
31 March
2010
£m
2.3 Finance leases repayable within one year
2.3 Short-term borrowings
373.4 Loans repayable in greater than one year
9.5 Finance leases repayable in greater than one year
382.9 Long-term borrowings 370.4
Half year ended
30 September
2010
£m
2.3
2.3
361.9
8.5
2009
£m
2.1
2.1
405.2
10.8
416.0
(20.0) Cash and short-term deposits
365.2 Borrowings and cash
– before impact of cross-currency swaps
(7.5) Cash included in disposal group
(20.5) Impact of cross-currency swaps *
337.2 Net Debt
(24.3)
348.4
-
(12.9)
335.5
(23.5)
394.6
-
(14.2)
380.4
* The Group has $233 million and €75 million of loan notes against which cross-currency swaps have been put in place to fix interest and principal repayments in Sterling (March 2010 and September 2009: $233 million an d €75 million). Under
IFRS, currency borrowings are retranslated into Sterling at year end exchange rates. The cross-currency swaps are recorded at fair value and incorporate movements in both market exchange rates and interest rates. The Group defines 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 £12.9 million adjustment included above (March 2010: £20.5 million; September 2009: £14.2 million) c onverts the Sterling equivalent of Dollar and Euro loan notes from period end exchange rates (£212.9 million
(March 2010: £220.5 million; September 2009: £214.2 million)) to the fixed Sterling liability of £200.0 million.

Movement in net debt
Six months to 30 September 2010
Cash and short-tem deposits
Borrowings
Finance leases
Cross-currency swaps
Cash in disposal group
Six months to 30 September 2009
Cash and short-tem deposits
Borrowings
Finance leases
Cross-currency swaps
Year to 31 March 2010
Cash and short-tem deposits
Borrowings
Finance leases
Cross-currency swaps
Cash in disposal group
Opening balances
£m
20.0
(373.4)
(11.8)
20.5
7.5
(337.2)
107.5
(541.6)
(13.8)
32.1
(415.8)
107.5
(541.6)
(13.8)
32.1
-
(415.8)
Cash flow
£m
4.6
(0.6)
1.0
-
(7.5)
(2.5)
(83.9)
116.7
0.9
-
33.7
(79.7)
150.6
2.0
-
-
72.9
Transfer movement
£m £m
-
-
-
-
-
-
(7.5)
-
-
-
7.5
-
-
-
-
-
-
Exchange
(0.3)
12.1
-
(7.6)
-
4.2
(0.1)
19.7
-
(17.9)
1.7
(0.3)
17.6
-
(11.6)
-
5.7
11 Retirement benefit obligations
The Group’s defined benefit pension scheme is accounted for in accordance with the requirements of IAS 19 ‘Employee
Benefits’. The net pension liability of the Group pension scheme at 30 September 2010 can be analysed as follows:
Year ended
31 March
Half year ended
2010
£m
63.6 Equities
234.0 Bonds and cash
70.0 Equity return swaps valuation
261.1 Insured retirement obligations
30 September
2010
£m
2009
£m
61.3
240.2
65.3
260.7
120.3
175.1
39.0
266.1
51.4 Property and other
680.1 Total market value of assets
(561.4) Defined benefit obligation:
(261.1)
Uninsured retirement obligations
Insured retirement obligations
(142.4) Net liability recognised in the balance sheet
39.9 Related deferred tax asset
(102.5) Net pension liability
52.9
680.4
(556.9)
(260.7)
(137.2)
37.0
(100.2)
29.3
629.8
(541.7)
(266.1)
(178.0)
49.8
(128.2)
Analysis of movements in the Group pension deficit during the period:
(63.3) Opening net liability
(9.5) Current service costs
16.9 Curtailment gains
(0.5) Net finance income
(117.7) Actuarial loss
29.7 Contributions
2.0 Wexford scheme assets transferred to disposal group held for sale
(142.4)
-
-
-
(6.2)
-
11.4
(63.3)
(5.0)
(0.2)
(122.6)
-
-
13.1
(142.4) Closing net liability (137.2) (178.0)
The closing deficit at 31 March 2010 incorporates the Dairy Crest Group Pension Fund only. The WCL pension deficit was included within liabilities associated with disposal group held for sale.
The principal assumptions used in determining retirement benefit obligations for the Group's pension fund are as follows:
Mar 10 Sep 10 Sep 09
5.2 Rate of increase in salaries (%)
3.7 Price inflation (%)
20.9 Average expected remaining life expectancy for a non-retired 65 year old male (years)
19.8 Average expected remaining life expectancy for a retired 65 year old male (years)
5.7 Discount rate (%)
7.8 Expected return (%) - Equities
5.1
7.0
5.7
- Bonds and cash
- Property and other
- Insured retirement obligations n/a *
3.1
20.9
19.8
5.2
7.8
5.1
7.0
5.2
4.6
3.1
20.9
19.8
5.5
8.3
7.1
7.0
5.5
Closing balances
£m
24.3
(361.9)
(10.8)
12.9
-
(335.5)
23.5
(405.2)
(12.9)
14.2
(380.4)
20.0
(373.4)
(11.8)
20.5
7.5
(337.2)

*Benefits are no longer linked to final salaries following the closure to future benefit accrual on 31 March 2010. This resulted in a curtailment gain of £16.9 million in the year ended 31 March 2010 (see Note 5).
The Group continues to make additional funding contributions of £20 million per annum and settled final March 2010 employer contributions in April 2010. The March 2010 triennial valuation is currently underway and is expected to be completed during the second half of the year. Following this, future funding requirements will be agreed with the scheme’s
Trustee.
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. This will reduce the volatility of the reported defined benefit obligations in future periods.
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 pension 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. At inception the principal value of each leg was £200 million. The positive valuation of synthetic equity at 30 September 2010 reflects the underlying strength in equities subsequent to their purchase.
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 valuation of obligations which they cover. The expected rate of return on equities of
7.75% (September 2009: 8.25%) reflects historic UK equity returns with an assumption for 2010/11 that the strong equity performance during the previous year might lower future equity return assumptions. The equity return assumption represents a reasonable risk premium over gilts and it is within the range of assumptions typically used by companies of a similar size. The expected rate of return on bonds of 5.1% (September 2009: 7.1%) is based upon the gross redemption yield available on a similar profile of gilts and corporate bonds.
The average duration of scheme liabilities is approximately 18 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 benefit payments. Inflation assumptions are based upon the difference between long-term fixed income and index linked gilt yields. The scheme deficit is highly dependent upon these input assumptions which are as of reporting period end date. A 0.1% decrease in the discount rate assumption would increase the scheme obligation by approximately
£16 million.
12 Capital commitments
Future capital expenditure contracted on property, plant and equipment as at 30 September 2010 was £18.1 million (March
2010: £6.1 million; September 2009: £9.0 million).
13 Related party transactions
The Group's only significant re lated party is, from 12th June 2010, its associate Wexford Creamery Limited (‘WCL’). During the period ended 30 September 2010 the Group purchased cheese at a cost of £2.7 million from WCL.

Statement of directors' responsibilities
The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules. With the exception of Neil Monnery, who resigned as a non-executive director on 20 July 2010, the Board of Directors that served during the six months to 30
September 2010, and their respective responsibilities, can be found on pages 10 and 11 of the 2010 Annual Report and
Accounts. On 4 October 2010, it was announced that Richard Macdonald and Stephen Alexander would be appointed to the Board as non-executive directors on 3 November 2010 and 1 January 2011 respectively. Furthermore, Carole Piwnica will step down as a non-executive director from 9 December 2010.
M Allen
By order of the Board
Chief Executive
10 November 2010
A S N Murray
Finance Director
10 November 2010
Principal risks and uncertainties
The Board considers risk assessment, identification of mitigating actions and internal controls to be fundamental to achieving Dairy Crest's strategic corporate objectives. The principal factors considered when assessing Dairy Crest's ability to achieve its short-term and long-term objectives are:
- Economic, cultural and market conditions which influence consumer and customer behaviour and in particular the current weak economic conditions resulting from the global financial crisis and subsequent recession;
- Relationships with dairy farmers and future milk sourcing;
- The impact of increased milk costs and the volatility of ingredients and other commodity markets;
- Investing in our brand portfolio and innovative new product development;
- Attracting and retaining the best people;
- Maintaining high levels of food safety standards and operational performance across the manufacturing base;
- Risk of loss of major liquid milk contract;
- impact of financial market turmoil on pension scheme assets and future funding requirements;
- Regulatory and legal risks; and
- Environmental trends and risks.
There have been no significant changes in the material risks faced by the Group since publication of the 2010 Annual
Report nor the Board does not currently anticipate any significant changes to the material risks and uncertainties faced by the Group in the second half of the year. The processes by which the Board safeguards shareholder value and the assets of the Group and risks and uncertainties that would have a significant impact on long-term value generation are set out in the 2010 Annual Report and Accounts on pages 16 to 17.

Independent Review Report to Dairy Crest Group plc
Introduction
We have been engaged by Dairy Crest Group plc (the ‘Company’) to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 which comprises the Interim Consolidated Income
Statement, Interim Consolidated Statement of Comprehensive Income, Interim Consolidated Balance Sheet, Interim
Consolidated Statement of Changes in Equity, Interim Consolidated Cash Flow Statement and the related notes 1 to 13. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review
Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP
London
10 November 2010