Going Forward, Will Be to Crest
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Dairy Crest Group plc Annual Report 2016 GOING FOR Dairy Crest Group plc Claygate House Littleworth Road Esher Surrey KT10 9PN Company No: 3162897 Visit our website at www.dairycrest.co.uk Dairy Crest Group plc http://www.dairycrest.co.uk/investors Annual Report 2016 ABOUT US Dairy Crest is a leading British dairy company. We have a well-established strategy, a clear vision, robust values and great people. Dairy Crest makes market-leading brands including Cathedral City cheese, Clover dairy spread, Country Life butter and Frylight one calorie cooking spray. This year we have also invested to enter the high-growth global infant formula market. We constantly innovate, bringing new products to market and introducing new ways of working across the business. We are a responsible business and always aim to do the right thing for our employees, our farmers, our customers and our consumers. We continue to ensure we are setting the standard for responsible business practice. The year ended 31 March 2016 has been transformational for Dairy Crest with the completion of the sale of our loss-making Dairies business in December 2015. Dairy Crest is now well- positioned for profitable and sustainable growth in our added value and branded markets. The UK’s No1 branded cheese The UK’s No1 dairy spread This report is printed on Chorus Lux 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. The UK’s No1 oil brand The UK’s fastest growing butter brand Photographic direction by Hudson Wright Easton. Board photography by Ed Hill. 2016 HIGHLIGHTS CONTENTS Revenue 1 Adjusted profit Strategic report (£m) before tax 1,2 (£m) 2 At a glance 4 Our business model £422.3m £57.7m 6 Our strategy and Key Performance Indicators 8 Chairman’s statement 58.8 445.7 448.2 446.2 57.7 430.0 422.3 9 Chief Executive’s review 12 Financial review 46.5 16 Principal risks and uncertainties 39.9 Strategic report 37.3 18 Performance – continuing operations 18 – Cheese & whey 20 – Butters, spreads & oils 22 Corporate Responsibility Governance 28 Board of Directors and Advisers 30 Management Board 12 13 14 15 16 12 13 14 15 16 31 Corporate governance 41 Directors’ remuneration report Net debt Total dividends 61 Directors’ report Governance (£m) per share (pence) 64 Statement of Directors’ responsibilities £229.0m 22.1p The numbers 65 Independent auditor’s report 336.4 22.1 21.7 21.3 69 Consolidated income statement 20.7 20.4 70 Consolidated statement of comprehensive income 229.0 71 Consolidated and Parent 198.7 Company balance sheets 72 Consolidated statement 142.2 of changes in equity The numbers The 73 Parent Company statement 59.7 of changes in equity 74 Consolidated and Parent Company statement of cash flows 12 13 14 15 16 12 13 14 15 16 75 Accounting policies 81 Notes to the financial statements 1 All years have been restated to remove discontinued operations 119 Group financial history 2 Continuing operations before exceptional items, amortisation of acquired intangibles and pension interest 120 Shareholders’ information Statutory results Restated 2016 2015 Non-GAAP measures of financial performance £m £m used throughout this Annual Report and Accounts are defined in the Financial review Profit before tax from continuing operations 45.4 36.8 on pages 12 to 15 and in Note 1 to the Profit from continuing operations 38.5 29.4 financial statements. Loss from discontinued operations (151.5) (8.9) (Loss)/profit for the year (113.0) 20.5 Notice: Limitations on Director liability – The purpose of the Annual with and in reliance upon English company law. Liabilities of the Directors in Report and Accounts is to provide information to members of the Company connection with those reports shall be subject to the limitations and restrictions and it has been prepared for, and only for, the members of the Company as provided by such law. a body. The Company, its Directors, employees, agents and advisers do not accept or assume responsibility to any other person to whom this document Cautionary statement regarding forward-looking statements – The is shown or into whose hands it may come and any such responsibility is Group’s reports including this Annual Report and Accounts and written expressly disclaimed. Under the Companies Act 2006, a safe harbour limits information released or oral statements made to the public in future, by or the liability of Directors in respect of statements in and omissions from the on behalf of the Company and the Group, may contain forward-looking Report of the Directors contained on pages 4 to 29, 31 to 40 and 61 to 63 statements. By their nature, these statements involve uncertainty since future and from the Directors’ Remuneration Report at pages 41 to 60. Under English events and circumstances can cause results to differ materially from those law the Directors would be liable to the Company (but not to any third party) anticipated. The forward-looking statements reflect knowledge and information if the Report of the Directors contained errors as a result of recklessness available at the time of their preparation and, except to the extent required by or knowing misstatement or dishonest concealment of a material fact, but applicable regulations or by law, the Company and the Group undertake no would not otherwise be liable. The Report of the Directors and the Directors’ obligation to update these forward-looking statements. Nothing in this Annual Remuneration Report have been drawn up and presented in accordance Report and Accounts should be construed as a profit forecast. Dairy Crest Annual Report 2016 1 AT A GLANCE Who we are Dairy Crest is a leading British dairy company Vision Strategy • We are proud of our links to the countryside, our dairy • To generate growth by building strong positions in heritage and the part they play in everyday life branded and added value markets • We want to earn the right to consumers’ loyalty by • To simplify, make more resilient and reduce costs providing healthy, enjoyable, convenient products • To generate cash and reduce risk We aim to meet consumers’ needs and go where this • To make acquisitions where they will generate value takes us • • As we grow, we will look after our people and the communities where we work Our locations Manufactures Clover, Country Life, Utterly Butterly Vitalite and Willow brands Cheese & whey Cheese produced at Davidstow is matured and packed Kirkby into the Cathedral City and Davidstow brands Distribution Products from Kirkby and Frome, alongside Cathedral City Innovation Centre and Davidstow, are efficiently distributed to customers Harper Adams across the country A unique collaboration between Dairy Crest and Nuneaton Harper Adams University. The base for our research and development and technical teams Head Office Claygate Erith The UK’s largest cheese Home to our spray oil business creamery producing Frome MH Foods. Manufactures Frylight award-winning cheddar, Versatile cheese packing one calorie cooking spray demineralised whey and galacto-oligosaccharide Davidstow Dedicated West Country milk pool Our retail markets Sale and performance of Dairies On 26 December 2015 Dairy Crest Cheese* £2.5 billion completed the sale of its Dairies Butter and spreads* £1.2 billion business to Muller UK and Ireland Group LLP. Oils** £330 million Details of the sale and the *IRI market data, 52 weeks ended 26 March 2016 performance of the Dairies ** Kantar market data 52 weeks ended 27 March 2016 business to the date of sale are included in the Financial review on pages 13 to 14. 2 Dairy Crest Annual Report 2016 Product groups Cheese & whey Butters, spreads & oils Revenue Profit Revenue Profit Strategic report 63% 55% 37% 45% Contribution to Group: % of total Group. Revenue excludes other revenue. Profit is product group profit excluding share of associates. Dairy Crest produces and markets Cathedral City, the UK’s Dairy Crest manufactures a number of leading Butters, leading cheese brand, and the premium Davidstow cheddar spreads & oils brands in the UK. Key brands include Country brand. Our world-class supply chain starts with milk Life (butter) and Clover (spread) which are produced at a supplied by nearly 400 farmers in the dairying heartlands single facility in Kirkby, Merseyside, alongside a portfolio of of Cornwall and Devon. This top quality milk is made smaller brands in the spreads category. into cheddar cheese at our highly-automated creamery We also produce Frylight, one calorie cooking spray at in Davidstow, Cornwall. The cheese then matures for an our facility in Erith, Kent. average of nearly a year at our purpose-built Nuneaton Highlights facility before being cut, packed and distributed. We have a Country Life achieved 4% sales volume growth, significantly second packing site in Frome, Somerset, for more complex • outperforming the market and innovative packaging. Successful launch of new ‘No Artificial Ingredients’ Clover grew Whey is a by-product of the cheese making process. • value and volume market share in the second half Historically, we produced sweet whey, to sell to a variety Frylight continues to grow sales strongly and is now the UK’s of food manufacturers. We now have a new facility at • number 1 oil brand Davidstow producing demineralised whey and galacto- Re-launch of Vitalite, our iconic dairy-free