TIDMABF
RNS Number : 0238W
Associated British Foods PLC
04 November 2014
For release 4 November 2014
Associated British Foods plc results for 52 weeks ended 13
September 2014
ABF delivers 6% earnings growth
Financial Highlights
Actual Constant currency(1)
* Group revenue GBP12.9bn -3% +1%
* Adjusted operating profit GBP1,163m* -1% +2%
* Adjusted profit before tax up 2% to GBP1,105m**
* Adjusted earnings per share up 6% to 104.1p**
* Dividends per share up 6% to 34.0p
* Net capital investment of GBP691m
* Net debt reduced to GBP446m
* Operating profit down 1% to GBP1,080m, profit before
tax up 18% to GBP1,020m and basic earnings per share
up 30% to 96.5p
George Weston, Chief Executive of Associated British Foods,
said:
"I am pleased to report growth of 6% in adjusted earnings per
share. Significant progress was achieved in operating profit by
Grocery, Agriculture, Ingredients and Primark, all of which
substantially out-performed last year. Primark's trading success
and significant expansion delivered another magnificent year. Much
lower sugar prices in the EU held back the group's profit growth
although, operationally, Sugar performed well."
* before amortisation of non-operating intangibles, and profits less
losses on disposal of non-current assets.
** before amortisation of non-operating intangibles, profits less
losses on disposal of non-current assets, and profits less losses
on the sale and closure of businesses.
All adjustments to profit measures are shown on the face of the
consolidated income statement.
(1) Constant currency is derived by translating the 2013 results at
2014 average exchange rates.
For further information please contact:
Until 15.00 only
Associated British Foods:
John Bason, Finance Director
Flic Howard-Allen, Head of External
Affairs
Tel: 020 7638 9571
Citigate Dewe Rogerson:
Chris Barrie, Angharad Couch, Eleni Menikou
Tel: 020 7638 9571
Jonathan Clare
Tel: 07770 321881
After 15.00
John Bason, Finance Director
Flic Howard-Allen, Head of External
Affairs
Tel: 020 7399 6500
Notes to Editors
Associated British Foods is a diversified international food,
ingredients and retail group with sales of GBP12.9bn and 118,000
employees in 47 countries. It has significant businesses in Europe,
southern Africa, the Americas, China and Australia.
Our aim is to achieve strong, sustainable leadership positions
in markets that offer potential for profitable growth. We look to
achieve this through a combination of growth of existing
businesses, acquisition of complementary new businesses and
achievement of high levels of operating efficiency.
Prior year restatement
The results for the year ended 14 September 2013 have been
restated upon adoption of IAS19 Employee Benefits Revised. The
impact of this restatement on the income statement and segmental
analysis is summarised below together with adjustments to reflect
the merger, in 2014, of the activities of AB Mauri's yeast and
bakery ingredients businesses in Australia and New Zealand with the
flour milling business of George Weston Foods, and a small disposal
made in the year ended 13 September 2014, the details of which are
provided on page 30.
Year ended 14 September 2013
----------------------------- ------------------------------------------------------
restated Transfer IAS 19 previously
and disposals adjustments reported
Adjusted operating profit
(GBPm) 1,180 - (5) 1,185
Adjusted operating profit
from continuing businesses
(GBPm) 1,172 (2) (5) 1,179
Adjusted profit before
tax (GBPm) 1,088 - (8) 1,096
Adjusted earnings (GBPm) 775 - (6) 781
Adjusted earnings per
share (p) 98.1 - (0.8) 98.9
Segmental analysis
Continuing businesses
Adjusted operating profit:
Grocery (GBPm) 224 (6) (2) 232
Sugar (GBPm) 434 - (1) 435
Ingredients (GBPm) 5 4 - 1
Retail (GBPm) 513 (1) 514
Central (GBPm) (51) (1) (50)
Disposed businesses
Grocery 2 2 - -
Ingredients 6 - - 6
The IAS19 adjustments only affect the United Kingdom geographic
segment.
The transfers and disposals all arise in the Asia Pacific
segment.
ASSOCIATED BRITISH FOODS plc
ANNUAL RESULTS ANNOUNCEMENT
FOR THE 52 WEEKS ENDED 13 SEPTEMBER 2014
CHAIRMAN'S STATEMENT
I am pleased to report growth of 6% in adjusted earnings per
share for the financial year. Significant progress was achieved in
operating profit by Grocery, Agriculture, Ingredients and Primark,
all of which substantially outperformed last year. Much lower sugar
prices in the EU held back the group's profit growth although,
operationally, Sugar performed well. Earnings also benefited from
the strength of the group's balance sheet and effective cash
management which resulted in a much lower interest charge than last
year.
The financial year was characterised by price deflation in many
food commodities and a strengthening of sterling against our major
trading currencies. The impact of this is evident in the lower
revenues of our food businesses and, in this context, the profit
growth in Grocery, Agriculture and Ingredients is all the more
impressive. Grocery margin advanced with strong performances from
Twinings Ovaltine and ACH Foods in the US and Mexico, and a further
recovery in the bakery and meat businesses of George Weston Foods
in Australia. Our yeast and bakery ingredients business, AB Mauri,
is achieving a strong turnaround from the challenges of recent
years with the promise of further improvement to come. AB Agri
achieved another record result.
Primark had another magnificent year, increasing profit by 30%
at constant currency and adding a net 1.2 million sq ft of selling
space taking our total estate to over 10 million sq ft at the
financial year end. Our highly successful entry into France this
year brings the number of countries in which Primark operates to
nine. Primark has now developed experience in establishing the
brand in new markets and has achieved considerable trading success
in each of them. We recently announced that the next new market
would be in the north-east of the US, with the first stores
expected to open late in 2015 and with up to 10 stores by the end
of 2016.
The results of our sugar operations reflect a major fall in EU
sugar prices and a very low world sugar price. Looking back to
2011/12, a shortage of sugar available for sale in the EU and
relatively high world prices at the time drove EU prices to very
high levels which clearly benefited our Sugar profit in that year.
This was exceptional. Since then more sugar has become available,
sugar stocks in the EU have risen, the European Commission has
confirmed the abolition of sugar quotas from October 2017, and
world sugar prices have declined dramatically. We have seen
increased competition as European producers position themselves for
a post-quota market. This has driven a fall in prices which we
expect to continue in 2015. We anticipate restructuring in the
European sugar industry and, as the high stock levels are
liquidated, we expect to see volatility in market prices. This
structural change is painful, but AB Sugar has risen to challenges
of this nature before, and does so this time with a programme of
continuous performance improvement. We are one of the most
efficient producers in the EU and will continue to take the
necessary action to ensure that we are well placed to operate in
the post-quota environment.
We have a good track record of investing for the long term and
this year was no exception with net capital investment of GBP691m,
up from GBP600m last year. The higher level of capital expenditure
was driven by a larger number of new Primark stores opened, or
still to open but in the process of fit- out, during the year. The
five-year investment programme at Allied Bakeries to create a
state-of-the-art baking capability across the UK is now
substantially complete and ensures the reliable supply of high
quality bread to our customers. This programme also sets a new
benchmark for standards of food safety in the bakery sector and has
enhanced safety in our workplace.
Cash flow was again stronger than the previous year driven by a
working capital inflow more than offsetting the increase in net
capital investment. Net debt at the year end was GBP358m lower than
last year at GBP446m. With the group's cash generating ability, the
lower net debt and the committed borrowing facilities available, we
have the capacity to meet our growth ambitions for the foreseeable
future.
Corporate responsibility
Last year we published a comprehensive Corporate Responsibility
Report which outlined the close alignment between our values and
good business practice, and highlighted our commitment to improving
productivity and reducing waste. This report was well received by
all of our stakeholders and updates are now available to reflect
the achievements of the last 12 months. The report is available
online at www.abf.co.uk/responsibility. Of particular note is the
further progress Primark has made in its ethical trade programme
with an enlarged team of specialists, now located in seven
countries, which is critical to supporting sustainable improvements
within supplier factories. As a responsible business, AB Sugar is
actively contributing to the debate about the role that sugar can
play as part of a healthy, balanced diet with its Making Sense of
Sugar campaign. The board remains committed to the highest ethical
standards across the group.
The board
The Senior Independent Director, Tim Clarke, was appointed to
the board in 2004 and, in accordance with the UK Corporate
Governance Code, having completed nine years' service, his
independence must be confirmed annually by the rest of the board.
This having been done, we are delighted that Tim has agreed to
continue as a member of the board and as the Senior Independent
Director.
Three other independent directors will complete nine years on
the board in 2015 and 2016. To avoid the possibility of a
significant loss of experience in a short period we have
temporarily expanded the board. Ruth Cairnie was appointed as an
independent non-executive director with effect from 1 May 2014.
Ruth was recently Executive Vice President Strategy & Planning
at Royal Dutch Shell plc where she had also held a number of senior
commercial roles gaining experience in European and emerging
markets. We very much look forward to Ruth's participation in the
board's deliberations.
Employees
I would like to thank all our employees for their contribution
to the group's success in the past year. Operational improvements
have underpinned the increased profitability in Grocery and
Ingredients, and have become part of everyday business at AB Sugar.
Together with the excellent performances from Agriculture and
Primark these results are a tribute to the dedication and
commitment of our employees.
Dividends
I am pleased to report that a final dividend of 24.3p is
proposed, to be paid on 9 January 2015 to shareholders on the
register on 12 December 2014. Together with the interim dividend of
9.7p paid on 4 July 2014, this will make a total of 34.0p for the
year, an increase of 6%.
Outlook
In the coming year, we expect Primark's expansion to continue
and Grocery, Ingredients and Agriculture to make further progress.
With the continuing fall in EU sugar prices, and volatility in the
world sugar price, we expect a further large reduction in profit
from AB Sugar, but this will put much of the effect of the
structural changes in EU prices behind us. At this early stage we
expect a marginal decline in adjusted operating profit for the
group but the impact on earnings will be mitigated by much lower
tax and interest charges. We therefore see limited opportunity to
grow adjusted earnings per share in the new financial year. With
the strength of the group's balance sheet and strong cash
generation, we have every reason to be confident of further
progress for the group thereafter.
Charles Sinclair
Chairman
CHIEF EXECUTIVE'S STATEMENT
The delivery of an adjusted operating profit for the group in
line with last year reflects the considerable achievement of all of
our businesses in a year when EU sugar prices declined
substantially.
This financial year saw sterling strengthen against all of our
major trading currencies and particularly those in emerging
markets. Group revenue declined by 3% to GBP12.9bn but at constant
currency actually increased by 1%. Adjusted operating profit was 1%
lower at GBP1,163m but increased by 2% at constant currency.
Currency movements have had a significant impact on our business
segments this year and in order to understand the underlying
operating performance of each of them, we have referred to the
year-on-year changes at constant currency.
A key influence on this year's performance has been the impact
on our food businesses of price deflation in some of our major
commodities. The prices of wheat, barley, corn oil and rice all
fell during the year. World sugar prices have also fallen and, as
discussed elsewhere in this report, we are in the midst of a
structural change in EU sugar prices. As a consequence the growth
in revenues achieved by our food businesses in recent years has not
been sustained this year. It is against this background that I am
pleased with the profit and margin improvements delivered by
Agriculture, Grocery and Ingredients.
Operationally AB Sugar had an excellent year with good factory
performances and further substantial cost reductions from the
performance improvement programmes which are well embedded in each
of the businesses. We expect EU prices to fall further during the
coming year, but remain confident that our well-invested sugar
assets position us amongst the world's lowest-cost sugar
producers.
At Primark, a strong store opening programme, excellent buying,
and higher sales densities in our new stores, all came together to
drive revenues to within a fraction of GBP5bn with a further
improvement in margin. As well as expanding in our more established
UK market we also opened large stores in a number of major cities
across Europe, including Lisbon, Madrid, Berlin, Cologne,
Dusseldorf and Vienna. This year saw the opening of our first
stores in France, firstly in Marseille quickly followed by Dijon
and then three stores in the suburbs of Paris. We were delighted by
the success of these French stores, both for the size of the crowds
on opening days, which were overwhelming, but more importantly for
the tremendous customer enthusiasm for Primark, in very different
cities, which was sustained throughout the rest of the year.
Primark's response to the Rana Plaza disaster in Bangladesh in
2013, has been extensive. In addition to the payment of
compensation to the victims and their families, Primark was a
founding signatory to the Accord on Fire and Building Safety in
Bangladesh. This Accord is a contract between over 150 apparel
brands and retailers, international and local trade unions and
NGOs, which are committed to carrying out factory inspections and
improving working conditions in the Bangladesh garment industry.
Primark carried out building surveys in Bangladesh to assess the
structural integrity of all of the 80 factories from which we
source garments. These structural assessments will be extended to
other countries shortly.
Grocery made very good progress with profit and margin well
ahead of last year. Twinings Ovaltine had another excellent year,
both in the UK and overseas, and trading was much improved at ACH
Foods in the US and Mexico. The recovery in profitability at George
Weston Foods in Australia was well established this year. AB Agri
deserves credit for the further development of the business,
particularly for the strides made by AB Vista as it extends its
global customer reach. Profit in Ingredients recovered strongly
this year as the new management team at AB Mauri, our yeast and
bakery ingredients business, made significant progress in reducing
the cost base, restructuring operations and integrating the newly
acquired European bakery ingredients business.
Our businesses are encouraged to take advantage of the technical
skills, geographical presence, capabilities and experience that are
available elsewhere in the group, in the development of their own
operations. This Operating Review showcases some examples of our
success in leveraging the benefits of being part of a larger group,
an illustration of which was the collaboration between our enzymes,
cereal extrusion and Agri businesses to deliver the new cereal
extrusions factory at Evansville in the US which would not have
been achieved by any of the individual businesses on their own.
OPERATING REVIEW
SUGAR
2014 2013 Actual fx Constant
fx
--------------------------- ------ ------ ---------- ---------
Revenue GBPm 2,083 2,677 -22% -17%
--------------------------- ------ ------ ---------- ---------
Adjusted operating profit
GBPm 189 434 -56% -54%
--------------------------- ------ ------ ---------- ---------
Adjusted operating profit
margin 9.1% 16.2%
--------------------------- ------ ------ ---------- ---------
Return on average capital
employed 10.5% 23.3%
--------------------------- ------ ------ ---------- ---------
Revenue and adjusted operating profit for AB Sugar were
substantially lower than last year driven by declining sugar
prices, lower volumes and adverse currency translation. The price
and volume effects were predominantly seen in Europe where prices
were driven down by increased market competition as our competitors
seek to establish new market positions ahead of the removal of
quotas in 2017, and by a desire to reduce quota stock levels across
the EU which have been higher than normal. The world sugar price,
which has more of an impact on EU exports and our Chinese business,
was low, and fell further, throughout the year but we consider this
to be unsustainable given that it is markedly below the global
average cost of production.
Our sugar businesses have been actively engaged in performance
improvement programmes for a number of years. All businesses have
undertaken a review of overheads, substantial reductions have
already been delivered and the programmes are continuing. These are
aimed at extending our cost leadership in all regions to ensure
that AB Sugar is well positioned as a globally competitive
producer.
British Sugar produced 1.32 million tonnes of sugar compared
with 1.15 million tonnes last year. Good growing conditions
extended into the mild winter resulting in higher beet yields and
sugar content than last year. All UK factories performed well with
further progress achieved in performance improvement initiatives
and in health, safety and environmental metrics.
The crop for the 2014/15 campaign has benefited from excellent
growing conditions, with every indication that it will be much
larger than that processed in the previous year. The new campaign
has started well with production ahead of schedule and with our
Newark and Wissington factories already exceeding daily beet
throughput records. This larger crop will provide the opportunity
to confirm our ability to process the higher volumes that we expect
to become the norm in a post-quota environment.
The beet price payable to growers for the 2014/15 crop was
agreed in summer 2013, at a substantial increase over the price for
the year under review, and at an increased cost to British Sugar of
some GBP30m. Negotiations for delivered beet costs for the 2015/16
campaign have now been concluded with a reduction of some 20% on
the previous year. This will make a major contribution to ensuring
a more sustainable UK beet sugar industry reflective of the new
commercial environment for EU sugar.
In Spain, sugar beet volumes were lower than last year with a
larger crop area in the south not compensating for a reduction in
the area planted in the north due to waterlogged fields during the
spring. As a consequence, total beet sugar production was 338,000
tonnes, down from 405,000 tonnes in the previous year. 200,000
tonnes of imported raw sugar was refined at Guadalete and a further
59,000 tonnes was co-refined at the northern beet plants
supplementing the beet sugar production and minimising logistics
costs to market.
Contract negotiations with our EU customers for the 2014/15
marketing year are proving to be as challenging as last year. There
are high stocks of sugar in the EU, competition continues to be
intense and both of these factors have continued to drive EU prices
downward. In response to this difficult commercial environment we
have undertaken a review of our cost base and a provision of GBP22m
for the cost of overhead reduction has been charged to adjusted
operating profit this year.
After a complex commissioning process, production volumes at the
Vivergo biofuels plant increased significantly this year. Although
inclusion levels of ethanol in gasoline continued to rise in the EU
year-on-year, gasoline consumption has fallen which has led to
lower prices. Vivergo sustained a loss this year but further
enhancements to the plant in the new financial year will improve
reliability and throughputs are expected to meet or exceed rated
capacity. Combined with lower wheat prices the profitability of
Vivergo is therefore expected to improve.
Profit at Illovo saw some reduction. Sugar production of 1.70
million tonnes this financial year compared with 1.87 million
tonnes last year, primarily as a result of lower production in
Zambia and Swaziland where the phasing of the campaign is slightly
later than last year. Domestic pricing increased in line with local
inflation with the exception of Tanzania and South Africa which
were affected by low-cost imports. However, import tariffs have now
been introduced in South Africa which has resulted in some
improvement in local pricing. The profitability of exports of raw
sugar to the EU market under preferential import arrangements was
adversely affected by the lower pricing in that market. Co-product
contribution, which is of growing importance to Illovo, increased
this year with the successful operation of the new potable alcohol
distillery in Tanzania.
In China, profitability has improved with the implementation of
a number of overhead reduction and efficiency initiatives. In the
south, excellent growing conditions and a higher sugar content in
the cane resulted in an increase in sugar production from 500,000
tonnes last year to 560,000 tonnes this year. However, flooding in
Heilongjiang province led to a reduction in beet supplied to our
factories which resulted in much lower sugar production in the
north, at 116,000 tonnes. The campaigns at Qianqi and Zhangbei were
excellent with good factory throughput and a high sugar content in
the beet following our success in working with the growers over a
number of years.
A significant level of imports and increased domestic production
resulted in very low domestic prices throughout the year.
AGRICULTURE
2014 2013 Actual fx Constant
fx
--------------------------- ------ ------ ---------- ---------
Revenue GBPm 1,312 1,410 -7% -6%
--------------------------- ------ ------ ---------- ---------
Adjusted operating profit
GBPm 50 47 +6% +11%
--------------------------- ------ ------ ---------- ---------
Adjusted operating profit
margin 3.8% 3.3%
--------------------------- ------ ------ ---------- ---------
Return on average capital
employed 17.3% 16.4%
--------------------------- ------ ------ ---------- ---------
AB Agri had another excellent year with adjusted operating
profit 11% ahead of last year at constant currency. The decline in
revenue reflected lower wheat and other commodity costs. However,
cash margins in UK feed were maintained and the profit growth was
delivered by the higher margin businesses.
The wet winter in the UK, particularly in the west country,
adversely impacted livestock farming but excellent forage growing
conditions during a dry spring and summer, as well as a softening
commodity market, led to a period of more stable prices and
increased confidence amongst farmers. UK feed volumes remained
resilient. Oversupply in the UK poultry market depressed prices
during the summer but the market is now beginning to stabilise.
Strong growth was achieved by AB Vista driven by the success of
Quantum Blue, its phytase feed enzyme, notably in Latin America and
the Middle East but also in the EU where it was launched recently
following its approval by the European Food Safety Authority. The
new granulation facility at Evansville, Indiana, is operating
successfully providing additional capacity to meet the increasing
demand for these enzymes.
Good commercial and procurement management drove a strong
performance at Speciality Nutrition, our UK pre-mix and starter
feeds business. Expansion and modernisation of its plant at Rugeley
enabled the business to meet increasingly stringent customer
demands for high-quality pre-mixes. AB Sustain's responsible
sourcing programme achieved growth during the year and this
programme has now been extended into overseas markets.
AB Agri China maintained margins through good procurement and a
favourable product mix. Consumer demand for meat in China continues
to grow with a particular need to ensure reliable and high-quality
sources. As meat production in China therefore transitions from
small, family-run concerns towards large-scale commercial
operations, there is increasing demand for high-quality feed
supplied by modern, efficient feed mills. Construction and
commissioning of our new feed mill at Zhenlai was completed to plan
in August and good progress is being made with construction of a
mill at Rudong, both of which will supply these large, integrated
meat processors.
Profit at Frontier was ahead of last year. Fine weather during
the planting seasons saw strong demand for cereal and rape seed and
the growing conditions of a mild winter and warm spring drove
demand for crop inputs such as fungicides. Encouragingly, the warm
dry summer resulted in an early wheat harvest of excellent yield
and quality.
RETAIL
2014 2013 Actual fx Constant
fx
--------------------------- ------ --------- ---------- ---------
restated
--------------------------- ------ --------- ---------- ---------
Revenue GBPm 4,950 4,273 +16% +17%
--------------------------- ------ --------- ---------- ---------
Adjusted operating profit
GBPm 662 513 +29% +30%
--------------------------- ------ --------- ---------- ---------
Adjusted operating profit
margin 13.4% 12.0%
--------------------------- ------ --------- ---------- ---------
Return on average capital
employed 33.2% 26.0%
--------------------------- ------ --------- ---------- ---------
Sales at Primark were 17% ahead of last year at constant
currency. This excellent result was driven by an increase in retail
selling space, like-for-like sales growth of 4%, and superior sales
densities in the new stores. The year was characterised by success
for our autumn/winter and spring/summer ranges. Sales over the
Christmas period were excellent and were boosted in the third
quarter by warm weather, especially in the spring and early summer.
We began trading in France in December last year and sales across
all five stores have been exceptional. Eight years on from our
initial entry into Iberia, this year's like-for-like growth
achieved by our Spanish stores was particularly strong.
The adjusted operating profit margin in the first half was
higher than last year reflecting the benefit of warehouse and
distribution efficiencies and lower freight rates. These benefits
continued in the second half and, with strong trading over the
summer resulting in a lower level of markdowns, the margin for the
full year reached 13.4%. This lower level of markdowns was a
consequence of a strengthening of our buying and merchandising
teams and the success of our seasonal range.
In the immediate aftermath of last year's collapse of Rana Plaza
in Bangladesh, Primark committed to meeting its responsibilities in
full and to paying long-term compensation to the workers employed
by its supplier or their dependants. We began making these
long-term payments in March 2014 and, throughout the process, we
have provided broadly based support. Primark also paid short-term
aid to the families of all the workers employed at Rana Plaza, most
of whom were making clothes for its competitors. Primark's total
commitment amounts to US$12m, of which US$7m was provided in last
year's results and US$5m has been charged this year.
The safety of the staff employed by our suppliers is a high
priority. We have now undertaken structural assessments of all of
our supplier factories in Bangladesh. We further strengthened our
in-country teams of ethical trading specialists who are critical in
supporting sustainable improvements within supplier factories, and
providing greater visibility across the supply chain. We conducted
2,058 audits in the last calendar year, and ethical trade training
continues to be provided to every new Primark employee. We intend
to extend our programme of structural assessments to include
factories producing for us outside Bangladesh.
The pace of selling space expansion quickened further this year
with the gross addition of 1.4 million sq ft. We relocated three
stores, extended three stores and opened in 25 new locations. It is
perhaps worth putting this growth into context - in the year 2000
when we opened our 100(th) store after 31 years of trading, the
entire estate was just 1.4 million sq ft and now, 14 years later,
the estate is seven times larger. This year saw the entry of
Primark into France where we now have five stores: Marseille, Dijon
and three in the suburbs of Paris. We closed seven smaller stores,
primarily where larger, better located, premises became available
in the same city, resulting in a net increase in selling space of
1.2 million sq ft. This brings our total estate to 278 stores and
10.2 million sq ft at the financial year end.
Responding to the increasing scale of our business in
continental Europe, we doubled the size of our warehouse in Torija,
Spain this summer and the Mönchengladbach warehouse in Germany,
which services the stores in northern Europe, is being extended by
60% and will become fully operational early in 2015.
Northern
Continental Republic
UK Iberia Europe of Ireland Total
sq stores sq stores sq stores sq stores sq ft stores
ft ft ft ft '000
'000 '000 '000 '000
September
2013 5,760 161 1,330 41 880 17 1,030 38 9,000 257
Change
in year 280 3 240 6 680 13 - (1) 1,200 21
September
2014 6,040 164 1,570 47 1,560 30 1,030 37 10,200 278
+5% +18% +77% - +13%
------------ ------- -------- ------- -------- ------- -------- ------- -------- -------- --------
We have a very strong pipeline of new stores in Europe extending
over a number of years. We have already opened five new stores
since the year end: one in Portugal, two in the Netherlands and two
in Germany, with a further five scheduled to open before Christmas
including a relocation in Northampton to a store more than three
times the size. We expect the increase in selling space for the
financial year to be a little less than 1.0 million sq ft, to be
followed in the autumn of 2015 by a strong programme of European
openings.
We have announced that,after extensive research, we have decided
to take Primark to consumers in the north-east of the US. We have
chosen stores which are located close to areas of high urban
density and which benefit from high levels of existing customer
footfall. Our strategy is to generate interest in, and awareness
of, the Primark brand. A lease for some 70,000 sq ft of selling
space at Downtown Crossing in the heart of Boston, Massachusetts
was signed in April and we expect this store to open in late 2015.
We have subsequently signed the lease of a further seven stores in
this region including an 80,000 sq ft store in the King of Prussia
shopping mall in Pennsylvania, one of the busiest in the US. We
intend that all eight stores will be trading from 0.5 million sq ft
by late 2016. These stores will be supported by leased
warehousing.
New store openings:
Spain Portugal UK
Albacete Lisbon Bath
Cartagena Canterbury
Fuengirola Austria Cardiff
Huelva Vienna Crawley
Logrono Leeds - Trinity
Madrid - Plenilunio France Warrington
Roquetas de Mar Dijon
Tenerife Marseille The Netherlands
Paris - Creteil SC Eindhoven
Germany Paris - O'Parinor Enschede
Berlin - Alexanderplatz Paris - VLG Quartz Nijmegen
Cologne Zoetermeer
Dusseldorf
Relocations or closures:
Spain UK Republic of Ireland
La Coruna Cardiff Dundalk
Madrid - Plenilunio Crawley
Zaragoza Leytonstone
GROCERY
2014 2013 Actual fx Constant
fx
--------------------------- ------ --------- ---------- ---------
restated
--------------------------- ------ --------- ---------- ---------
Revenue GBPm 3,337 3,568 -6% -1%
--------------------------- ------ --------- ---------- ---------
Adjusted operating profit
GBPm 269 224 +20% +24%
--------------------------- ------ --------- ---------- ---------
Adjusted operating profit
margin 8.1% 6.3%
--------------------------- ------ --------- ---------- ---------
Return on average capital
employed 20.8% 16.9%
--------------------------- ------ --------- ---------- ---------
Grocery operating profit increased by 24% at constant currency
with George Weston Foods in Australia, ACH Foods in the US and
Twinings Ovaltine all well ahead of last year. Revenues were level
with last year at constant currency and were held back by lower
food commodity prices.
Twinings Ovaltine delivered strong revenue growth in tea with
record market shares achieved in each of its four largest markets.
Growth was achieved in all categories in the UK led by excellent
progress in green teas and infusions, and we remain the fastest
growing tea brand in the US. Ovaltine again performed well in its
developing markets, particularly Brazil, where the brand was
supported by a new advertising campaign, in south east Asia, and in
Nigeria where our new Ovaltine packing plant is now fully
operational. Tea manufacturing conversion costs were lower than
last year with the benefit of higher volumes, further improvements
in operating efficiency at the factory in Poland and more
high-speed packing equipment at Andover.
At Allied Bakeries, revenues and profit were ahead of last year
with higher branded sales and an increase in market share.
Successful new products this year included Kingsmill Great White, a
white bread with as much fibre as a wholemeal loaf, which was
launched in February supported by an in-store marketing campaign
and television advertising. New re-sealable packaging with a
refreshed design drove further growth of Kingsmill wraps, and
towards the end of the year we launched Sandwich Thins which are
proving very popular. Following its relaunch last year, the
Allinson brand received further national advertising support this
year and achieved further growth. The five-year capital investment
programme to upgrade our UK bakeries is almost at an end with
completion of the modernisation of the Glasgow bakery during the
year and the installation of a new bread plant in Stevenage which
is due to be commissioned in November. The proposed closure of the
Orpington bakery was announced in August with employee consultation
nearing conclusion.
Silver Spoon's revenue and profitability was well below last
year reflecting an especially competitive year for the UK packed
sugar market which saw the loss of a number of granulated sugar
contracts. This was mitigated in part by a reduction in overheads
at the Bury packaging plant. New product launches resulted in
Truvia growing its share of the stevia sweeteners market and, in
the home baking sector, Allinson maintained its position as the
leading bread flour brand following last year's relaunch.
Revenue and profit at Jordans and Ryvita were ahead of last year
with good growth in our international business, particularly in
France, Canada and Australia. The new Ryvita Thins line at the
Poole factory yielded improvements in production efficiency and
product quality, enabling supply to keep pace with substantially
increased demand. On 20 October, after clearance from the
Competition and Markets Authority, we completed the acquisition of
Dorset Cereals. This premium brand, with particular strength in the
growing Muesli sector, will complement our existing Jordans cereals
and Ryvita crispbread brands. We intend to maintain Dorset Cereals'
existing production facility in Poundbury, Dorset.
AB World Foods achieved revenue growth in the UK for Patak's and
Blue Dragon which are, respectively, the largest Indian and
Oriental ambient food brands. Both brands also performed well
internationally, particularly in Canada where social media
campaigns to coincide with ethnic festivals proved to be an
effective way of promoting awareness of the product range. The core
brands of Westmill Foods, Lucky Boat noodles and Elephant Atta
flour, both achieved further growth and, towards the end of the
year, we relaunched the Rajah spice brand with new packaging,
advertising support and in-store trial.
George Weston Foods in Australia achieved a major improvement in
performance with higher bread prices, increased meat volumes, the
delivery of a number of cost reduction initiatives and improved
commodity procurement. In a challenging retail and competitor
environment, Tip Top successfully implemented bread price rises in
the first half of the year which, together with an increase in the
proportion of higher margin products sold and further productivity
improvements, led to a higher operating profit for the bakery
business. Factory productivity was also better at Don KRC which
contributed to better meat yields and a reduction in labour costs.
Enhanced product quality and improved customer service levels
resulted in a number of new contracts being secured and an increase
in market share. The opening of the new meat factory in Castlemaine
enabled the closure of our factory near Perth in Western Australia
and the redevelopment of the substantial site. Good progress has
been made with the preparation of this site for housing
development, and a number of lots were sold this year.
Sales at ACH were ahead of last year, largely the result of
increased demand for Mazola with positive consumer reaction to a
plant sterols advertising campaign highlighting the
cholesterol-lowering benefits of corn oil. In our Flavours
business, volume increases were secured in barbeque and grilling
spices with a very successful marketing campaign, 'Grilling with
the Greats', in association with Major League Baseball. Capullo,
our premium oil brand in Mexico, increased its market share which,
together with the benefit of lower input costs, drove profit ahead
of last year.
INGREDIENTS
Continuing businesses 2014 2013 Actual fx Constant
fx
--------------------------- ------ --------- ---------- ---------
restated
--------------------------- ------ --------- ---------- ---------
Revenue GBPm 1,261 1,360 -7% +4%
--------------------------- ------ --------- ---------- ---------
Adjusted operating profit
GBPm 41 5
--------------------------- ------ --------- ---------- ---------
Adjusted operating profit
margin 3.3% 0.4%
--------------------------- ------ --------- ---------- ---------
Return on average capital
employed 5.8% 0.6%
--------------------------- ------ --------- ---------- ---------
Ingredients' revenues were 4% ahead of last year at constant
currency but with most of these businesses being located overseas,
the strengthening of sterling resulted in a decline of 7% at actual
rates. Profit recovery was substantial, driven by much stronger
trading from AB Mauri and the benefit from the non-recurrence of
last year's restructuring and accelerated depreciation charges.
AB Mauri made progress in all of its regions and in both yeast
and bakery ingredients. Good revenue growth was achieved in South
America where, in a very competitive market, cost inflation was
either recovered through pricing or offset by improvements in
efficiency. Higher volumes and a focus on business development
drove growth in North America and the new yeast factory in Mexico
is now supplying the markets of North and Central America. In
China, the site of our Meishan yeast factory in Guangzhou City is
to be redeveloped by the local government, the factory has been
closed and provision for the small associated cost has been made.
Customer requirements will be met from our other factories in
China.
In January, AB Mauri completed the acquisition of a small bakery
ingredients business operating across western Europe which offers
craft and industrial customers a range of high-quality bakery
ingredients. Its integration with our existing operations will
broaden our product offering and our ability to respond to customer
needs in a number of key markets.
At ABF Ingredients, good growth was achieved in extruded cereals
in the US and in speciality ingredients which provide enhanced
functionality when incorporated into pharmaceutical formulations.
Further progress was made in baking enzymes with several new
products launched during the year and, following a series of
successful trials in the pulp and paper industry, a number of mills
have converted to the use of enzymes to reduce costs and lessen
their environmental impact. The next phase of expansion at the
enzymes manufacturing facility in Finland is under way. The closure
of the yeast extracts plant in China, for which provision was made
last year end, was well managed and profit benefited from the
transfer of production to lower cost facilities elsewhere in the
group. The new cereal extrusions factory in the US at Evansville,
Indiana, is now in production, providing increased capacity to meet
the growing demand both for extruded cereal products and AB Vista's
granulated feed products.
In view of the complementary product portfolios and common
customer base, the Australian and New Zealand yeast and bakery
ingredients businesses of AB Mauri have been integrated with the
flour milling business of George Weston Foods in Australia. This
will reduce overheads and allow the combined business to bring its
technologies to market more effectively. Reflecting this change,
the results of the Australian milling business, which were
previously included within the Grocery segment, are now included
within the Ingredients segment. The comparative results for 2013
have been restated resulting in GBP272m of sales and GBP4m of
operating profit being transferred from Grocery to Ingredients.
SUMMARY
Looking ahead to the next few years we see excellent prospects
for Primark and further development of Grocery, Ingredients and
Agriculture. We expect a further large reduction in profit for AB
Sugar during 2014/15 and some volatility in the medium term with
the reduction of excess stocks and as the sugar industry
restructures. By the end of our 2015 financial year much of the
structural change in EU prices will be behind us and we have every
reason to be confident of further progress for the group
thereafter.
George Weston
Chief Executive
FINANCIAL REVIEW
GROUP PERFORMANCE
Group revenue increased by 1% at constant exchange rates, but
the strengthening of sterling against our major trading currencies,
particularly in the second half of the year, resulted in a decline
in revenues of 3% at actual rates, to GBP12.9bn. Adjusted operating
profit of GBP1,163m was 2% ahead of last year at constant rates but
1% lower at actual rates. In calculating adjusted operating profit,
the amortisation charge on non-operating intangibles and any
profits or losses on disposal of non-current assets are excluded.
On an unadjusted basis, operating profit was 1% below last year at
GBP1,080m. Comparative results for 2013 have been restated for the
effects of adopting the revised accounting standard for employee
benefits, details of which are provided under 'Pensions' below.
During the year we merged the activities of AB Mauri's
Australian and New Zealand yeast and bakery ingredients businesses
with the flour milling business of George Weston Foods in
Australia. The results of the Australian milling business, which
were previously included within the Grocery segment, are now
included within the Ingredients segment. The comparative results
for 2013 have been restated resulting in GBP272m of sales and GBP4m
of operating profit being transferred from Grocery to
Ingredients.
The income statement benefited from the non-recurrence of last
year's loss of GBP128m on the sale or closure of businesses in our
Ingredients and Sugar segments.
Finance expense less finance income of GBP58m compared with a
net charge of GBP87m last year. This reduction reflected the
retirement of expensive long-term debt, including the redemption of
British Sugar's GBP150m 10 3/4 % debenture on 4 July 2013 and the
repayment of GBP194m of private placement notes, $120m of which was
repaid mid way through last year and $194m was repaid this year.
The average level of debt also benefited from another strong cash
flow performance.
Profit before tax increased from GBP868m to GBP1,020m. On an
adjusted basis, where the amortisation of non-operating intangible
assets and any profits or losses on the sale of non-current assets
and on the sale and closure of businesses are excluded, profit
before tax increased by 2% to GBP1,105m.
TAXATION
We recognise the importance of complying fully with all
applicable tax laws as well as paying and collecting the right
amount of tax in every country in which the group operates. We have
had a board-adopted tax policy for many years which is based on
seven tax principles that are embedded in the financial and
non-financial processes and controls of the group. Our tax
principles are included in the appendix to our Corporate
Responsibility Report.
The tax charge for the year of GBP237m included an underlying
charge of GBP257m at an effective rate of 23.3% (2013 - 24.2%) on
the adjusted profit before tax. The reduction in the effective rate
is a result of the mix of profits earned in different tax
jurisdictions and the reduction in the UK corporation tax rate from
23% to 21% with effect from 1 April 2014. A further reduction in
the UK rate to 20% is due to take effect on 1 April 2015. The
legislation to effect these rate changes was enacted before the
prior year balance sheet date and as deferred tax is measured at
the rates that are expected to apply in the periods when the
underlying timing differences reverse, opening and closing UK
deferred tax balances have both been calculated using a rate of
20%.
The overall tax charge for the year benefited from a GBP21m
(2013 - GBP29m) credit for tax relief on the amortisation of
non-operating intangible assets and goodwill arising from previous
acquisitions.
EARNINGS AND DIVIDENDS
Earnings attributable to equity shareholders were GBP762m,
GBP177m higher than last year, and the weighted average number of
shares in issue during the year used to calculate earnings per
share was 790 million (2013 - 790 million). Earnings per ordinary
share were 30% higher than last year at 96.5p with the absence of
losses on sales and closure of businesses. Adjusted earnings per
share, which provides a more consistent measure of trading
performance, increased by 6% from 98.1p to 104.1p.
The interim dividend was increased by 4% to 9.7p and a final
dividend has been proposed at 24.3p which represents an overall
increase of 6% for the year. The proposed dividend is expected to
cost GBP192m and will be charged next year. Dividend cover, on an
adjusted basis, is just over three times.
BALANCE SHEET
Non-current assets of GBP6.8bn were similar to last year.
Intangible assets were GBP114m lower, mainly reflecting the
amortisation charge for the year and foreign exchange translation
losses. Property, plant and equipment increased by GBP113m with
capital expenditure in the year running ahead of depreciation.
Working capital at the year end was GBP164m lower than last year
reflecting lower food commodity prices and the benefit of
management action to reduce the average level of working capital
throughout the year. When expressed as a percentage of sales, this
also showed further improvement. Net borrowings at the year end
were GBP358m lower than last year at GBP446m as a consequence of
the very strong cash flow.
A currency loss of GBP250m arose on the translation into
sterling of the group's foreign currency denominated net assets.
The group's net assets increased by GBP234m to GBP6,753m.
Return on capital employed (ROCE) for the group increased
further this year to 18.9%, up from last year's restated return of
18.4%. All businesses with the exception of Sugar delivered an
improvement through higher profits, with the average level of
capital employed in the business little changed from last year.
ROCE is calculated by expressing adjusted operating profit as a
percentage of the average capital employed for the year.
CASH FLOW
Net cash flow from operating activities was very strong again
this year, increasing from GBP1,276m to GBP1,439m with a working
capital inflow of GBP100m compared to last year's outflow of
GBP97m.
We continued to invest in the future growth of the group and the
GBP691m spent on property, plant and equipment and intangibles net
of disposals during the year was an increase on last year's
investment of GBP600m. Primark spent GBP378m on the acquisition of
new stores, the fit-out of new and existing stores and warehousing.
Expenditure in the food businesses was lower than last year but
major projects included further investment in the modernisation of
our UK bakeries, new tea packing machines in Twinings' three
factories, two animal feed mills in China and the redevelopment of
a former bakery site in Western Australia including ground works
and utilities in preparation for its sale for housing
development.
FINANCING
The financing of the group is managed by a central treasury
department. The group has total committed borrowing facilities
amounting to GBP2.2bn, which comprise: GBP579m of US private
placement notes maturing between 2016 and 2024; GBP1.2bn provided
under a newly negotiated syndicated, revolving credit facility
which matures in July 2019 with an option to extend by two years; a
GBP120m loan from the European Investment Bank maturing in January
2015 and GBP328m of local committed facilities in Africa and Spain.
During the financial year we repaid, from existing cash resources,
US$194m of private placement notes. At the year end, GBP821m was
drawn down under these committed facilities. The group also had
access to GBP644m of uncommitted credit lines under which GBP132m
was drawn at the year end. Cash and cash equivalents totalled
GBP519m at the year end.
The financial strength and flexibility of the group is enhanced
by diversifying our sources of funding and having certainty of
finance over a long period. The strength and breadth of the 12
banks in the syndicate reflect the scale and international presence
of the group and during the renegotiation this year we included
another European bank in the syndicate to reflect the increasing
activities of the group in continental Europe through Primark's
expansion. The average fixed interest coupon on the private
placement notes is 5.1%.
PENSIONS
Pension liabilities in the group's defined benefit pension
schemes exceeded employee benefit assets at the year end by GBP43m
compared with last year's restated deficit of GBP15m. The UK scheme
accounts for 91% of the group's total pension assets and the
increase in the market value of these assets during the year was
slightly more than the increase in the present value of scheme
liabilities. Total contributions to defined benefit plans in the
year amounted to GBP41m (2013 - GBP69m), the lower amount
reflecting the end of the GBP30m p.a. deficit contributions that
were paid in each of the last five years. A triennial valuation of
the UK scheme was undertaken as at 5 April 2014, which was agreed
by the trustees after the group's year end, and revealed a surplus
of GBP78m. As a result there is no requirement to agree a recovery
plan with the trustees.
On 1 October 2012 new legislation came into effect which
required all eligible UK employees to be automatically enrolled
into a qualifying pension scheme. We embraced this new legislation
by providing an attractive scheme with employer contribution rates
in excess of the statutory minimum and we saw a high take-up.
The charge for the year for the group's defined contribution
schemes, which is equal to the contributions made, amounted to
GBP76m (2013 - GBP66m) and this is the first year that defined
contribution costs have exceeded the cash contribution made to the
defined benefit schemes reflecting the changing shape of pension
provision in the group.
The accounting standard under which the group's pension schemes
are accounted, IAS 19 Employee benefits, has been revised, and the
new provisions were adopted by the group with effect from 15
September 2013. The comparative results for the financial year 2013
have been restated as a prior year adjustment, the effect of which
was to reduce the reported operating profit by GBP5m to reflect a
change in the treatment of administration costs, and to increase
other financial expenses by GBP3m due to the replacement of the
expected rate of return on assets with the discount rate. There was
little difference between the expected rates of return on assets
and the discount rates in the group's schemes in 2013 hence the
small adjustment.
John Bason
Finance Director
The annual report and accounts is available at www.abf.co.uk and
will be despatched to shareholders on 6 November 2014. The annual
general meeting will be held at Congress Centre, 28 Great Russell
Street, London. WC1B 3LS at 11am on Friday, 5 December 2014.
PRINCIPAL RISKS AND UNCERTAINTIES
Each business is responsible for its own risk management
assessment which is reported to the group's Director of Financial
Control annually. Our decentralised business model empowers the
boards and management of our businesses to identify, evaluate and
manage the risks they face on a timely basis. Key risks and
internal control procedures are reviewed at group level by the
board.
We require all businesses to implement appropriate levels of
risk management to ensure compliance with all relevant legislation,
our group health, safety and environment policies, our overriding
business principles and group policies relating to them, taking
into account business needs and local circumstances.
Each business is responsible for regularly assessing its health,
safety and environmental risks with managers, operators,
contracting companies and specialist staff working together to
identify hazards. Appropriate operational procedures and controls
are put in place to mitigate risks and all employees are provided
with appropriate information, training and supervision. Further
details of our risk mitigation activities can be found in our
Corporate Responsibility Report at
www.abf.co.uk/responsibility.
The board reviews annually the material financial and
non-financial risks facing our businesses and, on a rolling cycle
basis, reviews the effectiveness of the risk management process and
the resources that our individual businesses devote to them. The
principal risks currently identified by our businesses and reviewed
by the board are:
People
----------------------------------------------------------------------------------------------------------------
Issue Risk Mitigation
------------------- --------------------------- --------------------------------------------------------------
Product safety Reputational damage Food safety is put before economic considerations.
caused by food
hygiene or product Our businesses employ quality control
safety incidents. specialists and operate strict policies
to ensure consistently high standards
Non-compliance are maintained in our operations and
with regulatory in the sourcing and handling of raw materials.
requirements.
Food safety systems are regularly reviewed
Public concerns for efficacy and legal compliance.
over materials
used in packaging We participate in independent food health
and ingredients and safety audits. Quality and food safety
in products. audits are undertaken at our manufacturing
sites.
Documented and tested product recall
procedures are embedded in all our businesses
and are regularly reviewed.
We proactively monitor the regulatory
and legislative environment as well as
emerging scientific research.
------------------- --------------------------- --------------------------------------------------------------
Health and Health concerns Recipes are regularly reviewed and reformulation
nutrition over fat, salt is conducted to improve the nutritional
and calorie content value of products, with a focus on reducing
of foods. fat, salt and calorie content where possible.
Our UK Grocery group has signed the UK
Responding correctly government's 'Public Health Responsibility
to the spectrum Deal' and associated pledges to reduce
of food poverty salt, remove trans fats and promote healthy
and malnutrition eating and lifestyle options to our employees.
versus obesity.
All of our grocery products are labelled
with nutritional information.
Inappropriate
advertising to Our UK Grocery portfolio contains only
children. a small number of products specifically
intended for children. These products
are marketed responsibly, following accepted
codes of practice and within the parameters
of a clear, operational business policy.
We are looking further to continue programmes
related to health and nutrition, and
to develop partnerships to help educate
people about health and nutrition.
------------------- --------------------------- --------------------------------------------------------------
Workplace health Potential for Group Health and Safety Policy and practices
and safety fatal accidents are embedded with a strong ethos of workplace
and serious injuries safety across the group. We maintain
to employees, a programme of audits to verify implementation
contractors and and support continuous improvement.
visitors.
Accountable senior executives and specialists
Loss of healthy are appointed.
workforce and We provide health and safety training
supply chain due and continue to share guidance and best
to diseases such practice with our businesses.
as HIV/AIDS, TB
and malaria in We have extended the internal and external
high-risk countries. auditing of health, safety and management
reporting.
We continue to invest in health and safety
management.
------------------- --------------------------- --------------------------------------------------------------
Management Failure to plan Each business has a succession plan which
succession for succession is reviewed with group management twice
to key roles could a year, and with the board annually.
lead to a lack
of management Development of our senior managers is
continuity and co-ordinated by the Group HR Director
suboptimal operational and the Head of Executive Development.
or financial performance.
A small number of executive search companies
have been briefed to introduce us to
talented executives from other companies
who could add value to the group.
------------------- --------------------------- --------------------------------------------------------------
Suppliers and Damage to brands Maintain programme of supplier audits
supply chain caused by supply where appropriate. Extensive audit programme
reliability chain weakness, for labour standards of suppliers.
e.g. poor conditions
for workers. We have introduced a Supplier Code of
Conduct which is being implemented across
Problems with all our businesses, tailored to their
supply reliability requirements.
caused by natural
disasters and We continue to work, in partnership with
other incidents. suppliers and NGOs, to improve working
conditions, e.g. via training.
Understanding
the sustainability Continued focus on worker safety and
and responsible safe working conditions. We have built
business practices up an intensive programme of ethical
of our suppliers. audits in Primark's supply chain.
Primark has maintained its classification
as a leader, by the Ethical Trade Initiative,
and we are mapping second tier suppliers
(subcontractors).
The Grocery division conducts independent
reviews of the environmental and ethical
risks in its supply chains to increase
understanding.
External communication and transparency
on the management of our supply chain
in Primark and Grocery has been enhanced.
Business continuity and disaster recovery
plans are regularly reviewed.
------------------- --------------------------- --------------------------------------------------------------
Ethical business Unacceptable business All businesses are signed up to the group's
practices practices which Business Principles and Anti-Bribery
contravene our and Corruption Policy.
business principles.
A programme of training and compliance
Reputational damage has been implemented for all employees.
through irresponsible
business practices Appointment of anti-bribery and corruption
of individuals. specialists.
Businesses work co-operatively to ensure
Penalties imposed visibility of reputational risk within
through bribery, supply chains and draw upon best practice
corruption or management expertise across the group
unfair competition. including Primark and Twinings.
------------------- --------------------------- --------------------------------------------------------------
Environment
----------------------------------------------------------------------------------------------------------------
Environment Long-term increase Compliance with the group's Environment
management in energy prices. Policy and annual reporting of environmental
including climate impact.
change Physical threats
to operations Best available techniques are employed
from climate change, to reduce energy consumption - statutory
e.g. flooding. requirement for all sites subject to
the EU's Pollution Prevention and Control
Climate change regime.
impact altering
growth rates of Agricultural raw materials are sourced
raw materials from a wide range of geographical locations
we use. and suppliers.
Increasing cost We have a continued focus on reducing
to operations our environmental impact and implementing
to adapt to climate changes to our operations to maximise
change and mitigate opportunities such as recycling more
impact. waste and using more renewable sources
of fuel.
Negative impact
on the environment We have implemented infrastructural protections
and the communities against weather-related risks such as
which depend on floods.
land used by our
operations. Greenhouse gas emissions are measured
and reported annually and subject to
assurance by KPMG LLP.
Substantial investment is made to improve
environmental risk management, with a
focus on energy efficiency, when investing
in new capital projects.
------------------- --------------------------- --------------------------------------------------------------
Water use and Securing access Water-intensive sites in areas of water
availability to sources of stress identified, and efforts focused
water and maintaining on water efficiencies in these areas.
water availability
for all. Investing heavily in the quality of our
water usage data to enable improved measurement
Ensuring good and management of water use and water
practices in sharing quality.
and managing water
supplies with Investment in irrigation systems.
local communities.
Operating in water Look to build long-term partnerships
stress areas. to address water issues at a local level.
Finalise the standardised approach to
water measurement across the group so
that we can target investment and build
an effective water stewardship.
------------------- --------------------------- --------------------------------------------------------------
Financial and regulatory
----------------------------------------------------------------------------------------------------------------
Competition Penalties for Clear policy direction and close support
rules failing to comply from specialist in-house legal department.
with the 1998
Competition Act, Compulsory awareness training.
the 2003 Enterprise
Act, relevant
EU law and all
relevant competition
legislation.
------------------- --------------------------- --------------------------------------------------------------
Financial, Loss sustained Adherence to the group's financial control
currency and as a result of framework and anti-fraud policy.
commodity risks failure of internal
controls or fraud, Treasury operations are conducted within
and exposure to a framework of board-approved policies
foreign currencies, and guidelines.
interest rates,
counterparty credit Sufficient funding is maintained by way
risk, liquidity of external loans and committed bank
risk, and changes facilities, which are renewed or extended
in market prices on a timely basis, having regard to the
especially for group's projected funding needs.
energy and commodities.
Financial transactions are dealt through
financial institutions with a credit
rating of A or better. Details of the
group's accounting and risk management
policies with respect to financial instruments
and associated quantitative and qualitative
disclosures are set out in note 24 on
pages 118-127 in the Annual Report.
------------------- --------------------------- --------------------------------------------------------------
Tax compliance Failure to comply The group has a financial control framework
with local tax and a board adopted tax policy requiring
law resulting all businesses to comply fully with all
in underpayment relevant local tax law.
of tax and exposure
to related interest Provision is made for known issues based
and penalties. on management's interpretation of country
specific tax law and the likely outcome.
Any interest and penalties on tax issues
are provided for in the tax charge.
------------------- --------------------------- --------------------------------------------------------------
IT security Data loss or theft. Group IT Security policies and procedures
breach are rolled out across the businesses.
Business disruption.
Employee awareness campaigns are undertaken
to highlight key activities to minimise
IT security risks.
Technical security controls are in place
over key IT platforms.
Head of IT Security is tasked with identifying
security risks and working with the businesses
to implement mitigating controls.
Internal audit reviews of compliance
with policies and procedures are undertaken.
------------------- --------------------------- --------------------------------------------------------------
Loss of a major The loss of one Our businesses have in place business
site of our key sites continuity plans to manage the impact
could present of such an event and group insurance
significant operational programmes to mitigate the financial
difficulties. consequences.
------------------- --------------------------- --------------------------------------------------------------
Regulatory Failure to recognise We remain vigilant to future changes
and political political or cultural and the risk presented by operating in
differences in emerging markets.
the many countries
in which we operate We engage with governments and NGOs to
could directly ensure the views of our stakeholders
impact the success are represented and we try to anticipate,
of our operations. and contribute to, important changes
in public policy.
Proposals to end
sugar quotas in Our financial control requirements are
2017. consistently applied wherever we operate.
------------------- --------------------------- --------------------------------------------------------------
Major capital Risk of overspending All major projects are managed by dedicated
projects and initial cost estimates, teams who work in close liaison with
acquisitions overrunning construction business management.
timelines and
failure to meet Project plans are reviewed and approved
design specifications. by group management and, for larger projects,
by the board. Updates on progress are
provided throughout the project.
------------------- --------------------------- --------------------------------------------------------------
CAUTIONARY STATEMENTS
This report contains forward-looking statements. These have been
made by the directors in good faith based on the information
available to them up to the time of their approval of this report.
The directors can give no assurance that these expectations will
prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors underlying such
forward-looking information, actual results may differ materially
from those expressed or implied by these forward-looking
statements. The directors undertake no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL
STATEMENTS
We, the directors of the Company, confirm that, to the best of
our knowledge:
-- the financial statements prepared in accordance with the
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the Company
and the undertakings included in the consolidation taken as a
whole; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
group, together with a description of the principal risks and
uncertainties that it faces.
The contents of this announcement, including the responsibility
statement above, have been extracted from the annual report and
accounts for the 52 weeks ended 13 September 2014 which can be
found at www.abf.co.uk and will be despatched to shareholders on 6
November 2014. Accordingly this responsibility statement makes
reference to the financial statements of the Company and the group
and to the relevant narrative appearing in that annual report and
accounts rather than the contents of this announcement.
On behalf of the board
Charles Sinclair George Weston John Bason
Chairman Chief Executive Finance Director
4 November 2014
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 13 September 2014
2014 2013
(restated)
Continuing operations Note GBPm GBPm
------------------------------------------ ---- -------- ----------
Revenue 1 12,943 13,315
Operating costs (11,865) (12,240)
1,078 1,075
Share of profit after tax from joint
ventures and associates 13 13
Profits less losses on disposal of
non-current assets (11) -
------------------------------------------ ---- -------- ----------
Operating profit 1,080 1,088
Adjusted operating profit 1 1,163 1,180
Profits less losses on disposal of
non-current assets (11) -
Amortisation of non-operating intangibles (72) (92)
------------------------------------------ ---- -------- ----------
Profits less losses on sale and closure
of businesses 2 (2) (128)
------------------------------------------ ----
Profit before interest 1,078 960
Finance income 15 13
Finance expense (73) (100)
Other financial income/(expense) - (5)
------------------------------------------ ---- -------- ----------
Profit before taxation 1,020 868
Adjusted profit before taxation 1,105 1,088
Profits less losses on disposal of
non-current assets (11) -
Amortisation of non-operating intangibles (72) (92)
Profits less losses on sale and closure
of businesses (2) (128)
------------------------------------------ ---- -------- ----------
Taxation - UK (117) (111)
- Overseas (120) (129)
3 (237) (240)
------------------------------------------ ---- -------- ----------
Profit for the period 783 628
========================================== ==== ======== ==========
Attributable to
Equity shareholders 762 585
Non-controlling interests 21 43
------------------------------------------ ---- -------- ----------
Profit for the period 783 628
========================================== ==== ======== ==========
Basic and diluted earnings per ordinary
share (pence) 4 96.5 74.0
Dividends per share paid and proposed
for the period (pence) 5 34.0 32.0
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 13 September 2014
2014 2013
(restated)
GBPm GBPm
Profit for the period recognised in the income statement 783 628
Other comprehensive income
Remeasurements of defined benefit schemes (25) 33
Deferred tax associated with defined benefit schemes 3 (7)
------------------------------------------------------------- -------- --------------
Items that will not be reclassified to profit or
loss (22) 26
Effect of movements in foreign exchange (275) (114)
Net gain/(loss) on hedge of net investment in foreign
subsidiaries 25 (20)
Deferred tax associated with movements in foreign
exchange - 2
Current tax associated with movements in foreign
exchange 2 -
Reclassification adjustment for movements in foreign
exchange on subsidiaries disposed - 7
Movement in cash flow hedging position 55 6
Deferred tax associated with movement in cash flow
hedging position (11) (2)
Share of other comprehensive income of joint ventures
and associates (5) -
Items that are or may be subsequently reclassified
to profit or loss (209) (121)
Other comprehensive income for the period (231) (95)
------------------------------------------------------------- -------- --------------
Total comprehensive income for the period 552 533
------------------------------------------------------------- -------- --------------
Attributable to
Equity shareholders 580 527
Non-controlling interests (28) 6
------------------------------------------------------------- -------- --------------
Total comprehensive income for the period 552 533
------------------------------------------------------------- -------- --------------
CONSOLIDATED BALANCE SHEET
At 13 September 2014
2014 2013 2012
(restated) (restated)
GBPm GBPm GBPm
Non-current assets
Intangible assets 1,467 1,581 1,769
Property, plant and equipment 4,665 4,552 4,541
Biological assets 96 97 89
Investments in joint ventures 180 182 174
Investments in associates 32 36 40
Employee benefits assets 90 81 45
Deferred tax assets 152 273 189
Other receivables 164 148 151
-------- ----------- -----------
Total non-current assets 6,846 6,950 6,998
-------- ----------- -----------
Current assets
Inventories 1,631 1,581 1,500
Biological assets 109 112 109
Trade and other receivables 1,293 1,342 1,236
Derivative assets 74 27 33
Cash and cash equivalents 519 362 391
-------- ----------- -----------
Total current assets 3,626 3,424 3,269
-------- ----------- -----------
TOTAL ASSETS 10,472 10,374 10,267
-------- ----------- -----------
Current liabilities
Loans and overdrafts (358) (394) (538)
Trade and other payables (2,046) (1,881) (1,752)
Derivative liabilities (15) (38) (50)
Income tax (193) (166) (150)
Provisions (72) (47) (98)
-------- ----------- -----------
Total current liabilities (2,684) (2,526) (2,588)
-------- ----------- -----------
Non-current liabilities
Loans (607) (772) (914)
Provisions (29) (30) (38)
Deferred tax liabilities (266) (431) (373)
Employee benefits liabilities (133) (96) (112)
-------- ----------- -----------
Total non-current liabilities (1,035) (1,329) (1,437)
-------- ----------- -----------
TOTAL LIABILITIES (3,719) (3,855) (4,025)
-------- ----------- -----------
NET ASSETS 6,753 6,519 6,242
-------- ----------- -----------
Equity
Issued capital 45 45 45
Other reserves 175 175 175
Translation reserve 238 440 532
Hedging reserve 29 (13) (17)
Retained earnings 5,950 5,508 5,120
-------- ----------- -----------
TOTAL EQUITY ATTRIBUTABLE TO EQUITY
SHAREHOLDERS 6,437 6,155 5,855
-------- ----------- -----------
Non-controlling interests 316 364 387
-------- ----------- -----------
TOTAL EQUITY 6,753 6,519 6,242
-------- ----------- -----------
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 13 September 2014
2014 2013
(restated)
GBPm GBPm
Cash flow from operating activities
Profit before taxation 1,020 868
Profits less losses on disposal of non-current
assets 11 -
Profits less losses on sale and closure of businesses 2 128
Finance income (15) (13)
Finance expense 73 100
Other financial expense - 5
Share of profit after tax from joint ventures
and associates (13) (13)
Amortisation 94 130
Depreciation 402 405
Impairment of property, plant and equipment - 27
Impairment of operating intangibles - 4
Impairment of goodwill - 10
Net change in the fair value of biological assets (21) (26)
Share-based payment expense 15 15
Pension costs less contributions 7 (24)
Increase in inventories (119) (112)
Decrease/(increase) in receivables 19 (158)
Increase in payables 200 173
Purchases less sales of current biological assets (3) (2)
Increase in provisions 13 11
------------------------------------------------------ ----- ----------
Cash generated from operations 1,685 1,528
Income taxes paid (246) (252)
------------------------------------------------------ ----- ----------
Net cash from operating activities 1,439 1,276
------------------------------------------------------ -----
Cash flows from investing activities
Dividends received from joint ventures and associates 17 11
Purchase of property, plant and equipment (676) (593)
Purchase of intangibles (32) (22)
Purchase of non-current biological assets - (1)
Sale of property, plant and equipment 17 15
Purchase of subsidiaries, joint ventures and
associates (8) (75)
Sale of subsidiaries, joint ventures and associates 15 35
Loans to joint ventures (15) (4)
Purchase of non-controlling interests - (1)
Interest received 10 10
------------------------------------------------------
Net cash from investing activities (672) (625)
------------------------------------------------------ ----- ----------
Cash flows from financing activities
Dividends paid to non-controlling interests (21) (29)
Dividends paid to equity shareholders (256) (232)
Interest paid (77) (107)
Financing:
Decrease in short-term loans (158) (258)
Decrease in long-term loans (10) (23)
Sale of shares in subsidiary undertakings to
non-controlling interests 1 1
Movements from changes in own shares held (59) (10)
------------------------------------------------------ ----- ----------
Net cash from financing activities (580) (658)
------------------------------------------------------ ----- ----------
Net increase/(decrease) in cash and cash equivalents 187 (7)
Cash and cash equivalents at the beginning of
the period 243 245
Effect of movements in foreign exchange (31) 5
------------------------------------------------------ ----- ----------
Cash and cash equivalents at the end of the period 399 243
====================================================== ===== ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 13 September 2014
Attributable to equity shareholders
Issued Other Translation Hedging Retained Non-controlling Total
capital reserves reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance as at 15 September
2012 (restated) 45 175 532 (17) 5,120 5,855 387 6,242
Total comprehensive
income
Profit for the period
recognised in the income
statement (restated) - - - - 585 585 43 628
Remeasurements of defined
benefit schemes (restated) - - - - 35 35 (2) 33
Deferred tax associated
with defined benefit
schemes (restated) - - - - (7) (7) - (7)
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Items that will not
be reclassified to profit
or loss - - - - 28 28 (2) 26
Effect of movements
in foreign exchange - - (86) - - (86) (28) (114)
Net loss on hedge of
net investment in foreign
subsidiaries - - (13) - - (13) (7) (20)
Deferred tax associated
with movements in foreign
exchange - - - - 2 2 - 2
Reclassification adjustment
for movements in foreign
exchange on subsidiaries
disposed - - 7 - - 7 - 7
Movement in cash flow
hedging position - - - 6 - 6 - 6
Deferred tax associated
with movement in cash
flow hedging position - - - (2) - (2) - (2)
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Items that are or may
be subsequently reclassified
to profit or loss - - (92) 4 2 (86) (35) (121)
Other comprehensive
income - - (92) 4 30 (58) (37) (95)
Total comprehensive
income - - (92) 4 615 527 6 533
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Transactions with owners
Dividends paid to equity
shareholders - - - - (232) (232) - (232)
Net movement in own
shares held - - - - 5 5 - 5
Dividends paid to
non-controlling
interests - - - - - - (29) (29)
Total transactions with
owners - - - - (227) (227) (29) (256)
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Balance as at 14 September
2013 45 175 440 (13) 5,508 6,155 364 6,519
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Total comprehensive
income
Profit for the period
recognised in the income
statement - - - - 762 762 21 783
Remeasurements of defined
benefit schemes - - - - (25) (25) - (25)
Deferred tax associated
with defined benefit
schemes - - - - 3 3 - 3
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Items that will not
be reclassified to profit
or loss - - - - (22) (22) - (22)
Effect of movements
in foreign exchange - - (224) - - (224) (51) (275)
Net gain on hedge of
net investment in foreign
subsidiaries - - 25 - - 25 - 25
Current tax associated
with movements in foreign
exchange - - 2 - - 2 - 2
Movement in cash flow
hedging position - - - 53 - 53 2 55
Deferred tax associated
with movement in cash
flow hedging position - - - (11) - (11) - (11)
Share of other comprehensive
income of joint ventures
and associates - - (5) - - (5) - (5)
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Items that are or may
be subsequently reclassified
to profit or loss - - (202) 42 - (160) (49) (209)
Other comprehensive
income - - (202) 42 (22) (182) (49) (231)
Total comprehensive
income - - (202) 42 740 580 (28) 552
Transactions with owners
Dividends paid to equity
shareholders - - - - (256) (256) - (256)
Net movement in own
shares held - - - - (44) (44) - (44)
Current tax associated
with share-based payments - - - - 2 2 - 2
Dividends paid to
non-controlling
interests - - - - - - (21) (21)
Acquisition of non-controlling
interests - - - - - - 1 1
Total transactions with
owners - - - - (298) (298) (20) (318)
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
Balance as at 13 September
2014 45 175 238 29 5,950 6,437 316 6,753
------------------------------ -------- --------- ----------- -------- --------- ----- --------------- -------
NOTES TO THE ANNUAL RESULTS ANNOUNCEMENT
For the 52 weeks ended 13 September 2014
1. Operating segments
The group has five operating segments, as described below. These are
the group's operating divisions, based on the management and internal
reporting structure, which combine businesses with common characteristics.
The board is the chief operating decision-maker.
Inter-segment pricing is determined on an arm's length basis. Segment
result is adjusted operating profit, as shown on the face of the consolidated
income statement. Segment assets comprise all non-current assets except
employee benefits assets and deferred tax assets, and all current
assets except cash and cash equivalents. Segment liabilities comprise
trade and other payables, derivative liabilities and provisions. Segment
results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable
basis. Unallocated items comprise mainly corporate assets and expenses,
cash, borrowings, employee benefits balances and current and deferred
tax balances. Segment non-current asset additions are the total cost
incurred during the period to acquire segment assets that are expected
to be used for more than one year, comprising property, plant and
equipment, operating intangibles and biological assets.
The group is comprised of the following operating segments:
Grocery The manufacture of grocery products, including hot beverages,
sugar & sweeteners, vegetable oils, bread & baked goods, cereals,
ethnic foods, herbs & spices, and meat products, which are sold to
retail, wholesale and foodservice businesses.
Sugar The growing and processing of sugar beet and sugar cane for
sale to industrial users and to Silver Spoon, which is included in
the grocery segment.
Agriculture The manufacture of animal feeds and the provision of other
products and services for the agriculture sector.
Ingredients The manufacture of bakers' yeast, bakery ingredients,
enzymes, lipids yeast extracts and cereal specialities.
Retail Buying and merchandising value clothing and accessories through
the Primark and Penneys retail chains.
Geographical information
In addition to the required disclosure for operating segments, disclosure
is also given of certain geographical information about the group's
operations, based on the geographical groupings: United Kingdom; Europe
& Africa; The Americas; and Asia Pacific.
Revenues are shown by reference to the geographical location of customers.
Profits are shown by reference to the geographical location of the
businesses. Segment assets are based on the geographical location
of the assets.
Revenue Adjusted operating profit
52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended
13 September 14 September 13 September 14 September
2014 2013 2014 2013
(restated)
Operating segments GBPm GBPm GBPm GBPm
-------------- --------------- ------------- -------------
Grocery 3,337 3,568 269 224
Sugar 2,083 2,677 189 434
Agriculture 1,312 1,410 50 47
Ingredients 1,261 1,360 41 5
Retail 4,950 4,273 662 513
Central - - (49) (51)
-------------- --------------- ------------- -------------
12,943 13,288 1,162 1,172
Businesses disposed:
Grocery - - 1 2
Ingredients - 27 - 6
12,943 13,315 1,163 1,180
-------------- --------------- ------------- -------------
Geographical information
United Kingdom 5,631 5,728 602 710
Europe & Africa 3,924 3,790 393 386
The Americas 1,211 1,282 127 103
Asia Pacific 2,177 2,488 40 (27)
-------------- --------------- ------------- -------------
12,943 13,288 1,162 1,172
Businesses disposed:
The Americas - 27 - 6
Asia Pacific - - 1 2
-------------- --------------- ------------- -------------
12,943 13,315 1,163 1,180
-------------- --------------- ------------- -------------
See page 29 for details of the restatement of 2013 comparative
data
1. Operating segments for the 52 weeks
ended 13 September 2014
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 3,344 2,164 1,312 1,423 4,950 (250) 12,943
Internal revenue (7) (81) - (162) - 250 -
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
External revenue from continuing
businesses 3,337 2,083 1,312 1,261 4,950 - 12,943
Businesses disposed - - - - - - -
----------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Revenue from external customers 3,337 2,083 1,312 1,261 4,950 - 12,943
Adjusted operating profit
before joint ventures and
associates 254 215 36 31 662 (49) 1,149
Share of profit after tax
from joint ventures and associates 15 (26) 14 10 - - 13
Businesses disposed 1 - - - - - 1
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Adjusted operating profit 270 189 50 41 662 (49) 1,163
Profits less losses on disposal
of non-current assets 6 - 1 - (14) (4) (11)
Amortisation of non-operating
intangibles (50) (17) (3) (2) - - (72)
Profits less losses on sale
and closure of businesses - - - (2) - - (2)
Profit before interest 226 172 48 37 648 (53) 1,078
Finance income 15 15
Finance expense (73) (73)
Taxation (237) (237)
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Profit for the period 226 172 48 37 648 (348) 783
======================================== ======== ====== ============ ============ ========= ======== ========
Segment assets (excluding
joint ventures and associates) 2,431 2,327 312 1,266 2,948 215 9,499
Investments in joint ventures
and associates 38 13 113 48 - - 212
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Segment assets 2,469 2,340 425 1,314 2,948 215 9,711
Cash and cash equivalents 519 519
Deferred tax assets 152 152
Employee benefits assets 90 90
Segment liabilities (495) (385) (125) (251) (784) (122) (2,162)
Loans and overdrafts (965) (965)
Income tax (193) (193)
Deferred tax liabilities (266) (266)
Employee benefits liabilities (133) (133)
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Net assets 1,974 1,955 300 1,063 2,164 (703) 6,753
======================================== ======== ====== ============ ============ ========= ======== ========
Non-current asset additions 153 103 28 65 394 1 744
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Depreciation 96 80 7 44 171 4 402
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Amortisation 64 20 6 4 - - 94
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of goodwill on
closure of business - - - 4 - - 4
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Revenue from external customers 5,631 3,924 1,211 2,177 12,943
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Segment assets 3,951 3,220 968 1,572 9,711
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Non-current asset additions 279 351 34 80 744
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Depreciation 184 122 27 69 402
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Amortisation 22 19 43 10 94
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of goodwill on
closure of business - - - 4 4
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
1. Operating segments for the 52 weeks
ended 14 September 2013 (restated)
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 3,576 2,808 1,410 1,544 4,273 (323) 13,288
Internal revenue (8) (131) - (184) - 323 -
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
External revenue from continuing
businesses 3,568 2,677 1,410 1,360 4,273 - 13,288
Businesses disposed - - - 27 - - 27
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Revenue from external customers 3,568 2,677 1,410 1,387 4,273 - 13,315
Adjusted operating profit
before joint ventures and
associates 216 449 35 (3) 513 (51) 1,159
Share of profit after tax
from joint ventures and associates 8 (15) 12 8 - - 13
Businesses disposed 2 - - 6 - - 8
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Adjusted operating profit 226 434 47 11 513 (51) 1,180
Amortisation of non-operating
intangibles (19) (21) (1) (51) - - (92)
Profits less losses on sale
and closure of businesses - (15) - (113) - - (128)
Profit before interest 207 398 46 (153) 513 (51) 960
Finance income 13 13
Finance expense (100) (100)
Other financial expense (5) (5)
Taxation (240) (240)
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Profit for the period 207 398 46 (153) 513 (383) 628
======================================== ======== ====== ============ ============ ========= ======== ========
Segment assets (excluding
joint ventures and associates) 2,510 2,432 319 1,315 2,677 187 9,440
Investments in joint ventures
and associates 33 34 99 52 - - 218
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Segment assets 2,543 2,466 418 1,367 2,677 187 9,658
Cash and cash equivalents 362 362
Deferred tax assets 273 273
Employee benefits assets 81 81
Segment liabilities (496) (398) (121) (250) (619) (112) (1,996)
Loans and overdrafts (1,166) (1,166)
Income tax (166) (166)
Deferred tax liabilities (431) (431)
Employee benefits liabilities (96) (96)
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Net assets 2,047 2,068 297 1,117 2,058 (1,068) 6,519
======================================== ======== ====== ============ ============ ========= ======== ========
Non-current asset additions 158 158 10 77 220 6 629
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Depreciation 102 86 7 55 151 4 405
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Amortisation 36 37 3 54 - - 130
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of property, plant
and equipment - 8 - 19 - - 27
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of operating intangibles - 4 - - - - 4
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of goodwill - 10 - - - - 10
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of property, plant
and equipment on closure of
business - 3 - 74 - - 77
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of goodwill on
sale of business - 14 - - - - 14
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Revenue from external customers 5,728 3,790 1,309 2,488 13,315
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Segment assets 3,863 3,096 1,022 1,677 9,658
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Non-current asset additions 260 209 51 109 629
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Depreciation 177 102 28 98 405
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Amortisation 35 26 39 30 130
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of property, plant
and equipment - 19 - 8 27
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of operating intangibles - - - 4 4
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of goodwill - - - 10 10
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of property, plant
and equipment on closure of
business - - - 77 77
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Impairment of goodwill on
sale of business - - - 14 14
---------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
The comparative results for 2013 have been restated for the
adoption of IAS19 Revised - Employee benefits
During the year, the activities of AB Mauri's yeast and bakery
ingredients businesses in Australia and New Zealand were merged
with the flour milling business of George Weston Foods. The results
of the flour milling business, which were previously included
within the Grocery segment, are now included in the Ingredients
segment. The comparative results for 2013 have been reclassified,
resulting in GBP272m of revenue and GBP4m of adjusted operating
profit being transferred from Grocery to Ingredients. Segment
assets and liabilities have also been restated in this respect.
Disposed businesses comprise the disposal during the year of the
group's interest in a US associate in the Ingredients segment and
an associated Australian royalty stream in the Grocery segment,
together with the prior year disposal of the group's US whey
protein businesses in the Ingredients segment.
2. Profits less losses on sale and closure of businesses
2014
The group disposed of its interest in a US associate in the Ingredients
segment for a profit of GBP7m. Cash consideration was GBP12m, deferred
consideration was GBP1m, share of net assets disposed was GBP2m and
provisions made were GBP4m. In addition, a charge of GBP9m was made
in the Ingredients segment in China and India for restructuring costs
associated with business closures, including a GBP4m impairment of
goodwill.
2013
Loss on sale and closure of businesses of GBP128m comprised GBP113m
for disposals and closures in the Ingredients segment and GBP15m for
the loss on disposal of the sugar business in Chifeng, north China.
Included within the amount charged in the Ingredients segment was
a loss of GBP26m in respect of the disposal of our US whey protein
operation, a charge of GBP72m to write down the carrying value of
certain Ingredients assets in China and to provide for restructuring
costs and a charge of GBP13m to write down the value of yeast plants
in India.
3. Income tax expense
52 weeks 52 weeks
ended ended
13 September 14 September
2014 2013
(restated)
GBPm GBPm
Current tax expense
UK - corporation tax at 22.1% (2013 -
23.5%) 137 143
Overseas - corporation tax 148 145
UK - under/(over) provided in prior periods 3 (9)
Overseas - overprovided in prior periods (2) (10)
286 269
Deferred tax expense
UK deferred tax (17) (23)
Overseas deferred tax (19) 2
UK - overprovided in prior periods (6) -
Overseas - overprovided in prior periods (7) (8)
------------- ------------
(49) (29)
------------- ------------
Total income tax expense in income statement 237 240
============= ============
Reconciliation of effective tax rate
Profit before taxation 1,020 868
Less share of profit after tax from joint
ventures and associates (13) (13)
------------- ------------
Profit before taxation excluding share
of profit after tax from joint ventures
and associates 1,007 855
------------- ------------
Nominal tax charge at UK corporation tax
rate of 22.1% (2013 - 23.5%) 222 201
Different tax rates on overseas earnings (11) (15)
Effect of changes in tax rates on income
statement 4 (19)
Expenses not deductible for tax purposes 25 24
Disposal of assets covered by tax exemptions
or unrecognised capital losses 2 39
Deferred tax not recognised 7 37
Adjustments in respect of prior periods (12) (27)
------------- ------------
237 240
============= ============
Income tax recognised directly in equity
Deferred tax associated with defined benefit
schemes (3) 7
Current tax associated with share-based
payments (2) -
Deferred tax associated with movement
in cash flow hedging position 11 2
Deferred tax associated with movements
in foreign exchange - (2)
Current tax associated with movements
in foreign exchange (2) -
------------- ------------
4 7
============= ============
Following the enactment of legislation by the UK government prior to
14 September 2013 to reduce the corporation tax rate to 20% with effect
from 1 April 2015, UK deferred tax has been calculated using a rate
of 20%. The impact of this change was a reduction of GBP18m in the
deferred tax charge for the year ended 14 September 2013.
4. Earnings per share
The calculation of basic earnings per share at 13 September 2014 was
based on the net profit attributable to equity shareholders of GBP762m
(2013 - GBP585m), and a weighted average number of shares outstanding
during the year of 790 million (2013 - 790 million). The calculation
of the weighted average number of shares excludes the shares held by
the Employee Share Ownership Plan Trust on which the dividends are
being waived.
Adjusted earnings per ordinary share, which exclude the impact of profits
less losses on disposal of non-current assets and the sale and closure
of businesses, amortisation of non-operating intangibles and any associated
tax credits, is shown to provide clarity on the underlying performance
of the group.
The diluted earnings per share calculation takes into account the dilutive
effect of share incentives. The diluted, weighted average number of
shares is 790 million (2013 - 790 million). There is no difference
between basic and diluted earnings.
52 weeks 52 weeks
ended ended
13 September 14 September
2014 2013
(restated)
pence pence
Adjusted earnings per share 104.1 98.1
Disposal of non-current assets (1.4) -
Sale and closure of businesses (0.3) (16.2)
Tax effect on above adjustments (0.1) (0.8)
Amortisation of non-operating intangibles (9.1) (11.7)
Tax credit on non-operating intangibles
amortisation and goodwill 2.7 3.7
Non-controlling interests' share of
amortisation of non-operating
intangibles net of tax 0.6 0.9
----------------- ----------------
Earnings per ordinary share 96.5 74.0
================= ================
5. Dividends
2014 2013
pence pence 2014 2013
per share per share GBPm GBPm
2012 final - 20.00 - 158
2013 interim - 9.35 - 74
2013 final 22.65 - 179 -
2014 interim 9.70 - 77 -
------------------------------------------ --------- ----------------- -------- ----------------
32.35 29.35 256 232
------------------------------------------ --------- ----------------- -------- ----------------
The 2014 interim dividend was declared on 23 April 2014 and paid on
4 July 2014. The 2014 final dividend of 24.3 pence, total value of
GBP192m, will be paid on 9 January 2015 to shareholders on the register
on 12 December 2014.
Dividends relating to the period were 34.0 pence per share totalling
GBP269m (2013 - 32.0 pence per share totalling GBP253m).
6. Acquisitions and disposals
2014
During 2014, the group acquired a bakery ingredients business in Western
Europe and a small animal feed specialist in the UK, which had the
following effect on the group's assets and liabilities:
Recognised
values on
acquisition
Net assets GBPm
Non-operating intangibles 4
Property, plant and equipment 2
Inventories 4
Trade and other receivables 11
Cash and cash equivalents 5
Trade and other payables (8)
Loans (4)
Provisions (4)
Employee benefits liabilities (1)
Taxation (1)
----------------
Net assets and liabilities and total consideration 8
Satisfied by
Cash consideration 7
Deferred consideration 1
----------------
Net cash
Cash consideration 7
Cash and cash equivalents acquired (5)
----------------
2
================
Pre-acquisition carrying amounts were the same as recognised values
on acquisition apart from a GBP4m non-operating intangible recognised
in respect of customer relationships. The acquisitions in aggregate
contributed revenue of GBP27m and adjusted profit before tax of GBP1m
for the period between the dates of acquisition and 13 September 2014.
Aggregate contributions to revenue and adjusted profit before tax
had the acquisitions occurred at the beginning of the period have
not been disclosed, as appropriate financial information prepared
under Adopted IFRS is not available.
The net cash of GBP2m in the acquisition table above differs by GBP6m
from the cash outflow of GBP8m on the purchase of subsidiaries, joint
ventures and associates shown in the cash flow statement. This difference
relates to a GBP5m investment in an existing joint venture and GBP1m
of deferred consideration paid in respect of prior year acquisitions.
During the year, the group disposed of its interest in a US associate
in the Ingredients segment for a profit of GBP7m. Cash consideration
was GBP12m, deferred consideration was GBP1m, share of net assets
disposed was GBP2m and provisions made were GBP4m. In addition, a
charge of GBP9m was made in the Ingredients segment in China and India
for restructuring costs associated with business closures including
a GBP4m impairment of goodwill.
2013
During 2013, the group completed no new business combinations. Cash
flow on purchase of subsidiaries, joint ventures and associates of
GBP75m comprised GBP71m of deferred consideration in respect of previous
business combinations, a GBP2m investment in a joint venture and a
GBP2m adjustment to goodwill for a previous acquisition. Goodwill
and deferred consideration were both reduced by GBP7m in respect of
deferred consideration for previous acquisitions no longer payable.
Loss on sale and closure of businesses of GBP128m comprised GBP113m
for disposals and closures in the Ingredients segment and GBP15m for
the loss on disposal of the sugar business in Chifeng, north China.
Included within the amount charged in the Ingredients segment was
a loss of GBP26m in respect of the disposal of our US whey protein
operation. Cash consideration for the US disposal was GBP20m, tangible
assets disposed amounted to GBP8m and goodwill disposed was GBP27m.
Provisions made were GBP4m and foreign exchange differences recycled
from equity were GBP7m. A charge of GBP72m was made to write down
the carrying value of certain Ingredients assets in China and to provide
for restructuring costs, and a charge of GBP13m to write down the
value of yeast plants in India.
Cash flow on sale of subsidiaries, joint ventures and associates of
GBP35m comprised GBP20m in respect of the US whey protein business
and GBP15m of deferred consideration received for previous disposals.
7. Analysis of net debt
At At
14 September Cash Non-cash Exchange 13 September
2013 flow Acquisitions items adjustments 2014
GBPm GBPm GBPm GBPm GBPm GBPm
Cash at bank and in
hand, cash
equivalents and overdrafts 243 187 - - (31) 399
Short-term loans (275) 158 (4) (124) 7 (238)
Long-term loans (772) 10 - 124 31 (607)
------------- ------ ------------ ---------- ------------ -------------
(804) 355 (4) - 7 (446)
============= ====== ============ ========== ============ =============
Cash and cash equivalents comprise bank and cash balances, call deposits
and short-term investments with original maturities of three months
or less. Bank overdrafts that are repayable on demand of GBP120m form
an integral part of the group's cash management and are included as
a component of cash and cash equivalents for the purpose of the cash
flow statement.
8. Related party transactions
The group has a controlling related party relationship with its parent
company, Wittington Investments Limited, which is also its ultimate
parent company. The group also has a related party relationship with
its associates and joint ventures and with its directors. In the course
of normal operations, related party transactions entered into by the
group have been contracted on an arm's length basis.
Material transactions and year end balances with related parties were
as follows:
2014 2013
Sub note GBP'000 GBP'000
Charges to Wittington Investments Limited in respect
of services provided by the Company and its subsidiary
undertakings 403 338
Dividends paid by ABF and received in a beneficial
capacity by:
(i) trustees of the Garfield Weston Foundation 1 9,125 8,277
(ii) directors of Wittington Investments Limited
who are not trustees of the Foundation 1,442 1,297
(iii) directors of the Company who are not trustees
of the Foundation and are not directors of Wittington
Investments Limited 43 30
(iv) a member of the Weston family employed within
the Associated British Foods group 2 952 864
Sales to fellow subsidiary undertakings on normal
trading terms 3 93 2
Sales to companies with common key management
personnel on normal trading terms 4 12,459 16,538
Commissions paid to companies with common key
management personnel on normal trading terms 4 1,418 787
Amounts due from a company with common key management
personnel 4 1,456 2,227
Sales to joint ventures on normal trading terms 21,337 18,488
Sales to associates on normal trading terms 30,248 19,460
Purchases from joint ventures on normal trading
terms 372,496 397,449
Purchases from associates on normal trading terms 16,266 20,805
Amounts due from joint ventures 182,254 163,170
Amounts due from associates 3,274 1,790
Amounts due to joint ventures 33,095 30,806
Amounts due to associates 6,640 1,059
1. The Garfield Weston Foundation ('the Foundation') is an English
charitable trust, established in 1958 by the late W Garfield Weston.
The Foundation has no direct interest in the Company, but as at 13
September 2014 was the beneficial owner of 683,073 shares (2013 -
683,073 shares) in Wittington Investments Limited representing 79.2%
(2013 - 79.2%) of that company's issued share capital and is, therefore,
the Company's ultimate controlling party. At 13 September 2014 trustees
of the Foundation comprised two children and two grandchildren of
the late W Garfield Weston and five children of the late Garry H Weston.
2. A member of the Weston family who is employed by the group and
is not a director of the Company or Wittington Investments Limited
and is not a trustee of the Foundation.
3. The fellow subsidiary undertaking is Fortnum and Mason plc.
4. The companies with common key management personnel are the George
Weston Limited group, in Canada, and Selfridges & Co. Limited.
Amounts due from joint ventures comprise GBP14m (2013 - GBP15m) of
finance lease receivables and GBP145m (2013 - GBP130m) of loan receivables.
The remainder of the balance is trading balances. The loan receivables
are all non-current (2013 - all non-current), and all but GBP3m (2013
- GBP3m) of the finance lease receivables are non-current.
9. Other information
The financial information set out above does not constitute the
Company's statutory accounts for the 52 weeks ended 13 September
2014, or the 52 weeks ended 14 September 2013. Statutory accounts
for 2013 have been delivered to the Registrar of Companies and those
for 2014 will be delivered following the Company's annual general
meeting. The auditors have reported on those accounts. Their reports
were (i) unqualified, (ii) did not include references to any matters
to which the auditors drew attention by way of emphasis without
qualifying their reports and (iii) did not contain a statement under
section under section 498(2) or (3) of the Companies Act 2006 in
respect of the accounts.
10. Basis of preparation
Associated British Foods plc ('the Company') is a company domiciled
in the United Kingdom. The consolidated financial statements of
the Company for the 52 weeks ended 13 September 2014 comprise those
of the Company and its subsidiaries (together referred to as 'the
group') and the group's interests in joint ventures and associates.
The consolidated financial statements were authorised for issue
by the directors on 4 November 2014.
The consolidated financial statements have been prepared and approved
by the directors in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the EU. Under IFRS, management
is required to make judgements, estimates and assumptions about
the reported amounts of assets and liabilities, income and expense
and the disclosure of contingent assets and liabilities. The estimates
and associated assumptions are based on experience. Actual results
may differ from these estimates. The estimates and underlying assumptions
are reviewed on a regular basis. Revisions to accounting estimates
are recognised from the period in which the estimates are revised.
The consolidated financial statements are presented in sterling,
rounded to the nearest million. They are prepared on the historical
cost basis except that biological assets and certain financial instruments
are stated at fair value. Assets classified as held for sale are
stated at the lower of carrying amount and fair value less costs
to sell.
The consolidated financial statements of the group are prepared
to the Saturday nearest to 15 September. Accordingly, these financial
statements have been prepared for the 52 weeks ended 13 September
2014. To avoid delay in the preparation of the consolidated financial
statements, the results of certain subsidiaries, joint ventures
and associates are included up to 31 August 2014. The results of
Illovo are included for the period to 30 September 2014 in line
with Illovo's local reporting date. Adjustments are made as appropriate
for significant transactions or events occurring between 31 August
and 30 September.
11. Significant accounting policies
The accounting policies applied by the group in this annual results
announcement are substantially the same as those applied by the
group in its consolidated financial statements for the 52 weeks
ended 14 September 2013. There have been a number of minor changes
to standards which have become applicable for the year ending 13
September 2014, none of which have been assessed as having a significant
impact on the group.
The revised IAS 19 Employee Benefits is applicable to the group
for the first time in 2014 and makes changes to measurement and
disclosure requirements for defined benefit post-employment arrangements.
The expected return on plan assets and the interest charge on scheme
liabilities have been replaced by net interest income or expense
calculated by applying the liability discount rate to the net pension
asset or liability. Scheme administration costs are expensed as
incurred and the reserve for scheme costs, which was previously
included in scheme liabilities, has been removed. IAS 19 service
cost is charged to operating profit and pension financing costs
are charged to other financial expense.
The impact of adoption of the revised standard, which has been applied
with retrospective effect from the 2012 balance sheet date, is set
out below. The impact of all charges is reflected in retained earnings
in equity and is wholly attributable to equity shareholders.
52 weeks ended
14 September 2013
(previously
(restated) reported)
---------- -------------
GBPm GBPm
Income statement
Adjusted operating profit 1,180 1,185
Operating profit 1,088 1,093
Other financial expense (5) (2)
Adjusted profit before taxation 1,088 1,096
Profit before taxation 868 876
Taxation (240) (242)
Profit for the period 628 634
pence pence
Basic earnings per share 74.0 74.8
Adjusted earnings per share 98.1 98.9
GBPm GBPm
Other comprehensive income
Remeasurements of defined benefit
schemes 33 24
Deferred tax associated with defined
benefit schemes (7) (5)
Balance sheet
Net employee benefits balances (15) (44)
Net deferred tax balances (158) (151)
In the 2012 balance sheet, the GBP95m net pension liability decreased
by GBP28m to GBP67m and net deferred tax liabilities of GBP177m increased
by GBP7m to GBP184m.
These adjustments had no effect on net cash from operating activities
but the cash flow statement does reflect the above adjustments to
profit before taxation offset by an equal and opposite adjustment
to pension costs less contributions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EASFDEDELFFF
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