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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Associated British Foods Plc | LSE:ABF | London | Ordinary Share | GB0006731235 | ORD 5 15/22P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 18.00 | 0.95% | 1,908.50 | 1,913.50 | 1,914.50 | 1,914.50 | 1,888.00 | 1,893.00 | 2,695,951 | 16:35:05 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Textile Goods, Nec | 20.07B | 1.46B | 1.9867 | 9.64 | 13.85B |
From Feb 2020 to Feb 2025
TIDMABF
RNS Number : 1603S
Associated British Foods PLC
05 November 2013
Associated British Foods plc results for 52 weeks ended 14 September 2013
Another record year for ABF
Financial Highlights
Hot Features
Premium
-- Group revenue up 9% to GBP13.3bn
-- Adjusted operating profit up 10% to GBP1,185m*
-- Adjusted profit before tax up 13% to GBP1,096m**
-- Adjusted earnings per share up 13% to 98.9p**
-- Dividends per share up 12% to 32.0p
-- Net capital investment of GBP600m
-- Net debt reduced to GBP804m
-- Operating profit up 25% to GBP1,093m, profit before tax up 15%
to GBP876m and basic earnings per share up 6% to 74.8p
George Weston, Chief Executive of Associated British Foods, said:
"I am delighted to report that the group has again delivered a great set of results. Grocery was much improved, Agriculture achieved record profits, Sugar was in line with our expectations and it was a remarkable year for Primark."
* before amortisation of non-operating intangibles, profits less
losses on disposal of non-current assets and exceptional items.
** before amortisation of non-operating intangibles, profits less
losses on disposal of non-current assets, profits less losses
on the sale and closure of businesses, and exceptional items.
All adjustments to profit measures are shown on the face of the
consolidated income statement.
For further information please contact:
Associated British Foods:
Until 15.00 only
John Bason, Finance Director
Tel: 020 7638 9571
Chris Barrie/Nicola Swift, Citigate Dewe Rogerson
Tel: 020 7638 9571
Jonathan Clare
Tel: 07770 321881
After 15.00
John Bason, Finance Director
Tel: 020 7399 6500
Notes to Editors
Associated British Foods is a diversified international food, ingredients and retail group with sales of GBP13.3bn and 113,000 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.
ASSOCIATED BRITISH FOODS plc
ANNUAL RESULTS ANNOUNCEMENT
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
CHAIRMAN'S STATEMENT
In reporting on last year's fine performance I concluded my statement with the expectation that the group would make some further progress this year. This year's results exceeded those expectations with very good growth: revenue increased by 9%, adjusted operating profit was ahead by 10% and adjusted earnings per share were up 13% on last year. This operating performance resulted in a strong cash flow and a healthy reduction in the group's net debt.
Primark had an outstanding year, increasing profit by 44% and adding a further 800,000 sq ft, or 10%, to its already substantial estate. Grocery margins improved with a recovery in both the baking and meat businesses of George Weston Foods in Australia. The momentum of recent years in AB Agri continued and underlying trading in Ingredients achieved some stabilisation. AB Sugar performed well, delivering a result which, although below last year's high level, was in line with our expectations.
The decline in AB Sugar's profit in 2013 was the result of lower European production and higher beet costs for British Sugar. In June this year, the European Council of Ministers confirmed that EU sugar quotas for domestic production would end in 2017 and the market has already started to react. Pricing for the 2014 financial year is lower as a consequence of the greater availability of sugar globally and an increase in competition. We have worked for a number of years to lower the cost base and improve the efficiency of our European operations and we are confident of our ability to succeed in this new environment.
Capital expenditure was lower again this year. Investment included the completion of the new yeast plant in Mexico and the South African warehouse and Tanzanian distillery for Illovo, and further expenditure on our programme to reduce the cost base at Allied Bakeries with new bread plants at three of our UK bakeries. We continued to pursue the big retail expansion opportunity in Primark, especially in continental Europe, and we expect this to increase in the coming year.
Cash flow was strong with higher profit and a lower level of capital investment more than offsetting a working capital outflow and higher taxes paid. We are a substantial tax payer and, of the GBP252m of corporation tax paid by the group during the year, more than half was paid in the UK. Net debt at the year end had reduced to GBP804m.
Primark has continued to make significant progress with its ethical trade programme. We take this programme extremely seriously and have built a team of some 40 in-country ethical trading specialists, of whom eight are located in Bangladesh. The tragic events in April caused by the collapse of the Rana Plaza building near Dhaka, Bangladesh were deeply saddening. Our response to these events was based on our determination to alleviate hardship arising from this disaster as quickly as possible. We were able to achieve this as a result of the experience and capability of our in-country team. The operating review contains considerable detail about the company's response. The board remains committed to the highest ethical standards not just at Primark but across all of the group's businesses.
Corporate responsibility
Our principal value to society lies in what we do every day: providing people with access to good quality, affordable food and clothing. If the rapidly growing global population is to be fed, it will be fed by companies like Associated British Foods, working in developed and emerging economies to encourage reliable and efficient supply. There is a close alignment between our moral obligation and good business practice. We have a modern and efficient food supply chain and we are constantly improving our productivity, investing in new assets, reducing waste and making more from less. Of course, we must do this for each succeeding generation, so our actions must look to the longer term and must be sustainable. We consistently invest in our cost base and our distribution reach. We use technology to improve productivity and to assure sources of supply but we must also use it to inform us of the impact of our actions on the environment. We label our products properly and market them appropriately to customers and we constantly strive to improve food safety. Our annual report includes examples of the application of our corporate responsibility philosophy, and much more detail is provided in our latest Corporate Responsibility Report which has been fully refreshed since first publication in 2010 and is available for download from our website.
Diversity
Our businesses around the world are largely staffed and managed by local teams and our workforce is consequently ethnically rich and diverse. We understand the importance of harnessing and nurturing talent, yet it is clear that women are not as well represented at senior levels within our organisation as they could be. This is a missed opportunity that we have begun to address. There is no common solution and this is reflected in our approach to gender diversity where we have piloted initiatives that can be copied, applied and adapted to local business conditions. While gender is a good place to start in tackling diversity, it is important that we work, not only to increase diversity in all its forms, but to ensure that it becomes part of our everyday business activity.
Remuneration
Our remuneration policy aims to reward employees for the performance of those parts of the business for which they are accountable and which they can directly influence. Management incentives are designed to encourage the right decisions being taken in the interests of the long-term health of the business. We seek to reward competitively for good performance but comparison with market data is just one of the factors taken into account when determining remuneration. Close attention is also paid to the nature and degree of autonomy of each role because management appreciate being given the freedom to act which encourages creativity, fosters a spirit of enterprise and ensures decisions are taken as close to our customers as possible. It is this combination of proper pay and job structure which enables us to attract and retain the calibre of management that has delivered these results.
Targets for long-term and short-term incentive arrangements are reviewed annually by the Remuneration committee, having regard to internal and external factors and the relationship between the level of payments made and the performance of the group over a number of years. Our executives understand that they are well remunerated and that this not only reflects the marketplace but also takes into account the performance and growth of the group, the degree of expertise required to fulfil the role and the level of individual experience. Our executives are properly rewarded for the work that they do and the responsibilities they bear.
Shareholders will note that the directors' remuneration report addresses the new reporting regime, albeit that we are not yet required to meet these standards until next year.
The board
The board has had the great benefit of a stable group of independent directors since 2007. The Senior Independent Director, Tim Clarke, was appointed in 2004 and has therefore served as a director for nine years. The UK Corporate Governance Code requires that Tim's independence is confirmed by the rest of the board, if he is to continue as an independent director. This they have done and we are delighted that Tim has agreed to continue his distinguished service to the group.
The three other independent directors were appointed in 2006 and 2007 and will complete nine years on the board in 2015 and 2016. Such a significant loss of experience in so short a period is to be avoided and, accordingly, we have decided to make an earlier appointment, expanding the board by one when the search that is currently under way has been completed. It is expected that, in due course, the board will revert to its current size.
Employees
I would like to thank all our employees for the contribution they have made to the group's success in the past year. The average number of people employed by the group increased during the year to 113,000 and, at a time of continuing unemployment in many of the markets in which we operate, and despite the continued drive for efficiency within our businesses, we are proud to have provided employment to 7,000 more people this year.
Dividends
I am pleased to report that a final dividend of 22.65p is proposed, to be paid on 10 January 2014 to shareholders on the register on 6 December 2013. Together with the interim dividend of 9.35p paid on 5 July 2013, this will make a total of 32.0p for the year, an increase of 12%.
Outlook
We expect a further reduction in profit from AB Sugar next year as EU sugar prices fall and the market rapidly adjusts ahead of regime reform in 2017. Primark's continued expansion together with revenue growth and margin improvement in Grocery are expected to deliver further increases in profit in those businesses. The lower level of borrowings and the retirement of more expensive long-term financing this year will lead to a reduced interest charge. As a result, and at this early stage, we continue to expect adjusted earnings per share for the coming year to be similar to 2013.
Charles Sinclair
Chairman
OPERATING REVIEW
I am delighted to report that the group has again delivered a great set of results. The group's revenue increased by 9% to GBP13.3bn and adjusted operating profit increased by 10% to GBP1,185m. The long-term performance of the group is important to us and this year's growth is in line with the compound annual revenue and profit growth achieved over the last ten years of 10% and 11% respectively. This success is a direct result of our business model, more description of which is presented in this year's annual report.
AB Sugar delivered an excellent profit this year which, although lower than last year, was in line with our expectations. The date and extent of EU sugar regime reform have now been clarified and sugar prices for our next financial year are already reflecting a transition. We have invested significantly in our European sugar assets over the years and the AB Sugar management team has plans for further efficiency improvements. As a result, we have established British Sugar as one of the lowest-cost sugar businesses in the world. Maintaining our dialogue with growers and strengthening our relationship with them will be necessary to build a sustainable and competitive sugar industry for the future.
The Primark results this year were remarkable with sales increasing by 22% and profit by 44%. Both the autumn/winter and spring/summer ranges sold out this year with little discount, which was testament to the success of our buying teams. Our newly opened and refurbished stores have never looked better and the increase in our selling space in continental Europe was significant. Expansion in our more established markets of the UK and Ireland focused on increasing selling space in major cities. In London, we opened our second store on Oxford Street, and extended our stores in Manchester, Newcastle and Mary Street, Dublin. In continental Europe, we increased selling space by 25% and were very encouraged by trading in all countries. Each new store opening generated excitement which gives us the confidence to believe that Primark is capable of much further growth and I look forward to the opening of our first store in France.
We were shocked and deeply saddened by the events in April 2013 when the Rana Plaza building in Bangladesh collapsed killing more than 1,100 people. A Primark supplier occupied the second floor of this eight storey building which was also the location of a number of other garment manufacturers. Our response focused on meeting the immediate needs of the victims and, in parallel, organising long-term compensation. We donated food to some 1,300 families shortly after the tragedy, and have since paid short-term financial support of six months' salary to more than 3,600 workers in the building, irrespective of their employer. Primark has committed to provide long-term financial compensation to victims who worked for its supplier, and their dependants. This was an unprecedented undertaking for us and was only possible with the support and close collaboration of international and local stakeholders including NGOs and trade unions.
The garment industry in Bangladesh has also experienced a number of factory fires in recent years. As a result, we signed the Accord on Fire and Building Safety in Bangladesh, a pioneering agreement between almost 100 apparel brands and retailers, international and local trade unions and NGOs. Primark was the first UK brand to sign this accord which is designed to ensure that sustainable improvements are made to working conditions in the garment industry and reinforces our commitment to health and safety in the workplace.
Grocery made good progress this year with revenue growth and profit ahead by 24%, mainly as a result of margin improvement from both good trading and the non-recurrence of restructuring costs. Twinings Ovaltine is our most profitable grocery business and it achieved excellent results, performing well in all of its major markets. I am pleased with the much improved result from George Weston Foods in Australia following the action taken by the management team which delivered higher volumes and lower conversion costs in the meat business and increased sales and margins in the bread business. The results in UK Grocery showed good progress from Jordans, Ryvita, Westmill and AB World Foods, offset by margin pressure in the bakeries and Silver Spoon.
The management team at AB Agri deserves much credit for its achievements over recent years. These have seen the development of the business into a profitable group that makes a major contribution to agriculture, especially in the UK, focused on providing value-adding animal feed products and services. It is recognised for its innovation and the development of bespoke services to customers, and this year delivered a record profit.
Following last year's appointment of a new chief executive at AB Mauri, our yeast and bakery ingredients business, a number of further management changes have been made during the financial year. Some stabilisation in underlying trading has already been achieved and the new team is engaged in reviewing the cost base and structure of the business.
Although the level of capital expenditure was lower again this year, it still represents a substantial investment in the assets of the group. We completed a number of projects in AB Mauri and AB Sugar and took a major step forward in the programme to equip our UK bakeries with state-of-the-art bread plants. The rate of selling space expansion at Primark is increasing and we expect capital investment in the coming year to rise. We can fund this comfortably from the high level of cash generated from operations.
SUGAR
2013 2012 change
--------------------------- ------ ------ -------
Revenue GBPm 2,677 2,666 level
--------------------------- ------ ------ -------
Adjusted operating profit
GBPm 435 510 -15%
--------------------------- ------ ------ -------
Adjusted operating profit
margin 16.2% 19.1%
--------------------------- ------ ------ -------
Return on average capital
employed 23.4% 26.5%
--------------------------- ------ ------ -------
After last year's record performance, AB Sugar delivered revenue and underlying adjusted operating profit in 2013 that were in line with management expectations at the beginning of the year which recognised that reduced European production, as a consequence of lower yields, and higher beet costs in the UK, would lead to a profit decline. Production volumes in Africa were ahead of last year and profit benefited from good sales demand and stable pricing. Profitability in China was lower than last year as a result of weak sugar prices throughout the year. Our performance improvement programme is now firmly established across all our businesses with the aim of increasing asset utilisation and reducing costs. The programme seeks to embed continuous improvement within all areas of our businesses by identifying and driving major change initiatives, tailoring capital expenditure to underpin our performance improvement and accelerating the implementation of co-product activities across the group.
British Sugar produced 1.15 million tonnes of sugar, lower than last year's 1.32 million tonnes as a result of poor growing conditions during 2012 which led to lower beet yields and sugar recovery. Sugar prices generally remained strong, consolidating the full year impact of last year's price increases. Co-product prices remained good with animal feed sales supported by exceptionally high wheat prices. These were offset to some extent by low, combined heat and power plant contributions, which were a feature of low electricity prices but high gas prices. We continued to invest in our production facilities with completion, during the year, of several major schemes focused on reducing energy consumption and increasing plant reliability. Looking forward to 2013/14, crop yields are expected to be slightly below average but we expect sugar production to at least achieve sales quota and to meet our bioethanol requirement. Beet costs for the forthcoming financial year were agreed in June 2012 at levels similar to those incurred in the campaign in this financial year.
In Spain, sugar beet volumes were lower than last year with a reduction in the area planted in the north. Heavy rains in the spring led to a delay in the completion of the campaign until the second week of May. Beet yields in both the north and south were very good and partly compensated for the lower volumes. Total beet sugar production was 405,000 tonnes, down from 468,000 tonnes in the previous year. 242,000 tonnes of imported raw sugar were refined at Guadalete and a further 95,000 tonnes were co-refined at the northern beet plants. Significant energy efficiency improvement work was completed during the year substantially reducing the energy cost per tonne of refined white sugar.
In June 2013, the European Council of Ministers confirmed that existing quota arrangements would continue until 30 September 2017 when sugar quotas for domestic production would end. Tariffs for sugar imports into the EU are not affected. AB Sugar expects this change to encourage growth in EU production by the most efficient producers of both sugar and isoglucose.
Negotiations with our EU customers regarding prices for the 2013/14 marketing year have been challenging. There has been a higher availability of sugar in the EU as a consequence of the conversion of non-quota sugar to quota, additional tariff rate quotas for imported sugars and low world sugar prices. In addition, competition has increased as other European producers look for new market opportunities ahead of regime change. Both of these factors have created a downward pressure on EU prices. The market is rapidly adjusting ahead of the regime reform in 2017. As a well-invested business, and one of the world's lowest-cost producers, we believe that we are well placed to succeed in this market with higher sugar volumes, albeit at lower prices.
Construction of Vivergo's bioethanol plant in Hull was completed last year and continues to make progress, albeit behind plan. Monthly production volumes are increasing and full production is expected in the new calendar year. The plant uses feed wheat and has the capacity to produce 420 million litres of bioethanol and 500,000 tonnes of high-protein, high-fibre animal feed.
Illovo's sugar production of 1.87 million tonnes for the financial year compared to 1.77 million tonnes last year, reflecting further recovery in the South African crop and good performances from the recently expanded facilities in Swaziland and Zambia. Prices throughout the year were generally stable although increased levels of imports into Tanzania and South Africa have brought some price pressure in these two countries. In Malawi, the currency has stabilised and domestic prices were increased in line with inflation. Pressure on prices across the region is expected to increase in the coming year.
The recently completed new custom-designed warehouse and distribution facility in Pietermaritzburg is fully operational and will provide improved storage and logistics benefits to the South African business. Construction of the new potable alcohol distillery in Tanzania was successfully completed within budget. This plant is now in the final stages of commissioning with the first sales made in October. The three downstream facilities in South Africa all operated well.
In China, sugar production in the south was higher than last year at 500,000 tonnes, principally due to an increase in the planted area, and in the north was in line with last year at 277,000 tonnes. An increase in sugar supply, from high levels of imports and improved domestic production, led to lower sugar prices. With exceptionally high government intervention stockholdings, the price outlook for the new financial year remains challenging. The business sustained a significant loss in the year and embarked upon a major cost reduction and factory efficiency programme. This included, in the first half, the decision to mothball our Baolongshan and Wangkui factories at the end of the campaign, with a non-cash charge of GBP22m included within adjusted operating profit. In early September we completed the sale of our beet factory at Chifeng where the regional government had announced its intention to redevelop the area. A charge of GBP15m has been taken as a loss on sale of businesses in the income statement.
AGRICULTURE
2013 2012 change
--------------------------- ------ ------ -------
Revenue GBPm 1,410 1,265 +11%
--------------------------- ------ ------ -------
Adjusted operating profit
GBPm 47 40 +18%
--------------------------- ------ ------ -------
Adjusted operating profit
margin 3.3% 3.2%
--------------------------- ------ ------ -------
Return on average capital
employed 16.4% 16.5%
--------------------------- ------ ------ -------
Agriculture had a record year with revenues and profit well ahead of last year driven by a strong performance across the UK businesses and international growth for AB Vista.
The UK livestock sector experienced a mixed year. Dairy farmers saw milk price increases being largely offset by higher costs and poor quality and quantity of forage. Consolidation in the poultry market depressed farm margins and the pig market continued its slow recovery from several years of low margins and high raw material costs. The continuing trend among UK consumers and retailers to prefer locally produced meat has provided a welcome stimulus to the UK industry and there are some signs of raw material costs beginning to fall.
Our UK feed business, AB Connect, saw strong demand for ruminant feeds, and poultry feed volumes grew in line with increased demand from UK consumers. Our international feed enzyme and micro-ingredients business, AB Vista, continued to grow faster than the market, particularly in North America with the success of our Quantum Blue phytase enzyme, sales of which were up more than 30% on last year. The business also became the second largest global supplier of betaine, a functional micro-ingredient extracted from sugar beet molasses.
Premier Nutrition traded well, particularly in UK poultry, and maintained its market-leading position in UK starter feeds. Further progress was achieved in its developing markets in Asia, and Central and Eastern Europe. AB Sustain's beef and dairy farm carbon footprint models have been improved further and were recertified by The Carbon Trust. In addition, its new biodiversity valuation programme 'Think.Nature' secured an endorsement from Natural England.
China continued to be a challenging market, particularly in pigs and poultry. Progress in poultry was hampered by an avian flu outbreak during the year but growth was achieved in our co-products business. Good raw material procurement and cost management underpinned profit delivery.
Frontier performed well in a year in which the supply of UK grain was poor and of variable quality. A higher volume of wheat imports increased the complexity and cost of the UK cereal supply chain which, together with global price volatility throughout the year, resulted in strong earnings from grain trading. A wet autumn in 2012 lowered wheat plantings thereby reducing demand for fertiliser and crop protection products. However, the cool spring and warm summer of 2013 provided good growing conditions for autumn planted crops and spring cereals creating a better harvest potential than was previously expected.
RETAIL
2013 2012 % change
--------------------------- ------ ------ ---------
Revenue GBPm 4,273 3,503 +22%
--------------------------- ------ ------ ---------
Adjusted operating profit
GBPm 514 356 +44%
--------------------------- ------ ------ ---------
Adjusted operating profit
margin 12.0% 10.2%
--------------------------- ------ ------ ---------
Return on average capital
employed 26.1% 19.2%
--------------------------- ------ ------ ---------
Primark's revenue was 22% ahead of last year at actual exchange rates, which benefited from the recent strengthening of the euro, and was 21% ahead at constant currency. This excellent result was driven by an increase in retail selling space, like-for-like sales growth of 5% for the full year, and superior sales densities in the larger new stores. Like-for-like growth during the year was affected by two periods of unseasonable weather; it was flattered at the start of this financial year with the benefit of seasonal autumnal weather compared with an unseasonably warm autumn in 2011, and was subdued during the very cold months of March and April 2013. Trading at other times of the year was strong, building upon the success of the comparable periods in the prior year. Trading in our stores in northern continental Europe was strong throughout the year and like-for-like growth in Spain, which was initially held back by the large number of new store openings, improved later in the year. Sales of the autumn/winter range in the new financial year are encouraging.
Operating profit margin in the first half was higher than last year reflecting the benefit of lower cotton prices and lower markdowns. The strong trading over the summer also resulted in lower markdowns in the second half and the margin for the full year exceeded our expectations at 12.0%. A feature of this year was the achievement of satisfactory operating profit margins, more quickly than expected, in northern continental Europe. This was delivered by superior sales densities and a focus on operating costs. Adjusted operating profit was 44% higher than last year at GBP514m reflecting the strong revenue growth. Movements in exchange rates had no material effect on profit.
Primark is an international brand with a global supply chain sourcing products from a number of countries in Europe and Asia. We have a responsibility to act and trade ethically and we have a duty of care to workers throughout the supply chain. We are signatories to the United Nations' Guiding Principles on Business and Human Rights. These were launched in 2012 and outline the responsibility of business and government to protect human rights by preventing and remedying the impact of abuse. This year 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 1,825 audits in the last calendar year and ethical trade training continues to be provided to every new Primark employee. We are also developing ways to support workers' livelihoods and wellbeing through longer-term initiatives such as the HERproject, focused on education regarding health and nutrition, and our Sustainable Cotton programme.
This was another very active year for Primark's property team and saw the group extend its operations into Austria for the first time with stores in Innsbruck and Vienna. We opened 16 new stores in total during the financial year, including our second store on London's Oxford Street which has 82,000 sq ft of selling space. We extended and refurbished the stores in Manchester, Newcastle, Chester and Mary Street, Dublin and closed the smaller of our two stores in Lincoln. This added 0.8m sq ft of selling space and brought the total to 257 stores and 9.0 million sq ft at the financial year end.
UK Iberia Republic Northern Total
of Ireland Continental
Europe
sq stores sq stores sq stores sq stores sq ft stores
ft ft ft ft '000
'000 '000 '000 '000
September
2012 5,425 157 1,100 35 1,010 38 665 12 8,200 242
Change
in year 335 4 230 6 20 - 215 5 800 15
September
2013 5,760 161 1,330 41 1,030 38 880 17 9,000 257
+6% +21% +2% +32% +10%
------------ ------- -------- ------- -------- ------- -------- ------- -------- ------- --------
Our new store design provides an exciting, fashionable and fun shopping experience. Strategically placed mannequins help to inspire customers to choose outfits that are readily available on adjacent fixtures, and prominent signage and wider aisles enable easy navigation through the store. We are also enhancing customer service by providing a higher ratio of fitting rooms and cash registers to ensure a smoother experience when trying on outfits and paying for them.
The new financial year will see another busy schedule of store openings. We expect to add more than a million square feet of selling space during the year, with an extensive programme of 13 openings in time for Christmas 2013 including five in Spain and our first store in France, which will open in Marseille. We also have plans to open a further four stores in France during the financial year. Although our focus is to develop the business through expansion in our existing countries of operation, we continue to explore territories beyond this geographic footprint in the medium term.
We have invested further to improve the efficiency, and increase the capacity, of our logistics network. A purpose-built depot in Mönchengladbach, in the west of Germany, came into operation in August 2012 with 425,000 sq ft of warehouse space. This increased our total warehouse capability to 2.7 million sq ft, adding to the footprint of our existing depots in Ireland, the UK and Spain, and enabled a more flexible response to the needs of our customers in northern Europe. We also undertook a substantial upgrade of our garment-on-hangers system in Magna Park in the UK, and extensions to the Spanish and German sites are planned for the new financial year to facilitate our growth across continental Europe.
New store openings:
Spain Germany The Netherlands
Orihuela, La Zenia Karlsruhe Almere
Santander, Valle Real Frankfurt, Zeil
Santiago de Compostela UK
Valladolid Austria Oxford Street East
Vitoria Innsbruck Thanet, Westwood Cross
Zaragoza, Puerto Venecia Vienna North (G3) Peterborough, Queensgate
Milton Keynes
West Bromwich
UK relocation: UK closure:
Sunderland, Bridges Lincoln
------------------------- ------------------ -------------------------
GROCERY
2013 2012 % change
--------------------------- ------ ------ ---------
Revenue GBPm 3,840 3,726 +3%
--------------------------- ------ ------ ---------
Adjusted operating profit
GBPm 232 187 +24%
--------------------------- ------ ------ ---------
Adjusted operating profit
margin 6.0% 5.0%
--------------------------- ------ ------ ---------
Return on average capital
employed 15.8% 12.2%
--------------------------- ------ ------ ---------
Grocery revenue increased by 3% but adjusted operating profit increased by 24%, a substantial improvement over last year with the benefit of the non-recurrence of restructuring costs, a strong performance from Twinings Ovaltine, and underlying growth in George Weston Foods in Australia in the second half.
Twinings Ovaltine again achieved excellent profit growth driven by higher sales volumes, improved pricing and an increase in total marketing investment with a focus on developing markets. Twinings achieved significant full year sales growth in all of its major markets, and particularly in the US where it was again the fastest growing tea brand. Despite more difficult trading in Thailand, Ovaltine made further progress in its developing markets of Asia and South America. Further investment was made during the year in cost reduction and efficiency projects across the business, notably at the tea factory in Poland and from the bringing in-house of liquid malt extract production in Thailand.
Allied Bakeries made significant progress this year in driving volume growth and reducing its cost base. A combination of organic volume growth and the new Co-op supply contract, which commenced in April this year, drove an increase in market share and established Kingsmill as the number two bread brand in the UK. Allinson bread benefited from advertising investment which saw the brand back on television for the first time in ten years, and Allinson Wholemeal regained its position as the number one brand in the Premium Wholemeal segment. We continued our capital investment programme to upgrade and modernise the bakeries. The new bread line at our Stockport bakery came on stream in September 2012 and in April this year we opened a new bread line at Walthamstow creating one of the most advanced bakeries in the UK. At West Bromwich another new bread line is on schedule to start commissioning during the autumn of 2013. This is the final stage of a five-year investment journey at West Bromwich, which will leave the site as one of the biggest and most modern in the world. However, the UK bakery market remained intensely competitive and there was some pressure on margins.
Silver Spoon's revenue and operating profit were below last year reflecting an especially competitive year within the UK packed sugar market. The long, warm summer resulted in less home baking although Billington's maintained its leading position in brown sugar as a result of increased press advertising and point of sale promotions. In the growing stevia sector, Truvia has become market leader with two product launches including a baking blend. Allinson flour continued to grow strongly, where it is market leader in the bread flour sector, following a brand relaunch and increased distribution.
Jordans and Ryvita both had an excellent year with strong UK sales growth driven by the launch of new pack formats. Jordans achieved its highest market share since its acquisition five years ago. The relaunch of Ryvita crispbread in new foil-fresh packaging drove increased sales, and new varieties of Crackerbread and Thins have recently been introduced. Internationally, both brands achieved good sales growth, particularly in Canada, and in France the introduction of a small in-country marketing team strengthened our presence and drove an increase in market share. For the second year running the business won the "Waitrose Way" Championing British award for branded products; this year for its pioneering work with British farmers from whom it purchases 80% of its raw materials.
AB World Foods made good progress achieving revenue growth in the UK for Patak's and Blue Dragon. Internationally, a number of new products were launched under these brands with recipes specifically formulated to meet national tastes. Those launched in Canada, Australia and Mexico performed particularly well. Westmill achieved revenue growth in its core brands: Elephant Atta, Lucky Boat noodles, Tolly Boy basmati rice and Patak's, despite continued weakness in the UK ethnic restaurant and take away trade. The Elephant Atta brand, which was acquired in September 2012, traded well and production, warehousing and distribution were all successfully integrated during the year.
At ACH in the US, baking volumes recovered after a warm 2012 winter, and prices were increased to recover higher commodity costs. Flavours secured increased volumes with key customers, and Foodservice made progress as restaurant trade showed some improvement. Investment in new product development continued, supported by a higher level of marketing and advertising expenditure, particularly for the new Weber flavouring products which achieved good distribution. In Mexico, there has been an improvement in the overall economic environment and Capullo volumes increased following its successful relaunch in 2012.
At George Weston Foods in Australia, trading met expectations with recovery and improved profitability in the second half. The bread business achieved margin improvement through a combination of an improved product mix and price increases, despite a challenging trading environment where the major retailers are continuing to promote in-store bakery products. Good progress was made with cost reduction programmes to offset inflationary pressures. There was also a continued focus on brand building and innovation with Burgen, The One and Abbott's all being relaunched during the year resulting in an increase in market share. The meat business performed in line with expectations, showing a significant improvement over last year with higher volumes and factory productivity gains resulting in improved margins and better customer service. Further efficiencies were achieved in sales distribution and warehousing, and administrative costs were reduced, all of which contributed to improved profitability.
INGREDIENTS
2013 2012 % change
--------------------------- ------ ------ ---------
Revenue GBPm 1,088 1,067 +2%
--------------------------- ------ ------ ---------
Adjusted operating profit
GBPm 1 27 -96%
--------------------------- ------ ------ ---------
Adjusted operating profit
margin 0.1% 2.5%
--------------------------- ------ ------ ---------
Return on average capital
employed 0.1% 4.4%
--------------------------- ------ ------ ---------
Revenue for the full year was 2% ahead of last year and underlying operating profit was in line. Adjusted operating profit includes a rationalisation charge of GBP21m for the cost of closing dry yeast production in Italy following the start-up of the new low-cost dry yeast plant in Mexico earlier in the year, and GBP5m of accelerated depreciation in China.
Following the difficulties experienced by the yeast business last year, the performance by AB Mauri this year was steady although markets remain very competitive and raw material costs high. The new management team is undertaking a review of margin improvement opportunities and particularly a number of cost reduction and restructuring initiatives. There were solid performances from HispanoAmerica, Australia, New Zealand and the UK and particularly in the US where the impact of the failure of a major customer was mitigated by business development activities. Trading in China improved and bakery ingredients products made a good contribution.
Commissioning of the new yeast factory in Mexico, which was built to enhance our reach and competitiveness in the global dry yeast market, saw the start of a new phase of business development in Central America and the Caribbean. The performance of the new yeast factory at Yantai, China met expectations. The recently opened bakery ingredients facility in Cordoba, Spain was designed to develop the growing bakery ingredients market in Iberia and complements our existing yeast manufacturing and marketing business there.
At ABF Ingredients, increased demand in the US for extruded ingredients has resulted in our existing production facility reaching full capacity. A new cereal extrusions factory has been built at Evansville, Indiana which is now being commissioned. Further growth was achieved in bakery, feed and speciality enzymes, with a particularly good response to new products launched last year. The growth achieved by Enzymes since the factory in Finland was expanded in 2009 has resulted in this factory also reaching full capacity, and further expansion is now being planned. The yeast extracts business in China was affected by the reduced availability and high price of sugar beet molasses with limited opportunity to improve profitability through price increases. Production of yeast extracts in China in the current market and with high input costs is uneconomical and we have taken a charge of GBP72m within the loss on sale and closure of businesses in the income statement, to write down the carrying value of the associated assets and to provide for restructuring costs. We have also written down the value of our yeast assets in India due to increasingly strict regulatory requirements for waste discharge.
In August we completed the disposal of our small US whey protein operation. Although profitable, we have not been able to develop sufficiently differentiated products and the consolidation of the dairy protein industry presented an opportunity to exit this market. A charge of GBP26m has been taken as a loss on disposal of the business reflecting a profit on the disposal of the tangible assets net of a write-off of the associated goodwill.
Since the financial year end we have entered into an agreement to acquire, subject to approval by the relevant competition authority, a bakery ingredients business with sales of GBP50m and operations in western Europe. This business will strengthen AB Mauri's operations in the region by broadening its product range in key craft markets beyond a yeast-only offering.
SUMMARY
Looking ahead to the next few years we see excellent prospects for Primark and further margin recovery in Grocery. However, this year we have seen an earlier than anticipated weakening of EU sugar prices, ahead of the now confirmed reform of the European sugar regime in 2017, and, as we stated in our September statement, this is expected to reduce AB Sugar's profits further. With the strength of the group's balance sheet and strong cash generation, we have every reason to be confident in the continuing development of the group.
George Weston
Chief Executive
FINANCIAL REVIEW
GROUP PERFORMANCE
Group revenue increased by 9% to GBP13.3bn and adjusted operating profit was up 10% at GBP1,185m. Movements in foreign currency exchange rates had no material net effect on revenues but at constant exchange rates, adjusted operating profit was 12% ahead of last year. In calculating adjusted operating profit, the amortisation charge on non-operating intangibles, any profits or losses on disposal of non-current assets and any exceptional items are excluded. On an unadjusted basis, operating profit was 25% ahead of last year at GBP1,093m benefiting from the non-recurrence of last year's exceptional impairment charge of GBP98m.
A net loss of GBP128m arose on the sale or closure of businesses this year of which disposals and closures in our Ingredients segment accounted for GBP113m and the loss on disposal of our sugar business in Chifeng, north China amounted to GBP15m. These losses are excluded from the calculation of adjusted earnings. Within the amount charged for the Ingredients business is a loss of GBP26m in respect of the disposal of our US whey protein operation which was completed in August 2013. This included a profit on the disposal of the tangible assets net of a write-off of the associated goodwill. Although profitable, we have not been able to develop sufficiently differentiated products and the consolidation of the dairy protein industry presented an opportunity to exit this market. 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 was alsomade to write down the value of our yeast plants in India due to increasingly strict regulatory requirements for waste discharge.
Finance expense less finance income of GBP87m compared with a net charge of GBP105m last year. This reduction reflected the group's strong cash flow and the resultant lower average level of net debt during the year. The redemption of British Sugar's GBP150m 103/4% debenture on 4 July 2013 contributed a small saving on the interest charge but, with the group's very low marginal cost of borrowing, this will have a more significant impact in the new financial year.
Profit before tax increased from GBP761m to GBP876m. On an adjusted basis, where the amortisation of non-operating intangible assets and any exceptional items are excluded together with any profits or losses on the sale of non-current fixed assets and the sale and closure of businesses, profit before tax increased by 13% to GBP1,096m.
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 GBP242m included an underlying charge of GBP265m at an effective rate of 24.2% (2012 - 24.8%) 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 24% to 23%, with effect from 1 April 2013. Further reductions to 21% and 20% are due to take effect on 1 April 2014 and 1 April 2015 respectively. The legislation to effect these rate changes was enacted before the 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, closing UK deferred tax balances have been calculated using a rate of 20%. The tax charge included a credit of GBP18m from the calculation of deferred tax liabilities reflecting this reduction.
The group is a substantial UK tax payer and although the rate of corporation tax has reduced, out of total tax paid in the year of GBP252m (2012 - GBP191m), the amount paid in the UK increased from GBP107m to GBP133m as a result of the higher profits earned by our UK businesses.
The overall tax charge for the year benefited from a GBP29m (2012 - GBP33m) credit for tax relief on the amortisation of non-operating intangible assets and goodwill arising from previous acquisitions. A tax charge of GBP6m arose on the property and business disposals.
EARNINGS AND DIVIDENDS
Earnings attributable to equity shareholders were GBP591m, GBP36m 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 (2012 - 789 million). Earnings per ordinary share were 6% higher than last year at 74.8p. Adjusted earnings per share, which provides a more consistent measure of performance, increased by 13% from 87.2p to 98.9p.
The interim dividend was increased by 10% to 9.35p and a final dividend has been proposed at 22.65p which represents an overall increase of 12% for the year. The proposed dividend is expected to cost GBP179m and will be charged next year. Dividend cover, on an adjusted basis, is just over three times.
BALANCE SHEET
Non-current assets of GBP6,921m were broadly unchanged from last year. Intangible assets were GBP188m lower, mainly reflecting the amortisation and impairment charges for the year and foreign exchange translation losses of GBP30m. Property, plant and equipment increased by GBP11m with capital expenditure in the year largely offset by depreciation and impairment charges.
Working capital at the year end was GBP58m higher than last year but average working capital across the year expressed as a percentage of sales showed further improvement. Net borrowings at the year end were GBP257m lower than last year at GBP804m as a consequence of the very strong cash flow.
A currency loss of GBP134m arose on the translation into sterling of the group's foreign currency denominated net assets. This resulted from a strengthening of sterling at the end of the year, against the rand and the Australian dollar which more than offset the effect of its weakening against the euro and the US dollar. The group's net assets increased by GBP276m to GBP6,497m.
Return on capital employed (ROCE) for the group increased from 17.0% to 18.5% this year. Grocery and Primark both delivered an improvement through much higher profits and Agriculture was level with last year, but lower profits resulted in a reduction in the returns for Sugar and Ingredients. 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 GBP1,240m to GBP1,276m. This increase was driven by the higher profit and the addition of non-cash items of amortisation, depreciation and impairment charges which, in total, were slightly higher this year. This was partly offset by a working capital outflow of GBP97m compared to last year's inflow of GBP43m and higher corporation taxes paid.
We continued to invest in the future growth of the group but the GBP600m spent on property, plant and equipment and intangibles net of disposals during the year was a reduction on last year's investment of GBP707m. Primark spent GBP228m on the acquisition of new stores and the fit-out of new and existing stores. Expenditure elsewhere included the completion of a number of large projects including the new yeast plant in Mexico, the South African warehouse and the distillery in Tanzania for Illovo. Further expenditure was incurred on our programme to reduce the cost base at Allied Bakeries with new bread lines at three of our UK bakeries. No new acquisitions were made in the period but GBP75m was paid out, almost all of which related to deferred consideration on acquisitions made in prior years.
FINANCING
The financing of the group is managed by a central treasury department. The group has total committed borrowing facilities amounting to GBP2.4bn, which comprise: GBP710m of US private placement notes maturing between 2014 and 2024; GBP1.15bn provided under a syndicated, revolving credit facility which matures in July 2015; a GBP120m loan from the European Investment Bank maturing in January 2015 and almost GBP400m of local committed facilities in Africa and Spain. During the financial year we repaid, from existing cash resources, US$120m of private placement notes and British Sugar's GBP150m 103/4% debenture. At the year end, GBP1.0bn was drawn down under these committed facilities. The group also had access to GBP773m of uncommitted credit lines under which GBP160m was drawn at the year end. Cash and cash equivalents totalled GBP362m 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. The syndicated bank finance will be renegotiated, in the ordinary course of events, in the months prior to maturity to ensure the group continues to have access to funding of an appropriate level and duration. The average fixed interest coupon on the private placement notes is 5.3%.
PENSIONS
Pensions are accounted for in accordance with IAS 19 Employee benefits and, on this basis, liabilities in the group's defined benefit pension schemes exceeded employee benefit assets by GBP44m compared with last year's deficit of GBP95m. 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. By agreement with the Trustees, the Company agreed to eliminate the deficit identified at the time of the triennial actuarial valuation of the UK pension scheme in 2008 with five annual payments of GBP30m each. Despite a small surplus at the most recent triennial valuation in 2011, the Company agreed to make the remaining two payments, the last of which was in March 2013. Total contributions to defined benefit plans in the year amounted to GBP69m (2012 - GBP71m).
With effect from 15 September 2013 the provisions of IAS 19 Revised will be adopted by the group and the comparative results for the financial year 2013 will be restated as a prior year adjustment. Under the revised Accounting Standard the reported operating profit for 2013 will be reduced by GBP4m to reflect a change in the treatment of administration costs and the other financial expense will increase 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.
On 1 October 2012 new legislation came into effect which required all eligible UK employees to be automatically enrolled into a qualifying pension scheme. With 40,000 employees in the UK, this was a major exercise for the group. We conducted an extensive awareness campaign in the months leading up to our selected implementation date of 1 February 2013, which resulted in an additional 15,000 employees joining the existing defined contribution section of the Associated British Foods Pension Scheme. The charge for the year for the group's defined contribution schemes, which is equal to the contributions made, amounted to GBP66m (2012 - GBP53m).
John Bason
Finance Director
The annual report and accounts is available at www.abf.co.uk and will be despatched to shareholders on 7 November 2013. The annual general meeting will be held at Congress Centre, 28 Great Russell Street, London. WC1B 3LS at 11am on Friday, 6 December 2013.
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.
-------------------- --------------------------- --------------------------------------------------------------
Employee rights Non-compliance We aim to ensure compliance with the
with internationally United Nations Universal Declaration
recognised standards. of Human Rights in the management of
all our businesses.
Inability to recruit
and retain high-calibre Employees throughout the group are recruited,
people at all trained and rewarded according to performance
levels necessary alone.
to achieve business
performance targets Whistleblowing policy and procedures
and maintain profitable in place.
growth.
We will consider how our approach to
Maintaining our managing employee rights can be shared
duty of care to with principal suppliers.
employees, contractors
and workers in
our supply chain.
-------------------- --------------------------- --------------------------------------------------------------
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 Refocus on worker safety and safe working
and responsible conditions. We have built up an intensive
business practices programme of ethical audits in Primark's
of our suppliers. 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 conducted an independent
review 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 the 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. Measuring and reporting our Greenhouse
Gas emissions for the group in 2014.
Measuring the CO2e emissions of our transport
for the first time.
Substantial investment is made to improve
environmental risk management, with a
focus on reducing CO2e emissions, when
investing in new capital projects.
-------------------- --------------------------- --------------------------------------------------------------
Air pollution Unacceptable impact Establish effective procedures across
on environment. our business to contain or minimise emissions.
Offence caused Plant and process changes are assessed
to local communities in advance before authorisation is sought.
by emissions to Comply with emission standards in country
air from factories. of operation, as a minimum.
Continue to monitor procedures and swiftly
redress non-compliance.
-------------------- --------------------------- --------------------------------------------------------------
Disposal of Legal sanction Responsibility is assigned to senior
waste and effluent and reputational executives in all businesses and specialists
damage because employed. Comply with standards in country
of non-compliance of operation as a minimum.
with regulations
and licences. Group wide focus on segregating all waste
so that more can be reused or recycled
Negative impact wherever practicable. Work with waste
on the local environment. contractors to help us measure the amount
of waste disposed or sent for beneficial
Managing quality use.
of water discharge.
Improvements in the packaging of our
Increasing cost products resulting in less waste.
of waste and managing
responsible waste Continued investment in our effluent
disposal. treatment plants and the treatment of
waste water.
Our UK Grocery group supports the Courtauld
2 Commitment to reduce packaging waste,
the Food and Drink Federation "Fivefold
Environmental Ambition" and the Institute
of Grocery Distribution Water Savings
Initiative.
-------------------- --------------------------- --------------------------------------------------------------
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 reduction 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.
We published our first Water Disclosure
Potential increasing in 2013 to the Carbon Disclosure Project.
cost of water. Illovo published its first Water Disclosure
in 2012.
Operating in water
stress areas.
Look to build long-term partnerships
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 risk management programme.
-------------------- --------------------------- --------------------------------------------------------------
Resource efficiency Unnecessary costs Use of raw materials optimised.
from inefficient
use of natural Use of packaging minimised consistent
resources. with food safety and product protection.
Maintaining a Fuel consumption in transport is minimised.
sustainable supply
of raw materials.
-------------------- --------------------------- --------------------------------------------------------------
Use of commodities Damage to the Group commitment that all businesses
such as palm environment and will use Certified Sustainable or Identity
oil, soya and communities reliant Preserved palm oil by 2015.
cocoa on commodities.
Membership of various industry bodies
Damage to the to collaborate on solutions including
reputation of the Roundtable on Responsible Soya. Twinings
the business from is a founder member of the Ethical Tea
unsustainable Partnership.
sourcing of certain
commodities. Commissioned independent assessment of
commodity and country risks.
Planning review of suppliers and sourcing
strategy for certain high risk commodities.
-------------------- --------------------------- --------------------------------------------------------------
Genetically Consumer concern Continue to label all food containing
modified (GM) over use of GM genetically modified ingredients.
crops food ingredients.
Continue to monitor consumer trends.
Consultation with other businesses, Governments
and industry bodies regarding GM products
and undertake further research to gain
deeper insight into the issue.
-------------------- --------------------------- --------------------------------------------------------------
Financial and regulatory
-----------------------------------------------------------------------------------------------------------------
Competition Penalties for Clear policy direction and close support
rules failing to comply from specialist in-house legal department.
with 1998 Competition
Act, the 2003 Compulsory awareness training.
Enterprise Act,
relevant EU law
and all relevant
competition legislation.
-------------------- --------------------------- --------------------------------------------------------------
Global economic Demand for our Mitigated by diversity of business portfolio
slowdown and products declines and geographic reach.
changing consumer due to uncertainty
demand over economic Substantial investment in research and
outlook and impact development, product quality, advertising
on disposable and promotion, and focus on cost management.
incomes.
-------------------- --------------------------- --------------------------------------------------------------
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 113-123 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.
An experienced Head of IT Security has
been appointed. He 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
The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, 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.
Pursuant to Disclosure and Transparency Rules, Chapter 4, the following sections of the Company's annual report contain a fair review of the development and performance of the business and the position of the Company, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face:
1. The Chairman's statement on pages 8 and 9;
2. Operating review on pages 20 to 35 which includes a review
of the external environment, future development and performance
measures;
3. Financial review on pages 36 to 39;
4. Other disclosures: 'Research and development';
5. Other disclosures: 'Financial instruments';
6. Other disclosures: 'Property, plant and equipment';
7. Other disclosures: 'Power of the directors'; and
8. Other disclosures: 'Principal risks and uncertainties'
The contents of this announcement, including the responsibility statement above, have been extracted from the annual report and accounts for the 52 weeks ended 14 September 2013 which can be found at www.abf.co.uk and will be despatched to shareholders on 7 November 2013. 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
5 November 2013
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 14 September 2013
2013 2012
Continuing operations Note GBPm GBPm
-------------------------------------------------------- ---- -------- --------
Revenue 1 13,315 12,252
Operating costs before exceptional
items (12,235) (11,302)
Exceptional items - (98)
1,080 852
Share of profit after tax from joint
ventures and associates 13 27
Profits less losses on disposal of
non-current assets - (6)
-------------------------------------------------------- ---- -------- --------
Operating profit 1,093 873
Adjusted operating profit 1 1,185 1,077
Profits less losses on disposal of
non-current assets - (6)
Amortisation of non-operating intangibles (92) (100)
Exceptional items - (98)
Profits less losses on sale and closure
of businesses 2 (128) (9)
-------------------------------------------------------- ----
Profit before interest 965 864
Finance income 13 9
Finance expense (100) (114)
Other financial (expense)/income (2) 2
-------------------------------------------------------- ---- -------- --------
Profit before taxation 876 761
Adjusted profit before taxation 1,096 974
Profits less losses on disposal of
non-current assets - (6)
Amortisation of non-operating intangibles (92) (100)
Exceptional items - (98)
Profits less losses on sale and closure
of businesses (128) (9)
Taxation - UK (113) (91)
- Overseas (excluding tax on exceptional
items) (129) (116)
- Overseas (on exceptional items) - 29
3 (242) (178)
-------------------------------------------------------- ---- -------- --------
Profit for the period 634 583
======================================================== ==== ======== ========
Attributable to
Equity shareholders 591 555
Non-controlling interests 43 28
-------------------------------------------------------- ---- -------- --------
Profit for the period 634 583
======================================================== ==== ======== ========
Basic and diluted earnings per ordinary
share (pence) 4 74.8 70.3
Dividends per share paid and proposed
for the period (pence) 5 32.0 28.5
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 14 September 2013
2013 2012
GBPm GBPm
Profit for the period recognised in the income statement 634 583
Other comprehensive income
Actuarial gains/(losses) on defined benefit schemes 24 (99)
Deferred tax associated with defined benefit schemes (5) 23
--------------------------------------------------------- ------- -----
Items that will not be reclassified to profit or
loss 19 (76)
Effect of movements in foreign exchange (114) (241)
Net (loss)/gain on hedge of net investment in foreign
subsidiaries (20) 11
Deferred tax associated with movements in foreign
exchange 2 3
Reclassification adjustment for movements in foreign
exchange on subsidiaries disposed 7 -
Current tax associated with movements in foreign
exchange - (4)
Movement in cash flow hedging position 6 (21)
Deferred tax associated with movement in cash flow
hedging position (2) 4
Items that are or may be subsequently reclassified
to profit or loss (121) (248)
Other comprehensive income for the period (102) (324)
--------------------------------------------------------- ------- -----
Total comprehensive income for the period 532 259
--------------------------------------------------------- ------- -----
Attributable to
Equity shareholders 526 281
Non-controlling interests 6 (22)
--------------------------------------------------------- ------- -----
Total comprehensive income for the period 532 259
--------------------------------------------------------- ------- -----
CONSOLIDATED BALANCE SHEET
At 14 September 2013
2013 2012
GBPm GBPm
Non-current assets
Intangible assets 1,581 1,769
Property, plant and equipment 4,552 4,541
Biological assets 97 89
Investments in joint ventures 182 174
Investments in associates 36 40
Employee benefits assets 52 18
Deferred tax assets 273 189
Other receivables 148 151
-------- --------
Total non-current assets 6,921 6,971
-------- --------
Current assets
Inventories 1,581 1,500
Biological assets 112 109
Trade and other receivables 1,342 1,236
Derivative assets 27 33
Cash and cash equivalents 362 391
-------- --------
Total current assets 3,424 3,269
-------- --------
TOTAL ASSETS 10,345 10,240
-------- --------
Current liabilities
Loans and overdrafts (394) (538)
Trade and other payables (1,881) (1,752)
Derivative liabilities (38) (50)
Income tax (166) (150)
Provisions (47) (98)
-------- --------
Total current liabilities (2,526) (2,588)
-------- --------
Non-current liabilities
Loans (772) (914)
Provisions (30) (38)
Deferred tax liabilities (424) (366)
Employee benefits liabilities (96) (113)
-------- --------
Total non-current liabilities (1,322) (1,431)
-------- --------
TOTAL LIABILITIES (3,848) (4,019)
-------- --------
NET ASSETS 6,497 6,221
-------- --------
Equity
Issued capital 45 45
Other reserves 175 175
Translation reserve 440 532
Hedging reserve (13) (17)
Retained earnings 5,486 5,099
-------- --------
TOTAL EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS 6,133 5,834
-------- --------
Non-controlling interests 364 387
-------- --------
TOTAL EQUITY 6,497 6,221
-------- --------
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 14 September 2013
2013 2012
GBPm GBPm
Cash flow from operating activities
Profit before taxation 876 761
Profits less losses on disposal of non-current
assets - 6
Profits less losses on sale and closure of businesses 128 9
Finance income (13) (9)
Finance expense 100 114
Other financial expense/(income) 2 (2)
Share of profit after tax from joint ventures
and associates (13) (27)
Amortisation 130 122
Depreciation 405 394
Impairment of property, plant and equipment 27 92
Impairment of operating intangibles 4 6
Impairment of goodwill 10 -
Net change in the fair value of biological assets (26) (28)
Share-based payment expense 15 8
Pension costs less contributions (29) (38)
Increase in inventories (112) (125)
(Increase)/decrease in receivables (158) 3
Increase in payables 173 165
Purchases less sales of current biological assets (2) (3)
Increase/(decrease) in provisions 11 (17)
------------------------------------------------------ ----- -----
Cash generated from operations 1,528 1,431
Income taxes paid (252) (191)
------------------------------------------------------ ----- -----
Net cash from operating activities 1,276 1,240
------------------------------------------------------ -----
Cash flows from investing activities
Dividends received from joint ventures and associates 11 11
Purchase of property, plant and equipment (593) (700)
Purchase of intangibles (22) (13)
Purchase of non-current biological assets (1) (1)
Sale of property, plant and equipment 15 6
Purchase of subsidiaries, joint ventures and
associates (75) (45)
Sale of subsidiaries, joint ventures and associates 35 2
Loans to joint ventures (4) 24
Purchase of non-controlling interests (1) -
Interest received 10 10
------------------------------------------------------
Net cash from investing activities (625) (706)
------------------------------------------------------ ----- -----
Cash flows from financing activities
Dividends paid to non-controlling interests (29) (23)
Dividends paid to equity shareholders (232) (200)
Interest paid (107) (108)
Financing:
Decrease in short-term loans (258) (533)
(Decrease)/increase in long-term loans (23) 298
Sale of shares in subsidiary undertakings to
non-controlling interests 1 4
Movements from changes in own shares held (10) -
------------------------------------------------------ ----- -----
Net cash from financing activities (658) (562)
------------------------------------------------------ ----- -----
Net decrease in cash and cash equivalents (7) (28)
Cash and cash equivalents at the beginning of
the period 245 291
Effect of movements in foreign exchange 5 (18)
------------------------------------------------------ ----- -----
Cash and cash equivalents at the end of the period 243 245
====================================================== ===== =====
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 14 September 2013
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 17
September
2011 45 175 712 - 4,816 5,748 427 6,175
Total comprehensive
income
Profit for the period
recognised
in the income
statement - - - - 555 555 28 583
Actuarial losses on
defined
benefit schemes - - - - (99) (99) - (99)
Deferred tax
associated
with defined benefit
schemes - - - - 23 23 - 23
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
Items that will not
be
reclassified to
profit
or loss - - - - (76) (76) - (76)
Effect of movements
in
foreign exchange - - (192) - - (192) (49) (241)
Net gain/(loss) on
hedge
of net investment in
foreign
subsidiaries - - 12 - - 12 (1) 11
Deferred tax
associated
with movements in
foreign
exchange - - - - 3 3 - 3
Current tax
associated
with movements in
foreign
exchange - - - - (4) (4) - (4)
Movement in cash flow
hedging
position - - - (21) - (21) - (21)
Deferred tax
associated
with movement in
cash flow
hedging position - - - 4 - 4 - 4
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
Items that are or may
be
subsequently
reclassified
to profit or loss - - (180) (17) (1) (198) (50) (248)
Other comprehensive
income - - (180) (17) (77) (274) (50) (324)
Total comprehensive
income - - (180) (17) 478 281 (22) 259
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
Transactions with
owners
Dividends paid to
equity
shareholders - - - - (200) (200) - (200)
Net movement in own
shares
held - - - - 8 8 - 8
Deferred tax
associated
with share-based
payments - - - - (2) (2) - (2)
Dividends paid to
non-controlling
interests - - - - - - (23) (23)
Changes in ownership
of
subsidiaries - - - - (1) (1) 5 4
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
Total transactions
with
owners - - - - (195) (195) (18) (213)
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
Balance as at 15
September
2012 45 175 532 (17) 5,099 5,834 387 6,221
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
Total comprehensive
income
Profit for the period
recognised
in the income
statement - - - - 591 591 43 634
Actuarial
gain/(losses)
on defined benefit
schemes - - - - 26 26 (2) 24
Deferred tax
associated
with defined benefit
schemes - - - - (5) (5) - (5)
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
Items that will not
be
reclassified to
profit
or loss - - - - 21 21 (2) 19
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 23 (65) (37) (102)
Total comprehensive
income - - (92) 4 614 526 6 532
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) 5,486 6,133 364 6,497
---------------------- --------- ---------- ------------ --------- ---------- ------ ---------------- --------
NOTES TO THE ANNUAL RESULTS ANNOUNCEMENT
For the 52 weeks ended 14 September 2013
1. Operating segments
The group discloses five operating segments, as described below. These
are the group's operating divisions, based on the group's 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 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
14 September 15 September 14 September 15 September
2013 2012 2013 2012
Operating segments GBPm GBPm GBPm GBPm
-------------- --------------- ------------- -------------
Grocery 3,840 3,726 232 187
Sugar 2,677 2,666 435 510
Agriculture 1,410 1,265 47 40
Ingredients 1,088 1,067 1 27
Retail 4,273 3,503 514 356
Central - - (50) (48)
-------------- --------------- ------------- -------------
13,288 12,227 1,179 1,072
Businesses disposed:
Ingredients 27 25 6 5
13,315 12,252 1,185 1,077
-------------- --------------- ------------- -------------
Geographical information
United Kingdom 5,728 5,248 715 638
Europe & Africa 3,790 3,328 386 325
The Americas 1,282 1,216 103 95
Asia Pacific 2,488 2,435 (25) 14
-------------- --------------- ------------- -------------
13,288 12,227 1,179 1,072
Businesses disposed:
The Americas 27 25 6 5
-------------- --------------- ------------- -------------
13,315 12,252 1,185 1,077
-------------- --------------- ------------- -------------
1. Operating segments for the 52 weeks
ended 14 September 2013
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 3,851 2,808 1,410 1,193 4,273 (247) 13,288
Internal revenue (11) (131) - (105) - 247 -
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
External revenue from continuing
businesses 3,840 2,677 1,410 1,088 4,273 - 13,288
Businesses disposed - - - 27 - - 27
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Revenue from external customers 3,840 2,677 1,410 1,115 4,273 - 13,315
Adjusted operating profit
before joint ventures and
associates 224 450 35 (7) 514 (50) 1,166
Share of profit after tax
from joint ventures and associates 8 (15) 12 8 - - 13
Businesses disposed - - - 6 - - 6
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Adjusted operating profit 232 435 47 7 514 (50) 1,185
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 213 399 46 (157) 514 (50) 965
Finance income 13 13
Finance expense (100) (100)
Other financial expense (2) (2)
Taxation (242) (242)
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Profit for the period 213 399 46 (157) 514 (381) 634
====================================== ======== ====== ============ ============ ========= ======== ========
Segment assets (excluding
joint ventures and associates) 2,666 2,432 319 1,159 2,677 187 9,440
Investments in joint ventures
and associates 33 34 99 52 - - 218
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Segment assets 2,699 2,466 418 1,211 2,677 187 9,658
Cash and cash equivalents 362 362
Deferred tax assets 273 273
Employee benefits assets 52 52
Segment liabilities (539) (398) (121) (207) (619) (112) (1,996)
Loans and overdrafts (1,166) (1,166)
Income tax (166) (166)
Deferred tax liabilities (424) (424)
Employee benefits liabilities (96) (96)
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Net assets 2,160 2,068 297 1,004 2,058 (1,090) 6,497
====================================== ======== ====== ============ ============ ========= ======== ========
Non-current asset additions 165 158 10 70 220 6 629
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Depreciation 108 86 7 49 151 4 405
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
Amortisation 37 37 3 53 - - 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
-------------------------------------- -------- ------ ------------ ------------ --------- -------- --------
1. Operating segments for the 52 weeks
ended 15 September 2012
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing
businesses 3,734 2,808 1,275 1,138 3,503 (231) 12,227
Internal revenue (8) (142) (10) (71) - 231 -
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
External revenue from continuing
businesses 3,726 2,666 1,265 1,067 3,503 - 12,227
Businesses disposed - - - 25 - - 25
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Revenue from external customers 3,726 2,666 1,265 1,092 3,503 - 12,252
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Adjusted operating profit
before joint ventures and
associates 179 514 27 17 356 (48) 1,045
Share of profit after tax
from joint ventures and
associates 8 (4) 13 10 - - 27
Businesses disposed - - - 5 - - 5
Adjusted operating profit 187 510 40 32 356 (48) 1,077
Profits less losses on disposal
of non-current assets - 1 - - - (7) (6)
Amortisation of non-operating
intangibles (16) (22) (1) (61) - - (100)
Exceptional items (98) - - - - - (98)
Profits less losses on sale
and closure of businesses - (6) - (3) - - (9)
Profit before interest 73 483 39 (32) 356 (55) 864
Finance income 9 9
Finance expense (114) (114)
Other financial income 2 2
Taxation (178) (178)
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Profit for the period 73 483 39 (32) 356 (336) 583
================================== ======== ======== ============== ============== ========= ======== ========
Segment assets (excluding
joint ventures and associates) 2,685 2,510 275 1,353 2,423 182 9,428
Investments in joint ventures
and associates 24 47 87 56 - - 214
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Segment assets 2,709 2,557 362 1,409 2,423 182 9,642
Cash and cash equivalents 391 391
Deferred tax assets 189 189
Employee benefits assets 18 18
Segment liabilities (573) (413) (104) (204) (526) (118) (1,938)
Loans and overdrafts (1,452) (1,452)
Income tax (150) (150)
Deferred tax liabilities (366) (366)
Employee benefits liabilities (113) (113)
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Net assets 2,136 2,144 258 1,205 1,897 (1,419) 6,221
================================== ======== ======== ============== ============== ========= ======== ========
Non-current asset additions 153 160 14 96 329 3 755
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Depreciation 105 95 7 47 132 8 394
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Amortisation 33 24 3 62 - - 122
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Impairment of property, plant
and equipment 92 - - - - - 92
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Impairment of operating
intangibles 6 - - - - - 6
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Impairment of property, plant
and equipment on closure of
business - - - 3 - - 3
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- -------- -------------- -------------- --------- -------- --------
Revenue from external customers 5,248 3,328 1,241 2,435 12,252
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Segment assets 3,689 3,002 1,051 1,900 9,642
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Non-current asset additions 270 278 65 142 755
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Depreciation 184 95 25 90 394
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Amortisation 15 49 26 32 122
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Impairment of property, plant
and equipment - - - 92 92
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Impairment of operating
intangibles - - - 6 6
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
Impairment of property plant
and equipment on closure of
business - - - 3 3
---------------------------------- -------- -------- -------------- -------------- --------- -------- --------
2. Profits less losses on sale and closure of businesses
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 is a
loss of GBP26m in respect of the disposal of our US whey protein operation,
which was completed in August 2013, 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.
2012
Loss on sale and closure of businesses of GBP9m comprised a GBP15m
non-cash charge for the write-off of Illovo's investment in pre-project
expenditure in Mali (Sugar and Europe & Africa segments), offset by
a GBP9m credit for recognition of deferred profit on the disposal
of the group's Polish sugar operations in November 2009 (Sugar and
Europe & Africa segments) together with other small charges totalling
GBP3m.
3. Income tax expense
52 weeks 52 weeks
ended ended
14 September 15 September
2013 2012
GBPm GBPm
Current tax expense
UK - corporation tax at 23.5% (2012 -
25.1%) 143 108
Overseas - corporation tax 145 110
UK - overprovided in prior periods (9) (6)
Overseas - overprovided in prior periods (10) (2)
269 210
Deferred tax expense
UK deferred tax (21) (14)
Overseas deferred tax 2 (20)
UK - underprovided in prior periods - 3
Overseas - overprovided in prior periods (8) (1)
------------------------ -----------------------
(27) (32)
------------------------ -----------------------
Total income tax expense in income statement 242 178
======================== =======================
Reconciliation of effective tax rate
Profit before taxation 876 761
Less share of profit after tax from joint
ventures and associates (13) (27)
------------------------ -----------------------
Profit before taxation excluding share
of profit after tax from joint ventures
and associates 863 734
------------------------ -----------------------
Nominal tax charge at UK corporation tax
rate of 23.5% (2012 - 25.1%) 203 184
Benefit of lower tax rates (34) (19)
Expenses not deductible for tax purposes 24 3
Profits/losses on disposal of assets covered
by tax exemptions or unrecognised capital
loses 39 2
Deferred tax not recognised 37 14
Adjustments in respect of prior periods (27) (6)
------------------------ -----------------------
242 178
======================== =======================
Income tax recognised directly in equity
Deferred tax associated with defined benefit
schemes 5 (23)
Deferred tax associated with share-based
payments - 2
Deferred tax associated with movement
in cash flow hedging position 2 (4)
Deferred tax associated with movements
in foreign exchange (2) (3)
Current tax associated with movements
in foreign exchange - 4
------------------------ -----------------------
5 (24)
======================== =======================
The UK corporation tax rate was reduced from 24% to 23% with effect
from 1 April 2013, and further reductions to 21% and 20% are due to
take effect on 1 April 2014 and 1 April 2015 respectively. The legislation
to effect these rate changes was enacted before the balance sheet date
and UK deferred tax has therefore been calculated using a rate of 20%.
This rate change results in an GBP18m reduction in the tax charge in
the income statement.
A tax credit of GBP29m arising on the exceptional impairment charge
in 2012 was included within the overseas deferred tax credit.
4. Earnings per share
The calculation of basic earnings per share at 14 September 2013 was
based on the net profit attributable to equity shareholders of GBP591m
(2012 - GBP555m), and a weighted average number of shares outstanding
during the year of 790 million (2012 - 789 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, exceptional
items 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 (2012 - 789 million). There is no difference
between basic and diluted earnings.
52 weeks 52 weeks
ended ended
14 September 15 September
2013 2012
pence pence
Adjusted earnings per share 98.9 87.2
Disposal of non-current assets - (0.8)
Sale and closure of businesses (16.2) (1.1)
Exceptional items - (12.4)
Tax effect on above adjustments (0.8) 3.9
Amortisation of non-operating intangibles (11.7) (12.7)
Tax credit on non-operating intangibles
amortisation and goodwill 3.7 4.2
Non-controlling interests' share of
amortisation of non-operating
intangibles net of tax 0.9 2.0
------------------------ -----------------------
Earnings per ordinary share 74.8 70.3
======================== =======================
5. Dividends 2013 2012
pence pence 2013 2012
per
share per share GBPm GBPm
2011 final - 16.85 - 133
2012 interim - 8.50 - 67
2012 final 20.00 - 158 -
2013 interim 9.35 - 74 -
-------- -------------------------------------------------- ------- ------------------------ -------- -----------------------
29.35 25.35 232 200
-------- -------------------------------------------------- ------- ------------------------ -------- -----------------------
The 2013 interim dividend was declared on 23 April 2013 and paid on
5 July 2013. The 2013 final dividend of 22.65 pence, total value of
GBP179m, will be paid on 10 January 2014 to shareholders on the register
on 6 December 2013.
Dividends relating to the period were 32.0 pence per share totalling
GBP253m (2012 - 28.5 pence per share totalling GBP225m).
6. Exceptional items
In 2012, an exceptional charge of GBP98m was made to impair property,
plant and equipment assets (GBP92m) and operating intangible assets
(GBP6m) in the Australian meat business. An exceptional tax credit
of GBP29m arose on the recognition of the resultant deferred tax asset.
7. Acquisitions and disposals
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 is a
loss of GBP26m in respect of the disposal of our US whey protein operation,
which was completed in August 2013. 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.
2012
During 2012 the group acquired Elephant Atta, the UK's leading ethnic
flour brand, for a consideration of GBP34m. Additionally a number
of smaller acquisitions were made with a total cash consideration
of GBP3m, and deferred consideration payable on prior year acquisitions
was increased by GBP9m. Total consideration therefore amounted to
GBP46m. Net identifiable assets and liabilities acquired were GBP38m,
comprising non-operating intangibles of GBP36m, inventory of GBP3m,
cash of GBP1m, trade payables of GBP1m and short-term borrowings of
GBP1m. Goodwill arising was GBP8m.
Cash flow on purchase of subsidiaries, joint ventures and associates
of GBP45m comprises GBP37m cash consideration, less GBP1m cash acquired,
and a GBP9m investment in joint ventures.
Loss on sale and closure of businesses of GBP9m comprised a GBP15m
non-cash charge for the write-off of Illovo's investment in pre-project
expenditure in Mali (Sugar and Europe & Africa segments), offset by
a GBP9m credit for recognition of deferred profit on the disposal
of the group's Polish sugar operations in November 2009 (Sugar and
Europe & Africa segments) together with other small charges totalling
GBP3m. Cash flow on sale of subsidiaries, joint ventures and associates
of GBP2m in the cash flow statement comprises receipts of deferred
consideration in respect of previous business disposals.
8. Analysis of net debt
At
15 At
September Cash Non-cash Exchange 14 September
2012 flow items adjustments 2013
GBPm GBPm GBPm GBPm GBPm
Cash at bank and in
hand, cash
equivalents and overdrafts 245 (7) - 5 243
Short-term borrowings (392) 258 (135) (6) (275)
Loans over one year (914) 23 135 (16) (772)
---------- --------- -------------- ------------------ --------------------
(1,061) 274 - (17) (804)
========== ========= ============== ================== ====================
Cash and cash equivalents comprise cash balances, call deposits and
investments with original maturities of three months or less. Bank
overdrafts that are repayable on demand of GBP119m are included as
a component of cash and cash equivalents for the purpose of the cash
flow statement. Non-cash movements previously shown net within cash
flow have been shown separately.
9. Related party transactions
The group has a controlling related party relationship with its parent
company, 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:
2013 2012
Sub note GBP'000 GBP'000
Charges to Wittington Investments Limited in respect
of services provided by the Company and its subsidiary
undertakings 338 330
Dividends paid by ABF and received in a beneficial
capacity by:
(i) trustees of the Garfield Weston Foundation 1 8,277 7,143
(ii) directors of Wittington Investments Limited
who are not trustees of the Foundation 1,297 1,120
(iii) directors of the Company who are not trustees
of the Foundation and are not directors of Wittington
Investments Limited 30 21
(iv) a member of the Weston family employed within
the Associated British Foods group 2 864 746
Sales to fellow subsidiary undertakings on normal
trading terms 3 2 135
Sales to companies with common key management
personnel on normal trading terms 4 16,538 14,710
Commissions paid to companies with common key
management personnel on normal trading terms 4 787 300
Amounts due from a company with common key management
personnel 4 2,227 1,531
Sales to joint ventures on normal trading terms 18,488 18,177
Sales to associates on normal trading terms 19,460 17,598
Purchases from joint ventures on normal trading
terms 397,449 292,687
Purchases from associates on normal trading terms 20,805 21,898
Amounts due from joint ventures 163,170 152,136
Amounts due from associates 1,790 898
Amounts due to joint ventures 30,806 24,808
Amounts due to associates 1,059 2,398
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 14
September 2013 was the beneficial owner of 683,073 shares (2012 -
683,073 shares) in Wittington Investments Limited representing 79.2%
(2012 - 79.2%) of that company's issued share capital and is, therefore,
the Company's ultimate controlling party. At 14 September 2013 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 undertakings are Fortnum and Mason plc and
Heal & Son Limited.
4. The companies with common key management personnel are the George
Weston Limited group, in Canada, and Selfridges & Co Ltd.
Amounts due from joint ventures comprise GBP15m (2012 - GBP16m) of
finance lease receivables and GBP130m (2012 - GBP126m) of loan receivables.
The remainder of the balance is trading balances. The loan receivables
are all non-current (2012 - all non-current), and all but GBP3m (2012
- GBP3m) of the finance lease receivables are non-current.
10. Other information
The financial information set out above does not constitute the Company's
statutory accounts for the 52 weeks ended 14 September 2013, or the
52 weeks ended 15 September 2012. Statutory accounts for 2012 have
been delivered to the Registrar of Companies and those for 2013 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.
11. 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 14 September 2013 comprise those of
the Company and its subsidiaries (together referred to as 'the group')
and the group's interest in joint ventures and associates.
The consolidated financial statements were authorised for issue by
the directors on 5 November 2013.
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 expenses 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 14 September
2013. 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 2013. The results of Illovo
are included for the period to 30 September 2013 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.
12. Significant accounting policies
The accounting policies applied by the group in this annual results
announcement are the same as those applied by the group in its consolidated
financial statements for the year ended 14 September 2013.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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