TIDMABF
RNS Number : 7185V
Associated British Foods PLC
07 November 2017
For release 7 November 2017
Associated British Foods plc results for 52 weeks ended 16
september 2017
Strong growth for the group
Financial Headlines
Constant
Actual currency
* Group revenue GBP15.4bn +15% +6%
* Adjusted operating profit GBP1,363m +22% +13%
* Adjusted profit before tax up 22% to GBP1,310m
* Adjusted earnings per share up 20% at 127.1p
* Dividends per share up 12% to 41.0p
* Gross investment of GBP945m
* Net cash GBP673m
* Statutory operating profit up 21% to GBP1,336m, and
with the benefit of a profit on the sale of
businesses, profit before tax up 51% to GBP1,576m and
basic earnings per share up 47% to 151.6p
George Weston, Chief Executive of Associated British Foods,
said:
"This was a highly successful year for the group. These results
reflect our international diversity, and the strong underlying
performance of our businesses was driven by management actions
throughout the year. Capital investment was a record as we
continued to pursue the opportunities to grow our businesses into
the future."
Adjusted operating profit is stated before the amortisation of
non-operating intangibles, transaction costs and profits less
losses on disposal of non-current assets.
These items, together with profits less losses on the sale and
closure of businesses, are excluded from adjusted profit before tax
and adjusted earnings per share.
All adjustments to profit measures are shown on the face of the
consolidated income statement. Constant currency is derived by
translating the 2016 results at 2017 average exchange rates.
For further information please contact:
Until 15.00 only
Associated British Foods:
John Bason, Finance Director
Flic Howard-Allen, Head of External Affairs
Tel: 020 7638 9571
Citigate Dewe Rogerson:
Chris Barrie, Eleni Menikou
Tel: 020 7638 9571
Jonathan Clare
Tel: 07770 321881
After 15.00
John Bason, Finance Director
Flic Howard-Allen, Head of External Affairs
Tel: 020 7399 6500
Notes to Editors
Associated British Foods is a diversified international food,
ingredients and retail group with sales of GBP15.4bn and 133,000
employees in 50 countries. It has significant businesses in Europe,
southern Africa, The Americas, Asia 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.
Annual Results Announcement
For the 52 weeks ended 16 September 2017
CHAIRMAN'S STATEMENT
Group revenue of GBP15.4bn was 15% ahead of last year and
adjusted operating profit of GBP1,363m was 22% ahead. Given the
economic and currency uncertainties a year ago, these results
demonstrate the benefit of our international diversity and the
strong underlying performance of our businesses. I am therefore
very pleased to report excellent progress this year with adjusted
earnings per share up 20% to 127.1 pence.
Gross investment was again significant this year at GBP945m.
This comprised GBP866m of capital expenditure and operating
intangible assets, driven by a higher level of investment by
Primark with expenditure in all its countries of operation, and
GBP79m on business acquisitions. This year we delivered a
particularly impressive cash flow which emphasises the group's
ability to convert profitability into cash. We also realised
proceeds, net of costs and tax, of over GBP500m from two business
disposals. Together these resulted in last year's net debt of
GBP315m becoming a net cash balance of GBP673m this year end.
As anticipated, we delivered a strong recovery in sugar profits
this year. This was a consequence of the recent structural changes
made to AB Sugar, the considerable benefit derived from performance
improvement over a number of years and an increase in EU sugar
prices. Moving to full ownership of Illovo last year has proved to
be a positive step with an increase in profit which benefited from
an acceleration of its commercial development and performance
improvement. We believe that we are well placed to take advantage
of the removal of sugar quotas in the EU arising from the reform of
the sugar regime, and to meet the challenges including the recent
fall in EU sugar prices.
Further cost reduction drove the continued recovery of the yeast
and bakery ingredients business while excellence in execution was
the driver of the strong performance from speciality ingredients.
Together they increased adjusted operating profit by 34% this
year.
Good progress was made by Twinings Ovaltine, ACH in the US and
George Weston Foods in Australia, but Grocery results were held
back by the trading environment faced by the UK bakeries. Since the
year end we have completed the acquisition of Acetum S.p.A., a
producer of high-quality balsamic vinegar from Modena, Italy. We
look forward to the opportunity of developing further this fine
business, using our existing capability in selling and marketing
speciality foods internationally.
Primark has the potential for significant growth and this was
demonstrated again this year by its opening of a net 30 stores and
1.5 million sq ft of selling space across nine countries. The
Primark management team also had further success in mitigating
currency headwinds, they delivered on-trend fashion and their
stores have never looked better. We look forward to further growth
in the coming year.
Two business disposals took place at the beginning of the
financial year. In November 2016 the sale of our US herbs and
spices operation significantly reduced the complexity of ACH and
facilitated a reduction in overhead. In December 2016, we sold our
cane sugar operations in south China to a party better placed to
drive its further development. We are proud of the transformation
in agricultural productivity, sugar yields and factory efficiencies
that we achieved over our 20 years of ownership. We realised a
pre-tax profit of GBP293m from these two disposals with little
impact on the group's trading profit.
Corporate responsibility
Our group has grown and evolved considerably since its formation
in 1935 and a great deal has changed, but the essence of what we do
has remained a constant. Operating ethically is a core value at the
heart of our group and our intention has always been to do the
right thing for our people and the wider community, believing that
we achieve this by feeding and clothing millions of people every
day. Our approach to ensuring that this is sustained is described
in our Corporate Responsibility Report which has been updated this
year. A copy of the update is available for download at
www.abf.co.uk/responsibility.
Remuneration
As noted in the Remuneration report we revised our remuneration
policy last year to align it more closely with our business
strategy. In particular, an additional earnings per share measure
was introduced into the long term incentive plan that is designed
to take into account volatility in world and European sugar prices.
Although incentive payments under this additional measure will not
arise until 2019, the changes in sugar prices seen over recent
months support this decision.
The board
We are announcing today that Tim Clarke will retire as a
director with effect from 30 November 2017, after 13 years on the
board. Tim's extensive experience in retailing and his wise counsel
over the years have been of immeasurable value and we are very
grateful for his substantial contribution. His tenure did not
diminish his independence at any time.
Javier Ferrán has completed more than nine years' service as a
director of the Company and, in accordance with the UK Corporate
Governance Code, the rest of the board must now confirm his
independence annually. This having been done, we are delighted that
Javier has agreed to continue as a member of the board and, with
Tim's retirement, to take on the responsibilities of Senior
Independent Director.
We have recently announced the appointment of Michael McLintock
as a non-executive director of the Company with effect from 1
November 2017. Michael is currently a trustee of the Grosvenor
Estate and a non-executive director of Grosvenor Group. He was
chief executive of M&G Investments from 1997 until his
retirement in 2016. He became a member of the Audit and
Remuneration committees on appointment.
Employees
Our 133,000 colleagues in 50 countries contribute to the success
of the group and I would like to thank them for everything they
bring to their businesses. It is their innovation, entrepreneurial
skill, drive and ambition that enable us to grow and develop, and
through their collaboration, build a network that makes the whole
so much greater than the sum of its parts.
Dividends
I am pleased to report that a final dividend of 29.65p is
proposed, to be paid on 12 January 2018 to shareholders on the
register on 15 December 2017. Together with the interim dividend of
11.35p paid on 7 July 2017, this will make a total of 41.0p for the
year, an increase of 12%.
Outlook
Primark's selling space expansion will continue and with margins
in line with the current year we expect an increase in Retail
profit. Progress is expected from Grocery, Agriculture and
Ingredients. In Sugar, higher volumes and lower costs will only
partially mitigate the effect of much lower EU prices.
At current exchange rates we expect no material transactional or
translational effect on profit.
Taking all of these factors into account, at this early stage,
we expect progress in adjusted operating profit and adjusted
earnings per share for the group for the coming year.
Charles Sinclair
Chairman
Chief executive's statement
2017 was a very productive year in which all of our businesses
made significant progress and delivered an excellent set of group
results. With over 60% of our sales and profits now generated
outside the UK, the headline results benefited from sterling
weakness on translation. Nevertheless, growth was very strong on a
constant currency basis with revenue and adjusted operating profit
ahead by 6% and 13% respectively.
Over the last few years AB Sugar has taken major steps to
transform its business with the sale of the cane sugar operations
in south China this year, the move to full ownership of Illovo last
year and the benefits delivered by the performance improvement
programme over many years. It is pleasing to report a substantial
increase in Sugar profit this year which benefited from all of
these initiatives and an increase in EU sugar prices. Illovo is
making good progress with its accelerated programme of commercial
development and the delivery of further production efficiencies. In
the EU, we have established a low cost business which is positioned
to exploit the market opportunities and associated freedom to
export, following the abolition of sugar quotas in October this
year.
In Grocery, Twinings Ovaltine, ACH in the US and George Weston
Foods in Australia all increased adjusted operating profit.
However, a difficult trading environment in the UK bread market led
to a decline in revenues at Allied Bakeries and it sustained a
loss. We are continuing to invest in our brands and are working
closely with our customers to improve the profitability of our
bakery business. AB Agri continued with its strategy of expanding
the value-adding elements of its business. Ingredients achieved
another strong profit and margin increase driven by further cost
reduction in AB Mauri and excellent performances from speciality
ingredients.
The expansion of Primark's selling space continued apace this
year and trading was excellent, particularly over the summer,
delivering strong increases in market share. Our determination to
be the best value on the high street drove the decision not to pass
on to our customers the higher input costs arising from sterling
weakness against the US dollar. The gross impact of this on
Primark's margin was, to some extent, mitigated by the work of the
buying and merchandising teams and margin declined by less than
expected at the beginning of the year to 10.4%. Notwithstanding
this highly successful year, Primark constantly seeks better ways
of delivering value to customers, be that through store design and
location, stock availability, or enhancing its reputation for
on-trend fashion. The Primark website and social media are playing
an ever more important role in the relationship with our customers
in driving awareness of our products and footfall in our stores.
Primark will continue to expand its selling space across all its
countries of operation with another strong programme of new store
openings scheduled for the coming year.
Implications of the EU referendum
The consequences for the group of the UK's decision to leave the
EU should be seen in the context of the diversity of our operations
and geographical footprint, combined with a business model that has
discrete Primark supply chains for the UK and Eurozone and,
wherever possible, aligns food production with the end markets for
our products. Changes in legislation and trade agreements provide
significant opportunities for the food industry to replace imported
food and build export markets and, for UK agricultural policy
particularly, they have the potential to benefit our group. We are
engaged at all levels with a number of UK Government departments to
ensure that the full range of opportunities and risks, as they
affect us, are recognised.
We are pleased with the Government's commitment that least
developed countries will not face an increase in tariffs on their
exports to the UK after it leaves the EU. This will provide
benefits both for UK consumers and trade with these countries,
which plays an important part in securing the livelihoods of local
workforces. In common with many other businesses, we share a
concern about the risk of abrupt changes to the UK's customs
procedures. We therefore welcome the Government's intention to have
a transition period beyond March 2019 in which to implement the
necessary systems and processes.
OPERATING REVIEW
Grocery
Actual Constant
Continuing businesses 2017 2016 fx fx
Revenue GBPm 3,381 3,097 +9% level
=================================== ===== ===== ====== ========
Adjusted operating profit GBPm 303 294 +3% -6%
=================================== ===== ===== ====== ========
Adjusted operating profit margin 9.0% 9.5%
=================================== ===== ===== ====== ========
Return on average capital employed 24.7% 24.2%
=================================== ===== ===== ====== ========
Grocery revenue and adjusted operating profit from continuing
businesses, which exclude the results of the US herbs and spices
business sold during the year, were both ahead of last year at
actual exchange rates. Revenue was level with last year at constant
currency although profit was lower. Twinings Ovaltine had another
good year with excellent sales and profit growth. Profits and
margins improved at ACH in the US and at George Weston Foods in
Australia. However, a very competitive UK bread market and
inflationary cost pressures led to lower revenue and margin at
Allied Bakeries.
The Twinings brand performed well in its major markets. It
gained further value market share in Australia and the US, and good
volume growth was achieved in black tea in the UK although
infusions and green tea came under some competitive pressure.
Significant investment in tea packaging technology in the UK was
completed during the year driving production efficiencies and
enabling the relaunch of infusions with an improved format. Last
year's return to growth for Ovaltine in Thailand, which is its
largest market, was sustained, driven by a strong increase in
ready-to-drink sales. Further progress was made in Switzerland with
particular success for Ovomaltine brand extensions, and the strong
sales growth of Crunchy Cream over the last few years led to
capital investment enabling production to be brought in-house.
At Allied Bakeries, the Kingsmill relaunch earlier this year was
well received by consumers. However, with low retail prices, a
resurgence of lower margin own-label products as retailers sought
to differentiate their bakery offering, and inflationary cost
pressures all combined to result in a significant margin
decline.
Jordans and Dorset Cereals continued their international
expansion with the brands now being sold in 75 countries, and
overseas sales of Jordans now greater than those in the UK. Country
Crisp and the launch of Frusli bars drove strong sales growth in
France and further success was achieved in Australia where the
brands lead the growing granola market. Trading conditions in the
UK were more challenging for Ryvita with a larger crispbread market
share being taken by own-label driven by the growth of the European
retail discounters.
Westmill Foods recently announced a further expansion of noodle
production capacity at its Manchester factory, responding to
increased demand, and a continuing focus on overhead reduction led
to a rationalisation of its distribution operations. Patak's and
Blue Dragon are the leaders in their respective categories in the
UK and both performed well this year. Blue Dragon underwent a
significant re-branding and both achieved further growth in
international markets.
We acquired two small sports nutrition brands during the year:
HIGH5, a hydration and recovery brand with leading positions in the
UK and Scandinavia; and Reflex Nutrition, a premium, protein-based,
strength and recovery brand. Sports nutrition has grown strongly in
recent years reflecting healthier, more active, consumer
lifestyles. The two brands have annual sales of some GBP20m and
production will be rationalised into one site, in Brighton, by the
end of this calendar year.
On 12 October 2017 we completed the acquisition of Acetum
S.p.A., the leading Italian producer of Balsamic Vinegar of Modena
for EUR317m including debt assumed. These vinegars have been
granted European Protected Geographical Indication status due to
the unique nature of their production, their provenance and high
quality. Acetum was founded by Cesare Mazzetti and Marco Bombarda,
both of whom will remain in the business, and its brands include
Mazzetti, the leading brand in Germany and Australia, as well as
Acetum and Fini. Its products are sold in more than 60 countries
and, in the year ended 31 December 2016, generated net sales of
EUR102m. This business will benefit from the group's existing
capability in selling and marketing speciality foods
internationally and we have ambitious plans to grow.
We completed the sale of ACH's herbs and spices business in the
US on 21 November 2016 for a gross cash consideration of GBP294m.
Operating profit at ACH's continuing operations were well ahead of
last year driven by higher revenue and lower overheads. Mazola
increased its market share, with continued support from its
successful television advertising, and consumer yeast, corn syrup
and corn starch all performed well both in retail and
foodservice.
Margins improved again this year at George Weston Foods in
Australia where cost management delivered significant operational
efficiencies and overhead reduction. Tip Top achieved strong
listings of Thins, a product new to the Australian market, which
was launched during the year. The Don KRC meat business continued
to grow volumes and worked closely with key customers to develop
the category as exemplified by the introduction of a much improved
deli ham range for Coles Supermarkets.
Sugar
Actual Constant
Continuing businesses 2017 2016 fx fx
Revenue GBPm 2,174 1,636 +33% +21%
=================================== ===== ===== ====== ========
Adjusted operating profit GBPm 223 35 +537% +374%
=================================== ===== ===== ====== ========
Adjusted operating profit margin 10.3% 2.1%
=================================== ===== ===== ====== ========
Return on average capital employed 14.1% 2.3%
=================================== ===== ===== ====== ========
AB Sugar's revenue and adjusted operating profit from continuing
businesses, which exclude the results of the south China cane sugar
business sold during the year, were substantially ahead of last
year. The main drivers were higher EU sugar prices, lower UK beet
costs, increased production and sales volumes at Illovo, and a
further major contribution from the performance improvement
programme across the group. We changed the Illovo financial year
end in 2016 to align it with that of the group and this year's
results therefore included a full 12 months' performance compared
to 11 months last year.
The performance improvement programme comprises continuous cost
reduction and business development delivered through production
efficiencies, capital investment and procurement activities. The
importance of anticipating and responding to the changing needs of
our customers and their end consumers is well understood, and the
long-awaited structural changes to the EU sugar industry, which are
now upon us, have provided an added stimulus over recent years. Our
businesses have been preparing for this with a thorough review of
all aspects of their operations, from capabilities and processes
through to routes to market and pack formats. The programme has
generated initiatives across a range of disciplines and there are
many still to pursue.
UK profitability improved significantly. Sugar production of
900,000 tonnes in the 2016/17 year was abnormally low as a
consequence of the reduction in the contracted growing area in
order to reduce the high level of stocks brought forward from the
prior year. EU stocks were at a low level at the end of this
marketing year and, in anticipation of the abolition of quota and
export restrictions from October 2017, our contracted area for the
2017/18 season was increased by a third. The crop has developed
well, with favourable rainfall and temperatures during the growing
season, and the latest sugar production estimate for 2017/18 is in
excess of 1.4 million tonnes.
EU sugar prices for 2017/18 will be below those achieved this
year although the profit impact for British Sugar is expected, to
some extent, to be mitigated by the higher production volumes and
the benefit of euro strength against sterling on euro-denominated
sales. Beet costs will be in line with this year.
In Spain, profit was well ahead of last year with an increase in
sugar production and higher EU sugar prices. Although beet sugar
production of 362,000 tonnes was lower than last year's 449,000
tonnes, the Guadalete refinery produced 300,000 tonnes and imported
raw sugars co-refined at the beet factories produced a further
30,000 tonnes. Next year we expect lower EU sugar prices to reduce
the profit at Azucarera.
In China, we completed the sale of our five cane sugar factories
on 22 December 2016 for total proceeds, including debt assumed, of
GBP297m. Our continuing operations now comprise two beet factories
in north China at Zhangbei and Qianqi. These factories processed a
record beet crop with 180,000 tonnes of sugar produced although
sucrose yields were lower than in recent years. Market prices have
been stable and profit was ahead of last year. Looking ahead to
2017/18, the crop is progressing well with a smaller growing area
to enable the optimisation of processing efficiency. Sucrose yields
are expected to improve as a result of the work undertaken with
growers to increase mechanisation of their agricultural operations
and improve beet storage methods. Sugar production is estimated at
over 170,000 tonnes.
Sugar production at Illovo was 1.65 million tonnes, compared
with 1.40 million tonnes last year on a comparable basis, following
better growing conditions in the new season, particularly in South
Africa and Swaziland. As a consequence, sales were strong and we
continued to improve our consumer offering in Zambia, Malawi and
Tanzania with an extended range of pack sizes and enhanced point of
sale materials. Combined with the continuing performance
improvement activities, profit was ahead of last year. The new
refining and sugar conditioning plant in Zambia, which was
commissioned last year, operated well during the year. This
facility provides the capacity to meet the growing demand for more
refined sugars in the local and regional markets.
Further improvement in throughput and reliability was made
during the year at the Vivergo Fuels bioethanol plant, although an
operating loss was driven by higher UK wheat costs and lower
ethanol prices. The UK Government produced its response to the
consultation on renewables in transport fuels on 14 September 2017
and proposed that the percentage of transport fuel from renewable
sources would increase from its current level of 4.75% to 9.75% by
2020. The crop-based component of this would be capped at 4% until
2020, declining to 3% by 2026 and 2% by 2032. Whilst we support the
increase in the renewables mandate we are concerned about the
reduction in the crop cap after 2020 and will maintain a close
dialogue with government on this.
Agriculture
Actual Constant
2017 2016 fx fx
Revenue GBPm 1,203 1,084 +11% +8%
=================================== ===== ===== ====== ========
Adjusted operating profit GBPm 50 58 -14% -21%
=================================== ===== ===== ====== ========
Adjusted operating profit margin 4.2% 5.4%
=================================== ===== ===== ====== ========
Return on average capital employed 14.2% 17.7%
=================================== ===== ===== ====== ========
AB Agri revenues were well ahead of last year with growth in all
businesses and the benefit of a full year's trading from Agrokorn
which was acquired last year. Adjusted operating profit was,
however, lower than last year mainly reflecting reduced margins in
China and UK feeds, as a result of strong competition and higher
raw material costs, and an increase in investment in new business
opportunities.
Demand for feed in the UK was weak and the smaller sugar beet
crop reduced co-product volumes. New liquid co-products from
Vivergo's biofuel production were developed for the animal feed and
anaerobic digestion (AD) markets which partly offset the reduced
availability of co-products from the food and drink industry. Our
AD plant in Yorkshire was commissioned during the year enabling
sales of new AD products and services under the Amur brand. A
smaller UK wheat crop and low market volatility adversely affected
Frontier's grain trading performance, but firmer grain pricing and
good growing conditions contributed to a strong result from its
crop inputs business.
In Asia, AB Vista performed well with higher enzyme revenues
although the market weakened in the second half after a strong
start. Margin and profit reduced in China as a result of a more
challenging environment as evidenced by egg prices falling to their
lowest level in 20 years. Our feed mill in Shanghai was relocated
to a new site with increased capacity. Our first standalone feed
pre-mix site in China is now operational, addressing the growing
demand for specialist, tailored ingredients.
In continental Europe, starter feeds imported into Poland from
our Primary Diets business in the UK achieved excellent growth, and
construction of the new starter feed factory in Spain was completed
by the year end. AB Vista performed well both in Europe and North
America, driving strong enzyme sales, and progress was made beyond
the traditional pig and poultry sectors in both ruminant and
aquaculture markets. Last year's acquisition of Agrokorn, a Danish
producer of animal nutrition products, premixes and milk replacers,
extended our capability in alternative proteins and created a
platform for further product development and geographic expansion.
This business is now well integrated into our existing
operations.
AB Agri's extensive experience across the farming industry,
combined with the greater availability of on-farm data and the use
of proprietary technology, are being leveraged to provide greater
insight into on-farm management. This is aimed at assisting farmers
to increase productivity and improve animal nutrition.
Ingredients
Actual Constant
2017 2016 fx fx
Revenue GBPm 1,493 1,294 +15% +2%
=================================== ===== ===== ====== ========
Adjusted operating profit GBPm 125 93 +34% +18%
=================================== ===== ===== ====== ========
Adjusted operating profit margin 8.4% 7.2%
=================================== ===== ===== ====== ========
Return on average capital employed 15.3% 13.1%
=================================== ===== ===== ====== ========
Ingredients' revenues and adjusted operating profit were again
well ahead of last year with a further increase in margin.
AB Mauri delivered another year of significant improvement with
growth achieved in yeast and bakery ingredients. North America
benefited from successful bakery ingredient product launches
although the market for bakery yeast remains highly competitive.
The business was well represented at the International Baking
Industry Exposition held last October where it promoted its baking
technology credentials to attendees from more than 100 countries.
The EMEA region delivered profit growth and Asia's results improved
following last year's rationalisation of production facilities in
China. Although the economic climate in South America remains
challenging, operating performance was robust. Capital investment
in a new bakery ingredients plant in Buenos Aires was completed at
the end of the financial year.
In January 2017 we completed the acquisition of Specialty
Blending based in Cedar Rapids, Iowa. The plant features multiple
blending lines capable of handling whole-grain bread concentrates
and sweet goods mixes. It also has a speciality mill of a scale
suited for ancient and organic grains and custom blends.
Integration of the business has progressed well with improvements
in its cake and doughnut mixes from the application of our
ingredients' technologies.
ABF Ingredients delivered strong sales and profit growth with
margin improvement driven by a higher proportion of revenues from
premium markets. Higher enzyme sales, especially feed enzymes to AB
Vista, drove high factory utilisation and improved overhead
absorption. We completed the capacity expansion of the enzymes
manufacturing facility in Finland which has also improved
production efficiency.
Significant growth in food and beverage nutritional
applications, as well as branded and generic pharmaceutical drugs,
drove another year of strong sales growth at Abitec, our speciality
lipids business in North America. Further investment was made at
the Janesville, Wisconsin plant to meet increasing demand and to
improve our research capability. SPI also benefited from
developments in the pharmaceutical sector with good growth for its
functional excipients and drug delivery solutions. Our US protein
extrusion business gained from the consumer trend for healthy
snacking, and achieved margin growth through improvement in
manufacturing yields.
Retail
Actual Constant
2017 2016 fx fx
Revenue GBPm 7,053 5,949 +19% +12%
=================================== ===== ===== ====== ========
Adjusted operating profit GBPm 735 689 +7% +3%
=================================== ===== ===== ====== ========
Adjusted operating profit margin 10.4% 11.6%
=================================== ===== ===== ====== ========
Return on average capital employed 27.3% 30.2%
=================================== ===== ===== ====== ========
Sales at Primark were 19% ahead of last year at actual exchange
rates and 12% ahead at constant currency. On a comparable week
basis, adjusting for the impact of 2016 being a 53 week year for
Primark, sales at constant currency were 14% ahead driven by
increased retail selling space and 1% growth in like-for-like
sales. Operating profit margin declined from 11.6% to 10.4%
reflecting the strength of the US dollar on input costs. The gross
transactional effect of the strength of the US dollar was lessened
by effective input-margin mitigation and the strength of our summer
trading which resulted in a lower than normal level of markdown. As
a consequence, on a comparable week basis at constant currency,
adjusted operating profit was 5% ahead.
Primark performed particularly well in the UK where sales were
10% ahead of last year on a comparable basis and our share of the
total clothing market increased significantly. After a good first
half, third quarter trading was strong in the lead-up to Easter,
with the growth also benefiting from comparison with prior year
results that were affected by poor weather and an earlier Easter
holiday. Fourth quarter trading was equally strong, fully
reflecting the success of our consumer offering. This was driven by
the ability of our buying, merchandising and design teams to
identify and deliver key seasonal trends. The consumer response to
our new autumn/winter range has been encouraging.
Sales in continental Europe were 16% ahead of last year at
constant currency and on a comparable week basis, reflecting the
extensive selling space expansion there. It is noteworthy that, of
Primark's top 20 stores by sales density, 15 are now in continental
Europe including seven in our newest markets of France and Italy.
The major success of the newly-opened store in Liffey Valley in
Dublin demonstrates the opportunity for further selling space
expansion in our more established markets. During the two years
since the opening of our first US store at Downtown Crossing in
Boston we have learned much about trading in the US and are
constantly fine-tuning our ranges and store size to recognise the
different demands of US shoppers. We opened three stores during the
year and extended the Boston store by 20% to 92,000 sq ft. In the
coming year we plan to reduce the size of three of our earlier
stores in order to optimise their efficiency and provide the best
shopping experience for our customers. We will also open our ninth
US store in Brooklyn, New York in the summer.
Primark enjoys a loyal fashion following and the brand boasts
over 10 million followers across its social media platforms. From
the latest beauty tutorial videos to live streaming of press events
and store openings, engaging this community directly drives
footfall in our stores, and sales. The Primark website aims to
inspire, and enables its followers to keep up-to-date on all the
latest products, create wish lists, receive styling advice, and
upload outfit posts to Primania. When leading Irish lifestyle
blogger, Pippa O'Connor, put a picture of a star print Primark
dress on Instagram in November 2016 it received over 11,000 'likes'
in a week and the dress sold out in a matter of days.
With most of next year's first half UK purchases contracted at a
weaker sterling/US dollar exchange rate than the same period last
year, there will be an adverse effect on margin in the first half.
However, the strengthening of the euro against the US dollar in
recent months will have a beneficial transaction effect on
Primark's eurozone margins particularly in the second half of next
year if these rates prevail. With a more typical level of markdowns
and the absorption of some cost increases we expect full year
margins to be similar to that achieved this year.
This year's increase in the scale and breadth of the Primark
estate was very strong: 1.5 million sq ft of selling space and a
net 30 stores were opened across nine countries. This brought the
total estate to 345 stores and 13.9 million sq ft at the financial
year end. Eleven stores were added in the UK; three in each of
Spain, France, the Netherlands, Italy and the US; two in Germany
and one each in Belgium and Ireland. Our city centre flagship store
at Oxford Street East was extended by 40% during the year,
increasing it to 114,000 sq ft. The stores in Sheffield and Reading
were relocated to bigger, better locations and two stores have been
temporarily relocated while their existing sites are
redeveloped.
Year ended Year ended
16 September 17 September
2017 2016
=============== ===============
# of sq ft # of sq ft
stores 000 stores 000
UK 182 6,835 171 6,362
Spain 44 1,675 41 1,503
Germany 22 1,401 20 1,272
Republic of Ireland 37 1,083 36 1,032
Netherlands 18 849 15 679
France 11 562 8 407
US 8 485 5 322
Portugal 9 300 9 300
Austria 5 242 5 243
Belgium 5 227 4 166
Italy 4 203 1 56
==================== ======= ====== ======= ======
345 13,862 315 12,342
==================== ======= ====== ======= ======
New store openings:
UK Spain The Netherlands Italy
Bracknell Granada Damrak, Amsterdam Brescia
Carlisle Mallorca Hilversum Florence
Colchester Tarragona Zwolle Verona
Llandudno
Llanelli France Germany US
Rushden Evry, Paris Hamburg Burlington, Massachusetts
South Shore,
Shrewsbury Lille Mannheim Massachusetts
Val d'Europe, Staten Island,
Stafford Paris New York
Truro
Uxbridge Belgium Ireland Relocations:
Liffey Valley,
York, Coppergate Charleroi Dublin Reading & Sheffield
We continued to invest in the existing estate alongside this
ambitious new store opening programme. This investment in refitting
older stores improves brand image and sentiment and enhances the
customer's shopping experience. It also includes an update of the
back-of-house areas to deliver a better work environment for
employees. In 2016, we undertook the refit of 15 stores in the
United Kingdom, Republic of Ireland and the Netherlands.
In the next financial year we are planning over 1.2 million sq
ft of additional selling space. France, Germany and the UK will see
the most space added and overall we will open 19 new stores
together with a number of relocations and extensions. The larger
stores will be in Stuttgart and Munich in Germany; Toulouse and
Bordeaux in France; and Antwerp in Belgium.
George Weston
Chief Executive
FINANCIAL REVIEW
Group performance
Group revenue increased by 15% to GBP15.4bn and adjusted
operating profit was 22% higher at GBP1,363m. In calculating
adjusted operating profit, the amortisation charge on non-operating
intangibles, transaction costs, and profits or losses on disposal
of non-current assets are excluded. On an unadjusted basis,
operating profit was 21% higher than last year at GBP1,336m. Last
year's revenue and operating profit both benefited to a small
extent from a 53rd week's trading activity in some of our
businesses, but this was offset by the consolidation of only 11
months' results for Illovo last year as a consequence of the
alignment of its year end with the rest of the group.
The result of the UK referendum on EU membership saw sterling
weaken substantially in June 2016 against all major currencies.
With over 60% of the group's operating profit earned outside the
UK, this devaluation resulted in a translation benefit of GBP85m
this financial year, most of which arose in the first three
quarters. Sterling weakness against the US dollar had an adverse
transactional effect on Primark's largely dollar denominated
purchases this year, whilst the euro's strength in the second half
had a beneficial effect on British Sugar's margin.
Next year we expect no material translation benefit at current
exchange rates. Sterling weakness against the US dollar will
continue to have an adverse transactional effect on Primark's
margin in the first half although a benefit from the euro's
strength is expected in the second half. At current exchange rates,
we also expect the euro's strength to benefit British Sugar's
margin next year.
Net financing costs remained at a similar level to last year,
despite the improvement in our net cash position, as a result of
the group's longer-term financing, through our US private
placement, and some local currency debt maintained as a hedge
against assets in high inflation economies. Profit before tax
increased from GBP1,042m to GBP1,576m with the benefit of
substantial profits on the sale of businesses. On our adjusted
basis, which excludes these items, profit before tax rose by 22% to
GBP1,310m.
Acquisitions and disposals
The disposal of our cane sugar business in south China was
completed on 22 December 2016 for total proceeds, including debt
assumed, of GBP297m. The sale of ACH's herbs and spices business in
the US completed on 21 November 2016 for a gross cash consideration
of GBP294m and the assumption by the purchaser of net pension
liabilities of GBP14m. The profit arising on these disposals
amounted to GBP293m on which tax of GBP87m was payable.
In October 2016 Stratas Foods, our commodity oils joint venture,
completed the purchase of Supreme Oil, based in New Jersey, thereby
strengthening its market capability in the northeast of the US. In
January 2017 AB Mauri acquired Specialty Blending, a bakery
ingredients business located in Iowa.
We also acquired two small sports nutrition businesses in the
UK. HIGH5 is a hydration and energy brand popular with endurance
athletes and Reflex Nutrition provides a range of premium
protein-based recovery products. Sports nutrition is a high-growth
market segment and we plan to develop these brands and broaden
their distribution.
Since the year end we have completed the acquisition of Acetum
S.p.A., the leading Italian producer of Balsamic Vinegar of Modena
for EUR317m including debt assumed. In the year ended 31 December
2016, the company generated net sales of EUR102m.
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. Our
board-adopted tax strategy is based on seven tax principles that
are embedded in the financial and non-financial processes and
controls of the group. Our tax strategy is available on the group's
website at
www.abf.co.uk/documents/pdfs/policies/abf_tax_strategy.pdf.
This year's tax charge of GBP365m includes a charge of GBP293m
at an effective rate of 22.4% (2016 - 21.2%) on the adjusted profit
before tax. Last year's effective rate included the beneficial
effect of the revaluation of UK deferred tax balances following
announced reductions in the rate of UK corporation tax to 17% from
1 April 2020. We currently expect next year's effective tax rate
for the group to be similar to the current year.
The overall tax charge for the year included a charge arising on
the disposal of businesses of GBP87m and benefited from a credit of
GBP15m (2016 - GBP5m) for tax relief on the amortisation of
non-operating intangible assets and goodwill arising from business
combinations.
Earnings and dividends
Earnings attributable to equity shareholders in the current year
were GBP1,198m and the weighted average number of shares in issue
during the year, which is used to calculate earnings per share, was
790 million (2016 - 791 million). Earnings per ordinary share were
47% higher than last year at 151.6p with the benefit of substantial
profits on the sale of businesses this year. Adjusted earnings per
share, which provides a more consistent measure of trading
performance, increased by an impressive 20% from 106.2p to
127.1p.
The interim dividend was increased by 10% to 11.35p and a final
dividend has been proposed at 29.65p which represents an overall
increase of 12% for the year. The proposed dividend is expected to
cost GBP234m and will be charged next year. Dividend cover, on an
adjusted basis increased to 3.1 times.
Balance sheet
Non-current assets of GBP7.6bn were GBP0.7bn higher than last
year driven by higher capital expenditure than depreciation and an
increase in employee benefits assets following the move of the UK
defined benefit pension scheme into surplus.
Working capital at the year end was at a similar level to last
year, despite the growth of the group. As a consequence of the very
tight management throughout the year, average working capital as a
percentage of sales improved substantially from 8.4% last year to
6.5% this year, with lower inventories and higher sales in AB Sugar
being a major driver. Net cash at the year end was GBP673m compared
with net debt at the end of last year of GBP315m reflecting the
strong operating cash flow and proceeds from business
disposals.
The group's net assets increased by GBP1.3bn to GBP8.4bn. Return
on capital employed for the group, which is calculated by
expressing adjusted operating profit as a percentage of the average
capital employed for the year, was higher again this year at 20.5%
compared with 18.1% last year. This reflected a major improvement
in AB Sugar and increases in Ingredients and Grocery which more
than offset the decline in Primark, which reflected the reduction
in its margin.
Cash flow
This was a year of very strong cash generation for the group
with a net cash inflow from operating activities of GBP1,641m
driven by the higher operating profit and a substantial reduction
in working capital achieved with lower sugar stocks and the benefit
of tight management by the businesses during the year. Gross
capital expenditure including operating intangibles amounted to
GBP866m compared with GBP804m last year. Primark spent GBP487m of
this including the acquisition of new stores and the fit-out of
existing stores. Expenditure in the food businesses remained at a
similar level to last year. GBP49m was realised from the sale of
property, plant and equipment, the major elements of which were the
sale for redevelopment of a former bakery in Australia, two former
bakery sites in the UK and the sale of two Primark stores in the UK
following relocation to larger premises.
The net cash inflow after tax from the sale of the south China
sugar and US herbs and spices businesses amounted to GBP477m,
including debt disposed, and GBP79m was invested in acquisitions in
US bakery ingredients and the sports nutrition businesses.
Tax paid in the year amounted to GBP356m including GBP92m
arising on the business disposals. Generally in the UK, 50% of the
corporation tax due in respect of an accounting period is payable
in that period with the remaining 50% being paid in the following
accounting period. Changes made by HMRC, which will come into
effect for our financial year ending September 2020, will result in
all of the tax due for a financial year being paid in that
financial year.
Financing
The financing of the group is managed by a central treasury
department. The group has total committed borrowing facilities
amounting to GBP1.9bn, which comprise: GBP0.6bn of US private
placement notes maturing between 2019 and 2024, with an average
fixed rate coupon of 4.7%; GBP1.2bn provided under a syndicated,
revolving credit facility which matures in July 2021; and GBP0.1bn
of local committed facilities in Africa. During the financial year
we repaid, from existing cash resources, GBP15m of private
placement notes. At the year end, GBP558m was drawn down under
these committed facilities. The group also had access to GBP621m of
uncommitted credit lines under which GBP214m was drawn at the year
end. Cash and cash equivalents totalled GBP1.6bn at the year
end.
Pensions
The group's defined benefit pension schemes were in surplus by
GBP126m at the year end compared with a net deficit last year of
GBP303m. The UK scheme accounts for 89% of the group's gross
pension liabilities and this year's surplus of GBP233m compared
with a deficit of GBP138m last year. The major drivers of the
year-on-year improvement were the use of the latest scheme
membership data in the 2017 triennial valuation, which identified
that there had been more exits from the scheme than expected over
the past three years, and higher investment returns relative to the
IAS19 assumptions.
The most recent triennial valuation of the UK scheme was
undertaken as at 5 April 2017, which was agreed by the scheme
trustees after the group's year end, and revealed a surplus of
GBP176m on a funding basis. As a result there is no requirement to
agree a recovery plan with the trustees.
The charge for the year for the group's defined contribution
schemes, which was equal to the contributions made, amounted to
GBP79m (2016 - GBP74m). This compared with the cash contribution to
the defined benefit schemes of GBP36m (2016 - GBP38m).
John Bason
Finance Director
The annual report and accounts is available at www.abf.co.uk and
will be despatched to shareholders on 9 November 2017. The annual
general meeting will be held at Congress Centre, 28 Great Russell
Street, London. WC1B 3LS at 11am on Friday, 8 December 2017.
Risk Management
Our approach to risk management
The delivery of our strategic objectives and the sustainable
growth (or long-term shareholder value) of our business, is
dependent on effective risk management. We regularly face business
uncertainties and it is through a structured approach to risk
management that we are able to mitigate and manage these risks, and
embrace opportunities when they arise.
The diversified nature of our operations, geographical reach,
assets and currencies are important factors in mitigating the risk
of a material threat to the group's balance sheet and results.
Effective risk management is nevertheless central to the board's
role in providing strategic oversight and stewardship of the group.
The board is accountable for ensuring that risk is successfully
managed and undertakes a robust annual assessment of the principal
risks, including those that would threaten the business model,
future performance, solvency or liquidity, together with the
internal control procedures and resources devoted to them.
The board also monitors the group's exposure to risks as part of
the performance reviews conducted at each board meeting. Financial
risks are specifically reviewed by the Audit committee which also
reviews the effectiveness of the group's risk mitigation
processes.
Our decentralised business model empowers the management of our
businesses to identify, evaluate and manage the risks they face, on
a timely basis, to ensure compliance with relevant legislation, our
business principles and group policies. The risks assessments
consider materiality, risk controls and the likely impact against a
range of criteria such as business objectives, health and safety,
financial performance, the environment and community, regulation
and reputation. The collated risks from each business are shared
with the respective divisional chief executives who present their
divisional risks to the group executive.
The group's Director of Financial Control receives the risk
assessments on an annual basis and, with the Group Finance
Director, reviews and challenges them with the divisional chief
executives. These risks and their impact on business performance
are reported during the year and are considered as part of the
monthly management review process.
Group functional heads including Legal, Treasury, Tax, IT,
Pensions, HR and Insurance also provide input to this process,
sharing with the Director of Financial Control their view of key
risks and what activities are in place or planned to mitigate them.
A summary of these risk assessments is then shared and discussed
with the Group Finance Director and Chief Executive at least
annually.
The Director of Financial Control holds meetings with each of
the non-executive directors seeking their feedback on the reviews
performed and discussing the key risks and mitigating activities.
Once all non-executive directors have been consulted, a board
report is prepared summarising the full process and providing an
assessment of the status of risk management across the group. The
key risks, mitigating controls and relevant policies are
summarised. This report also details when formal updates, relating
to the key risks, will be provided to the board throughout the
year.
Key areas of focus this year
Effective risk management processes and internal controls
We aim to maintain a practical approach to effective risk
management which allows our businesses the scope to address their
current and potential risks. We continued to seek improvements in
our risk management processes to ensure the quality and integrity
of information and the ability to respond swiftly to direct
risks.
During the year, the board conducted reviews on the
effectiveness of the group's risk management processes and internal
controls in accordance with the UK Corporate Governance Code. Our
approach to risk management and systems of internal control is in
line with the recommendations in the Financial Reporting Council's
(FRC) revised guidance 'Risk management, internal control and
related financial and business reporting' (the Risk Guidance). The
board is satisfied that internal controls were properly reviewed
and key risks are being appropriately identified and managed.
Brexit
Last year, we identified the UK's decision to leave the European
Union as having had some immediate impact on our results as a
consequence of the effect on currency markets. As the UK government
continues its negotiations, uncertainty remains as to the extent to
which our operations and financial performance will be affected in
the longer term. At a group and business level, we have continued
to prepare for changes in legislation, trade agreements and working
practices in order to take advantage of the changing commercial
landscape and to mitigate risk. We have contributed to
government-led consultations on the potential changes and their
likely impact on businesses and markets to help inform the exit
strategy.
Our principal risks and uncertainties
The directors have carried out a robust assessment of the
principal risks facing the Company, including those that would
threaten the business model, future performance, solvency or
liquidity. Outlined below are the group's principal risks and
uncertainties and the key mitigating activities in place to address
them. These are the principal risks of the group as a whole and are
not in any order of priority. Associated British Foods is exposed
to a variety of other risks but we report those we believe are
likely to have the greatest current or near-term impact on our
strategic and operational plans and reputation.
They are grouped into external risks, which may occur in the
markets or environment in which we operate, and operational risks,
which are related to internal activity linked to our own operations
and internal controls.
The 'Changes since 2016' highlight the significant variations in
the profile of our principal risks or describe our experience and
activity over the last year.
Principal risks and uncertainties
External risks
Risk Context and potential Changes since
trend impact Mitigation 2016
------ --------------------------- ----------------------------------------- --------------------------------------
vw Movement in exchange rates and inflation
------ --------------------------------------------------------------------------------------------------------------
Associated British Businesses impacted Sterling has
Foods is a multinational by exchange rate weakened against
group with operations volatility, specifically most of our major
and transactions those manufacturing trading currencies
in many currencies. or purchasing in this year.
Changes in exchange one currency and The net impact
rates give rise selling in another, on adjusted operating
to transactional constantly review profit for 2016/17
exposures within their currency-related from the translation
the businesses exposures. of overseas results
and to translation Board-approved into sterling
exposures when policies require was a gain of
the assets, liabilities businesses to hedge GBP85m.
and results of all transactional Although Primark
overseas entities currency exposures covers its currency
are translated and long-term supply exposure on purchases
into sterling upon or purchase contracts of merchandise
consolidation. which give rise denominated in
to currency exposures, foreign currencies
using foreign exchange when orders are
forward contracts. placed, this
Cash balances and hedging activity
borrowings are typically covers
largely maintained a period of only
in the functional six months. Sterling
currency of the weakness against
local operations. the US dollar,
Cross-currency since its decline
swaps are used following the
to align borrowings UK referendum
with the underlying in June 2016,
currencies of the had an adverse
group's net assets transactional
(refer to note effect on Primark's
24 to the financial largely dollar-denominated
statements in the purchases this
annual report for year. However,
more information). the euro's strength
in the second
half had a beneficial
effect on British
Sugar's margin.
------ ----------------------------- --------------------------------------- --------------------------------------
vw Fluctuations in commodity and energy prices
------ --------------------------------------------------------------------------------------------------------------
Changes in commodity We constantly monitor EU and world
and energy prices the markets in sugar prices
can have a material which we operate were higher than
impact on the group's and manage certain last year which
operating results, of these exposures had a positive
asset values and with exchange traded effect on Sugar
cash flows. contracts and hedging profitability.
instruments. Lower ethanol
The commercial prices and higher
implications of wheat costs adversely
commodity price affected margins
movements are continuously at Vivergo Fuels.
assessed and, where Higher agricultural
appropriate, are commodity prices
reflected in the adversely affected
pricing of our margins in our
products. China and UK
compound feed
businesses although
firmer grain
pricing benefited
Frontier Agriculture.
------ ----------------------------- --------------------------------------- --------------------------------------
vw Operating in global markets
------ --------------------------------------------------------------------------------------------------------------
Operating in 50 Our approach to In preparing
countries with risk management for the abolition
a supply chain incorporates potential of EU sugar quotas
covering even more, short-term market from October
we are exposed volatility and 2017, AB Sugar
to: global market evaluates longer-term continued to
forces; fluctuations socio-economic reduce its cost
in national economies; and political scenarios. base with the
societal and political The group's financial benefit of its
changes; a range control framework performance improvement
of consumer concerns; and board-adopted programme.
and evolving legislation. tax and treasury We acquired two
Failure to recognise policies require small businesses
and respond to all businesses in the sports
any of these factors to comply fully nutrition market
could directly with relevant local this year but
impact the profitability laws. neither is of
of our operations. Provision is made sufficient scale
Entering new markets for known issues to represent
is a risk to any based on management's a material risk
business. interpretation to the group's
of country-specific profitability
tax law, EU cases in the event
and investigations of failure. Other
on tax rulings, acquisitions
and their likely were in market
outcome. sectors or countries
We engage with very familiar
governments, local to the group.
regulators and In all cases
community organisations thorough due
to contribute to, diligence was
and anticipate undertaken.
important changes
in, public policy.
We conduct rigorous
due diligence when
entering, or commencing
business activities,
in new markets.
------ ----------------------------- --------------------------------------- --------------------------------------
vw Health and nutrition
------ --------------------------------------------------------------------------------------------------------------
Failure to respond Consumer preferences Our businesses
appropriately to and market trends continued to
health and nutrition are monitored continuously. review their
concerns in the Recipes are regularly products and
formulation of reviewed and reformulated to partner with
our products could to improve the others to enable
result in adverse nutritional value a swift and innovative
consumer reaction. of our grocery response to changing
Failure to keep products, all of consumer needs.
pace with changing which are labelled Our Sugar and
consumer tastes, with nutritional Grocery businesses
choices and shopping information. have supported
behaviours could We develop partnerships healthy eating
impact business with other organisations campaigns during
performance. to help educate the year to help
We must also act consumers about consumers make
responsibly across making healthy informed choices
the spectrum of choices. about their food.
food poverty and
malnutrition to
obesity.
------ ------------------------------- ------------------------------------- --------------------------------------
r Socio-political uncertainty
------ --------------------------------------------------------------------------------------------------------------
Geopolitical uncertainty, By their nature Reviewed and
the threat of terrorism these events mean upgraded contingency
and social unrest they are largely plans across
could all have unpredictable. our businesses.
a direct impact Nonetheless our
on our operations, businesses have
our suppliers and prepared detailed
our people. Such contingency plans
events may also which include site-level
impact consumer emergency responses
confidence. and improved security
for employees.
Operational risks
--------------------------------------- ------------------------------------- --------------------------------------
Risk Context and potential Changes since
trend impact Mitigation 2016
------ ------------------------------- ------------------------------------- --------------------------------------
vw Workplace health
and safety
------ ------------------------------- ------------------------------------- --------------------------------------
Many of our operations, Safety continues During the year
by their nature, to be the number there has been
have the potential one priority for a 15% increase
for injuries and our businesses in our employee
fatal accidents with active endorsement lost time injury
to employees, contractors and accountability rate to 0.76%.
and visitors. from the chief Our businesses
executives of each conduct thorough
business. root cause analysis
Our Health and to learn from
Safety policy and accidents and
practices are firmly implement safety
embedded in each changes.
business, supporting
a strong ethos
of workplace safety.
Independent audits
are conducted to
verify implementation
and support continuous
improvement.
Best practice safety
and occupational
health training
and guidance are
shared across the
businesses, co-ordinated
from the corporate
centre, to supplement
the delivery of
their own programmes.
vw Product safety
and quality
As a leading food Across the group, No significant
manufacturer and product safety changes this
retailer, it is is put before economic year.
fundamental that considerations.
we manage the safety Our businesses
and integrity of employ quality
our products throughout control specialists
the supply chain. and operate strict
policies within
an organisational
culture of hygiene
and product safety
to ensure that
consistently high
standards are maintained
in our operations
and in the sourcing
and handling of
raw materials and
garments.
We monitor the
regulatory environment
and emerging scientific
research while
reviewing our food
safety systems
for efficacy and
legal compliance.
A programme of
independent food
quality and safety
audits is undertaken
across all our
manufacturing sites
and a due diligence
programme is in
place to ensure
the safety of our
retail products.
vw Our use of natural resources and
managing our environmental impact
Our businesses We aim to go beyond The environmental
rely on a stable environmental compliance. performance of
supply of natural Our businesses the group, with
resources some employ environmental updates by division,
of which are vulnerable specialists who is reported in
to external factors use the best available the 2017 Corporate
such as natural technologies and Responsibility
disasters and climate techniques to reduce Update at www.abf.co.uk/responsibility
change. our use of consumables, We report our
Our operations adapt operations approach to climate
give rise to a to climate change change, water
range of emissions and reduce our and deforestation
including dust, environmental footprint. risk via CDP
waste water and We monitor developments at www.cdp.org
waste which, if and engage with Some of our businesses
not controlled, governmental bodies have started
could lead to a on climate change; to develop a
risk to the environment we limit reliance structured approach
and our local communities. on certain resources to 'being a good
Many of our sites such as fossil neighbour' in
are surrounded fuels and respond order to evaluate
by other businesses to changes such their positive
or residential as carbon pricing effect on the
areas. and energy supply. community and
Our businesses to mitigate any
are mindful of potential adverse
being good neighbours impact.
through local community
engagement and
the monitoring
and management
of noise pollution
and odours.
vw Our supply chain and ethical business
practices
Our suppliers are Our Supplier Code Our businesses
essential to the of Conduct is designed have continued
successful operation to ensure suppliers, to engage with
of the group. representatives key suppliers
We therefore work and all with whom on a range of
with them to ensure we deal, adhere shared issues
reliability and to our values and such as maximising
to help them meet standards. environmental
our standards of The full Code is and cost efficiencies,
product quality available at: maintaining safe
and safety, financial www.abf.co.uk/supplier_code_of_conduc workplaces, supporting
stability, ethics, t steady employment
technical competence Adherence to the and increasing
and people safety. Code is verified transparency
Potential supply through our supplier across the wider
chain and ethical audit system with supply chain.
business practice our procurement All our businesses
risks include: and operational have undertaken
reputational damage teams establishing risk assessments
through supply strong working to identify supply
chain weaknesses relationships with chains at high
e.g. poor conditions suppliers to help risk from modern
for workers; them meet our standards. slavery. Over
unacceptable and All businesses the year, we
unethical behaviour, are required to have focused
including bribery, comply with the on embedding
corruption and group's Business our work in this
slavery risk; Principles including area through
impact on reliability its Anti-Bribery training and
of supply and business and Corruption sharing learning
continuity due Policy. across the businesses.
to unforeseen incidents Our Modern Slavery
e.g. natural disasters; and Human Trafficking
and Statement 2017
long-term sustainability and the steps
of key suppliers. we take to try
to ensure that
any forms of
modern slavery
are not present
within our own
operations or
our supply chain
are reported
in detail in
the 2017 Corporate
Responsibility
Update at www.abf.co.uk/responsibility
------ ------------------------------- ------------------------------------- --------------------------------------
r Breaches of IT
and information
security
------ ------------------------------- ------------------------------------- --------------------------------------
Our delivery of We seek to understand We instigated
efficient and effective the changing cyber regular security
operations is enhanced risks faced by scanning of all
by the use of relevant our businesses websites in 2016
technologies and and take appropriate and developed
the sharing of action. incident management
information. We We have established plans for potential
are therefore subject processes, group IT attacks; both
to potential internal IT security policies approaches yielded
and external cyber and technologies positive outcomes
threats such as in place, all of in 2017.
computer viruses which are subject We enhanced the
and the loss or to regular internal security assessments
theft of data. audit. and due diligence
We are increasingly Access to sensitive required for
interacting with data is restricted new IT projects.
customers, consumers and closely monitored.
and suppliers through Robust disaster
technology and recovery plans
therefore greater are in place for
emphasis is placed business-critical
on secure and reliable applications.
IT systems, enabling Technical security
careful management controls are in
of information. place over key
There is also the IT platforms with
potential for disruption the Head of IT
to operations from Security tasked
unforeseen IT and with identifying
system malfunctions and responding
or external attack. to potential security
risks.
CAUTIONARY STATEMENTS
This report contains forward-looking statements. These have been
made by the directors in good faith based on the information
available to them up to the time of their approval of this report.
The directors can give no assurance that these expectations will
prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors underlying such
forward-looking information, actual results may differ materially
from those expressed or implied by these forward-looking
statements. The directors undertake no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
Directors' responsibilities in respect of the financial
statements
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the Strategic report includes a fair review of the
development and performance of the business and the position of the
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.
We consider the annual report and financial statements, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
The contents of this announcement, including the responsibility
statement above, have been extracted from the annual report and
accounts for the 52 weeks ended 16 September 2017 which will be
despatched to shareholders on 9 November 2017 and may then be found
at www.abf.co.uk. 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
7 November 2017
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 16 September 2017
2017 2016
Continuing operations Note GBPm GBPm
Revenue 1 15,357 13,399
Operating costs (14,090) (12,364)
1,267 1,035
Share of profit after tax from joint
ventures and associates 63 57
Profits less losses on disposal of
non-current assets 6 11
========================================== ==== ======== ========
Operating profit 1,336 1,103
Adjusted operating profit 1 1,363 1,118
Profits less losses on disposal of
non-current assets 6 11
Amortisation of non-operating intangibles (28) (21)
Transaction costs (5) (5)
========================================== ==== ======== ========
Profits less losses on sale and closure
of businesses 5 293 (14)
========================================== ==== ======== ========
Profit before interest 1,629 1,089
Finance income 9 6
Finance expense (59) (56)
Other financial (expense)/income (3) 3
========================================== ==== ======== ========
Profit before taxation 1,576 1,042
Adjusted profit before taxation 1,310 1,071
Profits less losses on disposal of
non-current assets 6 11
Amortisation of non-operating intangibles (28) (21)
Transaction costs (5) (5)
Profits less losses on sale and closure
of businesses 293 (14)
========================================== ==== ======== ========
Taxation - UK (62) (73)
- Overseas (303) (148)
========================================== ==== ======== ========
2 (365) (221)
========================================== ==== ======== ========
Profit for the period 1,211 821
========================================== ==== ======== ========
Attributable to
Equity shareholders 1,198 818
Non-controlling interests 13 3
========================================== ==== ======== ========
Profit for the period 1,211 821
========================================== ==== ======== ========
Basic and diluted earnings per ordinary
share (pence) 3 151.6 103.4
Dividends per share paid and proposed
for the period (pence) 4 41.00 36.75
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 16 September 2017
2017 2016
GBPm GBPm
Profit for the period recognised in the
income statement 1,211 821
Other comprehensive income
Remeasurements of defined benefit schemes 438 (258)
Deferred tax associated with defined benefit
schemes (77) 50
Current tax associated with defined benefit
schemes - 1
=================================================== ===== =====
Items that will not be reclassified to
profit or loss 361 (207)
Effect of movements in foreign exchange 61 610
Net loss on hedge of net investment in
foreign subsidiaries (9) (75)
Deferred tax associated with movements
in foreign exchange (2) 8
Current tax associated with movements in
foreign exchange (1) 1
Reclassification adjustment for movements
in foreign exchange on subsidiaries disposed (28) -
Movement in cash flow hedging position (8) (13)
Deferred tax associated with movement in
cash flow hedging position - 4
Share of other comprehensive income of
joint ventures and associates - 16
=================================================== ===== =====
Items that are or may be subsequently reclassified
to profit or loss 13 551
Other comprehensive income for the period 374 344
=================================================== ===== =====
Total comprehensive income for the period 1,585 1,165
=================================================== ===== =====
Attributable to
Equity shareholders 1,573 1,153
Non-controlling interests 12 12
=================================================== ===== =====
Total comprehensive income for the period 1,585 1,165
=================================================== ===== =====
CONSOLIDATED BALANCE SHEET
At 16 September 2017
2017 2016
GBPm GBPm
Non-current assets
Intangible assets 1,414 1,348
Property, plant and equipment 5,470 5,145
Investments in joint ventures 210 221
Investments in associates 44 39
Employee benefits assets 285 6
Deferred tax assets 143 139
Other receivables 54 41
===================================== ======= =======
Total non-current assets 7,620 6,939
===================================== ======= =======
Current assets
Assets classified as held for sale - 312
Inventories 2,101 2,033
Biological assets 90 86
Trade and other receivables 1,342 1,337
Derivative assets 79 105
Income tax 28 9
Cash and cash equivalents 1,550 555
===================================== ======= =======
Total current assets 5,190 4,437
===================================== ======= =======
Total assets 12,810 11,376
===================================== ======= =======
Current liabilities
Liabilities classified as held for
sale - (75)
Loans and overdrafts (265) (245)
Trade and other payables (2,500) (2,366)
Derivative liabilities (113) (73)
Income tax (170) (147)
Provisions (105) (54)
===================================== ======= =======
Total current liabilities (3,153) (2,960)
===================================== ======= =======
Non-current liabilities
Loans (612) (640)
Other payables (216) (185)
Provisions (27) (34)
Deferred tax liabilities (231) (139)
Employee benefits liabilities (159) (296)
===================================== ======= =======
Total non-current liabilities (1,245) (1,294)
===================================== ======= =======
Total liabilities (4,398) (4,254)
===================================== ======= =======
Net assets 8,412 7,122
===================================== ======= =======
Equity
Issued capital 45 45
Other reserves 175 175
Translation reserve 456 433
Hedging reserve (31) (22)
Retained earnings 7,694 6,423
===================================== ======= =======
Total equity attributable to equity
shareholders 8,339 7,054
Non-controlling interests 73 68
===================================== ======= =======
Total equity 8,412 7,122
===================================== ======= =======
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 16 September 2017
2017 2016
GBPm GBPm
Cash flow from operating activities
Profit before taxation 1,576 1,042
Profits less losses on disposal of non-current
assets (6) (11)
Profits less losses on sale and closure
of businesses (293) 14
Transaction costs 3 5
Finance income (9) (6)
Finance expense 59 56
Other financial expense/(income) 3 (3)
Share of profit after tax from joint ventures
and associates (63) (57)
Amortisation 57 47
Depreciation 514 439
Net change in the fair value of current
biological assets - (12)
Share-based payment expense 21 7
Pension costs less contributions 12 7
Increase in inventories (40) (62)
Increase in receivables (2) (55)
Increase in payables 168 107
Purchases less sales of current biological
assets (2) (2)
(Decrease)/increase in provisions (1) 5
=============================================== ===== =====
Cash generated from operations 1,997 1,521
Income taxes paid (356) (211)
=============================================== ===== =====
Net cash from operating activities 1,641 1,310
=============================================== ===== =====
Cash flows from investing activities
Dividends received from joint ventures
and associates 69 25
Purchase of property, plant and equipment (823) (774)
Purchase of intangibles (43) (30)
Sale of property, plant and equipment 49 27
Purchase of subsidiaries, joint ventures
and associates (79) (10)
Sale of subsidiaries, joint ventures and
associates 452 -
Interest received 8 6
=============================================== ===== =====
Net cash from investing activities (367) (756)
=============================================== ===== =====
Cash flows from financing activities
Dividends paid to non-controlling interests (4) (10)
Dividends paid to equity shareholders (299) (279)
Interest paid (59) (62)
Increase/(decrease) in short-term loans 49 (109)
(Decrease)/increase in long-term loans (9) 12
Purchase of shares in subsidiary undertaking
from non-controlling interests (3) (252)
Movements from changes in own shares held (10) (19)
=============================================== ===== =====
Net cash from financing activities (335) (719)
=============================================== ===== =====
Net increase/(decrease) in cash and cash
equivalents 939 (165)
Cash and cash equivalents at the beginning
of the period 462 585
Effect of movements in foreign exchange (15) 42
=============================================== ===== =====
Cash and cash equivalents at the end of
the period 1,386 462
=============================================== ===== =====
CONSOLIDATED STATEMENT of changes in equity
For the 52 weeks ended 16 September 2017
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 12 September
2015 45 175 (120) (11) 6,232 6,321 190 6,511
Total comprehensive income
Profit for the period
recognised in the income
statement - - - - 818 818 3 821
Remeasurements of defined
benefit schemes - - - - (258) (258) - (258)
Deferred tax associated
with defined benefit schemes - - - - 50 50 - 50
Current tax associated
with defined benefit schemes - - - - 1 1 - 1
============================== ======== ========= =========== ======== ========= ===== =============== =======
Items that will not be
reclassified to profit
or loss - - - - (207) (207) - (207)
Effect of movements in
foreign exchange - - 603 2 - 605 5 610
Net loss on hedge of net
investment in foreign
subsidiaries - - (75) - - (75) - (75)
Deferred tax associated
with movements in foreign
exchange - - 8 - - 8 - 8
Current tax associated
with movements in foreign
exchange - - 1 - - 1 - 1
Movement in cash flow
hedging position - - - (17) - (17) 4 (13)
Deferred tax associated
with movement in cash
flow hedging position - - - 4 - 4 - 4
Share of other comprehensive
income of joint ventures
and associates - - 16 - - 16 - 16
============================== ======== ========= =========== ======== ========= ===== =============== =======
Items that are or may
be subsequently reclassified
to profit or loss - - 553 (11) - 542 9 551
Other comprehensive income - - 553 (11) (207) 335 9 344
Total comprehensive income - - 553 (11) 611 1,153 12 1,165
============================== ======== ========= =========== ======== ========= ===== =============== =======
Transactions with owners
Dividends paid to equity
shareholders - - - - (279) (279) - (279)
Net movement in own shares
held - - - - (12) (12) - (12)
Deferred tax associated
with share-based payments - - - - (2) (2) - (2)
Current tax associated
with share-based payments - - - - 1 1 - 1
Dividends paid to
non-controlling
interests - - - - - - (10) (10)
Acquisition and disposal
of non-controlling interests - - - - (128) (128) (124) (252)
============================== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (420) (420) (134) (554)
============================== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 17 September
2016 45 175 433 (22) 6,423 7,054 68 7,122
============================== ======== ========= =========== ======== ========= ===== =============== =======
Total comprehensive income
Profit for the period
recognised in the income
statement - - - - 1,198 1,198 13 1,211
Remeasurements of defined
benefit schemes - - - - 438 438 - 438
Deferred tax associated
with defined benefit schemes - - - - (77) (77) - (77)
Items that will not be
reclassified to profit
or loss - - - - 361 361 - 361
Effect of movements in
foreign exchange - - 63 - - 63 (2) 61
Net loss on hedge of net
investment in foreign
subsidiaries - - (9) - - (9) - (9)
Deferred tax associated
with movements in foreign
exchange - - (2) - - (2) - (2)
Current tax associated
with movements in foreign
exchange - - (1) - - (1) - (1)
Reclassification adjustment
for movements in foreign
exchange on subsidiaries
disposed - - (28) - - (28) - (28)
Movement in cash flow
hedging position - - - (9) - (9) 1 (8)
Items that are or may
be subsequently reclassified
to profit or loss - - 23 (9) - 14 (1) 13
Other comprehensive income - - 23 (9) 361 375 (1) 374
Total comprehensive income - - 23 (9) 1,559 1,573 12 1,585
============================== ======== ========= =========== ======== ========= ===== =============== =======
Transactions with owners
Dividends paid to equity
shareholders - - - - (299) (299) - (299)
Net movement in own shares
held - - - - 11 11 - 11
Deferred tax associated
with share-based payments - - - - 1 1 - 1
Current tax associated
with share-based payments - - - - (1) (1) - (1)
Dividends paid to
non-controlling
interests - - - - - - (4) (4)
Acquisition and disposal
of non-controlling interests - - - - - - (3) (3)
============================== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (288) (288) (7) (295)
============================== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 16 September
2017 45 175 456 (31) 7,694 8,339 73 8,412
============================== ======== ========= =========== ======== ========= ===== =============== =======
NOTES TO THE ANNUAL RESULTS ANNOUNCEMENT
For the 52 weeks ended 16 September 2017
1. Operating segments
The group has five operating segments, as described below. These
are the group's operating divisions, based on the management and
internal reporting structure, which combine businesses with common
characteristics, primarily in respect of the type of products
offered by each business, but also the production processes
involved and the manner of the distribution and sale of goods. 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, income tax
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,
and meat products, which are sold to retail,
wholesale and foodservice businesses.
Sugar The growing and processing of sugar beet and
sugar cane for sale to industrial users and
to Silver Spoon, which is included in the grocery
segment.
Agriculture The manufacture of animal feeds and the provision
of other products and services for the agriculture
sector.
Ingredients The manufacture of bakers' yeast, bakery ingredients,
enzymes, lipids, yeast extracts and cereal specialities.
Retail Buying and merchandising value clothing and
accessories through the Primark and Penneys
retail chains.
Geographical information
In addition to the required disclosure for operating segments,
disclosure is also given of certain geographical information about
the group's operations, based on the geographical groupings: United
Kingdom; Europe & Africa; The Americas; and Asia Pacific.
Revenues are shown by reference to the geographical location of
customers. Profits are shown by reference to the geographical
location of the businesses. Segment assets are based on the
geographical location of the assets.
Adjusted operating
Revenue profit
============================ ============================
52 weeks 53 weeks 52 weeks 53 weeks
ended ended ended ended
16 September 17 September 16 September 17 September
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
Operating segments
Grocery 3,381 3,097 303 294
Sugar 2,174 1,636 223 35
Agriculture 1,203 1,084 50 58
Ingredients 1,493 1,294 125 93
Retail 7,053 5,949 735 689
Central - - (75) (60)
------------------------- ------------- ------------- ------------- -------------
15,304 13,060 1,361 1,109
Businesses disposed:
Grocery 53 177 5 10
Sugar - 162 (3) (1)
------------------------- ------------- ------------- ------------- -------------
15,357 13,399 1,363 1,118
========================= ============= ============= ============= =============
Geographical information
United Kingdom 5,702 5,375 504 484
Europe & Africa 5,865 4,564 555 364
The Americas 1,538 1,226 189 158
Asia Pacific 2,199 1,895 113 103
========================= ============= ============= ============= =============
15,304 13,060 1,361 1,109
Businesses disposed:
The Americas 53 177 5 10
Asia Pacific - 162 (3) (1)
========================= ============= ============= ============= =============
15,357 13,399 1,363 1,118
========================= ============= ============= ============= =============
1. Operating segments for the 52 weeks ended 16 September
2017
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing
businesses 3,384 2,282 1,207 1,674 7,053 (296) 15,304
Internal revenue (3) (108) (4) (181) - 296 -
================================ ======= ===== =========== =========== ======= ======= =======
External revenue from
continuing businesses 3,381 2,174 1,203 1,493 7,053 - 15,304
Businesses disposed 53 - - - - - 53
================================ ======= ===== =========== =========== ======= ======= =======
Revenue from external
customers 3,434 2,174 1,203 1,493 7,053 - 15,357
================================ ======= ===== =========== =========== ======= ======= =======
Adjusted operating profit
before joint ventures
and associates 264 220 37 112 735 (75) 1,293
Share of profit after
tax from joint ventures
and associates 39 3 13 13 - - 68
Businesses disposed 5 (3) - - - - 2
================================ ======= ===== =========== =========== ======= ======= =======
Adjusted operating profit 308 220 50 125 735 (75) 1,363
Profits less losses on
disposal of non-current
assets 17 - - - (6) (5) 6
Amortisation of non-operating
intangibles (25) (1) (1) (1) - - (28)
Transaction costs (4) - - (1) - - (5)
Profits less losses on
sale and closure of businesses 110 183 - - - - 293
================================ ======= ===== =========== =========== ======= ======= =======
Profit before interest 406 402 49 123 729 (80) 1,629
Finance income 9 9
Finance expense (59) (59)
Other financial expense (3) (3)
Taxation (365) (365)
================================ ======= ===== =========== =========== ======= ======= =======
Profit for the period 406 402 49 123 729 (498) 1,211
================================ ======= ===== =========== =========== ======= ======= =======
Segment assets (excluding
joint ventures and associates) 2,349 2,079 371 1,416 4,245 90 10,550
Investments in joint ventures
and associates 36 23 131 64 - - 254
================================ ======= ===== =========== =========== ======= ======= =======
Segment assets 2,385 2,102 502 1,480 4,245 90 10,804
Cash and cash equivalents 1,550 1,550
Income tax 28 28
Deferred tax assets 143 143
Employee benefits assets 285 285
Segment liabilities (515) (480) (112) (273) (1,382) (199) (2,961)
Loans and overdrafts (877) (877)
Income tax (170) (170)
Deferred tax liabilities (231) (231)
Employee benefits liabilities (159) (159)
================================ ======= ===== =========== =========== ======= ======= =======
Net assets 1,870 1,622 390 1,207 2,863 460 8,412
================================ ======= ===== =========== =========== ======= ======= =======
Non-current asset additions 140 100 27 78 519 3 867
================================ ======= ===== =========== =========== ======= ======= =======
Depreciation (116) (84) (11) (52) (248) (3) (514)
================================ ======= ===== =========== =========== ======= ======= =======
Amortisation (43) (4) (2) (4) (3) (1) (57)
================================ ======= ===== =========== =========== ======= ======= =======
Impairment of property,
plant & equipment on disposal
of business (2) - - - - - (2)
================================ ======= ===== =========== =========== ======= ======= =======
Geographical information
Europe
United & The Asia
Kingdom Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 5,702 5,865 1,591 2,199 15,357
===================================== ======== ======= ========= ======== ======
Segment assets 4,199 4,123 1,077 1,405 10,804
===================================== ======== ======= ========= ======== ======
Non-current asset additions 290 407 89 81 867
===================================== ======== ======= ========= ======== ======
Depreciation (189) (190) (54) (81) (514)
===================================== ======== ======= ========= ======== ======
Amortisation (33) (8) (5) (11) (57)
===================================== ======== ======= ========= ======== ======
Impairment of property, plant
& equipment on disposal of business - - (2) - (2)
===================================== ======== ======= ========= ======== ======
1. Operating segments for the 53 weeks ended 17 September
2016
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing
businesses 3,100 1,736 1,090 1,444 5,949 (259) 13,060
Internal revenue (3) (100) (6) (150) - 259 -
================================ ======= ===== =========== =========== ======= ======= =======
External revenue from
continuing businesses 3,097 1,636 1,084 1,294 5,949 - 13,060
Businesses disposed 177 162 - - - - 339
================================ ======= ===== =========== =========== ======= ======= =======
Revenue from external
customers 3,274 1,798 1,084 1,294 5,949 - 13,399
================================ ======= ===== =========== =========== ======= ======= =======
Adjusted operating profit
before joint ventures
and associates 262 33 44 84 689 (60) 1,052
Share of profit after
tax from joint ventures
and associates 32 2 14 9 - - 57
Businesses disposed 10 (1) - - - - 9
================================ ======= ===== =========== =========== ======= ======= =======
Adjusted operating profit 304 34 58 93 689 (60) 1,118
Profits less losses on
disposal of non-current
assets 3 8 - - - - 11
Amortisation of non-operating
intangibles (19) (1) - (1) - - (21)
Transaction costs - (5) - - - - (5)
Profits less losses on
sale and closure of businesses - - - (5) -- (9) (14)
================================ ======= ===== =========== =========== ======= ======= =======
Profit before interest 288 36 58 87 689 (69) 1,089
Finance income 6 6
Finance expense (56) (56)
Other financial income 3 3
Taxation (221) (221)
================================ ======= ===== =========== =========== ======= ======= =======
Profit for the period 288 36 58 87 689 (337) 821
================================ ======= ===== =========== =========== ======= ======= =======
Segment assets (excluding
joint ventures and associates) 2,503 2,139 333 1,359 3,942 95 10,371
Investments in joint ventures
and associates 52 21 129 58 - - 260
================================ ======= ===== =========== =========== ======= ======= =======
Segment assets 2,555 2,160 462 1,417 3,942 95 10,631
Cash and cash equivalents 581 581
Income tax 13 13
Deferred tax assets 145 145
Employee benefits assets 6 6
Segment liabilities (522) (498) (106) (274) (1,166) (156) (2,722)
Loans and overdrafts (896) (896)
Income tax (147) (147)
Deferred tax liabilities (180) (180)
Employee benefits liabilities (309) (309)
================================ ======= ===== =========== =========== ======= ======= =======
Net assets 2,033 1,662 356 1,143 2,776 (848) 7,122
================================ ======= ===== =========== =========== ======= ======= =======
Non-current asset additions 116 141 27 69 466 9 828
================================ ======= ===== =========== =========== ======= ======= =======
Depreciation (98) (78) (10) (47) (202) (4) (439)
================================ ======= ===== =========== =========== ======= ======= =======
Amortisation (38) (4) (1) (3) - (1) (47)
================================ ======= ===== =========== =========== ======= ======= =======
Geographical information
Europe
United & The Asia
Kingdom Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 5,375 4,564 1,403 2,057 13,399
================================ ======== ======= ========= ======== ======
Segment assets 4,108 3,804 1,239 1,480 10,631
================================ ======== ======= ========= ======== ======
Non-current asset additions 315 349 99 65 828
================================ ======== ======= ========= ======== ======
Depreciation (195) (144) (35) (65) (439)
================================ ======== ======= ========= ======== ======
Amortisation (30) (4) (3) (10) (47)
================================ ======== ======= ========= ======== ======
The above segment disclosures are stated before reclassification
of assets and liabilities as held for sale.
2. Income tax expense
52 weeks 53 weeks
ended ended
16 September 17 September
2017 2016
GBPm GBPm
Current tax expense
UK - corporation tax at 19.54% (2016 -
20.00%) 82 85
Overseas - corporation tax 297 142
UK - (over)/under provided in prior periods (12) 6
Overseas - over provided in prior periods (9) (17)
============================================= ============= =============
358 216
Deferred tax expense
UK deferred tax (10) (14)
Overseas deferred tax 17 28
UK - under/(over) provided in prior periods 2 (4)
Overseas - over provided in prior periods (2) (5)
============================================= ============= =============
7 5
============================================= ============= =============
Total income tax expense in income statement 365 221
============================================= ============= =============
Reconciliation of effective tax rate
Profit before taxation 1,576 1,042
Less share of profit after tax from joint
ventures and associates (63) (57)
============================================= ============= =============
Profit before taxation excluding share
of profit after tax from joint ventures
and associates 1,513 985
============================================= ============= =============
Nominal tax charge at UK corporation tax
rate of 19.54% (2016 - 20.00%) 296 197
Effect of higher and lower tax rates on
overseas earnings 39 5
Effect of changes in tax rates on income
statement - (6)
Expenses not deductible for tax purposes 24 38
Disposal of assets covered by tax exemptions
or unrecognised capital losses 9 (1)
Deferred tax not recognised 18 8
Adjustments in respect of prior periods (21) (20)
============================================= ============= =============
365 221
============================================= ============= =============
Income tax recognised directly in equity
Deferred tax associated with defined benefit
schemes 77 (50)
Current tax associated with defined benefit
schemes - (1)
Deferred tax associated with share-based
payments (1) 2
Current tax associated with share-based
payments 1 (1)
Deferred tax associated with movement in
cash flow hedging position - (4)
Deferred tax associated with movements
in foreign exchange 2 (8)
Current tax associated with movements in
foreign exchange 1 (1)
============================================= ============= =============
80 (63)
============================================= ============= =============
Legislation has been enacted to reduce the UK corporation tax
rate from 20% to 19% with effect from 1 April 2017 with a further
reduction to 17% from 1 April 2020. Accordingly, UK deferred tax
has been calculated using these rates as appropriate.
3. Earnings per share
The calculation of basic earnings per share at 16 September 2017
was based on the net profit attributable to equity shareholders of
GBP1,198m (2016 - GBP818m), and a weighted average number of shares
outstanding during the year of 790 million (2016 - 791 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, transaction costs, amortisation of
non-operating intangibles and any associated tax credits, is shown
to provide clarity on the underlying performance of the group.
The diluted earnings per share calculation takes into account
the dilutive effect of share incentives. The diluted, weighted
average number of shares is 790 million (2016 - 791 million). There
is no difference between basic and diluted earnings.
52 weeks 53 weeks
ended ended
16 September 17 September
2017 2016
pence pence
Adjusted earnings per share 127.1 106.2
Disposal of non-current assets 0.8 1.4
Sale and closure of businesses 37.0 (1.8)
Transaction costs (0.6) (0.6)
Tax effect on above adjustments (11.0) 0.1
Amortisation of non-operating intangibles (3.5) (2.6)
Tax credit on non-operating intangibles
amortisation and goodwill 1.8 0.6
Non-controlling interests' share of the
above adjustments - 0.1
========================================== ============= =============
Earnings per ordinary share 151.6 103.4
========================================== ============= =============
4. Dividends
2017 2016
pence pence
per per 2017 2016
share share GBPm GBPm
2015 final - 25.00 - 198
2016 interim - 10.30 - 81
2016 final 26.45 - 209 -
2017 interim 11.35 - 90 -
============= ====== ====== ===== =====
37.80 35.30 299 279
============= ====== ====== ===== =====
The 2017 interim dividend was declared on 19 April 2017 and paid
on 7 July 2017. The 2017 final dividend of 29.65 pence, total value
of GBP234m, will be paid on 12 January 2018 to shareholders on the
register on 15 December 2017.
Dividends relating to the period were 41.0 pence per share
totalling GBP324m (2016 - 36.75 pence per share totalling
GBP290m).
5. Acquisitions and disposals
Acquisitions
2017
During the year the group acquired two small Grocery businesses
in the UK and an Ingredients business in the US. Total
consideration was GBP85m, comprising cash of GBP83m and deferred
consideration of GBP2m. Net assets acquired comprised intangible
assets of GBP69m, cash of GBP5m and other operating assets and
liabilities of GBP11m. The cash outflow of GBP79m on the purchase
of subsidiaries, joint ventures and associates in the cash flow
statement comprises cash consideration of GBP83m less cash acquired
with the businesses of GBP5m, and GBP1m of deferred consideration
in respect of prior year acquisitions.
After the year end, on 12 October 2017, the group completed the
acquisition of 100% of Acetum S.p.A., the leading Italian producer
of Balsamic Vinegar of Modena for EUR317m including debt assumed.
In the year ended 31 December 2016, the business generated net
sales of EUR102m and profit after tax of EUR3m. Given the timing of
the acquisition after the group's financial year end and its
proximity to the date of approval of the group's financial
statements, completion of the initial accounting for the
acquisition has not yet been undertaken. Consequently, the
disclosures relating to goodwill, acquired intangibles, and the
fair values of other assets and liabilities acquired have not been
made. These disclosures will be provided in the condensed
consolidated interim financial statements for the 24 weeks ending 3
March 2018.
2016
Last year the group acquired two small European Agriculture
businesses which, together, increased net assets by GBP8m satisfied
in cash. Pre-acquisition carrying amounts were the same as
recognised values on acquisition apart from a GBP2m non-operating
intangible asset recognised in respect of brands. The acquisitions
contributed aggregate revenues of GBP13m and no adjusted profit
before tax for the period between the dates of acquisition and 17
September 2016. Aggregate contributions to revenue and adjusted
profit before tax, had the acquisitions occurred at the beginning
of the period, were not disclosed as appropriate financial
information, prepared under adopted IFRS, was not available.
The GBP8m of cash consideration differed by GBP2m from the cash
outflow of GBP10m on the purchase of subsidiaries, joint ventures
and associates in the cash flow statement. The difference comprised
payment of deferred consideration in respect of prior year
acquisitions.
In June 2016 the group paid GBP252m, including costs, to acquire
the minority shareholdings in Illovo Sugar Limited. As Illovo and
its subsidiaries had been consolidated in the group financial
statements since the acquisition of the original controlling
interest in 2006, this was treated as a transaction with owners and
recorded in equity rather than as an acquisition. The cash flow was
shown within financing activities.
Disposals
2017
The group disposed of its US herbs and spices business, reported
within the Grocery segment. Cash proceeds amounted to GBP294m, net
assets disposed were GBP26m and the associated goodwill was
GBP124m. Provisions for transaction and associated restructuring
costs were GBP33m, with a loss of GBP1m on recycling foreign
exchange differences. The pre-tax gain on disposal was GBP110m. The
group also disposed of its south China cane sugar operations for
cash proceeds of GBP194m. The purchaser also assumed GBP103m of
debt resulting in total proceeds of GBP297m. Net assets disposed
were GBP120m. Provisions for transaction and associated
restructuring costs were GBP24m, offset by a gain of GBP29m on
recycling of foreign exchange differences and GBP1m of
non-controlling interests. The pre-tax gain on disposal was
GBP183m.
The cash inflow of GBP452m on the sale of subsidiaries, joint
ventures and associates in the cash flow statement comprises cash
proceeds of GBP488m less cash disposed with the businesses of
GBP26m and GBP10m of transaction costs.
2016
The group closed a small number of Ingredients businesses during
the year, incurring closure costs of GBP4m in the Asia Pacific
segment and GBP1m in Europe & Africa. The group also charged a
GBP9m onerous lease provision to sale and closure of business (in
the Central segment) as a result of lease reversions following the
administration of the BHS retail chain in the UK.
6. Analysis of net cash/(debt)
At At
17 September Cash Non-cash Exchange 16 September
2016 flow Disposals items adjustments 2017
GBPm GBPm GBPm GBPm GBPm GBPm
Cash at bank and in
hand, cash
equivalents and overdrafts 462 939 - - (15) 1,386
Short-term loans (137) (49) 103 (19) 1 (101)
Long-term loans (640) 9 - 19 - (612)
============================ ============= ===== ========= ======== ============ =============
(315) 899 103 - (14) 673
============================ ============= ===== ========= ======== ============ =============
7. Related party transactions
The group has a controlling shareholder relationship with its
parent company, Wittington Investments Limited, with the trustees
of the Garfield Weston Foundation and with certain other
individuals who hold shares in the Company. The group 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:
Sub 2017 2016
note GBP'000 GBP'000
Charges to Wittington Investments Limited in respect of services
provided by the Company and
its subsidiary undertakings 992 1,226
Dividends paid by Associated British Foods and received in
a beneficial capacity by:
(i) trustees of the Garfield Weston Foundation and their close
family 1 10,675 10,012
(ii) directors of Wittington Investments Limited who are not
trustees of the Foundation and their
close family 2,799 2,613
(iii) directors of the Company who are not trustees of the
Foundation and are not directors of Wittington Investments
Limited 62 54
(iv) members of the Weston family employed within the Associated
British Foods group 2 2 2
Sales to fellow subsidiary undertakings on normal trading
terms 3 46 48
Sales to companies with common key management personnel on
normal trading terms 4 14,790 16,642
Commissions paid to companies with common key management personnel
on normal trading terms 4 1,391 1,490
Amounts due from companies with common key management personnel 4 1,938 1,748
Sales to joint ventures on normal trading terms 16,615 13,460
Sales to associates on normal trading terms 23,112 41,494
Purchases from joint ventures on normal trading terms 400,242 324,959
Purchases from associates on normal trading terms 16,128 17,424
Amounts due from joint ventures 49,649 37,531
Amounts due from associates 2,451 4,244
Amounts due to joint ventures 37,154 28,374
Amounts due to associates 1,100 3,342
=================================================================== ===== ======== ========
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 16 September 2017 was the beneficial owner of
683,073 shares (2016 - 683,073 shares) in Wittington Investments
Limited representing 79.2% (2016 - 79.2%) of that company's issued
share capital and is, therefore, the Company's ultimate controlling
party. At 16 September 2017 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. Members of the Weston family who are employed by the group
and are not directors of the Company or Wittington Investments
Limited and are not trustees 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.
Limited.
Amounts due from joint ventures include GBP48m (2016 - GBP36m)
of finance lease receivables. The remainder of the balance is
trading balances. All but GBP3m (2016 - GBP3m) of the finance lease
receivables are non-current.
8. Other information
The financial information set out above does not constitute the
Company's statutory accounts for the 52 weeks ended 16 September
2017, or the 53 weeks ended 17 September 2016. Statutory accounts
for 2016 have been delivered to the Registrar of Companies and
those for 2017 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 498(2) or (3) of the Companies Act 2006
in respect of the accounts.
9. 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 16 September 2017
(2016 - 53 weeks ended 17 September 2016) comprise those of the
Company and its subsidiaries (together referred to as 'the group')
and the group's interests in joint ventures and associates.
The consolidated financial statements were authorised for issue
by the directors on 7 November 2017.
The consolidated financial statements have been prepared and
approved by the directors in accordance with International
Financial Reporting Standards ('IFRS') as adopted by the EU. Under
IFRS, management is required to make judgements, estimates and
assumptions about the reported amounts of assets and liabilities,
income and expense and the disclosure of contingent assets and
liabilities. The estimates and associated assumptions are based on
experience. Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on a regular
basis. Revisions to accounting estimates are recognised from the
period in which the estimates are revised.
The consolidated financial statements are presented in sterling,
rounded to the nearest million. They are prepared on the historical
cost basis except that biological assets and certain financial
instruments are stated at fair value. Assets classified as held for
sale are stated at the lower of carrying amount and fair value less
costs to sell.
The consolidated financial statements of the group are prepared
to the Saturday nearest to 15 September. Accordingly, these
financial statements have been prepared for the 52 weeks ended 16
September 2017. 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 2017.
10. Significant accounting policies
There have been no significant changes to accounting policies
during the year. The group is assessing the impact of the following
standards, interpretations and amendments that are not yet
effective. Where already endorsed by the EU, these changes will be
adopted on the effective dates noted. Where not yet endorsed by the
EU, the adoption date is less certain. The standards effective in
2018 are not expected to have any material effect on the group.
-- Amendments to IFRS 2: Classification and Measurement of
Share-based Payment Transactions effective 2019 financial year (not
yet endorsed by the EU)
-- Amendments to IFRS 4: Applying IFRS 9 Financial Instruments
with IFRS 4 Insurance Contracts effective 2019 financial year (not
yet endorsed by the EU)
-- Annual Improvements to IFRSs 2014-2016 effective 2018 and
2019 financial years
-- IFRS 9: Financial Instruments: Classification and Measurement
effective 2019 financial year
-- IFRS 15: Revenue from Contracts with Customers effective 2019
financial year
-- IFRS 16: Leases effective 2020 financial year (not yet
endorsed by the EU)
-- IFRS 17: Insurance contracts effective 2022 financial year
(not yet endorsed by the EU)
-- Amendments to IAS 7: Disclosure Initiative effective 2018
financial year (not yet endorsed by the EU)
-- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses effective 2018 financial year (not yet endorsed
by the EU)
-- IFRIC 22: Foreign Currency Transactions and Advance
Consideration effective 2019 financial year (not yet endorsed by
the EU)
-- IFRIC 23: Uncertainty over Income Tax Treatments effective
2020 financial year (not yet endorsed by the EU)
The three new standards with the most significant potential
effect on the group's financial statements are IFRS 9, IFRS 15 and
IFRS 16. Impact assessments and implementation planning is already
under way for these standards. Further details of the group's
transitional approach to their implementation and their expected
impact will be provided in the 2018 consolidated financial
statements. The impact of the other standards is currently under
review but is expected to be much less significant.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FSWFUMFWSESF
(END) Dow Jones Newswires
November 07, 2017 02:00 ET (07:00 GMT)
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