REG - Assoc.British Foods - Annual Results
08/11/2022 07:00
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RNS Number : 5970F Associated British Foods PLC 08 November 2022
For release 8 November 2022
Annual Results Announcement
Year ended 17 September 2022
FOR RELEASE 8 NOVEMBER 2022
Robust delivery in food; retail performance strongly ahead
Financial Headlines
Actual currency Constant currency
change change
Group revenue £16,997m +22% +22%
Adjusted operating profit £1,435m +42% +38%
Adjusted profit before tax £1,356m +49%
Adjusted earnings per share 131.1p +64%
Dividends per share 43.7p +8%
Gross investment £930m
Net cash before lease liabilities £1,488m
Net debt including lease liabilities £1,764m
Statutory operating profit £1,178m +46%
Statutory profit before tax £1,076m +48%
Basic earnings per share 88.6p +46%
Statutory operating profit of £1,178m was 46% ahead and is stated after
charging net exceptional items of £206m (2021: £151m)
Food
- 10% sales growth at constant currency demonstrating price actions
- Adjusted operating profit for Sugar, Agriculture and Ingredients ahead of last
year
- Grocery margin of 10.7% reflecting a lag in pricing to recover input cost
inflation
Primark
- Total sales £7.7bn, 43% ahead of last year on a 52-week comparable basis at
constant currency
- Significant increase in customer footfall and sales densities as markets
emerged from pandemic
- UK like-for-like sales and market shares now broadly in line with pre-COVID
levels
- Weaker like-for-like sales in Continental Europe given cautious customer
sentiment
- Improved full year adjusted operating profit margin at 9.8%
- Continuing to build digital capability, new UK website, Click and Collect
trial launching in 25 UK stores
Shareholder returns
- Total dividends of 43.7p up 8% over 40.5p last year (6.2p interim, 20.5p final
and 13.8p special)
- Announcement of £500m share buy-back programme to be completed in financial
year 2022/23
George Weston, Chief Executive of Associated British Foods, said:
"The Group delivered strong revenue and profit growth this year in a clear
demonstration of the benefits of our diversification, brand strength, and of
our commitment to disciplined financing and investment. The performance was
achieved despite pandemic-induced disruption being followed by high and
volatile input cost inflation.
Our Food businesses continued to play their important role providing safe,
nutritious food in an era of supply chain disruption and high inflation. Sales
increased by 10% driven by price recovery with adjusted operating profit
proving resilient.
Sales, margin and profits at Primark increased significantly as more normal
customer behaviour resumed after the pandemic. Significant progress was made
in building out Primark's digital capability, which will be a key element in
the future development of Primark.
Looking ahead, substantial and volatile input cost inflation will be the most
significant challenge in the new financial year, and our businesses will
continue to seek to recover these higher costs in the most appropriate way.
Primark has faced significant input cost inflation and sharply moving currency
exchange rates. We have decided to hold prices for the new financial year at
the levels already implemented and planned and to stand by our customers,
rather than set pricing against these highly volatile input costs and exchange
rates.
As a result, in the current financial year, we expect significant growth in
Group sales from pricing in Food, as well as from some pricing and from space
expansion at Primark. Our outlook remains unchanged. We continue to expect
Group adjusted operating profit and adjusted earnings per share to be lower
than the financial year just closed.
The Group remains financially strong with good cash generation and substantial
liquidity and we are announcing this year a share buyback programme of £500m
together with an 8% increase in the total dividend."
Like-for-like sales metric expressed over three years enables measurement of
the performance of our retail stores compared to our experience in 2019, which
was before any of the economic effects of COVID-19.
The Group has defined, and outlined the purpose of, its Alternative
performance measures in note 13. These measures are used within the Financial
Headlines and in this Annual Results Announcement. In FY 2021 the 53rd week
applied to Primark and George Weston Foods.
For further information please contact:
Associated British Foods:
Tel: 020 7399 6545
John Bason, Finance Director
Chris Barrie, Corporate Affairs Director
Citigate Dewe Rogerson:
Tel: 020 7638 9571
Holly Gillis Tel: 07940 797560
Angharad Couch Tel: 07507 643004
There will be an analyst and investor presentation at 09.00am GMT today which
will be streamed online and accessed via our website here
(https://www.abf.co.uk/investorrelations/results_and_presentations) .
Notes to Editors
Associated British Foods is a diversified international food, ingredients and
retail group with sales of £17bn and 132,000 employees in 53 countries. It
has significant businesses in Europe, Africa, the Americas, Asia and
Australia.
Our aim is to achieve strong, sustainable leadership positions in markets that
offer potential for long-term 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.
FOR RELEASE 8 NOVEMBER 2022
Annual Results Announcement
For the 52 weeks ended 17 September 2022
Chairman's statement
Group revenue and profit were much stronger this year than last, demonstrating
that our businesses have emerged robustly from the disruption of the pandemic.
But just as we began to experience a more normal operating environment, we
encountered the most challenging economic conditions for many years with
sharply rising and broadly based inflation, as well as highly volatile input
costs and exchange rates. We estimate that inflation increased costs across
the Group by some £1bn in this year alone. The fact that the Group prospered
is testimony once again to the agility and expertise of our people and to the
strength of our business model.
Group revenue increased to £17bn, an increase of 22% over last year at both
actual and constant currency. Adjusted operating profit rose to £1,435m, an
increase of 42% at actual exchange rates and of 38% at constant currency.
Adjusted earnings per share rose by 64% to 131.1p. Compared to our last
pre-pandemic financial year, 2019, revenue was ahead and adjusted operating
profit and adjusted earnings per share were broadly in line. The increases
over last year, and the comparison to our 2019 financial year, highlight the
very real progress the Group has made in the last 12 months.
Adjusted operating profit for our Food businesses was in line with last year
driven by good trading, efficient operational performances, and pricing
actions to recover significant input cost inflation. The year's strong
financial performance was driven by much improved sales and operating profit
margin at Primark which followed the removal of COVID-19 trading restrictions
applied to our stores and the resumption of more normal customer behaviour.
This year all our businesses experienced cost inflation across an
unprecedented range of inputs. Although hard work has successfully recovered
much of this cost inflation, more remains to be done.
The Group continued to invest for the long term with a gross investment this
year of £930m, notably up on the £721m investment last year. This year we
increased capital investment in technology and the fitout of automated
warehouses for Primark, we commenced the construction of a new sugar factory
in Tanzania, progressed with the construction of a state-of-the-art feed mill
in Western Australia, and began a major expansion of our yeast extracts
facility in Hamburg, Germany. We spent £160m on acquisitions this year, with
the key additions being the life sciences company Fytexia for ABF Ingredients,
and Greencoat, an animal supplement and care business for AB Agri.
A strong capital base
The Group's treasury policies maintain a strong capital base and manage the
Group's balance sheet and liquidity to ensure long-term financial stability.
These policies are the basis for investor, creditor and market confidence and
enable the successful development of our businesses.
In February we acted to diversify our sources of funding by issuing an
inaugural public bond of £400m, 2.5 per cent due 2034. The bond also served
to extend the duration of our borrowings. Most of the £297m private placement
notes remaining at the beginning of the financial year were repaid during the
year. The Group's existing Revolving Credit Facility of £1.1bn, due to expire
in 2023, was replaced in June. The new facility for £1.5bn is now free of
performance covenants and runs for five years with two 1-year extension
options. The Group holds an 'A' grade long-term issuer credit rating with
stable outlook from S&P Global, reflecting the strength of ABF's
businesses and the Group's conservative financial policy.
The Group's balance sheet was also strengthened this year by an increase in
the net surplus of the Group's defined benefit schemes, driven by the UK
defined benefit scheme, from £0.6bn last year end to £1.4bn this year end.
Dividends
The Board is proposing a final dividend of 29.9p a share which will be paid on
13 January 2023 to shareholders on the register on 16 December 2022. Taken
with the interim dividend of 13.8p a share, the total dividend of 43.7p a
share is 8% higher than the total dividend of 40.5p in 2021, which comprised
an interim dividend of 6.2p, final dividend of 20.5p and a special dividend of
13.8p a share. The total dividend for 2022 is three times covered by the
adjusted earnings per share of 131.1p.
Shareholder returns
Last year we set out our policies on financial leverage and capital
allocation. In the ordinary course of business, the Board prefers to see the
Group's financial leverage, expressed as the ratio of net debt including lease
liabilities to adjusted EBITDA, to be well under 1.5 times at each half year
and year end reporting date. In exceptional circumstances the Board will be
prepared to see leverage above that level for a short period of time.
Our capital allocation policy is to invest in our businesses at an appropriate
pace and wherever attractive returns on capital can be generated. We continue
to see considerable opportunities to do this. Nevertheless, as previously
stated the Board may from time to time conclude that it has surplus cash and
capital. In making this assessment, the Board will be mindful that financial
leverage consistently below 1.0 times and substantial net cash balances at
both half and full year ends may indicate such a surplus position. Given it is
not possible to anticipate every possible set of circumstances, this policy
remains subject to the Board's discretion. Surplus capital may be returned to
shareholders by special dividend or share buy-backs.
At the end of this financial year the financial leverage ratio was 0.8 times
and net cash balances before lease liabilities amounted to £1.5bn.
Looking ahead, economic conditions are challenging and the outlook for
consumer discretionary spending may well prove to be weak in the near term.
However, the Group continues to trade robustly and our businesses are well
invested and offer competitive products to customers. The Food businesses
occupy positions of strength in their markets and have a pipeline of
development opportunities ahead. With Primark stores open and trading, its
cash flows are strong. The Group also benefits from considerable financial
strength attributable to its strong cash generating capability and its
effective management of cash, which result in a steady reduction in financial
leverage over time.
By contrast, the value attributed by the financial markets to the Group's
share capital has fallen considerably this year.
Taking into account all these factors, including the Group's policies on
leverage and capital allocation, the Board has decided not only to declare a
final dividend but also to commence a share buyback programme of £500m. At
yesterday's market close, this buyback programme represents approximately 4.7%
of the issued share capital of the Group with our intention being to complete
it within this financial year. Shares bought back will be cancelled.
The Board views the share buyback as an investment, rather than simply a
return of capital, with both the size and timing of the programme now
considered to be appropriate for the delivery of value to shareholders whilst
at the same time, continuing to leave appropriate scope for both organic and
inorganic investment opportunities. The Board will continue to review the
availability of surplus cash and capital at each half year and financial year
end, in accordance with the Group's policies on financial leverage and capital
allocation.
Our commitment to ESG
This year the Group continued to make further significant and wide-ranging
progress in its environmental, social and governance activity.
In May we presented to investors the environmental factors which are most
material for our businesses. With regard to greenhouse gas emissions, our
focus has been on delivering on our 2030 commitments, but we are also intent
on achieving net zero by 2050 or potentially sooner. Some 54% of the Group's
total energy needs are already met from renewable sources which are mostly
from bio-mass by-products in our Sugar businesses; furthermore, we highlighted
that our Sugar businesses provide co-products that in turn are critical
feedstock for other important industries.
Inflation is most onerous to people on lower incomes. We take the wellbeing of
our people seriously. Across the Group our businesses are taking steps to
mitigate wherever possible these higher living costs. In the UK we have
delivered several initiatives to support our people. These include
differentiated salary increases, so that those on lower incomes have higher
increases, short-term financial support, benefits hubs offering discounts on
goods including groceries, and other measures. The detail of this support
varies by business and country, as we are a decentralised group, but the
principles are clear and our businesses across the world are adopting a
similar approach.
Progress on ESG must be owned by management at all levels, starting with the
most senior. Effective from the 2022/23 financial year, 15% of the short-term
incentive opportunity for the Chief Executive and Finance Director will be
linked to ESG priorities including those that are climate-related.
Looking ahead, we recognise that there is likely to be further significant
regulation and legislation from governments to drive ESG progress and bring
transparency to related corporate activity. Whilst we will of course comply
with all new requirements, our focus will be on actions which make the most
material difference.
Our latest Responsibility Report is issued with the Annual Report and it
details the large number of actions being taken across the Group. It can be
found on the Group website.
Board
I have only one instance of succession planning to report this year, but it is
unusually noteworthy. In July we announced that John Bason would be stepping
down as Finance Director of the Group, and from the Board on 28 April next
year after a long and distinguished period of service. John took up the post
of Finance Director in May 1999 and his tenure has been marked by clear
analysis, excellent judgement and tireless commitment to the Group. On behalf
of the Board I would like to place on record our deep gratitude for his
exceptional contribution. I am delighted that we are retaining John's
experience and expertise in Primark where he will become Senior Advisor and
Chairman of the newly constituted Strategic Advisory Board from May next year.
In his place we welcome Eoin Tonge from Marks and Spencer Group Plc where he
is currently Chief Financial Officer and Chief Strategy Officer. Eoin was
previously Chief Financial Officer of Greencore Group plc and so importantly
he has experience of both food and retail industries. He will join the Board
no later than February 2023 and I am confident that he will make a strong
contribution.
Our employees
In the first half of this year our businesses had to contend with considerable
disruption from the pandemic, and the second half of the year saw the
emergence of high inflation and volatile prices. I would like to thank our
people for the way in which they responded to the many challenges of the year
in a fast-changing business environment. The skills and professionalism of our
people continue to impress me hugely.
Looking ahead
The Group continues to face considerable headwinds from high inflation,
particularly in energy costs, volatile exchange rates and pressure on consumer
discretionary spending. However, I remain confident that the Group has the
business model necessary to deliver a year of resilient performance with
further growth in sales.
We look forward to Primark's accelerated rollout of stores, especially in the
United States, and to further digital development including the launch of the
new Click and Collect trial in stores in the north of England and Wales. Our
Food businesses continue to plan to recover rising input costs both through
pricing and efficiency improvements, to launch new products and to invest in
brand development.
In a Group as diversified as this, there are no shortages of opportunities: we
shall continue to invest wherever and whenever our return thresholds can be
met.
Michael McLintock
Chairman
Chief Executive's statement
Last year I stated how proud I was of the Group's response to the many
challenges presented by COVID-19. This year has continued to be challenging
with continuing reverberations from the pandemic, significant economic
uncertainty, accelerating inflationary pressures and the terrible conflict in
Ukraine. Once again our people demonstrated care, good judgement, operational
resilience and immense hard work in rising to these challenges.
Our financial performance this year clearly demonstrates the strength of the
Group and its ability to bounce back. We delivered substantial increases in
sales and adjusted operating profit year-on-year. This outturn comes from the
strength of our brands, the diversity of our products and markets, our
geographic spread, conservative financing and an organisational design that
permits fast and flexible decision-taking.
Revenue for the Group of £17bn was 22% ahead of last year both at actual
exchange rates and at constant currency. In our Food businesses, higher
revenues reflect price actions and some volume increases, especially in
Ingredients. In Primark, the much higher revenues reflect the ending of
COVID-related restrictions and the resumption of more normal customer
behaviour.
Our Food businesses delivered another resilient performance this year.
AB Sugar traded well this year with revenues 18% ahead of last year at
constant currency driven by higher sugar and co-product prices, especially for
bioethanol. Adjusted operating profit increased to £162m this year, a strong
performance given that these results included the costs of recommissioning
Vivergo, our bioethanol plant in Hull. We should expect a high level of
variability in the operating results for Vivergo given that its profitability
is reliant on prices in a number of discrete commodity markets and there has
indeed been a high level of variability in these markets over the last year.
At Illovo, sugar production was held back by unseasonal weather including
severe flooding. Against the consequential background of difficult operational
challenges, Illovo pushed ahead and made major progress with its programme to
produce retail packs for its domestic markets in high quality stand-alone
facilities located in-country. These facilities are key to supporting Illovo's
strategy of developing its domestic retail sugar businesses.
Grocery revenues were 3% ahead of last year at constant currency but operating
profit margin declined. The planning, negotiation and implementation of
pricing with the retailers inevitably results in a delay in the recovery of
input cost inflation. In some categories, price realisation has been limited
by competitor actions. Our actions to tackle the losses in Allied Bakeries,
our UK baking business, have been undermined this year by the scale of cost
inflation in all aspects of its operations including in gas, wheat and
logistics. Although progress has been delayed, we are working on solutions
beyond pricing.
AB Agri had a good year, with sales well ahead of last year, with higher
selling prices, and adjusted operating profit was also well ahead. Our joint
venture Frontier was created 17 years ago, has developed consistently over
that time and I am delighted that this financial year was a record. The
performance was driven by both strong grain trading and high demand for crop
protection products. We acquired Greencoat, a UK-based animal supplement and
care business which included the widely recognised equine supplement brand,
NAF, in July and we expect these products to support the AB Agri expansion in
international markets for animal nutrition and technology.
In Ingredients, the businesses in ABF Ingredients performed very strongly this
year, with volume growth, from both winning new business and post-pandemic
customer volume recoveries, and strong price execution. All of the businesses
have developed strongly with every expectation that we will take advantage of
many opportunities ahead. The acquisition of Fytexia this year brings another
high-quality ingredient business to our portfolio. The profit at AB Mauri
declined this financial year as a result of lower retail yeast volumes from
their elevated COVID levels and with some lag in pricing recovery. We have
long seen the potential to build on our position in the fast-growing Indian
market. Initial work has now commenced on building a fresh yeast facility in
Uttar Pradesh, which will expand our capacity to meet domestic demand.
This year saw the appointment of new Chief Executives to two of our
businesses: Paul Kenward, formerly Managing Director of British Sugar, became
Group Chief Executive of AB Sugar, succeeding Dr Mark Carr who is retiring
after 18 years and Olav Silden, who joined from Selecta Group BV where he was
Chief Commercial Officer with responsibility for many beverage brands,
succeeded Bob Tavener as Chief Executive of Twinings Ovaltine.
At Primark, total sales and adjusted operating profit increased significantly
compared to prior year. Trading was strong in the UK and the Republic of
Ireland. In Continental Europe trading remained below pre-pandemic levels
driven by different factors in each market. Consumer confidence was generally
weaker and market data for some markets indicate that the total apparel market
was still well below pre-COVID levels. Trade was affected by the exceptionally
hot summer months and with colder weather we have seen many markets improve.
In Germany we are considering the repositioning of Primark to increase sales
densities and make the business sustainably profitable. These accounts include
an exceptional charge of £206m which is a non-cash one-time writedown of
property, plant and equipment and right-of-use for our German assets. Looking
ahead to this new financial year we expect to make significant progress in
Primark's digital development with the launch of our new enhanced website in
all our markets along with the UK launch of our trial Click and Collect
service. Having rebuilt the new store pipeline during the last financial year,
we expect to open a net 1 million sq ft of retail selling space this next
financial year. We have demonstrated that our US store model is profitable and
believe that the opportunity ahead is substantial; we expect nearly to double
our retail selling space in this new financial year. John Bason will take up
his new role at Primark next May and I know that he will provide additional
experience and expertise to Primark's decision-making in business-critical
areas.
Adjusted operating profit of £1,435m was significantly ahead of last year,
42%, in line with our expectations. For the full year the weakening of
sterling against our major currencies has led to a translation gain of some
£15m. The statutory operating profit for the year at £1,178m was 46% ahead
of the prior year, and was stated after the exceptional charge of £206m for
the impairment of Primark German assets, which compares to a £151m net
exceptional charge in the prior year.
This year benefitted from higher interest income compared to last year and
other financial income was higher driven by a further increase in the surplus
in the Group's UK defined benefit pension scheme. As expected, the Group's
full year effective tax rate declined from 28.1% last financial year to 22.2%
this year. As a result, adjusted earnings per share increased by 64% from
80.1p to 131.1p per share. Basic earnings per share were 88.6p, an increase of
46% on the reported 60.5p per share last year.
There was a cash outflow for the Group this year mainly due to an increase in
working capital of some £750m. The increase in working capital was driven by
the timing of receipt of Primark autumn/winter inventory of £440m in total
around both financial year end dates, the effect of inflation across our
businesses and, where necessary, some planned higher levels of inventory to
mitigate potential supply chain disruption.
As a result, net cash before lease liabilities at the financial year end was
£1.5bn, a reduction on £1.9bn at the end of the last financial year.
The Group remains financially strong with good cash generation and substantial
liquidity and we are announcing this year a share buyback programme of £500m.
ESG
We have made considerable progress in understanding the environmental factors
most material to our businesses. Our focus is to deliver on our 2030
commitment to reduce greenhouse gas emissions and we intend to achieve net
zero by 2050 or potentially sooner. Some 54% of the Group's total energy needs
are already met from renewable sources, mostly from bio-mass by-products from
our Sugar and Agriculture businesses.
Our Sugar businesses produce by-products that act as critical feedstock for
important industries. We have a clearly identified pipeline of capital
projects, all of them delivering above our required return on capital
employed, and which will deliver the 30% reduction commitment in carbon
emissions for Sugar by 2030.
Our businesses play a crucial role in providing products to help other
companies and customers reduce their own emissions. For example, AB Enzymes
has recently launched cold cellulase products which enable cotton production
to take place at lower water temperatures and enzymes for the detergent
industry, which enable consumers to wash at lower temperatures and reduce
their electricity usage.
We have incorporated in our annual report our reporting on the Task Force on
Climate-related Financial Disclosures framework (TCFD). We have engaged with
the spirit as well as the letter of the scenario planning that is central to
TCFD. More broadly our understanding of the opportunities and risks ahead has
been enhanced by an improvement in our data collection and analysis. We
conducted a comprehensive risk assessment across the Group's supply chains
which led to a focus on the most material risks: AB Sugar, Primark and
Twinings. Taking into account different scenarios for climate change, we
believe that the risks to the Group are not material to 2030. In doing this
work we recognised that the main consequence of climate change for us will be
that we will be affected by a pattern of more frequent and more extreme
weather conditions. The effects of cyclones and severe flooding in Illovo, and
the flooding in the eastern part of Australia, are examples of such events and
our businesses are inevitably already building on their capabilities to deal
with the consequences of these. Over the period to 2030 there is more
confidence in the climate change models and hence the outcomes. Not
surprisingly the variability of outcomes for longer-term scenarios to 2050 is
much greater, and so we use the 2050 data to check our sense of direction. Our
actions are focused on the period to 2030. The benefit we have seen from
developing the long-term scenarios, however, is that they have added impetus
to, and provided focus for, our businesses' strategic plans.
Our social commitments remain as important as ever to us. We believe firmly in
the pursuit of a "just transition" that balances action to protect the planet
with a concern for the welfare of our employees and the people in our value
chain. Partnership with suppliers becomes more important than ever in the face
of geopolitical uncertainty and economic volatility and enables us to plan
much more effectively for disruption.
Outlook
As we look ahead, we expect further significant input cost inflation, and
ongoing high volatility inevitably has made forecasting more difficult.
We expect the aggregate profit of our Food businesses to be ahead of the
2021/22 financial year. Adjusted operating profit is expected to be well ahead
in AB Sugar, and broadly in line in AB Agri and Ingredients. We expect some
further margin erosion in Grocery with significant additional inflation in
input costs which should be recovered through pricing in the course of the
year. Investment in our Grocery brands will increase with higher marketing
spend.
We expect Primark sales growth to be driven by the price increases implemented
for autumn/winter this year and those already planned for spring/summer next
year and the increase in retail selling space. Input cost inflation is
expected to be significant, with inflation in raw material and energy costs
and in labour rates, alongside higher purchasing costs which have resulted
from the strengthening of the US dollar against sterling and the euro. Given a
context of a likely reduction in consumer disposable income we have decided
this year not to implement further price increases on the autumn/winter and
spring/summer ranges beyond those already implemented and planned. We believe
this decision is in the best interests of Primark, supporting our core
proposition of everyday affordability and price leadership and supporting
market share growth over the longer term. We expect Primark's adjusted
operating profit margin for next year to be lower than 8% but looking further
ahead, we remain focused on returning to an adjusted operating profit margin
of some 10% as commodity prices moderate and consumer confidence improves.
Finance income is expected to increase reflecting higher interest rates on our
net bank balances. Other financial income will increase substantially as a
result of the further increase in the surplus in the Group's defined benefit
pension schemes. We expect an increase in the effective tax rate to around
25%, driven by an adverse change in the profit mix of the Group and higher UK
corporation tax rates.
Our outlook remains unchanged. For the full year, we continue to expect
significant growth in sales for the Group, and adjusted operating profit and
adjusted earnings per share to be lower than the financial year just closed.
References to growth in the following commentary are based on constant
currency unless stated otherwise.
Operating review
Grocery
2022 2021 Actual Constant currency
currency
Revenue £m 3,735 3,593 +4% +3%
Adjusted operating profit £m 399 413 -3% -5%
Adjusted operating profit margin 10.7% 11.5%
Return on average capital employed 29.3% 31.4%
Grocery revenues were 3% ahead of last year benefitting from the build of
price increases taken during the year with the year-on-year increase
particularly evident in the last quarter. Further pricing is underway. As
expected, adjusted operating profit was below last financial year driven
mostly by the lag between input cost inflation and revenues resulting from
subsequent price actions.
Ovaltine sales were ahead with continued strong performances in Switzerland,
Thailand, Brazil and Nigeria and a return to stronger out-of-home consumption
and foodservice sales. Twinings sales reflected a return to more normal levels
of demand after the COVID lockdowns of last year and were supported by further
new product launches in the wellness category. Twinings Ovaltine profit
included some £4m of ERP development costs in line with the application of
the IFRIC clarification on configuration or customisation costs in a cloud
computing arrangement.
Within our UK Grocery business, Allied Bakeries sales were ahead of last year
due to significant price increases but losses increased with significantly
higher costs for wheat, energy and distribution. Although pricing action at AB
World Foods and Jordans Dorset Ryvita led sales to be ahead, margins declined
as cost inflation outpaced pricing. Westmill benefited from the continued
improvement in restaurant and take-away trade sales. In Acetum, the Mazzetti
brand was developed further with continued advertising support in its major
markets, and investment in capacity was focused on aged and organic vinegars.
Revenue growth at ACH was stronger with the benefit of price actions taken
over the last year which more than offset a decline in the US retail yeast
volumes from COVID-elevated levels. Baking volumes have remained higher than
pre-COVID levels. Profit at Stratas, our joint venture in the US, was strongly
ahead driven by strong procurement and effective price negotiations.
George Weston Foods in Australia delivered good sales growth and an increase
in adjusted operating profit compared to last year despite COVID-related
labour shortages in our Tip Top bread and Don KRC meat businesses. Volumes to
Quick Service Restaurants were strongly ahead, particularly for Tip Top, and
margins were supported by better buying in the Don KRC meat business.
Sugar
2022 2021 Actual Constant currency
currency
Revenue £m 2,016 1,650 +22% +18%
Adjusted operating profit £m 162 152 +7% -5%
Adjusted operating profit margin 8.0% 9.2%
Return on average capital employed 10.3% 10.2%
AB Sugar revenues were 18% ahead of last year driven by higher sugar and
co-product prices, especially for bioethanol. Sales volumes for AB Sugar
declined, driven by lower volumes in Illovo and China partially offset by an
increase in Azucarera. Illovo was impacted by the disruption caused by
unseasonal heavy rains in southern Africa at the start of the sugar processing
season which in turn limited the availability of sugar to supply local
markets. Adjusted operating profit increased to £162m this year, but this
increase was held back by the inclusion of recommissioning and start-up costs
of £33m for Vivergo, our bioethanol plant in Hull. More than ever all
businesses focused on cost reduction programmes, with a particular emphasis on
reducing energy usage given the significant inflation in energy costs. Return
on average capital employed increased to 10.3%.
European sugar production in 2021/22 was marginally higher than the previous
year with a recovery in sugar yields to more normal levels marginally
offsetting a reduction in crop area. European sugar prices were much higher
this year with demand again exceeding supply with low stock levels and support
from higher world sugar prices. This benefitted our UK and Spanish businesses.
Looking ahead to the coming year, European sugar demand is expected to exceed
production again and sugar beet costs will increase significantly with growers
facing higher input costs.
UK sugar production was 1.03 million tonnes in the year 2021/22, up on the 0.9
million tonnes produced in the last campaign with good growing conditions
supporting higher yields which more than offset a reduced growing area. The
factories performed well despite a delay at the start of the campaign which
affected throughput. Energy costs were at high levels although forward cover
of gas mitigated much of the impact this financial year. We benefitted from
strong pricing for both the electricity we produce and export to the grid and
from the bioethanol produced from sugar. The Vivergo bioethanol plant
re-started during the year with a steady increase in production rates.
Trading in Spain was much improved, with higher sugar production leading to a
strong increase in sales volumes. Higher production volumes were achieved from
an increase in refined raw sugar volumes. However, beet sugar production from
the southern region was significantly lower, impacted by drought and very high
temperatures which reduced crop yields. The significant improvement in sales
volumes reflected both higher demand in Iberia and reduced imports from other
EU countries.
Illovo's sugar production for the full year is now expected to be 1.45 million
tonnes compared to 1.58 million tonnes last year. The end of the 2021/22
season saw disruption to production in Malawi, Eswatini and Mozambique due to
cyclones and production at the beginning of the 2022/23 season was further
constrained in South Africa, Eswatini and Malawi as a result of heavy rains,
limiting the amount of sugar available for local markets. Illovo sales were
broadly in line with last year, with higher regional prices, along with a
strong co-product contribution in South Africa, more than offsetting the
volume decline as a consequence of the production difficulties. Margin and
adjusted operating profit were in line with last year.
Production volumes at AB Sugar China were much lower this year as a result of
a reduction in the crop area and the operating result was lower as a
consequence. The crop area has increased for the coming campaign.
Agriculture
2022 2021 Actual Constant currency
currency
Revenue £m 1,722 1,537 +12% +11%
Adjusted operating profit £m 47 44 +7% +7%
Adjusted operating profit margin 2.7% 2.9%
Return on average capital employed 10.3% 10.6%
AB Agri delivered a strong trading performance with revenue and adjusted
operating profit ahead by 11% and 7% respectively. The growth in revenue was
mainly driven by higher feed prices which were a consequence of much higher
commodity prices.
Higher adjusted operating profit was delivered by our UK feed business and our
specialist premix business, Premier Nutrition, with the benefit of good raw
material procurement. However, reduced demand for piglet starter feeds in the
UK and Europe, due to a combination of low pig pricing within the European
market and elevated rearing costs, contributed to a lower operating profit at
our specialist starter feed business, AB Neo.
Margin pressure driven by much higher supply chain costs and adverse product
and region mix contributed to a reduction in adjusted operating profit this
year at AB Vista, our international feed additives business, when compared to
the prior year.
Frontier delivered a record operating profit with a strong result from grain
trading against a background of high commodity price volatility and a
tightening of global supply. Its UK crop protection business also had a much
improved season as farmers sought to maximise crop yields. Our China business
delivered an improved trading performance, despite the disruption of regional
lockdowns due to COVID-19, with growth of our premix business and favourable
raw material purchasing contributing to this performance.
Expansion in animal supplements globally remains core to our growth strategy.
In July we acquired Greencoat Limited, an equine and companion pet animal
supplement business, which is particularly recognised for its NAF Five Star
brand across the UK and EU equine markets.
Ingredients
2022 2021 Actual Constant currency
currency
Revenue £m 1,827 1,508 +21% +19%
Adjusted operating profit £m 159 151 +5% +3%
Adjusted operating profit margin 8.7% 10.0%
Return on average capital employed 14.8% 16.9%
Revenues were significantly ahead of last year with growth of 19%, driven by
both AB Mauri and ABF Ingredients. Adjusted operating profit was 3% ahead of
last year with a strong increase in ABF Ingredients which more than offset a
decline in AB Mauri.
The sales growth in AB Mauri was mainly driven by strong trading performances
in the Americas and Europe. Significant price increases were implemented
during the year to recover input cost inflation but pricing lagged inflation
and so margin and adjusted operating profit for AB Mauri declined as a result.
The trading in the Americas and Europe benefited from an increase in bakery
ingredients volumes driven by growth in demand from industrial and foodservice
channels as our markets emerged from the pandemic. This more than offset a
volume decline for retail yeast and bakery ingredients where demand reduced
from the elevated levels experienced during the COVID lockdowns but demand
still remains above pre-COVID levels. Initial work has now commenced on
building a fresh yeast facility in Uttar Pradesh, India, which will expand our
capacity to meet increasing domestic demand. The results in Argentina, Turkey
and Venezuela are reported under IAS 29, Financial Reporting in
Hyperinflationary Economies, with Turkey being designated as hyperinflationary
during the year.
ABF Ingredients delivered a record performance with revenues and profit well
ahead of last year. Revenues were driven by volume growth, from both winning
new business and post pandemic customer volume recoveries, and strong price
execution to offset input cost inflation. Both AB Enzymes and Ohly delivered
record performances. In AB Enzymes production yields benefited from process
optimisation developed at the pilot plant opened last year in Rajamaki,
Finland, and its wider global capability was further developed this year with
the opening of regional baking laboratories in the US and Asia. The success of
Ohly in recent years has taken the utilisation of the Hamburg site to close to
capacity. The first step in a major expansion of the site is the construction,
which started this year, of a new spray drying facility which will bring this
important capability in-house and provide further capacity. ABITEC delivered a
significant increase in revenues driven by increased volumes, improved sales
mix and price increases driven by its specialty ingredient input cost
inflation. Trading at PGPI strengthened significantly this year with the
strong recovery in US demand for extruded protein crisps, and operating
margins improved markedly. The acquisition in the year of Fytexia Group, a
life science company, has broadened our product portfolio into scientifically
supported active nutrients for human health. The integration of this business
is progressing well.
Retail
2022 2021 Actual Constant currency
currency
Revenue £m 7,697 5,593 +38% +40%
Adjusted operating profit £m 756 321 +136% +135%
Adjusted operating profit (before repayment of job retention scheme monies in 756 415 ( ) +82% +81%
2021) £m
Adjusted operating profit margin 9.8% 7.4% ((1))
Return on average capital employed 12.9% 6.6% ((1))
1. Stated before repayment of job retention scheme monies in 2021
Revenues, adjusted operating profit margin, and return on average capital
employed all recovered strongly this year as our markets emerged from the
pandemic. Trading this financial year reflected an increase in customer
footfall, following the end of COVID-related restrictions and a return of many
customer behaviours to a level broadly experienced pre-pandemic. This compared
to our 2020/21 financial year, which was characterised by periods of store
closures and public health restrictions which affected trading for most of
that year. Revenues for the financial year were 40% ahead of the sales
reported last year at constant currency, and 43% ahead of last year adjusted
to a comparable 52-week basis. As a result of our stores trading for the full
year and the improvement in store sales densities as footfall increased, the
adjusted operating profit margin improved sharply from 7.4% last year to 9.8%
this year. Adjusted operating profit increased 81% at constant currency to
£756m compared to prior year before repayment of job retention scheme monies.
Return on average capital employed recovered strongly to 12.9%.
This financial year, as we came out of the pandemic, our stores in retail
parks continued to perform strongly and, as the year progressed, we saw more
customers return to major high streets and sales densities in our stores in
destination cities were much improved with the return of commuter traffic and
the growth of tourism into the summer season. Throughout the year, nightwear
and loungewear sold well as customers bought the core essentials they need.
This trend has continued into our autumn/winter season. There has been
particularly strong demand for novelty prints and cosy textures including
fluffy pyjamas and thermals with both velvet plush leggings and the 'Snuddie',
which has built on the strong sales of last year, being stand-out best
sellers. Demand has also been strong for our exclusive collaborations. The
fourth collection from our partnership with Kem Cetinay has had broad appeal
across our European markets and of course is very strong in the UK, reflecting
a return to a smart casual menswear look. In the UK and Republic of Ireland
the latest kids' collection from Stacey Solomon has started well. In our
important Iberian market we have seen very strong customer demand for our
first collaboration with the high profile Spanish model and actress Paula
Echevarria. Our collaboration with Greggs has created real excitement around
the Primark brand this year and we are launching a third range of clothing and
gifting to coincide with the Christmas season.
Trading in the UK was strong and improved as the year progressed with total
sales ahead of the prior year by 48% adjusted for a 52-week comparable basis.
Like-for-like sales were 13% ahead of last year for the last quarter of the
financial year on a one-year basis. For the full year like-for-like sales were
broadly in line with last year, and, compared to pre-COVID levels,
like-for-like sales improved from a decline of 10% in the first quarter to a
decline of 2% in the last quarter. Primark's share of the total UK clothing,
footwear and accessories market by value, which includes online sales, for the
12 weeks ending 18 September increased on last year and importantly was
broadly in line with pre-COVID levels three years ago. That positive trading
performance has continued into the new financial year.
Total sales in the Republic of Ireland were 48% ahead of the prior year,
adjusted for a 52-week comparable basis. On a three year like-for-like basis,
we traded strongly and consistently throughout the year.
In Continental Europe, total sales for the year were 42% ahead of the prior
year, adjusted for a 52-week comparable basis. Footfall in these markets
improved and like-for-like sales were 5% ahead on a one-year basis. Driven by
different factors in each market, consumer confidence was generally weaker and
contributed to a like-for-like decline on a three-year pre-COVID basis of 16%.
In Iberia, sales densities were much improved on last year when COVID
restrictions constrained domestic demand and resulted in low levels of
tourism. The improvement this year was held back by extreme temperatures
during the summer months which kept many customers at home. Market data
earlier this year indicated that the total market for apparel was still well
below pre-COVID levels. In France, the total retail clothing sector has
continued to trade behind pre-COVID levels without the expected step-up in
customer footfall, particularly in the Paris outskirts where we have a
concentration of stores and where we believe sales have lagged the rest of the
country. In Italy, total sales in the quarter increased 20% year-on-year on a
52-week comparable basis, with enthusiastic customer reaction to the four new
stores opened during the year. We have seen some improvement in trading in
these markets from the beginning of this financial year.
We first entered the German market in 2009 and achieved very high sales
densities in our early stores. We then opened stores in many city centres with
a retail selling space much larger than the average for the rest of the
Primark estate. As a result, the average size of our German stores is
significantly higher than the Primark average. However, sales densities
declined in the latter years up to the 2019 financial year and, as Germany
recovered from the pandemic, they have not returned to pre-Covid levels. As a
consequence, and combined with the high cost to serve in this market, store
profitability has fallen to an unacceptable level and these accounts include
an exceptional, one-off non-cash impairment of £206m in the value of our
German property, plant and equipment and right-of-use assets. We remain
committed to our loyal customers in this important market for Primark and we
are now reviewing options to return our business in Germany to long-term
profitability. These options include the potential to optimise the retail
selling space by store as well as reviewing the footprint of the overall store
portfolio.
Our US business performed well with total sales 11% ahead of the prior year on
a 52-week comparable basis. Our new store openings in the prior year -
Sawgrass Mills Florida, American Dream New Jersey, State Street Chicago, and
Fashion District Philadelphia - all performed well and like-for-like sales
were 3% up on pre-COVID levels three years ago. We look forward to nearly
doubling the retail selling space in this important growth market in the
coming year.
Full year like-for-like sales for Primark were 10% lower than pre-COVID levels
three years ago and 1% ahead of last year.
Operating profit margin improved strongly this year to 9.8%, reflecting our
stores trading for the whole of the period and a sharp increase in sales
densities as COVID-related restrictions lifted and more normal customer
behaviour resumed. The benefit of this normalisation of trading on the
operating profit margin was partially offset by high inflation of input costs,
such as energy and labour costs, and higher purchasing costs due to the
significant strengthening of the US dollar against sterling and the euro.
Looking ahead to the next financial year, we expect sales growth to be driven
by like-for-like growth, resulting from the price increases implemented for
autumn/winter and those planned for spring/summer, and the increase in retail
selling space. Primark has already been managing the challenges of supply
chain disruption, inflation in raw material and energy costs and in labour
rates, alongside the higher purchasing costs. In addition to price increases
there are plans to improve store labour efficiencies and these will partially
offset these inflationary pressures. In recent months the US dollar has
strengthened significantly against sterling and the euro, and energy costs
remain volatile and higher. Against this current volatile backdrop and a
context of likely much reduced disposable consumer income, we have decided not
to implement further price increases on this year's autumn/winter and
spring/summer ranges beyond those already actioned and planned. We believe
this decision is in the best interests of Primark and supports our core
proposition of everyday affordability and price leadership.
We continue to expect Primark's adjusted operating profit margin for next year
to be lower than the margin of 8.0% for the second half of this financial
year. Looking further ahead, we remain focused on returning the business to an
operating profit margin of some 10% as commodity prices moderate and consumer
confidence improves.
In September last year, Primark unveiled a wide-ranging sustainability
strategy pledging to make more sustainable clothing choices affordable for
all. This foundational year has focused on developing the internal processes
and programmes that will underpin the significant changes required, both
within Primark and across its value chain, to deliver on its commitments. This
has included putting in place robust metrics and gathering the data
necessary to set baselines against which we can measure and report our
progress. This will not be linear: the Primark Cares strategy encompasses nine
ambitious commitments across three pillars of Product, Planet and People
through to 2030. But as we operationalise our plans, we remain confident we
will deliver on these. We will report our progress on all nine commitments in
our first annual Primark Sustainability and Ethics progress report which will
be published for the first time later this month. In summary:
- In our Product pillar, some 45% of all the clothing units we sold in the
financial year contained recycled or more sustainably sourced materials, up
from 25% at launch. This is a significant step forward to meet our commitment
that all our clothes will be made from recycled or sustainably sourced
materials by 2030. Within this, 40% of our cotton clothing now contains cotton
that is organic, recycled or sourced from our Primark Sustainable Cotton
Programme.
- In our Planet pillar, we have committed to reduce our carbon emissions across
our value chain by 50% by 2030, compared to our baseline financial year
2018/19. This year, our carbon emissions increased by 2.6% compared to the
baseline. This is largely the result of the increased volume of material used
to produce the products sold over that period. We expect this trend to
continue in the short term, but then decline as the savings from the energy
efficiency programmes that are being rolled out across our supply chain begin
to deliver at scale.
- In our People pillar, as part of our commitment to pursuing the living wage
for workers in our supply chain by 2030, we have commissioned the Global
Living Wage Coalition to generate new or updated living wage benchmarks for
our four key sourcing markets of China, Bangladesh, India and Pakistan. This
information, which we will make publicly available, will be critical in
establishing the current wage gaps in these markets to enable us to pilot
initiatives which address them. More broadly, we continue to work within ACT,
training our buying teams on its responsible purchasing practices.
This financial year we have made good progress in building our digital
capability. The new UK website launched in April on our new digital platform
showcasing many more products and offering enhanced functionality and a
much-improved customer experience. Customer reaction has been very positive
with early indications that the new site is helping to drive additional sales
to our UK stores. Traffic to the new site is up 83% compared to last year and
customers are viewing on average nearly twice as many pages per session.
Around 15% of visitors are using the new store stock checker functionality, a
key driver of footfall into stores. We are continuing to roll out this
enhanced website across the rest of our markets, with all remaining markets
due to transition to the new site by the end of the first half of 2023.
We are on track to launch the UK trial of a Click and Collect service in 25
stores in the north of England and Wales before Christmas. Customers of these
stores will be able to shop a far wider range of nursery, baby and children's
products, many of which will be exclusively available online. We believe this
has the potential to satisfy unfulfilled demand from both existing and new
customers, driving footfall into stores and delivering incremental sales.
At the year end, we were trading from 408 stores and 17.3 million sq ft of
retail selling space after opening three new stores in the last week of the
financial year: Brno in Czechia, Tallaght in the Republic of Ireland and San
Sebastián in Spain. Retail selling space increased over the financial year by
a net 0.5 million sq ft. Ten new stores were opened: four each in our growth
markets of Spain and Italy, one in the Republic of Ireland and one in Czechia.
In addition, we relocated to larger premises in Gloucester UK and in Carlow
Republic of Ireland, and our store in Luton UK was extended.
We have developed a strong pipeline of new stores, in line with our ambition
to grow to some 530 stores by the end of our 2026 financial year. We plan to
open 27 new stores in the 2022/23 financial year with ten of these stores
opening in the run-up to Christmas 2022. We plan to open in the full financial
year ten stores in the US, with Roosevelt Field Long Island, Jamaica Avenue
Queens, and City Point Brooklyn, all due to open in this first quarter. In
Continental Europe, we will open four new stores in France, four in Italy and
three in Spain. In central Europe, we plan to enter two new markets next year,
with two stores in Bucharest, Romania, and a store in Bratislava, Slovakia, as
well as two further stores in Poland. After four years of restoration
following the devastating fire in 2018, we were delighted to reopen Bank
Buildings in the centre of Belfast last week. The temporary store in Donegal
Place, Belfast, was closed. A further new store will be opened in Northern
Ireland. A number of store extensions are also planned for the year which
notably includes extending our recently-opened store in Sawgrass Mills,
Florida US. Building on the success of this store, we have additionally signed
a lease for a second store in Florida at The Florida Mall in Orlando. We are
closing two stores in Germany this financial year, Weiterstadt which closed
last month and Berlin SSC which will close in the second quarter. As a result,
we expect to add a net one million sq ft of retail selling space in the
financial year.
New store openings in the year ended 17 September 2022:
Czechia Italy Republic of Ireland Spain
Olympia - Brno Bologna Gran Reno Tallaght Girona Espai Girones
Catania Centro Sicilia San Fernando Bahia Sur
Chieti Megaló SC San Sebastián Garbera
Milan Via Torino Vigo Vialia
Year ended Year ended
17 September 2022
18 September 2021
# of stores sq ft 000 # of stores sq ft 000
UK 191 7,620 191 7,597
Spain 56 2,305 52 2,143
Germany 32 1,841 32 1,841
Republic of Ireland 37 1,121 36 1,076
France 20 1,044 20 1,044
Netherlands 20 1,016 20 1,016
US 13 563 13 563
Italy 11 552 7 361
Belgium 8 403 8 403
Portugal 10 383 10 383
Austria 5 242 5 242
Czechia 2 89 1 50
Poland 2 77 2 77
Slovenia 1 46 1 46
Total 408 17,302 398 16,842
Financial review
Group performance
Group revenue was well ahead of last year on a reported basis at £17bn. In
our Food businesses, higher revenues reflected price actions and, in some
businesses, volume increases, in particular ABF Ingredients. In Primark,
revenues were significantly higher and reflected the emergence from the
pandemic during this last financial year in our markets. Adjusted operating
profit for the Group of £1,435m was 42% ahead of last financial year on a
reported basis. The adjusted operating profit is derived by adjusting the
following items to the statutory operating profit: the amortisation charge on
non-operating intangibles, profits less losses on disposal of non-current
assets, transaction costs, amortisation of acquired inventory fair value
adjustments and exceptional items.
The income statement this year included an exceptional charge of £206m
comprising non-cash writedowns of assets in Primark Germany, £72m against
property plant and equipment and £134m against right-of-use assets. We first
entered the German market in 2009 and achieved very high sales densities in
our early stores. We then opened stores in many city centres with retail
selling spaces much larger than the average for the rest of the Primark
estate. However, sales densities declined in the later years up to the 2019
financial year. After weaker than expected trading in the second half of this
financial year we consider that a strong recovery from these sales densities
is unlikely. Germany is a high cost-to-serve market for retailers. As a
consequence, the discounted cashflow of our revised forecast for our German
stores requires the recognition of an impairment which has been charged in
these financial statements. We remain committed to our loyal customers in this
important European market and we are now reviewing options to return our
business in Germany to long-term profitability. These options include the
potential to optimise the retail selling space by store as well as reviewing
the footprint of the overall store portfolio. The Group's total tax charge
includes a £63m exceptional charge of which £50m relates to the
de-recognition of the deferred tax assets relating to the impaired German
assets.
The prior year exceptional charge of £151m mainly comprised £141m of
non-cash writedowns of property, plant and equipment at Azucarera and other
sugar businesses.
On an unadjusted basis, statutory operating profit was ahead 46% at £1,178m.
The strengthening of the US dollar, particularly in the latter half of this
financial year, and the weakness of sterling against some of our trading
currencies resulted in a gain on translation of £15m.
Finance income increased as a result of higher interest rates earned on our
cash deposits. Other financial income increased this year as a consequence of
the higher surplus in the Group's UK defined benefit pension scheme at the
beginning of the financial year. Losses on the sale and closure of businesses
amounted to £23m and profits less losses on sale of non-current assets were
£7m.
Adjusted profit before tax of £1,356m was 49% up on last year on a reported
basis. Statutory profit before tax of £1,076m was 48% up on last year on a
reported basis.
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 tax strategy, approved by the Board, is based on
seven tax principles that are embedded in the financial and non-financial
processes and controls of the Group. This tax strategy is available on the
Group's website at: www.abf.co.uk/documents/pdfs/policies/abf_tax_strategy.pdf
(http://www.abf.co.uk/documents/pdfs/policies/abf_tax_strategy.pdf) .
This year's tax charge on the adjusted profit before tax was £301m, an
effective rate of 22.2% (2021 - 28.1%). This effective tax rate was a
significant reduction from the higher tax rates in both of the COVID-affected
financial years when profits at Primark were much reduced. Primark has a lower
tax rate because of the lower tax rates in some of its jurisdictions.
The total tax charge for the year was £356m. This included an exceptional
charge of £63m relating to the impairment of German assets in these accounts
mainly driven by the partial de-recognition of the German deferred tax assets.
There was a £55m tax charge on adjusting items (2021 - £27m credit).
The Group is exposed to a range of uncertain tax positions. It provides for
open tax matters where it believes it is probable that payments will be
required. These include routine tax audits, which are by nature complex and
may take a number of years to resolve. Uncertainty is driven by the resolution
of the issue and estimation process in arriving at the amount. The Group has
recognised potential current corporate tax liabilities for a number of
uncertain tax positions, none of which are individually material. The
provision at the financial year end for these uncertain tax positions was
£102m (2021 - £100m). The majority of these provisions relate to transfer
pricing risks across a number of jurisdictions in which the Group has
operations. Transfer pricing is a complex area with resolution of matters
taking many years. Given the underlying nature of these risks, the timing of
when they will resolve is uncertain. The Group has applied IFRIC 23
Uncertainty over Income Tax Treatments to measure uncertain tax positions. The
Group calculates each provision using management's best estimate of the
liability based on interpretation of tax law in each jurisdiction and ongoing
monitoring of tax cases and rulings. The Group believes it has adequate
provision for these matters. Final conclusion of each matter may result in an
outcome different to any amounts provided but the Group has concluded that
this is unlikely to have a material impact.
We expect there to be an upward pressure on the Group's effective tax rate in
the new financial year, to some 25%, and this includes the increase in UK
corporation tax rate to 25% in April 2023, as well as a change in the mix of
profits by tax jurisdiction. Our analysis of the consequences of the OECD's
BEPS 2.0 proposals is that the most significant change would be the likely
increase in the corporation tax rate for the Republic of Ireland. The Irish
tax authorities have proposed an increase in the corporation tax rate from
12.5% to 15% in the future. Based on current proposals we therefore do not
anticipate a material impact on the Group's effective tax rate.
Earnings and shareholder returns
On an adjusted basis profit before tax was up 49% to £1,356m. Following the
reduction in the effective tax rate, adjusted earnings attributable to equity
shareholders of £1,034m were 63% up on prior year. The weighted average
number of shares in issue during the year was 789 million (2021 - 790
million). As a result, adjusted earnings per share increased by 64% from 80.1p
to 131.1p. Earnings attributable to equity shareholders were £700m this
financial year and earnings per share were 88.6p, 46% ahead of last year.
This year the Board declared an interim dividend of 13.8p per share (2021 -
6.2p per share) and the Board has proposed a final dividend of 29.9p per
share, giving a total dividend of 43.7p per share for the 2022 financial year.
Dividends this financial year are 64% ahead of last year's ordinary dividends.
It is a reflection of the strength of this year's financial performance that
the total dividends for this financial year were 8% ahead of all the dividends
for last financial year, which included a special dividend.
We announced a capital allocation policy for the Group last year, to invest in
our businesses at an appropriate pace and wherever attractive returns on
capital can be generated. The Board may from time to time conclude that it has
surplus cash and in making this assessment, that financial leverage will be
consistently below 1.0 times with substantial net cash balances at both half
and full year ends. The Board received authority from shareholders at the last
Annual General Meeting to purchase its own shares up to a maximum of 10% of
the Company's issued ordinary share capital.
This year we are announcing a share buyback programme of £500m. Taking this
programme into account we have sufficient liquidity not only to support our
existing capital investment plans but also to pursue acquisition
opportunities.
Cash flow
Very unusually this financial year there was a small cash outflow before the
payment of dividends. Furthermore, the cash outflow for dividends was
substantially ahead of the prior year as a result of the resumption of the
payment of ordinary dividends and a special dividend last year.
Although operating profit increased this financial year, the net cash inflow
from operating activities actually decreased by £260m to £1,153m this year.
The biggest contributor to this reduction was the £770m increase in working
capital. An increase in working capital should be expected in an inflationary
economy but the scale of the increase this year was unusual. £440m of this
increase related to the timing of receipt of Primark autumn/winter inventory
at both financial year ends. £200m of inventory arrived later than the end of
last financial year as a result of supply chain disruptions and £240m related
to the planned earlier receipt this year end to avoid higher freight costs.
Capital expenditure increased by £142m compared to the prior year was mainly
driven by our Food businesses where there are a number of capital projects
which are underway. The Primark capital expenditure reflected an increase in
expenditure in technology and the automation of warehouses. This financial
year Primark has focused on building its pipeline of new stores and so an
increase in new store capital expenditure will be evident in the new financial
year. Cash spent on acquisitions increased by £97m in this financial year as
acquisition opportunities returned with the lifting of COVID-related
restrictions.
Acquisitions and disposals
The spend on acquisitions this financial year was £160m.
The most significant of these was the ABF Ingredients' acquisition of Fytexia
Group, a B2B specialty ingredients business in France and Italy producing and
formulating polyphenols-based active ingredients for the dietary supplements
industry. Fytexia broadens the product portfolio and capabilities of ABF
Ingredients to serve the pharmaceutical, nutritional and food market sectors.
In July, AB Agri acquired Greencoat, a UK-based animal supplement and care
business which included the widely recognised equine supplement brand, NAF, to
support its expansion in international animal nutrition and technology.
During the year, the Group also acquired three small businesses: Dad's Pies in
New Zealand, a business in Finland specialising in gut health diagnostics, and
a speciality distributor of animal feeds in Australia.
The Group's investment in North China Sugar was classified as held-for-sale at
the financial year end and an associated £19m non-cash writedown of its
carrying value has been charged to loss on sale and closure of businesses.
Following our decision to recommission Vivergo, the remaining £3m closure
provision was released and a £4m provision for potential warranties on a
historic sale of business is no longer required.
Balance sheet
Non-current assets of £11.9bn were £1.2bn higher than last year. This was
driven by a £0.8bn increase in the surplus of the Group's defined benefit
pension schemes, a translation benefit arising from the weakening of sterling
against the US dollar and euro, and the increase in goodwill and intangibles
which relate to acquisitions made during the year.
Working capital increased by some £770m. £440m of this was the result of the
timing of receipt of Primark autumn/winter inventory around both year end
dates. This was also impacted by the effect of inflation across our businesses
and, where necessary, some higher levels of inventory to mitigate potential
supply chain disruption.
Net cash excluding lease liabilities at the financial year end was £1.5bn
compared to net cash at the end of last financial year of £1.9bn as a result
of the cash outflow this financial year. Net debt, including lease liabilities
of £3.3bn, was £1.8bn and compared to £1.4bn last year and financial
leverage was 0.8 times at year end. We measure financial leverage at both the
half year and year end balance sheet dates. Given the normal seasonality of
the Group's cash-flows, net cash reduces in the first half of our financial
year, mainly driven by the inventory build in our Sugar business and payment
of the final dividend. As a result, financial leverage at the half year would
typically be higher than that at the year end.
The Group's net assets of £11.6bn were £1.6bn higher than last year, driven
by the increase in non-current assets and working capital, partially offset by
the decrease in net cash. Return on average capital employed for the Group
recovered strongly this year to 14.0% compared with 9.8% last year and was
mainly driven by the improvement at Primark.
Financing and liquidity
The Group's treasury policies are in place to maintain a strong capital base
and manage the balance sheet to ensure long-term financial stability. They are
the basis for investor, creditor and market confidence and enable the
successful future development of the business. Financing of the Group is
managed by a central treasury department.
Financing of the Group has been strengthened over the last financial year.
This builds on the announcement of our treasury policies relating to financial
leverage and liquidity, the codification of the Group's capital allocation
policy and securing an 'A' issuer rating by S&P Global. Our financing is
now more diversified, tenor has been significantly extended and, most
importantly, the Group is free of financial performance covenants. The
majority of our private placement notes have now been repaid, and the
inaugural fixed 2.5 per cent public bond and renegotiated Revolving Credit
Facility were secured at significantly lower cost. The Group now has
significant additional financial strength and flexibility.
In the ordinary course, the Board prefers to see the Group's ratio of net
debt, including lease liabilities, to adjusted EBITDA to be well under 1.5
times at each half year and year end reporting date. In exceptional
circumstances, the Board will be prepared to see leverage above that level for
a short period of time. The Group holds significant liquidity to ensure that
it can meet unforeseen circumstances which includes substantial net cash
balances and access to undrawn committed credit facilities.
The Group's committed Revolving Credit Facility, due to expire in 2023, was
renewed in June. The new Facility is for £1.5bn, up from £1.1bn previously,
is now free of performance covenants and runs for five years with two 1-year
extension options. Our inaugural public bond of £400m, 2.5 per cent due 2034
was launched in February. During the year £221m of private placement notes
were repaid with the remaining £87m due March 2024.
At the year end, the Group had total committed borrowing facilities of
£1.7bn, comprising £1.5bn provided under the RCF, £0.1bn of US private
placement notes and £0.1bn of local committed facilities in Africa.
Cash and cash equivalents totalled £2.1bn at the year end. Total liquidity
increased during the year and is now £3.4bn.
Pensions
The surplus of the Group's defined benefit pension schemes increased
materially at the financial year end to £1,314m compared to last year's
£493m. The UK scheme, which accounts for 90% of the Group's gross pension
assets, was in surplus by £1,366m (2021 - £633m). The increase in the UK
pension surplus was driven by a significant increase in bond yields, placing a
lower value on the defined benefit obligations, marginally offset by higher
inflation expectations. The pension surplus for the Group at the end of the
previous financial year resulted in an increase in other financial income this
financial year and the increase in this financial year end will result in a
further increase in the next financial year.
The last triennial valuation of the UK scheme was undertaken at 5 April 2020
and determined a deficit of £302m. The date of this valuation was just after
the introduction of the first COVID-19 restrictions and the adverse reaction
of the financial markets. We agreed a recovery plan with the trustees, but no
deficit recovery payments were made given the recovery in the financial
markets over the next year. The next triennial valuation is due at 5 April
2023 and is currently expected to reveal a surplus. The Company is consulting
with the trustees on both new investment and funding strategies and will also
agree the Company contribution as part of this valuation process. It is
currently envisaged the Company will be able to reduce a very significant
proportion of the employer contributions required for both the defined benefit
and defined contribution sections of the scheme.
The charge for the year for the Group's defined contribution schemes, which
was equal to the contributions made, amounted to £87m (2021 - £81m). This
compared with the cash contribution to the defined benefit schemes of £38m
(2021 - £42m).
Non-financial metrics and TCFD
We have now carried out a comprehensive review of the climate risks and
opportunities most material to the Group and this led to a focus on Primark,
AB Sugar and Twinings. Key risks were assessed using scenario analyses. In
our Annual Report we have set out our progress in accordance with the
requirements of TCFD. We do not see TCFD as simply a disclosure exercise and
our businesses have been actively engaged in the analysis which has helped
them confirm the actions they need to take to either adapt to or mitigate the
impacts of climate change, and consider opportunities where value can be
created.
We also recognise the importance of accurate non-financial metrics to enable
stakeholders to understand our ESG performance. We continue to evolve the
role of Finance in non-financial data bringing skills historically applied to
ensure the accuracy of financial data to non-financial data. This year we also
increased the number of metrics subject to external limited assurance.
BEIS
In relation to the Government's response to the BEIS White Paper: Restoring
Trust in Audit and Corporate Governance, which was published in May 2022, we
are nearing completion of a Group wide programme, supported by external
consultants, to formalise our approach and to provide a documented trail to
support our assessment of the effectiveness of key controls.
New accounting policies
The following accounting standards and amendments were adopted during the year
and had no significant impact on the Group:
- Amendments to IFRS 4 Insurance Contracts - Extension of the Temporary
Exemption from Applying IFRS 9
- Amendment to IFRS 16 Leases (COVID-19 Related Rent Concessions beyond 30 June
2021)
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate
Benchmark Reform - Phase 2. Financial authorities have announced the timing of
key interest rate benchmark replacements such as LIBOR in the UK, the US and
the EU and other territories, with remaining USD tenors expected to cease in
2023.
John Bason
Finance Director
The annual report and accounts is available at www.abf.co.uk
(file:///C%3A/Users/RJardim/Downloads/www.abf.co.uk) and will be despatched to
shareholders shortly. The annual general meeting will be held at 11am on
Friday, 9 December 2022. Further details are provided in the Notice of Annual
General Meeting, although please also monitor the AGM 2022 page of the
Company's website (www.abf.co.uk/agm
(file:///C%3A/Users/RJardim/Downloads/www.abf.co.uk/agm) ) for any updates.
Principal risks and uncertainties
Managing our risks
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. These disciplines
remain effective as we face increased economic volatility resulting from the
aftermath of COVID-19, which has been exacerbated by geopolitical uncertainty
triggered by the war in Ukraine.
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 sustainable growth and long-term shareholder value. However, as
with any business, risks and uncertainties are inherent in our business
activities. These risks may have a financial, operational or reputational
impact.
The Board is accountable for effective risk management, for agreeing the
principal, including emerging, risks facing the Group and ensuring they are
successfully managed. The Board undertakes a robust annual assessment of the
principal risks, including emerging risks, that would threaten the business
model, future performance, solvency or liquidity. The Board also monitors the
Group's exposure to risks as part of the business performance reviews
conducted at each Board meeting. Financial risks are specifically reviewed by
the Audit Committee.
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.
Our businesses perform risk assessments which consider materiality, risk
controls and specific local risks relevant to the markets in which they
operate. The collated risks from each business are shared with the respective
divisional chief executives who present their divisional risks to the Group
Executive.
Emerging risks are identified and considered at both a Group and individual
business level, with key management being close to their geographies. These
risks are identified, as part of the overall risk management process, through
a variety of horizon-scanning methods including: geopolitical insights;
ongoing assessment of competitor activity and market factors; workshops and
management meetings focused on risk identification; analysis of existing risks
using industry knowledge and experience to understand how these risks may
affect us in the future; and representation and participation in key industry
associations.
The Group's Director of Financial Control receives the risk assessments on an
annual basis and, with the Finance Director, reviews and challenges them with
the divisional chief executives, on an individual basis.
These discussions are wide-ranging and consider operational, environmental and
other external risks. 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,
Procurement 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 combination of these perspectives with
the business risk assessments creates a consolidated view of the Group's risk
profile. A summary of these risk assessments is then shared and discussed with
the 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, which include emerging risks, and mitigating
activities identified through the risk assessment exercise. 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 and the Board confirms the Group's principal risks.
These are the risks which could prevent Associated British Foods (ABF) from
delivering our strategic objectives. 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 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 Audit Committee on behalf of the Board
conducted reviews on the effectiveness of the Group's risk management
processes and internal controls in accordance with the 2018 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 Board is satisfied that internal controls were properly maintained and
that principal and emerging risks are being appropriately identified and
managed.
Geopolitical uncertainty and Russia's war in Ukraine
The global inflationary impacts of COVID-19 have been exacerbated by the
geopolitical uncertainty caused by Russia's war in Ukraine. This has resulted
in economic uncertainty in almost all of the markets in which we operate, and
has adversely impacted energy pricing, commodity costs and supply chains. Our
management teams are monitoring the situation closely and continue to
demonstrate agility and an ability to take appropriate mitigating actions to
secure raw materials, maintain production and provide a reliable supply to our
customers. This is an ongoing challenge and its impacts will depend on the
duration of the current crisis and the geopolitical repercussions.
Household budgets
Household budgets, in a number of markets in which we operate, are facing real
pressures as a result of high inflation, increased interest rates and general
economic uncertainty. This means that some consumers are having to make
challenging and difficult choices in respect of what they spend and where they
spend it. Whilst we continue to offer safe, nutritious and affordable food and
affordable, quality clothes to our customers, the full consequences of the
current cost of living crisis remains uncertain. The impact on our businesses
will depend on the extent of government intervention and the duration of any
economic downturns.
Recent global financial data suggests that there is an increasing risk of
recession across a number of the key economies in which we operate and the
possibility of a prolonged period of stagnation. All of our businesses have
developed strategies considering the potential changes in both end consumer
and our customer behaviours and demands, the implications for the business and
where investment or changes to business models may be appropriate.
Regulatory changes
Our businesses continue to face a large number of regulatory changes with new
requirements being developed in a number of areas including the Task Force on
Climate-related Financial Disclosures (TCFD), Environmental, Social and
Governance (ESG), and extended producer responsibility regarding packaging and
plastics. For each of these areas, groupwide initiatives are well advanced to
meet the specific requirements. The extent of change will have an impact on
the capacity of management at the time when they are dealing with the ongoing
challenges resulting from economic uncertainty, alongside the day-to-day
growth of our businesses.
In response to Task Force on Climate-related Financial Disclosures (TCFD)
requirements we have conducted a comprehensive risk assessment across the
whole supply chain, focused on climate related risks and opportunities at a
divisional level, aligned with the risk management processes at ABF and our
decentralised structure. Details of this are provided on pages 83 to 93 of the
Annual Report.
In anticipation of the government's response to the BEIS white paper:
Restoring trust in Audit and Corporate Governance published in 2021, we are
nearing the completion of a business wide programme, supported by external
consultants. The programme formalises our approach to internal control matters
and to provide a documented trail to support our assessment of the
effectiveness of key controls which minimise the risk of a material
misstatement in our financial statements.
Environment
ABF has a clear sense of social purpose: it exists to provide safe, nutritious
and affordable food, and clothing that is great value for money, to hundreds
of millions of customers worldwide. ABF is set on a mission: to continue to
make food and clothes available and affordable and also carbon neutral as
quickly as we can. The people in our businesses are motivated by the
excitement that comes from driving social and environmental improvement. ESG
isn't simply a matter of risk mitigation. ESG factors, including the potential
implications of climate change, are considered as part of our well-established
risk management framework and they also frame opportunities for our businesses
to become better. Our leaders are empowered to include the prioritisation of
mitigation of environmental impacts as a central aspect of their business
plans, sharing learnings from other ABF businesses and applying industry best
practice. The Board reviews each business segment in depth every year, and ESG
factors are central to the analysis and discussion.
Our culture and values, and particularly our devolved decision-making model,
empowers the people closest to risks to make the right judgements to mitigate
risks. In respect of ESG, each of our businesses has prioritised and is
devoting most resources to those ESG factors which are of greatest relevance
and will make the greatest long-term difference. They are also challenged by
the centre through detailed reviews of the Group's environmental performance,
health and safety performance, and its diversity, equity and inclusion and
workforce engagement programmes.
Our principal risks and uncertainties
The directors have carried out an assessment of the principal risks facing
ABF, including emerging risks, that would threaten our 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.
ABF is exposed to a variety of other risks related to a range of issues such
as human resources and the attraction, development and retention of people,
community relations, the regulatory environment and competition. These are
managed as part of the risk process and a number of these are referred to in
our 2022 Responsibility Report. Here, we report the principal risks which 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 2021' describe our experience and activity over the last
year.
External risks
Movement in exchange rates
Context and potential impact Board-approved policies require businesses to hedge all transactional currency Primark covers its currency exposure on purchases of merchandise denominated
Associated British Foods is a multinational Group with operations and exposures and committed long-term supply or purchase contracts which are in foreign currencies at the time of placing orders, with an average tenor of
transactions in many currencies. denominated in a foreign currency, using foreign exchange forward contracts. Primark's hedging activity of between three and four months. There was a
Cash balances and borrowings are largely maintained in the functional currency negative transactional effect from the appreciation of the US dollar exchange
Changes in exchange rates give rise to transactional exposures within the of the local operations. rate against both the sterling and euro on Primark's largely
businesses and to translation exposures when the assets, liabilities and
Cross-currency swaps have been used to align part of the Group's borrowings with the underlying currencies of the Group's net assets (refer to note 26 to the financial statements for more information). dollar-denominated purchases for the year.
results of overseas entities are translated into sterling upon consolidation. Changes since 2021
Mitigation
Sterling has weakened against most of our trading currencies this year, There has been a greater level of volatility in sterling exchange rates
Our businesses constantly review their currency exposures and their hedging resulting in an operating profit gain on translation of £15m. against our major trading currencies during the financial year, caused by
instruments and, where necessary, ensure appropriate actions are taken to
global inflationary and growth challenges.
manage the impact of currency movements.
Fluctuations in commodity and energy prices
Context and potential impact The commercial implications of commodity price movements are continuously Energy prices, particularly in the UK and Europe, have increased materially as
Changes in commodity and energy prices can have a material impact on the Group's operating results, asset values and cash flows. assessed and, where appropriate, are reflected in the pricing of our products. a result of significant market uncertainty and supply concerns since the
Mitigation
Changes since 2021 Russian invasion of Ukraine. The increase in energy prices has impacted all of
The Group purchases a wide range of commodities in the ordinary course of
Commodity price inflation has been a global factor throughout the year. A the Group's businesses. Businesses continue to manage commodity price risk
business. We constantly monitor the markets in which we operate and manage number of our food and agriculture businesses have experienced increased input under their existing risk management frameworks and, where appropriate,
certain of these exposures with exchange traded contracts and hedging costs driven by the appreciation of energy and agricultural commodity prices reflect this in pricing of products.
instruments. in the financial year.
Operating in global markets
Context and potential impact Provision is made for known issues based on management's interpretation of The increased geopolitical risks induced by the Russian invasion of Ukraine is
Associated British Foods operates in 53 countries with sales and supply chains in many more, so we are exposed to global market forces; fluctuations in national economies; societal unrest and geopolitical uncertainty; a range of consumer trends; evolving legislation; and changes made by our competitors. country-specific tax law, EU cases and investigations on tax rulings and their weighing adversely on global economic conditions throughout 2022; particularly
Failure to recognise and respond to any of these factors could directly impact the profitability of our operations. likely outcomes. impacted are energy pricing, commodity costs and supply chains. Recent global
Entering new markets is a risk to any business.
financial data suggests that there is an increasing risk of recession across a
Mitigation By their nature socio-political events are largely unpredictable. Nonetheless number of the key economies in which we operate and the possibility of a
Our approach to risk management incorporates potential short-term market our businesses have detailed contingency plans which include site-level prolonged period of stagnations.
volatility and evaluates longer-term socio-economic and political scenarios. emergency responses and improved security for employees.
The Group's financial control framework and Board-adopted tax and treasury
Supply chains risks are increasing and are vulnerable to energy and wage
policies require all businesses to comply fully with relevant local laws. We engage with governments, local regulators and community organisations to inflation, as well as a greater risk of a move towards protectionism and
contribute to, and anticipate, important changes in public policy. heightened disruption exacerbated by the war in Ukraine. Geopolitical tensions
continue to arise in a number of countries in which we operate and this is
We conduct rigorous due diligence when entering or commencing business having an impact on sourcing and supplier management. For example, the
activities in new markets. situation in Myanmar, a country that supplies Primark, remains extremely
Changes since 2021 concerning and very complex.
There is continued uncertainty as a result of the COVID-19 pandemic.
Authorities, particularly in China, continue to impose restrictions on both a High inflation continues to be a challenge for our yeast and bakery
regional and local basis. ingredients business based in Argentina.
Health and nutrition
Context and potential impact We actively consider consumer health in the context of brand development and Notable examples include AB World Foods, which has reformulated nine of its
Failure to adapt to changing consumer health choices or to address nutrition merger and acquisition activity; for example, the launch of the Twinings core UK Patak's sauce products to reduce fat, sugar and salt. The businesses
concerns in the formulation of our products, related to consumer preferences wellness range. Branded grocery acquisitions over the past decade include have also added colour coded traffic light labelling to the front of the
or government public health policies, could result in a loss of consumer base Acetum, producers of Balsamic Vinegar of Modena, that is typically consumed as packaging. Likewise, Jordans Dorset Ryvita has reformulated the Dorset cereals
and impact business performance. This year we have provided a more detailed an accompaniment to salads; and Dorset Cereals, producers of high-fibre granola range.
breakdown of our UK Grocery product portfolio in the context of nutrition breakfast cereals made from whole grains and dried fruits, nuts and seeds.
within the ABF Corporate Responsibility Report. Likewise, the HIGH5 and Reflex range of sports-nutrition products. Our In addition, our Sugar business's campaign 'Making Sense of Sugar' has
Mitigation specialist sports-nutrition brand HIGH5 typically supports over 500 events continued to develop into a global platform. The aim is to provide factual
All of our food businesses are individually responsible for managing their annually, which promote exercise across the UK. information based on robust science to help inform and educate people about
product portfolio. Consumer preferences, regulation and market trends are
sugar and their diet.
monitored continually. Recipes are regularly reviewed and, where technically We invest in research with experts to improve our understanding of the science
feasible, are considered for reformulation to improve their overall and societal trends. Both ABF UK Grocery and British Sugar support the Our businesses continue to assess the nutritional content of their products on
nutritional value. charitable work of the British Nutrition Foundation to promote understanding an ongoing basis; and engage with stakeholders, directly and through trade
of nutrition science in the context of healthy and sustainable diets. associations, in relation to nutrition science and changes to the regulatory
All of our grocery products are labelled with nutritional information,
Changes since 2021 and consumer operating environment.
including in many cases front of pack nutrition labelling on our branded
Our Sugar and Grocery businesses have continued to focus on nutrition and
grocery products. health during the year to help consumers improve their diet.
Operational risks
Workplace health and safety
Context and potential impact We have a continuous safety audit programme to verify implementation of safety We are deeply saddened to report that in the year there were four work-related
Many of our operations, by their nature, have the potential for loss of life management and support a culture of continuous improvement. fatalities: one to an employee and three to contractors. They occurred in
or workplace injuries to employees, contractors and visitors.
South Africa, Australia, Mexico and Spain. Our businesses have conducted
Best practice safety and occupational health guidance is shared across the thorough root cause analyses, have implemented safety changes and communicated
We are saddened that since the start of the pandemic in March 2020, we have businesses, co-ordinated from the corporate centre, to supplement the delivery the findings to the other businesses.
lost 43 colleagues to COVID-19 of which 42 were in the year to September 2021 of their own programmes.
and one very early in this reporting year. We deeply mourn their passing and
Changes since 2021 This year over £35m was invested in reducing the safety and health risks
our hearts go out to their families and colleagues.
The safety performance of the Group is reported in the 2022 Responsibility across a wide range of operational hazards. As part of this, we invested
Mitigation Report at www.abf.co.uk/responsibility £9.3m dedicated to COVID-19 safety measures for employees, customers and
Safety continues to be one of our main priorities. The chief executives of (file:///C%3A/Users/RJardim/Downloads/www.abf.co.uk/responsibility) . other visitors to our stores and manufacturing sites.
each business, who lead by example, are accountable for the safety performance
of their business.
Product safety and quality
Context and potential impact Food quality and safety audits are conducted across all our manufacturing All Primark's products are tested to, and must meet, stringent product safety
As a leading food manufacturer and retailer, it is vital that we manage the sites, by independent third parties and customers, and a due diligence specifications in line with and in some instances above legal requirements.
safety and quality of our products throughout the supply chain. programme is in place to ensure the safety of our retail products. Primark continues to drive and improve product performance for quality and
Mitigation
compliance purposes through its product approval processes, in country
Product safety is put before economic considerations. Our sites comply with international food safety and quality management inspections centres and management of its supply base.
standards and our businesses conduct regular mock product incident exercises.
Changes since 2021
We operate strict food safety and traceability policies within an
We did not have any major product recalls.
organisational culture of hygiene and product safety to ensure consistently All businesses set clear expectations of suppliers, with relevant third-party
high standards in our operations and in the sourcing and handling of raw certification or other assessment a condition of doing business. Product Businesses have continued to define and refine KPIs in this area.
materials and garments. testing and trials are undertaken as required and where bespoke raw materials
are purchased, the businesses will work closely with the supplier to ensure
quality parameters are suitably specified and understood.
Breaches of IT and information security
Context and potential impact Robust disaster recovery plans are in place for business-critical applications In response to an increased level of phishing attacks, we have developed and
To meet customer, consumer and supplier needs, our IT infrastructure needs to and are adequately tested. improved our user awareness training programmes.
be flexible, reliable and secure to allow us to interact through technology.
Cyber incident response testing is done at all levels of the business to As cybersecurity risks evolve, we continue to invest in our security
Our delivery of efficient and effective operations is enhanced using relevant ensure we have adequate and effective processes to respond to a cyber capabilities at a Group level and across the businesses allowing us to more
technologies and the sharing of information. We are therefore subject to incident. effectively detect, respond to and recover from disruptive cyber-threats.
potential cyber-threats such as social engineering attacks, computer viruses
Technical security controls are in place over key IT platforms with the Chief Information Security Officer tasked with identifying and responding to potential security risks.
and the loss or theft of data. Changes since 2021 We have improved and developed the existing disciplines to ensure that user
Due to the changes in how people have worked since the COVID-19 pandemic the devices are regularly patched and upgraded to reflect changing IT security
There is the potential for disruption to operations from data centre failures, delivery of our IT services and systems has changed. A large proportion of our threats. Revised guidance for laptop and desktop patching has been issued to
IT malfunctions or external cyber-attacks. employees work in a hybrid fashion and the IT services, including the all businesses to ensure that systems are up to date and secure.
Mitigation information security controls and measures, have been developed to support
In parallel to building IT roadmaps and developing our technology systems, we this. During the year we have reviewed and tested both IT disaster recovery plans
invest in developing the IT skills and capabilities of our people across our
and cyber incident response plans across the businesses.
businesses. There is an ongoing programme of investment in both technology and people to
enhance the longevity of our IT environments for both on-site and remote
We continue to actively monitor and mitigate any cyber-threats and suspicious working.
IT activity.
To maintain the support for seamless hybrid working we continue to improve our
We have established Group IT security policies, technologies and processes, IT infrastructure, manage bandwidth with our telecommunications partners and
all of which are subject to regular internal audit. improve our collaboration tools.
Access to sensitive data is restricted and closely monitored.
Our use of natural resources and managing our environmental impact
Context and potential impact The steering committee comprises senior functional leaders from Corporate These have involved a range of measures, including switching to LED lighting,
Our businesses and their supply chains rely on a secure supply of finite Social Responsibility, Environment, Finance, Risk Management, and HR, together updating building management systems and embedding a culture that prioritises
natural resources, some of which are vulnerable to external factors such as with senior representation from AB Sugar and Primark. Our 2022 Climate-related saving energy. In Poland, solar panels have also been installed. After
natural disasters and climate change and others are vulnerable based on the Financial Disclosure (TCFD) can be found on page 83 of the Annual Report. reducing emissions in this way, the residual emissions have been offset
operational choices we take. Our material environmental impacts come from:
through projects carried out by Climate Impact Partners, who support access to
fuel and energy use; agricultural operations giving rise to GHG emissions; use Within our Sugar business, Illovo Sugar in Africa is already managing clean cookstoves and water filters in Kenya.
of land related to agricultural operations; the abstraction and management of significant climate variability so their responses to extreme weather events
water and wastewater especially in water-stressed areas; and waste which is are already well developed. They are also improving irrigation efficiency to Regarding packaging and plastic, our UK Grocery businesses have been
not yet eliminated at source, reused or recycled, including single-use reduce the risk of drought, including investing in drip irrigation, and river signatories to the WRAP UK Plastics Pact commitment since 2018. Through this
plastics. defences to reduce storm damage. commitment they have pledged to stop using a number of plastics, including PVC
and polystyrene, by 2025. They have also agreed to make all of their plastic
We recognise that climate change represents a material risk throughout our Primark and Twinings Ovo sourcing strategies focus on geographical packaging 100% recyclable, reusable or compostable.
supply chains and poses challenges to some of our businesses. Many of our diversification for sourcing products and developing risk mitigation
businesses rely on agricultural crops with complex supply chains. Long-term strategies to increase flexibility and agility when unexpected events occur. George Weston Foods, our Australian Grocery business, is a member of the
climate change will impact agricultural crops and workers while extreme
Australian Packaging Covenant Organisation (APCO). As part of this membership,
weather events have the potential to cause disruption across value chains. Currently 40% of Primarks' clothing sales by volume contain cotton, either it has committed to national packaging targets that require all packaging to
organic, recycled or from its Sustainable Cotton Programme (PSCP). Launched in be 100% recyclable, reusable or compostable, with 70% of plastic packaging
In our assessment of climate-related business risks we recognise that the 2013, the PSCP has to date some 250,000 farmers in the programme in India, being recycled or composted and comprise 50% average recycled content by 2025.
cumulative impacts of changes in weather and water availability could affect Bangladesh and Pakistan, with 275,000 farmers targeted to have completed or be
our operations at a Group level. However, the diversified and decentralised in the process of being trained by the programme by the end of 2023. Primark has set a goal is to eliminate all single-use plastic in its business
nature of the Group means that mitigation or adaptation strategies are
by 2027.
considered and implemented by the individual businesses. In regard to GHG emissions, our businesses are committed to cutting Scope 1
In addition to GHG emissions, our operations generate a range of other emissions such as dust, wastewater and waste which, if not controlled, could pose a risk to the environment and local communities, potentially creating risk to our licence to operate and resulting in additional costs. and Scope 2 carbon emissions from their operations. AB Sugar has committed to ensure that all plastic packaging is reusable,
Mitigation
recyclable, biodegradable or compostable by 2030.
We continuously seek ways to improve the efficiency of our operations, using AB Sugar has developed a detailed plan to reduce their Scope 1 and 2 carbon
Changes since 2021
technologies and techniques to reduce our use of natural resources and emissions by 30% by 2030 from a 2018 baseline. They will do this through a
The environmental performance of the Group is reported in the 2022
minimise waste and the subsequent impact on the environment. range of fuel substitution and energy efficiency programmes that are both Responsibility Report and the ESG Insights at www.abf.co.uk/responsibility
affordable and commercially attractive. (file:///C%3A/Users/RJardim/Downloads/www.abf.co.uk/responsibility) .
The Audit Committee and the Board have received specific briefings on climate
change matters and on our approach to achieving TCFD compliance. We have AB Sugar and Primark are committed to setting a near-term science-based This year the Group has complied with the requirements of Listing Rule 9.8.6.R
engaged external experts to support our TCFD implementation and established a emission reduction target in consultation with The Science Based Targets by including climate-related financial disclosures consistent with the four
steering committee sponsored by the Finance Director, to oversee its initiative (SBTi). TCFD recommendations and the 11 recommended disclosures, published in 2017 by
governance, which reports to the Audit Committee.
the TCFD, including the supplemental guidance for all sectors. Our 2022
Primark also has a detailed plan to achieve a 50% reduction in GHG emissions Climates Related Financial Disclosure (TCFD) can be found on page 83 to 93 of
across Scope 1, 2 and 3 against a 2018 baseline by 2030. This is an integral the Annual Report.
part of the Primark Cares strategy.
Twinings has set a target of carbon neutrality 'from bush to shelf' for tea
and herbal infusions by 2030.
Twinings' own operations, located in the UK and Poland, have now been
certified carbon neutral as a result of energy efficiency projects, the
greater use of renewable energy and carbon offsetting.
Our supply chain and ethical business practices
Context and potential impact As our Code and our position on modern slavery are common across all Changes since 2021
We understand the potential for many of our businesses, through their scale businesses, we have developed online training modules to facilitate internal
Our Modern Slavery Statement 2022, together with the steps we take to try to
and scopes, to have a positive impact on the Sustainability Agenda of the awareness across the Group. These resources are also used to support knowledge ensure that any forms of modern slavery are not present within our own
United Nations as set out in the UN's Sustainable Development Goals (SDGs). of our approach and expectations amongst our suppliers. operations or supply chains, are reported in detail on our website and in the
2022 Responsibility Report at www.abf.co.uk/responsibility
We also recognise the expectations on businesses to abide by internationally Some of our businesses have developed their own code of conduct based on the (file:///C%3A/Users/RJardim/Downloads/www.abf.co.uk/responsibility) .
recognised frameworks such as the United Nations Guiding Principles on standards outlined in ABF's Code. Primark has recently updated its code of
Business and Human Rights; operating within the parameters of what has become conduct and has also strengthened its policies around modern slavery. AB Agri's Human Rights Policy addresses modern slavery and other issues in
recognised as responsible business conduct. Primark's code is tailored specifically to some of the risks in the apparel line with the Universal Declaration of Human Rights.
and textile sector. Primark is a member of the Ethical Trading Initiative and
Our businesses work closely with their suppliers to help them understand and is also internationally recognised for its Ethical Trade and Environmental AB Sugar has further developed its modern slavery policy and created its 'We
meet the standards we expect in our supply chains, as detailed in our Supplier Sustainability programme. Listen, We Act, We Remedy' toolkit.
Code of Conduct. https://www.abf.co.uk/about-us/corporate-governance/policies
(https://www.abf.co.uk/about-us/corporate-governance/policies) . More information is available at https://corporate.primark.com Primark has revised and updated its Code of Conduct, further strengthening the
(https://corporate.primark.com) . requirements that guard against forced labour and has added in a new clause
The supply chain due diligence is risk-based, focusing on the needs of those
that requires all suppliers to have effective grievance procedures for
working in our supply chains and the environment in which we operate. Our businesses work to understand the issues specific to the communities workers.
Potential supply chains ethical businesses practice rules include from the through which their respective supply chains flow. For example, Twinings uses
perspective of supply chain due diligence, the most critical challenges we a comprehensive Community Needs Assessment Framework, developed in Primark launched its "Primark Cares" strategy, underpinned with ESG targets
currently face include: consultation with expert external stakeholders. In addition to labour rights, based on its long-standing ethical trade and environmental sustainability
- the vulnerability of workers in our supply chains and the amplification of this framework covers housing, water and sanitation, health and nutrition, programmes. Primark also published a supply chain human rights policy,
this as a result of the ongoing impacts of COVID-19 land, gender and children's rights, farming practices and more. available on its website.
- ensuring due diligence is consistent across a wide range of diversified
suppliers; and Three of our businesses, AB Sugar, Primark and Twinings, have published Twinings revised its Human Rights Policy in 2022. In 2016 Twinings set a
- ensuring we have the leverage to prevent, avoid or mitigate issues interactive sourcing maps. These help our businesses to both prove and improve target to positively impact 500,000 people through their Sourced with Care
due diligence activity. These sourcing maps can also be used to identify where programme which has now reached more than 500,000 people and delivered lasting
Mitigation there is overlap with the supply chains of other businesses. change.
ABF has a Supplier Code of Conduct which outlines the standards we expect in
our supply chains. The Code is based on the International Labour
Organization's (ILO) standards as well as the Ethical Trading Initiative's
Base Code.
Mitigation
ABF has a Supplier Code of Conduct which outlines the standards we expect in
our supply chains. The Code is based on the International Labour
Organization's (ILO) standards as well as the Ethical Trading Initiative's
Base Code.
As our Code and our position on modern slavery are common across all
businesses, we have developed online training modules to facilitate internal
awareness across the Group. These resources are also used to support knowledge
of our approach and expectations amongst our suppliers.
Some of our businesses have developed their own code of conduct based on the
standards outlined in ABF's Code. Primark has recently updated its code of
conduct and has also strengthened its policies around modern slavery.
Primark's code is tailored specifically to some of the risks in the apparel
and textile sector. Primark is a member of the Ethical Trading Initiative and
is also internationally recognised for its Ethical Trade and Environmental
Sustainability programme.
More information is available at https://corporate.primark.com
(https://corporate.primark.com) .
Our businesses work to understand the issues specific to the communities
through which their respective supply chains flow. For example, Twinings uses
a comprehensive Community Needs Assessment Framework, developed in
consultation with expert external stakeholders. In addition to labour rights,
this framework covers housing, water and sanitation, health and nutrition,
land, gender and children's rights, farming practices and more.
Three of our businesses, AB Sugar, Primark and Twinings, have published
interactive sourcing maps. These help our businesses to both prove and improve
due diligence activity. These sourcing maps can also be used to identify where
there is overlap with the supply chains of other businesses.
Changes since 2021
Our Modern Slavery Statement 2022, together with the steps we take to try to
ensure that any forms of modern slavery are not present within our own
operations or supply chains, are reported in detail on our website and in the
2022 Responsibility Report at www.abf.co.uk/responsibility
(file:///C%3A/Users/RJardim/Downloads/www.abf.co.uk/responsibility) .
AB Agri's Human Rights Policy addresses modern slavery and other issues in
line with the Universal Declaration of Human Rights.
AB Sugar has further developed its modern slavery policy and created its 'We
Listen, We Act, We Remedy' toolkit.
Primark has revised and updated its Code of Conduct, further strengthening the
requirements that guard against forced labour and has added in a new clause
that requires all suppliers to have effective grievance procedures for
workers.
Primark launched its "Primark Cares" strategy, underpinned with ESG targets
based on its long-standing ethical trade and environmental sustainability
programmes. Primark also published a supply chain human rights policy,
available on its website.
Twinings revised its Human Rights Policy in 2022. In 2016 Twinings set a
target to positively impact 500,000 people through their Sourced with Care
programme which has now reached more than 500,000 people and delivered lasting
change.
Viability statement
The directors have determined that the most appropriate period over which to
assess the Company's viability, in accordance with the 2018 UK Corporate
Governance Code, is three years. This is consistent with the Group's business
model which devolves operational decision making to the businesses. Each
business sets a strategic planning time horizon appropriate to its activities
and which are typically of a three to five year duration. The directors also
considered the diverse nature of the Group's activities and the degree to
which the businesses change and evolve in the relatively short term.
The directors considered the Group's profitability, cash flows and key
financial ratios over this period and the potential impact that the Principal
Risks and Uncertainties set out on pages 94 to 101 of the Annual Report could
have on future performance, solvency or liquidity of the Group and its
resilience to threats to its viability posed by severe but plausible
scenarios. Sensitivity analysis was applied to these metrics and the projected
cash flows were stress tested against a range of scenarios.
The directors considered the level of performance that would cause the Group
to exhaust its available liquidity, the financial implications of making any
strategic acquisitions and a variety of additional factors that have the
potential to reduce profit or to consume cash substantially. The directors
considered actions which could damage the Group's reputation for the long
term, macro-economic influences such as fluctuations in commodity markets and
climate-related business risks. Specific consideration has been given to the
potential ongoing risks associated with the outlook for a potential global
recession, reducing demand for goods in both the Food businesses and Primark,
and continuing inflationary cost pressures.
The Board's treasury policies are in place to maintain a strong capital base
and manage the Group's balance sheet and liquidity to ensure long-term
financial stability. These policies are the basis for investor, creditor and
market confidence and enable the successful development of the business. The
events of the last two years demonstrated the importance of sufficient
financial resources and credit strength to meet any operational challenges or
business disruption events. The financial leverage policy requires that, in
the ordinary course of business, the Board prefers to see the Group's ratio of
net debt including lease liabilities to adjusted EBITDA to be well under 1.5x.
At the end of this financial year, the financial leverage ratio was 0.8x and
the Group had net cash before lease liabilities of £1,488m and an undrawn
Committed Revolving Credit facility of £1,500m.
In November last year, S&P Global Ratings announced they had assigned the
Group an 'A' grade long-term issuer credit rating. In February this year, the
Group announced its inaugural £400m public bond, due in 2034, further
diversifying its funding base. Furthermore the Group's committed Revolving
Credit Facility, due to expire in 2023, was renewed in June. The new facility
is for £1.5bn, up from £1.1bn previously, is now free of performance
covenants and runs for five years to 2027, with two 1-year extension options.
The diversity of the Group is such that we have some 60 different businesses
operating in different markets, sectors, customer groups, geographies and
products. While the principal risks considered all have the potential to
affect future performance, none of them are considered individually or
collectively to threaten the viability of the Company for the period of the
assessment.
The Group has a track record of delivering strong cash flows, with in excess
of £1bn of operating cash being generated in each of the last ten years. This
has been more than sufficient to meet not only our ongoing financing
obligations but also to fund the Group's expansionary capital investment.
Even in a worst-case scenario, with risks modelled to materialise
simultaneously and for a sustained period, the possibility of the Group having
insufficient resources to meet its financial obligations is considered remote.
Based on this assessment, the directors confirm that they have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the three-year period to 13 September
2025.
Going concern
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason, they continue to adopt the going concern
basis in preparing the consolidated financial statements.
The forecast for the going concern assessment period to 2 March 2024 has been
updated for the business's latest trading in October and is the best estimate
of cashflow in the period. Having reviewed this forecast and having applied a
downside sensitivity analysis and performed a reverse stress test, the
directors consider it a remote possibility that the financial headroom could
be exhausted.
The Board's treasury policies are in place to maintain a strong capital base
and manage the Group's balance sheet and liquidity to ensure long-term
financial stability. These policies are the basis for investor, creditor and
market confidence and enable the successful development of the business. The
events of the last two years demonstrated the importance of sufficient
financial resources and credit strength to meet any operational challenges or
business disruption events. The financial leverage policy states that, in the
ordinary course of business, the Board prefers to see the Group's ratio of net
debt including lease liabilities to adjusted EBITDA to be well under 1.5x. At
the end of this financial year, the financial leverage ratio was 0.8x and the
Group had net cash before lease liabilities of £1,488m and an undrawn
Committed Revolving Credit facility of £1,500m.
In November last year, S&P Global Ratings announced they had assigned the
Group an 'A' grade long-term issuer credit rating. In February this year, the
Group announced its inaugural £400m public bond, due in 2034, further
diversifying its funding base. Furthermore, the Group's committed Revolving
Credit Facility, due to expire in 2023, was renewed in June. The new facility
is for £1.5bn, up from £1.1bn previously, is now free of performance
covenants and runs for five years to 2027, with two 1-year extension options.
In reviewing the cash flow forecast for the period, the directors reviewed the
trading for both Primark and the Food businesses in light of the experience
gained from events of the last two years of trading and emerging trading
patterns. The directors have a thorough understanding of the risks,
sensitivities and judgements included in these elements of the cash flow
forecast and have a high degree of confidence in these cash flows.
As a downside scenario the directors considered the adverse scenario in which
inflationary costs are not fully recovered and in which energy costs are twice
the forecasted increase and other inflationary cost pressures are 25% higher.
It also includes further adverse foreign exchange impacts combined with a
global recession, reducing demand for goods further than the base levels
forecast. This downside scenario was modelled without taking any mitigating
actions within their control. Under this downside scenario the Group forecasts
liquidity throughout the period and compliance with financial covenants in the
remaining $100m of outstanding private placement notes (due March 2024).
In addition, the directors also considered the circumstances which would be
needed to exhaust the Group's total liquidity over the assessment period - a
reverse stress test. This indicates that increasing inflation (rising energy
costs and other inflationary cost pressures; and adverse foreign exchange
impacts) combined with a global recession, reducing demand for goods, would
need to exceed £2.4 billion more than the level forecasted by the Group,
without any mitigating actions being taken before total liquidity is
exhausted. The likelihood of these circumstances is considered remote for two
reasons. Firstly, over such a long period, management could take substantial
mitigating actions, such as reviewing pricing, cost cutting measures and
reducing capital investment. Secondly, the Group has significant business and
asset diversification and would be able to, if it were necessary, dispose of
assets and/or businesses to raise considerable levels of funds.
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, are
fair, balanced and understandable and provide 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 17 September 2022 which may be found at www.abf.co.uk
(http://www.abf.co.uk) and will be despatched to shareholders shortly.
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
Michael McLintock George Weston John Bason
Chairman Chief Executive Finance Director
8 November 2022
Consolidated income statement
for the 52 weeks ended 17 September 2022
Continuing operations note 2022 2021
£m
£m
Revenue 1 16,997 13,884
Operating costs before exceptional items (15,729) (13,008)
Exceptional items 2 (206) (151)
1,062 725
Share of profit after tax from joint ventures and associates 109 79
Profits less losses on disposal of non-current assets 7 4
Operating profit 1,178 808
Adjusted operating profit 1 1,435 1,011
Profits less losses on disposal of non-current assets 7 4
Amortisation of non-operating intangibles (47) (50)
Acquired inventory fair value adjustments (5) (3)
Transaction costs (6) (3)
Exceptional items 2 (206) (151)
Profits less losses on sale and closure of businesses 7 (23) 20
Profit before interest 1,155 828
Finance income 19 9
Finance expense 3 (111) (111)
Other financial income/(expense) 13 (1)
Profit before taxation 1,076 725
Adjusted profit before taxation 1,356 908
Profits less losses on disposal of non-current assets 7 4
Amortisation of non-operating intangibles (47) (50)
Acquired inventory fair value adjustments (5) (3)
Transaction costs (6) (3)
Exceptional items 2 (206) (151)
Profits less losses on sale and closure of businesses 7 (23) 20
Taxation - UK (excluding tax on exceptional items) (50) (68)
- UK (on exceptional items) 3 3
- Overseas (excluding tax on exceptional items) (243) (196)
- Overseas (on exceptional items) (66) 34
4 (356) (227)
Profit for the period 720 498
Attributable to
Equity shareholders 700 478
Non-controlling interests 20 20
Profit for the period 720 498
Basic and diluted earnings per ordinary share (pence) 6 88.6 60.5
Dividends per share paid and proposed for the period (pence) 5 43.7 26.7
Special dividend per share proposed for the period (pence) 5 - 13.8
Consolidated statement of comprehensive income
for the 52 weeks ended 17 September 2022
2022 2021
£m
£m
Profit for the period recognised in the income statement 720 498
Other comprehensive income
Remeasurements of defined benefit schemes 821 559
Deferred tax associated with defined benefit schemes (198) (144)
Items that will not be reclassified to profit or loss 623 415
Effect of movements in foreign exchange 440 (355)
Net (loss)/gain on hedge of net investment in foreign subsidiaries (1) 14
Net gain on other investments held at fair value through other comprehensive 4 -
income
Reclassification adjustment for movements in foreign exchange on subsidiaries - (6)
disposed
Movement in cash flow hedging position 419 39
Deferred tax associated with movement in cash flow hedging position (28) (14)
Deferred tax associated with movement in other investments (1) -
Share of other comprehensive income/(loss) of joint ventures and associates 28 (10)
Effect of hyperinflationary economies 46 18
Items that are or may be subsequently reclassified to profit or loss 907 (314)
Other comprehensive income for the period 1,530 101
Total comprehensive income for the period 2,250 599
Attributable to
Equity shareholders 2,219 579
Non-controlling interests 31 20
Total comprehensive income for the period 2,250 599
Consolidated balance sheet
at 17 September 2022
2022 2021
£m
£m
Non-current assets
Intangible assets 1,868 1,581
Property, plant and equipment 5,599 5,286
Right-of-use assets 2,456 2,649
Investments in joint ventures 301 278
Investments in associates 85 60
Employee benefits assets 1,393 640
Income tax 23 23
Deferred tax assets 158 218
Other receivables 58 55
Total non-current assets 11,941 10,790
Current assets
Assets classified as held for sale 45 13
Inventories 3,259 2,151
Biological assets 105 85
Trade and other receivables 1,758 1,367
Derivative assets 475 124
Current asset investments 4 32
Income tax 67 58
Cash and cash equivalents 2,121 2,275
Total current assets 7,834 6,105
Total assets 19,775 16,895
Current liabilities
Liabilities classified as held for sale (14) −
Lease liabilities (316) (289)
Loans and overdrafts (157) (330)
Trade and other payables (3,114) (2,386)
Derivative liabilities (205) (34)
Income tax (160) (172)
Provisions (87) (71)
Total current liabilities (4,053) (3,282)
Non-current liabilities
Lease liabilities (2,936) (2,992)
Loans (480) (76)
Provisions (26) (31)
Deferred tax liabilities (647) (363)
Employee benefits liabilities (79) (147)
Total non-current liabilities (4,168) (3,609)
Total liabilities (8,221) (6,891)
Net assets 11,554 10,004
Equity
Issued capital 45 45
Other reserves 178 175
Translation reserve 422 (34)
Hedging reserve 154 43
Retained earnings 10,649 9,692
Total equity attributable to equity shareholders 11,448 9,921
Non-controlling interests 106 83
Total equity 11,554 10,004
Consolidated cash flow statement
for the 52 weeks ended 17 September 2022
2022 2021
£m
£m
Cash flow from operating activities
Profit before taxation 1,076 725
Profits less losses on disposal of non-current assets (7) (4)
Profits less losses on sale and closure of businesses 23 (20)
Transaction costs 6 3
Finance income (19) (9)
Finance expense 111 111
Other financial (income)/expense (13) 1
Share of profit after tax from joint ventures and associates (109) (79)
Amortisation 68 74
Depreciation (including of right-of-use assets) 802 823
Exceptional items 206 151
Acquired inventory fair value adjustments 5 3
Effect of hyperinflationary economies 16 7
Net change in the fair value of current biological assets (8) (12)
Share-based payment expense 19 17
Pension costs less contributions 7 4
Increase in inventories (953) (120)
Increase in receivables (288) (98)
Increase in payables 512 175
Purchases less sales of current biological assets (4) (1)
Increase/(decrease) in provisions 7 (40)
Cash generated from operations 1,457 1,711
Income taxes paid (304) (298)
Net cash generated from operating activities 1,153 1,413
Cash flow from investing activities
Dividends received from joint ventures and associates 93 63
Purchase of property, plant and equipment (680) (551)
Purchase of intangibles (89) (76)
Lease incentives received 46 10
Sale of property, plant and equipment 30 21
Purchase of subsidiaries, joint ventures and associates (154) (57)
Sale of subsidiaries, joint ventures and associates - 34
Purchase of other investments (7) (14)
Interest received 17 9
Net cash used in investing activities (744) (561)
Cash flow from financing activities
Dividends paid to non-controlling interests (8) (4)
Dividends paid to equity shareholders (380) (49)
Interest paid (114) (116)
Repayment of lease liabilities (321) (290)
Decrease in short-term loans (12) (10)
Increase/(decrease) in long-term loans 178 (18)
Decrease/(increase) in current asset investments 30 (2)
Purchase of shares in subsidiary undertaking from non-controlling interests - (23)
Movement from changes in own shares held (50) -
Net cash used in financing activities (677) (512)
Net (decrease)/increase in cash and cash equivalents (268) 340
Cash and cash equivalents at the beginning of the period 2,189 1,909
Effect of movements in foreign exchange 74 (60)
Cash and cash equivalents at the end of the period 1,995 2,189
Consolidated statement of changed in equity
for the 52 weeks ended 17 September 2022
Attributable to equity shareholders Non- Total
controlling
equity
interests
£m
£m
Issued Other Translation Hedging Retained Total
capital
reserves
reserve
reserve
earnings
£m
£m
£m
£m
£m
£m
Balance as at 12 September 2020 45 175 323 (7) 8,819 9,355 84 9,439
Total comprehensive income
Profit for the period recognised in the income statement - - - - 478 478 20 498
Remeasurements of defined benefit schemes - - - - 559 559 - 559
Deferred tax associated with defined benefit schemes - - - - (144) (144) - (144)
Items that will not be reclassified to profit or loss - - - - 415 415 - 415
Effect of movements in foreign exchange - - (355) - - (355) - (355)
Net gain on hedge of net investment in foreign subsidiaries - - 14 - - 14 - 14
Reclassification adjustment for movements in foreign exchange - - (6) - - (6) - (6)
on subsidiaries disposed
Movement in cash flow hedging position - - - 39 - 39 - 39
Deferred tax associated with movements in cash flow hedging position - - - (14) - (14) - (14)
Share of other comprehensive income of joint ventures and associates - - (10) - - (10) - (10)
Effect of hyperinflationary economies - - - - 18 18 - 18
Items that are or may be subsequently reclassified to profit or loss - - (357) 25 18 (314) - (314)
Other comprehensive income - - (357) 25 433 101 - 101
Total comprehensive income - - (357) 25 911 579 20 599
Inventory cash flow hedge movements
Gains transferred to cost of inventory - - - 25 - 25 - 25
Total inventory cash flow hedge movements - - - 25 - 25 - 25
Transactions with owners
Dividends paid to equity shareholders - - - - (49) (49) - (49)
Net movement in own shares held - - - - 17 17 - 17
Dividends paid to non-controlling interests - - - - - - (4) (4)
Acquisition of non-controlling interests - - - - (6) (6) (17) (23)
Total transactions with owners - - - - (38) (38) (21) (59)
Balance as at 18 September 2021 45 175 (34) 43 9,692 9,921 83 10,004
Total comprehensive income
Profit for the period recognised in the income statement - - - - 700 700 20 720
Remeasurements of defined benefit schemes - - - - 821 821 - 821
Deferred tax associated with defined benefit schemes - - - - (198) (198) - (198)
Items that will not be reclassified to profit or loss - - - - 623 623 - 623
Effect of movements in foreign exchange - - 429 - - 429 11 440
Net loss on hedge of net investment in foreign subsidiaries - - (1) - - (1) - (1)
Net gain on other investments held at fair value through other comprehensive - 4 - - - 4 - 4
income
Movement in cash flow hedging position - - - 419 - 419 - 419
4 422
Deferred tax associated with movements in cash flow hedging position - - - (28) - (28) - (28)
Deferred tax associated with movement in other investments - (1) - - - (1) - (1)
Share of other comprehensive income of joint ventures and associates - - 28 - - 28 - 28
Effect of hyperinflationary economies - - - - 46 46 - 46
Items that are or may be subsequently reclassified to profit or loss - 3 456 391 46 896 11 907
Other comprehensive income - 3 456 391 669 1,519 11 1,530
Total comprehensive income - 3 456 391 1,369 2,219 31 2,250
Inventory cash flow hedge movements
Losses transferred to cost of inventory - - - (280) - (280) - (280)
Total inventory cash flow hedge movements - - - (280) - (280) - (280)
Transactions with owners
Dividends paid to equity shareholders - - - - (380) (380) - (380)
Net movement in own shares held - - - - (31) (31) - (31)
Deferred tax associated with share-based payments - - - - (1) (1) - (1)
Dividends paid to non-controlling interests - - - - - - (8) (8)
Total transactions with owners - - - - (412) (412) (8) (420)
Balance as at 17 September 2022 45 178 422 154 10,649 11,448 106 11,554
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, current asset investments and income
tax assets. Segment liabilities comprise trade and other payables, derivative
liabilities, provisions and lease liabilities.
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, right-of-use assets,
operating intangibles and biological assets.
Businesses disposed are shown separately and comparatives are re-presented for
businesses sold or closed during the year.
The Group comprises the following operating segments:
Grocery
The manufacture of grocery products, including hot beverages, sugar and
sweeteners, vegetable oils, balsamic vinegars, bread and 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.
Revenue Adjusted operating profit
2022 2021 2022 2021
£m
£m
£m
£m
Operating segments
Grocery 3,735 3,593 399 413
Sugar 2,016 1,650 162 152
Agriculture 1,722 1,537 47 44
Ingredients 1,827 1,508 159 151
Retail 7,697 5,593 756 321
Central - - (88) (70)
16,997 13,881 1,435 1,011
Businesses disposed
Grocery - 2 - -
Ingredients - 1 - -
16,997 13,884 1,435 1,011
Geographical information
United Kingdom 6,378 4,982 533 293
Europe & Africa 6,291 4,944 482 302
The Americas 2,028 1,678 279 259
Asia Pacific 2,300 2,277 141 157
16,997 13,881 1,435 1,011
Businesses disposed:
Asia Pacific - 3 - -
16,997 13,884 1,435 1,011
2022
Grocery Sugar Agriculture Ingredients Retail Central Total
£m £m £m £m £m £m £m
Revenue from continuing businesses 3,736 2,097 1,728 1,996 7,697 (257) 16,997
Internal revenue (1) (81) (6) (169) - 257 -
Revenue from external customers 3,735 2,016 1,722 1,827 7,697 - 16,997
Adjusted operating profit before joint ventures and associates 328 154 31 142 756 (88) 1,323
Share of profit after tax from joint ventures and associates 71 8 16 17 - - 112
Adjusted operating profit 399 162 47 159 756 (88) 1,435
Finance income 19 19
Finance expense (1) (2) - (1) (76) (31) (111)
Other financial income 13 13
Adjusted profit before taxation 398 160 47 158 680 (87) 1,356
Profits less losses on disposal of non-current assets 4 2 - - - 1 7
Amortisation of non-operating intangibles (32) - (2) (13) - - (47)
Acquired inventory fair value adjustments (1) - (2) (2) - - (5)
Transaction costs (1) - (2) (3) - - (6)
Exceptional items - - - - (206) - (206)
Profits less losses on sale and closure of businesses - (16) - (7) - - (23)
Profit before taxation 368 146 41 133 474 (86) 1,076
Taxation (356) (356)
Profit for the period 368 146 41 133 474 (442) 720
Segment assets (excluding joint ventures and associates) 2,876 2,422 597 2,017 7,570 136 15,618
Investments in joint ventures and associates 62 45 143 136 - - 386
Segment assets 2,938 2,467 740 2,153 7,570 136 16,004
Cash and cash equivalents 2,121 2,121
Current asset investments 4 4
Income tax 90 90
Deferred tax assets 163 163
Employee benefits assets 1,393 1,393
Segment liabilities (703) (616) (196) (450) (4,545) (188) (6,698)
Loans and overdrafts (637) (637)
Income tax (160) (160)
Deferred tax liabilities (647) (647)
Employee benefits liabilities (79) (79)
Net assets 2,235 1,851 544 1,703 3,025 2,196 11,554
Non-current asset additions 128 223 26 183 489 3 1,052
Depreciation (including of right-of-use assets) (109) (75) (17) (57) (532) (12) (802)
Amortisation (37) (3) (3) (14) (11) - (68)
Impairment of property, plant & equipment and - (19) - (11) - - (30)
right-of-use assets
2021
Grocery Sugar Agriculture Ingredients Retail Central Total
£m £m £m £m £m £m £m
Revenue from continuing businesses 3,594 1,714 1,539 1,687 5,593 (246) 13,881
Internal revenue (1) (64) (2) (179) - 246 -
External revenue from continuing businesses 3,593 1,650 1,537 1,508 5,593 - 13,881
Businesses disposed 2 - - 1 - - 3
Revenue from external customers 3,595 1,650 1,537 1,509 5,593 - 13,884
Adjusted operating profit before joint ventures and associates 364 149 31 134 321 (70) 929
Share of profit after tax from joint ventures and associates 49 3 13 17 - - 82
Adjusted operating profit 413 152 44 151 321 (70) 1,011
Finance income 9 9
Finance expense (1) (2) - (1) (80) (27) (111)
Other financial expense (1) (1)
Adjusted profit before taxation 412 150 44 150 241 (89) 908
Profits less losses on disposal of non-current assets 2 1 - 1 - - 4
Amortisation of non-operating intangibles (41) - (2) (7) - - (50)
Acquired inventory fair value adjustments (3) - - - - - (3)
Transaction costs - - - (2) - (1) (3)
Exceptional items - (141) - - (6) (4) (151)
Profits less losses on sale and closure of businesses - - - 19 - 1 20
Profit before taxation 370 10 42 161 235 (93) 725
Taxation (227) (227)
Profit for the period 370 10 42 161 235 (320) 498
Segment assets (excluding joint ventures and associates) 2,541 1,776 441 1,480 6,919 154 13,311
Investments in joint ventures and associates 53 28 139 118 - - 338
Segment assets 2,594 1,804 580 1,598 6,919 154 13,649
Cash and cash equivalents 2,275 2,275
Current asset investments 32 32
Income tax 81 81
Deferred tax assets 218 218
Employee benefits assets 640 640
Segment liabilities (601) (361) (151) (340) (4,142) (208) (5,803)
Loans and overdrafts (406) (406)
Income tax (172) (172)
Deferred tax liabilities (363) (363)
Employee benefits liabilities (147) (147)
Net assets 1,993 1,443 429 1,258 2,777 2,104 10,004
Non-current asset additions 113 134 21 118 343 16 745
Depreciation (including of right-of-use assets) (110) (82) (16) (56) (549) (10) (823)
Amortisation (48) (4) (3) (9) (8) (2) (74)
Reversal of impairment of property, plant & equipment and - - - 10 - - 10
right-of-use assets
1. Operating segments - geographical information
2022
United Kingdom Europe & Africa The Americas Asia Pacific Total
£m £m £m £m £m
Revenue from external customers 6,378 6,291 2,028 2,300 16,997
Segment assets 5,972 6,519 1,840 1,673 16,004
Non-current asset additions 285 487 177 103 1,052
Depreciation (including of right-of-use assets) (277) (392) (69) (64) (802)
Amortisation (25) (32) (5) (6) (68)
Impairment of property, plant and equipment on sale and closure of businesses - - - (30) (30)
Acquired inventory fair value adjustments (2) (3) - - (5)
Transaction costs (2) (3) - (1) (6)
Exceptional items - (206) - - (206)
2021
United Kingdom Europe & Africa The Americas Asia Pacific Total
£m £m £m £m £m
Revenue from external customers 4,982 4,944 1,678 2,280 13,884
Segment assets 5,178 5,754 1,324 1,393 13,649
Non-current asset additions 200 382 74 89 745
Depreciation (including of right-of-use assets) (288) (406) (62) (67) (823)
Amortisation (35) (26) (7) (6) (74)
Reversal of impairment of property, plant and equipment on sale and closure of - - - 10 10
businesses
Acquired inventory fair value adjustments - (3) - - (3)
Transaction costs (2) - - (1) (3)
Exceptional items (13) (117) - (21) (151)
The Group's operations in the following countries met the criteria for
separate disclosure:
Revenue Non-current assets
2022 2021 2022 2021
£m
£m
£m £m
Australia 1,232 1,209 623 533
Spain 1,545 1,190 650 670
United States 1,315 1,098 866 672
All segment disclosures are stated before reclassification of assets and
liabilities classified as held for sale.
2. Exceptional items
2022
The income statement this year included an exceptional charge of £206m
comprising non-cash writedowns of £72m against property, plant and equipment
and a writedown of £134m of right-of-use assets relating to the
capitalisation of store leases for Primark. We first entered the German market
in 2009 and achieved very high sales densities in our early stores. We then
opened stores in many city centres with a retail selling space much larger
than the average for the rest of the Primark estate. However, sales densities
declined in the later years up to the 2019 financial year and, weaker trading
in the second half of this financial year, particularly in Germany, has made
it very unlikely that sales densities will recover to pre-COVID levels. In
addition, Germany is a high cost to serve market for retailers. As a
consequence, the future cashflows in our revised store forecast for Germany at
the financial year end requires us to recognise an impairment which has been
treated as exceptional in these financial statements. We remain committed to
our loyal customers in this important market and we are now reviewing options
to return our business in Germany to long-term profitability. These options
include the potential to optimise the retail selling space by store as well as
reviewing the footprint of the overall store portfolio. Also £49m of the
£63m exceptional charge included in the Group's total tax charge for this
financial year was the de-recognition of the deferred tax assets relating to
Germany.
2021
Exceptional items of £151m included impairments of £141m in property, plant
and equipment at Azucarera and other sugar businesses, a £21m inventory
charge in Primark, the reversal of £20m of the £22m Primark inventory
provision raised in 2020, a £5m provision for excessive stock of COVID-19
related items in Primark and a £4m pension past service cost following a
further High Court ruling on 20 November 2020 regarding the equalisation of
Guaranteed Minimum Pensions.
3. Finance expense
2022 2021
£m £m
Bank loans and overdrafts (20) (16)
All other borrowings (8) (10)
Lease liabilities (81) (84)
Other payables (2) (1)
(111) (111)
4. Income tax expense
2022 2021
£m £m
Current tax expense
UK - corporation tax at 19% (2021 - 19%) 44 46
Overseas - corporation tax 244 208
UK - (over)/under provided in prior periods (12) 9
Overseas - under/(over) provided in prior periods 1 (9)
277 254
Deferred tax expense
UK deferred tax 18 13
Overseas deferred tax 72 (37)
UK - over provided in prior periods (3) (3)
Overseas - over provided in prior periods (8) -
79 (27)
Total income tax expense in the income statement 356 227
Reconciliation of effective tax rate
Profit before taxation 1,076 725
Less share of profit after tax from joint ventures and associates (109) (79)
Profit before taxation excluding share of profit after tax from joint ventures 967 646
and associates
Nominal tax charge at UK corporation tax rate of 19% (2021 - 19%) 184 123
Effect of higher and lower tax rates on overseas earnings 4 33
Effect of changes in tax rates on income statement 2 17
Expenses not deductible for tax purposes 63 51
Disposal of assets covered by tax exemptions or unrecognised capital losses 6 (3)
Deferred tax not recognised 120 9
Adjustments in respect of prior periods (23) (3)
356 227
Income tax recognised directly in equity
Deferred tax associated with defined benefit schemes 198 144
Deferred tax associated with share-based payments 1 -
Deferred tax associated with movement in cash flow hedging position 28 14
Deferred tax associated with movement in other investments 1 -
228 158
The UK corporation tax rate of 19% is set to increase to 25% from 1 April
2023. The legislation to effect these changes was enacted before the balance
sheet date and UK deferred tax has been calculated accordingly.
In April 2019 the European Commission published its decision on the Group
Financing Exemption in the UK's controlled foreign company legislation. The
Commission found that the UK law did not comply with EU State Aid rules in
certain circumstances. The Group has arrangements that may be impacted by this
decision as might other UK-based multinational groups that had financing
arrangements in line with the UK's legislation in force at the time. The UK
Government, the Group and a number of other UK companies appealed against this
decision to the General Court of the European Union ('GCEU'). On 8 June 2022,
the GCEU found in favour of the Commission's original decision. As a result of
this, in August 2022, the UK Government, the Group and various other UK
companies appealed GCEU decision to the Court of Justice of the European
Union. We have calculated our maximum potential liability to be £26m (2021:
£26m), however we do not consider that any provision is required in respect
of this amount based on our current assessment of the issue. Following receipt
of charging notices from HM Revenue & Customs ('HMRC'), we made payments
to HMRC in the prior year. Our assessment remains that no provision is
required in respect of this amount. We will continue to consider the impact of
the Commission's decision on the Group and the potential requirement to record
a provision.
5. Dividends
2022 2021 2022 2021
pence per share
pence per share
£m
£m
2020 final - - - -
2021 interim - 6.20 - 49
2021 final and special 34.30 - 271 -
2022 interim 13.80 - 109 -
48.10 6.20 380 49
The 2022 interim dividend was declared on 26 April 2022 and was paid on 8 July
2022. The 2022 final dividend of 29.9p, total value of £236m, will be paid on
13 January 2023 to shareholders on the register on 16 December 2022.
Dividends relating to the period were 43.7p per share totalling £345m (2021 -
40.5p per share totalling £320m including the special dividend of 13.8p for
£109m).
6. Earnings per share
The calculation of basic earnings per share at 17 September 2022 was based on
the net profit attributable to equity shareholders of £700m (2021 - £478m),
and a weighted average number of shares outstanding during the year of 789
million (2021 - 790 million). The calculation of the weighted average number
of shares excludes the shares held by the Employee Share Ownership Plan Trust
on which the dividends are being waived.
Adjusted earnings per ordinary share, which exclude the impact of profits less
losses on disposal of non-current assets and the sale and closure of
businesses, amortisation of acquired inventory fair value adjustments,
transaction costs, amortisation of non-operating intangibles, exceptional
items and any associated tax credits, is shown to provide clarity on the
underlying performance of the Group.
The diluted earnings per share calculation takes into account the dilutive
effect of share incentives. The diluted, weighted average number of shares is
789 million (2021 - 790 million). There is no difference between basic and
diluted earnings.
2022 2021
pence
pence
Adjusted earnings per share 131.1 80.1
Disposal of non-current assets 0.9 0.5
Sale and closure of businesses (2.9) 2.5
Acquired inventory fair value adjustments (0.6) (0.4)
Transaction costs (0.8) (0.4)
Exceptional items (26.1) (19.1)
Tax effect on above adjustments (8.0) 3.0
Amortisation of non-operating intangibles (6.0) (6.3)
Tax credit on non-operating intangibles amortisation and goodwill 1.0 0.6
Earnings per ordinary share 88.6 60.5
7. Acquisitions and disposals
Acquisitions
2022
In January, the Group acquired 100% of Fytexia, a B2B specialty ingredients
business in France and Italy producing and formulating polyphenols-based
active ingredients for the dietary supplements industry. This acquisition will
expand the Group's portfolio of products and capabilities to serving the
pharmaceutical, nutritional and food market sectors.
In July, the Group acquired Greencoat, a UK-based animal supplement and care
business. This acquisition contributes to AB Agri's strategic goal to expand
its international animal nutrition and technology business.
During the year, the Group also acquired a small grocery company in New
Zealand, a small agriculture business in Finland and a small ingredients
business in Australia. The acquisitions had the following effect on the
Group's assets and liabilities:
Pre-acquisition carrying Recognised values on acquisition
values Fytexia Greencoat Other Total
£m
£m £m £m £m
Net assets
Intangible assets - 54 27 7 88
Property, plant and equipment and right-of-use assets 14 1 1 12 14
Working capital 17 3 11 11 25
Cash and overdrafts 10 6 1 3 10
Loans (23) (11) (3) (9) (23)
Lease liabilities (8) - - (8) (8)
Provisions (7) (7) - - (7)
Taxation (8) (14) (8) (2) (24)
Net identifiable assets and liabilities (5) 32 29 14 75
Goodwill 61 12 12 85
Total consideration 93 41 26 160
Recognised values on acquisition
£m
Satisfied by
Cash consideration 153
Deferred consideration 7
160
Net cash
Cash consideration 153
Cash and cash equivalents acquired (10)
143
Pre-acquisition carrying amounts were the same as recognised values on
acquisition apart from £88m of non-operating intangibles in respect of
brands, technology and customer relationships, an £8m uplift to inventory, a
£16m related deferred tax liability and goodwill of £85m. Cash flow on
acquisition of subsidiaries, joint ventures and associates of £154m comprised
£153m cash consideration less £10m cash and overdrafts acquired, £7m of
deferred consideration relating to previous acquisitions and a £4m
contribution to an existing joint venture in China.
2021
In the prior period, the Group's Ingredients business acquired DR Healthcare
España, a Spanish enzymes producer. Total consideration for this transaction
was £14m, comprising £12m cash consideration and £2m deferred
consideration. Net assets acquired included non-operating intangible assets of
£19m, which were recognised with their related deferred tax of £5m.
The Group also contributed £43m to the bakery ingredients joint venture in
China with Wilmar International and paid £2m of deferred consideration on
acquisitions made in prior years.
Disposals
2022
The proposed sale of a yeast company to the joint venture with Wilmar
International in China (classified as held for sale at the 2021 year end) is
not going ahead. The £10m non-cash impairment reversed in 2021 through
profit/(loss) on sale and closure of business has been reinstated at a cost of
£11m.
The Group's investment in north China Sugar is classified as held-for-sale at
year end and an associated £19m non-cash write-down has been charged to loss
on sale and closure of business.
The Group also released £3m of closure provisions in Vivergo in the UK and
£4m of warranty provisions no longer required for a disposed Ingredients
business in the United States.
2021
The Group sold a number of Chinese yeast and bakery ingredients businesses
into a new Chinese joint venture with Wilmar International. Gross cash
consideration was £39m with £5m of cash disposed with the businesses. The
joint venture also assumed £11m of debt, resulting in net proceeds of £45m.
Net assets disposed were £33m with provisions of £6m for associated
restructuring costs and a £6m gain on the recycling of foreign exchange
differences. The gain on disposal was £6m.
The Group agreed the sale of a factory in China to the same joint venture,
subject to regulatory approval. These assets were fully written down in 2019
when the proposed joint venture with Wilmar was first announced. A non-cash
reversal of impairment of £10m was included in profit on sale and closure of
business. This was reversed in 2022 (see above).
Closure provisions of £3m relating to disposals made in previous years were
no longer required and were released to sale and closure of business in
Ingredients and Grocery, both in Asia Pacific. Property provisions of £1m
held in previous years were also no longer required and were released in the
Central and UK segments.
8. Analysis of net debt
At Cash flow Acquisitions and Disposals New leases and non-cash Exchange At
17 September
18 September £m £m items adjustments
2022
£m
2021 £m £m
£m
Short-term loans (244) 12 (23) 224 - (31)
Long-term loans (76) (178) - (224) (2) (480)
Lease liabilities (3,281) 321 (8) (186) (98) (3,252)
Total liabilities from financing activities (3,601) 155 (31) (186) (100) (3,763)
Cash at bank and in hand, cash equivalents and overdrafts 2,189 (268) - - 74 1,995
Current asset investments 32 (30) - - 2 4
(1,380) (143) (31) (186) (24) (1,764)
At Cash flow Acquisitions and Disposals New leases and non-cash Exchange At
12 September £m £m items adjustments 18 September
2020 £m £m 2021
£m £m
Short-term loans (65) 10 10 (202) 3 (244)
Long-term loans (318) 18 - 202 22 (76)
Lease liabilities (3,639) 290 - (100) 168 (3,281)
Total liabilities from financing activities (4,022) 318 10 (100) 193 (3,601)
Cash at bank and in hand, cash equivalents and overdrafts 1,909 340 - - (60) 2,189
Current asset investments 32 2 - - (2) 32
(2,081) 660 10 (100) 131 (1,380)
Cash and cash equivalents comprise bank and cash balances, deposits and
short-term investments with original maturities of three months or less.
£126m (2021 - £86m) of bank overdrafts that are repayable on demand form
part of the Group's cash management and are included as a component of cash
and cash equivalents for the purpose of the cash flow statement.
Net cash excluding lease liabilities is £1,488m (2021 - £1,901m).
£126m (2021 - £86m) of bank overdrafts plus the £31m (2021 - £244m) of
short-term loans shown above comprise the £157m (2021 - £330m) of current
loans and overdrafts shown on the face of the balance sheet.
Current and non-current lease liabilities shown on the face of the balance
sheet of £316m and £2,936m respectively (2021 - £289m and £2,992m
respectively) comprise the £3,252m (2021 - £3,281m) of lease liabilities
shown above.
Current asset investments comprise term deposits and short-term investments
with original maturities of greater than three months.
Interest paid is included within financing activities. The roll-forward of the
liabilities associated with interest paid is an opening balance of £(20)m,
expense of £(111)m, payments of £114m, fx of £(1)m and a closing balance of
£(18)m (2021 - opening balance of £(23)m, expense of £(111)m, payments of
£116m, fx of £(2)m and a closing balance of £(20)m).
9. Related parties
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 2022 2021
note £000 £000
Charges to Wittington Investments Limited in respect of services provided by 930 895
the Company and its subsidiary undertakings
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 12,361 1,570
ii. directors of Wittington Investments Limited who are not trustees of 2,322 300
the Foundation and their close family
iii. directors of the Company who are not trustees of the Foundation and are 128 14
not directors of Wittington Investments Limited
Sales to fellow subsidiary undertakings on normal trading terms 2 48 55
Sales to companies with common key management personnel on normal trading 3 16,891 14,980
terms
Amounts due from companies with common key management personnel 3 2,898 1,705
Sales to joint ventures on normal trading terms 54,111 44,405
Sales to associates on normal trading terms 73,360 46,407
Purchases from joint ventures on normal trading terms 436,467 361,287
Purchases from associates on normal trading terms 13,879 16,524
Amounts due from joint ventures 37,865 35,941
Amounts due from associates 9,151 4,033
Amounts due to joint ventures 30,214 22,960
Amounts due to associates 594 1,615
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 17 September 2022 was the
beneficial owner of 683,073 shares (2021 - 683,073 shares) in Wittington
Investments Limited representing 79.2% (2021 - 79.2%) of that company's issued
share capital and is, therefore, the Company's ultimate controlling party. At
17 September 2022 trustees of the Foundation comprised nine grandchildren of
the late W. Garfield Weston of whom five are children of the late Garry H.
Weston.
2. The fellow subsidiary undertakings are Fortnum and Mason plc and Heal &
Son Limited.
3. 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 £29m (2021 - £32m) of finance lease
receivables. The remainder of the balance is trading balances. All but £4m
(2021 - £4m) of the finance lease receivables are non-current.
10. Other Information
The financial information set out above does not constitute the Company's
statutory accounts for the 52 weeks ended 17 September 2022, or the 53 weeks
ended 18 September 2021. Statutory accounts for 2021 have been delivered to
the Registrar of Companies and those for 2022 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.
11. Basis of preparation
The Company presents its consolidated financial statements in sterling,
rounded to the nearest million, prepared on the historical cost basis except
that current biological assets and certain financial instruments are stated at
fair value, and assets classified as held for sale are stated at the lower of
carrying amount and fair value less costs to sell.
The preparation of financial statements under Adopted IFRS requires management
to make judgements, estimates and assumptions about the reported amounts of
assets and liabilities, income and expenses and the disclosure of contingent
assets and liabilities. The estimates and associated assumptions are based on
experience. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed regularly. Revisions to
accounting estimates are recognised prospectively from when the estimates are
revised.
Details of accounting standards which came into force in the year are set out
in note 12 below.
The Group's consolidated financial statements are prepared to the Saturday
nearest to 15 September. Accordingly, they have been prepared for the 52 weeks
ended 17 September 2022 (2021 - 53 weeks ended 18 September 2021).
To avoid delay in the preparation of the consolidated financial statements,
the results of certain subsidiaries, joint ventures and associates are
included to 31 August each year.
Adjustments have been made where appropriate for significant transactions or
events occurring between 31 August and 17 September.
12. New accounting policies
The following accounting standards and amendments were adopted during the
year and had no significant impact on the Group:
- Amendments to IFRS 4 Insurance Contracts - Extension of the Temporary
Exemption from Applying IFRS 9;
- Amendment to IFRS 16 Leases (COVID-19 - Related Rent Concessions beyond 30
June 2021); and
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate
Benchmark Reform - Phase 2. Financial authorities have announced the timing of
key interest rate benchmark replacements such as LIBOR in the UK, the US and
the EU and other territories, with remaining USD tenors expected to cease in
2023.
The Group is assessing the impact of the following standards, interpretations
and amendments that are not yet effective. Where already endorsed by the UKEB,
these changes will be adopted on the effective dates noted. Where not yet
endorsed by the UKEB, the adoption date is less certain:
- Amendments to IFRS 3 Business Combinations effective 2023 financial year;
- Amendment to IFRS 9 Financial Instruments effective 2023 financial year;
- Annual Improvements to IFRS Standards 2018-2020 effective 2023 financial year;
- IFRS 17 Insurance Contracts effective 2024 financial year
- Amendments to IAS 1 Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current effective 2024 financial year (not yet
endorsed by the UKEB);
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2) effective 2024 financial year (not yet endorsed by the UKEB);
- Definition of Accounting Estimates (Amendments to IAS 8) effective 2024
financial year (not yet endorsed by the UKEB);
- Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12) effective 2024 financial year (not yet
endorsed by the UKEB);
- Property, Plant and Equipment - Proceeds before Intended Use (Amendments to
IAS 16) effective 2023 financial year; and
- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
effective 2023 financial year.
13. Alternative performance measures
In reporting financial information, the Board uses various APMs which it
believes provide useful additional information for understanding the financial
performance and financial health of the Group. These APMs should be considered
in addition to IFRS measures and are not intended to be a substitute for them.
Since IFRS does not define APMs, they may not be directly comparable to
similar measures used by other companies.
The Board also uses APMs to improve the comparability of information between
reporting periods and geographical units (such as like-for-like sales) by
adjusting for non-recurring or uncontrollable factors which affect IFRS
measures, to aid users in understanding the Group's performance.
Consequently, the Board and management use APMs for performance analysis,
planning, reporting and incentive-setting.
APM Closest equivalent IFRS measure Definition/purpose Reconciliation/calculation
Like-for-like sales No direct equivalent The like-for-like sales metric enables measurement of the performance of our Consistent with the definition given
retail stores on a comparable year-on-year basis.
This measure represents the change in sales at constant currency in our retail
stores adjusted for new stores, closures and relocations. Refits, extensions
and downsizes are also adjusted for if a store's retail square footage changes
by 10% or more. For each change described above, a store's sales are excluded
from like-for-like sales for one year.
No adjustments are made for disruption during refits, extensions or downsizes
if a store's retail square footage changes by less than 10%, for
cannibalisation by new stores, or for the timing of national or bank holidays.
It is measured against comparable trading days in each year.
Three year like-for-like sales No direct equivalent The like-for-like sales metric expressed over three years enables measurement Consistent with the definition given
of the performance of our retail stores compared to our experience in 2019,
the last full financial year before any of the economic effects of COVID-19.
It is calculated as described above for like-for-like sales, but with 2019
data as the comparator.
Adjusted operating (profit) margin No direct equivalent Adjusted operating (profit) margin is adjusted operating profit as a See note A
percentage of revenue.
Adjusted operating profit Operating profit Adjusted operating profit is stated before amortisation of non-operating A reconciliation of this measure is provided on the face of the consolidated
intangibles, transaction costs, amortisation of fair value adjustments made to income statement and by operating segment in note 1 of the financial
acquired inventory, profits less losses on disposal of non-current assets and statements
exceptional items.
Items defined above which arise in the Group's joint ventures and associates
are also treated as adjusting items for the purposes of adjusted operating
profit.
Adjusted operating profit before repayment of job retention scheme monies See adjusted operating profit (non-IFRS) measure Adjusted operating profit before repayment of job retention scheme monies is See note A
adjusted operating profit adjusted for repayment of job retention scheme
monies.
Adjusted profit before tax Profit before tax Adjusted profit before tax is stated before amortisation of non-operating A reconciliation of this measure is provided on the face of the consolidated
intangibles, transaction costs, amortisation of fair value adjustments made to income statement and by operating segment in note 1 of the financial
acquired inventory, profits less losses on disposal of non-current assets, statements
exceptional items and profits less losses on sale and closure of businesses.
Items defined above which arise in the Group's joint ventures and associates
are also treated as adjusting items for the purposes of adjusted profit before
tax.
Adjusted earnings and adjusted earnings per share Earnings and earnings per share Adjusted earnings and adjusted earnings per share are stated before Reconciliations of these measures are provided in note 6 of the financial
amortisation of non-operating intangibles, transaction costs, amortisation of statements
fair value adjustments made to acquired inventory, profits less losses on
disposal of non-current assets, exceptional items and profits less losses on
sale and closure of businesses, together with the related tax effect.
Items defined above which arise in the Group's joint ventures and associates
are also treated as adjusting items for the purposes of adjusted earnings and
adjusted earnings per share.
Exceptional items No direct equivalent Exceptional items are items of income and expenditure which are material and Exceptional items are included on the face of the consolidated income
unusual in nature and are considered of such significance that they require statement with further detail provided in note 2 of the financial statements
separate disclosure on the face of the income statement.
Constant currency Revenue and see adjusted operating profit (non-IFRS) measure Constant currency measures are derived by translating the relevant prior year See note B
figures at current year average exchange rates, except for countries where CPI
has escalated to extreme levels, in which case actual exchange rates are used.
There are currently three countries where the Group has operations in this
position - Argentina, Venezuela and Turkey.
Effective tax rate Income tax expense The effective tax rate is the tax charge for the year expressed as a Whilst the effective tax rate is not disclosed, a reconciliation of the tax
percentage of profit before tax. charge on profit before tax at the UK corporation tax rate to the actual tax
charge is provided in note 4 of the financial statements
Adjusted effective tax rate No direct equivalent The adjusted effective tax rate is the tax charge for the year excluding tax The tax impact of reconciling items between profit before tax and adjusted
on adjusting items expressed as a percentage of adjusted profit before tax. profit before tax is shown in note 6 of the financial statements
Dividend cover No direct equivalent Dividend cover is the ratio of adjusted earnings per share to dividends per See note C
share relating to the year.
Capital expenditure No direct equivalent Capital expenditure is a measure of the investment each year in non-current See note D
assets in existing businesses. It comprises cash outflows from the purchase of
property, plant and equipment and intangibles.
Gross investment No direct equivalent Gross investment is a measure of investment each year in non-current assets in See note E
existing businesses and acquisitions of new businesses. It includes capital
expenditure as well as cash outflows from the purchase of subsidiaries, joint
ventures and associates, additional shares in subsidiary undertakings
purchased from non-controlling interests and other investments, as well as net
debt assumed in acquisitions.
Net cash/debt before lease liabilities No direct equivalent This measure comprises cash, cash equivalents and overdrafts, current asset A reconciliation of this measure is shown in note 8
investments and loans.
Net cash/debt including lease liabilities No direct equivalent This measure comprises cash, cash equivalents and overdrafts, current asset A reconciliation of this measure is shown in note 8
investments, loans and lease liabilities.
Adjusted EBITDA See Adjusted operating profit (non-IFRS) measure Adjusted EBITDA is stated before depreciation, amortisation and impairments See note F
charged to adjusted operating profit.
Financial leverage ratio No direct equivalent Financial leverage is the ratio of net cash/debt including lease liabilities See note F
to adjusted EBITDA.
Total liquidity No direct equivalent Total liquidity comprises net cash/debt before lease liabilities plus See note G
qualifying debts and credit facilities. Qualifying debt and credit facilities
are those which are medium-to-long-term, are committed and either contain no
performance covenants, or where they do, they are assessed as highly unlikely
to be breached in even a severe downside scenario.
(Average) capital employed No direct equivalent Capital employed is derived from the management balance sheet and does not Consistent with the definition given
reconcile directly to the statutory balance sheet. All elements of capital
employed are calculated in accordance with Adopted IFRS.
Average capital employed for each segment and the Group is calculated by
averaging the capital employed for each period of the financial year based on
the reporting calendar of each business.
Return on (average) capital employed No direct equivalent The return on (average) capital employed measure divides adjusted operating Consistent with the definition given
profit by average capital employed.
(Average) working capital No direct equivalent Working capital is derived from the management balance sheet and does not Consistent with the definition given
reconcile directly to the statutory balance sheet. All elements of working
capital are calculated in accordance with Adopted IFRS.
Average working capital for each segment and the Group is calculated by
averaging the working capital for each period of the financial year based on
the reporting calendar of each business.
(Average) working capital as a percentage of revenue No direct equivalent This measure expresses (average) working capital as a percentage of revenue. Consistent with the definition given
Note A
Grocery Sugar Agriculture Ingredients Retail Central and disposed businesses Total
£m £m £m £m £m £m £m
2022
External revenue from continuing businesses 3,735 2,016 1,722 1,827 7,697 - 16,997
Adjusted operating profit 399 162 47 159 756 (88) 1,435
Adjusted operating margin % 10.7% 8.0% 2.7% 8.7% 9.8% 8.4%
2021
External revenue from continuing businesses 3,593 1,650 1,537 1,508 5,593 3 13,884
Adjusted operating profit 413 152 44 151 321 (70) 1,011
Repayment of job retention scheme monies - - - - 94 -- 94
Adjusted operating profit before repayment of job retention scheme monies 413 152 44 151 415 (70) 1,105
Adjusted operating margin % 11.5% 9.2% 2.9% 10.0% 5.7% 7.3%
Note B
Grocery Sugar Agriculture Ingredients Retail Central and disposed businesses Total
£m
£m
£m
£m
£m
£m
£m
2022
External revenue from continuing businesses 3,735 2,016 1,722 1,827 7,697 - 16,997
at actual rates
2021
External revenue from continuing businesses 3,593 1,650 1,537 1,508 5,593 3 13,884
at actual rates
Impact of foreign exchange 36 54 18 27 (88) - 47
External revenue from continuing businesses 3,629 1,704 1,555 1,535 5,505 3 13,931
at constant currency
% change at constant currency +3% +18% +11% +19% +40% +22%
Grocery Sugar Agriculture Ingredients Retail Central and disposed businesses Total
£m
£m
£m
£m
£m
£m
£m
2022
Adjusted operating profit at actual rates 399 162 47 159 756 (88) 1,435
2021
Adjusted operating profit at actual rates 413 152 44 151 321 (70) 1,011
Impact of foreign exchange 5 18 - 3 1 - 27
Adjusted operating profit at constant currency 418 170 44 154 322 (70) 1,038
% change at constant currency -5% -5% +7% +3% +135% +38%
Note C
2022 2021
Adjusted earnings per share (pence) 131.1 80.1
Dividends relating to the year (pence) - excluding special dividend proposed 43.7 26.7
Dividend cover 3.00 3.00
Note D
From the cash flow statement 2022 2021
£m
£m
Purchase of property, plant and equipment 680 551
Purchase of intangibles 89 76
769 627
Note E
From the cash flow statement 2022 2021
£m
£m
Purchase of property, plant and equipment 680 551
Purchase of intangibles 89 76
Purchase of subsidiaries, joint ventures and associates 154 57
Purchase of shares in subsidiary undertaking from non-controlling interests - 23
Purchase of other investments 7 14
930 721
Note F
2022 2021 2020
£m
£m
£m
Adjusted operating profit 1,435 1,011 1,024
Charged to adjusted operating profit:
Depreciation of property, plant and equipment 521 535 538
Amortisation of operating intangibles 24 26 33
Depreciation of right-of-use assets and non-cash lease adjustments 281 288 289
Impairment of property, plant and equipment and right-of-use assets - - 15
Adjusted EBITDA 2,261 1,860 1,899
Net debt including lease liabilities (1,764) (1,380) (2,081)
Financial leverage ratio 0.8 0.7 1.1
Note G
2022 2021 2020
£m
£m
£m
Net cash before lease liabilities 1,488 1,901 1,558
Qualifying debt 400 72 236
Qualifying credit facilities 1,500 1,088 1,088
Total liquidity 3,388 3,061 2,882
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