REG - Assoc.British Foods - Interim Results Announcement
26/04/2022 07:16
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RNS Number : 2815J Associated British Foods PLC 26 April 2022
For release 26 APRIL 2022
Interim Results Announcement
24 weeks ended 5 March 2022
For release 26 APRIL 2022
Associated British Foods plc results for the 24 weeks ended 5 March 2022
Group sales and profit return to pre-COVID levels
Financial Headlines
Actual currency Constant currency
change change
Group revenue £7,882m +25% +28%
Adjusted operating profit £706m +91% +92%
Adjusted profit before tax £666m +109%
Adjusted earnings per share 63.8p +154%
Dividend per share 13.8p +123%
Gross investment £450m
Net cash before lease liabilities £1,476m
Net debt including lease liabilities £1,665m
Statutory operating profit £686m +114%
Statutory profit before tax £635m +131%
Basic earnings per share 60.3p +194%
Statutory operating profit is stated after exceptional charges and other items
shown on the face of the condensed consolidated income statement. There was a
£25m exceptional charge in the prior half year.
Food: resilient operational performance
• Sales up 6% to £4,342m; adjusted operating profit down 9% to £330m
• Cost reduction and pricing action taken but lag in recovery of cost inflation
• High input cost inflation, logistics challenges, COVID-related labour absences
• Sugar sales and profit well ahead
Primark: strong recovery in sales and margin
• Sales up 59% to £3,540m; adjusted operating profit margin 11.7%
• UK/Ireland: strong sales recovery with increased holiday travel and
socialising
• Continental Europe: consumer footfall remained weak
• US: trading well
• Transforming digital capability; launch of new website
Dividend
• Interim dividend of 13.8p per share (2021: 6.2p)
George Weston, Chief Executive of Associated British Foods, said:
"This half year sales and operating profit for the Group returned to pre-COVID
levels. Our people have responded well to the many challenges we faced.
Our food businesses have once again proved their operational resilience and
Sugar had another strong period, building on its recent track record of
recovery. Measures to mitigate higher costs in all our businesses have been
taken and more are planned. Primark delivered a significant increase in sales
and profit, with stores now open and trading largely free of restrictions.
Looking further ahead, inflationary pressures are such that we are unable to
offset them all with cost savings, and so Primark will implement selective
price increases across some of the autumn/winter stock. However, we are
committed to ensuring our price leadership and everyday affordability,
especially in this environment of greater economic uncertainty.
Notwithstanding the inflationary pressures we are experiencing, our outlook
for the year is for significant progress in adjusted operating profit and
adjusted earnings per share for the Group."
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 Interim Results Announcement.
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
Jos Bieneman Tel: 07834 336650
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 annual sales of £13.9bn and 128,000 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 26 APRIL 2022
Interim Results Announcement
For the 24 weeks ended 5 March 2022
Chairman's statement
This half year sales and adjusted operating profit for the Group returned to
the pre-COVID levels reached in the half year to 29 February 2020. This has
been led by a strong recovery in sales and operating profit margin at Primark
where trading was much improved following the relaxing of most government
restrictions on store operations. All our businesses are experiencing
logistics challenges, COVID-related labour absences and significant
inflationary pressures in raw materials, supply chains and energy. At the end
of the period these inflationary pressures increased further with the Russian
invasion of Ukraine. Given this backdrop, our food businesses delivered a
resilient operational performance.
Our people have faced challenges on so many fronts; I would like to recognise
their perseverance and commitment and I thank them for it.
Revenue for the Group of £7.9bn was 25% ahead of last year at actual exchange
rates and adjusted operating profit of £706m was 91% ahead.
The net of Finance and Other financial income and expense improved by £10m
and so adjusted profit before tax was 109% ahead of last year. The stronger
profitability of Primark, and the consequent change in the weight of profit by
tax jurisdiction for the Group, has resulted in a return of the Group's
effective tax rate to closer to pre-COVID levels at 23.2% from 34.9% last half
year. Adjusted earnings per share increased by 154% to 63.8p.
The statutory operating profit for the period of £686m increased by 114%.
This reflects the improvement in adjusted operating profit and there was a
£25m exceptional charge in the prior half year.
We have continued to invest for the future with Gross investment of £450m.
This mainly comprised capital investment which was directed at building
capacity in our businesses and, increasingly, expanding capabilities with
automation and technology. Acquisitions in Ingredients and Grocery accounted
for £114m.
The cash outflow for the first half reflected our normal seasonal build in
sugar inventories and the payment of final and special dividends for our last
financial year. This was much improved on the same period last year which was
adversely affected by the lengthy closure of most Primark stores. As a result,
net cash before lease liabilities at the half year was £1.5bn, which compared
to £705m a year ago. Net debt including lease liabilities at the half year
was £1.7bn giving a financial leverage ratio of 0.8 times, demonstrating once
again the strength of our balance sheet.
The successful launch on 10 February of our inaugural public bond of £400m,
2.5 per cent due 2034, diversified the Group's sources of funding and extended
the duration of our borrowings. Some £221m of the remaining £297m Private
Placement Notes have been repaid this financial year.
Dividends
The Board was pleased to resume the payment of dividends for the 2021
financial year and a special dividend was also declared as a sign of
confidence in the recovery in trading across the Group's activities.
This half year, the Board has declared an interim dividend of 13.8p per share
which compares to the interim dividend declared last year of 6.2p per share.
This will be paid on 8 July 2022 to shareholders registered at the close of
business on 10 June 2022.
Capital allocation
Our capital allocation and treasury policies were set out in the Annual
Results Announcement of 9 November 2021. Our priority is always to invest in
our businesses, both organically and by acquisition, at an appropriate pace
and wherever attractive returns on capital can be generated.
The Board recognises that the financial leverage of 0.8 times at the half year
is below 1.0 times and judges this appropriate given the uncertainty of the
current economic environment. The Board will review the availability of
surplus cash and capital at the year end.
ESG
Our ESG priorities are shaped and led by the management of each of our
businesses, who apply their detailed local knowledge and customer insights to
identify the risks and develop the opportunities relevant to their business.
ESG actions become an integral part of their business strategy and they are
put into effect with clear ownership.
Last year, we engaged extensively with our investors on the key ESG factors
for the Group and our strategy and governance in relation to these. We
provided an in-depth review of Primark's processes to provide assurance of its
supplier practices and of its sustainability strategy, Primark Cares. The
presentations for the two briefings can both be found on our website.
We have committed to report our progress regularly. We have made good progress
since the launch of Primark Cares in September 2021 and the Operating Review
details the encouraging increase in the proportion of clothes made from
recycled or more sustainable materials and the percentage of cotton used that
is organic, recycled or sourced from our Sustainable Cotton Programme.
We have evaluated where climate change is likely to have the most material
impact on the Group and we will set out the relevant scenario analyses in our
full year reporting in accordance with the requirements of TCFD.
We will be hosting an ESG Investor Briefing on 18 May, which will focus on the
environmental factors that are most material for the Group.
Outlook
All our food businesses are experiencing increasing inflationary pressures in
many areas including raw materials, commodities, supply chain and energy.
Action has been taken to offset these higher input costs through operational
cost savings and, where necessary, the implementation of price increases.
However, the benefit of price increases inevitably lags input cost inflation.
While we have no businesses in either country, commodity and energy prices
have increased further following the Russian invasion of Ukraine. As a result,
we now expect a greater margin reduction in these businesses than previously
expected for the full year. We expect recovery in the run-rate of these
margins but the full effect of margin recovery is now anticipated in our next
financial year. We continue to expect an improvement in profit at AB Sugar for
the full year.
In Primark, we have seen a progressive easing of COVID-related restrictions
across our markets and an improvement in like-for-like sales is evident in the
UK and Ireland. With new store openings, selling space at the end of this
financial year will be 10% ahead of the selling space at the end of the 2019
financial year. As a consequence, total sales for Primark in the second half
are anticipated to be ahead of the second half of the 2019 financial year,
which was pre-COVID. Reflecting further inflationary pressures, we now expect
a greater reduction in the second half operating profit margin than previously
expected although the full year Primark margin will be some 10%. We still
anticipate Primark's adjusted operating profit in the second half will be
ahead of the same period last year.
With the recovery in Primark's profitability, we expect the Group's effective
tax rate for the full year to be close to that of the half year rate.
We will continue to invest in building the capacity and capabilities of all
our businesses.
Notwithstanding the greater inflationary pressures and lower second half
margins, we still expect growth in adjusted operating profit for the Group in
the second half compared to the same period last year. Our outlook for the
year is for significant progress in adjusted operating profit and adjusted
earnings per share for the Group.
Michael McLintock
Chairman
Operating review
For the half year, sales and adjusted operating profit for the Group were
strongly ahead of the prior half year.
All our businesses have experienced increasing inflationary pressures in many
areas including raw materials, commodities, supply chain and energy. We have
not seen such a scale of inflation in our major markets in recent times. The
Group's devolved business model ensures that our management teams are close to
their markets and customers, and they have responded to the challenge. We have
been taking steps to offset these higher input costs through operational cost
savings and, where necessary, the implementation of price increases. However,
actions on price inevitably lag input cost inflation and margins in our food
businesses declined in the first half as a result. We are focused on
recovering these margins but given the extent of the inflation, the full
effect is expected in our next financial year.
Despite the inflationary pressures, we have continued to invest in both
marketing and new product development in our Grocery brands. Twinings had
particular success with the launch of further products in Wellbeing teas,
while at Acetum we continue to internationalise the Mazzetti brand. Our
Australian bread business Tip Top successfully launched new products into
growth markets such as gluten-free bread.
AB Sugar delivered further growth in sales and operating profit in the first
half. Both Illovo and Azucarera increased their domestic sugar volumes. Over
the years we have invested in our capability to produce valuable co-products.
In addition to higher sugar prices, higher prices for these co-products,
especially bioethanol and electricity, enabled our businesses to more than
offset the increase in energy cost in the first half.
ABF Ingredients performed well in the first half. Its capabilities were
enhanced in this period by the acquisition of the Fytexia Group. This is an
expert life science company, based in France and Italy, which develops active
nutrients for human health. This business is fast-growing and it will broaden
our product portfolio to serve the pharmaceutical, nutritional, food and feed
markets.
Primark sales for the first half were well ahead of last year at constant
currency at 64%. All our stores remained open and trading throughout the
period except for short periods in Austria and The Netherlands. Operating
profit margin recovered strongly and reached 11.7%, in line with pre-COVID
levels. This was primarily achieved by the recovery in store sales densities
as footfall has increased and customers return to Primark. The effect of
inflation on Primark this first half has been broadly mitigated by a reduction
in store operating costs and a favourable US dollar exchange rate. With the
increasing inflationary pressures and dollar strengthening, we will implement
selective price increases across some of our autumn/winter stock while
remaining committed to ensuring our price leadership and everyday
affordability, which matters so much to customers.
The table below shows the results by segment on a reported basis.
Revenue Adjusted operating profit
24 weeks ended 24 weeks ended 53 weeks ended 24 weeks ended 24 weeks ended 53 weeks ended
5 March 27 February 2021 18 September 2021 5 March 27 February 2021 18 September 2021
2022 £m £m 2022 £m £m
£m
£m
Operating segments
Grocery 1,821 1,834 3,593 175 199 413
Sugar 914 763 1,650 77 66 152
Agriculture 809 746 1,537 15 19 44
Ingredients 798 735 1,508 63 78 151
Food 4,342 4,078 8,288 330 362 760
Retail 3,540 2,232 5,593 414 43 321
Central - - - (38) (37) (70)
7,882 6,310 13,881 706 368 1,011
Businesses disposed:
Grocery - 2 2 -- 1 -
Ingredients - 1 1 - - -
7,882 6,313 13,884 706 369 1,011
References to changes in revenue and adjusted operating profit in the
following segmental commentary are based on constant currency.
Grocery
2022 2021 Actual Constant currency
currency
Revenue £m 1,821 1,834 -1% +2%
Adjusted operating profit £m 175 199 -12% -9%
Revenue in the first half was 2% ahead of last year in the face of a number of
challenges: retail volumes returned to more normal levels after the COVID
lockdowns last year, operating constraints this year as a result of supply
chain disruption and COVID-related absences, and Allied Bakeries exiting the
Co-op contract in April last year. Operating profit margin reduced with high
levels of input cost inflation, especially in Allied Bakeries. Pricing actions
have already been implemented and more are in hand to mitigate subsequent cost
increases.
Twinings Ovaltine performed well in this period driven by Ovaltine revenue
growth in Switzerland and Germany and some recovery in Thailand. In Twinings,
further new product launches of Wellbeing teas more than offset a reduction in
the retail sales of other teas from COVID-elevated levels last year.
Allied Bakeries sales were well below the same period last year. Restaurant
and take-away trade sales were strong for Westmill. Sales were ahead at Acetum
as we continue to internationalise and develop the Mazzetti brand. Patak's,
Blue Dragon and Al'Fez performed strongly for AB World Foods but margins here,
and at Jordans Dorset Ryvita, reduced with the later phasing of price
increases.
ACH revenue growth was driven by the price increases for its vegetable oils
implemented over the last year to mitigate the impact of higher commodity
costs. Strong bakery ingredient volumes more than offset declines in US retail
yeast volumes compared to the COVID-elevated levels during lockdowns. Adjusted
operating profit for George Weston Foods in Australia was ahead of last year,
despite COVID-related operational challenges in our Tip Top bread and Don KRC
meat businesses. Tip Top traded well with successful new product launches into
growth markets such as gluten-free bread. In the period we developed our pie
business in New Zealand with the acquisition of Dad's Pies, a producer of
premium pies.
Sugar
2022 2021 Actual Constant currency
currency
Revenue £m 914 763 +20% +19%
Adjusted operating profit £m 77 66 +17% +8%
AB Sugar traded strongly in the first half with revenue driven by both higher
domestic sales volumes in Illovo and Azucarera and higher sugar and bioethanol
prices. This period is the next step in the recovery of profit with an
increase of 8% over last year. All businesses continued to focus on reducing
the cost of sugar production through on-going efficiency programmes. These
cost savings and the contribution from higher sales prices helped mitigate the
effects of significant input cost inflation, particularly energy costs. The
margin decline was driven by the start-up costs for our Vivergo bioethanol
plant included in this period.
EU sugar prices continued to improve over last year as a result of the
continuation of low European sugar stocks. Our UK and Spanish businesses have
largely contracted sales for the year at much improved prices compared to last
year.
UK sugar production is now expected to be 1.03 million tonnes, compared to 0.9
million tonnes produced in the last campaign, with good growing conditions
supporting higher yields and mitigating the reduced growing area. The
factories performed well, overcoming early beet logistics issues which delayed
the start of the campaign. Energy costs remain at very high levels although
substantial forward cover mitigated to some degree the margin impact during
the first half. We have benefitted from strong pricing of the electricity we
produce for export and from the bioethanol produced from sugar.
Re-commissioning of the Vivergo bioethanol plant is well underway.
The performance of Azucarera in Spain improved with higher prices and volumes.
Significantly improved sales volumes reflected share recovery in Iberia. Sugar
production is expected to be significantly higher than last year, although
mostly from lower margin refined raws.
Illovo continued to deliver strong domestic sales in Zambia, Malawi and
Tanzania along with a strong contribution from co-products in South Africa.
However, there was some disruption to production in Malawi, Eswatini and
Mozambique in the period, in large part due to adverse weather. Sugar
production for the full year is expected to be broadly in line with last year
with earlier season start-ups planned later this year to offset the delays
already experienced at the end of the current season. The construction of our
new sugar factory in Tanzania has begun.
AB Sugar China trading performance was in line with last year.
Agriculture
2022 2021 Actual Constant currency
currency
Revenue £m 809 746 +8% +9%
Adjusted operating profit £m 15 19 -21% -17%
Revenue at AB Agri was well ahead of last year in the first half with higher
selling prices reflecting commodity and energy cost increases. Profit margins
were reduced in the period compared to the first half of the last financial
year due to the later phasing of mitigating pricing actions.
In the UK sales of monogastric feed benefited from increased demand while pigs
were held longer on farms due to meat processing constraints, but piglet feed
demand reduced in response to low pork prices.
Frontier sales benefited from a strong start to the year for certified seed,
crop protection and fertiliser with farmers willing to invest in crop inputs
due to the strength of agricultural commodity prices. The profit from grain
merchanting was behind the elevated levels last year when market volatility
was high ahead of the end of the Brexit transition period at the end of
calendar 2020.
Our business in China traded well with the benefit of a range of new premium
products and we successfully opened a new mill in Tongchuan, which makes
compound feed for pigs and ruminants.
Ingredients
2022 2021 Actual Constant currency
currency
Revenue £m 798 735 +9% +12%
Adjusted operating profit £m 63 78 -19% -17%
Revenue in the first half was 12% ahead of last year driven by volume
recoveries in a number of our businesses and the price increases already
implemented. However, margins were much lower as significant inflation
impacted costs ahead of price actions especially in yeast and bakery
ingredients.
AB Mauri revenues were ahead although held back by lower demand for retail
yeast and retail bakery ingredients compared to last year when COVID
restrictions were driving the popularity of home baking. Adjusted operating
profit was impacted by the lag in the recovery of significant commodity input
cost inflation and the timing of customer price actions. We continued to
invest in capacity and capability. We opened a new facility in São Paulo,
Brazil, which incorporates an innovation laboratory and bakery centre. A new
specialty yeast plant is entering the final phase of construction at our Hull
site in the UK which will further expand AB Biotek's ability to develop and
deliver innovative products and solutions.
The businesses in ABF Ingredients performed well, with revenue significantly
ahead driven by sustained volume recoveries and price increases to compensate
for input inflation. AB Enzymes continued to see strong momentum in bakery,
food and textiles and our animal feed enzymes performed well in a competitive
environment. Abitec, our specialty lipids business, delivered sales growth in
pharmaceutical excipients and specialty human nutrition products. Ohly, our
yeast extracts business, traded well driven by new products targeted at the
attractive meat alternative and human health and nutrition segments. This
period we acquired the Fytexia Group, an expert life science company based in
France and Italy which develops scientifically supported active nutrients for
human health. This business is fast-growing, and the acquisition will broaden
our product portfolio and enhance our capabilities to serve the
pharmaceutical, nutritional, food and feed markets.
Retail
2022 2021 Actual Constant currency
currency
Revenue £m 3,540 2,232 +59% +64%
Adjusted operating profit £m 414 43 +863% +781%
All Primark stores were trading at the period end and, with minor exceptions,
remained open throughout the half year. This compared to prolonged periods of
store closures in the UK and Europe in the first half of last year. As a
consequence, sales for the first half were 64% ahead of last year and
operating profit margin recovered strongly to 11.7%, broadly in line with
pre-COVID levels achieved two years ago.
Like-for-like sales improved compared to the final quarter of our 2021
financial year and for the first half were 10% lower than pre-COVID levels in
the same period two years ago. Total sales were 4% lower than pre-COVID levels
two years ago having opened 27 stores which increased our selling space during
this period. Sales were disrupted by the Omicron infections in the middle of
this half year but subsequently we have seen like-for-like sales pick up
strongly in the UK and Ireland. However, recovery has been slower in
Continental Europe where some restrictions have persisted for longer and
consumer footfall has remained weaker.
Sales in our UK stores were well ahead of last year. Like-for-like sales were
8% below two years ago and have continued to improve after the period end.
Stores in retail parks and town centres have outperformed and footfall in
destination city centre stores has picked up as more customers return to work,
socialise and shop in city centres.
Sales in Continental Europe were also well ahead of last year. Total sales
were 3% below two years ago; like-for-like sales were 14% down, offset by a
12% increase in retail selling space.
Our US business traded well. Total sales were 37% ahead of two years ago;
like-for-like sales were 1% ahead of two years ago.
We have seen strong sales of luggage and holiday essentials such as swimwear
and sandals as customers return to holiday travel. Sales of health and beauty
also staged a recovery as customers return to socialising and false eyelashes
and nails performed particularly well with demand boosted by promotion on our
social media channels. Homewares benefitted from more home entertaining.
Customer reaction to our new spring/summer fashion ranges has been very
positive. We continued to develop The Edit, our quality investment pieces for
women which first launched in the autumn, and The Great Outdoors, our range of
high-performance clothing and accessories of which one-third is made from
recycled or more sustainably sourced materials.
Operating profit margin of 11.7% in the first half mainly reflected our stores
trading for the whole of the period with minor exceptions. In this half year,
inflation in raw materials and supply chain costs was broadly mitigated by a
favourable US dollar exchange rate and a reduction in store operating costs.
Our stock purchases for the second half of the financial year are already
largely committed and we expect some reduction in the second half operating
profit margin compared to the first half. We expect Primark's full year margin
to be some 10%. With increasing inflationary pressure and dollar
strengthening, we will implement selective price increases across some of our
autumn/winter stock. However, we are committed to ensuring our price
leadership and everyday affordability.
Following the launch last September of the sustainability strategy, Primark
Cares, we are developing key performance indicators for the three pillars that
will form the basis of ESG reporting in our full year results. We are making
progress in a number of key areas, in line with our pledge to make more
sustainable choices affordable for all. Some 39% of all clothes sold in the
first half were made from recycled or more sustainably sourced materials, a
big step-up from 25% for the six months to July 2021. More than half of the
clothes we sell are made from cotton and one-third of the cotton in our
clothes is now recycled, organic or sourced from the Primark Sustainable
Cotton Programme, up from 27% at the launch of Primark Cares. We have now
trained some 150,000 farmers in more sustainable farming practices under this
Programme, and we are well-placed to reach our target of 160,000 farmers by
the end of this calendar year.
Six months to Six months to July 2021
March 2022
Proportion of clothes made from recycled or more sustainably sourced materials 39% 25%
(in unit sales)
Proportion of cotton that is organic, recycled or sourced from the Primark 33% 27%
Sustainable Cotton Programme
The disruption experienced in the supply chain in the autumn continued to
alleviate. However, we are still experiencing some delays in dispatch at ports
of origin and we expect longer shipping times to continue for some time.
The roll-out of the Oracle stock management system across our store estate is
now complete and we are making good progress to equip all stores with
state-of-the art point of sale terminals.
We are transforming Primark's digital capability. We took a significant step
forward with the UK launch earlier this month of our new customer website. The
new site showcases many more of our products and allows customers to check
stock availability in their chosen store. We have seen good early reaction
from customers: in the first two weeks, traffic to the new site doubled with
customers viewing on average twice as many individual pages per session. We
will add additional features including a customer account and the ability to
create a wishlist of favourite products enabling more personalised marketing.
We will roll out the new website across all our markets by the autumn.
Retail selling space increased by 0.2 million sq ft since the financial year
end and at 5 March 2022 we were trading from 402 stores and
17.0 million sq ft of retail space, which compared to 16.5 million sq ft a
year ago. Four new stores were opened in the period: Catania in Sicily, Italy,
and Vigo, Girona and Cadiz in Spain. In addition, we relocated to larger
premises in Gloucester in the UK. Since the half year, we opened a new
flagship store in Milan city centre, Italy, which has been met by a very
strong customer response. We expect to add a net total of 0.5 million sq ft of
selling space this financial year.
We continue to make good progress in developing the pipeline of new stores to
deliver our ambition to grow our store estate to some 530 stores in the next
five years. Our growth markets are the US, France, Italy and Iberia. We will
deliver a strong programme of store openings in our next financial year with
many currently scheduled during the period up to Christmas 2022. We will also
enter the new markets of Romania and Slovakia during that financial year,
which will be our fifteenth and sixteenth markets. The US will become a major
market for us and, in addition to the six new leases already announced, we
have signed an additional three: Walden Galleria Buffalo, in upstate New York,
Jersey Gardens, Elizabeth New Jersey, and Woodfield Mall, which will become
our second store in the Chicago area. We are already planning an extension to
our recently opened store in Sawgrass Mills, Florida.
Principal risks and uncertainties
Managing our risks
Our approach to risk management
The delivery of our strategic objectives is dependent on effective risk
management. There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance and could cause actual
results to differ materially from expected and historical results. Details of
the principal risks facing the Group's businesses at an operational level were
included on pages 88 to 94 of the Group's Annual Report and Accounts for the
53 weeks ended 18 September 2021, as part of the Strategic Report.
We have reassessed our principal risks as the world faces the repercussions
and impacts of the ongoing geopolitical crisis between Russia and Ukraine;
together with the inflationary pressures on raw materials, commodities and
energy as economies recover from the impacts of COVID.
In response to the geopolitical uncertainties, our procurement teams have been
working closely with suppliers to help them assess their business continuity
plans and where appropriate to identify and establish alternative suppliers
for essential ingredients and services. In addition, some of our businesses
are looking at amending recipes to substitute ingredients, such as sunflower
oil, which are likely to be in short supply.
Our businesses remain on high alert to the heightened risk of IT security
breaches and cyber-based attacks. We continue to invest in monitoring and
detection capabilities.
Whilst the majority of the world is emerging from the COVID pandemic,
localised restrictions remain a risk, particularly in Asia.
The purchase of merchandise denominated in foreign currencies by Primark is
the most material currency transaction risk for the Group, although Primark is
now fully bought for this financial year. The crisis in Ukraine has led to
significant volatility in FX markets and a general strengthening of the US
dollar, and other commodity-independent currencies such as the Australian
dollar, versus Sterling and the Euro. The net impact of these moves will
likely lead to a small translation gain in the second half of the financial
year.
The Group purchases a wide range of commodities, including the consumption of
energy, in the ordinary course of business. We constantly monitor the markets
in which we operate and manage certain of these exposures with fixed price
supply contracts, exchange traded contracts and hedging instruments. The
commercial implications of commodity price movements are continuously assessed
and, where appropriate, are reflected in the pricing of our products.
The number of employees working from home continues to be high and they are
supported by effective collaboration tools with appropriate IT infrastructure
and bandwidth. Remote working has increased the exposure to phishing attacks,
which together with socially engineered fraud, have become more sophisticated.
In response to this we have worked on increasing user awareness and have
implemented higher levels of monitoring.
The Group continues to focus on tightly managing cash flow and maintaining a
very strong level of liquidity, further strengthened by the issuance of ABF's
£400m 12-year inaugural public bond in February 2022.
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 Condensed Consolidated Interim Financial Statements.
See note 10 to the Condensed Consolidated Interim Financial Statements.
Condensed consolidated income statement
for the 24 weeks ended 5 March 2022
Continuing operations Note 24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February
18 September
2022
2021
2021
£m
£m
£m
Revenue 1 7,882 6,313 13,884
Operating costs before exceptional items (7,237) (5,996) (13,008)
Exceptional items 2 - (25) (151)
645 292 725
Share of profit after tax from joint ventures and associates 37 26 79
Profits less losses on disposal of non-current assets 4 2 4
Operating profit 686 320 808
Adjusted operating profit 706 369 1,011
Profits less losses on disposal of non-current assets 4 2 4
Amortisation of non-operating intangibles (20) (24) (50)
Acquired inventory fair value adjustments - (1) (3)
Transaction costs (4) (1) (3)
Exceptional items 2 - (25) (151)
Profits less losses on sale and closure of businesses 6 (11) 5 20
Profit before interest 675 325 828
Finance income 6 5 9
Finance expense (50) (52) (111)
Other financial income/(expense) 4 (3) (1)
Profit before taxation 635 275 725
Adjusted profit before taxation 666 319 908
Profits less losses on disposal of non-current assets 4 2 4
Amortisation of non-operating intangibles (20) (24) (50)
Acquired inventory fair value adjustments - (1) (3)
Transaction costs (4) (1) (3)
Exceptional items 2 - (25) (151)
Profits less losses on sale and closure of businesses 6 (11) 5 20
Taxation UK (excluding tax on exceptional items) (29) (18) (68)
UK (on exceptional items) - 3 3
Overseas (excluding tax on exceptional items) (122) (90) (196)
Overseas (on exceptional items) - 2 34
3 (151) (103) (227)
Profit for the period 484 172 498
Attributable to
Equity shareholders 476 162 478
Non-controlling interests 8 10 20
Profit for the period 484 172 498
Basic and diluted earnings per ordinary share (pence) 4 60.3 20.5 60.5
Dividends per share paid and proposed for the period (pence) 5 13.8 6.2 26.7
Special dividend per share proposed for the period (pence) 5 nil nil 13.8
Condensed consolidated statement of comprehensive income
for the 24 weeks ended 5 March 2022
24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February
18 September
2022
2021
2021
£m
£m
£m
Profit for the period recognised in the income statement 484 172 498
Other comprehensive income
Remeasurements of defined benefit schemes 300 448 559
Deferred tax associated with defined benefit schemes (74) (84) (144)
Items that will not be reclassified to profit or loss 226 364 415
Effect of movements in foreign exchange 5 (335) (355)
Net gain on hedge of net investment in foreign subsidiaries 5 11 14
Reclassification adjustment for movements in foreign exchange on subsidiaries - (6) (6)
disposed
Movement in cash flow hedging position 72 (26) 39
Deferred tax associated with movement in cash flow hedging position (3) (1) (14)
Share of other comprehensive income of joint ventures and associates 7 (10) (10)
Effect of hyperinflationary economies 10 12 18
Items that are or may be subsequently reclassified to profit or loss 96 (355) (314)
Other comprehensive income for the period 322 9 101
Total comprehensive income for the period 806 181 599
Attributable to
Equity shareholders 799 177 579
Non-controlling interests 7 4 20
Total comprehensive income for the period 806 181 599
Condensed consolidated balance sheet
at 5 March 2022
Note 5 March 27 February 2021 18 September 2021
£m
£m
2022
£m
Non-current assets
Intangible assets 1,756 1,570 1,581
Property, plant and equipment 5,308 5,417 5,286
Right-of-use assets 2,511 2,772 2,649
Investments in joint ventures 271 256 278
Investments in associates 69 59 60
Employee benefits assets 9 942 531 640
Income tax 23 - 23
Deferred tax assets 191 217 218
Other receivables 53 58 55
Total non-current assets 11,124 10,880 10,790
Current assets
Assets classified as held for sale - - 13
Inventories 2,525 2,596 2,151
Biological assets 115 96 85
Trade and other receivables 1,507 1,381 1,367
Derivative assets 146 64 124
Current asset investments 7 34 33 32
Income tax 62 13 58
Cash and cash equivalents 7 2,190 1,112 2,275
Total current assets 6,579 5,295 6,105
Total assets 17,703 16,175 16,895
Current liabilities
Lease liabilities 7 (292) (290) (289)
Loans and overdrafts 7 (275) (213) (330)
Trade and other payables (2,466) (1,931) (2,386)
Derivative liabilities (40) (48) (34)
Income tax (152) (101) (172)
Provisions (80) (102) (71)
Total current liabilities (3,305) (2,685) (3,282)
Non-current liabilities
Lease liabilities 7 (2,849) (3,130) (2,992)
Loans 7 (473) (227) (76)
Provisions (35) (47) (31)
Deferred tax liabilities (456) (300) (363)
Employee benefits liabilities (145) (149) (147)
Total non-current liabilities (3,958) (3,853) (3,609)
Total liabilities (7,263) (6,538) (6,891)
Net assets 10,440 9,637 10,004
Equity
Issued capital 45 45 45
Other reserves 175 175 175
Translation reserve (16) (11) (34)
Hedging reserve 61 - 43
Retained earnings 10,091 9,359 9,692
Total equity attributable to equity shareholders 10,356 9,568 9,921
Non-controlling interests 84 69 83
Total equity 10,440 9,637 10,004
Condensed consolidated cash flow statement
for the 24 weeks ended 5 March 2022
Note 24 weeks ended 5 March 24 weeks ended 27 February 2021 53 weeks ended 18 September 2021
2022
£m
£m
£m
Cash flow from operating activities
Profit before taxation 635 275 725
Profits less losses on disposal of non-current assets (4) (2) (4)
Profits less losses on sale and closure of businesses 11 (5) (20)
Transaction costs 4 1 3
Finance income (6) (5) (9)
Finance expense 50 52 111
Other financial (income)/expense (4) 3 1
Share of profit after tax from joint ventures and associates (37) (26) (79)
Amortisation 33 34 74
Depreciation (including depreciation of right-of-use assets and non-cash lease 373 409 823
adjustments)
Exceptional items - 25 151
Acquired inventory fair value adjustments - 1 3
Effect of hyperinflationary economies 2 2 7
Net change in the fair value of current biological assets (29) (32) (12)
Share-based payment expense 8 8 17
Pension costs less contributions 3 4 4
Increase in inventories (376) (565) (120)
Increase in receivables (122) (113) (98)
Increase/(decrease) in payables 46 (269) 175
Purchases less sales of current biological assets - - (1)
Increase/(decrease) in provisions 13 (16) (40)
Cash generated from/(utilised in) operations 600 (219) 1,711
Income taxes paid (150) (160) (298)
Net cash generated from/(utilised in) operating activities 450 (379) 1,413
Cash flow from investing activities
Dividends received from joint ventures and associates 45 27 63
Purchase of property, plant and equipment (272) (263) (551)
Purchase of intangibles (64) (44) (76)
Lease incentives received 8 12 10
Sale of property, plant and equipment 10 9 21
Purchase of subsidiaries, joint ventures and associates 6 (114) (39) (57)
Sale of subsidiaries, joint ventures and associates 6 - 34 34
Purchase of other investments - (13) (14)
Interest received 4 6 9
Net cash used in investing activities (383) (271) (561)
Cash flow from financing activities
Dividends paid to non-controlling interests (6) (2) (4)
Dividends paid to equity shareholders 5 (271) - (49)
Interest paid (48) (56) (116)
Repayment of lease liabilities 7 (131) (131) (290)
(Decrease)/increase in short-term loans 7 (80) 4 (10)
Increase/(decrease) in long-term loans 7 402 - (18)
Increase in current asset investments 7 (1) (2) (2)
Movement from changes in own shares held (50) - -
Purchase of shares in subsidiary undertaking from non-controlling interests - (23) (23)
Net cash used in financing activities (185) (210) (512)
Net (decrease)/increase in cash and cash equivalents (118) (860) 340
Cash and cash equivalents at the beginning of the period 2,189 1,909 1,909
Effect of movements in foreign exchange 20 (23) (60)
Cash and cash equivalents at the end of the period 7 2,091 1,026 2,189
Condensed consolidated statement of changes in equity
for the 24 weeks ended 5 March 2022
Attributable to equity shareholders Non-controlling interests £m Total equity £m
Issued capital £m Other reserves £m Translation reserve Hedging reserve £m Retained earnings £m Total
£m
£m
Note
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 - - - - 476 476 8 484
Remeasurements of defined benefit schemes - - - - 300 300 - 300
Deferred tax associated with defined benefit schemes - - - - (74) (74) - (74)
Items that will not be reclassified to profit or loss - - - - 226 226 - 226
Effect of movements in foreign exchange - - 6 - - 6 (1) 5
Net gain on hedge of net investment in foreign subsidiaries - - 5 - - 5 - 5
Movement in cash flow hedging position - - - 72 - 72 - 72
Deferred tax associated with movement in cash flow hedging position - - - (3) - (3) - (3)
Share of other comprehensive income of joint ventures and associates - - 7 - - 7 - 7
Effect of hyperinflationary economies - - - - 10 10 - 10
Items that are or may be reclassified to profit or loss - - 18 69 10 97 (1) 96
Other comprehensive income - - 18 69 236 323 (1) 322
Total comprehensive income - - 18 69 712 799 7 806
Inventory cash flow hedge movements
Gains transferred to cost of inventory - - - (51) - (51) - (51)
Total inventory cash flow hedge movements - - - (51) - (51) - (51)
Transactions with owners
Dividends paid to equity shareholders 5 - - - - (271) (271) - (271)
Net movement in own shares held - - - - (42) (42) - (42)
Dividends paid to non-controlling interests - - - - - - (6) (6)
Total transactions with owners - - - - (313) (313) (6) (319)
Balance as at 5 March 2022 45 175 (16) 61 10,091 10,356 84 10,440
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 - - - - 162 162 10 172
Remeasurements of defined benefit schemes - - - - 448 448 - 448
Deferred tax associated with defined benefit schemes - - - - (84) (84) - (84)
Items that will not be reclassified to profit or loss - - - - 364 364 - 364
Effect of movements in foreign exchange - - (329) - - (329) (6) (335)
Net gain on hedge of net investment in foreign subsidiaries - - 11 - - 11 - 11
Reclassification adjustment for movements in foreign exchange on subsidiaries - - (6) - - (6) - (6)
disposed
Movement in cash flow hedging position - - - (26) - (26) - (26)
Deferred tax associated with movement in cash flow hedging position - - - (1) - (1) - (1)
Share of other comprehensive income of joint ventures and associates - - (10) - - (10) - (10)
Effect of hyperinflationary economies - - - - 12 12 - 12
Items that are or may be subsequently reclassified to profit or loss - - (334) (27) 12 (349) (6) (355)
Other comprehensive income - - (334) (27) 376 15 (6) 9
Total comprehensive income - - (334) (27) 538 177 4 181
Inventory cash flow hedge movements
Losses transferred to cost of inventory - - - 34 - 34 - 34
Total inventory cash flow hedge movements - - - 34 - 34 - 34
Transactions with owners
Net movement in own shares held - - - - 8 8 - 8
Dividends paid to non-controlling interests - - - - - - (2) (2)
Acquisition of non-controlling interests - - - - (6) (6) (17) (23)
Total transactions with owners - - - - 2 2 (19) (17)
Balance as at 27 February 2021 45 175 (11) - 9,359 9,568 69 9,637
Condensed consolidated statement of changes in equity (continued)
for the 24 weeks ended 5 March 2022
Attributable to equity shareholders Non-controlling interests £m Total equity £m
Note Issued capital £m Other reserves £m Translation reserve Hedging reserve £m Retained earnings £m Total
£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 on subsidiaries - - (6) - - (6) - (6)
disposed
Movement in cash flow hedging position - - - 39 - 39 - 39
Deferred tax associated with movement 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
Losses transferred to cost of inventory - - - 25 - 25 - 25
Total inventory cash flow hedge movements - - - 25 - 25 - 25
Transactions with owners
Dividends paid to equity - - - - (49) (49) - (49)
shareholders
5
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
1. Operating segments
The Group has five operating segments. 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 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 have been
re-presented for businesses sold or closed during the period.
The Group is comprised of 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 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
24 weeks ended 24 weeks ended 53 weeks ended 24 weeks ended 24 weeks ended 53 weeks ended
5 March 2022
27 February 2021
18 September 2021
5 March 2022
27 February 2021
18 September 2021
£m
£m
£m
£m
£m
£m
Operating segments
Grocery 1,821 1,834 3,593 175 199 413
Sugar 914 763 1,650 77 66 152
Agriculture 809 746 1,537 15 19 44
Ingredients 798 735 1,508 63 78 151
Food 4,342 4,078 8,288 330 362 760
Retail 3,540 2,232 5,593 414 43 321
Central - - - (38) (37) (70)
7,882 6,310 13,881 706 368 1,011
Businesses disposed:
Grocery - 2 2 - 1 -
Ingredients - 1 1 - - -
7,882 6,313 13,884 706 369 1,011
Geographical information
United Kingdom 2,951 2,186 4,982 288 99 293
Europe & Africa 2,902 2,180 4,944 255 69 302
The Americas 919 801 1,678 107 130 259
Asia Pacific 1,110 1,143 2,277 56 70 157
7,882 6,310 13,881 706 368 1,011
Businesses disposed:
Asia Pacific - 3 3 - 1 -
7,882 6,313 13,884 706 369 1,011
Operating segments for the 24 weeks ended 5 March 2022
Grocery Sugar Agriculture Ingredients Retail Central Total
£m £m £m £m £m £m £m
Revenue from continuing businesses 1,822 950 810 878 3,540 (118) 7,882
Internal revenue (1) (36) (1) (80) - 118 -
External revenue from continuing businesses 1,821 914 809 798 3,540 - 7,882
Revenue from external customers 1,821 914 809 798 3,540 - 7,882
Adjusted operating profit before joint ventures and associates 150 75 13 54 414 (38) 668
Share of profit after tax from joint ventures and associates 25 2 2 9 - - 38
Adjusted operating profit 175 77 15 63 414 (38) 706
Profits less losses on disposal of non-current assets 3 - - - - 1 4
Amortisation of non-operating intangibles (15) - - (5) - - (20)
Transaction costs (1) - - (3) - - (4)
Profits less losses on sale and closure of businesses - - - (11) - - (11)
Profit before interest 162 77 15 44 414 (37) 675
Finance income 6 6
Finance expense (1) (1) - - (35) (13) (50)
Other financial income 4 4
Taxation (151) (151)
Profit for the period 161 76 15 44 379 (191) 484
Segment assets (excluding joint ventures and associates) 2,611 2,099 519 1,722 6,805 165 13,921
Investments in joint ventures and associates 37 32 141 130 - - 340
Segment assets 2,648 2,131 660 1,852 6,805 165 14,261
Cash and cash equivalents 2,190 2,190
Current asset investments 34 34
Income tax 85 85
Deferred tax assets 191 191
Employee benefits assets 942 942
Segment liabilities (649) (461) (177) (349) (3,906) (220) (5,762)
Loans and overdrafts (748) (748)
Income tax (152) (152)
Deferred tax liabilities (456) (456)
Employee benefits liabilities (145) (145)
Net assets 1,999 1,670 483 1,503 2,899 1,886 10,440
Non-current asset additions 55 120 14 73 142 1 405
Depreciation and non-cash lease adjustments (52) (42) (8) (26) (240) (5) (373)
Amortisation (20) (1) (1) (6) (5) - (33)
Impairment of property, plant, equipment and right-of-use assets on sale and - - - (11) - - (11)
closure of businesses
Operating segments for the 24 weeks ended 27 February 2021
Grocery Sugar Agriculture Ingredients Retail Central Total
£m £m £m £m £m £m £m
Revenue from continuing businesses 1,835 798 747 825 2,232 (127) 6,310
Internal revenue (1) (35) (1) (90) - 127 -
External revenue from continuing businesses 1,834 763 746 735 2,232 - 6,310
Businesses disposed 2 - - 1 - - 3
Revenue from external customers 1,836 763 746 736 2,232 - 6,313
Adjusted operating profit before joint ventures and associates 186 64 16 69 43 (37) 341
Share of profit after tax from joint ventures and associates 13 2 3 9 - - 27
Businesses disposed 1 - - - - - 1
Adjusted operating profit 200 66 19 78 43 (37) 369
Profits less losses on disposal of non-current assets 1 - - 1 - - 2
Amortisation of non-operating intangibles (20) - (1) (3) - - (24)
Acquired inventory fair value adjustments (1) - - - - - (1)
Transaction costs - - - (1) - - (1)
Exceptional items - - - - (21) (4) (25)
Profits less losses on sale and closure of businesses - - - 5 - - 5
Profit before interest 180 66 18 80 22 (41) 325
Finance income 5 5
Finance expense - (1) - - (37) (14) (52)
Other financial expense (3) (3)
Taxation (103) (103)
Profit for the period 180 65 18 80 (15) (156) 172
Segment assets (excluding joint ventures and associates) 2,585 1,925 466 1,394 7,417 167 13,954
Investments in joint ventures and associates 36 27 139 113 - - 315
Segment assets 2,621 1,952 605 1,507 7,417 167 14,269
Cash and cash equivalents 1,112 1,112
Current asset investments 33 33
Income tax 13 13
Deferred tax assets 217 217
Employee benefits assets 531 531
Segment liabilities (609) (334) (153) (302) (3,924) (226) (5,548)
Loans and overdrafts (440) (440)
Income tax (101) (101)
Deferred tax liabilities (300) (300)
Employee benefits liabilities (149) (149)
Net assets 2,012 1,618 452 1,205 3,493 857 9,637
Non-current asset additions 44 50 10 59 162 8 333
Depreciation and non-cash lease adjustments (56) (47) (8) (27) (266) (5) (409)
Amortisation (24) (1) (2) (4) (2) (1) (34)
Operating segments for the 53 weeks ended 18 September 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
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 interest 371 12 42 162 315 (74) 828
Finance income 9 9
Finance expense (1) (2) - (1) (80) (27) (111)
Other financial expense (1) (1)
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 and non-cash lease adjustments (110) (82) (16) (56) (549) (10) (823)
Amortisation (48) (4) (3) (9) (8) (2) (74)
Reversal of impairment of property, plant, equipment and right-of-use assets - - - 10 - - 10
on sale and closure of businesses
Geographical information for the 24 weeks ended 5 March 2022
United Kingdom Europe & Africa The Americas Asia Pacific Total
£m £m £m £m £m
Revenue from external customers 2,951 2,902 919 1,110 7,882
Segment assets 5,449 5,856 1,415 1,541 14,261
Non-current asset additions 139 170 54 42 405
Depreciation and non-cash lease adjustments (138) (176) (29) (30) (373)
Amortisation (14) (13) (3) (3) (33)
Transaction costs (3) - - (1) (4)
Impairment of property, plant, equipment and right-of-use assets on sale and - - - (11) (11)
closure of businesses
Geographical information for the 24 weeks ended 27 February 2021
United Kingdom Europe & Africa The Americas Asia Pacific Total
£m £m £m £m £m
Revenue from external customers 2,186 2,180 801 1,146 6,313
Segment assets 5,577 6,020 1,214 1,458 14,269
Non-current asset additions 98 164 32 39 333
Depreciation and non-cash lease adjustments (144) (203) (30) (32) (409)
Amortisation (17) (10) (4) (3) (34)
Acquired inventory fair value adjustments - (1) - - (1)
Transaction costs - - - (1) (1)
Exceptional items (18) (7) - - (25)
Geographical information for the 53 weeks ended 18 September 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 and non-cash lease adjustments (288) (406) (62) (67) (823)
Amortisation (35) (26) (7) (6) (74)
Acquired inventory fair value adjustments - (3) - - (3)
Reversal of impairment of property, plant, equipment and right-of-use assets - - - 10 10
on sale and closure of businesses
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
24 weeks ended 24 weeks ended 53 weeks ended 24 weeks ended 24 weeks ended 53 weeks ended
5 March 2022
27 February 2021
18 September 2021
5 March 2022
27 February 2021
18 September 2021
£m
£m
£m
£m
£m
£m
Australia 571 601 1,209 568 545 533
Spain 748 541 1,190 635 776 670
United States 614 530 1,098 683 651 672
All segment disclosures are stated before reclassification of assets and
liabilities classified as held for sale.
2. Exceptional items
2021
Exceptional items of £151m for the 53 weeks ended 18 September 2021 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.
Our prior year half year results were announced on 20 April 2021 and included
an exceptional inventory impairment charge of £21m in Primark, which related
to certain seasonal items already on display in closed stores and which could
not be sold before the end of the season. These items had been cleared from
our stores and the exceptional provision was charged to reflect the write down
of this inventory to net realisable value, which was subsequently utilised.
The £4m pension past service cost was recorded in the first half.
3. Income tax expense
24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February 2021
18 September 2021
2022
£m
£m
£m
Current tax expense
UK - corporation tax at 19% (2021 - 19%) 18 12 46
Overseas - corporation tax 112 98 208
UK - under provided in prior periods 1 - 9
Overseas - over provided in prior periods (3) (2) (9)
128 108 254
Deferred tax expense
UK deferred tax 10 3 13
Overseas deferred tax 12 (8) (37)
UK - over provided in prior periods - - (3)
Overseas - under provided in prior periods 1 - -
23 (5) (27)
Total income tax expense in income statement 151 103 227
Reconciliation of effective tax rate
Profit before taxation 635 275 725
Less share of profit after tax from joint ventures and associates (37) (26) (79)
Profit before taxation excluding share of profit after tax from joint ventures 598 249 646
and associates
Nominal tax charge at UK corporation tax rate of 19% (2021 - 19%) 114 47 123
Effect of higher and lower tax rates on overseas earnings 7 26 33
Effect of changes in tax rates on income statement 3 - 17
Expenses not deductible for tax purposes 24 26 51
Disposal of assets covered by tax exemptions or unrecognised capital losses 1 - (3)
Deferred tax not recognised 3 6 9
Adjustments in respect of prior periods (1) (2) (3)
151 103 227
Income tax recognised directly in equity
Deferred tax associated with defined benefit schemes 74 84 144
Deferred tax associated with movement in cash flow hedging position 3 1 14
77 85 158
The adjusted tax rate of 23.2% is the estimated weighted average annual tax
rate based on full year projections and has been applied to profit before
adjusting items for the 24 weeks ended 5 March 2022. The tax impact of
adjusting items has been calculated on an item-by-item basis.
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 2021 year
end 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 Group
has appealed against the European Commission's decision, as have the UK
Government and a number of other UK companies. We have calculated our maximum
potential liability to be £26m (2021 year end: £26m; 2021 half year: £27m),
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.
4. Earnings per share
24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February 2021
18 September 2021
2022
pence
pence
pence
Adjusted earnings per share 63.8 25.1 80.1
Disposal of non-current assets 0.5 0.3 0.5
Sale and closure of businesses (1.4) 0.6 2.5
Acquired inventory fair value adjustments - (0.1) (0.4)
Transaction costs (0.5) (0.1) (0.4)
Exceptional items - (3.2) (19.1)
Tax effect on above adjustments - 0.3 3.0
Amortisation of non-operating intangibles (2.5) (3.0) (6.3)
Tax credit on non-operating intangibles amortisation and goodwill 0.4 0.6 0.6
Earnings per ordinary share 60.3 20.5 60.5
5. Dividends
24 weeks ended 24 weeks 53 weeks 24 weeks ended 24 weeks 53 weeks
5 March
ended
ended
5 March
ended
ended
2022
27 February 2021
18 September 2021
2022
27 February 2021
18 September 2021
pence
pence
pence
£m
£m
£m
2021 interim - 6.2 - 49
2021 final 20.5 - - 162 - -
2021 special 13.8 - - 109 - -
34.3 - 6.2 271 - 49
The combined 2021 final and special dividend of 34.3p was approved on 10
December 2021 and totalled £271m when paid on 14 January 2022. The 2022
interim dividend of 13.8p per share, totalling £109m will be paid on 8 July
2022 to shareholders on the register on 10 June 2022.
6. Acquisitions and disposals
Acquisitions
2022
On 31 January 2022, 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. The
Group also acquired a small grocery company in New Zealand and a small
agriculture business in Finland during the period. The acquisitions had the
following effect on the Group's assets and liabilities:
Pre-acquisition carrying Recognised values on acquisition
values Fytexia Other Total
£m
£m £m £m
Net assets
Intangible assets - 54 7 61
Property, plant and equipment 5 1 4 5
Right-of-use assets 8 - 8 8
Inventory 3 2 1 3
Trade and other receivables 3 2 1 3
Cash 8 6 2 8
Lease liabilities (8) - (8) (8)
Short-term loans (13) (11) (2) (13)
Trade and other payables (3) (2) (1) (3)
Provisions (6) (6) - (6)
Taxation - (14) (2) (16)
Net identifiable assets and liabilities (3) 32 10 42
Goodwill 61 10 71
Total consideration 93 20 113
Recognised values on acquisition
£m
Satisfied by
Cash consideration 111
Deferred consideration 2
113
Net cash
Cash consideration 111
Cash and cash equivalents acquired (8)
103
Pre-acquisition carrying amounts were the same as recognised values on
acquisition apart from £61m of non-operating intangibles in respect of
brands, technology and customer relationships, a £16m related deferred tax
liability and goodwill of £71m. Cash flow on acquisition of subsidiaries,
joint ventures and associates of £114m comprised £111m cash consideration
less £8m cash acquired, a £4m contribution to an existing joint venture in
China and £7m of deferred consideration relating to previous acquisitions.
2021
In the second half of 2021, the Group acquired DR Healthcare España, a
Spanish enzymes producer (Ingredients segment). Total consideration was £14m,
comprising £12m cash consideration and £2m deferred consideration. Net
assets acquired included non-operating intangible assets of £19m together
with related deferred tax of £5m.
During the period, the Group contributed £43m (£39m in the half year
results) to the bakery ingredients joint venture in China with Wilmar
International and also paid £2m of deferred consideration relating to
previous acquisitions.
Disposals
2022
There were no disposals in the first half. The transaction to sell a further
yeast company to the joint venture with Wilmar International in China
(classified as held for sale at the end of last year) is no longer going
ahead. The £10m non-cash impairment reversed last year through profit/(loss)
on sale and closure of business has therefore been reinstated at a cost of
£11m.
2021
In the first half of 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 at year end and
£4m at the half year.
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. The half year release was £1m of closure provisions
no longer required in the Asia Pacific and Ingredients segments.
7. Analysis of net debt
At Cash flow Acquisitions New leases and non-cash Exchange adjustments At
18 September
£m
£m
items
£m
5 March
2021
£m
2022
£m
£m
Short-term loans (244) 80 (13) - 1 (176)
Long-term loans (76) (402) - - 5 (473)
Lease liabilities (3,281) 131 (8) (25) 42 (3,141)
Total liabilities from financing activities (3,601) (191) (21) (25) 48 (3,790)
Cash at bank and in hand, cash equivalents and overdrafts 2,189 (118) - - 20 2,091
Current asset investments 32 1 - - 1 34
Net debt including lease liabilities (1,380) (308) (21) (25) 69 (1,665)
Net cash excluding lease liabilities is £1,476m (2021 half year - £705m;
2021 year end -£1,901m).
8. Related parties
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Full details of the Group's other related party relationships,
transactions and balances are given in the Group's financial statements for
the 53 weeks ended 18 September 2021. There have been no material changes in
these relationships in the 24 weeks ended 5 March 2022 or up to the date of
this report. No related party transactions have taken place in the first 24
weeks of the current financial year that have materially affected the
financial position or the performance of the group during that period.
9. Defined benefit pension schemes
Employee benefits assets primarily comprise the accounting surplus of the
Group's UK defined benefit scheme. At the end of the period these were £942m
(2021 half year: £531m). The increase from £640m at the end of the last
financial year was driven by a reduction in scheme liabilities as a result of
an increase in the discount rate applied from 1.75% at the financial year end
to 2.40% at this half year.
10. Basis of preparation
Associated British Foods plc ('the Company') is a company domiciled in the
United Kingdom. The condensed consolidated interim financial statements of the
Company for the 24 weeks ended 5 March 2022 comprise those of the Company and
its subsidiaries (together referred to as 'the Group') and the Group's
interests in joint ventures and associates.
The consolidated financial statements of the Group for the 53 weeks ended 18
September 2021 are available upon request from the Company's registered office
at 10 Grosvenor Street, London, W1K 4QY or at www.abf.co.uk
(http://www.abf.co.uk) .
The condensed consolidated interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting. They do not include all of
the information required for full annual financial statements and should be
read in conjunction with the consolidated financial statements for the 53
weeks ended 18 September 2021.
Lower Group adjusted operating profit for the last two financial years
compared to 2018/19 was driven by closure of Primark stores and subsequent
trading restrictions because of COVID. All our stores have been reopened for
some time and almost all of them are free of trading restrictions.
The events of the last two years demonstrated the importance of sufficient
financial resources and credit strength to meet operational challenges. In
November last year, S&P Global 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.
At the half year, the Group had net cash before lease liabilities of £1,476m
compared to £705m at the half year last year. In August 2020, a two-year
extension to the Group's £1,088m committed facility was negotiated extending
its maturity to July 2023. Although we expect to replace this facility, as
these plans are not yet finalised, for the purpose of this going concern
assessment we have assumed this facility will not be available after maturity.
The directors have reviewed a detailed cash flow forecast to the end of the
2023 financial year. The directors reviewed the trading of both the Food and
Primark businesses in the base case and applied a downside sensitivity and a
reverse stress test. 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.
In the downside sensitivity, the two most significant challenges are price
inflation and the potential for future COVID trading restrictions affecting
Primark.
All businesses are facing significant supply-side inflationary pressures in
commodities and other raw materials, packaging, labour, energy (gas and
electricity) and logistics. Inflation has been compounded by the Russian
invasion of Ukraine. Actions are being taken by the business to recover
inflationary cost increases.
The downside scenario assumes that approximately two thirds of cost inflation
in the Food businesses and Primark is not recovered and that no mitigating
actions are taken. It also assumes further COVID trading restrictions reduce
revenues across the Primark estate by 25% for six months. This includes the
key Christmas trading period. Again we have assumed that no mitigating actions
are taken. It has also been assumed that there will be no further assistance
from national governments.
Under these sensitivities, the Group has a net cash position (before lease
liabilities) throughout the assessment period and complies with all debt
covenants.
The reverse stress test considers circumstances which could exhaust the
Group's cash resources during the assessment period. Cost inflation would need
to more than double, without any price increases to customers or mitigating
actions, before the cash resources are exhausted.
Under the downside scenario, headroom throughout the period is substantial,
therefore the directors did not consider it necessary to assess potential
mitigating actions available to the Group. The directors consider the
likelihood of the headroom being exhausted to be remote.
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 condensed consolidated interim financial statements.
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Operating
Review. Note 26 on pages 186 to 197 of the 2021 Annual Report provides details
of the Group's policy on managing its financial and commodity risks.
The 24 week period for the condensed consolidated interim financial statements
of the Company means that the second half of the year is usually a 28 week
period, and the two halves of the reporting year are therefore not of equal
length. For the Retail segment, Christmas, falling in the first half of the
year, is a particularly important trading period. For the Sugar segment, the
balance sheet, and working capital in particular, is strongly influenced by
seasonal growth patterns for both sugar beet and sugar cane, which vary
significantly in the markets in which the Group operates.
The condensed consolidated interim financial statements are unaudited but have
been subject to an independent review by the auditor and were approved by the
board of directors on 26 April 2022. They do not constitute statutory
financial statements as defined in section 434 of the Companies Act 2006. The
comparative figures for the 53 weeks ended 18 September 2021 have been
abridged from the Group's 2021 financial statements and are not the Company's
statutory financial statements for that period. Those financial statements
have been reported on by the Company's auditor for that period and delivered
to the Registrar of Companies. The report of the auditor was unqualified, did
not include a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
This Interim Results Announcement has been prepared solely to provide
additional information to shareholders as a body, to assess the Group's
strategies and the potential for those strategies to succeed. This Interim
Results Announcement should not be relied upon by any other party or for any
other purpose.
11. Significant accounting policies
Except where detailed otherwise, the accounting policies applied by the Group
in these condensed consolidated interim financial statements are substantially
the same as those applied by the Group in its consolidated financial
statements for the 53 weeks ended 18 September 2021 including for derivatives
and current biological assets, which are recognised in the balance sheet at
fair value and fair value less costs to sell, respectively. The methodology
for selecting assumptions underpinning the fair value calculations has not
changed since 18 September 2021.
In April 2021 the IFRS Interpretations Committee issued a final agenda
decision regarding configuration or customisation costs in a cloud computing
arrangement which provided additional guidance on how to determine whether
configuration or customisation expenditure relating to cloud computing
arrangements result in an intangible asset. This agenda decision did not have
a material impact on the prior period or current results.
New accounting standards
The following accounting standards, amendments and clarifications were adopted
during the period 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 expected at the end of 2021, with remaining USD
tenors expected to cease in 2023. The Group is primarily exposed to USD LIBORs
that will be available until June 2023.
Accounting standards not yet applicable
The Group is assessing the impact of the following standards, interpretations
and amendments that are not yet effective. Where already endorsed by the UK
Endorsement Board (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 (not
yet endorsed by the UKEB)
• Amendment to IFRS 9 Financial Instruments effective 2023 financial year (not
yet endorsed by the UKEB)
• Annual Improvements to IFRS Standards 2018-2020 effective 2023 financial year
(not yet endorsed by the UKEB)
• IFRS 17 Insurance Contracts effective 2023 financial year (not yet endorsed by
the UKEB)
• 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 (not yet endorsed by the UKEB)
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
effective 2023 financial year (not yet endorsed by the UKEB)
12. Accounting estimates and judgements
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. In preparing the
condensed consolidated interim financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those applied to
the consolidated financial statements for the 53 weeks ended 18 September
2021.
13. Alternative performance measures
In reporting financial information, the Board uses various alternative
performance measures (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 period.
Two year like-for-like sales No direct equivalent The like-for-like sales metric expressed over two years enables measurement of Consistent with the definition given
the performance of our retail stores compared to our experience in the first
half of 2020, which was before any of the economic effects of COVID.
It is calculated as described above for like-for-like sales, but with 2020
data as the comparator.
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.
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 condensed
intangibles, transaction costs, amortisation of fair value adjustments made to consolidated income statement and by operating segment in note 1 of the
acquired inventory, profits less losses on disposal of non-current assets and interim results announcement
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 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 condensed
intangibles, transaction costs, amortisation of fair value adjustments made to consolidated income statement.
acquired inventory, profits less losses on disposal of non-current assets,
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 per share Earnings per share Adjusted earnings per share is stated before amortisation of non-operating Reconciliation of this measure is provided in note 4 of the interim results
intangibles, transaction costs, amortisation of fair value adjustments made to announcement
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 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 condensed consolidated
unusual in nature and are considered of such significance that they require income statement with further detail provided in note 2 of the interim results
separate disclosure on the face of the income statement. announcement
Constant currency Revenue and see adjusted operating profit (non-IFRS) measure Constant currency measures are derived by translating the relevant prior See note B
period figure at current period average exchange rates, except for countries
where CPI has escalated to extreme levels, in which case actual exchange rates
are used. There are currently two countries where the Group has operations in
this position - Argentina and Venezuela.
Effective tax rate Income tax expense The effective tax rate is the tax charge for the period 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 3 of the interim results announcement
Adjusted effective tax rate No direct equivalent The adjusted effective tax rate is the tax charge for the period 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 3 of the interim results announcement
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 period.
Capital expenditure No direct equivalent Capital expenditure is a measure of investment each period 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 period in non-current assets See note E
of 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 7 of the interim results
investments and loans. announcement
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 7 of the interim results
investments, loans and lease liabilities. announcement
Adjusted EBITDA See Adjusted operating profit (non-IFRS) measure Adjusted EBITDA is stated before depreciation, amortisation and impairment 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 based on the last 12 months rolling adjusted EBITDA.
(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 No direct equivalent This measure expresses (average) working capital as a percentage of revenue. Consistent with the
as a percentage of revenue
definition given
Note A
Grocery Sugar Agriculture Ingredients Retail Central and disposed businesses Total
£m
£m
£m
£m
£m
£m
£m
24 weeks ended 5 March 2022
External revenue from continuing businesses 1,821 914 809 798 3,540 - 7,882
Adjusted operating profit 175 77 15 63 414 (38) 706
Adjusted operating margin % 9.6% 8.4% 1.9% 7.9% 11.7% 9.0%
24 weeks ended 27 February 2021
External revenue from continuing businesses 1,834 763 746 735 2,232 3 6,313
Adjusted operating profit 199 66 19 78 43 (36) 369
Adjusted operating margin % 10.9% 8.7% 2.5% 10.6% 1.9% 5.8%
Note B
Grocery Sugar Agriculture Ingredients Retail Disposed businesses Total
£m
£m
£m
£m
£m
£m
£m
24 weeks ended 5 March 2022
External revenue from continuing businesses 1,821 914 809 798 3,540 - 7,882
at actual rates
24 weeks ended 27 February 2021
External revenue from continuing businesses 1,834 763 746 735 2,232 3 6,313
at actual rates
Impact of foreign exchange (41) 4 (2) (21) (77) - (137)
External revenue from continuing businesses 1,793 767 744 714 2,155 3 6,176
at constant currency
% change at constant currency +2% +19% +9% +12% +64% +28%
Grocery Sugar Agriculture Ingredients Retail Central and disposed businesses Total
£m
£m
£m
£m
£m
£m
£m
24 weeks ended 5 March 2022
Adjusted operating profit at actual rates 175 77 15 63 414 (38) 706
24 weeks ended 27 February 2021
Adjusted operating profit at actual rates 199 66 19 78 43 (36) 369
Impact of foreign exchange (7) 5 (1) (2) 4 (1) (2)
Adjusted operating profit at constant currency 192 71 18 76 47 (37) 367
% change at constant currency -9% +8% -17% -17% +781% +92%
Note C
24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February 2021
2022
pence 18 September 2021
pence
pence
Adjusted earnings per share (pence) 63.8 25.1 80.1
Adjustment to reflect the impact of the future repayment of £79m job -
retention monies received in the first half taxed at the adjusted effective
tax rate (pence) (6.6) -
63.8 18.5 80.1
Dividends relating to the year (pence) - excluding special dividend 13.8 6.2 26.7
Dividend cover 5 3 3
Note D
From the cash flow statement 24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February 2021
18 September 2021
2022
£m
£m
£m
Purchase of property, plant and equipment 272 263 551
Purchase of intangibles 64 44 76
336 307 627
Note E
From the cash flow statement 24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February 2021
18 September 2021
2022
£m
£m
£m
Purchase of property, plant and equipment 272 263 551
Purchase of intangibles 64 44 76
Purchase of subsidiaries, joint ventures and associates 114 39 57
Purchase of shares in subsidiary undertaking from non-controlling interests - 23 23
Purchase of other investments - 13 14
450 382 721
Note F
24 weeks ended 24 weeks ended 53 weeks ended
5 March
27 February 2021
18 September 2021
2022
£m
£m
£m
Adjusted operating profit 706 369 1,011
Charged to adjusted operating profit:
Depreciation of property, plant and equipment 245 265 535
Amortisation of operating intangibles 14 11 26
Depreciation of right-of-use assets and non-cash lease adjustments 128 144 288
Adjusted EBITDA 1,093 789 1,860
Net debt including lease liabilities (1,665) (2,715) (1,380)
Financial leverage ratio (based on the last 12 months rolling adjusted EBITDA) 0.8 1.7 0.7
14. Subsequent events
In addition to the planned repayment of $100 million of private placement debt
during the period, two further planned repayments of $100 million and £80
million have been made since the end of the period.
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.
Responsibility statement
The Interim Results Announcement complies with the Disclosure and Transparency
Rules ('the DTR') of the UK's Financial Conduct Authority in respect of the
requirement to produce a half-yearly financial report.
The directors confirm that to the best of their knowledge:
this financial information has been prepared in accordance with UK-adopted
International Accounting Standard 34 Interim Financial Reporting;
this Interim Results Announcement includes a fair review of the important
events during the first half and their impact on the financial information,
and a description of the principal risks and uncertainties for the remaining
half of the year as required by DTR 4.2.7R; and
this Interim Results Announcement includes a fair review of the disclosure of
related party transactions and changes therein as required by DTR 4.2.8R.
On behalf of the board
Michael McLintock George Weston John Bason
Chairman Chief Executive Finance Director
26 April 2022
Independent review report to Associated British Foods plc
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the Interim Results Announcement for the 24 week period ended 5
March 2022 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated cash flow statement,
the condensed consolidated statement of changes in equity and the related
explanatory notes. We have read the other information contained in the Interim
Results Announcement and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated interim financial statements in the
Interim Results Announcement for the 24 week period ended 5 March 2022 are not
prepared, in all material respects, in accordance with UK-adopted
International Accounting Standard 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK and Ireland) Review of Interim Financial information
performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 10, the annual financial statements of the Group will be
prepared in accordance with UK-adopted international accounting standards. The
condensed set of financial statements included in this Interim Results
Announcement has been prepared in accordance with UK-adopted International
Accounting Standard 34 Interim Financial Reporting.
Responsibilities of the directors
The directors are responsible for preparing the Interim Results Announcement
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Auditor's responsibilities for the review of the financial information
In reviewing the Interim Results Announcement, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statements in the Interim Results Announcement. Our conclusion is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK and
Ireland) Review of Interim Financial information performed by the Independent
Auditor of the Entity issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our work, for this report, or for the conclusions
we have formed.
Ernst & Young LLP
Birmingham
26 April 2022
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