REG - Assoc.British Foods - Interim Results Announcement
23/04/2024 07:00
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RNS Number : 5893L Associated British Foods PLC 23 April 2024
FOR RELEASE 23 APRIL 2024
Interim Results Announcement
24 weeks ended 2 March 2024
FOR RELEASE 23 APRIL 2024
Associated British Foods plc results for the 24 weeks ended 2 March 2024
Financial Headlines
24 weeks ended 2 March 2024 24 weeks ended 4 March 2023 Actual currency Constant currency
change change
Group revenue £9,734m £9,560m +2 % +5 %
Adjusted operating profit £951m £684m +39 % +46 %
Adjusted profit before tax £911m £667m +37 %
Adjusted earnings per share 90.4p 62.0p +46 %
Operating profit £931m £663m +40 %
Profit before taxation £881m £644m +37 %
Basic earnings per share 87.4p 67.0p +30 %
Gross investment £571m £527m +8 %
Free cash flow £468m £(510)m
Net cash before lease liabilities £668m £586m
Total net debt £(2,496)m £(2,601)m
Interim dividend 20.7p 14.2p +46 %
Adjusted operating profit is derived from operating profit after taking
certain charges and credits as shown on the face of the condensed consolidated
income statement. References to changes in revenue and adjusted operating
profit in the following segmental commentary are based on constant currency.
The Group has defined and outlined the purpose of its Alternative performance
measures in note 14. These measures are used within the Financial Headlines
and in this Interim Results Announcement.
George Weston, Chief Executive of Associated British Foods, said:
"This is a very strong set of financial results, as we are now benefitting
from the restoration of some normality in our markets and in our supply
chains. Improvements to the Group's operational performance, driven by the
investments and strong execution over the last few years, are now becoming
visible. Group profit margins are recovering accordingly to more normal
levels.
Looking ahead, we continue to invest with discipline to build further
sustainable growth. Geopolitical risks remain, of course, and the consumer has
yet to fully emerge from cost of living pressures. But the Group is well
positioned to deliver good returns to shareholders."
Group performance
- Revenue growth, up 5%, driven by continued good momentum in Retail and food
businesses
- Significant growth in adjusted operating profit, up 46%, reflecting strong
margin recovery
- Investment of £571m, including a number of strategic initiatives to improve
capacity, capability and sustainability
- Free cash flow of £468m, reflecting profit growth and a significant reduction
in working capital outflow
Segmental performance
- Strong Retail sales growth and further margin recovery
● Revenue up 7.5% to £4.5bn, reflecting continued growth in selling space
● Like-for-like sales up 2.1%, driven by good performance across most markets
due to pricing and well-received product ranges
● Significant increase in adjusted operating profit, up 46% to £508m, with
margin recovery to 11.3%
● Rolling out Click + Collect service more broadly in the UK
- Significant profitability improvement in Grocery led by US-focused brands and
reduction of losses in Allied Bakeries
- Strong profitability improvement in Sugar, driven by better Vivergo
performance
- Good profit growth in Ingredients, driven by continued strong performance in
AB Mauri
- Higher profitability in Agriculture due to lower input costs
Shareholder returns
- Significant increase in interim dividend, to 20.7p, reflecting growth in
earnings
- Final £56m of first £500m and £225m of the second £500m share buyback
programmes completed in the period
Full year outlook
The Group has delivered a strong first half performance and is on track to
deliver significant growth in both profitability and cash generation ahead of
expectations at the start of this financial year.
We expect Grocery to continue to perform well, supported by a step-up in
marketing investment, although the strong profitability of our US-focused
brands is expected to normalise somewhat towards the end of the second half.
In Sugar, we continue to expect a substantial improvement in profitability,
benefitting from a more typical beet crop and production level at British
Sugar and the reduced losses in Vivergo. Following a better than expected
first half, we now expect Ingredients to perform well this financial year,
driven by AB Mauri. We continue to expect Agriculture to move forward as
markets improve and it integrates and leverages the acquisitions of the last
two years.
We expect Primark to continue to perform well in the second half driven by our
store expansion programme and the modest levels of like-for-like growth, as we
focus on driving volumes. While the consumer environment remains soft, we
expect to benefit from the strength of our value proposition, our product
relevance and category stretch and our increasingly effective digital
engagement. We expect a moderate improvement in adjusted operating margin in
Primark in the second half compared to the first half, albeit with a step-up
in investment to support medium-term growth.
The Group continues to prioritise investment in its businesses and we continue
to expect to increase spend in each of the next few years to slightly above
last year's level.
For further information please contact:
Associated British Foods:
+44 20 7399 6545
Eoin Tonge, Finance Director
Lucinda Baker, Head of Investor Relations
Chris Barrie, Corporate Affairs Director
Citigate Dewe Rogerson:
+44 20 7638 9571
Jos Bieneman +44 7834 336 650
Angharad Couch +44 7507 643 004
Ellen Wilton +44 7921 352 851
There will be an analyst and investor presentation at 09.00am BST 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 £20bn and 133,000 employees in 55
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.
Operating review
Grocery
24 weeks ended 2 March 2024 24 weeks ended 4 March 2023 Actual Constant currency
currency
Revenue £m 2,124 2,105 +1 % +5 %
Adjusted operating profit £m 230 173 +33 % +39 %
Adjusted operating profit margin 10.8% 8.2%
Operating profit £m 219 163 +34 %
Our Grocery segment performed better than expected in the period. Sales were
higher than the same period last year, driven by last year's price increases
to offset input cost inflation and by volume growth at some of our leading
brands. There has generally been good demand for our brands, particularly in
the US where Mazola, our consumer oils business, continued to perform very
well. Losses reduced at Allied Bakeries year on year building on the improved
performance in the second half of last year. In general, our brands are now
trading in a more stable environment following last year's high input cost
inflation. Across the Grocery businesses as a whole, adjusted operating profit
margin recovered and adjusted operating profit was significantly higher.
Among our international brands, Twinings grew well with good volume growth in
its major markets of the US, UK and France. The growth in the US and UK was
supported by investment in brand and marketing, as well as strong instore
execution. In the US, Twinings expanded its advertising across the Eastern
seaboard and the brand continues to grow its distribution among key US
customers with higher market share as a result. Sales in the UK were also well
ahead, led by infusions and wellbeing teas. Ovaltine had a more mixed
performance. In Thailand, sales of powder products were lower, partially
offset by sales of lower margin ready-to-drink products, which continue to
grow. Sales were also lower in China where economic conditions have impacted
our channel mix. Sales growth in Ovaltine in Europe continued to be good.
Profitability at both Twinings and Ovaltine reflected the higher marketing
investment in both brands. Performance was generally good across our other
international brands. Patak's delivered good sales growth against the same
period last year, with international sales and the US in particular driving
that performance. Jordans changed its promotional activity, which impacted
sales but delivered improved results. Mazzetti, our balsamic vinegars brand
enjoyed further good volume growth.
Our US-focused brands continued to trade very well. Our consumer oils
business, the market leader Mazola, benefitted from increased production
capacity and delivered growth in sales and volumes and, as a result, good
growth in profitability. Sales of our Fleischmann's yeast and bakery
ingredients business also grew. Stratas, our joint venture that supplies oils
to the foodservice, ingredients and retail markets, traded in line with last
year's strong performance.
Our UK-focused brands generally traded well. Allied Bakeries delivered a
significant reduction in losses compared to last year with better sales and
volumes as well as improved operational performance. Ryvita started to benefit
from successful new product launches and Dorset Cereals' sales stabilised with
new product development and advertising under way. Our Australia and New
Zealand-focused brands faced a more challenging consumer environment. Our Tip
Top bakery brand was held back by consumers trading down due to the higher
cost of living. In our Don meat business, volumes were flat although
profitability was impacted by higher input costs. Yumi's, which produces dips
and snacks made with natural ingredients, delivered good growth in sales and
profitability.
Ingredients
24 weeks ended 2 March 2024 24 weeks ended 4 March 2023 Actual Constant currency
currency
Revenue £m 1,056 1,088 -3 % +1 %
Adjusted operating profit £m 117 102 +15 % +19 %
Adjusted operating profit margin 11.1% 9.4%
Operating profit £m 110 95 +16 %
Performance in our Ingredients segment continued to be strong and ahead of
expectations. This result was driven by AB Mauri, our yeast and bakery
ingredients business, which maintained its strong performance from last year.
Sales and profits were moderately lower at ABF Ingredients, our portfolio of
specialty ingredients businesses, much as expected.
AB Mauri performed particularly well. Sales benefitted from both the
annualisation of price increases and resilient underlying volume growth. In
particular, we delivered strong performances in North America, Brazil, Mexico
and Europe. Our business in Argentina continues to be impacted by currency
devaluation, although performance on an underlying basis has been resilient.
AB Mauri's profitability was supported by the strong sales and management of
input costs. New Food Coatings, our joint venture in Australia, New Zealand
and SE Asia specialising in seasonings, sauces and ingredients, traded well.
Production began in the period at our recently built specialty yeast plant in
Hull in the UK, expanding our capability in innovation. Construction continued
on our new yeast plant in northern India where we believe there will be
considerable demand for bakery yeast. In our Australian and New Zealand Mauri
business, our new animal feed mill in Hope Valley, Western Australia, stepped
up production in the period and we closed our older facility at Bentley as
planned.
ABF Ingredients traded broadly as expected with some continued customer
destocking holding back sales volumes, particularly in our pharmaceutical
ingredients business SPI Pharma, specialty lipids business ABITEC and in feed
enzymes, impacting AB Enzymes. Fytexia, our life sciences polyphenols
business, had good sales growth with botanicals performing strongly. All
businesses benefitted from reduced input costs and were able to improve their
margins. In these businesses, we continued to make long-term investments in
R&D and commercial capabilities. Overall, we believe there are early signs
of a recovery in volumes and trading towards the end of the period was better.
We continue to invest in capacity for Ohly in Hamburg, Germany. Construction
of our new enzyme powder packing plant for AB Enzymes is progressing well and
will bring more capacity. During the period, we announced that Jeremy Xu would
join to become chief executive of ABF Ingredients succeeding Fabienne
Saadane-Oaks who is retiring.
Agriculture
24 weeks ended 2 March 2024 24 weeks ended 4 March 2023 Actual Constant currency
currency
Revenue £m 850 950 -11 % -9 %
Adjusted operating profit £m 14 12 +17 % +27 %
Adjusted operating profit margin 1.7% 1.3%
Operating profit £m 10 7 +43 %
Sales were lower than the same period a year ago due to continued soft demand
for compound animal feed in the UK and China, but profits improved on better
procurement, improved pricing and contribution from acquisitions.
Our Dairy business, which is developing a unique full-service offer to the
dairy sector, performed well in the period, supported by a good contribution
from National Milk Records, which was acquired last year.
We continue to make progress in our other global agricultural technology
businesses, built around a combination of established and recently-acquired
businesses. At AB Vista, our international feed additives business, sales and
profit declined from weaker enzyme additives, although we are starting to see
the benefit from growth in non-enzyme additives and product development is
progressing. Profitability improved at AB Neo, our starter feed business.
Profitability also improved at Germains, our seed supply and development
business. Nutritional Supplements, our equine and pet feed business, traded
resiliently.
Our compound feed businesses in the UK and China continued to have soft
demand. Reduced herd sizes and excess feed production capacity continued to
drive market conditions in the UK, while the Chinese market continued to be
driven by low volumes and reduced herd sizes as a result of challenging farm
profitability. However, there are some signs of stabilisation in the compound
feed businesses, particularly in the poultry market.
Frontier, our joint venture business specialising in arable farm inputs and
grain marketing in the UK, had a decline in profits in the period as a result
of reduced demand for its services due to wet weather.
Sugar
24 weeks ended 2 March 2024 24 weeks ended 4 March 2023 Actual Constant currency
currency
Revenue £m 1,170 1,168 In line +9 %
Adjusted operating profit £m 125 97 +29 % +74 %
Adjusted operating profit margin 10.7% 8.3%
Operating profit £m 121 86 +41 %
Sales increased against the same period last year, driven in part by strong
prices in our European businesses, and by higher volumes at Azucarera and
Vivergo. Profitability improved significantly, driven by a much-reduced loss
at Vivergo and the stronger performance at Azucarera, partially offset by the
phasing of profits at British Sugar. It is worth noting that there was a
foreign exchange translation loss of £36m on our non-sterling earnings in the
period, which mostly impacted Illovo and resulted in flat profit growth for
that business on an actual currency basis.
Sales at British Sugar were lower in the period, due to lower stock levels
held over from last year's production campaign, which was severely affected by
adverse weather. We were also impacted by lower co-product prices in the
period. As expected, profits were somewhat lower as a result. However, despite
some disruption caused by wet weather, sugar production from the 2023/24
campaign is expected to be 1.1 million tonnes, significantly ahead of last
year's unusually low crop (0.74m tonnes) and broadly in line with historical
levels.
British Sugar continues to make progress in decarbonising its operations. In
the period we approved two projects: the replacement of a coal boiler at our
Cantley plant and new evaporators at our Wissington plant to increase
efficiency and significantly reduce energy usage.
Sales grew at Azucarera reflecting larger acreage and higher volumes,
supported by higher European sugar prices. Profits grew accordingly, despite
higher beet and raw cane costs, which were partially offset by lower energy
costs.
Illovo, our set of sugar businesses in southern Africa, traded well in general
with good domestic sales growth. Profits were flat in actual currency after
the impact of foreign currency translation. Our business in Zambia had good
trading with higher sales and production. Our business in Malawi had higher
sales but lower production due to adverse weather and poor cane yields caused
by recent cyclones. It was also impacted by currency devaluation but this was
managed effectively through pricing. Tanzania also had lower production due to
adverse weather. The half year on half year results benefitted from
non-recurring prior-year losses in Mozambique, which remains closed due to
severe flooding last year.
Vivergo, our bioethanol plant in the UK, is now delivering a good operational
performance. However, margins continued to be volatile, which impacted
financial performance in the period. Notwithstanding these trading conditions,
the business reduced its losses substantially in the period. Due to this
volatility in margin, an impairment of £18m was recognised.
Following a review, we closed our sugar business in the north of China and we
are in the process of selling its assets and this has now been disclosed as a
business to be closed rather than a continuing activity.
Retail
24 weeks ended 2 March 2024 24 weeks ended 4 March 2023 Actual Constant currency
currency
Revenue £m 4,500 4,228 +6 % +7.5 %
Adjusted operating profit £m 508 351 +45 % +46 %
Adjusted operating profit margin 11.3% 8.3%
Operating profit £m 508 351 +45 %
Primark delivered strong sales growth in the period. This was driven by
newly-opened stores and by last year's carefully selected price increases to
offset inflation. Sales of womenswear and menswear both grew well, as did
sales of our health and beauty ranges. Our digital engagement continued to
support sales growth in the period.
Sales were up 7.5% in the period, following the previously reported sales
growth up 7.9% in the 16 weeks to 6 January 2024. Trading in that period was
marked by a slow start for many cold weather categories due to unseasonal warm
weather, followed by strong Christmas trading with our seasonal ranges selling
through well. Sales of womenswear and menswear were strong, particularly in
performance wear, leisure, knitwear as well as our Rita Ora collection. In the
8 weeks to 2 March 2024, sales increased by 6.3%. Trading was generally softer
in terms of volumes. Due to prolonged colder weather, average selling prices
were higher than expected in the period across cold-weather products with
generally good sell-through of stock. Sales of Home were strong, but cold and
wet weather slowed sales of luggage, beach and swimwear.
Overall, new stores contributed 5.4% of sales growth, due to both increased
selling space and higher sales densities. Like-for-like sales growth was 2.1%
in the period, driven by higher average selling prices, partially offset by
slightly smaller basket sizes and accordingly lower volumes. Footfall was
broadly in line with the same period last year and we saw notably strong
trading at our destination city centre stores, particularly where located in
tourist destinations.
In the UK, sales grew by 4.3% against the same period last year, driven by
like-for-like sales growth of 3.6% and a contribution from new space of 0.7%.
Trading was marked by warm weather early in the period, good sales of seasonal
ranges at Christmas and soft trading in January and February due to wet
weather and commuter transport disruption. Our city centre stores performed
well with the continued return of tourists and office workers particularly
benefitting our stores in Oxford Street, London, Edinburgh and Birmingham.
Primark's market share((1)) continued to grow, increasing from 6.7% to 6.9% in
the 24 weeks to the end of the period.
In Europe (excluding the UK), sales grew by 7.9%. New selling space
contributed 6.4% to that growth, with like-for-like sales up 1.5%. This
like-for-like metric was impacted by the fast pace of store expansion,
particularly in France and Italy. Trading in France was very good, with
footfall driving significant growth in total sales, supported by good
like-for-like sales growth, strong performance from our new stores and overall
outperforming the market. Trading in Spain was good, also outperforming the
market, with strong sales growth in our stores located in regions benefitting
from tourism, albeit partially offset by adverse weather conditions. In Italy,
sales were well ahead with a very strong performance in new stores. In the
Republic of Ireland and Portugal, we had only satisfactory trading with warm
weather holding back pre-Christmas sales and slower recovery in consumer
sentiment. Trading in the Netherlands was strong, with good like-for-like
sales driven by operational improvements. In Germany, underlying trading was
strong with total sales lower as a consequence of our reduced selling space
but like-for-like sales increased despite industry-wide strike action. The
restructuring in Germany is now largely complete and has resulted in improved
sales densities and profitability, as expected. We also launched our first
ever multi-media brand campaign in the country.
Sales growth in the US was 38.4%, driven by new store openings which performed
well. Adjusted operating profit improved significantly in the period. We
opened three new stores in the period: Woodfield Mall in Chicago, Smith Haven
Long Island, and Charlotte North Carolina. We opened a new distribution centre
in Jacksonville, Florida, to serve our expansion in southern states and at the
same time, we announced lease agreements for stores in Tennessee, Maryland and
Texas.
Our digital growth strategy continues to progress. Traffic to our websites
increased in all markets in the period, with record traffic levels over
Christmas. In most markets, some 20% of visitors now use the stock checker
facility and we believe this facility, combined with the other improvements we
have made to the websites, provide meaningful support to sales. We continue to
invest in search engine optimisation, CRM and paid marketing.
We have completed our latest Click + Collect trial in the UK. The trial showed
good basket sizes and strong additional attachment store sales. The trial also
demonstrated that the Click + Collect service is satisfying unfulfilled demand
from both new and existing customers by offering them extended choice beyond
their local store offering. We believe we have developed a bespoke version of
ecommerce that is additive to our store-led model, enhances our overall
digital engagement programme and delivers incremental sales. The results give
us confidence to roll out this service across all our stores in England, Wales
and Scotland, with a curated product range across womenswear, kids, menswear
and a selection of homewear.
Adjusted operating profit margin for the period recovered to 11.3%,
significantly higher than the same period last year, reflecting an increase in
all countries. This growth in margin was driven by a significant improvement
in product gross margin, driven by lower material and freight costs and the
annualisation of prior year price increases, partially offset by the impact of
foreign exchange. Stock loss remained high in most countries and we continue
to invest in actions to mitigate this loss. Labour costs in the period
increased in line with our expectations. We have been stepping up investment
across technology, digital and customer activities to support growth. We
expect this investment to continue to increase over the medium term.
Retail selling space increased by 0.2m sq ft since the last financial year-end
and on 2 March 2024 we were trading from 440 stores from 18.4m sq ft of
selling space. Nine new stores opened in the period: three in the US, three in
France, two in Spain, and one in Poland. One store in Germany was closed in
the period and seven stores are now rightsized. We have also rightsized four
stores in the Netherlands in the period. Towards the end of the period Primark
opened a store at La Vaguada in Madrid, the first of four openings in the city
this year. We are expanding into our 16(th) market in the second half of the
financial year, opening our first store in Hungary. We continue to target 530
stores by the end of 2026 and have visibility for continued footprint
expansion beyond.
1. Kantar, Primark market share of the total UK clothing, footwear and
accessories market including online by value, 24-week data to 3 March 2024
Financial review
Group performance
Group revenue in the period was £9.7bn, 2% ahead of last year at actual rates
and 5% at constant currency, driven by continued good momentum in our Retail
and food businesses. The Group generated an adjusted operating profit of
£951m, an increase of 39% at actual rates compared to last year, reflecting
strong margin recovery, and improvements in operational performance. Operating
profit for the Group of £931m was 40% ahead, after charging exceptional items
of £6m (2023 half year - nil).
For the period, there was a translation loss of £57m of our non-sterling
earnings, primarily driven by the strengthening of sterling against the US
dollar and the euro, as well as against some of our trading currencies in our
businesses in Africa.
Segmental summary
Revenue Adjusted operating profit
24 weeks ended 24 weeks ended Change 52 weeks ended 24 weeks ended 24 weeks Change 52 weeks ended
2 March 4 March % 16 September 2023 2 March ended % 16 September 2023
2024 2023 £m 2024 4 March £m
£m £m £m 2023
£m
At actual rates
Grocery 2,124 2,105 +0.9 4,198 230 173 +32.9 448
Ingredients 1,056 1,088 -2.9 2,157 117 102 +14.7 214
Agriculture 850 950 -10.5 1,840 14 12 +16.7 41
Sugar 1,170 1,168 +0.2 2,474 125 97 +28.9 179
Retail 4,500 4,228 +6.4 9,008 508 351 +44.7 735
Central - - - - (45) (40) -12.5 (94)
9,700 9,539 +1.7 19,677 949 695 +36.5 1,523
Business to be closed
Sugar 34 21 73 2 (11) (10)
9,734 9,560 +1.8 19,750 951 684 +39.0 1,513
The segmental analysis by division has been set out in the operating reviews.
The closure of our China North Sugar business has now been disclosed as a
business to be closed rather than a continuing activity.
The segmental analysis by geography is set out in note 1 of the condensed
financial statements. Of note is the increase in adjusted operating profit in
Europe and the UK driven by Retail and an improved performance in our Sugar
segment. The Noth America increase was driven by the continued success of our
Grocery and Ingredients businesses and Retail in the US.
Adjusted earnings per share
24 weeks ended 2 March 24 weeks ended 4 March Change 52 weeks ended 16 September 2023
2024 2023 % £m
£m £m
Adjusted operating profit 951 684 +39.0 1,513
Net finance income excluding lease interest 18 4 11
Other financial (expense)/income (13) 20 40
Lease interest (45) (41) (91)
Adjusted profit before taxation 911 667 +36.6 1,473
Taxation on adjusted profit (211) (165) (346)
Adjusted profit after tax 700 502 +39.4 1,127
Adjusted earnings attributable to equity shareholders 685 487 +40.7 1,103
Adjusted earnings per share (in pence) 90.4 62.0 +45.8 141.8
Net finance income and other financial expense
Finance income continued to increase as a result of higher interest rates
earned on our cash balances. In other financial expenses, we recorded losses
on cash and foreign exchange balances on some of our African countries of
operations, such as Nigeria and Malawi, where material currency devaluations
have taken place. Lease interest increased during the period due to higher
interest rates and as we continue our Primark store expansion programme. We
expect a similar level of finance income and lease interest in the second
half, however, we do not expect the losses on cash and foreign exchange
balances in other financial expenses to repeat.
On an adjusted basis, profit before tax was up 36.6%, to £911m.
Taxation on adjusted profit
In the period, the adjusted tax charge increased to £211m, primarily driven
by the increase in adjusted profit before tax, offset by a decrease in the
adjusted effective tax rate to 23.2% from 24.7% for the same period last year.
The adjusted effective tax rate includes the full-year impact of the increase
in UK corporation tax rate from 19% to 25% in April 2023 but this is more than
offset by the changes to the mix in profits by jurisdiction.
Adjusted earnings per share increased by 45.8% to 90.4p per share for the
period. This increase is driven by the increase in adjusted earnings. The
adjusted earnings per share also continued to benefit from the reduction in
weighted average number of shares, from 786 million for the same period in
2023 to 758 million for the same period in 2024, as a result of the continuing
buyback programmes. The weighted average number of shares will continue to
reduce from the completion of the remaining £275m of our second share buyback
programme.
Basic earnings per share
24 weeks ended 2 March 24 weeks ended 4 March Change 52 weeks ended 16 September 2023
2024 2023 % £m
£m £m
Adjusted profit before taxation 911 667 +36.6 1,473
Acquired inventory fair value adjustments (1) (2) (3)
Amortisation of non-operating intangibles (20) (20) (41)
Exceptional items (6) - (109)
Profits less losses on sale and closure of businesses (10) (2) (3)
Profits less losses on disposal of non-current assets 8 2 28
Transaction costs (1) (1) (5)
Profit before taxation 881 644 +36.8 1,340
Taxation (203) (102) (272)
Profit after tax 678 542 +25.1 1,068
Earnings attributable to equity shareholders 663 527 +25.8 1,044
Basic earnings per share (in pence) 87.4 67.0 +30.4 134
Profit before tax of £881m was 36.8% ahead of the prior period.
This included a non-cash exceptional impairment charge of £6m in our Sugar
segment. This comprised an impairment charge of £18m in our Vivergo business,
which continues to be impacted by the volatility in margin. In addition, a
£12m reversal of the £35m impairment recognised in the Sugar business in
Mozambique at the end of financial year 2023 was also taken. No exceptional
impairment charge was recognised in the same period in 2023.
A non-cash provision of £10m was included in profit less losses on sale and
closure of business in respect of the closure of our China North Sugar
business.
Total tax charge in the period was £203m (2023 half year - £102m). The
increase compared to the prior period reflects the increase to the adjusted
tax charge. Last year included a £58m deferred tax credit on exceptional
items, reflecting the recognition of deferred tax assets relating to Primark
Germany.
Earnings attributable to equity shareholders were £663m and basic earnings
per share were 87.4p, 30.4% ahead of the same period last year.
Cash flow
24 weeks ended 2 March 24 weeks ended 4 March 52 weeks ended 16 September 2023
2024 2023 £m
£m £m
Adjusted EBITDA 1,377 1,090 2,361
Repayment of lease liabilities net of incentives received (148) (123) (246)
Working capital 6 (703) (216)
Capital expenditure (565) (498) (1,073)
Purchase of subsidiaries, joint ventures and associates (4) (29) (94)
Sale of subsidiaries, joint ventures and associates - 4 4
Net interest paid (29) (35) (74)
Income taxes paid (145) (148) (341)
Share of adjusted profit after tax from joint ventures and associates (51) (51) (127)
Dividends received from joint ventures and associates 43 43 107
Other (16) (60) (32)
Free cash flow 468 (510) 269
Share buyback (281) (140) (448)
Dividends (348) (235) (345)
Movement in loans and current asset investments 52 (10) (10)
Cash flow (109) (895) (534)
There was free cash inflow in the period totalling £468m as a result of
higher operating profit generated by the Group, and lower working capital
movement compared to the same period last year. The better performance in
working capital reflects a normalisation of inventory at Primark as expected,
stock reductions in most of our food businesses, reducing inflation overall,
and other working capital initiatives. Overall, we continue to expect a
decrease in working capital at the year end, primarily driven by the lower
Primark inventory.
The capital expenditure increase was driven by the number of large capital
projects in Primark and the food businesses.
The level of cash tax was lower as expected due to the reallocation of
historical overpayments and favourable settlements of historical enquiries and
returns. We expect this lower level to continue for the year. 'Other' cash
flow benefitted from the abatement of UK employer pension contributions.
There was cash outflow of £281m for our continued share buyback programmes.
We also paid £348m for total dividends in this period, which reflects the
final 2023 dividend of £251m and a special dividend of £97m that was
declared in respect of the 2023 financial year.
Financing and liquidity
At 2 March 2024 At 4 March At 16 September 2023
£m 2023 £m
£m
Short-term loans (109) (17) (99)
Long-term loans (432) (480) (394)
Lease liabilities (3,164) (3,187) (3,160)
Total debt (3,705) (3,684) (3,653)
Cash at bank and in hand, cash equivalents and overdrafts 1,209 1,080 1,388
Current asset investments - 3 -
Total net debt (2,496) (2,601) (2,265)
Leverage ratio 0.9 1.2 1.0
At 2 March 2024, the Group held cash and cash equivalents, net of bank
overdrafts of £1,209m. In addition, the Group has an undrawn Revolving Credit
Facility ('RCF') for £1.5bn, which is free from performance covenants.
Following the first extension in 2023, the facility was extended for an
additional year in April 2024 bringing the final maturity to June 2029. Our
final $100m Private Placement notes were repaid on 2 April 2024.
Total liquidity at 2 March 2024 was £2.5bn, comprising the £1.3bn of cash,
less £0.2bn of short-term loans and overdrafts and £0.1bn of inaccessible
cash, plus the £1.5bn RCF. This compares to £2.7bn at the end of the 2023
financial year and £2.5bn at the end of the same period last year.
Pensions
Employee benefits assets primarily comprise the accounting surplus of the
Group's UK defined benefit scheme. At the end of the period the surplus in the
UK was £1,476m (2023 half and full year - £1,397m). The increase from the
end of the last financial year reflects positive asset returns and a decrease
in long term expected inflation, partially offset by an increase in the
liabilities due to a decrease in corporate bond yields.
Dividends and share buyback
During the period, we completed our first £500m share buyback programme and
£225m of our second £500m share buyback programme, with the remaining amount
anticipated to be completed by the end of the financial year. On 2 March
2024, the financial leverage ratio was 0.9 times.
The Board has declared an interim dividend of 20.7p a share, an increase of
46% on same period last year reflecting the growth in earnings. The dividend
will be paid on 5 July 2024 to shareholders registered at the close of
business on 31 May 2024.
Our principal risks and uncertainties
Details of the principal risks facing the Group's businesses at an operational
level were included on pages 68 to 75 of the Group's Annual Report and
Accounts for the 52 weeks ended 16 September 2023, as part of the Strategic
Report. We have reassessed our principal risks for the remaining six months of
the financial year as the world continues to face political and economic
uncertainties.
The ongoing Russian war in Ukraine continues to drive some economic
uncertainty in global markets. We have experienced no direct impact by the
conflict in the Middle East, but we are monitoring the situation. Whilst
supply chain volatility has eased and energy prices and sea freight costs have
reduced, the ongoing geopolitical situation remains fragile. We continue to
monitor the situation in the Red Sea but at this stage we do not expect any
significant disruption to our supply chain. All geopolitical uncertainty could
have an impact on the cost of raw materials and key commodities. Our
procurement teams continue to work closely with suppliers to maintain the
effective operation of our supply chains.
Consumer spending has continued to be resilient in this trading period.
However, a number of our countries continue to face the risk of recession that
could trigger market instability. The impact on our businesses will depend on
the extent of government intervention and the duration of any economic
downturns.
General elections are planned in a number of our key markets, including UK,
USA, and in a number of countries in South America, Africa and South East
Asia. The commercial implications of any governmental changes are being
evaluated.
On average, sterling has slightly strengthened against most of our trading
currencies this year, resulting in a small negative translation impact on
operating profit. A number of businesses have benefitted from lower input
costs due to the depreciation of energy costs. Agriculture commodity prices
varied across the Group with some indexes seeing higher levels of volatility.
Businesses continue to manage commodity price risk under their existing risk
management frameworks and, where appropriate, reflect this in pricing of
products.
Going concern
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence to the end
of the 2025 financial year. For this reason, they continue to adopt the going
concern basis in preparing the Condensed Consolidated Interim Financial
Statements. See note 11 to the Condensed Consolidated Interim Financial
Statements.
Condensed consolidated income statement
for the 24 weeks ended 2 March 2024
24 weeks ended 2 March 24 weeks ended 52 weeks ended 16 September 2023
2024 4 March £m
£m 2023
£m
Continuing operations Note
Revenue 1 9,734 9,560 19,750
Operating costs before exceptional items (8,854) (8,949) (18,410)
Exceptional items 2 (6) - (109)
874 611 1,231
Share of profit after tax from joint ventures and associates 49 50 124
Profits less losses on disposal of non-current assets 8 2 28
Operating profit 931 663 1,383
Adjusted operating profit 951 684 1,513
Profits less losses on disposal of non-current assets 8 2 28
Amortisation of non-operating intangibles (20) (20) (41)
Acquired inventory fair value adjustments (1) (2) (3)
Transaction costs (1) (1) (5)
Exceptional items 2 (6) - (109)
Profits less losses on sale and closure of businesses 7 (10) (2) (3)
Profit before interest 921 661 1,380
Finance income 35 22 48
Finance expense (62) (59) (128)
Other financial (expense)/income (13) 20 40
Profit before taxation 881 644 1,340
Adjusted profit before taxation 911 667 1,473
Profits less losses on disposal of non-current assets 8 2 28
Amortisation of non-operating intangibles (20) (20) (41)
Acquired inventory fair value adjustments (1) (2) (3)
Transaction costs (1) (1) (5)
Exceptional items 2 (6) - (109)
Profits less losses on sale and closure of businesses 7 (10) (2) (3)
Taxation - UK (excluding tax on exceptional items) (59) (28) (40)
- UK (on exceptional items) 4 - -
- Overseas (excluding tax on exceptional (148) (132) (300)
items)
- Overseas (on exceptional items) - 58 68
3 (203) (102) (272)
Profit for the period 678 542 1,068
Attributable to
Equity shareholders 663 527 1,044
Non-controlling interests 15 15 24
Profit for the period 678 542 1,068
Basic and diluted earnings per ordinary share (pence) 4 87.4 67.0 134.2
Dividends per share paid and proposed for the period (pence) 5 20.7 14.2 47.3
Special dividend per share proposed for the period (pence) - - 12.7
Condensed consolidated statement of comprehensive income
for the 24 weeks ended 2 March 2024
24 weeks ended 24 weeks ended 4 March 52 weeks ended 16 September 2023
2 March 2023 £m
2024 £m
£m
Profit for the period recognised in the income statement 678 542 1,068
Other comprehensive income
Remeasurements of defined benefit schemes 65 18 (7)
Deferred tax associated with defined benefit schemes (17) (2) 4
Items that will not be reclassified to profit or loss 48 16 (3)
Effect of movements in foreign exchange (151) (179) (470)
Net gain on hedge of net investment in foreign subsidiaries 2 1 1
Deferred tax associated with movements in foreign exchange - - (5)
Current tax associated with movements in foreign exchange - - 6
Movement in cash flow hedging position (11) (271) (260)
Deferred tax associated with movement in cash flow hedging position 4 62 40
Share of other comprehensive loss of joint ventures and associates (3) (6) (18)
Effect of hyperinflationary economies 41 26 40
Items that are or may be subsequently reclassified to profit or loss (118) (367) (666)
Other comprehensive loss for the period (70) (351) (669)
Total comprehensive income for the period 608 191 399
Attributable to
Equity shareholders 609 191 397
Non-controlling interests (1) - 2
Total comprehensive income for the period 608 191 399
Condensed consolidated balance sheet
at 2 March 2024
2 March 2024 4 March 2023 16 September 2023
£m £m £m
Note
Non-current assets
Intangible assets 1,885 1,901 1,870
Property, plant and equipment 5,944 5,702 5,766
Right-of-use assets 2,365 2,386 2,350
Investments in joint ventures 297 297 303
Investments in associates 99 91 91
Employee benefits assets 1,523 1,440 1,446
Income tax 23 23 23
Deferred tax assets 186 204 193
Other receivables 70 58 63
Total non-current assets 12,392 12,102 12,105
Current assets
Assets classified as held for sale 6 - 92 -
Inventories 3,120 3,601 3,207
Biological assets 128 129 99
Trade and other receivables 1,677 1,824 1,778
Derivative assets 87 92 96
Current asset investments 8 - 3 -
Income tax 69 68 102
Cash and cash equivalents 8 1,268 1,213 1,457
Total current assets 6,349 7,022 6,739
Total assets 18,741 19,124 18,844
Current liabilities
Liabilities classified as held for sale 6 - (26) -
Lease liabilities 8 (345) (322) (335)
Loans and overdrafts 8 (168) (150) (168)
Trade and other payables (2,799) (2,892) (2,953)
Derivative liabilities (71) (134) (69)
Income tax (95) (140) (109)
Provisions (61) (60) (55)
Total current liabilities (3,539) (3,724) (3,689)
Non-current liabilities
Lease liabilities 8 (2,819) (2,865) (2,825)
Loans 8 (432) (480) (394)
Provisions (55) (28) (48)
Deferred tax liabilities (660) (593) (626)
Employee benefits liabilities (71) (77) (69)
Total non-current liabilities (4,037) (4,043) (3,962)
Total liabilities (7,576) (7,767) (7,651)
Net assets 11,165 11,357 11,193
Equity
Issued capital 43 45 44
Other reserves 180 178 179
Translation reserve (178) 253 (42)
Hedging reserve (10) (49) 2
Retained earnings 11,043 10,830 10,910
Total equity attributable to equity shareholders 11,078 11,257 11,093
Non-controlling interests 87 100 100
Total equity 11,165 11,357 11,193
Condensed consolidated cash flow statement
for the 24 weeks ended 2 March 2024
24 weeks ended 2 March 24 weeks ended 4 March 52 weeks ended 16 September 2023
2024 2023 £m
£m £m
Note
Cash flow from operating activities
Profit before taxation 881 644 1,340
Profits less losses on disposal of non-current assets (8) (2) (28)
Profits less losses on sale and closure of businesses 10 2 3
Transaction costs 1 1 5
Finance income (35) (22) (48)
Finance expense 62 59 128
Other financial expense/(income) 13 (20) (40)
Share of profit after tax from joint ventures and associates (49) (50) (124)
Amortisation 41 39 82
Depreciation (including of right-of-use assets) 403 386 804
Exceptional items 6 - 109
Acquired inventory fair value adjustments 1 2 3
Effect of hyperinflationary economies 5 8 14
Net change in the fair value of current biological assets (56) (39) (11)
Share-based payment expense 13 8 18
Pension costs less contributions 25 (2) (8)
Decrease/(increase) in inventories 47 (437) (94)
Decrease/(increase) in receivables 57 (115) (107)
Decrease in payables (98) (151) (15)
Purchases less sales of current biological assets 5 - (9)
Decrease in provisions (3) (20) (27)
Cash generated from operations 1,321 291 1,995
Income taxes paid (145) (148) (341)
Net cash generated from operating activities 1,176 143 1,654
Cash flow from investing activities
Dividends received from joint ventures and associates 43 43 107
Purchase of property, plant and equipment (523) (444) (997)
Purchase of intangibles (42) (54) (76)
Lease incentives received 12 12 62
Sale of property, plant and equipment 12 11 48
Purchase of subsidiaries, joint ventures and associates 7 (4) (29) (94)
Sale of subsidiaries, joint ventures and associates - 4 4
Purchase of other investments (2) - (4)
Interest received 26 22 44
Net cash used in investing activities (478) (435) (906)
Cash flow from financing activities
Dividends paid to non-controlling interests (12) (5) (7)
Dividends paid to equity shareholders 5 (348) (235) (345)
Interest paid (55) (57) (118)
Repayment of lease liabilities 8 (160) (135) (308)
Increase/(decrease) in short-term loans 8 11 (11) (13)
Increase in long-term loans 8 41 - -
Decrease in current asset investments 8 - 1 3
Share buyback (281) (140) (448)
Movement from changes in own shares held (3) (21) (46)
Net cash used in financing activities (807) (603) (1,282)
Net decrease in cash and cash equivalents (109) (895) (534)
Cash and cash equivalents at the beginning of the period 1,388 1,995 1,995
Effect of movements in foreign exchange (70) (20) (73)
Cash and cash equivalents at the end of the period 8 1,209 1,080 1,388
Condensed consolidated statement of changes in equity
for the 24 weeks ended 2 March 2024
Issued capital Other reserves Translation reserve Hedging reserve Retained earnings Total Non- controlling interests Total equity
£m £m £m £m £m £m £m £m
Note
Balance as at 16 September 2023 44 179 (42) 2 10,910 11,093 100 11,193
Total comprehensive income
Profit for period recognised in income statement - - - - 663 663 15 678
Remeasurements of defined benefit schemes - - - - 65 65 - 65
Deferred tax associated with defined benefit schemes - - - - (17) (17) - (17)
Items that will not be reclassified to profit or loss - - - - 48 48 - 48
Effect of movements in foreign exchange - - (135) - - (135) (16) (151)
Net gain on hedge of net investment in foreign subsidiaries - - 2 - - 2 - 2
Movement in cash flow hedging position - - - (11) - (11) - (11)
Deferred tax associated with movement in cash flow hedging position - - - 4 - 4 - 4
Share of other comprehensive income of joint ventures and associates - - (3) - - (3) - (3)
Effect of hyperinflationary economies - - - - 41 41 - 41
Items that are or may be subsequently reclassified to profit or loss - - (136) (7) 41 (102) (16) (118)
Other comprehensive income - - (136) (7) 89 (54) (16) (70)
Total comprehensive income - - (136) (7) 752 609 (1) 608
Inventory cash flow hedge movements
Amounts transferred to cost of inventory - - - (5) - (5) - (5)
Total inventory cash flow hedge movements - - - (5) - (5) - (5)
Transactions with owners
Dividends paid to equity shareholders 5 - - - - (348) (348) - (348)
Net movement in own shares held - - - - 10 10 - 10
Share buyback (1) 1 - - (281) (281) - (281)
Dividends paid to non-controlling interests - - - - - - (12) (12)
Total transactions with owners (1) 1 - - (619) (619) (12) (631)
Balance as at 2 March 2024 43 180 (178) (10) 11,043 11,078 87 11,165
Balance as at 17 September 2022 45 178 422 154 10,649 11,448 106 11,554
Total comprehensive income
Profit for the period recognised in the income statement - - - - 527 527 15 542
Remeasurements of defined benefit schemes - - - - 18 18 - 18
Deferred tax associated with defined benefit schemes - - - - (2) (2) - (2)
Items that will not be reclassified to profit or loss - - - - 16 16 - 16
Effect of movements in foreign exchange - - (164) - - (164) (15) (179)
Net gain on hedge of net investment in foreign subsidiaries - - 1 - - 1 - 1
Movement in cash flow hedging position - - - (271) - (271) - (271)
Deferred tax associated with movement in cash flow hedging position - - - 62 - 62 - 62
Share of other comprehensive income of joint ventures and associates - - (6) - - (6) - (6)
Effect of hyperinflationary economies - - - - 26 26 - 26
Items that are or may be subsequently reclassified to profit or loss - - (169) (209) 26 (352) (15) (367)
Other comprehensive income - - (169) (209) 42 (336) (15) (351)
Total comprehensive income - - (169) (209) 569 191 - 191
Inventory cash flow hedge movements
Amounts transferred to cost of inventory - - - 6 - 6 - 6
Total inventory cash flow hedge movements - - - 6 - 6 - 6
Transactions with owners
Dividends paid to equity 5 - - - - (235) (235) - (235)
shareholders
Net movement in own shares held - - - - (13) (13) - (13)
Share buyback - - - - (140) (140) - (140)
Dividends paid to non-controlling interests - - - - - - (6) (6)
Total transactions with owners - - - - (388) (388) (6) (394)
Balance as at 4 March 2023 45 178 253 (49) 10,830 11,257 100 11,357
Balance as at 17 September 2022 45 178 422 154 10,649 11,448 106 11,554
Total comprehensive income
Profit for the period recognised in the income statement - - - - 1,044 1,044 24 1,068
Remeasurements of defined benefit schemes - - - - (7) (7) - (7)
Deferred tax associated with defined benefit schemes - - - - 4 4 - 4
Items that will not be reclassified to profit or loss - - - - (3) (3) - (3)
Effect of movements in foreign exchange - - (448) - - (448) (22) (470)
Net gain on hedge of net investment in foreign subsidiaries - - 1 - - 1 - 1
Deferred tax associated with movements in foreign exchange - - (5) - - (5) (5)
Current tax associated with movements in foreign exchange - - 6 - - 6 6
Movement in cash flow hedging position - - - (260) - (260) - (260)
Deferred tax associated with movement in cash flow hedging position - - - 40 - 40 - 40
Share of other comprehensive income of joint ventures and associates - - (18) - - (18) - (18)
Effect of hyperinflationary economies - - - - 40 40 - 40
Items that are or may be subsequently reclassified to profit or loss - - (464) (220) 40 (644) (22) (666)
Other comprehensive income - - (464) (220) 37 (647) (22) (669)
Total comprehensive income - - (464) (220) 1,081 397 2 399
Inventory cash flow hedge movements
Amounts transferred to cost of inventory - - - 68 - 68 - 68
Total inventory cash flow hedge movements - - - 68 - 68 - 68
Transactions with owners
Dividends paid to equity shareholders 5 - - - - (345) (345) - (345)
Net movement in own shares held - - - - (28) (28) - (28)
Share buyback (1) 1 - - (448) (448) - (448)
Deferred tax associated with share-based payments - - - - 1 1 - 1
Dividends paid to non-controlling interests - - - - - - (8) (8)
Total transactions with owners (1) 1 - - (820) (820) (8) (828)
Balance as at 16 September 2023 44 179 (42) 2 10,910 11,093 100 11,193
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, income tax assets, 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 and
operating intangibles.
Businesses disposed, closed or to be closed during the period are shown
separately and comparatives have been re-presented.
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.
Ingredients
The manufacture of bakers' yeast, bakery ingredients, enzymes, lipids, yeast
extracts and cereal specialities.
Agriculture
The manufacture of animal feeds and the provision of other products and
services for the agriculture sector.
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.
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 2 March 24 weeks ended 4 March 52 weeks ended 16 September 2023 24 weeks ended 2 March 24 weeks ended 52 weeks ended 16 September 2023
2024 2023 £m 2024 4 March £m
£m £m £m 2023
£m
Operating segments
Grocery 2,124 2,105 4,198 230 173 448
Ingredients 1,056 1,088 2,157 117 102 214
Agriculture 850 950 1,840 14 12 41
Sugar 1,170 1,168 2,474 125 97 179
Retail 4,500 4,228 9,008 508 351 735
Central - - - (45) (40) (94)
9,700 9,539 19,677 949 695 1,523
Business to be closed
Sugar 34 21 73 2 (11) (10)
9,734 9,560 19,750 951 684 1,513
Geographical information
United Kingdom 3,585 3,590 7,271 339 261 488
Europe & Africa 3,717 3,508 7,552 367 235 559
The Americas 1,248 1,219 2,420 213 160 353
Asia Pacific 1,150 1,222 2,434 30 39 123
9,700 9,539 19,677 949 695 1,523
Business to be closed
Asia Pacific 34 21 73 2 (11) (10)
9,734 9,560 19,750 951 684 1,513
Operating segments for the 24 weeks ended 2 March 2024
Grocery Ingredients Agriculture Sugar Retail Central Total
£m £m £m £m £m £m £m
Revenue from continuing businesses 2,134 1,159 852 1,230 4,500 (175) 9,700
Internal revenue (10) (103) (2) (60) - 175 -
External revenue from continuing businesses 2,124 1,056 850 1,170 4,500 - 9,700
Business to be closed - - - 34 - - 34
Revenue from external customers 2,124 1,056 850 1,204 4,500 - 9,734
Operating profit 219 110 10 121 508 (37) 931
Adjusted operating profit before joint ventures and associates 201 99 14 121 508 (45) 898
Share of adjusted profit after tax from joint ventures and associates 29 18 - 4 - - 51
Business to be closed - - - 2 - - 2
Adjusted operating profit 230 117 14 127 508 (45) 951
Finance income - - - - - 35 35
Finance expense - - - (1) (43) (18) (62)
Other financial expense - - - - - (13) (13)
Adjusted profit before taxation 230 117 14 126 465 (41) 911
Profits less losses on disposal of non-current assets - - - - - 8 8
Amortisation of non-operating intangibles (10) (6) (4) - - - (20)
Acquired inventory fair value adjustments (1) - - - - - (1)
Transaction costs - (1) - - - - (1)
Exceptional items - - - (6) - - (6)
Profits less losses on sale and closure of businesses - - - (10) - - (10)
Profit before taxation 219 110 10 110 465 (33) 881
Taxation - - - - - (203) (203)
Profit for the period 219 110 10 110 465 (236) 678
Segment assets (excluding joint ventures and associates) 2,720 2,034 654 2,541 7,181 146 15,276
Investments in joint ventures and associates 51 138 155 52 - - 396
Segment assets 2,771 2,172 809 2,593 7,181 146 15,672
Cash and cash equivalents 1,268 1,268
Income tax 92 92
Deferred tax assets 186 186
Employee benefits assets 1,523 1,523
Segment liabilities (672) (371) (183) (617) (4,120) (187) (6,150)
Loans and overdrafts (600) (600)
Income tax (95) (95)
Deferred tax liabilities (660) (660)
Employee benefits liabilities (71) (71)
Net assets 2,099 1,801 626 1,976 3,061 1,602 11,165
Non-current asset additions 95 78 15 163 323 2 676
Depreciation and non-cash lease adjustments (48) (32) (11) (43) (266) (3) (403)
Amortisation (12) (6) (5) (1) (17) - (41)
Operating segments for the 24 weeks ended 4 March 2023
Grocery Ingredients Agriculture Sugar Retail Central Total
£m £m £m £m £m £m £m
Revenue from continuing businesses 2,117 1,194 953 1,229 4,228 (182) 9,539
Internal revenue (12) (106) (3) (61) - 182 -
External revenue from continuing businesses 2,105 1,088 950 1,168 4,228 - 9,539
Business to be closed - - - 21 - - 21
Revenue from external customers 2,105 1,088 950 1,189 4,228 - 9,560
Operating profit 163 95 7 86 351 (39) 663
Adjusted operating profit before joint ventures and associates 141 91 8 93 351 (40) 644
Share of adjusted profit after tax from joint ventures and associates 32 11 4 4 - - 51
Business to be closed - - - (11) - - (11)
Adjusted operating profit 173 102 12 86 351 (40) 684
Finance income 22 22
Finance expense (1) - - (1) (39) (18) (59)
Other financial income 20 20
Adjusted profit before taxation 172 102 12 85 312 (16) 667
Profits less losses on disposal of non-current assets 1 - - - - 1 2
Amortisation of non-operating intangibles (11) (7) (2) - - - (20)
Acquired inventory fair value adjustments - - (2) - - - (2)
Transaction costs - - (1) - - - (1)
Profits less losses on sale and closure of businesses - 4 - (6) - - (2)
Profit before taxation 162 99 7 79 312 (15) 644
Taxation (102) (102)
Profit for the period 162 99 7 79 312 (117) 542
Segment assets (excluding joint ventures and associates) 2,866 2,113 643 2,509 7,501 147 15,779
Investments in joint ventures and associates 52 141 147 48 - - 388
Segment assets 2,918 2,254 790 2,557 7,501 147 16,167
Cash and cash equivalents 1,213 1,213
Current asset investments 3 3
Income tax 91 91
Deferred tax assets 210 210
Employee benefits assets 1,440 1,440
Segment liabilities (696) (391) (190) (670) (4,193) (187) (6,327)
Loans and overdrafts (630) (630)
Income tax (140) (140)
Deferred tax liabilities (593) (593)
Employee benefits liabilities (77) (77)
Net assets 2,222 1,863 600 1,887 3,308 1,477 11,357
Non-current asset additions 67 86 11 131 282 2 579
Depreciation and non-cash lease adjustments (57) (30) (9) (47) (239) (4) (386)
Amortisation (13) (7) (3) (1) (15) - (39)
Operating segments for the 52 weeks ended 16 September 2023
Grocery Ingredients Agriculture Sugar Retail Central Total
£m £m £m £m £m £m £m
Revenue from continuing businesses 4,222 2,366 1,849 2,591 9,008 (359) 19,677
Internal revenue (24) (209) (9) (117) - 359 -
External revenue from external customers 4,198 2,157 1,840 2,474 9,008 - 19,677
Business to be closed - - - 73 - - 73
Revenue from external customers 4,198 2,157 1,840 2,547 9,008 - 19,750
-
Operating profit 402 201 32 119 717 (88) 1,383
-
Adjusted operating profit before joint ventures and associates 368 190 25 172 735 (94) 1,396
Share of adjusted profit after tax from joint ventures and associates 80 24 16 7 - - 127
Business to be closed - - - (10) - - (10)
Adjusted operating profit 448 214 41 169 735 (94) 1,513
Finance income 48 48
Finance expense (1) (1) - (3) (86) (37) (128)
Other financial income 40 40
Adjusted profit before taxation 447 213 41 166 649 (43) 1,473
Profits less losses on disposal of non-current assets 19 - - - - 9 28
Amortisation of non-operating intangibles (23) (13) (5) - - - (41)
Acquired inventory fair value adjustments (1) - (2) - - - (3)
Transaction costs - - (2) - - (3) (5)
Exceptional items (41) - - (50) (18) - (109)
Profits less losses on sale and closure of businesses - 3 - (6) - - (3)
Profit before taxation 401 203 32 110 631 (37) 1,340
Taxation (272) (272)
Profit for the period 401 203 32 110 631 (309) 1,068
Segment assets (excluding joint ventures and associates) 2,759 2,011 640 2,179 7,530 110 15,229
Investments in joint ventures and associates 58 133 155 48 - - 394
Segment assets 2,817 2,144 795 2,227 7,530 110 15,623
Cash and cash equivalents 1,457 1,457
Income tax 125 125
Deferred tax assets 193 193
Employee benefits assets 1,446 1,446
Segment liabilities (689) (407) (196) (501) (4,326) (166) (6,285)
Loans and overdrafts (562) (562)
Income tax (109) (109)
Deferred tax liabilities (626) (626)
Employee benefits liabilities (69) (69)
Net assets 2,128 1,737 599 1,726 3,204 1,799 11,193
Non-current asset additions 154 174 20 289 711 4 1,352
Depreciation and non-cash lease adjustments (114) (62) (19) (75) (526) (8) (804)
Amortisation (26) (15) (7) (3) (31) - (82)
Geographical information for the 24 weeks ended 2 March 2024
United Kingdom Europe & Africa The Americas Asia Pacific Total
£m £m £m £m £m
Revenue from external customers 3,585 3,717 1,248 1,184 9,734
Segment assets 5,850 6,530 1,775 1,517 15,672
Non-current asset additions 171 348 83 74 676
Depreciation (including of right-of-use assets) (147) (187) (43) (26) (403)
Amortisation (9) (29) (2) (2) (42)
Acquired inventory fair value adjustments - (1) - - (1)
Transaction costs - (1) - - (1)
Exceptional items (18) 12 - - (6)
Geographical information for the 24 weeks ended 4 March 2023
United Kingdom Europe & Africa The Americas Asia Pacific Total
£m £m £m £m £m
Revenue from external customers 3,590 3,508 1,219 1,243 9,560
Segment assets 5,916 6,744 1,803 1,704 16,167
Non-current asset additions 143 292 105 39 579
Depreciation (including of right-of-use assets) (136) (175) (41) (34) (386)
Amortisation (8) (26) (2) (3) (39)
Acquired inventory fair value adjustments (2) - - - (2)
Transaction costs (1) - - - (1)
Geographical information for the 52 weeks ended 16 September 2023
United Kingdom Europe & Africa The Americas Asia Pacific Total
£m £m £m £m £m
Revenue from external customers 7,271 7,552 2,420 2,507 19,750
Segment assets 5,690 6,651 1,792 1,490 15,623
Non-current asset additions 305 732 217 98 1,352
Depreciation (including of right-of-use assets) (279) (374) (84) (67) (804)
Amortisation (17) (56) (4) (5) (82)
Acquired inventory fair value adjustments (2) (1) - - (3)
Transaction costs (4) (1) - - (5)
Exceptional items - (53) - (56) (109)
The Group's operations in the following countries met the criteria for
separate disclosure:
Revenue Non-current assets
24 weeks ended 2 March 24 weeks ended 4 March 52 weeks ended 16 September 2023 24 weeks ended 2 March 24 weeks ended 4 March 52 weeks ended 16 September 2023
2024 2023 £m 2024 2023 £m
£m £m £m £m
Australia 687 705 1,407 571 606 541
Spain 991 880 1,836 694 647 651
United States 833 806 1,580 893 854 887
All segment disclosures are stated before reclassification of assets and
liabilities classified as held for sale.
2. Exceptional items
2024
At half year, there was a non-cash exceptional impairment charge of £6m in
our Sugar Division. The Vivergo business has been impacted by the volatility
in margin and an impairment was recognised of £17m against property, plant
and equipment and £1m against right-of-use assets. This was partially offset
by a partial reversal of the impairment recognised in the Maragra Sugar
business in Mozambique at the end of the 2023 financial year where market
valuations indicate in the first half of this half year a resale value of
£12m on the impaired property, plant and equipment. The impairment of £35m
in Maragra in 2023 was due to severe flooding and damage to the sugar crop
fields and included the full write down of £25m against property, plant and
equipment, £7m against current biological assets, £2m provided for personnel
costs and a £1m write down of inventory .
2023
At half year, there were no exceptional items. For the full year, a non-cash
exceptional impairment charge was included of £109m specifically £41m for
the Don business in the Grocery segment, £50m for the Sugar segment including
£15m for China North Sugar and £35m for Maragra, and £18m for the Retail
segment relating to the German Primark store portfolio.
3. Income tax expense
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March £m
2024 2023
£m £m
Current tax expense
UK - corporation tax at 25% (2023 - 21.8%) 21 23 26
Overseas - corporation tax 147 112 249
UK - over provided in prior years - (7) (14)
Overseas - (over)/under provided in prior years (3) - 18
165 128 279
Deferred tax expense
UK - deferred tax 34 12 54
Overseas - deferred tax 3 20 28
UK - over provided in prior years - - (26)
Overseas - under/(over) provided in prior years 1 (58) (63)
38 (26) (7)
Total income tax expense in the income statement 203 102 272
Reconciliation of effective tax rate
Profit before taxation 881 644 1,340
Less share of profit after taxation from joint ventures and associates (49) (50) (124)
Profit before taxation excluding share of profit after taxation from joint 832 594 1,216
ventures and associates
Nominal tax charge at UK corporation tax rate of 25% (2023 - 21.8%) 208 129 265
Effect of higher and lower tax rates on overseas earnings (43) - (16)
Effect of changes in tax rates on the income statement 1 2 5
Expenses not deductible for tax purposes 39 28 66
Disposal of assets covered by tax exemptions or unrecognised capital losses 3 1 (2)
Deferred tax not recognised (3) 7 39
Adjustments in respect of prior periods (2) (65) (85)
203 102 272
Other comprehensive income or equity
Deferred tax associated with defined benefit schemes 17 2 (4)
Deferred tax associated with share-based payments - - (1)
Deferred tax associated with movements in cash flow hedging position (4) (62) (40)
Deferred tax associated with movements in foreign exchange - - 5
Current tax associated with movements in foreign exchange - - (6)
13 (60) (46)
The adjusted effective tax rate of 23.2% (2023 half year - 24.7%) is the
estimated weighted average annual tax rate based on full year projections and
was applied to profit before adjusting items for the 24 weeks ended 2 March
2024. The tax impact of adjusting items was calculated on an item-by-item
basis. In the prior half year a £58m exceptional tax credit was recognised in
relation to deferred tax asset recognition in Germany. The UK corporation tax
rate of 19% increased to 25% from 1 April 2023.
As in the prior year, the Group considers a provision is not required in
relation to the EU State Aid ruling on the UK's controlled foreign company
legislation based on our assessment of the issue. The ruling is currently
being appealed in the Court of Justice of the European Union ('CJEU'). The
maximum potential liability is £26m (2023 half and full year - £26m).
Pillar Two legislation has been enacted or substantively enacted in certain
jurisdictions in which the Group operates, including the UK. The legislation
will be effective for the Group's 2025 financial year. The Group has performed
an assessment of the Group's potential exposure to Pillar Two income taxes.
This assessment is based on data available from the Group's 2023 consolidated
financial statements and the 2023 financial year Country-by Country Report.
Based on the assessment, the Pillar Two effective tax rates in most of the
jurisdictions in which the Group operates are above 15%. However, there are a
limited number of jurisdictions where the transitional safe harbour relief
does not apply. Of these jurisdictions, the most noteworthy is Ireland, where
the statutory tax rate is 12.5%, but where there will be a local top up tax to
15%. Based on a high-level assessment, the impact in 2023 of Pillar 2 on the
ABF adjusted effective tax rate would have been less than 1%. The Pillar 2
legislation is complex and still evolving. We will continue to monitor the
impact of future developments.
The Group recognises the importance of complying fully with all applicable tax
laws as well as paying and collecting the right amount of tax in every country
in which the Group operates. The Group's board-approved tax strategy is based
on seven tax principles embedded in the Group's financial and non financial
processes and controls. This tax strategy is available in the Policies section
of the Group's website.
4. Earnings per share
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March pence per share
2024 2023
pence per share pence per share
Adjusted earnings per share 90.4 62.0 141.8
Disposal of non-current assets 1.1 0.3 3.6
Sale and closure of businesses (1.4) (0.3) (0.4)
Acquired inventory fair value adjustments (0.1) (0.3) (0.4)
Transaction costs (0.2) (0.1) (0.6)
Exceptional items (0.8) - (14.0)
Tax effect on above adjustments and exceptional tax 0.3 7.4 8.2
Amortisation of non-operating intangibles (2.6) (2.5) (5.3)
Tax credit on non-operating intangibles amortisation 0.7 0.5 1.3
Earnings per ordinary share 87.4 67.0 134.2
5. Dividends
24 weeks ended 2 March 24 weeks ended 4 March 52 weeks ended 16 September 2023 24 weeks ended 2 March 24 weeks ended 4 March 52 weeks ended 16 September 2023
2024 2023 pence per share 2024 2023 £m
pence per share pence per share £m £m
2022 final - 29.9 29.9 - 235 235
2023 interim - - 14.2 - - 110
2023 final and special 45.8 - - 348 - -
45.8 29.9 44.1 348 235 345
The 2023 final dividend of 33.1p approved by shareholders on 8 December
2023, together with the special dividend of 12.7p totalled £348m when paid on
12 January 2024. The 2024 interim dividend of 20.7p per share, totalling an
estimated cost of £155m will be paid on 5 July 2024 to shareholders on the
register on 31 May 2024.
6. Assets and liabilities classified as held for sale
The Group has no assets and liabilities classified as held for sale in 2024.
In the prior half year period, the Group disclosed its China North Sugar
business as held for sale on the expectation the business was to be disposed.
This business was not disposed but instead is now set to close (see note 7).
As part of this disclosure last year, £92m of assets were classified as held
for sale comprising inventories, property, plant and equipment, operating
intangibles, trade and other receivables and a deferred tax asset and £26m of
liabilities classified as held for sale comprised of trade and other
payables.
7. Acquisitions and disposals
Acquisitions
2024
AB World Foods in our Grocery segment, acquired the UK business Capsicana,
provider of Latin American products including tortillas, pastes, kits and
seasoning mixes. Total consideration for this transaction was £11m,
comprising £3m cash consideration and £8m deferred consideration. Net assets
acquired included non-operating intangible assets of £12m, with related
deferred tax of £3m and £1m of other operating liabilities. Goodwill of £3m
resulted from this acquisition.
2023
In the first half, the Agriculture division acquired Kite Consulting, Advance
Sourcing and Progres. Kite Consulting is a specialist dairy consultant and
Advance Sourcing provides specialist products to create value by improving
herd performance and supports dairy farmers to improve herd efficiency and
build resilience across the agri-food supply chain. Progres in Finland uses a
patented additive to support good health, reduce inflammation and stimulate
recovery, which improves gut integrity and the performance of animals.
In April, the Ingredients division acquired Vital Solutions, a German company
specialising in natural science-based ingredients for application in dietary
supplements and functional foods.
The Agriculture division acquired IFCN AG, a dairy research and consulting
company in June and in August acquired National Milk Records plc (NMR) for
£48m. NMR is the leading agri-tech supplier of management information and
testing services to the UK dairy supply chain, developing technology used to
inform farming efficiency and animal welfare, and quantify food provenance.
Pre-acquisition carrying amounts were the same as recognised values on
acquisition apart from £32m of non-operating intangibles in respect of
brands, technology and customer relationships, a £7m related deferred tax
liability, a £6m uplift to the investment in joint ventures and goodwill of
£39m. Cash flow on acquisition of subsidiaries, joint ventures and associates
of £94m comprised £78m cash consideration less £1m cash and overdrafts
acquired, £16m of deferred consideration relating to previous acquisitions
and a £1m contribution to an existing joint venture in China.
Disposals
2024
A non-cash provision of £10m was included in profit less losses on sale and
closure of business for the closure of the Group's China North Sugar business.
2023
The Group agreed to sell property, plant and equipment to its Chinese joint
venture partner. Profit on sale was £3m for the full year (2023 half year -
£4m).
In March 2023, Gledhow, the Group's 30% equity-accounted associate in Illovo
South Africa formally went into business rescue. A non-cash provision of £6m
was booked on the financial guarantee held on this business' liabilities.
8. Analysis of net debt
At 16 September 2023 Cash flow New leases, non-cash items and transfers Exchange adjustments At 2 March 2024
£m £m £m £m £m
Short-term loans (99) (11) - 1 (109)
Long-term loans (394) (41) - 3 (432)
Lease liabilities (3,160) 160 (180) 16 (3,164)
Total liabilities from financing activities (3,653) 108 (180) 20 (3,705)
Cash at bank and in hand, cash equivalents and overdrafts 1,388 (109) - (70) 1,209
Net debt including lease liabilities (2,265) (1) (180) (50) (2,496)
Cash and cash equivalents comprise bank and cash balances, deposits and
short-term investments with original maturities of three months or less. £59m
(2023 half year - £133m; 2023 full year - £69m) of bank overdrafts that are
repayable on demand form part of the Group's cash management and are included
as a component of cash and cash equivalents for the purpose of the cash flow
statement.
Net cash before lease liabilities is £668m, comprising cash at bank and in
hand, cash equivalents and overdrafts of £1,209m, short-term loans of
£109m, long-term loans of £432m and current asset investments of £nil (2023
half year - £586m, £1,080m, £17m, £480m and £3m respectively; 2023
full year - £895m, £1,388m, £99m, £394m and £nil respectively).
£59m (2023 half year - £133m; 2023 full year - £69m) of bank overdrafts
plus the £109m (2023 half year - £17m; 2023 full year - £99m) of short-term
loans shown above comprise the £168m (2023 half year - £150m; 2023 full year
- £168m) of current loans and overdrafts shown on the face of the balance
sheet.
Current and non-current lease liabilities shown on the face of the balance
sheet of £345m and £2,819m respectively (2023 half year - £322m and
£2,865m respectively; 2023 full year - £335m and £2,825m respectively)
comprise the £3,164m (2023 half year - £3,187m; 2023 full year - £3,160m)
of lease liabilities shown above.
Current asset investments comprise term deposits and short-term investments
with original maturities of greater than three months.
Interest paid is included within financing activities. The roll-forward of the
liabilities associated with interest paid is an opening balance of £(25)m,
expense of £(62)m, payments of £55m, effect of hyperinflationary economies
of £3m and a closing balance of £(29)m (2023 half year: opening balance of
£(18)m, expense of £(59)m, payments of £57m, interest on the interest rate
swap £(5)m and a closing balance of £(25)m; 2023 full year: opening
balance of £(18)m, expense of £(128)m, payments of £118m, effect of
hyperinflationary economies £3m and a closing balance of £(25)m).
9. 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 52 weeks ended 16 September 2023. There have been no material changes in
these relationships in the 24 weeks ended 2 March 2024 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.
10. 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, the surplus in
the UK was £1,476m (2023 half and full year - £1,397m). The increase from
the end of the last financial year reflects positive asset returns and a
decrease in long term expected inflation, partially offset by an increase in
the liabilities due to a decrease in corporate bond yields.
Under the UK Pensions Act and Regulation requirements, a court case outcome on
16 June 2023 involving Virgin Media has revealed potential challenges with
other previously contracted-out defined benefit schemes in the UK. This
development may cast doubt on the validity of scheme changes made between 1997
and 2016, where those changes were not accompanied by appropriate actuarial
certificates.
The ABF UK pension scheme was contracted out during this period and made
amendments that potentially impacted members' benefits. Until completion of a
full analysis of the scheme changes undertaken during this period the company
is unable to determine whether there is any impact or if this could be
reliably estimated.
11. 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 2 March 2024 comprise those of the Company and
its subsidiaries (together referred to as 'the Group') and the Group's
interests in joint ventures and associates. In the prior half year, the share
buyback was shown as a movement in other reserves. This has been re-presented
as a movement in retained earnings in line with the treatment for the full
year.
The consolidated financial statements of the Group for the 52 weeks ended 16
September 2023 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 UK-adopted 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 52 weeks ended 16 September 2023.
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence to the end
of the 2025 financial year. For this reason, they continue to adopt the going
concern basis in preparing the consolidated interim financial statements.
The directors have reviewed a detailed cash flow forecast to the end of the
2025 financial year. Having reviewed this forecast and having applied a
downside sensitivity analysis and performed a reverse stress test, the
directors consider it a remote possibility that the financial headroom could
be exhausted.
The Board's treasury policies are in place to maintain a strong capital base
and manage the Group's balance sheet and liquidity to ensure long-term
financial stability. These policies are the basis for investor, creditor and
market confidence and enable the successful development of the business. The
financial leverage policy requires that, in the ordinary course of business,
the Board prefers to see the Group's ratio of net debt including lease
liabilities to adjusted EBITDA to be well under 1.5x. At the end of this
financial period, the financial leverage ratio was 0.9x and the Group had
total cash of £1.3bn and an undrawn committed Revolving Credit Facility of
£1.5bn.
In March 2023, S&P Global Ratings reaffirmed their assignment to the Group
of an 'A' grade long-term issuer credit rating. The Group's funding basis is
supported by the existing £400m public bond due in 2034. Furthermore the
Group's committed Revolving Credit Facility is free of performance covenants
and matures in 2029, after a further one year extension was made in April
2024. The $100m of outstanding private placement notes were repaid on 2 April
2024 after which point Group funding is not subject to financial performance
covenants.
In reviewing the cash flow forecast for the period, the directors reviewed the
trading for both Primark and the food businesses in light of the experience
gained from events of the last three years of trading and emerging trading
patterns. The directors have a thorough understanding of the risks,
sensitivities and judgements included in these elements of the cash flow
forecast and have a high degree of confidence in these cash flows.
As a downside scenario the directors considered the adverse scenario in which
inflationary costs are not fully recovered, there are adverse foreign exchange
impacts, operations are materially impacted by extreme weather events and
there is a global recession, reducing demand for goods further than the base
levels forecast. This downside scenario was modelled without taking any
mitigating actions within their control. Under this downside scenario the
Group forecasts liquidity throughout the period.
In addition, the directors also considered the circumstances which would be
needed to exhaust the Group's total liquidity over the assessment period - a
reverse stress test. This indicates that, on top of the downside scenario
outlined above, cost inflation would need to exceed £2.7bn over the going
concern period without any price increases or other mitigating actions being
taken before total liquidity is exhausted. The likelihood of these
circumstances is considered remote for two reasons. Firstly, over such a long
period, management could take substantial mitigating actions, such as
reviewing pricing, cost cutting measures and reducing capital investment.
Secondly, the Group has significant business and asset diversification and
would be able to, if it were necessary, dispose of assets and/or businesses to
raise considerable levels of funds.
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 166 to 177 of the 2023 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 23 April 2024. They do not constitute statutory
financial statements as defined in section 434 of the Companies Act 2006. The
comparative figures for the 52 weeks ended 16 September 2023 have been
abridged from the Group's 2023 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.
12. 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 52 weeks ended 16 September 2023 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 16 September 2023.
New accounting standards
The following accounting standards, amendments and clarifications were adopted
in the period with no significant impact:
- International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)
(refer to note 3)
- Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
- Definition of Accounting Estimates (Amendments to IAS 8)
- Disclosure of Accounting policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
- IFRS 17 Insurance Contracts, Amendments to IFRS 17, Initial Application
of IFRS 17 and IFRS 9 - Comparative Information
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:
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) effective 2025
financial year
Amendments to IAS 1 Presentation of Financial Statements effective 2025
financial year
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7), effective 2025
financial year
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of
Exchangeability, effective 2026 financial year (not yet endorsed by the UKEB).
13. 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 52 weeks ended 16 September
2023.
14. 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.
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
acquired inventory, profits less losses on disposal of non-current assets and
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 taxation Profit before tax Adjusted profit before taxation 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
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
taxation.
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
intangibles, transaction costs, amortisation of fair value adjustments made to
acquired inventory, profits less losses on disposal of non-current assets,
exceptional items and profits less losses on sale and closure of businesses
together with the related tax effect.
Items defined above which arise in the Group's joint ventures and associates
are also treated as adjusting items for the purposes of adjusted earnings 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
separate disclosure on the face of the condensed income statement.
Constant currency Revenue and adjusted operating profit (non-IFRS) measure Constant currency measures are derived by translating the relevant prior year See note B
figures at current year average exchange rates, except for countries where CPI
has escalated to extreme levels, in which case actual exchange rates are used.
There are currently three countries where the Group has operations in this
position - Argentina, Venezuela and Turkey.
Effective tax rate Income tax expense The effective tax rate is the tax charge for the 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
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
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 8
investments and loans.
Net cash/debt including lease liabilities No direct equivalent This measure comprises cash, cash equivalents and overdrafts, current asset A reconciliation of this measure is shown in note 8
investments, loans and lease liabilities.
Adjusted EBITDA See Adjusted operating profit (non-IFRS) measure Adjusted EBITDA is stated before depreciation, amortisation and 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.
Free cash flow No direct equivalent This measure represents the cash that the Group generates from its operations See note G
after maintaining and investing in its capital assets.
All the items below Adjusted EBITDA can be found on the face of the cash flow
statement or derived directly from it.
Working capital comprises the movements in inventories, receivables and
payables within net cash generated from operating activities.
Net interest paid is the sum of interest received within net cash used
in investing activities and interest paid within net cash used in
financing activities.
Share of adjusted profit after tax from joint ventures and associates
is the amount on the face of the cash flow statement, plus the £2m
(2023 half year - £1m; 2023 full year - £3m) non-operating intangible
amortisation which is not included in Adjusted EBITDA.
Other includes all other items from net cash generated from operating
activities and net cash used in investing activities except for the purchase
and sale of subsidiaries, joint ventures and associates, plus dividends paid
to non-controlling interests and the movement from changes in own shares held.
Total liquidity No direct equivalent Total liquidity comprises cash at bank and in hand and cash equivalents less See note H
current loans and overdrafts, and an estimate of inaccessible cash, plus the
undrawn RCF.
Cash at bank and in hand and cash equivalents and current loans and overdrafts
are set out in note 8.
Inaccessible cash is generally located in jurisdictions where there is limited
access to foreign currency or where there are exchange controls. It is
estimated at 5% of cash at bank and in hand and cash equivalents.
The RCF is long-term, legally committed and contains no
performance covenants.
(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 Group balance sheet. All elements of capital
employed are calculated in accordance with UK-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 annualised adjusted Consistent with the definition given
operating 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 Group balance sheet. All elements of working capital
are calculated in accordance with UK-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 Ingredients Agriculture Sugar Retail Central and business to be closed Total
£m £m £m £m £m £m £m
24 weeks ended 2 March 2024
External revenue from continuing businesses 2,124 1,056 850 1,170 4,500 34 9,734
Adjusted operating profit 230 117 14 125 508 (43) 951
Adjusted operating margin % 10.8% 11.1% 1.7% 10.7% 11.3% 9.8%
24 weeks ended 4 March 2023
External revenue from continuing businesses 2,105 1,088 950 1,168 4,228 21 9,560
Adjusted operating profit 173 102 12 97 351 (51) 684
Adjusted operating margin % 8.2% 9.4% 1.3% 8.3% 8.3% 7.2%
Note B
Grocery Ingredients Agriculture Sugar Retail Central and business to be closed Total
£m £m £m £m £m £m £m
24 weeks ended 2 March 2024
External revenue from continuing businesses at actual rates 2,124 1,056 850 1,170 4,500 34 9,734
24 weeks ended 4 March 2023
External revenue from continuing businesses at actual rates 2,105 1,088 950 1,168 4,228 21 9,560
Impact of foreign exchange (76) (40) (15) (98) (42) (1) (272)
External revenue from continuing businesses at constant currency 2,029 1,048 935 1,070 4,186 20 9,288
% change at constant currency +5 % +1 % -9 % +9 % +7.5 % +5 %
Grocery Ingredients Agriculture Sugar Retail Central and business to be closed Total
£m £m £m £m £m £m £m
24 weeks ended 2 March 2024
Adjusted operating profit at actual rates 230 117 14 125 508 (43) 951
24 weeks ended 4 March 2023
Adjusted operating profit at actual rates 173 102 12 97 351 (51) 684
Impact of foreign exchange (7) (4) (1) (25) (2) 5 (34)
Adjusted operating profit at constant currency 166 98 11 72 349 (46) 650
% change at constant currency +39 % +19 % +27 % +74 % +46 % +46 %
Note C
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March
2024 2023
Adjusted earnings per share (in pence) 90.4 62.0 141.8
Dividend relating to the period (in pence) - excluding special dividend 20.7 14.2 47.3
proposed
Dividend cover 4 4 3
Note D
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March £m
2024 2023
£m £m
From the cash flow statement
Purchase of property, plant and equipment 523 444 997
Purchase of intangibles 42 54 76
Capital expenditure 565 498 1,073
Note E
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March £m
2024 2023
£m £m
From the cash flow statement
Purchase of property, plant and equipment 523 444 997
Purchase of intangibles 42 54 76
Purchase of subsidiaries, joint ventures and associates 4 29 94
Purchase of other investments 2 - 4
Gross investment 571 527 1,171
Note F
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March £m
2024 2023
£m £m
Adjusted operating profit 951 684 1,513
Charged to adjusted operating profit:
Depreciation of property, plant and equipment 264 258 531
Amortisation of operating intangibles 23 20 44
Depreciation of right-of-use assets and non-cash 139 128 273
lease adjustments
Adjusted EBITDA 1,377 1,090 2,361
Net debt including lease liabilities (2,496) (2,601) (2,265)
Financial leverage ratio 0.9 1.2 1.0
Note G
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March £m
2024 2023
£m £m
Adjusted EBITDA (see note F) 1,377 1,090 2,361
Repayment of lease liabilities net of incentives received (148) (123) (246)
Working capital 6 (703) (216)
Capital expenditure (see note D) (565) (498) (1,073)
Purchase of subsidiaries, joint ventures and associates (4) (29) (94)
Sale of subsidiaries, joint ventures and associates - 4 4
Net interest paid (29) (35) (74)
Income taxes paid (145) (148) (341)
Share of adjusted profit after tax from joint ventures and associates (51) (51) (127)
Dividends received from joint ventures and associates 43 43 107
Other (16) (60) (32)
Free cash flow 468 (510) 269
Note H
24 weeks ended 24 weeks ended 52 weeks ended 16 September 2023
2 March 4 March £m
2024 2023
£m £m
Cash at bank and in hand and cash equivalents 1,268 1,213 1,457
Current loans and overdrafts (168) (150) (168)
Estimated inaccessible cash (63) (61) (73)
RCF 1,500 1,500 1,500
Total liquidity 2,537 2,502 2,716
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 material related
party transactions and changes therein since the last annual report as
required by DTR 4.2.8R.
On behalf of the board
Michael McLintock George Weston Eoin Tonge
Chairman Chief Executive Finance Director
23 April 2024
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 weeks ended 2 March
2024 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 weeks ended 2 March 2024 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 the International Standard on
Review Engagements 2410 (UK and Ireland) Review of Interim Financial
information ('ISRE') 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 11, 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.
Conclusions relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
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.
In preparing the Interim Results Announcement, the directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
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, including our
Conclusions Relating to Going Concern, 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
23 April 2024
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