TIDMABF
RNS Number : 5614S
Associated British Foods PLC
07 November 2023
For release 7 November 2023
Annual Results Announcement
Year ended 16 September 2023
Associated British Foods plc results for the 52 weeks ended 16
September 2023
Financial Headlines
Actual
2023 2022 currency Constant currency
=========================================== ========== ========== ========= =================
Group revenue GBP19,750m GBP16,997m +16% +15%
Adjusted operating profit GBP1,513m GBP1,435m +5% +4%
Adjusted profit before tax GBP1,473m GBP1,356m +9%
Adjusted earnings per share 141.8p 131.1p +8%
Operating profit GBP1,383m GBP1,178m +17%
Profit before tax GBP1,340m GBP1,076m +25%
Basic earnings per share 134.2p 88.6p +51%
Gross investment GBP1,171m GBP930m +26%
Free cash flow GBP269m GBP(84)m
Net cash before lease liabilities GBP895m GBP1,488m
Total net debt GBP2,265m GBP1,764m
Return on Average Capital Employed (ROACE) 13.6% 14.0%
Total dividends per share 60.0p 43.7p +37%
=========================================== ========== ========== ========= =================
Performance
- Strong performance in demanding environment
- Significant growth in Group sales driven in large part by pricing
actions
- Resilient growth in Group adjusted operating profit
- Continued momentum across Retail
- Revenues well ahead at GBP9.0bn, supported by selective pricing
and well received ranges
- Adjusted operating profit 3% lower at GBP735m with margin of
8.2% reflecting our decisions on pricing
- Space expansion on track with 27 new stores in the year
- Continued investment in digital capability with completion of
enhanced website rollout and Click + Collect expansion
- Significant profit growth at Ingredients
- Good growth in Grocery led by international brands, US focused brands
and recovery in Allied Bakeries
- Sugar sales well ahead, profitability ahead but impacted by more
challenging British Sugar crop conditions and Vivergo
- Lower profitability at Agriculture due to tough market conditions
- Investment of GBP1.2bn with a number of strategic initiatives driving
increased capacity and capability
- Good progress on ESG priorities
- Free cash flow of GBP269m with higher profit, offset by higher capital
investment and reduced working capital outflow
Shareholder returns
-- Initial GBP500m buyback programme concluded end of October. Additional
GBP500m buyback programme announced
-- Total dividends of 60.0p per share up 37% comprising interim of 14.2p
per share, final proposed of 33.1p per share and special dividend
of 12.7p per share
George Weston, Chief Executive of Associated British Foods,
said:
"At the outset of this financial year the Group was facing very
significant economic challenges caused in part by major
geo-political events. Looking back on the year, it is clear to me
that the Group performed extremely well and is as a result now well
positioned for the year ahead.
Trading at Primark was excellent under the circumstances. At the
beginning of the year we implemented selective price increases
partially to protect profitability, on the grounds that the
significant input cost inflation was temporary. That careful
pricing delivered as intended, with customers continuing to shop
with us enthusiastically. Profitability in our food businesses
moved ahead as a result of the appeal of our products and the
strength of our brands, both of which supported us in the recovery
of high levels of input cost inflation without disrupting our
customer relationships.
Although consumer demand remains uncertain, Primark is as well
placed as it has ever been. We continue to believe that Primark's
offer is very attractive not just to existing customers but also to
new customers engaged by our digital platform, new store openings,
and word of mouth which remains as powerful as ever. With Primark
margin now moving back to its historic levels, we view the future
for this business with confidence. Our food businesses are also in
very good shape, and our Sugar business especially should see much
better profitability in the year ahead."
The Group has defined, and outlined the purpose of, its
Alternative performance measures (APMs) in note 13. These measures
are used within the Financial Headlines and in this Annual Results
Announcement.
References to growth in the following commentary are based on
constant currency unless stated otherwise.
For further information please contact:
Associated British Foods:
Tel: 020 7399 6545
Eoin Tonge, Finance Director
Chris Barrie, Corporate Affairs Director
Citigate Dewe Rogerson:
Tel: 020 7638 9571
Holly Gillis Tel: 07940 797 560
Jos Bieneman Tel: 07834 336 650
Angharad Couch Tel: 07507 643 004
There will be an analyst and investor presentation at 09.00am
GMT today which will be streamed online and accessed via our
website here .
Notes to Editors
Associated British Foods is a diversified international food,
ingredients and retail group with sales of GBP20bn 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.
Summary
The Group performed very well in the financial year despite
significant inflationary and other macro-economic pressures. Group
revenue increased to GBP19.8bn, 16% higher than the previous year
at actual exchange rates and 15% higher at constant currency. This
increase in revenue was largely due to price increases across our
businesses to mitigate high levels of inflation. As the financial
year progressed, we saw the rate of inflation ease. Adjusted
operating profit rose to GBP1,513m, 5% higher at actual exchange
rates and 4% at constant currency. Operating profit for the Group
of GBP1,383m was 17% ahead at actual rates and is stated after
exceptional charges of GBP109m (2022 - GBP206m). Adjusted profit
before tax rose by 9% at actual rates to GBP1,473m and adjusted
earnings per share increased by 8% to 141.8p.
Grocery revenues were well ahead of last year largely as a
result of price increases to mitigate inflation. Our international
brands - Twinings, Ovaltine, Blue Dragon, Patak's, Jordans and
Mazzetti - generally traded well, with particularly strong sales in
the US. Our US regional brands and businesses also traded well. In
the UK the performance of Allied Bakeries improved considerably due
to higher volumes and stronger pricing and the financial losses in
this business reduced as a result.
Our Ingredients businesses had a very good year with revenues
and profit significantly ahead. AB Mauri delivered a very strong
performance, particularly in the US. We continued to invest in our
ABF Ingredients' speciality ingredients businesses. Agriculture had
a more challenging year with declines in the compound feed markets
in the UK and China. AB Vista and our dairy businesses improved and
we continue to invest in building expertise in these areas.
Sugar had a good year considering the impacts of challenging
weather in both Europe and Africa. British Sugar production was
significantly down after poor weather conditions reduced beet
yields and the business had to obtain expensive alternative sources
of supply to make good the resulting production shortfall. Illovo,
our African sugar business, had a much improved year and made
further progress in developing local routes to market. Vivergo made
a substantial loss for the year as a whole but profitability
improved markedly in the course of the year.
Full year revenues at Retail rose significantly, increasing by
17% to GBP9.0bn at actual rates and 15% on a constant currency
basis. Trading was much better than we expected at the start of the
year when volatile inflation had threatened to disrupt consumer
spending. However, the strength of the Primark offer, and our
decision to pass on only part of our input cost increases, stood us
in good stead with our customers. Although unseasonal weather was a
feature of our performance, particularly in the second half,
trading remained generally robust. Adjusted operating profit proved
resilient as a consequence despite the high levels of input cost
inflation in the year. Our space expansion continued, both in
Europe and the US, and benefits of the restructuring of our German
estate are starting to become visible. We continue to create a more
coherent and powerful digital platform for Primark with investment
in numerous capabilities including completion of the roll-out of
the enhanced website in all markets, and the extension by range and
geography of our UK Click + Collect trial.
We made further progress in our ESG initiatives with significant
investments in decarbonisation at Sugar, and in water and effluent
projects in Ingredients. In Primark we progressed a number of
Primark Cares initiatives including increasing the proportion of
recycled or more sustainably sourced materials used in our
clothing.
Gross investment stepped up to GBP1.2bn in the financial year
reflecting the many strategic investments made in our Grocery,
Ingredients and Sugar divisions as well as a step-up in the store
and technology roll-out in Primark. We made a number of small
acquisitions for a total cash payment of GBP94m, in particular in
our Agriculture division to expand the strength and breadth of our
offer to the dairy sector.
The Group generated a free cash inflow of GBP269m with higher
profit offset by the increased capital expenditure. There was a
working capital outflow in the year predominantly reflecting the
impact of inflation. After payment of dividends of GBP345m and the
share buyback cash outflow of GBP448m, the Group cash outflow was
GBP534m, leaving net cash before lease liabilities of GBP895m and
net debt after lease liabilities of GBP2,265m.
Capital structure and shareholder returns
Our capital allocation policy is for the Group's financial
leverage, expressed as the ratio of total net debt including lease
liabilities to adjusted EBITDA, to be well under 1.5 times whilst
financial leverage consistently below 1.0 times may indicate a
surplus capital position. Surplus capital may be returned to
shareholders by special dividends or share buybacks, subject to the
Board's discretion.
During the financial year we executed GBP446m of a GBP500m share
buyback programme with the remaining amount being completed
recently. At the end of the financial year the financial leverage
ratio was just under 1.0 times. The Group continues to prioritise
investment in its businesses, and we expect to increase spend in
each of the next few years to slightly above last year's level.
Nevertheless, given the outlook for the Group, the strength of the
balance sheet and the underlying cash generation of the business,
the Board has decided to continue to return additional capital to
shareholders. Therefore, the Group will continue with a buyback
programme, targeting an additional amount of GBP500m over the next
12 months. In addition, the Group is declaring a special dividend
of 12.7p per share.
The Board is proposing a final dividend of 33.1p per share which
together with the special dividend will be paid on 12 January 2024
to shareholders on the register on 15 December 2023. Taken with the
interim dividend of 14.2p per share, the aggregate total dividend
equates to 60.0p per share, 37% higher than the total dividend of
43.7p in 2022.
Outlook
Whilst the environment is still challenging for the consumer,
inflationary pressures have eased and there is less volatility than
there was 12 months ago. The Group is well positioned as a
result.
At Primark, we believe our trading performance demonstrates the
enduring strength of our appeal to customers across all markets. We
continue to invest in both our existing store estate and in new
stores and in our digital infrastructure. We expect further growth
in sales next year driven by new selling space expansion of some 1
million sq ft and modest levels of like-for-like sales growth. This
like-for-like growth will be underpinned by our value proposition,
our product relevance and stretch, our increasingly effective
digital platform and some limited pricing. Lower material costs and
lower freight costs should result in a substantial recovery in
gross margin and overall we expect Primark adjusted operating
profit margin to recover strongly. At this early stage we believe
that the adjusted operating profit margin will be above 10% with
further improvement dependent on levels of consumer demand.
In our food businesses, we expect stability across our Grocery
division as inflation recedes and as we step up our investment in
marketing in our international brands. In Ingredients we anticipate
a modest decline in sales and profit as we consolidate following a
year of very strong growth and we invest to enhance capabilities.
We expect Agriculture to move forward as markets improve and it
integrates and leverages the acquisitions of the last two years. We
continue to expect the broader Sugar portfolio to deliver a
substantial improvement in profitability in this new financial
year, driven by a marked improvement in the performance of British
Sugar with an anticipated better UK sugar beet crop, and a
significant reduction in losses at Vivergo.
Strong cash generation will be driven by higher profitability,
lower working capital, lower levels of cash tax payable and pension
contributions, partially offset by higher capital investment. We
look forward to a year of meaningful progress.
Operating review
Grocery
Actual
2023 2022 currency Constant currency
=================================== ===== ===== ========= =================
Revenue GBPm 4,198 3,735 +12% +11%
=================================== ===== ===== ========= =================
Adjusted operating profit GBPm 448 399 +12% +8%
=================================== ===== ===== ========= =================
Adjusted operating profit margin 10.7% 10.7%
=================================== ===== ===== ========= =================
Operating profit GBPm 402 369 +9%
=================================== ===== ===== ========= =================
Return on average capital employed 30.0% 29.3%
=================================== ===== ===== ========= =================
Our Grocery businesses performed with great resilience in what
were challenging inflationary conditions. Revenues were strongly
ahead of last year driven primarily by price increases through the
course of the year to mitigate cost inflation. Despite the
challenges of dealing with inflation volatility, adjusted operating
profit margin held at 10.7%, helped in part by a recovery in our
Allied Bakeries business. Adjusted operating profit for the year
was 8% higher at GBP448m. In the first half of the year revenues
were 10% higher than the same period a year ago. In the second
half, revenues were 12% higher. The difference in the growth rates
predominantly reflects the lag between the input cost inflation of
the prior year and the first half of this financial year and the
time taken to implement pricing. A s this year progressed,
inflation abated somewhat. Adjusted operating profit in the first
half was GBP173m, down 10% on the same period a year ago. However,
in the second half adjusted operating profit increased by 23% to
GBP275m as the effect of pricing came through.
Our group of international brands - Twinings, Ovaltine, Blue
Dragon, Patak's, Jordans and Mazzetti - largely performed well.
Sales at Twinings moved higher on pricing to recover input cost
inflation, with volumes broadly flat. Within this, there were good
performances in the US, UK, Australia and France. The brand
conducted a number of marketing trials in the year as a prelude to
deploying marketing spend to drive further growth. Sales of fruit
and herbal infusion teas have increased significantly and are now
close to those of black teas. Ovaltine sales also moved higher,
with good performances in Brazil, Switzerland and Nigeria partially
offset by lower foodservice sales in China and by difficult trading
conditions in Myanmar. We saw an increase in sales of
Ready-to-drink products in Thailand but lower sales of higher
margin powder products. Patak's and Blue Dragon both traded well.
Half the sales of Patak's are now located outside the UK where we
delivered good growth, and the brand also delivered strong growth
in the US and good growth in Australia. Blue Dragon delivered
strong value growth, increasing further its proportion of
international sales with growth in the US and Canada. Jordans had a
resilient year, broadly maintaining its international sales. The
Mazzetti brand of balsamic vinegars continued its international
growth and nearly half of sales are now outside Europe.
As noted above, in the US our international brands performed
well. Our US focused brands and businesses also traded well.
Mazola, the leading brand in the US edible oils category, delivered
strong volumes and profitability supported by new production
capabilities. Sales of our Fleischmann's yeast and baking
ingredients products have also been strong. Stratas, our joint
venture in the US that supplies oils and other products to the
foodservice, ingredients and retail markets, traded strongly due to
improved sales mix and good procurement of oils.
In our UK focused brands and businesses, the sales trajectory of
Allied Bakeries improved considerably through the course of the
year due to higher volumes, stronger pricing and operational
improvement. We continue to work on improvements to the financial
performance of this business. Ryvita continues to underperform but
is investing in a brand relaunch and early results are positive.
Shortly after the period end we acquired the Capsicana range of
Latin American products such as tortillas, pastes, kits and
seasoning mixes, broadening further our range of world foods.
In our Australian focused brands and businesses, sales at our
Tip Top brand increased due to pricing taken to mitigate cost
inflation. Performance at Don was held back by high meat costs,
labour shortages and the insolvency of a major distribution
business. As a result, we have conducted a value in use assessment
which has led to a non-cash exceptional impairment charge of
GBP41m.
Investment continued, with major projects including the
re-construction of the Canning Vale bakery in Western Australia
which will secure Tip Top's position as the leading supplier in
that state and the first part of Ovaltine's investment in a
production facility in Nigeria to serve markets across West Africa.
We have also invested in increased edible oil production capacity
in the US. The division has also stepped up its investment
programme in core technology platforms.
Ingredients
Actual
2023 2022 currency Constant currency
=================================== ===== ===== ========= =================
Revenue GBPm 2,157 1,827 +18% +15%
=================================== ===== ===== ========= =================
Adjusted operating profit GBPm 214 159 +35% +28%
=================================== ===== ===== ========= =================
Adjusted operating profit margin 9.9% 8.7%
=================================== ===== ===== ========= =================
Operating profit GBPm 201 141 +43%
=================================== ===== ===== ========= =================
Return on average capital employed 16.1% 14.8%
=================================== ===== ===== ========= =================
Ingredients had a very strong year with substantial increases in
both revenues and profits and, significantly for the future
development of these businesses, higher investment in both
production capacity and capability.
Revenues were well ahead of last year primarily due to pricing
action to recover large increases in raw material and other input
costs which were apparent both this year and in the prior financial
year. Revenues in the first half of the financial year were ahead
of the same period last year by 27% at GBP1,088m. In the second
half of this financial year, revenues were 6% ahead at
GBP1,069m.
Profitability this year was well ahead of the last financial
year as the benefits of pricing were felt, with volumes proving
generally resilient and a particularly strong performance by AB
Mauri, our yeast and bakery ingredients business. In the first half
of the financial year, Ingredients' adjusted operating profit was
48% higher than the same period a year ago at GBP102m; in the
second half of the period, adjusted operating profit was 14% higher
at GBP112m.
AB Mauri had a very strong year with significant increases in
both revenues and profit. Price increases lagged prior year input
cost inflation as customer contracts came up for renewal. As these
contracts were repriced, the benefits came through strongly with
little impact on volumes. Demand for yeast remained good, both from
industrial bakers and from consumers who returned to home baking
during the pandemic. Sales and profitability were particularly
strong in the US. Elsewhere, hyperinflation continued in Argentina,
Venezuela and Turkey with a consequent need for frequent repricing.
Transition of our China business to our joint venture was
completed.
We continue to invest in effluent treatment plants at many sites
to deliver on our commitment to maintain appropriate standards of
water quality, this investment being significant in recent years.
More broadly, the company's water strategy focuses on reducing its
water-intensity ratio defined as the quantity of water consumed per
tonne of product produced, excluding by-products. AB Mauri has
reduced its overall water-intensity ratio by 25% since 2017/18.
ABF Ingredients, our portfolio of specialty ingredients
businesses, delivered a solid increase in revenues derived from
pricing taken to offset input cost inflation, partially offset by a
small decline in volumes, particularly in the second half of the
period as customers destocked following the stabilisation of supply
chains. Profits were slightly lower year-on-year as we continue to
invest in these growth businesses to enhance capability in both
research and development and in commercial activities.
Specifically, AB Enzymes, specialising in food and feed enzymes,
had flat sales with pricing offsetting lower volumes caused by
destocking. Ohly, specialising in yeast extracts, delivered good
revenue growth driven by robust demand from food and bionutrients
customers. SPI Pharma, specialising in pharmaceutical excipients,
continued to progress with pricing and volume growth and an
improvement in manufacturing efficiency. ABITEC, specialising in
lipids, delivered a modest increase in sales driven by a solid
performance in the Pharma and Nutritional Science sectors. Fytexia,
our life sciences businesses acquired last year, continued to
perform well. PGPI, which specialises in extruded proteins, saw
volumes fall due to lower consumer demand for nutrition bars in the
US.
Investment continued, with major projects including a powder
packing line for AB Enzymes at Rajamaki , Finland, and increased
capacity at Ohly's fermentation and spray dryer operations in
Hamburg. In Mauri ANZ, investment in our animal feed mill in Hope
Valley in Western Australia was completed and commissioned. Our
specialty yeast plant in Hull has now been commissioned.
Agriculture
Actual
2023 2022 currency Constant currency
=================================== ===== ===== ========== =================
Revenue GBPm 1,840 1,722 +7% +7%
=================================== ===== ===== ========== =================
* 15%
Adjusted operating profit GBPm 41 47 * 13%
=================================== ===== ===== ========== =================
Adjusted operating profit margin 2.2% 2.7%
=================================== ===== ===== ========== =================
Operating profit GBPm 32 41 * 22%
=================================== ===== ===== ========== =================
Return on average capital employed 8.4% 10.3%
=================================== ===== ===== ========== =================
AB Agri revenues were up 7% against the same period last year
driven by pricing taken to mitigate input cost inflation, partially
offset by lower volumes in the UK and China compound feed
businesses. By period, revenue in the first half grew 15% compared
to the same period a year ago but fell by 1% year-on-year in the
second half, largely reflecting movements in input commodity
prices. As a result of these challenging market conditions,
adjusted operating profit reduced to GBP41m despite a modest
recovery in the second half of the financial year.
There was a decline in the size of the European pig and poultry
sectors as a result of disease and high cost of inputs, reducing
sales volumes and margins in our compound feed and starter feed
businesses. The dairy sector was more resilient, and we saw higher
revenues and profits in our businesses serving that sector. In
China, lockdowns caused by the pandemic depressed demand for pork
products and reduced pig herd sizes, resulting in a decline in that
market. AB Vista, our international feed additives business, traded
robustly with sales and profits both slightly higher. The
performance at Frontier, our joint venture specialising in farm
crop inputs and grain marketing, was only slightly lower than the
record results achieved last year as grain and fertiliser trading
normalised.
We believe there is an opportunity to develop a unique full
service offer to the dairy sector. In August 2023 we completed the
acquisition of National Milk Records for GBP48m which provides
services to the dairy supply industry including testing services
and management information which are complementary to AB Agri's
existing services. This follows our acquisition in November 2022 of
Kite Consulting and Advance Sourcing which also serve customers in
this sector.
Sugar
Actual
2023 2022 currency Constant currency
=================================== ===== ===== ========== =================
Revenue GBPm 2,547 2,016 +26% +29%
=================================== ===== ===== ========== =================
Adjusted operating profit GBPm 169 162 +4% +8%
=================================== ===== ===== ========== =================
Adjusted operating profit margin 6.6% 8.0%
=================================== ===== ===== ========== =================
Operating profit GBPm 119 164 * 27%
=================================== ===== ===== ========== =================
Return on average capital employed 9.7% 10.3%
=================================== ===== ===== ========== =================
Sales were well ahead of last year with a strong performance by
Illovo, our African sugar business, which delivered both higher
sugar production and strong pricing actions. Illovo also made good
progress in developing new and higher margin routes to market
through pre-pack branded sugar facilities. In Europe, production
was lower due to adverse weather conditions, but the resulting
impact on profitability was partially offset by good co-product
sales.
Revenues were strongly ahead of the prior year driven by higher
sugar pricing, a recovery in production and sales in Eswatini in
Africa following strike action last year, and much higher sales
from Vivergo, our bioethanol plant in Hull. European sugar prices
moved higher this year, building on the price levels seen in the
previous year and driven by lower European sugar production and
higher world market prices. Prices in Africa also increased. Sales
volumes increased modestly, with higher volumes at Illovo more than
offsetting declines at British Sugar and Azucarera. Total
production, at 2.8 million tonnes, is 8% down on last year
reflecting lower volumes as a result of adverse weather affecting
European crops, partly mitigated by strong co-product performance
and partially offset by higher production in Africa driven by the
recovery in Eswatini and good factory performances in Malawi and
South Africa. By period, revenue in the first half increased 27% to
GBP1.2bn against the same period a year ago; in the second
half, revenue rose 31% to GBP1.4bn.
Adjusted operating profit was modestly ahead of last year at
GBP169m. Overall, the contribution from higher sales prices was
partially offset by higher costs for beet, cane and energy.
Specifically, profit was impacted by the need for British Sugar to
buy and import sugar to make good a shortfall in beet sugar
production. Overall profits were held back by the substantial
trading losses incurred by Vivergo in the first half of the year.
First half Sugar adjusted operating profit was 5% ahead of the same
period last year at GBP86m while second half adjusted operating
profit was 11% higher at GBP83m.
British Sugar production levels were exceptionally low at 0.74
million tonnes, 27% lower than the prior year's campaign, the
result of a sequence of unusually poor weather conditions which
reduced the crop size and lowered beet yields and sugar content.
The business secured alternative sources of supply in order to
fulfil customer contracts but profitability was significantly
reduced as a consequence in the second half of the year. In the
course of the year energy costs remained at elevated levels, but
were partially offset by strong pricing for electricity produced
and other co-products. Profitability for the year at British Sugar
was lower as a result of the combination of these factors.
Azucarera, our Spanish sugar business, benefitted in the course
of the year from the higher prices, partially offset by elevated
costs for beet, raw sugars and energy. Beet sugar production was
lower than the prior year due to hot and dry weather, and
additional purchasing of raw sugars for refining was required in
order to support sales. Overall production was down 20% at some
0.45 million tonnes.
Our Illovo Sugar Africa business performed very well. The
business continues to develop sales and higher margin routes to
market for pre-packed branded sugar in Malawi, Tanzania and Zambia.
Overall, Illovo sugar production was 1.53 million tonnes compared
to 1.45 million tonnes in the previous financial year reflecting
the recovery in production in Eswatini and good production in
Malawi and South Africa partially offset by the impact of flooding
in Mozambique. The combination of higher volumes and strong pricing
resulted in both sales and profit being well ahead of last year.
Construction of our new sugar mill in Tanzania continues and will
increase our production capacity considerably in that country.
At the end of February, severe flooding in Mozambique affected
our cane estate at Maragra and most of our partner-grower
operations. The Maragra mill will not open for sugar production
this season and as such we have taken a non-cash exceptional
impairment charge of GBP35m in these accounts to write down the net
asset value of this business.
The trading performance of AB Sugar China was below last year as
a result of lower demand caused by lockdowns earlier in the year.
More recently the relaxation of restrictions has caused sugar
prices to recover strongly. However, trading remains difficult and
we have reviewed our outlook for this business, including the
forecast for the evolution of beet crop area and yields. As a
result, we have taken a one-off non-cash adjustment of GBP15m as an
exceptional impairment charge this year.
Vivergo incurred substantial losses in the first half due to
high wheat and energy costs and low bioethanol prices. The second
half of the year saw much reduced losses and a significant
improvement in margin and operating performance, particularly in
the fourth quarter.
Sugar made good progress in its decarbonisation programme in the
financial year. It completed 17 decarbonisation projects across
various sugar processes, which contributed to a 4% reduction in
greenhouse gas emissions compared with 2022. Among the projects
completed are modifications in the UK to replace coal with natural
gas in the dryers at our Bury St Edmunds processing plant,
improvements to gas turbine performance at our Wissington plant,
the elimination of heavy fuel oil at Cantley, and the installation
of more efficient slicer machines at Bury St Edmunds. In addition,
Sugar has also published its transition plan to a low carbon
economy by 2030.
Retail
Actual
2023 2022 currency Constant currency
=================================== ===== ===== ========= =================
Revenue GBPm 9,008 7,697 +17% +15%
=================================== ===== ===== ========= =================
* 3%
Adjusted operating profit GBPm 735 756 * 3%
=================================== ===== ===== ========= =================
Adjusted operating profit margin 8.2% 9.8%
=================================== ===== ===== ========= =================
Operating profit GBPm 717 550 +30%
=================================== ===== ===== ========= =================
Return on average capital employed 12.0% 12.9%
=================================== ===== ===== ========= =================
Primark revenues rose strongly in this financial year, up 15%
and exceeding our expectations a year ago. This reflects a sales
increase in all our markets driven by a number of factors,
including carefully selected price increases taken to partially
offset high and volatile input cost inflation, well-received
product ranges and the resulting appeal of our offer to new and
existing customers. Good footfall, strongly performing new stores
and the rollout of our enhanced customer website also contributed
to the strong sales performance. Sales increased in both halves of
the year: in the first half, by 17% to GBP4.2bn against the same
period in the prior year; and in the second half, by 14% to
GBP4.8bn.
We believe that our product offer was a source of
differentiation and competitive advantage throughout the year. Cold
weather essentials and other seasonal product lines, including our
well-received velvet plush leggings, drove strong sales leading
into a record Christmas season which included a resurgence in
women's partywear, tailoring separates and beauty products as a
return to festive socialising gathered pace. In the new year sales
of beachwear and luggage were exceptionally strong as customers
looked early to holidays. Our summer trading was good, led by our
boho-inspired design trend. Throughout the year we further
broadened our ranges and collaborations to appeal to customers
trying Primark for the first time alongside existing customers. We
expanded our Edit collection, our more premium essentials range for
women, across more stores which sold well. We also continued our
successful UK and European collaborations with Stacey Solomon, Kem
Cetinay and Paula Echevarria launched our first truly international
partnership with Rita Ora whose first collection sales have
surpassed expectations. Sales of licensed products grew
significantly year-on-year, in particular over Christmas across our
growing portfolio of brand partners including Disney, Netflix, The
Grinch, and US sports partners NFL and NBA. Our summer Barbie
collection with Mattel also proved very successful.
Trading was influenced in the second half of the year by
weather. We saw good sales through the early summer with the
exception of Iberia which suffered unusually poor weather in May.
In July, there was very poor weather in the UK and Ireland and
heatwaves in Southern Europe, followed by warm conditions in August
and September which coincided with the launch of our Autumn /
Winter ranges. Despite these unseasonal conditions, we generally
traded well with our core product ranges remaining in robust demand
and partially offsetting inevitable volatility in sales more
dependent on fashion and season.
Like-for-like sales growth was 8.5% for the year. In the first
half, like-for-like sales rose by 10% driven by higher average
selling prices and higher unit volumes partially offset by smaller
basket sizes. Footfall increased in both the UK and Europe, against
a comparative period which featured some disruption from the
pandemic. In the second half of the year like-for-like growth was
lower than in the first half at 7%. This growth was driven by a
slightly greater benefit from selective pricing taken to
part-mitigate inflation, the benefits of which were partially
offset in turn by lower unit volumes, smaller basket sizes and
slightly lower footfall. Space growth contributed sales growth of
6%, driven by the increase in selling space across a number of our
markets, in particular Italy, France and the US, and higher sales
densities in most new stores.
Adjusted operating profit margin for the full year was 8.2%,
down on the previous financial year's 9.8%. Adjusted operating
profit margin in the first half was 8.3%, down on the same period a
year ago due to our decision not to fully recover all the inflation
in input costs. In the first half the higher costs of bought-in
goods, higher freight rates, higher labour costs and higher energy
costs outweighed the benefits of our selective price increases and
an improvement in store sales densities due to higher footfall. In
the second half, compared with the same period a year ago, the cost
of bought-in goods was higher again including a more significant
impact of the strength of the US dollar against sterling and the
euro when we placed orders for our Spring / Summer ranges several
months earlier. This higher cost of goods was offset somewhat by
the benefit of like-for-like sales growth and sales from new store
openings and by the benefit of additional pricing being implemented
in the spring and summer ranges. Freight costs fell in the fourth
quarter, but labour costs were higher than the same period a year
ago. Second half operating profit margin was 8.0%, slightly below
the first half of the year, and also held back by higher than
expected stock loss and a modest amount of German restructuring
costs, albeit helped by
lower markdowns.
In the UK, sales increased by 11% against the previous financial
year, driven by like-for-like growth of 10% helped in particular by
our new customer website that has now been running for more than a
year. This sales performance was achieved despite unhelpful weather
impacts in the third and fourth quarters which resulted in slightly
lower footfall in contrast to the first half of the year when
footfall was significantly higher. Primark's market share(1) grew
in the financial year, increasing from 6.4% last year to 6.7% this
year.
In Europe excluding the UK, sales increased by 18% on the
previous financial year, with like-for-like growth of 8% despite
weaker trading at times due to unseasonable weather. Our store
estates in all the countries in which we operate delivered
like-for-like sales growth, with good performances in Iberia,
France, Germany, Belgium, the Netherlands and Eastern Europe. Italy
delivered strong total sales growth and continues to operate on
high sales densities. We opened 17 stores in the European region in
the period to strong customer demand and good resulting footfall.
Sales densities in most of these new stores continue to be higher
than average. Primark's share of the total clothing, footwear and
accessories market by value increased in both Spain and France. In
Germany we closed two stores in the period and, after period end,
we closed one more store and agreed two further closures. In
addition we have started our rightsizing programme with two stores
in the period and the signs are encouraging. Two further stores
were resized in September after the period end. We continue to
consider further resizing. We are also developing plans to open new
stores smaller than average in new locations with merchandise
selected to appeal to local customer demand.
In the US, total net sales were 24% higher than last year driven
by space expansion. We opened eight new stores in the period,
largely in the Northeast, taking the estate to 21 stores trading
from 0.9 million sq ft and are on track to meet our US store
expansion target of around 60 stores by the end of 2026. We are
pleased with trading in our new stores which are benefitting from
our growing knowledge of the US consumer and the wider retail
market. We have refined the design, size and layout of our stores
and continue to tailor our ranges to suit the US consumer. We
continued to expand our footprint beyond the Northeast with further
progress in the new store pipeline and two leases signed recently
in Texas. Investment in infrastructure to support this expansion
continues with work ongoing at our new Jacksonville logistics
centre where we expect to be operational in the spring.
Further progress has been made implementing our wide-ranging
sustainability strategy unveiled two years ago, itself an evolution
of an earlier and long-standing ethical trade and sustainability
programme. During the year we further embedded the processes and
capabilities needed to drive and accelerate change both internally
and across our value chain. Some 55% of all the clothing units we
sold in the financial year contained recycled or more sustainably
sourced materials, up from 45% last year and up from 25% at launch
two years ago. This represents good progress in the delivery of our
commitment that all our clothes will be made from recycled or
sustainably sourced materials by 2030. Within this, 46% of our
cotton clothing now contains cotton that is organic, recycled or
sourced from our Primark Sustainable Cotton Programme (PSCP), up
from 40% last year. Our commitment to reduce our carbon emissions
across our value chain by 50% by 2030 was validated by the Science
Based Targets initiative (SBTi). While carbon emissions increased
this year by 11% compared to our baseline 2018/19 financial year,
this is as expected: Scope 1 and 2 emissions reduced but there was
an increase in our Scope 3 emissions due to an increase in the
volume of materials used to produce the higher number of products
sold in the period year-on-year. In the short term, this trend is
likely to continue, but emissions will decline in time as we
increase the use of more sustainably sourced materials across our
product ranges. In our own store estate, some 70% of our stores are
now powered by renewable or low-carbon electricity and 141 stores
have switched to energy-efficient lighting.
Primark continues to build and invest in transforming its
digital capability. This year we successfully rolled out our new
and improved website to all 16 markets. Since launching the new
website, we have seen a positive customer reaction and strong
traffic uplift in all trading markets, led by the UK and the
Republic of Ireland which were the first two countries to move on
to the new platform. Usage of the stock checker facility ranged
broadly between 15%-20% of website sessions across our markets. We
are also putting more focus on increasing traffic growth to
www.primark.com through organic search, CRM and selected
performance marketing trials and, overall, working in closer
alignment with our already strong social media engagement. We
believe our digital platform is already beginning to support good
uplifts in footfall and that it is contributing to store
like-for-like sales across our markets.
In April we announced the expansion of our Click + Collect trial
to an additional 32 stores in London, taking the total number
offering this service to 57 stores, one third of our UK estate. On
13 September 2023 we extended the service to include womenswear,
alongside the existing offer on kidswear. Although this remains a
trial, we are encouraged by the early results. In addition, we
implemented self-checkouts in 22 stores in the period. This service
has seen high utilisation and customer engagement and the roll-out
continues.
Retail selling space overall increased by just under 1 million
sq ft since the last financial year end and on 16 September 2023 we
were trading from 432 stores and 18.2 million sq ft of selling
space. We added 27 stores in the period: eight in the US; six in
Central and Eastern Europe with three in Poland, two in Romania and
our first store in Slovakia marking our 15(th) and 16(th) market;
four in Italy and France respectively; three in Spain; and two in
the UK. We fully reopened our Bank Buildings store in the heart of
Belfast, and closed our temporary store in Donegal Place. As
referred to above, two stores in Germany were closed during the
year. We also re-started our store refurbishment programme.
We remain on track to grow to 530 stores by the end of 2026 and
have visibility for continued footprint expansion beyond.
Year ended Year ended
16 September 2023 17 September 2022
====================== ======================
# of stores sq ft 000 # of stores sq ft 000
==================== =========== ========= =========== =========
UK 192 7,725 191 7,620
Spain 59 2,390 56 2,305
Germany 30 1,605 32 1,841
France 24 1,203 20 1,044
Republic of Ireland 37 1,165 37 1,121
Netherlands 20 1,016 20 1,016
US 21 873 13 563
Italy 15 747 11 552
Belgium 8 403 8 403
Portugal 10 383 10 383
Austria 5 242 5 242
Poland 5 197 2 77
Czechia 2 89 2 89
Romania 2 75 - -
Slovenia 1 46 1 46
Slovakia 1 39 - -
==================== =========== ========= =========== =========
Total 432 18,198 408 17,302
==================== =========== ========= =========== =========
1. Kantar, Primark market share of the total UK clothing,
footwear and accessories market including online by value, 52-week
data to 16 September 2023
Financial review
Group performance
Group revenue was GBP19.8bn, 15% ahead of last year at constant
currency, with sales growth in each of our businesses, benefitting
from the build of price increases taken to offset inflation.
However, as expected, adjusted operating profit margin declined,
from 8.4% last year to 7.7% this year as a result of the overall
inflation. The Group generated an adjusted operating profit of
GBP1,513m, an increase of 5% at actual rates ahead of last year, a
strong result given the scale of input cost increases. Statutory
operating profit for the Group of GBP1,383m was 17% ahead, after
charging exceptional items of GBP109m (2022 - GBP206m).
For the full year the average rates used to translate the income
statement resulted in a translation gain of GBP17m, primarily
driven by the strengthening of the US dollar, particularly in the
first half compared to the first half of 2022. The weakness of
sterling against some of our trading currencies also drove a
benefit on translation of our non-sterling earnings.
Segmental summary Revenue Adjusted operating profit
------------------ ---------------------- -----------------------------
2023 2022 Change 2023 2022 Change
At actual rates GBPm GBPm % GBPm GBPm %
------------------ ------ ------ ------ ------ ------ -------------
Grocery 4,198 3,735 +12.4 448 399 +12.3
Ingredients 2,157 1,827 +18.1 214 159 +34.6
* 12.8
Agriculture 1,840 1,722 +6.9 41 47
Sugar 2,547 2,016 +26.3 169 162 +4.3
* 2.8
Retail 9,008 7,697 +17.0 735 756
* 6.8
Central - - - (94) (88)
------------------ ------ ------ ------ ------ ------ -------------
19,750 16,997 +16.2 1,513 1,435 +5.4
------------------ ------ ------ ------ ------ ------ -------------
The segmental analysis by division is set out in the operating
reviews. The segmental analysis by geography is set out in note 1
on page 22. Of note is the increase in adjusted operating profit in
North America which is driven by the success of our Grocery and
Ingredients' businesses there.
Adjusted earnings per share
2023 2022 Change
GBPm GBPm %
-------------------------------------------------------- ------ ------ -----------
Adjusted operating profit 1,513 1,435 +5.4
Net finance income/(expense) excluding lease interest 11 (11) +200.0
Other financial income 40 13 +207.7
Lease interest (91) (81) * 12.3
Adjusted profit before tax 1,473 1,356 +8.6
Taxation on adjusted profit (346) (302) * 14.6
--------------------------------------------------------- ------ ------ -----------
Adjusted profit after tax 1,127 1,054 +6.9
--------------------------------------------------------- ------ ------ -----------
Adjusted earnings attributable to equity shareholders 1,103 1,034 +6.7
--------------------------------------------------------- ------ ------ -----------
Adjusted earnings per share (in pence) 141.8p 131.1p +8.2
--------------------------------------------------------- ------ ------ -----------
Net finance income and other financial income
Finance income increased as a result of higher interest rates
earned on our cash deposits. Other financial income increased this
year as a consequence of the higher surplus in the Group's UK
defined benefit pension scheme at the beginning of the financial
year. Lease interest increased during the year because of more
leases being entered into from our continued store expansion
programme, particularly in the US, Italy and France.
As a result, on an adjusted basis, profit before tax was up
8.6%, to GBP1,473m.
Taxation
This year's tax charge on the adjusted operating profit before
tax was GBP346m, with an increase in adjusted effective tax rate to
23.5% from 22.2% last year. This rate includes the impact on the
blended tax rate for the full year of the increase in UK
corporation tax rate from 19% to 25% in April 2023. The Group is
exposed to a range of uncertain tax positions. The provision at the
financial year end for these tax positions was GBP55m (2022 -
GBP102m). The reduction in the provision is due to the conclusion
of UK tax audits covering several businesses and years. This
reduction in the provision between last financial and this
financial year was due to partial utilisation and also translated
into a one-off benefit to the effective tax rate for the year.
We expect the Group's effective tax rate in 2024 to be broadly
in line with 2023. This includes the full year impact of the
increase in the UK corporation tax rate in April 2023 and changes
to the mix in profits by jurisdiction.
Adjusted earnings per share increased by 8.2% to a record 141.8p
per share. This increase follows from the higher adjusted profit
and the higher financial income, more than offsetting the slightly
higher adjusted effective tax rate. The adjusted earnings per share
also benefit from the reduction in weighted average number of
shares, from 789 million for 2022 to 778 million for 2023, as a
result of the buyback programme.
Basic earnings per share
2023 2022 Change
GBPm GBPm %
-------------------------------------------------------- ------ ----- ------
Adjusted profit before tax 1,473 1,356 +8.6
Acquired inventory fair value adjustments (3) (5)
Amortisation of non-intangibles (41) (47)
Exceptional items (109) (206)
Profits less losses on sale and closure of businesses (3) (23)
Profits less losses on disposal of non-current assets 28 7
Transaction costs (5) (6)
Profit before tax 1,340 1,076 +24.5
Taxation (272) (356) +23.6
--------------------------------------------------------- ------ ----- ------
Profit after tax 1,068 720 +48.3
--------------------------------------------------------- ------ ----- ------
Earnings attributable to equity shareholders 1,044 700 +49.1
--------------------------------------------------------- ------ ----- ------
Basic earnings per share (in pence) 134.2p 88.6p +51.5
--------------------------------------------------------- ------ ----- ------
Profit before tax of GBP1,340m was 24.5% ahead of last year,
benefitting from the lower level of exceptional items in 2023.
Exceptional items
2023 2022
GBPm GBPm
------------------------------------------------------------- ----- -----
Grocery - Impairment 41 -
Sugar - Impairments 50 -
Retail - Impairments, rightsizing and fair value write downs 18 206
109 206
------------------------------------------------------------- ----- -----
The income statement this year included a non-cash exceptional
impairment charge of GBP109m. In Grocery, the Don business has been
impacted by inflationary pressures, a surplus supply of fresh pork
in the market, labour constraints, equipment reliability causing
production shortfalls and additional transportation costs following
the unforeseen liquidation of its distribution partner. As a result
we recognised impairment write-downs of GBP39m against property,
plant and equipment, GBP1m against right-of-use assets and GBP1m
against intangible assets.
In Sugar, the China Sugar North business recognised a GBP15m
impairment write-down against property, plant and equipment. This
business was held for sale in the previous year but that process
was halted in the second half of the year. Due to severe flooding
in Mozambique, the related damage to the sugar crop fields and the
inability to plant for the foreseeable future Illovo Mozambique
recognised GBP25m impairment write-downs against property, plant
and equipment, GBP7m against current biological assets, GBP2m of
personnel costs and GBP1m write-down against inventory.
In Retail, the German Primark portfolio recognised exceptional
impairment charges relating to stores that were impaired in the
previous year: GBP13m as a result of additional right-of-use assets
being recognised due to rent indexation adjustments on right-of-use
assets that were impaired, a further GBP5m non-cash exceptional
charge for the rightsizing of four stores and the fair value
write-down of a store.
The prior year exceptional impairment charge of GBP206m
comprised non-cash write-downs of assets in Primark Germany, GBP72m
against property plant and equipment and GBP134m against
right-of-use assets.
Total tax charge for the year was GBP272m. This includes the
positive benefit of deferred tax on exceptional items from the
prior year, when a GBP63m exceptional charge was included in the
Group's total tax charge reflecting the de-recognition of the
deferred tax assets relating to Primark Germany. A significant
proportion of that asset had been deemed to be irrecoverable and
was written off as an exceptional tax charge last year. As a result
of further work undertaken this year it has been determined that
more of this deferred tax asset is recoverable and so, an
exceptional non-cash tax credit of GBP58m was recognised in the
first half.
Earnings attributable to equity shareholders were GBP1,044m and
basic earnings per share were 134.2p, 52% ahead of last year.
Cash flow
2023 2022
GBPm GBPm
------------------------------------------------------------------------ ------- -----
Adjusted EBITDA 2,361 2,261
Repayment of lease liabilities net of incentives received (246) (275)
Working capital (216) (729)
Capital expenditure (1,073) (769)
Purchase of subsidiaries, joint ventures and associates (94) (154)
Sale of subsidiaries, joint ventures and associates 4 -
Net interest paid (74) (97)
Taxation (341) (304)
Share of adjusted profit after tax from joint ventures and associates (127) (112)
Dividends received from joint ventures and associates 107 93
Other (32) 2
Free cash flow 269 (84)
Share buyback (448) -
Dividends (345) (380)
Movement in loans and current asset investments (10) 196
-------------------------------------------------------------------------- ------- -----
Cash flow (534) (268)
-------------------------------------------------------------------------- ------- -----
There was free cash inflow in the year totalling GBP269m as a
result of the operating profit generated by the Group, despite cash
outflows driven by higher capital expenditure than the prior year
and a working capital outflow.
The capital expenditure increase was driven by the number of
large capital projects and a step up following low levels of the
last few years. The increase of the investment in our food
businesses primarily relates to projects to build capacity. In
Primark the increase reflects the acceleration of our new store
programme and expenditure to expand our capabilities in warehouse
automation and technology. We expect this higher level of
investment to continue over the medium term.
The main factors driving the increase in working capital were
twofold: the impact of inflation across all our food businesses and
higher inventories, particularly in our Sugar and Primark
businesses. As a reminder Primark inventories a year ago were too
low and reflected the logistics and supply chain difficulties
experienced in the prior year. We do expect a working capital
inflow in 2024 as Primark inventory levels normalise.
Cash tax increased in the year driven by the increase in profit
before tax. We expect a reduced level of cash tax in 2024 due to
the reallocation of historic overpayments and favourable
settlements of historical enquires and returns.
There was cash outflow of GBP448m for our share buyback
programme, with the remainder of the GBP500m programme completed
after the year end. We also paid GBP345m for total dividends in
this financial year, which reflects the final 2022 dividend and
interim 2023 dividend. The GBP380m paid in the prior year included
a special dividend that was declared in respect of the 2021
financial year.
Acquisitions and disposals
The spend on acquisitions this financial year was GBP94m. The
most significant of these were the acquisitions of National Milk
Records, Kite Consulting and Advance Sourcing in Agriculture.
For disposals, a non-cash provision of GBP6m was included in
profit less losses on sale and closure of business in respect of
Illovo's investment in Gledhow.
Financing and liquidity
2023 2022
GBPm GBPm
------------------------------------------------------------ ------- -------
Short-term loans (99) (31)
Long-term loans (394) (480)
Lease liabilities (3,160) (3,252)
-------------------------------------------------------------- ------- -------
Total debt (3,653) (3,763)
Cash at bank and in hand, cash equivalents and overdrafts 1,388 1,995
Current asset investments - 4
-------------------------------------------------------------- ------- -------
Total net debt (2,265) (1,764)
-------------------------------------------------------------- ------- -------
Leverage ratio 0.96 0.78
-------------------------------------------------------------- ------- -------
At 16 September 2023, the Group held cash balances of GBP1,388m.
In addition, the Group has an undrawn Revolving Credit Facility
(RCF) for GBP1.5bn. This facility is free from performance
covenants and was extended in June 2023 for a further year,
bringing the maturity to 2028. Our GBP400m bond, launched last
year, at 2.5% is due in 2034, and our final $100m Private Placement
notes are due in March 2024.
Total liquidity at year end was GBP2.7bn, comprising the
GBP1.5bn of cash, less GBP0.2bn of short-term loans and overdrafts
and GBP0.1bn of inaccessible cash, plus the GBP1.5bn RCF. This
compares to GBP3.4bn at the end of 2022.
Pensions
The Group's defined benefit pension schemes aggregate surplus
increased by 5% to GBP1,377m at year end compared to last year's
GBP1,314m. The UK scheme, which accounts for around 90% of the
Group's gross pension assets was in surplus by GBP1,397m (2022 -
GBP1,366m). A significant increase in the pension surplus in the
prior year was driven by an increase in bond yields reducing
liabilities. Details of the assumptions made in the current and
previous year are disclosed in note 12 of the financial statements
together with the bases on which those assumptions have been
made.
The charge for the year for the Group's defined contribution
schemes, which was equal to the contributions made, amounted to
GBP95m (2022 - GBP87m). This compared with the cash contribution to
the defined benefit schemes of GBP36m (2022 - GBP36m).
The most recent triennial actuarial valuation of the UK scheme
was carried out as of 5 April 2023. This last valuation showed a
funding surplus of GBP1,013m. This is a clear improvement on the
previous valuation undertaken at 5 April 2020, which showed a
deficit of GBP302m. As agreed with the trustees in September, as a
result of this significant increase in the surplus, the Group will
receive a cash flow benefit of approximately GBP70m per year from
the abatement of UK employer pension contributions on both the
defined benefit and defined contribution schemes. This will take
effect from the start of the new financial year.
Dividend and shareholder returns
We announced a share buyback programme of GBP500m in November
2022. In the financial year we purchased 23.7 million shares for
GBP446m and the shares bought back were cancelled. At the end of
the financial year we had 765 million ordinary shares in issue. The
weighted average number of shares for the year was 778 million
which compared to 789 million for the last financial year. This
share buyback has resulted in a positive impact on our reported
adjusted earnings per share of 1.8p. Since the financial year end,
a further 2.8 million shares were purchased, completing the total
GBP500m buyback programme. The Group has announced the continuation
of a buyback programme, targeting an additional amount of GBP500m
over the next 12 months.
This year the Board declared an interim dividend of 14.2p per
share (2022 - 13.8p), an increase of 3% compared to prior year. The
Board is proposing a final dividend of 33.1p per share. It is also
declaring a special dividend of 12.7p per share to be paid as a
second interim dividend. Taken with the first interim dividend of
14.2p per share, the aggregate total dividend for the year is 60.0p
per share, 37% higher than the total dividend of 43.7p in 2022,
which comprised an interim dividend of 13.8p, and a final dividend
of 29.9p.
Principal risks and uncertainties
Our principal risks and uncertainties
The directors have carried out an assessment of the principal
risks facing ABF, including emerging risks, that would threaten our
business model, future performance, solvency or liquidity. Outlined
below are the Group's principal risks and uncertainties. These have
been detailed in the 2023 Annual Report and Accounts together with
the key mitigating activities in place to address them.
Operating in global markets
Fluctuations in commodity and energy prices
Movement in exchange rates
Health and nutrition
Workplace health and safety
Product safety and quality
Breaches of IT and information security
Our supply chain and ethical business practices
Our use of natural resources and managing our environmental
impact
The impact of climate change and natural disasters on our
operations
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
consolidated financial statements.
The forecast for the going concern assessment period to 1 March
2025 has been updated for the business's latest trading in October
and is the best estimate of cashflow in the period. Having reviewed
this forecast and having applied a downside sensitivity analysis
and performed a reverse stress test, the directors consider it a
remote possibility that the financial headroom could be
exhausted.
The Board's treasury policies are in place to maintain a strong
capital base and manage the Group's balance sheet and liquidity to
ensure long-term financial stability. These policies are the basis
for investor, creditor and market confidence and enable the
successful development of the business. The financial leverage
policy requires that, in the ordinary course of business, the Board
prefers to see the Group's ratio of net debt including lease
liabilities to adjusted EBITDA to be well under 1.5x. At the end of
this financial year, the financial leverage ratio was 1.0x and the
Group had total cash of GBP1.5bn and an undrawn committed Revolving
Credit Facility of GBP1.5bn.
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
GBP400m public bond due in 2034. Furthermore the Group's committed
Revolving Credit Facility is free of performance covenants and
matures in 2028, with one 1-year extension option remaining (after
the first was utilised during the year). The $100m of outstanding
private placement notes are due in March 2024 after which point
Group funding will not be 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 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 GBP1.9bn 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 period, management could take
substantial mitigating actions, such as reviewing pricing, taking
cost cutting measures and reducing capital investment. Secondly,
the Group has significant business and asset diversification and
would be able to, if it were necessary, dispose of assets and/or
businesses to raise considerable levels of funds.
Cautionary statements
This report contains forward-looking statements. These have been
made by the directors in good faith based on the information
available to them up to the time of their approval of this report.
The directors can give no assurance that these expectations will
prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors, underlying such
forward-looking information, actual results may differ materially
from those expressed or implied by these forward-looking
statements. The directors undertake no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
Directors' responsibilities in respect
of the financial statements
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation taken as a whole; and
- the Strategic report includes a fair review of the development and performance of the business
and the position of the Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and financial statements, taken as
a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
The contents of this announcement, including the responsibility
statement above, have been extracted from the annual report and
accounts for the 52 weeks ended 16 September 2023 which may be
found at www.abf.co.uk and will be despatched to shareholders
shortly. Accordingly this responsibility statement makes reference
to the financial statements of the Company and the Group and to the
relevant narrative appearing in that annual report and accounts
rather than the contents of this announcement.
On behalf of the Board
Michael McLintock George Weston Eoin Tonge
Chairman Chief Executive Finance Director
7 November 2023
Consolidated income statement
for the 52 weeks ended 16 September 2023
2023 2022
Continuing operations note GBPm GBPm
=================================================================== ==== ======== ========
Revenue 1 19,750 16,997
Operating costs before exceptional items (18,410) (15,729)
Exceptional items 2 (109) (206)
=================================================================== ==== ======== ========
1,231 1,062
Share of profit after tax from joint ventures and associates 124 109
Profits less losses on disposal of non-current assets 28 7
=================================================================== ==== ======== ========
Operating profit 1,383 1,178
Adjusted operating profit 1 1,513 1,435
Profits less losses on disposal of non-current assets 28 7
Amortisation of non-operating intangibles (41) (47)
Acquired inventory fair value adjustments (3) (5)
Transaction costs (5) (6)
Exceptional items 2 (109) (206)
=================================================================== ==== ======== ========
Profits less losses on sale and closure of businesses 7 (3) (23)
=================================================================== ==== ======== ========
Profit before interest 1,380 1,155
Finance income 48 19
Finance expense 3 (128) (111)
Other financial income 40 13
=================================================================== ==== ======== ========
Profit before taxation 1,340 1,076
Adjusted profit before taxation 1,473 1,356
Profits less losses on disposal of non-current assets 28 7
Amortisation of non-operating intangibles (41) (47)
Acquired inventory fair value adjustments (3) (5)
Transaction costs (5) (6)
Exceptional items 2 (109) (206)
Profits less losses on sale and closure of businesses 7 (3) (23)
=================================================================== ==== ======== ========
Taxation * UK (excluding tax on exceptional items) (40) (50)
* UK (on exceptional items) - 3
* Overseas (excluding tax on exceptional items) (300) (243)
* Overseas (on exceptional items) 68 (66)
================================================================== ==== ======== ========
4 (272) (356)
=================================================================== ==== ======== ========
Profit for the period 1,068 720
=================================================================== ==== ======== ========
Attributable to
Equity shareholders 1,044 700
Non-controlling interests 24 20
=================================================================== ==== ======== ========
Profit for the period 1,068 720
=================================================================== ==== ======== ========
Basic and diluted earnings per ordinary share (pence) 6 134.2 88.6
Dividends per share paid and proposed for the period (pence) 5 47.3 43.7
Special dividend per share proposed for the period (pence) 5 12.7 -
=================================================================== ==== ======== ========
Consolidated statement of comprehensive income
for the 52 weeks ended 16 September 2023
2023 2022
GBPm GBPm
==================================================================================== ===== =====
Profit for the period recognised in the income statement 1,068 720
Other comprehensive income
Remeasurements of defined benefit schemes (7) 821
Deferred tax associated with defined benefit schemes 4 (198)
===================================================================================== ===== =====
Items that will not be reclassified to profit or loss (3) 623
Effect of movements in foreign exchange (470) 440
Net gain/(loss) on hedge of net investment in foreign subsidiaries 1 (1)
Net gain on other investments held at fair value through other comprehensive income - 4
Deferred tax associated with movements in foreign exchange (5) -
Current tax associated with movements in foreign exchange 6 -
Movement in cash flow hedging position (260) 419
Deferred tax associated with movement in cash flow hedging position 40 (28)
Deferred tax associated with movement in other investments - (1)
Share of other comprehensive (loss)/income of joint ventures and associates (18) 28
Effect of hyperinflationary economies 40 46
===================================================================================== ===== =====
Items that are or may be subsequently reclassified to profit or loss (666) 907
Other comprehensive income for the period (669) 1,530
===================================================================================== ===== =====
Total comprehensive income for the period 399 2,250
===================================================================================== ===== =====
Attributable to
Equity shareholders 397 2,219
Non-controlling interests 2 31
===================================================================================== ===== =====
Total comprehensive income for the period 399 2,250
===================================================================================== ===== =====
Consolidated balance sheet
at 16 September 2023
2023 2022
GBPm GBPm
================================================= ======= =======
Non-current assets
Intangible assets 1,870 1,868
Property, plant and equipment 5,766 5,599
Right-of-use assets 2,350 2,456
Investments in joint ventures 303 301
Investments in associates 91 85
Employee benefits assets 1,446 1,393
Income tax 23 23
Deferred tax assets 193 158
Other receivables 63 58
================================================== ======= =======
Total non-current assets 12,105 11,941
================================================== ======= =======
Current assets
Assets classified as held for sale - 45
Inventories 3,207 3,259
Biological assets 99 105
Trade and other receivables 1,778 1,758
Derivative assets 96 475
Current asset investments - 4
Income tax 102 67
Cash and cash equivalents 1,457 2,121
================================================== ======= =======
Total current assets 6,739 7,834
================================================== ======= =======
Total assets 18,844 19,775
================================================== ======= =======
Current liabilities
Liabilities classified as held for sale - (14)
Lease liabilities (335) (316)
Loans and overdrafts (168) (157)
Trade and other payables (2,953) (3,114)
Derivative liabilities (69) (205)
Income tax (109) (160)
Provisions (55) (87)
================================================== ======= =======
Total current liabilities (3,689) (4,053)
================================================== ======= =======
Non-current liabilities
Lease liabilities (2,825) (2,936)
Loans (394) (480)
Provisions (48) (26)
Deferred tax liabilities (626) (647)
Employee benefits liabilities (69) (79)
================================================== ======= =======
Total non-current liabilities (3,962) (4,168)
================================================== ======= =======
Total liabilities (7,651) (8,221)
================================================== ======= =======
Net assets 11,193 11,554
================================================== ======= =======
Equity
Issued capital 44 45
Other reserves 179 178
Translation reserve (42) 422
Hedging reserve 2 154
Retained earnings 10,910 10,649
================================================== ======= =======
Total equity attributable to equity shareholders 11,093 11,448
================================================== ======= =======
Non-controlling interests 100 106
================================================== ======= =======
Total equity 11,193 11,554
================================================== ======= =======
Consolidated cash flow statement
for the 52 weeks ended 16 September 2023
2023 2022
GBPm GBPm
============================================================= ======= =====
Cash flow from operating activities
Profit before taxation 1,340 1,076
Profits less losses on disposal of non-current assets (28) (7)
Profits less losses on sale and closure of businesses 3 23
Transaction costs 5 6
Finance income (48) (19)
Finance expense 128 111
Other financial income (40) (13)
Share of profit after tax from joint ventures and associates (124) (109)
Amortisation 82 68
Depreciation (including of right-of-use assets) 804 802
Exceptional items 109 206
Acquired inventory fair value adjustments 3 5
Effect of hyperinflationary economies 14 16
Net change in the fair value of current biological assets (11) (8)
Share-based payment expense 18 19
Pension costs less contributions (8) 7
Increase in inventories (94) (953)
Increase in receivables (107) (288)
(Decrease)/increase in payables (15) 512
Purchases less sales of current biological assets (9) (4)
(Decrease)/increase in provisions (27) 7
============================================================== ======= =====
Cash generated from operations 1,995 1,457
Income taxes paid (341) (304)
============================================================== ======= =====
Net cash generated from operating activities 1,654 1,153
============================================================== ======= =====
Cash flow from investing activities
Dividends received from joint ventures and associates 107 93
Purchase of property, plant and equipment (997) (680)
Purchase of intangibles (76) (89)
Lease incentives received 62 46
Sale of property, plant and equipment 48 30
Purchase of subsidiaries, joint ventures and associates (94) (154)
Sale of subsidiaries, joint ventures and associates 4 -
Purchase of other investments (4) (7)
Interest received 44 17
============================================================== ======= =====
Net cash used in investing activities (906) (744)
============================================================== ======= =====
Cash flow from financing activities
Dividends paid to non-controlling interests (7) (8)
Dividends paid to equity shareholders (345) (380)
Interest paid (118) (114)
Repayment of lease liabilities (308) (321)
Decrease in short-term loans (13) (12)
Increase in long-term loans - 178
Decrease in current asset investments 3 30
Share buyback (448) -
Movement from changes in own shares held (46) (50)
============================================================== ======= =====
Net cash used in financing activities (1,282) (677)
============================================================== ======= =====
Net decrease in cash and cash equivalents (534) (268)
Cash and cash equivalents at the beginning of the period 1,995 2,189
Effect of movements in foreign exchange (73) 74
============================================================== ======= =====
Cash and cash equivalents at the end of the period 1,388 1,995
============================================================== ======= =====
Consolidated statement of changes in equity
for the 52 weeks ended 16 September 2023
Attributable to equity shareholders
=============================================================
Non-
Issued Other Translation Hedging Retained controlling Total
capital reserves reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================= ======== ========= =========== ======== ========= ======
Balance as at 18 September
2021 45 175 (34) 43 9,692 9,921 83 10,004
============================== ======== ========= =========== ======== ========= ====== ============ =======
Total comprehensive income
Profit for the period
recognised in the income
statement - - - - 700 700 20 720
Remeasurements of defined
benefit schemes - - - - 821 821 - 821
Deferred tax associated with
defined benefit schemes - - - - (198) (198) - (198)
============================== ======== ========= =========== ======== ========= ====== ============ =======
Items that will not be
reclassified to profit or
loss - - - - 623 623 - 623
Effect of movements in foreign
exchange - - 429 - - 429 11 440
Net loss on hedge of net
investment in foreign
subsidiaries - - (1) - - (1) - (1)
Net gain on other investments
held at fair value through
other comprehensive income - 4 - - - 4 - 4
Movement in cash flow hedging
position - - - 419 - 419 - 419
Deferred tax associated with
movements in cash flow
hedging position - - - (28) - (28) - (28)
Deferred tax associated with
movement in other investments - (1) - - - (1) - (1)
Share of other comprehensive
income of joint ventures and
associates - - 28 - - 28 - 28
Effect of hyperinflationary
economies - - - - 46 46 - 46
============================== ======== ========= =========== ======== ========= ====== ============ =======
Items that are or may be
subsequently reclassified to
profit or loss - 3 456 391 46 896 11 907
============================== ======== ========= =========== ======== ========= ====== ============ =======
Other comprehensive income - 3 456 391 669 1,519 11 1,530
============================== ======== ========= =========== ======== ========= ====== ============ =======
Total comprehensive income - 3 456 391 1,369 2,219 31 2,250
============================== ======== ========= =========== ======== ========= ====== ============ =======
Inventory cash flow hedge
movements
Amounts transferred to cost of
inventory - - - (280) - (280) - (280)
============================== ======== ========= =========== ======== ========= ====== ============ =======
Total inventory cash flow
hedge movements - - - (280) - (280) - (280)
============================== ======== ========= =========== ======== ========= ====== ============ =======
Transactions with owners
Dividends paid to equity
shareholders - - - - (380) (380) - (380)
Net movement in own shares
held - - - - (31) (31) - (31)
Deferred tax associated with
share-based payments - - - - (1) (1) - (1)
Dividends paid to
non-controlling interests - - - - - - (8) (8)
============================== ======== ========= =========== ======== ========= ====== ============ =======
Total transactions with owners - - - - (412) (412) (8) (420)
============================== ======== ========= =========== ======== ========= ====== ============ =======
Balance as at 17 September
2022 45 178 422 154 10,649 11,448 106 11,554
============================== ======== ========= =========== ======== ========= ====== ============ =======
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) 4 (260) 422 (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 - - - - (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, as described below. These
are the Group's operating divisions, based on the management and
internal reporting structure, which combine businesses with common
characteristics, primarily in respect of the type of products
offered by each business, but also the production processes
involved and the manner of the distribution and sale of goods. The
Board is the chief operating decision-maker.
Inter-segment pricing is determined on an arm's length basis.
Segment result is Adjusted operating profit, as shown on the face
of the consolidated income statement. Segment assets comprise all
non-current assets except employee benefits assets, income tax
assets, deferred tax assets, and all current assets except cash and
cash equivalents, current asset investments and income tax assets.
Segment liabilities comprise trade and other payables, derivative
liabilities, provisions and lease liabilities.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated items comprise mainly corporate
assets and expenses, cash, borrowings, employee benefits balances
and current and deferred tax balances.
Segment non-current asset additions are the total cost incurred
during the period to acquire segment assets that are expected to be
used for more than one year, comprising property, plant and
equipment, right-of-use assets, operating intangibles and
biological assets.
Businesses disposed are shown separately and comparatives are
re-presented for businesses sold or closed during the year.
The Group comprises the following operating segments:
Grocery
The manufacture of grocery products, including hot beverages,
sugar and sweeteners, vegetable oils, balsamic vinegars, bread and
baked goods, cereals, ethnic foods and meat products, which are
sold to retail, wholesale and foodservice businesses.
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 of certain geographical information about the Group's
operations is also given 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
============== ===========================
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
========================= ====== ====== ============= ============
Operating segments
Grocery 4,198 3,735 448 399
Ingredients 2,157 1,827 214 159
Agriculture 1,840 1,722 41 47
Sugar 2,547 2,016 169 162
Retail 9,008 7,697 735 756
Central - - (94) (88)
========================= ====== ====== ============= ============
19,750 16,997 1,513 1,435
========================= ====== ====== ============= ============
Geographical information
United Kingdom 7,271 6,378 488 533
Europe & Africa 7,552 6,291 559 482
The Americas 2,420 2,028 353 279
Asia Pacific 2,507 2,300 113 141
========================= ====== ====== ============= ============
19,750 16,997 1,513 1,435
========================= ====== ====== ============= ============
2023
Grocery Ingredients Agriculture Sugar Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================================= ======= =========== =========== ===== ======= ======= =======
Revenue from continuing businesses 4,222 2,366 1,849 2,680 9,008 (375) 19,750
Internal revenue (24) (209) (9) (133) - 375 -
================================================= ======= =========== =========== ===== ======= ======= =======
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 25 162 735 (94) 1,386
Share of adjusted profit after tax from joint
ventures and associates 80 24 16 7 - - 127
================================================= ======= =========== =========== ===== ======= ======= =======
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 (including of right-of-use assets) (114) (62) (19) (75) (526) (8) (804)
================================================= ======= =========== =========== ===== ======= ======= =======
Amortisation (26) (15) (7) (3) (31) - (82)
================================================= ======= =========== =========== ===== ======= ======= =======
2022
Grocery Ingredients Agriculture Sugar Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================================= ======= =========== =========== ===== ======= ======= =======
Revenue from continuing businesses 3,736 1,996 1,728 2,097 7,697 (257) 16,997
Internal revenue (1) (169) (6) (81) - 257 -
================================================= ======= =========== =========== ===== ======= ======= =======
Revenue from external customers 3,735 1,827 1,722 2,016 7,697 - 16,997
================================================= ======= =========== =========== ===== ======= ======= =======
Operating profit 369 141 41 164 550 (87) 1,178
Adjusted operating profit before joint ventures
and associates 328 142 31 154 756 (88) 1,323
Share of adjusted profit after tax from joint
ventures and associates 71 17 16 8 - - 112
================================================= ======= =========== =========== ===== ======= ======= =======
Adjusted operating profit 399 159 47 162 756 (88) 1,435
Finance income 19 19
Finance expense (1) (1) - (2) (76) (31) (111)
Other financial expense 13 13
------------------------------------------------- ------- ----------- ----------- ----- ------- ------- -------
Adjusted profit before taxation 398 158 47 160 680 (87) 1,356
Profits less losses on disposal of non-current
assets 4 - - 2 - 1 7
Amortisation of non-operating intangibles (32) (13) (2) - - - (47)
Acquired inventory fair value adjustments (1) (2) (2) - - - (5)
Transaction costs (1) (3) (2) - - - (6)
Exceptional items - - - - (206) - (206)
Profits less losses on sale and closure of
businesses - (7) - (16) - - (23)
================================================= ======= =========== =========== ===== ======= ======= =======
Profit before taxation 368 133 41 146 474 (86) 1,076
Taxation (356) (356)
================================================= ======= =========== =========== ===== ======= ======= =======
Profit for the period 368 133 41 146 474 (442) 720
================================================= ======= =========== =========== ===== ======= ======= =======
Segment assets (excluding joint ventures and
associates) 2,876 2,017 597 2,422 7,570 136 15,618
Investments in joint ventures and associates 62 136 143 45 - - 386
================================================= ======= =========== =========== ===== ======= ======= =======
Segment assets 2,938 2,153 740 2,467 7,570 136 16,004
Cash and cash equivalents 2,121 2,121
Current asset investments 4 4
Income tax 90 90
Deferred tax assets 163 163
Employee benefits assets 1,393 1,393
Segment liabilities (703) (450) (196) (616) (4,545) (188) (6,698)
Loans and overdrafts (637) (637)
Income tax (160) (160)
Deferred tax liabilities (647) (647)
Employee benefits liabilities (79) (79)
================================================= ======= =========== =========== ===== ======= ======= =======
Net assets 2,235 1,703 544 1,851 3,025 2,196 11,554
================================================= ======= =========== =========== ===== ======= ======= =======
Non-current asset additions 128 183 26 223 489 3 1,052
================================================= ======= =========== =========== ===== ======= ======= =======
Depreciation (including of right-of-use assets) (109) (57) (17) (75) (532) (12) (802)
================================================= ======= =========== =========== ===== ======= ======= =======
Amortisation (37) (14) (3) (3) (11) - (68)
================================================= ======= =========== =========== ===== ======= ======= =======
Reversal of impairment of property, plant &
equipment and right-of-use assets - (11) - (19) - - (30)
================================================= ======= =========== =========== ===== ======= ======= =======
1. Operating segments - geographical information
2023
United Kingdom Europe & Africa The Americas Asia Pacific Total
GBPm GBPm GBPm GBPm GBPm
================================================ ============== =============== ============ ============ ======
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)
================================================ ============== =============== ============ ============ ======
2022
United Kingdom Europe & Africa The Americas Asia Pacific Total
GBPm GBPm GBPm GBPm GBPm
================================================= ============== =============== ============ ============ ======
Revenue from external customers 6,378 6,291 2,028 2,300 16,997
================================================= ============== =============== ============ ============ ======
Segment assets 5,972 6,519 1,840 1,673 16,004
================================================= ============== =============== ============ ============ ======
Non-current asset additions 285 487 177 103 1,052
================================================= ============== =============== ============ ============ ======
Depreciation (including of right-of-use assets) (277) (392) (69) (64) (802)
================================================= ============== =============== ============ ============ ======
Amortisation (25) (32) (5) (6) (68)
================================================= ============== =============== ============ ============ ======
Impairment of property, plant and equipment on
sale and closure of businesses - - - (30) (30)
================================================= ============== =============== ============ ============ ======
Acquired inventory fair value adjustments (2) (3) - - (5)
================================================= ============== =============== ============ ============ ======
Transaction costs (2) (3) - (1) (6)
================================================= ============== =============== ============ ============ ======
Exceptional items - (206) - - (206)
================================================= ============== =============== ============ ============ ======
The Group's operations in the following countries met the
criteria for separate disclosure:
Revenue Non-current assets
============ ====================
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
============== ===== ===== ========= =========
Australia 1,407 1,232 541 623
Spain 1,836 1,545 651 650
United States 1,580 1,315 887 866
============== ===== ===== ========= =========
All segment disclosures are stated before reclassification of
assets and liabilities classified as held for sale.
2. Exceptional items
2023
The income statement this year included a non-cash exceptional
impairment charge of GBP109m. In Grocery, the Don business has been
adversely affected by inflationary pressures, a surplus supply of
fresh pork in the market, labour constraints and equipment
reliability causing production shortfalls and additional
transportation costs following the unforeseen liquidation of its
distribution partner. As a result, the Group has recognised
impairment write-downs of GBP39m against property, plant and
equipment, GBP1m against right-of-use assets and GBP1m against
intangible assets.
In the Sugar segment, north China recognised a GBP15m impairment
write-down against property, plant and equipment. This business was
classified as held for sale in the previous year, but the potential
buyer withdrew their offer in the second half of the year. Due to
the severe flooding in Mozambique, the related damage to the sugar
crop fields and the inability to plant for the foreseeable future,
Illovo Mozambique recognised a GBP25m impairment write-down against
property, plant and equipment, GBP7m against current biological
assets, provided GBP2m for personnel costs and wrote down inventory
by GBP1m.
In the Retail segment, the Group recognised GBP13m of
exceptional impairment charge relating to the German store
portfolio. This primarily related to stores impaired in the
previous year after additional right-of-use assets were recognised
due to rent indexation adjustments. The Group also recognised a
GBP4m charge including a GBP3m exceptional impairment charge for
the write-down of property, plant and equipment for the
right-sizing of four further German stores and GBP1m to write down
a freehold store
The income statement included an exceptional impairment charge
of GBP206m comprising non-cash write-downs of GBP72m against
property, plant and equipment and a write-down of GBP134m of
right-of-use assets relating to the capitalisation of store leases
for Primark. Also GBP49m of the GBP63m exceptional charge included
in the Group's total tax charge for this financial year was the
de-recognition of the deferred tax assets relating to Germany.
3. Finance expense
2023 2022
GBPm GBPm
========================== ===== ======
Bank loans and overdrafts (23) (20)
All other borrowings (11) (8)
Lease liabilities (91) (81)
Other payables (3) (2)
=========================== ===== ======
(128) (111)
========================== ===== ======
4. Income tax expense
2023 2022
GBPm GBPm
============================================================================================== ===== =====
Current tax expense
UK - corporation tax at 21.8% (2022 - 19%) 26 44
Overseas - corporation tax 249 244
UK - over provided in prior periods (14) (12)
Overseas - under provided in prior periods 18 1
============================================================================================== ===== =====
279 277
Deferred tax expense
UK deferred tax 54 18
Overseas deferred tax 28 72
UK - over provided in prior periods (26) (3)
Overseas - over provided in prior periods (63) (8)
============================================================================================== ===== =====
(7) 79
============================================================================================== ===== =====
Total income tax expense in the income statement 272 356
============================================================================================== ===== =====
Reconciliation of effective tax rate
Profit before taxation 1,340 1,076
Less share of profit after tax from joint ventures and associates (124) (109)
============================================================================================== ===== =====
Profit before taxation excluding share of profit after tax from joint ventures and associates 1,216 967
============================================================================================== ===== =====
Nominal tax charge at UK corporation tax rate of 21.8% (2022 - 19%) 265 184
Effect of higher and lower tax rates on overseas earnings (16) 4
Effect of changes in tax rates on income statement 5 2
Expenses not deductible for tax purposes 66 63
Disposal of assets covered by tax exemptions or unrecognised capital losses (2) 6
Deferred tax not recognised 39 120
Adjustments in respect of prior periods (85) (23)
============================================================================================== ===== =====
272 356
============================================================================================== ===== =====
Income tax recognised in equity
Deferred tax associated with defined benefit schemes (4) 198
Deferred tax associated with share-based payments (1) 1
Deferred tax associated with movement in cash flow hedging position (40) 28
Deferred tax associated with movements in foreign exchange 5 -
Current tax associated with movements in foreign exchange (6) -
Deferred tax associated with movement in other investments - 1
============================================================================================== ===== =====
(46) 228
============================================================================================== ===== =====
The UK corporation tax rate of 19% increased to 25% from 1 April
2023. The legislation to effect these changes was enacted before
the balance sheet date and UK deferred tax has been calculated
accordingly.
In April 2019 the European Commission published its decision on
the Group Financing Exemption in the UK's controlled foreign
company legislation. The Commission found that the UK law did not
comply with EU State Aid rules in certain circumstances. The Group
has arrangements that may be impacted by this decision as might
other UK-based multinational groups that had financing arrangements
in line with the UK's legislation in force at the time. The UK
Government, the Group and a number of other UK companies appealed
against this decision to the General Court of the European Union
('GCEU'). On 8 June 2022, the GCEU found in favour of the
Commission's original decision. As a result of this, in August 2022
the UK Government, the Group and various other UK companies
appealed GCEU's decision to the Court of Justice of the European
Union. We have calculated our maximum potential liability to be
GBP26m (2022 - GBP26m), however we do not consider that any
provision is required in respect of this amount based on our
current assessment of the issue. Following receipt of charging
notices from HM Revenue & Customs ('HMRC'), we made payments to
HMRC in 2021. Our assessment remains that no provision is required
in respect of this amount. We will continue to consider the impact
of the Commission's decision on the Group and the potential
requirement to record a provision.
In the second half of last year a deferred tax asset arose
mainly in relation to the charge taken for the impairment of
property, plant and equipment and store leases in Primark Germany.
A significant proportion of this asset was deemed not to be
recoverable and was written off as an exceptional tax charge. Since
then, further work has been undertaken to assess the amount of the
deferred tax asset that is expected to be recoverable. This work
determined that the deferred tax asset at last year end was
understated in error.
The Directors believe that this understatement of the deferred
tax asset was not material to the prior period financial
statements. Accordingly, an exceptional tax credit of GBP58m has
been recognised in this year.
We recognise the importance of complying fully with all
applicable tax laws as well as paying and collecting the right
amount of tax in every country in which the Group operates. Our tax
strategy, approved by the Board, is based on seven tax principles
that are embedded in the financial and non financial processes and
controls of the Group. This tax strategy is available in the
Policies section of the Group's website.
5. Dividends
2023 2022
2023 pence per share 2022 pence per share GBPm GBPm
======================= ==================== ==================== ===== =====
2021 final and special - 34.3 - 271
2022 interim - 13.8 - 109
2022 final 29.9 - 235 -
2023 interim 14.2 - 110 -
======================= ==================== ==================== ===== =====
44.1 48.1 345 380
======================= ==================== ==================== ===== =====
The 2023 interim dividend was declared on 25 April 2023 and was
paid on 7 July 2023. Given the outlook for the Group, the strength
of the balance sheet and the underlying cash generation of the
business, we have declared the payment of a special dividend, to be
paid as a second interim dividend of 12.7p per share at an
estimated cost of GBP97m.
The Board has proposed a final dividend of 33.1p per share at an
estimated cost of GBP252m. The combined 2023 final and special
dividend of 45.8p, with an estimated total value of GBP349m, will
be paid on 12 January 2024 to shareholders on the register on 15
December 2023.
Dividends relating to the period including the special dividend
were 60.0p per share totalling GBP459m (2022 - 43.7p per share
totalling GBP345m).
6. Earnings per share
The calculation of basic earnings per share at 16 September 2023
was based on the net profit attributable to equity shareholders of
GBP1,044m (2022 - GBP700m), and a weighted average number of shares
outstanding during the year of 778 million (2022 - 789 million).
The calculation of the weighted average number of shares excludes
the shares held by the Employee Share Ownership Plan Trust on which
the dividends are being waived. The weighted average number of
shares has reduced as a result of our first share buyback
programme. In the year, we repurchased 23.7 million shares which
were cancelled.
Adjusted earnings per ordinary share, which exclude the impact
of profits less losses on disposal of non-current assets and the
sale and closure of businesses, amortisation of acquired inventory
fair value adjustments, transaction costs, amortisation of
non-operating intangibles, exceptional items and any associated tax
credits, is shown to provide clarity on the underlying performance
of the Group.
The diluted earnings per share calculation takes into account
the dilutive effect of share incentives. The diluted, weighted
average number of shares is 778 million (2022 - 789 million). There
is no difference between basic and diluted earnings.
2023 2022
pence pence
================================================================== ====== ======
Adjusted earnings per share 141.8 131.1
Disposal of non-current assets 3.6 0.9
Sale and closure of businesses (0.4) (2.9)
Acquired inventory fair value adjustments (0.4) (0.6)
Transaction costs (0.6) (0.8)
Exceptional items (14.0) (26.1)
Tax effect on above adjustments 8.2 (8.0)
Amortisation of non-operating intangibles (5.3) (6.0)
Tax credit on non-operating intangibles amortisation and goodwill 1.3 1.0
=================================================================== ====== ======
Earnings per ordinary share 134.2 88.6
=================================================================== ====== ======
7. Acquisitions and disposals
Acquisitions
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 GBP48m. 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 Recognised values on acquisition
values
GBPm
======================== ====================================
National Milk Records Other Total
GBPm GBPm GBPm
=================================================== ======================== ====================== ===== =====
Net assets
Intangible assets 3 23 12 35
Property, plant and equipment and right-of-use
assets 5 4 1 5
Investment in joint ventures 3 9 - 9
Cash and overdrafts 1 - 1 1
Working capital (1) - (1) (1)
Loans (2) (2) - (2)
Taxation 1 (4) (2) (6)
==================================================== ======================== ====================== ===== =====
Net identifiable assets and liabilities 10 30 11 41
Goodwill 18 21 39
==================================================== ======================== ====================== ===== =====
Total consideration 48 32 80
==================================================== ======================== ====================== ===== =====
Recognised values on acquisition
GBPm
=================================== ================================
Satisfied by
Cash consideration 78
Deferred consideration 2
=================================== ================================
80
=================================== ================================
Net cash
Cash consideration 78
Cash and cash equivalents acquired (1)
=================================== ================================
77
=================================== ================================
Pre-acquisition carrying amounts were the same as recognised
values on acquisition apart from GBP32m of non-operating
intangibles in respect of brands, technology and customer
relationships, a GBP7m deferred related tax liability, a GBP6m
uplift to the investment in joint ventures and goodwill of GBP39m.
Cash flow on acquisition of subsidiaries, joint ventures and
associates of GBP94m comprised GBP78m cash consideration less GBP1m
cash and overdrafts acquired, GBP16m of deferred consideration
relating to previous acquisitions and a GBP1m contribution to an
existing joint venture in China.
2022
In January, the Group acquired 100% of Fytexia, a B2B specialty
ingredients business in France and Italy producing and formulating
polyphenols-based active ingredients for the dietary supplements
industry. In July, the Group acquired Greencoat, a UK-based animal
supplement and care business. During the year, the Group also
acquired a small grocery company in New Zealand, a small
agriculture business in Finland and a small ingredients business in
Australia.
Pre-acquisition carrying amounts were the same as recognised
values on acquisition apart from GBP88m of non-operating
intangibles in respect of brands, technology and customer
relationships, an GBP8m uplift to inventory, a GBP16m related
deferred tax liability and goodwill of GBP85m. Cash flow on
acquisition of subsidiaries, joint ventures and associates of
GBP154m comprised GBP153m cash consideration less GBP10m cash and
overdrafts acquired, GBP7m of deferred consideration relating to
previous acquisitions and a GBP4m contribution to an existing joint
venture in China.
Disposals
2023
The Group agreed to sell property, plant and equipment to its
Chinese joint venture partner. Profit on sale was GBP3m. In March
Gledhow, the Group's 30% equity-accounted associate in Illovo South
Africa, formally went into business rescue. A non-cash provision of
GBP6m was booked on the financial guarantee held on this business'
liabilities.
2022
The proposed sale of a yeast company to the joint venture with
Wilmar International in China (classified as held for sale at the
2021 year end) is not going ahead. The GBP10m non-cash impairment
reversed in 2021 through profit/(loss) on sale and closure of
business has been reinstated at a cost of GBP11m.
The Group's investment in north China Sugar is classified as
held for sale at year end and an associated GBP19m non-cash
write-down has been charged to loss on sale and closure of
business.
The Group also released GBP3m of closure provisions in Vivergo
in the UK and GBP4m of warranty provisions no longer required for a
disposed Ingredients business in the United States.
8. Analysis of net debt
At New leases and At
17 September Acquisitions and non-cash Exchange 16 September
2022 Cash flow Disposals items adjustments 2023
GBPm GBPm GBPm GBPm GBPm GBPm
==================== ============= ========= =================== ==================== ============ =============
Short-term loans (31) 13 (1) (87) 7 (99)
Long-term loans (480) - (1) 87 - (394)
Lease liabilities (3,252) 308 - (279) 63 (3,160)
==================== ============= ========= =================== ==================== ============ =============
Total liabilities
from financing
activities (3,763) 321 (2) (279) 70 (3,653)
==================== ============= ========= =================== ==================== ============ =============
Cash at bank and in
hand, cash
equivalents and
overdrafts 1,995 (534) - - (73) 1,388
Current asset
investments 4 (3) - - (1) -
==================== ============= ========= =================== ==================== ============ =============
Net debt including
lease liabilities (1,764) (216) (2) (279) (4) (2,265)
==================== ============= ========= =================== ==================== ============ =============
At New leases and At
18 September Acquisitions and non-cash Exchange 17 September
2021 Cash flow Disposals items adjustments 2022
GBPm GBPm GBPm GBPm GBPm GBPm
==================== ============= ========= =================== ==================== ============ =============
Short-term loans (244) 12 (23) 224 - (31)
Long-term loans (76) (178) - (224) (2) (480)
Lease liabilities (3,281) 321 (8) (186) (98) (3,252)
==================== ============= ========= =================== ==================== ============ =============
Total liabilities
from financing
activities (3,601) 155 (31) (186) (100) (3,763)
==================== ============= ========= =================== ==================== ============ =============
Cash at bank and in
hand, cash
equivalents and
overdrafts 2,189 (268) - - 74 1,995
Current asset
investments 32 (30) - - 2 4
==================== ============= ========= =================== ==================== ============ =============
Net debt including
lease liabilities (1,380) (143) (31) (186) (24) (1,764)
==================== ============= ========= =================== ==================== ============ =============
Cash and cash equivalents comprise bank and cash balances,
deposits and short-term investments with original maturities of
three months or less. GBP69m (2022 - GBP126m) 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 GBP895m, comprising cash at
bank and in hand, cash equivalents and overdrafts of GBP1,388m,
short-term loans of GBP99m, long-term loans of GBP394m and current
asset investments of GBPnil (2022 - GBP1,488m, GBP1,995m, GBP31m,
GBP480m and GBP4m, respectively) .
GBP69m (2022 - GBP126m) of bank overdrafts plus the GBP99m (2022
- GBP31m) of short-term loans shown above comprise the GBP168m
(2022 - GBP157m) 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 GBP335m and GBP2,825m respectively (2022 -
GBP316m and GBP2,936m respectively) comprise the GBP3,160m (2022 -
GBP3,252m) 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 GBP(18)m, expense of GBP(128)m, payments of
GBP118m, effect of hyperinflationary economies of GBP3m and a
closing balance of GBP(25)m (2022 - opening balance of GBP(20)m,
expense of GBP(111)m, payments of GBP114m, fx of GBP(1)m and a
closing balance of GBP(18)m).
9. Related parties
The Group has a controlling shareholder relationship with its
parent company, Wittington Investments Limited, with the trustees
of the Garfield Weston Foundation and with certain other
individuals who hold shares in the Company. The Group has a related
party relationship with its associates and joint ventures and with
its directors. In the course of normal operations, related party
transactions entered into by the Group have been contracted on an
arm's length basis.
Material transactions and year end balances with related parties
were as follows:
Sub 2023 2022
note GBP000 GBP000
============================================================================================= ===== ======= =======
Charges to Wittington Investments Limited in respect of services provided by the Company and
its subsidiary undertakings 985 930
Dividends paid by Associated British Foods and received in a beneficial capacity by:
i. trustees of the Garfield Weston Foundation and their close family 1 11,219 12,361
ii. directors of Wittington Investments Limited who are not trustees of the Foundation and
their close family 2,159 2,322
iii. directors of the Company who are not trustees of the Foundation and are not directors
of Wittington Investments Limited 89 128
Sales to fellow subsidiary undertakings on normal trading terms 2 18 48
Sales to companies with common key management personnel on normal trading terms 3 9,912 16,891
Amounts due from companies with common key management personnel 3 1,028 2,898
Sales to joint ventures on normal trading terms 40,645 54,111
Sales to associates on normal trading terms 88,753 73,360
Purchases from joint ventures on normal trading terms 482,267 436,467
Purchases from associates on normal trading terms 97,844 13,879
Amounts due from joint ventures 36,986 37,865
Amounts due from associates 8,745 9,151
Amounts due to joint ventures 17,609 30,214
Amounts due to associates 7,161 594
============================================================================================= ===== ======= =======
1. The Garfield Weston Foundation ('the Foundation') is an English
charitable trust, established in 1958 by the late W. Garfield Weston.
TheFoundation has no direct interest in the Company, but as at 16
September 2023 was the beneficial owner of 683,073 shares (2022
- 683,073 shares) in Wittington Investments Limited representing
79.2% (2022 - 79.2%) of that company's issued share capital and
is, therefore, the Company's ultimate controlling party. At 16 September
2023 trustees of the Foundation comprised nine grandchildren of
the late W. Garfield Weston of whom five are children of the late
Garry H. Weston
2. The fellow subsidiary undertaking is Fortnum and Mason plc.
3. The company with common key management personnel is the George Weston
Limited group, in Canada.
Amounts due from joint ventures include GBP32m (2022 - GBP29m)
of finance lease receivables. The remainder of the balance is
trading balances. All but GBP4m (2022 - GBP4m) of the finance lease
receivables are non-current.
10. Other Information
The financial information set out above does not constitute the
Company's statutory accounts for the 52 weeks ended 16 September
2023, or the 52 weeks ended 17 September 2022. Statutory accounts
for 2022 have been delivered to the Registrar of Companies and
those for 2023 will be delivered following the Company's annual
general meeting. The auditors have reported on those accounts.
Their reports were (i) unqualified, (ii) did not include references
to any matters to which the auditors drew attention by way of
emphasis without qualifying their reports and (iii) did not contain
a statement under section 498(2) or (3) of the Companies Act 2006
in respect of the accounts.
11. Basis of preparation
The Company presents its consolidated financial statements in
sterling, rounded to the nearest million, prepared on the
historical cost basis except that current biological assets and
certain financial instruments are stated at fair value, and assets
classified as held for sale are stated at the lower of carrying
amount and fair value less costs to sell.
The preparation of financial statements under Adopted IFRS
requires management to make judgements, estimates and assumptions
about the reported amounts of assets and liabilities, income and
expenses and the disclosure of contingent assets and liabilities.
The estimates and associated assumptions are based on experience.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed regularly.
Revisions to accounting estimates are recognised prospectively from
when the estimates are revised.
Details of accounting standards which came into force in the
year are set out in note 12 below.
The Group's consolidated financial statements are prepared to
the Saturday nearest to 15 September. Accordingly, they have been
prepared for the 52 weeks ended 16 September 2023 (2022 - 52 weeks
ended 17 September 2022).
To avoid delay in the preparation of the consolidated financial
statements, the results of certain subsidiaries, joint ventures and
associates are included to 31 August each year.
Adjustments have been made where appropriate for significant
transactions or events occurring between 31 August and 16
September.
12. New accounting standards
The following accounting standards and amendments were adopted
during the year and had no significant impact on the Group:
- Reference to the Conceptual Framework (Amendments to IFRS
3)
- Property, Plant and Equipment: Proceeds before Intended
Use (Amendments to IAS 16)
- Onerous Contracts-Cost of Fulfilling a Contract (Amendments
to IAS 37)
- Annual Improvements to IFRS 2018-2020:
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:
- IFRS 17 Insurance Contracts, Amendments to IFRS 17, Initial Application
of IFRS 17 and IFRS 9 - Comparative Information, effective 2024
financial year
- Disclosure of Accounting policies (Amendments to IAS 1 and IFRS
Practice Statement 2), effective 2024 financial year
- Definition of Accounting Estimates (Amendments to IAS 8) effective
2024 financial year
- Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12), effective 2024 financial year
- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
effective 2024 financial year
- International Tax Reform - Pillar Two Model Rules (Amendments to
IAS 12), effective 2024 financial year
- Amendments to IAS 1 Presentation of Financial Statements,effective
2024 financial year
- Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7),
effective 2025 financial year (not yet endorsed by the UKEB)
- 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. Alternative performance measures
In reporting financial information, the Board uses various APMs
which it believes provide useful additional information for
understanding the financial performance and financial health of the
Group. These APMs should be considered in addition to IFRS measures
and are not intended to be a substitute for them. Since IFRS does
not define APMs, they may not be directly comparable to similar
measures used by other companies.
The Board also uses APMs to improve the comparability of
information between reporting periods and geographical units (such
as like-for-like sales) by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid users in
understanding the Group's performance.
Consequently, the Board and management use APMs for performance
analysis, planning, reporting and incentive-setting.
APM Closest equivalent IFRS Definition/purpose Reconciliation/calculation
measure
============================ ============================ ============================ ============================
Like-for-like sales No direct equivalent The like-for-like sales Consistent with the
metric enables measurement definition given
of the performance of our
retail stores
on a comparable year-on-year
basis.
This measure represents the
change in sales at constant
currency in our retail
stores adjusted
for new stores, closures and
relocations. Refits,
extensions and downsizes are
also adjusted
for if a store's retail
square footage changes by
10% or more. For each change
described above,
a store's sales are excluded
from like-for-like sales for
one year.
No adjustments are made for
disruption during refits,
extensions or downsizes if a
store's
retail square footage
changes by less than 10%,
for cannibalisation by new
stores, or for
the timing of national or
bank holidays.
It is measured against
comparable trading days in
each year.
============================ ============================ ============================ ============================
Adjusted operating profit Operating profit Adjusted operating profit is A reconciliation of this
stated before amortisation measure is provided on the
of non-operating face of the consolidated
intangibles, transaction income statement
costs, amortisation of fair and by operating segment in
value adjustments made to note 1 of the financial
acquired inventory, profits statements
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 operating (profit) No direct equivalent Adjusted operating (profit) See note A
margin margin is Adjusted operating
profit as a percentage of
revenue.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Adjusted profit before tax Profit before tax Adjusted profit before tax A reconciliation of this
is stated before measure is provided on the
amortisation of face of the consolidated
non-operating intangibles, income statement
transaction and by operating segment in
costs, amortisation of fair note 1 of the financial
value adjustments made to statements
acquired inventory, profits
less losses
on disposal of non-current
assets, exceptional items
and profits less losses on
sale and closure
of businesses.
Items defined above which
arise in the Group's joint
ventures and associates are
also treated
as adjusting items for the
purposes of Adjusted profit
before tax.
============================ ============================ ============================ ============================
Adjusted earnings and Earnings and earnings per Adjusted earnings and Reconciliations of these
Adjusted earnings per share share adjusted earnings per share measures are provided in
are stated before note 7 of the financial
amortisation of statements
non-operating
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 and Adjusted
earnings per share.
============================ ============================ ============================ ============================
Exceptional items No direct equivalent Exceptional items are items Exceptional items are
of income and expenditure included on the face of the
which are material and consolidated income
unusual in nature statement with further
and are considered of such detail provided in note 2 of
significance that they the financial statements
require separate disclosure
on the face
of the income statement.
============================ ============================ ============================ ============================
Constant currency Revenue and Adjusted Constant currency measures See note B
operating profit (non-IFRS) are derived by translating
measure the relevant prior year
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 This measure is the tax Whilst the Effective tax
charge for the year rate is not disclosed, a
expressed as a percentage of reconciliation of the tax
profit before tax. charge on profit
before tax at the UK
corporation tax rate to the
actual tax charge is
provided in note 5 of
the financial statements
============================ ============================ ============================ ============================
Adjusted effective tax rate No direct equivalent This measure is the tax The tax impact of
charge for the year reconciling items between
excluding tax on adjusting profit before tax and
items expressed as Adjusted profit before tax
a percentage of adjusted is shown in note 7 of the
profit before tax. financial statements
============================ ============================ ============================ ============================
Dividend cover No direct equivalent Dividend cover is the ratio See note C
of Adjusted earnings per
share to dividends per share
relating
to the year.
============================ ============================ ============================ ============================
Capital expenditure No direct equivalent Capital expenditure is a See note D
measure of the investment
each year in non-current
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 See note E
measure of investment in
non-current assets in
existing businesses and
acquisition of new
businesses. It comprises
capital expenditure, cash
outflows from the purchase
of subsidiaries, joint
ventures and associates,
additional shares in
subsidiary undertakings
purchased from
non-controlling interests
and other investments, and
net debt assumed in
acquisitions.
============================ ============================ ============================ ============================
Net cash/debt before lease No direct equivalent This measure comprises cash, A reconciliation of this
liabilities cash equivalents and measure is shown in note 8
overdrafts, current asset
investments and
loans.
============================ ============================ ============================ ============================
Net cash/debt including No direct equivalent This measure comprises cash, A reconciliation of this
lease liabilities cash equivalents and measure is shown in note 8
overdrafts, current asset
investments, loans
and lease liabilities.
============================ ============================ ============================ ============================
Adjusted EBITDA Adjusted operating profit Adjusted EBITDA is stated See note F
(non-IFRS) measure before depreciation,
amortisation and impairments
charged to Adjusted
operating profit.
============================ ============================ ============================ ============================
Financial leverage ratio No direct equivalent Financial leverage is the See note F
ratio of net cash/debt
including lease liabilities
to Adjusted EBITDA.
============================ ============================ ============================ ============================
Free cash flow No direct equivalent This measure represents the See note G
cash that the Group
generates from its
operations 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 GBP3m
(2022 - GBP3m) 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 See note H
cash at bank and in hand and
cash equivalents less
current loans
and overdrafts, and an
estimate of inaccessible
cash, plus the undrawn RCF.
In our Annual Report and
Accounts, Cash at bank and
in hand and cash equivalents
are set out
in note 18 and current loans
and overdrafts are set out
in note 19.
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 Consistent with the
from the management balance definition given
sheet and does not reconcile
directly
to the statutory balance
sheet. All elements of
capital employed are
calculated in accordance
with Adopted IFRS.
Average capital employed for
each segment and the Group
is calculated by averaging
the capital
employed for each period of
the financial year based on
the reporting calendar of
each business.
============================ ============================ ============================ ============================
Return on (average) capital No direct equivalent This measure expresses Consistent with the
employed Adjusted operating profit as definition given
a percentage of Average
capital employed.
============================ ============================ ============================ ============================
(Average) working capital No direct equivalent Working capital is derived Consistent with the
from the management balance definition given
sheet and does not reconcile
directly
to the statutory balance
sheet. All elements of
working capital are
calculated in accordance
with Adopted IFRS.
Average working capital for
each segment and for the
Group is calculated by
averaging the
working capital for each
period of the financial year
based on the reporting
calendar of each
business.
============================ ============================ ============================ ============================
(Average) working capital as No direct equivalent This measure expresses Consistent with the
a percentage of revenue (Average) working capital as definition given
a percentage of revenue.
============================ ============================ ============================ ============================
Note A
Central and disposed
Grocery Ingredients Agriculture Sugar Retail businesses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================= ======= =========== =========== ===== ====== ============================= ======
2023
External revenue from
continuing businesses 4,198 2,157 1,840 2,547 9,008 - 19,750
Adjusted operating profit 448 214 41 169 735 (94) 1,513
Adjusted operating margin % 10.7% 9.9% 2.2% 6.6% 8.2% 7.7%
2022
External revenue from
continuing businesses 3,735 1,827 1,722 2,016 7,697 - 16,997
Adjusted operating profit 399 159 47 162 756 (88) 1,435
Adjusted operating margin % 10.7% 8.7% 2.7% 8.0% 9.8% 8.4%
============================= ======= =========== =========== ===== ====== ============================= ======
Note B
Central and disposed
Grocery Ingredients Agriculture Sugar Retail businesses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================= ======= =========== =========== ===== ====== ============================= ======
2023
External revenue from
continuing businesses at
actual rates 4,198 2,157 1,840 2,547 9,008 - 19,750
2022
External revenue from
continuing businesses at
actual rates 3,735 1,827 1,722 2,016 7,697 - 16,997
Impact of foreign exchange 51 46 3 (40) 137 - 197
============================= ======= =========== =========== ===== ====== ============================= ======
External revenue from
continuing businesses at
constant currency 3,786 1,873 1,725 1,976 7,834 - 17,194
% change at constant currency +11% +15% +7% +29% +15% +15%
============================= ======= =========== =========== ===== ====== ============================= ======
Central and disposed
Grocery Ingredients Agriculture Sugar Retail businesses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ======= =========== =========== ===== ========= ============================ =====
2023
Adjusted operating profit at
actual rates 448 214 41 169 735 (94) 1,513
2022
Adjusted operating profit at
actual rates 399 159 47 162 756 (88) 1,435
Impact of foreign exchange 16 8 1 (5) 4 - 24
============================ ======= =========== =========== ===== ========= ============================ =====
Adjusted operating profit at
constant currency 415 167 48 157 760 (88) 1,459
% change at constant
currency +8% +28% * 15% +8% * 3% +4%
============================ ======= =========== =========== ===== ========= ============================ =====
Note C
2023 2022
============================================================================= ===== =====
Adjusted earnings per share (pence) 141.8 131.1
Dividends relating to the year (pence) - excluding special dividend proposed 47.3 43.7
============================================================================= ===== =====
Dividend cover 3 3
============================================================================= ===== =====
Note D
2023 2022
From the cash flow statement GBPm GBPm
========================================== ===== =====
Purchase of property, plant and equipment 997 680
Purchase of intangibles 76 89
========================================== ===== =====
Capital expenditure 1,073 769
========================================== ===== =====
Note E
2023 2022
From the cash flow statement GBPm GBPm
======================================================== ===== =====
Purchase of property, plant and equipment 997 680
Purchase of intangibles 76 89
Purchase of subsidiaries, joint ventures and associates 94 154
Purchase of other investments 4 7
======================================================== ===== =====
Gross investment 1,171 930
======================================================== ===== =====
Note F
2023 2022
GBPm GBPm
=================================================================== ======= =======
Adjusted operating profit 1,513 1,435
Charged to adjusted operating profit:
Depreciation of property, plant and equipment 531 521
Amortisation of operating intangibles 44 24
Depreciation of right-of-use assets and non-cash lease adjustments 273 281
Adjusted EBITDA 2,361 2,261
Net debt including lease liabilities (2,265) (1,764)
Financial leverage ratio 1.0 0.8
==================================================================== ======= =======
Note G
2023 2022
GBPm GBPm
====================================================================== ======= =====
Adjusted EBITDA (see note F) 2,361 2,261
Repayment of lease liabilities net of incentives received (246) (275)
Working capital (216) (729)
Capital expenditure (see note D) (1,073) (769)
Purchase of subsidiaries, joint ventures and associates (94) (154)
Sale of subsidiaries, joint ventures and associates 4 -
Net interest paid (74) (97)
Income taxes paid (341) (304)
Share of adjusted profit after tax from joint ventures and associates (127) (112)
Dividends received from joint ventures and associates 107 93
Other (32) 2
======================================================================= ======= =====
Free cash flow 269 (84)
======================================================================= ======= =====
Note H
2023 2022
GBPm GBPm
============================================== ===== =====
Cash at bank and in hand and cash equivalents 1,457 2,121
Current loans and overdrafts (168) (157)
Estimated inaccessible cash (73) (106)
RCF 1,500 1,500
=============================================== ===== =====
Total liquidity 2,716 3,358
=============================================== ===== =====
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END
FR FSFEFMEDSESF
(END) Dow Jones Newswires
November 07, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Associated British Foods (LSE:ABF)
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Grafico Azioni Associated British Foods (LSE:ABF)
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