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Associated British Foods Plc - Annual Results

A resilient performance


Financial Headlines




Constant currency

• Group revenue




• Adjusted operating profit




 Adjusted profit before tax              




 Adjusted earnings per share                 




 Dividends per share                            




 Gross investment




 Net cash




 Statutory operating profit




 Statutory profit before tax




 Basic earnings per share






Statutory operating profit down 5% to £1,282m mainly as a result of an exceptional charge of £79m included in this year's income statement. This year includes a greater loss on closure of businesses, and so statutory profit before tax was down 8% to £1,173m and basic earnings per share were down 13% to 111.1p.


George Weston, Chief Executive of Associated British Foods, said:

"The group delivered a resilient performance this year, with strong profit growth from Grocery and Primark which more than offset the profit decline in Sugar. We continued to pursue the opportunities to grow our businesses with a gross investment of over £800m. Next year the group is well-positioned for further progress, with the continued expansion of Primark, a material improvement in our Sugar profit and strong profit growth in Grocery."


Adjusted operating profit is stated before the amortisation of non-operating intangibles, profits less losses on disposal of non-current assets, transaction costs, amortisation of acquired inventory fair value adjustments and exceptional items. These items, together with profits less losses on the sale and closure of businesses, are excluded from adjusted profit before tax and adjusted earnings per share. References to operating profit in the Operating Review are based on this adjusted operating profit measure.

Constant currency figures are derived by translating the 2018 results at 2019 average exchange rates, except for countries where consumer price inflation has escalated to extreme levels, in which case actual rates are used.

References to underlying profit for Twinings Ovaltine and Grocery exclude a £12m charge in 2019 in respect of the closure of the Twinings tea factory in Jinqiao, China.




It is a testament to the breadth of the group that profit growth was achieved in a year where the effects of a radical change in the European sugar market fully impacted our businesses. In a period when our ongoing sugar businesses experienced a significant drop in profits, the resilience of the group was demonstrated by an increase in the profits of our non-sugar activities, mainly driven by strong performances from Grocery and Primark. Revenues were 2% higher than last year at £15.8bn and adjusted operating profit was 1% ahead at £1,421m. There was a minimal effect from currency translation and so revenue and profit increases were broadly the same at constant currency. Net finance expense was much lower than last year following the maturity of a portion of the group's private placement notes and other financial income was higher as a consequence of an increase in the surplus of our defined benefit pension schemes between the 2017 and 2018 year ends. The group's adjusted effective tax rate of 21.5% was in line with last year. Adjusted earnings per share increased by 2% to 137.5p.

This year Primark celebrated the 50th anniversary of the opening of its first store, and I am pleased to report another year of strong progress and notable achievements. The expansion in selling space included Birmingham High Street, a showcase for our entire product range and innovative in-store experiences, and our first move into eastern Europe with the opening of a store in Slovenia. Our stores in the US performed very well and we have announced four further stores to open in the near future. Primark again demonstrated its track record for operational excellence with further improvements in buying and stock management.

Adjusted operating profit at Grocery was well ahead of last year. The margin improvement was broad-based, with excellent performances from our businesses in Australia and the US, Acetum, which was acquired last year, and Twinings Ovaltine on an underlying basis. Profit was down substantially at AB Sugar, mainly due to the effect of a further decline in EU sugar prices last year. This decline resulted from a coincidence of a regional oversupply of sugar and the end of the EU sugar regime. Following the subsequent reduction in EU sugar supply, sugar prices have increased and we look forward to a material increase in our Sugar profit in the coming year.

We continued to invest for the long term, with a gross investment of £837m comprising capital expenditure of £737m and acquisitions of £100m. The capital expenditure for Primark was driven by investment in selling space expansion, supply chain and infrastructure. Investments in our food businesses focused on capacity expansion and projects to drive further operational efficiencies.

In September 2018 we were delighted to acquire Yumi's, an Australian producer of premium chilled dips and snacks, and, on 6 September 2019, Anthony's Goods, a California-based online marketer and blender of speciality baking ingredients. We also signed an agreement to form a yeast and bakery ingredients joint venture in China with Wilmar International. The joint venture will see us build a major new low-cost yeast plant in the north east of China and will combine AB Mauri's existing activities and technical expertise in China with Wilmar's extensive sales and distribution capability.

We delivered a stronger operating cash flow this year and the closing net cash position of £936m, before the adoption of IFRS 16 from the coming year, compared to £614m at last year end. The group has the financial strength to invest in all its businesses and to continue to pursue value accretive acquisition opportunities.

Statutory operating profit for the year was 5% down at £1,282m after taking into account exceptional charges of £79m. Losses on sale and closure of businesses increased to £94m this year and as a result, the statutory profit before tax reduced by 8% to £1,173m and basic earnings per share reduced by 13% to 111.1p.

Corporate responsibility

At Associated British Foods, our purpose is to provide safe, nutritious, affordable food and clothing that is great value for money. We are committed to being a good neighbour and supporting the communities where we operate.

This year we have, for the first time, set out our four group-wide values: acting with integrity, respecting everyone's dignity, progressing through collaboration and pursuing with rigour. These values provide clarity and guidance across all our businesses for employees, customers, suppliers and shareholders alike.

Our businesses have always aimed to make a lasting positive contribution to society and our 2019 Responsibility Report, Living our values, details the actions we are taking to invest in our people, support society, strengthen supply chains and respect our environment. To see how we make a difference, please download Living our values, at


This year we have undertaken a review of the group's executive reward arrangements which has included consultation with some of the group's largest shareholders. As a result, a number of changes are proposed to our remuneration policy to further improve alignment with shareholder interests and these are set out in the Remuneration Report.



The board

In September 2018 we welcomed Graham Allan to the board as a non-executive director. I want to thank Graham for also leading this year's internal evaluation of the board and its committees. Javier Ferrán stood down at our Annual General Meeting in December 2018 and my last statement recorded my thanks to Javier. Ruth Cairnie took on the responsibilities of Senior Independent Director. Richard Reid was appointed as designated non-executive director for engagement with the workforce.


These results are a tribute to the ongoing dedication and commitment of our 138,000 employees during the past year. Operating in 52 countries, some of which are challenging markets, they have delivered operational improvements which have underpinned the increased profit and cash generation that we report today. I would like to thank all of our employees for their valuable contribution, determination to succeed and in bringing our values to life every day.


I am pleased to report that a final dividend of 34.3p is proposed to be paid on 10 January 2020, to shareholders on the register on 13 December 2019. Together with the interim dividend of 12.05p paid on 5 July 2019, this will make a total of 46.35p for the year, an increase of 3%.

IFRS 16 Leases

The group will adopt the new accounting standard IFRS 16 Leases from the coming financial year. This is a significant accounting change for the group and will bring lease liabilities of £3.6bn on to the balance sheet, predominantly relating to Primark's leasehold stores. Under our chosen transition option, the results for the 2019 financial year will not be restated. However, we have set out the pro forma effects on our financial results this year, and on the key metrics for Primark, in the Financial review.


In the coming year, AB Sugar will benefit materially from the increase seen this year in EU sugar prices and from further cost reduction. We expect another year of strong profit and margin growth in Grocery, with Twinings Ovaltine in particular benefiting from a more efficient tea supply chain.

Primark will continue to expand its selling space next year, with the most stores being added in France and Spain. Looking further ahead, Primark has a strong pipeline of good quality sites. We expect cost reductions in both the cost of goods and overheads during the year, but the weakness of sterling during this financial year will result in a margin decline for Primark in the first half. The sterling exchange rate is currently very volatile but, at current exchange rates, we now expect margin in the second half to be in line with the same period this year and margin for the full year to be only a small reduction on that achieved this year. Margin comparisons are on a lease-adjusted basis.

Our businesses have completed all practical preparations for Brexit and contingency plans are in place should our businesses experience some disruption at the time of exit.

Taking these factors into account, at this early stage, we expect progress, on both a reported and an IFRS 16 adjusted basis, in adjusted earnings per share for the group for the coming year.


Michael McLintock





The group made further progress this year. Group revenue increased by 2% to £15.8bn and adjusted operating profit of £1,421m was 1% higher than last year, at constant currency.

Our Grocery businesses enjoyed a successful year, with strong underlying profit growth of 14% after adjusting for the £12m cost for the closure of the Twinings tea factory in China. George Weston Foods in Australia, ACH in the US and Acetum all delivered particularly impressive margin improvements through better procurement and cost reduction. We continued to invest in our manufacturing capability and the new facilities commissioned for Ryvita and for noodle production will increase capacity and product innovation. At Allied Bakeries we are committed to reducing the operating losses this coming year, with a programme of cost reductions. These follow the closure of the Cardiff bakery at the end of the financial year. We continued to develop our presence in the faster growing segments of the grocery market and see much potential from our recent acquisitions of Yumi's in Australia and Anthony's Goods in the US.

Primark marked its 50th anniversary by delivering an 8% increase in profit. 14 new stores were added across the UK and continental Europe in the year, including our largest ever store, in Birmingham. Looking forward, France, Italy, Spain, eastern Europe and the US provide the most significant prospects for further growth. Our buying team delivered a further improvement in margin, driven by exciting on-trend ranges, better buying and reduced markdowns. We continued to put the customer at the heart of our digital campaigns, with our social media channels now boasting 20m followers, up from 13m last year. We successfully collaborated with high profile influencers with whom we launched special collections throughout the year, generating further social media reach. We achieved another year of substantial market share growth in the UK. The group's like-for-like sales decline of 2% was significantly affected by weak trading in Germany where we have been taking action to address performance. A new managing director is in role and is leading a number of initiatives which include targeted local marketing campaigns.

Profit at AB Sugar was well down on the prior year, as expected, due to lower EU sugar prices and a poor crop in China. With our ongoing focus on performance improvement and cost reduction, improving EU sugar prices and the continued strength of Illovo we look forward to an improvement in the profit and return on capital employed for our sugar business in the coming year.

AB Agri experienced a difficult year, with the loss of co-products following the closure of the Vivergo bioethanol plant last year, lower UK feed margins and a smaller sugar beet crop. Our Ingredients business was impacted by the challenging economic environment in Argentina and this year's result includes a hyperinflationary accounting charge for the first time.


The group's business model, wherever possible, aligns food production with the end market for the product while Primark operates largely discrete supply chains for its stores in each of the UK, US and EU27. The group therefore undertakes relatively little cross-border trading between the UK and the rest of the EU and consequently we do not expect Brexit to have a significant effect on the group's results. Nevertheless, we have evaluated the forms that Brexit could take and our businesses have completed all practical preparations and have contingency plans in place should they experience some disruption at the time of exit.

Arthur Ryan

Arthur Ryan, the founder of Primark, passed away in July this year after a short illness. My grandfather and uncle recruited Arthur to run Penneys in 1969 with only one store in Dublin. He went on to build a phenomenal world-class retailer, making fashion accessible to all, and his legacy looms large as one of the great giants of retailing. We will all miss his larger-than-life presence, his sharp wit and his friendship.