TIDMABF
RNS Number : 2665K
Associated British Foods PLC
21 April 2020
For release 21 April 2020
Associated British Foods plc
Interim Results Announcement
24 weeks ended 29 February 2020
a personal message from the chief executive
Today, Associated British Foods is announcing its financial
results for the first half. However, before we turn to the details
of those results, I'd like to set out some personal reflections on
how our group is responding to this unprecedented pandemic.
Two of our employees, Mario Marioli who worked for forty years
in our Italian yeast plant, and Claudio Maini who worked at Acetum
for twenty years, have lost their lives to COVID-19 in the last
three weeks, and we have another employee currently in intensive
care in the USA. One of our ABF head office colleagues lost her
partner to the disease last week. Many of us have vulnerable
relatives and friends we must protect and I am sure we all know
people working under huge stress in the NHS and in health and care
services around the world.
Much as I would love to be allowed to reopen Primark stores
across the UK, Continental Europe and the USA soon, because
lockdown has so harmed our business and our supply chains, I know
that we must not do so until we have suppressed this disease. And
when we are allowed to reopen we must make our Primark stores safe
for our staff and our customers, even if that means ensuring there
are fewer people shopping at any one time and so accepting lower
sales at least until the remaining risk is minimal. In time we can
rebuild the profits. We can't replace the people we lose.
ABF has been squarely in the path of this pandemic. At Primark
we have 68,000 of our people receiving furlough payments from
governments across Europe, without which we would have been forced
to make most redundant. From making sales of GBP650m each month,
since the last of our stores closed on 22 March, we have sold
nothing. One of the world's great clothing retailers is entirely
shut. We have paid for in full, and taken delivery of, very large
amounts of completed stock which we can't sell for now and we have
established a fund that will ensure everyone in a vulnerable
country who worked on a Primark garment, whether completed or not,
is paid for that work. And we are supporting suppliers with
commitments to buy garments that are as yet unfinished. But not
until shops reopen and we can place new orders, will the economic
hardship that COVID-19 has caused to all those in our supply chain
begin to reduce.
I am in awe of the Primark teams for their care, good judgement
and immense hard work as they have managed this crisis.
Our food businesses, and in particular our food factories and
depots and drivers, have equally been put under intense pressure
since this pandemic began, but in very different ways. ABF
businesses produce more food in the UK than any other organisation
and we are significant producers of food in other countries too. It
has been essential that they all keep fully running. Indeed, during
the weeks of panic buying, they had to produce more than ever
before. They have had to do so whilst reconfiguring factory layouts
to ensure safe working for our staff, whilst suffering inevitably
from higher than normal absence and whilst often being isolated
from outside sources of technical support. The willingness of
thousands of our people to come to work whilst so many of the rest
of us sit this disease out safely at home has been humbling; and
the ingenuity, hard work and leadership of dozens and dozens of
frontline managers has been amazing. Our factories are full of
people who know how vital their work is and who are skilled and
committed. Our success in keeping the nation fed is testament to
the robustness of the modern food chain; it is also testament to
the reality that you don't need to tell most people how to behave
well, you just need to allow them to do so; and it is the finest
thing I have seen in a career in business.
George Weston
Chief Executive
Associated British Foods plc results for the 24 weeks ended 29
February 2020
Encouraging first half results
Resourced to respond to the challenges of COVID-19
Financial headlines
2019 IFRS 2019 IFRS
16 16 2019
pro forma pro forma as reported
Constant
Actual currency currency Actual currency
* Group revenue GBP7,646m +2% +3% +2%
* Adjusted operating profit GBP682m +2% +3% +7%
* Adjusted profit before tax GBP636m +3% +1%
* Adjusted earnings per share 61.8p +3% +1%
* Dividend per share nil
* Gross investment GBP363m
* Net cash (before lease liabilities) GBP801m
* Net debt (including lease liabilities) GBP2,751m
* Statutory operating profit GBP349m -38% -35%
* Statutory profit before tax GBP298m -41% -42%
* Basic earnings per share 27.5p -43% -44%
Statutory operating profit is stated after exceptional charges
of GBP309m. We have carefully reviewed the inventory on hand at
Primark and, to reflect an expected lower net realisable value on
some inventory when our stores reopen, this charge includes a
GBP284m provision.
George Weston, Chief Executive of Associated British Foods,
said:
"The group delivered an encouraging trading performance in the
first half. The rapid spread of COVID-19 has impacted all of our
lives and the human tragedy that continues to unfold has shocked
and saddened us all. We are a strong, diversified and resilient
group. Our people are working hard to maintain supply from our food
businesses. Primark is managing through an extraordinarily
challenging period after all of its stores closed in March and our
management response to mitigate the cash outflows was swift and
proportionate. Although uncertainty remains, we have the people and
the cash resources to meet the challenges ahead."
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.
The 2019 results have been provided on an IFRS 16 pro forma
basis in addition to the results previously reported under IAS 17
in order to provide a better understanding of comparison between
the 2020 results and the 2019 results. These IFRS 16 pro forma
figures have been prepared using the same data and assumptions as
those used for the transition adjustment.
Constant currency figures are derived by translating the 2019
results on an IFRS 16 pro forma basis at 2020 average exchange
rates, except for Argentina and Venezuela where consumer price
inflation has escalated to extreme levels, in which case actual
exchange rates are used.
For further information please contact:
Until 15.00 only
Associated British Foods:
John Bason, Finance Director
Catherine Hicks, Corporate Affairs Director
Tel: 020 7638 9571
Citigate Dewe Rogerson:
Tel: 020 7638 9571
Chris Barrie Tel: 07968 727289
Jos Bieneman Tel: 07834 336650
Elizabeth Kittle Tel: 07720 498455
After 15.00
John Bason, Finance Director
Catherine Hicks, Corporate Affairs Director
Tel: 020 7399 6545
Interim Results Announcement
For the 24 weeks ended 29 February 2020
CHAIRMAN'S STATEMENT
The rapid spread of COVID-19 has impacted all of our lives in
ways we could not have imagined just a few weeks ago. The human
tragedy that continues to unfold has shocked and saddened us all.
It has affected every facet of life. The restrictions on the
movement of people and trading activity applied by most governments
to contain the spread of the virus have had an immediate and severe
effect on economic activity.
The most significant challenges we are facing are maintaining
the production of essential food and food ingredients and the cash
flow impact arising from the closure of all Primark stores in March
until further notice. The operational challenges faced by our food
businesses, and our responses to these, and the management actions
taken to mitigate the consequential and significant profit and cash
flow impacts arising from the loss of Primark sales are set out in
the Operating Review. There was very little effect of COVID-19 on
our underlying first half results but trading in our second half
will be radically different.
Turning then to the first half results, this is the first period
in which we report following our adoption of IFRS 16 Leases using
the modified retrospective approach. This does not permit us to
restate comparatives but, to provide a better understanding of the
underlying performance of the businesses, comparatives in the
Operating Review are on a pro forma, lease-adjusted basis.
Revenue for the group of GBP7.6bn was 2% ahead of last year at
actual exchange rates and 3% ahead at constant currency. Adjusted
profit before tax of GBP636m was 1% ahead of last year at actual
exchange rates. Adjusted operating profit of GBP682m was 7% ahead
of last year at actual exchange rates and benefited by GBP28m as a
result of the adoption of IFRS 16. Net finance expense increased by
GBP32m and included lease interest for the first time which more
than offset the decrease in interest on reduced debt. Adjusted
earnings per share increased by 1%.
The statutory operating profit for the period reduced by 35% to
GBP349m as a result of exceptional items of GBP309m charged in this
half year compared to GBP79m in the same period last year.
Following the closure of its stores the level of inventory at
Primark increased significantly as sales ceased immediately and the
inbound supply chain continued for several weeks with goods in
transit. An assessment of the carrying value of this inventory has
resulted in an exceptional charge of GBP284m. Our Speedibake
Wakefield factory was destroyed by fire on 1 February. Following an
evaluation of replacement options we have regretfully announced
that this factory will be closed and this has led to an exceptional
charge of GBP25m. As a consequence statutory profit before tax
decreased by 42% to GBP298m and basic earnings per share decreased
by 44% to 27.5 pence.
We were pleased with much better underlying trading at Primark.
Performance in the Eurozone was particularly encouraging, with
increased like-for-like sales in France and Italy and an improved
like-for-like sales trend in Northern Europe. We increased our
market share, measured by value, in a weak UK market. The operating
profit margin decline was much less than originally expected given
the adverse effect of the stronger US dollar on purchases this half
year compared to last year. This was achieved with lower cost of
materials, another strong performance from our buying teams,
improved sourcing and tight stock management.
AB Sugar saw the initial benefits from increased EU sugar prices
and delivery of further cost reduction. Our European sugar prices
are contracted for the remainder of this financial year which
underpin our expected material improvement in Sugar profit for the
full year. The progress of our Grocery businesses continued, with
an increase of 13% in reported adjusted operating profit and much
higher margins.
Net cash flow improved compared to the corresponding period last
year driven by the higher adjusted operating profit and lower
capital expenditure in our food businesses following the completion
of a number of major projects last year. The usual, seasonal
working capital outflow in the first half was consistent with last
year. The net cash balance for the group, before lease liabilities,
was GBP801m. This compared to net cash of GBP386m at this time last
year and net cash of GBP936m at the end of the last financial year.
Including lease liabilities of GBP3,552m, net debt at the half year
was GBP2,751m.
Over the years, prudent financial management has been a
cornerstone for the group and is demonstrated by the strong balance
sheet at the half year. This has positioned us well as we have
developed our response to the cash flow challenges resulting from
the effects of COVID-19.
COVID-19
The board recognises that a group of our scale and significance
has responsibilities to many stakeholders. We intend to meet those
responsibilities as fully as we can in the months ahead.
Our food businesses have continued to operate fully, providing
safe, nutritious, affordable food to customers, and have in recent
weeks seen a significant increase in demand.
The rapid closure of Primark stores has presented a major
challenge to the group to manage and mitigate the profit and cash
flow impacts arising from the loss of sales. The Operating Review
sets out the detailed actions taken by management and, at the same
time, we have taken steps to confirm the availability of existing,
and to agree new, borrowing facilities.
There is substantial financial headroom between our cash flow
forecast and the cash available to the group over the next year. At
the half year, the group had net cash of GBP801m and had an
undrawn, committed revolving credit facility (RCF) of GBP1,088m. As
a precaution to avoid any possible illiquidity in the banking
market, funds were drawn down in full on the RCF on 18 March 2020.
We saw no need to seek a waiver for the covenant test for September
2020 but it was considered prudent to seek a waiver for February
2021, which was confirmed on 8 April 2020. The group's headroom was
increased further following the confirmation by the Bank of England
of our eligibility to access funding under its Covid Corporate
Financing Facility on 15 April 2020. As at the date of these
interim results, the group has available central cash on hand of
GBP1.5bn.
Our assessment of going concern shows that, even though this is
a time of unprecedented uncertainty, the group has ample cash
liquidity to deal with the likely challenges in the year ahead.
I'd like to pay tribute on behalf of the board to every one of
our employees for their hard work and determination in these
exceptionally difficult times. So many have gone beyond the
ordinary call of duty. I am proud of the many examples of the
contribution of our employees to support local communities at a
time of such need.
The board is acutely aware that many of our employees will see
their livelihoods affected by COVID-19. With this in mind, the
board has accepted the proposal by the executive directors to
reduce their base pay temporarily by 50% and that no bonuses
relating to the current financial year will be paid to them. In
addition, the non-executive directors of the board, including
myself as chairman, have decided that their fees should be reduced
temporarily by 25%. These steps are appropriate given our
expectation that full year earnings for the group will now be much
lower than we anticipated at the start of the financial year.
Dividends
The board has decided not to declare an interim dividend. The
directors consider that this is prudent given the focus on managing
the group's cash outflow in the second half of this financial
year.
We will consider the declaration of a dividend at the year end
in the light of trading for the full financial year and the
financial circumstances at that time.
Outlook
Our expectation for the aggregate operating result for our
Sugar, Grocery, Ingredients and Agriculture businesses in the
second half is unchanged.
We have good visibility that we will be able to mitigate half of
the operating costs of the Primark business while the stores remain
closed. The timing of the reopening of the stores however remains
uncertain; moreover, the process of reopening, once it begins, is
likely to be complex. As a result, it is too early to provide
earnings guidance for the remainder of the current financial
year.
I am confident that, with our strong management team and the
financial resources at our disposal, your company will emerge from
the difficulties of this period well positioned to return to
growth.
Michael McLintock
Chairman
Operating review
COVID-19
Our management focus since the half year has been to tackle the
immediate operational challenges which have resulted from the
spread of COVID-19.
Our top priority has been to protect the health and safety of
our employees by implementing social distancing, providing personal
protective equipment and sharing experiences. To support seamless
home-working, we have modified our IT infrastructure, increased
bandwidth with our telecommunications partners, and made extensive
use of collaboration software.
Our food businesses have continued production at all facilities,
maintaining their essential output to support the food, animal feed
and pharmaceutical supply chains. This has been and remains a key
priority for us.
Our group's ethos is to take its responsibilities to its local
communities very seriously, and our employees have in many ways
made tangible differences on the ground. Primark is donating to
staff at London's Nightingale Hospital and other hospitals across
Europe so they have fresh clothing available at the end of long
shifts. AB Sugar in Africa is preparing and equipping each of its
medical facilities on our sugar estates. In Asia we have
established a fund in more vulnerable countries to support textile
workers who have been affected by the cancellation of Primark
orders. We are also working with other clothing retailers to seek
help for our suppliers from their governments.
Over a very short period in March, all of the Primark stores
closed. We took immediate action across the group to stop
non-essential capital and discretionary operating expenditure. At
Primark, payment was agreed for the GBP0.6bn of stock in transit.
As a result, in the period up to the date of this announcement,
inventory has now reached GBP1.5bn. With no sales in its stores and
with this level of inventory, it was essential to prevent further
cash outflows. We have committed to take all product that was both
in production and finished, and planned for handover by 17 April.
Future orders were cancelled until further notice. We have
carefully reviewed stock on hand and, to reflect an expected lower
net realisable value on some of this inventory when our stores
reopen, we have made a GBP284m provision.
In each European country where Primark operates it intends to
access each government programme for funds designed to provide
income for those employees no longer working and to preserve their
continued employment. We are also seeking discussions with other
counterparties in Primark, in particular landlords, to seek help
with our lease payments. We welcome the relief from business rates
for the coming year announced by the UK government. As a result of
all these cost mitigation measures, we currently estimate being
able to recover some 50% of Primark's total operating costs,
leaving us with a monthly cash outflow of some GBP100m, while the
stores remain closed.
We have taken steps to confirm the availability of existing, and
to agree new, borrowing facilities and we are confident that we
have the financial resources to meet the challenges ahead.
Review of the first half
We are encouraged by our performance in the first half. Group
revenue of GBP7.6bn was 3% ahead of the same period last year at
constant currency. Adjusted operating profit of GBP682m was 3%
ahead on an IFRS 16 pro forma basis at constant currency. Grocery
achieved excellent profit and margin growth, Sugar is on track to
deliver a material improvement in profit for the full year and
Primark profit was ahead of our expectations. The average exchange
rate for sterling against our major trading currencies, other than
the US dollar, was stronger in the first half than in the
comparable period last financial year leading to a loss on
translation in these results of GBP6m.
Primark performed well. We achieved further market share growth,
measured by value, in the UK, with a good contribution from the
selling space added over the last year. Underlying performance
improved in the Eurozone, including in Germany where it was
pleasing to see the initial benefits of the actions taken by our
new management team there. Our buying teams delivered an
outstanding performance and, combined with lower raw material
prices, substantially mitigated the adverse effect of currency on
our buying margin.
In AB Sugar, our European businesses benefited from the
substantial increase in EU sugar prices, all businesses continued
to reduce their cost base and our business in China benefited from
an improvement in sugar yield. This was another period of excellent
profit and margin growth in Grocery. ACH in the US performed
strongly. Twinings Ovaltine launched a wide range of new products
in many of its markets and benefited from last year's investment in
supply chain simplification. Further significant cost reductions
were implemented in Allied Bakeries following its loss of own label
volume. Profit at AB Agri improved with strong sales of feed
enzymes in international markets. In Ingredients, AB Mauri traded
well in the first half driven by its performance in North America
and China, although profit was held back in ABF Ingredients by
increased competition.
Sales and profit growth commentary in this Operating Review are
based on 2019 comparatives on an IFRS 16 pro forma basis and are
stated at constant currency. Constant currency figures are derived
by translating the 2019 results at 2020 average exchange rates,
except for Argentina and Venezuela where consumer price inflation
has escalated to extreme levels, in which case actual exchange
rates are used.
Note 1 shows the results by segment on a reported basis. The
table below shows comparative adjusted operating profit on an IFRS
16 pro forma basis. Revenue is not affected by the implementation
of IFRS 16.
24 weeks 24 weeks 24 weeks
ended ended ended
29 February 2 March 2 March
2020 2019 2019
(IFRS
16 pro
(IFRS forma (IAS
16) basis) 17)
GBPm GBPm GBPm
Operating segments
Grocery 189 168 167
Sugar 12 3 1
Agriculture 16 15 15
Ingredients 62 64 64
Retail 441 451 426
Central (37) (34) (34)
----------------------------------------- ------------- --------- ---------
683 667 639
Businesses disposed:
Grocery (1) - -
682 667 639
===================================== ============= ========= =========
Grocery
Actual Constant
Ongoing businesses 2020 2019 fx fx
Revenue GBPm 1,689 1,707 -1% In line
================================================== ===== ===== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 189 168 +13% +12%
================================================== ===== ===== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 189 167 +13%
================================================== ===== ===== ====== ========
Revenue in the first half was in line with last year at constant
currency. Higher sales at George Weston Foods in Australia, AB
World Foods and Silver Spoon offset the expected sales decline at
Allied Bakeries and a slow start in Thailand for Twinings
Ovaltine.
Operating profit was 12% ahead at constant currency driven by
further margin improvement. Margins improved in ACH, Twinings
Ovaltine which included a GBP12m one-time cost for the closure of
the tea factory in China last year, and operating losses were
reduced at Allied Bakeries.
Twinings revenues were ahead of last year, driven by growth in
black teas, excellent sales of herbal teas and new ranges of
infusions in the US, UK and France. Ovaltine revenues were held
back by a slow start in Thailand, partially offset by foodservice
distribution gains in China and new products in Brazil and
Switzerland.
AB World Foods achieved good sales growth driven by strong sales
for Blue Dragon in the UK and increased Patak's sales in Europe and
North America. The business also acquired Al'Fez, a fast-growing
Middle Eastern food brand with sales in the UK and Europe. Silver
Spoon increased revenues with improved sugar pricing and the launch
of a range of flavoured inclusions for home bread making under the
Allinson's brand.
Further significant cost reductions were implemented by Allied
Bakeries in the first half to mitigate the contribution shortfall
from lower own label bread volumes. In February, our Speedibake
Wakefield factory was destroyed by fire and, following a review of
options, we have announced that the factory will permanently close
and some products will transfer to the Bradford site. This resulted
in an exceptional charge of GBP25m in the first half. We have
comprehensive insurance and have made significant progress with our
insurers regarding receipt of compensation for the entire effects
of the fire.
Acetum performed well in the period, with increased sales in
Italy, the UK and France and margins ahead of last year. ACH
delivered further market share gains through higher US sales of
Mazola corn oil. We benefited from the first contribution from
Anthony's Goods, the California-based online speciality baking
ingredients business acquired in September 2019, which continued to
deliver strong sales growth.
Revenue continued to increase at George Weston Foods in
Australia. Tip Top achieved sales growth in packaged bread and
broadened its Thins range with new burger and sourdough products.
The Don meat business benefited from a successful back-to-school
advertising campaign, while Yumi's continued to grow strongly with
particularly good trading over Christmas.
Sugar
Actual Constant
2020 2019 fx fx
Revenue GBPm 803 769 +4% +8%
================================================== ==== ==== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 12 3 n/a n/a
================================================== ==== ==== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 12 1 n/a
================================================== ==== ==== ====== ========
AB Sugar revenue was 8% ahead of last year in the first half due
to higher EU sugar prices and increased export sales at Illovo more
than offsetting a decline in sales volumes in Spain. The increase
in adjusted operating profit in the first half was a result of
these higher EU prices, a much-improved crop in China and
reductions in the costs of sugar production. This was partially
offset by Illovo, following a reduction in high margin domestic
sales in South Africa and later profit phasing with weather
curtailing the end of the processing season. Most of the
improvement in Sugar profit this year will be delivered in the
second half as a result of this phasing of Illovo profit and a
larger proportion of our contracts reflecting the higher EU sugar
prices.
The world market sugar price has fallen in recent months. This,
however, only reverses price increases over the last six months and
the world sugar price is now at a similar level to that which
prevailed when this year's European sugar contracts were struck.
Our UK and Spanish businesses have completed contracting sales for
this financial year. Looking ahead, more importantly we expect
European demand to be in excess of production in the next
campaign.
UK sugar production of 1.18 million tonnes compared to 1.15
million tonnes last year, with a recovery in sugar yield more than
offsetting the reduction in crop area. Adverse winter weather
delayed beet harvesting, but strong collaboration between growers,
contractors and our own operations teams enabled us to successfully
process all of the crop. Our forecast for the next year is that we
expect sugar production to be in line with this year, as we expect
an increase in crop area to be offset by lower beet yields.
In Spain, the operating loss was significantly reduced due to
the lower beet prices contracted with growers last year, coupled
with higher sugar prices. Beet sugar production will be lower than
last year at 220,000 tonnes. Through the excellent cooperation and
flexibility of our people, all our factories have continued
operating as planned in spite of the challenges presented by
COVID-19. We expect crop area in the north to partially recover for
the 2020/21 campaign.
Our China sugar business benefited from a much better quality
crop which, combined with the linking of some grower payments to
the sugar content of their beet, resulted in a significantly
reduced operating loss in the first half. The effect on sales of
lower production this year at 125,000 tonnes was partially offset
by higher domestic sugar prices. Next financial year we expect to
benefit from an increased crop area and the linking of the majority
of grower payments to the sugar content of their beet.
At Illovo, revenues were ahead of last year, however this was
driven mainly by export sales which had a much lower margin. Our
higher-margin domestic sales in South Africa fell in the first
quarter due to increased imports and a decline in consumption in
that developed market, which was primarily driven by product
reformulations by our customers. Sugar production and operating
costs in the first half were impacted by heavy rains in a number of
countries. We expect some recovery in production in the second half
which will result in a later phasing of profit this financial
year.
Germains increased sales to the growing US horticulture market
which largely offset a reduction in sales in a more competitive UK
beet seed treatment market.
Agriculture
Actual Constant
2020 2019 fx fx
Revenue GBPm 692 665 +4% +5%
================================================== ==== ==== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 16 15 +7% +7%
================================================== ==== ==== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 16 15 +7%
================================================== ==== ==== ====== ========
AB Agri revenue increased by 5% in the first half but was
marginally lower on an underlying basis, as last year was a shorter
accounting period for our UK feed businesses. Operating profit
improved due to higher sales of feed enzymes, partially offset by
lower margins in UK feed.
In the UK, increased sales volumes to the pig sector partially
offset reduced demand and pricing for ruminant feed due to higher
than usual levels of forage stocks. Frontier Agriculture
experienced lower grain trading and reduced crop input sales during
unusually wet weather in the UK which delayed the planting of
autumn crops.
Speciality Nutrition, our premix and starter feed business,
gained new business in Spain, however sales in Eastern Europe and
to the pet sector declined.
Sales and profit at AB Vista increased significantly in the
first half. Feed enzymes sales were exceptionally strong in the
Americas where sales of Signis, our new and innovative animal
digestion aid, continue to exceed expectations.
Ingredients
Actual Constant
Ongoing businesses 2020 2019 fx fx
Revenue GBPm 742 744 In line +2%
================================================== ==== ==== ======= ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 62 64 -3% -2%
================================================== ==== ==== ======= ========
Adjusted operating profit (reported comparatives)
GBPm 62 64 -3%
================================================== ==== ==== ======= ========
Ingredients revenues in the first half were 2% ahead of last
year. There was a small reduction in adjusted operating profit due
to lower sales at ABF Ingredients.
AB Mauri delivered sales and operating profit growth. The US
business performed well, with strong sales growth in yeast and
operational efficiencies. Italmill, the specialist bakery
ingredients business acquired in May last year, was successfully
integrated. Sales of our high-quality bakery toppings from our new
facility in Brazil were ahead of expectation. Following regulatory
clearance, we expect the completion of the Chinese yeast and bakery
ingredients joint venture with Wilmar International in the second
half of the financial year.
At ABF Ingredients, Abitec and SPI Pharma experienced lower
sales volumes as a result of increased competition. This was
partially offset by continuing sales growth in the enzymes business
to the feed, food and technical markets. We continued to invest in
capacity and capability with new production capacity at SPI
Pharma's facility in Grand Haven, Michigan and progressing the
construction of a new state-of-the-art pilot plant for enzymes and
formulations in Rajamaki, Finland.
Retail
Actual Constant
2020 2019 fx fx
Revenue GBPm 3,710 3,630 +2% +4%
================================================== ===== ===== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 441 451 -2% -1%
================================================== ===== ===== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 441 426 +4%
================================================== ===== ===== ====== ========
Sales at Primark were 3.9% ahead of last year at constant
currency and 2.2% ahead at actual exchange rates, driven by
increased retail selling space partially offset by a 0.5% decline
in like-for-like sales. With the smaller than expected decline in
margin, operating profit was only marginally down on last year on
an IFRS 16 pro forma basis at constant currency.
In the UK, we delivered a further increase in our share,
measured by value, of the total clothing, footwear and accessories
market. Sales were 2.7% ahead of last year, driven by a good
contribution from new selling space added over the last year
partially offset by a 1.7% decline in like-for-like sales. Although
trading was particularly good over November and December,
like-for-like sales weakened in January and especially February
against very strong comparatives in the prior year.
Sales in the Eurozone were 5.0% ahead of last year at constant
currency with particularly strong sales growth in France, Belgium
and Italy. Our new store in Milan traded ahead of expectation and
our store in Ljubljana, Slovenia continued to trade strongly. There
was a marked upturn in like-for-like sales performance for the
Eurozone which was 0.2% ahead in the period, continuing the
improvement reported in the final quarter of last financial year.
This was driven by excellent like-for-like sales in France and
Italy and, at this early stage, a notable improvement in Germany
which was delivered through a series of operational changes made by
the new management team.
Our business in the US continued to perform strongly, delivering
like-for-like sales growth, with particularly strong trading at the
store in Brooklyn, and recording a break-even operating result in
the period.
Over the half year, our following across all our social media
channels increased from 20 million to 22 million. This was driven
by a combination of innovative social media campaigns featuring
collaborations with celebrity influencers and our exciting product
collections.
Operating margin in the first half was 11.9% which was down on
the same period last year when margin, on an IFRS 16 pro forma
basis, was 12.4%. Purchases in the first half were contracted at a
much stronger US dollar exchange rate than for purchases in the
comparable period last year, but the effect was substantially
mitigated by both reduced markdowns and reductions in the costs of
goods, primarily lower materials prices.
Retail selling space increased by 0.2 million sq ft since the
financial year end and, at 29 February 2020, 375 stores were
trading from 15.8 million sq ft compared to 15.1 million sq ft a
year ago. Three new stores were opened in the period: Seville Lagoh
in Spain; Kiel in Germany; and Milan Fiordaliso in Italy. In
addition, we relocated to larger premises in the Norte shopping
centre in Porto, Portugal and the Norwich store in the UK was
extended. Selling space was reduced in two stores in Germany and a
small store in Rathfarnham, Ireland was closed.
The store opening programme planned for the third quarter was
strong with 0.5 million sq ft of retail selling space planned to be
added. However, these openings have been delayed pending the
reopening of existing stores. These planned openings comprised:
Trafford Centre, Manchester in the UK; American Dream in New
Jersey, US; Lens, Strasbourg, Paris Plaisir and Paris Belle Epine
in France; Maximo in Rome, Italy; Mons in Belgium; Barcelona Plaza
de Cataluña in Spain; Gropius Passagen in Berlin, Germany; and
Warsaw, Poland.
George Weston
Chief Executive
PRINCIPAL risks and uncertainties
The delivery of our strategic objectives is dependent on
effective risk management. There are a number of potential risks
and uncertainties which could have a material impact on the group's
performance and could cause actual results to differ materially
from expected and historical results. Details of the principal
risks facing the group's businesses at an operational level were
included on pages 62 to 66 of the group's statutory financial
statements for the 52 weeks ended 14 September 2019, as part of the
Strategic report.
The COVID-19 pandemic has become a worldwide crisis and at the
date of this report the situation was still evolving. We have
considered the impact of this on our businesses and reassessed our
principal risks and uncertainties. The closure of Primark stores
presented an immediate cash flow challenge to the group. Our
response is detailed in the Operating Review and the work done to
ensure adequate cash liquidity for the group for the next year is
included in the note below in the assessment of going concern.
Looking forward, the greatest uncertainty is the timing, phasing
and nature of the reopening of Primark stores. We are confident
that we have the necessary resources to meet even the most
pessimistic of our forecasts.
In the financial markets, there has been increased exchange rate
volatility and sterling has weakened against the US dollar and euro
since the end of February. Primark covers its currency exposures on
the purchase of merchandise denominated in foreign currencies at
the time of placing orders and this is the most material currency
transaction risk in the group. Following the cancellation of future
orders by Primark, there is no need for further foreign currency
hedges until orders resume. As a result, the currency transaction
risk to movement of exchange rates for the group has reduced
significantly, leaving currency translation risk for the group,
which is not hedged.
The world market sugar price has fallen in recent months. This,
however, only reverses price increases over the last six months and
the world sugar price is now at a similar level to that which
prevailed when this year's European sugar contracts were struck.
Our UK and Spanish businesses have completed contracting sales for
this financial year.
The significant increase in employees working at home has had an
impact on the delivery of IT services and increased our IT and
information security risks. To support seamless home-working we
have modified our IT infrastructure, increased bandwidth with our
telecommunications partners and deployed collaboration tools.
The extent of remote working has increased the risk of users
falling victim to phishing attacks because users rely primarily on
email communication. We have an ongoing phishing testing regime and
there is regular communication with all users to remind them of the
risks. We have raised the level of monitoring for phishing attempts
and other security threats. In addition, we have issued security
awareness advice on secure home-working best practices.
We have also increased disciplines to ensure that user devices
are regularly patched and upgraded to reflect changing IT security
threats. Revised guidance for laptop and desktop patching has been
issued to all businesses to ensure that systems are up to date and
secure.
Going concern
After making enquiries, the directors have a reasonable
expectation that the group has adequate resources to continue in
operational existence for the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements.
The directors have taken into consideration that, since the
balance sheet date, restrictions on trading activity and the
movement of people applied by most governments to contain the
spread of COVID-19 have had a severe effect on economic activity.
The closure of Primark stores in Italy on 12 March was followed
rapidly by closures in other countries. The whole estate was closed
once UK stores shut on 22 March. Measures, both immediate and
planned, were taken across the whole of the group to mitigate the
consequential and significant profit and cash flow impacts arising
from the loss of Primark sales. The directors have reviewed a
detailed cash flow forecast to the end of the 2021 financial year
which takes into account these mitigating actions. The Primark
supply chain has many weeks of stock which is in transit and, after
agreement to pay for that stock, all future orders were cancelled
until further notice. We are in the process of accessing the
emergency funds made available by European governments, and the UK
government in particular, to safeguard employment. The forecast
also includes conservative judgements where there is continued
uncertainty. Having reviewed this forecast for the coming year, and
having applied reverse stress tests, we consider it a remote
possibility that the financial headroom could be exhausted.
At the half year, the group had net cash of GBP801m and had an
undrawn, committed revolving credit facility (RCF) of GBP1,088m for
the coming year. As a precaution to avoid any possible illiquidity
in the banking market, funds were drawn down in full on the RCF on
18 March 2020. Our cash flow and EBITDA forecasts were used to
assess the possibility of the RCF covenant being breached in both
September 2020 and February 2021. Our forecasts did not indicate
breach on either date. We saw no need to seek a waiver for the
covenant test for September 2020 but it was considered prudent to
seek a waiver for February 2021. The agent acting for the
participating banks in the RCF confirmed on 8 April 2020 that the
waiver had been granted. The group's headroom was increased further
following the confirmation by the Bank of England of our
eligibility to access funding under its Covid Corporate Financing
Facility (CCFF) on 15 April 2020. The directors have satisfied
themselves that the RCF is available for at least the next 12
months and the CCFF for 12 months from the date of drawing, having
assessed the group's projected compliance with the remaining terms
and covenants of these facilities. As at the date of approval of
these interim results, the group has available central cash on hand
of GBP1.5bn.
In reviewing the cash flow forecast for the coming year, the
directors reviewed the trading of the non-Primark businesses and
the cash outflows for Primark while the stores remain closed. The
directors have a thorough understanding of the risks, sensitivities
and judgements included in these elements of the cash flow
forecasts and have a high degree of confidence in these cash flows.
The main uncertainties in the year ahead were considered to be the
length of time for which the Primark stores will remain closed and
the strength of their trading as they reopen. In this regard, the
forecast has taken the conservative view that the stores will
remain closed until the end of this financial year and their sales
will then take some time to re-establish the levels achieved before
their closure.
There is substantial financial headroom between this forecast
and the cash on hand and facilities available to the group over the
next year. A number of extreme, adverse assumptions were considered
and the likelihood of the headroom being exhausted was considered
remote:
-- We have some 60 different food businesses with a diversity of markets,
sectors, customers, geographies and products. The importance of basic
food production has been highlighted by recent events and our employees
have successfully worked to ensure the resilience of the food supply
chain. It would require a large number of adverse events within our food
businesses for there to be a collective material impact on headroom,
and sales for the whole of the next 12 months would need to decline substantially,
in every business, and with no cost mitigation.
-- Separately, for Primark we considered the stores remaining closed until
May 2021, and also the possibility of the stores opening and then closing
again during the next 12 months. The cash flow consequences did not exhaust
the financial headroom.
Brexit
Our businesses have completed all practical preparations for
Brexit and contingency plans continue to be in place should our
businesses experience some disruption at the end of the transition
period.
condensed CONSOLIDATED INCOME STATEMENT
For the 24 weeks ended 29 February 2020
24 weeks 24 weeks 52 weeks
ended ended ended
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
Continuing operations Note GBPm GBPm GBPm
Revenue 1 7,646 7,532 15,824
Operating costs before exceptional items (7,024) (6,945) (14,524)
Exceptional items 2 (309) (79) (79)
313 508 1,221
Share of profit after tax from joint
ventures and associates 27 24 57
Profits less losses on disposal of non-current
assets 9 2 4
================================================== ==== ============= ========= ==============
Operating profit 349 534 1,282
Adjusted operating profit 1 682 639 1,421
Profits less losses on disposal of non-current
assets 9 2 4
Amortisation of non-operating intangibles (24) (20) (47)
Acquired inventory fair value adjustments (8) (7) (15)
Transaction costs (1) (1) (2)
Exceptional items (309) (79) (79)
================================================== ==== ============= ========= ==============
Profits less losses on sale and closure
of businesses 6 (5) (7) (94)
================================================== ==== ============= ========= ==============
Profit before interest 344 527 1,188
Finance income 7 8 15
Finance expense (54) (23) (42)
Other financial income 1 3 12
================================================== ==== ============= ========= ==============
Profit before taxation 298 515 1,173
Adjusted profit before taxation 636 627 1,406
Profits less losses on disposal of non-current
assets 9 2 4
Amortisation of non-operating intangibles (24) (20) (47)
Acquired inventory fair value adjustments (8) (7) (15)
Transaction costs (1) (1) (2)
Exceptional items (309) (79) (79)
Profits less losses on sale and closure
of businesses (5) (7) (94)
================================================== ==== ============= ========= ==============
- UK (excluding tax on exceptional
Taxation items) (34) (39) (75)
- UK (on exceptional items) 25 12 12
- Overseas (excluding tax
on exceptional items) (103) (91) (214)
- Overseas (on exceptional
items) 35 - -
----------------------------------------------------- ---- ============= ========= ==============
3 (77) (118) (277)
================================================== ==== ============= ========= ==============
Profit for the period 221 397 896
================================================== ==== ============= ========= ==============
Attributable to
Equity shareholders 217 389 878
Non-controlling interests 4 8 18
================================================== ==== ============= ========= ==============
Profit for the period 221 397 896
================================================== ==== ============= ========= ==============
Basic and diluted earnings per ordinary
share (pence) 4 27.5 49.2 111.1
Dividends per share paid and proposed
for the period (pence) 5 - 12.05 46.35
condensed CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 24 weeks ended 29 February 2020
24 weeks 24 weeks 52 weeks
ended ended ended
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
GBPm GBPm GBPm
Profit for the period recognised in the income
statement 221 397 896
Other comprehensive income
Remeasurements of defined benefit schemes 17 (178) (407)
Deferred tax associated with defined benefit schemes (3) 30 68
Current tax associated with defined benefit schemes - - 2
Items that will not be reclassified to profit
or loss 14 (148) (337)
Effect of movements in foreign exchange (283) (134) 43
Net gain on hedge of net investment in foreign
subsidiaries 10 8 3
Reclassification adjustment for movements in foreign
exchange on subsidiaries disposed - (3) (3)
Movement in cash flow hedging position 18 (33) (29)
Deferred tax associated with movement in cash
flow hedging position (3) 8 7
Share of other comprehensive income of joint ventures
and associates (6) - 4
Effect of hyperinflationary economies 12 46 38
Deferred tax associated with hyperinflationary
economies - (6) (2)
Items that are or may be subsequently reclassified
to profit or loss (252) (114) 61
Other comprehensive loss for the period (238) (262) (276)
====================================================== ============= ========= ==============
Total comprehensive (loss)/income for the period (17) 135 620
====================================================== ============= ========= ==============
Attributable to
Equity shareholders (15) 131 601
Non-controlling interests (2) 4 19
====================================================== ============= ========= ==============
Total comprehensive (loss)/income for the period (17) 135 620
====================================================== ============= ========= ==============
condensed CONSOLIDATED BALANCE SHEET
At 29 February 2020
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
GBPm GBPm GBPm
Non-current assets
Intangible assets 1,631 1,658 1,681
Property, plant and equipment 5,620 5,663 5,769
Right-of-use assets 3,057 - -
Investments in joint ventures 216 215 225
Investments in associates 54 49 50
Employee benefits assets 247 403 228
Deferred tax assets 183 131 160
Other receivables 50 47 51
================================================= =========== ======= ============
Total non-current assets 11,058 8,166 8,164
================================================= =========== ======= ============
Current assets
Assets classified as held for sale 42 - 43
Inventories 2,025 2,282 2,386
Biological assets 96 106 84
Trade and other receivables 1,379 1,435 1,436
Derivative assets 96 91 99
Current asset investments 29 26 29
Income tax - - 24
Cash and cash equivalents 1,320 1,149 1,495
================================================= =========== ======= ============
Total current assets 4,987 5,089 5,596
================================================= =========== ======= ============
Total assets 16,045 13,255 13,760
================================================= =========== ======= ============
Current liabilities
Liabilities classified as held for sale (6) - (6)
Lease liabilities (273) - -
Loans and overdrafts (204) (439) (227)
Trade and other payables (2,134) (2,298) (2,556)
Derivative liabilities (40) (58) (52)
Income tax (69) (94) (163)
Provisions (108) (61) (64)
================================================= =========== ======= ============
Total current liabilities (2,834) (2,950) (3,068)
================================================= =========== ======= ============
Non-current liabilities
Lease liabilities (3,279) - -
Loans (344) (350) (361)
Other payables - (267) (271)
Provisions (33) (54) (54)
Deferred tax liabilities (248) (305) (261)
Employee benefits liabilities (194) (154) (195)
================================================= =========== ======= ============
Total non-current liabilities (4,098) (1,130) (1,142)
================================================= =========== ======= ============
Total liabilities (6,932) (4,080) (4,210)
================================================= =========== ======= ============
Net assets 9,113 9,175 9,550
================================================= =========== ======= ============
Equity
Issued capital 45 45 45
Other reserves 175 175 175
Translation reserve 136 238 409
Hedging reserve 6 (12) (9)
Retained earnings 8,662 8,643 8,832
================================================= =========== ======= ============
Total equity attributable to equity shareholders 9,024 9,089 9,452
Non-controlling interests 89 86 98
================================================= =========== ======= ============
Total equity 9,113 9,175 9,550
================================================= =========== ======= ============
condensed CONSOLIDATED CASH FLOW STATEMENT
For the 24 weeks ended 29 February 2020
24 weeks 24 weeks 52 weeks
ended ended ended
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
GBPm GBPm GBPm
Cash flow from operating activities
Profit before taxation 298 515 1,173
Profits less losses on disposal of non-current
assets (9) (2) (4)
Profits less losses on sale and closure of businesses 5 7 94
Transaction costs 1 1 2
Finance income (7) (8) (15)
Finance expense 54 23 42
Other financial income (1) (3) (12)
Share of profit after tax from joint ventures
and associates (27) (24) (57)
Amortisation 33 32 68
Depreciation (including depreciation of right-of-use
assets) 386 265 544
Exceptional items 309 79 79
Acquired inventory fair value adjustments 8 7 15
Effect of hyperinflationary economies 4 - 6
Net change in the fair value of current biological
assets (20) (26) -
Share-based payment expense 7 9 22
Pension costs less contributions 3 2 (10)
Decrease/(increase) in inventories 29 (139) (202)
Decrease/(increase) in receivables 3 (12) 18
(Decrease)/increase in payables (318) (138) 44
Purchases less sales of current biological assets - - (1)
Decrease in provisions (14) (24) (28)
======================================================== ============= ========= ==============
Cash generated from operations 744 564 1,778
Income taxes paid (151) (122) (269)
======================================================== ============= ========= ==============
Net cash from operating activities 593 442 1,509
======================================================== ============= ========= ==============
Cash flows from investing activities
Dividends received from joint ventures and associates 29 25 52
Purchase of property, plant and equipment (315) (348) (680)
Purchase of intangibles (43) (34) (57)
Lease incentives received 12 - -
Sale of property, plant and equipment 18 6 12
Purchase of subsidiaries, joint ventures and associates (3) (47) (84)
Sale of subsidiaries, joint ventures and associates 2 5 6
Purchase of other investments (2) - -
Interest received 6 10 20
======================================================== ============= ========= ==============
Net cash from investing activities (296) (383) (731)
======================================================== ============= ========= ==============
Cash flows from financing activities
Dividends paid to non-controlling interests (4) (1) (4)
Dividends paid to equity shareholders (271) (263) (358)
Interest paid (42) (20) (43)
Repayment of lease liabilities (115) - -
Decrease in short-term loans (18) (11) (263)
(Decrease)/increase in long-term loans - (7) 2
(Increase)/decrease in current asset investments (3) 3 1
Purchase of shares in subsidiary undertaking from
non-controlling interests (2) (1) (1)
Movements from changes in own shares held - - (25)
======================================================== ============= ========= ==============
Net cash from financing activities (455) (300) (691)
======================================================== ============= ========= ==============
Net (decrease)/increase in cash and cash equivalents (158) (241) 87
Cash and cash equivalents at the beginning of
the period 1,358 1,271 1,271
Effect of movements in foreign exchange (17) 1 -
======================================================== ============= ========= ==============
Cash and cash equivalents at the end of the period 1,183 1,031 1,358
======================================================== ============= ========= ==============
Condensed cONSOLIDATED STATEMENT of changes in equity
For the 24 weeks ended 29 February 2020
Attributable to equity shareholders
============================================================
Issued Other Translation Hedging Retained Non-controlling Total
capital reserves reserve reserve earnings Total interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance as at 14
September
2019 45 175 409 (9) 8,832 9,452 98 9,550
IFRS 16 opening balance
adjustment - - - - (149) (149) (1) (150)
Balance as at 15
September
2019 45 175 409 (9) 8,683 9,303 97 9,400
Total comprehensive
income
Profit for the period
recognised
in the income statement - - - - 217 217 4 221
Remeasurements of
defined
benefit schemes - - - - 17 17 - 17
Deferred tax associated
with
defined benefit schemes - - - - (3) (3) - (3)
Items that will not be
reclassified
to profit or loss - - - - 14 14 - 14
- -
Effect of movements in
foreign
exchange - - (277) - - (277) (6) (283)
Net gain on hedge of net
investment
in foreign subsidiaries - - 10 - - 10 - 10
Movement in cash flow
hedging
position - - - 18 - 18 - 18
Deferred tax associated
with
movements in cash flow
hedging
position - - - (3) - (3) - (3)
Share of other
comprehensive
income of joint
ventures and
associates - - (6) - - (6) - (6)
Effect of
hyperinflationary
economies - - - - 12 12 - 12
Items that are or may be
subsequently
reclassified to profit
or
loss - - (273) 15 12 (246) (6) (252)
Other comprehensive
income - - (273) 15 26 (232) (6) (238)
Total comprehensive
income - - (273) 15 243 (15) (2) (17)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Transactions with owners
Dividends paid to equity
shareholders 5 - - - - (271) (271) - (271)
Net movement in own
shares
held - - - - 7 7 - 7
Dividends paid to
non-controlling
interests - - - - - - (4) (4)
Acquisition and disposal
of
non-controlling
interests - - - - - - (2) (2)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (264) (264) (6) (270)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 29
February
2020 45 175 136 6 8,662 9,024 89 9,113
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 15
September
2018 45 175 363 13 8,615 9,211 85 9,296
Total comprehensive
income
Profit for the period
recognised
in the income statement - - - - 389 389 8 397
Remeasurements of
defined
benefit schemes - - - - (178) (178) - (178)
Deferred tax associated
with
defined benefit schemes - - - - 30 30 - 30
Items that will not be
reclassified
to profit or loss - - - - (148) (148) - (148)
Effect of movements in
foreign
exchange - - (130) - - (130) (4) (134)
Net gain on hedge of net
investment
in foreign subsidiaries - - 8 - - 8 - 8
Movements in foreign
exchange
on businesses disposed - - (3) - - (3) - (3)
Movement in cash flow
hedging
position - - - (33) - (33) - (33)
Deferred tax associated
with
movement in cash flow
hedging
position -- -- - 8 - 8 - 8
Effect of
hyperinflationary
economies -- -- - - 46 46 - 46
Deferred tax associated
with
hyperinflationary
economies -- -- - - (6) (6) - (6)
Items that are or may be
subsequently
reclassified to profit
or
loss - - (125) (25) 40 (110) (4) (114)
1
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Other comprehensive
income - - (125) (25) (108) (258) (4) (262)
9
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Total comprehensive
income - - (125) (25) 281 131 4 135
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Transactions with owners
Dividends paid to equity
shareholders 5 - - - - (263) (263) - (263)
Net movement in own
shares
held - - - - 9 9 - 9
Dividends paid to
non-controlling
interests - - - - - - (1) (1)
Acquisition and disposal
of
non-controlling
interests - - - - 1 1 (2) (1)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (253) (253) (3) (256)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 2 March
2019 45 175 238 (12) 8,643 9,089 86 9,175
------------------------ ---- -------- --------- ----------- -------- --------- ----- --------------- -------
Condensed cONSOLIDATED STATEMENT of changes in equity
continued
For the 24 weeks ended 29 February 2020
Attributable to equity shareholders
============================================================
Issued Other Translation Hedging Retained Non-controlling Total
capital reserves reserve reserve earnings Total interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance as at 15
September
2018 45 175 363 13 8,615 9,211 85 9,296
Total comprehensive
income
Profit for the period
recognised
in the income statement - - - - 878 878 18 896
Remeasurements of
defined
benefit schemes - - - - (407) (407) - (407)
Deferred tax associated
with
defined benefit schemes - - - - 68 68 - 68
Current tax associated
with
defined benefit schemes - - - - 2 2 - 2
Items that will not be
reclassified
to profit or loss - - - - (337) (337) - (337)
- -
Effect of movements in
foreign
exchange - - 42 - - 42 1 43
Net gain on hedge of net
investment
in foreign subsidiaries - - 3 - - 3 - 3
Movements in foreign
exchange
on businesses disposed - - (3) - - (3) - (3)
Movement in cash flow
hedging
position - - - (29) - (29) - (29)
Deferred tax associated
with
movements in cash flow
hedging
position - - - 7 - 7 - 7
Share of other
comprehensive
income of joint
ventures and
associates - - 4 - - 4 - 4
Effect of
hyperinflationary
economies - - - - 38 38 - 38
Deferred tax associated
with
hyperinflationary
economies - - - - (2) (2) - (2)
Items that are or may be
subsequently
reclassified to profit
or
loss - - 46 (22) 36 60 1 61
Other comprehensive
income - - 46 (22) (301) (277) 1 (276)
----------- -------- --------- ----- --------------- -------
Total comprehensive
income - - 46 (22) 577 601 19 620
======================== ==== ======== ========= ----------- -------- --------- ----- --------------- -------
Transactions with owners
Dividends paid to equity
shareholders 5 - - - - (358) (358) - (358)
Net movement in own
shares
held - - - - (3) (3) - (3)
Dividends paid to
non-controlling
interests - - - - - - (4) (4)
Acquisition and disposal
of
non-controlling
interests - - - - 1 1 (2) (1)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (360) (360) (6) (366)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 14
September
2019 45 175 409 (9) 8,832 9,452 98 9,550
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
NOTES TO THE condensed consolidated interim financial
statements
For the 24 weeks ended 29 February 2020
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 and deferred tax
assets, and all current assets except cash and cash equivalents,
current asset investments and income tax assets. Segment
liabilities comprise trade and other payables, derivative
liabilities, provisions and lease liabilities.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated items comprise mainly corporate
assets and expenses, cash, borrowings, employee benefits balances
and current and deferred tax balances. Segment non-current asset
additions are the total cost incurred during the period to acquire
segment assets that are expected to be used for more than one year,
comprising property, plant and equipment, right-of-use assets,
operating intangibles and biological assets. Businesses disposed
are shown separately and comparatives have been re-presented for
businesses sold or closed during the period.
The group is comprised of the following operating segments:
Grocery The manufacture of grocery products, including hot beverages,
sugar & sweeteners, vegetable oils, balsamic vinegars, bread
& baked goods, chilled foods, cereals, ethnic foods and meat
products, which are sold to retail, wholesale and foodservice
businesses.
Sugar The growing and processing of sugar beet and sugar cane for
sale to industrial users and to Silver Spoon, which is included
in the Grocery segment.
Agriculture The manufacture of animal feeds and the provision of other
products and services for the agriculture sector.
Ingredients The manufacture of bakers' yeast, bakery ingredients, enzymes,
lipids, yeast extracts, cereal specialities and pharmaceutical
excipients.
Retail Buying and merchandising value clothing and accessories through
the Primark and Penneys retail chains.
Geographical information
In addition to the required disclosure for operating segments,
disclosure is also given of certain geographical information about
the group's operations, based on the geographical groupings: United
Kingdom; Europe & Africa; The Americas; and Asia Pacific.
Revenues are shown by reference to the geographical location of
customers. Profits are shown by reference to the geographical
location of the businesses. Segment assets are based on the
geographical location of the assets.
Revenue Adjusted operating profit
========================================
24 weeks 24 weeks 52 weeks 24 weeks 24 weeks 52 weeks
ended ended ended ended ended ended
29 February 2 March 14 September 29 February 2 March 14 September
2020 2019 2019 2020 2019 2019
(IFRS (IAS (IAS (IFRS (IAS (IAS
16) 17) 17) 16) 17) 17)
GBPm GBPm GBPm GBPm GBPm GBPm
Operating segments
Grocery 1,689 1,707 3,498 189 167 380
Sugar 803 769 1,608 12 1 26
Agriculture 692 665 1,385 16 15 42
Ingredients 742 744 1,515 62 64 136
Retail 3,710 3,630 7,792 441 426 913
Central - - - (37) (34) (76)
------------------------- ------------- --------- -------------- ------------- --------- --------------
7,636 7,515 15,798 683 639 1,421
Businesses disposed:
Grocery 10 14 23 (1) - -
Ingredients - 3 3 - - -
------------------------- ------------- --------- -------------- ------------- --------- --------------
7,646 7,532 15,824 682 639 1,421
========================= ============= ========= ============== ============= ========= ==============
Geographical information
United Kingdom 2,881 2,784 5,971 254 230 476
Europe & Africa 2,882 2,854 5,992 241 255 589
The Americas 804 780 1,609 122 116 237
Asia Pacific 1,069 1,097 2,226 66 38 119
========================= ============= ========= ============== ============= ========= ==============
7,636 7,515 15,798 683 639 1,421
Businesses disposed:
The Americas - 3 3 - - -
Asia Pacific 10 14 23 (1) - -
========================= ============= ========= ============== ============= ========= ==============
7,646 7,532 15,824 682 639 1,421
========================= ============= ========= ============== ============= ========= ==============
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
1. Operating segments for the 24 weeks ended 29 February 2020
(IFRS 16)
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 1,690 833 694 829 3,710 (120) 7,636
Internal revenue (1) (30) (2) (87) - 120 -
===================================== ======= ===== =========== =========== ======= ======= =======
External revenue from continuing
businesses 1,689 803 692 742 3,710 - 7,636
Businesses disposed 10 - - - - - 10
===================================== ======= ===== =========== =========== ======= ======= =======
Revenue from external customers 1,699 803 692 742 3,710 - 7,646
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Adjusted operating profit before
joint ventures and associates 173 10 14 54 441 (37) 655
Share of profit after tax from
joint ventures and associates 16 2 2 8 - - 28
Businesses disposed (1) - - - - - (1)
Adjusted operating profit 188 12 16 62 441 (37) 682
Profits less losses on disposal
of non-current assets 9 - - - - - 9
Amortisation of non-operating
intangibles (22) - - (2) - - (24)
Acquired inventory fair value
adjustments (8) - - - - - (8)
Transaction costs (1) - - - - - (1)
Exceptional items (25) - - - (284) - (309)
Profits less losses on sale and
closure of businesses (6) - - 1 - - (5)
===================================== ======= ===== =========== =========== ======= ======= =======
Profit before interest 135 12 16 61 157 (37) 344
Finance income 7 7
Finance expense - (1) - - (37) (16) (54)
Other financial income 1 1
Taxation (77) (77)
===================================== ======= ===== =========== =========== ======= ======= =======
Profit for the period 135 11 16 61 120 (122) 221
===================================== ======= ===== =========== =========== ======= ======= =======
Segment assets (excluding joint
ventures and associates) 2,674 2,120 444 1,444 7,158 156 13,996
Investments in joint ventures
and associates 36 27 137 70 - - 270
===================================== ======= ===== =========== =========== ======= ======= =======
Segment assets 2,710 2,147 581 1,514 7,158 156 14,266
Cash and cash equivalents 1,320 1,320
Current asset investments 29 29
Deferred tax assets 183 183
Employee benefits assets 247 247
Segment liabilities (561) (394) (140) (296) (4,263) (219) (5,873)
Loans and overdrafts (548) (548)
Income tax (69) (69)
Deferred tax liabilities (248) (248)
Employee benefits liabilities (194) (194)
===================================== ======= ===== =========== =========== ======= ======= =======
Net assets 2,149 1,753 441 1,218 2,895 657 9,113
===================================== ======= ===== =========== =========== ======= ======= =======
Non-current asset additions 55 35 11 54 251 8 414
===================================== ======= ===== =========== =========== ======= ======= =======
Depreciation (including depreciation
of right-of-use assets) (52) (49) (8) (27) (246) (4) (386)
===================================== ======= ===== =========== =========== ======= ======= =======
Amortisation (26) (1) (1) (3) (1) (1) (33)
===================================== ======= ===== =========== =========== ======= ======= =======
Impairment of property, plant
and equipment on sale and
closure of businesses (2) - - - - - (2)
===================================== ======= ===== =========== =========== ======= ======= =======
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 2,881 2,882 804 1,079 7,646
============================================ ======== ========= ========= ======== ======
Segment assets 5,458 6,050 1,328 1,430 14,266
============================================ ======== ========= ========= ======== ======
Non-current asset additions 106 208 64 36 414
============================================ ======== ========= ========= ======== ======
Depreciation (including depreciation of
right-of-use assets) (138) (183) (33) (32) (386)
============================================ ======== ========= ========= ======== ======
Amortisation (20) (7) (3) (3) (33)
============================================ ======== ========= ========= ======== ======
Acquired inventory fair value adjustments - (7) (1) - (8)
============================================ ======== ========= ========= ======== ======
Exceptional items (151) (150) (8) - (309)
============================================ ======== ========= ========= ======== ======
Transaction costs (1) - - - (1)
============================================ ======== ========= ========= ======== ======
Impairment of property, plant and equipment
on sale and closure of businesses - - - (2) (2)
============================================ ======== ========= ========= ======== ======
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
1. Operating segments for the 24 weeks ended 2 March 2019 (IAS
17)
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 1,708 796 667 827 3,630 (113) 7,515
Internal revenue (1) (27) (2) (83) - 113 -
=================================== ======= ===== =========== =========== ======= ======= =======
External revenue from continuing
businesses 1,707 769 665 744 3,630 - 7,515
Businesses disposed 14 - - 3 - - 17
----------------------------------- ======= ===== =========== =========== ======= ======= =======
Revenue from external customers 1,721 769 665 747 3,630 - 7,532
=================================== ------- ----- ----------- ----------- ------- ------- -------
Adjusted operating profit before
joint ventures and associates 152 - 13 57 426 (34) 614
Share of profit after tax from
joint ventures and associates 15 1 2 7 - - 25
Adjusted operating profit 167 1 15 64 426 (34) 639
Profits less losses on disposal
of non-current assets 2 - - - - - 2
Amortisation of non-operating
intangibles (18) - - (2) - - (20)
Acquired inventory fair value
adjustments (7) - - - - - (7)
Transaction costs - - (1) - - - (1)
Exceptional items (65) - - - - (14) (79)
Profits less losses on sale and
closure of businesses - - - (7) - - (7)
=================================== ======= ===== =========== =========== ======= ======= =======
Profit before interest 79 1 14 55 426 (48) 527
Finance income 8 8
Finance expense (23) (23)
Other financial expense 3 3
Taxation (118) (118)
=================================== ======= ===== =========== =========== ======= ======= =======
Profit for the period 79 1 14 55 426 (178) 397
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets (excluding joint
ventures and associates) 2,638 2,202 463 1,467 4,386 126 11,282
Investments in joint ventures
and associates 35 26 136 67 - - 264
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets 2,673 2,228 599 1,534 4,386 126 11,546
Cash and cash equivalents 1,149 1,149
Current asset investments 26 26
Deferred tax assets 131 131
Employee benefits assets 403 403
Segment liabilities (532) (397) (149) (261) (1,198) (201) (2,738)
Loans and overdrafts (789) (789)
Income tax (94) (94)
Deferred tax liabilities (305) (305)
Employee benefits liabilities (154) (154)
=================================== ======= ===== =========== =========== ======= ======= =======
Net assets 2,141 1,831 450 1,273 3,188 292 9,175
=================================== ======= ===== =========== =========== ======= ======= =======
Non-current asset additions 66 48 5 46 173 9 347
=================================== ======= ===== =========== =========== ======= ======= =======
Depreciation (47) (46) (6) (24) (141) (1) (265)
=================================== ======= ===== =========== =========== ======= ======= =======
Amortisation (25) (1) (1) (3) (1) (1) (32)
=================================== ======= ===== =========== =========== ======= ======= =======
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 2,784 2,854 783 1,111 7,532
========================================== ======== ========= ========= ======== ======
Segment assets 4,549 4,418 1,087 1,492 11,546
========================================== ======== ========= ========= ======== ======
Non-current asset additions 155 123 30 39 347
========================================== ======== ========= ========= ======== ======
Depreciation (96) (118) (21) (30) (265)
========================================== ======== ========= ========= ======== ======
Amortisation (19) (7) (2) (4) (32)
========================================== ======== ========= ========= ======== ======
Acquired inventory fair value adjustments - (7) - - (7)
========================================== ======== ========= ========= ======== ======
Transaction costs (1) - - - (1)
========================================== ======== ========= ========= ======== ======
Exceptional items (79) - - - (79)
========================================== ======== ========= ========= ======== ======
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
1. Operating segments for the 52 weeks ended 14 September 2019
(IAS 17)
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 3,502 1,667 1,388 1,690 7,792 (241) 15,798
Internal revenue (4) (59) (3) (175) - 241 -
=================================== ------- ----- ----------- ----------- ------- ------- -------
External revenue from continuing
businesses 3,498 1,608 1,385 1,515 7,792 - 15,798
Businesses disposed 23 - - 3 - - 26
=================================== ------- ----- ----------- ----------- ------- ------- -------
Revenue from external customers 3,521 1,608 1,385 1,518 7,792 - 15,824
=================================== ------- ----- ----------- ----------- ------- ------- -------
Adjusted operating profit before
joint ventures and associates 347 26 30 122 913 (76) 1,362
Share of profit after tax from
joint ventures and associates 33 - 12 14 - - 59
Adjusted operating profit 380 26 42 136 913 (76) 1,421
Profits less losses on disposal
of non-current assets 3 - 1 - - - 4
Amortisation of non-operating
intangibles (40) - (2) (5) - - (47)
Acquired inventory fair value
adjustments (15) - - - - - (15)
Transaction costs (1) - - (1) - - (2)
Exceptional items (65) - - - - (14) (79)
Profits less losses on sale and
closure of businesses 4 - (3) (95) - - (94)
=================================== ------- ----- ----------- ----------- ------- ------- -------
Profit before interest 266 26 38 35 913 (90) 1,188
Finance income 15 15
Finance expense (42) (42)
Other financial income 12 12
Taxation (277) (277)
=================================== ------- ----- ----------- ----------- ------- ------- -------
Profit for the period 266 26 38 35 913 (382) 896
=================================== ------- ----- ----------- ----------- ------- ------- -------
Segment assets (excluding joint
ventures and associates) 2,732 2,083 408 1,422 4,775 129 11,549
Investments in joint ventures
and associates 45 26 135 69 - - 275
=================================== ------- ----- ----------- ----------- ------- ------- -------
Segment assets 2,777 2,109 543 1,491 4,775 129 11,824
Cash and cash equivalents 1,495 1,495
Current asset investments 29 29
Income tax 24 24
Deferred tax assets 160 160
Employee benefits assets 228 228
Segment liabilities (540) (388) (137) (278) (1,476) (184) (3,003)
Loans and overdrafts (588) (588)
Income tax (163) (163)
Deferred tax liabilities (261) (261)
Employee benefits liabilities (195) (195)
=================================== ------- ----- ----------- ----------- ------- ------- -------
Net assets 2,237 1,721 406 1,213 3,299 674 9,550
=================================== ------- ----- ----------- ----------- ------- ------- -------
Non-current asset additions 132 98 14 93 382 13 732
=================================== ------- ----- ----------- ----------- ------- ------- -------
Depreciation (96) (79) (12) (51) (303) (3) (544)
=================================== ------- ----- ----------- ----------- ------- ------- -------
Amortisation (53) (2) (3) (7) (2) (1) (68)
=================================== ------- ----- ----------- ----------- ------- ------- -------
Impairment of goodwill on sale
and closure of businesses - - (3) (56) - - (59)
=================================== ------- ----- ----------- ----------- ------- ------- -------
Impairment of property, plant
and equipment on sale and
closure of businesses - - - (32) - - (32)
=================================== ------- ----- ----------- ----------- ------- ------- -------
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
1. Operating segments for the 52 weeks ended 14 September 2019
continued (IAS 17)
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 5,971 5,992 1,612 2,249 15,824
============================================== -------- --------- --------- -------- ------
Segment assets 4,406 4,842 1,194 1,382 11,824
============================================== -------- --------- --------- -------- ------
Non-current asset additions 255 345 57 75 732
============================================== -------- --------- --------- -------- ------
Depreciation (191) (247) (45) (61) (544)
============================================== -------- --------- --------- -------- ------
Amortisation (41) (16) (4) (7) (68)
============================================== -------- --------- --------- -------- ------
Acquired inventory fair value adjustments - (15) - - (15)
============================================== -------- --------- --------- -------- ------
Impairment of goodwill on sale and closure
of businesses (3) - - (56) (59)
============================================== -------- --------- --------- -------- ------
Impairment of property, plant and equipment
on sale and
closure of businesses - - - (32) (32)
============================================== -------- --------- --------- -------- ------
Transaction costs - (1) (1) - (2)
============================================== -------- --------- --------- -------- ------
Exceptional items (79) - - - (79)
============================================== -------- --------- --------- -------- ------
2. Exceptional items
Following the spread of the COVID-19 virus in January and
February of this year, subsequent to the balance sheet date Primark
closed all of its stores in March. Based on events prior to the
balance sheet date and the further information available to the
group after the balance sheet date, the group has assessed the
recoverability of its Retail inventory as at 29 February 2020. No
impairment triggers were identified in relation to the group's food
businesses.
The group has performed a detailed assessment of all Retail
inventory, including items in stores, warehouses and those
goods-in-transit for which the group bears ownership risk. This
review included the following considerations, performed by
individual inventory types:
-- items already received in store and on display which are likely
to be damaged or otherwise unsaleable when stores reopen;
-- items specific to the Spring/Summer 2020 season (for example Father's
Day and Euro 2020 goods) which are unlikely to retain any value;
-- other Spring/Summer 2020 items that may not be saleable at a profit
when stores reopen; and
-- broader analysis of other items, largely held in warehouses, between
core items considered likely to be saleable (for example t-shirts,
underwear and other staple items) and other items which are likely
to be less saleable after the closure period, principally the most
fashion-led lines.
The group has therefore concluded that it should recognise an
inventory impairment charge of GBP248m and an onerous contract
provision of GBP36m for inventory yet to be delivered.
In February 2020, our Speedibake Wakefield factory was
significantly damaged by fire, following which we announced that
the factory would permanently close. This resulted in an
exceptional charge of GBP25m in the period, comprising GBP18m
impairment of non-current assets, GBP1m of inventory write-off and
GBP6m of closure costs. We have comprehensive insurance and have
made significant progress with our insurers regarding receipt of
compensation for the entire effects of the fire.
The first half of the prior year included GBP79m of exceptional
items. Following the termination of our largest private label bread
contract in December 2018, the carrying value of the assets of the
Allied Bakeries business was no longer supported by our forecasts
of its discounted future cash flows and a non-cash impairment
charge of GBP65m was recognised. As a result of a High Court ruling
regarding the equalisation of Guaranteed Minimum Pensions in
October 2018, a pension service cost of GBP14m was taken for
members of the company's defined benefit pension scheme for service
between 1990 and 1997.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
3. Income tax expense
24 weeks 24 weeks 52 weeks
ended ended ended
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
GBPm GBPm GBPm
Current tax expense
UK - corporation tax at 18.08% (2019 - 19.00%) 9 23 80
Overseas - corporation tax 72 87 229
UK - over provided in prior periods - - (5)
Overseas - over provided in prior periods - (1) (1)
===================================================== ============= ========= ==============
81 109 303
Deferred tax expense
UK deferred tax - 4 (7)
Overseas deferred tax (4) 4 (11)
UK - over provided in prior periods - - (5)
Overseas - under/(over) provided in prior periods - 1 (3)
===================================================== ============= ========= ==============
(4) 9 (26)
===================================================== ============= ========= ==============
Total income tax expense in income statement 77 118 277
===================================================== ============= ========= ==============
Reconciliation of effective tax rate
Profit before taxation 298 515 1,173
Less share of profit after tax from joint ventures
and associates (27) (24) (57)
===================================================== ============= ========= ==============
Profit before taxation excluding share of profit
after tax from joint ventures and associates 271 491 1,116
===================================================== ============= ========= ==============
Nominal tax charge at UK corporation tax rate
of 18.08% (2019 - 19.00%) 49 93 212
Effect of higher and lower tax rates on overseas
earnings 9 6 14
Effect of changes in tax rates on income statement - - (1)
Expenses not deductible for tax purposes 18 12 37
Disposal of assets covered by tax exemptions or
unrecognised capital losses - 1 17
Deferred tax not recognised 1 6 12
Adjustments in respect of prior periods - - (14)
===================================================== ============= ========= ==============
77 118 277
===================================================== ============= ========= ==============
Income tax recognised directly in equity
Deferred tax associated with defined benefit schemes 3 (30) (68)
Current tax associated with defined benefit schemes - - (2)
Deferred tax associated with movement in cash
flow hedging position 3 (8) (7)
Deferred tax associated with hyperinflationary
economies - 6 2
==============
6 (32) (75)
===================================================== ============= ========= ==============
The UK corporation tax rate of 19% was scheduled to reduce to
17% effective from 1 April 2020. The legislation to effect these
rate changes had been substantially enacted before the balance
sheet date and accordingly, UK deferred tax has been calculated
using 17%. Since the balance sheet date, a further change has been
substantially enacted for the UK rate to remain at 19%. The group
expects that this rate change will increase the group's adjusted
effective rate for this financial year by 0.2% with a deferred tax
charge of GBP7m arising principally on the amortisation of
non-operating intangibles and exceptional items. The tax rate on
Primark profits is lower than that for the rest of the group. A
consequence of the likely loss at Primark in the second half will
be a significant increase in the overall effective tax rate for the
group for the full year.
In April 2019 the European Commission published its decision on
the Group Financing Exemption in the UK's controlled foreign
company legislation. The Commission found that the UK law did not
comply with EU State Aid rules in certain circumstances. The group
has arrangements that may be impacted by this decision as might
other UK-based multinational groups that had financing arrangements
in line with the UK's legislation in force at the time. The group
has appealed against the European Commission's decision, as have
the UK Government and a number of other UK companies. We have
calculated our maximum potential liability to be GBP26m, however we
do not consider that any provision is required in respect of this
amount based on our current assessment of the issue. We will
continue to consider the impact of the Commission's decision on the
group and the potential requirement to record a provision.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
4. Earnings per share
24 weeks 24 weeks 52 weeks
ended ended ended
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
pence pence pence
Adjusted earnings per share 61.8 61.1 137.5
Disposal of non-current assets 1.1 0.3 0.5
Sale and closure of businesses (0.6) (0.9) (11.9)
Acquired inventory fair value adjustments (1.0) (1.0) (1.9)
Transaction costs (0.1) (0.1) (0.3)
Exceptional items (39.1) (10.0) (10.0)
Tax effect on above adjustments 7.8 1.7 1.9
Amortisation of non-operating intangibles (3.0) (2.5) (6.0)
Tax credit on non-operating intangibles amortisation
and goodwill 0.6 0.6 1.3
Earnings per share 27.5 49.2 111.1
===================================================== ============= ========= ==============
5. Dividends
24 weeks 24 weeks 52 weeks
ended ended ended
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
pence pence pence
2018 final - 33.30 33.30
2019 interim - - 12.05
2019 final 34.30 - -
============= ============= ========= ==============
34.30 33.30 45.35
============= ============= ========= ==============
24 weeks 24 weeks 52 weeks
ended ended ended
29 February 2 March 14 September
2020 2019 2019
(IFRS (IAS (IAS
16) 17) 17)
GBPm GBPm GBPm
2018 final - 263 263
2019 interim - - 95
2019 final 271 - -
============= ============= ========= ==============
271 263 358
============= ============= ========= ==============
The 2019 final dividend of 34.3p per share was approved on 6
December 2019 and totalled GBP271m when paid on 10 January 2020. No
interim dividend will be paid this year.
6. Acquisitions and disposals
Acquisitions
2020
In December 2019 the group's Grocery business in the UK acquired
Al'Fez, a Middle Eastern food brand with customers in the UK and
Europe. A GBP7m non-operating intangible asset was recognised in
respect of the brand, comprising a GBP3m cash outflow on the
purchase of subsidiaries, joint ventures and associates in the cash
flow statement and GBP4m of deferred consideration.
2019
In the first half of 2019, the group's Grocery business
completed the acquisition of 100% of Yumi's Quality Foods, a
chilled food manufacturer in Australia, and its Agriculture
business acquired a small manufacturer of piglet starter feed in
Poland. The cash outflow of GBP47m on the purchase of subsidiaries,
joint venture and associates in the cash flow statement comprised
cash consideration of GBP46m for these acquisitions less cash
acquired with the businesses of GBP1m and a GBP2m payment of
deferred consideration in respect of previous acquisitions.
In the second half of 2019, the group's Grocery business
completed the acquisition of Anthony's Goods, a California-based
blender and online marketer of speciality baking ingredients. The
group also acquired Italmill, an Italian bakery ingredients
producer as part of the Ingredients business.
The full year cash outflow of GBP84m on the purchase of
subsidiaries, joint ventures and associates in the cash flow
statement comprised cash consideration of GBP85m for these
acquisitions less cash acquired with the businesses of GBP2m and
GBP1m payment of deferred consideration in respect of acquisitions
in previous years.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
6. Acquisitions and disposals (continued)
Disposals
2020
In the first half of 2020 the group announced the closure of the
Cake business in the Grocery segment in Australia, with GBP7m
included in loss on closure of business comprising a GBP2m non-cash
impairment of property, plant and equipment and GBP5m of
restructuring provisions. The group also sold a small business in
China, reported within the Asia Pacific and Grocery segments. Cash
proceeds amounted to GBP2m on GBP1m of net assets disposed,
resulting in a pre-tax profit on disposal of GBP1m. Warranty
provisions of GBP1m relating to disposals made in previous years
were no longer required and were released to sale and closure of
business in the Americas and Ingredients segments.
2019
In the first half of 2019 the group disposed of its torula
facility and associated torula whole cell business in Hutchinson,
Minnesota, reported within the US and Ingredients segments. Cash
proceeds amounted to GBP5m, net assets disposed were GBP5m and the
associated goodwill was GBP8m. Provisions for transaction and
associated restructuring costs were GBP2m, with a gain of GBP3m on
recycling foreign exchange differences. The pre-tax loss on
disposal was GBP7m.
In August 2019 we signed an agreement to form a yeast and bakery
ingredients joint venture in China with Wilmar International, with
completion subject to regulatory approval. 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 commercial activities
and technical expertise in China with Wilmar's extensive sales and
distribution capability. As a consequence, a non-cash impairment
charge of GBP88m was included in the loss on closure of businesses,
comprising GBP56m of goodwill and GBP32m of property, plant and
equipment.
In addition, in the second half of 2019, GBP4m of warranty and
restructuring provisions relating to disposals made in previous
years were no longer required and were released to sale and closure
of business within the Americas and Grocery segments. In the
Agriculture segment, goodwill with a carrying value of GBP3m was
written off on the closure of a small business in the UK.
7. Analysis of net debt
At At
14 September IFRS Cash Exchange 29 February
2019 16 transition flow Disposals New leases adjustments 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cash at bank and in hand,
cash equivalents
and overdrafts 1,358 - (158) - - (17) 1,183
Current asset investments 29 - 3 - - (3) 29
Short-term loans (90) 1 18 - - 4 (67)
Long-term loans (361) 13 - - - 4 (344)
Lease liabilities - (3,678) 115 1 (65) 75 (3,552)
============================ ============= ============== ===== ========= ========== ============ ============
936 (3,664) (22) 1 (65) 63 (2,751)
============================ ============= ============== ===== ========= ========== ============ ============
8. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Full details of the group's other related
party relationships, transactions and balances are given in the
group's financial statements for the 52 weeks ended 14 September
2019. There have been no material changes in these relationships in
the 24 weeks ended 29 February 2020 or up to the date of this
report. No related party transactions have taken place in the first
24 weeks of the current financial year that have materially
affected the financial position or the performance of the group
during that period.
9. Basis of preparation
Associated British Foods plc ('the Company') is a company
domiciled in the United Kingdom. The condensed consolidated interim
financial statements of the Company for the 24 weeks ended 29
February 2020 comprise those of the Company and its subsidiaries
(together referred to as 'the group') and the group's interests in
joint ventures and associates.
The consolidated financial statements of the group for the 52
weeks ended 14 September 2019 are available upon request from the
Company's registered office at 10 Grosvenor Street, London, W1K 4QY
or at www.abf.co.uk.
The condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting. They do not include all of the information required for
full annual financial statements and should be read in conjunction
with the consolidated financial statements for the 52 weeks ended
14 September 2019.
After making enquiries, the directors have a reasonable
expectation that the group has adequate resources to continue in
operational existence for the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements. Further
details of this assessment are set out in the Principal Risks and
Uncertainties section. The group's business activities, together
with the factors likely to affect its future development,
performance and position are set out in the Operating Review. Note
25 on pages 154 to 166 of the 2019 Annual Report provides details
of the group's policy on managing its financial and commodity
risks.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
9. Basis of preparation (continued)
The 24 week period for the condensed consolidated interim
financial statements of the Company means that the second half of
the year is usually a 28 week period, and the two halves of the
reporting year are therefore not of equal length. For the Retail
segment, Christmas, falling in the first half of the year, is a
particularly important trading period. For the Sugar segment, the
balance sheet, and working capital in particular, is strongly
influenced by seasonal growth patterns for both sugar beet and
sugar cane, which vary significantly in the markets in which the
group operates.
The condensed consolidated interim financial statements are
unaudited but have been subject to an independent review by the
auditor and were approved by the board of directors on 21 April
2020. They do not constitute statutory financial statements as
defined in section 434 of the Companies Act 2006. The comparative
figures for the 52 weeks ended 14 September 2019 have been abridged
from the group's 2019 financial statements and are not the
Company's statutory financial statements for that period. Those
financial statements have been reported on by the Company's auditor
for that period and delivered to the Registrar of Companies. The
report of the auditor was unqualified, did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
This Interim Results Announcement has been prepared solely to
provide additional information to shareholders as a body, to assess
the group's strategies and the potential for those strategies to
succeed. This Interim Results Announcement should not be relied
upon by any other party or for any other purpose.
10. Significant accounting policies
Except where detailed otherwise, the accounting policies applied
by the group in these condensed consolidated interim financial
statements are substantially the same as those applied by the group
in its consolidated financial statements for the 52 weeks ended 14
September 2019 including for derivatives and current biological
assets, which are recognised in the balance sheet at fair value and
fair value less costs to sell, respectively. The methodology for
selecting assumptions underpinning the fair value calculations has
not changed since 14 September 2019.
New accounting standards
The following accounting standards and amendments were adopted
during the period and had no significant impact on the group other
than IFRS 16 Leases:
-- IFRS 16 Leases
-- IFRIC 23 Uncertainty over Income Tax Treatments
-- Amendments to IFRS 9 Prepayment features with Negative Compensation
-- Amendments to IAS 19 Plan Amendment, Curtailment or Settlement
Amendments to IAS 28 Long-term Interests in Associates and Joint
-- Ventures
-- Annual Improvements to IFRS 2015- 2017
IFRS 16 Leases
IFRS 16 introduces a new model for the identification of leases
and accounting for lessors and lessees. It replaces IAS 17 Leases
and other related requirements. The group adopted IFRS 16 on 15
September 2019 and applies it for the first time in the 2020
financial year.
IFRS 16 distinguishes leases from service contracts on the basis
of control of an identified asset. For lessees, it removes the
previous accounting distinction between (off-balance sheet)
operating leases and (on-balance sheet) finance leases and
introduces a single model recognising a lease liability and
corresponding right-of-use asset for all leases except for
short-term leases and leases of low-value assets.
For lessors, IFRS 16 substantially retains existing accounting
requirements and continues to require classification of leases
either as operating or finance in nature.
The group engaged external experts to support its implementation
project and established a steering committee to oversee its
governance, which reported to the Audit committee. The group
completed its implementation project during the 2019 financial
year.
IFRS 16 permits a choice of transition approaches: a fully
retrospective approach with an adjustment made to the opening
retained earnings of the comparative period; or a modified
retrospective approach with the cumulative effect of initial
application recognised at the date of initial application without
restating prior periods.
The age, size and complexity of the group's lease portfolio
meant that it would have been either impossible or extremely costly
and difficult to collate sufficient information to apply the fully
retrospective approach. The group has therefore determined to adopt
the modified retrospective approach.
Lease liabilities are measured initially at the present value of
lease payments yet to be paid, subsequently adjusted for interest
and lease payments as well as a number of other changes to lease
provisions. Lease liabilities are included in net debt.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
10. Significant accounting policies (continued)
Right-of-use assets are reported as non-current assets and are
initially measured at either:
-- carrying amount as if IFRS 16 had been applied since the lease commencement
date, discounted by the group's incremental borrowing rate as at
15 September 2019 (applied to a majority of the group's leases where
sufficient historical information was available); or
-- an amount equal to the lease liability, adjusted by the amount of
any prepaid or accrued lease payments (applied to a small number
of leases where sufficient historical information was not available).
Right-of-use assets are subsequently measured at cost less
accumulated depreciation and any impairment losses, adjusted for
any remeasurement of the lease liability.
There is no change to overall cash flows. Operating lease
payments were previously presented as operating cash flows and
finance lease payments were allocated between payments of principal
and interest within financing cash flows. Under IFRS 16, lease
payments are split between payments of principal and interest,
presented as financing cash flows.
Operating lease expenses previously charged to operating profit
have been replaced by depreciation of right-of-use assets (within
operating profit) and interest cost (within finance expense).
Although the aggregate income statement impact of each lease over
its life does not change, the generally straight-line profile of
operating lease expense is now more front-loaded under IFRS 16
because of the interest charge on the lease liability.
In applying IFRS 16, the group has applied the following
practical expedients as of the transition date:
reliance on the previous identification of a lease (as defined by
-- IAS 17) for all contracts that existed at the date of initial application;
reliance on previous assessment of whether leases are onerous instead
of performing an impairment review (rental payments associated with
these leases are recognised in the Income statement on a straight-line
-- basis over the life of the lease);
accounting for operating leases with a remaining lease term of less
than 12 months as at the transition date as short-term leases excluded
from the scope of IFRS 16 (rental payments associated with these
leases are recognised in the Income statement on a straight-line
-- basis over the life of the lease); and
accounting for operating leases for low-value items as excluded
-- from the scope of IFRS 16;
No adjustment has been made to the recognition and measurement
of assets previously recognised as finance leases under IAS 17
which were transferred to right-of-use assets on adoption of IFRS
16, with the related borrowings transferred to lease
liabilities.
Impact on the group's results and financial position
The first results published under IFRS 16 are these 2020 interim
results. The impact of IFRS 16 on the group's results and financial
position is significant. IFRS 16 affects a number of financial
statement captions and ratios, including the following:
Item Comment
=================== ==============================================================
Earnings There is a marginal impact on earnings and therefore
marginal impact on dividend cover.
=================== ==============================================================
Operating profit/ Operating profit and operating margin have increased
operating margin as operating lease expenses are replaced by the depreciation
of right-of-use assets.
=================== ==============================================================
Finance expense Finance expense has increased significantly as a result
of the interest cost on lease liabilities. Interest
cover has therefore reduced.
=================== ==============================================================
Taxation Taxation has changed in line with the changes in profit
before tax.
=================== ==============================================================
Net debt Net debt has increased very significantly as lease liabilities
are recorded within current and non-current liabilities.
Gearing ratios have therefore increased. The reconciliation
of net debt includes more non-cash items as new leases
are entered into.
=================== ==============================================================
Return on capital The return on capital employed has reduced as a result
employed of the changes to operating profit and non-current assets.
=================== ==============================================================
Cash flow statement There is no overall impact on cash flow, but classifications
of cash flows have changed, as set out above.
=================== ==============================================================
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
10. Significant accounting policies (continued)
The changes set out below to the group's assets and liabilities
were recorded at the transition date of 15 September 2019 in the
2020 financial year and were charged against opening equity in this
2020 interim report.
As reported
14 September IFRS 16 15 September
2019 adjustments 2019
GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 5,769 (20) 5,749
Right-of-use assets - 3,204 3,204
Deferred tax assets 160 41 201
Other non-current assets 2,235 - 2,235
Total non-current assets 8,164 3,225 11,389
================================================= ============= ============ ============
Current assets
Other current assets 5,596 3 5,599
================================================= ============= ============ ============
Total current assets 5,596 3 5,599
================================================= ============= ============ ============
Total assets 13,760 3,228 16,988
================================================= ============= ============ ============
Liabilities
Lease liabilities - (3,678) (3,678)
Loans and overdrafts (588) 14 (574)
Provisions (118) 10 (108)
Deferred tax liabilities (261) - (261)
Other liabilities (3,243) 276 (2,967)
================================================= ============= ============ ============
Total liabilities (4,210) (3,378) (7,588)
================================================= ============= ============ ============
Net assets 9,550 (150) 9,400
================================================= ============= ============ ============
Equity
Total equity attributable to equity shareholders 9,452 (149) 9,303
Non-controlling interests 98 (1) 97
================================================= ============= ============ ============
Total equity 9,550 (150) 9,400
================================================= ============= ============ ============
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
10. Significant accounting policies (continued)
The 2019 results have been provided on an IFRS 16 pro forma
basis in addition to the results previously reported under IAS 17
in order to provide a better understanding of comparison between
the 2020 results and the 2019 results. These IFRS 16 pro forma
figures have been prepared using the same data and assumptions as
those used for the transition adjustment.
52 weeks
ended
52 weeks 14 September
ended 2019
14 September (IFRS
2019 16 pro
(IAS IFRS 16 forma
17) adjustments basis)
Continuing operations GBPm GBPm GBPm
Operating profit 1,282 61 1,343
Adjusted operating profit 1,421 61 1,482
Profits less losses on disposal of non-current
assets 4 - 4
Amortisation of non-operating intangibles (47) - (47)
Acquired inventory fair value adjustments (15) - (15)
Transaction costs (2) - (2)
Exceptional items (79) - (79)
================================================ ============= ============ =============
Profits less losses on sale and closure
of businesses (94) - (94)
================================================ ============= ============ =============
Profit before interest 1,188 61 1,249
Finance income 15 - 15
Finance expense (42) (82) (124)
Other financial income 12 - 12
================================================ ============= ============ =============
Profit before taxation 1,173 (21) 1,152
Adjusted profit before taxation 1,406 (21) 1,385
Profits less losses on disposal of non-current
assets 4 - 4
Amortisation of non-operating intangibles (47) - (47)
Acquired inventory fair value adjustments (15) - (15)
Transaction costs (2) - (2)
Exceptional items (79) - (79)
Profits less losses on sale and closure
of businesses (94) - (94)
================================================ ============= ============ =============
Taxation (277) 4 (273)
================================================ ============= ============ =============
Profit for the period 896 (17) 879
================================================ ============= ============ =============
Attributable to
Equity shareholders 878 (17) 861
Non-controlling interests 18 - 18
================================================ ============= ============ =============
Profit for the period 896 (17) 879
================================================ ============= ============ =============
Basic and diluted earnings per ordinary
share (pence) 111.1 (2.1) 109.0
Adjusted earnings per ordinary share (pence) 137.5 (2.1) 135.4
IFRS 16 has the most significant impact on the Retail segment
given the significant number of store leases to which Primark is a
party. The changes in other liabilities mainly relate to the
elimination of lease incentives received from the landlords of
stores in the Retail segment.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
10. Significant accounting policies (continued)
Disclosures on transition
The following table reconciles the operating lease commitments
as at 14 September 2019 disclosed in the group's 2019 Annual Report
to the amount recognised on the consolidated balance sheet in
respect of lease liabilities on adoption of IFRS 16.
GBPm
Undiscounted future operating lease commitments disclosed
as at 14 September 2019 5,213
Effect of assumptions on renewal options and break clauses (490)
Effect of discounting (1,028)
Accruals and prepayments (32)
Other reconciling items (net) 1
------------------------------------------------------------ -------
IFRS 16 lease liabilities recognised as at 15 September
2019 3,664
------------------------------------------------------------ -------
Existing finance lease liabilities as at 14 September 2019 14
------------------------------------------------------------ -------
Total lease liabilities recognised as at 15 September 2019 3,678
------------------------------------------------------------ -------
Under the modified retrospective transition method, lease
payments were discounted to present value at 15 September 2019
using incremental borrowing rates derived as at that date
representing the rate of interest that the group entity that
entered into the lease would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an
asset of a similar value to the right-of-use asset in a similar
economic environment.
Given the disproportionate value and profile of property leases
in the Retail segment (GBP3,495m, 95% of the group total at
transition), it is not appropriate to provide a single weighted
average discount rate applied for the group at transition.
The weighted average incremental borrowing rate applied on
transition for the Retail segment was 2.28%. For the food
businesses, the incremental borrowing rates applied to individual
leases range between 0.00% and 14.56%.
Accounting standards not yet applicable
The group is assessing the impact of the following standards,
interpretations and amendments that are not yet effective. Where
already endorsed by the EU, these changes will be adopted on the
effective dates noted. Where not yet endorsed by the EU, the
adoption date is less certain:
-- IFRS 17 Insurance Contracts effective 2022 financial year (not yet
endorsed by the EU)
-- Amendments to IFRS 3 Definition of a Business effective 2021 financial
year (not yet endorsed by the EU)
-- Amendments to IAS 1 and IAS 8 Definition of Material effective 2021
financial year
-- Amendments to IAS 1 Presentation of Financial Statements: Classification
of Liabilities as Current or Non-current effective 2023 financial
year (not yet endorsed by the EU)
-- Amendments to References to the Conceptual Framework in IFRS Standards
effective 2021 financial year
11. Accounting estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing the condensed
consolidated interim financial statements, the significant
judgements made by management in applying the group's accounting
policies and the key sources of estimation uncertainty were the
same as those applied to the consolidated financial statements for
the 52 weeks ended 14 September 2019 except as set out below.
IFRS 16
The adoption of IFRS 16 requires the group to make a number of
estimates and judgements.
Transition approach
The selection of transition approach is a significant judgment.
The group has adopted the modified retrospective transition
approach. The rationale for this is set out in note 10.
Lease term
IFRS 16 defines lease term as the non-cancellable period of a
lease together with options to renew or break a lease, if the
lessee is reasonably certain to exercise that option. The
assessment of lease term is a significant estimate. Where leases
include an option to extend or reduce the lease term, the group
makes a lease-by-lease assessment as to whether it is reasonably
certain that the option will be exercised. This assessment
considers the length of the time before any renewal or break option
is exercisable, current and forecast store trading, the remaining
useful economic life of store assets and any planned capital
investment. Assessments for individual leases are also considered
in aggregate to ensure consistency of approach.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 29 February 2020
11. Accounting estimates and judgements (continued)
Discount rate
The selection of discount rates is a significant judgment. The
incremental borrowing rate applied to each lease was determined
based on the risk-free rate in each country of operation adjusted
for factors such as the estimated credit rating of the contracting
entity, guarantees given by other group companies and the terms and
conditions of each lease. Group Treasury devised a consistent and
structured approach using a third-party model evaluating the
following:
external market data (e.g. risk-free rates in each country of operation
-- and published financial statements);
lease-specific data (e.g. lease dates and payments, lease counterparties
-- and guarantors); and
internal data and judgments (e.g. assessment of business model,
-- judgments as to lease term).
Impairment risk associated with COVID-19
The global spread of COVID-19 began before the half year balance
sheet date. The group has considered this in updating its half year
assessment of impairment risk.
All of the group's food and ingredients factories have continued
to operate, many of them at or near to full capacity. The group has
identified no material impairment risk indicators in respect of its
food businesses.
All of Primark's stores were closed in March and it is not yet
known when they will be able to reopen. The group has considered
the impact of these unplanned closures on impairment risk to the
carrying value of its store property estate. The primary impact of
this will be to delay the generation of future store profits and so
no new impairments in respect of its retail estate have been
identified.
The group has concluded that it should recognise impairment
charges and provisions in respect of its retail inventory of
GBP284m, details of which are set out in note 2.
12. Subsequent events
Following the balance sheet date, COVID-19 has spread rapidly.
Governments have implemented significant restrictions on movement
of people and trade in order to contain the further spread of the
virus. This note sets out the subsequent events which are material
to the group up to the date of this report. The risk of impairment
of assets at the half year balance sheet date relating to COVID-19
were considered and the conclusions are set out in note 11.
Between 12 and 22 March, the group closed all Primark stores
until further notice. Payment was confirmed with suppliers for all
stock in transit. With no sales in Primark stores it was essential
to prevent further cash outflows for stock and, as a result, all
future orders were cancelled until further notice.
In each European country where Primark operates it intends to
access each government programme for funds designed to provide
income for those employees no longer working and to preserve their
continued employment.
In April the Bank of England confirmed our eligibility to access
funding under the Covid Corporate Financing Facility. The group
ensured the availability of its GBP1.1bn committed revolving credit
facility for the coming year and, as a precaution to avoid any
possible illiquidity in the banking market, the facility was drawn
down in full on 18 March.
Review of the key financial assumptions relating to the group's
defined benefit pension schemes subsequent to the balance sheet
date indicates that fluctuations in obligations fall within the
range of sensitivities described in note 11 of the 2019 Annual
Report. The fair value of plan assets is expected to be volatile in
the short term due to uncertain market conditions.
CAUTIONARY STATEMENTS
This Interim Results Announcement contains forward-looking
statements. These have been made by the directors in good faith
based on the information available to them up to the time of their
approval of this report. The directors can give no assurance that
these expectations will prove to have been correct. Due to the
inherent uncertainties, including both economic and business risk
factors underlying such forward-looking information, actual results
may differ materially from those expressed or implied by these
forward-looking statements. The directors undertake no obligation
to update any forward-looking statements whether as a result of new
information, future events or otherwise.
responsibility statement
The Interim Results Announcement complies with the Disclosure
and Transparency Rules ('the DTR') of the UK's Financial Conduct
Authority in respect of the requirement to produce a half-yearly
financial report.
The directors confirm that to the best of their knowledge:
-- this financial information has been prepared in accordance with
IAS 34 as adopted by the EU;
-- this Interim Results Announcement includes a fair review of the
important events during the first half and their impact on the financial
information, and a description of the principal risks and uncertainties
for the remaining half of the year as required by DTR 4.2.7R; and
-- this Interim Results Announcement includes a fair review of the
disclosure of related party transactions and changes therein as
required by DTR 4.2.8R.
On behalf of the board
Michael McLintock George Weston John Bason
Chairman Chief Executive Finance Director
21 April 2020
INDEPENDENT REVIEW REPORT TO ASSOCIATED BRITISH FOODS PLC
Introduction
We have been engaged by the Company to review the condensed
consolidated interim financial statements in the Interim Results
Announcement for the 24 weeks ended 29 February 2020 which comprise
the condensed consolidated income statement, the condensed
consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated cash flow
statement, the condensed consolidated statement of changes in
equity and the related explanatory notes. We have read the other
information contained in the Interim Results Announcement and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed
consolidated interim financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The Interim Results Announcement is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the Interim Results Announcement in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 9, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
consolidated interim financial statements included in this Interim
Results Announcement have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated interim financial statements in the
Interim Results Announcement based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim
financial statements in the Interim Results Announcement for the 24
weeks ended 29 February 2020 are not prepared, in all material
respects, in accordance with International Accounting Standard 34
Interim Financial Reporting as adopted by the European Union and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
21 April 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DZGZDLGDGGZM
(END) Dow Jones Newswires
April 21, 2020 02:00 ET (06:00 GMT)
Associated British Foods (LSE:ABF)
Historical Stock Chart
From Mar 2024 to Apr 2024
Associated British Foods (LSE:ABF)
Historical Stock Chart
From Apr 2023 to Apr 2024
