TIDMABF
RNS Number : 0222E
Associated British Foods PLC
03 November 2020
For release 3 November 2020
Associated British Foods plc
Annual Results Announcement
Year ended 12 September 2020
Associated British Foods plc results for 52 weeks ended 12
september 2020
Very strong delivery in food, robust performance in retail
Financial Headlines
2019
2019 IFRS 16 pro 2019
IFRS 16 pro forma forma as reported
Actual currency Constant currency Actual currency
* Group revenue GBP13,937m -12% -11% -12%
* Adjusted operating profit GBP1,024m -31% -30% -28%
* Adjusted profit before tax GBP914m -34% -35%
* Adjusted earnings per share 81.1p -40% -41%
* Dividend per share nil
* Gross investment GBP641m
* Net cash (before lease liabilities) GBP1,558m
* Net debt (including lease liabilities) GBP2,081m
* Statutory operating profit GBP810m -40% -37%
* Statutory profit before tax GBP686m -40% -42%
* Basic earnings per share 57.6p -47% -48%
Statutory operating profit for the year reduced to GBP810m from
GBP1,282m last year, driven by the reduction in adjusted operating
profit and an increase in the net exceptional charges to GBP156m
this year from GBP79m last year.
George Weston, Chief Executive of Associated British Foods,
said:
"I am proud of how our people have responded to the many
challenges presented by COVID-19. Throughout, we have provided
safe, nutritious food under the most extraordinary conditions,
proving the value and resilience of our supply chains. Our food
businesses delivered an adjusted operating profit increase of 26%,
driven by high demand and improved productivity.
"Following a three-month closure, Primark delivered a robust
performance, receiving an overwhelmingly positive response when it
safely welcomed customers back to its stores. Uncertainty about
temporary store closures in the short-term remains, but sales since
reopening to the year end of GBP2bn demonstrate the relevance and
appeal of our value-for-money offering.
"We have the people and the cash resources to meet the
challenges ahead and we are investing for the future."
The group has defined, and outlined the purpose of, its
Alternative Performance Measures in note 13. These measures are
used within the Financial Headlines and in this Annual Results
Announcement.
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.
For further information please contact:
Associated British Foods:
John Bason, Finance Director
Catherine Hicks, Corporate Affairs Director
Tel: 020 7399 6545
Citigate Dewe Rogerson:
Tel: 020 7638 9571
Chris Barrie Tel: 07968 727289
Jos Bieneman Tel: 07834 336650
Elizabeth Kittle Tel: 07720 498455
There will be an analyst and investor presentation at 09.00am
GMT today which will be streamed online and accessed via our
website here .
Notes to Editors
Associated British Foods is a diversified international food,
ingredients and retail group with sales of GBP13.9bn and 133,000
employees in 53 countries. It has significant businesses in Europe,
Africa, the Americas, Asia and Australia.
Our aim is to achieve strong, sustainable leadership positions
in markets that offer potential for long-term profitable growth. We
look to achieve this through a combination of growth of existing
businesses, acquisition of complementary new businesses and
achievement of high levels of operating efficiency.
Annual Results Announcement
For the 52 weeks ended 12 September 2020
CHAIRMAN'S STATEMENT
To say that this has been an extraordinary year would be
something of an understatement. The rapid spread of COVID-19 across
the globe has affected everyone in ways which we could not have
imagined a year ago.
When we first heard of COVID-19 our business concerns were
around the disruption to the supply chain of goods coming from
China. However, as the virus rapidly spread around the world it was
clear that its effect would be more profound. For our group, we
were required to close all Primark stores in Europe and the US in
just 12 days in March. This was not something that we had ever
envisaged.
Unable to sell anything, Primark moved from profit to loss in a
few short days, with no visibility as to how long these conditions
would persist. Closure for six months seemed plausible, with the
possibility of it being significantly longer. These monthly
operating losses, together with the need to pay for goods in
transit, would place a severe strain on the group's cash reserves
and necessitated immediate management action.
Measures to mitigate the cash outflow included cutting back on
discretionary spend and non-essential capital expenditure across
the group. Primark instigated a major cost-reduction exercise that
included stopping further orders and accessing government job
retention schemes across Europe. I must emphasise that at a time of
such uncertainty, these job retention schemes provided critical
support and enabled us to preserve the jobs of some 68,000
employees. In total we received some GBP98m and we are grateful for
this support. Most Primark employees not covered by government
schemes agreed to a temporary reduction in salary. These actions
reduced Primark's operating costs by 50%, but the cash outflow was
still some GBP100m per month.
At the same time, our food businesses faced operational
challenges of their own. Consumer demand switched from eating out
to eating at home and in particular, demand for home cooking and
baking products soared. At each of our food production sites,
working practices were adapted to protect our workforce and
production was increased, in some cases substantially, even with
higher absenteeism due to shielding or isolation. It was of vital
importance that food businesses such as ours continued to produce
food safely, and in sufficient quantities, to meet the exceptional
demand in retail.
At the half year, the Board decided not to declare an interim
dividend. The directors considered that this was prudent given the
focus on managing the group's cash flow in the second half with, at
that time, no prospect for the reopening of stores.
As events transpired, we were able to reopen Primark stores much
earlier than envisaged. The Primark team performed a remarkable job
in ensuring the rapid reopening of so many stores, including 153
stores in one day in England, in a way that was both welcoming and
appealing to customers while also incorporating the health and
safety measures required for customers and colleagues alike.
We did not know how quickly, and in what numbers, customers
would return. In the event, there were queues outside most of our
stores on reopening days. We were very encouraged by the strength
of our sales across all markets for the period since reopening.
Primark returned to profitability and the timing of reopening from
early May allowed us to sell down the majority of spring/summer
stock on hand with minimal markdowns, and so generated significant
cash in the fourth quarter. Although later than usual, we were
pleased to be able to place substantial orders for autumn/winter
stock.
Primark still suffered a cash outflow of some GBP800m while the
stores were closed after making supplier payments and incurring the
net operating losses.
When the majority of the Primark stores had reopened, we stopped
claiming support from UK and European government job retention
schemes. Furthermore, when the UK Government announced a job
retention bonus in July, we felt it would be unnecessary to claim
as we were trading profitably.
With Primark opening earlier and trading more strongly than we
had expected, and sales and cash flow from our food businesses in
the second half well ahead of our expectations, our cash reserves
built quickly.
The year end net cash balance before lease liabilities was
GBP1.56bn, a position we could not have possibly predicted back in
March. This outcome was driven not only by the better trading in
the fourth quarter, but also by a much lower level of working
capital across the group than is usual at this time of year. In
particular, it reflected later than normal timing of orders for
Primark's autumn/winter ranges and lower food inventories, a
consequence of higher consumer demand. These working capital
benefits will reverse in the first half of the 2020/21 financial
year.
Results
Revenue for the group was GBP13.9bn, 12% lower than last year on
a reported basis. These financial statements adopt IFRS 16 Leases
in the current year and under our chosen transition option the
prior year has not been restated. Adjusted operating profit this
year of GBP1,024m was lower than the GBP1,421m reported last year.
Inclusion of lease interest expense in the income statement this
year was the major driver of the increase in the charge for net
finance expense and other financial income from GBP15m last year to
GBP110m. A lower proportion of the group's profit was generated in
the UK and Ireland and consequently the group's adjusted effective
tax rate increased from 21.5% to 28.8% this year. Adjusted earnings
per share reduced by 41% to 81.1p.
The full year decline in group revenue was mainly seen in the
third quarter, driven by the total loss of sales for the period in
which Primark's stores were closed. The decline in the full year
adjusted operating profit for the group was a consequence of this.
We estimate that Primark lost GBP2bn of sales and some GBP650m of
profit as a result of COVID-19.
The increase in adjusted operating profit for Grocery, Sugar,
Ingredients and Agriculture combined was a very strong 26% at
constant currency with growth in all business segments.
Grocery delivered another year of strong profit and margin
improvement. In the second half of the year this included higher
retail sales which more than offset a decline in foodservice as a
result of COVID-19. A significant improvement in the profits of our
European and Chinese sugar businesses more than offset a
disappointing result for Illovo. The improvement in Ingredients was
driven by substantially higher demand for AB Mauri's yeast and
bakery ingredients.
Statutory operating profit for the year reduced to GBP810m from
GBP1,282m last year, driven by the reduction in adjusted operating
profit and an increase in the net exceptional charges to GBP156m
this year from GBP79m last year. The decline in the statutory
profit before tax was broadly in line with the decline in statutory
operating profit. Basic earnings per share were 57.6p, a reduction
from the reported 111.1p last year.
Leadership
COVID-19 has made the task of leadership significantly more
challenging and I have seen so many examples of outstanding
leadership in the group over the last six months.
I would like to pay particular tribute to George Weston and John
Bason for their tireless commitment to the task of navigating the
group through the unprecedented circumstances that we faced. They
led from the front and agreed to reduce their base pay temporarily
by 50% from the beginning of April and to forego any bonus for this
financial year. The reduction in base pay ran until the end of the
financial year.
Paul Marchant, CEO of Primark, and his leadership team deserve a
special mention. They demonstrated tremendous energy and
professionalism throughout a succession of challenges.
I also want to thank the chief executives and managing directors
of all our businesses, and the group senior management team, for
their selfless dedication. They calmly got on with enabling and
motivating their teams to adapt to the new conditions and
challenges and collaborated in support of each other.
Thank you too to my non-executive colleagues on the Board for
their invaluable counsel. They agreed to reduce their fees by 25%
from April to the end of the financial year.
Corporate responsibility
Our purpose to provide safe, nutritious, affordable food and
clothing that is great value for money has never been more
relevant. We are committed to being a good neighbour and supporting
the communities in which we operate. Our four group-wide values:
acting with integrity, respecting everyone's dignity, progressing
through collaboration and pursuing with rigour have proved to be
critical in determining our responses to the challenges posed by
COVID-19. The strong culture of the group, which has been
established and then embedded in each of our businesses over many
years, provided the firm foundation for the ways in which decisions
were implemented.
Our businesses have always aimed to make a lasting positive
contribution to society. Our 2020 Responsibility Update details the
actions we continue to take to invest in our people, support
society, strengthen supply chains and respect our environment. To
see how we make a difference, please download this Update, at
www.abf.co.uk/responsibility.
Dividends
Your Board is acutely aware of the importance of dividends to
shareholders. Following the decision not to declare an interim
dividend, and in the light of our subsequent profitable trading and
the group's net cash balance at the end of the year, the Board has
given much consideration to the payment of a dividend for this
financial year. Our experience of the cash outflow following
government restrictions that required us to close all of our stores
in March and, at the time of writing, the increasing restrictions
in a number of Primark's major markets, lead us to be cautious. On
balance, we have elected not to propose a final dividend for the
year whilst we monitor the impact of further COVID-19 restrictions
on Primark during this important trading season.
Outlook
We suspended earnings guidance for the group on 16 March due to
significantly increased uncertainty concerning the impact of
COVID-19 on business performance. We have reported on a profitable
financial year with strong cash flow and we started our new
financial year with good sales and cash flow across the group.
However, the impact on Primark of the increasing number of
government restrictions in the markets in which it operates is
significant.
Notwithstanding the currently announced periods of restriction,
we expect Primark full year sales and profit to be higher next
year. There will be a sales decline in the first half compared to
last year but higher sales in the second half, reflecting the
period of store closures in the third quarter of this financial
year. We will continue to expand retail selling space. Sugar is
expected to deliver a higher profit next year with improvements in
Europe and in the performance of Illovo.
Following the UK's exit from the EU, our businesses have
completed all practical preparations for the end of the transition
period and contingency plans are in place should our businesses
experience some disruption at that time.
Thank you to our employees
The strength of our culture shone through this year and I am
proud to be able to represent such a group. Our operating model of
devolved decision making to each business and market enabled us to
respond very quickly and most appropriately to local challenges.
The responses are a testament to the dedication, skills and
ingenuity of our people. Most of our employees have had to adapt to
new ways of working and on top of that many found the time to
support important community work. I will never be able to thank all
of them enough for their extraordinary efforts during this
time.
Michael McLintock
Chairman
Chief executive's statement
I am proud of how our people have responded to the many
challenges presented by COVID-19 this year. All of our people
demonstrated care, good judgement and immense hard work. At the
time of our half year we had lost two of our employees to COVID-19.
Now we have lost nine. We mourn them all.
Our financial performance this year more than ever demonstrates
the resilience of the group. This comes from the strength of our
brands, the diversity of our products and markets, our geographic
spread, conservative financing and an organisation design that
permits fast and flexible decision-taking.
Group revenue reduced by 11% to GBP13.9bn at constant currency,
with the reduction mainly seen in the third quarter driven by the
total loss of sales for the three-month period in which Primark's
stores were closed. The decline in adjusted operating profit was a
consequence of this and at GBP1,024m was 30% lower than last year
on an IFRS 16 pro forma basis at constant currency. So far COVID-19
has cost the group some GBP2bn of sales, GBP650m in lost profit and
a cash outflow of GBP800m.
Our food businesses delivered an outstanding performance this
year and throughout the pandemic we have provided safe, nutritious
food under the most extraordinary conditions, proving the value and
resilience of our supply chains. The adjusted operating profit of
Grocery, Sugar, Agriculture and Ingredients combined increased by a
very strong 26%, with each of these business segments growing their
profits.
Sugar delivered a material increase in adjusted operating
profit, driven mainly by our European businesses, with the benefit
of the anticipated strong recovery in European sugar prices.
British Sugar operating profit and return on capital employed
improved significantly from the unacceptable levels seen over the
two years after the abolition of EU sugar quotas in October 2017.
Our Spanish and Chinese businesses also took some good steps
forward and we have plans for further improvement to achieve
acceptable returns. Illovo's performance this year was
disappointing and was mainly driven by a decline in demand in the
developed South African sugar market. We have now closed our
Umzimkulu sugar mill in South Africa. Demand for sugar is expected
to grow in all the developing markets in the region and we will
increase our domestic and regional sales while benefiting from
profit improvement programmes across Illovo.
Grocery delivered a strong improvement in adjusted operating
profit with a 15% increase at constant currency to GBP437m. Over
the last five years our Grocery businesses have shown considerable
growth with operating margin improving over that period from 9.0%
to 12.4% this year. This has been achieved through a combination of
great brands, new product development and innovation, cost
efficiencies and successful acquisitions. Acetum, our Italian
balsamic vinegar business acquired in October 2017, and more
recently Yumi's and Anthony's Goods, are all thriving. Twinings
Ovaltine is the biggest profit contributor to Grocery and has long
been an outstanding growth story and this year was no exception.
George Weston Foods continued to make good progress and ACH had an
outstanding year. Allied Bakeries delivered a substantial cost
reduction this year, following the loss of a major customer. A
further restructuring of our bakery and associated logistics
operations is planned for next year.
Operating profit for Ingredients was well ahead, driven by AB
Mauri which responded to an increase in demand, in some markets an
exceptional increase, for its yeast and bakery ingredients. I am
pleased that our joint venture in China with Wilmar International
has now commenced operation. The combination of our technical
expertise with Wilmar's extensive sales and distribution capability
has great potential. ABF Ingredients continued to invest in its
research and development capability and the enzymes business
delivered strong growth.
Turning to Primark, the business performed well in the first
half of the year, achieving further UK market share growth and a
much improved sales performance in Europe. The progress in Germany
was notable. However, in March we were required to close all our
stores due to COVID-19 and our focus moved to managing the human
and operational consequences. Mitigating the significant cash
outflow was a huge task. Every area of the business was
scrutinised. Discretionary spend was cut, we accessed support from
the UK and European government job retention schemes, we worked
with all Primark's counterparties including suppliers and
landlords, and most Primark employees took a reduction in salary
while the stores were closed. As a result monthly overhead costs
were reduced by 50%.
Great care was taken in planning for the reopening of our
estate. We prioritised measures to safeguard the health and
wellbeing of everyone in store and to instil confidence in our
store environment. These measures enabled customers to move freely
through our stores, exploring the merchandise on display, with
little hindrance whilst ensuring the maintenance of social
distancing. Primark received an overwhelmingly positive response
when we reopened our doors. The queues outside most of our stores
on reopening days, the excitement of our customers and their
comments about affordability that we both heard and read,
reaffirmed the relevance and value of Primark's offering. We also
opened nine new stores in the second half, including our first
store in Poland.
Trading since reopening has been robust, delivering GBP2bn of
revenue in the period until the end of the financial year. Most
encouraging is that despite the disruption to our trading, UK
market share data for sales in all channels shows that we have
returned to at least our pre-COVID-19 level. From the time of
reopening to the year end the number of transactions has improved,
driven by increasing footfall.
Primark sales reflect the way that people live their lives.
Sales were ahead of pre-COVID-19 levels in children's, leisure and
nightwear and weak in formal menswear and travel accessories. By
store, trading has varied reflecting the current circumstances of
our customers including homeworking, less commuting and much less
tourism. Sales at our stores in retail parks are higher than a year
ago, shopping centres and regional high street stores are broadly
in line with last year, and large destination city centre stores
which are heavily reliant on tourism and commuters have, not
surprisingly, seen a significant decline in footfall. Since
reopening the lower level of sales compared to pre-pandemic levels
reflects consumer demand.
Over the coming year Primark sales will continue to reflect the
broader trend in consumer demand. The autumn/winter season and the
run up to Christmas is important to the retail sector. Our stores
have exciting seasonal ranges which are already proving a success
with our customers. However, at the time of writing, governments
are increasing the restrictions on the movement of people and
trading activity. In some parts of Europe and the UK this has led
to a reduction in trading hours or the temporary closure of stores.
In England, temporary store closures are expected from 5 November.
Uncertainty during a significant trading period remains.
Over the past six months we have developed a flexible set of
responses across the group and are ready to deploy these as
required in response to future government restrictions.
Our businesses have completed all practical preparations should
the UK exit the Brexit transition period with or without a trade
deal. Primark operates largely discrete supply chains for its
stores in each of the UK, US and Europe and the group's food
production is largely aligned with the end market. As a result,
there is relatively little group cross-border trading between the
UK and the EU. Contingency plans are in place should some of our
businesses experience disruption.
We have the people and the cash resources to meet the challenges
ahead and we are investing for the future.
OPERATING REVIEW
The table below shows comparative adjusted operating profit on
both an IFRS 16 pro forma basis and as reported. Note 1 to these
accounts shows the results by segment on a reported basis only.
52 weeks
ended
52 weeks 14 September 52 weeks
ended 2019 ended
12 September (IFRS 14 September
2020 16 pro 2019
(IFRS forma (IAS
16) basis) 17)
GBPm GBPm GBPm
------------- -------------
Operating segments
Grocery 437 381 381
Sugar 100 30 26
Agriculture 43 42 42
Ingredients 147 137 136
Retail 362 969 913
Central (63) (76) (76)
------------------------- ------------- ------------- -------------
1,026 1,483 1,422
Businesses disposed:
Grocery (1) (1) (1)
Ingredients (1) - -
1,024 1,482 1,421
===================== ============= ============= =============
The revenue and adjusted operating profit growth commentary in
this Operating Review are stated at constant currency as defined in
note 13, and adjusted operating profit growth is based on 2019
comparatives on an IFRS 16 pro forma basis.
Grocery
Actual Constant
Ongoing businesses 2020 2019 fx fx
----- ----- ------
Revenue GBPm 3,528 3,498 +1% +2%
================================================== ===== ===== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 437 381 +15% +15%
================================================== ===== ===== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 437 381 +15%
================================================== ===== ===== ====== ========
Adjusted operating profit margin (IFRS
16 pro forma comparatives) 12.4% 10.9%
================================================== ===== ===== ====== ========
Return on average capital employed (IFRS
16 pro forma comparatives) 31.3% 26.2%
================================================== ===== ===== ====== ========
Our Grocery businesses delivered a very strong performance with
adjusted operating profit growth of 15% and profit margin
increasing from 10.9% to 12.4%. Their business plans, set a year
ago to achieve further margin improvement through improved trading
and cost efficiencies, were realised. Our businesses responded to
the increased demand for food sold through the retail channel as a
result of the restrictions imposed by governments to contain the
spread of COVID-19. Workplaces were rapidly adapted to ensure a
safe working environment for our employees. We overcame the
logistical and operational challenges posed by COVID-19 and
produced higher volumes throughout the second half. These higher
volumes more than offset the decline in those products sold to
out-of-home and foodservice channels.
Grocery revenues were 2% ahead of last year with growth in
Twinings, UK Grocery, ACH and George Weston Foods in Australia.
This growth was held back by lower foodservice sales and a decline
in Allied Bakeries. Adjusted operating profit growth of 15% was
driven by cost efficiencies and, particularly in the second half,
lower promotional spend more than offsetting a one-time non-cash
asset write-down in Allied Bakeries of GBP15m.
Twinings made good progress this year with volume growth in
black tea and infusions in the retail channel in each of its major
markets. In the second half of the year the benefits from an
increase in home consumption more than offset a decline in the much
smaller out-of-home channels. A key driver was the growth in
healthy teas with the launch of a Twinings Infusions range in
France for the first time and the expansion of the Wellness range
in the US. Sales of Ovaltine were held back by the impact of
COVID-19 on impulse sales, particularly in Thailand and Vietnam,
partially offset by successful new product launches in Switzerland
and Brazil. Overall margins improved and also benefited from a full
year of production efficiencies following the closure of our tea
factory in China last year.
Silver Spoon, Jordans, Dorset Cereals, Ryvita and AB World Foods
all benefited from significant increases in consumer demand in the
second half of the year. Westmill and AB Sports Nutrition saw sales
and profit declines due to the reduction in foodservice demand and
sports events respectively. The acquisition of the fast-growing
Al'Fez Middle Eastern brand complements AB World Food's existing
brand portfolio and we have already achieved new retail listings in
the UK and internationally.
Allied Bakeries revenues declined this year following the
termination of our largest private label bread contract earlier in
the financial year. The business implemented a significant cost
reduction programme during the year. Combined with a COVID-19
related uplift in sales the underlying operating result improved.
Following our announcement in July of our exit from the Co-op
contract, the carrying values of some of our distribution assets
have been reviewed, resulting in a write-down charge of GBP15m. In
the second half we received GBP30m for the insurance claim relating
to the fire in February at our Speedibake Wakefield factory. This
has been treated as exceptional and more than offsets the
exceptional charge of GBP25m taken in the first half.
Acetum delivered profit growth with increased sales of balsamic
vinegar in North America and a further improvement in margin. ACH's
Mazola became the leading US brand in cooking oils earlier this
year and the second half saw extremely high demand from the retail
channel for our products. Since the introduction of government
restrictions related to COVID-19 in North America there has been an
exceptional increase in the demand for ingredients for home baking.
Although successful in significantly increasing production capacity
for baking ingredients, demand has still exceeded our ability to
supply. Anthony's Goods, the supplier of high quality natural and
organic food products acquired in September last year, performed
strongly this year also driven by this demand for home baking
products.
George Weston Foods delivered excellent sales growth and margin
improvement, with strong sales of bread and breakfast goods by Tip
Top more than offsetting weaker foodservice sales of meat products
by the Don KRC business. Yumi's has seen continued strong sales
growth and we have invested in new packaging equipment and
marketing activity to support the launch of a new vegetarian
burger.
Sugar
Actual Constant
2020 2019 fx fx
----- ----- ------
Revenue GBPm 1,594 1,608 -1% +5%
================================================== ===== ===== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 100 30 +233% +376%
================================================== ===== ===== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 100 26 +285%
================================================== ===== ===== ====== ========
Adjusted operating profit margin (IFRS
16 pro forma comparatives) 6.3% 1.9%
================================================== ===== ===== ====== ========
Return on average capital employed (IFRS
16 pro forma comparatives) 6.3% 1.8%
================================================== ===== ===== ====== ========
AB Sugar revenue was 5% ahead of last year at constant currency.
Adjusted operating profit was well ahead, driven by further savings
from the cost improvement programme and the expected recovery in EU
sugar prices which more than offset lower profits at Illovo. Each
business remained focused on reducing the cost of sugar production
by identifying efficiencies in all areas including our agricultural
supply chain.
EU sugar prices increased this year with a reduction in stocks
following lower EU sugar production in the last two campaigns.
Looking ahead, estimates for EU sugar production in the 2020/21
campaign are lower again due to reduced yields following adverse
weather conditions throughout the season and the prevalence of
virus yellows disease in the beet. Production volumes in the EU are
estimated to be below consumption in the next marketing year.
Furthermore there has been a recovery in the world sugar price
following a sharp decline in March this year. Our UK and Spanish
businesses have largely contracted sales for next year at prices in
line with our expectations.
In the UK, sugar production from the 2019/20 campaign of 1.19
million tonnes was ahead of the prior year with a strong operating
performance by the factories overcoming a much-prolonged campaign
as a result of adverse weather. Beet processing lasted 208 days, a
record for European sugar production. With the higher sales price
and some improvement in sales volume the profitability of British
Sugar improved significantly. At this early stage a reduction of
well over 10% in sugar production is expected next year.
The operating performance in Spain improved significantly and
the business delivered a breakeven operating result. This was
achieved by a combination of higher sales prices, lower beet costs
and a significant reduction in operating costs. In light of the
beet volumes contracted by Azucarera in the second crop year after
reducing the beet price, we have revised our financial forecasts
for this business. This has resulted in a one-time non-cash
write-off of goodwill of GBP23m as an exceptional charge.
Illovo delivered a much-reduced profit which was mostly driven
by our performance in South Africa. Market demand in South Africa
reduced this year by some 10% in response to the recent
introduction of a sugar tax and we expect market volumes to
continue at these lower levels. Adjusted operating profit included
a GBP10m charge for restructuring, including the closure of the
Umzimkulu mill in this market, which, combined with the cost
improvement programme, is expected to deliver benefits in the next
financial year. Illovo's sugar production was below last year at
1.63 million tonnes with the 2019/20 season curtailed by the early
onset of the rainy season. The operating profit in Malawi was
impacted by lower sales volumes this year but plans are in place to
deliver an improvement next year. Export sales across southern
Africa have been limited by COVID-19 restrictions on cross-border
traffic between countries and on port capacity.
In China a return to normal yields after a very poor crop last
year and higher sugar sales prices resulted in a much-improved
operating result. Further progress is expected next year with a
larger crop area and the benefit of almost 80% of grower contract
payments now linked to beet sugar content.
Agriculture
Actual Constant
2020 2019 fx fx
----- ----- ------
Revenue GBPm 1,395 1,385 +1% +1%
================================================== ===== ===== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 43 42 +2% +2%
================================================== ===== ===== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 43 42 +2%
================================================== ===== ===== ====== ========
Adjusted operating profit margin (IFRS
16 pro forma comparatives) 3.1% 3.0%
================================================== ===== ===== ====== ========
Return on average capital employed (IFRS
16 pro forma comparatives) 10.5% 10.3%
================================================== ===== ===== ====== ========
Revenue and adjusted operating profit at AB Agri were in line
with last year. As COVID-19 appeared in our markets the business
reacted swiftly and effectively to ensure the safety of employees
and continued availability of animal feed to our customers.
Sales and profit at AB Vista, our international feed enzymes
business, were strongly ahead of last year, with good sales growth
in the Americas and the first full year of sales from Signis, our
innovative animal digestion aid. Growth trended lower in the second
half as customers either reduced feed production volume or reduced
their feed enzyme inclusion rates in response to lower foodservice
demand.
Sales were lower this year at our UK feed businesses. Sales
prices were reduced due to lower commodity costs and the benefit of
new customers only partially offset lower compound feed demand
following a decline in foodservice milk and poultry meat volumes as
a result of COVID-19. The new premix production facility at Fradley
Park in Staffordshire has now been fully commissioned. Our feed
businesses in Spain and Denmark have performed particularly
strongly and our Polish business, acquired last year, has performed
well.
Intellync is our newly formed data and technology-led supplier
of insights that enable more effective decision making on farms.
This will improve efficiency and animal welfare on farms and
provide enhanced supply chain assurance. During the year two small
farm data and technology businesses were acquired and a new
technology centre in Kilkenny, Ireland was opened.
Profits in our Chinese feed business benefited from lower raw
material prices and tight cost control. Growth in our beef and
sheep feed business is reducing our reliance on pig production,
which continues to suffer from the effects of African Swine Fever.
Frontier Agriculture, our grain trading and crop inputs joint
venture, saw a reduction in profit with unfavourable weather in the
autumn and spring leading to a much-reduced winter cereal area and
lower demand for fertilizer and crop protection treatments.
Ingredients
Actual Constant
Ongoing businesses 2020 2019 fx fx
----- ----- -------
Revenue GBPm 1,503 1,505 In line +3%
================================================== ===== ===== ======= ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 147 137 +7% +10%
================================================== ===== ===== ======= ========
Adjusted operating profit (reported comparatives)
GBPm 147 136 +8%
================================================== ===== ===== ======= ========
Adjusted operating profit margin (IFRS
16 pro forma comparatives) 9.8% 9.1%
================================================== ===== ===== ======= ========
Return on average capital employed (IFRS
16 pro forma comparatives) 16.7% 15.5%
================================================== ===== ===== ======= ========
Revenues for Ingredients were 3% ahead of last year at constant
currency. Strong growth by AB Mauri was partially offset by a
decline in ABF Ingredients to deliver an increase in adjusted
operating profit of 10%. The results of AB Mauri in Argentina
continue to be reported under IAS 29 Financial Reporting in
Hyperinflationary Economies, which reduced operating profit by
GBP5m (2019 - GBP6m).
Underlying trading in AB Mauri was very strong driven by its
operations in China and North America. Non-dairy toppings are
better suited to hot climates and sales in Brazil grew strongly
following our major investment in a new production line. Margins
were strongly ahead, with procurement savings and operational
efficiencies adding to the benefits seen from the increased sales
volumes. The integration of our Italmill bakery ingredients
business, acquired last year, is now complete. Investment is
underway in a new, expanded, bakery ingredients technology centre
in the Netherlands.
As a result of COVID-19 restrictions AB Mauri experienced a
rapid and substantial increase in retail demand for yeast and
bakery ingredients. Sales were also strong to industrial bakery
customers but demand from foodservice and craft bakers was lower.
Capacity was increased at a number of production sites and included
the installation of additional retail yeast packing lines in China
and the recruitment of additional staff in North America.
Our yeast and bakery ingredients joint venture in China with
Wilmar International received regulatory approval in April and the
new business commenced operations just after the year end.
Construction of the major new yeast plant in northern China is well
underway.
ABF Ingredients revenues were in line with last year. Our
enzymes business delivered very strong sales growth and record
profit with strong sales in feed, food and technical applications.
Ohly, our yeast extracts business, made excellent progress in the
food and health markets especially in meat-free alternatives. These
revenue gains were offset by the effects of increased competition
on our speciality lipids business, ABITEC, and reduced demand for
our protein crisp inclusions in nutritional bars.
We continue to invest in our research and development
capability. We are commissioning a new enzymes pilot plant
alongside our enzymes facility in Finland which will enhance our
ability to bring innovation to market. This year ABITEC acquired
Larodan, a manufacturer and international marketer of high purity
research-grade lipids. Larodan will enhance ABITEC's scientific
capabilities and expand its functional lipid offerings to the
pharmaceutical, nutritional and industrial markets.
Retail
Actual Constant
2020 2019 fx fx
----- ----- ------
Revenue GBPm 5,895 7,792 -24% -24%
================================================== ===== ===== ====== ========
Adjusted operating profit (IFRS 16 pro
forma comparatives) GBPm 362 969 -63% -62%
================================================== ===== ===== ====== ========
Adjusted operating profit (reported comparatives)
GBPm 362 913 -60%
================================================== ===== ===== ====== ========
Adjusted operating profit margin (IFRS
16 pro forma comparatives) 6.1% 12.4%
================================================== ===== ===== ====== ========
Return on average capital employed (IFRS
16 pro forma comparatives) 5.6% 15.2%
================================================== ===== ===== ====== ========
The full year decline in Primark's revenue was mainly seen in
the third quarter driven by the total loss of sales for the period
in which our stores were closed as a result of government
restrictions to contain the spread of COVID-19. Sales in the first
half of the year were 4% ahead of last year at constant currency
driven by the increase in retail selling space and supported by a
substantial improvement in like-for-like sales in continental
Europe, with a key driver being a notable improvement in Germany.
All stores reopened by mid-July and since reopening we have traded
strongly with a low level of markdown. We estimate that sales were
some GBP2bn lower as a result of COVID-19. The reduction in
operating profit from GBP969m to GBP362m was driven by the loss of
contribution arising from the sales shortfall, partially offset by
the benefits of mitigating actions taken to reduce operating
costs.
Compared to pre-COVID-19, sales performance since reopening has
in aggregate been reassuring and encouraging. By store the
performance has varied, reflecting the current circumstances of our
customers including increased home working, less commuting and much
less tourism. Sales at our stores in retail parks are higher than a
year ago. Shopping centre and regional high street stores are
broadly in line with last year and large destination city centre
stores, which are heavily reliant on tourism and commuters, have
seen a significant decline in footfall. Our 16 largest destination
city centre stores contributed 13% of total sales pre-COVID-19 and
8% of sales after reopening.
In the UK sales since reopening to the year end were 12% lower
on a like-for-like basis and if the four large UK destination city
centre stores are excluded the decline was 6%. UK market data for
consumer spend on clothing, footwear and accessories in all
channels shows that in the 12 weeks to 20 September our value
market share was in line with our pre-COVID-19 share achieved a
year ago. This reflects the overwhelmingly positive response we saw
from customers on reopening of stores and the ongoing relevance and
appeal of our value-for-money offering.
Sales in Europe since reopening to the year end were 17% lower
on a like-for-like basis, reflecting increased public health
restrictions, particularly in Spain and Portugal. If we excluded
our 11 European destination city centre stores, like-for-like sales
were down 14%.
Sales in the US since reopening to the year end were 10% lower
on a like-for-like basis. However, excluding our Boston destination
city centre store they were level with last year. Importantly, our
US business was breakeven for the total period while the stores
were open.
Since the year end governments have been increasing the
restrictions on the movement of people and trading activity on both
a regional and national basis. At the time of writing, all our
stores in the Republic of Ireland, France, Belgium, Wales,
Catalonia in Spain and Slovenia are temporarily closed, which
represent 19% of our total retail selling space. The announced
period of closure varies by market. The UK Government has announced
its intention to close non-essential shops in England for one month
from 5 November to 2 December. Assuming that this will be passed by
the UK Parliament on 4 November, 57% of our total selling space
will be temporarily closed from 5 November. Our estimated loss of
sales for these stores, including the stores in England, for the
announced periods of closure is GBP375m.
At the half year we recognised an exceptional charge of GBP284m
as a provision against the carrying value of Primark's inventory.
At the time of the announcement, the dates for the reopening of
Primark stores were not known and over half of the provision
related to stock which was on display in the closed stores. The
earlier reopening of stores and especially the subsequent
successful spring/summer trading avoided the need for this
inventory provision and it was released as an exceptional item. The
value of spring/summer inventory that has been carried into next
year is only some GBP150m. Furthermore, Primark's working capital
at the year end was lower than last year. A markdown provision of
GBP22m was created at the year end for inventory stored on our
behalf by suppliers for longer than usual as a result of the
pandemic.
Total customer spend on clothing, footwear and accessories in
all sales channels in our markets has been impacted by COVID-19. It
has been recovering from a low point in April and the rate
accelerated with the reopening of stores. Since reopening we have
seen increasing numbers of transactions driven by footfall. The
average basket size was initially significantly higher than last
year, reflecting some pent-up demand, and while this outperformance
has reduced it remains higher than a year ago.
We are prioritising the health and wellbeing of everyone in
store and have received positive feedback from our customers about
the safety measures in place and the welcoming store environment.
We are working constantly to optimise the implementation of
in-store safety measures and have recently installed additional
dividers at the tills in the majority of our stores which has
enabled more tills to be opened and has reduced queues.
While the stores were closed a number of actions were taken to
reduce the overhead costs of the business and mitigate the monthly
cash outflow. This included access to UK and European government
job retention schemes designed to provide income for those
employees no longer working and to preserve their continued
employment. We entered into discussions with other counterparties,
in particular landlords to seek help with lease payments. Relief
from UK and Republic of Ireland business rates for the calendar
year from April to March was very welcome. As we began to mitigate
costs we prioritised more funds to support our suppliers. We
established a wages fund to ensure workers were paid as soon as
possible for goods in production for Primark in the most vulnerable
countries and GBP23m has been paid out. We have now committed to
pay for all garments both finished and in production as well as any
fabric costs incurred for Primark prior to the stores closing.
Orders worth GBP1.25bn have been placed with our suppliers for
goods for the autumn/winter season.
In July Primark announced the rollout of its UK recycling
programme, inviting customers to donate their pre-loved clothes,
textiles, footwear and bags from any brand. Collection boxes are
now available in all Primark's UK stores and donated items will be
reused, recycled or repurposed, with nothing going to landfill.
Profit from the scheme will go to UNICEF, Primark's global charity
partner, in support of its education programmes for vulnerable
children around the world.
The store opening programme for the second half of this year was
delayed by restrictions on access to complete the fit-out of our
stores. Nevertheless, we successfully opened a total of 12 new
stores during the year, bringing the total estate to 384 stores
trading from 16.2m sq ft of space compared to 15.6m sq ft a year
ago. We closed our small store in Rathfarnham in Ireland and
relocated three other stores. We have seen the benefits from the
successful downsizing of three stores in the US and three stores in
Germany; we have plans for several more stores in these markets and
have recognised a one-time non-cash asset write-down as an
exceptional charge of GBP116m. Of the new stores opened in the
final quarter, initial trading in our new stores in Plaisir and
Belle Épine in Paris, France and Warsaw, Poland has been very
strong.
We still expect to add a net 0.7m sq ft of additional selling
space in the next financial year even though COVID-19 has slowed
the development of our store opening programme. This will comprise
14 new stores with four in Spain; three in the US; two in Italy;
and one each in the UK, France, Netherlands and Poland as well as
our first store in Czechia, Prague.
We were excited by the customer response to the opening this
October of two new stores in American Dream, New Jersey, and
Sawgrass Mills, Florida. We are focused on building the future
pipeline of stores and France, Italy, Spain, eastern Europe and the
US provide the most significant prospects for further growth.
New store openings in the year ended 12 September 2020:
UK France Germany Poland
Manchester Trafford
Centre Lens Noyelles Kiel Warsaw Galeria Mlociny
Paris Belle Épine Berlin Gropius Passagen
Belgium Paris Plaisir Spain
Mons Strasbourg Italy Seville Lagoh
Barcelona Plaza de
Milan Fiordaliso Cataluña
Year ended Year ended
12 September 14 September
2020 2019
=================== ===================
sq ft sq ft
# of stores 000 # of stores 000
UK 190 7,534 189 7,449
Spain 48 1,988 46 1,850
Germany 32 1,841 30 1,830
Republic of Ireland 36 1,076 37 1,085
France 19 996 15 776
Netherlands 20 971 20 971
US 9 470 9 470
Belgium 8 403 7 372
Portugal 10 383 10 348
Austria 5 242 5 242
Italy 5 257 4 203
Slovenia 1 46 1 46
Poland 1 40 - -
==================== =========== ====== =========== ======
Total 384 16,247 373 15,642
==================== =========== ====== =========== ======
George Weston
Chief Executive
FINANCIAL REVIEW
Group performance
Group revenue reduced by 12% on a reported basis to GBP13.9bn
mainly as a result of the total loss of sales for the period in
which Primark's stores were closed. On a reported basis adjusted
operating profit was 28% lower at GBP1,024m. These financial
statements adopt IFRS 16 Leases in the current year and under our
chosen transition option the prior year has not been restated.
Adjusted operating profit for last year on an IFRS 16 proforma
basis would have been GBP61m higher than the GBP1,421m reported.
Comparative adjusted operating profit for the business segments on
an IFRS 16 pro forma basis is set out in the operating review. In
calculating adjusted operating profit, the amortisation charge on
non-operating intangibles, profits or losses on disposal of
non-current assets, transaction costs, amortisation of acquired
inventory fair value adjustments and exceptional items are excluded
from statutory operating profit.
The income statement this year includes exceptional items of
GBP156m. GBP116m relates to a one-time non-cash asset write-down of
Primark stores. At the half year we recognised an exceptional
charge of GBP284m as a provision against the carrying value of
Primark's inventory. At the time of the announcement, the dates for
the reopening of Primark stores were not known and over half of the
provision related to stock which was on display in the closed
stores. The earlier reopening of the stores and subsequent
successful trading of the spring/summer inventory avoided the need
for this provision. At the year end a markdown provision of GBP22m
was created for inventory stored on our behalf by suppliers for
longer than usual as a result of the pandemic. In the light of the
beet volumes contracted by Azucarera in the second crop year after
reducing the beet price, we have revised our financial forecasts
for this business. This has resulted in a one-time non-cash
write-off of goodwill of GBP23m as an exceptional charge. Insurance
proceeds of GBP30m more than offset the GBP25m costs of the closure
of our Speedibake Wakefield factory following the fire in
February.
On an unadjusted basis, statutory operating profit was 37% lower
than last year at GBP810m.
The strengthening of sterling this year against some of our
trading currencies has resulted in a loss on translation of GBP16m.
The transactional effect in the movement in the US dollar on
Primark's largely dollar-denominated purchases was negligible. Next
year, based on the current US dollar exchange rates, we expect a
positive effect on the Primark margin in our second half.
Net finance expense increased this year due to the inclusion of
lease interest of GBP84m following the adoption of IFRS 16. The
reduction in other financial income reflected the reduction in the
surplus of our defined benefit pension schemes between the 2018 and
2019 year ends. Losses on the disposal of three small businesses
amounted to GBP14m and profits less losses on sale of non-current
assets were GBP18m.
Statutory profit before tax on a reported basis was down 42% to
GBP686m. On our adjusted basis profit before tax was down by 35% to
GBP914m.
Acquisitions and disposals
AB World Foods acquired the Al'Fez brand, AB Agri acquired small
farm data and technology businesses in Denmark and Northern Ireland
and Ingredients acquired Larodan for a combined consideration of
GBP19m.
Following regulatory approval the AB Mauri joint venture in
China with Wilmar International commenced operations just after the
year end.
The three small businesses disposed of this year were the
Australian cake business, Jasol New Zealand and a small bakery in
Wuhan, China. Total proceeds were GBP2m.
Taxation
We recognise the importance of complying fully with all
applicable tax laws as well as paying and collecting the right
amount of tax in every country in which the group operates. Our
Board-adopted tax strategy is based on seven tax principles that
are embedded in the financial and non-financial processes and
controls of the group. This tax strategy is available on the
group's website at:
www.abf.co.uk/documents/pdfs/policies/abf_tax_strategy.pdf.
This year's tax charge on the adjusted profit before tax was
GBP263m at an effective rate of 28.8% (2019 - 21.5%). The increase
in the effective tax rate was a result of the much lower Primark
profits in the UK and Ireland. Based on corporation tax rates at
the time of writing, we expect next year's effective tax rate to
decrease from this level to some 25% as Primark's profitability is
expected to recover.
The total tax charge for the year of GBP221m benefited from a
credit of GBP42m (2019 - GBP25m) for tax relief on the amortisation
on non-operating intangible assets, amortisation of acquired
inventory fair value adjustments, profits on disposal of
non-current assets, losses on disposal of businesses and
exceptional items.
Earnings and dividends
Earnings attributable to equity shareholders in the current year
were GBP455m and the weighted average number of shares in issue
during the year, which is used to calculate earnings per share, was
790 million (2019 - 790 million). Given the decline in operating
profits and exceptional items charged this year, earnings per
ordinary share were 48% lower than last year at 57.6p. Adjusted
earnings per share, which provides a more consistent measure of
trading performance, declined by 41% from 137.5p to 81.1p.
No interim dividend was paid this year. As stated in the
Chairman's statement the dividend consideration was based on
Primark's trading experience this year and, at the time of writing,
the increasing restrictions in a number of Primark's major markets.
On balance the Board has elected not to propose a final dividend
for the year.
Balance sheet
The adoption of IFRS 16 Leases at 15 September 2019 resulted in
the recognition of GBP3.2bn of non-current right-of-use assets and
GBP3.7bn of lease liabilities, together with a reduction in other
liabilities of GBP0.3bn. The following commentary reflects balance
sheet movements in the year excluding those arising on the adoption
of IFRS 16.
Non-current assets of GBP10.9bn were GBP0.5bn lower than last
year. This was driven by a decrease in the investment in property,
plant and equipment, right-of-use assets and intangible assets with
depreciation, amortisation and impairments higher than capital
expenditure and acquisitions made in the year. There was also a
reduction in employee benefits assets as the surplus in the UK
defined benefit pension scheme declined.
Working capital at the year end was lower than last year.
Working capital in the food businesses was much lower than last
year as a result of strong demand for our products in the second
half. Primark's working capital was also lower with goods for the
autumn/winter season ordered later than usual this year.
Net cash at the year end excluding lease liabilities was
GBP1.56bn compared with net cash at the end of last year of GBP936m
reflecting the strong operating cash flow in the year. Net debt
including lease liabilities was GBP2.1bn compared with GBP2.7bn at
the date of transition to IFRS 16.
The group's net assets are broadly unchanged at GBP9.4bn. Return
on capital employed for the group which is calculated by expressing
adjusted operating profit as a percentage of the average capital
employed for the year, was lower this year at 9.5% compared with
13.8% last year on an IFRS pro forma basis, driven by the reduction
in Primark's profit.
Cash flow
Net cash inflow from operating activities increased from
GBP1,509m to GBP1,753m. The removal of some GBP300m of lease
payments from this measure, following the adoption of IFRS 16, and
the reduction in working capital described above more than offset
the lower operating profit. Capital expenditure reduced by GBP115m
compared to the prior year with some projects delayed by the
restrictions arising from COVID-19. GBP30m was realised from the
sale of property, plant and equipment. The net cash outlay on
acquisitions and disposals was GBP14m.
Tax paid in the year amounted to GBP254m (2019 - GBP269m). The
impact this year of the acceleration of the phasing of quarterly
payments to HMRC, such that all of the tax due for a year is
payable in that year, was more than offset by the lower tax payable
as a result of the reduction in the group's profit.
Financing and liquidity
The financing of the group is managed by a central treasury
department.
When Primark's stores were closed in March, and with no
certainty as to when they could be reopened, management action was
taken immediately to secure the liquidity of the group and the
focus on central cash availability was increased. The group's
Revolving Credit Facility (RCF) was drawn down to protect against
the possibility of a banking liquidity crisis. We considered it to
be prudent to seek a waiver for the RCF covenant test for February
2021 from our relationship banks and this was confirmed on 8 April.
Access was granted to the Bank of England Covid Corporate Financing
Facility (CCFF) on 15 April. Our Interim Results Announcement on 21
April confirmed the adoption of the going concern basis in
preparing the condensed consolidated interim financial
statements.
In August a two-year extension to the RCF was agreed, extending
its maturity to July 2023, and the facility was repaid in full. The
waiver of the RCF covenant test for February 2021 remains in place.
The CCFF was not utilised during the financial year. We do not
intend to use it and as a result will allow our eligibility to
lapse on 31 December 2020.
At the year end, the group had total committed borrowing
facilities amounting to GBP1.5bn, comprising GBP1.1bn provided
under the RCF, GBP0.3bn of US private placement notes, maturing
between 2021 and 2024, and GBP0.1bn of local committed facilities
in Africa. This excludes the CCFF which we expect to expire
shortly. At the year end, GBP0.4bn was drawn down under the private
placement notes and local committed facilities. The group also had
access to GBP0.5bn of uncommitted credit lines under which GBP0.1bn
was drawn at the year end.
Cash and cash equivalents totalled GBP2.0bn at the year end of
which available central cash on hand amounted to GBP1.6bn.
Pensions
The group's defined benefit pension schemes were in deficit by
GBP66m at the year end compared with a surplus last year of GBP33m.
The UK scheme, which accounts for 91% of the group's gross pension
assets, was in surplus by GBP94m (2019 - GBP220m). The reduction in
the UK pension surplus was driven by the decline in long-term UK
bond yields during the year. These yields increased the value of
the defined benefit obligations for accounting purposes and so
decreased the UK pension surplus. The pension deficit for the group
will result in an interest expense next year compared to an
interest income this year, and this is reported in other financial
income.
These accounts reflect the triennial valuation of the UK scheme
undertaken at 5 April 2017 which determined a surplus of GBP176m on
a funding basis. As a result there was no requirement to agree a
recovery plan with the trustees. The latest triennial valuation at
5 April 2020 has not yet been finalised but we expect this
valuation to lead to a moderate deficit.
The charge for the year for the group's defined contribution
schemes, which was equal to the contributions made, amounted to
GBP79m (2019 - GBP80m). This compared with the cash contribution to
the defined benefit schemes of GBP37m (2019 - GBP50m).
New accounting standards
The accounting policies applied during this financial year, and
details of the impact of adoption of new accounting standards in
future financial years, are set out in note 12 of this annual
results announcement.
The following accounting standards were adopted during the year
and had no significant impact on the group other than IFRS 16
Leases:
-- IFRS 16 Leases
-- IFRIC 23 Uncertainty over income Tax Treatments
Prepayment Features with Negative Compensation (Amendments to IFRS
-- 9)
-- Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
Long-term Interests in Associates and Joint Ventures (Amendments
-- to IAS 28)
-- Annual Improvements to IFRS 2015-2017
The group adopted IFRS 16 Leases this year, which is the most
significant accounting change for our group for many years. It has
affected many aspects of the group's financial statements,
including operating profit, earnings per share and net debt, as
well as return on capital employed.
The vast majority of the lease liabilities relate to Primark's
leasehold store estate. The effect on our food businesses, where
many of our properties are owned under freeholds, is much less
significant.
We transitioned using the 'modified retrospective' approach,
under which the comparative period is not restated. The effects of
adopting IFRS 16 at our transition date of 15 September 2019 and
the 2019 results on an IFRS 16 pro forma basis are set out in note
12 of this annual results announcement. We recognised lease
liabilities at transition of GBP3.7bn and right-of-use assets of
GBP3.2bn.
The pro forma effect on group and Primark metrics for 2019 was
as follows:
The balance sheet at transition would have shown net debt including
-- lease liabilities of GBP2.7bn.
Adjusted operating profit in 2019 would have increased by GBP61m,
-- with rental expense replaced by depreciation of right-of-use assets.
Interest expense in 2019 would have increased by GBP82m of interest
-- charged on lease liabilities.
-- Adjusted profit before tax in 2019 would have reduced by GBP21m.
Adjusted earnings per share would have reduced by 2% from 137.5p
-- to 135.4p.
-- Primark's margin would have increased from 11.7% to 12.4% due to
higher adjusted operating profit, with store rental expense replaced
with a depreciation charge on right-of-use assets.
Primark's return on capital employed would have decreased from 29%
-- to 15%, as right-of-use assets are now included in capital employed.
There is no change to overall net cash flows and while this is a
significant change in financial reporting, our business model
remains unchanged and our balance sheet remains robust.
John Bason
Finance Director
The annual report and accounts is available at www.abf.co.uk and
will be despatched to shareholders on 5 November 2020. The annual
general meeting will be held at 11am on Friday, 4 December 2020.
Regrettably, shareholders will be unable to attend in person but
will be able to access a live broadcast of the meeting on the web
and by telephone, further details of which are provided in the
Notice of Annual General Meeting.
Risk Management
Our approach to risk management
The delivery of our strategic objectives and the sustainable
growth (or long-term shareholder value) of our business, is
dependent on effective risk management. We regularly face business
uncertainties and it is through a structured approach to risk
management that we are able to mitigate and manage these risks and
embrace opportunities when they arise. These disciplines have
proved to be effective as we navigate our way through the
challenges resulting from the COVID-19 pandemic.
The diversified nature of our operations, geographical reach,
assets and currencies are important factors in mitigating the risk
of a material threat to the group's sustainable growth and
long-term shareholder value. However, as with any business, risks
and uncertainties are inherent in our business activities. These
risks may have a financial, operational or reputational impact.
The Board is accountable for effective risk management, for
agreeing the principal, including emerging, risks facing the group
and ensuring they are successfully managed. The Board undertakes a
robust annual assessment of the principal risks, including emerging
risks, that would threaten the business model, future performance,
solvency or liquidity. The Board also monitors the group's exposure
to risks as part of the performance reviews conducted at each board
meeting. Financial risks are specifically reviewed by the Audit
Committee.
Our decentralised business model empowers the management of our
businesses to identify, evaluate and manage the risks they face, on
a timely basis, to ensure compliance with relevant legislation, our
business principles and group policies.
Our businesses perform risk assessments which consider
materiality, risk controls and specific local risks relevant to the
markets in which they operate. The collated risks from each
business are shared with the respective divisional chief executives
who present their divisional risks to the group executive.
The group's Director of Financial Control receives the risk
assessments on an annual basis and, with the Finance Director,
reviews and challenges them with the divisional chief executives,
on an individual basis.
These discussions are wide ranging and consider operational,
environmental and other external risks. These risks and their
impact on business performance are reported during the year and are
considered as part of the monthly management review process.
Group functional heads including Legal, Treasury, Tax, IT,
Pensions, HR, Procurement and Insurance also provide input to this
process, sharing with the Director of Financial Control their view
of key risks and what activities are in place or planned to
mitigate them. A combination of these perspectives with the
business risk assessments creates a consolidated view of the
group's risk profile. A summary of these risk assessments is then
shared and discussed with the Finance Director and Chief Executive
at least annually.
The Director of Financial Control holds meetings with each of
the non-executive directors seeking their feedback on the reviews
performed and discussing the key risks, which include emerging
risks, and mitigating activities identified through the risk
assessment exercise. Once all non-executive directors have been
consulted, a Board report is prepared summarising the full process
and providing an assessment of the status of risk management across
the group. The key risks, mitigating controls and relevant policies
are summarised and the Board confirms the group's principal risks.
These are the risks which could prevent Associated British Foods
from delivering its strategic objectives. This report also details
when formal updates relating to the key risks will be provided to
the Board throughout the year.
Key areas of focus this year
Effective risk management processes and internal controls
We continued to seek improvements in our risk management
processes to ensure the quality and integrity of information and
the ability to respond swiftly to direct risks. During the year,
the Audit Committee on behalf of the Board conducted reviews on the
effectiveness of the group's risk management processes and internal
controls in accordance with the 2018 UK Corporate Governance Code.
Our approach to risk management and systems of internal control is
in line with the recommendations in the Financial Reporting
Council's (FRC) revised guidance 'Risk management, internal control
and related financial and business reporting' (the Risk
Guidance).
The Board is satisfied that internal controls were properly
reviewed and key risks are being appropriately identified and
managed.
COVID-19
The COVID-19 pandemic continues to be a worldwide crisis and the
situation is still uncertain. Authorities continue to impose
restrictions on both a regional and local basis. Since March, when
the pandemic became apparent, the Audit Committee, on behalf of the
Board have provided ongoing support and challenge of management's
processes and internal controls.
Whilst our businesses had not planned for a global pandemic,
under extraordinary circumstances, our teams reacted with immediacy
to adapt to the evolving situation. Effective communication both
within the divisions and across the group has ensured that
appropriate actions were taken to enable our food businesses to
operate fully, providing safe, nutritious, affordable food to
customers and meeting increased demand. Primark stores were able to
reopen safely as restrictions were lifted.
Many lessons have been learnt over the past six months and we
have developed a flexible set of possible responses that are ready
to be deployed in the event of further restrictions being imposed,
whether that be locally, regionally or globally.
When this virus was first identified, our initial concern was
the supply of goods for Primark and, to a lesser extent, some food
ingredients sourced from China. As the pandemic progressed, the
most significant challenges we faced were maintaining the
production of essential food and food ingredients and the cash flow
impact arising from the closure of all Primark stores between March
and their reopening, in line with local market regulations,
throughout May, June and July. We took immediate steps to ensure
adequate cash liquidity.
Whilst Primark stores were closed, we paid for in full, and took
delivery of, very large amounts of completed stock. A fund was
established to ensure everyone in a vulnerable country who worked
on a Primark garment, whether completed or not, is paid for that
work. In July, we committed to pay our garment suppliers in full
for all outstanding finished garments and to utilise or pay for any
finished fabric liabilities.
A significant number of our employees continue to work from
home. To support seamless homeworking we 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.
EU Exit
Following the UK's referendum decision to leave the EU in 2016,
the group established an EU Exit steering committee which consists
of a small dedicated team. This steering committee worked with all
the businesses to assess the risks and opportunities arising from
the UK's decision to leave the EU. Primark operates largely
discrete supply chains for its stores in each of the UK, US and
Europe and the group's food production is largely aligned with the
end market. As a result, there is relatively little group
cross-border trading between the UK and the EU. We therefore
quickly concluded that the overall impact of EU exit on the group
was relatively minor.
We recognise that the outcome of the negotiations between the UK
and the EU remains uncertain. While we would prefer a negotiated
free trade agreement, we are prepared for any of the potential
outcomes.
Over the last year the group and the individual businesses have
taken steps to mitigate possible impacts of the transitional period
ending without a negotiated free trade agreement. The key risks
identified, and the actions taken are as follows:
-- Imports to the UK - The UK government has indicated the tariffs
on imports in the absence of a free trade agreement. We expect these
to have a net positive impact on the group. All necessary registrations
have been completed. Where goods are imported into the UK by third
parties on behalf of the businesses, assurances have been sought
that these will be available when required.
-- Disruption to EU-UK logistics - The businesses that could be impacted
by this have reviewed their exposure and where appropriate have
plans to increase inventory levels to partially mitigate the risk.
The ability to do this is constrained by warehouse availability
and the shelf life of the goods.
-- Data - Where necessary, the businesses have agreed Standard Contractual
Terms to enable certain personal data to be transferred from the
EU to the UK.
-- People - The businesses have publicised the UK government's Settled
Status Scheme and where appropriate have assisted employees with
the application process.
Our principal risks and uncertainties
The directors have carried out an assessment of the principal
risks facing Associated British Foods, including emerging risks,
that would threaten its business model, future performance,
solvency or liquidity. Outlined below are the group's principal
risks and uncertainties and the key mitigating activities in place
to address them. These are the principal risks of the group as a
whole and are not in any order of priority.
Associated British Foods is exposed to a variety of other risks
related to a range of issues such as human resources and talent,
community relations, the regulatory environment and competition.
These are managed as part of the risk process and a number of these
are referred to in our 2020 Responsibility Update. Here, we report
the principal risks which we believe are likely to have the
greatest current or near-term impact on our strategic and
operational plans and reputation.
They are grouped into external risks, which may occur in the
markets or environment in which we operate, and operational risks,
which are related to internal activity linked to our own operations
and internal controls.
The 'Changes since 2019' describe our experience and activity
over the last year.
Principal risks and uncertainties
External risks
Risk Context and potential
trend impact Mitigation Changes since 2019
----- ------------------------------------------------------------- --------------------------- ----------------------
r Movement in exchange rates
===== ==================================================================================================================
Associated British Our businesses constantly Sterling strengthened
Foods is a multinational review their currency against some of our
group with operations exposures and their major trading
and transactions in hedging instruments currencies
many currencies. and, where necessary, this year, resulting
Changes in exchange ensure appropriate actions in a loss on
rates give rise to are taken to manage translation
transactional exposures the impact of currency of GBP16m.
within the businesses movements. Primark covers its
and to translation Board-approved policies currency
exposures when the require businesses to exposure on purchases
assets, liabilities hedge all transactional of merchandise
and results of overseas currency exposures and denominated
entities are translated long-term supply or in foreign currencies
into sterling upon purchase contracts which at the time of placing
consolidation. are denominated in a orders, with an
foreign currency, using average
foreign exchange forward tenor of Primark's
contracts. hedging
Cash balances and activity of between
borrowings 3 and 4 months. There
are largely maintained was a minimal
in the functional currency transactional
of the local operations. effect from changes
Cross-currency swaps in the US dollar
are used to align exchange
borrowings rate on Primark's
with the underlying largely
currencies of the group's dollar denominated
net assets (refer to purchases
note 26 to the financial for the year in
statements for more aggregate.
information). There has been a
greater
level of volatility
in sterling exchange
rates against our
major
trading currencies
during
the financial year,
caused in part by the
impact of the COVID-19
pandemic and by
continued
EU exit uncertainty.
v w Fluctuations in commodity and energy prices
===== ==================================================================================================================
Changes in commodity The group purchases EU sugar prices
and energy prices a wide range of commodities increased
can have a material in the ordinary course this year with a
impact on the group's of business. reduction
operating results, We constantly monitor in stocks following
asset values and cash the markets in which lower EU sugar
flows. we operate and manage production
certain of these exposures in the last two
with exchange traded campaigns.
contracts and hedging The price of UK wheat,
instruments. a key commodity for
The commercial implications our UK bakery
of commodity price business,
movements increased during the
are continuously assessed course of the year as
and, where appropriate, a result of the impact
are reflected in the of poor weather
pricing of our products. conditions
on yields.
r Health and nutrition
===== ==================================================================================================================
Failure to adapt to Consumer preferences Our Sugar and Grocery
changing consumer and market trends are businesses have
health choices or monitored continually. invested
to address nutrition Recipes are regularly in communication
concerns in the formulation reviewed and reformulated linked
of our products could to improve the nutritional to nutrition and
result in a loss of value of our products. health
consumer base and All of our grocery products during the year to
impact business performance. are labelled with help
nutritional consumers make
information. informed
We develop partnerships choices about their
with other organisations diet.
to promote healthy options. Notable examples
Pre-COVID-19, our include
specialist the Ryvita 'Fibre Fit'
sports-nutrition brand campaign in the UK,
HIGH5 typically supports through which the
over 600 events which business
promote exercise across engaged over 50,000
the UK each year, helping consumers in relation
over 500,000 people to the benefit of a
improve their fitness high fibre diet.
levels. These events In addition, our sugar
are predominantly promoted business's campaign
on-line, and HIGH5 assist 'Making Sense of
in this promotion by Sugar'
highlighting events has developed into a
on their website and global platform. The
via social media in aim is to provide
conjunction with factual
nutritional information based on
advice. robust science to help
We invest in research inform and educate
with experts to improve people
our understanding of about sugar and the
the science and societal role it can play as
trends to support policy part of a healthy
approach. balanced
diet.
Our businesses
continue
to assess the
nutritional
content of their
products
on an ongoing basis;
and engage with
stakeholders,
directly and through
trade associations,
in relation to changes
to the regulatory and
consumer operating
environment.
r Operating in global markets
===== ==================================================================================================================
Associated British Our approach to risk Increased uncertainty
Foods operates in management incorporates as a result of the
53 countries with potential short-term COVID-19
sales and supply chains market volatility and pandemic. Authorities
in many more, so we evaluates longer-term continue to impose
are exposed to global socio-economic and restrictions
market forces; fluctuations political on both a regional and
in national economies; scenarios. local basis.
societal unrest and The group's financial High inflation
geopolitical uncertainty; control framework and continued
a range of consumer Board-adopted tax and to adversely affect
trends; evolving legislation treasury policies require our yeast and bakery
and changes made by all businesses to comply ingredients business
our competitors. fully with relevant based in Argentina.
Failure to recognise local laws. 12 new Primark stores
and respond to any Provision is made for were opened in the
of these factors could known issues based on year
directly impact the management's interpretation including our first
profitability of our of country-specific store in Poland.
operations. tax law, EU cases and
Entering new markets investigations on tax
is a risk to any business. rulings and their likely
outcomes.
By their nature
socio-political
events are largely
unpredictable.
Nonetheless our businesses
have detailed contingency
plans which include
site-level emergency
responses and improved
security for employees.
We engage with governments,
local regulators and
community organisations
to contribute to, and
anticipate, important
changes in public policy.
AB Sugar continues to
reduce its cost base
through its performance
improvement programme.
We conduct rigorous
due diligence when
entering,
or commencing business
activities in, new markets.
Operational risks
-------------------------------------------------------------------------------------------------------------------------
Risk Context and potential
trend impact Mitigation Changes since 2019
--------- --------------------------------------------------------- --------------------------- ----------------------
r Workplace health and safety
========= ==============================================================================================================
Many of our operations, Safety continues to The safety performance
by their nature, have be one of our main of the group is
the potential for priorities. reported
loss of life or workplace The chief executives in the 2020
injuries to employees, of each business, who Responsibility
contractors and visitors. lead by example, are Update at
accountable for the www.abf.co.uk/responsi
safety performance of bility.
their business. In 2020 there were
Our Health and Safety three
Policy and Practices work-related
are firmly embedded fatalities
in each business, in our Spanish and
supporting southern
a strong ethos of workplace Africa operations. Our
safety. businesses have
We have a continuous conducted
safety audit programme thorough root cause
to verify implementation analyses and are
of safety management implementing
and support a culture safety changes.
of continuous improvement. This year, over GBP46m
Best practice safety was invested in safety
and occupational health risk management, of
guidance is shared across which GBP14m was
the businesses, dedicated
co-ordinated to COVID-19 safety
from the corporate centre, measures
to supplement the delivery for employees,
of their own programmes. customers
and other visitors to
our stores and
manufacturing
sites. At the start
of the COVID-19
outbreak,
we established a group
level steering
committee
to respond in a timely
manner to the dynamic
changes including
reimagining
working environments
for many of our
people.
Other investments this
year included measures
to improve working in
confined spaces and
at height, fire risk
assessments and
equipment
upgrades, dust
monitoring
and air quality,
improvements
to lighting and safety
signage and emergency
first aid training.
v w Product safety and quality
========= ==============================================================================================================
As a leading food Product safety is put We did not have any
manufacturer and retailer, before economic major product recalls.
it is vital that we considerations. Businesses have
manage the safety We operate strict food continued
and quality of our safety and traceability to define and refine
products throughout policies within an KPIs in this area.
the supply chain. organisational
culture of hygiene and
product safety to ensure
consistently high standards
in our operations and
in the sourcing and
handling of raw materials
and garments.
Food quality and safety
audits are conducted
across all our
manufacturing
sites, by independent
third parties and
customers,
and a due diligence
programme is in place
to ensure the safety
of our retail products.
Our sites comply with
international food safety
and quality management
standards and our
businesses
conduct regular mock
product incident exercises.
All businesses set clear
expectations of suppliers,
with relevant third-party
certification or other
assessment a condition
of doing business. Product
testing and trials are
undertaken as required
and where bespoke raw
materials are purchased,
the businesses will
work closely with the
supplier to ensure quality
parameters are suitably
specified and understood.
All Primark's products
are tested to, and must
meet, stringent product
safety specifications
in line with and in
some instances above
legal requirements.
Primark continues to
drive and improve product
performance for quality
and compliance purposes
through its product
approval processes,
in country inspections
centres and management
of its supply base.
========= ========================================================= =========================== ======================
r Our use of natural resources and managing our environmental
impact
========= ==============================================================================================================
Our businesses rely We continuously seek The environmental
on a secure supply ways to improve the performance
of natural resources, efficiency of our of the group is
some of which are operations, reported
vulnerable to external use technologies and in the 2020
factors such as natural techniques to reduce Responsibility
disasters and climate our use of natural Update at
change. Our material resources. www.abf.co.uk/responsi
environmental impacts Our businesses are bility.
are energy use and considering This year we are
resultant greenhouse the most effective ways reporting
gas emissions, water of mitigating the impacts our Scope 2
abstraction and management, of physical and market-based
waste management and transitional emissions for the
packaging. risks associated with first
In our assessment climate change, such time. Scope 2 covers
of climate-related as changes in extreme indirect emissions
business risks, we weather conditions, from
recognise that the and the introduction the generation of
cumulative impacts of carbon price schemes. purchased
of changes in weather We recognise the importance electricity, heat and
and water availability of integrating climate steam. This is a key
could affect our operations related risks and consideration when
at a group level. opportunities making
The diversified nature into our business decisions energy purchasing
of Associated British to help with the transition decisions.
Foods means that mitigation to a low carbon economy. We continued to focus
or adaptation strategies We consider climate on improving our
are considered and related risks and energy
implemented by individual opportunities efficiency and
businesses and divisions. in our business decisions optimising
Our operations generate and recognise the the use of renewable
a range of emissions importance energy sources with
such as dust, waste of adopting the 55% of energy used
water and waste which, recommendations this
if not controlled, of the Task Force on year coming from
could pose a risk Climate-related Financial renewables,
to the environment, Disclosures to help mainly from a
local communities with the zero-carbon biomass-based
and result in additional transition/to help with fuel.
costs. the smooth transition As a group we continue
to a low carbon economy. to develop our
Our packaging and product packaging
design teams are working to align with future
together to address environmental
the use of single-use packaging
plastics and scale up legislation in local
solutions to the geographies whilst
environmental balancing
impacts of our packaging. the needs to minimise
Our businesses aim to food waste and carbon
be a good neighbour emissions with food
within their local safety and integrity
communities. at the core. Our UK
Aspects of this include Grocery Group are
the monitoring and signatories
management to the Courtauld
of noise, particle and Commitment
odour pollution and 2025 as well as the
community engagement. UK Plastics PACT, a
Where possible, our collaborative
businesses implement initiative
circular economy principles delivered by WRAP,
to use more from less that
and continuously seek will create a circular
ways to recycle or reuse economy for plastics.
all waste materials. We report our approach
AB Sugar and AB Agri to climate change,
have set commitments water
for their own operations and deforestation risk
and supply chain to on an annual basis via
improve sustainability CDP at www.cdp.net.
performance. This year 84% of the
Primark is committed waste materials
to the Sustainable Clothing generated
Action Plan (SCAP), by our businesses'
an industry-wide commitment operations
made by brands, retailers, was sent for
charities and recycling recycling,
organisations to recovery or other
collectively beneficial
reduce the carbon, water uses.
and waste impacts of Primark announced the
the clothing industry. rollout of its
Through Primark's nation-wide
Sustainable recycling programme,
Cotton Programme it inviting customers to
has committed to train donate their pre-loved
160,000 farmers in more clothes, textiles,
sustainable farming footwear
methods by 2022. This and bags from any
commitment goes some brand
way towards helping to be 're-loved' via
Primark fulfil its the Primark In-Store
long-term Recycling Scheme.
ambition of ensuring In August, Primark
all the cotton used introduced
in its supply chain a brand-new fleet of
is sustainably sourced. 15 Longer Semi
Trailers
(LSTs) which will help
to significantly
reduce
the environmental
impact
of Primark's logistics
operations in the UK.
In September, British
Sugar's logistics
partner,
Abbey Logistics, took
delivery of 11 new
latest
generation trucks that
will go into Abbey's
core British Sugar
fleet,
providing bulk sugar
transport movements
throughout the UK and
Ireland. The vehicles
will produce up to 20%
less nitrogen oxide
and fewer particulates
than previous
generation
vehicles being
replaced
in the fleet, as
British
Sugar maximises the
environmental benefits
of homegrown sugar.
v w Our supply chain and ethical business practices
========= ==============================================================================================================
As an international Our Supplier Code of Our Modern Slavery and
business with suppliers Conduct is designed Human Trafficking
and representatives to ensure suppliers, Statement
the world over, people representatives and 2020, together with
with whom we deal all with whom we deal, the steps we take to
and in particular adhere to our values try to ensure that any
our suppliers and and standards. The full forms of modern
our representatives Code is available at slavery
must live up to our www.abf.co.uk/supplier_code are not present within
values and standards _of_conduct our own operations or
and share that responsibility. . supply chain, are
We therefore work Suppliers are expected reported
with them to ensure to sign and abide by in detail in the 2020
reliability and to this Code. Responsibility Update
help them meet our Adherence to the Code at
standards of product is verified through www.abf.co.uk/responsi
quality and safety, our supplier audit system bility.
acceptable working with our procurement In April, we endorsed
conditions, financial and operational teams the International
stability, ethics establishing strong Labour
and technical competence. working relationships Organisation led
Potential supply chain with suppliers to help COVID-19
and ethical business them meet our standards. Action in the Global
practice risks include: All businesses are required Garment Industry,
* supply chain weaknesses such as poor conditions for to comply with the group's working
the workforce; Business Principles towards a coordinated
including its Anti-Bribery global response to
and Corruption Policy. ongoing
* unacceptable and unethical behaviour including We have developed a industry-wide issues.
bribery, corruption and slavery risk; and Company-wide online We continue to play
training module about our part in this
modern slavery to help initiative.
* impact on reliability of supply and business accelerate Whilst Primark stores
continuity due to unforeseen incidents e.g. natural awareness-raising were closed, we paid
disasters. and give businesses for in full, and took
the tools to train people. delivery of, very
Primark has been working large
to strengthen its policies amounts of completed
relating to human rights stock. We established
and modern slavery and a wages fund to ensure
has published a revised workers in vulnerable
supplier code of conduct. countries were paid
Primark, Twinings and as soon as possible
AB Sugar have all produced for work on products
interactive sourcing in production for
maps. AB Sugar's map Primark
outlines where it grows, when orders were
sources and exports cancelled
sugar: in March. We also
www.absugar.com/sourcing-ma committed
p. to pay our suppliers
in full for all
garments
both finished and in
production as well as
any fabric costs for
Primark prior to the
stores closing.
r Breaches of IT and information security
========= ==============================================================================================================
To meet customer, In parallel to building The significant
consumer and supplier IT roadmaps and developing increase
needs, our IT infrastructure our technology systems, in employees working
needs to be flexible, we invest in developing at home, as a result
reliable and secure the IT skills and of COVID-19
to allow us to interact capabilities restrictions,
through technology. of our people across has had an impact on
Our delivery of efficient our businesses. the delivery of IT
and effective operations We continue to actively services
is enhanced by the monitor and mitigate and increased our IT
use of relevant technologies any cyber-threats and and information
and the sharing of suspicious IT activity. security
information. We are We have established risks.
therefore subject group IT security policies, There is an ongoing
to potential cyber-threats technologies and processes, programme of
such as computer viruses all of which are subject investment
and the loss or theft to regular internal in both technology and
of data. audit. people to enhance the
There is the potential Access to sensitive longevity of our IT
for disruption to data is restricted and environments.
operations from data closely monitored. To support seamless
centre failures, IT Robust disaster recovery homeworking we have
malfunctions or external plans are in place for modified our IT
cyber-attacks. business-critical infrastructure,
applications increased bandwidth
and are adequately tested. with our
Technical security controls telecommunications
are in place over key partners and deployed
IT platforms with the collaboration tools.
Chief Information Security The extent of remote
Officer (CISO) tasked working has increased
with identifying and the risk of users
responding to potential falling
security risks. 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.
Improved
cyber-security
capability is in place
within the group and
across the businesses
allowing us to more
effectively detect,
respond and recover
from disruptive
cyber-threats.
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.
During the year we
have
reviewed and tested
IT disaster recovery
plans across the
businesses.
========= ========================================================= =========================== ======================
Viability statement
The directors have determined that the most appropriate period
over which to assess the Company's viability, in accordance with
the UK Corporate Governance Code, is three years. This is
consistent with the group's business model which devolves
operational decision making to the businesses, each of which sets a
strategic planning time horizon appropriate to its activities which
are typically of three years duration. The directors also
considered the diverse nature of the group's activities and the
degree to which the businesses change and evolve in the relatively
short term.
The directors considered the group's profitability, cash flows
and key financial ratios over this period and the potential impact
that the Principal Risks and Uncertainties set out on pages 18 to
23 could have on future performance, solvency or liquidity of the
group and its resilience to threats to its viability posed by
severe but plausible scenarios. Sensitivity analysis was applied to
these metrics and the projected cash flows were stress tested
against a range of scenarios.
The directors considered the level of performance that would
cause the group to exhaust its available liquidity; to breach its
debt covenants; the financial implications of making any strategic
acquisitions and a variety of factors that have the potential to
reduce profit substantially. We considered actions which could
damage the group's reputation for the long term, macro-economic
influences such as fluctuations in commodity markets and the
possible implications of a no-deal Brexit, and climate-related
business risks. Specific consideration has been given to the
potential ongoing risks associated with COVID-19. These risks
include its impact on Primark's trading performance and to a lesser
extent our ability to run our factories efficiently with the
potential for disruption through shortage of labour or logistical
issues caused by port constraints.
At the year end the group had gross cash of GBP2,030m and
GBP1,088m of undrawn committed Revolving Credit Facilities (RCF)
which together provide some GBP3,118m of liquidity. In August, a
two-year extension to the group's RCF was agreed with its
relationship banks extending the maturity of the facility to July
2023. During the course of this assessment GBP261m of the GBP336m
of outstanding private placement notes will mature and the RCF will
require refinancing. Based on discussions with our relationship
banks and our private placement investors, it is the opinion of the
Board that these facilities can be renewed and that substantial
further funding could be secured should the need arise.
We have operations in 53 countries and sales into more than 100.
The diversity of our businesses, in different sectors with
different customers, products and markets removes the possibility
of any single adverse event having a material impact on headroom.
The importance of food production has been highlighted by recent
events and the resilience of the group has been demonstrated by our
ability to ensure the continuity of the food supply chain. While
the principal risks considered all have the potential to affect
future performance, none of them are considered individually or
collectively to give rise to a deterioration in trading to a level
that is likely to threaten the viability of the Company for the
period of the assessment.
The group has a track record of delivering strong cash flows,
with in excess of GBP1bn of operating cash being generated in each
of the last nine years. This has been more than sufficient to meet
not only our ongoing financing obligations but also to fund the
group's expansionary capital investment.
Even in a worst-case scenario, with risks modelled to
materialise simultaneously and for a sustained period, the
possibility of the group having insufficient resources to meet its
financial obligations is considered extremely remote. Based on this
assessment, the directors confirm that they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three-year
period to 16 September 2023.
Going concern
After making enquiries, the directors have a reasonable
expectation that the group has adequate resources to continue in
operational existence for the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing the
consolidated financial statements.
The forecast for the period to the end of February 2022 has been
updated for our trading to October and is our best estimate of
future cashflow. Having reviewed this forecast, and having applied
reverse stress tests, the possibility that the financial headroom
could be exhausted is considered to be extremely remote.
As stated at the half year, as a precaution against illiquidity
in the banking market, the Revolving Credit Facility (RCF) was
drawn down. In August the facility was repaid in full. A two-year
extension has now been agreed with our relationship banks which
extends the maturity of the RCF to July 2023. In April we received
confirmation from the Bank of England that we had access to the
COVID Corporate Financing Facility (CCFF). Since then, we have not
needed to draw upon this facility and do not expect to draw upon it
in the coming months and as a result will allow our eligibility to
lapse. Accordingly, the CCFF has not been taken into account in
making our assessment of financial headroom.
At the year end, the group had gross cash of GBP2,030m and the
undrawn RCF of GBP1,088m. The directors have satisfied themselves
that the RCF will be available for at least the period to the end
of February 2022, having assessed the group's projected compliance
with the terms and covenants of this facility.
In reviewing the cash flow forecast for the period, the
directors reviewed the trading for both Primark and the food
businesses in light of the experience gained from the last six
months of trading and emerging trading patterns. The directors
understand the risks, sensitivities and judgements included in the
cash flow forecast and have a high degree of confidence in these
cash flows.
There is substantial financial headroom between this cash flow
forecast and the cash on hand and facilities available to the group
over the period. A number of extreme, adverse assumptions were
considered and the likelihood of the headroom being exhausted was
considered to be extremely remote.
We have operations in 53 countries and sales into more than 100.
The diversity of our businesses, in different sectors with
different customers, products and markets removes the possibility
of any single adverse event having a material impact on headroom.
The importance of food production has been highlighted by recent
events and our employees continue to work successfully to ensure
the continuity and resilience of the food supply chain. It would
require a large number of adverse events for there to be a
collective material impact on headroom and sales for the whole of
the period would need to decline substantially, in every business,
and with no cost mitigation. For Primark we considered the more
extreme, adverse scenarios in which all the Primark stores were
closed for three months over the Christmas trading period, without
taking any of the available cost mitigation actions that are within
our control, and the cash flow consequences did not exhaust the
financial headroom.
CAUTIONARY STATEMENTS
This report contains forward-looking statements. These have been
made by the directors in good faith based on the information
available to them up to the time of their approval of this report.
The directors can give no assurance that these expectations will
prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors, underlying such
forward-looking information, actual results may differ materially
from those expressed or implied by these forward-looking
statements. The directors undertake no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
Directors' responsibilities in respect of the financial
statements
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a whole;
and
-- the Strategic report includes a fair review of the development and
performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
We consider the annual report and financial statements, taken as
a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
The contents of this announcement, including the responsibility
statement above, have been extracted from the annual report and
accounts for the 52 weeks ended 12 September 2020 which may be
found at www.abf.co.uk and will be despatched to shareholders on 5
November 2020. Accordingly this responsibility statement makes
reference to the financial statements of the Company and the group
and to the relevant narrative appearing in that annual report and
accounts rather than the contents of this announcement.
On behalf of the Board
Michael McLintock George Weston John Bason
Chairman Chief Executive Finance Director
3 November 2020
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 12 September 2020
2020 2019
Continuing operations Note GBPm GBPm
---- --------
Revenue 1 13,937 15,824
Operating costs before exceptional items (13,046) (14,524)
Exceptional items 2 (156) (79)
735 1,221
Share of profit after tax from joint ventures and
associates 57 57
Profits less losses on disposal of non-current assets 18 4
----------------------------------------------------------- ---- -------- --------
Operating profit 810 1,282
Adjusted operating profit 1 1,024 1,421
Profits less losses on disposal of non-current assets 18 4
Amortisation of non-operating intangibles (59) (47)
Acquired inventory fair value adjustments (15) (15)
Transaction costs (2) (2)
Exceptional items (156) (79)
----------------------------------------------------------- ---- -------- --------
Profits less losses on sale and closure of businesses 7 (14) (94)
----------------------------------------------------------- ---- -------- --------
Profit before interest 796 1,188
Finance income 11 15
Finance expense 3 (124) (42)
Other financial income 3 12
----------------------------------------------------------- ---- -------- --------
Profit before taxation 686 1,173
Adjusted profit before taxation 914 1,406
Profits less losses on disposal of non-current assets 18 4
Amortisation of non-operating intangibles (59) (47)
Acquired inventory fair value adjustments (15) (15)
Transaction costs (2) (2)
Exceptional items (156) (79)
Profits less losses on sale and closure of businesses (14) (94)
----------------------------------------------------------- ---- -------- --------
Taxation - UK (excluding tax on exceptional items) (69) (75)
- UK (on exceptional items) 1 12
- Overseas (excluding tax on exceptional items) (189) (214)
- Overseas (on exceptional items) 36 -
---------------------------------------------------------- ---- -------- --------
4 (221) (277)
----------------------------------------------------------- ---- -------- --------
Profit for the period 465 896
----------------------------------------------------------- ---- -------- --------
Attributable to
Equity shareholders 455 878
Non-controlling interests 10 18
----------------------------------------------------------- ---- -------- --------
Profit for the period 465 896
----------------------------------------------------------- ---- -------- --------
Basic and diluted earnings per ordinary share (pence) 5 57.6 111.1
Dividends per share paid and proposed for the period
(pence) 6 nil 46.35
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 12 September 2020
2020 2019
GBPm GBPm
-----
Profit for the period recognised in the income statement 465 896
Other comprehensive income
Remeasurements of defined benefit schemes (89) (407)
Deferred tax associated with defined benefit schemes 15 68
Current tax associated with defined benefit schemes - 2
Items that will not be reclassified to profit or loss (74) (337)
Effect of movements in foreign exchange (97) 43
Net (loss)/gain on hedge of net investment in foreign
subsidiaries (3) 3
Deferred tax associated with movements in foreign exchange 1 -
Reclassification adjustment for movements in foreign
exchange on subsidiaries disposed - (3)
Movement in cash flow hedging position (15) (29)
Deferred tax associated with movement in cash flow hedging
position - 7
Share of other comprehensive income of joint ventures
and associates (1) 4
Effect of hyperinflationary economies 17 38
Deferred tax associated with hyperinflationary economies - (2)
Items that are or may be subsequently reclassified to
profit or loss (98) 61
Other comprehensive loss for the period (172) (276)
----------------------------------------------------------- ----- -----
Total comprehensive income for the period 293 620
----------------------------------------------------------- ----- -----
Attributable to
Equity shareholders 296 601
Non-controlling interests (3) 19
----------------------------------------------------------- ----- -----
Total comprehensive income for the period 293 620
----------------------------------------------------------- ----- -----
CONSOLIDATED BALANCE SHEET
At 12 September 2020
2020 2019
GBPm GBPm
Non-current assets
Intangible assets 1,629 1,681
Property, plant and equipment 5,651 5,769
Right-of-use assets 2,990 -
Investments in joint ventures 233 225
Investments in associates 56 50
Employee benefits assets 100 228
Deferred tax assets 212 160
Other receivables 45 51
-------------------------------------------------- ------- -------
Total non-current assets 10,916 8,164
-------------------------------------------------- ------- -------
Current assets
Assets classified as held for sale 43 43
Inventories 2,150 2,386
Biological assets 72 84
Trade and other receivables 1,328 1,436
Derivative assets 102 99
Current asset investments 32 29
Income tax 30 24
Cash and cash equivalents 1,996 1,495
-------------------------------------------------- ------- -------
Total current assets 5,753 5,596
-------------------------------------------------- ------- -------
Total assets 16,669 13,760
-------------------------------------------------- ------- -------
Current liabilities
Liabilities classified as held for sale (5) (6)
Lease liabilities (297) -
Loans and overdrafts (154) (227)
Trade and other payables (2,316) (2,556)
Derivative liabilities (87) (52)
Income tax (171) (163)
Provisions (123) (64)
-------------------------------------------------- ------- -------
Total current liabilities (3,153) (3,068)
-------------------------------------------------- ------- -------
Non-current liabilities
Lease liabilities (3,342) -
Loans (318) (361)
Other payables - (271)
Provisions (41) (54)
Deferred tax liabilities (210) (261)
Employee benefits liabilities (166) (195)
-------------------------------------------------- ------- -------
Total non-current liabilities (4,077) (1,142)
-------------------------------------------------- ------- -------
Total liabilities (7,230) (4,210)
-------------------------------------------------- ------- -------
Net assets 9,439 9,550
-------------------------------------------------- ------- -------
Equity
Issued capital 45 45
Other reserves 175 175
Translation reserve 323 409
Hedging reserve (7) (9)
Retained earnings 8,819 8,832
-------------------------------------------------- ------- -------
Total equity attributable to equity shareholders 9,355 9,452
-------------------------------------------------- ------- -------
Non-controlling interests 84 98
-------------------------------------------------- ------- -------
Total equity 9,439 9,550
-------------------------------------------------- ------- -------
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 12 September 2020
2020 2019
GBPm GBPm
-----
Cash flow from operating activities
Profit before taxation 686 1,173
Profits less losses on disposal of non-current
assets (18) (4)
Profits less losses on sale and closure of businesses 14 94
Transaction costs 2 2
Finance income (11) (15)
Finance expense 124 42
Other financial income (3) (12)
Share of profit after tax from joint ventures
and associates (57) (57)
Amortisation 89 68
Depreciation (including depreciation of right-of-use
assets and non-cash lease adjustments) 827 544
Impairment of property, plant & equipment and
right-of-use assets 15 -
Exceptional items 156 79
Acquired inventory fair value adjustments 15 15
Effect of hyperinflationary economies 5 6
Net change in the fair value of current biological
assets (1) -
Share-based payment expense 8 22
Pension costs less contributions 10 (10)
Decrease/(increase) in inventories 199 (202)
Decrease in receivables 81 18
(Decrease)/increase in payables (174) 44
Purchases less sales of current biological assets (1) (1)
Increase/(decrease) in provisions 41 (28)
--------------------------------------------------------- ----- -----
Cash generated from operations 2,007 1,778
Income taxes paid (254) (269)
--------------------------------------------------------- ----- -----
Net cash from operating activities 1,753 1,509
--------------------------------------------------------- ----- -----
Cash flows from investing activities
Dividends received from joint ventures and associates 43 52
Purchase of property, plant and equipment (561) (680)
Purchase of intangibles (61) (57)
Lease incentives received 35 -
Sale of property, plant and equipment 30 12
Purchase of subsidiaries, joint ventures and associates (16) (84)
Sale of subsidiaries, joint ventures and associates 2 6
Purchase of other investments (1) -
Interest received 11 20
--------------------------------------------------------- ----- -----
Net cash from investing activities (518) (731)
--------------------------------------------------------- ----- -----
Cash flows from financing activities
Dividends paid to non-controlling interests (7) (4)
Dividends paid to equity shareholders (271) (358)
Interest paid (104) (43)
Repayment of lease liabilities (247) -
Decrease in short-term loans (43) (263)
(Decrease)/increase in long-term loans (2) 2
(Increase)/decrease in current asset investments (2) 1
Purchase of shares in subsidiary undertaking from
non-controlling interests (2) (1)
Movements from changes in own shares held - (25)
--------------------------------------------------------- ----- -----
Net cash from financing activities (678) (691)
--------------------------------------------------------- ----- -----
Net increase in cash and cash equivalents 557 87
Cash and cash equivalents at the beginning of
the period 1,358 1,271
Effect of movements in foreign exchange (6) -
--------------------------------------------------------- ----- -----
Cash and cash equivalents at the end of the period 1,909 1,358
--------------------------------------------------------- ----- -----
CONSOLIDATED STATEMENT of changes in equity
For the 52 weeks ended 14 September 2019
Attributable to equity shareholders
============================================================ ------------
Non-
Issued Other Translation Hedging Retained 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 movement
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
economy (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 6 (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
=========================== ==== ======== --------- ----------- -------- --------- ----- ------------ -------
CONSOLIDATED STATEMENT of changes in equity
For the 52 weeks ended 12 September 2020
Attributable to equity shareholders
------------------------------------------------------------ ------------
Non-
Issued Other Translation Hedging Retained 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 455 455 10 465
Remeasurements of defined
benefit
schemes (89) (89) (89)
Deferred tax associated
with defined
benefit schemes 15 15 15
Items that will not be
reclassified
to profit or loss (74) (74) (74)
Effect of movements in
foreign
exchange (83) (1) (84) (13) (97)
Net loss on hedge of net
investment
in foreign subsidiaries (3) (3) (3)
Deferred tax associated
with movement
in foreign exchange 1 1 1
Movement in cash flow
hedging
position (15) (15) (15)
Share of other
comprehensive income
of joint ventures and
associates (1) (1) (1)
Effect of hyperinflationary
economies 17 17 17
Items that are or may be
subsequently
reclassified to profit or
loss (86) (16) 17 (85) (13) (98)
Other comprehensive income (86) (16) (57) (159) (13) (172)
--------------------------- ---- -------- --------- ----------- -------- --------- ----- ------------ -------
Total comprehensive income (86) (16) 398 296 (3) 293
--------------------------- ---- -------- --------- ----------- -------- --------- ----- ------------ -------
Inventory cash flow hedge
movements
Gains transferred to cost
of inventory 18 18 18
=========================== ==== ======== ========= =========== ======== ========= ===== ============ =======
Total inventory cash flow
hedge
movements 18 18 18
=========================== ==== ======== ========= =========== ======== ========= ===== ============ =======
Transactions with owners
Dividends paid to equity
shareholders 6 (271) (271) (271)
Net movement in own shares
held 8 8 8
Deferred tax associated
with share
based payments 1 1 1
Dividends paid to
non-controlling
interests (8) (8)
Acquisition and disposal of
non-controlling
interests (2) (2)
--------------------------- ---- -------- --------- ----------- -------- --------- ----- ------------ -------
Total transactions with
owners (262) (262) (10) (272)
--------------------------- ---- -------- --------- ----------- -------- --------- ----- ------------ -------
Balance as at 12 September
2020 45 175 323 (7) 8,819 9,355 84 9,439
--------------------------- ---- -------- --------- ----------- -------- --------- ----- ------------ -------
NOTES TO THE ANNUAL RESULTS ANNOUNCEMENT
For the 52 weeks ended 12 September 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 year.
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, 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 and cereal specialities.
Retail Buying and merchandising value clothing and accessories through
the Primark and Penneys retail chains.
Geographical information
In addition to the required disclosure for operating segments,
disclosure is also given of certain geographical information
about
the group's operations, based on the geographical groupings:
United Kingdom; Europe & Africa; The Americas; and Asia
Pacific.
Revenues are shown by reference to the geographical location of
customers. Profits are shown by reference to the geographical
location of the businesses. Segment assets are based on the
geographical location of the assets.
Adjusted
Revenue operating profit
-------------- -------------------
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
------ ------ --------- --------
Operating segments
Grocery 3,528 3,498 437 381
Sugar 1,594 1,608 100 26
Agriculture 1,395 1,385 43 42
Ingredients 1,503 1,505 147 136
Retail 5,895 7,792 362 913
Central - - (63) (76)
------------------------- ------ ------ --------- --------
13,915 15,788 1,026 1,422
Businesses disposed:
Grocery 13 23 (1) (1)
Ingredients 9 13 (1) -
========================= ====== ====== ========= ========
13,937 15,824 1,024 1,421
------------------------- ------ ------ --------- --------
Geographical information
United Kingdom 5,054 5,971 312 476
Europe & Africa 5,048 5,992 298 589
The Americas 1,619 1,609 254 237
Asia Pacific 2,194 2,216 162 120
------------------------- ------ ------ --------- --------
13,915 15,788 1,026 1,422
Businesses disposed:
The Americas - 3 - -
Asia Pacific 22 33 (2) (1)
========================= ====== ====== ========= ========
13,937 15,824 1,024 1,421
------------------------- ------ ------ --------- --------
1. Operating segments for the 52 weeks ended 12 September
2020
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 3,530 1,658 1,398 1,685 5,895 (251) 13,915
Internal revenue (2) (64) (3) (182) - 251 -
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
External revenue from continuing
businesses 3,528 1,594 1,395 1,503 5,895 - 13,915
Businesses disposed 13 - - 9 - - 22
------------------------------------- ======= ===== =========== =========== ======= ======= =======
Revenue from external customers 3,541 1,594 1,395 1,512 5,895 - 13,937
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Adjusted operating profit before
joint ventures and associates 404 98 33 132 362 (63) 966
Share of profit after tax from
joint ventures and associates 33 2 10 15 - - 60
Businesses disposed (1) - - (1) - - (2)
Adjusted operating profit 436 100 43 146 362 (63) 1,024
Profits less losses on disposal
of non-current assets 9 7 1 (1) 3 (1) 18
Amortisation of non-operating
intangibles (52) - (1) (6) - - (59)
Acquired inventory fair value
adjustments (15) - - - - - (15)
Transaction costs - - - (2) - - (2)
Exceptional items 5 (23) - - (138) - (156)
Profits less losses on sale
and closure of businesses (4) - - (4) - (6) (14)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Profit before interest 379 84 43 133 227 (70) 796
Finance income 11 11
Finance expense (1) (3) - - (79) (41) (124)
Other financial income 3 3
Taxation (221) (221)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Profit for the period 378 81 43 133 148 (318) 465
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Segment assets (excluding joint
ventures and associates) 2,689 1,893 429 1,470 7,372 155 14,008
Investments in joint ventures
and associates 51 27 136 75 - - 289
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Segment assets 2,740 1,920 565 1,545 7,372 155 14,297
Cash and cash equivalents 1,998 1,998
Current asset investments 32 32
Income tax 30 30
Deferred tax assets 212 212
Employee benefits assets 100 100
Segment liabilities (637) (351) (147) (334) (4,523) (219) (6,211)
Loans and overdrafts (472) (472)
Income tax (171) (171)
Deferred tax liabilities (210) (210)
Employee benefits liabilities (166) (166)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Net assets 2,103 1,569 418 1,211 2,849 1,289 9,439
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Non-current asset additions 104 88 21 97 476 13 799
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Depreciation (including depreciation
of right-of-use assets and non-cash
lease adjustments) (109) (85) (16) (57) (546) (14) (827)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Amortisation (62) (2) (2) (7) (14) (2) (89)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Impairment of property, plant
& equipment and right-of-use
assets (15) - - - - - (15)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Impairment of property, plant
and equipment on sale and closure
of businesses (1) - - (1) - - (2)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Impairment of right-of-use assets
on sale and closure of businesses - - - (2) - - (2)
------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
1. Operating segments for the 52 weeks ended 14 September
2019
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ----- ----------- ----------- ------- -------
Revenue from continuing businesses 3,502 1,667 1,388 1,680 7,792 (241) 15,788
Internal revenue (4) (59) (3) (175) - 241 -
----------------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
External revenue from continuing businesses 3,498 1,608 1,385 1,505 7,792 - 15,788
Businesses disposed 23 - - 13 - - 36
----------------------------------------------- ======= ===== =========== =========== ======= ======= =======
Revenue from external customers 3,521 1,608 1,385 1,518 7,792 - 15,824
----------------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Adjusted operating profit before joint
ventures and associates 348 26 30 122 913 (76) 1,363
Share of profit after tax from joint
ventures and associates 33 - 12 14 - - 59
Businesses disposed (1) - - - - - (1)
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)
----------------------------------------------- ------- ----- ----------- ----------- ------- ------- -------
1. Operating segments - geographical information
2020
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
-------- --------- --------- --------
Revenue from external customers 5,054 5,048 1,619 2,216 13,937
--------------------------------------------- -------- --------- --------- -------- ------
Segment assets 5,249 6,263 1,314 1,471 14,297
--------------------------------------------- -------- --------- --------- -------- ------
Non-current asset additions 197 406 128 68 799
--------------------------------------------- -------- --------- --------- -------- ------
Depreciation (including depreciation
of right-of-use assets and non-cash
lease adjustments) (292) (397) (70) (68) (827)
--------------------------------------------- -------- --------- --------- -------- ------
Amortisation (48) (27) (6) (8) (89)
--------------------------------------------- -------- --------- --------- -------- ------
Acquired inventory fair value adjustments - (15) - - (15)
--------------------------------------------- -------- --------- --------- -------- ------
Impairment of property, plant & equipment
and right-of-use assets (15) - - - (15)
--------------------------------------------- -------- --------- --------- -------- ------
Impairment of property, plant and equipment
on sale and closure of businesses - - - (2) (2)
--------------------------------------------- -------- --------- --------- -------- ------
Impairment of right-of-use assets on
sale and closure of
businesses - - - (2) (2)
--------------------------------------------- -------- --------- --------- -------- ------
Transaction costs - (1) - (1) (2)
--------------------------------------------- -------- --------- --------- -------- ------
Exceptional items (4) (108) (44) - (156)
--------------------------------------------- -------- --------- --------- -------- ------
2019
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)
--------------------------------------------- -------- --------- --------- -------- ------
The group's operations in the following countries met the
criteria for separate disclosure:
Non-current
Revenue assets
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
-------------- ---------- --------- -------- -------
Australia 1,161 1,177 558 521
--------------- ---------- --------- -------- -------
Spain 1,097 1,430 849 417
--------------- ---------- --------- -------- -------
United States 1,055 1,051 727 560
--------------- ---------- --------- -------- -------
All segment disclosures are stated before reclassification of
assets and liabilities classified as held for sale.
2. Exceptional items
2020
Exceptional items of GBP156m comprise impairments of GBP116m in
property, plant and equipment and right-of-use assets at Primark,
an impairment of GBP23m in goodwill relating to Azucarera, charges
of GBP22m relating to inventory in Primark and a GBP5m gain on the
closure of our Speedibake Wakefield factory.
Our half year results were announced on 21 April and included an
exceptional inventory impairment charge of GBP248m and an onerous
contract provision of GBP36m. At the time of the interim
announcement, the dates for the reopening of Primark stores were
not known and more than half of the impairment charge related to
stock already on display in the closed stores. The earlier
reopening of the stores and subsequent successful trading of the
spring/summer inventory avoided the need for this provision. At the
year end a markdown provision of GBP22m was created for inventory
stored on our behalf by suppliers for longer than usual as a result
of the pandemic.
We have seen the benefits from the successful downsizing of
three stores in the US and three stores in Germany; we have plans
for several more stores in these markets and have recognised
non-cash write-downs of GBP34m against property, plant and
equipment and GBP82m against right-of-use assets.
In the light of the beet volumes contracted by Azucarera in the
second crop year after reducing the beet price paid to farmers, we
have revised our forecasts for this business. This resulted in a
GBP23m non-cash write-down of goodwill recorded in the Sugar and
Europe & Africa operating segments.
Our Speedibake Wakefield factory was destroyed by fire in
February and an exceptional charge of GBP25m was recognised in the
half year results. This comprised an GBP18m non-cash write-down of
property, plant and equipment, a GBP1m provision against inventory
and GBP6m of closure costs. Net insurance proceeds of GBP30m were
received in the second half, more than offsetting the exceptional
charge recorded in the first half. The full year position is an
exceptional gain of GBP5m recorded in the Grocery and United
Kingdom operating segments.
2019
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 UK defined benefit pension scheme for service between
1990 and 1997.
3. Finance expense
52 weeks 52 weeks
ended ended
12 September 14 September
2020 2019
GBPm GBPm
-------------
Bank loans and overdrafts (29) (24)
All other borrowings (10) (16)
Lease liabilities (84) -
Finance leases - (1)
Other payables (1) (1)
--------------------------- ------------- -------------
(124) (42)
-------------------------- ------------- -------------
4. Income tax expense
52 weeks 52 weeks
ended ended
12 September 14 September
2020 2019
GBPm GBPm
Current tax expense
UK - corporation tax at 19% (2019 - 19%) 57 80
Overseas - corporation tax 203 229
UK - under/(over) provided in prior periods 3 (5)
Overseas - over provided in prior periods (4) (1)
============================================================= ============= =============
259 303
Deferred tax expense
UK deferred tax 5 (7)
Overseas deferred tax (53) (11)
UK - under/(over) provided in prior periods 3 (5)
Overseas - under/(over) provided in prior periods 7 (3)
============================================================= ============= =============
(38) (26)
============================================================= ============= =============
Total income tax expense in income statement 221 277
============================================================= ============= =============
Reconciliation of effective tax rate
Profit before taxation 686 1,173
Less share of profit after tax from joint ventures and
associates (57) (57)
============================================================= ============= =============
Profit before taxation excluding share of profit after
tax from joint ventures and associates 629 1,116
============================================================= ============= =============
Nominal tax charge at UK corporation tax rate of 19%
(2019 - 19%) 120 212
Effect of higher and lower tax rates on overseas earnings 18 14
Effect of changes in tax rates on income statement 13 (1)
Expenses not deductible for tax purposes 54 37
Disposal of assets covered by tax exemptions or unrecognised
capital losses 1 17
Deferred tax not recognised 6 12
Adjustments in respect of prior periods 9 (14)
============================================================= ============= =============
221 277
============================================================= ============= =============
Income tax recognised directly in equity
Deferred tax associated with defined benefit schemes (15) (68)
Current tax associated with defined benefit schemes - (2)
Deferred tax associated with share-based payments (1) -
Deferred tax associated with movement in cash flow hedging
position - (7)
Deferred tax associated with movements in foreign exchange (1) -
Deferred tax associated with hyperinflationary economies - 2
============================================================= ============= =============
(17) (75)
============================================================= ============= =============
A UK corporation tax rate of 19% (effective 1 April 2020) was
substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. The legislation to
effect these changes was enacted before the balance sheet date and
UK deferred tax has accordingly been calculated at 19%. The effect
of this change was a GBP6m tax charge in the income statement
principally on the amortisation of non-operating intangibles and
exceptional items and GBP3m tax charge recorded in other
comprehensive income.
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 GBP27m, 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.
5. Earnings per share
The calculation of basic earnings per share at 12 September 2020
was based on the net profit attributable to equity shareholders
of GBP455m (2019 - GBP878m), and a weighted average number of
shares outstanding during the year of 790 million (2019 - 790
million). The calculation of the weighted average number of shares
excludes the shares held by the Employee Share Ownership Plan Trust
on which the dividends are being waived.
Adjusted earnings per ordinary share, which exclude the impact
of profits less losses on disposal of non-current assets and the
sale and closure of businesses, amortisation of acquired inventory
fair value adjustments, transaction costs, amortisation of
non-operating intangibles, exceptional items and any associated tax
credits, is shown to provide clarity on the underlying performance
of the group.
The diluted earnings per share calculation takes into account
the dilutive effect of share incentives. The diluted, weighted
average number of shares is 790 million (2019 - 790 million). There
is no difference between basic and diluted earnings.
52 weeks 52 weeks
ended ended
12 September 14 September
2020 2019
pence pence
-------------
Adjusted earnings per share 81.1 137.5
Disposal of non-current assets 2.3 0.5
Sale and closure of businesses (1.8) (11.9)
Acquired inventory fair value adjustments (1.9) (1.9)
Transaction costs (0.3) (0.3)
Exceptional items (19.7) (10.0)
Tax effect on above adjustments 4.6 1.9
Amortisation of non-operating intangibles (7.5) (6.0)
Tax credit on non-operating intangibles amortisation
and goodwill 0.8 1.3
Earnings per ordinary share 57.6 111.1
===================================================== ============= =============
6. Dividends
2020 2019
pence pence 2020 2019
per share per share GBPm GBPm
---------- ---------- -----
2018 final - 33.30 - 263
2019 interim - 12.05 - 95
2019 final 34.30 - 271 -
34.30 45.35 271 358
============= ========== ========== ===== =====
No 2020 interim dividend was paid this year and no final
dividend is proposed.
There is no dividend relating to the period (2019 - 46.35p per
share totalling GBP366m).
7. 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. In the second half of the year the group acquired
two small Agriculture businesses in Europe and the group's
Ingredients business acquired Larodan, a Swedish manufacturer and
international marketer of state-of-the-art, high-purity
research-grade lipids that will expand our research and product
development capabilities to better serve the pharmaceutical,
nutritional and industrial market sectors.
Total consideration for these acquisitions was GBP19m,
comprising GBP16m cash consideration and GBP3m deferred
consideration. Net assets acquired comprised non-operating
intangible assets of GBP15m, which were recognised with their
related deferred tax of GBP3m, and GBP1m of other operating assets.
Goodwill of GBP6m resulted from these acquisitions.
2019
The group's Grocery business completed the acquisitions of 100%
of Yumi's Quality Foods, a chilled food manufacturer in Australia
and Anthony's Goods, a California-based blender and online marketer
of speciality baking ingredients, to further develop our presence
in the faster growing segments of the grocery market. The group
also acquired a small manufacturer of piglet starter feed in Poland
as part of the Agriculture business and Italmill, an Italian bakery
ingredients producer as part of the Ingredients business.
The acquisitions had the following effect on the group's assets
and liabilities in the year ended 14 September 2019:
Pre-acquisition Recognised
carrying values values on
GBPm acquisition
GBPm
------------------
Net assets
Intangible assets - 56
Property, plant and equipment 20 20
Other receivables (non-current) 2 2
Inventories 7 7
Trade and other receivables 14 14
Cash and cash equivalents 2 2
Trade and other payables (11) (11)
Loans (15) (15)
Taxation (1) (8)
Employee benefit liabilities (1) (1)
----------------------------------------------- ------------------ ------------
Net identifiable assets and liabilities 17 66
Goodwill 30
Total consideration 96
----------------------------------------------- ------------------ ------------
Recognised
values on
acquisition
GBPm
------------------------------------------------------------------- ------------
Satisfied by
Cash consideration 85
Deferred consideration 11
------------------------------------------------------------------- ------------
96
------------------------------------------------------------------- ------------
Net cash
Cash consideration 85
Cash and cash equivalents acquired (2)
Deferred consideration paid in respect of previous acquisition 1
------------------------------------------------------------------- ------------
84
------------------------------------------------------------------- ------------
Pre-acquisition carrying amounts were the same as recognised
values on acquisition apart from GBP56m of non-operating intangible
assets in respect of brands and customer relationships, which were
recognised together with related deferred tax of GBP7m. The cash
outflow of GBP84m on the purchase of subsidiaries, joint ventures
and associates in the cash flow statement comprises cash
consideration of GBP85m for these acquisitions less cash acquired
with the businesses of GBP2m and GBP1m payment of deferred
consideration in respect of prior year acquisitions.
The acquisitions have contributed aggregate revenues of GBP42m
and operating profit of GBP4m to the group's result for the period
from the date of acquisition to 14 September 2019.
Disposals
2020
In 2020 the group announced the closure of the Cake business in
the Grocery segment in Australia and the Jasol New Zealand business
in the Ingredients segment, with GBP10m included in loss on closure
of business, comprising GBP2m non-cash impairment of property,
plant and equipment, GBP2m non-cash impairment of right-of-use
assets and GBP6m 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.
The group also charged a GBP6m onerous lease provision to sale and
closure of business (in the Central and UK segments) in respect of
guarantees given on property leases assigned to third parties that
the group expects to be required to honour.
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.
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 loss on closure of businesses,
comprising GBP56m of goodwill and GBP32m of property, plant and
equipment.
In addition 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 businesses during
the year in Grocery (The Americas). In the Agriculture segment,
goodwill with a carrying value of GBP3m was written off on sale and
closure of a small business in the UK.
8. Analysis of net cash/(debt)
At New leases At
14 September IFRS 16 and non-cash Exchange 12 September
2019 transition Cash flow Disposals items adjustments 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----------- --------- --------- ------------- ------------
Cash at bank and in
hand,
cash
equivalents and
overdrafts 1,358 - 557 - - (6) 1,909
Current asset
investments 29 - 2 - - 1 32
Short-term loans (90) 1 43 - (23) 4 (65)
Long-term loans (361) 13 2 - 23 5 (318)
Lease liabilities - (3,678) 247 1 (143) (66) (3,639)
======================== ============= =========== ========= ========= ============= ============ =============
936 (3,664) 851 1 (143) (62) (2,081)
======================== ============= =========== ========= ========= ============= ============ =============
9. Related party transactions
The group has a controlling shareholder relationship with its
parent company, Wittington Investments Limited, with the trustees
of the Garfield Weston Foundation and with certain other
individuals who hold shares in the Company. The group has a related
party relationship with its associates and joint ventures and with
its directors. In the course of normal operations, related party
transactions entered into by the group have been contracted on an
arm's length basis.
Material transactions and year end balances with related parties
were as follows:
Sub 2020 2019
note GBP000 GBP000
----- -------
Charges to Wittington Investments Limited in respect of services
provided by the Company and
its subsidiary undertakings 1,095 1,143
Dividends paid by Associated British Foods and received in
a beneficial capacity by:
(i) trustees of the Garfield Weston Foundation and their close
family 1 9,151 12,083
(ii) directors of Wittington Investments Limited who are not
trustees of the Foundation and their
close family 3,632 5,941
(iii) directors of the Company who are not trustees of the
Foundation and are not directors of Wittington Investments
Limited 73 82
Sales to fellow subsidiary undertakings on normal trading
terms 2 96 75
Sales to companies with common key management personnel on
normal trading terms 3 18,404 16,014
Commissions paid to companies with common key management personnel
on normal trading terms 3 557 1,103
Amounts due from companies with common key management personnel 3 2,237 1,880
Sales to joint ventures on normal trading terms 14,154 12,744
Sales to associates on normal trading terms 28,249 31,174
Purchases from joint ventures on normal trading terms 323,860 380,176
Purchases from associates on normal trading terms 12,863 15,739
Amounts due from joint ventures 41,722 46,102
Amounts due from associates 3,497 2,620
Amounts due to joint ventures 26,745 27,962
Amounts due to associates 1,272 1,282
=================================================================== ===== ======= =======
1. The Garfield Weston Foundation ('the Foundation') is an
English charitable trust, established in 1958 by the late W.
Garfield Weston. The Foundation has no direct interest in the
Company, but as at 12 September 2020 was the beneficial owner of
683,073 shares (2019 - 683,073 shares) in Wittington Investments
Limited representing 79.2% (2019 - 79.2%) of that company's issued
share capital and is, therefore, the Company's ultimate controlling
party. At 12 September 2020 trustees of the Foundation comprised
four grandchildren of the late W. Garfield Weston and five children
of the late Garry H. Weston.
2. The fellow subsidiary undertakings are Fortnum and Mason plc and Heal & Son Limited.
3. The companies with common key management personnel are the
George Weston Limited group, in Canada, and Selfridges & Co.
Limited.
Amounts due from joint ventures include GBP40m (2019 - GBP44m)
of finance lease receivables. The remainder of the balance is
trading balances. All but GBP5m (2019 - GBP5m) of the finance lease
receivables are non-current.
10. Other information
The financial information set out above does not constitute the
Company's statutory accounts for the 52 weeks ended 12 September
2020, or the 52 weeks ended 14 September 2019. Statutory accounts
for 2019 have been delivered to the Registrar of Companies and
those for 2020 will be delivered following the Company's annual
general meeting. The auditors have reported on those accounts.
Their reports were (i) unqualified, (ii) did not include references
to any matters to which the auditors drew attention by way of
emphasis without qualifying their reports and (iii) did not contain
a statement under section 498(2) or (3) of the Companies Act 2006
in respect of the accounts.
11. Basis of preparation
Associated British Foods plc ('the Company') is a company
domiciled in the United Kingdom. The consolidated financial
statements of the Company for the 52 weeks ended 12 September 2020
(2019 - 52 weeks ended 14 September 2019) 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 were authorised for issue
by the directors on 3 November 2020.
The consolidated financial statements have been prepared and
approved by the directors in accordance with International
Financial Reporting Standards as adopted by the EU ('Adopted
IFRS'). Under Adopted IFRS, management is required to make
judgements, estimates and assumptions about the reported amounts of
assets and liabilities, income and expense and the disclosure of
contingent assets and liabilities. The estimates and associated
assumptions are based on experience. Actual results may differ from
these estimates. The estimates and underlying assumptions are
reviewed on a regular basis. Revisions to accounting estimates are
recognised from the period in which the estimates are revised.
The consolidated financial statements are presented in sterling,
rounded to the nearest million. They are prepared on the historical
cost basis except that current biological assets and certain
financial instruments are stated at fair value. Assets classified
as held for sale are stated at the lower of carrying amount and
fair value less costs to sell.
The consolidated financial statements of the group are prepared
to the Saturday nearest to 15 September. Accordingly, these
financial statements have been prepared for the 52 weeks ended 12
September 2020. To avoid delay in the preparation of the
consolidated financial statements, the results of certain
subsidiaries, joint ventures and associates are included up to 31
August 2020. Adjustments are made as appropriate for significant
transactions or events occurring between 12 September and these
other balance sheet dates.
12. New accounting policies
The following accounting standards and amendments were adopted
during the year 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.
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 were the 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.
=================== ==============================================================
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 annual 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
================================================= ============= ============ ============
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.
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
-- 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
13. Alternative performance measures
In the reporting of financial information, the Board uses
various Alternative Performance Measures (APMs) which they believe
provide useful additional information for understanding the
financial performance and financial health of the group. These APMs
should be considered in addition to IFRS measures and are not
intended to be a substitute for them. As they are not defined by
IFRS, they may not be directly comparable with other companies who
use similar measures.
APMs are also used to improve the comparability of information
between reporting periods and geographical units (such as
like-for-like sales) by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid users in
understanding the group's performance.
Consequently, APMs are used by the Board and management for
performance analysis, planning, reporting and incentive-setting
purposes.
Closest
equivalent
APM IFRS measure Definition/purpose Reconciliation/calculation
------------- ---------------------------------------------------
Like-for-like No direct The like-for-like sales metric enables Consistent with the
sales equivalent measurement of the performance of definition given.
our retail stores on a comparable
year-on-year basis.
This measure represents the change
in sales at constant currency in
our retail stores adjusted for new
stores, closures and relocations.
Refits, extensions and downsizes
are also adjusted for if a store's
retail square footage changes by
10% or more. For each change described
above, a store's sales are excluded
from like-for-like sales for one
year.
No adjustments are made for disruption
during refits, extension or downsizes,
for cannibalisation by new stores,
or for the timing of national or
bank holidays.
It is measured against comparable
trading days in each year subsequent
to reopening after lockdown.
================ ============= =================================================== ===========================
Operating No direct Operating (profit) margin is adjusted Reconciliation/calculation
(profit) equivalent operating profit as a percentage see
margin of revenue. Note A below.
This year, the comparative operating
(profit) margin is calculated using
2019 IFRS 16 pro forma data.
================ ============= =================================================== ===========================
Adjusted Operating Adjusted operating profit is stated A reconciliation
operating profit before amortisation of non-operating of this measure
profit intangibles, transaction costs, amortisation is provided on the
of fair value adjustments made to face of the consolidated
acquired inventory, profits less income statement
losses on disposal of non-current and by operating
assets and exceptional items. segment in note 1.
Items defined above which arise in
the group's joint ventures and associates
are also treated as adjusting items
for the purposes of adjusted operating
profit.
================ ============= =================================================== ===========================
Adjusted Profit Adjusted profit before tax is stated A reconciliation
profit before before amortisation of non-operating of this measure
before tax intangibles, transaction costs, amortisation is provided on the
tax of fair value adjustments made to face of the consolidated
acquired inventory, profits less income statement
losses on disposal of non-current and by operating
assets, exceptional items and profits segment in note 1.
less losses on sale and closure of
businesses.
Items defined above which arise in
the group's joint ventures and associates
are also treated as adjusting items
for the purposes of adjusted profit
before tax.
================ ============= =================================================== ===========================
Adjusted Earnings Adjusted earnings and adjusted earnings A reconciliation
earnings and earnings per share are stated before amortisation of adjusted earnings
and adjusted per share of non-operating intangibles, transaction per share is provided
earnings costs, amortisation of fair value in note 5.
per share adjustments made to acquired inventory,
profits less losses on disposal of
non-current assets, exceptional items
and profits less losses on sale and
closure of businesses together with
the related tax effect.
Items defined above which arise in
the group's joint ventures and associates
are also treated as adjusting items
for the purposes of adjusted earnings
and adjusted earnings per share.
================ ============= =================================================== ===========================
Exceptional No direct Exceptional items are items of income Exceptional items
items equivalent and expenditure which are material are included
and unusual in nature and are considered on the face of the
of such significance that they require consolidated income
separate disclosure on the face of statement with further
the income statement. detail provided in
note 2.
================ ============= =================================================== ===========================
Constant Revenue Constant currency measures are derived Reconciliation/calculation
currency and adjusted by translating the relevant prior see
operating year figure at current year average Note B below.
profit exchange rates, except for countries
(non-IFRS) where CPI has escalated to extreme
measure levels, in which case actual exchange
rates are used. There are currently
two countries where the group has
operations in this position - Argentina
and Venezuela.
This year, adjusted operating profit
at constant currency is calculated
against the 2019 IFRS 16 pro forma
adjusted operating profit measure.
---------------- ------------- --------------------------------------------------- ---------------------------
Closest
equivalent
APM IFRS measure Definition/purpose Reconciliation/calculation
---------------- --------------- ------------------------------------------------- ---------------------------
Effective Income The effective tax rate is the tax charge Whilst the effective
tax rate tax expense for the year expressed as a percentage of tax rate is not disclosed,
profit before tax. a reconciliation
of the tax charge
on profit before
tax at the UK corporation
tax rate to the actual
tax charge is provided
in note 4.
================ =============== ================================================= ===========================
Adjusted No direct The adjusted effective tax rate is the tax The tax impact of
effective equivalent charge for the year on the adjusted profit reconciling items
tax rate before tax expressed as a percentage of between profit before
adjusted profit before tax. tax and adjusted
profit before tax
is shown in note
5.
================ =============== ================================================= ===========================
Dividend No direct Dividend cover is the ratio of adjusted Reconciliation/calculation
cover equivalent earnings per share to dividends per share see
relating to the year. Note C below.
================ =============== ================================================= ===========================
Capital No direct Capital expenditure is a measure of investment Reconciliation/calculation
expenditure equivalent each year in non-current assets in existing see
businesses. It comprises cash outflows from Note D below.
the purchase of property, plant and equipment
and intangibles.
================ =============== ================================================= ===========================
Gross No direct Gross investment is a measure of investment Reconciliation/calculation
investment equivalent each year in non-current assets of existing see
businesses and acquisitions of new businesses. Note E below.
It includes capital expenditure (see above)
as well as cash outflows from the purchase
of subsidiaries, joint ventures and associates,
additional shares in subsidiary undertakings
from non-controlling interests and other
investments, as well as net debt assumed
in acquisitions.
================ =============== ================================================= ===========================
Net cash/debt No direct This measure comprises cash, cash equivalents A reconciliation
excluding equivalent and overdrafts, current asset investments of this measure
lease and loans. is in note 8.
liabilities
================ =============== ================================================= ===========================
Net cash/debt No direct This measure comprises cash, cash equivalents A reconciliation
including equivalent and overdrafts, current asset investments, of this measure
lease loans and lease liabilities. is in note 8.
liabilities
================ =============== ================================================= ===========================
(Average) No direct Capital employed is derived from the management Consistent with the
capital equivalent balance sheet and does not reconcile directly definition given.
employed to the statutory balance sheet. All elements
of capital employed are calculated in accordance
with Adopted IFRS.
Average capital employed for each segment
and the group is calculated by averaging
the capital employed for each period of
the financial year based on the reporting
calendar of each business.
================ =============== ================================================= ===========================
Return No direct The return on (average) capital employed Consistent with the
on (average) equivalent measure divides adjusted operating profit definition given.
capital by average capital employed. Also referred
employed to as ROCE and ROACE.
================ =============== ================================================= ===========================
(Average) No direct Working capital is derived from the management Consistent with the
working equivalent balance sheet and does not reconcile directly definition given.
capital to the statutory balance sheet. All elements
of working capital are calculated in accordance
with Adopted IFRS.
Average working capital for each segment
and the group is calculated by averaging
the working capital for each period of the
financial year based on the reporting calendar
of each business.
================ =============== ================================================= ===========================
(Average) No direct This measure expresses average working capital Consistent with the
working equivalent as a percentage of revenue. definition given.
capital
as a percentage
of revenue
================ =============== ================================================= ===========================
Note A
Central
and disposed
Grocery Sugar Agriculture Ingredients Retail businesses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ----- ----------- ----------- ------ -------------
2020
External revenue from continuing
businesses 3,528 1,594 1,395 1,503 5,895 22 13,937
Adjusted operating profit 437 100 43 147 362 (65) 1,024
Operating margin % 12.4% 6.3% 3.1% 9.8% 6.1% 7.3%
2019
External revenue from continuing
businesses 3,498 1,608 1,385 1,505 7,792 36 15,824
Adjusted operating profit (IFRS
16 pro forma comparatives) 381 30 42 137 969 (77) 1,482
Operating margin % 10.9% 1.9% 3.0% 9.1% 12.4% 9.4%
================================== ======= ===== =========== =========== ====== ============= ======
Note B
Disposed
Grocery Sugar Agriculture Ingredients Retail businesses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ----- ----------- ----------- ------ -----------
2020
External revenue from continuing
businesses at actual rates 3,528 1,594 1,395 1,503 5,895 22 13,937
2019
External revenue from continuing
businesses at actual rates 3,498 1,608 1,385 1,505 7,792 36 15,824
Impact of foreign exchange (38) (91) (7) (44) (33) (1) (214)
================================== ======= ===== =========== =========== ====== =========== ======
External revenue from continuing
businesses at
constant currency 3,460 1,517 1,378 1,461 7,759 35 15,610
% change at constant currency +2% +5% +1% +3% -24% -11%
Central
and disposed
Grocery Sugar Agriculture Ingredients Retail businesses Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ----- ----------- ----------- ------ -------------
2020
Adjusted operating profit at
actual rates 437 100 43 147 362 (65) 1,024
2019
Adjusted operating profit at
actual rates 381 30 42 137 969 (77) 1,482
Impact of foreign exchange - (9) - (3) (4) - (16)
============================== ======= ===== =========== =========== ====== ============= =====
Adjusted operating profit at
constant currency 381 21 42 134 965 (77) 1,466
% change at constant currency +15% +376% +2% +10% -62% -30%
Note C
2020 2019
-----
Adjusted earnings per share (pence) 81.10 137.50
Dividends relating to the year (pence) - 46.35
======================================== ===== ======
Dividend cover n/a 2.97
======================================== ===== ======
Note D
2020 2019
From the cash flow statement GBPm GBPm
-----
Purchase of property, plant and equipment 561 680
Purchase of intangibles 61 57
=========================================== ===== =====
622 737
========================================== ===== =====
Note E
2020 2019
From the cash flow statement GBPm GBPm
-----
Purchase of property, plant and equipment 561 680
Purchase of intangibles 61 57
Purchase of subsidiaries, joint ventures and associates 16 84
Purchase of shares in subsidiary undertaking from
non-controlling interests 2 1
Purchase of other investments 1 -
Net debt assumed in acquisitions (from the reconciliation
of net debt) - 15
=========================================================== ===== =====
641 837
========================================================== ===== =====
14. Subsequent events
We consider the government decisions to close temporarily
certain Primark stores to be a non-adjusting post balance sheet
event given the timing of the announcements after the year end. Any
financial implications arising from these closures will be
reflected in the financial results for the year ended September
2021.
Our yeast and bakery ingredients joint venture in China with
Wilmar International received regulatory approval in April and the
new business commenced operations just after the year end.
Construction of the major new yeast plant in northern China is well
underway.
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END
FR FSSSSDESSESF
(END) Dow Jones Newswires
November 03, 2020 02:00 ET (07:00 GMT)
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