TIDMABF
RNS Number : 8615W
Associated British Foods PLC
24 April 2019
For release 24 April 2019
Associated British Foods plc
Interim Results Announcement
24 weeks ended 2 March 2019
For release 24 April 2019
Associated British Foods plc results for 24 weeks ended 2 March
2019
ABF delivers a robust set of results
Financial Headlines
Actual Constant currency
* Group revenue GBP7,532m +1% +2%
* Adjusted operating profit GBP639m -1% -2%
* Adjusted profit before tax GBP627m In line
* Adjusted earnings per share 61.1p In line
* Dividend per share 12.05p +3%
* Gross investment GBP433m
* Net cash GBP386m
* Statutory operating profit down 14% to GBP534m,
statutory profit before tax down 15% to GBP515m, and
a reduction in basic earnings per share of 19% to
49.2p mainly as a result of an exceptional charge of
GBP79m included in this year's income statement.
George Weston, Chief Executive of Associated British Foods,
said:
"This is a robust set of results. Profit at AB Sugar was
substantially reduced but, from this period, we expect our sugar
profitability to improve. The strong underlying growth in Grocery
profits demonstrates good momentum. Primark delivered excellent
profit growth, driven by further development of our customer
experience and selling space expansion."
Adjusted operating profit is stated before the amortisation of
non-operating intangibles, profits less losses on disposal of
non-current assets, transaction costs, amortisation of acquired
inventory fair value adjustments and exceptional items. These
items, together with profits less losses on the sale and closure of
businesses, are excluded from adjusted profit before tax and
adjusted earnings per share. References to operating profit in the
Operating Review are based on this adjusted operating profit
measure.
Constant currency figures are derived by translating the 2018
results at 2019 average exchange rates, except for countries where
consumer price inflation has escalated to extreme levels, in which
case actual exchange rates are used, applied to local currency data
before the application of IAS 29.
Underlying profit for Grocery excludes a GBP12m charge in 2019
in respect of the closure of the Twinings tea factory in Jinqiao,
China.
For further information please contact:
Until 15.00 only
Associated British Foods:
John Bason, Finance Director
Tel: 020 7638 9571
Citigate Dewe Rogerson:
Chris Barrie
Tel: 020 7638 9571
After 15.00
John Bason, Finance Director
Tel: 020 7399 6500
For release 24 April 2019
Interim Results Announcement
For the 24 weeks ended 2 March 2019
CHAIRMAN'S STATEMENT
Revenue for the group of GBP7.5bn in the first half was 1% ahead
of last year and adjusted operating profit of GBP639m was 1% lower
than last year, at actual exchange rates. There was a minimal
effect on the translation of these results arising from changes in
sterling exchange rates. Net financing costs reduced against the
same period last year as a result of an increase in the surplus for
our defined benefit pension schemes between the 2017 and 2018 year
ends and favourable interest rate movements. As a result, adjusted
earnings per share were in line with last year at 61.1 pence.
The statutory operating profit for the period was 14% down at
GBP534m. This year the statutory operating profit includes
exceptional items of GBP79m. Low bread prices and strong
competition have been a feature of the trading environment for
Allied Bakeries. Notice of the termination of its largest private
label manufacturing contract has led to a non-cash impairment of
GBP65m to the assets of that business. A pension service cost of
GBP14m has also been taken for the equalisation of Guaranteed
Minimum Pensions for members of the company's defined benefit
pension scheme for the period between 1990 and 1997. As a result,
the statutory profit before tax reduced by 15% to GBP515m and basic
earnings per share reduced by 19% to 49.2 pence.
We continued to invest for the long term with a gross investment
of GBP433m. Capital expenditure was GBP382m with over half of this
spent on Primark's expansion, including our new store at Birmingham
High Street which opened in April, becoming our largest Primark
store. In our food businesses, investments were made to expand
capacity, including a new state-of-the-art Ryvita bakery in
Bardney, Lincolnshire and Westmill's new noodle line in Manchester.
Cost reduction remained a focus for capital projects in our sugar,
yeast and bakery ingredients businesses, while the expansion of
Twinings' tea factory in Poland enabled the consolidation of
production from, and closure of, its facility in China. In
September 2018 we acquired Yumi's Quality Foods, an Australian
manufacturer of premium chilled dips and snacks.
Cash flow before acquisitions and disposals improved compared to
the corresponding period last year driven by a reduction in the
usual seasonal working capital outflow in the first half. Capital
expenditure was in line with last year and consideration paid for
businesses acquired during the period amounted to GBP47m. Together
with the payment of the final dividend, these resulted in a net
cash balance for the group at the half year of GBP386m, up from
GBP123m at this time last year, and compared to net cash of GBP614m
at the beginning of the financial year.
Board
As noted in the Annual Report, in September 2018 we welcomed
Graham Allan to the board as a non-executive director. We look
forward to working with him.
After twelve years as a director on our board, Javier Ferrán
stood down at our Annual General Meeting in December, and I
reiterate my thanks to him for his time and commitment throughout
these years. Ruth Cairnie took on the responsibilities of Senior
Independent Director.
Dividends
The board has declared an interim dividend of 12.05 pence per
share, an increase of 3% on last year. The dividend will be paid on
5 July 2019 to shareholders registered at the close of business on
7 June 2019.
Outlook
In the first half, excellent profit growth was delivered by
Primark and, on an underlying basis, by Grocery. This growth was
mainly offset by the decline in AB Sugar. In the second half we
expect the underlying growth in Grocery to continue. Our full year
outlook for Primark profit is unchanged and will reflect the
expected margin reduction in the second half due to the effect of a
stronger US dollar on purchases.
Our full year outlook for the group is unchanged, with adjusted
earnings per share expected to be in line with last year.
Michael McLintock
Chairman
Operating review
Group revenue of GBP7.5bn was 2% ahead of last year, and
adjusted operating profit was 2% behind last year, at constant
currency. The group delivered a robust set of results in this
period, with excellent profit growth achieved in Primark and
Grocery, offset by the expected reduction in profit at AB
Sugar.
Primark's profit growth of 25% was very strong, reflecting its
continued selling space expansion and improved margins, which were
driven not only by favourable exchange rates but also by better
buying. It was pleasing to see the business trade well in most
countries and gain substantial share in competitive European retail
markets. In Germany we have strengthened the management team to
address our difficult trading there. Of particular note is the
strength of our performance in the UK, with superior sales growth
and a strong increase in our share of the overall clothing market.
We unveiled our new store in Birmingham this month, our largest
Primark store to date, which was greeted enthusiastically by our
customers. This store showcases the breadth of the Primark offer as
it is today and is a clear demonstration of Primark's continuing
development.
Strong progress was made in Grocery, with excellent growth in
adjusted operating profit on an underlying basis. This growth was
broadly based, driven by a combination of commercial developments,
cost reduction and improvements in operating efficiency. The
trading performance of our recently acquired premium balsamic
vinegar business, Acetum, was very pleasing especially with its
development in international markets. We are focused on, and
committed to, further reducing the losses at Allied Bakeries and
are developing options for measures to be taken as needed.
The reduction in profit reported by our UK and Spanish sugar
businesses was, as previously explained, the result of
significantly lower prices which affected the EU sugar industry.
With our ongoing cost reduction focus, a later phasing of profit in
this financial year for Illovo, and some recovery in EU sugar
prices we expect, from this period, our sugar profitability to
improve.
The consequences for the group of the UK leaving the EU should
be seen in the context of the diversity of our operations and
geographical footprint. Primark has discrete supply chains for the
UK and Eurozone and our business model, wherever possible, aligns
food production with the end markets for our products. In common
with many other businesses, we share a concern about the risk of
abrupt changes to the UK's customs procedures. We therefore welcome
the recently agreed extension to the Article 50 process and
Government's intention to have a transition period in which to
implement the necessary systems and processes. While we continue to
regard the possibility of the UK leaving the EU without any form of
transition period as unlikely, those businesses that might expect
to see some disruption in these circumstances have made the
preparations necessary to ensure this disruption is minimised. We
do not expect these preparations to materially impact the financial
performance, or position, of the group.
Sales and profit growth commentary in this Operating Review are
based on results stated at constant currency. Constant currency
figures are derived by translating the 2018 results at 2019 average
exchange rates, except for countries where consumer price inflation
has escalated to extreme levels, in which case actual exchange
rates are used, applied to local currency data before the
application of IAS 29.
Grocery
Actual Constant
2019 2018 fx fx
Revenue GBPm 1,721 1,672 +3% +3%
=============================== ===== ===== ====== ========
Adjusted operating profit GBPm 167 159 +5% +2%
=============================== ===== ===== ====== ========
Revenue in the first half was 3% ahead of last year at constant
currency. We have adopted the new accounting standard IFRS 15
Revenue from Contracts with Customers from the start of this
financial year. Revenue was reduced by GBP16m in the first half as
certain payments to customers, which were previously expensed, are
now deducted from revenue and so, on a comparable basis, Grocery
revenue increased 4% on last year. The major contributors to this
growth were George Weston Foods in Australia, including the first
contribution from Yumi's, a full half year contribution from
Acetum, Twinings Ovaltine and pricing at Allied Bakeries.
Operating profit in the first half was up 2% at constant
currency. However, this includes a GBP12m one-time cost for the
closure of the Twinings tea factory in Jinqiao, China. On an
underlying basis Grocery profit increased 10% on last year and
margin was well ahead. This margin improvement was driven by
trading at Twinings Ovaltine, George Weston Foods, ACH in the US,
and improved profitability at Acetum.
Twinings Ovaltine revenues were ahead of last year with
especially strong growth in Twinings. Sales in Australia and the UK
benefited from the success of the Cold Infuse teas range launched
last summer leading to record market shares in both countries. In
addition, good growth was achieved in the US, China and Italy.
Ovaltine increased sales in the important market of Switzerland,
through new product launches, and achieved good growth in Brazil,
although sales in Thailand were lower than an exceptionally strong
first half last year. We successfully completed the transfer of tea
production from Jinqiao, China to our existing site in Swarzedz,
Poland.
Jordans and Ryvita achieved good sales growth in a number of
international markets, sales of Ryvita Thins grew in the UK,
although profit declined due to increased raw materials costs.
Strong progress was made in the period to deliver an improved
manufacturing capability, with the commissioning of the new Ryvita
bakery in Bardney, Lincolnshire and the closure of the production
facility at Poundbury, Dorset. At AB World Foods sales of Blue
Dragon increased in the UK, while strong market share gains were
delivered in the US through expanded distribution and supported by
the successful Patak's paste pots advertising campaign featuring
Jamie Oliver. Westmill achieved further growth in sales of noodles,
although rice sales declined in a highly competitive market.
At Allied Bakeries, recent customer discussions on pricing have
had some success but have also led to the termination of our
largest private label bread manufacturing contract by a major
retailer. The effect of the volume loss is expected to be seen in
our next financial year. Although our operating losses are forecast
to be reduced this year, the carrying value of the assets in this
business was no longer supported by our forecasts of its discounted
future cash flows as a result of the termination of the private
label contract. Consequently, a non-cash impairment charge of
GBP65m has been recognised as an exceptional item in the income
statement. We continue to reduce the cost base at Allied Bakeries
with some actions planned in the second half. We are focused on,
and committed to, further reducing these losses and are developing
options for measures to be taken as needed.
We have benefited from a full period of ownership of Acetum, the
leading Italian producer of Balsamic Vinegar of Modena, which was
acquired in October 2017. Margins have improved with grape must
prices lower than the exceptionally high level last year following
a poor grape harvest in 2017. Sales increased in the important
market of Germany, distribution was extended in Australia and the
Mazzetti brand was introduced to the UK.
At ACH in the US sales of Mazola corn oil increased strongly,
supported by successful television advertising, and delivered
further volume and share growth in a competitive consumer oils
market. This, coupled with lower oil commodity costs, resulted in
increased operating profit and margins. Profit in Mexico benefited
from improved margins for Capullo canola oil.
At George Weston Foods in Australia, sales increased and margins
improved significantly. Tip Top achieved higher packaged bread
volumes while the launch of Abbott's Bakery Thins was well
received. Operating performance at the Don KRC meat business
improved and additional improvements in factory efficiency,
combined with lower procurement costs, delivered a further increase
in margin. Sales grew strongly at Yumi's, the recently acquired
premium chilled dips and snacks business, and resulted in
significant market share gains.
Sugar
Actual Constant
Ongoing businesses 2019 2018 fx fx
Revenue GBPm 769 881 -13% -11%
=============================== ==== ==== ====== ========
Adjusted operating profit GBPm 1 106
=============================== ==== ==== ====== ========
AB Sugar revenue was well down on last year in the first half,
as expected, with lower EU contracted sugar prices impacting our UK
and Spanish businesses. The decline in adjusted operating profit
was the consequence of these lower prices, a poor crop in China and
a later phasing of profit in Illovo this financial year. We expect
the profit decline for the full year to be reflected in this first
half and for second half profits to be in line with those achieved
in the second half last year. Operating profit for the full year
remains in line with our expectations.
EU stock levels have been tightening during 2018/19 as a
consequence of the lower sugar production in the current campaign.
A reduction in the total European crop area for the 2019/20 season
is expected and the UK crop area will be 7% lower. Stocks are
likely to remain low which should underpin spot EU sugar prices
following their recent recovery.
In the UK, sugar production of 1.15 million tonnes compared to
1.37 million tonnes last year when beet yields reached record
levels. The campaign benefited from good harvesting conditions, as
a result of dry weather, and consistent factory throughputs.
Looking ahead, there has been good take-up by growers of sugar beet
contracts for the 2019/20 season. Early drilling, as a result of
the mild, dry spring, should result in improved beet yields.
However, the range of crop estimates is wider than usual due to the
potential impact of the ban on neonicotinoids as a seed treatment
from this year.
In Spain, production from beet is expected to be 270,000 tonnes,
lower than last year due to adverse weather in the south. The beet
sugar shortfall will be compensated by increased production from
the refining of cane raws at Guadalete which has yielded 154,000
tonnes. Drilling for the 2019/20 campaign has commenced, reduced
beet prices have been notified, and we have commenced the
contracting of volumes with growers. The benefit of these reduced
costs will be seen next financial year, although it is expected to
be partially offset by a reduced crop area in the north.
In China, sugar production was 148,000 tonnes compared to
166,000 tonnes last year due to very poor quality beet following a
period of adverse weather. As a result of the lower production and
low domestic sugar prices the business will make a loss in this
financial year.
Driven by further improvements in cane yields, sugar production
at Illovo is expected to be 1.76 million tonnes in this financial
year compared to 1.7 million tonnes last year. Wet weather delayed
the start of the campaign and will result in a later phasing of
profit during this financial year. Production at the Nakambala mill
in Zambia exceeded 400,000 tonnes in the last campaign. Domestic
sugar prices strengthened, particularly in South Africa. Cyclone
Idai made landfall in March in central Mozambique and also affected
Malawi and Zimbabwe. The impact to our operations was modest, with
some flooding at our Nchalo sugar estate in southern Malawi. We
have provided aid and support to those affected among our
workforce.
Germains, our seed treatment and enhancement business, benefited
from increased capacity in the US horticulture market following the
completion of the expansion of the facility in Gilroy,
California.
Agriculture
Actual Constant
Ongoing businesses 2019 2018 fx fx
Revenue GBPm 665 614 +8% +8%
=============================== ==== ==== ====== ========
Adjusted operating profit GBPm 15 24 -38% -40%
=============================== ==== ==== ====== ========
AB Agri revenue increased by 8% in the first half, driven by
higher feed sales in the UK and China where higher feed prices
reflected increased raw material costs, especially grain. Adjusted
operating profit fell markedly, mainly as a result of reduced
margins and later phasing in sales of UK animal feed, and lower
profits at Speciality Nutrition which benefited from high vitamin
prices last year.
In the UK, compound feed volumes were higher due to increased
demand in the pig and poultry sectors but sales of sugar beet feed
fell due to the mild winter, although are expected to recover in
the second half. Margins were reduced with an adverse sales mix and
an under-recovery of energy and distribution costs. The closure of
the Vivergo bioethanol plant last autumn reduced the availability
of co-products, of which Trident Feeds was the sole marketer, with
a consequent reduction in operating profit.
Profit at Speciality Nutrition, our premix and starter feed
business, reduced in the half year but this compared to a strong
first half last year when vitamin prices and margins were unusually
high. Sales grew strongly from our new mill in Spain and we
acquired a small starter feed business in Poland.
This year, Frontier is expected to benefit from an improvement
in grain trading in the UK and higher crop input sales to farmers
following the mild winter. AB Vista maintained its position as a
leader in phytase in the global feed enzyme market and, although
sales were impacted by increased competition in the Americas, good
sales growth was achieved in south east Asia.
Ingredients
Actual Constant
Ongoing businesses 2019 2018 fx fx
Revenue GBPm 744 716 +4% +5%
=============================== ==== ==== ====== ========
Adjusted operating profit GBPm 64 63 +2% +2%
=============================== ==== ==== ====== ========
Revenue in the first half was 5% ahead of last year and
operating profit was 2% ahead at constant currency.
AB Mauri delivered sales growth in all regions, with a
consequent increase in operating profit, and continued to invest in
the operating performance of its plants. In North America higher
input costs, especially freight, impacted margins in the first half
although price increases have now been secured to offset this. Our
businesses in South America performed well in challenging economic
conditions. In Argentina selling prices and raw materials costs
were well-managed in that inflationary economy. Following a
sustained period of high price inflation, we have applied
hyperinflationary accounting under IAS 29 for Argentina from the
beginning of this financial year.
Trading performance in Europe benefited from the integration of
Holgran and Fleming Howden which were acquired last year. In China,
the construction of a new state-of-the-art bakery ingredients
factory in Dongguan was completed, and increased customer coverage
for yeast resulted in higher sales volumes.
ABF Ingredients also delivered sales growth but margin was
slightly reduced with adverse sales mix in enzymes and investment
in sales and business development capability. Our enzymes business
achieved significant growth in the bakery, food and detergent
markets through new product development and international
expansion. SPI Pharma delivered strong growth in pharmaceutical
excipients and PGPI, our US protein extrusion business, increased
sales of plant protein crisps and took further share in the
expanding US health and nutrition bar market. Ohly, our yeast
extracts and seasoning powders business, simplified its operation
in the US with the sale of its underutilised torula yeast
fermentation facility at Hutchinson combined with a long-term
supply agreement with the purchaser. Details of this disposal are
set out in note 6.
Retail
Actual Constant
2019 2018 fx fx
Revenue GBPm 3,630 3,477 +4% +4%
=============================== ===== ===== ====== ========
Adjusted operating profit GBPm 426 341 +25% +25%
=============================== ===== ===== ====== ========
Sales at Primark were 4.4% ahead of last year, driven by
increased retail selling space partially offset by a 1.5% decline
in like-for-like sales. With a much higher margin, profit was 25%
ahead of last year. Early customer reaction to the new
spring/summer range has been encouraging.
The UK continued to perform well. Sales were 2.3% ahead of last
year, like-for-like sales grew by 0.6% and our share of the total
clothing, footwear and accessories market increased substantially.
The effect of low footfall in November was offset by good trading
in all other months of the first half, with strong growth in the
last two weeks of the period compared to a spell of very cold
weather last year.
Sales in the Eurozone were 5.3% ahead of last year at constant
currency. Like-for-like sales fell by 3.2% driven by the decline in
the German market and also footfall in November across all markets.
Particularly strong sales growth was seen in Spain, France, Italy
and Belgium. In Germany we have strengthened the management team to
address the trading which continues to be difficult. Preparations
are underway to reduce selling space at a small number of German
stores in order to optimise their cost base.
Our business in the US continued to perform strongly, driven by
excellent trading at our recently opened Brooklyn store combined
with like-for-like sales growth. This, coupled with the benefit to
store profitability arising from the reduction in selling space at
Freehold and Danbury last year, resulted in a much-reduced US
operating loss.
Operating margin in the first half was 11.7%, well ahead of the
same period last year when margin was 9.8%. The effect of a weaker
US dollar on purchases contracted for the first half benefited
input costs, while better buying, tight stock management and
reduced markdowns also drove the margin improvement. Foreign
exchange contracts are in place for all of the remaining purchases
for the year and the strengthening of the US dollar reflected in
those contracts will result in a lower operating margin in the
second half. For the full year our expectation for operating profit
is unchanged, with margin a little ahead of last year.
During the second half Primark's buying, merchandising, design,
sourcing and quality functions, currently located in Reading and
Dublin, will be consolidated in Dublin. This will further enable
one global product range for our customers, the delivery of
efficiencies and support our expansion into international
markets.
Retail selling space increased by 0.3 million sq ft since the
financial year end and, at 2 March 2019, 364 stores were trading
from 15.1 million sq ft compared to 14.3 million sq ft a year ago.
Four new stores were opened in the period: Seville and Almeria in
Spain, Toulouse in France and a city centre store in Berlin,
Germany. In the UK we relocated to larger premises in Harrow and
the Merry Hill and Peckham stores were extended.
We expect to add 950,000 square feet of new selling space in
this financial year, comprising stores in new locations and
additional space from relocations. In the third quarter a net 0.4
million sq ft of additional selling space is planned with six
stores opening over six days. We have already opened new stores in
Brussels in Belgium, Bordeaux in France, Wuppertal in Germany,
Hastings, Bluewater, Milton Keynes and Belfast in the UK and we
have relocated to new premises in Birmingham High Street which, at
160,000 sq ft, became our largest store. For the remainder of the
year, new stores are planned for Utrecht in the Netherlands, Bonn
in Germany and our first store in Slovenia, in Ljubljana.
There will be a reduction of some 150,000 sq ft this year. Our
smaller store in Oviedo, Spain has been closed, our store in the
King of Prussia mall in Pennsylvania has been downsized, and we are
working to reduce selling space at a small number of German
stores.
Ljubljana will be our first store in central Europe and we have
now signed leases for our first stores in Poland and the Czech
Republic.
New store openings to date
UK Spain Germany France Belgium
Brussels Chaussee
Hastings Seville Berlin Zoom Toulouse D'Ixelles
Bluewater Almeria Wuppertal Bordeaux
Belfast Donegall
Place
Milton Keynes
Relocations
Harrow, Birmingham
High Street
New stores planned for the second half
Netherlands Germany Slovenia
Utrecht Bonn Ljubljana
George Weston
Chief Executive
condensed CONSOLIDATED INCOME STATEMENT
For the 24 weeks ended 2 March 2019
24 weeks 24 weeks 52 weeks
ended ended ended
2 March 3 March 15 September
2019 2018 2018
Continuing operations Note GBPm GBPm GBPm
Revenue 1 7,532 7,422 15,574
Operating costs before exceptional items (6,945) (6,830) (14,290)
Exceptional items 2 (79) - -
508 592 1,284
Share of profit after tax from joint ventures
and associates 24 24 54
Profits less losses on disposal of non-current
assets 2 2 6
=============================================== ==== ======== ======== =============
Operating profit 534 618 1,344
Adjusted operating profit 1 639 648 1,404
Profits less losses on disposal of non-current
assets 2 2 6
Amortisation of non-operating intangibles (20) (17) (41)
Acquired inventory fair value adjustments (7) (15) (23)
Transaction costs (1) - (2)
Exceptional items (79) - -
=============================================== ==== ======== ======== =============
Profits less losses on sale and closure
of businesses 6 (7) 5 (34)
=============================================== ==== ======== ======== =============
Profit before interest 527 623 1,310
Finance income 8 7 15
Finance expense (23) (25) (50)
Other financial income/(expense) 3 (2) 4
=============================================== ==== ======== ======== =============
Profit before taxation 515 603 1,279
Adjusted profit before taxation 627 628 1,373
Profits less losses on disposal of non-current
assets 2 2 6
Amortisation of non-operating intangibles (20) (17) (41)
Acquired inventory fair value adjustments (7) (15) (23)
Transaction costs (1) - (2)
Exceptional items (79) - -
Profits less losses on sale and closure
of businesses (7) 5 (34)
=============================================== ==== ======== ======== =============
Taxation - UK (27) (32) (105)
- Overseas (91) (80) (152)
=============================================== ==== ======== ======== =============
3 (118) (112) (257)
=============================================== ==== ======== ======== =============
Profit for the period 397 491 1,022
=============================================== ==== ======== ======== =============
Attributable to
Equity shareholders 389 481 1,007
Non-controlling interests 8 10 15
=============================================== ==== ======== ======== =============
Profit for the period 397 491 1,022
=============================================== ==== ======== ======== =============
Basic and diluted earnings per ordinary
share (pence) 4 49.2 60.9 127.5
Dividends per share paid and proposed for
the period (pence) 5 12.05 11.70 45.00
condensed CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 24 weeks ended 2 March 2019
24 weeks 24 weeks 52 weeks
ended ended ended
2 March 3 March 15 September
2019 2018 2018
GBPm GBPm GBPm
Profit for the period recognised in the income
statement 397 491 1,022
Other comprehensive income
Remeasurements of defined benefit schemes (178) 224 310
Deferred tax associated with defined benefit schemes 30 (42) (53)
Items that will not be reclassified to profit
or loss (148) 182 257
Effect of movements in foreign exchange (134) (7) (85)
Net gain/(loss) on hedge of net investment in
foreign subsidiaries 8 (7) (10)
Deferred tax associated with movements in foreign
exchange - 1 1
Reclassification adjustment for movements in foreign
exchange on subsidiaries disposed (3) - -
Movement in cash flow hedging position (33) 20 55
Deferred tax associated with movement in cash
flow hedging position 8 (4) (12)
Effect of hyperinflationary economies 46 - -
Deferred tax associated with hyperinflationary
economies (6) - -
Items that are or may be subsequently reclassified
to profit or loss (114) 3 (51)
Other comprehensive income for the period (262) 185 206
===================================================== ======== ======== =============
Total comprehensive income for the period 135 676 1,228
===================================================== ======== ======== =============
Attributable to
Equity shareholders 131 666 1,215
Non-controlling interests 4 10 13
===================================================== ======== ======== =============
Total comprehensive income for the period 135 676 1,228
===================================================== ======== ======== =============
condensed CONSOLIDATED BALANCE SHEET
At 2 March 2019
2 March 3 March 15 September
2019 2018 2018
GBPm GBPm GBPm
Non-current assets
Intangible assets 1,658 1,627 1,632
Property, plant and equipment 5,663 5,611 5,747
Investments in joint ventures 215 204 219
Investments in associates 49 48 47
Employee benefits assets 403 504 579
Deferred tax assets 131 149 133
Other receivables 47 54 50
================================================= ======= ======= =============
Total non-current assets 8,166 8,197 8,407
================================================= ======= ======= =============
Current assets
Inventories 2,282 2,314 2,187
Biological assets 106 103 84
Trade and other receivables 1,435 1,346 1,436
Derivative assets 91 74 132
Current asset investments 26 - 30
Income tax - - 54
Cash and cash equivalents 1,149 887 1,362
================================================= ======= ======= =============
Total current assets 5,089 4,724 5,285
================================================= ======= ======= =============
Total assets 13,255 12,921 13,692
================================================= ======= ======= =============
Current liabilities
Loans and overdrafts (439) (183) (419)
Trade and other payables (2,298) (2,223) (2,529)
Derivative liabilities (58) (78) (52)
Income tax (94) (138) (160)
Provisions (61) (82) (88)
================================================= ======= ======= =============
Total current liabilities (2,950) (2,704) (3,248)
================================================= ======= ======= =============
Non-current liabilities
Loans (350) (581) (359)
Other payables (267) (246) (269)
Provisions (54) (48) (52)
Deferred tax liabilities (305) (330) (324)
Employee benefits liabilities (154) (154) (144)
================================================= ======= ======= =============
Total non-current liabilities (1,130) (1,359) (1,148)
================================================= ======= ======= =============
Total liabilities (4,080) (4,063) (4,396)
================================================= ======= ======= =============
Net assets 9,175 8,858 9,296
================================================= ======= ======= =============
Equity
Issued capital 45 45 45
Other reserves 175 175 175
Translation reserve 238 443 363
Hedging reserve (12) (15) 13
Retained earnings 8,643 8,126 8,615
================================================= ======= ======= =============
Total equity attributable to equity shareholders 9,089 8,774 9,211
Non-controlling interests 86 84 85
================================================= ======= ======= =============
Total equity 9,175 8,858 9,296
================================================= ======= ======= =============
condensed CONSOLIDATED CASH FLOW STATEMENT
For the 24 weeks ended 2 March 2019
24 weeks 24 weeks 52 weeks
ended ended ended
2 March 3 March 15 September
2019 2018 2018
GBPm GBPm GBPm
Cash flow from operating activities
Profit before taxation 515 603 1,279
Profits less losses on disposal of non-current
assets (2) (2) (6)
Profits less losses on sale and closure of businesses 7 (5) 34
Transaction costs 1 - 2
Finance income (8) (7) (15)
Finance expense 23 25 50
Other financial (income)/expense (3) 2 (4)
Share of profit after tax from joint ventures
and associates (24) (24) (54)
Amortisation 32 28 65
Depreciation 265 233 509
Exceptional items 79 - -
Acquired inventory fair value adjustments 7 15 23
Net change in the fair value of current biological
assets (26) (14) 5
Share-based payment expense 9 7 19
Pension costs less contributions 2 1 4
Increase in inventories (139) (128) (35)
(Increase)/decrease in receivables (12) 11 (99)
Decrease in payables (138) (284) (19)
Purchases less sales of current biological assets - - (1)
Decrease in provisions (24) (25) (30)
============================================================= ======== ======== =============
Cash generated from operations 564 436 1,727
Income taxes paid (122) (111) (297)
============================================================= ======== ======== =============
Net cash from operating activities 442 325 1,430
============================================================= ======== ======== =============
Cash flows from investing activities
Dividends received from joint ventures and associates 25 25 42
Purchase of property, plant and equipment (348) (351) (787)
Purchase of intangibles (34) (37) (81)
Sale of property, plant and equipment 6 10 23
Purchase of subsidiaries, joint ventures and associates (47) (195) (208)
Sale of subsidiaries, joint ventures and associates 5 - 1
Interest received 10 4 10
============================================================= ======== ======== =============
Net cash from investing activities (383) (544) (1,000)
============================================================= ======== ======== =============
Cash flows from financing activities
Dividends paid to non-controlling interests (1) (2) (4)
Dividends paid to equity shareholders (263) (234) (327)
Interest paid (20) (22) (50)
Decrease in short-term loans (11) (115) (111)
(Decrease)/increase in long-term loans (7) (5) 19
Decrease/(increase) in current asset investments 3 - (30)
Purchase of shares in subsidiary undertaking from
non-controlling interests (1) (1) (1)
Sale of shares in subsidiary undertakings to non-controlling
interests - 1 1
Movements from changes in own shares held - - (30)
============================================================= ======== ======== =============
Net cash from financing activities (300) (378) (533)
============================================================= ======== ======== =============
Net decrease in cash and cash equivalents (241) (597) (103)
Cash and cash equivalents at the beginning of
the period 1,271 1,386 1,386
Effect of movements in foreign exchange 1 (6) (12)
============================================================= ======== ======== =============
Cash and cash equivalents at the end of the period 1,031 783 1,271
============================================================= ======== ======== =============
Condensed cONSOLIDATED STATEMENT of changes in equity
For the 24 weeks ended 2 March 2019
Attributable to equity shareholders
============================================================
Issued Other Translation Hedging Retained Non-controlling Total
capital reserves reserve reserve earnings Total interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance as at 15
September
2018 45 175 363 13 8,615 9,211 85 9,296
Total comprehensive
income
Profit for the period
recognised
in the income statement - - - - 389 389 8 397
Remeasurements of
defined
benefit schemes - - - - (178) (178) - (178)
Deferred tax associated
with
defined benefit schemes - - - - 30 30 - 30
Items that will not be
reclassified
to profit or loss - - - - (148) (148) - (148)
- -
Effect of movements in
foreign
exchange - - (130) - - (130) (4) (134)
Net gain on hedge of net
investment
in foreign subsidiaries - - 8 - - 8 - 8
Movements in foreign
exchange
on businesses disposed - - (3) - - (3) - (3)
Movement in cash flow
hedging
position - - - (33) - (33) - (33)
Deferred tax associated
with
movements in cash flow
hedging
position - - - 8 - 8 - 8
Effect of
hyperinflationary
economies - - - - 46 46 - 46
Deferred tax associated
with
hyperinflationary
economies - - - - (6) (6) - (6)
Items that are or may be
subsequently
reclassified to profit
or
loss - - (125) (25) 40 (110) (4) (114)
Other comprehensive
income - - (125) (25) (108) (258) (4) (262)
Total comprehensive
income - - (125) (25) 281 131 4 135
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Transactions with owners
Dividends paid to equity
shareholders 5 - - - - (263) (263) - (263)
Net movement in own
shares
held - - - - 9 9 - 9
Dividends paid to
non-controlling
interests - - - - - - (1) (1)
Acquisition and disposal
of
non-controlling
interests - - - - 1 1 (2) (1)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (253) (253) (3) (256)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 2 March
2019 45 175 238 (12) 8,643 9,089 86 9,175
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 16
September
2017 45 175 456 (31) 7,694 8,339 73 8,412
Total comprehensive
income
Profit for the period
recognised
in the income statement - - - - 481 481 10 491
Remeasurements of
defined
benefit schemes - - - - 224 224 - 224
Deferred tax associated
with
defined benefit schemes - - - - (42) (42) - (42)
Items that will not be
reclassified
to profit or loss - - - - 182 182 - 182
Effect of movements in
foreign
exchange - - (7) - - (7) - (7)
Net loss on hedge of net
investment
in foreign subsidiaries - - (7) - - (7) - (7)
Deferred tax associated
with
movements in foreign
exchange - - 1 - - 1 - 1
Movement in cash flow
hedging
position - - - 20 - 20 - 20
Deferred tax associated
with
movement in cash flow
hedging
position - - - (4) - (4) - (4)
Items that are or may be
subsequently
reclassified to profit
or
loss - - (13) 16 - 3 - 3
Other comprehensive
income - - (13) 16 182 185 - 185
Total comprehensive
income - - (13) 16 663 666 10 676
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Transactions with owners
Dividends paid to equity
shareholders 5 - - - - (234) (234) - (234)
Net movement in own
shares
held - - - - 7 7 - 7
Dividends paid to
non-controlling
interests - - - - - - (3) (3)
Acquisition and disposal
of
non-controlling
interests - - - - (4) (4) 4 -
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (231) (231) 1 (230)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 3 March
2018 45 175 443 (15) 8,126 8,774 84 8,858
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 16
September
2017 45 175 456 (31) 7,694 8,339 73 8,412
Total comprehensive
income
Profit for the period
recognised
in the income statement - - - - 1,007 1,007 15 1,022
Remeasurements of
defined
benefit schemes - - - - 310 310 - 310
Deferred tax associated
with
defined benefit schemes - - - - (53) (53) - (53)
Items that will not be
reclassified
to profit or loss - - - - 257 257 - 257
Effect of movements in
foreign
exchange - - (83) - - (83) (2) (85)
Net loss on hedge of net
investment
in foreign subsidiaries - - (10) - - (10) - (10)
Deferred tax associated
with
movements in foreign
exchange - - 1 - - 1 - 1
Movement in cash flow
hedging
position - - (1) 56 - 55 - 55
Deferred tax associated
with
movement in cash flow
hedging
position - - - (12) - (12) - (12)
Items that are or may be
subsequently
reclassified to profit
or
loss - - (93) 44 - (49) (2) (51)
Other comprehensive
income - - (93) 44 257 208 (2) 206
Total comprehensive
income - - (93) 44 1,264 1,215 13 1,228
Transactions with owners
Dividends paid to equity
shareholders 5 - - - - (327) (327) - (327)
Net movement in own
shares
held - - - - (11) (11) - (11)
Deferred tax associated
with
share-based payments - - - - (1) (1) - (1)
Dividends paid to
non-controlling
interests - - - - - - (5) (5)
Acquisition and disposal
of
non-controlling
interests - - - - (4) (4) 4 -
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Total transactions with
owners - - - - (343) (343) (1) (344)
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
Balance as at 15
September
2018 45 175 363 13 8,615 9,211 85 9,296
======================== ==== ======== ========= =========== ======== ========= ===== =============== =======
NOTES TO THE condensed consolidated interim financial
statements
For the 24 weeks ended 2 March 2019
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 and provisions.
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, operating intangibles and
biological assets. Businesses disposed are shown separately and
comparatives have been re-presented for businesses sold or closed
during the period.
The group is comprised of the following operating segments:
Grocery The manufacture of grocery products, including hot beverages,
sugar & sweeteners, vegetable oils, balsamic vinegars, bread
& baked goods, chilled foods, cereals, ethnic foods and meat
products, which are sold to retail, wholesale and foodservice
businesses.
Sugar The growing and processing of sugar beet and sugar cane for
sale to industrial users and to Silver Spoon, which is included
in the Grocery segment.
Agriculture The manufacture of animal feeds and the provision of other
products and services for the agriculture sector.
Ingredients The manufacture of bakers' yeast, bakery ingredients, enzymes,
lipids, yeast extracts, cereal specialities and pharmaceutical
excipients.
Retail Buying and merchandising value clothing and accessories through
the Primark and Penneys retail chains.
Geographical information
In addition to the required disclosure for operating segments,
disclosure is also given of certain geographical information about
the group's operations, based on the geographical groupings: United
Kingdom; Europe & Africa; The Americas; and Asia Pacific.
Revenues are shown by reference to the geographical location of
customers. Profits are shown by reference to the geographical
location of the businesses. Segment assets are based on the
geographical location of the assets.
Revenue Adjusted operating profit
=================================
24 weeks 24 weeks 52 weeks 24 weeks 24 weeks 52 weeks
ended ended ended ended ended ended
2 March 3 March 15 September 2 March 3 March 15 September
2019 2018 2018 2019 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm
Operating segments
Grocery 1,721 1,672 3,420 167 159 335
Sugar 769 881 1,730 1 106 123
Agriculture 665 614 1,350 15 24 59
Ingredients 744 716 1,459 64 63 143
Retail 3,630 3,477 7,477 426 341 843
Central - - - (34) (29) (64)
------------------------- -------- -------- ------------- -------- -------- -------------
7,529 7,360 15,436 639 664 1,439
Businesses disposed:
Sugar - 57 128 - (16) (34)
Agriculture - 1 1 - - (1)
Ingredients 3 4 9 - - -
------------------------- -------- -------- ------------- -------- -------- -------------
7,532 7,422 15,574 639 648 1,404
========================= ======== ======== ============= ======== ======== =============
Geographical information
United Kingdom 2,784 2,723 5,863 230 251 557
Europe & Africa 2,854 2,833 5,851 255 245 528
The Americas 780 742 1,525 116 102 206
Asia Pacific 1,111 1,062 2,197 38 66 148
========================= ======== ======== ============= ======== ======== =============
7,529 7,360 15,436 639 664 1,439
Businesses disposed:
United Kingdom - 29 66 - (16) (34)
Europe & Africa - 28 62 - - -
The Americas 3 4 9 - - -
Asia Pacific - 1 1 - - (1)
========================= ======== ======== ============= ======== ======== =============
7,532 7,422 15,574 639 648 1,404
========================= ======== ======== ============= ======== ======== =============
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
1. Operating segments for the 24 weeks ended 2 March 2019
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 1,722 796 667 827 3,630 (113) 7,529
Internal revenue (1) (27) (2) (83) - 113 -
=================================== ======= ===== =========== =========== ======= ======= =======
External revenue from continuing
businesses 1,721 769 665 744 3,630 - 7,529
Businesses disposed - - - 3 - - 3
=================================== ======= ===== =========== =========== ======= ======= =======
Revenue from external customers 1,721 769 665 747 3,630 - 7,532
----------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Adjusted operating profit before
joint ventures and associates 152 - 13 57 426 (34) 614
Share of profit after tax from
joint ventures and associates 15 1 2 7 - - 25
Adjusted operating profit 167 1 15 64 426 (34) 639
Profits less losses on disposal
of non-current assets 2 - - - - - 2
Amortisation of non-operating
intangibles (18) - - (2) - - (20)
Acquired inventory fair value
adjustments (7) - - - - - (7)
Transaction costs - - (1) - - - (1)
Exceptional items (65) - - - - (14) (79)
Profits less losses on sale and
closure of businesses - - - (7) - - (7)
=================================== ======= ===== =========== =========== ======= ======= =======
Profit before interest 79 1 14 55 426 (48) 527
Finance income 8 8
Finance expense (23) (23)
Other financial income 3 3
Taxation (118) (118)
=================================== ======= ===== =========== =========== ======= ======= =======
Profit for the period 79 1 14 55 426 (178) 397
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets (excluding joint
ventures and associates) 2,638 2,202 463 1,467 4,386 126 11,282
Investments in joint ventures
and associates 35 26 136 67 - - 264
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets 2,673 2,228 599 1,534 4,386 126 11,546
Cash and cash equivalents 1,149 1,149
Current asset investments 26 26
Deferred tax assets 131 131
Employee benefits assets 403 403
Segment liabilities (532) (397) (149) (261) (1,198) (201) (2,738)
Loans and overdrafts (789) (789)
Income tax (94) (94)
Deferred tax liabilities (305) (305)
Employee benefits liabilities (154) (154)
=================================== ======= ===== =========== =========== ======= ======= =======
Net assets 2,141 1,831 450 1,273 3,188 292 9,175
=================================== ======= ===== =========== =========== ======= ======= =======
Non-current asset additions 66 48 5 46 173 9 347
=================================== ======= ===== =========== =========== ======= ======= =======
Depreciation (47) (46) (6) (24) (141) (1) (265)
=================================== ======= ===== =========== =========== ======= ======= =======
Amortisation (25) (1) (1) (3) (1) (1) (32)
=================================== ======= ===== =========== =========== ======= ======= =======
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 2,784 2,854 783 1,111 7,532
========================================== ======== ========= ========= ======== ======
Segment assets 4,549 4,418 1,087 1,492 11,546
========================================== ======== ========= ========= ======== ======
Non-current asset additions 155 123 30 39 347
========================================== ======== ========= ========= ======== ======
Depreciation (96) (118) (21) (30) (265)
========================================== ======== ========= ========= ======== ======
Amortisation (19) (7) (2) (4) (32)
========================================== ======== ========= ========= ======== ======
Acquired inventory fair value adjustments - (7) - - (7)
========================================== ======== ========= ========= ======== ======
Transaction costs (1) - - - (1)
========================================== ======== ========= ========= ======== ======
Exceptional items (79) - - - (79)
========================================== ======== ========= ========= ======== ======
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
1. Operating segments for the 24 weeks ended 3 March 2018
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 1,674 923 616 804 3,477 (134) 7,360
Internal revenue (2) (42) (2) (88) - 134 -
=================================== ======= ===== =========== =========== ======= ======= =======
External revenue from continuing
businesses 1,672 881 614 716 3,477 - 7,360
Businesses disposed - 57 1 4 - - 62
----------------------------------- ------- ----- ----------- ----------- ------- ------- -------
Revenue from external customers 1,672 938 615 720 3,477 - 7,422
=================================== ======= ===== =========== =========== ======= ======= =======
Adjusted operating profit before
joint ventures and associates 145 104 21 57 341 (29) 639
Share of profit after tax from
joint ventures and associates 14 2 3 6 - - 25
Businesses disposed - (16) - - - - (16)
Adjusted operating profit 159 90 24 63 341 (29) 648
Profits less losses on disposal
of non-current assets 2 - - - - - 2
Amortisation of non-operating
intangibles (15) (1) - (1) - - (17)
Acquired inventory fair value
adjustments (15) - - - - - (15)
Profits less losses on sale and
closure of businesses - 23 - - - (18) 5
=================================== ======= ===== =========== =========== ======= ======= =======
Profit before interest 131 112 24 62 341 (47) 623
Finance income 7 7
Finance expense (25) (25)
Other financial expense (2) (2)
Taxation (112) (112)
=================================== ======= ===== =========== =========== ======= ======= =======
Profit for the period 131 112 24 62 341 (179) 491
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets (excluding joint
ventures and associates) 2,662 2,298 432 1,401 4,246 90 11,129
Investments in joint ventures
and associates 26 26 133 67 - - 252
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets 2,688 2,324 565 1,468 4,246 90 11,381
Cash and cash equivalents 887 887
Deferred tax assets 149 149
Employee benefits assets 504 504
Segment liabilities (500) (398) (134) (254) (1,161) (230) (2,677)
Loans and overdrafts (764) (764)
Income tax (138) (138)
Deferred tax liabilities (330) (330)
Employee benefits liabilities (154) (154)
=================================== ======= ===== =========== =========== ======= ======= =======
Net assets 2,188 1,926 431 1,214 3,085 14 8,858
=================================== ======= ===== =========== =========== ======= ======= =======
Non-current asset additions 63 53 11 26 227 2 382
=================================== ======= ===== =========== =========== ======= ======= =======
Depreciation (46) (45) (6) (25) (110) (1) (233)
=================================== ======= ===== =========== =========== ======= ======= =======
Amortisation (21) (2) (1) (2) (1) (1) (28)
=================================== ======= ===== =========== =========== ======= ======= =======
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 2,752 2,861 746 1,063 7,422
========================================== ======== ========= ========= ======== ======
Segment assets 4,414 4,507 1,032 1,428 11,381
========================================== ======== ========= ========= ======== ======
Non-current asset additions 171 159 24 28 382
========================================== ======== ========= ========= ======== ======
Depreciation (90) (94) (19) (30) (233)
========================================== ======== ========= ========= ======== ======
Amortisation (17) (6) (2) (3) (28)
========================================== ======== ========= ========= ======== ======
Acquired inventory fair value adjustments - (15) - - (15)
========================================== ======== ========= ========= ======== ======
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
1. Operating segments for the 52 weeks ended 15 September
2018
Grocery Sugar Agriculture Ingredients Retail Central Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue from continuing businesses 3,423 1,821 1,354 1,640 7,477 (279) 15,436
Internal revenue (3) (91) (4) (181) - 279 -
=================================== ======= ===== =========== =========== ======= ======= =======
External revenue from continuing
businesses 3,420 1,730 1,350 1,459 7,477 - 15,436
Businesses disposed - 128 1 9 - - 138
=================================== ======= ===== =========== =========== ======= ======= =======
Revenue from external customers 3,420 1,858 1,351 1,468 7,477 - 15,574
=================================== ======= ===== =========== =========== ======= ======= =======
Adjusted operating profit before
joint ventures and associates 306 121 47 129 843 (64) 1,382
Share of profit after tax from
joint ventures and associates 29 2 12 14 - - 57
Businesses disposed - (34) (1) - - - (35)
=================================== ======= ===== =========== =========== ======= ======= =======
Adjusted operating profit 335 89 58 143 843 (64) 1,404
Profits less losses on disposal
of non-current assets 4 2 - - - - 6
Amortisation of non-operating
intangibles (36) - (1) (4) - - (41)
Acquired inventory fair value
adjustments (23) - - - - - (23)
Transaction costs (1) - - (1) - - (2)
Profits less losses on sale and
closure of businesses - (11) 1 (2) - (22) (34)
=================================== ======= ===== =========== =========== ======= ======= =======
Profit before interest 279 80 58 136 843 (86) 1,310
Finance income 15 15
Finance expense (50) (50)
Other financial income 4 4
Taxation (257) (257)
=================================== ======= ===== =========== =========== ======= ======= =======
Profit for the period 279 80 58 136 843 (374) 1,022
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets (excluding joint
ventures and associates) 2,702 2,090 414 1,396 4,556 110 11,268
Investments in joint ventures
and associates 41 25 134 66 - - 266
=================================== ======= ===== =========== =========== ======= ======= =======
Segment assets 2,743 2,115 548 1,462 4,556 110 11,534
Cash and cash equivalents 1,362 1,362
Current asset investments 30 30
Income tax 54 54
Deferred tax assets 133 133
Employee benefits assets 579 579
Segment liabilities (530) (429) (140) (275) (1,382) (234) (2,990)
Loans and overdrafts (778) (778)
Income tax (160) (160)
Deferred tax liabilities (324) (324)
Employee benefits liabilities (144) (144)
=================================== ======= ===== =========== =========== ======= ======= =======
Net assets 2,213 1,686 408 1,187 3,174 628 9,296
=================================== ======= ===== =========== =========== ======= ======= =======
Non-current asset additions 148 141 19 63 533 12 916
=================================== ======= ===== =========== =========== ======= ======= =======
Depreciation (99) (81) (13) (49) (264) (3) (509)
=================================== ======= ===== =========== =========== ======= ======= =======
Amortisation (48) (4) (1) (6) (5) (1) (65)
=================================== ======= ===== =========== =========== ======= ======= =======
Impairment of property, plant
and equipment on sale and
closure of businesses - (14) - - - - (14)
=================================== ======= ===== =========== =========== ======= ======= =======
Geographical information
United Europe The Asia
Kingdom & Africa Americas Pacific Total
GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 5,929 5,913 1,534 2,198 15,574
============================================== ======== ========= ========= ======== ======
Segment assets 4,460 4,610 1,079 1,385 11,534
============================================== ======== ========= ========= ======== ======
Non-current asset additions 418 375 57 66 916
============================================== ======== ========= ========= ======== ======
Depreciation (204) (202) (43) (60) (509)
============================================== ======== ========= ========= ======== ======
Amortisation (36) (17) (6) (6) (65)
============================================== ======== ========= ========= ======== ======
Acquired inventory fair value adjustments - (23) - - (23)
============================================== ======== ========= ========= ======== ======
Impairment of property, plant and equipment
on sale and
closure of businesses (14) - - - (14)
============================================== ======== ========= ========= ======== ======
Transaction costs (1) - - (1) (2)
============================================== ======== ========= ========= ======== ======
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
2. Exceptional items
Guaranteed Minimum Pensions
The Guaranteed Minimum Pension (GMP) is the minimum pension
which a UK occupational pension scheme must provide for those
employees who were contracted out of the State Earnings-Related
Pensions Scheme between 6 April 1978 and 5 April 1997.
On 26 October 2018, the High Court of Justice of England and
Wales ruled that GMPs must be equalised in respect of retirement
ages for men and women for all pensionable service after 17 May
1990. This affects the group's UK defined benefit scheme and the
ruling set out a number of methodologies that could be used to
calculate the impact. The group has adopted method C2 to identify
its best estimate of the additional liabilities. These are charged
as a past service cost in the income statement with subsequent
changes accounted for in other comprehensive income. The past
service cost is treated as an exceptional item since the
liabilities relate to employee service between 1990 and 1997 and
they have no link to current business performance.
The increase in liabilities is estimated at GBP14m, assessed
using market conditions at the date of the ruling as required by
IAS 19.
Impairment
In the 2018 Annual Report, it was noted that low bread prices
and strong continuing competition in the UK bakery market had led
to an operating loss at Allied Bakeries and the consequent need for
an assessment of impairment. Headroom at that time was GBP113m on a
cash-generating unit (CGU) carrying value of GBP243m.
In December 2018, subsequent to the publication of the 2018
Annual Report, Allied Bakeries received notice of the termination
of its largest private label manufacturing contract. This is
expected to result in a significant reduction in bread volumes from
late in the 2019 calendar year, with limited opportunity to
mitigate this volume loss in the short term.
As set out in previous annual reports, the board has been
concerned about the worsening trend in the performance of Allied
Bakeries and the difficulty in recovering cost increases in a
highly competitive market. In light of the forthcoming termination
of the private label contract mentioned above, management is
considering courses of action to return the business to
profitability.
Of the methodologies available to calculate the impairment, the
group has applied the "fair value less costs of disposal" approach
to identify its best estimate of the impairment. The key
assumptions used in this assessment are similar to those in
previous year end impairment assessments - bread volumes, bread
prices and long-term growth in the market, as well as logistical
and other savings from restructuring. The discount rate used was
10.9%.
This assessment resulted in a shortfall of GBP65m compared to
the CGU carrying value of GBP243m. A charge for this has been
included as an exceptional item in the income statement and has
been allocated to the property, plant and equipment of the
business. There is no goodwill associated with Allied Bakeries.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
3. Income tax expense
24 weeks 24 weeks 52 weeks
ended ended ended
2 March 3 March 15 September
2019 2018 2018
GBPm GBPm GBPm
Current tax expense
UK - corporation tax at 19% (2018 - 19%) 23 28 82
Overseas - corporation tax 87 78 200
UK - under provided in prior periods - 2 8
Overseas - over provided in prior periods (1) (4) (28)
===================================================== ======== ======== =============
109 104 262
Deferred tax expense
UK deferred tax 4 2 -
Overseas deferred tax 4 7 (19)
UK - under provided in prior periods - - 15
Overseas - under/(over) provided in prior periods 1 (1) (1)
===================================================== ======== ======== =============
9 8 (5)
===================================================== ======== ======== =============
Total income tax expense in income statement 118 112 257
===================================================== ======== ======== =============
Reconciliation of effective tax rate
Profit before taxation 515 603 1,279
Less share of profit after tax from joint ventures
and associates (24) (24) (54)
===================================================== ======== ======== =============
Profit before taxation excluding share of profit
after tax from joint ventures and associates 491 579 1,225
===================================================== ======== ======== =============
Nominal tax charge at UK corporation tax rate
of 19% (2018 - 19%) 93 110 233
Effect of higher and lower tax rates on overseas
earnings 6 6 29
Effect of changes in tax rates on income statement - (9) (16)
Expenses not deductible for tax purposes 12 12 33
Disposal of assets covered by tax exemptions or
unrecognised capital losses 1 (6) (15)
Deferred tax not recognised 6 2 (1)
Adjustments in respect of prior periods - (3) (6)
===================================================== ======== ======== =============
118 112 257
===================================================== ======== ======== =============
Income tax recognised directly in equity
Deferred tax associated with defined benefit schemes (30) 42 53
Deferred tax associated with share-based payments - - 1
Deferred tax associated with movement in cash
flow hedging position (8) 4 12
Deferred tax associated with movements in foreign
exchange - (1) (1)
Deferred tax associated with hyperinflationary
economies 6 - -
(32) 45 65
===================================================== ======== ======== =============
The UK corporation tax rate of 19% (2018 - 19%) will be reduced
to 17% effective from 1 April 2020. The legislation to effect these
rate changes had been enacted before the balance sheet date.
Accordingly, UK deferred tax has been calculated using these rates
as appropriate.
In April 2019 the European Commission concluded that the Group
Financing Exemption in the UK's controlled foreign company
legislation is not compliant with EU State Aid rules in certain
circumstances.
The group may be affected 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. If there are
no successful appeals against the decision, the group's maximum
potential liability is calculated as some GBP24m.
We are assessing the impact of the Commission's decision on the
tax treatment of the group's financing arrangements. Based on that
assessment and the current level of uncertainty, we consider that
no provision is currently required. We will continue to consider
the impact of the Commission's decision on the group and the
potential requirement to record a provision.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
4. Earnings per share
24 weeks 24 weeks 52 weeks
ended ended ended
2 March 3 March 15 September
2019 2018 2018
pence pence pence
Adjusted earnings per share 61.1 61.3 134.9
Disposal of non-current assets 0.3 0.3 0.8
Sale and closure of businesses (0.9) 0.6 (4.3)
Acquired inventory fair value adjustments (1.0) (1.9) (2.9)
Transaction costs (0.1) - (0.3)
Exceptional items (10.0) - -
Tax effect on above adjustments 1.7 1.1 0.8
Amortisation of non-operating intangibles (2.5) (2.2) (5.2)
Tax credit on non-operating intangibles amortisation
and goodwill 0.6 1.7 3.7
Earnings per ordinary share 49.2 60.9 127.5
===================================================== ======== ======== =============
5. Dividends
24 weeks 24 weeks 52 weeks
ended ended ended
2 March 3 March 15 September
2019 2018 2018
pence pence pence
2017 final - 29.65 29.65
2018 interim - - 11.70
2018 final 33.30 - -
============= ======== ======== =============
33.30 29.65 41.35
============= ======== ======== =============
24 weeks 24 weeks 52 weeks
ended ended ended
2 March 3 March 15 September
2019 2018 2018
GBPm GBPm GBPm
2017 final - 234 234
2018 interim - - 93
2018 final 263 - -
============= ======== ======== =============
263 234 327
============= ======== ======== =============
The 2018 final dividend of 33.30p per share was approved on 7
December 2018 and totalled GBP263m when paid on 11 January 2019.
The 2019 interim dividend of 12.05p per share, total value of
GBP95m, will be paid on 5 July 2019 to shareholders on the register
on 7 June 2019.
6. Acquisitions and disposals
Acquisitions
2019
On 17 September 2018 the group's Grocery business completed the
acquisition of 100% of Yumi's Quality Foods, a chilled food
manufacturer in Australia, and its Agriculture business acquired a
small manufacturer of piglet starter feed in Poland.
The acquisitions had the following effect on the group's assets
and liabilities:
Recognised
Pre-acquisition values
carrying on
values acquisition
GBPm GBPm
Net assets
Intangible assets - 21
Property, plant and equipment 8 8
Inventories 2 2
Trade and other receivables 5 5
Cash and cash equivalents 1 1
Trade and other payables (5) (5)
Loans (3) (3)
Taxation - (6)
---------------------------------------- --------------- ------------
Net identifiable assets and liabilities 8 23
Goodwill 23
Total consideration 46
======================================== =============== ============
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
6. Acquisitions and disposals (continued)
Recognised
values
on
acquisition
GBPm
Satisfied by
Cash consideration 46
46
----------------------------------------------------------- ------------
Net cash
Cash consideration 46
Cash and cash equivalents acquired (1)
Deferred consideration in respect of previous acquisitions 2
------------------------------------------------------------ ------------
47
----------------------------------------------------------- ------------
Pre-acquisition carrying amounts were the same as recognised
values on acquisition apart from GBP21m of non-operating intangible
assets in respect of brand and customer relationships, which were
recognised together with related deferred tax of GBP6m.
The cash outflow of GBP47m on the purchase of subsidiaries,
joint ventures and associates in the cash flow statement comprises
cash consideration of GBP46m for these acquisitions less cash
acquired with the businesses of GBP1m and GBP2m payment of deferred
consideration in respect of previous acquisitions.
2018
During the first half of 2018 the group's Grocery business
completed the acquisition of 100% of Acetum S.p.A, the leading
Italian producer of Balsamic Vinegar of Modena for a net
consideration of GBP284m including debt assumed of GBP89m and
deferred consideration of GBP2m. The group also acquired a small
aerial survey and informatics company as part of the UK Agriculture
business.
In the year ended 15 September 2018, the group also acquired
Holgran, a supplier of malted grains, and Fleming Howden, an
Edinburgh-based blender and distributor of bakery ingredients, both
as part of the UK Ingredients business. The full year cash outflow
of GBP208m on the purchase of subsidiaries, joint ventures and
associates in the cash flow statement comprises cash consideration
of GBP218m for acquisitions in the year less cash acquired with the
businesses of GBP11m and GBP1m payment of deferred consideration in
respect of prior year acquisitions.
Disposals
2019
In the first half of 2019 the group disposed of its torula
facility and associated torula whole cell business in Hutchinson,
Minnesota, reported within the US Ingredients segment. 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.
2018
There were no business disposals in the first half of 2018. In
October 2017 the group completed the buy-out of the remaining 5.5%
minority interest in Vivergo. This resulted in the recognition of a
gain of GBP23m (in the Sugar and UK segments) arising from the
extinguishment of the associated shareholder loan and interest,
which was recognised in sale and closure of businesses in line with
the original transaction in 2015. The group also charged an GBP18m
onerous lease provision to sale and closure of business (in the
Central and UK segments) against rental guarantees given on
property leases assigned to third parties that the group expects to
be required to honour.
During the second half of 2018 GBP18m of warranty and
restructuring provisions relating to disposals made in previous
years were no longer required and were released to sale and closure
of business. These comprised GBP17m in Sugar (Asia Pacific) and
GBP1m in Ingredients (Europe & Africa). The group also charged
a GBP6m onerous lease provision to sale and closure of business (in
the Central and UK segments) against rental guarantees given on
property leases assigned to third parties that the group expects to
be required to honour. In October 2018 the group shut down
operations at Vivergo, AB Sugar's bioethanol plant in Hull. A
charge of GBP51m was included for this in the year ended 15
September 2018 in the loss on closure of businesses line in the
income statement.
7. Analysis of net cash
At At
15 September Non-cash Exchange 2 March
2018 Cash flow Acquisitions items adjustments 2019
GBPm GBPm GBPm GBPm GBPm GBPm
Cash at bank and in hand,
cash equivalents
and overdrafts 1,271 (241) - - 1 1,031
Current asset investments 30 (3) - - (1) 26
Short-term loans (328) 11 (3) (4) 3 (321)
Long-term loans (359) 7 - 4 (2) (350)
============================ ============= ========= ============ ======== ============ ========
614 (226) (3) - 1 386
============================ ============= ========= ============ ======== ============ ========
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
8. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Full details of the group's other related
party relationships, transactions and balances are given in the
group's financial statements for the 52 weeks ended 15 September
2018. There have been no material changes in these relationships in
the 24 weeks ended 2 March 2019 or up to the date of this report.
No related party transactions have taken place in the first 24
weeks of the current financial year that have materially affected
the financial position or the performance of the group during that
period.
9. Basis of preparation
Associated British Foods plc ('the Company') is a company
domiciled in the United Kingdom. The condensed consolidated interim
financial statements of the Company for the 24 weeks ended 2 March
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 of the group for the 52
weeks ended 15 September 2018 are available upon request from the
Company's registered office at 10 Grosvenor Street, London, W1K 4QY
or at www.abf.co.uk.
The condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting. They do not include all of the information required for
full annual financial statements and should be read in conjunction
with the consolidated financial statements for the 52 weeks ended
15 September 2018.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing the condensed
consolidated interim financial statements, the significant
judgements made by management in applying the group's accounting
policies and the key sources of estimation uncertainty were the
same as those applied to the consolidated financial statements for
the 52 weeks ended 15 September 2018.
After making enquiries, the directors have a reasonable
expectation that the group has adequate resources to continue in
operational existence for the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements. The group's
business activities, together with the factors likely to affect its
future development, performance and position are set out in the
Operating Review. Note 24 on pages 145 to 154 of the 2018 annual
report provides details of the group's policy on managing its
financial and commodity risks.
The group has considerable financial resources, good access to
debt markets, a diverse range of businesses and a wide geographic
spread. It is therefore well placed to continue to manage business
risks successfully despite the current economic uncertainty.
The 24 week period for the condensed consolidated interim
financial statements of the Company means that the second half of
the year is usually a 28 week period, and the two halves of the
reporting year are therefore not of equal length. For the Retail
segment, Christmas, falling in the first half of the year, is a
particularly important trading period. For the Sugar segment, the
balance sheet, and working capital in particular, is strongly
influenced by seasonal growth patterns for both sugar beet and
sugar cane, which vary significantly in the markets in which the
group operates.
The condensed consolidated interim financial statements are
unaudited but have been subject to an independent review by the
auditor and were approved by the board of directors on 24 April
2019. They do not constitute statutory financial statements as
defined in section 434 of the Companies Act 2006. The comparative
figures for the 52 weeks ended 15 September 2018 have been abridged
from the group's 2018 financial statements and are not the
Company's statutory financial statements for that period. Those
financial statements have been reported on by the Company's auditor
for that period and delivered to the Registrar of Companies. The
report of the auditor was unqualified, did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
This Interim Results Announcement has been prepared solely to
provide additional information to shareholders as a body, to assess
the group's strategies and the potential for those strategies to
succeed. This Interim Results Announcement should not be relied
upon by any other party or for any other purpose.
10. Significant accounting policies
Except where detailed otherwise, the accounting policies applied
by the group in these condensed consolidated interim financial
statements are substantially the same as those applied by the group
in its consolidated financial statements for the 52 weeks ended 15
September 2018 including for derivatives and current biological
assets, which are recognised in the balance sheet at fair value and
fair value less costs to sell, respectively. The methodology for
selecting assumptions underpinning the fair value calculations has
not changed since 15 September 2018.
New accounting standards
The following accounting standards and amendments were adopted
during the period and had no significant impact on the group other
than IFRS 9 Financial Instruments and IFRS 15 Revenue from
Contracts with Customers:
-- IFRIC 22 Foreign Currency Transactions and Advance Consideration
-- Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions
-- Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
-- Annual Improvements to IFRS 2014 - 2016
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
10. Significant accounting policies (continued)
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and
Measurement. It includes requirements for recognition and
measurement, impairment, derecognition and general hedge
accounting. The standard introduces changes to three key areas:
-- new requirements for the classification and measurement of
financial instruments;
-- a new impairment model based on expected credit losses for
recognising provisions (compared to IAS 39, which used an incurred
loss model); and
-- simplified hedge accounting through closer alignment with an
entity's risk management methodology.
Financial assets are classified using a principles-based
approach in three measurement categories: amortised cost, fair
value through other comprehensive income or fair value through
profit or loss. Classification is performed on initial recognition
of the asset based on the characteristics of the asset and the
local business model. The vast majority of the group's financial
assets were previously recorded at amortised cost and this
continues to be the case.
For financial liabilities, there are no significant
classification and measurement changes compared to IAS 39.
The new principles for hedge accounting provide a more flexible
framework which is better aligned with the economic decision-making
of the group. This will result in the group being able to achieve
hedge accounting on a wider range of transactions than under IAS
39. The IAS 39 effectiveness test has been replaced with the
'economic relationship' principle. Retrospective assessment of
hedge effectiveness is no longer necessary. IFRS 9 also requires
additional disclosures concerning risk management and the effects
of hedge accounting.
In the prior year, the group completed a groupwide impact
assessment across these three key areas, supported by external
resource, involving each of the group's businesses. As a result of
this assessment, the group has concluded that the adoption of IFRS
9 does not have a significant impact on either the group's results
or financial position.
IFRS 9 applies retrospectively to all periods presented, but
with substantial transition provisions, including not being
required to restate comparative information. The group adopted IFRS
9 on 16 September 2018 and has applied it for the first time in
these condensed consolidated interim financial statements, without
restating comparative information. As expected, the group did not
record a transition adjustment in opening retained earnings.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a principles-based approach to recognising
revenue only when performance obligations are satisfied and control
of the related goods or services is transferred. It addresses items
such as the nature, amount, timing and uncertainty of revenue and
cash flows arising from contracts with customers. IFRS 15 replaces
IAS 18 and other related requirements.
IFRS 15 applies a five-step approach to the timing of revenue
recognition and applies to all contracts with customers except
those in the scope of other standards.
Step 1 Identify the contract(s) with a customer
Step 2 Identify the performance obligations in the contract
Step 3 Determine the transaction price
Step 4 Allocate the transaction price to the performance
obligations in the contract
Step 5 Recognise revenue when (or as) the entity satisfies a
performance obligation
In the prior year, the group completed a groupwide impact
assessment, utilising external resource to support local management
where necessary. The assessment included areas that required
additional specific consideration, including rights of return and
principal vs agent considerations. The group's revenue recognition
processes are generally straightforward, with recognition of
revenue at the point of sale and little significant judgement
required in determining the timing of transfer of control.
The impact assessment concluded that IFRS 15 results in no
change to the timing of revenue or the timing or amount of profit
recognised. The only impact on the amount of revenue recognised was
some GBP30m of operating expenses which under IFRS 15 will be
deducted from revenue.
The group adopted IFRS 15 on 16 September 2018 and has applied
it for the first time in these condensed consolidated interim
financial statements. IFRS 15 has been adopted retrospectively
without the requirement to restate comparative information. IFRS 15
has no impact on the group's reported profits. No cumulative
adjustment to recognise the impact of applying IFRS 15 as at 16
September 2018 was required.
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:
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
10. Significant accounting policies (continued)
-- IFRS 16 Leases effective 2020 financial year
-- IFRS 17 Insurance Contracts effective 2022 financial year (not yet endorsed by the EU)
-- IFRIC 23 Uncertainty over Income Tax Treatments effective 2020 financial year
-- Amendments to IFRS 3 Definition of a Business effective 2021
financial year (not yet endorsed by the EU)
-- Amendments to IFRS 9 Prepayment Features with Negative
Compensation effective 2020 financial year
-- Amendments to IAS 1 and IAS 8 Definition of Material
effective 2021 financial year (not yet endorsed by the EU)
-- Amendments to IAS 28 Long-term Interests in Associates and
Joint Ventures effective 2020 financial year
-- Amendments to References to the Conceptual Framework in IFRS
Standards effective 2021 financial year (not yet endorsed by the
EU)
-- Annual Improvements to IFRS Standards 2015 - 2017 effective 2020 financial year
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 will adopt IFRS 16 on 15
September 2019 and apply 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 has engaged external experts to support its
implementation project and established a steering committee to
oversee its governance, which reports regularly to the Audit
committee. During the current period, the group made further
progress in all project areas, including identification of leases
and areas of complexity or judgement, collation of lease data,
identification of changes to systems and processes for internal and
external reporting, and the development of initial estimates for
discount rates.
IFRS 16 permits a choice of transitional approaches: a fully
retrospective approach with an adjustment made to the opening
retained earnings of the comparative period; or a modified
retrospective approach where the cumulative effect of initial
application is recognised at the date of initial application
without restating prior periods.
The age, size and complexity of the group's lease portfolio
means that it would either be 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.
The group will provide a further update in the 2019 annual
report, when indicative details of the impact on opening retained
earnings will be provided. The first results published under IFRS
16 will be the 2020 interim results.
Impact on the group's results and financial position
The impact of IFRS 16 on the group's results and financial
position is dependent on completion of the work areas described
above, and on the facts and circumstances at the time of
transition. It will not include restatement of prior periods. For
these reasons, it is not yet practicable to determine a reliable
estimate of the precise impact on the group, but the impact is
expected to be significant.
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 will be included in net debt.
Right-of-use assets are measured initially at cost (including
the value of the lease liability) and subsequently at cost less
accumulated depreciation and any impairment losses, adjusted for
any remeasurement of the lease liability. Right-of-use assets will
be reported as non-current assets.
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
will be 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 will not change, the generally straight line profile of
operating lease expenses will be more front-loaded under IFRS 16
because of the interest on the lease liability.
NOTES TO THE condensed consolidated interim financial statements
continued
For the 24 weeks ended 2 March 2019
10. Significant accounting policies (continued)
IFRS 16 will affect a number of financial statement captions and
ratios, including the following:
Earnings Based on our impact assessment, the group expects
a marginal impact on earnings. It is not yet possible
to predict reliably what this might be. There will
be a consequent impact on dividend cover.
Operating profit/margin Operating profit and operating margin are expected
to increase significantly as operating lease expenses
are replaced by depreciation of right-of-use assets.
Finance expense Finance expense is expected to increase significantly
as a result of the interest cost on lease liabilities.
Interest cover will therefore reduce.
Taxation Taxation will change in line with the changes in
profit before tax.
Non-current assets Non-current assets will increase very significantly
as the right-of-use assets are recorded alongside
property, plant and equipment.
Net debt Net debt will increase very significantly as lease
liabilities are recorded within current and non-current
liabilities. Gearing ratios will therefore increase.
The reconciliation of net debt will include more
non-cash items as new leases are entered into.
Return on capital The return on capital employed will reduce as a
employed result of the changes to operating profit and non-current
assets. It is not yet possible to predict reliably
what this might be.
Cash flow statement There is no overall impact on cash flow, but classifications
of cash flows will change, as set out above.
The group will reassess its incentive arrangements to align
targets with the new accounting requirements.
IFRS 16 is expected to have the most significant impact on the
Retail segment given the number of significant store leases to
which Primark is a party.
For finance leases where the group is a lessee, the group
expects no significant impact.
Hyperinflation
The Argentinian economy was designated hyperinflationary from 1
July 2018. The group concluded this had an insignificant impact for
the 2018 financial year but has applied IAS 29 Financial Reporting
in Hyperinflationary Economies (IAS 29) to its Argentinian
operations from the beginning of this financial year. IAS 29
requires that hyperinflationary adjustments are reflected from the
start of the reporting period in which it is applied. For the
group's Argentinian operations this is 1 September 2018. In
accordance with IAS 21 The Effects of Changes in Foreign Exchange
Rates, the comparative figures for 2018 have not been modified. The
adjustments required by IAS 29 are set out below.
-- Adjustment of historical cost non-monetary assets and
liabilities from their date of initial recognition to the balance
sheet date to reflect the changes in purchasing power of the
currency caused by inflation, according to the official indices
published by the Federación Argentina de Consejos Profesionales de
Ciencias Económicas (FACPCE).
-- Adjustment of the components of the income statement and cash
flow statement for the inflation index since their generation, with
a balancing entry in the income statement and a reconciling item in
the cash flow statement, respectively.
-- Adjustment of the income statement to reflect the impact of
inflation on holding monetary assets and liabilities in local
currency.
-- The financial statements of the group's Argentinian
operations have been translated into sterling at the closing
exchange rate at 2 March 2019 (ARS52.46:GBP1).
-- The cumulative impact corresponding to previous years has
been reflected in other comprehensive income in the period.
Reflecting the impact of inflation on the components of the
income statement and cash flow statement and on net monetary assets
and liabilities is immaterial to the group's results.
The Venezuelan economy has been designated hyperinflationary for
a number of years, but the impact on the group's results remains
immaterial.
Constant currency
Constant currency figures are derived by translating the prior
year results at the current year average exchange rates, except for
countries where consumer price inflation (CPI) has escalated to
extreme levels, in which case actual exchange rates are used,
applied to local currency data before the application of IAS 29.
There are currently two countries where we have operations which
are experiencing extreme levels of CPI - Argentina and Venezuela,
as described above.
CAUTIONARY STATEMENTS
This Interim Results Announcement contains forward-looking
statements. These have been made by the directors in good faith
based on the information available to them up to the time of their
approval of this report. The directors can give no assurance that
these expectations will prove to have been correct. Due to the
inherent uncertainties, including both economic and business risk
factors underlying such forward-looking information, actual results
may differ materially from those expressed or implied by these
forward-looking statements. The directors undertake no obligation
to update any forward-looking statements whether as a result of new
information, future events or otherwise.
risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the group's performance over the
remainder of the financial year and could cause actual results to
differ materially from expected and historical results. These
include, but are not limited to, competitor activity and
competition risk, commercial relationships with customers and
suppliers, changes in foreign exchange rates and commodity prices.
Details of the principal risks facing the group's businesses at an
operational level are included on pages 60 to 64 of the group's
statutory financial statements for the 52 weeks ended 15 September
2018, as part of the Strategic report. Details of further potential
risks and uncertainties arising since the issue of the previous
statutory financial statements are included within the Chairman's
statement and the Operating Review as appropriate.
responsibility statement
The Interim Results Announcement complies with the Disclosure
and Transparency Rules ('the DTR') of the UK's Financial Conduct
Authority in respect of the requirement to produce a half-yearly
financial report.
The directors confirm that to the best of their knowledge:
-- this financial information has been prepared in accordance
with IAS 34 as adopted by the EU;
-- this Interim Results Announcement includes a fair review of
the important events during the first half and their impact on the
financial information, and a description of the principal risks and
uncertainties for the remaining half of the year as required by DTR
4.2.7R; and
-- this Interim Results Announcement includes a fair review of
the disclosure of related party transactions and changes therein as
required by DTR 4.2.8R.
On behalf of the board
Michael McLintock George Weston John Bason
Chairman Chief Executive Finance Director
24 April 2019
INDEPENDENT REVIEW REPORT TO ASSOCIATED BRITISH FOODS PLC
Introduction
We have been engaged by the Company to review the condensed
consolidated interim financial statements in the Interim Results
Announcement for the 24 weeks ended 2 March 2019 which comprise the
condensed consolidated income statement, the condensed consolidated
statement of comprehensive income, the condensed consolidated
balance sheet, the condensed consolidated cash flow statement, the
condensed consolidated statement of changes in equity and the
related explanatory notes. We have read the other information
contained in the Interim Results Announcement and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed consolidated
interim financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The Interim Results Announcement is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the Interim Results Announcement in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 9, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
consolidated interim financial statements included in this Interim
Results Announcement have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated interim financial statements in the
Interim Results Announcement based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim
financial statements in the Interim Results Announcement for the 24
weeks ended 2 March 2019 are not prepared, in all material
respects, in accordance with International Accounting Standard 34
Interim Financial Reporting as adopted by the European Union and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
24 April 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR CKNDNABKDDQB
(END) Dow Jones Newswires
April 24, 2019 02:00 ET (06:00 GMT)
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