Interim Results

Associated British Foods PLC 16 April 2003 16 April 2003 Associated British Foods announces 13% increase in profit before tax and 12% increase in first interim dividend Interim results for 24 weeks ended 1 March 2003 Highlights • Operating profit up 14% to £204 million * • Group sales up 8% to £2,259 million • Net investment income down from £13 million to £12 million • Profit before tax up 13% to £216 million ** • Adjusted earnings per share up 14% to 19.3p ** • First interim dividend per share up 12% to 4.75p • Net cash funds of £836 million Peter Jackson, Chief Executive of Associated British Foods, said: 'This is a strong set of results with double digit operating profit growth. It demonstrates good performances from our continuing businesses as well as the benefits of the investments made in acquiring Mazola and Ovaltine. 'A consistent financially demanding approach, an insistence on a strong balance sheet and first rate devolved management provide us with a strong foundation for future growth.' * before amortisation of goodwill ** before exceptional items, profits less losses on the sale of fixed assets and businesses and amortisation of goodwill Figures stated after exceptional items, profits less losses on the sale of fixed assets and businesses and amortisation of goodwill are shown on the face of the consolidated profit and loss account. For further information please contact: Associated British Foods: Until 1500 only Peter Jackson, Chief Executive Geoff Lancaster, Head of External Affairs John Bason, Finance Director Mobile: 07860 562 659 Tel: 020 7638 9571 Jonathan Clare/Chris Barrie/Sara Batchelor, Citigate Dewe Rogerson Tel: 020 7638 9571 After 1500 John Bason, Finance Director Tel: 020 7589 6363 ASSOCIATED BRITISH FOODS plc INTERIM REPORT FOR THE 24 WEEKS ENDED 1 MARCH 2003 For release 16 April 2003 CHAIRMAN'S STATEMENT This is my first report to shareholders after succeeding Harry Bailey as Chairman in December. In the period covered by this interim report difficult general economic conditions and substantial political uncertainty have continued across the world, affecting many of the markets in which the group trades. In these circumstances, I am pleased to announce further strong growth in trading results. Operating profit, before amortisation of goodwill, has risen by 14% to £204 million. The increase in operating profit is not only a result of the strong contribution from acquired businesses but also the organic growth from our existing businesses. Without exception our businesses have faced tough conditions, but despite this much progress has been made. The results include a full period from Mazola in the US, which was acquired in July 2002, and three months from Ovaltine, acquired at the end of November 2002. During the period two significant disposals were made, Allied Glass Containers in December 2002 and our British third party flour milling business in February 2003. As a consequence of such changes in the group, the segmental analysis of our operating results has been amended to reflect its current composition. In grocery, the acquisitions of Mazola and Ovaltine have extended the range of brands. Both of these businesses have performed in line with our expectations when purchased and have contributed substantially to profit growth. The integration of Mazola has been completed successfully and the integration of the more recent and geographically diverse Ovaltine acquisition is progressing well. Twinings experienced another period of excellent growth. Some of the smaller grocery businesses faced market problems or operational difficulties but these are being addressed. In primary food & agriculture, a good sugar campaign and the euro's strength against sterling helped British Sugar's profits. These benefits were partly offset by weak prices in Poland and China. There was a mixed performance in our ingredients businesses. Both enzymes and lipid technologies showed particularly strong growth and the improvement shown last year at SPI, our US based polyols business, has continued. We reported six months ago that the Abitec ingredients business had faced problems in re-organising and integrating its existing and newly acquired bakery ingredients businesses in the UK and the US. I regret that these problems are taking longer than expected to resolve and results in the period have been poor. The results of George Weston Foods, our Australian business, are now included in the appropriate business segments. Following the acquisition of the minority shareholdings in September 2002, management has been restructured, overhead savings identified and planning commenced for substantial improvement in operating results. Non-recurring costs associated with these changes have resulted in lower profits than a year ago. I am confident that as 2003 progresses, there will be real improvement. Primark, our clothing retail chain, has experienced strong like-for-like sales growth in the period. Further investment has been made in store refits and extensions. A major new store was opened in Birmingham where trading has been good and we continue to search for new sites. Operating profits in the period have risen by 14%. A recent interim valuation of the main UK pension scheme indicates that it remains fully funded. However, given prevailing market conditions your board has agreed with the Trustee company that contributions by the group should be recommenced. £4 million has been charged against profits reflecting the contribution due for the period. Investment income less interest paid showed little change on the previous year. Profit before tax, adjusted for profits less losses on the sale of fixed assets and businesses and amortisation of goodwill, rose by 13% to £216 million. Adjusted earnings per share increased by 14% to 19.3p. Management continues to place great emphasis on cash flow. This has remained strong in the period. Capital expenditure to maintain and develop the capacity of our businesses has continued. In the year since 2 March 2002 £475 million has been invested in new businesses, mainly Mazola and Ovaltine and the acquisition of the minority shareholding in George Weston Foods. £133 million has been generated by the sale of businesses which were not central to the group's future development. In spite of this £342 million net investment, cash balances less borrowings at 1 March 2003 amounted to £836 million compared to £902 million a year earlier, a strong testament to the group's cash generation. Outlook I referred earlier to the difficult economic and political conditions of the past half year. At the time of writing there is no sign of imminent improvement; if anything the risks of economic recession and political volatility are greater than they have been. Although the sectors in which we operate are less vulnerable than many to the consequences of such conditions, they are not immune. We expect further significant operating profit growth in the second half of the year although it is unlikely to be as strong as in the first half. There will be a higher underlying tax rate in the full year compared to last year. Directors I started this report by reminding shareholders that I succeeded Harry Bailey as Chairman when he retired from the board at the conclusion of the annual general meeting on 5 December. Mr Bailey served this company for 40 years, 23 as a director and latterly as Chairman. His contribution to the company in that time was immense. His incisive thinking and sure judgement were very greatly valued by his colleagues on the board. We wish him a long and happy retirement. Dividend For many years the first interim dividend has not changed, any increase in total being applied to the second dividend. The board has decided that, in future, increases will also be considered for the first interim dividend. On this occasion the first interim will be increased by 12% from 4.25p to 4.75p, which will be paid on 29 August 2003 to shareholders registered at the close of business on 1 August 2003. This increase should not be taken as a guide to the likely increase in total dividends for the year, which will be of an amount that will reflect the underlying growth in earnings over the year. Martin Adamson Chairman 16 April 2003 OPERATING REVIEW Group sales increased by 8% to £2,259 million and adjusted operating profit increased by 14% to £204 million. A number of significant acquisitions and disposals have been made recently. The major acquisitions were Mazola in the US in July 2002, Ovaltine in November 2002 and the minority shareholdings in George Weston Foods in Australia in September 2002. The main disposals were the glass packaging business, Allied Glass Containers, in December 2002 and the British third party flour milling business in February 2003. The segmental analysis by business has been amended to reflect the recent changes in the group and now comprises grocery, primary food & agriculture, ingredients and retail. Details of the changes are outlined in note 1 to this interim report. Although no longer included in the analysis by business, the results for the businesses in Australia and New Zealand are still separately identified in the analysis by geography. Grocery 2003 2002 Sales £m 1,068 923 Operating profit £m 69 50 Our international grocery businesses performed strongly with sales up 16% to £1,068 million and profit up 38% to £69 million. This strong growth reflects the inclusion of Mazola and Ovaltine which have significantly increased the scale of our grocery businesses. More than half our sales are outside the UK either through strong export performances or local manufacturing operations and we have leading brand and market positions in Europe, the US, Australia and the Far East. ACH Food Companies, our US grocery and foodservice business, enjoyed strong growth as a result of good progress in its branded foodservice cooking oils and the contribution from its acquisition of the Mazola retail cooking oil business and related brands. By the end of the calendar year Mazola had been fully integrated within ACH and is performing to expectation. The acquisition of Ovaltine was completed at the end of November 2002, and the integration with our existing international Twinings teas business is proceeding well. The combined business has a leading position in international hot beverages. Twinings delivered strong double digit sales and profit growth and there is significant investment in increasing capacity to meet demand. The profit from Ovaltine is in line with expectation with a good performance from the key growth markets of south east Asia. £3 million of the costs of integration have been charged in the first half. Following the sale of the low margin British third party flour milling operations, we are integrating the remaining mills with our UK bakery business, Allied Bakeries. The mills retained at Manchester and Tilbury are high volume and highly efficient, and the integration will ensure a low cost supply chain for flour deliveries. Allied Bakeries increased volume, particularly with further investment in the Kingsmill brand, and reduced costs but these benefits were offset by the impact of margin pressure in a very competitive environment. Profitability at Speedibake fell as a result of reduced prices in commodity sectors and operational difficulties. Management action has been taken to provide our customers with an enhanced range and to improve operations. Our Australian businesses are making progress. Overhead and systems costs have been reduced and a rationalisation charge has been made for this in the first half. In baking, the volume growth has been offset by pressure on pricing. The milling business delivered a strong performance with increased flour prices recovering the impact of much higher wheat costs due to the very poor harvest. Following management changes and restructuring, the meat & dairy business showed improvement in the first half and there are clear plans for further improvement. The profitability of biscuit & cake was again impacted by price discounting and a number of strategic options are being evaluated for the future of this business. As already announced, our deputy chairman, George Weston, has taken over as chief executive of our Australian businesses. Silver Spoon consolidated its leadership of the granulated sugar market and strengthened its position in the UK sweetener and syrups markets. 'Nothing Comes Closer To Sugar' benefited from consumer promotions and further consolidated its number two position in the competitive alternative sweetener market and Crusha milk shake syrup continued its strong growth since acquisition last year. Primary food & agriculture 2003 2002 Sales £m 711 720 Operating profit £m 75 72 Sales were virtually unchanged at £711 million with profit up 4% to £75 million. British Sugar benefited from a crop 210,000 tonnes up on last year at 1.43 million tonnes and the strength of the euro against sterling. In addition processing efficiency was much improved and several factories achieved production records, notably the Wissington factory which suffered last year with filtration difficulties. This excellent performance was all the more significant given that this was the first year that the UK sugar beet crop was processed in just six factories following the closure of Kidderminster factory. The new resin separation plant, which was commissioned last spring at Wissington, made a full contribution and performed fully to expectations. Larger crops were more than offset by the impact of weak market prices in the Chinese and Polish sugar operations. Furthermore, a late frost in China will reduce final sugar production. In Poland, our biggest factory, Glinojeck, became the first sugar factory in that country to produce in excess of 100,000 tonnes in a single year. BSO Polska also gained accreditation to the international quality standard ISO 9001. In agriculture, the combination of our expertise in nutrition and procurement and our quality assurance systems secured further business supplying the pig and poultry markets. The integration of our arable and animal feeds businesses last year delivered benefits this year, notably in the new grain procurement arrangements for the animal feed mills. Profits reduced at Kings, the speciality crop contracting business, with some pressure on pricing and increased investment for further development. Ingredients 2003 2002 Sales £m 141 123 Operating profit £m 13 12 Our ingredients group is focused on high technology products for food, pharmaceutical and personal care applications. It has a significant position in enzymes and lipid technologies, and is a leader in bakery ingredients and polyols. Sales were up 15% to £141 million and profits up 8% to £13 million. Our US polyols business, SPI, maintained the strong recovery reported at the year-end. In Food, crystalline maltitol and speciality liquid sweeteners continued to benefit from the rapid growth of the sugar-free confectionery market. In Pharma, our quick dissolving drug delivery system, Pharmaburst, has been specified as the preferred excipient for a number of new product launches. Enzymes generated excellent sales and profit growth. Textile enzymes experienced particularly rapid growth and benefited from a new dedicated Asian sales resource. New applications continue to be found giving confidence that further development can be expected. Lipid technologies performed well in the US and UK. Sales of sterols in the US were strong and the use of one of our pharmaceutical excipients in a new product further boosted sales. The integration of Cereform, our bakery ingredients businesses in the UK and US, continued to be problematic and performance was disappointing. In the US, a new management team is now in place and new business is being won. In the UK, the operational problems are being tackled with improvement expected in the second half. Retail 2003 2002 Sales £m 359 312 Operating profit £m 42 37 Primark, our retail textile business, continued to make excellent progress with sales up 15% to £359 million and profit up 14% to £42 million. This result reflects both the increase in retail selling space and strong like-for-like sales growth of 7%. We are now trading from over 2 million square feet of retail space and, following the opening of our new 46,000 square feet store in Birmingham, we have a total of 115 stores in the UK and Eire. The programme of refits, involving 11 stores and started last year, was completed. This included a relocation in Wandsworth and the creation of additional sales area in Hemel Hempstead and Stevenage. A new store at the Plaza Centre, East Kilbride, will open this Easter. Summary This is a strong set of results with double digit operating profit growth. It demonstrates good performances from our continuing businesses as well as the benefits of the investments made in acquiring Mazola and Ovaltine. A consistent financially demanding approach, an insistence on a strong balance sheet and first rate devolved management provide us with a strong foundation for future growth. Peter Jackson Chief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT 24 weeks 24 weeks 52 weeks ended ended ended 1 March 2 March 14 September 2003 2002 2002 Note £m £m £m Turnover of the group including its share of joint 2,268 2,100 4,567 ventures Less share of turnover of joint ventures (9) (8) (22) Group turnover 1 2,259 2,092 4,545 Operating costs (2,075) (1,922) (4,175) Group operating profit 184 170 370 Share of operating results of - joint ventures 2 1 3 - associates 1 2 4 Total operating profit 1 187 173 377 Operating profit before amortisation of goodwill 204 179 395 Amortisation of goodwill (17) (6) (18) Profits less losses on sale of fixed assets (6) 3 8 Profits less losses on sale of businesses 11 - - Investment income 26 23 57 Profit on ordinary activities before interest 218 199 442 Interest payable (14) (10) (22) Profit on ordinary activities before taxation 204 189 420 Adjusted profit before taxation 216 192 430 Profits less losses on sale of fixed assets (6) 3 8 Profits less losses on sale of businesses 11 - - Amortisation of goodwill (17) (6) (18) Tax on profit on ordinary activities 2 (58) (56) (95) Profit on ordinary activities after taxation 146 133 325 Minority interests - equity - (2) (3) Profit for the financial period 146 131 322 Dividends - first interim (37) (34) (34) - second interim - - (71) Transfer to reserves 109 97 217 Basic and diluted earnings per ordinary share 3 18.5p 16.6p 40.8p Adjusted earnings per ordinary share 3 19.3p 17.0p 38.7p The group has made no material acquisitions nor discontinued any operations within the meaning of the Financial Reporting Standards during either 2003 or 2002. CONSOLIDATED BALANCE SHEET At At At 1 March 2 March 14 September 2003 2002 2002 £m £m £m Fixed assets Intangible assets - goodwill 515 198 383 Tangible assets 1,379 1,428 1,421 1,894 1,626 1,804 Interest in net assets of - joint ventures 9 9 9 - associates 13 12 12 Other investments 11 12 11 Total fixed asset investments 33 33 32 1,927 1,659 1,836 Current assets Stocks 749 726 498 Debtors 583 531 552 Investments 1,296 1,139 1,362 Cash at bank and in hand 135 21 139 2,763 2,417 2,551 Creditors amounts falling due within one year Short term borrowings (198) (91) (64) Other creditors (779) (697) (736) (977) (788) (800) Net current assets 1,786 1,629 1,751 Total assets less current liabilities 3,713 3,288 3,587 Creditors amounts falling due after one year Loans (397) (167) (387) Other creditors (7) (10) (8) (404) (177) (395) Provisions for liabilities and charges (139) (126) (126) 3,170 2,985 3,066 Capital and reserves Called up share capital 47 47 47 Revaluation reserve 3 3 3 Other reserves 173 173 173 Profit and loss account 2,919 2,684 2,768 Equity shareholders' funds 3,142 2,907 2,991 Minority interests in subsidiary undertakings - equity 28 78 75 3,170 2,985 3,066 CONSOLIDATED CASH FLOW STATEMENT 24 weeks 24 weeks 52 weeks ended ended ended 1 March 2 March 14 September 2003 2002 2002 Note £m £m £m Cash flow from operating activities 4 83 21 523 Dividends from joint ventures 1 2 3 Dividends from associates - - 1 Return on investments and servicing of finance Investment income 27 23 60 Interest paid (15) (11) (22) Dividends paid to minorities (16) (3) (4) (4) 9 34 Taxation (63) (35) (97) Capital expenditure and financial investment Purchase of tangible fixed assets (66) (89) (186) Sale of tangible fixed assets 5 12 40 Sale of equity investments - 2 4 (61) (75) (142) Acquisitions and disposals Purchase of subsidiary undertakings (212) (28) (267) Purchase of joint ventures and associates - (2) (1) Sale of subsidiary undertakings 118 18 34 (94) (12) (234) Equity dividends paid (71) (59) (93) Net cash outflow before use of liquid funds (209) (149) (5) and financing Management of liquid funds 6 76 62 (164) Financing 5 127 12 216 (Decrease)/increase in cash 6 (6) (75) 47 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 24 weeks 24 weeks 52 weeks ended ended ended 1 March 2 March 14 September 2003 2002 2002 £m £m £m Profit for the financial period 146 131 322 Currency translation differences on foreign currency net assets 30 23 (21) Tax on currency translation differences 1 (3) 5 Total recognised gains and losses relating to the period 177 151 306 RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 24 weeks 24 weeks 52 weeks ended ended ended 1 March 2 March 14 September 2003 2002 2002 £m £m £m Opening shareholders' funds 2,991 2,790 2,790 Profit for the financial period 146 131 322 Dividends - first interim (37) (34) (34) - second interim - - (71) Goodwill written back 11 - - Other recognised gains and losses 31 20 (16) relating to the period Closing shareholders' funds 3,142 2,907 2,991 NOTES TO THE INTERIM REPORT Group turnover Operating profit 24 weeks 24 weeks 52 weeks 24 weeks 24 weeks 52 weeks ended ended ended ended ended ended 1 March 2 March 14 September 1 March 2 March 14 September 2003 2002 2002 2003 2002 2002 £m £m £m £m £m £m 1. Segmental Analysis Analysis by business Grocery 1,068 923 2,027 69 50 108 Primary food & agriculture 711 720 1,545 75 72 168 Ingredients 141 123 291 13 12 30 Retail 359 312 654 42 37 72 Inter company sales (89) (82) (169) - - - Central costs - - - (8) (6) (15) Pension credit - - - 8 10 22 2,190 1,996 4,348 199 175 385 Businesses disposed: Grocery 51 56 117 3 2 4 Ingredients - 15 22 - (1) (2) Packaging 18 25 58 1 2 5 Pension credit - - - 1 1 3 2,259 2,092 4,545 204 179 395 Amortisation of goodwill - - - (17) (6) (18) 2,259 2,092 4,545 187 173 377 Analysis by geography (by origin and destination) European Union (mainly UK and Ireland) 1,384 1,349 2,853 138 129 292 Australia & New Zealand 291 256 580 8 9 12 North America 405 314 709 40 21 42 Elsewhere 122 88 233 5 6 17 Intercompany sales (12) (11) (27) - - - Pension credit - - - 8 10 22 2,190 1,996 4,348 199 175 385 Businesses disposed: European Union 58 66 149 3 4 9 Australia & New Zealand - 15 22 - (1) (2) North America 11 15 26 1 - - Pension credit - - - 1 1 3 2,259 2,092 4,545 204 179 395 Amortisation of goodwill - - - (17) (6) (18) 2,259 2,092 4,545 187 173 377 Business segment operating profits include a pension charge that reflects the regular cost. The difference between this charge and that required under SSAP 24 is shown as a credit held centrally. Virtually all of the credit arises in the European Union. NOTES TO THE INTERIM REPORT continued Capital employed 24 weeks 24 weeks 52 weeks ended ended ended 1 March 2 March 14 September 2003 2002 2002 £m £m £m 1. Segmental analysis continued Analysis by business Grocery 797 751 702 Primary food & agriculture 870 883 692 Ingredients 130 136 131 Retail 292 290 298 Central capital employed (50) (33) (32) 2,039 2,027 1,791 Businesses disposed Grocery - 54 55 Ingredients - 13 - Packaging - 45 46 2,039 2,139 1,892 Analysis by geography European Union (mainly UK and Ireland) 1,417 1,411 1,239 Australia & New Zealand 254 250 207 North America 209 223 219 Elsewhere 159 143 126 2,039 2,027 1,791 Businesses disposed European Union - 87 89 Australia & New Zealand - 13 - North America - 12 12 2,039 2,139 1,892 Capital employed comprises tangible fixed assets, interests in joint ventures and associates, current assets (excluding deferred taxation, cash and investments), creditors (excluding borrowings, tax and dividends) and provisions for liabilities and charges excluding deferred taxation. The segmental analysis by business has been amended as follows: - the retained UK flour mills are now integrated with Allied Bakeries and included in grocery - with the acquisition of Mazola, ACH is now included in grocery - following the disposal of Allied Glass Containers, the renamed retail segment represents Primark - the businesses in Australia and New Zealand are now analysed across the grocery and ingredients segments - the renamed ingredients segment now comprises SPI, Abitec and the Australian ingredients businessesComparatives have been restated. NOTES TO THE INTERIM REPORT continued 24 weeks 24 weeks 52 weeks ended ended ended 1 March 2 March 14 September 2003 2002 2002 £m £m £m 2. Tax on profit on ordinary activities Tax charge comprises: UK corporation tax at 30% 38 38 81 Overseas income and corporation tax 9 11 24 Joint ventures and associates - 1 2 Current tax charge 47 50 107 UK deferred taxation 2 5 10 Overseas deferred taxation 9 1 (22) Total tax charge 58 56 95 Add back: Tax credit on goodwill 5 - 4 amortisation Tax credit on sale of fixed assets and 1 - - businesses Exceptional credit on US deferred - - 23 taxation Underlying tax charge 64 56 122 Pence Pence Pence 3. Earnings per ordinary share Adjusted earnings per ordinary 19.3 17.0 38.7 share Earnings per ordinary share on: Sale of fixed assets (0.8) 0.4 1.0 Sale of businesses 1.4 - - Tax effect on above 0.2 - - Exceptional tax credit - - 2.9 Amortisation of goodwill (2.2) (0.8) (2.3) Tax credit on goodwill 0.6 - 0.5 amortisation Earnings per ordinary share 18.5 16.6 40.8 £m £m £m 4. Cash flow from operating activities Operating profit 184 170 370 Amortisation of goodwill 17 6 18 Depreciation 72 70 149 (Increase)/decrease in working capital - stocks (249) (252) (18) - debtors (36) 4 (13) - creditors 85 33 27 Provisions 10 (10) (10) 83 21 523 5. Analysis of changes in financing Repayment of short-term loans (49) (57) (102) Issue of short-term loans 163 64 103 Repayment of loans over one year (2) (1) (7) Issue of loans over one year 15 6 238 Increase in bank borrowings - - (16) 127 12 216 NOTES TO THE INTERIM REPORT continued 24 weeks 24 weeks 52 weeks ended ended ended 1 March 2 March 14 September 2003 2002 2002 £m £m £m 6. Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash (6) (75) 47 Management of liquid funds (76) (62) 164 Net increase in borrowings (127) (12) (216) Change in net funds resulting from (209) (149) (5) cash flows Effect of currency changes 6 1 4 On acquisition of subsidiary (11) - - undertakings Other - (1) - Movement in net funds (214) (149) (1) Opening net funds 1,050 1,051 1,051 Closing net funds 836 902 1,050 At Acquisition At 14 September Cash of subsidiary Exchange 1 March 2002 flow undertakings adjustments 2003 £m £m £m £m £m 7. Analysis of net funds Cash at bank and in hand 139 (6) - 2 135 Short-term borrowings (64) (114) (11) (9) (198) Investments 1,362 (76) - 10 1,296 Loans over one year (387) (13) - 3 (397) 1,050 (209) (11) 6 836 8. Basis of preparation The figures shown for the financial year ended 14 September 2002, which have been abridged from the group's 2002 financial statements, are not the group's statutory accounts. Those accounts have been reported on by the auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The figures for the 24 weeks ended 1 March 2003 and 2 March 2002 are unaudited. The interim financial information has been prepared on the basis of the accounting policies set out in the group's 2002 statutory accounts. END This information is provided by RNS The company news service from the London Stock Exchange

Companies

Associated British Foods (ABF)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today