Interim Results

Associated British Foods PLC 19 April 2005 Associated British Foods plc announces 16% increase in adjusted profit before tax and 14% increase in interim dividend Interim results for the 24 weeks ended 5 March 2005 Highlights â€¢ Adjusted operating profit up 18% to Â£252m* â€¢ Group sales up 10% to Â£2,618m â€¢ Adjusted profit before tax up 16% to Â£268m ** â€¢ Adjusted earnings per share up 16% to 24.2p ** â€¢ Interim dividend per share up 14% to 6.0p â€¢ Net cash funds of Â£464m â€¢ Basic earnings per share up 16% to 22.9p and profit before tax up 15% to Â£252m George Weston, Chief Executive of Associated British Foods, said: 'These results reflect the strong contribution from recent acquisitions and good progress from our existing businesses. The integration of the acquisitions is virtually complete and these businesses are performing in line with our expectation.' * before amortisation of goodwill. ** before profits less losses on the sale of businesses and fixed assets and amortisation of goodwill. All figures stated after profits on the sale of businesses and fixed assets 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 George Weston, 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 7399 6500 ASSOCIATED BRITISH FOODS plc INTERIM REPORT FOR THE 24 WEEKS ENDED 5 MARCH 2005 CHAIRMAN'S STATEMENT The period has seen sizeable changes in the group due, in particular, to the major investments made at the end of the last financial year. Growth in sales and operating profit has been boosted by these acquisitions and by organic growth in the existing businesses. The profit contribution is now more evenly balanced across the four main business areas and the group's operations have a greater geographic spread. Operating profit, before amortisation of goodwill, rose by 18% to Â£252m and the increase in grocery and ingredients reflected the contribution from the new businesses. Trading conditions continued to be testing in highly competitive markets. A number of key input costs such as energy and packaging increased and, although some commodity costs fell, others rose significantly. Currency fluctuations had varying effects but, including profit translation, the impact was adverse overall. The acquisitions of the US herbs and spices and consumer yeast businesses and the Capullo oils business in Mexico accounted for a substantial part of the advance in grocery. Further progress by the UK bakery business and improvements at ACH, our US oils business, also contributed to this profit growth. The contribution from primary food and agriculture showed little change from the same period last year. Despite a good campaign, the profit at British Sugar UK was adversely impacted by an oversupply of sugar in the EU this year, currency and higher energy costs. However, this was more than offset by the benefit of the introduction of the EU sugar regime in Poland, higher volumes in China and an improvement in animal feeds. In ingredients, the acquisition of the bakers' yeast and yeast extract businesses greatly increased its scale and geographical coverage. Although yeast pricing weakened in North America and Turkey, this was partially offset by a strong performance from the operations in South America and Eastern Asia. The acquired businesses have operated in line with our expectations and we are confident that they will make a significant contribution to the group's future performance. Clothing retailing is as competitive a market as any at the present time. The performance of Primark is therefore particularly satisfying. Sales advanced by 12% and by 6% on a like-for-like basis. Margins showed further improvement and operating profit grew by 18%. Shareholders will probably be aware that Primark has acquired a number of sites formerly traded by the Allders department store chain. These, together with other sites secured as part of Primark's continuing store development programme, will provide substantial additional selling space by the autumn of this year. This continuing increase in floor space will provide the basis for further profitable development in the future. The group's strategic intent includes broadening the spread of our businesses and their global coverage thereby reducing the proportion of the group's profits earned from sugar production, particularly in the UK. The geographical and segmental analysis together with the comments in the operating review show the extent to which the group has moved in the desired direction. Specifically, given the forthcoming changes to the EU sugar regime, it is significant that the profit contribution from British Sugar in the UK was a little over a quarter of total operating profits compared to around a third a year earlier. Investment income less interest payable reduced from Â£14m to Â£11m. This reduction was less than might have been expected given the major acquisitions made at the end of the previous year and was due to higher interest rates and strong cash generation in the last twelve months. Profit before taxation, adjusted for profits less losses on the sale of fixed assets and businesses and before amortisation of goodwill, rose by 16% from Â£232m to Â£268m. The group's underlying effective rate of taxation was 28.0% as against 28.8% in the last full year. Adjusted earnings per share increased by 16% to 24.2p. The substantial cash outflow in the period included Â£630m of acquisition cost, virtually all of which related to the yeast business. Capital expenditure on fixed assets was also higher than in recent years, influenced by increased expenditure on new Primark stores. Net cash funds amounted to Â£464m which compared with Â£1,025m a year earlier. The underlying cash flow remained strong and the group retains the flexibility to invest appropriately in the development of the businesses. Dividends The interim dividend will be 6.0p per share, an increase of 14%, broadly in line with the growth in adjusted earnings per share in the period. The dividend will be paid on 4 July 2005 to shareholders registered at the close of business on 3 June 2005. Board Changes It was announced last autumn that Peter Jackson had decided to retire on 31 March, having been chief executive since 1999. He was managing director of British Sugar when it was acquired in 1991 and joined the ABF board in 1992. In his time as Chief Executive great progress was made in operating performance and in the strategic development of the group. Peter's contribution over this period has been critical to our success and has been greatly valued by his colleagues. We wish him the very best for the future. George Weston has been appointed Chief Executive as successor to Peter Jackson. On taking up this role he ceased to be Deputy Chairman. International Financial Reporting Standards We are required to report our results for the financial year ending in September 2006 in accordance with International Financial Reporting Standards rather than UK GAAP. The results for the year ending 18 September 2005 will be published under UK GAAP in November this year and a restatement of these results under IFRS will be published in December. Outlook Although the operating environment will be no less demanding in the second period of the year, we nevertheless expect to report good progress in operating profit for the full year. However, net investment income will be significantly lower than in the corresponding period of the previous year. Even after the major acquisitions referred to in this statement, our financial resources remain strong and will enable the group to support new investment initiatives. Your group is well placed for further development. Martin Adamson Chairman 19 April 2005 OPERATING REVIEW Group sales increased by 10% to Â£2,618m and adjusted operating profit increased by 18% to Â£252m. All business areas again made progress. In existing businesses, Primark contributed another strong performance and ACH has recovered from the impact of the sharp increase in soy and corn oil costs last year. However, British Sugar UK has been affected by an oversupply of sugar in the EU and increased input costs, and the Australian bread business has been affected by continued competitive pressure. Acquisitions have significantly contributed to the development of the group in the first half and, less disposals, added Â£33m to operating profit. Grocery has benefited from the acquisitions of the herbs and spices and consumer yeast businesses in the US, Capullo in Mexico and Billington's in the UK. Ingredients now includes the international yeast and bakery ingredients business, AB Mauri. Each of these has performed to expectation and integration is virtually complete. GROCERY Our businesses around the world produce and sell famous brands as well as own label grocery products. 2005 2004 Sales Â£m 1,244 1,168 Operating profit Â£m 86 70 There was strong growth in our international grocery businesses with sales up 7% to Â£1,244m and profit up 23% to Â£86m. Margins at ACH have benefited from a recovery in the oils business with lower soy and corn oil costs. Further progress was made by Mazola in the US with volumes ahead of last year by 3%. The acquisitions of Capullo in Mexico and the US herbs and spices and consumer yeast businesses are meeting our expectation. The integration of the US businesses with the existing sales, marketing and supply chain infrastructure is well under way and has already provided some cost savings. This combination with our existing retail brands, led by Mazola, has enabled ACH to consolidate its selling and brokerage relationships which will enhance sales coverage and scale with key retailers. In Mexico, our organisation will be fully staffed by May. The bread market in Australia continues to experience pressure on volume and price due to strong competition, and margins have suffered as a result. The new Chullora bakery starts production in May with completion scheduled for the summer. In the UK, Allied Bakeries benefited from growth in the Kingsmill brand which has received national television advertising support. Our frozen bakery business, Speedibake, has continued to improve its operational efficiency. Our international hot beverage brands, Twinings and Ovaltine, have maintained the momentum of strong sales growth reported last year. Twinings sales have grown well in the key UK and US markets with a similar performance from Ovaltine in Asia. Ovaltine has grown market share in Switzerland, China and in its single largest market, Thailand, driven by new product introductions and increased advertising and promotion spend. We have recently announced the intention to close factories in the US and France with additional investment in the UK and China. A rationalisation charge has been taken to operating profit in these results. Silver Spoon, our UK retail sugar brand, completed the national roll-out of its reduced calorie 'Light' variety, and the integration of Billington's, the leading supplier of unrefined cane sugars to the UK, is proceeding to plan. A strong profit performance from Ryvita was fuelled by sales growth in its core crispbread range and the successful launch of the snack version Minis. The Blue Dragon brand of ethnic foods traded particularly well in the important Chinese New Year period and benefited from national television advertising. The new Manchester factory which produces noodles and a range of microwaveable products is now fully operational. PRIMARY FOOD & AGRICULTURE We add value to primary products through our sophisticated and efficient processing facilities to produce high quality staple ingredients such as sugar. 2005 2004 Sales Â£m 736 747 Operating profit Â£m 86 83 British Sugar had a good campaign with a crop of 1.39 million tonnes. Excellent agricultural yields from good quality beet offset the effect of a smaller crop area. The UK is now ranked highly in the EU for agricultural productivity as well as being the most efficient processor. Factory performance was excellent with record production from Wissington. However, the UK profit has been affected by an oversupply of sugar in the EU this year as a result of the European Commission's incorrect forecasts of consumption and stocks particularly in the new member states. This is expected to continue to impact the business throughout the second half. In addition, higher energy costs and a weaker euro, compared to last year, have further reduced profit. Poland has benefited from higher sugar prices following its accession to the EU last year. These prices are now subject to the same market and currency forces that affect the EU market in general. Our sugar business in China has performed well with a combination of a good campaign, strong sales and firmer pricing. Reform of the European sugar regime is the most significant strategic issue facing British Sugar. The European Commission made indicative proposals for quota and price reductions in July last year. The Council of Ministers is expected to have considered these proposals by the end of this year. Their final form is expected to take effect from July 2006. Notwithstanding the uncertainties surrounding the outcome, we should expect that the new arrangements will still provide for efficient companies to be able to make an adequate return on the investment they have made in the industry. The UK animal feeds business continues to present a challenging environment with overcapacity making cost recovery difficult at a time of high energy costs. In April we formed a joint venture with Banks Cargill Agriculture, trading as Frontier, which combined the UK arable businesses of both partners to create a business of national scale, offering a broader product range to its farming and cereal processing customers. In China, market demand for quality assured feeds is high and has resulted in a strong performance. We purchased the interests of our Chinese joint venture partners in the feed mills in the period. INGREDIENTS We develop and produce functional ingredients from natural products for use in a diverse range of applications. 2005 2004 Sales Â£m 267 133 Operating profit Â£m 32 15 Sales and profit have more than doubled and reflect the recent acquisition of the international yeast and bakery ingredients businesses. At AB Mauri, the new organisation is well established. Although yeast pricing has weakened in North America and Turkey and higher molasses and energy costs have affected profits in a number of countries, the operations in South America and Eastern Asia performed strongly. Growth in China has been excellent and a new factory is on target to open in Xinjiang, Western China, later this year. We have announced plans for the construction of a new plant in New Zealand and the rationalisation of plants in India. The integration of our existing bakery ingredients businesses in the UK, US and Australia with those of AB Mauri has made good progress and provides the opportunity for important market and customer synergies. In the US, our food polyol business has slowed as the trend for low carbohydrate products in the US has weakened but antacid sales and profit have improved. Speciality lipids and emulsifiers benefited from improved operational efficiencies and the introduction of new plant sterol products. RETAIL Primark has a winning formula for providing quality merchandise at affordable prices. 2005 2004 Sales Â£m 448 399 Operating profit Â£m 59 50 Primark's excellent performance saw sales increase by 12% to Â£448m and profit by 18% to Â£59m. The sales increase was driven by 6% growth in like-for-like sales, maintaining the momentum of the last financial year, and an increase in retail selling space. The like-for-like value growth was achieved against a background of 5% price deflation. The margin improvement reflected better purchasing and the benefit of the weaker US dollar. Three new stores opened in the period in Lincoln, Sunderland and Dundrum. Smaller stores in Glengormley and Dundrum were closed. Extensions to Watford, Drogheda and Cork were completed. At the end of the period we were trading from 121 stores and 2.4 million sq ft of selling space. We continue to place great priority on the expansion of Primark. Through a combination of store refurbishments, extensions to selling space and acquisitions of new sites and re-sitings we have spent a total of Â£70m in capital expenditure over the period. We now have an extensive programme of new store openings which include the recently announced acquisition of stores which had previously traded as Allders. We expect that Kingston and a larger store in Mullingar will commence trading by the end of this financial year with a further six stores, in Leicester, Bromley, Hull, Leeds, Cardiff and Dundalk, opening in time for Christmas. Oxford is scheduled to open next year and we are evaluating the redevelopment of the Coventry store. SUMMARY These results reflect the strong contribution from recent acquisitions and good progress from our existing businesses. The integration of the acquisitions is virtually complete and these businesses are performing in line with our expectation. George Weston Chief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT Continuing Ongoing Acquisitions Total 24 weeks 24 weeks 24 weeks 24 weeks 53 weeks ended ended ended ended ended 5 March 5 March 5 March 28 February 18 September 2005 2005 2005 2004 2004 (restated) Note Â£m Â£m Â£m Â£m Â£m Turnover of the group including its share of joint ventures 2,433 195 2,628 2,380 5,181 Less share of turnover of joint ventures (4) (6) (10) (8) (16) Group turnover 1 2,429 189 2,618 2,372 5,165 Operating costs (2,227) (177) (2,404) (2,187) (4,744) Group operating profit 202 12 214 185 421 Share of operating results of: joint ventures - 1 1 6 8 associates 2 - 2 2 3 Total operating profit 1 204 13 217 193 432 Operating profit before amortisation of goodwill 226 26 252 213 478 Amortisation of goodwill (22) (13) (35) (20) (46) Profits less losses on sale of fixed 19 (1) 8 assets Profits less losses on sale of businesses - 8 7 Investment income 25 24 59 Profit on ordinary activities before 261 224 506 interest Interest payable (14) (10) (23) Other financial income 5 5 11 Profit on ordinary activities before 252 219 494 taxation Adjusted profit before taxation 268 232 525 Profits less losses on sale of fixed 19 (1) 8 assets Profits less losses on sale of businesses - 8 7 Amortisation of goodwill (35) (20) (46) Tax on profit on ordinary 2 (69) (63) (146) activities Profit on ordinary activities after 183 156 348 taxation Minority interests - equity (2) - (6) Profit for the financial period 181 156 342 Dividends (47) (41) (129) Transfer to reserves 134 115 213 Basic and diluted earnings per ordinary share 3 22.9p 19.8p 43.3p Adjusted earnings per ordinary share 3 24.2p 20.9p 46.6p The results of acquisitions shown separately above are those of the US herbs and spices business and the international yeast and bakery ingredients business recently acquired from Burns Philp. The group has discontinued no operations within the meaning of the Financial Reporting Standards during either 2005 or 2004. The results for the 24 weeks ended 28 February 2004 have been restated to reflect the adoption of FRS 17 - Retirement Benefits in the group's 2004 financial statements. The impact of this change is detailed in note 8. CONSOLIDATED BALANCE SHEET At At At 5 March 28 February 18 September 2005 2004 2004 (restated) Â£m Â£m Â£m Fixed assets Intangible assets - goodwill 1,036 475 593 Tangible assets 1,644 1,371 1,459 2,680 1,846 2,052 Interest in net assets of - joint ventures 15 13 12 - associates 13 11 11 Other investments 1 1 1 Total fixed asset 29 25 24 investments 2,709 1,871 2,076 Current assets Stocks 841 755 496 Debtors 672 567 600 Investments 905 1,305 1,547 Cash at bank and in hand 164 158 136 2,582 2,785 2,779 Creditors amounts falling due within one year Short- term borrowings (102) (89) (68) Other creditors (918) (744) (829) (1,020) (833) (897) Net current assets 1,562 1,952 1,882 Total assets less current liabilities 4,271 3,823 3,958 Creditors amounts falling due after one year Loans (503) (349) (357) Other creditors (2) (7) (8) (505) (356) (365) Provisions for liabilities and charges (171) (144) (155) Net assets excluding pension asset 3,595 3,323 3,438 Pension asset 44 33 58 Net assets 3,639 3,356 3,496 Capital and reserves Called up share capital 47 47 47 Revaluation reserve 3 3 3 Other reserves 173 173 173 Profit and loss reserve including pension reserve 3,392 3,111 3,246 Equity shareholders' funds 3,615 3,334 3,469 Minority interests in subsidiary undertakings - equity 24 22 27 3,639 3,356 3,496 The balance sheet at 28 February 2004 has been restated to reflect the adoption of FRS 17 - Retirement Benefits in the group's 2004 financial statements. The impact of this change is detailed in note 8. CONSOLIDATED CASH FLOW STATEMENT 24 weeks 24 weeks 53 weeks ended ended ended 5 March 28 February 18 September 2005 2004 2004 Note Â£m Â£m Â£m Cash flow from operating activities 4 71 16 631 Dividends from joint ventures - 1 4 Dividends from associates - 1 2 Return on investments and servicing of finance Investment income 27 25 55 Interest paid (13) (13) (23) Dividends paid to minorities (2) - (1) 12 12 31 Taxation (72) (65) (128) Capital expenditure and financial investment Purchase of tangible fixed assets (142) (96) (223) Sale of tangible fixed assets 31 5 29 (111) (91) (194) Acquisitions and disposals Purchase of subsidiary undertakings (630) (33) (229) Sale of joint ventures and associates 1 1 1 Sale of subsidiary undertakings 1 19 24 (628) (13) (204) Equity dividends paid (88) (78) (119) Net cash (outflow)/inflow before use of liquid (816) (217) 23 funds and financing Management of liquid funds 6 641 223 (18) Financing 5 200 (5) (28) Increase/(decrease) in cash 6 25 1 (23) CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 24 weeks 24 weeks 53 weeks ended ended ended 5 March 28 February 18 September 2005 2004 2004 (restated) Â£m Â£m Â£m Profit for the financial period 181 156 342 Actuarial gains on net pension assets - - 43 Deferred tax associated with net pension assets - - (13) Currency translation differences on foreign 10 (77) (75) currency net assets Tax on currency translation differences - (1) 1 Total recognised gains and losses relating to the 191 78 298 period RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 24 weeks 24 weeks 53 weeks ended ended ended 5 March 28 February 18 September 2005 2004 2004 (restated) Â£m Â£m Â£m Opening shareholders' funds 3,469 3,304 3,304 Profit for the financial period 181 156 342 Dividends (47) (41) (129) Goodwill written back - (3) (3) Net decrease/(increase) in own shares held 2 (4) (1) Other recognised gains and losses relating to 10 (78) (44) the period Closing shareholders' funds 3,615 3,334 3,469 These statements have been restated to reflect the adoption of FRS 17 - Retirement Benefits in the group's 2004 financial statements. NOTES TO THE INTERIM REPORT Group turnover Operating profit 24 weeks 24 weeks 53 weeks 24 weeks 24 weeks 53 weeks ended ended ended ended ended ended 5 March 28 February 18 September 5 March 28 February 18 September 2005 2004 2004 2005 2004 2004 (restated) (restated) 1. Segmental Analysis Â£m Â£m Â£m Â£m Â£m Â£m Analysis by business Grocery 1,244 1,168 2,446 86 70 160 Primary food & agriculture 736 747 1,682 86 83 189 Ingredients 267 133 294 32 15 36 Retail 448 399 858 59 50 108 Inter company sales (77) (116) (160) - - - Central costs - - - (11) (9) (19) 2,618 2,331 5,120 252 209 474 Businesses disposed: Grocery - 19 22 - - 1 Primary food & agriculture - 22 23 - 4 3 2,618 2,372 5,165 252 213 478 Amortisation of goodwill - - - (35) (20) (46) 2,618 2,372 5,165 217 193 432 Analysis by geography (by origin and destination) United Kingdom 1,390 1,343 2,952 140 140 298 Rest of Europe 303 250 526 36 21 59 The Americas 519 386 865 51 33 66 Australia, Asia & Rest of World 439 387 834 25 15 51 Inter company sales (33) (35) (57) - - - 2,618 2,331 5,120 252 209 474 Businesses disposed: United Kingdom - 23 26 - - - Rest of Europe - 4 5 - - - Australia, Asia & Rest of World - 14 14 - 4 4 2,618 2,372 5,165 252 213 478 Amortisation of goodwill - - - (35) (20) (46) 2,618 2,372 5,165 217 193 432 The composition of our geographic segments was revised in the financial statements for the year ended 18 September 2004 to reflect the increasingly international breadth of our businesses. The segmental analysis for the 24 weeks ended 28 February 2004 has been restated to reflect these changes and the adoption of FRS 17 - Retirement Benefits, the impact of which is detailed in note 8. Segmental analysis of acquisitions for the 24 weeks ended 5 March 2005 (Â£m): Sales Operating profit By business before goodwill Grocery 58 9 Ingredients 131 17 189 26 By geography United Kingdom 6 1 Rest of Europe 29 5 The Americas 122 16 Australia, Asia & Rest of World 32 4 189 26 Goodwill amortisation of Â£13m, relating to these acquisitions, was charged in the period. Capital employed At At At 5 March 28 February 18 September 2005 2004 2004 (restated) Â£m Â£m Â£m 1. Segmental analysis continued Analysis by business Grocery 832 738 767 Primary food & agriculture 885 901 690 Ingredients 319 127 125 Retail 392 317 338 Central capital employed (55) (29) (24) 2,373 2,054 1,896 Businesses disposed Grocery - 2 - Primary food & agriculture - 5 - 2,373 2,061 1,896 Analysis by geography United Kingdom 1,373 1,359 1,169 Rest of Europe 310 196 193 The Americas 313 184 255 Australia, Asia & Rest of World 377 315 279 2,373 2,054 1,896 Businesses disposed United Kingdom - 7 - 2,373 2,061 1,896 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. Capital employed is reconciled to net assets as follows: At At At 5 March 28 February 18 September 2005 2004 2004 (restated) Â£m Â£m Â£m Capital employed 2,373 2,061 1,896 Goodwill 1,036 475 593 Other fixed asset investments 1 1 1 Net funds 464 1,025 1,258 Tax and dividends (279) (239) (310) Pension asset 44 33 58 Net assets 3,639 3,356 3,496 24 weeks 24 weeks 53 weeks ended ended ended 5 March 28 February 18 September 2005 2004 2004 (restated) Â£m Â£m Â£m 2. Tax on profit on ordinary activities Tax charge comprises: UK corporation tax at 30% 39 37 94 Overseas income and corporation tax 26 18 30 Joint ventures and associates 1 1 2 Current tax charge 66 56 126 UK deferred taxation 2 3 7 Overseas deferred taxation 1 4 13 Total tax charge 69 63 146 Add back: Tax credit on goodwill amortisation 6 4 9 Tax credit on sale of fixed assets and businesses - - (4) Underlying tax charge 75 67 151 3. Earnings per ordinary share Pence Pence Pence Adjusted earnings per ordinary share 24.2 20.9 46.6 Earnings per ordinary share on: Sale of fixed assets 2.4 (0.1) 1.0 Sale of businesses - 0.9 0.9 Tax effect on above - 0.1 (0.5) Amortisation of goodwill (4.4) (2.5) (5.8) Tax credit on goodwill amortisation 0.7 0.5 1.1 Earnings per ordinary share 22.9 19.8 43.3 4. Cash flow from operating activities Â£m Â£m Â£m Operating profit 214 185 421 Amortisation of goodwill 35 20 46 Depreciation 79 72 139 (Increase)/decrease in working capital - stocks (314) (259) 30 - debtors (15) (28) (39) - creditors 52 15 16 Other provisions 13 3 4 Pension cost less contributions 7 8 13 Other movement in own shares held reserve - - 1 Net cash from operating activities 71 16 631 24 weeks 24 weeks 53 weeks ended ended ended 5 March 28 February 18 September 2005 2004 2004 Â£m Â£m Â£m 5. Analysis of changes in financing Repayment of short-term loans (9) (61) (97) Issue of short-term loans 40 65 81 Repayment of loans over one year (199) (6) (6) Issue of loans over one year 366 1 2 Decrease in bank borrowings - - (6) Net decrease/(increase) in cost of own shares held 2 (4) (2) 200 (5) (28) 6. Reconciliation of net cash flow to movement in net funds Increase /(decrease) in cash 25 1 (23) Management of liquid resources (641) (223) 18 Net (increase)/decrease in borrowings (198) 1 26 Change in net funds resulting from cash flows (814) (221) 21 Effect of currency changes 24 17 8 On acquisition of subsidiary undertakings (4) (9) (9) Movement in net funds (794) (213) 20 Opening net funds 1,258 1,238 1,238 Closing net funds 464 1,025 1,258 At Acquisition At 18 September Cash of subsidiary Exchange 5 March 2004 flow undertakings adjustments 2005 Â£m Â£m Â£m Â£m Â£m 7. Analysis of net funds Cash at bank and in hand 136 25 - 3 164 Short-term borrowings (68) (31) (5) 2 (102) Investments 1,547 (641) 1 (2) 905 Loans over one year (357) (167) - 21 (503) 1,258 (814) (4) 24 464 8. Basis of preparation The figures shown for the financial year ended 18 September 2004, which have been abridged from the group's 2004 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 5 March 2005 and 28 February 2004 are unaudited. The interim financial information has been prepared on the basis of the accounting policies set out in the group's 2004 statutory accounts. The adoption of FRS 17 in the 2004 statutory accounts required a change to the accounting treatment of defined benefit pension arrangements such that the group now includes the assets and liabilities of these arrangements in the consolidated balance sheet. Current service costs, curtailments and settlement gains and losses and net financial returns are included in the profit and loss account in the period to which they relate. Actuarial gains and losses are recognised in the statement of total recognised gains and losses. The following table sets out the impact of adopting FRS 17 on the affected line items in the group profit and loss account and balance sheet at 28 February 2004. Tax on Profit Profit on Other profit on for the Operating sale of financial ordinary financial profit businesses income activities period Â£m Â£m Â£m Â£m Â£m Profit and loss account As previously reported 204 6 - (64) 159 Adoption of FRS 17 (11) 2 5 1 (3) As restated 193 8 5 (63) 156 Other Provision for Net Profit creditors liabilities pension & loss due within and charges assets reserve 1 year Â£m Â£m Â£m Â£m Balance sheet As previously reported (746) (147) - 3,073 Adoption of FRS 17 2 3 33 38 As restated (744) (144) 33 3,111 This information is provided by RNS The company news service from the London Stock Exchange

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