Final Results

Associated British Foods PLC 04 November 2003 4 November 2003 Associated British Foods profits increase by 10% to Â£473m Preliminary results for year ended 13 September 2003 Highlights â€¢ Adjusted operating profit up 14% to Â£450m* â€¢ Group sales up 8% to Â£4,909m â€¢ Investment income less interest payable down from Â£35m to Â£23m â€¢ Adjusted profit before tax up 10% to Â£473m ** â€¢ Adjusted earnings per share up 10% to 42.6p ** â€¢ Dividends per share up 10% to 14.6p â€¢ Cash generated, before acquisitions and disposals, of Â£292m â€¢ Net cash funds of Â£1,238m â€¢ Basic earnings per share up 3% to 42.1p and profit before tax up 9% to Â£457m Peter Jackson, Chief Executive of Associated British Foods, said: 'This is another strong set of results with good growth from all our business categories. During the year we continued to build a range of strong market positions and broaden our international base. Mazola and Ovaltine, which we acquired last year, performed very strongly over the year and have been well integrated into the group. 'Our proven ability to increase profits and at the same time generate strong cash flow for further investment should give our shareholders confidence for the future.' * before amortisation of goodwill. ** before profits 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 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 Notes to Editors 1. Associated British Foods (ABF) is an international food, ingredients and retail group with annual sales of Â£4.9 billion and over 35,000 employees. The group is one of Europe's largest food companies and has significant businesses in Australasia and the US. 2. These 2003 preliminary results represent another year of substantial progress in the achievement of sustained profit growth with strong cash flow. Â£m 1999 2000 2001 2002 2003 Adjusted operating profit 326 340 351 395 450 Cash flow before acquisitions/ 42 140 108 229 292 disposals* * excludes special dividend in 1999 and payment of European Commission fine of Â£27m in 2001 3. Stronger market positions in grocery, ingredients and retail have been built, while primary food and agriculture remained strongly profitable and cash generative. During the year, ABF spent Â£230m on acquisitions including a special dividend of Â£15m paid to the former minority shareholders in George Weston Foods. 4. Grocery now represents 33% of the group's total profit (2002 - 28%) and includes some leading brand names: Twinings A world leader in speciality teas Ovaltine Manufactured in Europe, Asia and Australia, and sold in 50 countries Mazola The leading US corn oil brand Silver Spoon The UK's leading retail sugar brand Kingsmill Number six grocery brand in the UK (Top 50 Biggest Brands - Marketing 28/08/03) Ryvita UK number one in crispbread Tip Top (Bread) Australia's number one food brand ASSOCIATED BRITISH FOODS plc PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 13 SEPTEMBER 2003 For release 4 November 2003 CHAIRMAN'S STATEMENT I am very glad to report to shareholders on a year of strong growth in trading results. Operating profit, before amortisation of goodwill, has risen by 14% to Â£450m. This reflects considerable progress in many of our operations and contribution from new investment. All our businesses have faced highly competitive conditions and in addition the year has been one of general economic difficulty and considerable political uncertainty. In these circumstances the overall trading result is particularly welcome. The results include a full year contribution from Mazola, the bottled corn oils business acquired in July 2002, and nine months from Ovaltine which was acquired at the end of November 2002. The results also reflect two significant disposals, Allied Glass Containers in December 2002 and our British third party flour milling business in February this year. Not surprisingly, the biggest contributor to profit growth has been grocery which benefited from the two major acquisitions. However, progress across many of our businesses has enabled the group to absorb poorer performance from a few as well as the impact of one-off costs. In grocery we have successfully completed the integration of both Mazola in the US and the more geographically diverse Ovaltine business. Together these businesses have contributed significantly to profit growth and both have performed well and in line with our acquisition plans. Twinings, which is now managed together with Ovaltine as an international beverages business, has had another year of improved sales and profits. Following the sale of our third party flour mills, the UK bakery business is now supported by dedicated mills in an integrated operation. Further steps have been taken to develop our branded product range and to increase operational efficiency. Our Australian bakery business gave a strong performance and is also well advanced in the development of the new Sydney bakery which will further improve operations when it opens towards the end of 2004. Most of the other grocery businesses performed satisfactorily so it is disappointing that our frozen bakery business in the UK has been held back by operational problems. In primary food & agriculture, British Sugar had excellent results. The campaign progressed with a good crop and further operational efficiency, the latter due to the continuing investment over the years in plant and improved working practices. In addition pricing, as a function of the relative strength of the euro against sterling, was strong. The result in the UK was partly offset by Poland and China, both of which showed cyclical falls in prices. Our animal feed business built on the success of the previous year. Our ingredients businesses showed good progress overall. The US polyols business traded strongly, continuing the progress of the previous year and taking advantage both of recent demand for low calorie food products and of the increased opportunities amongst pharmaceutical customers. The enzyme business based in Germany and Abitec in the US both recorded strong sales growth. In my half year report I referred to the problems in our bakery ingredients businesses in the UK and US and although the results in the year were poor there are signs that remedial action is having its effect. The results from our clothing retail business were excellent. Strong growth in like-for-like sales, extra space and improvement in operating margins have all contributed to an operating profit 21% ahead of the previous year. The management team's continuing ability to offer our customers a combination of attractive goods and keen prices has been responsible for this success. We continue our investment in store refits and to search for good sites which will enable us to penetrate the market more fully. We believe there is further scope for developing this business. In my interim report I referred to the action taken at our Australian businesses following the acquisition in September 2002 of the minority shareholdings. Management has been restructured, overhead savings have been made and good improvements in operating results were apparent as the year progressed. In addition, the loss-making biscuit business has been sold. In spite of non-recurring costs relating to the management action taken, there has been a substantial improvement in profit. Consideration of operating results overall should not ignore the continuing need for rationalisation, the total cost of which at Â£30m was rather larger than in recent years. The strong progress made in the year is after absorbing these costs and an increase in pension costs referred to below, an achievement that is indicative of the group's strength. Investment income less interest payable fell by Â£12m compared to a year ago. This was primarily due to lower interest rates on our cash and other short-term investments. Group profit before tax, adjusted for goodwill amortisation and profits on the sale of businesses and fixed assets, rose by 10% to Â£473m. Adjusted earnings per share were 10% ahead of last year at 42.6p. I believe this is a very creditable performance. The group is noted for its strong cash flow and this year has been no exception. Â£180m was spent on fixed assets, to maintain and expand the operational capacity of our businesses, and Â£230m was invested in acquisitions, primarily Ovaltine and the minority shareholding in George Weston Foods. In spite of this level of capital spending and investment, the net cash inflow was Â£186m including Â£124m generated by the sale of businesses. This strong performance reflects continuing management focus on the control of capital expenditure and working capital. Following an interim valuation of the main UK pension scheme earlier this year, your board agreed with the Trustee company to resume contributions. Â£8m has been charged against profits reflecting the contribution for the year. This action was taken, although the scheme remained fully funded, in the context of prevailing market conditions. Dividends The directors have declared a second interim dividend of 9.85p, which will be paid on 18 February 2004 to shareholders registered at the close of business on 16 January 2004. Together with the first interim of 4.75p this makes a total of 14.6p for the year, representing an increase in the total dividend of 10%. In my interim report I explained that for many years the first interim dividend had not changed but commencing with this financial year the board would consider increases to the first interim as well. We plan to continue this policy in the future with the second interim dividend expected to form substantially the larger of the two dividends. Board Changes I referred in my interim report to Harry Bailey's retirement as Chairman last December after 40 years' service with the company, 23 of those as a director. I can do no better than repeat the comments I made to you in April. 'His contribution to this 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'. In May of this year, it was announced that Jeff Harris had been appointed as a non-executive director. Mr Harris is chairman of Alliance UniChem plc, having previously been chief executive. He is also a non-executive director of Bunzl plc. His personal qualities and business experience will enable him to contribute strongly to ABF. Roland Smith retired from the board at the end of the financial year in September. Sir Roland, who was senior independent director, had been a director since December 1994. He had an exceptionally wide experience of business and industry. This experience linked to his formidable intellect was of great benefit to us over his period on the board. We are very grateful to him for his input over the past nine years. John MacGregor has taken on the responsibilities of senior independent director. Employees The results that the group has reported are due to the skills and effort of over 35,000 people worldwide. They have faced the continuing competitive pressures and have adapted successfully to the changes affecting the group. I am deeply grateful to them all for their achievements. Outlook Looking forward it is certain that the competitive environment faced by our businesses will continue to be difficult, regardless of general economic conditions. In spite of this there are opportunities for many of our businesses to develop their market position through product improvement and continued attention to operational efficiency. Backed by strong cash flow and a sound balance sheet, we will develop our businesses for the long-term by investing in these opportunities and adding new businesses. In the coming year we expect to report further growth. Martin Adamson Chairman CHIEF EXECUTIVE'S REVIEW Another strong performance from the group saw operating profit, before amortisation of goodwill, grow by 14% to Â£450m. Group sales rose by 8% to Â£4,909m. This was a particularly good performance as growth came from across all of our business segments. This year's growth can be seen in a broader context if we look at the results for the group since the financial year 1998/9. Adjusted operating profit over this period increased from Â£326m to Â£450m this year, a growth of 38% or 8% per annum. Throughout this period, although the profitability of British Sugar, with its sales limited by quotas, remained broadly flat, our other businesses increased their profitability by two-thirds. While delivering this consistent growth, our businesses have continued to generate excellent cash flow. In the last year, cash flow generated after capital expenditure but before acquisitions and disposals was Â£292m. Despite spending major sums on capital investment and targeted acquisitions over the last five years, net cash funds of Â£1,238m at the end of this financial year were Â£247m higher than at the beginning of the financial year 1998/9 (after adjusting for the payment of the special dividend of Â£448m in May 1999). Our proven ability to increase profits and at the same time generate strong cash flow for further investment should give our shareholders confidence for the future. As well as a robust balance sheet and growth track record, our business continues to build a range of strong market positions at the same time as broadening its geographical base, particularly in North America and Asia. The future will see us continue to build on those parts of our business that put forward clear growth strategies. We will invest heavily in support of these strategies and, where appropriate, acquire businesses that fit well with these growth plans. Acquisitions grab the headlines, but we are less interested in the headlines than in ensuring that, when we spend our money, it is our shareholders who benefit in the short, medium and long term, rather than just the shareholders of the selling business. The management team is ambitious to grow the business and sees acquisitions as an important feature in this growth. However, the timing of any transactions will be based solely on opportunity and suitability, rather than any desire to move quickly for its own sake. Nevertheless, our search for suitable acquisition candidates is ongoing and it has been encouraging to see the beneficial effect that recent acquisitions have had on our business. In the US, the acquisition of Mazola and a strong stable of foodservice brands have enabled ACH to move forward despite a weakening in the market for less differentiated commodity oils. The ACH supply chain capability, as well as the marketing strength that has been built around these acquired brands, will provide a strong base for further growth in North America. In speciality hot beverages, the acquisition of Ovaltine now provides us with a stronger international presence, particularly in Asia. This presence will prove an even better platform for Twinings which already has a strong international growth record and which we are supporting over the next year by capital investments aimed at significantly increasing its production capacity and efficiency. This financial year also saw us acquire the minority interests of George Weston Foods, our Australian business. After a number of difficult years, this business is clearly benefiting from a simplification of its focus. Its head office has been slimmed down commensurate with the businesses' needs and, with the sale of our biscuit business and the restructuring of our cake operation, we now have a business that can concentrate on growth. As part of our investment for growth, the coming year will see a significant increase in the amount of resources spent on marketing initiatives and new product development. This will include support for healthy eating brand extensions for Ryvita, reinforcement of Kingsmill's growth in the UK bread market and new products to reinforce SPI's position in US non-sugar sweeteners. Capital projects will be aimed at increasing differentiation where possible as well as improving our operational efficiency. One example of this will be the completion of Westmill's new factory in Manchester which will not only enable the manufacture of a range of microwaveable ethnic products for the retail market but also improve the efficiency of noodle manufacture. Primark continues to make a major contribution. This business is totally dedicated to providing customers with the best possible value products which are sold under its own brand labels. Primark is run by an extremely experienced and focused team of people who are dedicated to retailing and to building their business. Their 7% like-for-like sales increase in the year is impressive by any measure. One of the major challenges over the next year will be its search to find appropriate stores in the many towns and cities where we are not yet represented and we have increased the resource dedicated to finding these stores. This year has seen a further streamlining in the number of businesses in our portfolio. Our UK glass business and US rice business were profitable but along with our loss-making Australian biscuit interests were unlikely to prosper within our group. The sale of our third party British flour milling interests was particularly beneficial in that it enabled us to retain a very strong core milling capability which is now fully integrated into our bakery business providing a simple, dedicated flour supply chain. This is of great value to us in a highly competitive baking industry which operates on low margins and so requires a lean cost base and maximum innovation. Nothing ever stands still for long and we will continue to evaluate our portfolio of businesses but, at this stage, we have confidence that all the major sectors of our business can fulfil their role in providing strong returns for our shareholders. British Sugar provides good returns but growth is constrained by EU production quotas. Changes to the European sugar regime are expected from 2006 which could adversely affect its profitability although the outcome of the current deliberations is not yet known. We expect that the new arrangements will still provide for farmers to continue to grow sugar beet profitably and for efficient companies to have the opportunity to make a return on the heavy investments that have already been made in this industry. The management team of British Sugar has always appreciated that the sugar regime could be changed at any time. With this in mind it has worked hard to become the lowest cost processor of beet sugar in Europe as well as making strides to develop an efficient operational base in the Polish sugar industry, which should clearly benefit from its entry into the European sugar regime next year, regardless of the eventual level of EU price support available. British Sugar has generated significant cash flow over the years and we expect this flow to continue although eventually on a reduced basis. This cash will be used in two ways, firstly to invest back into sugar to maximise our efficiencies and secondly to develop other businesses within the group to ensure that growth will continue despite the possible erosion of sugar profitability. We can look back on this financial year with some satisfaction having achieved a very good result. We look forward to the coming year with enthusiasm, knowing that there are opportunities available and that we have the resources to take full advantage. We also know that there is room for improvement. Performance at our frozen bakery operation in the UK is still unsatisfactory and the required progress has not been forthcoming from our bakery ingredients operation in Denver or from our China based animal feed business. We aim to give these businesses the attention necessary to ensure improvement. The group operates a very devolved management style which ensures that decisions are taken as close to the point of impact as possible with the minimum of bureaucracy. This freedom to act and with it the heightened level of accountability of local management are major elements in making the group an exciting place to work for those people with an appetite for decision making. We have confidence in our people and are committed to providing those who make the decisions with the proper development and support. Where necessary we will continue to add to our teams with targeted moves either from across the group or through recruitment from outside the business. Our success in developing people will be a major determinant in the achievement of long-term profit growth. Overall we are pleased to record another year of strong results. Our focus is now on a future which we face with enthusiasm and confidence. GROCERY Our businesses around the world produce and sell famous brands as well as own label grocery products. 2003 2002 Sales Â£m 2,346 2,027 Operating profit Â£m 148 108 Our international grocery businesses performed strongly with sales up 16% to Â£2,346m and profit up 37% to Â£148m. They represent an increasingly significant proportion of the group's activities at 47% of sales and 33% of profit. This year has benefited from the acquisition of Mazola in July 2002 and the acquisition of Ovaltine in November 2002. The addition of Mazola to our existing foodservice and own label business has more than doubled the profit from ACH this year. The acquisition of Ovaltine and its integration with our existing international specialist tea operation, Twinings, has created an international hot beverages business. Strong growth was also delivered by our existing businesses, particularly George Weston Foods in Australia and Twinings. Grocery profit, however, has been impacted by significant rationalisation costs charged this year relating to Australia, Westmill and Allied Bakeries and the poor performance of our frozen bakery operation in the UK. In the US, Mazola has been integrated with ACH's existing oils business in line with the acquisition plan. The ACH supply chain capability as well as the marketing strength that has been built around these acquired brands will provide a strong base for further growth in North America, especially within the fast growing Hispanic community where the Mazola brand is very strong. The strength of the Mazola brand was demonstrated by resilient volumes despite price increases to recover significantly higher costs of corn oil. Encouraging progress was made in branded foodservice oils, where ACH built on the strength of its leading brands, Whirl and Frymax, despite the slow recovery of the North American foodservice market. However, margins reduced in the own label retail and ingredients businesses. After the year end the own label retail business was strengthened by the acquisition of a smaller competitor. The complex integration of Ovaltine and its related brands with Twinings has been implemented in line with the acquisition plan by a dedicated integration team whose success is testament to meticulous project management. Integration will be concluded early next year when we move into our newly constructed Swiss headquarters for Ovaltine adjacent to the Neuenegg factory. The resulting combination, with a strong management team, provides us with a platform for further growth in international hot beverages. Twinings has continued to grow in its core speciality tea markets. Sales were particularly strong in the US and Europe and capital is being invested to increase the tea-bagging capacity at its Newcastle factory. The profit from Ovaltine was in line with expectations with a good performance from the key growth markets of south east Asia. Allied Bakeries increased volume, continued to invest behind its successful Kingsmill brand, and reduced costs but these benefits were offset by the impact of margin pressure in a very competitive environment. Kingsmill investment saw strong promotional and trade support and the successful launch of Toastie, a recipe created to give consumers great toast. A major programme of new product launches is planned for the coming year and after the year end the largest ever promotion in the UK bread sector was launched with 'Kingsmill Kit for Clubs' supported by national television advertising. In distribution, investment is underway to install satellite tracking technology across the vehicle fleet. The positional and engine management data will be used to optimise the operation of the fleet whilst minimising vehicle emissions and maximising customer service. The flour mills retained following our exit from third party milling are now integrated within Allied Bakeries. The mills at Manchester and Tilbury are among the most modern and efficient in Europe and opportunities to remove cost from our supply chain have already positively impacted this year's results with further potential benefits to come. Tough market conditions and operating difficulties continued to impact the results at our frozen bakery operation in the UK and its profitability declined as a result. Management changes have been made which should lead to progress in the coming year. Ryvita, a brand synonymous with healthy eating, has seen demand for its traditional crispbread range remain strong in its UK home market. A focus on manufacturing efficiencies has improved production costs. To meet the public demand for more healthy snack products, Rice Cakes and Tondo's, extensions to the Ryvita brand, have been launched and offer great tasting, low fat snacks. Westmill Foods made significant progress in its wholesale business and has now introduced new retail products. It specialises in ethnic foods and, in response to the growth in consumer demand for convenience food, it has launched a range of innovative microwaveable products for the retail trade during the year. Four new rice products, Basmati, Pilau, Garlic & Coriander and Coconut & Mustard Seed have been rolled out under the licensed brand, Patak's. At the year end we launched a range of Ken Hom stir fry sauces and microwaveable rice and noodles which will be supported by a television advertising campaign. Westmill has also announced its plans to rationalise its production sites from five to three with the closure of three small sites and the opening of a new factory in Manchester. The new factory is expected to be fully operational next summer to manufacture noodles with improved efficiency and provide the capacity for the microwaveable products. Silver Spoon has demonstrated that its brand values and distribution strengths make it a perfect vehicle for brand extensions. From its position of strength as the UK's leading retail sugar brand it now offers a complete range in the sweetening sector. 'Nothing Comes Closer To Sugar' increased its share of the sweetener market and in the second half of the year a reduced calorie sugar option, Silver Spoon Light, was test marketed. Crusha milk shake syrup sales increased, supported in the second half of the year by an innovative interactive television advertising campaign. Strong signs of recovery are evident in the results of our Australian operations. In September 2002 we acquired the minority shareholdings in George Weston Foods and delisted the company from the Sydney Stock Exchange. This led the way for a complete review of head office and administrative functions, which have been considerably simplified, with a greater emphasis now being placed on devoting management time to profit improvement initiatives. One-time costs of Â£12m have been charged which relate to rationalisation both in the businesses and head office. This reduction in overheads has been complemented by a much improved underlying trading position. In baking, the continued success of Tip Top as Australia's favourite food brand and cost saving initiatives, resulted in an improvement in profit. This is a creditable performance particularly in view of the disruption caused by the loss of the Fairfield bakery last year through fire. A new site has now been secured, the new bakery is under construction and the first production line is due to start by the end of 2004. Milling in Australia also performed well and recovered from the impact of record wheat prices which resulted from droughts in Australia and North America. In addition, good wheat stock management, strong animal feed prices and cost savings resulted in an increased profit. The loss-making biscuit & cake business was rationalised during the year. The cake operation was transferred to the bakery business and production will be consolidated in the Brisbane factory. The closure of Sydney biscuit factory has been announced and the sale of the main chocolate biscuit brands was completed after the year end. Meat & dairy continued to make progress following the management changes and restructuring reported at the half year. Volume increased in branded pre-packaged products and a 'lite' ham was launched with an on-pack endorsement from the Heart Foundation. Volumes in fresh meat also increased and the benefits of cost savings in the factories are being realised. 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. 2003 2002 Sales Â£m 1,611 1,543 Operating profit Â£m 176 168 Sales increased 4% to Â£1,611m and profit increased 5% to Â£176m. British Sugar in the UK benefited from a larger crop, up 210,000 tonnes to 1.43 million tonnes and from a record crop purity which, through excellent processing efficiencies, saw several production records set. This, combined with the strength of the euro against sterling, resulted in an increase in profit. This performance was all the more creditable given that the crop was processed at only six factories following the closure last year of the Kidderminster factory. The largest factory, at Wissington, had an excellent season with the elimination of the processing difficulties experienced during the previous campaign following capital investment. The resin separation plant installed here prior to the processing season had its first full year of operation and exceeded expectation. During the sugar production process, combined heat and power plants are to used to generate electricity, substantial quantities of which are exported into the national network when the economics are favourable. The efficiency of these environmentally friendly generation plants has resulted in the grant of a substantial exemption from the UK Government Climate Change Levy. Our sugar operations in China and Poland also benefited from increased sugar production but oversupply in both markets led to a fall in domestic prices and significantly lower profits. However, with Poland's accession to the EU in May next year, the Polish sugar industry will join the European sugar regime. This will bring about the restructuring necessary to balance consumption with production resulting in less volatile market dynamics and an environment more conducive to forward planning and investment. In Poland we have successfully established a retail business with a brand modelled on Silver Spoon in the UK. We continued the process of rationalisation with the merging of production from two of our factories into our largest factory in Glinojeck. Sugar production from Glinojeck was a record at over 100,000 tonnes. Germains Technology Group, our international seed treatment and coatings operation, benefited from a rapid expansion of sales of the new primed sugar beet seed in the UK and US. However, profit was impacted by the continuing decline in EU beet seed volumes and a mixed performance in horticulture seed treatment. In agriculture, ABNA achieved its growth targets despite facing challenging market conditions in the UK. The development of supply chain partnerships, particularly in the pig and poultry sectors, is based on our procurement and nutritional expertise. The major retailers increasingly require produce from an auditable supply chain. In response to their demands, processors rely on our feed with its systems of quality assurance. ABNA will focus on market sectors where such partnerships can lead to significant positions. The integration last year of the arable and animal feed businesses continued to deliver benefits particularly in respect of supply chain efficiencies. INGREDIENTS We develop and produce functional ingredients from natural products for use in a diverse range of applications. 2003 2002 Sales Â£m 314 291 Operating profit Â£m 32 30 Our ingredients group focuses on high technology ingredients for both food and non-food applications. It has established significant positions supplying leaders in the pharmaceutical and personal care sectors as well as in its more traditional bakery ingredients business. It also has significant interests in enzymes technology and antacid ingredients. Sales increased 8% to Â£314m and profit was up 7% to Â£32m. A new chief executive has recently been appointed to manage this group of businesses. Our US polyols business, SPI, benefited from the steep growth in demand for low calorie food products. SPI is uniquely positioned to capitalise on the trend towards low carbohydrate versions of manufacturers' current products as its proprietary products, based on maltitol, function and taste like sugar. Working closely with food manufacturers we offer a broad range of low calorie sweeteners for specific applications and it is our breadth of offering and technical expertise that has driven a significant increase this year in our sales of these speciality products. The outsourcing of the liquid sorbitol production at Atlas Point was completed this year and the associated rationalisation costs of Â£2m have been charged to operating profit. These changes are expected to yield a profit improvement next year. SPI's pharmaceutical operation broadened its antacid ingredient offering through the acquisition in 2002 of a smaller competitor. This provided access to new customers in new markets. Also during the year the first customer application of our unique quick-dissolve drug delivery system, Pharmaburst, was launched. This is an area of high potential and further customer launches are anticipated in 2004. Our enzymes business saw strong sales growth during the year. There was profit growth with strong performances from textile and animal feed enzymes which offset the effects of adverse currency movements and strong competitor activity in bakery enzymes. Abitec in the US achieved record sales and profit with the personal care sector being particularly buoyant. It is a clear leader in the supply of medium chain triglycerides in the US and number two worldwide. The technology that has delivered this success is now employed in the UK and substantial progress has been made in European markets. This now enables Abitec to bid for global contracts by offering strong US and European manufacturing and technical support. The integration of Cereform, our UK and US bakery ingredients businesses, as has been previously reported, did not go well. However, good progress was made in the second half of the year in the UK where production costs have been substantially reduced, raw material cost increases have been recovered and volumes have stabilised following the operational problems. In the US, a new management team has focused on controlling manufacturing costs and developing profitable new business. Our speciality ingredients business in the US which produces crisp rice, extruded grain particulates, soy protein crisp rice and specialised functional grain-based ingredients benefited from strong growth in the US nutritional bar market. RETAIL Primark has a winning formula for providing quality merchandise at affordable prices. 2003 2002 Sales Â£m 752 654 Operating profit Â£m 87 72 Primark had another excellent year with sales up 15% to Â£752m and profit up 21% to Â£87m. This business is totally dedicated to providing customers with the best possible value products which are sold under its own brand labels. The sales increase of 15% reflects a like-for-like uplift of 7% and increased retail selling space from new stores and extensions to existing stores. A combination of the strong sales improvement and the weakness of the US dollar, the currency in which many goods are sourced, resulted in an improvement in the operating profit margin. New stores were opened in East Kilbride and Birmingham during the year. The Birmingham store is 46,000 square feet, occupies a city centre location and both stores have traded very successfully since opening. The programme of refits to existing stores continued during the year. We are taking the opportunity to extend selling space wherever possible during this programme and an additional 33,000 square feet has been added through extensions to the Stevenage, Hamilton and Middlesbrough stores this year. We now trade from 116 stores and the retail selling space is 2.1 million square feet. A major extension to Mary Street in Dublin, substantially increasing its retail space to 70,000 square feet, is virtually complete and Newport is being extended and refitted. Completion of both stores is planned before the important Christmas trading season. We continue to negotiate to acquire more stores and expect to announce further openings during the coming year. In addition, the programme of extensions identified for the new financial year will increase selling space further. A major point of differentiation between Primark and its rivals at the value end of the fashion market is its creation and development of own brands with major appeal to the key groups amongst its consumers. Early Days is a major high street brand for mothers with small babies and toddlers, and Secret Possessions has secured a significant share in ladies' lingerie. Following its introduction later in the year, there are early indications of strong consumer interest in a new range of home furnishings which includes bed linen, towels and cushions. Peter Jackson Chief Executive FINANCE DIRECTOR'S REPORT GROUP PERFORMANCE Group sales increased by 8% to Â£4,909m and operating profit, before the amortisation of goodwill, increased by 14% to Â£450m. This significant increase in profit benefited substantially from the profits from the acquired businesses, Mazola and Ovaltine. However, our existing businesses generated good underlying growth which more than offset the impact of higher one-time costs for rationalisation across the group, an Â£8m charge in respect of the resumption of contributions to the main UK pension scheme and the loss of contribution from businesses disposed of. Although British Sugar in the UK benefited by Â£18m from the strength of the euro, this was largely offset by a Â£15m decline in profitability in the sugar operations in Poland and China as a result of much weaker market prices. Historically we have consolidated the results of several of the group's overseas businesses to 31 July. Following the delisting of George Weston Foods from the Sydney Stock Exchange, we have taken the opportunity to align the year end of all these businesses with our other major overseas companies at 31 August. This change has had a minimal impact on the results for the group this year. The total acquisition spend in the year was Â£230m. This related primarily to the acquisition of Ovaltine, which completed on 29 November 2002, and the acquisition of the minority shareholding in George Weston Foods including the special dividend of Â£15m paid to minority shareholders as part of that transaction. Proceeds from the disposal of businesses were Â£124m and arose mainly from the sale of Allied Glass Containers in December 2002 and our British third party flour milling business and US speciality rice business in February 2003. We continued to dispose of properties that are no longer required by the group resulting in a profit on disposal of fixed assets of Â£12m compared with Â£8m last year. Investment income declined from Â£57m to Â£53m. Last year benefited by Â£3m from the profit on the sale of current asset equity investments. The underlying reduction of Â£1m resulted from the decline in interest rates more than offsetting an increase in the average funds invested. The increase of Â£8m in interest payable primarily related to the interest on the $360m loan which financed the Mazola acquisition, and short-term financing for the acquisition of the minority shareholding in George Weston Foods. As a result, investment income less interest payable declined by Â£12m compared to last year. Profit before tax increased from Â£420m to Â£457m. Adjusted to exclude profits on the sale of businesses and fixed assets and the amortisation of goodwill, profit before tax increased 10% from Â£430m to Â£473m. TAXATION The tax charge of Â£128m included an underlying charge of Â£138m, at an effective tax rate of 29.2% on the profit before tax adjusted for the profits less losses on the sale of businesses and fixed assets and the amortisation of goodwill, and compares to 28.4% in 2002. The tax charge for the year benefited from a Â£10m (2002 - Â£4m) credit for tax relief on the amortisation of goodwill arising from asset acquisitions. This credit has been excluded from the calculation of adjusted earnings per share. The increase in the underlying rate is a result of the increased profit generated by our businesses in the US which are subject to a higher than average rate. As anticipated last year we have now fully utilised our accumulated tax losses in the US. EARNINGS AND DIVIDENDS Earnings increased by Â£10m to Â£332m and the weighted average number of shares in issue remained constant at 789 million. Earnings per ordinary share increased by 3% from 40.8p to 42.1p. A more consistent measure of performance is provided by the adjusted earnings per share which excludes profits on the sale of businesses and fixed assets and the amortisation of goodwill net of any tax benefit. Adjusted earnings per share increased by 10% from 38.7p to 42.6p. The first interim dividend was increased by 12% to 4.75p and a second interim dividend has been declared at 9.85p which represents an overall increase of 10% for the year. Dividends will cost a total of Â£115m. Dividend cover, on an adjusted basis, is unchanged from last year at 2.9 times. Â£217m will be transferred to reserves. BALANCE SHEET Fixed assets increased by Â£112m to Â£1,916m due to the additional goodwill arising on acquisitions in the year. Net cash funds, being current asset investments and cash at bank less short-term borrowings and loans, were Â£188m higher than last year at Â£1,238m. Working capital, including tax and dividend accruals, reduced by Â£52m mainly as a result of higher trade creditors and accruals. The group's net assets increased by Â£230m to Â£3,296m. A currency gain of Â£52m arose on the translation into sterling of the group's non-sterling net assets. This resulted from the significant strengthening of the Australian dollar and the euro against sterling. The combination of higher profits and strong management of capital employed has resulted in an increased return on capital employed in each of our business segments and an increase from 21.5% to 24.5% for the continuing businesses of the group. Return on capital employed is defined as operating profit before the amortisation of goodwill expressed as a percentage of year end capital employed. CASH FLOW Net cash flow from operating activities was Â£630m, Â£107m higher than last year, as a result of the strong increase in profit before depreciation and amortisation of goodwill and a working capital inflow. Capital expenditure during the year was Â£180m of which Â£42m was spent on the acquisition or refitting of Primark stores, and the balance was used principally to upgrade, modernise and expand existing manufacturing facilities. The net expenditure on acquisitions, excluding the special dividend paid as part of the acquisition of the minority shareholdings in George Weston Foods, less proceeds from disposals, amounted to Â£91m. TREASURY POLICY AND CONTROLS The group's cash and current asset investments totalled Â£1,712m at the year end including Â£1,047m placed with professional investment managers who have full discretion to act within closely monitored and agreed guidelines. The investment objective is to preserve the underlying assets, whilst achieving a satisfactory return. The investment guidelines are kept under constant review with the objective of monitoring and controlling risk levels. The guidelines require that investments must carry a minimum credit rating of AA- and also set down conditions relating to sovereign risk, length of maturity, exchange rate exposure and type of investment instrument. Aggregate limits for each category of investment and risk exposure are set for each manager. The group's UK cash balances are managed by a central treasury department operating under strictly controlled guidelines, which also arranges term bank finance, as and when necessary, to finance short-term working capital requirements particularly for the sugar beet and wheat harvests. Futures contracts used as hedges in commodity trading operations are tightly controlled within set limits and transactions of a speculative nature are not undertaken. FOREIGN CURRENCY The main transaction exposures in the group are: sugar prices in British Sugar UK to movements in the euro exchange rate, sourcing for Primark and export activity in the hot beverages business. Elsewhere the businesses operate mainly in their local currency and as a result transaction exposure to exchange rate movements is minimal. Significant cross-border transactions are covered by forward purchases and sales of foreign currency, or foreign currency options as appropriate. The group does not hedge the translation effect of exchange rate movements on the profit and loss account. The group regards its interest in its overseas subsidiary undertakings as long-term investments and does not hedge the translation effect of exchange rate movements on them. FINANCIAL REPORTING STANDARDS AND ACCOUNTING POLICIES No new financial reporting standards have been issued during the year. The group has continued to account for pensions in accordance with SSAP 24 and has made the disclosures required by FRS 17 'Retirement Benefits' which was issued in November 2000. John Bason Finance Director The annual report and accounts will be available on 6 November 2003 and the annual general meeting will be held at The Royal Garden Hotel, London at 11am on Friday, 5 December 2003. CONSOLIDATED PROFIT AND LOSS ACCOUNT For the For the year ended year ended 13 14 September September 2003 2002 Note Â£m Â£m Turnover of the group including its share of 4,931 4,567 joint ventures Less share of turnover of joint ventures (22) (22) Group turnover 1 4,909 4,545 Operating costs (4,508) (4,175) Group operating profit 401 370 Share of operating results of: - joint ventures 4 3 - associates 3 4 Total operating profit 1 408 377 Operating profit before amortisation 450 395 of goodwill Amortisation of goodwill (42) (18) Profits less losses on sale of fixed assets 12 8 Profits less losses on sale of businesses 14 - Investment income 53 57 Profit on ordinary activities before 487 442 interest Interest payable (30) (22) Profit on ordinary activities before 457 420 taxation Adjusted profit before taxation 473 430 Profits less losses on sale of fixed 12 8 assets Profits less losses on sale of 14 - businesses Amortisation of goodwill (42) (18) Tax on profit on ordinary activities 2 (128) (95) Profit on ordinary activities after taxation 329 325 Minority interests - equity 3 (3) Profit for the financial year 332 322 Dividends - first interim 3 (37) (34) - second interim 3 (78) (71) Transfer to reserves 217 217 Basic and diluted earnings per ordinary 4 42.1p 40.8p share Adjusted earnings per ordinary share 4 42.6p 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 As at As at 13 September 2003 14 September 2002 Â£m Â£m Fixed assets Intangible assets - 510 383 goodwill Tangible assets 1,406 1,421 1,916 1,804 Interest in net assets of - joint ventures 9 9 - associates 12 12 Other investments 10 11 Total fixed asset 31 32 investments 1,947 1,836 Current assets Stocks 516 498 Debtors 544 552 Investments 1,542 1,362 Cash at bank and in hand 170 139 2,772 2,551 Creditors amounts falling due within one year Short-term borrowings (92) (64) Other creditors (799) (736) (891) (800) Net current assets 1,881 1,751 Total assets less current liabilities 3,828 3,587 Creditors amounts falling due after one year Loans (382) (387) Other creditors (7) (8) (389) (395) Provisions for liabilities and charges (143) (126) 3,296 3,066 Capital and reserves Called up share capital 47 47 Revaluation reserve 3 3 Other reserves 173 173 Profit and loss account 3,049 2,768 Equity shareholders' 3,272 2,991 funds Minority interests in subsidiary undertakings - 24 75 equity 3,296 3,066 CONSOLIDATED CASH FLOW STATEMENT For the For the year ended year ended 13 September 14 September 2003 2002 Note Â£m Â£m Cash flow from operating activities 5 630 523 Dividends from joint ventures 4 3 Dividends from associates 2 1 Return on investments and servicing of finance Investment income 52 60 Interest paid (27) (22) Dividends paid to minorities (16) (4) 9 34 Taxation (120) (97) Capital expenditure and financial investment Purchase of tangible fixed assets (180) (186) Sale of tangible fixed assets 40 40 Sale of equity investments - 4 (140) (142) Acquisitions and disposals Purchase of subsidiary undertakings (215) (267) Purchase of joint ventures and associates - (1) Sale of subsidiary undertakings 124 34 (91) (234) Equity dividends paid (108) (93) Net cash inflow/(outflow) before use of liquid funds and 186 (5) financing Management of liquid resources (173) (164) Financing Borrowings due within one year - repayment of loans (224) (102) - increase in loans 220 103 Borrowings due after one year - repayment of loans (3) (7) - increase in loans 4 238 Increase/(decrease) in bank borrowings 16 (16) Increase in cash 26 47 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the For the year ended year ended 13 September 14 September 2003 2002 Â£m Â£m Profit for the financial year 332 322 Currency translation differences on foreign 52 (21) currency net assets Tax on currency translation differences 1 5 Total recognised gains and losses relating to the 385 306 year CONSOLIDATED STATEMENT OF HISTORICAL COST PROFITS There is no material difference between the group results as reported and on an unmodified historical cost basis. Accordingly no note of historical cost profits and losses has been prepared. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the For the year ended year ended 13 September 14 September 2003 2002 Â£m Â£m Opening shareholders' funds 2,991 2,790 Profit for the financial year 332 322 Dividends (115) (105) Goodwill written back 11 - Other recognised gains and losses relating to the 53 (16) year Closing shareholders' funds 3,272 2,991 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. Segmental analysis Group Turnover Operating Profit Capital Employed 2003 2002 2003 2002 2003 2002 Â£m Â£m Â£m Â£m Â£m Â£m Analysis by business Grocery 2,346 2,027 148 108 709 702 Primary Food & Agriculture 1,611 1,543 176 168 710 692 Ingredients 314 291 32 30 134 131 Retail 752 654 87 72 293 298 Inter company sales (185) (169) - - - - Central costs / capital employed - - (16) (15) (30) (32) Pension credit - - 18 22 - - 4,838 4,346 445 385 1,816 1,791 Businesses disposed: Grocery 51 117 3 4 - 55 Primary Food & Agriculture 2 2 - - - - Ingredients - 22 - (2) - - Packaging 18 58 1 5 - 46 Pension credit - - 1 3 - - 4,909 4,545 450 395 1,816 1,892 Amortisation of goodwill - - (42) (18) - - 4,909 4,545 408 377 1,816 1,892 Analysis by geography (by origin and destination) European Union (mainly UK & 3,002 2,851 311 292 1,222 1,239 Ireland) Australia & New Zealand 672 580 26 12 239 207 North America 862 709 77 42 210 219 Elsewhere 325 233 13 17 145 126 Inter company sales (23) (27) - - - - Pension credit - - 18 22 - - 4,838 4,346 445 385 1,816 1,791 Businesses disposed: European Union 60 151 3 9 - 89 Australia & New Zealand - 22 - (2) - - North America 11 26 1 - - 12 Pension credit - - 1 3 - - 4,909 4,545 450 395 1,816 1,892 Amortisation of goodwill - - (42) (18) - - 4,909 4,545 408 377 1,816 1,892 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. The amortisation of goodwill arises in Primary Food & Agriculture Â£6m (2002 - Â£2m), Ingredients Â£7m (2002 - Â£6m) and Grocery Â£29m (2002 - Â£10m). By geography, the charge arises in the European Union Â£8m (2002 - Â£3m), North America Â£23m (2002 - Â£13m), Australia & New Zealand Â£1m (2002 - nil) and elsewhere Â£10m (2002 - Â£2m). Capital employed comprises tangible fixed assets, interests in joint ventures and associates, current assets (excluding deferred tax, cash and investments), creditors (excluding borrowings, tax and dividends) and provisions for liabilities and charges excluding deferred tax. NOTES TO THE PRELIMINARY ANNOUNCEMENT continued For the For the year ended year ended 13 September 14 September 2003 2002 Â£m Â£m 2. Tax on profit on ordinary activities The charge for the year comprises: UK corporation tax at 30% (2002 - 30%) 82 81 Overseas income and corporation tax 35 24 Joint ventures and associates 2 2 Current tax charge 119 107 UK deferred tax 2 10 Overseas deferred tax 7 (22) Total tax charge 128 95 Add back: Tax credit on goodwill amortisation 10 4 Exceptional credit on US deferred tax - 23 Underlying tax charge 138 122 3. Dividends First interim dividend of 4.75p per share 37 34 (2002 - 4.25p) Second interim dividend of 9.85p per share 78 71 (2002 - 9.00p) 115 105 The first interim dividend was paid on 29 August 2003. The second interim dividend will be paid on 18 February 2004. 4. Earnings per ordinary share Adjusted profit for the financial year 336 305 Profits less losses on sale of fixed assets 12 8 Profits less losses on sale of businesses 14 - Exceptional tax credit - 23 Amortisation of goodwill (42) (18) Tax credit on goodwill amortisation 10 4 Minority share of above 2 - Profit for the financial year attributable 332 322 to shareholders Adjusted earnings per ordinary share 42.6p 38.7p Earnings per ordinary share on: - sale of fixed assets 1.5p 1.0p - sale of businesses 1.8p - - exceptional tax credit - 2.9p - amortisation of goodwill (5.3p) (2.3)p - tax credit on goodwill amortisation 1.3p 0.5p - minority share of above 0.2p - Earnings per ordinary share 42.1p 40.8p The weighted average number of ordinary shares in issue during the year was 789 million (2002 - 789 million). The calculation of the weighted average number of shares excludes the shares held by the Employee Share Option Scheme on which the dividends are being waived. Adjusted earnings per ordinary share, which exclude the impact of profits less losses on the disposal of businesses and fixed assets, goodwill amortisation and the associated tax credit, is shown to provide clarity on the underlying performance of the group. The diluted earnings per share calculation takes into account the dilutive effect of share options. The diluted, weighted average number of shares is 789 million (2002 - 789 million). NOTES TO THE PRELIMINARY ANNOUNCEMENT continued For the For the year ended year ended 13 September 14 September 2003 2002 Â£m Â£m 5. Reconciliation of operating profit to cash flow from operating activities Group operating profit 401 370 Amortisation of goodwill 42 18 Depreciation 142 149 (Increase)/decrease in working capital - stocks (11) (18) - debtors 20 (13) - creditors 30 27 Other provisions 6 (10) Net cash from operating activities 630 523 2003 2002 6. Reconciliation of net cash flow to movement Â£m Â£m in net funds Increase in cash 26 47 Management of liquid resources 173 164 Net increase in borrowings (13) (216) Change in net funds resulting from cash 186 (5) flows Effect of currency changes 15 4 On acquisition of subsidiary undertakings (13) - Movement in net funds 188 (1) Opening net funds 1,050 1,051 Closing net funds 1,238 1,050 At Cash Acquisition Exchange At 14 September flow of subsidiary adjustments Â£m 13 September 2002 Â£m undertakings Â£m Â£m 2003 Â£m 7. Analysis of net funds Cash at bank and 139 26 - 5 170 in hand Short-term (64) (12) (13) (3) (92) borrowings Investments 1,362 173 - 7 1,542 Loans over one (387) (1) - 6 (382) year 1,050 186 (13) 15 1,238 8. Other information The financial information set out above does not constitute the group's statutory financial statements for the years ended 13 September 2003 and 14 September 2002, but is derived from them. The 2002 financial statements have been filed with the Registrar of Companies whereas those for 2003 will be delivered following the company's annual general meeting. The auditor's opinions on these financial statements were unqualified and did not include a statement under section 237 (2) or (3) of the Companies Act 1985. ACCOUNTING POLICIES Basis of preparation These financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets, and in accordance with applicable accounting standards and the Companies Act 1985. Basis of consolidation The group accounts comprise a consolidation of the accounts of the company and its subsidiary undertakings, together with the group's share of the results and net assets of its joint ventures and associates. The financial statements of the company and its subsidiary undertakings are made up for the 52 weeks ended 13 September 2003, except that, to avoid delay in the preparation of the consolidated financial statements, those of the Australian and New Zealand group, China, Poland and the North American subsidiary undertakings are made up to 31 August 2003. Acquisitions The consolidated profit and loss account includes the results of new subsidiary undertakings, joint ventures and associates attributable to the period since change of control. Disposals The results of subsidiary undertakings, joint ventures and associates sold are included up to the dates of change of control. The profit or loss on the disposal of an acquired business takes into account the amount of any related goodwill previously written off directly to reserves, or the net amount of capitalised goodwill remaining unamortised, as appropriate. Intangible fixed assets Intangible fixed assets consist of goodwill arising on acquisitions since 13 September 1998, being the excess of the fair value of the purchase consideration of new subsidiary undertakings, joint ventures and associates over the fair value of net assets acquired. Goodwill is capitalised in accordance with FRS 10 and amortised over its useful economic life, not exceeding 20 years. Goodwill previously written off against reserves has not been reinstated. Tangible fixed assets Tangible fixed assets are carried at their original cost less accumulated depreciation. Depreciation Depreciation is provided on the original cost of assets and is calculated on a straight line basis at rates sufficient to reduce them to their estimated residual value. No depreciation is provided on freehold land or payments on account. Leaseholds are written off over the period of the lease. The anticipated life of other assets is generally deemed to be not longer than: Freehold buildings 66 years Plant, machinery, fixtures and fittings - sugar factories 20 years - other operations 12 years Vehicles 8 years Fixed asset investments Joint ventures and associates are accounted for in the financial statements of the group under the equity method of accounting. Other fixed asset investments in the group's accounts, and all fixed asset investments in the accounts of the company, are stated at cost less amounts written off in respect of any impairment. Stocks Stocks are valued at the lower of cost or net realisable value, after making due provision against obsolete and slow-moving items. In the case of manufactured goods the term 'cost' includes ingredients, production wages and production overheads. Current asset investments Current asset investments are stated at the lower of cost or market value. ACCOUNTING POLICIES continued Foreign currencies Monetary assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date or at the contracted rate as appropriate. The assets and liabilities of overseas operations are translated into sterling at the rates of exchange ruling at the balance sheet date. The results of overseas operations have been translated at the average rate prevailing during the year. Exchange differences arising on consolidation are taken directly to reserves. Other exchange differences are dealt with as part of operating profits. Group Turnover Turnover represents the net invoiced value of goods and services delivered to customers excluding sales taxes. Pensions The group has established separately funded pension schemes for the benefit of its staff, which vary with employment conditions in the countries concerned. Net pension costs are charged to income over the expected average remaining service lives of employees. Any differences between the charge for pensions and total contributions are included within pension provisions or debtors as appropriate. Research and development Expenditure in respect of research and development is written off against profits in the period in which it is incurred. Leases All material leases entered into by the group are operating leases, whereby substantially all of the risks and rewards of ownership of an asset remain with the lessor. Rental payments are charged against profits on a straight line basis over the life of the lease. Financial instruments Forward foreign exchange contracts and currency options are used to hedge forecast transactional cash flows and accordingly, any gains or losses on these contracts are recognised in the profit and loss account when the underlying transaction is settled. Derivative commodity contracts are used to hedge committed purchases or sales of commodities and accordingly, any gains or losses on these contracts are recognised in the profit and loss account in the same accounting period as the underlying purchase or sale. Gains or losses arising on hedging instruments that are cancelled due to the termination of the underlying exposure are taken to the profit and loss account immediately. Deferred tax Provision for deferred tax is made on all timing differences that have originated, but not reversed at the balance sheet date. A deferred tax asset is regarded as recoverable and therefore recognised only when it is regarded as more likely than not that there will be sufficient future taxable profits. Deferred tax is not discounted. This information is provided by RNS The company news service from the London Stock Exchange

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