Interim Results

Associated British Foods PLC 19 April 2006 For release 19 April 2006 Associated British Foods plc announces its interim results for the 24 weeks ended 4 March 2006 Highlights â€¢ Adjusted operating profit up 5% to Â£255m* â€¢ Group revenue up 10% to Â£2,887m â€¢ Adjusted profit before tax down 2% to Â£255m ** â€¢ Adjusted earnings per share down 1% to 23.3p ** â€¢ Interim dividend per share up 4% to 6.25p â€¢ Net debt of Â£162m â€¢ Basic earnings per share down 16% to 21.0p and profit before tax down 13% to Â£234m George Weston, Chief Executive of Associated British Foods, said: 'The resilience of the group's operations has produced good results despite tough trading conditions in some markets and sharply higher energy costs. Primark continues to perform strongly and will benefit from the heavy investment now being made in its expansion, while our hot beverages and international yeast businesses are also doing well. As expected, British Sugar has experienced price pressure but it is well positioned for the medium term and we remain confident about its prospects.' * before amortisation of intangibles and profits less losses on the sale of property, plant & equipment ** before amortisation of intangibles, profits less losses on the sale of property, plant & equipment and losses on the sale of businesses All figures stated after profits on the sale of businesses and property, plant & equipment and amortisation of intangibles are shown on the face of the consolidated income statement. 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 High resolution photographs of the recently opened Primark Bromley store are available at www.prshots.com. For release 19 April 2006 ASSOCIATED BRITISH FOODS plc INTERIM REPORT FOR THE 24 WEEKS ENDED 4 MARCH 2006 CHAIRMAN'S STATEMENT This period has been an eventful one for the group. Imbalances in supply and demand within the EU sugar market and changes in producer behaviour in anticipation of the new regime resulted in price pressure and much lower profit for British Sugar. Energy costs have risen sharply and have affected all of our businesses. Primark has again produced excellent results despite a devastating fire at its main UK warehouse and there was good progress at AB Mauri, the recently acquired bakery ingredients business. In the face of significant profit pressures, it is a demonstration of the resilience of the group that operating profit, before amortisation of intangibles and profits less losses on the sale of property, plant & equipment and businesses, rose by 5% to Â£255m. As expected net investment income has fallen and consequently net earnings attributable to shareholders have shown a marginal decline. The EU Commission published final proposals for sugar regime reform in November which define the shape of the sugar market from 2009. The changes are aimed at reducing processing capacity within the EU, eliminating subsidised exports and reducing sugar prices. Producers in Least Developed Countries ('LDCs') will be able to sell sugar without quota or tariff into the EU. British Sugar has always recognised the need for reform and expects, as a highly efficient producer, to have a strong and profitable position within the EU sugar market. However, the changes and continued imbalances in supply and demand can be expected to affect the profit of British Sugar during the transition period. In our grocery businesses, there was good organic growth in hot beverages, Ryvita and our Mexican oils business. However, profit growth was held back by lower UK bakery volumes and the final commissioning costs of the new Sydney bakery. In Ingredients, the major feature was the good progress of AB Mauri, which reflected the benefit of volume increases and improved pricing for yeast and a very satisfactory growth in bakery ingredients. We continue to invest for future growth with the opening of a new factory in Western China and other capacity increases at many locations. Primark's strong revenue and profit growth reflected a 6% like-for-like sales increase and the addition of seven new stores. This like-for-like growth was achieved against a background of weak sales in the UK high street generally but was inevitably affected by the warehouse fire, which occurred only eight weeks before Christmas. Stock levels have now recovered and the stores were ready for the Spring season. These results are a great credit to all Primark's people who reacted superbly to a crisis. Following the acquisition of the Littlewoods retail business last July it is very satisfying that the profit from trading these stores prior to the closure in January was ahead of our expectations. Primark is now refurbishing and refitting 41 stores which will add a further 1.4 million sq ft to its retail selling space by early 2007. Good progress has been made in disposing of the remainder of the Littlewoods stores. The investment in stores for Primark is the major contributor to the Â£16m reduction in net investment income. As a result, profit before taxation, adjusted for profits less losses on the sale of property, plant & equipment and businesses and before amortisation of intangibles, fell by Â£4m to Â£255m. The group's underlying effective rate of tax was 27.1% as against 27.4% in the first half of the previous year. Adjusted earnings per share fell by 1% to 23.3p. Negative cash flow from operations reflects the normal seasonal investment in working capital. This, together with continuing capital expenditure on renewing and extending capacity, particularly at Primark, and on new businesses, resulted in net borrowings at the period end of Â£162m, compared with net cash funds in September of Â£212m. The group's financial resources remain strong. On 15 March ABF confirmed that it was in discussions that could involve it acquiring a 51% interest in Illovo Sugar Limited. At the time of writing these discussions continue. Illovo, which is quoted on the Johannesburg Securities Exchange with a market capitalisation of around Â£510m, is the largest sugar producer in Africa and one of the world's leading low cost sugar producers. It grows and processes sugar cane in South Africa and Swaziland, as well as Malawi, Mozambique, Tanzania and Zambia which are classified as LDCs. Total production in 2004/5 was 1.9 million tonnes. With the recently announced changes to the EU sugar regime, LDCs will receive unrestricted access for sugar exports to the EU from 2009. British Sugar has a long experience of operations outside the UK, first in Poland and then in China. Its worldwide sugar production in 2004/5 was 2.0 million tonnes. A partnership between British Sugar and Illovo would enable the transfer of its expertise to support the development of Illovo's low cost production in Southern Africa and British Sugar would become Illovo's route to market when exports have unrestricted access to the EU from 2009. In anticipation of reform, the proportion of the group accounted for by sugar has reduced substantially in recent years as major investments have been made in our other food businesses and in Primark. We are committed to our investment in British Sugar, a profitable and highly efficient producer, and the addition of Illovo would strengthen this position. Dividends The interim dividend will be 6.25p per share, an increase of 4% over last year. The interim dividend will be paid on 3 July 2006 to shareholders registered at the close of business on 2 June 2006. International Financial Reporting Standards These interim financial statements have been prepared under International Financial Reporting Standards ('IFRS') and apply the accounting policies published in our IFRS Transition Document on 15 December 2005. The comparative results have been restated accordingly. Outlook Operating profit in the remainder of the year will continue to be adversely affected by conditions in the UK sugar business, our bakery operations and by energy costs. The benefit of trading profits from the Littlewoods stores prior to their closure has ended, and there will be net interest payable in the second half of the year reflecting the investment in fitting out the former Littlewoods stores. As a consequence, some reduction in earnings after tax can be expected in the second half compared with the previous year. Looking beyond the current year, the transition to the new EU sugar regime may well continue to impact on profits through 2006/7. We are confident that when the transition to the new regime is completed British Sugar will be satisfactorily profitable. We expect that the major investment in Primark will generate good returns which will build progressively as the new stores open and trading develops, and that there will be a substantial profit contribution in 2006/7 and beyond. Our financial resources remain strong. Even allowing for a successful outcome of the discussions with Illovo Sugar, the group will be well placed to continue to fund further investment in its businesses. The outlook for further progress in the long term remains good. Martin Adamson Chairman 19 April 2006 OPERATING REVIEW Group revenue increased by 10% to Â£2,887m and adjusted operating profit by 5% to Â£255m. This growth in operating profit has been achieved in the period despite an increased cost of some Â£20m across the group from higher energy prices and a significant reduction in profit from our EU sugar operations. Although some businesses recovered the higher energy costs through pricing, an estimated half of the Â£20m cost was not recovered and consequently affected profit. Excluding energy, profit at British Sugar reduced by Â£22m which resulted from the weakness of the euro and lower sugar pricing, caused in turn by changes in producer behaviour in anticipation of the new regime and by oversupply within the market. This lower sugar pricing was more severe and earlier than we expected. Many businesses delivered excellent growth in the period, notably Primark, from strong like-for-like sales growth and new store openings, AB Mauri and International Hot Beverages. GROCERY 2006 2005 Revenue Â£m 1,292 1,235 Operating profit Â£m 85 84 Revenue increased by 5% to Â£1,292m and profit by 1% to Â£85m. Strong progress was made by Ryvita, International Hot Beverages and ACH. However, the overall profit increase was held back by lower volumes at Allied Bakeries, commissioning costs at the new Sydney bakery and lower sugar pricing in Silver Spoon. ACH performed well. In Mexico, Capullo grew strongly and, supported by new advertising, has increased its market share. The Karo syrup brand, a recent acquisition, has been successfully integrated. In the US, the consumer brands in spices and yeast performed to expectation. In consumer oils Mazola volumes were down in a category which declined sharply. Significant investment has been made to support the launch of Mazola Pure oil spray. This is an innovative pan release and flavour enhancing oil spray without the alcohol or silicone found in many competitive products. It has been well received by both the trade and consumers. The UK cracker and crispbread market has continued to grow strongly and Ryvita achieved growth in its traditional products. Ryvita Minis, launched last year in the rapidly expanding healthy bagged snack market, continued to perform well. The brand was extended further with the launch of Ryvita Goodness nutritional bars in January. Our international hot beverage brands, Twinings and Ovaltine, continued to grow well with investment in new products and marketing. Twinings showed strong growth in the UK following the launch of premium Everyday and with higher Green Tea sales. The television advertising, featuring Stephen Fry, was extended to Green Teas and infusions promoting their health and wellness benefits. The rationalisation of the tea packing cost base was successfully completed. Plants in France and the US have been closed and a new facility opened in Shanghai, China. Ovaltine benefited from growth in powder sales in Thailand and from new product launches in Thailand, China and Switzerland. In Australia, profit at the bakery business was affected by commissioning costs of the new Sydney bakery. This new bakery replaces bakeries at Fairfield, which was destroyed by fire, and at Chatswood, which is now closed, and the distribution centre at Chipping Norton. Profitability of the New South Wales business will benefit once this facility is fully commissioned and a significant improvement is planned for the second half of the year. Good progress was made in all of the other Australian states and in New Zealand. Performance at Allied Bakeries was unsatisfactory. Kingsmill and own label revenues both declined and profit fell as a result. Steps are in place to recover lost volumes and to reduce our cost base further but a recovery in profitability is not likely in the second half. In Silver Spoon both Light, a low calorie offering, and Billington's continued to perform well but pricing pressure on granulated sugar reduced profit. Westmill's established position as a leading supplier to the UK ethnic food sector was strengthened with the acquisition in February of the Rajah, Green Dragon and Lotus brands from Heinz which it had just acquired from Danone. We also reached an agreement for the distribution of the Amoy brand in this channel. PRIMARY FOOD & AGRICULTURE Primary Food 2006 2005 Revenue Â£m 282 288 Operating profit Â£m 53 78 Agriculture 2006 2005 Revenue Â£m 299 393 Operating profit Â£m 8 8 In Primary Food, revenue reduced to Â£282m and the sharp decline in profit from Â£78m to Â£53m was caused by the EU operations of British Sugar. Imbalances in supply and demand within the EU sugar market and changes in producer behaviour in anticipation of the new regime resulted in more severe price pressure than had been expected. In addition, profit was reduced by a weaker euro and significantly higher energy costs, particularly gas prices in the UK. This year's processing campaigns were excellent with sugar production of 1.34 million tonnes in the UK and 206,000 tonnes in Poland. A number of production records were set covering productivity, sugar yields and energy usage. The EU Commission published its final proposals for sugar regime reform last November which have now been accepted by the Council of Ministers. Implementation will commence in July 2006. The key components are cuts in sugar and beet prices of 36% and 39% respectively over a four year transition period and a reduction in total EU quota of 5 million tonnes from 17.4 million tonnes to 12.4 million tonnes. A restructuring mechanism for quota reduction has been adopted within the regulations. Quota volume can be surrendered to the Commission with compensation paid out of a levy, funded by the industry, over the first three years. Announcements by some European processors regarding their quota have already been made. We view these changes as positive and we expect that efficient sugar beet producers, like British Sugar, will have a strong and profitable position in the EU sugar market from 2009 onwards. During the transition period the impact of these changes and imbalances in supply and demand can be expected to continue to affect the profit at British Sugar. In anticipation of oversupply in 2006/7, the Commission has announced a 2.5 million tonne transitional quota cut. This is higher than the current year and for British Sugar this equates to 133,000 tonnes in the UK and 20,000 tonnes in Poland. The Commission has confirmed that the restructuring levy will be based on the full permanent quota. In a continued drive for efficiency, the Dobre and Unislaw factories in Poland have now been closed and investment in expansion at Glinojeck has created a world class beet processing factory. In the UK, work has continued on cost reduction. Construction has started on the UK's first bioethanol production facility at Wissington. The 55,000 tonne, 70 million litres, unit will commence operations in February 2007 and has already attracted significant interest from the major oil companies. The Chinese cane sugar operations performed well in the first campaign following the expansion of the Shibie and WuXuan factories. Capacity is now more than half a million tonnes although the factories will produce substantially below this level this year because of a much reduced cane crop caused by insufficient rainfall. Despite the lower crop, profit was maintained through sharply higher sugar prices. In Agriculture revenue fell to Â£299m reflecting the sale of the grain trading business, Allied Grain, into Frontier, a joint venture with Cargill. Profit was maintained at Â£8m despite the effects of higher energy costs and avian influenza. Revenue from animal feeds in China was affected by a substantial cull of chickens in the North East following the outbreak of avian influenza there. Despite this our business in China continues to develop well and we have built a new feed mill in South Henan which will begin production in April. INGREDIENTS 2006 2005 Revenue Â£m 343 254 Operating profit Â£m 33 25 AB Mauri, our international yeast and bakery ingredients business, contributed strongly to the increase in revenue of 35% to Â£343m and profit of 32% to Â£33m. This reflected a full half-year of profit following its acquisition during the first half of last year, the benefits of price and volume increases in yeast, and growth in bakery ingredients. Good progress has been made with price increases for yeast in a number of key markets including North America, China, India and Western Europe. These have recovered higher raw material costs, particularly molasses and energy. The newly opened factory in Western China is operating well. The existing Harbin and Hebei plants in China are in the process of expansion and will be completed in the second half of the year as will the expansion in Vietnam and at Chiplun in India. We have worked hard to transfer our technology in bakery ingredients to all parts of AB Mauri. Resources are now in place in most markets with further opportunities to be developed particularly in China. Agreement has been reached to sell the small bakery mix and icings business of Cereform US which is based in Denver, Colorado. The operation was not well located and was loss-making. A loss of Â£5m on the sale of the business has been included in the income statement. Our yeast extracts businesses achieved good growth and have benefited from improvements in manufacturing efficiency and yield. Plans are in place to expand capacity, increase the product range and enhance our position in the food and fermentation markets. Our enzymes business continues to focus on the introduction of new products, particularly in the textile and bakery sectors. Despite higher energy costs our polyols business traded in line with last year, with food polyols benefiting from improved manufacturing efficiencies and antacids maintaining the improvement in performance seen last year. RETAIL 2006 2005 Primark Revenue Â£m 530 448 Operating profit Â£m 71 59 Littlewoods Revenue Â£m 141 - Operating profit Â£m 16 - Primark performed well once again with a revenue increase of 18% to Â£530m and a profit increase of 20% to Â£71m. The revenue increase resulted from 6% growth in like-for-like sales and a substantial increase in retail selling space. This is a remarkable result given the upheaval caused by the fire which destroyed the main UK warehouse last November. The potentially disastrous effect on the supply of stock to the stores was mitigated by the swift action of the management team. Operations were immediately transferred to an adjacent warehouse and back-up systems were rapidly commissioned. Deliveries to stores were restored after 48 hours and air-lifts and road transport were used to replace the lost warehouse stock. Like-for-like growth was inevitably affected by the fire but stock levels recovered well and we were ready for the Spring season. The stock loss, additional costs of working and business interruption were insured and a substantial proportion of the cash for the stock loss and additional costs of working was received during the period. However, the profit includes a charge for the self-insurance element of the claim. The overall profit margin improved, despite this charge, benefiting from lower levels of discounts. There was an extensive programme of new store openings in the period and initial trading has been very strong. Stores were opened in Dundalk, Lakeside Thurrock, Cardiff, Leicester, Bromley, Hull and Oxford. Three small stores were closed. At the end of the period we were trading from 126 stores and 2.9 million sq ft of retail selling space. The Littlewoods retail business was acquired last July and comprised 120 stores. This business was very successfully traded out and finally closed in early January. The profit from trading of Â£16m was well ahead of our expectation at the time of the acquisition. Of the 79 stores not required by Primark 61 have now been sold and negotiations for the sale of the remainder are continuing. The remaining 41 stores are now being extensively refurbished and refitted and will open as Primark over a period from May to early 2007. In total we will add 1.4 million sq ft of retail selling space. By the end of the financial year in September 2006 we expect that 16 of these stores and 0.4 million sq ft of retail selling space will have commenced trading. The first store in Spain, at Plenilunio outside Madrid, is expected to open in early Summer. This significant investment will have doubled the selling space in the UK from 1.8 million sq ft in September 2005 to 3.6 million sq ft when all these stores have opened. Primark will be firmly established as a major high street retailer. George Weston Chief Executive CONSOLIDATED INCOME STATEMENT 24 weeks 24 weeks 52 weeks ended ended ended 4 March 5 March 17 September 2006 2005 2005 Note Â£m Â£m Â£m Revenue 2,887 2,618 5,622 Operating costs (2,651) (2,387) (5,099) 236 231 523 Share of profit from joint ventures and associates 3 2 7 Profits less losses on sale of property, plant & - 19 20 equipment Operating profit 239 252 550 Adjusted operating profit 1 255 243 555 Profits less losses on the sale of property, plant - 19 20 & equipment Amortisation of intangibles (16) (10) (25) Losses on sale of businesses (5) - (1) Provision for loss on termination of an operation - - (47) Profit before interest 234 252 502 Investment income 20 25 49 Interest payable (25) (14) (34) Other net financial income 5 5 10 Profit before taxation 234 268 527 Adjusted profit before taxation 255 259 580 Profits less losses on the sale of property, plant - 19 20 & equipment Losses on sale of businesses (5) - (1) Provision for loss on termination of an operation - - (47) Amortisation of intangibles (16) (10) (25) Taxation: UK (34) (42) (82) Overseas (32) (26) (59) 2 (66) (68) (141) Profit for the period 168 200 386 Attributable to: Equity shareholders 166 198 379 Minority interests 2 2 7 Profit for the period 6 168 200 386 Basic and diluted earnings per ordinary share 3 21.0 25.1 48.0 (pence) CONSOLIDATED BALANCE SHEET At At At 4 March 5 March 17 September 2006 2005 2005 Note Â£m Â£m Â£m Non-current assets Intangible assets 1,239 1,078 1,152 Property, plant & 2,203 1,632 2,255 equipment Investments in joint ventures 39 15 36 Investments in associates 18 13 15 Employee benefits asset 96 73 95 Deferred tax assets 78 41 78 Other investments - 1 - Total non-current assets 3,673 2,853 3,631 Current assets Non-current assets held 77 12 9 for sale Inventories 854 839 556 Trade and other 758 665 678 receivables Other investments 201 429 269 Cash and cash 354 640 929 equivalents Total current assets 2,244 2,585 2,441 TOTAL ASSETS 5,917 5,438 6,072 Current liabilities Interest bearing loans and overdrafts (166) (102) (447) Trade and other payables (791) (753) (747) Income tax (99) (116) (113) Amounts owed to joint ventures (6) (2) (3) Provisions (11) (13) (61) Total current (1,073) (986) (1,371) liabilities Non-current liabilities Interest bearing loans and overdrafts (551) (503) (539) Income tax - (2) (4) Provisions (38) (39) (29) Deferred tax liabilities (251) (186) (233) Employee benefits (21) (10) (19) liability Total non-current (861) (740) (824) liabilities TOTAL LIABILITIES (1,934) (1,726) (2,195) NET ASSETS 3,983 3,712 3,877 Equity Issued capital 47 47 47 Other reserves 173 173 173 Translation reserve 78 15 42 Retained earnings 3,657 3,453 3,586 3,955 3,688 3,848 Minority interest 28 24 29 TOTAL EQUITY 6 3,983 3,712 3,877 CONSOLIDATED CASH FLOW STATEMENT 24 weeks 24 weeks 52 weeks ended ended ended 4 March 5 March 17 September 2006 2005 2005 Â£m Â£m Â£m Cash flow from operating activities Profit before taxation 234 268 527 Add back non-operating items Profits less losses on sale of property, plant & - (19) (20) equipment Losses on sale of businesses 5 - 1 Provision for loss on termination of an operation - - 47 Investment income (20) (25) (49) Interest payable 25 14 34 Other net financial income (5) (5) (10) Adjustments for Share of (profit) from joint ventures and (3) (2) (7) associates Amortisation 16 10 25 Depreciation 95 79 161 Pension cost less contributions 3 7 (8) Increase in inventories (279) (306) (25) Increase in receivables (58) (15) (20) Increase/(decrease) in payables 14 52 (9) (Decrease)/increase in other provisions (45) 13 - Cash generated from operations (18) 71 647 Income taxes paid (69) (72) (132) Net cash from operating activities (87) (1) 515 Cash flows from investing activities Dividends received from joint ventures - - 2 Dividends received from associates - - 2 Purchase of property, plant & equipment (156) (142) (403) Sale of property, plant & equipment 83 31 39 Purchase of subsidiary undertakings (100) (630) (1,130) Sale of subsidiary undertakings - 1 8 Sale of joint ventures and associates - 1 (18) Interest received 22 27 54 Loan repayment from joint venture - - 51 Net cash from investing activities (151) (712) (1,395) Cash flows from financing activities Dividends paid to minorities (4) (2) (4) Dividends paid to shareholders (95) (88) (135) Interest paid (25) (13) (29) Management of liquid resources 70 109 273 Financing (287) 200 551 Net cash from financing activities (341) 206 656 Net decrease in cash and cash equivalents (579) (507) (224) Cash and cash equivalents at the beginning of the 929 1,144 1,144 period Effect of exchange rate fluctuations on cash held 4 3 9 Cash and cash equivalents at the end of the period 354 640 929 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 24 weeks 24 weeks 52 weeks ended ended ended 4 March 5 March 17 September 2006 2005 2005 Â£m Â£m Â£m Actuarial losses on defined benefit schemes - - (7) Foreign exchange translation differences 39 16 44 Unrealised gain on sale of businesses - - 2 Movement of cash flow hedging position (8) - - Tax on currency translation differences (2) - (1) Net income recognised directly in equity 29 16 38 Profit for the period 168 200 386 Total recognised income and expense for the period 197 216 424 Adjustments relating to the adoption of IAS 32 and 9 - - IAS 39 on 18 September 2005 (Equity shareholders) 206 216 424 Attributable to: Equity shareholders 203 214 416 Minority interests 3 2 8 206 216 424 NOTES TO THE INTERIM REPORT 1. Segmental analysis Revenue Adjusted operating profit 24 weeks 24 weeks 52 weeks 24 weeks 24 weeks 52 weeks ended ended ended ended ended ended 4 March 5 March 17 September 4 March 5 March 17 September 2006 2005 2005 2006 2005 2005 Business segments Â£m Â£m Â£m Â£m Â£m Â£m Grocery 1,292 1,235 2,590 85 84 185 Primary Food 282 288 700 53 78 166 Agriculture 299 389 735 8 8 20 Ingredients 343 254 583 33 25 65 Retail 671 448 1,006 87 59 140 Central - - - (11) (11) (21) 2,887 2,614 5,614 255 243 555 Businesses disposed: Agriculture - 4 8 - - - 2,887 2,618 5,622 255 243 555 Geographical segments United Kingdom 1,487 1,364 2,923 133 140 314 Rest of Europe 312 296 638 36 35 72 The Americas 597 517 1,100 59 46 102 Australia, Asia & Rest of World 491 437 953 27 22 67 2,887 2,614 5,614 255 243 555 Businesses disposed: United Kingdom - 4 8 - - - 2,887 2,618 5,622 255 243 555 1. Segmental analysis - 24 weeks ended 4 March 2006 Business segments Primary Elimina- Grocery Food Agriculture Ingredients Retail Central tions Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Total revenue 1,298 330 299 362 671 - (73) 2,887 Internal revenue (6) (48) - (19) - - 73 - Revenue from external customers 1,292 282 299 343 671 - - 2,887 Adjusted operating profit 85 53 8 33 87 (11) - 255 Amortisation of intangibles (4) - - (12) - - - (16) Profits less losses on sale of property, - - - - - - - - plant & equipment Losses on sale of businesses - - - (5) - - - (5) Provision for loss on termination of an - - - - - - - - operation Profit before interest and taxation 81 53 8 16 87 (11) - 234 Net financing costs (5) - (5) Other net financial income 5 - 5 Income tax expense (66) - (66) Profit for the period 81 53 8 16 87 (77) - 168 Segment assets (excl. investments in 1,970 946 198 1,100 816 455 - 5,485 associates and joint ventures) Investment in associates and joint 6 6 25 20 - - - 57 ventures Segment assets 1,976 952 223 1,120 816 455 - 5,542 Employee benefits asset 96 - 96 Deferred tax assets 78 - 78 Other investments 201 - 201 Segment liabilities (337) (159) (56) (113) (168) (13) - (846) Interest bearing loans and overdrafts (717) - (717) Income tax (99) - (99) Deferred tax liabilities (251) - (251) Employee benefits liability (21) - (21) Net assets 1,639 793 167 1,007 648 (271) - 3,983 Capital expenditure 38 22 4 18 69 11 - 162 Depreciation 37 26 3 13 13 3 - 95 Amortisation 4 - - 12 - - - 16 Other significant non-cash expenses - - - - - - - - Geographical segments Australia, United Rest of The Asia & Elimina- Kingdom Europe Americas Rest of tions Total World Â£m Â£m Â£m Â£m Â£m Â£m Revenue from external customers 1,487 312 597 491 - 2,887 Segment assets 2,622 949 1,164 807 - 5,542 Capital expenditure 100 18 11 33 - 162 Depreciation 58 7 14 16 - 95 Amortisation 2 3 9 2 - 16 Other significant non-cash expenses - - - - - - 1. Segmental analysis - 24 weeks ended 5 March 2005 Business segments Primary Elimina- Grocery Food Agriculture Ingredients Retail Central tions Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Total revenue 1,248 342 398 269 448 - (91) 2,614 Businesses disposed - - 4 - - - - 4 Internal revenue (13) (54) (9) (15) - - 91 - Revenue from external customers 1,235 288 393 254 448 - - 2,618 Adjusted operating profit 84 78 8 25 59 (11) - 243 Amortisation of intangibles (1) - - (9) - - - (10) Profits less losses on sale of property, - 19 - - - - - 19 plant & equipment Losses on sale of businesses - - - - - - - - Provision for loss on termination of an - - - - - - - - operation Profit before interest and taxation 83 97 8 16 59 (11) - 252 Net financing income 11 - 11 Other net financial income 5 - 5 Income tax expense (68) - (68) Profit for the period 83 97 8 16 59 (63) - 200 Segment assets (excl. investments in 1,787 897 282 929 497 474 - 4,866 associates and joint ventures) Investment in associates and joint 1 4 - 23 - - - 28 ventures Segment assets 1,788 901 282 952 497 474 - 4,894 Employee benefits asset 73 - 73 Deferred tax assets 41 - 41 Other investments 430 - 430 Segment liabilities (333) (182) (74) (78) (95) (45) - (807) Interest bearing loans and overdrafts (605) - (605) Income tax (118) - (118) Deferred tax liabilities (186) - (186) Employee benefits liability (10) - (10) Net assets 1,455 719 208 874 402 54 - 3,712 Capital expenditure 40 11 2 10 67 - - 130 Depreciation 32 25 4 10 8 - - 79 Amortisation 1 - - 9 - - - 10 Other significant non-cash expenses 13 - - 1 - - - 14 Geographical segments Australia, United Rest of The Asia & Elimina- Kingdom Europe Americas Rest of tions Total World Â£m Â£m Â£m Â£m Â£m Â£m Revenue from external customers 1,368 296 517 437 - 2,618 Segment assets 2,432 783 945 734 - 4,894 Capital expenditure 77 20 7 26 - 130 Depreciation 49 7 10 13 - 79 Amortisation 1 2 5 2 - 10 Other significant non-cash expenses - 5 9 - - 14 1. Segmental analysis - 52 weeks ended 17 September 2005 Business segments Primary Elimina- Grocery Food Agriculture Ingredients Retail Central tions Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Total revenue 2,604 802 747 620 1,006 - (165) 5,614 Businesses disposed - - 11 - - - (3) 8 Internal revenue (14) (102) (15) (37) - - 168 - Revenue from external customers 2,590 700 743 583 1,006 - - 5,622 Adjusted operating profit 185 166 20 65 140 (21) - 555 Amortisation of intangibles (5) - - (20) - - - (25) Profits less losses on sale of (1) 24 (3) - - - - 20 property, plant & equipment Losses on sale of businesses 1 - 3 - - (5) - (1) Provision for loss on termination of an - - - - (47) - - (47) operation Profit before interest and taxation 180 190 20 45 93 (26) - 502 Net financing income 15 - 15 Other net financial income 10 - 10 Income tax expense (141) - (141) Profit for the period 180 190 20 45 93 (142) - 386 Segment assets (excl. investments in 1,937 727 173 992 877 873 - 5,579 associates and joint ventures) Investment in associates and joint 5 5 25 16 - - - 51 ventures Segment assets 1,942 732 198 1,008 877 873 - 5,630 Employee benefits asset 95 - 95 Deferred tax assets 78 - 78 Other investments 269 - 269 Segment liabilities (348) (96) (55) (99) (230) (12) - (840) Interest bearing loans and overdrafts (986) - (986) Income tax (117) - (117) Deferred tax liabilities (233) - (233) Employee benefits liability (19) - (19) Net assets 1,594 636 143 909 647 (52) - 3,877 Capital expenditure 109 38 7 25 228 - - 407 Depreciation 68 35 6 24 28 - - 161 Amortisation 5 - - 20 - - - 25 Other significant non-cash expenses 14 - - 5 47 - - 66 Geographical segments Australia, United Rest of The Asia & Elimina- Kingdom Europe Americas Rest of tions Total World Â£m Â£m Â£m Â£m Â£m Â£m Revenue from external customers 2,931 638 1,100 953 - 5,622 Segment assets 2,555 1,181 1,075 819 - 5,630 Capital expenditure 263 54 21 69 - 407 Depreciation 94 15 24 28 - 161 Amortisation 2 10 10 3 - 25 Other significant non-cash expenses 51 5 8 2 - 66 Other significant non-cash expenses includes a provision of Â£47m for costs associated with the termination of Littlewoods. 24 weeks 24 weeks 52 weeks ended ended ended 4 March 5 March 17 September 2006 2005 2005 Â£m Â£m Â£m 2. Income tax expense Current tax expense UK - corporation tax at 30% 28 39 84 Overseas - corporation tax 26 26 49 Over provided in prior years - - (1) 54 65 132 Deferred tax expense UK deferred tax 5 3 (2) Overseas deferred tax 7 - 12 Over provided in prior years - - (1) Total income tax expense in income statement 66 68 141 Reconciliation of effective tax rate Profit before taxation 234 268 527 Less share of profit from joint ventures and (3) (2) (7) associates Profit before taxation excluding share of profit 231 266 520 from joint ventures and associates Nominal tax charge at UK corporation tax rate (30%) 69 80 156 Lower tax rates on overseas earnings (10) (11) (25) Expenses not deductible for tax purposes 7 3 9 Utilisation of losses - (5) (1) Deferred tax not recognised - 1 3 Adjustments in respect of prior periods - - (1) 66 68 141 3. Earnings per ordinary share Pence Pence Pence Adjusted earnings per share 23.3 23.6 52.5 Earnings per share on: Sale of property, plant & equipment - 2.4 2.5 Sale of businesses (0.7) - (0.1) Provision for loss on termination of operation - - (6.0) Tax effect on above - - 1.4 Amortisation of intangibles (2.0) (1.3) (3.2) Tax credit on intangibles amortisation 0.4 0.4 0.9 Earnings per ordinary share 21.0 25.1 48.0 4. Dividends Pence Pence Pence Per share 2004 final - 11.15 11.15 2005 interim - - 6.0 2005 final 12.0 - - 12.0 11.15 17.15 Â£m Â£m Â£m Total 2004 final - 88 88 2005 interim - - 47 2005 final 95 - - 95 88 135 The 2005 final dividend of 12p was declared on 2 December 2005 and totalled Â£95m when paid on 13 January 2006. The 2006 interim dividend of 6.25p will be paid on 3 July 2006 to shareholders on the register on 2 June 2006. At Cash Flow Acquisition Exchange At 17 September of subsidiary adjustments 4 March 2006 2005 undertakings Â£m Â£m Â£m Â£m Â£m 5. Analysis of net funds/ (debt) Cash and cash equivalents at bank 929 (579) - 4 354 and in hand Short-term borrowings (447) 285 (2) (2) (166) Investments 269 (70) - 2 201 Loans over one year (539) - (1) (11) (551) 212 (364) (3) (7) (162) Cash and cash equivalents comprise cash balances, call deposits and investments with maturities of three months or less. 24 weeks 24 weeks 52 weeks ended ended ended 4 March 5 March 17 September 2006 2005 2005 Â£m Â£m Â£m 6. Summary of movements in equity Opening shareholders' funds (as previously reported under UK - 3,496 3,496 GAAP) Opening shareholders' funds (restated excluding IAS 32 and IAS 3,877 - - 39) Adjustments on adoption of IFRS from 18 September 2004 - 91 91 Adjustments relating to adoption of IAS 32 and IAS 39 on 18 9 - - September 2005 Opening shareholders' funds (restated) 3,886 3,587 3,587 Profit for the period 168 200 386 Other recognised income and expense for the period 29 16 38 Total recognised income and expense for the period 197 216 424 Dividends (95) (88) (135) Net decrease/(increase) in own shares held (1) 2 7 Minority interests (4) (5) (6) Closing shareholders' funds 3,983 3,712 3,877 Attributable to: Equity shareholders 3,955 3,688 3,848 Minority interests 28 24 29 Closing shareholders' funds 3,983 3,712 3,877 7. Basis of preparation The attached interim financial statements are the first interim financial statements following the adoption of International Financial Reporting Standards (IFRS). These interim financial statements have been prepared under IFRS applying the accounting policies published in the group's IFRS Transition Document on 15 December 2005. Detailed income statement, balance sheet and cash flow reconciliations to assist the reader in understanding the nature and quantum of differences between the application of UK Generally Accepted Accounting Practices ('UK GAAP') and IFRS for the restated comparative results for the year ended 17 September 2005 and for the 24 weeks ended 5 March 2005 are available on the company's website at www.abf.co.uk/media. These interim financial statements have been prepared in accordance with accounting policies the group expects to follow in its first full IFRS financial statements which will be for the year ending 16 September 2006. EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated financial statements of the company, for the year ending 16 September 2006, be prepared in accordance with IFRS adopted for use in the EU ('adopted IFRS'). These interim financial statements have been prepared on the basis of the recognition and measurement requirements of IFRS in issue that either are endorsed by the EU and effective (or available for early adoption) at 16 September 2006 or are expected to be endorsed and effective (or available for early adoption) at 16 September 2006, the group's first annual reporting date at which it is required to use adopted IFRS. Based on these IFRS, the directors have made assumptions about the accounting policies expected to be applied when the first annual IFRS financial statements are prepared for the year ending 16 September 2006. In particular, the directors have assumed that the draft amendment to IAS 21, the Effects of Changes in Foreign Exchange Rates, issued by the IASB on 30 September 2005 will be adopted and endorsed by the EU. The draft amendment clarifies the identification and accounting for exchange differences on monetary items forming part of a net investment in a foreign operation and requires that exchange differences on such items be recognised in equity. The adopted IFRS that will be effective (or available for early adoption) in the annual financial statements for the year ending 16 September 2006 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 16 September 2006. As allowed by IFRS 1, First-time adoption of IFRS, the group adopted IAS 32, Financial Instruments: disclosure and presentation, and IAS 39, Financial Instruments: recognition and measurement, prospectively from 18 September 2005. Therefore, until 17 September 2005, the group continued to hedge account for forecast foreign exchange transactions and commodity exposures in accordance with UK GAAP, and hence the comparative financial statements exclude the impact of these standards. The half year results are unaudited and were approved by the board of directors on 19 April 2006. The comparative figures for the financial year ended 17 September 2005 and half year ended 5 March 2005 are not the company's statutory accounts for those financial periods. Those accounts, which were prepared under UK GAAP, have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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