Associated British Foods plc
Associated British Foods plc
Review of interim results for 24 weeks ended 3 March 2007
24 April 2007
Associated British Foods plc
Financial Highlights
§ Adjusted operating profit up 7% to £272m *
§ Group revenue up 12% to £3,220m
§ Adjusted profit before tax up 5% to £268m **
§ Adjusted earnings per share level at 23.3p **
§ Interim dividend per share up 4% to 6.5p
§ Net investment in capital and acquisitions over the last year of £720m
§ Net debt of £350m
§ Basic earnings per share down 9% to 19.2p and profit before tax down 15% to £198m
* 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 amortisation of intangibles, profits or losses on the sale of businesses and property, plant & equipment are shown on the face of the consolidated income statement.
Associated British Foods plc
Business Highlights
§ Benefit from last year’s substantial investment in capital and acquisitions
§ Progress achieved despite £28m impact from EU sugar regime change
§ Transformation of sugar business underway
– strong Illovo contribution
– excellent performances in UK, Poland and China
– UK bioethanol plant commissioning June 2007
§ Good progress from Ingredients and Grocery businesses except Allied Bakeries
– Kingsmill now relaunched
§ Primark profit up 28%
– 23 stores opened
– strong likeforlike growth
Associated British Foods plc
12 Profits less losses on sale of property, plant & equipment
12 Profits less losses on sale of property, plant & equipment
2007
(16) (43) Amortisation of intangibles
+7% 255 272 Adjusted operating profit
239 241 Operating profit
3 3 Share of joint ventures and associates
(2,651) (2,994) Operating costs
+12% 2,887 3,220 Revenue
Change 2006 £m
Income Statement
Associated British Foods plc
Income Statement
+5% 255 268 Adjusted profit before tax*
168 155 Profit after tax
(66) (43) Tax
15% 234 198 Profit before tax
(73) (75) Financial expenses
73 71 Financial income
(5) (39) Losses on sale of businesses
+1% 239 241 Operating profit
Change 2006 2007 £m
* before amortisation of intangibles, profits less losses on the sale of P, P & E and businesses
Associated British Foods plc
Tax
(16) Credit for losses on sale of businesses and property, plant & equipment
66
(3)
69
£m
2006
£m
43
(13)
72
2007
28.2% 21.7% Reported charge
Credit on intangible amortisation
27.1% 26.9% Underlying charge
Associated British Foods plc
Earnings and Dividend Per Share
+4% 6.25p 6.50p Dividend per share
9% 21.0p 19.2p Earnings per share
level 23.3p 23.3p Adjusted earnings per share *
Change 2006 2007
* before amortisation of intangibles, profits less losses on the sale of P, P & E and businesses
Associated British Foods plc
Balance Sheet
(173) (320) Deferred tax
75 152 Net pension asset
3,983
28
3,955
3,983
(49)
(162)
(99)
815
2,337
1,239
2006
4,184
208 Minority interests
3,976 Equity shareholders’ funds
4,184
(68) Provisions
(350) Net debt
(71) Current tax
728 Working capital
2,659 Property, plant & equipment and other noncurrent asset investments
1,454 Intangible assets (including goodwill)
2007 £m
Associated British Foods plc
Cash Flow
(45) (18) Provisions
70 (4) Sale of Littlewoods stores
3 (14) Pension cost less contributions
16 43 Intangible amortisation
(100) (113) Food
(362) (42)
(100) 59 Acquisitions less disposals
(95) (99) Dividends paid
(237) 2 Free cash flow
9 10 Other
(3) (17) Net interest
(69) (48) Tax
(56) (114) Capital expenditure Primark
(323) (62) Working capital
95 109 Depreciation
236 226 Operating profit (before joint ventures and associates)
2006 2007 £m
Associated British Foods plc
N/A
16 141 Littlewoods
(11) (13) Central costs
Profit Revenue
71 91 530 721 Retail Primark
61 94 578 901 Primary food & agriculture
84 64 1,257 1,226 Grocery
32 33 322 345 Ingredients
255 272 2,887 3,220
2 3 59 27 Businesses disposed
253 269 2,828 3,193 Continuing businesses
£m £m £m £m
2006 2007 2006 2007
By business
Segmental Analysis
Margin ROCE
2007 2007 2006 2006
8.9 8.4
8.4 8.8
% %
6.7
10.6
9.9
13.4
%
5.2
10.4
9.6
12.6
%
(annualised)
N/A
19.3 17.8
20.5
17.5
20.4
27.5
15.8
21.5
20.6
17.4
11.3 N/A
Associated British Foods plc
8.8
N/A
8.9
5.5
10.1
12.6
9.0
%
2006
8.4
N/A
8.4
6.6
10.7
10.1
7.6
%
2007
Margin
255 272 2,887 3,220
2 3 59 27 Businesses disposed
253 269 2,828 3,193 Continuing businesses
27 35 491 532 Asia Pacific
58 58 576 544 The Americas
35 62 277 614 Europe, Middle East & Africa
133 114 1,484 1,503 United Kingdom
£m £m £m £m
2006 2007 2006 2007
Profit Revenue
By geography
Segmental Analysis
Associated British Foods plc
European Sugar
UK • £24m impact of regime change • sugar prices more stable • lower energy costs, efficient campaign, earlier exports • additional quota acquired • 1.16m tonne crop
Poland • excellent campaign • factories rationalised • Glinojeck performed well
+64% +105% Change
53 87 Operating Profit £m
282 579 Revenue £m 2007 2006 Primary food
Associated British Foods plc
China
• record crop
• high sugar yield, satisfactory prices
+64% +105% Change
53 87 Operating Profit £m
282 579 Revenue £m 2007 2006 Primary food
Illovo
• earnings for year to 31 March 2007 up over 40%
• better pricing, strong performances in Malawi, Zambia
• crop lower in South Africa, Tanzania
• exciting growth potential
– Swaziland expansion
– £100m investment in Zambia to double production
Associated British Foods plc
• UK’s first bioethanol plant to be commissioned June 2007
• developing plans for larger cereal based biofuel plant in UK
+64% +105% Change
53 87 Operating Profit £m
282 579 Revenue £m 2007 2006 Primary food
Associated British Foods plc
Effects of reform on European sugar industry
• EU reduction target of 5m tonnes
• some industries will shrink or close down
• those remaining will become more efficient
– increase productivity
– reduce costs, factory closures
• change facilitated by restructuring scheme
• increased EU trade flows from surplus to deficit areas
– change in competitor behaviour
• increased imports from LDCs
Associated British Foods plc
Sugar regime transition
• restructuring scheme will not deliver required reduction in production
• shortfall expected to be some 2m tonnes
• led to uncertainty for transition years 20072009
• European Commission intention to manage shortterm supply/demand balance
• first stage announced January 2007
– 2m tonne cut for beet industry across EU
– beet plantings were reduced this Spring
– further cut in October if necessary
Associated British Foods plc
Sugar regime transition
• European Commission now developing proposals for medium term
• enhance restructuring scheme
• timetable for agreement to proposals
– publication May
– debate May – September
– final agreement October
• resolution should remove uncertainty
Associated British Foods plc
13% +9%
Change
8 7 Operating Profit £m
296 322 Revenue £m 2007 2006 Agriculture
AB Agri
UK animal feeds • volumes and margins ahead
Frontier • strong revenue growth and cost synergies
China animal feeds • cyclical industry • slow restocking of livestock • higher raw material costs not recovered
Associated British Foods plc
24% 2%
Change
84 64 Operating Profit £m
1,257 1,226 Revenue £m 2007 2006 Grocery
ACH
• Mazola sales increase
• herbs and spices
– growth of Spice Islands
– launch of new Weber range
• rationalisation of commodity oils business
• further growth for Capullo
Associated British Foods plc
Ryvita
• growth in Minis and premium crispbread
• decline in standard crispbread
24% 2%
Change
84 64 Operating Profit £m
1,257 1,226 Revenue £m 2007 2006 Grocery
Silver Spoon
• Billington’s ahead with Illovo sourced Fairtrade sugar
• impact of price reduction last year
Westmill
• successful integration of businesses
Associated British Foods plc
Twinings/Ovaltine
• UK and export sales strong for Twinings
• further Ovaltine growth
• sale of Scandinavian food distributor
24% 2%
Change
84 64 Operating Profit £m
1,257 1,226 Revenue £m 2007 2006 Grocery
George Weston Foods
• strong recovery of bread business
– prices and volumes ahead
– Sydney bakery operating well
Associated British Foods plc
Allied Bakeries
• disappointing performance in first half
– lower volumes
– increased wheat costs not recovered
• major relaunch of Kingsmill on 19 February
– new recipes, larger loaves and softer texture
– new packaging
– subbrands under Kingsmill
24% 2%
Change
84 64 Operating Profit £m
1,257 1,226 Revenue £m 2007 2006 Grocery
– heavy marketing support
– price increase
Associated British Foods plc
Volume share of plant bread by brand within total coverage
19.6 21.1
24.0 23.8
WE 25.03.06
WE 08.04.06
WE 22.04.06
WE 06.05.06
WE 20.05.06
WE 03.06.06
WE 17.06.06
WE 01.07.06
WE 15.07.06
WE 29.07.06
WE 12.08.06
WE 26.08.06
WE 09.09.06
WE 23.09.06
WE 07.10.06
WE 21.10.06
WE 04.11.06
WE 18.11.06
WE 02.12.06
WE 16.12.06
WE 30.12.06
WE 13.01.07
WE 27.01.07
WE 10.02.07
WE 24.02.07
WE 10.03.07
WE 24.03.07
% Volum
e Sh
are
19.6 21.1
24.0 23.8
0
5
10
15
20
25
30
% Volum
e Sh
are
week ending
Kingsmill Hovis Warburtons Own label
Source: Nielsen EPOS Data
Associated British Foods plc
+3% +7%
Change
32 33 Operating Profit £m
322 345 Revenue £m 2007 2006 Ingredients
AB Mauri
• yeast price increases recover higher input costs
• recovery in North America
• further capacity expansion
ABF Ingredients
• strong growth across all businesses
• enzyme sales well ahead
• higher protein volumes and pricing
• US commodity food polyols business sold
Profit up 9% adjusted for adverse currency translation
Associated British Foods plc
+28%
+36%
Change
16 Littlewoods 71 91 Primark
Operating Profit £m
2006 2007 Retail
141 Littlewoods 530 721 Primark
Revenue £m
Primark
A period of intense activity
• 23 stores opened – on time, on budget
• new UK distribution centre fully operational
• second Spanish store opened
• strong likeforlike sales
– level with last year
– up 6% for stores unaffected by new openings
Associated British Foods plc
Primark store trading
§ trading in new stores encouraging
§ opportunity now to optimise performance
§ customers travelled over long distances
– Coventry, Cheltenham openings affected Birmingham
§ incremental business created
Newcastle likeforlikes improved during half year
+59% 13.8 21.9 76
9.3 34 Gateshead Metro
9% 13.8 12.6 42 Newcastle
£m £m
2006 2007 Sq ft ‘000
Sales first half
Associated British Foods plc
Primark selling space expansion
+53% +14% +64%
161 4,430 2 50 36 830 123 3,550 February 2007
126 2,890 35 730 91 2,160 February 2006
stores sq ft ‘000
stores sq ft ‘000
stores sq ft ‘000
stores sq ft ‘000
Total Spain Republic of Ireland UK
Associated British Foods plc
2007
Now…
Primark Oxford Street
2000
Then…
Associated British Foods plc
Summary
§ Benefit from last year’s substantial investment in capital and acquisitions
§ Progress achieved despite £28m impact from EU sugar regime change
§ Transformation of sugar business underway
– strong Illovo contribution
– excellent performances in UK, Poland and China
– UK bioethanol plant commissioning June 2007
§ Good progress from Ingredients and Grocery businesses except Allied Bakeries
– Kingsmill now relaunched
§ Primark profit up 28%
– 23 stores opened
– strong likeforlike growth
Associated British Foods plc
Associated British Foods plc
Review of interim results for 24 weeks ended 3 March 2007
24 April 2007
Associated British Foods plc
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whom the presentation pack may lawfully be promoted.