associated british foods plc review of preliminary results ... · – brand – price increase •...
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Associated British Foods plc
Associated British Foods plc
Review of preliminary results
for year ended
15 September 2007
6 November 2007
Associated British Foods plc
Business Highlights
� Strong revenue and profit growth
� Benefit from recent major investment
� Scale and range of sugar activities being transformed
� Grocery strengthened: Patak’s acquisition and creation of World Foods group
� Good performances from AB Agri and ABF Ingredients
� Primark now second largest clothing retailer in UK by volume
Associated British Foods plc
Financial Highlights
• Group revenue up 13% to £6.8bn
• Adjusted operating profit up 11% to £622m*
• Adjusted profit before tax up 10% to £613m **
• Adjusted earnings per share up 4% to 52.9p**
• Dividends per share up 4% to 19.5p
• Investment in capital expenditure and acquisitions of £489m
• Net debt of £311m
• Operating profit up 28% to £556m, profit before tax up 21% to £508m and basic earnings
per share up 23% to 46.7p.
* & ** - see notes at end
Associated British Foods plc
(97)-Exceptional costs
(41)(74)Amortisation of non-operating intangibles
108Profits less losses on sale of PP&E
108Profits less losses on sale of PP&E
2007
(97)-Exceptional items
+11%561622Adjusted operating profit
433556Operating profit
1010Share of jv’s and associates
(5,486)(6,262)Operating costs
+13%5,9966,800Revenue
Change2006£m
Income Statement
Associated British Foods plc
Income Statement
1226Other financial income
(8)-Provision for loss on termination of an operation
+10%559613Adjusted profit before tax*
301369Attributable to equity shareholders
(7)(31)Minority interests
308400Profit after tax
(111)(108)Tax
+21%419508Profit before tax
(46)(55)Finance expense
3220Finance income
(4)(39)Profits less losses on sale of businesses
+28%433556Operating profit
Change20062007£m
* before amortisation of non-operating intangibles, profits less losses on the sale of PP&E and profits less
losses on sale of businesses.
Associated British Foods plc
Tax
111
(13)
(26)
150
£m
2006
(15)Credit on exceptional items
£m
108
(30)
153
2007
26.5%21.3%Reported charge
Credit on goodwill & intangible amortisation
26.8%25.0%Underlying charge
Associated British Foods plc
Earnings and Dividends Per Share
+4%18.75p19.50pDividends per share
+23%38.1p46.7pEarnings per share
+4%50.9p52.9pAdjusted earnings per share *
Change20062007
* before amortisation of non-operating intangibles, profits less losses on the sale of PP&E, profits less losses
on sale of businesses and exceptional items.
Associated British Foods plc
Balance Sheet
(8)(10)Other financial liabilities
3541Net assets classified as held for sale
(316)(360)Deferred tax
5153Biological assets - current
127277Net pension asset
4,182
224
3,958
4,182
(70)
(298)
(85)
605
2,599
1,542
2006
4,464
220Minority interests
4,244Equity shareholders’ funds
4,464
(50)Provisions
(311)Net debt
(82)Current tax
565Working capital
2,771PP&E and other non-current assets
1,570Intangible assets (including goodwill)
2007£m
Associated British Foods plc
Cash Flow
(62)(17)Provisions
144-Sale of Littlewoods stores
(1)(14)Pension cost less contributions
(211)(246)- Food
(498)(4)Net cash flow before financing
(496)(92)(Acquisitions)/disposals
(150)(176)Dividends paid (incl minorities)
4264Free cash flow
2827Other
(11)(38)Net interest and other income
(117)(106)Tax
(221)(174)Capital expenditure - Primark
(129)1Working capital
177219Depreciation & amortisation of operating intangibles
551612Adjusted operating profit (before joint ventures and associates)
20062007£m
Associated British Foods plc
19.0
n/a
19.0
n/a
23.1
22.6
17.1
20.3
%
2006
ROCE
18.8
n/a
18.8
n/a
17.5
22.2
22.6
17.3
%
2007
9.1
n/a
9.1
n/a
12.5
10.3
11.8
5.9
%
2007
9.4
n/a
9.4
n/a
14.1
11.6
10.0
7.0
%
2006
Margin
1852001,3091,602Retail
1302171,2941,838Sugar & agriculture
1821532,5782,605Grocery
7975683728Ingredients
5616225,9966,800
7313227Businesses disposed
5546195,8646,773Continuing businesses
(22)(26)--Inter company/central costs
£m£m£m£m
2006200720062007
ProfitRevenue
By business
Segmental Analysis
* adjusted operating profit
*
Associated British Foods plc
9.1
-
9.1
8.0
9.9
12.6
7.9
%
2007
Margin
9.4
-
9.4
8.0
10.4
10.5
9.3
%
2006
5616225,9966,800
7313227Businesses disposed
5546195,8646,773Continuing businesses
83931,0371,164Asia Pacific
1211131,1641,142The Americas
701586681,251Europe, Middle East & Africa
2802552,9953,216United Kingdom
£m£m£m£m
2006200720062007
ProfitRevenue
By geography
Segmental Analysis
Associated British Foods plc
+73%
+72%
Change
115199Operating Profit £m
6711,151Revenue £m
2007 2006Sugar
Sugar – a transformation
• second largest producer in world
• three continents, nine countries
• two thirds of volume outside EU
• minimal exposure to cyclical world sugar price
• significant opportunity for capacity expansion
• presence in growth markets
• benefit of LDC status
• biofuel development
Associated British Foods plc
+73%
+72%
Change
115199Operating Profit £m
6711,151Revenue £m
2007 2006Sugar
Sugar – UK and Poland
• £26m impact of changes to regime
• excellent processing efficiencies
• benefit of 94,000 tonnes of acquired quota
• EU regime change
Associated British Foods plc
+73%
+72%
Change
115199Operating Profit £m
6711,151Revenue £m
2007 2006Sugar
EU regime change – update
• Commission action to restore balance in 2007/8
– temporary 2.1m tonnes quota cut
– quota sugar export up to 1.4m tonnes
– intervention stocks restricted to non-food uses
• adaptation package to reduce production permanently from 2008/9
– additional grower incentives, restructuring levy relief in 2007/8
– British Sugar plans to renounce – 13.5% would be 193,000 tonnes
– compensation for processor
Associated British Foods plc
Biofuel
• Wissington
– bioethanol plant on-stream
– beet sugar feedstock
– 70m litres / year
• .
– 45% joint venture with BP and DuPont established
– design stage for £200m investment at Saltend, Hull
– world-scale bioethanol plant
– 420m litres / year
– planned on-stream end 2009
+73%
+72%
Change
115199Operating Profit £m
6711,151Revenue £m
2007 2006Sugar
Associated British Foods plc
+73%
+72%
Change
115199Operating Profit £m
6711,151Revenue £m
2007 2006Sugar
Sugar – Illovo
• exceeding expectations
• 2006/7 crop of 1.7m tonnes affected by weather
• 2007/8 forecast 1.9m tonnes
• good operational and market performance
• Zambia investment - £100m
• further development opportunities
Associated British Foods plc
Sugar – China
Cane sugar record crop, firm sugar prices
Beet sugar
• 51% Bo Tian joint venture now approved
• initially four factories
– 145,000 tonnes sugar
• major growth potential
– five further factories under negotiation
– double agricultural yields
– increase factory efficiency
+73%
+72%
Change
115199Operating Profit £m
6711,151Revenue £m
2007 2006Sugar
Associated British Foods plc
Beet sugar in north east China
Beijing
Shanghai
Harbin
Yi’an
Wangkui
Zhaozhou
Zhaoyuan
Zhalantun
Wulanhaote
Chifeng
ZhangbeiQianQi
Existing
Under negotiation
Heilongjiang
I n n e r M
o n g o l I a
Associated British Foods plc
Yi’an factory
Associated British Foods plc
Agricultural yield improvements
North east China
• abundant high quality arable land
• Ideal growing conditions
Current practice
• farmers have small areas
• old seed varieties, low plant populations
• financially weak
• little use of herbicides
• no mechanisation and lack of labour
Improvements
• direct drill in April
• latest seed varieties, high plant populations
• crop supervision
• mechanical harvesting
Associated British Foods plc
First direct drilled field in China
Associated British Foods plc
Co-product opportunities
• AB Mauri - expand yeast operation in Harbin
• ABFI - build Harbin yeast extract plant
• AB Agri - significant volume of dried beet pulp
for animal feed
Associated British Foods plc
+20%
+10%
Change
1518Operating Profit £m
623687Revenue £m
2007 2006Agriculture
AB Agri
UK
• benefit from restructuring, cost savings, firmer pricing
• strong demand for ruminant, pig and poultry feeds
• Frontier exceeding expectations
Associated British Foods plc
Retail
+20%
+37%
Change
166200Operating Profit £m
1,1681,602Revenue £m
2007 2006Primark
Highlights
• Oxford Street opened in April
– one million items sold in first 10 days of trading
• Liverpool opened in September
– trading strongly
• #1 in UK value fashion (Verdict)
• #2 clothing retailer in UK by volume (TNS)
Associated British Foods plc
Retail
+20%
+37%
Change
166200Operating Profit £m
1,1681,602Revenue £m
2007 2006Primark
• very strong performance
• net increase of 27 stores this year, trading 170 at year end
• 37% space increase to 4.8 million sq ft
• conversion of Littlewoods stores complete
• like-for-like growth of 1% for year
– growth of 7% in stores unaffected by new openings
– despite impact of poor summer trading
Associated British Foods plc
Primark stores and selling space
• selling space growth driven by 39% increase in UK
• continued development in Ireland
• trading in Spain exceeding expectation
– sales density exceeds UK and Ireland average
4.80.10.83.9At September 2007
1.30.10.11.1Net additions
3.5-0.72.8At September 2006
Retail selling space m sq ft
170237131At September 2007
271224Net additions
143135107At September 2006
Stores
TotalSpainIrelandUK
Associated British Foods plc
Store evolution
• Average store size up more than 50%
– 2005 19,000 sq ft
– 2007 29,000 sq ft
• 25 stores over 50,000 sq ft
• 8 stores over 70,000 sq ft
Retail
+20%
+37%
Change
166200Operating Profit £m
1,1681,602Revenue £m
2007 2006Primark
Associated British Foods plc
Retail
+20%
+37%
Change
166200Operating Profit £m
1,1681,602Revenue £m
2007 2006Primark
Outlook
• store expansion will continue, less frenetic in UK!
• current plans for nine stores to open this financial year
– including roll-out of five stores in Spain
• more stores in negotiation pipeline
Associated British Foods plc
-16%
+1%
Change
182153Operating Profit £m
2,5782,605Revenue £m
2007 2006Grocery
• continued sales and profit growth
• share growth in major markets – UK, US, France, Italy
• UK success with Everyday
Twinings
• strong growth in Asia
• focus on growth in developing markets –
Brazil, Nigeria, Vietnam
• restructuring of Swiss factory – reduced costs
Ovaltine
Associated British Foods plc
-16%
+1%
Change
182153Operating Profit £m
2,5782,605Revenue £m
2007 2006Grocery
ACH
• satisfactory performance
• Mazola
– continued oil category decline
– sharp increase in corn oil costs
• foodservice transition to non trans fatty acid formulations
• oil processing at Jacksonville ceased
• good performance from Capullo in Mexico
• successful spice launches
– grinders
– Weber Grill
Associated British Foods plc
Silver Spoon
• £5m profit impact from EU sugar regime change
• Billington’s and Allinson relaunched
• rapid growth in Fairtrade – sourced from Illovo
-16%
+1%
Change
182153Operating Profit £m
2,5782,605Revenue £m
2007 2006Grocery
Ryvita
• launch of new products and formats
Jordans
• acquisition of 20% stake – successful and leading
breakfast cereal and cereal bar business
Associated British Foods plc
Allied Bakeries
• poor performance
• Kingsmill relaunch in February
– improved formulation
– brand
– price increase
• better performance in second half
– volumes and price
– operating efficiencies
• price increases this autumn to recover wheat cost increase
• continued brand development
-16%
+1%
Change
182153Operating Profit £m
2,5782,605Revenue £m
2007 2006Grocery
Associated British Foods plc
Australia
• strong performance in milling & baking
• Sydney bakery operating well
• benefit of cost recovery in pricing
• continued improvement in meat & dairy
-16%
+1%
Change
182153Operating Profit £m
2,5782,605Revenue £m
2007 2006Grocery
Associated British Foods plc
Blue Dragon
• new products, marketing investment drive growth
• manufacturing relocation to new factory in Poland
-16%
+1%
Change
182153Operating Profit £m
2,5782,605Revenue £m
2007 2006Grocery
Patak’s
• leading brand in authentic Indian cuisine
• manufactures, markets cooking sauces, curry
pastes, chutneys and other Indian meal
accompaniments
Creation of World Foods
• integration of Patak’s and Blue Dragon now underway
– selling and distribution
Associated British Foods plc
-16%
+1%
Change
182153Operating Profit £m
2,5782,605Revenue £m
2007 2006Grocery
Westmill
• leading supplier of ethnic foods to ethnic wholesale
• profit sharply ahead
• benefit from sales and supply chain integration last year
• strong growth for Lucky Boat, Rajah, Green Dragon
Associated British Foods plc
AB Mauri
• acquisition of certain European businesses from Gilde
– wet and dry yeast plant in Italy
– sales and distribution in France, Benelux
– Germany, Spain, Portugal dependent on anti-trust clearance
– Fermipan dry yeast brand in many markets
• good growth in S America, S & W Asia
-5%
+7%
Change
7975Operating Profit £m
683728Revenue £m
2007 2006Ingredients
Associated British Foods plc
ABF Ingredients
• strong growth in enzymes, proteins, yeast extracts
• capacity expansion
• investment in selling, research capabilities
• exit from commodity food polyols
-5%
+7%
Change
7975Operating Profit £m
683728Revenue £m
2007 2006Ingredients
Associated British Foods plc
Summary
� Strong revenue and profit growth
� Benefit from recent major investment
� Scale and range of sugar activities being transformed
� Grocery strengthened: Patak’s acquisition and creation of World Foods group
� Good performances from AB Agri and ABF Ingredients
� Primark now second largest clothing retailer in UK by volume
Associated British Foods plc
This presentation pack is directed only at investment professionals
falling within article 19 of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2001 and to other persons to
whom the presentation pack may lawfully be promoted.
Notes
* before amortisation of non-operating intangibles, profits less losses on the sale of PP&E and exceptional items.
** before amortisation of non-operating intangibles, profits less losses on sale of PP&E, profits less losses on the
sale and closure of businesses and exceptional items.
All figures stated after amortisation of non-operating intangibles, profits less losses on the sale of PP&E and losses on the
sale and closure of businesses are shown on the face of the consolidated income statement.