associated british foods plc review of preliminary results ... · – brand – price increase •...

Associated British Foods plc


Review of preliminary results

for year ended

15 September 2007

6 November 2007


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


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


(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


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.


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


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.


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


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


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

*


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


+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


+73%

+72%

Change


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


+73%

+72%

Change


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


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


6711,151Revenue £m

2007 2006Sugar


+73%

+72%

Change


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


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


6711,151Revenue £m

2007 2006Sugar


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


Yi’an factory


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


First direct drilled field in China


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


+20%

+10%

Change


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


Retail

+20%

+37%

Change


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)


Retail

+20%

+37%

Change



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


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


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



2007 2006Primark


Retail

+20%

+37%

Change



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


-16%

+1%

Change



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


-16%

+1%

Change



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


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



2007 2006Grocery

Ryvita

• launch of new products and formats

Jordans

• acquisition of 20% stake – successful and leading

breakfast cereal and cereal bar business


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



2007 2006Grocery


Australia

• strong performance in milling & baking

• Sydney bakery operating well

• benefit of cost recovery in pricing

• continued improvement in meat & dairy

-16%

+1%

Change



2007 2006Grocery


Blue Dragon

• new products, marketing investment drive growth

• manufacturing relocation to new factory in Poland

-16%

+1%

Change



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


-16%

+1%

Change



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


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


683728Revenue £m

2007 2006Ingredients


ABF Ingredients

• strong growth in enzymes, proteins, yeast extracts

• capacity expansion

• investment in selling, research capabilities

• exit from commodity food polyols

-5%

+7%

Change


683728Revenue £m

2007 2006Ingredients


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


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.

associated british foods plc review of preliminary results ... · – brand – price increase •...

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