Associated British Foods Plc – Interim Results announcement

Financial highlights

·      Statutory operating profit down 3% to £618m. Last year included the benefit of a profit on the sale of businesses which explains a 30% reduction in statutory profit before tax to £603m this year and a reduction in basic earnings per share of 24% to 60.9 pence.

George Weston, Chief Executive of Associated British Foods, said:

“The group made progress in this period. Good sales and profit growth was achieved by all of our businesses at constant currency, other than Sugar, where the reduction was as expected. Our full year outlook for the group is unchanged with progress expected in both adjusted operating profit and adjusted earnings per share.”

CHAIRMAN'S STATEMENT

This is my first report to shareholders having succeeded Charles Sinclair as Chairman this April, and I am pleased to report on our progress in the period. At actual exchange rates, revenue of £7.4bn in the first half was 2% ahead of last year and adjusted operating profit of £648m was 1% lower. At constant currency, revenue was 3% ahead and adjusted operating profit was 1% ahead of last year. Net financing costs reduced against the same period last year following favourable interest rate movements. The group's effective tax rate has reduced from 22.7% last year to 21.3% this year on adjusted profit before tax.  This is primarily due to the reduction in the US federal corporate tax rate which will reduce the group's effective tax rate by 1% in the current financial year.  As a result, adjusted earnings per share were 3% ahead at 61.3 pence.

The statutory operating profit for the period was 3% down at £618m. Last year the statutory profit before tax included a profit of £255m on the sale of both the group's US herbs and spices business and south China cane sugar operations. As a result, the statutory profit before tax has reduced by 30% to £603m this year and basic earnings per share has reduced by 24% to 60.9 pence.

Cash flow before acquisitions and disposals was lower than the corresponding period last year driven by a return to the usual seasonal cash outflow of AB Sugar and higher Primark inventories with deliveries accelerated ahead of Chinese New Year. Gross capital expenditure of £388m was in line with last year and the purchase consideration, on a debt-free basis, of Acetum in October 2017 amounted to £282m. Together with the payment of the final dividend, these resulted in a net cash balance for the group at the half year of £123m, which compared to net cash of £673m at the beginning of the financial year.

Board

Tim Clarke retired as a director on 30 November 2017 after 13 years on the board. Charles Sinclair has already paid tribute to the immeasurable value of Tim's contribution and, with his retirement, Javier Ferrán has taken on the responsibilities of Senior Independent Director.

Charles Sinclair retired as Chairman of the Company on 11 April 2018. On becoming Chairman, I succeeded Charles as chairman of the Nomination committee and have stepped down from the Audit committee. Ruth Cairnie succeeded Charles as chair of the Remuneration committee on that date.

Charles has served on the board for almost ten years, of which the last nine years were as Chairman. The development of the Company during his tenure is testament to his wise counsel and steady hand in steering the group through many periods of challenge and considerable change.  Over the last decade the group's revenue and profit have doubled. All of our businesses have become more efficient and Primark has evolved into a leading international retailer. Charles has always believed that operating ethically is a core value and he has ensured that the governance of the Company has at all times encouraged the management to take a long-term view and to invest in the future. The group's success in converting profitability into cash has funded the significant investment over this period. We greatly appreciate his tremendous contribution and our very best wishes follow him.

Dividends

The board has declared an interim dividend of 11.7 pence per share, an increase of 3% on last year. The dividend will be paid on 6 July 2018 to shareholders registered at the close of business on 8 June 2018.

Outlook

In the first half, adjusted operating profit was in line with the prior year with growth in Primark, Grocery, Ingredients and Agriculture offset by the expected decline in profit at AB Sugar. In the second half, we expect an acceleration in profit growth at Primark, as a result of margin improvement, and continued profit growth from our other non-Sugar businesses. These should more than offset the decline in profit at AB Sugar in the balance of the year.

As a result, our full year outlook for the group is unchanged with progress expected in both adjusted operating profit and adjusted earnings per share.

Michael McLintock

Chairman