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Associated British Foods plc
Associated British Foods plc
Review of preliminary results for year ended 16 September 2006
7 November 2006
Associated British Foods plc
Business Highlights
§ A resilient performance with operating profit ahead
§ £34m impact of sugar regime reform
§ £64m increase in energy costs – most not recovered in pricing
§ Excellent performances from Primark, AB Mauri, Twinings/Ovaltine, ACH
§ Significant Primark store expansion close to completion
§ Sugar repositioned
Associated British Foods plc
Financial Highlights
§ Adjusted operating profit up 1% to £561m*
§ Group revenue up 7% to £6.0bn
§ Adjusted profit before tax down 4% to £559m **
§ Adjusted earnings per share down 3% to 50.9p **
§ Dividends per share up 4% to 18.75p
§ Net investment in acquisitions and capital expenditure of £760m
§ Net debt of £298m
§ Basic earnings per share down 21% to 38.1p and profit before tax down 20% to £419m after exceptional charge for reorganisation of British Sugar of £97m
* & ** see notes at end
Associated British Foods plc
(25) (41) (41) Amortisation of intangibles
20 10 10 Profits less losses on sale of PP&E
20 10 10 Profits less losses on sale of PP&E
Restated Total Exceptional Items
Before Exceptional
items
561
530
10
(5,486)
5,996
2006
(97)
(97)
(97)
(97) Exceptional Items
+1% 555 561 Adjusted operating profit
550 433 Operating profit
7 10 Share of jv’s and associates
(5,099) (5,583) Operating costs
+7% 5,622 5,996 Revenue
Change 2005 £m
Income Statement
* 2005 restated to reflect adoption of IFRS.
*
Associated British Foods plc
Income Statement
(47) (8) Provision for loss on termination of an operation
4% 580 559 Adjusted profit before tax*
379 301 Attributable to equity shareholders
(7) (7) Minority interests
386 308 Profit after tax
(141) (111) Tax
20% 527 419 Profit before tax
(137) (151) Financial expenses
162 149 Financial income
(1) (4) Profits less losses on sale of businesses
21% 550 433 Operating profit
Change 2005 2006 £m
* before amortisation of intangibles, profits less losses on the sale of PPE and profits less losses on sale of businesses.
Associated British Foods plc
Tax
141
(7)
(11)
159
£m
2005
(26) Credit on exceptional items
£m
111
(13)
150
2006
26.8% 26.5% Reported charge
Credit on intangible amortisation
27.4% 26.8% Underlying charge
Associated British Foods plc
Earnings and Dividends Per Share
+4% 18.00p 18.75p Dividends per share
21% 48.0p 38.1p Earnings per share
3% 52.5p 50.9p Adjusted earnings per share *
Change 2005 2006
* before amortisation of 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
9 35 Net assets classified as held for sale
(155) (316) Deferred tax
51 Biological assets current
76 127 Net pension asset
3,877
29
3,848
3,877
(90)
212
(117)
484
2,306
1,152
2005
4,182
224 Minority interests
3,958 Equity shareholders’ funds
4,182
(70) Provisions
(298) Net (debt)/cash funds
(85) Current tax
597 Working capital
2,599 PP&E and other noncurrent assets
1,542 Intangible assets (including goodwill)
2006 £m
Associated British Foods plc
Cash Flow
(62) Provisions
144 Sale of Littlewoods stores
51 Loan repayment from Frontier
(8) (1) Pension cost less contributions
(182) (211) Food
(1,048) (498) Net cash flow before financing
(1,140) (496) (Acquisitions)/disposals
(139) (150) Dividends paid (incl minorities)
231 4 Free cash flow
43 28 Other
25 (11) Net interest and other income
(132) (117) Tax
(221) (221) Capital expenditure Primark
(54) (129) Working capital
161 177 Depreciation
548 551 Adjusted operating profit (before joint ventures and associates)
2005 2006 £m
Associated British Foods plc
23.6
n/a
23.6
n/a
33.4
21.1
23.5
21.9
%
2005
ROCE
18.9
n/a
18.9
n/a
23.1
21.6
17.2
20.2
%
2006
9.4
n/a
9.4
n/a
14.1
11.2
10.1
7.0
%
2006
9.9
n/a
9.9
n/a
13.9
11.1
13.0
7.1
%
2005
Margin
140 185 1,006 1,309 Retail
186 131 1,435 1,302 Primary food & agriculture
185 185 2,590 2,656 Grocery
65 82 583 729 Ingredients
555 561 5,622 5,996
8 Businesses disposed
555 561 5,614 5,996 Continuing businesses
(21) (22) Inter company/central costs
£m £m £m £m
2005 2006 2005 2006
Profit Revenue
By business
Segmental Analysis
* *
* excludes former Littlewoods stores not being converted into Primark
**
** adjusted operating profit
Associated British Foods plc
9.4
9.4
8.0
10.2
9.8
9.4
%
2006
Margin
9.9
9.9
6.9
9.3
10.0
11.2
%
2005
555 561 5,622 5,996
8 Businesses disposed
555 561 5,614 5,996 Continuing businesses
67 83 976 1,037 Asia Pacific
102 124 1,102 1,210 The Americas
72 73 720 746 Europe, Middle East & Africa
314 281 2,816 3,003 United Kingdom
£m £m £m £m
2005 2006 2005 2006
Profit Revenue
By geography
Segmental Analysis
Associated British Foods plc
31% 4%
Change
166 115 Operating Profit £m
700 671 Revenue £m 2006 2005 Primary food
Sugar
• a transformational year
• confirmation of details of regime change
• a strong response
Associated British Foods plc
31% 4%
Change
166 115 Operating Profit £m
700 671 Revenue £m 2006 2005 Primary food
Sugar – UK and Poland
• £26m impact of changes to regime
• £21m impact from unrecovered energy costs
• best ever processing campaigns
Sugar – China
• excellent cane operations
• 0.5 million tonnes of capacity after expansion at Shibie and WuXuan
• drought reduced crop but strong pricing
Associated British Foods plc
31% 4%
Change
166 115 Operating Profit £m
700 671 Revenue £m 2006 2005 Primary food
Sugar – Developments
• York and Allscott factory closures announced
• completion of Polish consolidation
• intention to purchase additional quota in UK and Poland
• collaboration with BP and DuPont on development of UK biofuels
• purchase of 51% of Illovo
Associated British Foods plc
Illovo plant locations
Associated British Foods plc
Cane irrigation
Associated British Foods plc
31% 4%
Change
166 115 Operating Profit £m
700 671 Revenue £m 2006 2005 Primary food
Sugar – Illovo
• strong management and sound ethics
• a leader in its African markets
• one of lowest cost producers in world
• well placed for LDC exports to EU
• opportunity for growth
– capacity expansion, operational efficiencies and business development
• ambition to develop in Africa and EU giving earnings stability
• British Sugar and Illovo: a powerful combination in Africa and Europe
Associated British Foods plc
Swaziland Dam
Associated British Foods plc
31% 4%
Change
166 115 Operating Profit £m
700 671 Revenue £m 2006 2005 Primary food
Sugar – Looking forward
• major producer
• limited exposure to world sugar price
• one third of production in most efficient plants in EU
• two thirds of production with growth potential
• new business opportunity in biofuels
Associated British Foods plc
20% 14%
Change
20 16 Operating Profit £m
735 631 Revenue £m
2006 2005 restated
Agriculture
ABNA
• Frontier trading well
• UK feeds business restructured for customer focus
• sixth Chinese feed mill opened in South Henan
• seventh mill under construction in North East China
• impact of avian flu and energy costs
Associated British Foods plc
Associated British Foods plc
Associated British Foods plc
Associated British Foods plc
Associated British Foods plc
Primark
Cashmere Coat £35.00
Cashmere Sweater £25.00
Leather gloves in assorted colours £8.00
Large bag £6.00
Shoes £15.00 Sweater Dress £10.00
Associated British Foods plc
n/a (1) 19 Littlewoods +18% 141 166 Primark
n/a 17 141 Littlewoods +18% 989 1,168 Primark
Retail Change
Operating Profit £m
Revenue £m
2006 2005 restated
Primark • revenue up 18%, profit up 18%, strong performance • 27 new stores this year, trading 143 stores at year end • 40% increase in selling space to 3.5 million sq ft • likeforlike growth of 3% for year
– exceptionally strong 12% increase in second half 2005 • continued growth in value clothing market share • first store in Spain • commissioning new larger distribution centre at Magna Park
Associated British Foods plc
Primark • growth in 2007 driven by big increases in floor space • Littlewoods openings on schedule and virtually complete
+18% +18%
Change
141 166 Operating Profit £m
989 1,168 Revenue £m
2006 2005 restated
Retail
Primark
Associated British Foods plc
Littlewoods stores conversions
Newcastle Metro Sutton Leeds White Rose Harlow Preston Luton Maidstone Exeter Portsmouth Mansfield Croydon Nottingham Swansea Southport Southend Darlington Bradford Glasgow Argyle Street
18 opened at financial year end
Camberley Glasgow Parkhead Inverness Burton on Trent Oldham Doncaster Dundee Blackpool Cheltenham Eastbourne
28 open now
Chesterfield Wolverhampton Poole Greenock Swindon Lincoln Hanley Dunfermline
36 by Christmas
Aberdeen Bedford Irvine Liverpool Brighton
41 by end 2007
Associated British Foods plc
Primark
• growth in 2007 driven by big increases in floor space
• Littlewoods openings virtually complete
• openings on time, to budget, and trading in line with expectations
• Oxford Street to open Spring 2007
• total of 4.5 million sq ft expected year end 2007
• in 2007 60% of selling space will be outside likeforlike measure
+18% +18%
Change
141 166 Operating Profit £m
989 1,168 Revenue £m
2006 2005 restated
Retail
Primark
Associated British Foods plc
level +3%
Change
185 185 Operating Profit £m
2,590 2,656 Revenue £m
2006 2005 restated
Grocery
• excellent sales and profit growth • strong UK growth Everyday, Green Tea • TV support for Green Tea and infusions • US relaunch • tea packing supply chain rationalised
– France and US closed – Shanghai operating well
Twinings
Associated British Foods plc
Associated British Foods plc
level +3%
Change
185 185 Operating Profit £m
2,590 2,656 Revenue £m
2006 2005 restated
Grocery
• excellent sales and profit growth • strong UK growth Everyday, Green Tea • TV support for Green Tea and infusions • US relaunch • tea packing supply chain rationalised
– France and US closed – Shanghai operating well
Twinings
• investment in new products and marketing • continued Asian growth • successful Thai launch of Hi9
Ovaltine
Associated British Foods plc
level +3%
Change
185 185 Operating Profit £m
2,590 2,656 Revenue £m
2006 2005 restated
Grocery
ACH
• good revenue and profit growth
• Capullo in Mexico well ahead
• Mazola volumes affected by oil category decline
• consumer yeast performed well
• development of premium brand Spice Islands
Associated British Foods plc
Silver Spoon • £8m profit impact from EU sugar regime
change • growth in Billington’s and ‘Light’
level +3%
Change
185 185 Operating Profit £m
2,590 2,656 Revenue £m
2006 2005 restated
Grocery
Ryvita • continued Ryvita crispbread growth • Minis now well established in healthy snack sector • launch of Goodness bars
Associated British Foods plc
level +3%
Change
185 185 Operating Profit £m
2,590 2,656 Revenue £m
2006 2005 restated
Grocery
Westmill
• strengthened supplier leadership to the UK ethnic food sector
• new brands Rajah, Green Dragon, Lotus and distribution rights for Amoy
• full product range – spices, sauces, rice, edible oils, flour, noodles
Associated British Foods plc
Allied Bakeries
• tough year
• new management team
• new products launched
• comprehensive recovery plan developed
level +3%
Change
185 185 Operating Profit £m
2,590 2,656 Revenue £m
2006 2005 restated
Grocery
Australia
• major operational improvements at Sydney bakery in second half
• first low GI white loaf launched
• improvements in Meat & Dairy
Associated British Foods plc
AB Mauri
• very strong revenue and profit growth
• energy and raw material costs recovered in key markets
• Asian expansion in China, India and Vietnam to meet strong demand
• new plant in New Zealand
• strong bakery ingredients growth in China, South America, South & West Asia
+26% +25%
Change
65 82 Operating Profit £m
583 729 Revenue £m
2006 2005 restated
Ingredients
Associated British Foods plc
ABF Ingredients
• speciality proteins – strong growth in yeast extracts – purchase of producer of dairy protein concentrates and
isolates
• enzymes – new management team – continued focus on new products
+26% +25%
Change
65 82 Operating Profit £m
583 729 Revenue £m
2006 2005 restated
Ingredients
Associated British Foods plc
Development of ABF
§ Strength in depth and wider geographical spread enabled group to absorb the impact of EU regime reform and energy costs this year
§ Major developments this year – scale of Primark with new store openings – complete repositioning of British Sugar with UK rationalisation, Illovo acquisition and biofuel opportunities
Associated British Foods plc
Summary
§ A resilient performance with operating profit ahead
§ £34m impact of sugar regime reform
§ £64m increase in energy costs – most not recovered in pricing
§ Excellent performances from Primark, AB Mauri, Twinings/Ovaltine, ACH
§ Significant Primark store expansion close to completion
§ Sugar repositioned
Associated British Foods plc
Associated British Foods plc
Review of preliminary results for year ended 16 September 2006
7 November 2006
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 intangibles, profits less losses on the sale of PP&E and exceptional items. ** before amortisation of intangibles, profits less losses on sale of PP&E, profits less losses on the sale of businesses
and exceptional items.
All figures stated after amortisation of intangibles, profits less losses on the sale of PP&E and losses on the sale of businesses are shown on the face of the consolidated income statement.