Associated British Foods plc (LON:ABF) has announced its results for the 52 weeks ended 14 September 2024
Financial headlines
| 2024 | 2023 | Actualcurrency | Constant currency | |
| Group revenue | £20,073m | £19,750m | +2% | +4% |
| Adjusted operating profit | £1,998m | £1,513m | +32% | +38% |
| Adjusted profit before tax | £1,957m | £1,473m | +33% | |
| Adjusted earnings per share | 196.9p | 141.8p | +39% | |
| Operating profit | £1,932m | £1,383m | +40% | |
| Profit before tax | £1,917m | £1,340m | +43% | |
| Basic earnings per share | 193.7p | 134.2p | +44% | |
| Gross investment | £1,281m | £1,171m | +9% | |
| Free cash flow | £1,355m | £269m | ||
| Net cash before lease liabilities | £1,044m | £895m | ||
| Total net debt | £(2,021)m | £(2,265)m | ||
| Return on Average Capital Employed (‘ROACE’) | 18.1% | 13.6% | ||
| Total dividends per share | 90.0p | 60.0p |
Adjusted operating profit is derived from operating profit after taking certain charges and credits as shown on the face of the consolidated income statement. The Group has defined and outlined the purpose of its Alternative performance measures (‘APMs’) in note 13. These measures are used within the Financial Headlines and in this Annual Results Announcement.
References to changes in revenue and adjusted operating profit in the following commentary are based on constant currency unless stated otherwise.
George Weston, Chief Executive of Associated British Foods, said:
“This was a year of very strong financial and operational progress across the Group. We delivered a substantial improvement in profitability, excellent cash generation and strong returns as a result of consistent, multi-year investment and a return to some normality in our markets and supply chains. Above all, these results reflect the excellent work and disciplined focus of our people.
Primark achieved good sales growth this year and I am particularly pleased with the significant recovery in margin. Our low-cost model is as strong as ever, as we maintain our relentless focus on delivering great-value clothing and a unique store experience. This is underpinned by a step up in investment in strategic initiatives across digital, product and brand. Significant white space for new stores remains across Europe and the US, which we expect to help drive sustainable growth over the medium and long term. Our food businesses delivered good growth and strong profitability this year. We are benefitting from an easing in input costs, as well as our increased investment in marketing, strong commercial execution and good product innovation.
Looking ahead, the Group is well-positioned. Strong cash flow generation is enabling disciplined capital allocation to growth opportunities across the Group and we have ongoing multi-year projects to deliver our focused sustainability priorities. We believe our long-term, patient investment approach will deliver strong returns and continue to create value for all stakeholders.”
Group performance
● Revenue growth of 4% driven by both Retail and food businesses
● Significant growth in adjusted operating profit, up 38%, reflecting strong margin recovery to 10.0% across the Group
● Adjusted EPS increased by 39% to 196.9p and basic EPS increased by 44% to 193.7p
● Gross investment of £1.3bn, adding capacity, capabilities, new technology and strategic acquisitions
● Good progress delivering our focused sustainability priorities, particularly decarbonisation
● Free cash flow of £1,355m driven by significant growth in operating profit and improvement in working capital
● Group return on average capital employed increased from 13.6% to 18.1%
Segmental performance
● Retail sales growth and significant margin recovery
● Revenue growth of 6% to £9.4bn
● Significant increase in adjusted operating profit, up 51% to £1.1bn, with margin recovery to 11.7%, up from 8.2% in 2023
● Strong performance across key growth markets, the US, France, Spain, Italy and Central and Eastern Europe, as well as growth in our largest market, the UK
● Continued good execution of store rollout programme in Europe and the US
● Benefitting from the relevance of our great-value clothing, unique store experience and increased digital engagement
● Grocery sales up 4% and adjusted operating profit up 17%, reflecting strong margin improvement overall while investing in marketing
● Ingredients sales growth of 2% and adjusted operating profit up 12%, led by yeast and bakery ingredients
● Sugar sales and adjusted operating profit strongly ahead of 2023, although European sugar prices reduced sharply in Q4 2024 as previously announced
● Agriculture adjusted operating profit increased 3%
Shareholder returns
● Strong balance sheet with leverage ratio of 0.7x times at year end
● Increased total dividend by 50% to 90.0p per share, comprising interim dividend of 20.7p per share, final declared dividend of 42.3p per share and special dividend of 27.0p per share
● Completed £565m of share buybacks in 2024; additional tranche of £100m completed in 2025 to-date
● Announcing further share buyback programme of £500m, expected to be completed before the end of financial year 2025
Outlook
Primark is targeting mid-single digit sales growth in 2025 as we continue to execute our store rollout programme in our growth markets in Europe and the US and to focus on like-for-like sales growth in our more mature markets. This will be supported by investment in initiatives across product, digital and brand. We expect adjusted operating margin to remain broadly in line with this year’s level, as gross margins stabilise and we step up investment to drive sustainable growth. Over the medium and long term, we continue to have significant white space opportunities in our growth markets. We are targeting our store rollout programme to contribute around 4% to 5% per annum to Primark’s total sales growth for the forseeable future.
In Grocery, we will continue to drive sales momentum, underpinned by increased marketing investment. As expected, the strong performance in our US-focused businesses during 2024 began to normalise towards the end of the year and we expect to see the full year effect in 2025. In Ingredients, we expect continued growth in yeast and bakery ingredients and improved growth in specialty ingredients.
In Sugar, as previously announced, we expect the reduction in European sugar pricing in Q4 2024 to impact performance in our sugar business significantly in 2025, with adjusted operating profit for the overall Sugar segment expected to be in the range of £50m to £75m. However, we expect profitability to recover in 2026 to be more in line with 2024, as a result of the lower beet prices that have been contracted and a rebalancing of supply and demand in the market. In Agriculture, we expect some improvement, particularly as our grain trading business recovers in the UK.
Associated British Foods is well positioned for the medium term, supported by strong cash generation and good momentum in our Retail and food businesses.
