Associated British Foods plc (LON:ABF) has announced its results for the 24 weeks ended 2 March 2024.
Financial Headlines
| 24 weeks ended 2 March 2024 | 24 weeks ended 4 March 2023 | Actual currencychange | Constant currencychange | |
| Group revenue | £9,734m | £9,560m | +2 % | +5 % |
| Adjusted operating profit | £951m | £684m | +39 % | +46 % |
| Adjusted profit before tax | £911m | £667m | +37 % | |
| Adjusted earnings per share | 90.4p | 62.0p | +46 % | |
| Operating profit | £931m | £663m | +40 % | |
| Profit before taxation | £881m | £644m | +37 % | |
| Basic earnings per share | 87.4p | 67.0p | +30 % | |
| Gross investment | £571m | £527m | +8 % | |
| Free cash flow | £468m | £(510)m | ||
| Net cash before lease liabilities | £668m | £586m | ||
| Total net debt | £(2,496)m | £(2,601)m | ||
| Interim dividend | 20.7p | 14.2p | +46 % |
Adjusted operating profit is derived from operating profit after taking certain charges and credits as shown on the face of the condensed consolidated income statement. References to changes in revenue and adjusted operating profit in the following segmental commentary are based on constant currency. The Group has defined and outlined the purpose of its Alternative performance measures in note 14. These measures are used within the Financial Headlines and in this Interim Results Announcement.
George Weston, Chief Executive of Associated British Foods, said:
“This is a very strong set of financial results, as we are now benefitting from the restoration of some normality in our markets and in our supply chains. Improvements to the Group’s operational performance, driven by the investments and strong execution over the last few years, are now becoming visible. Group profit margins are recovering accordingly to more normal levels.
Looking ahead, we continue to invest with discipline to build further sustainable growth. Geopolitical risks remain, of course, and the consumer has yet to fully emerge from cost of living pressures. But the Group is well positioned to deliver good returns to shareholders.”
Group performance
| – | Revenue growth, up 5%, driven by continued good momentum in Retail and food businesses |
| – | Significant growth in adjusted operating profit, up 46%, reflecting strong margin recovery |
| – | Investment of £571m, including a number of strategic initiatives to improve capacity, capability and sustainability |
| – | Free cash flow of £468m, reflecting profit growth and a significant reduction in working capital outflow |
Segmental performance
| – | Strong Retail sales growth and further margin recovery | ||
| ● | Revenue up 7.5% to £4.5bn, reflecting continued growth in selling space | ||
| ● | Like-for-like sales up 2.1%, driven by good performance across most markets due to pricing and well-received product ranges | ||
| ● | Significant increase in adjusted operating profit, up 46% to £508m, with margin recovery to 11.3% | ||
| ● | Rolling out Click + Collect service more broadly in the UK | ||
| – | Significant profitability improvement in Grocery led by US-focused brands and reduction of losses in Allied Bakeries | ||
| – | Strong profitability improvement in Sugar, driven by better Vivergo performance | ||
| – | Good profit growth in Ingredients, driven by continued strong performance in AB Mauri | ||
| – | Higher profitability in Agriculture due to lower input costs | ||
Shareholder returns
| – | Significant increase in interim dividend, to 20.7p, reflecting growth in earnings |
| – | Final £56m of first £500m and £225m of the second £500m share buyback programmes completed in the period |
Full year outlook
The Group has delivered a strong first half performance and is on track to deliver significant growth in both profitability and cash generation ahead of expectations at the start of this financial year.
We expect Grocery to continue to perform well, supported by a step-up in marketing investment, although the strong profitability of our US-focused brands is expected to normalise somewhat towards the end of the second half. In Sugar, we continue to expect a substantial improvement in profitability, benefitting from a more typical beet crop and production level at British Sugar and the reduced losses in Vivergo. Following a better than expected first half, we now expect Ingredients to perform well this financial year, driven by AB Mauri. We continue to expect Agriculture to move forward as markets improve and it integrates and leverages the acquisitions of the last two years.
We expect Primark to continue to perform well in the second half driven by our store expansion programme and the modest levels of like-for-like growth, as we focus on driving volumes. While the consumer environment remains soft, we expect to benefit from the strength of our value proposition, our product relevance and category stretch and our increasingly effective digital engagement. We expect a moderate improvement in adjusted operating margin in Primark in the second half compared to the first half, albeit with a step-up in investment to support medium-term growth.
The Group continues to prioritise investment in its businesses and we continue to expect to increase spend in each of the next few years to slightly above last year’s level.
There will be an analyst and investor presentation at 09.00am BST today which will be streamed online and accessed via our website here.
Operating review
| Grocery |
| 24 weeks ended 2 March 2024 | 24 weeks ended 4 March 2023 | Actualcurrency | Constant currency | |
| Revenue £m | 2,124 | 2,105 | +1 % | +5 % |
| Adjusted operating profit £m | 230 | 173 | +33 % | +39 % |
| Adjusted operating profit margin | 10.8% | 8.2% | ||
| Operating profit £m | 219 | 163 | +34 % |
Our Grocery segment performed better than expected in the period. Sales were higher than the same period last year, driven by last year’s price increases to offset input cost inflation and by volume growth at some of our leading brands. There has generally been good demand for our brands, particularly in the US where Mazola, our consumer oils business, continued to perform very well. Losses reduced at Allied Bakeries year on year building on the improved performance in the second half of last year. In general, our brands are now trading in a more stable environment following last year’s high input cost inflation. Across the Grocery businesses as a whole, adjusted operating profit margin recovered and adjusted operating profit was significantly higher.
Among our international brands, Twinings grew well with good volume growth in its major markets of the US, UK and France. The growth in the US and UK was supported by investment in brand and marketing, as well as strong instore execution. In the US, Twinings expanded its advertising across the Eastern seaboard and the brand continues to grow its distribution among key US customers with higher market share as a result. Sales in the UK were also well ahead, led by infusions and wellbeing teas. Ovaltine had a more mixed performance. In Thailand, sales of powder products were lower, partially offset by sales of lower margin ready-to-drink products, which continue to grow. Sales were also lower in China where economic conditions have impacted our channel mix. Sales growth in Ovaltine in Europe continued to be good. Profitability at both Twinings and Ovaltine reflected the higher marketing investment in both brands. Performance was generally good across our other international brands. Patak’s delivered good sales growth against the same period last year, with international sales and the US in particular driving that performance. Jordans changed its promotional activity, which impacted sales but delivered improved results. Mazzetti, our balsamic vinegars brand enjoyed further good volume growth.
Our US-focused brands continued to trade very well. Our consumer oils business, the market leader Mazola, benefitted from increased production capacity and delivered growth in sales and volumes and, as a result, good growth in profitability. Sales of our Fleischmann’s yeast and bakery ingredients business also grew. Stratas, our joint venture that supplies oils to the foodservice, ingredients and retail markets, traded in line with last year’s strong performance.
Our UK-focused brands generally traded well. Allied Bakeries delivered a significant reduction in losses compared to last year with better sales and volumes as well as improved operational performance. Ryvita started to benefit from successful new product launches and Dorset Cereals’ sales stabilised with new product development and advertising under way. Our Australia and New Zealand-focused brands faced a more challenging consumer environment. Our Tip Top bakery brand was held back by consumers trading down due to the higher cost of living. In our Don meat business, volumes were flat although profitability was impacted by higher input costs. Yumi’s, which produces dips and snacks made with natural ingredients, delivered good growth in sales and profitability.
| Ingredients |
| 24 weeks ended 2 March 2024 | 24 weeks ended 4 March 2023 | Actualcurrency | Constant currency | |
| Revenue £m | 1,056 | 1,088 | -3 % | +1 % |
| Adjusted operating profit £m | 117 | 102 | +15 % | +19 % |
| Adjusted operating profit margin | 11.1% | 9.4% | ||
| Operating profit £m | 110 | 95 | +16 % |
Performance in our Ingredients segment continued to be strong and ahead of expectations. This result was driven by AB Mauri, our yeast and bakery ingredients business, which maintained its strong performance from last year. Sales and profits were moderately lower at ABF Ingredients, our portfolio of specialty ingredients businesses, much as expected.
AB Mauri performed particularly well. Sales benefitted from both the annualisation of price increases and resilient underlying volume growth. In particular, we delivered strong performances in North America, Brazil, Mexico and Europe. Our business in Argentina continues to be impacted by currency devaluation, although performance on an underlying basis has been resilient. AB Mauri’s profitability was supported by the strong sales and management of input costs. New Food Coatings, our joint venture in Australia, New Zealand and SE Asia specialising in seasonings, sauces and ingredients, traded well.
Production began in the period at our recently built specialty yeast plant in Hull in the UK, expanding our capability in innovation. Construction continued on our new yeast plant in northern India where we believe there will be considerable demand for bakery yeast. In our Australian and New Zealand Mauri business, our new animal feed mill in Hope Valley, Western Australia, stepped up production in the period and we closed our older facility at Bentley as planned.
ABF Ingredients traded broadly as expected with some continued customer destocking holding back sales volumes, particularly in our pharmaceutical ingredients business SPI Pharma, specialty lipids business ABITEC and in feed enzymes, impacting AB Enzymes. Fytexia, our life sciences polyphenols business, had good sales growth with botanicals performing strongly. All businesses benefitted from reduced input costs and were able to improve their margins. In these businesses, we continued to make long-term investments in R&D and commercial capabilities. Overall, we believe there are early signs of a recovery in volumes and trading towards the end of the period was better.
We continue to invest in capacity for Ohly in Hamburg, Germany. Construction of our new enzyme powder packing plant for AB Enzymes is progressing well and will bring more capacity. During the period, we announced that Jeremy Xu would join to become chief executive of ABF Ingredients succeeding Fabienne Saadane-Oaks who is retiring.
| Agriculture |
| 24 weeks ended 2 March 2024 | 24 weeks ended 4 March 2023 | Actualcurrency | Constant currency | |
| Revenue £m | 850 | 950 | -11 % | -9 % |
| Adjusted operating profit £m | 14 | 12 | +17 % | +27 % |
| Adjusted operating profit margin | 1.7% | 1.3% | ||
| Operating profit £m | 10 | 7 | +43 % |
Sales were lower than the same period a year ago due to continued soft demand for compound animal feed in the UK and China, but profits improved on better procurement, improved pricing and contribution from acquisitions.
Our Dairy business, which is developing a unique full-service offer to the dairy sector, performed well in the period, supported by a good contribution from National Milk Records, which was acquired last year.
We continue to make progress in our other global agricultural technology businesses, built around a combination of established and recently-acquired businesses. At AB Vista, our international feed additives business, sales and profit declined from weaker enzyme additives, although we are starting to see the benefit from growth in non-enzyme additives and product development is progressing. Profitability improved at AB Neo, our starter feed business. Profitability also improved at Germains, our seed supply and development business. Nutritional Supplements, our equine and pet feed business, traded resiliently.
Our compound feed businesses in the UK and China continued to have soft demand. Reduced herd sizes and excess feed production capacity continued to drive market conditions in the UK, while the Chinese market continued to be driven by low volumes and reduced herd sizes as a result of challenging farm profitability. However, there are some signs of stabilisation in the compound feed businesses, particularly in the poultry market.
Frontier, our joint venture business specialising in arable farm inputs and grain marketing in the UK, had a decline in profits in the period as a result of reduced demand for its services due to wet weather.
| Sugar |
| 24 weeks ended 2 March 2024 | 24 weeks ended 4 March 2023 | Actualcurrency | Constant currency | |
| Revenue £m | 1,170 | 1,168 | In line | +9 % |
| Adjusted operating profit £m | 125 | 97 | +29 % | +74 % |
| Adjusted operating profit margin | 10.7% | 8.3% | ||
| Operating profit £m | 121 | 86 | +41 % |
Sales increased against the same period last year, driven in part by strong prices in our European businesses, and by higher volumes at Azucarera and Vivergo. Profitability improved significantly, driven by a much-reduced loss at Vivergo and the stronger performance at Azucarera, partially offset by the phasing of profits at British Sugar. It is worth noting that there was a foreign exchange translation loss of £36m on our non-sterling earnings in the period, which mostly impacted Illovo and resulted in flat profit growth for that business on an actual currency basis.
Sales at British Sugar were lower in the period, due to lower stock levels held over from last year’s production campaign, which was severely affected by adverse weather. We were also impacted by lower co-product prices in the period. As expected, profits were somewhat lower as a result. However, despite some disruption caused by wet weather, sugar production from the 2023/24 campaign is expected to be 1.1 million tonnes, significantly ahead of last year’s unusually low crop (0.74m tonnes) and broadly in line with historical levels.
British Sugar continues to make progress in decarbonising its operations. In the period we approved two projects: the replacement of a coal boiler at our Cantley plant and new evaporators at our Wissington plant to increase efficiency and significantly reduce energy usage.
Sales grew at Azucarera reflecting larger acreage and higher volumes, supported by higher European sugar prices. Profits grew accordingly, despite higher beet and raw cane costs, which were partially offset by lower energy costs.
Illovo, our set of sugar businesses in southern Africa, traded well in general with good domestic sales growth. Profits were flat in actual currency after the impact of foreign currency translation. Our business in Zambia had good trading with higher sales and production. Our business in Malawi had higher sales but lower production due to adverse weather and poor cane yields caused by recent cyclones. It was also impacted by currency devaluation but this was managed effectively through pricing. Tanzania also had lower production due to adverse weather. The half year on half year results benefitted from non-recurring prior-year losses in Mozambique, which remains closed due to severe flooding last year.
Vivergo, our bioethanol plant in the UK, is now delivering a good operational performance. However, margins continued to be volatile, which impacted financial performance in the period. Notwithstanding these trading conditions, the business reduced its losses substantially in the period. Due to this volatility in margin, an impairment of £18m was recognised.
Following a review, we closed our sugar business in the north of China and we are in the process of selling its assets and this has now been disclosed as a business to be closed rather than a continuing activity.
| Retail |
| 24 weeks ended 2 March 2024 | 24 weeks ended 4 March 2023 | Actualcurrency | Constant currency | |
| Revenue £m | 4,500 | 4,228 | +6 % | +7.5 % |
| Adjusted operating profit £m | 508 | 351 | +45 % | +46 % |
| Adjusted operating profit margin | 11.3% | 8.3% | ||
| Operating profit £m | 508 | 351 | +45 % |
Primark delivered strong sales growth in the period. This was driven by newly-opened stores and by last year’s carefully selected price increases to offset inflation. Sales of womenswear and menswear both grew well, as did sales of our health and beauty ranges. Our digital engagement continued to support sales growth in the period.
Sales were up 7.5% in the period, following the previously reported sales growth up 7.9% in the 16 weeks to 6 January 2024. Trading in that period was marked by a slow start for many cold weather categories due to unseasonal warm weather, followed by strong Christmas trading with our seasonal ranges selling through well. Sales of womenswear and menswear were strong, particularly in performance wear, leisure, knitwear as well as our Rita Ora collection. In the 8 weeks to 2 March 2024, sales increased by 6.3%. Trading was generally softer in terms of volumes. Due to prolonged colder weather, average selling prices were higher than expected in the period across cold-weather products with generally good sell-through of stock. Sales of Home were strong, but cold and wet weather slowed sales of luggage, beach and swimwear.
Overall, new stores contributed 5.4% of sales growth, due to both increased selling space and higher sales densities. Like-for-like sales growth was 2.1% in the period, driven by higher average selling prices, partially offset by slightly smaller basket sizes and accordingly lower volumes. Footfall was broadly in line with the same period last year and we saw notably strong trading at our destination city centre stores, particularly where located in tourist destinations.
In the UK, sales grew by 4.3% against the same period last year, driven by like-for-like sales growth of 3.6% and a contribution from new space of 0.7%. Trading was marked by warm weather early in the period, good sales of seasonal ranges at Christmas and soft trading in January and February due to wet weather and commuter transport disruption. Our city centre stores performed well with the continued return of tourists and office workers particularly benefitting our stores in Oxford Street, London, Edinburgh and Birmingham. Primark’s market share(1) continued to grow, increasing from 6.7% to 6.9% in the 24 weeks to the end of the period.
In Europe (excluding the UK), sales grew by 7.9%. New selling space contributed 6.4% to that growth, with like-for-like sales up 1.5%. This like-for-like metric was impacted by the fast pace of store expansion, particularly in France and Italy. Trading in France was very good, with footfall driving significant growth in total sales, supported by good like-for-like sales growth, strong performance from our new stores and overall outperforming the market. Trading in Spain was good, also outperforming the market, with strong sales growth in our stores located in regions benefitting from tourism, albeit partially offset by adverse weather conditions. In Italy, sales were well ahead with a very strong performance in new stores. In the Republic of Ireland and Portugal, we had only satisfactory trading with warm weather holding back pre-Christmas sales and slower recovery in consumer sentiment. Trading in the Netherlands was strong, with good like-for-like sales driven by operational improvements. In Germany, underlying trading was strong with total sales lower as a consequence of our reduced selling space but like-for-like sales increased despite industry-wide strike action. The restructuring in Germany is now largely complete and has resulted in improved sales densities and profitability, as expected. We also launched our first ever multi-media brand campaign in the country.
Sales growth in the US was 38.4%, driven by new store openings which performed well. Adjusted operating profit improved significantly in the period. We opened three new stores in the period: Woodfield Mall in Chicago, Smith Haven Long Island, and Charlotte North Carolina. We opened a new distribution centre in Jacksonville, Florida, to serve our expansion in southern states and at the same time, we announced lease agreements for stores in Tennessee, Maryland and Texas.
Our digital growth strategy continues to progress. Traffic to our websites increased in all markets in the period, with record traffic levels over Christmas. In most markets, some 20% of visitors now use the stock checker facility and we believe this facility, combined with the other improvements we have made to the websites, provide meaningful support to sales. We continue to invest in search engine optimisation, CRM and paid marketing.
We have completed our latest Click + Collect trial in the UK. The trial showed good basket sizes and strong additional attachment store sales. The trial also demonstrated that the Click + Collect service is satisfying unfulfilled demand from both new and existing customers by offering them extended choice beyond their local store offering. We believe we have developed a bespoke version of ecommerce that is additive to our store-led model, enhances our overall digital engagement programme and delivers incremental sales. The results give us confidence to roll out this service across all our stores in England, Wales and Scotland, with a curated product range across womenswear, kids, menswear and a selection of homewear.
Adjusted operating profit margin for the period recovered to 11.3%, significantly higher than the same period last year, reflecting an increase in all countries. This growth in margin was driven by a significant improvement in product gross margin, driven by lower material and freight costs and the annualisation of prior year price increases, partially offset by the impact of foreign exchange. Stock loss remained high in most countries and we continue to invest in actions to mitigate this loss. Labour costs in the period increased in line with our expectations. We have been stepping up investment across technology, digital and customer activities to support growth. We expect this investment to continue to increase over the medium term.
Retail selling space increased by 0.2m sq ft since the last financial year-end and on 2 March 2024 we were trading from 440 stores from 18.4m sq ft of selling space. Nine new stores opened in the period: three in the US, three in France, two in Spain, and one in Poland. One store in Germany was closed in the period and seven stores are now rightsized. We have also rightsized four stores in the Netherlands in the period. Towards the end of the period Primark opened a store at La Vaguada in Madrid, the first of four openings in the city this year. We are expanding into our 16th market in the second half of the financial year, opening our first store in Hungary. We continue to target 530 stores by the end of 2026 and have visibility for continued footprint expansion beyond.
1. Kantar, Primark market share of the total UK clothing, footwear and accessories market including online by value, 24-week data to 3 March 2024
Financial review
Group performance
Group revenue in the period was £9.7bn, 2% ahead of last year at actual rates and 5% at constant currency, driven by continued good momentum in our Retail and food businesses. The Group generated an adjusted operating profit of £951m, an increase of 39% at actual rates compared to last year, reflecting strong margin recovery, and improvements in operational performance. Operating profit for the Group of £931m was 40% ahead, after charging exceptional items of £6m (2023 half year – nil).
For the period, there was a translation loss of £57m of our non-sterling earnings, primarily driven by the strengthening of sterling against the US dollar and the euro, as well as against some of our trading currencies in our businesses in Africa.
Segmental summary
| Revenue | Adjusted operating profit | |||||||
| 24 weeks ended2 March2024£m | 24 weeks ended4 March2023£m | Change% | 52 weeks ended16 September 2023£m | 24 weeks ended2 March2024£m | 24 weeks ended4 March2023£m | Change% | 52 weeks ended16 September 2023£m | |
| At actual rates | ||||||||
| Grocery | 2,124 | 2,105 | +0.9 | 4,198 | 230 | 173 | +32.9 | 448 |
| Ingredients | 1,056 | 1,088 | -2.9 | 2,157 | 117 | 102 | +14.7 | 214 |
| Agriculture | 850 | 950 | -10.5 | 1,840 | 14 | 12 | +16.7 | 41 |
| Sugar | 1,170 | 1,168 | +0.2 | 2,474 | 125 | 97 | +28.9 | 179 |
| Retail | 4,500 | 4,228 | +6.4 | 9,008 | 508 | 351 | +44.7 | 735 |
| Central | – | – | – | – | (45) | (40) | -12.5 | (94) |
| 9,700 | 9,539 | +1.7 | 19,677 | 949 | 695 | +36.5 | 1,523 | |
| Business to be closed | ||||||||
| Sugar | 34 | 21 | 73 | 2 | (11) | (10) | ||
| 9,734 | 9,560 | +1.8 | 19,750 | 951 | 684 | +39.0 | 1,513 | |
The segmental analysis by division has been set out in the operating reviews. The closure of our China North Sugar business has now been disclosed as a business to be closed rather than a continuing activity.
The segmental analysis by geography is set out in note 1 of the condensed financial statements. Of note is the increase in adjusted operating profit in Europe and the UK driven by Retail and an improved performance in our Sugar segment. The Noth America increase was driven by the continued success of our Grocery and Ingredients businesses and Retail in the US.
Adjusted earnings per share
| 24 weeks ended 2 March2024£m | 24 weeks ended 4 March2023£m | Change% | 52 weeks ended 16 September 2023£m | |
| Adjusted operating profit | 951 | 684 | +39.0 | 1,513 |
| Net finance income excluding lease interest | 18 | 4 | 11 | |
| Other financial (expense)/income | (13) | 20 | 40 | |
| Lease interest | (45) | (41) | (91) | |
| Adjusted profit before taxation | 911 | 667 | +36.6 | 1,473 |
| Taxation on adjusted profit | (211) | (165) | (346) | |
| Adjusted profit after tax | 700 | 502 | +39.4 | 1,127 |
| Adjusted earnings attributable to equity shareholders | 685 | 487 | +40.7 | 1,103 |
| Adjusted earnings per share (in pence) | 90.4 | 62.0 | +45.8 | 141.8 |
Net finance income and other financial expense
Finance income continued to increase as a result of higher interest rates earned on our cash balances. In other financial expenses, we recorded losses on cash and foreign exchange balances on some of our African countries of operations, such as Nigeria and Malawi, where material currency devaluations have taken place. Lease interest increased during the period due to higher interest rates and as we continue our Primark store expansion programme. We expect a similar level of finance income and lease interest in the second half, however, we do not expect the losses on cash and foreign exchange balances in other financial expenses to repeat.
On an adjusted basis, profit before tax was up 36.6%, to £911m.
Taxation on adjusted profit
In the period, the adjusted tax charge increased to £211m, primarily driven by the increase in adjusted profit before tax, offset by a decrease in the adjusted effective tax rate to 23.2% from 24.7% for the same period last year. The adjusted effective tax rate includes the full-year impact of the increase in UK corporation tax rate from 19% to 25% in April 2023 but this is more than offset by the changes to the mix in profits by jurisdiction.
Adjusted earnings per share increased by 45.8% to 90.4p per share for the period. This increase is driven by the increase in adjusted earnings. The adjusted earnings per share also continued to benefit from the reduction in weighted average number of shares, from 786 million for the same period in 2023 to 758 million for the same period in 2024, as a result of the continuing buyback programmes. The weighted average number of shares will continue to reduce from the completion of the remaining £275m of our second share buyback programme.
Basic earnings per share
| 24 weeks ended 2 March2024£m | 24 weeks ended 4 March2023£m | Change% | 52 weeks ended 16 September 2023£m | |
| Adjusted profit before taxation | 911 | 667 | +36.6 | 1,473 |
| Acquired inventory fair value adjustments | (1) | (2) | (3) | |
| Amortisation of non-operating intangibles | (20) | (20) | (41) | |
| Exceptional items | (6) | – | (109) | |
| Profits less losses on sale and closure of businesses | (10) | (2) | (3) | |
| Profits less losses on disposal of non-current assets | 8 | 2 | 28 | |
| Transaction costs | (1) | (1) | (5) | |
| Profit before taxation | 881 | 644 | +36.8 | 1,340 |
| Taxation | (203) | (102) | (272) | |
| Profit after tax | 678 | 542 | +25.1 | 1,068 |
| Earnings attributable to equity shareholders | 663 | 527 | +25.8 | 1,044 |
| Basic earnings per share (in pence) | 87.4 | 67.0 | +30.4 | 134 |
Profit before tax of £881m was 36.8% ahead of the prior period.
This included a non-cash exceptional impairment charge of £6m in our Sugar segment. This comprised an impairment charge of £18m in our Vivergo business, which continues to be impacted by the volatility in margin. In addition, a £12m reversal of the £35m impairment recognised in the Sugar business in Mozambique at the end of financial year 2023 was also taken. No exceptional impairment charge was recognised in the same period in 2023.
A non-cash provision of £10m was included in profit less losses on sale and closure of business in respect of the closure of our China North Sugar business.
Total tax charge in the period was £203m (2023 half year – £102m). The increase compared to the prior period reflects the increase to the adjusted tax charge. Last year included a £58m deferred tax credit on exceptional items, reflecting the recognition of deferred tax assets relating to Primark Germany.
Earnings attributable to equity shareholders were £663m and basic earnings per share were 87.4p, 30.4% ahead of the same period last year.
Cash flow
| 24 weeks ended 2 March2024£m | 24 weeks ended 4 March2023£m | 52 weeks ended 16 September 2023£m | ||
| Adjusted EBITDA | 1,377 | 1,090 | 2,361 | |
| Repayment of lease liabilities net of incentives received | (148) | (123) | (246) | |
| Working capital | 6 | (703) | (216) | |
| Capital expenditure | (565) | (498) | (1,073) | |
| Purchase of subsidiaries, joint ventures and associates | (4) | (29) | (94) | |
| Sale of subsidiaries, joint ventures and associates | – | 4 | 4 | |
| Net interest paid | (29) | (35) | (74) | |
| Income taxes paid | (145) | (148) | (341) | |
| Share of adjusted profit after tax from joint ventures and associates | (51) | (51) | (127) | |
| Dividends received from joint ventures and associates | 43 | 43 | 107 | |
| Other | (16) | (60) | (32) | |
| Free cash flow | 468 | (510) | 269 | |
| Share buyback | (281) | (140) | (448) | |
| Dividends | (348) | (235) | (345) | |
| Movement in loans and current asset investments | 52 | (10) | (10) | |
| Cash flow | (109) | (895) | (534) |
There was free cash inflow in the period totalling £468m as a result of higher operating profit generated by the Group, and lower working capital movement compared to the same period last year. The better performance in working capital reflects a normalisation of inventory at Primark as expected, stock reductions in most of our food businesses, reducing inflation overall, and other working capital initiatives. Overall, we continue to expect a decrease in working capital at the year end, primarily driven by the lower Primark inventory.
The capital expenditure increase was driven by the number of large capital projects in Primark and the food businesses.
The level of cash tax was lower as expected due to the reallocation of historical overpayments and favourable settlements of historical enquiries and returns. We expect this lower level to continue for the year. ‘Other’ cash flow benefitted from the abatement of UK employer pension contributions.
There was cash outflow of £281m for our continued share buyback programmes. We also paid £348m for total dividends in this period, which reflects the final 2023 dividend of £251m and a special dividend of £97m that was declared in respect of the 2023 financial year.
Financing and liquidity
| At 2 March 2024£m | At 4 March2023£m | At 16 September 2023£m | ||
| Short-term loans | (109) | (17) | (99) | |
| Long-term loans | (432) | (480) | (394) | |
| Lease liabilities | (3,164) | (3,187) | (3,160) | |
| Total debt | (3,705) | (3,684) | (3,653) | |
| Cash at bank and in hand, cash equivalents and overdrafts | 1,209 | 1,080 | 1,388 | |
| Current asset investments | – | 3 | – | |
| Total net debt | (2,496) | (2,601) | (2,265) | |
| Leverage ratio | 0.9 | 1.2 | 1.0 |
At 2 March 2024, the Group held cash and cash equivalents, net of bank overdrafts of £1,209m. In addition, the Group has an undrawn Revolving Credit Facility (‘RCF’) for £1.5bn, which is free from performance covenants. Following the first extension in 2023, the facility was extended for an additional year in April 2024 bringing the final maturity to June 2029. Our final $100m Private Placement notes were repaid on 2 April 2024.
Total liquidity at 2 March 2024 was £2.5bn, comprising the £1.3bn of cash, less £0.2bn of short-term loans and overdrafts and £0.1bn of inaccessible cash, plus the £1.5bn RCF. This compares to £2.7bn at the end of the 2023 financial year and £2.5bn at the end of the same period last year.
Pensions
Employee benefits assets primarily comprise the accounting surplus of the Group’s UK defined benefit scheme. At the end of the period the surplus in the UK was £1,476m (2023 half and full year – £1,397m). The increase from the end of the last financial year reflects positive asset returns and a decrease in long term expected inflation, partially offset by an increase in the liabilities due to a decrease in corporate bond yields.
Dividends and share buyback
During the period, we completed our first £500m share buyback programme and £225m of our second £500m share buyback programme, with the remaining amount anticipated to be completed by the end of the financial year. On 2 March 2024, the financial leverage ratio was 0.9 times.
The Associated British Foods’ Board has declared an interim dividend of 20.7p a share, an increase of 46% on same period last year reflecting the growth in earnings. The dividend will be paid on 5 July 2024 to shareholders registered at the close of business on 31 May 2024.
