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ANNUAL REPORT
AND ACCOUNTS 2013
CONTENTS
Directors’ report
Business review
1 2013 highlights
2 Group business model and strategy
4 Our businesses at a glance
6 Business strategies
8 Chairman’s statement
20 Operating review
36 Financial review
Governance
40 Corporate responsibility
44 Board of directors
46 Corporate governance
62 Remuneration report
76 Other disclosures
80 Statement of directors’ responsibilities
in respect of the annual report and the
financial statements
81 Independent auditors’ report
Financial statements
82 Consolidated income statement
83 Consolidated statement of
comprehensive income
84 Consolidated balance sheet
85 Consolidated cash flow statement
86 Consolidated statement of changes
in equity
87 Significant accounting policies
92 Accounting estimates and judgements
93 Notes forming part of the financial
statements
127 Company financial statements
132 Progress report
Shareholder information
132 Company directory
Our PLC website is available on multiple platforms from
mobile devices to laptops. For a more interactive report,
go online at abf.co.uk/ar2013
For an in-depth look at our sustainable approach to
business refer to the Associated British Foods’ Corporate
Responsibility Report 2013 which is available at
abf.co.uk/responsibility
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2013 HIGHLIGHTS
Associated British Foods
is a diversified international
food, ingredients and
retail group with sales
of £13.3bn, and 113,000
employees in 47 countries.
• Another year of strong growth and
cash generation
• Remarkable performance by Primark
• Grocery much improved
• Record profit for Agriculture
• AB Sugar in line with expectations
• China Sugar and Ingredients
rationalisation
Group revenue
Adjusted operating profit*
£13.3bn
Up 9%
£1,185m
Up 10%
Adjusted profit before tax**
Adjusted earnings per share**
£1,096m
Up 13%
98.9p
Up 13%
Dividends per share
Net capital investment
32.0p
Up 12%
£600m
Net debt reduced to
Operating profit
£804m
£1,093m
Up 25%
Profit before tax
Basic earnings per share
£876m
Up 15%
74.8p
Up 6%
* Before amortisation of non-operating intangibles, profits less losses on disposal
of non-current assets and exceptional items.
** Before amortisation of non-operating intangibles, profits less losses on disposal
of non-current assets, profits less losses on the sale and closure of businesses
and exceptional items.
All adjustments to profit measures are shown on the face of the consolidated
income statement.
Associated British Foods Annual Report and Accounts 2013
GROUP BUSINESS MODEL AND STRATEGY
Associated British Foods is a diversified group of
food, ingredients and retail businesses selling into
more than 100 countries worldwide and with operations
in 47 countries across Europe, southern Africa, the
Americas, Asia and Australia.
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Our range of activities is broad in product, technology
and market scope. Our portfolio of businesses comprises
sizeable operations that achieve good revenue and profit
growth; mature, cash-generative operations; and smaller
enterprises that afford exciting growth potential.
In our markets, we aim to achieve strong and sustainable
positions through a combination of organic growth, acquisition
of complementary new businesses and achievement of high
levels of operating efficiency. We provide high-quality,
value-for-money food and clothing that are central to
people’s lives.
10 year adjusted earnings per share growth (pence)
100
80
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compound
annual growth
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Business structure
Our businesses are organised
so that they are close to the
markets and customers that
they serve.
They are managed as five business segments that
bring together common industry expertise, operational
capability and market intelligence. Operational decisions
are made locally because, in our experience, they are most
successful when made by the people who have the best
understanding of their markets and who have to implement
them. The corporate centre aims to provide a framework
in which our business leaders have the freedom and
decision-making authority to pursue opportunities with
entrepreneurial flair. The centre is small and uses short
lines of communication to ensure prompt, incisive and
unambiguous decision-making. It seeks to ensure that
business activities are appropriately monitored
and supported.
Associated British Foods Annual Report and Accounts 2013
BUSINESS STRATEGIES IN MORE DETAIL
The group operates through five strategic business segments:
Sugar, Agriculture, Retail, Grocery and Ingredients.
For more strategic content on our five businesses, go to page 6
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Strategy
The corporate centre agrees
strategy and budgets with
the businesses and monitors
their performance closely.
The group balance sheet is managed to ensure long-term
financial stability, regardless of the state of capital markets,
and capital funding is made available to all of our businesses
where returns meet or exceed clearly defined criteria. The
centre provides selected services where the scale of its
operations enables a more cost-effective or efficient delivery,
where expertise that might not be available at a business
level can be retained by the group, or where the provision of
such services would otherwise distract business executives.
Such services include investor relations, pensions, insurance,
tax and treasury management, where specialist expertise is
brought together in one place for the benefit of the group as
a whole. The centre also co-ordinates selected value-added
capabilities to support the businesses in their local markets
such as talent management and development, procurement,
and the sharing of best practice in, for example, health and
safety or engineering risk management. We operate to high
ethical standards as an organisation and expect the same of
our employees. We encourage an open and honest culture
in all our dealings and ensure that our core values are fully
implemented throughout the group.
Organic growth
Organic growth is achieved
through investment in
marketing, in the development
of existing and new products
and technologies and in
targeted capital expenditure
to improve efficiency and
expand capacity.
We are committed to innovation, the continuous pursuit
of improvement and the maintenance of our efficient
manufacturing capability.
We aim to operate in a sustainable, ethical, efficient and safe
manner. We have a strong culture of continuing operational
improvement and focus on delivering exceptional quality and
customer service. The group takes a long-term approach to
investment and is committed to increasing shareholder value
through sound commercial, responsible and sustainable business
decisions that deliver steady growth in earnings and dividends.
Acquisitions are made to complement existing business
activities and to exploit opportunities in adjacent markets
or geographies.
Associated British Foods Annual Report and Accounts 2013
OUR BUSINESSES AT A GLANCE
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The group operates
through five strategic
business segments:
Sugar, Agriculture,
Retail, Grocery and
Ingredients.
Sugar
Revenue
Agriculture
Revenue
£2,677m 2012: £2,666m
£1,410m 2012: £1,265m
Adjusted operating profit
£435m 2012: £510m
Adjusted operating profit
£47m 2012: £40m
Adjusted operating profit margin
Adjusted operating profit margin
16.2% 2012: 19.1%
3.3% 2012: 3.2%
Return on average capital employed
Return on average capital employed
23.4% 2012: 26.5%
16.4% 2012: 16.5%
Sugar, Europe
Our UK beet sugar factories produce
over one million tonnes of sugar annually.
Azucarera in Spain produces over
400,000 tonnes of beet sugar each year
and has a cane refining capacity of a
further 400,000 tonnes.
Sugar, China
We operate five cane sugar mills in
Guangxi Province and four beet sugar
factories in the north east of the country.
Continuous investment has raised annual
sugar capacity to over 900,000 tonnes.
Sugar, Southern Africa
Illovo is Africa’s largest sugar producer
with agricultural and production facilities
in six countries. Annual sugar production
is 1.8 million tonnes.
AB Agri operates at the heart of the
agricultural industry with activities that
stretch from field to fork. Its unique
breadth and experience enable it to add
value all along the food, drink and biofuel
industry supply chains.
AB Agri supplies products and services
to farmers, feed and food manufacturers,
processors and retailers. It also buys
grain from farmers and supplies crop
inputs through its joint venture arable
operation, Frontier Agriculture.
We employ over 2,000 people in the
UK and China and market products in
more than 65 countries worldwide.
Associated British Foods Annual Report and Accounts 2013
For more content on Sugar’s operations,
go to page 22
For more content on Agriculture’s operations,
go to page 25
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Retail
Revenue
Grocery
Ingredients
Revenue
Revenue
£4,273m 2012: £3,503m
£3,840m 2012: £3,726m
£1,088m 2012: £1,067m
Adjusted operating profit
Adjusted operating profit
£514m 2012: £356m
£232m 2012: £187m
Adjusted operating profit
£1m 2012: £27m
Adjusted operating profit margin
Adjusted operating profit margin
Adjusted operating profit margin
12.0% 2012: 10.2%
6.0% 2012: 5.0%
0.1% 2012: 2.5%
Return on average capital employed
Return on average capital employed
Return on average capital employed
26.1% 2012: 19.2%
15.8% 2012: 12.2%
0.1% 2012: 4.4%
Primark
Primark is a major retail group employing
48,000 people. It operates stores in the
UK, Republic of Ireland, Spain, Portugal,
Germany, the Netherlands, Belgium
and Austria.
It offers customers quality, up-to-the-minute
fashion at value-for-money prices.
Buying and merchandising teams in
Dublin (Republic of Ireland) and Reading
(UK) travel internationally to source and
buy fashion items that best reflect each
season’s key fashion trends. Primark’s
range includes womenswear, lingerie,
childrenswear, menswear, footwear,
accessories, hosiery and homeware.
International
Twinings and Ovaltine are our global hot
beverage brands.
Europe
Market leader in UK sugar with Silver
Spoon and Billington’s. Jordans cereals,
Ryvita, Kingsmill, Patak’s and Blue Dragon.
The Americas
Mazola is the leader in corn oil in the
US. Capullo is a premium canola oil in
Mexico. Tone’s, Spice Islands and Durkee
are US herbs and spices brands.
Australia
Ham, bacon and smallgoods under
Don and KRC brands. Tip Top Bakeries
produce a range of well-known breads
and baked goods.
Yeast and bakery ingredients
AB Mauri operates globally in yeast and
bakery ingredient production with 52
plants in 26 countries supplying plant and
artisanal bakers and the foodservice and
wholesale channels. It is a technology
leader in bread improvers, dough
conditioners and bakery mixes.
Speciality ingredients
ABF Ingredients focuses on high-value
ingredients for food and non-food
applications. It manufactures and markets
enzymes, lipids, yeast extracts and
cereal specialities worldwide with
manufacturing facilities in Europe
and the US.
For more content on Retail’s operations,
go to page 27
For more content on Grocery’s operations,
go to page 30
For more content on Ingredients’ operations,
go to page 34
Associated British Foods Annual Report and Accounts 2013
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BUSINESS STRATEGIES
Providing our business leaders with the freedom
and decision-making authority to pursue opportunities
with entrepreneurial flair.
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Sugar:
A world-leading
sugar business
focused on
excellence
Agriculture:
Driving value
for businesses
along the food
supply chain
AB Sugar is an advanced
manufacturer and has a simple
vision to be a world-leading sugar
business. We must remain cost
competitive whilst exceeding the
demanding and diverse needs of
our customers, and we must
grow sustainably.
AB Sugar aims to achieve growth
through excellence in agriculture
and operations including the application
of new technologies and the further
expansion of co-product opportunities.
We seek to ensure cost leadership in
our various regional supply chains
through: engagement with growers to
ensure optimum beet/cane growing
whilst providing fair returns to growers;
continual improvement in operating
performance by maintaining a well-invested
asset base; and by seeking out best
practice to optimise product quality and
the efficiency of the conversion process.
As a unique community of leading
agricultural businesses, AB Agri
consistently strives to improve the
sustainability of food production. We
work in partnership with customers
to deliver precision food production
by optimising resources, thereby
enabling the production of more
food with a lower environmental
impact. AB Agri operates through
individual, entrepreneurial
businesses empowered to grow their
interests independently, and through
a strong network of contacts across
the entire food supply chain.
Organic growth is achieved through
innovative product development and
through extending the business’s already
broad geographic reach into new
territories. Using the diverse breadth
of products, services and people within
the AB Agri community, the business
develops bespoke solutions specifically
tailored to its customers’ needs.
Extending this into new geographies
and into new areas that are adjacent
to its core capabilities affords further
growth opportunities. AB Agri will
continue its successful strategy of
seeking to make complementary
acquisitions to strengthen its portfolio
of businesses and its technical capability.
It will also continue to collaborate with
other businesses in the ABF group to
harness new contacts and technologies.
Associated British Foods Annual Report and Accounts 2013
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Retail:
Up-to-the-minute
fashion at amazing
prices
Grocery:
An enviable
portfolio of leading
food brands
Ingredients:
Technology and
innovation to meet
customer needs
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Primark offers great value for money
which it achieves by: incurring no
advertising costs, instead relying
on its customers ‘doing the talking’
about its products; buying in vast
quantities and passing on the cost
savings to customers; keeping
overheads to a minimum but
investing in state-of-the-art logistics
to enable its stores to replenish
stocks quickly; and by not
compromising its high quality
standards, rigorously testing
products at the various stages
of production.
In the world of fashion it is critical that
once a style is seen on the fashion show
catwalk it reaches the stores as quickly
as possible. It can take as little as six
weeks from initial design concept to
being available on shelf, and merchandise
is sourced from all corners of the globe.
Although Primark does not own the
companies or factories that produce
its merchandise, it recognises its
responsibility to the workers in those
factories, and to its customers, to ensure
that its products are made in good
working conditions.
Each of our Grocery businesses
pursues an independent strategy,
appropriate to its particular market
position and stage of development.
As examples, Jordans Ryvita is
focused on developing its brands
in its core markets, whilst AB World
Foods has had considerable success
extending its reach into new and
emerging markets.
All of these businesses are committed
to the consistent development of their
brands, and consumer research is
conducted locally and internationally
to establish consumer needs and ensure
appropriately targeted investment. Our
production facilities are well maintained
and we take a long-term approach to
capital investment, recognising the merits
of building for the future. Acquisitions
are undertaken when opportunities
are presented to either strengthen
or complement existing businesses.
Our Ingredients businesses are
dedicated to understanding the
key requirements of their customers
and their end-use markets in order
to ensure a relevant supply of
ingredients, systems, products
and technology that create value.
They develop partnership
relationships with customers to
achieve a genuine understanding
of their products, formulations,
equipment and processes and the
market environment in which the
products are sold. They aim to grow
by providing outstanding customer
service backed by a high level of
investment in technology, innovation,
research and development.
Each business has its own business
model that determines an appropriate
balance of emphasis across the full
range of potential sources of competitive
advantage: innovative and distinctive
products; an efficient and proprietary set
of production processes; and compelling
customer propositions comprising a
blend of product performance and
customer-specific services.
Associated British Foods Annual Report and Accounts 2013
CHAIRMAN’S STATEMENT
This year’s results exceeded our
expectations… revenue increased by
9%, adjusted operating profit was ahead
by 10% and adjusted earnings per share
were up 13% on last year.
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In reporting on last year’s fine
performance I concluded my
statement with the expectation that
the group would make some further
progress this year. This year’s results
exceeded those expectations with
very good growth: revenue increased
by 9%, adjusted operating profit was
ahead by 10% and adjusted earnings
per share were up 13% on last year.
This operating performance resulted
in a strong cash flow and a healthy
reduction in the group’s net debt.
Primark had an outstanding year,
increasing profit by 44% and adding
a further 800,000 sq ft, or 10%, to its
already substantial estate. Grocery margins
improved with a recovery in both the
baking and meat businesses of George
Weston Foods in Australia. The momentum
of recent years in AB Agri continued and
underlying trading in Ingredients achieved
some stabilisation. AB Sugar performed
well, delivering a result which, although
below last year’s high level, was in line
with our expectations.
The decline in AB Sugar’s profit in 2013
was the result of lower European
production and higher beet costs for
British Sugar. In June this year, the
European Council of Ministers confirmed
that EU sugar quotas for domestic
production would end in 2017 and the
market has already started to react.
Pricing for the 2014 financial year is lower
as a consequence of the greater availability
of sugar globally and an increase in
competition. We have worked for a
number of years to lower the cost base
and improve the efficiency of our
European operations and we are
confident of our ability to succeed in this
new environment.
Capital expenditure was lower again this
year. Investment included the completion
of the new yeast plant in Mexico and the
South African warehouse and Tanzanian
distillery for Illovo, and further expenditure
on our programme to reduce the cost
base at Allied Bakeries with new bread
plants at three of our UK bakeries. We
continued to pursue the big retail expansion
opportunity in Primark, especially in
continental Europe, and we expect
this to increase in the coming year.
Cash flow was strong with higher profit
and a lower level of capital investment
more than offsetting a working capital
outflow and higher taxes paid. We are
a substantial tax payer, and of the £252m
of corporation tax paid by the group
during the year, more than half was paid
in the UK. Net debt at the year end had
reduced to £804m.
Primark has continued to make significant
progress with its ethical trade programme.
We take this programme extremely
seriously and have built a team of some
40 in-country ethical trading specialists,
of whom eight are located in Bangladesh.
The tragic events in April caused by the
collapse of the Rana Plaza building near
Dhaka, Bangladesh, were deeply
saddening. Our response to these events
was based on our determination to
alleviate hardship arising from this
disaster as quickly as possible. We were
able to achieve this as a result of the
experience and capability of our
in-country team. The operating review
Associated British Foods Annual Report and Accounts 2013
contains considerable detail about
the Company’s response. The board
remains committed to the highest ethical
standards, not just at Primark but across
all of the group’s businesses.
Corporate responsibility
Our principal value to society lies in what
we do every day: providing people with
access to good quality, affordable food
and clothing. If the rapidly growing global
population is to be fed, it will be fed by
companies like Associated British Foods,
working in developed and emerging
economies to encourage reliable and
efficient supply. There is a close
alignment between our moral obligation
and good business practice. We have a
modern and efficient food supply chain
and we are constantly improving our
productivity, investing in new assets,
reducing waste and making more from
less. Of course we must do this for each
succeeding generation, so our actions
must look to the longer term and must
be sustainable. We consistently invest in
our cost base and our distribution reach.
We use technology to improve
productivity and to assure sources of
supply but we must also use it to inform
us of the impact of our actions on the
environment. We label our products
properly and market them appropriately
to customers and we constantly strive
to improve food safety. Our annual report
includes examples of the application of
our corporate responsibility philosophy,
and much more detail is provided in our
latest Corporate Responsibility Report
which has been fully refreshed since first
publication in 2010 and is available for
download from our website.
Diversity
Our businesses around the world are
largely staffed and managed by local
teams and our workforce is consequently
ethnically rich and diverse. We understand
the importance of harnessing and
nurturing talent, yet it is clear that women
are not as well represented at senior
levels within our organisation as they
could be. This is a missed opportunity
that we have begun to address. There is
no common solution and this is reflected
in our approach to gender diversity
where we have piloted initiatives that can
be copied, applied and adapted to local
business conditions. While gender is a
good place to start in tackling diversity,
it is important that we work, not only to
increase diversity in all its forms, but to
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ensure that it becomes part of our
everyday business activity.
Remuneration
Our remuneration policy aims to reward
employees for the performance of those
parts of the business for which they are
accountable and which they can directly
influence. Management incentives
are designed to encourage the right
decisions being taken in the interests of
the long-term health of the business. We
seek to reward competitively for good
performance but comparison with market
data is just one of the factors taken into
account when determining remuneration.
Close attention is also paid to the nature
and degree of autonomy of each role
because management appreciate being
given the freedom to act which encourages
creativity, fosters a spirit of enterprise
and ensures decisions are taken as close
to our customers as possible. It is this
combination of proper pay and job
structure which enables us to attract
and retain the calibre of management
that has delivered these results.
Targets for long-term and short-term
incentive arrangements are reviewed
annually by the Remuneration committee,
having regard to internal and external
factors and the relationship between
the level of payments made and the
performance of the group over a number
of years. Our executives understand that
they are well remunerated and that this
not only reflects the marketplace but also
takes into account the performance and
growth of the group, the degree of
expertise required to fulfil the role and
the level of individual experience. Our
executives are properly rewarded for the
work that they do and the responsibilities
they bear.
Shareholders will note that the directors’
remuneration report addresses the new
reporting regime, albeit that we are not
yet required to meet these standards
until next year.
The board
The board has had the great benefit of
a stable group of independent directors
since 2007. The Senior Independent
Director, Tim Clarke, was appointed
in 2004 and has therefore served as a
director for nine years. The UK Corporate
Governance Code requires that Tim’s
independence is confirmed by the rest
of the board, if he is to continue as an
independent director. This they have
done and we are delighted that Tim
has agreed to continue his distinguished
service to the group.
The three other independent directors
were appointed in 2006 and 2007 and
will complete nine years on the board
in 2015 and 2016. Such a significant loss
of experience in so short a period is to
be avoided and, accordingly, we have
decided to make an earlier appointment,
expanding the board by one when the
search that is currently under way has
been completed. It is expected that, in
due course, the board will revert to its
current size.
Employees
I would like to thank all our employees
for the contribution they have made to
the group’s success in the past year. The
average number of people employed by
the group increased during the year to
113,000 and, at a time of continuing
unemployment in many of the markets
in which we operate, and despite the
continued drive for efficiency within
our businesses, we are proud to have
provided employment to 7,000 more
people this year.
Dividends
I am pleased to report that a final dividend
of 22.65p is proposed, to be paid on
10 January 2014 to shareholders on the
register on 6 December 2013. Together
with the interim dividend of 9.35p paid
on 5 July 2013, this will make a total of
32.0p for the year, an increase of 12%.
Outlook
We expect a further reduction in
profit from AB Sugar next year as EU
sugar prices fall and the market rapidly
adjusts ahead of regime reform in 2017.
Primark’s continued expansion together
with revenue growth and margin
improvement in Grocery are expected
to deliver further increases in profit in
those businesses. The lower level of
borrowings and the retirement of more
expensive long-term financing this year
will lead to a reduced interest charge.
As a result, and at this early stage, we
continue to expect adjusted earnings per
share for the coming year to be similar
to 2013.
Charles Sinclair
Chairman
Associated British Foods Annual Report and Accounts 2013
10
SUGAR
Nothing goes to
waste in a sugar
factory
As one of the world’s leading
low-cost producers, AB Sugar has
an unwavering focus on continuous
improvement and operational
excellence. Best practice in
agronomy and sugar production is
shared across the group with the
lessons learned by our more mature
operations passed on to those at an
earlier stage of development. This
accelerates efficiency improvement
and enables the business to make
the most of every stick of cane and
root of beet.
At the heart of the business
philosophy is the need to eliminate
waste and to generate real value
from our range of co-products: cane
trash is burned as fuel; stones
removed during beet cleaning are
used in civil engineering; soil is
graded, conditioned and sold as
topsoil; lime used in the purification
process is sold for soil conditioning;
residual vegetable matter, once the
sugar has been extracted, is used
as animal feed; combined heat and
power plants export surplus energy,
generated through the conversion
process, to the grid; hot water and
CO2 is used to propagate tomatoes;
and betaine is produced which is a
valuable animal feed supplement.
Go to page 22 for more information
11
Associated British Foods Annual Report and Accounts 2013
12
AGRICULTURE
Our expertise
stretches across
the landscape
AB Agri operates at the heart of the
agricultural industry and its unique
breadth and experience enables it
to add value and drive profit for
businesses along the food, drink and
biofuel industry supply chains. Its
activities extend from sophisticated
research and the highest technical
innovation of products, to the
provision of compound animal feed,
starter feeds and premixes, and
include specialist design and delivery
of bespoke agricultural supply chain
solutions. Through its joint venture,
Frontier, it is also the UK’s leading
crop inputs and grain marketing
organisation.
Go to page 25 for more information
Crop production
Feed manufacturing
Grain farmers
The UK’s largest crop inputs,
agronomy advice and grain
marketing business, including
independent on-farm GPS -
guided precision arable
services.
Technical feed ingredients
Sustained investment in R&D
stimulates the development of new
highly technical and innovative
products such as micro-ingredients
for animal feeds; including enzymes,
yeasts, betaine, buffers and binders.
Premixes and starter feeds
Manufacturers of high-
quality bespoke vitamin/
mineral premixes and
micro-ingredients supplied
with world-class nutrition
advice internationally.
FROM
FARM
Associated British Foods Annual Report and Accounts 2013
13
Livestock production
Supply chain solutions
Animal feeds
Leading manufacturers and
marketeers of compound feeds,
blends, straights and ‘alternative
feeds’ selling direct to farmers,
merchants, blenders, compounders
and processors across all species.
Creating value through the
implementation of traceability
programmes across supply chains
with a range of flexible models that
enable quantitative measurement,
continuous improvement and
reporting of sustainability parameters.
Expert nutrition advice
and analytical services
Throughout AB Agri’s operations
the business propositions are
underpinned by the provision of
world-leading nutrition expertise
and analytical services from a
dedicated team of highly
trained specialists.
TO
FORK
Associated British Foods Annual Report and Accounts 2013
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RETAIL
Amazing fashion,
Amazing prices
Primark is a dynamic and exciting
retail proposition offering
up-to-the-minute fashion at amazing
prices. This unique product offering,
together with an extensive store
opening programme, has established
Primark as the go-to fashion
destination in some of the most
sought after retail locations across
Europe including London, Madrid,
Berlin, Dublin and Lisbon.
Primark stores combine energy,
excitement and style to create a
second-to-none shopping
experience. Take a stroll around one
of Primark’s flagship stores and see
for yourself! Bright, trend-focused
feature walls, mannequins pulling
together key looks and LED screens
all showcase the latest product
campaigns and fashion stories.
The constant flow of bulging carrier
bags leaving the stores is a
testament to Primark’s mass appeal.
The combination of amazing fashion
at amazing prices sold in a
contemporary and exciting store
environment are the key elements
that make the Primark proposition
unique.
Go to page 27 for more information
Associated British Foods Annual Report and Accounts 2013
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00
GROCERY
Everyday products
for people
everywhere
A well-managed food brand is
far more than just a label. It is an
indication of quality and a guarantee
of consistency that reflects the
values of the consumer. Good
brands are built using insight and
understanding of customers’ tastes
and cultures to create a bond of
trust, often over many years, if not
generations. Associated British
Foods, through its global businesses,
is the owner of an enviable portfolio
of leading food brands that reflect
the wonderful tastes of food from
a diversity of cultures around
the world.
Go to page 30 for more information
Associated British Foods Annual Report and Accounts 2013
Associated British Foods Annual Report and Accounts 2013
17
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Associated British Foods Annual Report and Accounts 2013
Associated British Foods Annual Report and Accounts 2013
18
Associated British Foods Annual Report and Accounts 2013
19
INGREDIENTS
Innovation,
technology,
experience
and worldwide
expertise
The baking of bread in one form
or another has been undertaken
across the planet for thousands of
years yet we are still searching for
ways to improve its taste, texture
and shelf life in response to changing
lifestyles and a variety of cultural and
regional demands. Our technology
extends beyond flour, fats and yeast
into the use of dough improvers,
conditioners and enzymes, and we
provide innovative solutions across
the bakery spectrum from major
plant bakeries to local artisans.
Although yeast and bakery
ingredients were the foundation
of our Ingredients division, our
businesses now reach into the
worlds of brewing, wine making,
biotechnology and pharmaceuticals,
with expertise in yeast extracts,
lipids, esters and speciality proteins.
Go to page 34 for more information
OPERATING REVIEW
The long-term performance of the group is important to us
and this year’s growth is in line with the compound annual
revenue and profit growth achieved over the last ten years
of 10% and 11% respectively.
20
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I am delighted to report that the
group has again delivered a great
set of results. The group’s revenue
increased by 9% to £13.3bn and
adjusted operating profit increased
by 10% to £1,185m. The long-term
performance of the group is
important to us and this year’s
growth is in line with the compound
annual revenue and profit growth
achieved over the last ten years of
10% and 11% respectively. This
success is a direct result of our
business model, more description
of which is presented in this
annual report.
AB Sugar delivered an excellent profit
this year which, although lower than last
year, was in line with our expectations.
The date and extent of EU sugar regime
reform have now been clarified and sugar
prices for our next financial year are
already reflecting a transition. We have
invested significantly in our European
sugar assets over the years and the
AB Sugar management team has plans
for further efficiency improvements.
As a result, we have established British
Sugar as one of the lowest-cost sugar
businesses in the world. Maintaining our
dialogue with growers and strengthening
our relationship with them will be
necessary to build a sustainable and
competitive sugar industry for the future.
With the strength of
the group’s balance
sheet and strong
cash generation we
have every reason
to be confident in
the continuing
development of
the group.
The Primark results this year were
remarkable with sales increasing by 22%
and profit by 44%. Both the autumn/
winter and spring/summer ranges sold
out this year with little discount, which
was testament to the success of our
buying teams. Our newly opened and
refurbished stores have never looked
better and the increase in our selling
space in continental Europe was
significant. Expansion in our more
established markets of the UK and
Ireland focused on increasing selling
space in major cities. In London, we
opened our second store on Oxford
Street, and extended our stores in
Manchester, Newcastle and Mary Street,
Dublin. In continental Europe, we increased
selling space by 25% and were very
encouraged by trading in all countries.
Each new store opening generated
excitement which gives us the confidence
to believe that Primark is capable of much
further growth and I look forward to the
opening of our first store in France.
We were shocked and deeply saddened
by the events in April 2013 when the
Rana Plaza building in Bangladesh
collapsed killing more than 1,100 people.
A Primark supplier occupied the second
floor of this eight storey building which
was also the location of a number of
other garment manufacturers. Our
response focused on meeting the
immediate needs of the victims and,
in parallel, organising long-term
compensation. We donated food to
some 1,300 families shortly after the
tragedy, and have since paid short-term
financial support of six months’ salary to
more than 3,600 workers in the building,
irrespective of their employer. Primark
has committed to provide long-term
financial compensation to victims who
worked for its supplier, and their
dependants. This was an unprecedented
undertaking for us and was only possible
with the support and close collaboration
of international and local stakeholders
including NGOs and trade unions.
Associated British Foods Annual Report and Accounts 2013
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The garment industry in Bangladesh has
also experienced a number of factory
fires in recent years. As a result, we
signed the Accord on Fire and Building
Safety in Bangladesh, a pioneering
agreement between almost 100 apparel
brands and retailers, international and
local trade unions and NGOs. Primark
was the first UK brand to sign this accord
which is designed to ensure that
sustainable improvements are made
to working conditions in the garment
industry and reinforces our commitment
to health and safety in the workplace.
Grocery made good progress this year
with revenue growth and profit ahead
by 24%, mainly as a result of margin
improvement from both good trading and
the non-recurrence of restructuring costs.
Twinings Ovaltine is our most profitable
grocery business and it achieved
excellent results, performing well in all of
its major markets. I am pleased with the
much improved result from George
Weston Foods in Australia following the
action taken by the management team
which delivered higher volumes and
lower conversion costs in the meat
business and increased sales and
margins in the bread business. The
results in UK Grocery showed good
progress from Jordans, Ryvita, Westmill
and AB World Foods, offset by margin
pressure in the bakeries and
Silver Spoon.
The management team at AB Agri
deserves much credit for its achievements
over recent years. These have seen the
development of the business into a
profitable group that makes a major
contribution to agriculture, especially
in the UK, focused on providing value-
adding animal feed products and
services. It is recognised for its
innovation and the development of
bespoke services to customers, and
this year delivered a record profit.
Following last year’s appointment of
a new chief executive at AB Mauri, our
yeast and bakery ingredients business, a
number of further management changes
have been made during the financial year.
Some stabilisation in underlying trading
has already been achieved and the new
team is engaged in reviewing the cost
base and structure of the business.
Although the level of capital expenditure
was lower again this year, it still
represents a substantial investment in
the assets of the group. We completed
a number of projects in AB Mauri and
AB Sugar and took a major step forward
in the programme to equip our UK
bakeries with state-of-the-art bread
plants. The rate of selling space
expansion at Primark is increasing and
we expect capital investment in the
coming year to rise. We can fund this
comfortably from the high level of cash
generated from operations.
Summary
Looking ahead to the next few years
we see excellent prospects for Primark
and further margin recovery in Grocery.
However, this year we have seen an
earlier than anticipated weakening of
EU sugar prices, ahead of the now
confirmed reform of the European sugar
regime in 2017, and, as we stated in our
September statement, this is expected
to reduce AB Sugar’s profits further. With
the strength of the group’s balance sheet
and strong cash generation, we have
every reason to be confident in the
continuing development of the group.
George Weston
Chief Executive
Associated British Foods Annual Report and Accounts 2013
SUGAR
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Revenue
£2,677m Level
Adjusted operating profit
£435m -15%
Adjusted operating profit margin
16.2% 2012: 19.1%
Return on average capital
employed
23.4% 2012: 26.5%
AB Sugar is a leading multinational
in the expanding international
markets for sugar and sugar-derived
co-products. In the EU, Azucarera
is the major producer in Iberia and
British Sugar is the sole processor
of the UK sugar beet crop and is
Europe’s most efficient processor.
Illovo Sugar, in which the group has
a 51% stake, is the largest sugar
processor in Africa and is one of the
world’s foremost low-cost producers.
We also have substantial businesses
in China producing cane sugar in the
south and beet sugar in the north
east. The group currently operates
31 plants in ten countries and has
the capacity to produce over 5 million
tonnes of sugar and 600 million litres
of ethanol annually. We also have the
capacity to generate power sufficient
to meet most of our internal needs
and, in a number of locations, we
export power into the local grid.
As a consumer of a large quantity
of agricultural inputs, we have a
number of programmes to maximise
crop yields whilst also minimising the
usage of herbicides, pesticides and
water. This applies equally to our
out-grower estates, funded jointly
with our growers, as well as our own
farms. We seek to ensure the early
transfer of technology and best
practice across AB Sugar. We are a
significant employer in each of our
countries of operation, some of
which are among the most
impoverished in the world. AB Sugar
seeks to ensure the wellbeing of all
its employees, their families and the
wider community and in the
developing countries we provide
more wide-ranging social support
including the provision of hospitals,
schooling, housing and healthy
living programmes.
After last year’s record performance,
AB Sugar delivered revenue and
underlying adjusted operating profit in
2013 that were in line with
management expectations at the
beginning of the year which
recognised that reduced European
production, as a consequence of
lower yields, and higher beet costs in
the UK, would lead to a profit decline.
Production volumes in Africa were ahead
of last year and profit benefited from
good sales demand and stable pricing.
Profitability in China was lower than last
year as a result of weak sugar prices
throughout the year. Our performance
improvement programme is now firmly
established across all our businesses
with the aim of increasing asset
utilisation and reducing costs. The
programme seeks to embed continuous
improvement within all areas of our
businesses by identifying and driving
major change initiatives, tailoring capital
expenditure to underpin our performance
improvement and accelerating the
implementation of co-product activities
across the group.
British Sugar produced 1.15 million
tonnes of sugar, lower than last year’s
1.32 million tonnes as a result of poor
growing conditions during 2012 which led
to lower beet yields and sugar recovery.
Sugar prices generally remained strong,
consolidating the full year impact of last
year’s price increases. Co-product prices
remained good with animal feed sales
supported by exceptionally high wheat
prices. These were offset to some extent
by low, combined heat and power plant
contributions, which were a feature of
low electricity prices but high gas prices.
We continued to invest in our production
facilities with completion, during the year,
of several major schemes focused on
reducing energy consumption and
increasing plant reliability. Looking
forward to 2013/14, crop yields are
expected to be slightly below average
but we expect sugar production to at
least achieve sales quota and to meet
our bioethanol requirement. Beet costs
for the forthcoming financial year were
agreed in June 2012 at levels similar to
those incurred in the campaign in this
financial year.
In Spain, sugar beet volumes were lower
than last year with a reduction in the area
planted in the north. Heavy rains in the
spring led to a delay in the completion of
the campaign until the second week of
May. Beet yields in both the north and
south were very good and partly
compensated for the lower volumes.
Total beet sugar production was 405,000
tonnes, down from 468,000 tonnes in
the previous year. 242,000 tonnes of
imported raw sugar were refined at
Guadalete and a further 95,000 tonnes
were co-refined at the northern beet
plants. Significant energy efficiency
improvement work was completed
during the year substantially reducing
the energy cost per tonne of refined
white sugar.
Associated British Foods Annual Report and Accounts 2013
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FOCUS ON SUGAR
AB SUGAR CHINA: NEW FACTORY COMMISSIONED
ILLOVO SUGAR: MALARIA IMPROVEMENTS IN MOZAMBIQUE
abf.co.uk
In north China, successful commissioning of the Zhangbei factory
was completed in time for the campaign start of 8 November 2012.
This was a tremendous achievement considering the difficult
weather conditions experienced in the region during the last two
years. Zhangbei achieved weekly processing throughput averages
of over 4,200 tonnes/day throughout its campaign.
AZUCARERA: RECORD YIELDS IN SPAIN
108
average
yield in tonnes/ha
achieved by
Spanish beet
growers
Spanish beet growers achieved an average
yield of 108 tonnes/ha of adjusted beet,
a new European record. This significant
achievement can be attributed to the
professionalism of growers, research and
development investment, knowledge
transfer and application of technical factors,
such as sowing dates, use of recommended
crop varieties and the correct application
of water.
Working together with the National Malaria
Control Programme, Illovo’s programme
achieved a 48% reduction in the number
of cases of malaria within the Maragra Sugar
Estate over a two-year period. This has been
extended into the surrounding local community,
where a 42% reduction was achieved this
year. Illovo continues to implement malaria
control measures in all areas of operation
where the disease is prevalent.
5,631
cases in 2012
3,291
cases in 2013
42%
reduction in cases
of malaria
BRITISH SUGAR: GRADUATE & APPRENTICE SCHEMES
Each year, British Sugar
invests in the future of over
40 young people through its
graduate and apprentice
training schemes. The British
Sugar graduate schemes last
for two years and equip
individuals with the
knowledge and experience to
develop into future business
leaders. The scheme received
external recognition in 2012/13
through the Times Top 100
and the Guardian UK 300 as a
graduate employer of choice.
Associated British Foods Annual Report and Accounts 2013
SUGAR CONTINUED
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In June 2013, the European Council of
Ministers confirmed that existing quota
arrangements would continue until 30
September 2017 when sugar quotas for
domestic production would end. Tariffs
for sugar imports into the EU are not
affected. AB Sugar expects this change
to encourage growth in EU production
by the most efficient producers of both
sugar and isoglucose.
Negotiations with our EU customers
regarding prices for the 2013/14
marketing year have been challenging.
There has been a higher availability of
sugar in the EU as a consequence of the
conversion of non-quota sugar to quota,
additional tariff rate quotas for imported
sugars and low world sugar prices. In
addition, competition has increased as
other European producers look for new
market opportunities ahead of regime
change. Both of these factors have
created a downward pressure on EU
prices. The market is rapidly adjusting
ahead of the regime reform in 2017.
As a well-invested business, and one
of the world’s lowest-cost producers,
we believe that we are well placed to
succeed in this market with higher sugar
volumes, albeit at lower prices.
Construction of Vivergo’s bioethanol
plant in Hull was completed last year
and continues to make progress, albeit
behind plan. Monthly production volumes
are increasing and full production is
expected in the new calendar year.
The plant uses feed wheat and has the
capacity to produce 420 million litres of
bioethanol and 500,000 tonnes of
high-protein, high-fibre animal feed.
Illovo’s sugar production of 1.87 million
tonnes for the financial year compared to
1.77 million tonnes last year, reflecting
further recovery in the South African crop
and good performances from the
recently expanded facilities in Swaziland
and Zambia. Prices throughout the year
were generally stable although increased
levels of imports into Tanzania and South
Africa have brought some price pressure
in these two countries. In Malawi, the
As a well-invested
business, and one
of the world’s lowest-
cost producers, we
believe that British
Sugar is well placed
to succeed in this
new environment.
currency has stabilised and domestic
prices were increased in line with
inflation. Pressure on prices across the
region is expected to increase in the
coming year.
The recently completed new
custom-designed warehouse and
distribution facility in Pietermaritzburg
is fully operational and will provide
improved storage and logistics benefits to
the South African business. Construction
of the new potable alcohol distillery in
Tanzania was successfully completed
within budget. This plant is now in the
final stages of commissioning with the
first sales made in October. The three
downstream facilities in South Africa all
operated well.
In China, sugar production in the south
was higher than last year at 500,000
tonnes, principally due to an increase in
the planted area, and in the north was in
line with last year at 277,000 tonnes. An
increase in sugar supply, from high levels
of imports and improved domestic
production, led to lower sugar prices.
With exceptionally high government
intervention stockholdings, the price
outlook for the new financial year remains
challenging. The business sustained a
significant loss in the year and embarked
upon a major cost reduction and factory
efficiency programme. This included, in
the first half, the decision to mothball our
Baolongshan and Wangkui factories at
the end of the campaign, with a non-cash
charge of £22m included within adjusted
operating profit. In early September we
completed the sale of our beet factory at
Chifeng where the regional government
had announced its intention to redevelop
the area. A charge of £15m has been
taken as a loss on sale of businesses
in the income statement.
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AGRICULTURE
to prefer locally produced meat has
provided a welcome stimulus to the UK
industry and there are some signs of raw
material costs beginning to fall.
Our UK feed business, AB Connect, saw
strong demand for ruminant feeds, and
poultry feed volumes grew in line with
increased demand from UK consumers.
Our international feed enzyme and
micro-ingredients business, AB Vista,
continued to grow faster than the market,
particularly in North America with the
success of our Quantum Blue phytase
enzyme, sales of which were up more
than 30% on last year. The business
also became the second largest global
supplier of betaine, a functional
micro-ingredient extracted from sugar
beet molasses.
Premier Nutrition traded well, particularly
in UK poultry, and maintained its
market-leading position in UK starter
feeds. Further progress was achieved in
its developing markets in Asia, and
Central and Eastern Europe. AB Sustain’s
beef and dairy farm carbon footprint
models have been improved further and
were recertified by The Carbon Trust. In
addition, its new biodiversity valuation
programme ‘Think.Nature’ secured an
endorsement from Natural England.
China continued to be a challenging
market, particularly in pigs and poultry.
Progress in poultry was hampered by
an avian flu outbreak during the year but
growth was achieved in our co-products
business. Good raw material
procurement and cost management
underpinned profit delivery.
Frontier performed well in a year in
which the supply of UK grain was poor
and of variable quality. A higher volume
of wheat imports increased the
complexity and cost of the UK cereal
supply chain which, together with global
price volatility throughout the year,
resulted in strong earnings from grain
trading. A wet autumn in 2012 lowered
wheat plantings thereby reducing
demand for fertiliser and crop protection
products. However, the cool spring and
warm summer of 2013 provided good
growing conditions for autumn planted
crops and spring cereals creating a
better harvest potential than was
previously expected.
Revenue
£1,410m +11%
Adjusted operating profit
£47m +18%
Adjusted operating profit margin
3.3% 2012: 3.2%
Return on average capital
employed
16.4% 2012: 16.5%
AB Agri is a major business in UK
agriculture and is increasingly
operating on a global scale. It supplies
feed and technology-based products
and services to farmers, feed and
food manufacturers, processors and
retailers. It also buys grain from UK
farmers and supplies them with
agronomy advice and crop inputs
through its joint venture, Frontier.
Operating across the agricultural
supply chain, AB Agri manufactures
high-performance compound feeds,
provides world-leading analytical
services, nutritional advice and poultry
marketing services for customers.
It provides a value-added service to
food, drink and bioethanol companies
internationally, by marketing their
co-products as animal feed, which
in turn helps to reduce the costs of
production for its farming customer
base. Working globally it supplies
the livestock and pet industries with
premixes, enzymes and other technical
ingredients and plays a key role in
delivering supply chain integrity for
retailers and processors.
AB Agri’s operations comprise:
• AB Connect – a UK business
recently created to unite the
long-established feed businesses
of KW, Trident and ABN which
supply the UK’s food and
farming community;
• AB Vista – an international supplier
of world-leading feed ingredients
and technical services;
• Premier Nutrition – a supplier of
high-quality, bespoke, vitamin/
mineral premixes, starter feed and
micro-ingredients, with
world-class nutrition and
formulation expertise;
• AB Sustain – a specialist in
designing, developing and
delivering bespoke sustainable
agricultural supply chain solutions
for clients;
• AB Agri China – two regionally
based businesses: ABNA, which
is a high-performance feed
manufacturer for the ruminant, pig
and poultry sectors, and ABCA,
which is a co-product marketing
and feed additives business; and
• Frontier – a joint venture which is
the UK’s leading crop inputs and
grain marketing organisation.
Agriculture had a record year with
revenues and profit well ahead of last
year driven by a strong performance
across the UK businesses and
international growth for AB Vista.
The UK livestock sector experienced a
mixed year. Dairy farmers saw milk price
increases being largely offset by higher
costs and poor quality and quantity of
forage. Consolidation in the poultry
market depressed farm margins and the
pig market continued its slow recovery
from several years of low margins and
high raw material costs. The continuing
trend among UK consumers and retailers
Associated British Foods Annual Report and Accounts 2013
AGRICULTURE CONTINUED
26
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FOCUS ON AGRICULTURE
AB AGRI INNOVATION BOARD: A COMMITMENT
TO COLLABORATION AND INVESTING IN R&D
PREMIER NUTRITION TAKES FEED ASSURANCE TO NEW
LEVELS WITH STATE-OF-THE-ART PREMIX FACILITY
70+
contributors from
our nutrition and
commercial teams
AB Agri’s Innovation Board enters its
second year, encouraging innovation and
sustainability through collaboration and
funding. We have made great progress
in the first six cross-business projects,
with the first project expected to realise
commercial benefit early in 2014. With
over 70 contributors from our nutrition
and commercial teams, across AB Vista,
Premier Nutrition, AB Connect, AB Sustain
and Frontier, we are excited about how
increased collaboration is driving
innovative idea generation.
Premier Nutrition has invested heavily to develop the most
advanced premix facility which will deliver the highest level
of premix assurance to its animal feed customers.
The new pharmaceutical-standard premix facility is designed
to deliver unsurpassed levels of assurance through automated
enhancements of the ultra-safe and residue-free tumble mixing
system. This means that all premixes are delivered with the same
level of homogeneity, safety and traceability. The use of NIR
analysis of incoming micro-ingredients, precision weighing,
residue-free tumble mixing and ‘intelligent’ packing systems means
that Premier Nutrition customers can enjoy complete assurance
that every bag of custom-made premix, that they add to their
animal feed, delivers the nutritional benefits they have worked
hard to formulate.
AB CONNECT LAUNCHES NEW BIOETHANOL
DISTILLERS’ FEEDS
UK farmers welcomed the commencement of production at the
Vivergo Fuels bioethanol site. The range of co-products produced
by the facility in Saltend, Hull, including dried and liquid protein
feeds, will help meet UK feed demand and reduce reliance on less
sustainable imported proteins.
AB Connect is responsible for developing new routes to market for
the products from the largest single site producer of animal feed
anywhere in Europe – producing over half a million tonnes of feed
per annum once operating at full capacity.
Associated British Foods Annual Report and Accounts 2013
QUANTUM BLUE CONTINUES TO DELIVER UNPRECEDENTED
PERFORMANCE
AB Vista has experienced major growth since the launch of
Quantum Blue. Its strategy to lead the debate on the importance
of phytate degradation has shifted industry thinking. Nutritionists
are changing how they use phytase, with higher inclusion levels
delivering greater value. In addition to gaining new customers,
AB Vista has increased the size of the phytase market through
this innovative approach.
RETAIL
27
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Revenue
£4,273m +22%
Adjusted operating profit
£514m +44%
Adjusted operating profit margin
12% 2012: 10.2%
Return on average capital
employed
26.1% 2012: 19.2%
Primark is one of the largest clothing
retailers in Europe. It has 257 stores
and employs 48,000 people in
the UK, Republic of Ireland, Spain,
Portugal, Germany, the Netherlands,
Belgium and Austria. It was founded
in June 1969 in the Republic of
Ireland where it continues to
trade as Penneys.
With a unique combination of the
latest fashion and lean operations,
Primark offers customers quality,
up-to-the-minute designs at value-
for-money prices. Buying and
merchandising teams travel
internationally to source and buy
garments that best reflect each
season’s key fashion trends. Primark’s
range includes womenswear, lingerie,
childrenswear, menswear, footwear,
accessories, hosiery and homeware.
Primark’s organic growth has been
achieved through a combination of
like-for-like growth and increasing
selling space. The like-for-like growth
reflects investment in buying,
merchandising and our success in
constantly refreshing the stores to
ensure they remain exciting places
to shop. The increase in selling
space has been driven by capital
investment in freehold and leasehold
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properties as they have become
available, first on the high streets
of the UK and Ireland, and more
recently on the high streets and in
the shopping centres of continental
Europe. The rate of growth has
accelerated and sales in the last
five years have more than doubled.
2006 saw Primark’s first foray into
continental Europe with the opening
of a store in Madrid. The business
now has 257 stores across eight
countries and operates from 9 million
square feet of selling space.
Expansion continues apace with the
first Primark store in France due to
open before Christmas 2013.
This excellent result
was driven by an
increase in retail
selling space, like-
for-like sales growth
of 5% for the full
year, and superior
sales densities in the
larger new stores.
Primark’s revenue was 22% ahead
of last year at actual exchange rates,
which benefited from the recent
strengthening of the euro, and was
21% ahead at constant currency.
This excellent result was driven by an
increase in retail selling space, like-for-like
sales growth of 5% for the full year, and
superior sales densities in the larger new
stores. Like-for-like growth during the
year was affected by two periods of
unseasonable weather; it was flattered
at the start of this financial year with the
benefit of seasonal autumnal weather
compared with an unseasonably warm
autumn in 2011, and was subdued during
the very cold months of March and April
2013. Trading at other times of the year
was strong, building upon the success
of the comparable periods in the prior
year. Trading in our stores in northern
continental Europe was strong
throughout the year and like-for-like
growth in Spain, which was initially held
back by the large number of new store
openings, improved later in the year.
Sales of the autumn/winter range in
the new financial year are encouraging.
Operating profit margin in the first half
was higher than last year reflecting the
benefit of lower cotton prices and lower
markdowns. The strong trading over
the summer also resulted in lower
markdowns in the second half and the
margin for the full year exceeded our
expectations at 12.0%. A feature of this
year was the achievement of satisfactory
operating profit margins, more quickly
than expected, in northern continental
Europe. This was delivered by superior
sales densities and a focus on operating
costs. Adjusted operating profit was 44%
higher than last year at £514m reflecting
the strong revenue growth. Movements
in exchange rates had no material effect
on profit.
Primark is an international brand with
a global supply chain sourcing products
from a number of countries in Europe and
Asia. We have a responsibility to act and
trade ethically and we have a duty of care
to workers throughout the supply chain.
Associated British Foods Annual Report and Accounts 2013
RETAIL CONTINUED
28
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We are signatories to the United Nations’
Guiding Principles on Business and
Human Rights. These were launched
in 2012 and outline the responsibility
of business and government to protect
human rights by preventing and
remedying the impact of abuse. This year
we further strengthened our in-country
teams of ethical trading specialists who
are critical in supporting sustainable
improvements within supplier factories,
and providing greater visibility across the
supply chain. We conducted 1,825 audits
in the last calendar year and ethical trade
training continues to be provided to every
new Primark employee. We are also
developing ways to support workers’
livelihoods and wellbeing through
longer-term initiatives such as the
HERproject, focused on education
regarding health and nutrition, and our
Sustainable Cotton programme.
This was another very active year for
Primark’s property team and saw the
group extend its operations into Austria
for the first time with stores in Innsbruck
and Vienna. We opened 16 new stores in
total during the financial year, including
our second store on London’s Oxford
Street which has 82,000 sq ft of selling
space. We extended and refurbished the
stores in Manchester, Newcastle,
Chester and Mary Street, Dublin and
closed the smaller of our two stores in
Lincoln. This added 0.8m sq ft of selling
space and brought the total to 257 stores
and 9.0 million sq ft at the financial
year end.
Our new store design provides an
exciting, fashionable and fun shopping
experience. Strategically placed
mannequins help to inspire customers to
choose outfits that are readily available
on adjacent fixtures, and prominent
signage and wider aisles enable easy
navigation through the store. We are also
enhancing customer service by providing
a higher ratio of fitting rooms and cash
registers to ensure a smoother
experience when trying on outfits
and paying for them.
The new financial year will see another
busy schedule of store openings. We
expect to add more than a million square
feet of selling space during the year, with
an extensive programme of 13 openings
in time for Christmas 2013 including five
in Spain and our first store in France,
which will open in Marseille. We also
have plans to open a further four stores in
France during the financial year. Although
our focus is to develop the business
through expansion in our existing countries
of operation, we continue to explore
territories beyond this geographic
footprint in the medium term.
We have invested further to improve
the efficiency, and increase the capacity,
of our logistics network. A purpose-built
depot in Mönchengladbach, in the west
of Germany, came into operation in
August 2012 with 425,000 sq ft of
warehouse space. This increased our
total warehouse capability to 2.7 million
sq ft, adding to the footprint of our
existing depots in Ireland, the UK and
Spain, and enabled a more flexible
response to the needs of our customers
in northern Europe. We also undertook
a substantial upgrade of our
garment-on-hangers system in Magna
Park in the UK, and extensions to the
Spanish and German sites are planned
for the new financial year to facilitate
our growth across continental Europe.
FOCUS ON RETAIL
NEW STORE OPENINGS IN 2012/13
16
new stores this financial year across
the UK, Republic of Ireland and
mainland Europe
257
stores in total
58
stores across mainland Europe
SPAIN
Orihuela, La Zenia
Santander, Valle Real
Santiago de Compostela
Valladolid
Vitoria
Zaragoza, Puerto Venecia
GERMANY
Karlsruhe
Frankfurt, Zeil
AUSTRIA
Innsbruck
Vienna North (G3)
THE NETHERLANDS
Almere
UK
Oxford Street East
Thanet, Westwood Cross
Peterborough, Queensgate
Milton Keynes
West Bromwich
UK RELOCATION
Sunderland, Bridges
UK CLOSURE
Lincoln
Associated British Foods Annual Report and Accounts 2013
Store expansion by region
September 2012
Change in year
September 2013
UK
Iberia
Republic of
Ireland
Northern Continental
Europe
Total
sq ft
000
5,425
335
5,760
+6%
stores
157
4
161
sq ft
000
1,100
230
1,330
+21%
stores
35
6
41
sq ft
000
1,010
20
1,030
+2%
stores
38
–
38
sq ft
000
665
215
880
+32%
stores
12
5
17
sq ft
000
8,200
800
9,000
+10%
stores
242
15
257
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BIGGER BETTER STORES
PRODUCT JOURNEY
Our newest stores typically have a larger sales area than the average for
the Primark estate and also benefit from new space efficient display
equipment. When combined with improved visual merchandising, eye-
catching inspirational windows and digital video screens showing our
product ranges, they deliver an exceptional customer experience.
From trend research and development right through to
the shop floor, Primark takes inspiring ideas and brings them
to life fast! All produced at a great value price that appeals
to the masses.
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NEW AND IMPROVED DIGITAL EXPERIENCE
Primark has developed a completely new non-transactional
platform to showcase the brand online via Primark.com to a wide
international audience.
This exciting and interactive site enables Primark to promote the
breadth of its fashion ranges, the amazing prices, encourage customers
to share their latest purchases and help them find their nearest store
via an engaging desktop platform and a dedicated mobile site.
Inspiration
Design teams commence
research based on a wide range
of inspiration including trend
forecasts, catwalks, bridge
designer ranges, street style
and celebrity influences.
Development and planning
Once the products are identified
they are then developed into a
technical pack. The supplier takes
the brief specified and puts it into
sampling in their in-house
sample rooms.
Production
The buyer receives an initial
sample for fitting purposes and,
once approved, it becomes the
‘final sealer’ on which all sizes and
details are then based for quality
standard and manufacturing
purposes.
Shipping and delivery
Shipping by sea takes up to six
weeks from Asia and many products
are consolidated at port to ensure
maximum cost efficiency.
In store
Product launch and in store
execution. Many of our key lines
are supported by in-store point
of sale, or window, campaigns.
Associated British Foods Annual Report and Accounts 2013
GROCERY
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Revenue
£3,840m +3%
Adjusted operating profit
£232m +24%
Adjusted operating profit margin
6.0% 2012: 5.0%
Return on average capital
employed
15.8% 2012: 12.2%
Grocery comprises consumer-facing
businesses that manufacture and
market a variety of well-known brands
both nationally and internationally.
Twinings Ovaltine has the broadest
geographical reach, selling premium
teas and malted beverages in more
than 100 countries. AB World Foods
focuses on the creation and
development of world flavours and
its Patak’s and Blue Dragon branded
products are sold internationally.
Westmill Foods specialises in
supplying UK restaurants and
wholesalers with high-quality ethnic
foods including rice, spices, sauces,
oils, flour and noodles under brands
such as Tolly Boy, Rajah, Lucky Boat
and Elephant.
Jordans and Ryvita operates in the
better-for-you cereal and savoury
biscuits categories in the UK but with
increasing international presence.
Jordans has a heritage of using
traditional methods in the production
of its wholegrain cereals and cereal
bars. Ryvita has built a strong
reputation in healthy snacking and is
the UK category leader in crispbreads.
Allied Bakeries produces a range of
bakery products under the Kingsmill,
Sunblest, Allinson and Burgen
brands, with flour and semolina
produced by sister company, Allied
Mills. Speedibake specialises in
own-label baked goods for retail and
foodservice customers. Our retail
sugar business is the market leader
in the UK with Silver Spoon and
Billington’s, complemented by a
range of dessert toppings and
syrups under the Askeys and
Crusha brands.
In Australia, Tip Top is one of the
country’s most recognised brands,
with an extensive range of bread and
baked goods and George Weston
Foods also manufactures a variety
of bacon, ham and meat products
including the Don and KR Castlemaine
brands. In North America, ACH
Foods includes within its range of
branded products, Mazola, the
leading corn oil in the US, Capullo,
a premium canola oil in Mexico
and a collection of herbs, spices
and corn-derived products.
Grocery revenue increased by 3% but
adjusted operating profit increased
by 24%, a substantial improvement
over last year with the benefit of
the non-recurrence of restructuring
costs, a strong performance from
Twinings Ovaltine, and underlying
growth in George Weston Foods
in Australia in the second half.
Twinings Ovaltine again achieved
excellent profit growth driven by higher
sales volumes, improved pricing and an
increase in total marketing investment
with a focus on developing markets.
Twinings achieved significant full year
sales growth in all of its major markets,
and particularly in the US where it was
again the fastest growing tea brand.
Despite more difficult trading in Thailand,
Ovaltine made further progress in its
developing markets of Asia and
South America. Further investment was
made during the year in cost reduction
and efficiency projects across the
business, notably at the tea factory in
Poland and from the bringing in-house of
liquid malt extract production in Thailand.
Allied Bakeries made significant progress
this year in driving volume growth and
reducing its cost base. A combination
of organic volume growth and the
new Co-op supply contract, which
commenced in April this year, drove an
increase in market share and established
Kingsmill as the number two bread brand
in the UK. Allinson bread benefited from
advertising investment which saw the
brand back on television for the first time
in ten years, and Allinson Wholemeal
regained its position as the number
one brand in the Premium Wholemeal
segment. We continued our capital
investment programme to upgrade and
modernise the bakeries. The new bread
line at our Stockport bakery came on
stream in September 2012 and in April
this year we opened a new bread line at
Walthamstow creating one of the most
advanced bakeries in the UK. At West
Bromwich another new bread line is on
schedule to start commissioning during
the autumn of 2013. This is the final
stage of a five-year investment journey
at West Bromwich, which will leave the
site as one of the biggest and most
modern in the world. However, the
UK bakery market remained intensely
competitive and there was some
pressure on margins.
Twinings achieved
significant full year
sales growth in all
of its major markets.
Associated British Foods Annual Report and Accounts 2013
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FOCUS ON GROCERY
UK: TWININGS INFUSIONS: RELAUNCHED WITH
GREAT SUCCESS
23
new products
47
new packaging designs
7
all delivered in seven
months
The redesign and relaunch of our
Infusions range was a major project for
Twinings, delivering 23 new products
and 47 new packaging designs in
7 months. We developed more than
600 variations of the blends to deliver
our best ever tasting Sensations
range, and the cross-functional team
developed new ways of working and
communicating in order to deliver this
complicated project to a challenging
timeline and on budget.
The relaunch of our Infusions range
gave us the opportunity to completely
transform the healthy teas fixture in
our key accounts and this, together
with our new designs and new
product development, has driven
phenomenal growth for both the
Twinings brand and the category.
644,000
more households
have bought Twinings
Infusions this year
abf.co.uk
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AUSTRALIA: ABBOTT’S VILLAGE BAKERY GOES FREE RANGE
Abbott’s Village Bakery was launched in 2009 in order to capture
some of the rapidly growing Premium bread segment. However, a
continued reliance on price promotions and lack of differentiation
meant brand share plateaued.
The consumer trend for more natural products was identified as
a key strategic driver within the business. The Abbott’s Village
Bakery range was reformulated to remove E-numbers in line with
this trend, and qualitative and quantitative research was undertaken
to ensure taste and appearance were optimised.
In order to communicate the brand differentiation and superior products,
a new campaign was developed called ‘Free Range Bread’. Results
so far have been positive. Abbott’s Village Bakery now has its
highest volume share of the Premium segment since launch.
The success of the Abbott’s Village Bakery relaunch demonstrates
that a strong brand, together with consumer-preferred products,
can provide a long-term platform for growth.
Associated British Foods Annual Report and Accounts 2013
GROCERY CONTINUED
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cost reduction programmes to offset
inflationary pressures. There was also
a continued focus on brand building and
innovation with Burgen, The One and
Abbott’s all being relaunched during the
year resulting in an increase in market
share. The meat business performed
in line with expectations, showing a
significant improvement over last year
with higher volumes and factory
productivity gains resulting in improved
margins and better customer service.
Further efficiencies were achieved in
sales distribution and warehousing,
and administrative costs were
reduced, all of which contributed
to improved profitability.
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Silver Spoon’s revenue and operating
profit were below last year reflecting an
especially competitive year within the
UK packed sugar market. The long, warm
summer resulted in less home baking
although Billington’s maintained its
leading position in brown sugar as a
result of increased press advertising and
point of sale promotions. In the growing
stevia sector, Truvia has become market
leader with two product launches
including a baking blend. Allinson flour
continued to grow strongly, where it is
market leader in the bread flour sector,
following a brand relaunch and
increased distribution.
Jordans and Ryvita both had an excellent
year with strong UK sales growth driven
by the launch of new pack formats.
Jordans achieved its highest market
share since its acquisition five years
ago. The relaunch of Ryvita crispbread in
new foil-fresh packaging drove increased
sales, and new varieties of Crackerbread
and Thins have recently been introduced.
Internationally, both brands achieved
good sales growth, particularly in
Canada, and in France the introduction
of a small in-country marketing team
strengthened our presence and drove
an increase in market share. For the
second year running the business won
the ‘Waitrose Way’ Championing British
award for branded products; this year for
its pioneering work with British farmers
from whom it purchases 80% of its
raw materials.
AB World Foods made good progress
achieving revenue growth in the UK for
Patak’s and Blue Dragon. Internationally,
a number of new products were
launched under these brands with
recipes specifically formulated to meet
national tastes. Those launched in
Canada, Australia and Mexico performed
particularly well. Westmill achieved
revenue growth in its core brands:
Elephant Atta, Lucky Boat noodles,
We opened a new
bread line at
Walthamstow
creating one of the
most advanced
bakeries in the UK.
Tolly Boy basmati rice and Patak’s,
despite continued weakness in the UK
ethnic restaurant and takeaway trade.
The Elephant Atta brand, which was
acquired in September 2012, traded
well and production, warehousing and
distribution were all successfully
integrated during the year.
At ACH in the US, baking volumes
recovered after a warm 2012 winter,
and prices were increased to recover
higher commodity costs. Flavours
secured increased volumes with key
customers, and Foodservice made
progress as restaurant trade showed
some improvement. Investment in new
product development continued,
supported by a higher level of marketing
and advertising expenditure, particularly
for the new Weber flavouring products
which achieved good distribution. In
Mexico, there has been an improvement
in the overall economic environment and
Capullo volumes increased following
its successful relaunch in 2012.
At George Weston Foods in Australia,
trading met expectations with recovery
and improved profitability in the second
half. The bread business achieved margin
improvement through a combination of
an improved product mix and price
increases, despite a challenging trading
environment where the major retailers
are continuing to promote in-store bakery
products. Good progress was made with
Associated British Foods Annual Report and Accounts 2013
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FOCUS ON GROCERY
US: FLEISCHMANN’S NEW BREAD
MIXES RAISE THE ROOF
Fleischmann’s Simply Homemade Bread
Mix, a new yeast bread mix that delivers
homemade bread in less than an hour, was
launched in the US in 2012 and quickly
became the number one yeast bread mix,
driving baking aisle growth. Simply
Homemade’s success led Wal-Mart to
praise ACH Foods at their annual Baking
Vendor Meeting, and to accept new Simply
Homemade Pretzel Creations in nearly all
of their stores.
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WHOLESALE: ELEPHANT ATTA
ACQUISITION PAYING OFF
Westmill Foods is the UK’s leading
producer and wholesaler of authentic
world foods. In 2012 Westmill acquired
Elephant Atta, the UK’s leading chapatti
flour brand, first launched for the emerging
South Asian market in 1964.
Westmill has also invested heavily in
advertising and promotion to ensure that
the brand remains the UK’s number one
choice for chapatti flour, or atta. As well as
running TV advertising, the business has
engaged with members of the South
Asian community in local centres around
the UK.
1964
the year Elephant Atta was first
launched in Britain
BLUE DRAGON: NOW GOING GLOBAL
Blue Dragon is now the number one brand
of Asian sauces and ingredients in the UK.
AB World Foods has begun to develop the
Blue Dragon brand in other markets around
the world, including Canada, Australia and
the US, with considerable success.
In Canada, distribution of the Blue Dragon
brand has extended across all retailers from
coast to coast, and sales are in double digit
growth as a result of effective advertising
and promotional support.
In January 2013 the Blue Dragon brand was
launched in Australia. This was preceded by
local research and recipe formulation to
ensure the range met the needs and
expectations of Australian consumers.
No. 1
Blue Dragon is now the number one
brand of Asian sauces and ingredients
in the UK
Associated British Foods Annual Report and Accounts 2013
INGREDIENTS
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Revenue
£1,088m +2%
Adjusted operating profit
£1m -96%
Adjusted operating profit margin
0.1% 2012: 2.5%
Return on average capital
employed
0.1% 2012: 4.4%
Ingredients comprises a number of
businesses that supply a range of
ingredients to food and non-food
manufacturers. Together they employ
more than 7,000 people in 52 plants
in 26 countries.
AB Mauri has a global presence in
bakers’ yeast with significant market
positions in the Americas, Europe
and Asia, and is a technology leader
in, and supplier of, bread improvers,
dough conditioners and bakery
mixes. The business employs experts
who have an unrivalled knowledge
and understanding of the yeast and
bakery ingredients business, the
equipment, the processes and the
raw materials.
ABF Ingredients comprises a
range of businesses focusing on
high-value ingredients for both food
and non-food applications. It has
established strong market positions
in enzymes, lipids, yeast extracts
and cereal specialties. It has
manufacturing facilities in Europe
and the US.
SPI Pharma is a leader in custom
formulation solutions for
pharmaceutical and nutraceutical
manufacturers in more than 50
countries. It manufactures and
markets antacids, excipients and
drug delivery systems for tablets
and specialises in drug development
services. It collaborates with
customers to deliver value-added
and cost-effective solutions to
their problems.
Revenue for the full year was 2% ahead
of last year and underlying operating
profit was in line. Adjusted operating
profit includes a rationalisation charge
of £21m for the cost of closing dry
yeast production in Italy following
the start-up of the new low-cost dry
yeast plant in Mexico earlier in the
year, and £5m of accelerated
depreciation in China.
Following the difficulties experienced
by the yeast business last year, the
performance by AB Mauri this year was
steady although markets remain very
competitive and raw material costs
high. The new management team
is undertaking a review of margin
improvement opportunities and
particularly a number of cost
reduction and restructuring initiatives.
There were solid performances from
HispanoAmerica, Australia, New Zealand
and the UK and particularly in the US
where the impact of the failure of a major
customer was mitigated by business
development activities. Trading in China
improved and bakery ingredients
products made a good contribution.
Commissioning of the new yeast factory
in Mexico, which was built to enhance
our reach and competitiveness in the
global dry yeast market, saw the start of
a new phase of business development in
Central America and the Caribbean. The
performance of the new yeast factory
at Yantai, China met expectations. The
recently opened bakery ingredients facility
in Cordoba, Spain was designed to
develop the growing bakery ingredients
market in Iberia and complements our
existing yeast manufacturing and
marketing business there.
At ABF Ingredients, increased demand
in the US for extruded ingredients has
resulted in our existing production facility
reaching full capacity. A new cereal
extrusions factory has been built at
Evansville, Indiana which is now being
commissioned. Further growth was
achieved in bakery, feed and speciality
enzymes, with a particularly good
response to new products launched last
year. The growth achieved by Enzymes
since the factory in Finland was
expanded in 2009 has resulted in this
factory also reaching full capacity, and
further expansion is now being planned.
The yeast extracts business in China was
affected by the reduced availability and
high price of sugar beet molasses with
limited opportunity to improve profitability
through price increases. Production of
yeast extracts in China in the current market
and with high input costs is uneconomical
and we have taken a charge of £72m
within the loss on sale and closure of
businesses in the income statement,
to write down the carrying value of the
associated assets and to provide for
restructuring costs. We have also written
down the value of our yeast assets in
India due to increasingly strict regulatory
requirements for waste discharge.
In August we completed the disposal
of our small US whey protein operation.
Although profitable, we have not been
able to develop sufficiently differentiated
Associated British Foods Annual Report and Accounts 2013
35
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products and the consolidation of the
dairy protein industry presented an
opportunity to exit this market. A charge
of £26m has been taken as a loss on
disposal of the business reflecting a profit
on the disposal of the tangible assets net
of a write-off of the associated goodwill.
Since the financial year end we have
entered into an agreement to acquire,
subject to approval by the relevant
competition authority, a bakery
ingredients business with sales of £50m
and operations in western Europe. This
business will strengthen AB Mauri’s
operations in the region by broadening
its product range in key craft markets
beyond a yeast-only offering.
Increased demand
in the US for
extruded ingredients
has resulted in the
building of a new
factory.
abf.co.uk
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FOCUS ON AGRICULTURE
PHARMABURST: THE MOST WIDELY LAUNCHED ODT PLATFORM
Pharmaburst was the first directly
compressible, off-the-shelf, orally
disintegrating technology (ODT) on the
market. It is the most widely launched ODT
platform, used in over 130 formulations for
more than 60 commercial products around
the world.
Medications developed with Pharmaburst
dissolve quickly in the mouth providing
convenient, easy, and accurate dosing. It is
used in many over-the-counter medicines
for pain, allergies, sleep aids, reduction of
gastric acid, and nutritional supplements.
AB ENZYMES: INVESTING FOR GROWTH
After years of consistent growth, our
enzymes business is getting ready for the
next phase of capacity expansion on the
Finnish manufacturing site in Rajamäki.
Following the last big expansion in 2009
and several smaller expansions more
recently, the coming years will be used to
further complete our manufacturing
footprint in Finland. The result will be a
facility with world-class capabilities to
meet customers’ needs, and in fact the
Finnish site will be one of the largest
enzyme producing factories in the world.
MEXICO: VERACRUZ NOW ON STREAM
Our new factory at Veracruz in Mexico is
now on stream supplying markets across
the Americas and exporting worldwide.
Mexico has a population of over 100
million and is the fourth largest market
for baked goods worldwide (bigger
than the UK, France or Germany).
Associated British Foods Annual Report and Accounts 2013
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FINANCIAL REVIEW
Adjusted earnings per share, which provides
a more consistent measure of performance,
increased by 13% from 87.2p to 98.9p.
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Group revenue increased by 9% to
£13.3bn and adjusted operating profit
was up 10% at £1,185m. Movements
in foreign currency exchange rates had
no material net effect on revenues but
at constant exchange rates, adjusted
operating profit was 12% ahead of
last year. In calculating adjusted
operating profit, the amortisation
charge on non-operating intangibles,
any profits or losses on disposal
of non-current assets and any
exceptional items are excluded. On
an unadjusted basis, operating profit
was 25% ahead of last year at £1,093m
benefiting from the non-recurrence
of last year’s exceptional impairment
charge of £98m.
A net loss of £128m arose on the sale or
closure of businesses this year of which
disposals and closures in our Ingredients
segment accounted for £113m and the
loss on disposal of our sugar business in
Chifeng, north China amounted to £15m.
These losses are excluded from the
calculation of adjusted earnings. Within
the amount charged for the Ingredients
business is a loss of £26m in respect of
the disposal of our US whey protein
operation which was completed in
August 2013. This included a profit on
the disposal of the tangible assets net
of a write-off of the associated goodwill.
Although profitable, we have not been
able to develop sufficiently differentiated
Net cash flow from
operations was very
strong again this
year, increasing from
£1,240m to £1,276m.
products and the consolidation of the
dairy protein industry presented an
opportunity to exit this market. A charge
of £72m was made to write down the
carrying value of certain Ingredients
assets in China and to provide for
restructuring costs, and a charge of £13m
was also made to write down the value of
our yeast plants in India due to increasingly
strict regulatory requirements for
waste discharge.
Finance expense less finance income
of £87m compared with a net charge of
£105m last year. This reduction reflected
the group’s strong cash flow and the
resultant lower average level of net debt
during the year. The redemption of British
Sugar’s £150m 10¾% debenture on
4 July 2013 contributed a small saving on
the interest charge but, with the group’s
very low marginal cost of borrowing, this
will have a more significant impact in the
new financial year.
Profit before tax increased from £761m
to £876m. On an adjusted basis, where
the amortisation of non-operating
intangible assets and any exceptional
items are excluded together with any
profits or losses on the sale of
non-current fixed assets and the sale and
closure of businesses, profit before tax
increased by 13% to £1,096m.
Taxation
We recognise the importance of
complying fully with all applicable tax
laws as well as paying and collecting the
right amount of tax in every country in
which the group operates. We have had
a board-adopted tax policy for many
years which is based on seven tax
principles that are embedded in the
financial and non-financial processes and
controls of the group. Our tax principles
are included in the appendix to our
corporate responsibility report.
The tax charge for the year of £242m
included an underlying charge of £265m
at an effective rate of 24.2% (2012 –
24.8%) on the adjusted profit before tax.
The reduction in the effective rate is a
result of the mix of profits earned in
different tax jurisdictions and the
reduction in the UK corporation tax rate
from 24% to 23%, with effect from
Associated British Foods Annual Report and Accounts 2013
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John Bason
Finance Director
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1 April 2013. Further reductions to 21%
and 20% are due to take effect on 1 April
2014 and 1 April 2015 respectively. The
legislation to effect these rate changes
was enacted before the balance sheet
date and as deferred tax is measured at
the rates that are expected to apply in
the periods when the underlying timing
differences reverse, closing UK deferred
tax balances have been calculated using
a rate of 20%. The tax charge included
a credit of £18m from the calculation
of deferred tax liabilities reflecting
this reduction.
The group is a substantial UK tax payer
and although the rate of corporation tax
has reduced, out of total tax paid in the
year of £252m (2012 – £191m), the
amount paid in the UK increased from
£107m to £133m as a result of the higher
profits earned by our UK businesses.
The overall tax charge for the year
benefited from a £29m (2012 – £33m)
credit for tax relief on the amortisation
of non-operating intangible assets
and goodwill arising from previous
acquisitions. A tax charge of £6m arose
on the property and business disposals.
Earnings and dividends
Earnings attributable to equity
shareholders were £591m, £36m higher
than last year, and the weighted average
number of shares in issue during the year
used to calculate earnings per share was
790 million (2012 – 789 million). Earnings
per ordinary share were 6% higher than
last year at 74.8p. Adjusted earnings per
share, which provides a more consistent
measure of performance, increased by
13% from 87.2p to 98.9p.
The interim dividend was increased
by 10% to 9.35p and a final dividend
has been proposed at 22.65p which
represents an overall increase of 12%
for the year. The proposed dividend is
expected to cost £179m and will be
charged next year. Dividend cover, on an
adjusted basis, is just over three times.
Balance sheet
Non-current assets of £6,921m were
broadly unchanged from last year.
Intangible assets were £188m lower,
mainly reflecting the amortisation and
impairment charges for the year and
foreign exchange translation losses of
£30m. Property, plant and equipment
increased by £11m with capital
expenditure in the year largely offset by
depreciation and impairment charges.
Working capital at the year end was
£58m higher than last year but average
working capital across the year
expressed as a percentage of sales
showed further improvement. Net
borrowings at the year end were £257m
lower than last year at £804m as a
consequence of the very strong
cash flow.
A currency loss of £134m arose on the
translation into sterling of the group’s
foreign currency denominated net assets.
This resulted from a strengthening of
sterling at the end of the year, against the
rand and the Australian dollar which more
than offset the effect of its weakening
against the euro and the US dollar. The
group’s net assets increased by £276m
to £6,497m.
Return on capital employed (ROCE)
for the group increased from 17.0% to
18.5% this year. Grocery and Primark
both delivered an improvement through
much higher profits and Agriculture was
level with last year, but lower profits
resulted in a reduction in the returns
for Sugar and Ingredients. ROCE is
calculated by expressing adjusted
operating profit as a percentage of the
average capital employed for the year.
Associated British Foods Annual Report and Accounts 2013
FINANCIAL REVIEW CONTINUED
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Net borrowings at
the year end were
£257m lower than
last year at £804m.
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Cash flow
Net cash flow from operating activities
was very strong again this year,
increasing from £1,240m to £1,276m.
This increase was driven by the higher
profit and the addition of non-cash items
of amortisation, depreciation and
impairment charges which, in total, were
slightly higher this year. This was partly
offset by a working capital outflow of
£97m compared to last year’s inflow
of £43m and higher corporation
taxes paid.
We continued to invest in the future
growth of the group but the £600m
spent on property, plant and equipment
and intangibles net of disposals during
the year was a reduction on last year’s
investment of £707m. Primark spent
£228m on the acquisition of new stores
and the fit-out of new and existing stores.
Expenditure elsewhere included the
completion of a number of large projects
including the new yeast plant in Mexico,
the South African warehouse and the
distillery in Tanzania for Illovo. Further
expenditure was incurred on our
programme to reduce the cost base
at Allied Bakeries with new bread lines
at three of our UK bakeries. No new
acquisitions were made in the period but
£75m was paid out, almost all of which
related to deferred consideration on
acquisitions made in prior years.
Associated British Foods Annual Report and Accounts 2013
Financing
The financing of the group is managed by
a central treasury department. The group
has total committed borrowing facilities
amounting to £2.4bn, which comprise:
£710m of US private placement notes
maturing between 2014 and 2024;
£1.15bn provided under a syndicated,
revolving credit facility which matures
in July 2015; a £120m loan from the
European Investment Bank maturing in
January 2015 and almost £400m of local
committed facilities in Africa and Spain.
During the financial year we repaid, from
existing cash resources, US$120m of
private placement notes and British
Sugar’s £150m 10¾% debenture. At
the year end, £1.0bn was drawn down
under these committed facilities. The
group also had access to £773m of
uncommitted credit lines under which
£160m was drawn at the year end. Cash
and cash equivalents totalled £362m at
the year end.
The financial strength and flexibility of
the group is enhanced by diversifying
our sources of funding and having
certainty of finance over a long period.
The strength and breadth of the 12 banks
in the syndicate reflect the scale and
international presence of the group.
The syndicated bank finance will be
renegotiated, in the ordinary course of
events, in the months prior to maturity
to ensure the group continues to have
access to funding of an appropriate level
and duration. The average fixed interest
coupon on the private placement notes
is 5.3%.
39
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Pensions
Pensions are accounted for in accordance
with IAS 19 Employee benefits and, on
this basis, liabilities in the group’s defined
benefit pension schemes exceeded
employee benefit assets by £44m
compared with last year’s deficit of
£95m. The UK scheme accounts for 91%
of the group’s total pension assets and
the increase in the market value of these
assets during the year was slightly more
than the increase in the present value
of scheme liabilities. By agreement with
the Trustees, the Company agreed to
eliminate the deficit identified at the
time of the triennial actuarial valuation
of the UK pension scheme in 2008 with
five annual payments of £30m each.
Despite a small surplus at the most
recent triennial valuation in 2011, the
Company agreed to make the remaining
two payments, the last of which was
in March 2013. Total contributions to
defined benefit plans in the year
amounted to £69m (2012 – £71m).
With effect from 15 September 2013
the provisions of IAS 19 Revised will
be adopted by the group and the
comparative results for the financial
year 2013 will be restated as a prior
year adjustment. Under the revised
Accounting Standard the reported
operating profit for 2013 will be reduced
by £4m to reflect a change in the
treatment of administration costs and
the other financial expense will increase
by £3m due to the replacement of the
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Total committed borrowing
facilities (£m)
Diversified sources of term funding
4
3
2
1 Banking syndicate
2 Private placement
3 EIB
4 Africa & Spain
1
1,150
710
120
378
expected rate of return on assets with the
discount rate. There was little difference
between the expected rates of return
on assets and the discount rates in the
group’s schemes in 2013 hence the
small adjustment.
On 1 October 2012 new legislation came
into effect which required all eligible UK
employees to be automatically enrolled
into a qualifying pension scheme. With
40,000 employees in the UK, this was
a major exercise for the group. We
conducted an extensive awareness
campaign in the months leading up to
our selected implementation date of
1 February 2013, which resulted in an
additional 15,000 employees joining
the existing defined contribution section
of the Associated British Foods Pension
Scheme. The charge for the year for the
group’s defined contribution schemes,
which is equal to the contributions made,
amounted to £66m (2012 – £53m).
John Bason
Finance Director
Associated British Foods Annual Report and Accounts 2013
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CORPORATE RESPONSIBILITY
“ Associated British Foods is both diversified and decentralised. We are successful because we
trust the people who run our businesses... The centre engages enthusiastically and deeply with
leaders across our portfolio of businesses, but it doesn’t dictate what operating companies’ agendas
or methods should be. The same is true of our CR agenda... Just as the centre engages with our
businesses on their commercial progress, so we also engage with our businesses on the progress
of their CR work. We firmly believe this is the best way to be effective in taking our social
responsibility seriously.” George Weston, Chief Executive
abf.co.uk/responsibility
ENCOURAGING ETHICAL
BUSINESS: DOWNLOAD OUR
CORPORATE RESPONSIBILITY
REPORT 2013 TODAY
yoUnG GIRLS qUeUe FoR THeIR
DonaTeD SUppLemenTS oF
IRon anD FoLIC aCID TabLeTS,
aS paRT oF THe TWInInGS
joInT InITIaTIVe WITH UnICeF
To HeLp aDoLeSCenT GIRLS In
aSSam, InDIa, WHeRe THe
majoRITy aRe anaemIC DUe
To pooR DIeT. FInD oUT moRe
on paGe 69.
The following pages detail just a
few of our achievements relating to
corporate responsibility. Please refer
to the website for more highlights,
as well as further details of our
accomplishments and case studies.
Our latest corporate responsibility
report is available online at
www.abf.co.uk/responsibility.
ReSponSIbLe
FoR pRomoTInG
GooD HeaLTH
We must use science to inform us of the effect of a particular
food type on the human body. We will label our products
properly and market them appropriately to customers.
George Weston Chief Executive, Associated British Foods plc
We provide affordable and nutritious food and ingredients
to millions of people around the world, and recognise we
have a part to play in helping people to lead healthy lives.
Consumer confidence in the quality and safety of our food
products is essential, and this is a top priority for all
relevant businesses. We are committed to giving our
consumers the necessary information to allow them to
make informed decisions about the type and quantity
of food they want to eat.
Sugar p36
Agriculture p47
Grocery p70
Ingredients p79
LookInG aHeaD: OUR PRIORITIES
1 .
All our food will be
of the highest quality
2 .
We will act responsibly
in how we market to children
3 .
We will support
organisations that
encourage people
to eat balanced diets and
avoid overconsumption
48
Associated British Foods plc Corporate Responsibility Report 2013
abf.co.uk
49
Retail
Retail
intRoduction
2013 has been a tragic year.
The collapse of the Rana
Plaza building in Savar,
Dhaka, Bangladesh, claimed
at least 1,127 lives and
shocked and saddened
everyone at Primark as well
as many others around the
world. Our enduring
thoughts remain with the
families of those who lost
their lives in the tragedy.
Our number one priority is, and
always has been, the safety of
the 43,000 staff we employ directly
and the 700,000 who are employed
by our suppliers in the production
of our clothing across three
continents. The Savar tragedy
underlines and affirms that this
must remain our top priority and
that we must go even further to
enable change in the Bangladeshi
garment industry.
We have tried to respond to
the tragedy in a manner that
is consistent with the way
we conduct all our business –
responsibly and ethically. As
a business that takes care of
its people and recognises its
legal and moral obligations,
our response was guided by our
ethical principles and we acted
immediately. Our first action
was to acknowledge publicly that
Primark did source products from
one of the factories in Rana Plaza.
We moved quickly to meet the
immediate needs of those
affected by the incident with
food and financial assistance
and we promised compensation
for the families of victims and for
injured workers. To address the
root cause of the incident, we
became a signatory to the
Accord on Fire and Building
Safety, designed to ensure
improved and assured building
safety in Bangladesh. We also
instigated an interim programme
of structural assessments on
factories producing for us in
Bangladesh, which led in June
2013 to the termination of our
contract with a supplier that we
deemed to be operating in an
unsafe environment.
There are some who say that
retailers should not source from
Bangladesh but we do not agree,
and neither do international and
local labour groups who know that
jobs in garment manufacturing
have played an important role in
reducing poverty rates in the
country over the last 20 years.
We have made a commitment
to Bangladesh and intend to work
with other stakeholders to ensure
that working conditions are safe.
By doing so, we can be a force for
good. For a full exploration of our
response to the tragedy, please
see page 52.
Primark is one of Europe’s largest
clothing retailers and, in order
to put our principles into action
across the world, we rely on many
partners including NGOs, trade
unions and other stakeholders
to advise and support us as we
strive to bring mutual benefits
to all those who work with and
alongside us. We would like
to thank all our partners for the
role they have played over many
years in helping us to support
our workers, protect the
environment and promote
ethical business practices.
As one of the largest clothing retailers in Europe, and with
an international supply chain, Primark recognises both the
importance and necessity of being a responsible business.
Our top priority is to improve the working conditions of the
people who work for our suppliers and our efforts have been
redoubled in response to the Rana Plaza tragedy.
We also take care to use natural resources efficiently and to
build relationships in the communities in which we operate.
18,596
4,818
Key facts and figuRes
Total no. of employees
46,802
hours of training provided
to suppliers on Primark’s
expected standards
the number of supplier
audits conducted by Primark
between 2010 – 2012
Employee type
8,145 full time
38,611 part time
46 seasonal contractors
85%
proportion of store waste
that is recycled
8,660
number of people helped
by the Primark-supported
HERproject
No. of women in workforce
35,917
No. of women in
management roles
50
Primark recognises its
obligation to consider
carefully its use of natural
resources. We are taking
steps to reduce our impact
on the environment, both
in our store operations
and in our supply chain,
from factory to farm level.
We were shocked and
deeply saddened by the
tragedy of the Rana Plaza
building collapse. On the
following pages, we explain
the facts and describe
Primark’s response.
Primark wants to be
welcome to do business
anywhere in the world.
This means we need to
be a good neighbour to the
communities located near
our stores, and in the towns
and countries where our
clothes are made.
Read more on p50
Read more on p52
Read more on p57
Right
People queue for food parcels
distributed by Primark following
the collapse of the Rana Plaza.
50
Retail
Associated British Foods plc Corporate Responsibility Report 2013
abf.co.uk
51
Retail
ResPonsiBle steWaRdsHiP
of ouR enViRonMent
Primark recognises its
obligation to consider
carefully its use of natural
resources. We are taking
steps to reduce our impact
on the environment, both in
our store operations and in
our supply chain, from
factory to farm level.
in aPRil 2013,
PRiMaRK enteRed
into a PaRtneRsHiP WitH
cottonconnect to
iMPleMent sustainaBle
cotton PRogRaMMes in
BotH noRtH cHina and
noRtH india oVeR tHe
next tHRee yeaRs.
In-store energy
In 2010 Primark, in conjunction
with the Carbon Trust, formed
an internal Carbon Strategy Group
which prepared a carbon strategy
for the UK and Ireland. This
strategic roadmap included:
establishing Primark’s carbon
footprint; mapping likely future
energy costs; and identifying the
key activities for reducing in-store
energy use. 2010 also saw the
opening of our first model ‘Green
Store’ in East Ham. This store
was designed to reduce CO2
emissions by up to 40% compared
with a standard store, and
incorporates features such as
rainwater harvesting, low energy
lighting, free cooling, efficient
chillers, natural daylight, natural
ventilation, sustainable timber,
cycle racks and a wildlife habitat.
In 2011, trials were conducted
across a number of Primark stores
in the UK and Ireland to establish
the potential for energy savings
through technology and behavioural
change. Lighting controls have
since been introduced into all
stores and energy-efficient lighting
is now being rolled out across the
estate. We have also installed
infrared sensors in staff areas so
that lighting and air conditioning
only function when rooms are in
use. All stores now operate a closed
front door policy to minimise
energy loss and delivery doors
are closed when not in use.
In 2012, further trials were
introduced to reduce the energy
used at night when stores are
not in operation. Ten sites in
the UK and 14 sites in Ireland
were included in the pilot and
so far they have shown an annual
combined saving of 4.73 million
kWh with some stores achieving
a reduction of 66%. Today 80%
of our stores use Building Energy
Management systems to control
energy consumption in stores
by monitoring lighting and
temperature levels. As a further
indication of Primark’s
commitments to reduce its energy
consumption, we were awarded
the Carbon Trust Standard in
2013, which demonstrates an
actual reduction in energy use
relative to sales growth.
Store waste recycling
Of the waste from our UK stores
including cardboard, hangers and
plastic, 85% is recycled through our
centralised facility at Thrapston.
This recycling plant uses a closed
loop system whereby the waste
from one process or product is
used in making another product;
it is a truly sustainable way of
doing business.
We estimate that in 2013/14
we will have:
• recycled 23 million hangers;
• recycled 14,000 tonnes of
cardboard to make the paper
carrier bags we use in store;
• saved 238,000 trees; and
• cut 21,576 lorry trips to our
stores, reducing road use by
160,525 miles and saving
27,869 gallons of fuel.
We are currently evaluating
whether the recycling plant
at Thrapston can be replicated
for our stores in Ireland and
in Spain, which demonstrates
an actual reduction in energy
use relative to sales.
Cleaner Production
Textile factories with dyeing
and printing operations use large
amounts of chemicals, energy
and water to wash fibres and to
dye and wash finished products.
Looking at the whole life cycle
of a garment, approximately 15%
of the water footprint of a single
item of clothing comes from the
manufacturing process itself and
approximately 20% of the energy
used across a garment’s life cycle
is linked to production.
To address this, Primark is
participating in the International
Finance Corporation (IFC) China
Water programme and the
Partnership for Cleaner Textile
(PaCT) programme in Bangladesh.
Through our partnerships with the
IFC and Dutch NGO Solidaridad,
we are enabling our suppliers to
make significant environmental
improvements in relation to their
washing, dyeing and finishing
operations, known within the
sector as ‘wet processes’.
As well as improving factory
energy and water consumption
and its waste management
systems, the programme also
stoRe Waste Recycling
We estimate that in 2013/14
we will have:
recycled
23,000,000
hangers
recycled
14,000
tonnes of cardboard
to make the paper carrier
bags we use in store
saved
238,000
trees
reduced road use by
160,525
miles
garment back to the farm on which
the cotton was grown. In addition
to ensuring traceability, the tool
can also alert companies to risks
embedded at critical points in
the supply chain. In 2012/13,
we carried out a third traceability
study utilising the FLA tool
for a garment manufactured
in Bangladesh and will continue
to work with the FLA on specific
supply chains in the future.
Supporting cotton
farmers
In April 2013, Primark entered into
a partnership with CottonConnect
to implement sustainable cotton
programmes in both north China
and north India over the next
three years.
Working directly with smallholder
cotton farmers as well as cotton
farm workers on larger farms,
the aim of these programmes
is to improve the livelihoods
of smallholders, workers and
their families through expert
support and training on
sustainable agricultural
practices. This will ultimately
lead to increased yields, reduced
input costs, and the production
of more environmentally
friendly cotton. The CottonConnect
training programme encompasses
environmental, social and
economic initiatives, including
water efficiency and irrigation
practices, the management
and reduced use of pesticides,
soil management, health and
safety, and improvement
in labour conditions.
provides opportunities to share
international and national best
practices from the textile and
dyeing sector with participating
suppliers and buying teams.
These improvements include
better control over, and reduction
of, ground water consumption,
enhanced waste water treatment,
improved energy efficiency,
significant operational cost
savings, improved quality control,
and capacity building for workers
and management.
These longer-term programmes
follow the completion, in 2012,
of successful pilot studies with
a number of key suppliers in China
and Bangladesh, to understand
thoroughly the principal challenges
related to current processing
techniques, and design practical
solutions with both commercial
and environmental benefits.
In summing up the Bangladesh
pilot, M Hafizur Rahman, Executive
Director of a participating Primark
supplier, said, “The Cleaner
Production pilot was undertaken
and conducted in our factory with
a view to improving awareness
amongst all concerned, and to
ensure economic and appropriate
consumption of water and energy
through close communication,
motivation and training. The project
was found to be very fruitful and
helped the company to minimise
its system loss in power and energy
consumption. The programme
also guided us in selecting
machines and equipment which
pose minimum threat to
the environment”.
In China, two knitting factories
with in-house dyeing and washing
facilities located along the Yangtze
River were selected to participate
in the Cleaner Production pilot.
Primark partnered with Solidaridad
to implement the pilot programme.
Improvement plans are now being
implemented at both factories,
covering insulation of dyeing
vessels, pipes and valves; detection
of compressed air leakages;
energy-efficient steam traps and
water cooling systems; and the
treatment and reuse of processing
water in conjunction with
continuing capacity building
and quality control training
for workers.
Sustainable cotton
Cotton is one of the key fibres
used in Primark’s clothing. Unlike
many commodity crops, cotton
is predominantly grown in the
developing world, often in areas
where knowledge of agricultural
best practice is limited.
Primark does not purchase raw
cotton directly, but we do have
a responsibility to work with
farmers and organisations to
support programmes that aim
to grow cotton more sustainably
and improve the livelihoods
of those who depend upon it.
Our sustainable cotton
programme enables us to work
with cotton farmers in key
growing countries to improve their
agricultural practices, specifically
around the use of pesticides and
water management, to improve
working conditions and,
ultimately, the livelihoods
of farmers and their families.
Traceability of cotton
supply chains
Being able to trace the source
of cotton and identify its country
of origin is a key issue for all
retailers, if we are to have full
visibility of our supply chain.
In 2011, we began working with
AB Sustain, a sister company
within the Associated British
Foods group, which has extensive
experience in tracing products
back from retailers through
agricultural supply chains.
Through this partnership, we
are developing an in-house
methodology and innovative tools
to trace the cotton used in our
garments and to identify the
country in which the cotton was
grown. A pilot programme will
be launched in 2014 in order to
test the tools and assess their
long-term viability for use in the
textile supply chain.
Primark has also partnered with
the Fair Labour Association (FLA)
to pilot its cotton traceability tool
on two of our supply chains
in India. Its Product Tracking
Tool and methodology aims to
be a proactive risk identification
and management tool. It features
an online resource designed
to aid companies and suppliers
in tracing the origins of a cotton
Associated British Foods Annual Report and Accounts 2013
Our corporate responsibility
activities are guided by four business
principles, outlined below. Please
refer to our corporate responsibility
report to learn more about how
individual businesses have chosen
to respond to them.
Responsible stewardship of
our environment
“ We have an obligation to our wider
environment which we must protect
as a common resource for future
generations. We acknowledge that
we create a footprint wherever we
operate. Sometimes it is deep…
We recognise also that some raw
materials are produced in an
unacceptable manner. We will
work with others to avoid using
these materials.”
George Weston, Chief Executive
51%
proportion of energy obtained from renewable
sources in 2013
Our operations have an impact on the
environment and we are committed to
making this a positive impact wherever
possible, and to protecting the resources
we need to deliver sustainable business
growth. The environmental performance
of each segment of the business is
regularly reviewed by the board.
Since 2010, we have invested over £182m
in environmental improvement activities.
In 2013, our absolute use of energy was
23,316 GWh compared with 22,727 GWh
in 2012, a 2.6% increase. Overall, this is
a minor increase in the use of energy
considering the growth in our business,
which demonstrates the positive impact
of the investments we have made in
energy efficiency.
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Total consumption of energy
(In GWh, split by renewable and
non-renewable energy)
Non-renewable energy
Renewable energy
12,944
11,726
11,151
10,805
11,864
12,985
10,552
12,614
11,922
11,452
2009
2010
2011
2012
2013
For a number of years, the proportion
of our energy use that has been from
renewable sources has been just under
half our total energy use. This year 51%
of our total energy use has been from
renewable sources.
In 2013, the volume of water which
entered our premises, excluding water
for irrigation and water for our Illovo
business, was 42 million m3. In addition,
Illovo’s water usage in manufacturing
was in the range of 30 million to
36 million m3.
The quantity of packaging used for our
products in 2013 was 238,000 tonnes,
down 3% from 2012.
There has been a concerted effort to
divert the amount of waste we send to
landfill. This year over two-thirds of our
waste has been recycled or recovered
for beneficial use.
Agriculture: measuring the value
of nature
It is well known that the protection of
biodiversity, while complex to value and
quantify accurately, is essential for future
wellbeing and economic development.
To address this key issue, AB Sustain
has developed Think.Nature. Endorsed
by Natural England, this unique model
enables the valuation of natural capital at
farm level. Farms are benchmarked and
provided with advice on how to increase
natural capital without negatively
affecting productivity.
Grocery: zero waste sites
Reducing waste to landfill is good for the
environment, and good for the bottom
line too. Our Jordans and Ryvita Company
site and the Twinings Andover factory are
both zero waste to landfill sites. Westmill
Foods and AB World Foods are following
suit to ensure their sites meet this
standard by 2015.
Being responsible for our people
“ What does it mean to us to be a
good employer? At one level it
means providing a safe working
environment as we have to do as
a matter of law, but we go beyond
that and we continue to be diligent
in reducing the injuries sustained by
our workforce, often in challenging
environments…
We have an obligation to people
who work for our suppliers,
particularly where other sources
of protection for them are absent
or only marginally effective. This
is particularly true in Primark’s
sourcing of clothes, but it is also true
in Twinings’ tea supply chain and in
the sourcing of spices. We have an
obligation to work to prevent abuse
and reduce risk wherever we can
and we have an obligation to foster
good operating standards. When
things go wrong, most awfully
at Rana Plaza, we also have an
obligation to contribute to tackling
the consequences of disaster.”
George Weston, Chief Executive
450,000
annual number of patient visits to our
free staff medical facilities in Africa
Being a responsible and ethical business
means doing everything we can to make
sure the people who work for us or our
suppliers are safe, treated fairly and
shown respect. First and foremost,
we ensure our employees, contractors
and visitors to our factories, stores,
warehouses and offices are safe and
do not harm others.
As such, we deeply regret a total of six
employee and contractor fatalities in
Africa, China and South America in 2013.
In each case, we have undertaken an
investigation and implemented measures
to minimise the likelihood of such
incidents recurring.
The prevention of all deaths and serious
accidents is an absolute priority throughout
the whole of the Associated British Foods
group and we are always seeking ways
to prevent them. We also work with our
suppliers to encourage the same attitude
to health and safety in their operations.
Associated British Foods Annual Report and Accounts 2013
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CORPORATE RESPONSIBILITY CONTINUED
Every business in the Associated British
Foods group has applied our Supplier
Code of Conduct which is designed to
ensure that our suppliers, representatives
and other people with whom we deal
adhere to our values and standards. As
well as being compliant with all local
laws, we expect our suppliers and
representatives to comply with the
Code’s 14 principles and to develop
relationships with their own supply
chains that are consistent with it.
Retail: the power of partnerships
Primark believes that collaboration with
other stakeholders is key to finding
sustainable and effective solutions to
the challenges faced by the garment
industry. Since 2008, Primark has been
a member of the Ethical Trading Initiative
(ETI), an alliance of companies, trade
unions and voluntary organisations that
work together to improve the lives of
workers who make or produce consumer
goods. Primark was pleased to be awarded
‘leader’ status by the ETI in June 2011
and again in June 2012. This is the
highest possible status and reflects
continued strong growth in auditing,
remediation and training programmes,
and extensive external engagement.
Sugar: looking after the health of
workers in Africa
We recognise that living standards and
working conditions in Africa can vary
and sometimes fall below acceptable
standards. As farm labourers make up
a significant proportion of Illovo Sugar’s
workforce in Africa, the business has
taken responsibility for creating a
comprehensive welfare system to make
sure its employees and their dependants
are housed and healthy, and have access
to education. For instance, Illovo Sugar
spends over £4m each year on running
four hospitals and 24 health clinics, and
providing medical insurance schemes.
Being a responsible neighbour
“ We have operations in over 200
locations worldwide. Some are in
prosperous communities, some are
in locations that are very vulnerable.
Our management teams in each
location must decide what we must
do to be welcomed wherever we
are and to contribute to the local
community wherever
we operate.”
George Weston, Chief Executive
£136m
donations made by the Garfield Weston
Foundation in the last three years
We recognise our responsibility to the
places in which we operate and encourage
our businesses to engage positively with
their local communities. Our businesses
engage with their neighbours in a variety
of ways, big and small, whether it is
raising money for local good causes or
working in partnership with global NGOs
to improve living standards.
At a group level, we are committed
to the support of local communities in
the UK, where we are headquartered.
This support is offered through the
Garfield Weston Foundation and
demonstrates what being a responsible
neighbour means in practice.
The Garfield Weston Foundation was set
up in 1958 by the creator of Associated
British Foods, the late W Garfield Weston.
It is one of the UK’s foremost philanthropic
organisations and donates money to
charitable causes across the UK.
Each year the Foundation distributes
the income it receives. Since it began,
the Foundation has donated more than
£735m and donations have continued
to grow. 2012/13 was a record year, with
the Foundation donating over £49m
benefiting around 1,500 charities.
The Foundation holds a majority stake
(79.2%) in a privately owned holding
company, Wittington Investments
Limited. Wittington has a diverse
portfolio of investments, its largest being
54.5% of the shares of Associated British
Foods plc. The fact that donations have
grown is a direct result of the success of
the underlying investments such as
Associated British Foods.
Ingredients: Scholarship programmes
in South America
AB Mauri recognises the value of offering
education and work experience to help
people into employment in its sites. In
Columbia and Ecuador, it is working with
partners to develop local skills in baking
and industry. In Uruguay, it offers four
internships a year and, already, three
former interns are now permanently
employed with it. In Mexico, it has a
scholarship agreement with a university
in Veracruz offering final year students
the chance to develop practical skills and,
typically, has six students engaged in
projects at its sites at any one time.
Agri: supporting education in Ghana
To help meet a growing need for
schooling in Ghana, AB Agri began
supporting the Shine Education Centre in
Accra in 2006. Since then, the company
has provided books and computers as
well as child development games and
teaching aids for pre-school. It has
provided logistical support by combining
shipments of AB Agri products from the
UK with donations. The centre is now
one of the highest achieving schools in
Ghana, and the student numbers have
swelled from 18 to 277.
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“ We acknowledge, however, that we cannot fix every problem that exists around us, and
that we cannot achieve anything alone. We acknowledge that our agenda and priorities
will not always coincide with those of others who also think and care deeply about social
and environmental issues. We will always respect other people’s agenda and try to learn
from them, but we will have confidence in our own, always remembering that in feeding
and clothing millions of people we do good every day.” George Weston, Chief Executive
Responsible for promoting
good health
“ I also believe that our principal value
to society lies in what we do every
day: providing people with access
to good quality, affordable food
and clothing. People benefit
immensely when the real cost of
their food comes down; and we are
all liberated when we know that
food will be safe and plentiful…
We must also use science to improve
productivity and to inform us of the
effect of a particular food type on
the human body. We will label our
products properly and market them
appropriately to customers and we
constantly strive to improve food
safety. When we do all this well,
then we are a powerful force
for good.”
George Weston, Chief Executive
We provide affordable and nutritious
food and ingredients to millions of people
around the world, and recognise we have
a part to play in helping people to lead
healthy lives.
There is a challenge at the heart of the
global food system, with most countries
experiencing both increasing levels of
obesity and a proportion of the population
that remains malnourished. As a business
that provides the raw ingredients and
finished products that help to feed the
world, we have a role to play in combating
both obesity and malnutrition.
£165,000
donated by ACH Foods to Share Our
Strength’s No Kid Hungry campaign, which
provides school breakfast and summer meals,
and teaches low-income families to cook
Taking responsibility for promoting
good health is a principle we put into
action every day through our products
and businesses. Our first priority is to
ensure consumers are empowered to
make choices which are right for their
lives, so we clearly label all our grocery
products with nutritional information.
We are also reformulating our products
to improve the nutritional value and
reduce salt content.
Through partnerships in the UK, Australia,
Spain and South Africa, we are helping
to educate people about nutrition and
health. In particular, in the UK, our Sugar
and Grocery divisions collaborate with
the government on helping to improve
the health of British consumers.
Grocery: product reformulation
In 2011, all the businesses within
Associated British Foods’ UK Grocery
group agreed to support the principles
set out within the UK government’s
Public Health Responsibility Deal.
The businesses pledged to reduce salt
content, remove artificial trans fats from
all products and improve catering and
occupational health standards within
Head Office and manufacturing facilities.
At the beginning of 2012, following
extensive technical and trials work,
Allied Bakeries achieved the salt targets
set out within the Public Health
Responsibility Deal, a reduction
of around 20% since 2007.
Sugar: nutrition education
AB Sugar works with a number of
scientific bodies around the world to
continue to understand and improve
the scientific basis of nutrition and the
constituents of a healthy, balanced diet.
In the UK, British Sugar has worked with
the British Nutrition Foundation to
develop a range of educational resources
for secondary schools covering areas
such as sugar production and processing.
Illovo Sugar supports the South African
Sugar Association which has developed
science-based nutritional information in
the area of sugar and health within the
medical community. Azucarera supports
the Spanish Sugar Institute, and during
the last two years has focused on
educating a range of stakeholders,
predominantly schools, universities
and housewives.
To read the full corporate responsibility
report, please visit our website at:
www.abf.co.uk/responsibility
Associated British Foods Annual Report and Accounts 2013
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BOARD OF DIRECTORS
Charles Sinclair
Chairman (age 65)
Charles was appointed a non-executive director in October 2008 and
as Chairman in April 2009. With wide business experience of both the
UK and overseas, his executive career was latterly with Daily Mail and
General Trust plc, where he was chief executive from 1989 until he
retired from that role and the board in September 2008.
Other appointments: He is a non-executive director of SVG Capital plc.
George G Weston
Chief Executive (age 49)
George was appointed to the board in 1999 and took up his current
appointment as Chief Executive in April 2005. In his former roles at
Associated British Foods, he was Managing Director of Westmill
Foods, Allied Bakeries and George Weston Foods Limited (Australia).
Other appointments: He is a non-executive director of Wittington
Investments Limited and a trustee of the Garfield Weston Foundation.
Committee membership: Chairman of the Nomination and
Remuneration committees.
John Bason
Finance Director (age 56)
John was appointed as Finance Director in May 1999. He was
previously the finance director of Bunzl plc and is a member of
the Institute of Chartered Accountants in England and Wales.
Other appointments: He is a non-executive director of Compass
Group PLC, a trustee of Voluntary Service Overseas and deputy
chairman of the charity FareShare.
Peter Smith
Independent non-executive director (age 67)
Peter was appointed a director in February 2007 and brings extensive
experience of international financial matters. Formerly, he was senior
partner at PricewaterhouseCoopers (PwC) in the UK. He served for two
years as chairman of Coopers & Lybrand International and as a member
of the global leadership team of PwC. He was also chairman of RAC plc
and a non-executive director of Safeway plc.
Other appointments: He is chairman of Savills plc and Templeton
Emerging Markets Investment Trust plc, and a member of the
supervisory board of Paris Orléans SCA. He is also chairman of
the Land Restoration Trust.
Committee membership: Chairman of the Audit committee and a member
of the Nomination and Remuneration committees.
Associated British Foods Annual Report and Accounts 2013
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Lord Jay of Ewelme GCMG
Independent non-executive director (age 67)
Lord Jay was appointed a director in November 2006 and has broad
experience of government and international business. During his
career in public service he was British Ambassador to France from
1996 to 2001 and Permanent Under Secretary at the Foreign &
Commonwealth Office from 2002 to 2006.
Other appointments: He is a non-executive director of Candover
Investments plc, Valeo (the French-based automobile parts company)
and of Electricité de France. He has been an independent member of
the House of Lords since 2006. He is also a member of the British
Library Advisory Council.
Committee membership: Member of the Audit, Nomination and
Remuneration committees.
Timothy Clarke
Independent non-executive director (age 56)
Tim was appointed a director in November 2004 and has been
Senior Independent Director since December 2007. Tim has extensive
experience of retailing. Until 2009, he was chief executive of Mitchells
& Butlers plc, following its demerger from Six Continents PLC where
he also held the position of chief executive. Previously he had been
a partner of Panmure Gordon & Co before joining Bass PLC in 1990.
Other appointments: He is a non-executive director of two pub and
brewing companies, Hall & Woodhouse Limited, and Timothy Taylor &
Company Limited, and also Triple Point VCT 2011 PLC.
Committee membership: Member of the Nomination and
Remuneration committees.
Javier Ferrán
Independent non-executive director (age 57)
Javier was appointed a director in November 2006. He spent the earlier
part of his career with Bacardi Group, where latterly he served as
president and chief executive officer. He has extensive experience of
consumer brands on an international basis and in international financing.
Emma Adamo
Non-executive director (age 50)
Emma was appointed a director in December 2011. She
was educated at Stanford University and INSEAD in France.
Other appointments: She is a director of Wittington Investments
Limited, and of the W Garfield Weston Foundation in Canada.
Other appointments: He is currently a partner at Lion Capital LLP,
a London-based private equity firm.
Committee membership: Member of the Audit, Nomination and
Remuneration committees.
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CORPORATE GOVERNANCE
Associated British Foods has a
well-established framework of
policies and processes to support
its governance objectives. They
are underpinned by one of the
group’s guiding business principles
of ‘encouraging ethical business’.
Chairman’s foreword
Effective corporate governance remains vital to the group’s
ability to operate successfully on a global basis. Associated
British Foods has a well-established framework of policies
and processes to support its governance objectives. They are
underpinned by one of the group’s guiding business principles
of ‘encouraging ethical business’. These principles are explored
in more detail in the Company’s newly published corporate
responsibility report.
The board is responsible for the long-term success of the group.
As Chairman, I lead the board and, in doing so, I recognise the
importance of the annual performance evaluation in helping to
ensure that the board operates properly in every aspect of its
role. This year’s evaluation again produced some useful insights
about how we work together, how well our committees
function and also about our individual contributions. You will find
details of the process, including some key outcomes, on pages
49 and 50 of this report.
Diversity is a key issue for all boards and, at Associated British
Foods, we recognise that relevant diversity, including of gender,
is vital to our business and its future growth. Our approach to
boardroom diversity and to nurturing talent to ensure that we
have a truly diverse workforce that both reflects all our
customers, and is capable of meeting future business
challenges, is discussed both in the Chairman’s statement on
page 8 and in the Nomination committee report on page 51.
In recent years, there have been a number of reviews and
consultations on governance-related matters. The board
continues to monitor and take an active interest in developments
in this arena. Our statement of compliance with the provisions
of the UK Corporate Governance Code is set out below. I am
pleased to report that, except in one aspect, the Company has
complied with all relevant provisions. We are required, for the
year under review, to report against the version of the UK
Corporate Governance Code published in 2010 but have taken
the revised edition of these guidelines into account where
possible in preparing this report.
Charles Sinclair
Chairman
Compliance with the UK Corporate Governance Code
As a premium listed company on the London Stock Exchange,
the Company reports in accordance with the UK Corporate
Governance Code (the ‘Code’) published in June 2010 which
sets out standards of good practice in relation to board
leadership and effectiveness, remuneration, accountability and
relations with shareholders. The Code is published by the UK
Financial Reporting Council (‘FRC’) and a copy of the Code is
available from the FRC website (www.frc.org.uk).
An updated version of the Code was published in September 2012
and first applies to companies with financial years commencing
after 1 October 2012 (the ‘2012 Code’). The Company will
therefore report in accordance with the revised guidelines in
its 2014 annual report, although the revised provisions of the
2012 Code have been taken into account where possible when
preparing this report.
The board considers that the Company has, throughout the
year ended 14 September 2013, applied the main principles
and complied with the provisions set out in the Code, with
the following exception:
Code provision
Status
Explanation
D.2.1 – The Chairman
should not chair the
Remuneration
committee
Charles Sinclair is both
Chairman and chairman of the
Remuneration committee.
The board of Associated British Foods plc considers that
Charles Sinclair, due to his experience, is best suited to chair
this committee. No director has any involvement in the
determination of his own remuneration. The board believes
that the Company has maintained robust governance while at
the same time benefiting from having Charles Sinclair as the
chairman of the Remuneration committee.
Associated British Foods Annual Report and Accounts 2013
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The board
The board is collectively responsible to the Company’s
shareholders for the direction and oversight of the Company
to ensure its long-term success. The board met regularly
throughout the year to approve the group’s strategic objectives,
to lead the group within a framework of effective controls which
enable risk to be assessed and managed and to ensure that
sufficient resources are available to meet the objectives set.
The board has agreed the specific business and governance
matters which are reserved for its decision to help it discharge
these responsibilities and oversee control of the Company’s
affairs. This schedule of matters reserved for the board’s
approval includes:
• annual business strategy and objectives, budget
and forecasts;
• monitoring delivery of the group’s business strategy
and objectives;
• changes to the Company’s capital, management or
control structures;
• dividend policy and dividend recommendation;
• tax and treasury policies;
• trading statements, interim results, interim management
statements, final results, annual report and accounts;
• the overall system of internal control and risk management;
• major capital projects, corporate actions or related actions
and investment;
• communications policy including procedures for the release
of price sensitive information;
• changes to the structure, size and composition of the board;
• appointment of directors and the Company Secretary; and
• material changes to pension plans or the introduction of
new schemes.
Certain specific responsibilities are delegated to the board
committees, notably the Audit, Remuneration and Nomination
committees, which operate within clearly defined terms of
reference, and report regularly to the board. For further details,
please see the ‘Board committees’ section below.
Board composition
At the date of this report, the board comprises eight directors:
Chairman
Charles Sinclair
Executive directors
George Weston (Chief Executive)
John Bason (Finance Director)
Non-executive directors
Emma Adamo
Tim Clarke
Javier Ferrán
Lord Jay
Peter Smith
Emma Adamo is not considered to be independent by the
board in view of her relationship with Wittington Investments
Limited, the Company’s majority shareholder. She was
appointed in December 2011 to represent this shareholding on
the board of the Company. The board considers that the other
four non-executive directors are independent in character and
judgement and that they are each free from any business or
other relationships which would materially interfere with the
exercise of their independent judgement.
The board recognises that, as at 3 November 2013, Tim Clarke
has served nine years as a director of the Company and, in
recognition of this length of service, he stepped down as a
member of the Audit committee on 11 September 2013. The
board has given careful consideration to the matter of Tim
Clarke’s independence and is mindful that the Code requires
that, if a director has served on the board for more than nine
years, the board should state its reasons if the director is
nevertheless considered to be independent. The length of
Tim’s service and the consequent knowledge and experience
he brings to the role are greatly valued by the board. It is the
board’s view that Tim Clarke continues to demonstrate the
qualities of independence in carrying out his role as a
non-executive director and Senior Independent Director,
supporting the executive team in an objective and independent
manner. Tim Clarke will offer himself for re-election at this year’s
annual general meeting. Subject to his re-election, Tim will
retain his role as Senior Independent Director and the board
will continue to keep his independence under review.
Biographical and related information about the directors is set
out on pages 44 and 45.
Chairman and Chief Executive
The roles of the Chairman and the Chief Executive are
separately held and the division of their responsibilities is clearly
established, set out in writing, and agreed by the board to
ensure that no one individual has unfettered powers of decision.
The Chairman, Charles Sinclair, is responsible for the operation
and leadership of the board, ensuring its effectiveness and
setting its agenda. The Chief Executive, George Weston, is
responsible for leading and managing the group’s business
within the authorities delegated by the board and the
implementation of board strategy and policy.
Senior Independent Director
Tim Clarke is the Company’s recognised Senior Independent
Director. The role of the Senior Independent Director is to act
as a sounding board for the Chairman and to serve as an
intermediary for other directors where necessary. He is also
available to shareholders should a need arise to convey
concerns to the board which they have been unable to convey
through the Chairman or through the executive directors.
During the year, led by the Senior Independent Director, the
non-executive directors have met once without the presence
of the Chairman to appraise his performance.
Associated British Foods Annual Report and Accounts 2013
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CORPORATE GOVERNANCE CONTINUED
The non-executive directors
In addition to their overall responsibility for strategy and
business results, the non-executive directors play a key role
in providing a solid foundation for good corporate governance
and ensure that no individual or group dominates the board’s
decision-making. They each occupy or have occupied senior
positions in industry or public life, bring a valuable external view
to the board’s deliberations through their experience and insight
from other sectors enabling them to contribute significantly to
board decision-making. The formal letters of appointment of
non-executive directors are available for inspection at the
Company’s registered office.
Re-election of directors
In accordance with the Code’s recommendations, all directors
will be proposed for re-election at the 2013 annual general
meeting to be held in December.
Board meetings
The board held eight meetings during the year.
Senior executives below board level are invited, when
appropriate, to attend board meetings and to make
presentations on the results and strategies of their business
units. Papers for board and committee meetings are generally
provided to directors for board and committee meetings a week
in advance.
The attendance of the directors at board and committee
meetings during the year to 14 September 2013 is shown in the
table below.
Board
Audit
committee
Nomination
committee
Remuneration
committee
Charles Sinclair
George Weston
John Bason
Emma Adamo
Tim Clarke1
Javier Ferrán1
Lord Jay
Peter Smith
8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
–
–
–
–
4/4
–
4/4
4/4
1/1
6/6
–
–
–
1/1
1/1
1/1
1/1
–
–
–
6/6
6/6
6/6
6/6
1 Javier Ferrán was appointed as a member of the Audit committee on
11 September 2013 in place of Tim Clarke who stepped down with effect
from the same date.
Board committees
The board has established three principal board committees
to which it has delegated certain of its responsibilities. These
are the Audit committee, the Nomination committee and the
Remuneration committee. The membership, responsibilities
and activities of these committees are described later in this
corporate governance report and, in the case of the
Remuneration committee, in the Remuneration report on
page 62. Membership of these committees is reviewed
annually. Minutes of committee meetings are made available
to all directors on a timely basis.
The full written terms of reference for the Nomination, Audit
and Remuneration committees are available on the Company’s
website (www.abf.co.uk) and hard copies are available
on request.
Information flow
The Company Secretary manages the provision of information
to the board at appropriate times in consultation with the
Chairman and Chief Executive. In addition to formal meetings,
the Chairman and Chief Executive maintain regular contact with
all directors. The Chairman also holds informal meetings with
non-executive directors, without any of the executives being
present, to discuss any issues affecting the group, if this is
thought necessary. Regular management updates are sent to
directors to keep the non-executive directors informed of events
throughout the group between board meetings and to ensure
that they are kept fully advised of the latest issues affecting
the group.
Conflicts of interest procedure
The Company has procedures in place to deal with the situation
where a director has a conflict of interest. As part of this
process, the board:
• considers each conflict situation separately on its
particular facts;
• considers the conflict situation in conjunction with the rest
of the conflicted directors’ duties under the Companies
Act 2006;
• keeps records and board minutes as to authorisations granted
by directors and the scope of any approvals given; and
• regularly reviews conflict authorisation.
The board has complied with these procedures during the year.
Directors’ insurance
The Company has in place appropriate directors’ and officers’
liability insurance cover in respect of legal action against its
executive and non-executive directors, amongst others.
Associated British Foods Annual Report and Accounts 2013
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Board business
During the financial year, key activities of the board included:
Strategy
Holding an annual meeting to focus on
group strategy.
Governance
and risk
Approving the Company’s full year and
interim results.
Making a recommendation on the 2012
final dividend and approving the 2013
interim dividend.
Carrying out an annual review of the
material financial and non-financial risks
facing the group’s businesses.
Receiving both regular divisional food
safety updates and an annual groupwide
update.
Participating fully in the annual board
performance evaluation and receiving
a report on the same.
Reviewing the composition of the
principal board committees.
Receiving regular updates on
regulatory matters.
Board performance evaluation
An evaluation to assess the performance of the board as a
whole, its committees and that of the individual directors is
conducted annually with the aim of improving the effectiveness
of the board and its members and the performance of
the group.
Following last year’s externally facilitated evaluation, this year’s
review, which took place in the final quarter of the financial year,
was led by the Senior Independent Director, Tim Clarke,
together with non-executive director, Emma Adamo.
Process
A discussion guide was prepared and circulated to each director
and the Company Secretary. This included the following topics,
which formed the basic agenda around which each discussion
was framed:
• board structure, organisation and dynamics, including the mix
of skills, experience, knowledge and diversity (including
gender diversity), the clarity of leadership given to the
organisation’s purpose, direction and values, how well the
board works as a unitary body, the environment for effective
debate and decision-making;
• board efficiency and effectiveness, including agenda content,
the quality of divisional presentations, the adequacy of time
given to reflective discussion, and leadership by the Chairman;
Performance
monitoring
Receiving regular reports to the board
from the Chief Executive.
• strategic review and debate;
• risk management and governance;
Receiving, on a rolling basis, senior
management presentations from each
of the group business areas.
Approving the group budget for the
2013/14 financial year.
Undertaking an annual goodwill and
property, plant and equipment
impairment review.
Receiving regular feedback on
directors’ meetings held with
institutional investors.
Receiving reports from the Audit
committee chairman.
Receiving an update from the Chief
Executive on his strategy for corporate
responsibility within the group.
Receiving regular management reports
on health, safety and environment
issues.
Receiving an update on Primark’s
response to the Rana Plaza collapse,
Bangladesh.
Considering senior succession planning
and people activities.
Undertaking appropriate preparations
for the holding of the annual general
meeting and, subsequently, discussing
issues arising from that meeting.
Corporate
responsibility
People
Various
• people issues including management development,
succession planning, and remuneration strategy;
• business performance, including the quality of reporting
measures and the level of information flowing to the board;
• the board committees, including whether all key issues were
being addressed, the quality and clarity of information
provided, the depth of debate and the effectiveness of the
chairman in each case; and
• improvements in board effectiveness made in 2013, and key
issues and improvements needed for 2014.
Tim Clarke and Emma Adamo undertook a confidential,
unattributable interview with each director, the Company
Secretary and each other based on the discussion guide.
Following the meetings, Tim Clarke and Emma Adamo
produced a written report, which was discussed with each
of the Chairman and the Chief Executive before being sent to
board members and discussed at the following board meeting.
It was widely recognised from the many positive responses
to this year’s exercise that good progress had been made in
implementing proposals arising out of the previous internal
evaluation in 2011 as well as from the 2012 externally
facilitated review.
Associated British Foods Annual Report and Accounts 2013
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CORPORATE GOVERNANCE CONTINUED
Actions implemented arising from 2012 evaluation include:
Objective
Synergy
Strategy
Research of possible synergies within the
group, particularly the Ingredients division,
was considered.
Good progress made by the board, as a
forum for constructive debate, over the key
area of strategy for the group as a whole,
including the role of the corporate centre
(which is described in the Group business
model and strategy section on pages 2
and 3 of this annual report).
Risk
management
Greater emphasis was placed on
understanding non-financial risks in
the businesses.
Succession
planning
General consensus reached on desirability
of further diversity at board level both in
terms of gender and international
perspectives.
Based on the response and results of the 2013 evaluation, the
directors’ view overall was that the board was working very
effectively as a unitary body and that the board’s principal
committees were also continuing to function efficiently and
effectively. Each of the directors was considered to be making
a valuable contribution and full commitment, including of time,
to their respective roles.
A list of recommended action points arising from this year’s
evaluation is being implemented under the direction of the
Chairman including actions set out in the table below.
Areas identified for action from 2013 evaluation include:
Objective
Board impact
Corporate
responsibility
Risk
management
Major
investments
Agenda to be shaped to give sufficient
prominence to certain key business issues
identified in the evaluation, namely the
expansion of Primark; the development of
the food portfolio; the implications of EU
sugar regime reform; and enhancing the
performance of Ingredients and GWF.
Additional time to be made available
on the board agenda to address further
development of groupwide CR agenda,
its divisional implications and associated
communication challenges.
Recognition of need for increased focus on
key existential risks arising from competitive,
regulatory, health or CR issues in each
business division.
Extended information to be provided to
the board in the area of key market demand
and competitive dynamics when a major
investment or proposal is under consideration.
Succession
planning
Nomination committee to meet more
regularly to progress board succession and
contingency plans.
Associated British Foods Annual Report and Accounts 2013
Board development
The Chairman, with the support of the Company Secretary, is
responsible for the induction of new directors and the continuing
development of directors. Training and development is provided
to all directors at board and committee meetings. During the
year under review, this included updates on reforms of the legal
framework for directors’ remuneration in quoted companies and
implications of the revised UK Corporate Governance Code. In
addition to any third-party training and development which all
the directors have undertaken on their own behalf or as part of
other non-executive directorships and business roles during the
year, board members received regular corporate governance
updates in their board packs. Non-executive directors make
periodic visits to group operations including on occasion making
visits to the group’s overseas businesses.
Engaging with shareholders
The board works to engage effectively with the Company’s
shareholders so that both its objectives and those of
shareholders are understood.
The Company announces its achievements and prospects to
shareholders by way of the interim results and annual report
and accounts, with significant matters relating to the trading or
development of the business disseminated to the market by
way of Stock Exchange announcements and by press release
and postings on the Company’s website.
The board continues to promote effective engagement with
its shareholders and, on behalf of the board, the Chairman,
Chief Executive and Finance Director have met institutional
shareholders and financial analysts on a regular basis throughout
the year to discuss the Company’s business strategy and
current performance. At each board meeting, the directors are
briefed on shareholder meetings that have taken place and on
the feedback received.
The Senior Independent Director is available to shareholders
in the event that communication with the Chairman, Chief
Executive or Finance Director has failed to resolve concerns
or where such contact is inappropriate.
The Company Secretary acts as a focal point for communications
on matters of corporate governance and corporate responsibility.
Annual general meeting (AGM)
The AGM will be held on Friday, 6 December 2013 at 11.00 am
at the Congress Centre in London. The board views the AGM as
a valuable opportunity to communicate with private shareholders
in particular, for whom it provides the opportunity to hear about
the general development of the business and to ask questions
of the Chairman and, through him, the chairmen of the key
committees and other directors. The practice has been for a
short film to be shown at the meeting explaining a particular
area of the group’s business. At this year’s AGM, the film
focuses on the group’s retail business, Primark.
The Notice of meeting, which sets out in full the resolutions for
consideration by shareholders together with explanatory notes,
has been sent to shareholders and is also available on the
Investors section of the Company’s website (www.abf.co.uk).
Any member attending the AGM has the right to ask questions.
The Company must cause to be answered any such question
relating to the business being dealt with at the meeting, unless
it is not in the interests of the Company or the good order of the
meeting to do so, or if to do so would involve the disclosure of
confidential information. Shareholders attending the meeting
will be advised of the number of proxy votes lodged for each
resolution. All resolutions will be voted on by poll and the results
will be announced to the London Stock Exchange and posted
on the Company’s website as soon as practicable following
the meeting.
Accountability and audit
The board is required by the Code to present a fair, balanced
and understandable assessment of the Company’s position
and prospects. In relation to this requirement, reference is made
to the statement of directors’ responsibilities for preparing the
financial statements set out on page 80 of this annual report
and accounts.
The independent auditors’ report on page 81 includes a
statement by the auditors about their reporting responsibilities.
The board recognises that its responsibility to present a fair,
balanced and understandable assessment extends to interim
and other price-sensitive public reports, reports to regulators,
and information required to be presented by law.
Business model
A description of the Company’s business model for sustainable
growth is set out in the Group business model and strategy
section on pages 2 and 3 and in the Business strategies section
on pages 6 and 7. These sections provide an explanation of the
basis on which the group generates value and preserves it over
the long term and its strategy for delivering its objectives.
Going concern
After making enquiries the directors have a reasonable
expectation that the Company and the group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, and consistent with the guidance contained
in the document titled ‘Going Concern and Liquidity Risk: Guidance
for Directors of UK Companies 2009’ published by the FRC,
they continue to adopt the going concern basis in preparing
the annual report and accounts.
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Nomination committee report
Members
During the year and at the date of this report:
Charles Sinclair (Chairman)
Tim Clarke
Javier Ferrán
Lord Jay
Peter Smith
Key duties
In accordance with its terms of reference, the Nomination
committee’s key duties include:
• leading the process for board appointments and making
recommendations to the board;
• regularly reviewing the board structure, size and
composition (including the skills, knowledge,
independence, experience and diversity), recommending
any changes;
• considering plans for orderly succession for appointments
to the board and to senior management to maintain an
appropriate balance of skills and experience within the
Company and to ensure progressive refreshment of
the board;
• keeping under review the leadership needs of the group,
both executive and non-executive, to ensure the continued
ability of the group to compete efficiently in the
marketplace; and
• before any appointment is made by the board, evaluating
the skills, knowledge, experience, independence and
diversity on the board and, in light of this evaluation,
preparing a description of the role and capabilities required
for a particular appointment.
Governance
The Nomination committee comprises a minimum of three
members at any time, a majority of whom are independent
non-executive directors. A quorum shall consist of two
members being either two independent non-executive directors
or one independent non-executive director and the Chairman.
Executive directors, members of senior management and other
parties may be invited to attend meetings as appropriate.
The Chairman does not chair the Nomination committee when
it is dealing with the appointment of his successor. In these
circumstances the committee is chaired by an independent
non-executive director elected by the remaining members.
The committee may take independent professional advice
on any matters covered by its terms of reference at the
Company’s expense.
The committee chairman reports the outcome of meetings
to the board.
The committee’s effectiveness is reviewed on an annual basis
as part of the board’s performance evaluation process.
The full terms of reference of the Nomination committee can
be viewed on the Investors section of the Company’s website
(www.abf.co.uk).
Associated British Foods Annual Report and Accounts 2013
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CORPORATE GOVERNANCE CONTINUED
Meetings
The committee met once during the year under review.
Committee activities during the year
During the year, the committee considered board succession
planning matters. The Code provides that length of tenure is
a factor to consider when determining the independence of
non-executive directors. This year, when reviewing the
re-election of directors at the AGM, the committee gave careful
consideration to the fact that Tim Clarke has served nine years
as a director of the Company as at 3 November 2013. It is the
board’s view, in line with that of the committee, that Tim
continues to demonstrate the qualities of independence in
carrying out his role as a non-executive director and as Senior
Independent Director, supporting the executive team in an
objective and independent manner.
The committee will continue to keep the composition of the
board under review in the year ahead and consider and develop
plans for orderly succession and progressive refreshing of
the board.
The committee also considers the membership of the key
committees. During the year, the committee made a
recommendation to the board that Javier Ferrán be appointed
as a member of the Audit committee in place of Tim Clarke,
in recognition of Tim’s length of tenure. The board approved
this recommendation on 11 September 2013.
The committee reviewed the time needed to fulfil the roles
of Chairman, Senior Independent Director and non-executive
director and was satisfied, following the conclusion of the
annual board performance evaluation, that all members of
the board are devoting sufficient time to their duties.
promotes and develops women in the workplace. There has
been the recognition that, in some of the group’s businesses,
women are under-represented at the most senior management
level. The series of programmes and initiatives has been created
to address the group’s gender diversity objectives and they
signal its long-term commitment to gender equality.
Audit committee report
Members
During the year and at the date of this report:
Peter Smith (Chairman)
Tim Clarke (until 11 September 2013)
Lord Jay
Javier Ferrán (from 11 September 2013)
Key duties
In accordance with its terms of reference, the Audit
committee’s key duties include:
• monitoring the integrity of the group’s financial statements
and any formal announcements relating to the Company’s
performance, reviewing significant financial reporting
judgements contained in them before their submission
to the board for approval;
• reviewing the group’s internal financial controls, including
the policies and overall process for assessing established
systems of internal financial control and the timeliness and
effectiveness of corrective action taken by management;
• overseeing the group’s arrangements for the prevention
and detection of fraud, and whistleblowing;
The performance of the committee was evaluated as part
of the annual board performance evaluation and was found
to be operating effectively.
• monitoring and reviewing the role and effectiveness of the
group’s internal audit function in the context of the group’s
overall financial risk management system; and
Diversity
The board recognises the benefits of achieving diversity
throughout the group’s businesses. The main focus of debate
in the UK recently has been on gender diversity, following the
publication of Lord Davies’ report, ‘Women on Boards’ in 2011.
The board has continued to follow this important debate on the
representation of women in the boardroom and gender diversity
was, again, a specific area considered in this year’s board
performance evaluation exercise.
It is also recognised that a genuinely diverse board comprises
individuals with a range of personal attributes, perspectives,
skills, experience and backgrounds, as well as representing
differences in nationality, race and gender. It therefore remains
the board’s policy to make new appointments based on merit.
It is also the policy of the board that, while candidates for future
board appointments will be considered from the widest possible
pool, executive search agencies will be asked to ensure that half
of the candidates they put forward for consideration are women.
Looking beyond the board to the group’s wider workforce, a
number of programmes and initiatives have been launched
across the group’s businesses since 2011 with the aim of
overcoming the barriers that women may face in the workplace.
The objective is to run businesses which attract and retain the
best female talent by creating a culture which welcomes,
Associated British Foods Annual Report and Accounts 2013
• overseeing the relationship with the group’s external
auditors, including reviewing and monitoring their objectivity
and independence, and agreeing the scope of their work
and fees paid to them for audit and non-audit services.
Governance
The Audit committee comprises a minimum of three members,
all of whom are independent non-executive directors of the
Company. Two members constitute a quorum. Appointments
are for a period of three years after which they are subject to
annual review, extendable by two further thee-year periods
so long as members continue to be independent. Accordingly
Tim Clarke retired from the committee with effect from
11 September 2013 and Javier Ferrán was appointed on
that date.
The committee structure requires the inclusion of one
financially qualified member (as recognised by the Consultative
Committee of Accountancy Bodies) with recent and relevant
financial experience. Currently, the committee chairman fulfils
this requirement. All committee members are expected to be
financially literate and to have an understanding of the
following areas:
• the principles of, and developments in, financial reporting
including the applicable accounting standards and statements
of recommended practice;
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• key aspects of the Company’s operations including corporate
• any significant adjustments to financial reporting arising
policies and the group’s internal control environment;
from the audit;
• matters which may influence the presentation of accounts
• litigation and contingent liabilities affecting the group; and
and key figures;
• potential tax contingencies, compliance with statutory tax
• the principles of, and developments in, company law,
obligations and the group’s tax policy.
sector-specific laws and other relevant corporate legislation;
• the role of internal and external auditing and risk management;
and
• the regulatory framework for the group’s businesses.
The committee invites the Group Finance Director, Group
Financial Controller, Director of Financial Control and senior
representatives of the external auditors to attend its meetings
in full, although it reserves the right to request any of these
individuals to withdraw. Other senior managers are invited
to present such reports as are required for the committee
to discharge its duties.
During the year, the committee held four meetings with the
external auditors without any executive members of the board
being present.
The committee has unrestricted access to Company documents
and information, as well as to employees of the Company and
the external auditors.
The committee may take independent professional advice
on any matters covered by its terms of reference at the
Company’s expense.
The committee chairman reports the outcome of meetings
to the board.
The committee’s effectiveness is reviewed on an annual basis
as part of the board’s performance evaluation process.
The full terms of reference of the Audit committee can be
viewed on the Investors section of the Company’s website
(www.abf.co.uk).
Meetings
The Audit committee met four times during the year and has
an agenda linked to events in the group’s financial calendar.
Activities during the year
In order to fulfil its terms of reference, the Audit committee
receives and reviews presentations and reports from the
group’s senior management, consulting as necessary with
the external auditors.
During the year, the committee formally reviewed draft interim
and annual reports and associated announcements. These
reviews considered:
• the accounting principles, policies and practices adopted in
the group’s financial statements, any proposed changes to
them, and the adequacy of their disclosure in the annual report;
• the integrity of the financial statements, including a review
of important accounting issues, areas of complexity and the
actions, estimates and judgements of management in relation
to financial reporting. The committee had a particular focus
on the carrying value of property, plant and equipment and
intangible assets, and the disclosure of restructuring and
closure costs;
The committee is required to assist the board to fulfil its
responsibilities relating to the adequacy and effectiveness of
the control environment, controls over financial reporting and
the group’s compliance with the UK Corporate Governance
Code. To fulfil these duties, the committee reviewed:
• the external auditors’ management letters and their Audit
committee memoranda;
• internal audit reports on key audit areas and significant
deficiencies in the financial control environment;
• reports on the systems of internal financial controls and risk
management;
• reports on fraud perpetrated against the group; and
• the group’s approach to IT, cyber security and whistleblowing.
The Audit committee is responsible for the development,
implementation and monitoring of policies and procedures
on the use of the external auditors for non-audit services, in
accordance with professional and regulatory requirements.
These policies are kept under review to meet the objective of
ensuring that the group benefits in a cost-effective manner from
the cumulative knowledge and experience of its auditors whilst
also ensuring that the auditors maintain the necessary degree
of independence and objectivity. Consequently, any non-audit
work to be undertaken by the auditor in excess of £300,000
requires authorisation by the chairman of the Audit committee
and the Group Finance Director prior to its commencement.
Individual assignments of less than £300,000 are approved by
the Group Finance Director. The aggregate expenditure with
the group auditors is reviewed by the Audit committee.
Typically, the committee will approve the use of the external
auditors to provide: accounting advice and training; employee
benefit plan audits; corporate responsibility, IT and other
assurance services; due diligence in respect of acquisitions
and disposals; certain specified tax services including tax
compliance, tax planning and related implementation advice;
and certain other services when it is in the best interests of
the Company to do so and they can be undertaken without
jeopardising auditor independence. No individually significant
non-audit assignments that would require disclosure were
undertaken in the financial year.
The Company has a policy that any recruits hired directly from
the external auditors must be pre-approved by the Group HR
Director, and the Group Finance Director or Group Financial
Controller.
The Audit committee has formally reviewed the independence
of its auditors. KPMG Audit Plc have provided a letter confirming
that they believe they remain independent within the meaning
of the regulations on this matter and in accordance with their
professional standards.
To fulfil its responsibility to ensure the independence of the
external auditors, the Audit committee reviewed:
Associated British Foods Annual Report and Accounts 2013
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CORPORATE GOVERNANCE CONTINUED
• changes in external audit executives in the audit plan for the
current year;
• a report from the external auditors describing their
arrangements to identify, report and manage any conflicts
of interest; and
• the extent of non-audit services provided by the
external auditors.
To assess the effectiveness of the external auditors, the
committee reviewed:
• the external auditors’ fulfilment of the agreed audit plan and
variations from it;
• reports highlighting the major issues that arose during the
course of the audit;
• feedback from the businesses evaluating the performance
of each assigned audit team; and
• a report from the Audit Quality Review Team of the Financial
Reporting Council (FRC).
The Audit committee holds private meetings with the external
auditors after each committee meeting to review key issues
within their sphere of interest and responsibility.
To fulfil its responsibility for oversight of the external audit
process, the Audit committee reviewed:
• the terms, areas of responsibility, associated duties and scope
of the audit as set out in the external auditors’ engagement
letter for the forthcoming year;
• the external auditors’ overall work plan for the forthcoming year;
• the external auditors’ fee proposal;
• the major issues that arose during the course of the audit
and their resolution;
• key accounting and audit judgements;
• the level of errors identified during the audit; and
• recommendations made by the external auditors in their
management letters and the adequacy of management’s
response.
Consideration is also given by the Audit committee to the need
to include the risk of the withdrawal of the external auditors
from the market in its risk evaluation and planning.
Although KPMG Audit Plc has been the Company’s auditor
for many years, KPMG periodically changes its audit partners
at a group, divisional and country level, in accordance with
professional and regulatory standards, in order to protect
independence and objectivity and provide fresh challenge to
the business. Such changes are carefully planned to ensure
that the Company benefits from continuity of staffing without
incurring undue risk or inefficiency.
Richard Pinckard was appointed as KPMG lead audit partner for
the financial year ended September 2012 and is expected to
continue as lead audit partner until the conclusion of the 2016
audit. Upon his appointment Mr Pinckard undertook a detailed
review of the external audit arrangements across the group
including a review of senior audit executives, and he presented
Associated British Foods Annual Report and Accounts 2013
his findings and recommendations to the Audit committee.
As part of the normal partner rotation arrangements, no
changes were necessary in the current year but four divisional
audit executives were changed last year.
The Audit committee is satisfied with the auditors’
effectiveness and independence and has not considered
it necessary this year to conduct a tender process for the
appointment of its auditors. Having carried out the review
described above and having satisfied itself that the external
auditors remain independent and effective, the Audit committee
has recommended to the board that KPMG LLP be appointed
as the Company’s external auditor for 2013/14. KPMG Audit Plc
(a fellow KPMG group company) has instigated an orderly
wind-down of business.
The Audit committee has noted the changes to the UK
Corporate Governance Code introduced by the FRC in
September 2012 and, in particular, the requirement contained
in the Guidance on Audit Committees to put the external audit
contract out to tender at least every ten years. The new Code
became effective for the Company on 15 September 2013
and, as suggested in the FRC’s transitional arrangements with
respect to audit tendering, it is likely that the Company will put
its audit out to tender to coincide with completion of the current
five-yearly cycle of partner rotation. The committee will take
into account, when determining its tendering arrangements,
the UK Competition Commission’s recent decision to introduce
mandatory audit tendering at ten-year intervals, and the
associated transitional provisions.
The total fees paid to KPMG Audit Plc for the year ended
14 September 2013 were £8.9m of which £2.8m related to
non-audit work. Further details are provided in note 2 to the
financial statements.
Internal audit function
The Audit committee is required to assist the board to
fulfil its responsibilities relating to the adequacy of the
resourcing and plans of internal audit. To fulfil these duties,
the committee reviewed:
• internal audit’s reporting lines and access to the committee
and all members of the board;
• internal audit’s plans and its achievement of the planned activity;
• the results of key audits and other significant findings, the
adequacy of management’s response and the timeliness
of resolution;
• statistics on staff numbers, qualifications and experience and
timeliness of reporting;
• the level and nature of non-audit activity performed by internal
audit; and
• changes since the last annual assessment in the nature
and extent of significant financial risks and the group’s
ability to respond to changes in its business and the
external environment.
The group’s ‘whistleblowing’ policy contains arrangements
for an independent external service provider to receive, in
confidence, complaints on accounting, risk issues, internal
controls, auditing issues and related matters for reporting to
the Audit committee as appropriate.
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The group’s anti-fraud policy has been communicated to all
employees and states that all employees have a responsibility
for fraud prevention and detection. Any suspicion of fraud should
be reported immediately and will be investigated vigorously.
Clearly defined guidelines have been established for capital
expenditure and investment decisions. These include the
preparation of budgets, appraisal and review procedures and
delegated authority levels.
Financial reporting
Detailed management accounts are prepared every four
weeks, consolidated in a single system and reviewed by senior
management and the board. They include a comprehensive set
of financial reports and key performance indicators covering
commercial, operational, environmental and people issues.
Performance against budgets and forecasts is discussed
regularly at board meetings and at meetings between
operational and group management. The adequacy and
suitability of key performance indicators is reviewed regularly.
All chief executives and finance directors of the group’s
operations are asked to sign an annual confirmation that their
business has complied with the Group Accounting Manual in
the preparation of consolidated financial statements and
specifically to confirm the adequacy and accuracy of
accounting provisions.
Internal audit
The group’s businesses employ internal auditors (both
employees and resources provided by Ernst & Young where
appropriate) with skills and experience relevant to the operation
of each business. All of the internal audit activities are
co-ordinated centrally by the group’s Director of Financial
Control, who is accountable to the Audit committee.
All group businesses are required to comply with the group’s
financial control framework that sets out minimum control
standards. A key function of the group’s internal audit resources
is to undertake audits to ensure compliance with the financial
control framework and make recommendations for
improvement in controls where appropriate. Internal audit also
conducts regular reviews to ensure that risk management
procedures and controls are observed. The Audit committee
receives regular reports on the results of internal audit’s work
and monitors the status of recommendations arising. The
committee reviews annually the adequacy, qualifications and
experience of the group’s internal audit resources and the nature
and scope of internal audit activity in the overall context of the
group’s risk management system set out below. The Director
of Financial Control meets with the chairman of the committee
as appropriate but at least annually, without the presence of
executive management, and has direct access to the Chairman
of the board. He also meets at least annually with the Audit
committee, without the presence of executive management.
The chairman of the Audit committee will be present at the
annual general meeting to answer questions on this report,
matters within the scope of the committee’s responsibilities
and any significant matters brought to the committee’s attention
by the external auditors.
Internal control
The board acknowledges its responsibilities for the group’s
system of internal control to facilitate the identification,
assessment and management of risk, the protection of
shareholders’ investments and the group’s assets. The directors
recognise that they are responsible for providing a return to
shareholders, which is consistent with the responsible
assessment and mitigation of risks.
Effective controls ensure that the group’s exposure to avoidable
risk is minimised, that proper accounting records are maintained,
that the financial information used within the business is reliable
and that the consolidated accounts preparation and financial
reporting processes comply with all relevant regulatory reporting
requirements. The dynamics of the group and the environment
within which it operates are continually evolving together with
its exposure to risk. The system is designed to manage, rather
than eliminate, the risk of assets being unprotected and to
guard against their unauthorised use and the failure to achieve
business objectives. Internal controls can only provide
reasonable and not absolute assurance against material
misstatement or loss.
The directors confirm that there is a process for identifying,
evaluating and managing the risks faced by the group and the
operational effectiveness of the related controls, which has
been in place for the year under review and up to the date of
approval of the annual report and accounts. They also confirm
that they have regularly reviewed the system of internal controls
utilising the review process set out below.
Standards
There are guidelines on the minimum groupwide requirements
for health and safety and environmental standards. There are
also guidelines on the minimum level of internal control that
each of the divisions should exercise over specified processes.
Each business has developed and documented policies and
procedures to comply with the minimum control standards
established, including procedures for monitoring compliance
and taking corrective action. The board of each business is
required to confirm bi-annually that it has complied with
these policies and procedures.
High level controls
All operations prepare annual operating plans and budgets
which are updated regularly. Performance against budget is
monitored at operational level and centrally, with variances being
reported promptly. The cash position at group and operational
level is monitored constantly and variances from expected levels
are investigated thoroughly.
Associated British Foods Annual Report and Accounts 2013
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CORPORATE GOVERNANCE CONTINUED
Principal risks and uncertainties
Each business is responsible for its own risk management
assessment which is reported to the group’s Director of
Financial Control annually. Our decentralised business model
empowers the boards and management of our businesses to
identify, evaluate and manage the risks they face on a timely
basis. Key risks and internal control procedures are reviewed
at group level by the board.
Each business is responsible for regularly assessing its health,
safety and environmental risks with managers, operators,
contracting companies and specialist staff working together to
identify hazards. Appropriate operational procedures and controls
are put in place to mitigate risks and all employees are provided
with appropriate information, training and supervision. Further
details of our risk mitigation activities can be found in our
corporate responsibility report at www.abf.co.uk/responsibility.
We require all businesses to implement appropriate levels of risk
management to ensure compliance with all relevant legislation,
our group health, safety and environment policies, our overriding
business principles and group policies relating to them, taking
into account business needs and local circumstances.
The board reviews annually the material financial and
non-financial risks facing our businesses and, on a rolling cycle
basis, reviews the effectiveness of the risk management
process and the resources that our individual businesses
devote to them. The principal risks currently identified by
our businesses and reviewed by the board are:
People
Issue
Risk
Mitigation
Product safety
Reputational damage
caused by food hygiene
or product safety
incidents.
Non-compliance with
regulatory requirements.
Public concerns over
materials used in
packaging and
ingredients in products.
Food safety is put before economic considerations.
Our businesses employ quality control specialists and operate strict policies to
ensure consistently high standards are maintained in our operations and in the
sourcing and handling of raw materials.
Food safety systems are regularly reviewed for efficacy and legal compliance.
We participate in independent food health and safety audits. Quality and food
safety audits are undertaken at our manufacturing sites.
Documented and tested product recall procedures are embedded in all our
businesses and are regularly reviewed.
We proactively monitor the regulatory and legislative environment as well as
emerging scientific research.
Health and
nutrition
Health concerns over fat,
salt and calorie content
of foods.
Recipes are regularly reviewed and reformulation is conducted to improve the
nutritional value of products, with a focus on reducing fat, salt and calorie
content where possible.
Responding correctly to
the spectrum of food
poverty and malnutrition
versus obesity.
Inappropriate advertising
to children.
Potential for fatal
accidents and serious
injuries to employees,
contractors and visitors.
Loss of healthy
workforce and supply
chain due to diseases
such as HIV/AIDs, TB
and malaria in high-risk
countries.
Our UK Grocery group has signed the UK government’s ‘Public Health
Responsibility Deal’ and associated pledges to reduce salt, remove trans fats
and promote healthy eating and lifestyle options to our employees.
All of our grocery products are labelled with nutritional information.
Our UK Grocery portfolio contains only a small number of products specifically
intended for children. These products are marketed responsibly, following
accepted codes of practice and within the parameters of a clear, operational
business policy.
We are looking further to continue programmes related to health and nutrition,
and to develop partnerships to help educate people about health and nutrition.
Group health and safety policy and practices are embedded with a strong
ethos of workplace safety across the group. We maintain a programme of
audits to verify implementation and support continuous improvement.
Accountable senior executives and specialists are appointed.
We provide health and safety training and continue to share guidance and best
practice with our businesses.
We have extended the internal and external auditing of health, safety and
management reporting.
We continue to invest in health and safety management.
Workplace health
and safety
Associated British Foods Annual Report and Accounts 2013
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People
Issue
Risk
Mitigation
Employee rights Non-compliance with
internationally
recognised standards.
Inability to recruit and
retain high-calibre people
at all levels necessary
to achieve business
performance targets
and maintain
profitable growth.
Maintaining our duty
of care to employees,
contractors and workers
in our supply chain.
Failure to plan for
succession to key roles
could lead to a lack of
management continuity
and suboptimal
operational or financial
performance.
Damage to brands
caused by supply chain
weakness, e.g. poor
conditions for workers.
Problems with supply
reliability caused by
natural disasters and
other incidents.
Understanding the
sustainability and
responsible business
practices of our
suppliers.
Unacceptable business
practices which
contravene our Business
Principles.
Reputational damage
through the irresponsible
business practices of
individuals.
Penalties imposed
through bribery,
corruption or unfair
competition.
Management
succession
Suppliers and
supply chain
reliability
Ethical business
practices
We aim to ensure compliance with the United Nations Universal Declaration
of Human Rights in the management of all our businesses.
Employees throughout the group are recruited, trained and rewarded according
to performance alone.
Whistleblowing policy and procedures in place.
We will consider how our approach to managing employee rights can be
shared with principal suppliers.
Each business has a succession plan which is reviewed with group
management twice a year, and with the board, annually.
Development of our senior managers is co-ordinated by the Group HR Director
and the Head of Executive Development.
A small number of executive search companies have been briefed to
introduce us to talented executives from other companies who could add
value to the group.
Maintain programme of supplier audits where appropriate. Extensive audit
programme for labour standards of suppliers.
We have introduced a Supplier Code of Conduct which is being implemented
across all our businesses, tailored to their requirements.
We continue to work, in partnership with suppliers and NGOs, to improve
working conditions, e.g. via training.
Refocus on worker safety and safe working conditions. We have built up an
intensive programme of ethical audits in Primark’s supply chain.
Primark has maintained its classification as a leader, by the Ethical Trade
Initiative, and we are mapping second tier suppliers (subcontractors).
The Grocery division conducted an independent review of the environmental
and ethical risks in its supply chains to increase understanding.
External communication and transparency on the management of our supply
chain in Primark and Grocery has been enhanced.
Business continuity and disaster recovery plans are regularly reviewed.
All businesses are signed up to the group’s Business Principles and
Anti-Bribery and Corruption Policy.
A programme of training and compliance has been implemented for
all employees.
Appointment of anti-bribery and corruption specialists.
Businesses work co-operatively to ensure visibility of reputational risk within
supply chains and draw upon best practice management expertise across the
group including Primark and Twinings.
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CORPORATE GOVERNANCE CONTINUED
Environment
Issue
Risk
Mitigation
Environment
management
including climate
change
Long-term increase in energy prices.
Physical threats to operations from
climate change, e.g. flooding.
Climate change impact altering growth
rates of raw materials we use.
Increasing cost to operations to adapt
to climate change and mitigate impact.
Negative impact on the environment
and the communities which depend
on land used by our operations.
Air pollution
Unacceptable impact on environment.
Offence caused to local communities by
emissions to air from factories.
Compliance with the group’s Environment Policy and
annual reporting of environmental impact.
Best available techniques are employed to reduce energy
consumption – statutory requirement for all sites subject
to the EU’s Pollution Prevention and Control regime.
Agricultural raw materials are sourced from a wide range
of geographical locations and suppliers.
We have a continued focus on reducing our environmental
impact and implementing changes to our operations to
maximise opportunities such as recycling more waste and
using more renewable sources of fuel.
We have implemented infrastructural protections against
weather-related risks such as floods.
Measuring and reporting our Greenhouse Gas emissions
for the group in 2014. Measuring the CO2e emissions of
our transport for the first time.
Substantial investment is made to improve environmental
risk management, with a focus on reducing CO2e emissions
when investing in new capital projects.
Establish effective procedures across our business to
contain or minimise emissions.
Plant and process changes are assessed in advance before
authorisation is sought. Comply with emission standards in
country of operation, as a minimum.
Continue to monitor procedures and swiftly redress
non-compliance.
Disposal of waste
and effluent
Legal sanction and reputational damage
because of non-compliance with
regulations and licences.
Responsibility is assigned to senior executives in all
businesses and specialists employed. Comply with
standards in country of operation, as a minimum.
Negative impact on the local environment.
Managing quality of water discharge.
Increasing cost of waste and managing
responsible waste disposal.
Groupwide focus on segregating all waste so that more
can be reused or recycled wherever practicable. Work with
waste contractors to help us measure the amount of waste
disposed or sent for beneficial use.
Improvements in the packaging of our products resulting in
less waste.
Continued investment in our effluent treatment plants and
the treatment of waste water.
Our UK Grocery group supports the Courtauld 2 Commitment
to reduce packaging waste, the Food and Drink Federation
‘Fivefold Environmental Ambition’ and the Institute of
Grocery Distribution Water Savings Initiative.
Associated British Foods Annual Report and Accounts 2013
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Environment
Issue
Risk
Mitigation
Water use and
availability
Securing access to sources of water
and maintaining water availability for all.
Water-intensive sites in areas of water stress identified,
and efforts focused on water reduction in these areas.
Ensuring good practices in sharing and
managing water supplies with local
communities.
Investing heavily in the quality of our water usage data to
enable improved measurement and management of water
use and water quality.
Potential increasing cost of water.
Investment in irrigation systems.
Operating in water stress areas.
Resource efficiency
Unnecessary costs from inefficient use
of natural resources.
Maintaining a sustainable supply of raw
materials.
We published our first Water Disclosure in 2013 to the
Carbon Disclosure Project. Illovo published its first Water
Disclosure in 2012.
Look to build long-term partnerships to address water
issues at a local level.
Finalise the standardised approach to water measurement
across the group so that we can target investment and build
an effective water risk management programme.
Use of raw materials optimised.
Use of packaging minimised consistent with food safety
and product protection.
Fuel consumption in transport is minimised.
Use of commodities
such as palm oil,
soya and cocoa
Damage to the environment and
communities reliant on commodities.
Group commitment that all businesses will use Certified
Sustainable or Identity Preserved palm oil by 2015.
Damage to the reputation of the business
from unsustainable sourcing of certain
commodities.
Membership of various industry bodies to collaborate
on solutions including the Roundtable on Responsible
Soya. Twinings is a founder member of the Ethical
Tea Partnership.
Commissioned independent assessment of commodity
and country risks.
Planning review of suppliers and sourcing strategy for
certain high risk commodities.
Genetically modified
(GM) crops
Consumer concern over use of GM
food ingredients.
Continue to label all food containing genetically
modified ingredients.
Continue to monitor consumer trends.
Consultation with other businesses, governments and
industry bodies regarding GM products and undertake
further research to gain deeper insight into the issue.
Associated British Foods Annual Report and Accounts 2013
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CORPORATE GOVERNANCE CONTINUED
Financial and regulatory
Issue
Risk
Mitigation
Competition rules
Global economic
slowdown and
changing consumer
demand
Financial, currency
and commodity risks
Penalties for failing to comply with 1998
Competition Act, the 2003 Enterprise Act,
relevant EU law and all relevant
competition legislation.
Demand for our products declines due
to uncertainty over economic outlook
and impact on disposable incomes.
Loss sustained as a result of failure of
internal controls or fraud, and exposure
to foreign currencies, interest rates,
counterparty credit risk, liquidity risk,
and changes in market prices especially
for energy and commodities.
Clear policy direction and close support from specialist
in-house legal department.
Compulsory awareness training.
Mitigated by diversity of business portfolio and
geographic reach.
Substantial investment in research and development,
product quality, advertising and promotion, and focus
on cost management.
Adherence to the group’s financial control framework
and anti-fraud policy.
Treasury operations are conducted within a framework
of board-approved policies and guidelines.
Sufficient funding is maintained by way of external loans
and committed bank facilities, which are renewed or
extended on a timely basis, having regard to the group’s
projected funding needs.
Financial transactions are dealt through financial
institutions with a credit rating of A or better. Details of
the group’s accounting and risk management policies with
respect to financial instruments and associated quantitative
and qualitative disclosures are set out in note 24 on pages
113 to 123.
Tax compliance
Failure to comply with local tax law
resulting in underpayment of tax and
exposure to related interest and penalties.
The group has a financial control framework and a board
adopted tax policy requiring all businesses to comply fully
with all relevant local tax law.
Provision is made for known issues based on
management’s interpretation of country specific tax law
and the likely outcome. Any interest and penalties on tax
issues are provided for in the tax charge.
Group IT Security policies and procedures are rolled out
across the businesses.
Employee awareness campaigns are undertaken to
highlight key activities to minimise IT security risks.
Technical security controls are in place over key
IT platforms.
An experienced Head of IT Security has been appointed.
He is tasked with identifying security risks and working
with the businesses to implement mitigating controls.
Internal audit reviews of compliance with policies and
procedures are undertaken.
IT security breach
Data loss or theft.
Business disruption.
Associated British Foods Annual Report and Accounts 2013
Financial and regulatory
Issue
Risk
Mitigation
Loss of a major site
The loss of one of our key sites could
present significant operational difficulties.
Regulatory and
political
Failure to recognise political or cultural
differences in the many countries in which
we operate could directly impact the
success of our operations.
Proposals to end sugar quotas in 2017.
Major capital
projects and
acquisitions
Risk of overspending initial cost estimates,
overrunning construction timelines and
failure to meet design specifications.
Our businesses have in place business continuity plans to
manage the impact of such an event and group insurance
programmes to mitigate the financial consequences.
We remain vigilant to future changes and the risk presented
by operating in emerging markets.
We engage with governments and NGOs to ensure the
views of our stakeholders are represented and we try to
anticipate, and contribute to, important changes in
public policy.
Our financial control requirements are consistently applied
wherever we operate.
All major projects are managed by dedicated teams who
work in close liaison with business management.
Project plans are reviewed and approved by group
management and, for larger projects, by the board.
Updates on progress are provided throughout the project.
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REMUNERATION REPORT
Annual statement by the Remuneration
Committee Chairman
Associated British Foods is a group of businesses that trade all
over the world, both in international and domestic markets. That
diversity extends to size, margin, growth rates and returns, as
well as to products. Businesses are expected to grow in the
long term, but are subject to short-term pressures which
prevent this from time to time. Recent years have seen strong
overall growth from the group and the remuneration achieved
by directors and many managers has reflected that. Given the
diversity of the group, growth does not occur uniformly across
all businesses in every year and we know that one of our bigger
businesses, European Sugar, will come under pressure in
coming years. However, to achieve its strategic objectives
ABF is always willing to invest for the long term, where
necessary at the expense of annual results.
The committee’s approach to remuneration is that it should
be kept as simple as possible. Our practice is to ensure that
remuneration directly reflects individual accountabilities for
business results. We seek to reward at the median of the
relevant market, and we believe that pay should be managed
fairly, given the importance of long-term profit development
over short-term results. Our framework for executive
remuneration is based on a set of guiding principles, such as a
belief in ‘line of sight’ and ‘doing the right thing’. This framework
has been largely unchanged for a number of years. The two
executive directors are an integral part of a flat pyramid of
management whose remuneration is dealt with in a consistent
manner. The only change to be made in the new financial year
will be the replacement, if approved, of the current share plan
which comes to the end of its ten-year term in December.
One of ABF’s strategic objectives is to deliver long-term growth
in earnings which makes earnings per share the natural measure
of performance over the long term. The committee debates
each year the appropriate range of growth which should
properly incentivise and reward directors and management in
the long term and also whether, and to what extent, targets
should be flexed to accommodate unexpected events which
disrupt short-term plans and alter longer-term outcomes. These
debates are rarely easy to resolve but are usually determined
by reference to the individual’s accountability for the business,
whether the event was beyond the individual’s control and
whether actions taken were in the long-term interests of the
business. As a matter of fact, discretion on fairness issues is
often debated but only used in limited circumstances.
As chairman of the committee, I invite the larger institutional
shareholders each year to discuss their views on the group’s
remuneration, along with strategy and governance. Those who
have taken up the invitation over the past year have expressed
confidence with the way in which the group has managed
remuneration, and discussion has been characterised by informed
enquiry and open debate. Remuneration is one of those subjects
on which every shareholder has a point of view. I hope that our
principles of clarity, relative simplicity, accountability and fairness
help to explain what the committee does and enable
shareholders to support the committee’s work.
Charles Sinclair
Remuneration Committee Chairman
Associated British Foods Annual Report and Accounts 2013
Remuneration policy
Role of the committee in relation to remuneration policy
The Remuneration committee is responsible to the board for
determining the remuneration policy for executive directors,
together with the specific terms and conditions of employment
of each individual director, and for reviewing the overall policy
for executive remuneration.
The Remuneration committee has reviewed its remuneration
practices and reporting in light of the government’s new
remuneration reporting reforms. These reforms come into
operation for financial years ending on or after 30 September
2013 and so will not become effective for the group until 2014.
In the meantime the committee has decided to make a number
of substantial changes to the 2013 Remuneration report in order
to provide shareholders with additional information about the
remuneration of directors and rewards for Company performance.
In summary, the remit of the Remuneration committee is to:
• determine and agree the framework or broad policy for the
remuneration of the executive directors and the Chairman
of the Company (in his absence);
• determine the framework or broad policy for the remuneration
for the first line and second line reports to the Chief Executive
and approve individual remuneration decisions when
proposed arrangements fall outside the broad policy for
remuneration;
• ensure that the executive directors and first line and second
line executives are provided with appropriate, stretching
incentives to encourage enhanced performance and are,
in a fair and responsible manner, rewarded for their
contributions to the long-term success of the Company;
• review the remuneration trends across the Company
or group when determining the remuneration policy for
executive directors;
• consider and determine all elements of the remuneration
of the executive directors, receiving advisory information
on the same in relation to the remuneration of the first
line executives;
• approve the design and monitor the operation of any
Company share plans; and
• consider and determine other provisions of the service
agreements of the executive directors and ensure that
contractual terms on termination, and any payments made,
are fair to the individual and the Company and that failure
is not rewarded and loss is mitigated.
The committee will apply discretion, where necessary
and by exception, to ensure that there are no unintended
consequences from the operation of the remuneration policy.
The committee exercised discretion in 2012 for the first time
in many years, when it determined that as a result of an
exceptional asset impairment charge it would be appropriate
to reduce the vesting under the Executive Share Incentive
Plan. This year, the committee has again exercised discretion
in order to reflect the underperformance of investments in a
particular sector.
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In setting the remuneration policy, the committee seeks to act
in the best interests of the Company. The committee chairman
engages with a number of our largest shareholders to understand
any concerns they may have about the approach to remuneration.
Whilst the views of employees are not explicitly sought, employees
are able to feed back their opinions through employee opinion
surveys or directly to the Company’s management.
the Remuneration committee taking into account group
performance, individual performance and competitive market
practice as well as the pay and conditions of the group’s UK
employees. The total annual remuneration of executive directors
comprises base salary, a cash bonus, shares granted under
a long-term incentive scheme, pension provisions and
other benefits.
Executive directors
The overall remuneration policy of the Company aims to:
• provide alignment between remuneration and the Company’s
business objectives;
• align executive rewards with shareholder value;
• attract and retain high-calibre executive directors;
• motivate executive directors to achieve challenging
performance levels and reward them for so doing;
• recognise both individual and group achievement; and
• reflect the diversity of the group’s interests.
The remuneration of executive directors is determined by
The Remuneration committee continues to believe that a
substantial element of compensation should be ‘at risk’ in
order to drive and reward performance and to align better
the interests of executives with those of shareholders. The
proportion of variable pay in the form of annual performance
bonus and long-term incentives compared to base salary for
executive directors is around 1.8 to 1 for ‘on target’ performance
and 3.5 to 1 for maximum performance. No increase in incentive
awards is proposed for 2013/14.
For 2012/13, the composition of the executive directors’
remuneration packages for fixed, threshold, ‘on target’ and
maximum performance is set out below:
George Weston (£000)
John Bason (£000)
5,000
4,500
4,000
3,500
3,000
2,500
2,000
4,848
39%
3,197
30%
1,500
1,482
1,790
11%
6%
24%
30%
1,000
500
0
100%
83%
46%
31%
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
3,224
2,138
29%
24%
39%
30%
47%
31%
1,010
1,212
100%
11%
6%
83%
Minimum
Threshold
On target
Maximum
Minimum
Threshold
On target
Maximum
Fixed elements
Annual variable element
Long-term variable element
Fixed elements
Annual variable element
Long-term variable element
Notes
1 Fixed elements include base salary, benefits and pension.
2 Annual variable element – bonus is calculated on base salary at end of financial year.
3 Long term incentive – value is calculated on base salary at the date of allocation, and excludes subsequent share price movements.
Associated British Foods Annual Report and Accounts 2013
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REMUNERATION REPORT CONTINUED
Summary of remuneration policy for executive directors
Element and purpose
Operation and link to business strategy
Maximum opportunity
Base salary
To provide core
reward for the role.
Base salaries are normally reviewed on an annual basis or following
a significant change in responsibilities.
Salaries are reviewed in relation to median market data for comparable
companies in terms of size, market sector and complexity. The
committee also receives an annual update from the Group HR Director
concerning the level of increases awarded to UK employees across
the group.
The committee considers the impact of any base salary increase on
the total remuneration package.
Annual performance bonus
Changes
effective for
2013–14
Annual review of
base salary with
increase in line
with other UK
executives across
the group.
To encourage and
reward the attainment
of challenging
financial targets and
the achievement of
personal performance
objectives over a
one-year period.
None.
150% of base salary,
of which 130% is
based on financial
results and 20% on
personal performance.
‘On target’ financial
performance will yield
a bonus of half the
maximum financial
payout and two-thirds
of the potential
personal performance
element will be
deemed ‘on target’
giving a total ‘on
target’ of 78.3%.
Group financial performance is assessed against adjusted operating
profit and average working capital as a percentage of sales.
These metrics have been chosen because they are prime financial
measures used across the whole group on a day-to-day basis to drive
and monitor performance.
Targets are set at the start of each financial year. Budgeted adjusted
operating profit is positioned as the ‘on target’ performance level, and
the Remuneration committee determines the range of operating profit
at which minimum and maximum incentive payouts will be made.
Similarly, the target and range for average working capital as a
percentage of sales is determined at the start of the financial year.
This metric is used as a multiplier to the bonus achieved for adjusted
operating profit, whereby that bonus can be enhanced or reduced by
up to 20%.
In the event of unusual or unforeseen circumstances occurring after
budgets have been set, the Remuneration committee retains discretion
to make adjustments, up or down, to respond to events and to
encourage executives to make the right business decisions regardless
of timing or the effect on incentives.
Individual personal objectives are also set each year. These may be
specific short-term goals or milestones towards medium or long-term
objectives, but are closely aligned to the overall strategy of the group.
Following the end of the financial year, the Chairman reviews the
performance of the Chief Executive against these objectives and
makes a recommendation to the Remuneration committee about the
appropriate level of payout for the personal element. Similarly, the Chief
Executive makes a recommendation to the Remuneration committee
regarding the Finance Director following an assessment
of his performance.
The structure and value of the overall annual bonus is as follows:
Payout based
on operating
profit only
108.3%
65.0%
15.0%
Maximum
On target
Threshold
Modification to
payout based
on average
working capital
Overall
financial
payout
Personal
element
Total
bonus
x1.2 130% 20.0% 150.0%
65% + 13.3% = 78.3%
x1.0
12.0%
0.0%
12%
x0.8
The committee has not introduced malus or clawback to the plan rules
as it is a discretionary scheme and the committee retains the discretion
to reduce or cancel payments.
Associated British Foods Annual Report and Accounts 2013
Summary of remuneration policy for executive directors
Element and purpose
Operation and link to business strategy
Maximum opportunity
Long-term incentives
To reward long-term
business growth,
promote executive
retention and align
the interests of
executives and
shareholders.
Executive directors are eligible to participate in the Associated
British Foods Executive Share Incentive Plan 2003 (the ‘Share
Incentive Plan’). The plan provides for annual allocations of
conditional shares, which vest over a three-year period, subject
to agreed performance targets being satisfied.
Under the terms of the current Share Incentive Plan, an allocation
of conditional shares will be made on or after 25 November 2013 for
the new performance period September 2013 to September 2016.
200% of base salary
at allocation
Award as
% of base
salary
200%
100%
20%
Max
On target
Min
Changes
effective for
2013–14
New plan to
be put to
shareholders
at 2013 AGM.
Measures
Group performance is measured against an absolute range of
compound annual growth in adjusted earnings per share (eps).
This measure was chosen because it:
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•
•
reflects the group’s objective of sustained long-term earnings
growth;
is a measure which is well understood both by participants
and shareholders;
is a published figure with limited adjustments; and
•
• encompasses the diverse nature of the group.
An absolute, rather than a relative measure is used, as the group is
a global business for which UK inflation factors are of limited impact.
Other financial measures have been considered, but found to be
unhelpful or inappropriate. Measures which require testing against a
group of companies, for example, relative TSR, are difficult to use given
the problem of finding appropriate comparator companies. Cash flow or
return measures have been considered, but these are to some extent
already encompassed within the earnings per share measure, are likely
to require many adjustments over a three-year period, and may reward
volatility and thus detract from a direct growth measure.
Targets
Targets are set by the committee at the beginning of each three-year
performance period, taking into account the state of the markets in
which the group operates as well as the scale of investments made
in the pursuit of long-term growth.
The Share Incentive Plan was designed to pay out an average of
around 50% of the maximum long-term incentive plan opportunity each
year over time. In determining a fair but stretching target, the committee
also considers the results of the long-term incentive scheme to date,
market expectations and internal forecasts for the next few years.
Associated British Foods Annual Report and Accounts 2013
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Changes
effective for
2013–14
Expectation
to build
shareholding.
None.
Company contribution
for senior executives
under the ABF DC
scheme is a
maximum of 25%
of base salary.
REMUNERATION REPORT CONTINUED
Summary of remuneration policy for executive directors
Element and purpose
Operation and link to business strategy
Maximum opportunity
Long-term incentives continued
New plan
The ‘Associated British Foods Executive Share Incentive Plan 2003’ is
a ten-year-plan which expires in December 2013, so a new ‘Associated
British Foods Long Term Incentive Plan’ will be put to shareholders for
approval at the 2013 annual general meeting. If approved, any share
allocations made after 6 December 2013 will be made under the
terms of the new plan.
Conditional shares already allocated for the three-year performance
periods 2010–13, 2011–14, 2012–15 and 2013-16 will vest under the
terms of the Executive Share Incentive Plan 2003.
Shareholding requirement
To demonstrate
commitment to the
Company by aligning
personal interests to
the success of the
group and its
shareholders.
Executive directors are required to build and maintain a shareholding
in the Company to a value at least equal to their pre-tax base salary. In
order to achieve this target, from the beginning of the 2013/14 financial
year executives will be required to retain at least 50% of any post-tax
shares vesting each year, until such time as the appropriate level of
shareholding has been reached and then to manage their shareholding
in such a way as to continue to meet the requirement.
Pension
To provide a
competitive
retirement benefit in
line with best practice
standards adopted by
major companies in
the United Kingdom
and continental
Europe.
The Company provides a final salary, defined benefit arrangement
for executives who were employed before the scheme was closed
to new entrants in October 2002. The scheme is designed to provide
retirement benefits of around two-thirds of final pensionable salary at
normal retirement age. John Bason has a two-thirds promise at age 62.
Executives employed after October 2002 benefit from a defined
contribution arrangement, with a Company contribution of 25%
of base salary.
Both pension schemes are HM Revenue & Customs approved.
Following governmental changes regarding the taxation of pensions
and the potential impact that any proposals would have on high earners,
the Company introduced flexible accrual and contribution options to
enable executives to mitigate their tax liabilities.
Where a UK-based pension arrangement is not possible, or is not tax
efficient, a cash supplement equivalent to the normal company pension
contribution may be paid in lieu.
The current executive directors were both members of the defined
benefit scheme, but opted out of this scheme on 5 April 2006, and
since then have earned benefits in the Employer Financed Retirement
Benefit Scheme (EFRBS). The EFRBS is unregistered, but is designed
to broadly mirror the provisions of the final salary defined benefit
arrangements.
Associated British Foods Annual Report and Accounts 2013
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Changes
effective for
2013–14
None.
Summary of remuneration policy for executive directors
Element and purpose
Operation and link to business strategy
Maximum opportunity
Benefits
To provide a
competitive and
cost-effective
benefits package
appropriate to
role and location.
The benefits provided include, but are not limited to, death in service
payment, permanent health insurance, company car plus private fuel,
family healthcare and, where relevant, fees to maintain professional
memberships. Executives are also provided with the technology
that they require to efficiently and effectively carry out their roles.
In addition to the above, if a new executive director were to relocate
from another country, additional support would be provided. The nature
of this potential ongoing support is detailed in the recruitment and
promotion arrangements section below.
As for other employees, we reimburse executives for expenses
necessarily incurred in the normal course of business.
Recruitment and promotion arrangements
To secure the
appointment or
promotion of
high-calibre
executive directors.
Salary
Starting salary will be based on a combination of market information,
internal relativities and individual experience. Thereafter, salary
progression will depend on the initial agreed base salary and the
normal review process.
Maximum level of
ongoing variable pay
will be in line with
normal policy.
Variable pay
(i) For external appointments
The Company may offer additional cash and/or share-based elements
when it considers these to be in the best interest of the Company. Such
payments would take account of the remuneration relinquished when
leaving a former employer and would reflect the nature, time horizons
and performance requirements attaching to that remuneration.
Where existing incentive or other arrangements are being bought out,
this will be done wherever possible by tying in any new arrangement
to achievement against group targets in either/both the annual
performance bonus and long-term incentives.
Annual performance bonus
If appropriate, some level of bonus, particularly during the first year
in post, may be guaranteed in order to encourage the executive to
move. This underpinning may be used as part of a buyout of existing
arrangements.
Long-term incentives
As shares under the normal long-term incentive scheme will not be
released for up to three years, some cash-based interim long-term
arrangement may be provided, but the level will not be more than
would otherwise have been paid. This may be used as part of the
buyout of existing arrangements.
(ii) For internal appointments
Any variable pay elements awarded in respect of the prior role may be
allowed to pay out according to the terms of the scheme, adjusted as
relevant to take account of the new appointment. In addition, any other
ongoing remuneration obligations existing prior to appointment
may continue.
Associated British Foods Annual Report and Accounts 2013
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REMUNERATION REPORT CONTINUED
Summary of remuneration policy for executive directors
Element and purpose
Operation and link to business strategy
Maximum opportunity
Recruitment and promotion arrangements continued
Changes
effective for
2013–14
Relocation
It is expected that a new recruit will establish a home base near the
corporate head office. Where required, the Company will pay:
•
•
actual relocation costs and other reasonable expenses relating to
moving house; and
disturbance allowance of up to 5% of base salary, of which £8,000
will be tax-free for qualifying expenditure;
And either
•
reasonable legal and estate agent fees and stamp duty for buying
and/or selling a family home; and
appropriate rental costs for up to six months to facilitate a new
recruit joining quickly and smoothly.
•
Or
• reasonable ongoing rental costs for recruits whose family home
remains overseas. In this case, where possible, recruits will be
expected to rent out their family home to offset the additional cost
of providing accommodation.
School fees
The Company will consider paying school fees for dependent children
of an executive director in cases where there are cultural or language
requirements.
Flights home
Where an executive is recruited from outside the UK the Company
will pay for one business class return fare per annum each for the
executive, his/her partner and dependent children in order to
maintain family or other links with his/her home country.
Retention arrangements
To allow the Company
to retain top executive
talent.
The Remuneration committee seeks to reward executives within
its agreed remuneration framework or broad policy. However, in
exceptional circumstances the committee may agree an additional
ad hoc cash payment in order to respond to the potential loss of
executive talent.
Executive directors serving as non-executive directors
To encourage
self-development
and allow for the
introduction of
external insight
and practice.
The Remuneration committee has determined that, with the consent
of the Chairman, executive directors may serve as non-executive
directors of other companies in an individual capacity and will retain
any fees earned.
Comparison of remuneration policy for executive directors and executives below the board
Whilst the Company is not required to disclose how the pay of executive directors compares with that of those below the board,
we believe that it is helpful to set their pay in a wider context. First line reports to the Chief Executive and other senior executives
are rewarded broadly within the same overall remuneration policy as executive directors, in order to ensure fairness and common
purpose across the group. Other executives therefore participate in incentive arrangements similar to those of the executive
directors, but with lower levels of potential payout. The proportion of variable pay to base salary for first line executives is around
1.2 to 1 for ‘on-target’ performance and 2.25 to 1 for maximum performance.
Annual bonus
The group comprises a very diverse set of businesses which are required to deliver financial progress over both the short and long
term. Financial targets for all executives are set on a business-by-business basis reflecting our ‘line of sight’ principle, i.e. what can
be directly influenced and the area of work for which each executive is accountable. Adjusted operating profit and working capital
are used as the prime financial measures across all businesses as they are common metrics which are used across the whole
group on a day-to-day basis to drive and monitor business performance.
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The Remuneration committee regularly reviews the annual performance bonus plans for other groups of senior executives below
board level to ensure that remuneration packages remain at a level sufficient to attract and retain high-calibre individuals.
Long-term incentives
Senior executives below board level are also eligible to receive conditional share allocations under the Share Incentive Plan.
Executives with divisional responsibility are largely measured against adjusted operating profit and working capital targets, rather
than group adjusted earnings per share, and individual business performance targets are set at the beginning of each three-year
cycle by reference to the specific business for which each executive is directly responsible. Again this reflects our ‘line of sight’
principle. The actual level of long-term share awards received by divisional executives therefore depends on the level of performance
achieved in each business.
In unusual circumstances, where realistic three-year targets cannot be set (for example where there is exceptional business
discontinuity or in a business recovery situation), an alternative mechanism may be used to calculate long-term achievement or
consistent progress against shorter-term goals. This alternative process, the ‘Accumulator’, determines the appropriate level of share
award to be paid over the normal performance period by averaging the actual financial performance achieved in each of the three
years of the LTIP period. The Accumulator is used very selectively and its use is agreed on a year-by-year basis.
Shareholding requirement
The Remuneration committee believes that all those executives who most closely influence the sustained long-term growth of the
Company should be required to demonstrate their commitment to the Company by aligning their personal interests to the success
of the group and its shareholders. Consequently, from 2013 all first line reports to the Chief Executive are expected to build and
maintain a shareholding in the Company to a value at least equal to their pre-tax base salary.
Other executives participating in the Share Incentive Plan are also encouraged to build up a beneficial interest in the Company,
but are not required to do so. No further changes are planned at the present time.
Summary of remuneration policy for non-executive directors
The board reviews non-executive directors’ fees periodically in the light of fees payable in comparable companies and the
importance attached to the retention and attraction of high-calibre individuals as non-executive directors. Fees are paid on a per
annum basis and are not varied for the number of days worked. Non-executive directors receive no other benefits and take no part
in any discussion or decision concerning their own fees.
The Remuneration committee (under the chairmanship of the Senior Independent Director) reviews the Chairman’s fees. In addition
to his fee, the Chairman also receives private medical insurance for himself and his spouse.
Fees for both the Chairman and other non-executive directors were last increased on 1 December 2012.
Element
Purpose
Operation
Chairman
Fees
To attract and retain a high-calibre
chairman by providing a competitive
core reward for the role.
The Chairman is paid a single fee for all his responsibilities.
The level of this fee is reviewed every other year by the committee (in the
absence of the Chairman) and the executive directors.
Benefits
To provide market competitive
benefits.
Non-executive directors
Fees
To attract and retain high-calibre
non-executive directors by offering
market competitive fees.
Fees are paid in cash on a monthly basis.
Private medical insurance (for Chairman and spouse).
Fees are paid on a per annum basis and are not varied for the number of
days worked.
The Chairman and executive directors review non-executive directors’ fees
periodically in the light of fees payable in comparable companies.
The Senior Independent Director and chairman of the Audit committee are
paid an additional fee to reflect their extra responsibilities.
Fees are paid in cash on a quarterly basis.
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REMUNERATION REPORT CONTINUED
Directors’ service agreements
It is the Company’s policy that all executive directors have rolling contracts with 12-month notice periods and that all non-executive
directors have rolling contracts with six-month notice periods.
The Company’s Articles of Association require that all directors retire from office if they have not retired at either of the preceding
two annual general meetings. In any event, at this year’s annual general meeting, all directors are standing for re-election in
compliance with the UK Corporate Governance Code. Contracts are available for inspection at the Company’s offices. Contracts and
service agreements are not reissued when base salaries or fees are changed. Pension arrangements for both the current executive
directors have also been amended, as described in the policy table, without reissuing their contracts.
Executive directors’ service contracts and provisions relating to their termination
Notice periods
Executive directors have rolling contracts with 12-month notice periods.
The Remuneration committee takes the view that this arrangement is in line with the practice of many comparable
companies.
Pay in lieu
Executive directors’ service contracts also provide for payment in lieu of notice at the Company’s discretion.
Appointments may be terminated with immediate effect and (except in the case of gross misconduct), in lieu
of the unexpired notice period, payments may be made in monthly instalments or as a lump sum as appropriate.
Pension and benefits
The Company may also make a series of monthly payments in respect of benefits and pension provision (or at the
Company’s discretion, a lump sum). Any monthly payments would be reduced to take account of amounts received
from alternative employment in line with the mitigation provisions.
Annual bonus
There is no automatic entitlement to accrued bonus on termination. If an executive director ceases to be employed
before, or is under notice when, the results for the financial year are published, then no award will be made unless
the committee determines otherwise. It is not our intention to make any payments in circumstances that amount to
‘payment for failure’, but in cases of redundancy, ill health, permanent disability, death in service or retirement with
the agreement of the Company, the committee will consider making a payment for the financial year in which the
termination took place. Any agreed payment will be made in the December following the year end.
Long-term incentive
If an executive director leaves the Company due to dismissal or resignation prior to the date when shares are due to
vest, all conditional share awards will be cancelled and no shares granted for any of the long-term incentive plans in
operation. There will be no contractual right to these shares or any cash equivalent.
Repatriation
Mitigation
If the executive leaves the Company due to retirement with the agreement of the Company, redundancy, permanent
disability or death in service, consideration will be given to releasing shares at the normal release date for any LTIP
which is due to mature during that year. In such cases, grants will be subject to normal performance calculations at
year end and will be prorated for length of service in completed months during the three-year period of the LTIP. Such
consideration will be at the discretion of the Remuneration committee. All LTIPs which are not due to mature during
the year will lapse.
Except in a case of gross misconduct, where an executive has been recruited from overseas and has been relocated
to the UK at the start of his/her employment, the Company will pay for his/her repatriation.
The Remuneration committee’s aim is always to deal fairly with cases of termination whilst taking a robust line in
minimising any compensation and ensuring that failure is not rewarded.
The Remuneration committee has given due consideration to the recommendations contained in the UK Corporate
Governance Code regarding inclusion of explicit provisions in directors’ service contracts for compensation
commitments in the event of early termination. The Remuneration committee will continue to keep under review its
current practice, which is not to include such provisions in order to enable it to respond appropriately to particular
circumstances. In such situations, the Remuneration committee will consider the appropriate use of mitigation.
Annual report on remuneration
Remuneration committee members
The Remuneration committee currently comprises five non-executive directors. The members of the committee who held office
during the year and at the date of this report were:
Charles Sinclair
Tim Clarke
Peter Smith
Lord Jay
Javier Ferrán
Chairman
Senior Independent Director
Chairman of Audit committee
The committee met on six occasions during the year and all members were present at each of the meetings.
Remuneration committee advisors and fees
Following a competitive tender in 2003, Towers Watson (then Towers Perrin) was selected to provide independent market
information and remuneration advice to the Remuneration committee. The committee has retained Towers Watson in this role
because it values continuity of advice over the long term and the robust data provided. The committee remains satisfied that the
advice from Towers Watson is independent, thoughtful and challenging.
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Towers Watson is a member of the Remuneration Consultants Group and adheres to its Code in relation to executive remuneration
consulting. Towers Watson does not provide any other consulting services to the Company.
The fees paid to Towers Watson for committee assistance over the past financial year totalled £82,970.
In addition to Towers Watson, the following people provided material advice or services to the committee during the year:
George Weston
Des Pullen
Group Chief Executive
Group HR Director
No director (including the Group Chief Executive or Chairman) participates in discussions relating to their own remuneration.
Statement on shareholder voting
At the last AGM in December 2012 the voting results on the remuneration resolution ‘To receive and approve the directors’
Remuneration report for the year ended 15 September 2012’ were as follows:
(i) the total number of votes cast in relation to the resolution was 652,929,365 – 644,285,996 ‘for’ and 8,643,369 ‘against’
(ii) the percentage ‘for’ was 98.68% and the percentage ‘against’ was 1.32%
(iii) the number of abstentions was 3,685,613
TSR performance and Chief Executive’s pay
The performance graph below illustrates the performance of the Company over the past five years from September 2008 to
September 2013, in terms of total shareholder return compared with that of the companies comprising the FTSE 100 index.
This index has been selected because it represents a cross-section of leading UK companies.
In addition, the graph provides a five-year summary of the total remuneration of the Group Chief Executive over the same period
showing a breakdown of each of the elements of variable pay within the total remuneration figure. For the purpose of calculating
the value of the remuneration of the Group Chief Executive, data has been collated on a basis consistent with the ‘single figure’
methodology as defined by the Department for Business Innovation & Skills.
Year-on-year TSR – ABF v FTSE 100 (2008 = 100)
280
260
240
220
200
180
160
140
120
100
80
ABF
FTSE 100
2008
2009
2010
2011
2012
2013
Total remuneration
(single figure, £000)
Annual variable pay (£000)
Potential maximum annual
variable pay (£000)
Annual variable pay
(% of maximum)
Long-term variable pay –
shares vesting as % of
maximum
2,540
1,165
1,290
90%
3,879
1,266
1,310
97%
3,182
438
1,373
32%
3,861
864
1,425
61%
5,251
1,219
1,466
83%
0%
99.12%
83.80%
97.42%
85.00%
At close of business on 13 September 2013, the last trading day before the end of the financial year, the market value of the
Company’s ordinary shares was 1809p. During the previous 12 months, the market value ranged from 1284p to 2031p.
Comparison of the Group Chief Executive’s remuneration with the remuneration of other employees and
other Company measures
Associated British Foods is very geographically dispersed and therefore subject to very different pay markets, so it is difficult to
make sensible comparisons with all employees across the group. As indicated previously, the salaries of executive directors are
reviewed in line with UK executives and in December 2012, when the target salary increase for all executives was between
2.5% and 3.0%, the Chief Executive received a salary increase of 2.84%.
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REMUNERATION REPORT CONTINUED
In order to drive and reward performance, and to align better the interests of executives and shareholders, the executive directors
have a greater proportion of their total reward package at risk than other employees. This means that in years of very good
performance, the Chief Executive’s package increases more than that of most other employees. However it should be noted that
the LTIP portion of the Chief Executive’s 2012/13 total remuneration reflects a 75% share price appreciation over the past three-year
period, a benefit shared by other shareholders.
A year-on-year comparison of the relative importance of pay and significant income distributions to shareholders and others is
shown below:
Expenditure
Pay spend for the group
Dividends relating to the period
Income taxes paid
Directors’ service contracts
2013
£m
1,943
253
252
2012
£m
1,760
225
191
Year-on-year
difference
10%
12%
32%
Details of the service contracts of directors who served during the year ended 14 September 2013 are set out below:
Executive directors
George Weston
John Bason
Non-executive directors
Charles Sinclair
Tim Clarke
Lord Jay
Javier Ferrán
Peter Smith
Emma Adamo
Date of
appointment
Effective
date
of current
contract
Notice
period from
Company
Notice
period from
director
19.04.99
04.05.99
01.06.05
16.03.99
12 months
12 months
12 months
12 months
01.10.08
03.11.04
01.11.06
01.11.06
28.02.07
09.12.11
21.04.09
03.11.04
01.11.06
01.11.06
28.02.07
09.12.11
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
Unexpired
portion of
service contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Directors’ remuneration in 2013
Base salary and fees
Executive directors’ salaries were reviewed on 1 December 2012 in accordance with normal policy and were increased in line with
average increases for UK executives across the group.
George Weston
John Bason
Dec 2012
977,000
643,000
Dec 2011
950,000
625,000
Increase
2.84%
2.88%
Executive directors’ salaries are next subject to review on 1 December 2013.
The fees of the Chairman and non-executive directors, which were last reviewed on 1 December 2010, were reviewed on
1 December 2012 and increases made as follows:
Charles Sinclair
Tim Clarke
Peter Smith
Javier Ferrán
Lord Jay
Emma Adamo
Dec 2012
350,000
82,500
82,500
65,000
65,000
65,000
Dec 2010
335,000
72,500
72,500
60,000
60,000
60,0001
Chairman
Senior Independent Director
Chairman, Audit committee
1 From date of appointment, 9 December 2011
Non-executive directors’ fees are next subject to review on 1 December 2014.
Annual bonus
In December 2013 there will be a payout of 112.23% of salary to executive directors in respect of the financial element of the annual
bonus for the 2012/13 financial year. This reflects the very strong performance of the group with adjusted operating profit above
expectations and working capital as a percentage of sales also ahead of target:
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Group operating profit
Group average working capital as a percentage of sales
Actual1
£1,185m
13.82%
1 No discretion was applied in relation to the incentive outcomes detailed above.
Below
bonus
threshold
Worse
than
target
Target
Better
than
target
√
Maximum
√
Following a review of individual performance against specific objectives for the 2012/13 financial year in accordance with the
normal policy, the Remuneration committee has determined that George Weston will receive 12.5% and John Bason 13.5% of base
salary for the personal element of the annual bonus. Individual objectives set for each of the executive directors were closely aligned
to the overall strategy of the group and will not be disclosed because of the commercial sensitivity. These percentage awards both
represent good overall performance with major objectives or milestones having been attained, although some minor objectives
were not achieved.
Long-term incentives
For the three-year performance period ended September 2012, the compound annual growth in adjusted earnings per share was
14.76%, against a target range of 5% to 11%. The Remuneration committee determined that as a result of an exceptional asset
impairment charge it would be appropriate for them to apply their discretion under the Executive Share Incentive Plan 2003 to
reduce the vesting proportion from 100% to 97.42%. Therefore, executive directors received 97.42% of the conditional shares
allocated in 2009.
For the three-year performance period ended September 2013, the compound annual growth in adjusted earnings per share
was 11.06%, against a target range of 5% to 11%. However, the committee has again decided to exercise its discretion under the
Executive Share Incentive Plan 2003 and has reduced the share vesting from 100% to 85% in order to reflect the underperformance
of investments in the Ingredients businesses.
In November 2013 executive directors will therefore receive 85% of the conditional shares allocated in 2010 – George Weston will
receive 137,928 shares and John Bason 92,584 shares.
The executive directors’ interests in shares under the Share Incentive Plan in which they participate are as follows:
George
Weston
John Bason
Date of
award
23.11.09
20.12.10
23.11.11
23.11.12
23.11.09
20.12.10
23.11.11
23.11.12
Market
price at
date of
award (p)
Number of
conditional
allocations
awarded
Face value
of allocations
(£000)
End of
three-year
performance
period
833.5
1076.0
1098.4
1433.4
833.5
1076.0
1098.4
1433.4
128,974
162,268
166,606
132,552
86,608
108,922
109,614
87,205
1,075
1,746
1,830
1,900
722
1,172
1,204
1,250
15.09.12
14.09.13
13.09.14
12.09.15
15.09.12
14.09.13
13.09.14
12.09.15
Vesting
date
23.11.12
23.11.13
24.11.14
23.11.15
23.11.12
23.11.13
24.11.14
23.11.15
Shares
vested
during
the year
Market price
at date of
vesting (p)
Value
vested
(£000)
Number of
conditional
allocations
as at 14.09.13
125,646
–
–
–
84,373
–
–
–
1442.7
–
–
–
1442.7
–
–
–
1,813
–
–
–
1,217
–
–
–
–
162,268
166,606
132,552
–
108,922
109,614
87,205
The Remuneration committee has recently reviewed the long-term incentive plan performance targets and has determined that for
the 2013–16 performance period, allocations should again be measured against an absolute range of 5% to 11% compound annual
growth in adjusted earnings per share. In setting this target, the Remuneration committee has taken into account the volatility
present in many of the markets in which the group operates, as well as the scale of investments made in the pursuit of long-term
growth. The committee believes that the 5% to 11% compound annual growth range remains achievable but stretching over the
next three-year period.
As far as other participants are concerned, long-term incentives for executives with divisional responsibility are largely measured
against adjusted operating profit and working capital targets, set by reference to the business for which each executive is directly
responsible in accordance with our ‘line of sight’ principle. The level of share awards for these executives therefore depends on
the level of performance achieved in each business. In November 2012, 55 senior executives, excluding the executive directors
(77.5% of all eligible participants), received a release of shares.
This year, 58 senior executives, excluding the executive directors, (80.6% of all eligible participants) will receive a release of shares
in November 2013.
Shareholding requirement
The requirement for executive directors and all first line reports to the Chief Executive to build up a shareholding in the Company
to a value at least equal to their pre-tax base salary will come into force in 2013. At the date of this report, both George Weston
and John Bason are already fully compliant with this requirement.
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REMUNERATION REPORT CONTINUED
Total directors’ interests in shares
The directors of the Company as at 14 September 2013 had the following interests in the shares of the Company notifiable under
the Disclosure and Transparency Rules.
Non-executive directors
Charles Sinclair
Associated British Foods plc, ordinary shares of 515/22p
Tim Clarke
Associated British Foods plc, ordinary shares of 515/22p
Lord Jay
Associated British Foods plc, ordinary shares of 515/22p
Javier Ferrán
Associated British Foods plc, ordinary shares of 515/22p
Peter Smith
Associated British Foods plc, ordinary shares of 515/22p
Emma Adamo3
Wittington Investments Limited, ordinary shares of 50p
Associated British Foods plc, ordinary shares of 515/22p
Executive directors
George Weston3
Wittington Investments Limited, ordinary shares of 50p
Associated British Foods plc, ordinary shares of 515/22p
John Bason
Associated British Foods plc, ordinary shares of 515/22p
Conditional
Beneficial
Total as at
14 September
2013
Total as at
15 September
2012
–
–
–
–
–
–
–
12,760
12,760
12,760
4,000
4,000
4,000
1,000
1,000
500
2,400
2,400
2,400
2,000
2,000
2,000
1,322
466,234
1,322
466,234
1,322
466,234
–
461,426
2,446
3,384,482
2,446
3,845,908
23,681
3,782,217 1
305,741
81,718
387,459
365,4812
1 Total of 3,324,369 shares in 2012 Remuneration report restated to include conditional allocations as at 15 September 2012.
2 Total of 60,337 shares in 2012 Remuneration report restated to include conditional allocations as at 15 September 2012.
3 George Weston and Emma Adamo are directors of Wittington Investments Limited. Wittington Investments Limited together with its subsidiary,
Howard Investments Limited, held 431,515,108 ordinary shares in Associated British Foods plc as at 14 September 2013.
The interests above remained the same at 5 November 2013.
Pensions
The table below shows the defined benefit pension entitlements from the ABF Scheme and EFRBS where appropriate, of executive
directors of Associated British Foods plc who were members of the ABF Scheme during the year ended 14 September 2013.
Pension entitlements and corresponding transfer values increased as follows during the year:
Value of
net increase
in accrual
over period
£000
(E)
281
335
Increase
in accrued
pension net
of inflation
£000 pa
(B)
27
20
Director’s
contributions
during period
£000
(D)
21
21
Total change
in value
during period
£000
(H)
527
510
Total
accrued
pension at
15.09.12
£000 pa
(C)
442
257
Value of
accrued
pension at
14.09.13
£000
(F)
5,653
5,024
Value of
accrued
pension at
15.09.12
£000
(G)
5,105
4,493
Increase
in accrued
pension
£000 pa
(A)
36
25
George Weston
John Bason
Notes:
1. Pension accruals (A) and (C) are the amounts which would be paid annually on retirement based on service to the end of the year,
or earlier retirement.
2. The pension values (E), (F) and (G) are transfer values calculated in accordance with Occupational Pension Schemes (Transfer
Values) Regulations 2008.
3. The increase in accrued pension net of inflation (B) uses a CPI based inflation figure.
4. The value of net increase in pension (E) represents the incremental value to the director of his pension benefits during the year,
resulting from additional service and increases in salary. It is based on the increase in accrued pension net of inflation (B) after
deducting the director’s contribution during the year (D).
5. The change in the transfer value (H) includes the effect of fluctuations in the transfer value due to factors beyond the control of the
Company and directors, such as stock market movements. The directors’ contributions during the year are excluded from this value.
6. Both directors opted out of the ABF Scheme on 5 April 2006, and since then have earned benefits in the Employer Financed
Retirement Benefit Scheme (EFRBS). The figures shown represent the aggregate of benefits in the ABF Scheme and the EFRBS.
7. Voluntary contributions paid by directors and resulting benefits are not shown.
8. Pension benefits include a 50% spouse’s pension. Pensions are guaranteed to increase in line with RPI limited each year to 5% (2.5%
for benefits accrued post 1 January 2008). Additional discretionary increases to pensions in payment have been granted in the past.
9. As in previous years the directors’ contributions during the period (D) recognises the amount of salary sacrifice made by the
directors in lieu of paying contributions. Both directors ‘contribute’ 15% of the scheme-specific salary cap so the amount is the
same for both (£21k).
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Benefits
The taxable value of a fully expensed company car, private medical insurance, life assurance, annual medical check-up, home
and mobile telephone costs and the reimbursement of reasonable business expenses is included in the table of directors’
remuneration below.
Summary of directors’ remuneration – single figure table
The remuneration paid to all directors for the year to 14 September 2013 was as follows:
Salary
or fees
£000
Benefits
£000
Pensions
£000
Annual
bonus4
£000
Long-term
incentive5
£000
2013
Single figure6
£000
2012
Single figure6
£000
2013
total
remuneration7
£000
2012
total
remuneration7
£000
Non-executive directors
Charles Sinclair
Tim Clarke
Lord Jay
Javier Ferrán
Peter Smith
Emma Adamo
Executive directors
George Weston
John Bason
346
81
64
64
81
64
948
617
1 1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
347
81
64
64
81
64
333
72
60
60
72
46
347
81
64
64
81
64
333
72
60
60
72
46
14 2
16 3
520
377
1,219
808
2,550
1,712
5,251
3,530
3,861
2,633
2,181
1,441
1,796
1,193
1 The value of Charles Sinclair’s benefits comprised £1,000 taxed as benefits-in-kind.
2 The value of George Weston’s benefits comprised £13,000 taken in cash and £1,000 taxed as benefits-in-kind.
3 The value of John Bason’s benefits comprised £13,000 taken in cash and £3,000 taxed as benefits-in-kind.
4 The annual bonus will be paid in December 2013 for the financial year 2012/13. Performance targets and weightings were as detailed on pages 72 and 73.
None of the incentive was subject to deferral.
5 The award under the long-term incentive plan has been estimated using the average mid-market closing price over the last quarter of the 2012/13 financial year
(17 June to 13 September 2013) of 1849p. The award will be made on 25 November 2013 and a figure recalculated for the actual share price will be presented in
the 2014 remuneration report. Information relating to performance targets, weightings and outcomes can be found on page 73.
6 The ‘single figure’, as defined by the Department for Business Innovation & Skills, includes the elements previously included in total directors’ remuneration (salary
or fees, benefits and annual bonus) as well as an amount for accrued pension benefits and long-term incentives. This is presented for both years for the first time.
7 Total remuneration on the basis previously presented in the Remuneration report.
Executive directors serving as non-executive directors
During the year, George Weston served as a non-executive director of Wittington Investments Limited, for which he received no
compensation.
John Bason is a non-executive director and chairman of the Audit committee of Compass Group PLC, for which he received a total
fee of £103,000 in the 2012/13 financial year. He also served as a trustee of Voluntary Service Overseas and as deputy chairman of
the charity FareShare, but received no compensation in respect of either of these roles.
Compliance statement
The Remuneration committee has made major changes to the structure and content of the 2013 Remuneration report in recognition
of the government’s new reporting requirements set out in the Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2013. The requirements under these Regulations will be implemented in full in the 2014 report, with the
Policy section first subject to a binding vote at the 2014 annual general meeting of the Company.
The current report sets out the policy and disclosures on directors’ remuneration as required by the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 issued under the Companies Act 2006 (‘the Act’). In accordance
with the Act, a resolution to approve the 2013 report will be proposed at the forthcoming annual general meeting of the Company.
The vote will have advisory status in respect of the remuneration policy and overall remuneration packages and will not be specific
to individual levels of remuneration.
KPMG Audit Plc has audited the report to the extent required by the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008, being the sections in the Remuneration report for 2012/13 above entitled ‘Total directors’ interests
in shares’, ‘Long-term incentives’, ‘Pensions’ and ‘Summary of directors’ remuneration’.
By order of the board
Paul Lister
Company Secretary
5 November 2013
Associated British Foods Annual Report and Accounts 2013
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OTHER DISCLOSURES
Business review
The Companies Act 2006 requires the Company to set out
in the Directors’ report a fair review of the business of the
Company during the financial year ended 14 September 2013
including an analysis of the position of the business at the end
of the financial year and a description of the principal risks and
uncertainties facing the Company (the ‘Business review’). The
purpose of the Business review is to enable shareholders to
assess how the directors have performed their duties under
section 172 of the Companies Act 2006, being the duty to
promote the success of the Company. The information that
fulfils the requirements of the Business review can be found
in the following sections of this report:
• Chairman’s statement on pages 8 and 9;
• Our businesses at a glance on pages 4 and 5;
• Group business model and strategy on pages 2 and 3 and
business strategies on pages 6 and 7;
• Operating review on pages 20 to 35, which includes a review
of the external environment, and performance measures;
• Financial review on pages 36 to 39;
• Corporate responsibility on pages 40 to 43;
• Principal risks and uncertainties described on pages 56 to 61;
• details of the principal operating subsidiaries set out on page
125; and
• information on essential contracts or arrangements on
page 78.
Principal activities
The activities of the group principally concern the processing
and manufacture of food worldwide and textile retailing in the
UK and continental Europe. Comments on the development of
the business during the period under review and on the future
outlook are contained within the Chairman’s statement on
pages 8 and 9 and the Operating review on pages 20 to 35.
The Company is the holding company for the Associated British
Foods plc group (‘the group’). Details of the principal operating
subsidiaries are set out on page 125.
The audited financial statements of the group and Company
appear on pages 82 to 131.
Results and dividends
The consolidated income statement is on page 82. Profit for
the financial year attributable to equity shareholders amounted
to £591m.
The directors recommend a final dividend of 22.65p per
ordinary share, to be paid, if approved, on 10 January 2014
which, together with the interim dividend of 9.35p per share
paid in July, amounts to 32.0p for the year. Dividends are
detailed on page 98.
Associated British Foods Annual Report and Accounts 2013
Research and development
Innovative use of existing and emerging technologies will
continue to be crucial to the successful development of new
products and processes for the group.
The Company has a major technical centre in the UK at the
Allied Technical Centre. Facilities also exist at ACH Food
Companies in the US, Weston Technologies and AB Mauri in
Australia and the Netherlands, and AB Enzymes in Germany.
These centres support the technical resources of the trading
divisions in the search for new technology and in monitoring
and maintaining high standards of quality and food safety.
Charitable and political donations
Contributions to charitable organisations by the group during the
year totalled £3.1m (2012 – £3.4m). No political donations were
made during the year.
Financial instruments
Details of the group’s use of financial instruments, together with
information on our risk objectives and policies and our exposure
to price, credit, liquidity, cash flow and interest rate risks, can be
found in note 24 on pages 113 to 123.
Payments to suppliers
The Company has no material trade creditors but has a group
policy on payment of suppliers set out in its business principles
which states that the group settles its bills promptly, being a
signatory to the Prompt Payment Code. The suppliers are made
aware of the terms of this policy. Further information concerning
this Prompt Payment Code, and copies of it, can be found at
www.promptpaymentcode.org.uk.
Employees
During the year under review, the group employed an average
of 112,652 people worldwide (2012 – 106,243) of whom 40,071
(2012 – 37,536) were employed in the UK. The group abides by
the following principles, recognising that people are its most
important resource:
• equal opportunities – the group is committed to offering
equal opportunities in recruitment, training, career
development and promotion to all people, having regard for
their particular aptitudes and abilities. As a matter of policy,
full and fair consideration is given to applicants with disabilities
and every effort is made to give employees who become
disabled whilst employed by the group an opportunity for
retraining and for continuation in employment. It is group
policy that the training, career development and promotion
of disabled persons should, as far as possible, be the same
as that of other employees;
• health and safety – health and safety are considered as equal
in importance to that of any other function of the group and its
business objectives. Our health and safety policy is available
on the Company’s website at www.abf.co.uk;
• harassment – sexual, mental or physical harassment in the
workplace will not be tolerated. It is expected that incidents
of harassment will be reported to the appropriate human
resources director;
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• human rights – managers must take account of the core
International Labour Organization labour conventions and
strive to observe the UN Universal Declaration of Human
Rights, by respecting the dignity and human rights of group
employees and in particular as stated below:
“Universal respect for an observance of human rights and
fundamental freedoms for all without discrimination as to
race, sex, language or religion.”
The group remunerates fairly with respect to skills,
performance, its peers and local conditions;
• communication – employees and their representatives
are briefed and consulted on all relevant matters on a
regular basis in order to take their views into account in
decision-making and to achieve a common awareness of all
the financial and economic factors affecting the performance
of the group. Information relevant to the employees will be
provided systematically to employees; and
• security – the security of our staff and customers is
paramount and the group will at all times take the necessary
steps to minimise risks to their safety.
The group encourages an open culture in all its dealings
between employees and people with whom it comes into
contact. Effective and honest communication is essential if
malpractice and wrongdoing are to be dealt with effectively.
The group’s whistleblowing procedure sets out guidelines
for individuals who feel they need to raise certain issues in
confidence with the Company or their own business. Every
effort is made to protect the confidentiality of those who raise
concerns, and employees may come forward without fear for
their position.
Property, plant and equipment
The group’s property, plant and equipment are included in the
financial statements at depreciated historic cost. The properties
are employed in the business and many of them were acquired
when market values were substantially lower than at present.
The directors consider that a surplus over book value exists,
but have not quantified the excess.
Substantial shareholding and controlling interest
Details of a controlling interest in the shares of the Company
by Wittington Investments Limited are given in note 28 on
page 125.
As at 31 October 2013, the Company had received formal
notification, under the Disclosure and Transparency Rules,
of the following material interest in its shares:
Shareholder
The Capital Group
Companies, Inc.
Number
of ordinary
shares
% of issued
share capital
31,794,121
4.016
Date of
notification
of interest
30 September
2013
Power to issue shares
At the last annual general meeting (‘AGM’), held on 7 December
2012, authority was given to the directors to allot unissued
relevant securities in the Company up to a maximum of an
amount equivalent to two-thirds of the shares in issue (of which
one-third must be offered by way of rights issue). This authority
expires on the date of this year’s AGM to be held on 6 December
2013. No such shares have been issued. The directors propose
to renew this authority at the 2013 AGM for the following year.
A further special resolution passed at that meeting granted
authority to the directors to allot equity securities in the
Company for cash, without regard to the pre-emption provisions
of the Companies Act 2006. This authority also expires on the
date of the 2013 AGM and the directors will seek to renew this
authority for the following year.
Power to purchase own shares
The Companies Act 2006 empowers the Company to purchase
its own shares subject to the necessary shareholder approval.
The Company has no existing authority to purchase its
own shares.
Directors
The names of the persons who were directors of the Company
during the financial year and as at 5 November 2013 appear on
pages 44 and 45. All the directors are standing for re-election
at this year’s AGM in December.
Appointment of directors
The Company’s Articles of Association (the ‘Articles’) give
the directors power to appoint and replace directors. Under
the terms of reference of the Nomination committee, any
appointment must be recommended by the Nomination
committee for approval by the board of directors. A person who
is not recommended by the directors may only be appointed as
a director where details of that director have been provided at
least seven and not more than 35 days prior to the relevant
meeting by at least two members of the Company.
The Articles require directors to retire and submit themselves
for election at the first AGM following appointment and all
directors who held office at the time of the two preceding
AGMs and, in any event, not less than one-third of the relevant
directors (excluding those directors who retire other than by
rotation), to submit themselves for re-election. The Articles
notwithstanding, all directors will stand for re-election at the
AGM this year in compliance with the UK Corporate
Governance Code.
Associated British Foods Annual Report and Accounts 2013
Essential contracts or arrangements
Individual companies in the group have contractual and other
arrangements with many third parties in support of the group’s
business activities. Such contracts and arrangements may
be deemed essential to one or more operating companies
but there are no contracts or arrangements considered to be
essential to the group as a whole, save that British Sugar has
collective bargaining agreements with UNITE and GMB unions
and a contract with the National Farmers’ Union, the Inter
Professional Agreement (‘IPA’). The IPA consists of approximately
3,600 identical but individual contracts with sugar beet growers.
Similarly, AB Azucarera Iberia in Spain has some 4,700 individual
contracts with sugar beet growers which are negotiated and
signed with the four professional agricultural organisations
(farmers’ unions) in that country.
Further information
Further information that fulfils the requirements of Part 6 of
the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 and which should be treated
as forming part of this report by reference are included in the
following sections of the annual report:
• details of the structure of the Company’s share capital
and the rights attached to the Company’s shares set out
on page 111; and
• details of share schemes set out on page 112, including the
voting policy of the trustee of a trust holding ordinary shares
of the Company.
Disclosure of information to auditors
The directors who held office at the date of approval of this
Directors’ report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company’s
auditors are unaware; and each director has taken all the steps
that he ought to have taken as a director to make himself aware
of any relevant audit information and to establish that the
Company’s auditors are aware of that information. For these
purposes, relevant audit information means information needed
by the Company’s auditors in connection with the preparation
of their report on page 81.
Auditors
In accordance with Section 489 of the Companies Act 2006,
KPMG LLP is proposed as statutory auditor of the Company
and a resolution for its appointment is to be proposed at the
forthcoming AGM.
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OTHER DISCLOSURES CONTINUED
Power of the directors
The directors are responsible for managing the business of
the Company and may exercise all the powers of the Company
subject to the provisions of relevant statutes, to any directions
given by special resolution and to the Company’s Articles. The
Articles, for example, contain specific provisions and restrictions
concerning the Company’s power to borrow money. As indicated
above, powers relating to the issuing of shares are also included
in the Articles and such authorities are renewed by shareholders
at the AGM each year.
Articles of Association
The Articles themselves may be amended by special resolution
of the shareholders.
Directors’ indemnities
Three directors of operating subsidiaries benefited from
qualifying third-party indemnity provisions provided by the
Company’s wholly owned subsidiary, ABF Investments plc,
during the financial year and at the date of this report.
Significant agreements
The group has contractual arrangements with many parties
including directors, employees, customers, suppliers and banking
groups. The following arrangements are considered to be
significant in terms of their potential impact on the business
of the group as a whole:
• the group has a number of borrowing facilities provided by
various banking groups. These facility agreements generally
include change of control provisions which, in the event of
a change in ownership of the Company, could result in their
renegotiation or withdrawal. The most significant agreements
are the £1.15bn syndicated loan facility which was signed
on 13 July 2010 and under which there were no drawdowns
at the year end and the £120m loan from the European
Investment Bank which was signed on 5 December 2007
and under which £120m was drawn down at the year end;
• in addition to these bank facilities, in March 2009 the
Company issued US$610m of private placement notes to
institutional investors and, in December 2011 and March
2012, the Company issued a further US$626m of private
placement notes. In accordance with the scheduled
maturities, US$120m of these notes were repaid in March
2013. In the event of a change in ownership of the Company,
the Company is obliged to make an offer of immediate
repayment to the remaining note holders; and
• in October 2013, the group entered into a three-year contract
for the supply of electricity to the UK business.
These agreements include provisions which, in the event of a
change of control of the Company, could result in the agreement
being altered or terminated.
Associated British Foods Annual Report and Accounts 2013
Directors’ responsibility statement
The financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the
EU, give a true and fair view of the assets, liabilities, financial
position and profit of the Company and the undertakings
included in the consolidation taken as a whole.
Pursuant to Disclosure and Transparency Rules, Chapter 4, the
following sections of the Company’s annual report contain a fair
review of the development and performance of the business
and the position of the Company, and the undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face:
1. The Chairman’s statement on pages 8 and 9;
2. Operating review on pages 20 to 35, which includes a review
of the external environment, future development and
performance measures;
3. Financial review on pages 36 to 39;
4. Other disclosures: ‘Research and development’;
5. Other disclosures: ‘Financial instruments’;
6. Other disclosures: ‘Property, plant and equipment’;
7. Other disclosures: ‘Power of the directors’; and
8. ‘Principal risks and uncertainties’ on pages 56 to 61.
On behalf of the board
Charles Sinclair
Chairman
George Weston
Chief Executive
John Bason
Finance Director
5 November 2013
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Associated British Foods Annual Report and Accounts 2013
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT
OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
company’s transactions and disclose with
reasonable accuracy at any time the
financial position of the parent company
and enable them to ensure that its
financial statements comply with the
Companies Act 2006. They have general
responsibility for taking such steps as are
reasonably open to them to safeguard
the assets of the group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations,
the directors are also responsible for
preparing a Directors’ Report, Directors’
Remuneration Report and Corporate
Governance Statement that complies
with that law and those regulations.
The directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
The directors are responsible for preparing
the annual report and the group and
parent company financial statements
in accordance with applicable law
and regulations.
Company law requires the directors
to prepare group and parent company
financial statements for each financial
year. Under that law they are required
to prepare the group financial statements
in accordance with IFRSs as adopted
by the EU and applicable law and have
elected to prepare the parent company
financial statements in accordance
with UK Accounting Standards and
applicable law (UK Generally Accepted
Accounting Practice).
Under company law the directors must
not approve the financial statements
unless they are satisfied that they give
a true and fair view of the state of affairs
of the group and parent company and
of their profit or loss for that period. In
preparing each of the group and parent
company financial statements, the
directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates
that are reasonable and prudent;
• for the group financial statements,
state whether they have been prepared
in accordance with IFRSs as adopted
by the EU;
• for the parent company financial
statements, state whether applicable
UK Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the parent company financial
statements; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
group and the parent company
will continue in business.
Associated British Foods Annual Report and Accounts 2013
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• we have not received all the
information and explanations we
require for our audit; or
Under the Listing Rules we are required
to review:
• the Directors’ statement, set out on
page 80, in relation to going concern;
• the part of the Corporate governance
statement on page 46 relating to the
Company’s compliance with the nine
provisions of the UK Corporate
Governance Code specified for
our review; and
• certain elements of the report to
shareholders by the Board on directors’
remuneration.
Richard Pinckard
(Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc,
Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
5 November 2013
INDEPENDENT AUDITORS’ REPORT
We have audited the financial statements
of Associated British Foods plc for the
52 weeks ended 14 September 2013
set out on pages 82 to 131. The financial
reporting framework that has been
applied in the preparation of the
consolidated financial statements is
applicable law and International Financial
Reporting Standards (IFRSs) as adopted
by the EU. The financial reporting
framework that has been applied in the
preparation of the Company financial
statements is applicable law and UK
Accounting Standards (UK Generally
Accepted Accounting Practice).
This report is made solely to the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Company’s members
those matters we are required to state
to them in an auditors’ report and for
no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other
than the Company and the Company’s
members, as a body, for our audit work,
for this report, or for the opinions
we have formed.
Respective responsibilities of
directors and auditors
As explained more fully in the Statement
of directors’ responsibilities set out on
page 80, the directors are responsible
for the preparation of the financial
statements and for being satisfied
that they give a true and fair view. Our
responsibility is to audit, and express an
opinion on, the financial statements in
accordance with applicable law and
International Standards on Auditing (UK
and Ireland). Those standards require us
to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
Scope of the audit of the
financial statements
A description of the scope of an audit of
financial statements is provided on the
Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a
true and fair view of the state of the
group’s and of the Company’s affairs
as at 14 September 2013 and of
the group’s profit for the period
then ended;
• the consolidated financial statements
have been properly prepared in
accordance with IFRSs as adopted by
the EU;
• the Company financial statements
have been properly prepared in
accordance with UK Generally
Accepted Accounting Practice; and
• the financial statements have been
prepared in accordance with the
requirements of the Companies Act
2006; and, as regards the consolidated
financial statements, Article 4 of the
IAS Regulation.
Opinion on other matters prescribed
by the Companies Act 2006
In our opinion:
• the part of the Remuneration report to
be audited has been properly prepared
in accordance with the Companies Act
2006; and
• the information given in the Directors’
report for the financial year for which
the financial statements are prepared
is consistent with the financial
statements.
Matters on which we are required to
report by exception
We have nothing to report in respect
of the following:
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• adequate accounting records have
not been kept by the parent company,
or returns adequate for our audit have
not been received from branches not
visited by us; or
• the parent company financial
statements and the part of the
Remuneration report to be audited
are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’
remuneration specified by law are
not made; or
Associated British Foods Annual Report and Accounts 2013
82
CONSOLIDATED INCOME STATEMENT
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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C
o
n
s
o
l
i
d
a
t
e
d
i
n
c
o
m
e
s
t
a
t
e
m
e
n
t
Note
1
2
2
11
2013
£m
13,315
(12,235)
–
1,080
13
–
1,093
1
8
2
21
4
4
4
8
2
21
5
7
6
1,185
–
(92)
–
(128)
965
13
(100)
(2)
876
1,096
–
(92)
–
(128)
(113)
(129)
–
(242)
634
591
43
634
74.8
32.0
2012
£m
12,252
(11,302)
(98)
852
27
(6)
873
1,077
(6)
(100)
(98)
(9)
864
9
(114)
2
761
974
(6)
(100)
(98)
(9)
(91)
(116)
29
(178)
583
555
28
583
70.3
28.5
Continuing operations
Revenue
Operating costs before exceptional items
Exceptional items
Share of profit after tax from joint ventures and associates
Profits less losses on disposal of non-current assets
Operating profit
Adjusted operating profit
Profits less losses on disposal of non-current assets
Amortisation of non-operating intangibles
Exceptional items
Profits less losses on sale and closure of businesses
Profit before interest
Finance income
Finance expense
Other financial (expense)/income
Profit before taxation
Adjusted profit before taxation
Profits less losses on disposal of non-current assets
Amortisation of non-operating intangibles
Exceptional items
Profits less losses on sale and closure of businesses
Taxation – UK
– Overseas (excluding tax on exceptional items)
– Overseas (on exceptional items)
Profit for the period
Attributable to
Equity shareholders
Non-controlling interests
Profit for the period
Basic and diluted earnings per ordinary share (pence)
Dividends per share paid and proposed for the period (pence)
Associated British Foods Annual Report and Accounts 2013
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
83
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o
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i
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a
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d
s
t
a
t
e
m
e
n
t
o
f
c
o
m
p
r
e
h
e
n
s
i
v
e
i
n
c
o
m
e
Profit for the period recognised in the income statement
Other comprehensive income
Actuarial gains/(losses) on defined benefit schemes
Deferred tax associated with defined benefit schemes
Items that will not be reclassified to profit or loss
Effect of movements in foreign exchange
Net (loss)/gain on hedge of net investment in foreign subsidiaries
Deferred tax associated with movements in foreign exchange
Reclassification adjustment for movements in foreign exchange on subsidiaries disposed
Current tax associated with movements in foreign exchange
Movement in cash flow hedging position
Deferred tax associated with movement in cash flow hedging position
Items that are or may be subsequently reclassified to profit or loss
Other comprehensive income for the period
Total comprehensive income for the period
Attributable to
Equity shareholders
Non-controlling interests
Total comprehensive income for the period
2013
£m
634
24
(5)
19
(114)
(20)
2
7
–
6
(2)
(121)
(102)
532
526
6
532
2012
£m
583
(99)
23
(76)
(241)
11
3
–
(4)
(21)
4
(248)
(324)
259
281
(22)
259
Associated British Foods Annual Report and Accounts 2013
84
CONSOLIDATED BALANCE SHEET
AT 14 SEPTEMBER 2013
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a
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d
b
a
l
a
n
c
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s
h
e
e
t
Non-current assets
Intangible assets
Property, plant and equipment
Biological assets
Investments in joint ventures
Investments in associates
Employee benefits assets
Deferred tax assets
Other receivables
Total non-current assets
Current assets
Inventories
Biological assets
Trade and other receivables
Derivative assets
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Loans and overdrafts
Trade and other payables
Derivative liabilities
Income tax
Provisions
Total current liabilities
Non-current liabilities
Loans
Provisions
Deferred tax liabilities
Employee benefits liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Other reserves
Translation reserve
Hedging reserve
Retained earnings
Total equity attributable to equity shareholders
Non-controlling interests
Total equity
Note
2013
£m
2012
£m
8
9
10
11
11
12
13
14
15
10
14
24
16
17
18
24
19
17
19
13
12
20
20
20
20
1,581
4,552
97
182
36
52
273
148
6,921
1,581
112
1,342
27
362
3,424
10,345
(394)
(1,881)
(38)
(166)
(47)
(2,526)
(772)
(30)
(424)
(96)
(1,322)
(3,848)
6,497
45
175
440
(13)
5,486
6,133
364
6,497
1,769
4,541
89
174
40
18
189
151
6,971
1,500
109
1,236
33
391
3,269
10,240
(538)
(1,752)
(50)
(150)
(98)
(2,588)
(914)
(38)
(366)
(113)
(1,431)
(4,019)
6,221
45
175
532
(17)
5,099
5,834
387
6,221
The financial statements on pages 82 to 126 were approved by the board of directors on 5 November 2013 and were signed on its
behalf by:
Charles Sinclair
Chairman
John Bason
Director
Associated British Foods Annual Report and Accounts 2013
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
85
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d
c
a
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h
fl
o
w
s
t
a
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e
m
e
n
t
Cash flow from operating activities
Profit before taxation
Profits less losses on disposal of non-current assets
Profits less losses on sale and closure of businesses
Finance income
Finance expense
Other financial expense/(income)
Share of profit after tax from joint ventures and associates
Amortisation
Depreciation
Impairment of property, plant and equipment
Impairment of operating intangibles
Impairment of goodwill
Net change in the fair value of biological assets
Share-based payment expense
Pension costs less contributions
Increase in inventories
(Increase)/decrease in receivables
Increase in payables
Purchases less sales of current biological assets
Increase/(decrease) in provisions
Cash generated from operations
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Dividends received from joint ventures and associates
Purchase of property, plant and equipment
Purchase of intangibles
Purchase of non-current biological assets
Sale of property, plant and equipment
Purchase of subsidiaries, joint ventures and associates
Sale of subsidiaries, joint ventures and associates
Loans to joint ventures
Purchase of non-controlling interests
Interest received
Net cash from investing activities
Cash flows from financing activities
Dividends paid to non-controlling interests
Dividends paid to equity shareholders
Interest paid
Financing:
Decrease in short-term loans
(Decrease)/increase in long-term loans
Sale of shares in subsidiary undertakings to non-controlling interests
Movements from changes in own shares held
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of movements in foreign exchange
Cash and cash equivalents at the end of the period
2013
£m
876
–
128
(13)
100
2
(13)
130
405
27
4
10
(26)
15
(29)
(112)
(158)
173
(2)
11
1,528
(252)
1,276
11
(593)
(22)
(1)
15
(75)
35
(4)
(1)
10
(625)
(29)
(232)
(107)
(258)
(23)
1
(10)
(658)
(7)
245
5
243
2012
£m
761
6
9
(9)
114
(2)
(27)
122
394
92
6
–
(28)
8
(38)
(125)
3
165
(3)
(17)
1,431
(191)
1,240
11
(700)
(13)
(1)
6
(45)
2
24
–
10
(706)
(23)
(200)
(108)
(533)
298
4
–
(562)
(28)
291
(18)
245
Associated British Foods Annual Report and Accounts 2013
86
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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o
f
c
h
a
n
g
e
s
i
n
e
q
u
i
t
y
Attributable to equity shareholders
Issued
capital
£m
Other
reserves
£m
Translation
reserve
£m
Hedging
reserve
£m
Retained
earnings
£m
Note
Non-
controlling
interests
£m
Total
£m
4,816
5,748
427
Total
equity
£m
6,175
Balance as at 17 September 2011
45
175
712
Total comprehensive income
Profit for the period recognised in the income statement
Actuarial losses on defined benefit schemes
Deferred tax associated with defined benefit schemes
Items that will not be reclassified to profit or loss
Effect of movements in foreign exchange
Net gain/(loss) on hedge of net investment in foreign
subsidiaries
Deferred tax associated with movements in foreign
exchange
Current tax associated with movements in foreign
exchange
Movement in cash flow hedging position
Deferred tax associated with movement in cash flow
hedging position
Items that are or may be subsequently reclassified to
profit or loss
Other comprehensive income
Total comprehensive income
Transactions with owners
Dividends paid to equity shareholders
Net movement in own shares held
Deferred tax associated with share-based payments
Dividends paid to non-controlling interests
Changes in ownership of subsidiaries
Total transactions with owners
Balance as at 15 September 2012
Total comprehensive income
Profit for the period recognised in the income statement
Actuarial gains/(losses) on defined benefit schemes
Deferred tax associated with defined benefit schemes
Items that will not be reclassified to profit or loss
Effect of movements in foreign exchange
Net loss on hedge of net investment in foreign subsidiaries
Deferred tax associated with movements in foreign
exchange
Reclassification adjustment for movements in foreign
exchange on subsidiaries disposed
Movement in cash flow hedging position
Deferred tax associated with movement in cash flow
hedging position
Items that are or may be subsequently reclassified to
profit or loss
Other comprehensive income
Total comprehensive income
Transactions with owners
Dividends paid to equity shareholders
Net movement in own shares held
Dividends paid to non-controlling interests
Total transactions with owners
Balance as at 14 September 2013
Associated British Foods Annual Report and Accounts 2013
6
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
175
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
175
–
–
–
–
(192)
12
–
–
–
–
(180)
(180)
(180)
–
–
–
–
–
–
532
–
–
–
–
(86)
(13)
–
7
–
–
(92)
(92)
(92)
–
–
–
–
440
–
–
–
–
–
–
–
–
–
(21)
4
(17)
(17)
(17)
–
–
–
–
–
–
(17)
–
–
–
–
–
–
–
–
6
(2)
4
4
4
–
–
–
–
(13)
555
555
28
583
(99)
23
(76)
(99)
23
(76)
–
–
–
(99)
23
(76)
–
–
3
(4)
–
–
(1)
(77)
478
(200)
8
(2)
–
(1)
(195)
5,099
(192)
(49)
(241)
12
3
(4)
(21)
4
(198)
(274)
281
(200)
8
(2)
–
(1)
(195)
5,834
(1)
–
–
–
–
(50)
(50)
(22)
–
–
–
(23)
5
(18)
387
11
3
(4)
(21)
4
(248)
(324)
259
(200)
8
(2)
(23)
4
(213)
6,221
591
591
43
634
26
(5)
21
–
–
2
–
–
–
2
23
614
26
(5)
21
(86)
(13)
2
7
6
(2)
(86)
(65)
526
(232)
5
–
(227)
5,486
(232)
5
–
(227)
6,133
(2)
–
(2)
(28)
(7)
–
–
–
–
(35)
(37)
6
–
–
(29)
(29)
364
24
(5)
19
(114)
(20)
2
7
6
(2)
(121)
(102)
532
(232)
5
(29)
(256)
6,497
SIGNIFICANT ACCOUNTING POLICIES
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
87
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s
Associated British Foods plc (‘the
Company’) is a company domiciled in
the United Kingdom. The consolidated
financial statements of the Company for
the 52 weeks ended 14 September 2013
comprise those of the Company and its
subsidiaries (together referred to as ‘the
group’) and the group’s interest in
associates and joint ventures.
The financial statements were
authorised for issue by the directors on
5 November 2013.
The consolidated financial statements
have been prepared and approved by the
directors in accordance with International
Financial Reporting Standards as adopted
by the EU (‘Adopted IFRS’).
The Company has elected to prepare its
parent company financial statements
under UK Generally Accepted Accounting
Practice. These are presented on pages
127 to 131.
Basis of preparation
The going concern basis has been
applied in these accounts. The
consolidated financial statements are
presented in sterling, rounded to the
nearest million. They are prepared on the
historical cost basis except that biological
assets and certain financial instruments
are stated at fair value. Assets classified
as held for sale are stated at the lower of
carrying amount and fair value less costs
to sell.
The preparation of financial statements
under Adopted IFRS requires
management to make judgements,
estimates and assumptions about the
reported amounts of assets and liabilities,
income and expenses and the disclosure
of contingent assets and liabilities. The
estimates and associated assumptions
are based on experience. Actual results
may differ from these estimates.
Judgements made by management in
the application of Adopted IFRS that
have a significant effect on the financial
statements, and estimates with a
significant risk of material adjustment
next year, are discussed in Accounting
estimates and judgements detailed on
page 92.
The estimates and underlying
assumptions are reviewed on a regular
basis. Revisions to accounting estimates
are recognised from the period in which
the estimates are revised.
The accounting policies set out below
have been applied to all periods presented,
except where detailed otherwise.
Details of new accounting standards
which came into force in the year are
set out at the end of this note. None of
them required restatement of primary
statements in comparative periods other
than for presentational items, nor had
any significant impact on the group’s
consolidated results or financial position.
The consolidated financial statements of
the group are prepared to the Saturday
nearest to 15 September. Accordingly,
these financial statements have been
prepared for the 52 weeks ended
14 September 2013. To avoid delay in
the preparation of the consolidated
financial statements, the results of
certain subsidiaries, joint ventures and
associates are included up to 31 August
2013. The results of Illovo are included
for the period to 30 September 2013 in
line with Illovo’s local reporting date.
Adjustments are made as appropriate
for significant transactions or events
occurring between 31 August and
30 September.
The group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the Operating review on
pages 20 to 35. The financial position
of the group, its cash flows, liquidity
position and borrowing facilities are
described in the Financial review on
pages 36 to 39. In addition, the Principal
risks and uncertainties on pages 56 to 61
and note 24 on pages 113 to 123 provide
details of the group’s policy on managing
its financial and commodity risks.
The group has considerable financial
resources, good access to debt markets,
a diverse range of businesses and a wide
geographic spread. It is therefore well
placed to manage business risks
successfully.
Basis of consolidation
The consolidated financial statements
include the results of the Company and
all of its subsidiaries from the date that
control commences to the date that
control ceases. The consolidated
financial statements also include the
group’s share of the after-tax results,
other comprehensive income and net
assets of its joint ventures and associates
on an equity-accounted basis from the
point at which joint control or significant
influence respectively commences, to
the date that it ceases.
Subsidiaries are entities controlled by
the Company. Control exists when the
Company has the power, directly or
indirectly, to govern the financial and
operating policies of an entity so as
to obtain benefits from its activities.
Changes in the group’s ownership
interest in a subsidiary that do not result
in a loss of control are accounted for
within equity.
Joint ventures are those entities over
whose activities the group has joint control,
typically established by contractual
agreement and requiring the venturers’
unanimous consent for strategic financial
and operating decisions.
Associates are those entities in which
the group has significant influence, but
not control, over the financial and
operating policies.
Where the group’s share of losses
exceed its interest in a joint venture or
associate, the carrying amount is reduced
to zero and recognition of further losses
is discontinued except to the extent that
the group has incurred legal or constructive
obligations or made payments on behalf
of an investee.
Business combinations
On the acquisition of a business, fair
values are attributed to the identifiable
assets, liabilities and contingent liabilities
acquired, reflecting conditions at the date
of acquisition. Adjustments to fair values
include those made to bring accounting
policies into line with those of the group.
Provisional fair values are finalised within
12 months of the business combination
date and where significant are adjusted
by restatement of the comparative period
in which the acquisition occurred.
Non-controlling interests are measured
at the proportionate share of the net
identifiable assets acquired.
For business combinations executed
before 3 September 2004, goodwill
is included on the basis of its deemed
cost, represented by the net book value
recorded under previous GAAP.
For business combinations executed in
periods ending on or before 12 September
2009, goodwill arising on a business
Associated British Foods Annual Report and Accounts 2013
88
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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combination was the excess of the
carrying amount of any existing equity
interest plus the fair value of consideration
payable for the additional stake over the
fair value of the share of net identifiable
assets and liabilities acquired (including
separately identified intangible assets),
net of non-controlling interests. Total
consideration included acquisition costs.
Contingent consideration was measured
at fair value at the date of the business
combination. Subsequent changes to
contingent consideration other than
settlements are accounted for as
adjustments to goodwill.
For business combinations executed
on or after 13 September 2009, existing
equity interests in the acquiree are
remeasured to fair value as at the date
of the business combination, with any
resulting gain or loss taken to the
income statement.
Goodwill arising on a business
combination is the excess of the
remeasured carrying amount of any
existing equity interest plus the fair value
of consideration payable for the additional
stake over the fair value of the share of
net identifiable assets and liabilities
acquired (including separately identified
intangible assets), net of non-controlling
interests. Total consideration does not
include acquisition costs, which are
expensed as incurred.
Contingent consideration is measured
at fair value at the date of the business
combination, classified as a liability or
equity (usually as a liability), and
subsequently accounted for in line with
that classification. Changes in contingent
consideration classified as a liability
resulting other than from the finalisation
of provisional fair values are accounted
for in the income statement.
Revenue
Revenue represents the invoiced value of
sales made to customers after deduction
of discounts and sales taxes. Discounts
include sales rebates, price discounts,
customer incentives, certain promotional
activities and similar items. Revenue
does not include sales between group
companies. Revenue is recognised when
the risks and rewards of the underlying
products have been substantially
transferred to the customer and when
it can be reliably measured.
Revenue from sale of goods is generally
recognised on dispatch or delivery to
customers, dependent on shipping
terms. Discounts are provided for as a
reduction to revenue at the time a sale
is recorded, based on management’s
best estimate of the amount required
to meet claims by customers.
Borrowing costs
Borrowing costs are accounted for using
the effective interest method. For qualifying
items of property, plant and equipment
where the commencement date for
capitalisation was on or after 13 September
2009, the group capitalises borrowing
costs directly attributable to the acquisition,
construction or production of those
qualifying assets as part of their cost.
The group previously expensed all
borrowing costs as incurred. Interest
capitalised is taxed under current or
deferred tax as appropriate.
Exceptional items
Exceptional items are defined as items
of income and expenditure which are
material and unusual in nature and which
are considered to be of such significance
that they require separate disclosure on
the face of the income statement in
accordance with IAS 1. They are
discussed further in the Accounting
estimates and judgements detailed
on page 92.
Adjusted profit and earnings
measures
Adjusted operating profit is stated before
amortisation of non-operating intangibles,
profits less losses on disposal of
non-current assets and exceptional items.
Adjusted profit before tax is stated before
amortisation of non-operating intangibles,
profits less losses on disposal of
non-current assets, profits less losses
on sale and closure of businesses and
exceptional items. Both are shown on
the face of the income statement.
Adjusted earnings per share is shown in
the notes and is stated before amortisation
of non-operating intangibles, profits less
losses on disposal of non-current assets,
profits less losses on sale and closure of
businesses and exceptional items
together with the related tax effect.
Foreign currencies
In individual companies, transactions
in foreign currencies are recorded at the
rate of exchange at the date of the
transaction. Monetary assets and liabilities
in foreign currencies are translated at the
rate prevailing at the balance sheet date.
Any resulting differences are taken to the
income statement.
On consolidation, assets and liabilities of
foreign operations that are denominated
in foreign currencies are translated into
sterling at the rate of exchange at the
balance sheet date. Income and expense
items are translated into sterling at
weighted average rates of exchange.
Differences arising from the retranslation
of opening net assets of group companies,
together with differences arising from the
restatement of the net results of group
companies from average rates to rates at
the balance sheet date, are taken to the
translation reserve in equity.
Pensions and other post-
employment benefits
The group’s principal pension funds are
defined benefit plans. In addition the
group has defined contribution plans
and other unfunded post-employment
liabilities. For defined benefit plans, the
amount charged in the income statement
is the cost of benefits accruing to
employees over the year, plus any benefit
improvements granted to members by
the group during the year. It also includes
the group’s expected return on pension
plan assets offset by a charge equal to
the expected interest on plan liabilities.
For each plan, the difference between
market value of assets and present value
of liabilities is disclosed as an asset or
liability in the balance sheet.
Any related deferred tax (to the extent
recoverable) is disclosed separately in
the balance sheet. Actuarial gains or
losses are recognised immediately in
other comprehensive income. Surpluses
are recognised only to the extent that
they are recoverable. Movements in
irrecoverable surpluses are recognised
immediately as an actuarial gain or loss
in other comprehensive income.
Contributions payable by the group in
respect of defined contribution plans are
charged to operating profit as incurred.
Other unfunded post-employment
liabilities are accounted for in the same
way as defined benefit pension plans.
Share-based payments
The fair value of share awards at grant date
is recognised as an employee expense
with a corresponding increase in equity,
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spread over the period during which
the employees become unconditionally
entitled to the shares. The amount
recognised is adjusted to reflect expected
and actual levels of vesting except where
the failure to vest is as a result of not
meeting a market condition.
Income tax
Income tax on profit or loss for the period
comprises current and deferred tax.
Income tax is recognised in the income
statement except to the extent that it
relates to items taken directly to other
comprehensive income.
Current tax is the tax expected to be
payable on taxable income for the year,
using tax rates enacted or substantively
enacted during the period, together with
any adjustment to tax payable in respect
of previous years.
Deferred tax is provided using the
balance sheet liability method, providing
for temporary differences between the
carrying amounts of assets and liabilities
for financial reporting purposes and the
amounts used for taxation purposes. The
following temporary differences are not
provided for: initial recognition of
goodwill; initial recognition of assets or
liabilities affecting neither accounting nor
taxable profit other than those acquired in
a business combination; and differences
relating to investments in subsidiaries to
the extent that they will probably not
reverse in the foreseeable future. The
amount of deferred tax provided is based
on the expected manner of realisation
or settlement of the carrying amount
of assets and liabilities, using tax rates
enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only
to the extent that it is probable that future
taxable profits will be available against
which the asset can be utilised.
Additional income taxes that arise from
the distribution of dividends are
recognised at the same time as the
liability to pay the related dividend.
Financial assets and liabilities
Financial assets and financial liabilities,
except for other non-current investments
and derivatives, are measured initially
at fair value, plus directly attributable
transaction costs, and thereafter at
amortised cost. Other non-current
investments (classified under other
non-current receivables) comprise
available-for-sale investments measured
at market prices where available. Where
quoted market prices in an active market
are not available, and where fair value
cannot be reliably measured, unquoted
equity instruments are measured at cost
less impairment.
Cash and cash equivalents
Cash and cash equivalents comprise
bank and cash balances, call deposits
and short-term investments with original
maturities of three months or less. Bank
overdrafts that are repayable on demand
are included as a component of cash and
cash equivalents for the purposes of the
cash flow statement.
Derivatives
Derivatives are used to manage the
group’s economic exposure to financial
and commodity risks. The principal
instruments used are foreign exchange
and commodity contracts, futures, swaps
or options (the ‘hedging instrument’).
The group does not use derivatives for
speculative purposes.
Derivatives are recognised in the
balance sheet, at fair value, based on
market prices or rates, or calculated
using either discounted cash flow or
option pricing models.
Changes in the value of derivatives are
recognised in the income statement
unless they qualify for hedge accounting,
when recognition of any change in fair
value depends on the nature of the item
being hedged.
The purpose of hedge accounting is
to mitigate the impact on the group’s
income statement of changes in foreign
exchange or interest rates and commodity
prices, by matching the impact of the
hedged risk and the hedging instrument
in the income statement.
Changes in the value of derivatives
used as hedges of future cash flows are
recognised through other comprehensive
income in the hedging reserve, with
any ineffective portion recognised
immediately within operating profit in
the income statement.
When the future cash flow results in the
recognition of a non-financial asset or
liability, the gains and losses previously
recognised in the hedging reserve are
included in the initial measurement of
that asset or liability. Otherwise, gains
and losses previously recognised in the
hedging reserve are recognised in the
income statement at the same time as
the hedged transaction.
Hedge accounting is discontinued when
the hedging instrument expires or is sold,
terminated, exercised, or no longer
qualifies for hedge accounting. At that
time, any cumulative gain or loss on
the hedging instrument recognised in
the hedging reserve is retained in the
hedging reserve until the forecast
transaction occurs. Gains or losses
on hedging instruments relating to
an underlying exposure that no longer
exists are taken to the income statement.
Hedges of the group’s net investment in
foreign operations principally comprise
borrowings in the currency of the
investment’s net assets.
The group economically hedges foreign
currency exposure on recognised
monetary assets and liabilities but does
not normally seek hedge accounting
under IAS 39. Any derivatives that the
group holds to hedge this exposure are
classified as ‘held for trading’ within
derivative assets and liabilities. Changes
in the fair value of such derivatives and
the foreign exchange gains and losses
arising on the related monetary items
are recognised within operating profit.
Intangible assets other than
goodwill
Non-operating intangible assets are
intangible assets that arise on business
combinations and typically include
technology, brands, customer
relationships and grower agreements.
Operating intangible assets are acquired
in the ordinary course of business and
typically include computer software, land
use rights and emissions trading licences.
Intangible assets other than goodwill
are stated at cost less accumulated
amortisation and impairment charges.
Amortisation is charged to the income
statement on a straight-line basis over
the estimated useful lives of intangible
assets from the date they are available
for use. The estimated useful lives are
generally deemed to be no longer than:
Technology and brands – up to 15 years
Customer relationships – up to 5 years
Grower agreements – up to 10 years
Associated British Foods Annual Report and Accounts 2013
90
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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Goodwill
Goodwill is defined under ‘Business
combinations’ on pages 87 and 88.
Certain commercial assets associated
with the acquisition of a business are
not capable of being recognised in the
acquisition balance sheet. In such
circumstances, goodwill is recognised,
which may include, but is not necessarily
limited to, workforce assets and the
benefits of expected future synergies.
Goodwill is not amortised but is subject
to an annual impairment review.
Research and development
Research expenditure is expensed as
incurred. Development expenditure is
capitalised if the product or process is
technically and commercially feasible
but is otherwise expensed as incurred.
Capitalised development expenditure
is stated at cost less accumulated
amortisation and impairment charges.
Impairment
The carrying amounts of the group’s
intangible assets and property, plant and
equipment are reviewed at each balance
sheet date to determine whether there is
any indication of impairment. If any such
indication exists, the asset’s recoverable
amount is estimated. For goodwill and
intangibles without a finite life, the
recoverable amount is estimated at
each balance sheet date.
An impairment charge is recognised
in the income statement whenever
the carrying amount of an asset or its
cash-generating unit (CGU) exceeds
its recoverable amount.
Impairment charges recognised in respect
of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated
to that CGU and then to reduce the
carrying amount of the other assets
in the unit on a pro rata basis.
Calculation of recoverable amount
The recoverable amount of assets is the
greater of their fair value less costs to sell
and their value in use. In assessing value
in use, the estimated future cash flows
are discounted to their present value
using a pre-tax discount rate that reflects
current market assessments of the time
value of money and the risks specific to
the asset. For an asset that does not
generate largely independent cash
inflows, the recoverable amount is
determined for the CGU to which the
asset belongs.
Reversals of impairment
An impairment charge in respect of
goodwill is not subsequently reversed.
For other assets, an impairment charge
is reversed if there has been a change
in the estimates used to determine the
recoverable amount, but only to the
extent that the new carrying amount
does not exceed the carrying amount
that would have been determined, net
of depreciation or amortisation, if no
impairment charge had been recognised.
Property, plant and equipment
Items of property, plant and equipment
are stated at cost less accumulated
depreciation and impairment charges.
Depreciation is charged to the income
statement on a straight-line basis over
the estimated useful lives of items of
property, plant and equipment sufficient
to reduce them to estimated residual
value. Land is not depreciated. Estimated
useful lives are generally deemed to be
no longer than:
Freehold buildings
Plant and equipment, fixtures
and fittings
– sugar factories, yeast plants
and mills
– other operations
Vehicles
66 years
20 years
12 years
10 years
Leases
A lease is an agreement whereby the
lessor conveys to the lessee, in return for
a payment or a series of payments, the
right to use a specific asset for an agreed
period of time.
Where the group is a lessee and has
substantially all the risks and rewards of
ownership of an asset, the arrangement
is considered a finance lease. Finance
leases are recognised as assets of the
group within property, plant and
equipment at the inception of the lease
at the lower of fair value and the present
value of the minimum lease payments.
Depreciation on leased assets is charged
to the income statement on the same
basis as owned assets. Payments made
under finance leases are apportioned
between capital repayments and interest
expense charged to the income
statement. Other leases where the group
is a lessee are treated as operating
leases. Payments made under operating
leases are recognised in the income
statement on a straight-line basis over
the term of the lease, as is the benefit
of lease incentives.
Where the group is a lessor under an
operating lease, the asset is capitalised
within property, plant and equipment and
depreciated over its useful economic life.
Payments received under operating
leases are recognised in the income
statement on a straight-line basis over
the term of the lease.
Biological assets
Biological assets are measured at fair
value less costs to sell. Cane roots and
growing cane are stated at fair value on
the following bases:
Cane roots – escalated average cost,
using appropriate inflation-related indices,
of each year of planting adjusted for
remaining expected life, currently ten
years in South Africa, seven years in
Zambia and eight years elsewhere.
Growing cane – estimated sucrose
content valued at estimated sucrose
price for the following season, less
estimated costs for harvesting and
transport.
When harvested, growing cane is
transferred to inventory at fair value
less costs to sell.
Inventories
Inventories are stated at the lower of
cost and net realisable value. Cost
includes raw materials, direct labour and
expenses and an appropriate proportion
of production and other overheads,
calculated on a first-in first-out basis.
Inventories for Primark are valued at
the lower of cost and net realisable value
using the retail method, calculated on
the basis of selling price less appropriate
trading margin. All Primark inventories
are finished goods.
New accounting policies
The group has adopted the following new
and amended IFRSs and IFRIC
interpretations with no material impact
(all effective from 16 September 2012):
Associated British Foods Annual Report and Accounts 2013
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• Amendments to IAS 1 Presentation
• Amendments to IFRS 7 Financial
Instruments: Disclosures effective
2014 and 2016 financial years
(partially endorsed by the EU);
• IFRS 9 Financial Instruments:
Classification and Measurement
effective 2016 financial year, which
amends the classification and
measurement for financial assets and
liabilities (not yet endorsed by the EU);
• IFRS 10 Consolidated Financial
Statements effective 2015
financial year;
• IFRS 11 Joint Arrangements effective
2015 financial year;
• IFRS 12 Disclosure of Interests in
Other Entities effective 2015
financial year;
• IFRS 13 Fair Value Measurement
effective 2014 financial year;
• IAS 28 Investments in Associates
and Joint Ventures effective 2015
financial year;
• Amendments to IAS 32 Financial
Instruments: Presentation effective
2014 and 2015 financial year; and
• Amendments to IAS 34 Interim
Financial Reporting effective 2014
financial year.
of Financial Statements, which
amend only the presentation of other
comprehensive income and the
statement of changes in equity; and
• Amendments to IAS 12 Income
Taxes.
The group will implement IAS 19 Employee
Benefits Revised in 2014. This makes
changes to measurement and disclosure
requirements for defined benefit
post-employment arrangements. The
first principal measurement change is
that the expected return on plan assets
and the interest charge on scheme
liabilities will be replaced by a net interest
expense or income calculated by applying
the liability discount rate to the net
pension asset or liability. The second
principal change is that scheme
administration costs will now be
expensed as incurred and the reserve for
scheme expenses included within
scheme liabilities will be removed.
The new standard applies for the first
time in the 2014 financial year, but with
retrospective effect from the 2012
balance sheet date. If applied in 2013, the
impact would have been an increase of
£4m in service cost and an increase of
£3m in net pension finance costs. Net
actuarial gains in 2013 of £24m would
have been replaced with net actuarial
gains of £32m. The £95m net pension
liability in the 2012 balance sheet is
replaced by a net liability of £67m, and
the £44m net pension liability in the 2013
balance sheet is replaced by a net liability
of £15m.
The group is also assessing the impact
of the following revised standards and
interpretations or amendments that
are not yet effective. Where already
endorsed by the EU, these changes will
be adopted on the effective dates noted.
Where not yet endorsed by the EU, the
adoption date is less certain. These
revised standards are not currently
expected to have a material impact
on the group’s reported profit, earnings
per share, net assets or disclosures (all
effective from 15 September 2013
unless otherwise stated):
• Certain elements of Annual
Improvements to IFRSs 2009-2011;
Associated British Foods Annual Report and Accounts 2013
92
ACCOUNTING ESTIMATES AND JUDGEMENTS
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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All exceptional items are included in the
appropriate income statement line item
to which they relate. In addition, separate
disclosure is made of all exceptional
items, with additional explanation in
the notes.
Taxation
The level of current and deferred tax
recognised is dependent on subjective
judgements as to the outcome of
decisions by tax authorities in various
jurisdictions around the world.
Fair values on acquisition
Items of property, plant and equipment
often have long operating lives, hence
determination of fair values can require
a significant degree of judgement.
Acquisitions often result in significant
intangible benefits for the group, some of
which qualify for recognition as intangible
assets. Other such benefits do not
meet the recognition requirements of
accounting standards and therefore form
part of goodwill. Significant judgement is
required in the assessment and valuation
of these intangible assets, often with
reference to internal data and models.
Professional valuers are engaged where
it is deemed appropriate to do so. Fair
values on major acquisitions are
disclosed in note 21.
In applying the accounting policies
detailed on pages 87 to 91, management
has made estimates in a number of areas
and the actual outcome may differ from
those calculated. Key sources of
estimation uncertainty at the balance
sheet date with a significant risk of
material adjustment to the carrying value
of assets and liabilities within the next
financial year are set out below.
Forecasts and discount rates
The carrying values of a number of items
on the balance sheet are dependent on
estimates of future cash flows arising
from the group’s operations which, in
some circumstances, are discounted
to arrive at a net present value.
Assessment for impairment involves
comparing the book value of an asset
with its recoverable amount (being the
higher of value in use and fair value less
costs to sell). Value in use is determined
with reference to projected future cash
flows discounted at an appropriate rate.
Both the cash flows and the discount
rate involve a significant degree of
estimation uncertainty.
The realisation of deferred tax assets is
dependent on the generation of sufficient
future taxable profits. The group
recognises deferred tax assets to the
extent that it is probable that sufficient
taxable profits will be available in the
future. Deferred tax assets are reduced
to the extent that it is no longer probable
that the related tax benefit will
be realised.
Post-retirement benefits
The group’s defined benefit pension
schemes and similar arrangements are
assessed annually in accordance with
IAS 19. The accounting valuation, which
has been assessed using assumptions
determined with independent actuarial
advice, resulted in a net liability of £44m
being recognised as at 14 September
2013. The size of this net liability is
sensitive to the market value of the
assets held by the schemes, to the
discount rate used in assessing actuarial
liabilities, to the actuarial assumptions
(which include price inflation, rates of
pension and salary increases, mortality
and other demographic assumptions) and
to the level of contributions. Further
details are included in note 12.
Provisions
Provisions are measured at the directors’
best estimate of the expenditure required
to settle the obligation at the balance
sheet date, taking into account a range
of possible outcomes.
Biological assets
Cane roots valuation requires an
estimation by management of the
average number of ratoons expected
from the crop. The carrying value of cane
roots is disclosed in note 10.
For the growing cane valuation, estimated
sucrose content requires management to
assess expected cane and sucrose yields
for the following season considering
weather conditions and harvesting
programmes; estimated sucrose price
requires management to assess into
which markets the forthcoming crop will
be sold and assess domestic and export
prices as well as related foreign currency
exchange rates. The carrying value of
growing cane is disclosed in note 10.
Cash flow hedge accounting
In order to achieve and maintain cash
flow hedge accounting, the group has
to determine, at inception and on an
ongoing basis, whether a forecast
transaction is highly probable and
whether the hedge is effective. This
requires both subjective and objective
measures of determination.
Exceptional items
The directors consider that items of
income or expense which are material by
virtue of their nature and amount should
be disclosed separately if the financial
statements are to present fairly the
financial position and financial
performance of the group. The
directors label these items collectively
as ‘exceptional items’. Determining
which transactions are to be considered
exceptional in nature is often a subjective
matter. However, circumstances that
the directors believe would give rise to
exceptional items for separate disclosure
might include major business
restructurings, impairments and
reversals of impairments.
Associated British Foods Annual Report and Accounts 2013
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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1. Operating segments
The group discloses five operating segments, as described below. These are the group’s operating divisions, based on the group’s
management and internal reporting structure, which combine businesses with common characteristics. The board is the chief
operating decision-maker.
Inter-segment pricing is determined on an arm’s length basis. Segment result is adjusted operating profit, as shown on the face of
the consolidated income statement. Segment assets comprise all non-current assets except employee benefits assets and deferred
tax assets, and all current assets except cash and cash equivalents. Segment liabilities comprise trade and other payables, derivative
liabilities and provisions. Segment results, assets and liabilities include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and expenses, cash, borrowings,
employee benefits balances and current and deferred tax balances. Segment non-current asset additions are the total cost incurred
during the period to acquire segment assets that are expected to be used for more than one year, comprising property, plant and
equipment, operating intangibles and biological assets.
The group is comprised of the following operating segments:
Grocery
Sugar
The manufacture of grocery products, including hot beverages, sugar & sweeteners, vegetable oils, bread & baked
goods, cereals, ethnic foods, herbs & spices, and meat products, which are sold to retail, wholesale and foodservice
businesses.
The growing and processing of sugar beet and sugar cane for sale to industrial users and to Silver Spoon, which is
included in the grocery segment.
Agriculture The manufacture of animal feeds and the provision of other products for the agriculture sector.
Ingredients The manufacture of bakers’ yeast, bakery ingredients, enzymes, lipids, yeast extracts and cereal specialities.
Retail
Buying and merchandising value clothing and accessories through the Primark and Penneys retail chains.
Geographical information
In addition to the required disclosure for operating segments, disclosure is also given of certain geographical information about the
group’s operations, based on the geographical groupings: United Kingdom; Europe & Africa; The Americas; and Asia Pacific.
Revenues are shown by reference to the geographical location of customers. Profits are shown by reference to the geographical
location of the businesses. Segment assets are based on the geographical location of the assets.
Operating segments
Grocery
Sugar
Agriculture
Ingredients
Retail
Central
Businesses disposed:
Ingredients
Geographical information
United Kingdom
Europe & Africa
The Americas
Asia Pacific
Businesses disposed:
The Americas
Revenue
2013
£m
Adjusted
operating profit
2012
£m
2013
£m
2012
£m
3,840
2,677
1,410
1,088
4,273
–
13,288
27
13,315
5,728
3,790
1,282
2,488
13,288
27
13,315
3,726
2,666
1,265
1,067
3,503
–
12,227
25
12,252
5,248
3,328
1,216
2,435
12,227
25
12,252
232
435
47
1
514
(50)
1,179
6
1,185
715
386
103
(25)
1,179
6
1,185
187
510
40
27
356
(48)
1,072
5
1,077
638
325
95
14
1,072
5
1,077
Associated British Foods Annual Report and Accounts 2013
94
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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1. Operating segments continued
For the 52 weeks ended 14 September 2013
Revenue from continuing businesses
Internal revenue
External revenue from continuing businesses
Businesses disposed
Revenue from external customers
Adjusted operating profit before joint ventures and associates
Share of profit after tax from joint ventures and associates
Businesses disposed
Adjusted operating profit
Amortisation of non-operating intangibles
Profits less losses on sale and closure of businesses
Profit before interest
Finance income
Finance expense
Other financial expense
Taxation
Profit for the period
Segment assets (excluding joint ventures and associates)
Investments in joint ventures and associates
Segment assets
Cash and cash equivalents
Deferred tax assets
Employee benefits assets
Segment liabilities
Loans and overdrafts
Income tax
Deferred tax liabilities
Employee benefits liabilities
Net assets
Non-current asset additions
Depreciation
Amortisation
Impairment of property, plant and equipment
Impairment of operating intangibles
Impairment of goodwill
Impairment of property, plant and equipment on closure
of business
Impairment of goodwill on sale of business
Geographical information
Revenue from external customers
Segment assets
Non-current asset additions
Depreciation
Amortisation
Impairment of property, plant and equipment
Impairment of operating intangibles
Impairment of goodwill
Impairment of property, plant and equipment on closure
of business
Impairment of goodwill on sale of business
Associated British Foods Annual Report and Accounts 2013
Grocery
£m
3,851
(11)
3,840
–
3,840
Sugar
£m
2,808
(131)
2,677
–
2,677
Agriculture
£m
1,410
–
1,410
–
1,410
Ingredients
£m
1,193
(105)
1,088
27
1,115
224
8
–
232
(19)
–
213
450
(15)
–
435
(21)
(15)
399
35
12
–
47
(1)
–
46
(7)
8
6
7
(51)
(113)
(157)
Retail
£m
4,273
–
4,273
–
4,273
514
–
–
514
–
–
514
213
399
2,666
33
2,699
2,432
34
2,466
46
319
99
418
(157)
514
1,159
52
1,211
2,677
–
2,677
(539)
(398)
(121)
(207)
(619)
2,160
2,068
297
1,004
2,058
165
108
37
–
–
–
–
–
158
86
37
8
4
10
3
14
10
7
3
–
–
–
–
–
70
49
53
19
–
–
74
–
220
151
–
–
–
–
–
–
United
Kingdom
£m
5,728
3,863
260
177
35
–
–
–
Europe
& Africa
£m
3,790
3,096
209
102
26
19
–
–
The
Americas
£m
1,309
1,022
51
28
39
–
–
–
–
–
–
–
–
–
Central
£m
(247)
247
–
–
–
Total
£m
13,288
–
13,288
27
13,315
(50)
–
–
(50)
–
–
(50)
13
(100)
(2)
(242)
(381)
187
–
187
362
273
52
(112)
(1,166)
(166)
(424)
(96)
(1,090)
6
4
–
–
–
–
–
–
Asia
Pacific
£m
2,488
1,677
109
98
30
8
4
10
77
14
1,166
13
6
1,185
(92)
(128)
965
13
(100)
(2)
(242)
634
9,440
218
9,658
362
273
52
(1,996)
(1,166)
(166)
(424)
(96)
6,497
629
405
130
27
4
10
77
14
Total
£m
13,315
9,658
629
405
130
27
4
10
77
14
95
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o
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s
f
o
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o
f
i
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e
fi
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a
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c
i
a
l
s
t
a
t
e
m
e
n
t
s
1. Operating segments continued
For the 52 weeks ended 15 September 2012
Revenue from continuing businesses
Internal revenue
External revenue from continuing businesses
Businesses disposed
Revenue from external customers
Adjusted operating profit before joint ventures and associates
Share of profit after tax from joint ventures and associates
Businesses disposed
Adjusted operating profit
Profits less losses on disposal of non-current assets
Amortisation of non-operating intangibles
Exceptional items
Profits less losses on sale and closure of businesses
Profit before interest
Finance income
Finance expense
Other financial income
Taxation
Profit for the period
Segment assets (excluding joint ventures and associates)
Investments in joint ventures and associates
Segment assets
Cash and cash equivalents
Deferred tax assets
Employee benefits assets
Segment liabilities
Loans and overdrafts
Income tax
Deferred tax liabilities
Employee benefits liabilities
Net assets
Non-current asset additions
Depreciation
Amortisation
Impairment of property, plant and equipment
Impairment of operating intangibles
Impairment of property, plant and equipment on closure
of business
Geographical information
Revenue from external customers
Segment assets
Non-current asset additions
Depreciation
Amortisation
Impairment of property, plant and equipment
Impairment of operating intangibles
Impairment of property, plant and equipment on closure
of business
Grocery
£m
3,734
(8)
3,726
–
3,726
Sugar
£m
2,808
(142)
2,666
–
2,666
Agriculture
£m
1,275
(10)
1,265
–
1,265
Ingredients
£m
1,138
(71)
1,067
25
1,092
Retail
£m
3,503
–
3,503
–
3,503
Central
£m
(231)
231
–
–
–
Total
£m
12,227
–
12,227
25
12,252
179
8
–
187
–
(16)
(98)
–
73
514
(4)
–
510
1
(22)
–
(6)
483
27
13
–
40
–
(1)
–
–
39
17
10
5
32
–
(61)
–
(3)
(32)
356
–
–
356
–
–
–
–
356
73
483
2,685
24
2,709
2,510
47
2,557
39
275
87
362
(32)
356
1,353
56
1,409
2,423
–
2,423
(573)
(413)
(104)
(204)
(526)
2,136
2,144
258
1,205
1,897
153
105
33
92
6
–
160
95
24
–
–
–
14
7
3
–
–
–
96
47
62
–
–
3
329
132
–
–
–
–
(48)
–
–
(48)
(7)
–
–
–
(55)
9
(114)
2
(178)
(336)
182
–
182
391
189
18
(118)
(1,452)
(150)
(366)
(113)
(1,419)
3
8
–
–
–
–
1,045
27
5
1,077
(6)
(100)
(98)
(9)
864
9
(114)
2
(178)
583
9,428
214
9,642
391
189
18
(1,938)
(1,452)
(150)
(366)
(113)
6,221
755
394
122
92
6
3
United
Kingdom
£m
5,248
3,689
270
184
15
–
–
Europe
& Africa
£m
3,328
3,002
278
95
49
–
–
The
Americas
£m
1,241
1,051
65
25
26
–
–
Asia
Pacific
£m
2,435
1,900
142
90
32
92
6
Total
£m
12,252
9,642
755
394
122
92
6
–
–
–
3
3
Associated British Foods Annual Report and Accounts 2013
96
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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i
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fi
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a
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c
i
a
l
s
t
a
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e
m
e
n
t
s
2. Operating costs
Operating costs
Cost of sales before exceptional items (including amortisation of intangibles)
Exceptional items1 charged to cost of sales
Distribution costs
Administration expenses
Operating costs are stated after charging/(crediting):
Employee benefits expense
Amortisation of non-operating intangibles
Amortisation of operating intangibles
Profits less losses on disposal of non-current assets
Depreciation of owned property, plant and equipment
Impairment of property, plant and equipment
Impairment of operating intangibles
Impairment of goodwill
Operating lease payments under property leases
Operating lease payments for hire of plant and equipment
Other operating income
Research and development expenditure
Fair value gains on financial assets and liabilities held for trading
Fair value losses on financial assets and liabilities held for trading
Foreign exchange gains on operating activities
Foreign exchange losses on operating activities
1 Refer to accounting policy on page 88.
Note
2013
£m
2012
£m
10,095
–
1,314
826
12,235
9,292
98
1,273
737
11,400
3
8
8
9
9
8
8
1,943
92
38
–
405
27
4
10
155
14
(22)
25
(14)
15
(30)
31
1,760
100
22
6
394
92
6
–
122
14
(20)
23
(30)
27
(50)
52
In 2012, an exceptional charge of £98m was made to impair property, plant and equipment assets (£92m) and operating intangible
assets (£6m) in the Australian meat business. An exceptional tax credit of £29m arose on the recognition of the resultant deferred
tax asset. There were no such items in 2013.
Auditors’ remuneration
Fees payable to the Company’s auditor and its associates
in respect of the audit
Group audit of these financial statements
Audit of the Company’s subsidiaries’ financial statements
Total audit remuneration
Fees payable to the Company’s auditor and its associates in respect
of non-audit related services
Audit-related assurance services
Tax compliance services
Tax advisory services
Information technology services
All other services
Total non-audit related remuneration
Fees payable to the Company’s auditor and its associates in respect
of the group’s pension schemes
Audit of the pension schemes
2013
£m
2012
£m
0.6
5.3
5.9
0.3
0.6
1.2
0.1
0.6
2.8
0.2
0.2
0.6
5.1
5.7
0.3
0.8
1.1
0.3
0.3
2.8
0.2
0.2
Associated British Foods Annual Report and Accounts 2013
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fi
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i
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e
m
e
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t
s
3. Employees
Average number of employees
United Kingdom
Europe & Africa
The Americas
Asia Pacific
Employee benefits expense
Wages and salaries
Social security contributions
Contributions to defined contribution schemes
Charge for defined benefit schemes
Equity-settled share-based payment schemes
2013
2012
40,071
49,247
4,036
19,298
112,652
37,536
45,301
3,822
19,584
106,243
Note
£m
£m
12
12
1,640
180
66
42
15
1,943
1,507
159
53
33
8
1,760
Details of directors’ remuneration, share options and pension entitlements are shown in the Remuneration report on pages 62 to 75.
4. Interest and other financial income and expense
Finance income
Cash and cash equivalents
Finance expense
Bank loans and overdrafts
All other borrowings
Finance leases
Other payables
Unwinding of discount on provisions
Other financial income/(expense)
Expected return on employee benefit scheme assets
Interest charge on employee benefit scheme liabilities
Net financial income from employee benefit schemes
Net foreign exchange losses on financing activities
Total other financial (expense)/income
Note
12
12
2013
£m
13
13
(42)
(54)
(1)
(2)
(1)
(100)
140
(139)
1
(3)
(2)
2012
£m
9
9
(52)
(57)
(1)
(1)
(3)
(114)
147
(142)
5
(3)
2
Associated British Foods Annual Report and Accounts 2013
98
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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p
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f
i
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s
5. Income tax expense
Current tax expense
UK – corporation tax at 23.5% (2012 – 25.1%)
Overseas – corporation tax
UK – overprovided in prior periods
Overseas – overprovided in prior periods
Deferred tax expense
UK deferred tax
Overseas deferred tax
UK – underprovided in prior periods
Overseas – overprovided in prior periods
Total income tax expense in income statement
Reconciliation of effective tax rate
Profit before taxation
Less share of profit after tax from joint ventures and associates
Profit before taxation excluding share of profit after tax
from joint ventures and associates
Nominal tax charge at UK corporation tax rate of 23.5% (2012 – 25.1%)
Benefit of lower tax rates
Expenses not deductible for tax purposes
Profits/losses on disposal of assets covered by tax exemptions or unrecognised capital losses
Deferred tax not recognised
Adjustments in respect of prior periods
Income tax recognised directly in equity
Deferred tax associated with defined benefit schemes
Deferred tax associated with share-based payments
Deferred tax associated with movement in cash flow hedging position
Deferred tax associated with movements in foreign exchange
Current tax associated with movements in foreign exchange
2013
£m
2012
£m
143
145
(9)
(10)
269
(21)
2
–
(8)
(27)
242
876
(13)
863
203
(34)
24
39
37
(27)
242
5
–
2
(2)
–
5
108
110
(6)
(2)
210
(14)
(20)
3
(1)
(32)
178
761
(27)
734
184
(19)
3
2
14
(6)
178
(23)
2
(4)
(3)
4
(24)
The UK corporation tax rate was reduced from 24% to 23% with effect from 1 April 2013, and further reductions to 21% and 20%
are due to take effect on 1 April 2014 and 1 April 2015 respectively. The legislation to effect these rate changes was enacted before
the balance sheet date and UK deferred tax has therefore been calculated using a rate of 20%. This rate change results in an £18m
reduction in the tax charge in the income statement.
The tax credit of £29m arising on the exceptional impairment charge in 2012 was included within the overseas deferred tax credit.
Deferred taxation balances are analysed in note 13.
6. Dividends
2011 final
2012 interim
2012 final
2013 interim
2013
pence
per share
–
–
20.00
9.35
29.35
2012
pence
per share
16.85
8.50
–
–
25.35
2013
£m
–
–
158
74
232
2012
£m
133
67
–
–
200
The 2013 interim dividend was declared on 23 April 2013 and paid on 5 July 2013. The 2013 final dividend of 22.65 pence, total
value of £179m, will be paid on 10 January 2014 to shareholders on the register on 6 December 2013.
Dividends relating to the period were 32.0 pence per share totalling £253m (2012 – 28.5 pence per share totalling £225m).
Associated British Foods Annual Report and Accounts 2013
99
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7. Earnings per share
The calculation of basic earnings per share at 14 September 2013 was based on the net profit attributable to equity shareholders
of £591m (2012 – £555m), and a weighted average number of shares outstanding during the year of 790 million (2012 – 789 million).
The calculation of the weighted average number of shares excludes the shares held by the Employee Share Ownership Plan Trust
on which the dividends are being waived.
Adjusted earnings per ordinary share, which exclude the impact of profits less losses on disposal of non-current assets and sale
and closure of businesses, amortisation of non-operating intangibles, exceptional items, and any associated tax credits, is shown
to provide clarity on the underlying performance of the group.
The diluted earnings per share calculation takes into account the dilutive effect of share incentives. The diluted, weighted average
number of shares is 790 million (2012 – 789 million). There is no difference between basic and diluted earnings.
Adjusted profit for the period
Disposal of non-current assets
Sale and closure of businesses
Exceptional items
Tax effect on above adjustments
Amortisation of non-operating intangibles
Tax credit on non-operating intangibles amortisation and goodwill
Non-controlling interests’ share of amortisation of non-operating intangibles net of tax
Profit for the period attributable to equity shareholders
Adjusted earnings per share
Disposal of non-current assets
Sale and closure of businesses
Exceptional items
Tax effect on above adjustments
Amortisation of non-operating intangibles
Tax credit on non-operating intangibles amortisation and goodwill
Non-controlling interests’ share of amortisation of non-operating intangibles net of tax
Earnings per ordinary share
2013
£m
781
–
(128)
–
(6)
(92)
29
7
591
2013
pence
98.9
–
(16.2)
–
(0.8)
(11.7)
3.7
0.9
74.8
2012
£m
688
(6)
(9)
(98)
31
(100)
33
16
555
2012
pence
87.2
(0.8)
(1.1)
(12.4)
3.9
(12.7)
4.2
2.0
70.3
Associated British Foods Annual Report and Accounts 2013
100
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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t
a
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s
f
o
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p
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o
f
i
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e
fi
n
a
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c
i
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s
t
a
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e
m
e
n
t
s
8. Intangible assets
Cost
At 17 September 2011
Acquisitions – externally purchased
Acquired through business combinations
Disposals
Effect of movements in foreign exchange
At 15 September 2012
Acquisitions – externally purchased
Acquired through previous business
combinations
Reversal of deferred consideration
Businesses disposed
Other disposals
Effect of movements in foreign exchange
At 14 September 2013
Amortisation and impairment
At 17 September 2011
Amortisation for the year
Impairment
Disposals
Effect of movements in foreign exchange
At 15 September 2012
Amortisation for the year
Impairment
Impairment on sale of business
Disposals
Effect of movements in foreign exchange
At 14 September 2013
Net book value
At 17 September 2011
At 15 September 2012
At 14 September 2013
Non-operating
Operating
Goodwill
£m
Technology
£m
Brands
£m
Customer
relationships
£m
Grower
agreements
£m
Other
£m
Other
£m
Total
£m
1,363
–
8
–
(51)
1,320
–
2
(7)
(27)
–
(22)
1,266
5
–
–
–
–
5
–
10
14
–
–
29
1,358
1,315
1,237
248
–
–
–
(13)
235
–
–
–
–
–
(8)
227
148
47
–
–
(8)
187
50
–
–
–
(10)
227
100
48
–
349
–
34
–
(10)
373
–
–
–
–
–
(3)
370
164
32
–
–
(7)
189
23
–
–
–
(4)
208
185
184
162
109
–
2
–
(7)
104
–
–
–
–
–
(2)
102
96
4
–
–
(6)
94
4
–
–
–
(2)
96
13
10
6
189
–
–
–
(23)
166
–
–
–
–
–
(26)
140
95
17
–
–
(12)
100
15
–
–
–
(17)
98
94
66
42
9
–
–
–
(1)
8
–
–
–
–
–
(1)
7
9
–
–
–
(1)
8
–
–
–
–
(1)
7
–
–
–
182
46
–
(14)
(4)
210
40
–
–
–
(21)
(4)
225
39
22
6
(2)
(1)
64
38
4
–
(13)
(2)
91
2,449
46
44
(14)
(109)
2,416
40
2
(7)
(27)
(21)
(66)
2,337
556
122
6
(2)
(35)
647
130
14
14
(13)
(36)
756
143
146
134
1,893
1,769
1,581
Impairment
As at 14 September 2013, the consolidated balance sheet included goodwill of £1,237m (2012 – £1,315m). Goodwill is allocated to
the group’s cash-generating units (CGUs), or groups of CGUs that are expected to benefit from the synergies of the business
combination that gave rise to the goodwill, as follows:
CGU or group of CGUs
ACH
AB Mauri
Twinings Ovaltine
Capullo
Illovo
AB World Foods
North China Sugar
Other*
Primary reporting segment
Grocery
Ingredients
Grocery
Grocery
Sugar
Grocery
Sugar
Various
Discount rate
9.1%
11.5%
9.6%
13.7%
13.8%
11.4%
13.0%
Various
2013
£m
241
341
119
58
137
78
46
217
1,237
2012
£m
237
347
119
58
161
84
67
242
1,315
* The amount of goodwill allocated to each CGU or group of CGUs is not individually significant.
Associated British Foods Annual Report and Accounts 2013
101
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8. Intangible assets continued
A CGU, or group of CGUs, to which goodwill has been allocated must be assessed for impairment annually, or more frequently
if events or circumstances indicate that the carrying amount may not be recoverable.
The carrying value of goodwill is assessed by reference to its value in use to perpetuity reflecting the projected cash flows of each
of the CGUs or group of CGUs. These projections are based on the most recent budget, which has been approved by the board and
reflects management’s expectations of sales growth, operating costs and margin, based on past experience and external sources of
information. Long-term growth rates for periods not covered by the annual budget reflect the products, industries and countries in
which the relevant CGU, or group of CGUs, operate.
For some recently acquired intangible assets, management expects to achieve growth over the next three to five years in excess
of the long-term growth rates for the applicable country or region. In these circumstances, budgeted cash flows are extended,
generally to between three and five years, using specific growth assumptions and taking into account the specific business risks.
The key assumptions on which the cash flow projections for the most recent annual budget are based relate to discount rates,
growth rates and expected changes in volumes, selling prices and direct costs.
The cash flow projections have been discounted using a range of rates based on the group’s pre-tax weighted average cost of
capital adjusted for country, industry and market risk. The rates used were in a range between 9.1% and 13.8% (2012 – between
8% and 12.8%).
The growth rates to perpetuity beyond the initial budgeted cash flows, applied in the value in use calculations for goodwill allocated
to each of the CGUs or groups of CGUs that are significant to the total carrying amount of goodwill, were in a range between 0%
and 3.5% (2012 – between 0% and 3%).
Changes in volumes, selling prices and direct costs are based on past results and expectations of future changes in the market.
Sensitivity to changes in key assumptions
Impairment testing is dependent on management’s estimates and judgements, particularly as they relate to the forecasting of future
cash flows, the discount rates selected and expected long-term growth rates. Each of the group’s CGUs had significant headroom
under the annual impairment review with the exception of AB Mauri and the North China sugar business.
AB Mauri has experienced increased competitive pressure, higher molasses costs and an inability to recover inflationary cost
increases through pricing in some of its different businesses around the world. This resulted in an indicator of impairment risk under
the requirements of IFRS. Management has reviewed detailed forecasts for this business taking those issues into account, and has
concluded that the assets are not impaired. Key drivers of the forecast improvement in performance include improved reach and
competitiveness in the global dry yeast market from the newly commissioned yeast factory in Mexico, implementation of a global
review of margin improvement opportunities, particularly on cost reduction, which is already under way, and continuing growth in
the global bakery ingredients business. Headroom was $103m on a CGU carrying value of $1,195m. The discount rate used was
11.5% and would have to increase to more than 12.1% before value in use fell below the CGU carrying value. Estimates of long-term
growth rates beyond the forecast periods were 2.5%–3% per annum dependent on location.
In North China Sugar, a £10m goodwill and £4m operating intangible impairment were charged to adjusted operating profit in the
year as a consequence of the decision to mothball the Baolongshan and Wangkui factories at the end of the campaign. £14m was
charged against goodwill as a loss on sale of business in the year in respect of the sale of the Chifeng beet factory, completed in
early September. Current forecasts for the remaining North China Sugar business continue to support the carrying value of the
assets, but the achievement of these forecasts depends on significant improvements in a variety of operational parameters, including
agricultural yields, factory volumes and sugar prices. Management has reviewed detailed forecasts for this business taking those
issues into account, and has concluded that no impairment is required. Headroom was £2m on a CGU carrying value of £221m.
The discount rate used was 13.0%. The estimate of long-term growth beyond the forecast period was 2% per annum.
For all goodwill other than AB Mauri and North China Sugar, management has concluded that no reasonably possible change in
key assumptions on which it has determined value in use would cause carrying values to materially exceed value in use.
Associated British Foods Annual Report and Accounts 2013
102
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
i
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a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
|
N
o
t
e
s
f
o
r
m
n
g
p
a
r
t
o
f
i
t
h
e
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
9. Property, plant and equipment
Cost
At 17 September 2011
Acquisitions – externally purchased
Interest capitalised
Disposals
Transfers from assets under construction
Effect of movements in foreign exchange
At 15 September 2012
Acquisitions – externally purchased
Interest capitalised
Businesses disposed
Other disposals
Transfers from assets under construction
Effect of movements in foreign exchange
At 14 September 2013
Depreciation and impairment
At 17 September 2011
Depreciation for the year
Impairment
Impairment on closure of business
Disposals
Effect of movements in foreign exchange
At 15 September 2012
Depreciation for the year
Impairment
Impairment on closure of business
Businesses disposed
Other disposals
Effect of movements in foreign exchange
At 14 September 2013
Net book value
At 17 September 2011
At 15 September 2012
At 14 September 2013
Net book value of finance lease assets
Land and buildings at net book value comprise:
– freehold
– long leasehold
– short leasehold
Capital expenditure commitments – contracted but not provided for
Land and
buildings
£m
Plant and
machinery
£m
Fixtures and
fittings
£m
Assets under
construction
£m
2,144
100
–
(26)
12
(54)
2,176
102
–
(1)
(8)
49
(20)
2,298
366
52
37
1
(24)
(7)
425
53
8
30
(1)
(5)
(8)
502
1,778
1,751
1,796
3,162
146
–
(130)
98
(103)
3,173
125
–
(12)
(132)
229
(97)
3,286
1,482
214
55
2
(124)
(38)
1,591
209
19
47
(5)
(116)
(57)
1,688
1,680
1,582
1,598
1,254
267
–
(48)
11
(31)
1,453
176
–
–
(20)
7
14
1,630
424
128
–
–
(48)
(9)
495
143
–
–
–
(19)
3
622
830
958
1,008
177
196
2
–
(121)
(4)
250
181
4
–
–
(285)
–
150
–
–
–
–
–
–
–
–
–
–
–
–
–
–
177
250
150
2013
£m
11
1,388
313
95
1,796
215
Total
£m
6,737
709
2
(204)
–
(192)
7,052
584
4
(13)
(160)
–
(103)
7,364
2,272
394
92
3
(196)
(54)
2,511
405
27
77
(6)
(140)
(62)
2,812
4,465
4,541
4,552
2012
£m
12
1,365
290
96
1,751
225
Impairment
In North China Sugar, £8m (comprising £2m land and buildings, and £6m plant and machinery) was charged to adjusted operating
profit in the year as a consequence of the decision to mothball the Baolangshan and Wangkui factories at the end of the campaign.
In the Ingredients and Europe & Africa segments, £19m (comprising £6m land and buildings, and £13m plant and machinery) was
charged to adjusted operating profit in the year following start-up of the new low-cost dry yeast plant in Mexico and consequent
closure of dry yeast production in Italy. The net book value of property, plant and equipment in the Italian business after the
impairment was £17m.
In the Ingredients and Asia Pacific segments, £74m (comprising £29m land and buildings, and £45m plant and machinery) was
charged to loss on closure of business to write down the carrying value of £61m of Ingredients assets in China and £13m of
Ingredients assets in India (see note 21 for further details). In North China Sugar, £3m was charged to loss on sale of business in
respect of the disposal of the sugar business in Chifeng (£1m land and buildings, and £2m plant and machinery).
Associated British Foods Annual Report and Accounts 2013
103
i
F
n
a
n
c
a
i
l
s
t
a
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e
m
e
n
t
s
|
N
o
t
e
s
f
o
r
m
n
g
p
a
r
t
o
f
i
t
h
e
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
10. Biological assets
At 17 September 2011
Transferred to inventory
Purchases
Changes in fair value
Effect of movements in foreign exchange
At 15 September 2012
Transferred to inventory
Purchases
Changes in fair value
Effect of movements in foreign exchange
At 14 September 2013
Cane roots
Area under cane as at the end of the period (hectares)
South Africa
Malawi
Zambia
Swaziland
Tanzania
Mozambique
Current
Non-current
Growing
cane
£m
104
(138)
1
158
(24)
101
(112)
–
124
(10)
103
Other
£m
8
(28)
2
26
–
8
(23)
2
22
–
9
Total
£m
112
(166)
3
184
(24)
109
(135)
2
146
(10)
112
Cane
roots
£m
99
–
1
10
(21)
89
–
1
15
(8)
97
2013
2012
8,729
20,031
16,848
8,646
9,565
5,900
69,719
8,477
20,594
17,113
8,646
9,676
6,000
70,506
Growing cane
The following assumptions have been used in the determination of the estimated sucrose tonnage at 14 September 2013:
Expected area to harvest (hectares)
Estimated yield (tonnes cane/hectare)
Average maturity of cane
South Africa
5,210
72.4
56.0%
Malawi
19,504
105.3
66.7%
Zambia
16,370
118.3
66.7%
Swaziland
8,144
102.3
66.7%
Tanzania Mozambique
5,752
93.2
66.7%
9,565
81.0
50.0%
The following assumptions were used in the determination of the estimated sucrose tonnage at 15 September 2012:
Expected area to harvest (hectares)
Estimated yield (tonnes cane/hectare)
Average maturity of cane
South Africa
5,038
72.0
56.0%
Malawi
20,181
109.9
66.7%
Zambia
16,888
111.0
66.7%
Swaziland
8,096
105.6
66.7%
Tanzania Mozambique
5,870
93.6
66.7%
9,676
81.0
50.0%
Associated British Foods Annual Report and Accounts 2013
104
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
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|
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o
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e
s
f
o
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m
n
g
p
a
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t
o
f
i
t
h
e
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
11. Investments in joint ventures and associates
At 17 September 2011
Acquisitions
Profit for the period
Dividends received
Effect of movements in foreign exchange
At 15 September 2012
Acquisitions
Profit for the period
Dividends received
Effect of movements in foreign exchange
At 14 September 2013
Joint ventures
Associates
Shares
£m
135
6
25
(5)
(5)
156
2
10
(6)
2
164
Goodwill
£m
15
–
–
–
3
18
–
–
–
–
18
Total
£m
150
6
25
(5)
(2)
174
2
10
(6)
2
182
Shares
£m
44
–
2
(6)
(1)
39
–
3
(5)
(2)
35
Goodwill
£m
–
–
–
–
1
1
–
–
–
–
1
Total
£m
44
–
2
(6)
–
40
–
3
(5)
(2)
36
Details of principal joint ventures and associates are listed in note 28.
Included in the consolidated financial statements are the following items that represent the group’s share of the assets, liabilities and
profit of joint ventures and associates:
Joint ventures
Associates
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Goodwill
Net assets
Revenue
Expenses
Taxation
Profit for the period
2013
£m
241
275
(179)
(173)
18
182
1,322
(1,311)
(1)
10
2012
£m
233
287
(198)
(166)
18
174
1,273
(1,243)
(5)
25
2013
£m
18
135
(116)
(2)
1
36
88
(82)
(3)
3
2012
£m
22
125
(107)
(1)
1
40
85
(81)
(2)
2
12. Employee entitlements
The group operates pension schemes, the majority of which are of the defined benefit type. The group also operates a small
number of unfunded overseas post-retirement medical benefit schemes.
UK schemes
The group’s principal UK defined benefit pension schemes are funded schemes and are closed to new members, with defined
contribution arrangements in place for other employees. The pension costs in the UK for the defined benefit schemes are assessed
in accordance with the advice of independent qualified actuaries using the projected unit method. For defined contribution schemes,
the pension costs are the contributions payable.
Actuarial gains and losses arising over the financial year are recognised immediately in other comprehensive income and are
reflected in the balance sheet at 14 September 2013. Past service cost is recognised immediately in the income statement to the
extent that the benefits have already vested.
The last actuarial valuation of the Associated British Foods Pension Scheme was carried out as at 5 April 2011. At the valuation
date the total market value of the assets of the Scheme was £2,559m and represented 101% of the benefits that had accrued
to members after allowing for expected future increases in earnings. By agreement with the trustees, the Company agreed to
eliminate the deficit identified at the time of the triennial actuarial valuation of the Scheme in 2008 with five annual payments of
£30m, and although the Scheme was in surplus at the time of the most recent valuation, the Company made the final payment
in March 2013.
Overseas schemes
The group also operates defined benefit pension schemes in a number of overseas businesses, which are primarily funded
schemes. The charge for the year is based on recommendations by qualified actuaries. Unfunded post-retirement medical benefit
schemes are accounted for as defined benefit pension schemes. For defined contribution schemes, the pension costs are the
contributions payable.
Associated British Foods Annual Report and Accounts 2013
105
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a
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s
f
o
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p
a
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t
o
f
i
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e
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
12. Employee entitlements continued
Assumptions
The UK pension schemes represent 91% (2012 – 90%) of the group’s plan assets and 89% (2012 – 88%) of the group’s scheme
liabilities. The financial assumptions used to value the UK pension schemes under IAS 19 are:
Discount rate
Inflation
Rate of increase in salaries
Rate of increase for pensions in payment
Rate of increase for pensions in deferment (where provided)
2013
%
4.7
3.5
4.5
3.3
3.0
2012
%
4.6
3.1
4.1
2.9
2.6
2011
%
5.1
3.3
4.3
3.1
2.8
The mortality assumptions used to value the UK pension schemes are derived from the S1NA generational mortality tables with
improvements in line with the 2009 projection model prepared by the Continuous Mortality Investigation of the UK actuarial profession,
with no rating for males and a +0.2 year rating for females, with a long-term underpin of 1.5%. These mortality assumptions take
account of experience to date, and assumptions for further improvements in life expectancy of scheme members.
Examples of the resulting life expectancies are as follows:
Life expectancy from age 65 (in years)
Member aged 65 in 2013 (2012)
Member aged 65 in 2033 (2032)
2013
2012
Male
22.7
25.0
Female
24.8
27.2
Male
22.6
24.8
Female
24.7
27.1
The other demographic assumptions have been set having regard to the latest trends in scheme experience and other relevant data.
The assumptions are reviewed and updated as necessary as part of the periodic actuarial valuation of the pension schemes.
For the overseas schemes, regionally appropriate assumptions have been used where recommended by local actuaries.
Balance sheet
The expected rates of return on plan assets were determined, based on actuarial advice, by a process that takes the long-term rate
of return on government bonds available at the balance sheet date and with a similar maturity to the scheme liabilities, and applies
to these rates suitable risk premia that take account of historic market returns and current market long-term expectations for each
asset class.
The UK schemes’ net pension asset of £28m (2012 – £4m liability) plus the overseas schemes’ net pension liability of £72m (2012
– £91m liability) totals a liability of £44m (2012 – £95m). This equates to the employee benefits asset of £52m (2012 – £18m) and
liability of £96m (2012 – £113m) shown on the face of the consolidated balance sheet.
The expected rates of return and market values of the assets of the principal schemes were as follows:
UK schemes
Expected long-term rates of return:
Equities
Government bonds
Non-government bonds
Property
Other
Total market value of plan assets
Present value of scheme liabilities
Net pension asset/(liability)
Unfunded liability included in the present value of scheme liabilities
above
2013
%
2013
£m
2012
%
2012
£m
2011
%
2011
£m
6.7
3.7
4.7
5.2
0.5
1,133
849
527
163
260
2,932
(2,904)
28
(23)
6.3
3.3
4.6
4.8
0.5
961
896
638
103
117
2,715
(2,719)
(4)
(19)
6.7
3.7
5.1
5.2
0.5
827
631
939
102
7
2,506
(2,490)
16
(17)
The plan assets, scheme liabilities and aggregate net deficit of the plans were respectively £2,405m, £2,434m and £29m in 2010
and £2,135m, £2,211m and £76m in 2009.
The sensitivities regarding the principal assumptions used to measure UK scheme liabilities at 14 September 2013 are:
Discount rate
Inflation
Rate of increase in salaries
Rate of mortality
Change in assumption
decrease/increase by 0.5%
increase/decrease by 0.5%
increase/decrease by 0.5%
reduce by one year
Impact on scheme liabilities
increase/decrease by 9.0%
increase/decrease by 7.9%
increase/decrease by 1.5%
increase by 2.8%
Associated British Foods Annual Report and Accounts 2013
106
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
i
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n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
|
N
o
t
e
s
f
o
r
m
n
g
p
a
r
t
o
f
i
t
h
e
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
12. Employee entitlements continued
Overseas schemes
Expected long-term rates of return:
Equities
Government bonds
Non-government bonds
Property
Other
Total market value of plan assets
Present value of scheme liabilities
Aggregate net deficit of the plans
Irrecoverable surplus (a)
Net pension liability
Unfunded liability included in the present value of scheme liabilities
above
2013
%
7.2
3.1
3.9
4.6
6.7
2011
%
8.0
4.7
3.5
5.2
5.9
2012
%
7.2
3.7
3.7
4.3
4.0
2013
£m
137
61
66
4
33
301
(361)
(60)
(12)
(72)
(41)
2012
£m
139
33
56
4
56
288
(371)
(83)
(8)
(91)
(38)
2011
£m
128
36
53
6
59
282
(334)
(52)
(8)
(60)
(34)
The plan assets, scheme liabilities and aggregate net deficit of the plans were respectively £285m, £342m and £57m in 2010 and
£238m, £242m and £4m in 2009.
(a) The surpluses in the plans are only recoverable to the extent that the group can benefit from either refunds formally agreed or
from future contribution reductions.
Income statement
The charge to the income statement comprises:
Charged to operating profit:
Defined benefit plans
Current service cost
Gain on curtailment
Defined contribution plans
Total operating cost
Reported in other financial income/(expense):
Expected return on assets
Interest charge on liabilities
Net financial income from employee benefit schemes
Net impact on the income statement (before tax)
The actual return on scheme assets was a gain of £292m (2012 – £294m).
2013
£m
2012
£m
(42)
–
(66)
(108)
140
(139)
1
(34)
1
(53)
(86)
147
(142)
5
(107)
(81)
Associated British Foods Annual Report and Accounts 2013
107
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n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
|
N
o
t
e
s
f
o
r
m
n
g
p
a
r
t
o
f
i
t
h
e
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
12. Employee entitlements continued
Cash flow
Group cash flow in respect of employee benefits schemes comprises contributions paid to funded plans and benefits paid in
respect of unfunded plans. In 2013, the benefits paid in respect of unfunded plans was £nil (2012 – £nil). Company contributions
to funded defined benefit plans are subject to periodic review. In 2013, contributions to funded defined benefit plans amounted to
£69m (2012 – £71m). Contributions to defined contribution plans amounted to £66m (2012 – £53m).
Total contributions to funded plans and benefit payments by the group in respect of unfunded plans are currently expected to be
approximately £42m in 2014 (2013 – £67m).
Other comprehensive income
Amounts recognised in other comprehensive income:
Actual return less expected return on pension scheme assets
Experience gains and losses arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Change in unrecognised surplus
Net actuarial gain/(loss) recognised in other comprehensive income (before tax)
2013
£m
152
(9)
(113)
30
(6)
24
Cumulative actuarial losses from 19 September 2004 reported in other comprehensive income are £410m (2012 – cumulative
actuarial losses of £434m).
Reconciliation of change in assets and liabilities
Asset/(liability) at beginning of year
Current service cost
Employee contributions
Employer contributions
Benefit payments
Gain on curtailments
Financial income
Financial expense
Actuarial gain/(loss)
Effect of movements in foreign exchange
Asset/(liability) at end of year
2013
assets
£m
3,003
–
9
69
(132)
–
140
–
152
(8)
3,233
2012
assets
£m
2,788
–
9
71
(137)
–
147
–
147
(22)
3,003
2013
liabilities
£m
(3,090)
(42)
(9)
–
132
–
–
(139)
(122)
5
(3,265)
2012
liabilities
£m
(2,824)
(34)
(9)
–
137
1
–
(142)
(246)
27
(3,090)
2013
net
£m
(87)
(42)
–
69
–
–
140
(139)
30
(3)
(32)
2012
£m
147
204
(450)
(99)
–
(99)
2012
net
£m
(36)
(34)
–
71
–
1
147
(142)
(99)
5
(87)
History of experience gains and losses
Difference between the expected and actual return on scheme assets
– amount (£m)
– percentage of scheme assets
Experience gains and losses on scheme liabilities
– amount (£m)
– percentage of scheme liabilities
Total amount included in other comprehensive income
– amount (£m)
– percentage of scheme liabilities
2013
2012
2011
2010
2009
152)
4.7%
147
4.9% 0.1%
4
236
8.8%
(203)
8.6%
(9)
0.3%
30
0.9%
204
6.6% 2.4%
67
(15)
0.5%
5
0.2%
(99)
3.2% 0.3%
9
(37)
1.3%
(231)
9.4%
Associated British Foods Annual Report and Accounts 2013
108
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
|
N
o
t
e
s
f
o
r
m
n
g
p
a
r
t
o
f
i
t
h
e
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
13. Deferred tax assets and liabilities
At 17 September 2011
Amount charged/(credited) to the income statement
Amount charged/(credited) to other comprehensive income
Effect of change in tax rate on income statement
Effect of movements in foreign exchange
At 15 September 2012
Amount charged/(credited) to the income statement
Amount charged/(credited) to other comprehensive income
Effect of change in tax rate on income statement
Effect of movements in foreign exchange
At 14 September 2013
Property,
plant and
equipment
£m
204
(13)
–
(3)
(9)
179
(21)
–
(12)
(2)
144
Intangible
assets
£m
115
(15)
–
(1)
(4)
95
2
–
(2)
(3)
92
Employee
benefits
£m
(15)
8
(21)
–
2
(26)
6
5
–
–
(15)
Financial
assets and
liabilities
£m
1
(1)
(4)
–
–
(4)
–
2
–
–
(2)
Other
temporary
differences
£m
44
2
(3)
–
(10)
33
(12)
(2)
(3)
(3)
13
Tax value of
carry-forward
losses
£m
(95)
(4)
–
(5)
4
(100)
17
–
(2)
4
(81)
Total
£m
254
(23)
(28)
(9)
(17)
177
(8)
5
(19)
(4)
151
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for
financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
2013
£m
(273)
424
151
2012
£m
(189)
366
177
The recoverability of deferred tax assets is supported by the expected level of future profits in the countries concerned. Other
deferred tax assets totalling £82m (2012 – £45m) have not been recognised on the basis that their future economic benefit
is uncertain.
In addition, there are temporary differences of £2,514m (2012 – £2,098m) relating to investments in subsidiaries. No deferred
tax has been provided in respect of these differences, since the timing of the reversals can be controlled and it is probable that
the temporary differences will not reverse in the future.
Associated British Foods Annual Report and Accounts 2013
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14. Trade and other receivables
Non-current – other receivables
Loans and receivables
Other non-current investments
Current – trade and other receivables
Trade receivables
Other receivables
Accrued income
Prepayments and other non-financial receivables
2013
£m
144
4
148
1,033
126
24
1,183
159
1,342
2012
£m
147
4
151
980
138
19
1,137
99
1,236
The directors consider that the carrying amount of receivables approximates fair value.
For details of credit risk exposure on trade and other receivables, see note 24.
Trade and other receivables include £15m (2012 – £16m) in respect of finance lease receivables, with £12m in non-current loans
and receivables and £3m in current other receivables (2012 – £13m in non-current loans and receivables and £3m in current other
receivables). Minimum lease payments receivable are £4m within one year and £12m between one and five years (2012 – £3m
within one year, £13m between one and five years).
The finance lease receivables relate to property, plant and equipment leased to a joint venture of the group (see note 27).
15. Inventories
Raw materials and consumables
Work in progress
Finished goods and goods held for resale
Write down of inventories
2013
£m
348
29
1,204
1,581
(78)
2012
£m
378
38
1,084
1,500
(66)
Associated British Foods Annual Report and Accounts 2013
110
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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fi
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a
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c
i
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s
t
a
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e
m
e
n
t
s
16. Cash and cash equivalents
Cash
Cash at bank and in hand
Cash equivalents
Cash and cash equivalents
Reconciliation to the cash flow statement
Bank overdrafts
Cash and cash equivalents in the cash flow statement
Note
24
17
2013
£m
231
131
362
(119)
243
2012
£m
233
158
391
(146)
245
Cash at bank and in hand generally earns interest at rates based on the daily bank deposit rate.
Cash equivalents generally comprise:
(i)
deposits placed on money markets for periods up to three months which earn interest at a short-term deposit rate; and
(ii) funds invested with fund managers that have a maturity of less than or equal to three months and are at fixed rates.
The carrying amount of cash and cash equivalents approximates fair value.
17. Loans and overdrafts
Current loans and overdrafts
Secured redeemable debenture stock
Secured loans
Unsecured loans and overdrafts
Non-current loans
Secured loans
Unsecured loans
Finance leases
103/4% secured redeemable debenture stock
Secured loans
– USD floating rate
– USD fixed rate
– EUR floating rate
– RMB floating rate
– Other floating rate
Unsecured loans and overdrafts
– Bank overdrafts
– GBP floating rate
– GBP fixed rate
– USD floating rate
– USD fixed rate
– EUR floating rate
– EUR fixed rate
– RMB floating rate
– RMB fixed rate
– Other floating rate
– Other fixed rate
Finance leases (fixed rate)
Note
25
24
Note
16
2013
£m
–
51
343
394
44
716
12
772
1,166
2013
£m
–
9
1
21
–
64
119
123
160
4
531
34
17
57
7
5
2
12
1,166
2012
£m
150
23
365
538
69
833
12
914
1,452
2012
£m
150
–
–
–
11
81
146
122
160
1
597
32
17
111
6
5
1
12
1,452
Secured loans comprise amounts borrowed from commercial banks and are secured by floating charges over the assets of
subsidiaries. Bank overdrafts generally bear interest at floating rates.
Associated British Foods Annual Report and Accounts 2013
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18. Trade and other payables
Trade payables
Accruals
Deferred income and other non-financial payables
For payables with a remaining life of less than one year, carrying amount is deemed to reflect the fair value.
19. Provisions
At 15 September 2012
Created
Unwinding of discount
Utilised
Released
Effect of movements in foreign exchange
At 14 September 2013
Current
Non-current
Restructuring
£m
20
21
–
(6)
–
–
35
Deferred
consideration
£m
80
–
1
(71)
(7)
–
3
21
14
35
1
2
3
2013
£m
903
753
1,656
225
1,881
Other
£m
36
15
–
(5)
(6)
(1)
39
25
14
39
2012
£m
824
681
1,505
247
1,752
Total
£m
136
36
1
(82)
(13)
(1)
77
47
30
77
Provisions were all financial liabilities in both years (see note 24).
Restructuring
Restructuring provisions relate to the cash costs, including redundancy, associated with the group’s announced reorganisation plans,
of which a majority will be utilised in 2013/14.
Deferred consideration
Deferred consideration comprises estimates of amounts due to the previous owners of businesses acquired by the group which are
often linked to performance or other conditions.
Other
Other provisions mainly comprise litigation claims and warranty claims arising from the sale and closure of businesses. The extent
and timing of the utilisation of these provisions is more uncertain given the nature of the claims and the period of the warranties.
20. Share capital and reserves
Share capital
Issued and fully paid
At 15 September 2012 and 14 September 2013
Ordinary
shares of
515⁄ 22p
each
000
Nominal
value
£m
791,674
45
At 14 September 2013, the Company’s issued share capital comprised 791,674,183 ordinary shares of 515⁄ 22p each, carrying one vote
per share.
Other reserves
£173m of other reserves arose from the cancellation of share premium account by the Company in 1993. The remaining £2m arose
in 2010 as a transfer to capital redemption reserve following redemption of two million £1 deferred shares at par. Both are
non-distributable.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations, as well as from the translation of liabilities that hedge the group’s net investment in foreign subsidiaries.
Hedging reserve
The hedging reserve comprises all changes in the value of derivatives to the extent that they are effective cash flow hedges, net of
amounts recycled from the hedging reserve on occurrence of the hedged transaction or when the hedged transaction is no longer
expected to occur.
Associated British Foods Annual Report and Accounts 2013
112
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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21. Acquisitions and disposals
2013
During 2013, the group completed no new business combinations. Cash flow on purchase of subsidiaries, joint ventures and
associates of £75m comprised £71m of deferred consideration in respect of previous business combinations, a £2m investment
in a joint venture and a £2m adjustment to goodwill for a previous acquisition. Goodwill and deferred consideration were both
reduced by £7m in respect of deferred consideration for previous acquisitions no longer payable.
Loss on sale and closure of businesses of £128m comprised £113m for disposals and closures in the Ingredients segment and
£15m for the loss on disposal of the sugar business in Chifeng, north China in September 2013, where the regional government
had announced its intention to redevelop the area. Included within the amount charged in the Ingredients segment is a loss of £26m
in respect of the disposal of our US whey protein operation, which was completed in August 2013. Cash consideration for the US
disposal was £20m, tangible assets disposed amounted to £8m and goodwill disposed was £27m. Provisions made were £4m
and foreign exchange differences recycled from equity were £7m. A charge of £72m was made to write down the carrying value of
certain Ingredients assets in China and to provide for restructuring costs as a result of uneconomic market conditions, and a charge
of £13m was also made to write down the value of yeast plants in India as a result of increasingly strict regulatory requirements for
waste discharge. Cash flow on sale of subsidiaries, joint ventures and associates of £35m comprised £20m in respect of the US
whey protein business and £15m of deferred consideration received for previous disposals.
2012
During 2012, the group acquired Elephant Atta, the UK’s leading ethnic flour brand, for a consideration of £34m. Additionally, a
number of smaller acquisitions were made with a total cash consideration of £3m and deferred consideration payable on prior year
acquisitions was increased by £9m. Total consideration therefore amounted to £46m. Net identifiable assets and liabilities acquired
were £38m, comprising non-operating intangibles of £36m, inventory of £3m, cash of £1m, trade payables of £1m and short-term
borrowings of £1m. Goodwill arising was £8m.
Cash flow on purchase of subsidiaries, joint ventures and associates of £45m comprises £37m cash consideration, less £1m cash
acquired, and a £9m investment in joint ventures.
Loss on sale and closure of businesses of £9m comprised a £15m non-cash charge for the write-off of Illovo’s investment in
pre-project expenditure in Mali (Sugar and Europe & Africa segments), offset by a £9m credit for recognition of deferred profit on the
disposal of the group’s Polish sugar operations in November 2009 (Sugar and Europe & Africa segments) together with other small
charges totalling £3m. Cash flow on sale of subsidiaries, joint ventures and associates of £2m in the cash flow statement comprises
receipts of deferred consideration in respect of previous business disposals.
22. Share-based payments
The group had the following equity-settled share-based payment plans in operation during the period:
Associated British Foods Executive Share Incentive Plan 2003 (‘the Share Incentive Plan’)
The Share Incentive Plan was approved and adopted by the Company at the annual general meeting held on 5 December 2003.
It takes the form of conditional allocations of shares which will be released if, and to the extent that, certain performance targets
are satisfied over a three-year performance period.
Further information regarding the operation of the above plans can be found in the Remuneration report on pages 62 to 75.
Details of the group’s equity-settled share-based payment plans are as follows:
2013
2012
Balance
outstanding at
the beginning
of the year
5,175,939
5,373,360
Granted/
awarded
2,067,195
1,944,957
Vested
(1,273,950)
(1,046,375)
Expired/
lapsed
(955,719)
(1,096,003)
Balance
outstanding
at the end
of the year
5,013,465
5,175,939
Ordinary shares subject to allocation under the Share Incentive Plan are held in a separate Employee Share Ownership Plan Trust.
The Trust is funded by the Company. Voting rights attached to shares held by the Trust are exercisable by the trustee, who is entitled
to consider any recommendation made by a committee of the Company. At 14 September 2013 the Trust held 1,995,073 (2012 –
2,769,023) ordinary shares of the Company. The market value of these shares at the year end was £36m (2012 – £35m). The Trust
has waived its right to dividends. Movements in the year were releases under the Share Incentive Plan of 1,273,950 and purchases of
500,000 (2012 – releases under the Share Incentive Plan of 1,046,375).
Fair values
The weighted average fair value of grants for the Share Incentive Plan was determined by taking the market price of the shares at
the time of grant and discounting for the fact that dividends are not paid during the vesting period. The weighted average fair value
of the shares awarded under the Share Incentive Plan during the year was 1,345 pence (2012 – 1,022 pence) and the weighted
average share price was 1,446 pence (2012 – 1,099 pence). The dividend yield used was 2.5%.
Associated British Foods Annual Report and Accounts 2013
113
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23. Analysis of net debt
Cash at bank and in hand, cash equivalents and overdrafts
Short-term borrowings
Loans over one year
At
15 September
2012
£m
245
(392)
(914)
(1,061)
Cash flow
£m
(7)
258
23
274
Non-cash
items
£m
–
(135)
135
–
Exchange
adjustments
£m
5
(6)
(16)
(17)
At
14 September
2013
£m
243
(275)
(772)
(804)
Cash and cash equivalents comprise cash balances, call deposits and investments with original maturities of three months or less.
Bank overdrafts that are repayable on demand of £119m are included as a component of cash and cash equivalents for the purpose
of the cash flow statement. Non-cash movements previously shown net within cash flow have been shown separately.
24. Financial instruments
a) Carrying amount and fair values of financial assets and liabilities
Financial assets
Cash and cash equivalents
Loans and receivables:
Trade and other receivables
Other non-current receivables (fair value 2013 – £143m; 2012 – £147m)
At fair value through profit or loss:
Derivative assets not designated in a cash flow hedging relationship:
– currency derivatives
– commodity derivatives
Designated net investment hedging relationships:
Derivative assets designated as net investment hedging instruments:
– currency derivatives
Designated cash flow hedging relationships:
Derivative assets designated and effective as cash flow hedging instruments:
– currency derivatives
– commodity derivatives
Total financial assets
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables
Secured redeemable debenture stock
Secured loans
Unsecured loans and overdrafts (fair value 2013 – £1,153m; 2012 – £1,332m)
Finance leases (fair value 2013 – £10m; 2012 – £10m)
Provisions
At fair value through profit or loss:
Derivative liabilities not designated in a cash flow hedging relationship:
– currency derivatives
– commodity derivatives
Designated cash flow hedging relationships:
Derivative liabilities designated and effective as cash flow hedging instruments:
– currency derivatives
– commodity derivatives
Total financial liabilities
Net financial liabilities
Except where stated, carrying amount is equal to fair value.
2013
£m
362
1,183
148
1
–
6
11
9
1,720
(1,656)
–
(95)
(1,059)
(12)
(77)
2012
£m
391
1,137
151
2
8
–
17
6
1,712
(1,505)
(150)
(92)
(1,198)
(12)
(136)
(4)
–
(4)
(8)
(33)
(1)
(2,937)
(1,217)
(35)
(3)
(3,143)
(1,431)
Associated British Foods Annual Report and Accounts 2013
114
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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24. Financial instruments continued
The methods and assumptions used to estimate fair values of financial assets and liabilities are as follows:
Financial asset/liability
Cash and cash equivalents
Trade receivables, other receivables and accrued income
Trade payables, other payables and accruals
Other non-current investments (recorded within other
non-current receivables)
Other long-term receivables
Loans, overdrafts and debenture stock
Finance leases
Derivatives
Provisions
Fair value determination
Fair values have been stated at book values due to short maturities or
otherwise immediate or short-term access and realisability.
These comprise minority shareholdings held primarily in privately owned,
unquoted companies, where there is no active market available to value
them. Where the fair value of the equity instruments cannot be reliably
measured, they are recorded at cost.
Where shareholdings are held in publicly quoted companies, bid price is
used to estimate fair value.
Fair values have been estimated by discounting expected future cash flows.
Fair values are typically determined either by reference to third-party
valuations (usually from a bank), or by reference to readily observable
market prices.
The group’s derivatives primarily cover a period of no more than 12 months
from the balance sheet date, and information derived from an active market
is almost always available to assist with the valuation of derivatives.
These are measured at the directors’ best estimate of the expenditure
required to settle the obligation at the balance sheet date and are
discounted to present value where the effect is material. Consequently,
fair value is equivalent to book value.
Valuation of financial instruments carried at fair value
Financial instruments carried at fair value in the balance sheet comprise other non-current investments and derivatives. The group
classifies these financial instruments using a fair value hierarchy that reflects the relative significance of both objective evidence and
subjective judgments on the inputs used in making the fair value measurements:
• Level 1: financial instruments are valued using observable inputs that reflect unadjusted quoted market prices in an active
market for identical instruments. An example of an item in this category is a widely traded equity instrument with a normal
quoted market price.
• Level 2: financial instruments are valued using techniques based on observable inputs, either directly (i.e. market prices and
rates) or indirectly (i.e. derived from market prices and rates). An example of an item in this category is a currency derivative,
where forward exchange rates and yield curve data which are observable in the market are used to derive fair value.
• Level 3: financial instruments are valued using techniques involving significant unobservable inputs.
b) Derivatives
All derivatives are classified as current on the face of the balance sheet. The table below analyses the carrying amount of derivatives
and their contractual/notional amounts, together with an analysis of derivatives by the level in the fair value hierarchy into which their
fair value measurement method is categorised.
Financial assets
Currency derivatives
Commodity derivatives
Financial liabilities
Currency derivatives
Commodity derivatives
2013
2012
Contractual/
notional
amounts
£m
783
264
1,047
1,450
22
1,472
Level 1
£m
Level 2
£m
Total
£m
–
6
6
–
–
–
18
3
21
(37)
(1)
(38)
18
9
27
(37)
(1)
(38)
Contractual/
notional
amounts
£m
536
110
646
1,396
70
1,466
Level 1
£m
Level 2
£m
–
10
10
–
(8)
(8)
19
4
23
(39)
(3)
(42)
Total
£m
19
14
33
(39)
(11)
(50)
Associated British Foods Annual Report and Accounts 2013
115
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24. Financial instruments continued
c) Cash flow hedging reserve
The following table identifies the movements in the cash flow hedging reserve during the year, and the periods in which the cash
flows are expected to occur. The periods in which the cash flows are expected to impact profit or loss are materially the same.
Opening balance
Losses/(gains) recognised in the hedging reserve
Amount removed from the hedging reserve and
included in the income statement due to settlement
of contracts:
– revenue
– cost of sales
Amount removed from the hedging reserve and
included in a non-financial asset due to settlement
of contracts:
– property, plant and equipment
– inventory
Deferred tax
Closing balance
Cash flows are expected to occur:
– within six months
– between six months and one year
– between one and two years
Currency
derivatives
£m
14
26
2013
Commodity
derivatives
£m
–
(5)
Total
£m
14
21
Currency
derivatives
£m
(4)
(38)
2012
Commodity
derivatives
£m
1
19
1
(2)
–
(22)
(1)
16
15
3
(2)
16
–
(1)
–
(3)
3
(6)
(6)
–
–
(6)
1
(3)
–
(25)
2
10
9
3
(2)
10
22
–
(1)
39
(4)
14
10
4
–
14
–
(15)
–
(5)
–
–
–
–
–
–
Total
£m
(3)
(19)
22
(15)
(1)
34
(4)
14
10
4
–
14
Of the closing balance of £10m, £13m is attributable to equity shareholders and £(3)m to non-controlling interests (2012 – £17m
attributable to equity shareholders and £(3)m to non-controlling interests). Net movements in the year of £(4)m (2012 – £17m) are
wholly attributable to equity shareholders in both years.
d) Financial risk identification and management
The group is exposed to the following financial risks from its use of financial instruments:
• market risk;
• credit risk; and
• liquidity risk.
The group’s financial risk management process seeks to enable the early identification, evaluation and effective management of key
risks facing the business. Risk management policies and systems have been established and are reviewed regularly to reflect changes
in market conditions and the group’s activities. The group, through its standards and procedures, aims to develop a disciplined and
constructive control environment in which all employees understand their roles and obligations.
The group sources and sells products and manufactures goods in many locations around the world. These operations expose the
group to potentially significant price volatility in the financial and commodity markets. Trading and risk management teams have
been established in the group’s major businesses to manage this exposure by entering into a range of products, including physical
and financial forward contracts, futures and, where appropriate, options. These teams work closely with group Treasury and report
regularly to executive management.
Treasury operations and commodity procurement are conducted within a clearly defined framework of board-approved policies
and guidelines to manage the group’s financial and commodity risks. Treasury works closely with the group’s procurement teams to
manage commodity risks. Treasury policy seeks to ensure that adequate financial resources are available to the group at all times, for
the management and development of the group’s businesses, whilst effectively managing its market risk and credit risk. The group’s
risk management policy explicitly forbids the use of financial or commodity derivatives (outside its risk management framework of
mitigating financial and commodity risks) for speculative purposes.
e) Foreign currency translation
The group presents its financial statements in sterling. As a result of its worldwide operations, the group is exposed to foreign
currency translation risk where overseas operations have a functional currency other than sterling. Changes in foreign currency
exchange rates impact the translation into sterling of both the income statement and net assets of these foreign operations.
Where appropriate, the group finances its operations by borrowing locally in the functional currency of its operations. This reduces
net asset values reported in functional currencies other than sterling, thereby reducing the economic exposure to fluctuations in
foreign currency exchange rates on translation.
Associated British Foods Annual Report and Accounts 2013
116
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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o
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p
a
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t
o
f
i
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e
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c
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24. Financial instruments continued
The group also finances its operations by obtaining funding at group level through external borrowings and, where they are not in
sterling, these borrowings may be designated as net investment hedges. This enables gains and losses arising on retranslation of
these foreign currency borrowings to be charged to other comprehensive income, providing a partial offset in equity against the
gains and losses arising on translation of the net assets of foreign operations.
The group does not actively hedge the translation impact of foreign exchange rate movements on the income statement (other than
via the partial economic hedge arising from the servicing costs on non-sterling borrowings), nor does it generally use derivatives to
hedge its net investments in foreign operations.
The group designates certain of its intercompany loan arrangements as quasi-equity for the purposes of IAS 21. The effect of the
designation is that any foreign exchange volatility arising within the borrowing entity and/or the lending entity is accounted for
directly within other comprehensive income.
The group has foreign currency borrowings that have been designated as hedges of its net investment in foreign operations in euros
and US dollars. The value of these financial liabilities used as hedging instruments at the balance sheet date was:
Euro
US dollar
2013
£m
17
532
549
2012
£m
17
597
614
A net foreign exchange loss of £26m (2012 – gain of £11m) on retranslation of these loans has been taken to the translation reserve
on consolidation. Of this balance a loss of £19m was attributable to equity shareholders and a loss of £7m to non-controlling
interests (2012 – £12m gain to equity shareholders and £1m loss to non-controlling interests). The group also held currency forwards
that have been designated as hedges of its net investment in Australian dollars, whose fair value of £6m (2012 – £nil) has been
credited to the translation reserve.
f) Market risk
Market risk is the risk of movements in the fair value of future cash flows of a financial instrument or forecast transaction as
underlying market prices change. The group is exposed to changes in the market price of commodities, interest rates and foreign
exchange rates. These risks are known as ‘transaction’ (or recognised) exposures and ‘economic’ (or forecast) exposures.
(i) Commodity price risk
Commodity price risk arises from the procurement of raw materials and the consequent exposure to changes in market prices.
The group purchases a wide range of commodities in the ordinary course of business. Exposure to changes in the market price of
certain of these commodities including wheat, edible oils, soya beans, meat, sugar raws, cocoa, rice, tea and energy is managed
through the use of forward physical contracts and hedging instruments, including futures and options contracts, primarily to convert
floating or indexed prices to fixed prices. The use of such contracts to hedge commodity exposures is governed by the group’s risk
management policies and is continually monitored by group Treasury. Commodity derivatives also provide a way to meet customers’
pricing requirements whilst achieving a price structure consistent with the group’s overall pricing strategy.
Some of the group’s commodity derivatives are treated as ‘own use’ contracts, since they are both entered into, and continue to
be held, for the purposes of the group’s ordinary operations, and the group takes physical delivery of the commodity concerned.
‘Own use’ contracts do not require accounting entries until the commodity purchase actually crystallises. Certain other commodity
derivatives are accounted for as cash flow hedges, but some are not eligible for treatment as ‘own use’ contracts and are not
contracts for which the strict requirements of hedge accounting can be satisfied. This occurs typically where the group does not
take physical delivery of the commodity concerned. Such commodity derivatives are used only where the business believes they
provide an economic hedge of an underlying exposure. These instruments are classified as held for trading and are marked to
market through the income statement.
The majority of the group’s forward physical contracts and commodity derivatives have original maturities of less than one year.
The group does not have significant sensitivities in respect of the accounting for its on-balance sheet commodity contracts.
(ii) Interest rate risk
Interest rate risk comprises two primary elements:
• interest price risk results from financial instruments bearing fixed interest rates. Changes in floating interest rates therefore
affect the fair value of these fixed rate financial instruments; and
• interest cash flow risk results from financial instruments bearing floating rates. Changes in floating interest rates affect cash
flows on interest receivable or payable.
Associated British Foods Annual Report and Accounts 2013
117
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24. Financial instruments continued
The group’s policy is to maintain floating rate debt for a significant proportion of its bank finance, although it periodically assesses
its position with respect to interest price and cash flow risk.
At 14 September 2013, £730m (63%) (2012 – £943m and 65%) of total debt was subject to fixed rates of interest. Following the
redemption in July 2013 of the £150m secured redeemable debenture stock, the majority of the group’s fixed rate debt is the US
private placement loans of £710m (2012 – £774m).
Floating rate debt comprises bank borrowings bearing interest rates fixed in advance, for various time periods up to 12 months, by
reference to official market rates (e.g. LIBOR).
The group does not have significant sensitivities to the impact of interest rates on derivative valuations, nor to the impact of interest
rates on floating rate borrowings.
(iii) Foreign currency risk
The group conducts business worldwide and consequently in many foreign currencies. As a result, it is exposed to movements
in foreign currency exchange rates which affect the group’s transaction costs. The group also publishes its financial statements in
sterling and is therefore exposed to movements in foreign exchange rates on the translation of the results and underlying net assets
of its foreign operations into sterling.
Translation risk is discussed in section e) above.
Transaction risk
Currency transaction exposure occurs where a business makes sales and purchases in a currency other than its functional currency.
It also arises where monetary assets and liabilities of a business are not denominated in its functional currency, and where dividends
or surplus funds are remitted from overseas. The group’s policy is to match transaction exposures wherever possible, and to hedge
actual exposures and firm commitments as soon as they occur by using forward foreign currency contracts. All foreign currency
instruments contracted with non-group entities to manage transaction exposures are undertaken by group Treasury or, where
foreign currency controls restrict group Treasury acting on behalf of subsidiaries, under its guidance. Identification of transaction
exposures is the responsibility of each business.
The group uses derivatives (principally forward foreign currency contracts and time options) to hedge its exposure to movements in
exchange rates on its foreign currency trade receivables and payables. The group does not seek formal fair value hedge accounting
for such transaction hedges. Instead, such derivatives are classified as held for trading and marked to market through the income
statement. This offsets the income statement impact of the retranslation of the foreign currency trade receivables and payables.
Economic (forecast) risk
The group also uses forward foreign currency contracts to hedge its exposure to movements in exchange rates on its highly
probable forecast foreign currency sales and purchases on a rolling 12-month basis. The group does not formally define the
proportion of highly probable forecast sales and purchases to hedge, but agrees an appropriate percentage on an individual basis
with each business by reference to the group’s risk management policies and prevailing market conditions. The group documents
currency derivatives used to hedge its forecast transactions as cash flow hedges. To the extent that cash flow hedges are effective,
gains and losses are deferred in equity until the forecast transaction occurs, at which point the gains and losses are recycled either
to the income statement or to the non-financial asset acquired.
The majority of the group’s currency derivatives have original maturities of less than one year.
The group’s most significant currency transaction exposures are:
• sugar prices in British Sugar to movements in the sterling/euro exchange rate;
• sugar prices in Illovo to movements in the South African rand/US dollar/euro exchange rates; and
• sourcing for Primark – costs are denominated in a number of currencies, predominantly sterling, euros and US dollars.
Elsewhere, a number of businesses make sales and purchase a variety of raw materials in foreign currencies (primarily US dollars
and euros), giving rise to transaction exposures. In all other material respects, businesses tend to operate in their functional
currencies and, as a result, further transaction exposure to foreign currency exchange rate movements is modest.
Associated British Foods Annual Report and Accounts 2013
118
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
24. Financial instruments continued
The analysis of the group’s foreign currency exposure to financial assets and liabilities by currency of denomination is as follows:
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Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Unsecured loans and overdrafts
Currency derivatives
Gross amounts receivable
Gross amounts payable
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Unsecured loans and overdrafts
Currency derivatives
Gross amounts receivable
Gross amounts payable
291
(397)
34
(87)
Sterling
£m
US dollar
£m
Sterling
£m
US dollar
£m
2013
Euro
£m
7
–
7
(5)
(11)
(16)
41
(47)
(6)
(15)
3
–
3
(3)
(4)
(7)
50
(66)
(16)
(20)
13
25
38
(209)
(533)
(742)
1,122
(127)
995
4
46
50
(27)
(17)
(44)
134
(537)
(403)
2012
Euro
£m
3
50
53
(22)
(19)
(41)
38
(686)
(648)
20
27
47
(142)
(598)
(740)
882
(151)
731
38
(636)
Other
£m
6
12
18
(10)
(2)
(12)
131
(103)
28
Total
£m
30
83
113
(251)
(563)
(814)
1,428
(814)
614
Other
£m
8
11
19
(10)
–
(10)
68
(28)
40
49
Total
£m
34
88
122
(177)
(621)
(798)
1,038
(931)
107
(569)
2012
1.62
1.23
13.35
10.26
1.54
The following significant exchange rates applied during the year:
US dollar
Euro
Rand
Renminbi
Australian dollar
Average rate
Closing rate
2013
1.56
1.19
14.37
9.68
1.56
2012
1.57
1.21
12.67
9.98
1.53
2013
1.59
1.19
15.76
9.71
1.72
Sensitivity analysis
The following sensitivity analysis illustrates the impact that a 10% strengthening of the group’s operating currencies against local
functional currencies would have had on profit and equity. The analysis covers currency translation exposures at year end on
businesses’ financial assets and liabilities that are not denominated in the functional currencies of those businesses. A similar but
opposite impact would be felt on both profit and equity if the group’s main operating currencies weakened against local functional
currencies by a similar amount.
The exposure to foreign exchange gains and losses on translating the financial statements of subsidiaries into sterling is not
included in this sensitivity analysis, as there is no impact on the income statement, and the gains and losses are recorded directly
in the translation reserve in equity (see below for a separate sensitivity). This sensitivity is presented before taxation and
non-controlling interests.
Associated British Foods Annual Report and Accounts 2013
119
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24. Financial instruments continued
10% strengthening against other currencies of
Sterling
US dollar
Euro
Other
2013
impact on
profit for
the year
£m
(1)
(5)
1
1
2013
impact on
total equity
£m
(1)
44
(54)
(3)
2012
impact on
profit for
the year
£m
–
3
2
1
2012
impact on
total equity
£m
(2)
21
(71)
3
A second sensitivity analysis calculates the impact on the group’s profit before tax if the average rates used to translate the results
of the group’s foreign operations into sterling were adjusted to show a 10% strengthening of sterling. A similar but opposite impact
would be felt on profit before tax if sterling weakened against the other currencies by a similar amount.
10% strengthening of sterling against
US dollar
Euro
Rand
Renminbi
Australian dollar
2013
impact on
profit for
the year
£m
(6)
(18)
(2)
16
1
2012
impact on
profit for
the year
£m
(4)
(13)
1
3
13
g) Credit risk
Credit risk is the risk that counterparties to financial instruments do not perform according to the terms of the contract or instrument.
The group’s businesses are exposed to counterparty credit risk when dealing with customers, and from certain financing activities.
The immediate credit exposure of financial instruments is represented by those financial instruments that have a net positive fair
value by counterparty at 14 September 2013. The group considers its maximum exposure to credit risk to be:
Cash and cash equivalents
Loans and receivables (see note 24a)
Financial assets at fair value through profit and loss
– derivative assets
Designated net investment hedging relationships
– derivative assets
Designated cash flow hedging relationships
– derivative assets
2013
£m
362
1,331
1
6
20
1,720
2012
£m
391
1,288
10
–
23
1,712
The majority of cash balances and short-term deposits are held with strong investment-grade banks or financial institutions.
The group uses market knowledge, changes in credit ratings and other techniques to identify significant changes to the financial
profile of its counterparties.
Trade and other receivables
Concentrations of credit risk are limited as a result of the group’s large and diverse customer base. The group has an established
credit policy applied by each business under which the credit status of each new customer is reviewed before credit is advanced.
This includes external credit evaluations where possible and in some cases bank references. Credit limits are established for all
significant or high-risk customers, which represent the maximum amount permitted to be outstanding without requiring additional
approval from the appropriate level of management. Outstanding debts are continually monitored by each business. Credit limits
are reviewed on a regular basis, and at least annually. Customers that fail to meet the group’s benchmark creditworthiness may
only transact with the group on a prepayment basis. Aggregate exposures are monitored at group level.
Many of the group’s customers have been transacting with the group for many years and the incidence of bad debts has been low.
Where appropriate, goods are sold subject to retention of title so that, in the event of non-payment, the group may have a secured
claim. The group does not typically require collateral in respect of trade and other receivables.
The group provides for impairment of financial assets including trade and other receivables based on known events, and makes a
collective provision for losses yet to be identified, based on historical data. The majority of the provision comprises specific amounts.
Associated British Foods Annual Report and Accounts 2013
120
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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24. Financial instruments continued
The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region of origin was:
UK
Europe & Africa
The Americas
Asia Pacific
Trade receivables can be analysed as follows:
Not overdue
Up to 1 month past due
Between 1 and 2 months past due
Between 2 and 3 months past due
More than 3 months past due
Provision for doubtful debts
2013
£m
460
234
149
340
1,183
2013
£m
894
126
15
6
27
(35)
1,033
2012
£m
405
241
141
350
1,137
2012
£m
850
107
22
6
32
(37)
980
Based on past experience, the group believes that no impairment allowance is necessary in respect of trade receivables that are not
past due.
Trade and other receivables are stated net of the following provision for irrecoverable amounts:
Opening balance
Amounts provided for during the year
Amounts released during the year
Amounts utilised during the year
Effect of movements in foreign exchange
Closing balance
2013
£m
37
7
(5)
(3)
(1)
35
2012
£m
38
9
(3)
(6)
(1)
37
No trade and other receivables (2012 – none) were written off directly to the income statement in the year.
The directors consider that the carrying amount of trade and other receivables approximates fair value.
Cash and cash equivalents
Banking relationships are generally limited to those banks that are members of the core relationship group. These banks are selected
for their credit status, global reach and their ability to meet the businesses’ day-to-day banking requirements. The credit ratings of
these institutions are monitored on a continuing basis. In locations where the core relationship banking group cannot be used,
operating procedures including choice of bank, opening of bank accounts and repatriation of funds must be agreed with group
Treasury. The group has not recorded impairments against cash or cash equivalents, nor have any recoverability issues been
identified with such balances. Such items are typically recoverable on demand or in line with normal banking arrangements.
Other financial assets
Other non-current investments are typically equity investments with no fixed maturity or recoverability date. No impairment issues
have been identified with respect to other non-current investments.
Since derivative assets are recorded at fair value, either through profit and loss for those not in a designated cash flow hedging
relationship, or otherwise through the hedging reserve, no impairment issues have been identified.
Associated British Foods Annual Report and Accounts 2013
121
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24. Financial instruments continued
h) Liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting its obligations associated with its financial liabilities as they
fall due. Group Treasury is responsible for monitoring and managing liquidity and ensures that the group has sufficient headroom in
its committed facilities to meet unforeseen or abnormal requirements. The group also has access to uncommitted facilities to assist
with short-term funding requirements.
Available headroom is monitored via the use of detailed cash flow forecasts prepared by each business, which are reviewed at least
quarterly, or more often, as required. Actual results are compared to budget and forecast each period, and variances investigated and
explained. Particular focus is given to management of working capital.
Details of the group’s borrowing facilities are given in section i).
The following table analyses the contractual undiscounted cash flows relating to financial liabilities at the balance sheet date and
compares them to carrying amounts:
Non-derivative financial liabilities
Trade and other payables
Secured loans
Unsecured loans and overdrafts
Finance leases
Provisions
Derivative financial liabilities
– Currency derivatives (net payments)
– Commodity derivatives (net payments)
Total financial liabilities
Non-derivative financial liabilities
Trade and other payables
Secured redeemable debenture stock
Secured loans
Unsecured loans and overdrafts
Finance leases
Provisions
Derivative financial liabilities
– Currency derivatives (net payments)
– Commodity derivatives (net payments)
Total financial liabilities
Due within
6 months
£m
Note
Due
between
6 months
and 1 year
£m
Due
between
1 and 2
years
£m
18
17
17
25
19
(1,649)
(39)
(345)
(1)
(42)
(20)
(10)
(2,106)
(7)
(12)
(28)
–
(5)
(18)
(4)
(74)
–
(37)
(157)
(1)
(6)
–
(3)
(204)
Due within
6 months
£m
Note
Due
between
6 months
and 1 year
£m
Due
between
1 and 2
years
£m
18
17
17
17
25
19
(1,494)
(5)
(6)
(353)
(1)
(86)
(29)
(22)
(1,996)
(11)
(158)
(17)
(43)
–
(2)
(10)
(6)
(247)
–
–
(27)
(161)
(1)
(27)
–
(1)
(217)
2013
Due
between
2 and 5
years
£m
–
(7)
(165)
(2)
(24)
–
–
(198)
2012
Due
between
2 and 5
years
£m
–
–
(42)
(289)
(2)
(19)
–
–
(352)
Due after
5 years
£m
Contracted
amount
£m
Carrying
amount
£m
–
–
(557)
(38)
–
–
–
(595)
(1,656)
(95)
(1,252)
(42)
(77)
(38)
(17)
(3,177)
(1,656)
(95)
(1,059)
(12)
(77)
(37)
(1)
(2,937)
Due after
5 years
£m
Contracted
amount
£m
Carrying
amount
£m
–
–
–
(558)
(38)
(2)
–
–
(598)
(1,505)
(163)
(92)
(1,404)
(42)
(136)
(39)
(29)
(3,410)
(1,505)
(150)
(92)
(1,198)
(12)
(136)
(39)
(11)
(3,143)
The above tables do not include forecast data for liabilities which may be incurred in the future but which were not contracted at
14 September 2013.
The principal reasons for differences between carrying values and contractual undiscounted cash flows are coupon payments on the
secured redeemable debenture stock and other fixed rate debt to which the group is already committed, future interest payments
on the group’s finance leases, and cash flows on derivative financial instruments which are not aligned with their fair value.
Associated British Foods Annual Report and Accounts 2013
122
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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24. Financial instruments continued
i) Borrowing facilities
The group has substantial borrowing facilities available to it. The undrawn committed facilities available at 14 September 2013,
in respect of which all conditions precedent have been met, amounted to £1,364m (2012 – £1,384m):
£1.15bn syndicated facility
US private placement
British Sugar secured redeemable debenture stock
European Investment Bank
Illovo
Azucarera
Other
Facility
£m
1,150
710
–
120
228
149
1
2,358
Uncommitted facilities available at 14 September 2013 were:
Money market lines
Illovo
China banking
Other
Facility
£m
100
90
452
131
773
2013
Drawn
£m
–
710
–
120
130
34
–
994
2013
Drawn
£m
–
50
59
51
160
Undrawn
£m
1,150
–
–
–
98
115
1
1,364
Undrawn
£m
100
40
393
80
613
Facility
£m
1,150
774
150
120
202
156
7
2,559
Facility
£m
100
112
528
134
874
2012
Drawn
£m
–
774
150
120
97
32
2
1,175
2012
Drawn
£m
–
72
158
35
265
Undrawn
£m
1,150
–
–
–
105
124
5
1,384
Undrawn
£m
100
40
370
99
609
In addition to the above facilities there are also £406m (2012 – £253m) of undrawn and available credit lines for the purposes
of issuing letters of credit and guarantees in the normal course of business.
The group also has £12m (2012 – £12m) of finance lease liabilities which are not included in the tables above, but which are included
in the group’s loans and overdrafts in note 17.
The £1.15bn syndicated facility matures in July 2015. In addition to the bank debt, the Company has £710m of private placement
notes in issue to institutional investors in the US and Europe. At 14 September 2013, these had an average remaining duration of
5.6 years and an average fixed coupon of 5.3%. The other significant core committed debt facilities comprise a £120m EIB loan
(maturing 2015), as well as local committed facilities in Illovo and Azucarera.
Uncommitted bank borrowing facilities are normally reaffirmed by the banks annually, although they can theoretically be withdrawn
at any time.
Refer to note 9 for details of the group’s capital commitments and to note 26 for a summary of the group’s guarantees. An
assessment of the group’s current liquidity position is given in the Financial review on page 38.
Associated British Foods Annual Report and Accounts 2013
123
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24. Financial instruments continued
j) Capital management
The capital structure of the group is presented in the balance sheet. The statement of changes in equity provides details on equity
and note 17 provides details of loans and overdrafts. Short and medium-term funding requirements are provided by a variety of loan
and overdraft facilities, both committed and uncommitted, with a range of counterparties and maturities. Longer term funding is
sourced from a combination of these facilities, the private placement notes and committed syndicated loan facilities.
The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to enable
successful future development of the business. The board monitors return on capital by division and determines the overall level
of dividends payable to shareholders.
From time to time the trustee of the Employee Share Ownership Plan Trust purchases the Company’s shares in the market to
satisfy awards under the group’s long-term incentive plan. Once purchased, shares are not sold back into the market. The group
does not have a defined share buy-back plan.
There were no changes to the group’s approach to capital management during the year. Neither the Company nor any of its
subsidiaries are subject to externally imposed capital requirements.
25. Lease commitments
Operating leases
The group acts as a lessee, lessor and sub-lessor for land and buildings, and plant and machinery, under operating leases.
Sublease receipts of £7m (2012 – £7m) were recognised in the income statement in the period, the majority relating to operating
leases. The total of future minimum sublease receipts expected to be received is £66m (2012 – £43m).
Under the terms of the lease agreements, no contingent rents are payable.
The future minimum lease payments under operating leases are as follows:
Within one year
Between one and five years
After five years
Finance leases
Finance lease liabilities are payable as follows:
Within one year
Between one and five years
After five years
2013
£m
174
670
2,040
2,884
2012
£m
166
608
1,959
2,733
2013
minimum
lease
payments
£m
1
3
38
42
2013
interest
£m
1
2
27
30
2013
principal
£m
–
1
11
12
2012
minimum
lease
payments
£m
1
3
38
42
2012
interest
£m
1
2
27
30
2012
principal
£m
–
1
11
12
Associated British Foods Annual Report and Accounts 2013
124
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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26. Contingencies
Litigation and other proceedings against companies in the group are not considered material in the context of these financial
statements.
The group has adopted the amendments to IAS 39 in relation to financial guarantee contracts which apply for periods commencing
on or after 1 January 2006. Where group companies enter into financial guarantee contracts to guarantee the indebtedness of other
group companies, the group considers these to be insurance arrangements and has elected to account for them as such in
accordance with IFRS 4. In this respect, the guarantee contract is treated as a contingent liability until such time as it becomes
probable that the relevant group company issuing the guarantee will be required to make a payment under the guarantee.
As at 14 September 2013, group companies have provided guarantees in the ordinary course of business amounting to £777m
(2012 – £833m).
27. Related parties
The group has a controlling related party relationship with its parent company, Wittington Investments Limited, which is also its
ultimate parent company (see note 28). The group also has a related party relationship with its associates and joint ventures (see
note 28) and with its directors. In the course of normal operations, related party transactions entered into by the group have been
contracted on an arm’s length basis.
Material transactions and year end balances with related parties were as follows:
Charges to Wittington Investments Limited in respect of services provided by the Company
and its subsidiary undertakings
trustees of the Garfield Weston Foundation
Dividends paid by Associated British Foods and received in a beneficial capacity by:
(i)
(ii) directors of Wittington Investments Limited who are not trustees of the Foundation
(iii) directors of the Company who are not trustees of the Foundation and are not directors
of Wittington Investments Limited
(iv) a member of the Weston family employed within the Associated British Foods group
Sales to fellow subsidiary undertakings on normal trading terms
Sales to companies with common key management personnel on normal trading terms
Commissions paid to companies with common key management personnel on normal trading terms
Amounts due from a company with common key management personnel
Sales to joint ventures on normal trading terms
Sales to associates on normal trading terms
Purchases from joint ventures on normal trading terms
Purchases from associates on normal trading terms
Amounts due from joint ventures
Amounts due from associates
Amounts due to joint ventures
Amounts due to associates
Sub note
1
2
3
4
5
5
5
6
6
6
6
6
6
6
6
2013
£000
338
8,277
1,297
30
864
2
16,538
787
2,227
18,488
19,460
397,449
20,805
163,170
1,790
30,806
1,059
2012
£000
330
7,143
1,120
21
746
135
14,710
300
1,531
18,177
17,598
292,687
21,898
152,136
898
24,808
2,398
1. The Garfield Weston Foundation (‘the Foundation’) is an English charitable trust, established in 1958 by the late W Garfield Weston.
The Foundation has no direct interest in the Company, but as at 14 September 2013 was the beneficial owner of 683,073 shares
(2012 – 683,073 shares) in Wittington Investments Limited representing 79.2% (2012 – 79.2%) of that company’s issued share
capital and is, therefore, the Company’s ultimate controlling party. At 14 September 2013 trustees of the Foundation comprised
two children and two grandchildren of the late W Garfield Weston and five children of the late Garry H Weston.
2. Details of the directors are given on pages 44 and 45. Their interests, including family interests, in the Company and its subsidiary
undertakings are given on page 74. Key management personnel are considered to be the directors, and their remuneration is
disclosed within the Remuneration report on page 75.
3. A member of the Weston family who is employed by the group and is not a director of the Company or Wittington Investments
Limited and is not a trustee of the Foundation.
4. The fellow subsidiary undertakings are Fortnum and Mason plc and Heal & Son Limited.
5. The companies with common key management personnel are the George Weston Limited group, in Canada, and Selfridges
& Co Ltd.
6. Details of the group’s principal joint ventures and associates are set out in note 28.
Amounts due from joint ventures comprise £15m (2012 – £16m) of finance lease receivables (see note 14) and £130m (2012 – £126m)
of loan receivables. The remainder of the balance is trading balances. The loan receivables are all non-current (2012 – all non-current),
and all but £3m (2012 – £3m) of the finance lease receivables are non-current.
Associated British Foods Annual Report and Accounts 2013
125
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28. Group entities
Control of the group
The largest group in which the results of the Company are consolidated is that headed by Wittington Investments Limited, the
accounts of which are available at Companies House, Crown Way, Cardiff CF14 3UZ. It is the ultimate holding company, is
incorporated in Great Britain and is registered in England.
At 14 September 2013 Wittington Investments Limited together with its subsidiary, Howard Investments Limited, held 431,515,108
ordinary shares (2012 – 431,515,108) representing in aggregate 54.5% (2012 – 54.5%) of the total issued ordinary share capital of
Associated British Foods plc.
Significant subsidiaries
A list of the group’s significant subsidiaries is given below. The entire share capital of the companies listed is held within the group
except where percentages are shown. These percentages give the group’s ultimate interest and therefore allow for the situation
where subsidiaries are owned by partly owned intermediate subsidiaries.
Manufacturing activities
AB Agri Limited
AB Azucarera Iberia, S.L. Sociedad Unipersonal
AB Brasil Industria e comercio de Alimentos LTDA
AB Calsa S.A. de C.V.
AB Enzymes GmbH
AB Enzymes Oy
ABF Grain Products Limited
AB Food & Beverages Australia Pty Ltd
AB Food & Beverages Philippines, Inc.
AB Food & Beverages (Thailand) Limited
AB (Harbin) Food Ingredients Company Limited
AB Mauri (Canada) Limited
AB Mauri Food Inc.
AB Mauri Food, S.A.
AB Mauri India (Private) Limited
AB Mauri Italia S.p.A.
AB Mauri Malaysia Sdn. Bnd.
AB Mauri Vietnam Ltd (66%)
Abitec Corporation
ABNA Feed (Liaoning) Co., Ltd
ABNA (Shanghai) Feed Co., Ltd
AB World Foods Limited
ACH Food Companies, Inc.
Alimentos Capullo, S.de R.L.de C.V.
Anzchem Pty Limited
Bo Tian Sugar Industry Company Limited
British Sugar (Overseas) Limited
British Sugar plc
Cereform Limited
Compañia Argentina de Levaduras S.A.I.C
Food Investments Limited
Foods International S.A.S.
G. Costa and Company Limited
George Weston Foods Limited
George Weston Foods (NZ) Limited
Germain’s (UK) Limited
Guangxi Bo Hua Food Co., Ltd (71%)
Guangxi Boqing Food Co., Ltd (60%)
Guangxi Boxuan Food Co., Ltd (70%)
Harbin Mauri Yeast Co., Ltd (85%)
Country of
incorporation
UK
Spain
Brazil
Mexico
Germany
Finland
UK
Australia
Philippines
Thailand
China
Canada
US
Spain
India
Italy
Malaysia
Vietnam
US
China
China
UK
US
Mexico
Australia
China
UK
UK
UK
Argentina
UK
France
UK
Australia
New Zealand
UK
China
China
China
China
Manufacturing activities
Hebei Mauri Food Co., Ltd
Illovo Sugar Limited (51%)
Illovo Sugar (Malawi) Limited (39%)
Jacksons of Piccadilly Limited
Kilombero Sugar Company Limited (28%)
Maragra Acucar SARL (46%)
Mauri Fermentos II, SA (96%)
Mauri Maya Sanayi A.S.
Mauri Products Limited
Patak’s Foods Limited
PGP International, Inc.
Premier Nutrition Products Limited
R. Twining and Company Limited
Shanghai AB Food & Beverages Co., Ltd
SPI Pharma Inc.
The Billington Food Group Limited
The Jordans & Ryvita Company Limited
Twinings North America Inc.
Ubombo Sugar Limited (31%)
Wander AG
Zambia Sugar plc (42%)
Retailing activities
Lojas Primark Portugal-Exploracao, Gestao e
Administracao de Espacos Comerciais S.A.
Primark
Primark Austria Ltd & Co.KG
Primark Deutschland GmbH
Primark Mode Ltd & Co.KG
Primark Netherlands BV
Primark NV
Primark Stores Limited
Primark Tiendas S.L.U.
Country of
incorporation
China
South Africa
Malawi
UK
Tanzania
Mozambique
Portugal
Turkey
UK
UK
US
UK
UK
China
US
UK
UK
US
Swaziland
Switzerland
Zambia
Portugal
Republic of Ireland
Austria
Germany
Germany
Netherlands
Belgium
UK
Spain
Investment and other activities
AB Exploration Limited
A.B.F. Holdings Limited
ABF Investments plc
ABF Overseas Limited
ABF (UK) Limited
Talisman Guernsey Limited
UK
UK
UK
UK
UK
Guernsey, Channel Islands
The group’s interest in subsidiaries are all equity investments.
British Sugar (Overseas) Limited operates subsidiaries in Asia. Otherwise, each subsidiary operates mainly in its country
of incorporation.
Associated British Foods Annual Report and Accounts 2013
126
NOTES FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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28. Group entities continued
Interest in joint ventures and associates
A list of the group’s significant interests in joint ventures and associates is given below:
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Joint ventures
Levaduras Collico S.A.
Roal Oy
Qingdao Xinghua Cereal Oil & Foodstuff Co., Ltd
Frontier Agriculture Limited
Vivergo Fuels Limited
Stratas Foods LLC
Uniferm & Co. KG GmbH
Associates
C. Czarnikow Limited
Harper-Love Adhesives Corporation
New Food Coatings Pty Ltd
Murray Bridge Bacon Pty Ltd
Gledhow Sugar Company Limited
Country of
incorporation
Issued ordinary
share capital
Group %
Chile
Finland
China
UK
UK
US
Germany
UK
US
Australia
Australia
South Africa
CLP1,834,390,000
€3,196,000
CNY24,844,000
£36,000,104
£96,027,000
US$2
€2
£1,000,000
US$13,200
A$150,000
A$11,040,000
ZAR10,000
50
50
25
50
47
50
50
43
50
50
20
15
Each joint venture and associate carries out manufacturing and food processing activities and operates mainly in its country
of incorporation.
The companies listed herein are those subsidiaries, joint ventures and associates whose results or financial position, in the opinion
of the directors, principally affected the figures shown in these annual accounts as a list of all group companies would result in
information of excessive length being given. A full list of subsidiaries will be annexed to the next annual return of Associated British
Foods plc delivered to the Registrar of Companies.
Associated British Foods Annual Report and Accounts 2013
COMPANY BALANCE SHEET
AT 14 SEPTEMBER 2013
127
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Fixed assets
Intangible assets
Investments in subsidiaries
Current assets
Debtors
– due within one year
– due after one year
Cash at bank and in hand
Creditors: amounts falling due within one year
Bank loans and overdrafts – unsecured
Other creditors
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Bank loans – unsecured
Amounts owed to subsidiaries
Net assets excluding pension liability
Net pension liability
Net assets
Capital and reserves
Issued share capital
Capital redemption reserve
Profit and loss reserve
Equity shareholders’ funds
Note
1
2
3
3
4
4
5
5
5
2013
£m
19
647
666
3,656
923
160
4,739
(154)
(2,940)
(3,094)
1,645
2,311
(706)
(1,188)
(1,894)
417
(17)
400
45
2
353
400
2012
£m
24
640
664
3,232
1,113
162
4,507
(81)
(2,666)
(2,747)
1,760
2,424
(817)
(1,228)
(2,045)
379
(15)
364
45
2
317
364
The financial statements on pages 127 to 131 were approved by the board of directors on 5 November 2013 and were signed on
its behalf by:
Charles Sinclair
Chairman
John Bason
Director
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
Profit for the financial year
Net movement in own shares held
Actuarial loss on defined benefit pension scheme
Dividends
Net increase in equity shareholders’ funds
Opening equity shareholders’ funds
Closing equity shareholders’ funds
2013
£m
263
5
–
(232)
36
364
400
2012
£m
209
8
(1)
(200)
16
348
364
Associated British Foods Annual Report and Accounts 2013
128
ACCOUNTING POLICIES
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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Basis of preparation
The financial statements are presented in sterling, rounded to the nearest million. They are prepared under the historical cost
convention, except that derivative financial instruments are stated at their fair value, and in accordance with applicable United
Kingdom accounting standards (UK GAAP) and the Companies Act 2006.
As permitted by section 408(4) of the Companies Act 2006, a separate profit and loss account for the Company has not been
included in these financial statements. As permitted by FRS 1, no cash flow statement for the Company has been included on the
grounds that the group includes the Company in its own published consolidated financial statements. As permitted by FRS 8, no
related party disclosures in respect of transactions with wholly owned subsidiaries have been included.
The Company has taken advantage of the exemption in FRS 25 Financial Instruments: Disclosure and Presentation, not to prepare a
note to the financial statements relating to financial instruments as the information is available in the published financial statements
of the group.
Intangible assets – goodwill
Intangible assets comprise goodwill arising on acquisitions since 17 September 1998, being the excess of the fair value of the
purchase consideration of businesses over the fair value of net assets acquired. Goodwill is capitalised in accordance with FRS 10
and amortised over its useful life, not exceeding 20 years. Goodwill previously written off against reserves has not been reinstated.
Investments in subsidiaries
Investments in subsidiaries are reported at cost less any provision for impairment.
Financial instruments
All financial assets and financial liabilities are measured initially at fair value plus directly attributable transaction costs, and thereafter
at amortised cost.
Pensions and other post-employment benefits
The Company operates defined contribution and defined benefit pension schemes. Contributions to the defined contribution scheme
are charged to the profit and loss account as they become payable. The principal defined benefit scheme is a multi-employer scheme
and the Company is unable to identify its share of underlying assets and liabilities on a consistent and reasonable basis. Contributions
to this scheme are accounted for as if they were contributions to a defined contribution scheme. The Company has one small unfunded
defined benefit scheme which it accounts for in accordance with FRS 17 using the advice of professional actuaries. The amount
charged to the profit and loss account is the cost of benefits accruing to employees over the year, plus any benefit improvements
granted to members during the year. It also includes a charge equal to the expected interest on plan liabilities over the year. The
present value of plan liabilities is disclosed as a liability on the balance sheet net of any related deferred tax.
Share-based payments
The Share Incentive Plan allows employees of the Company to receive allocations of shares to be distributed subject to attainment
of certain financial performance criteria and typically after a three-year performance period. The fair value of the shares to be
awarded is recognised as an employee expense with a corresponding increase in reserves. The fair value is measured at grant date
and spread over the period during which the executives become unconditionally entitled to the shares. The fair value of the shares
allocated is measured taking into account the terms and conditions under which the shares were allocated. The amount recognised
as an expense is adjusted to reflect the actual number of shares that vest.
Where the Company grants allocations of shares to employees of its subsidiaries, these are accounted for on the same basis as
allocations to employees of the Company, except that the fair value is recognised as an increase to investment in subsidiaries with
a corresponding increase in reserves.
Shares in the Company are held in a separate trust and are deducted in arriving at equity shareholders’ funds.
Associated British Foods Annual Report and Accounts 2013
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
129
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1. Intangible assets – goodwill
Cost
At 15 September 2012 and 14 September 2013
Amortisation
At 15 September 2012
Provided during the year
At 14 September 2013
Net book value
Net book value at 15 September 2012
Net book value at 14 September 2013
2. Investments in subsidiaries
At 15 September 2012
Additions
Disposals
At 14 September 2013
£m
71
47
5
52
24
19
£m
640
12
(5)
647
£7m of the additions relate to an increase in the Company’s investment in ABF Investments plc. £5m relates to the allocation of
shares under the Share Incentive Plan to employees of the Company’s subsidiaries as part of an investment restructuring that
included the disposal of the Company’s £5m investment in Chibnalls Holdings Limited.
There were no provisions for impairment in either year.
3. Debtors
Amounts falling due within one year
Amounts owed by subsidiaries
Other debtors
Corporation tax recoverable
Amounts falling due after one year
Amounts owed by subsidiaries
The directors consider that the carrying amount of debtors approximates their fair value.
4. Other creditors
Amounts falling due within one year
Other taxation and social security
Accruals and deferred income
Amounts owed to subsidiaries
Amounts falling due after one year
Amounts owed to subsidiaries
The directors consider that the carrying amount of creditors approximates their fair value.
2013
£m
3,635
5
16
3,656
2012
£m
3,213
6
13
3,232
923
1,113
2013
£m
1
49
2,890
2,940
2012
£m
1
35
2,630
2,666
1,188
1,228
Associated British Foods Annual Report and Accounts 2013
130
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE 52 WEEKS ENDED 14 SEPTEMBER 2013
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5. Capital and reserves
Issued and fully paid
At 15 September 2012 and 14 September 2013
Ordinary
shares of
515⁄22p
each
000
Nominal
value
£m
791,674
45
At 14 September 2013, the Company’s issued share capital comprised 791,674,183 ordinary shares of 515/22p each, carrying one vote
per share.
At 15 September 2012
Profit for the year
Net movement in own shares held
Dividends
At 14 September 2013
Share capital
£m
45
–
–
–
45
Capital
redemption
reserve
£m
2
–
–
–
2
Profit and
loss reserve
£m
317
263
5
(232)
353
Total
£m
364
263
5
(232)
400
Capital redemption reserve
The capital redemption reserve arose following redemption of two million £1 deferred shares at par in 2010.
Dividends
Details of dividends paid and proposed are provided in note 6 to the consolidated financial statements.
Own shares held reserve and share-based payments
Ordinary shares subject to allocation under the Share Incentive Plan, are held in a separate Employee Share Ownership Plan Trust.
The Trust is funded by the Company. Voting rights attached to shares held by the Trust are exercisable by the trustee, who is entitled
to consider any recommendation made by a committee of the Company. At 14 September 2013, the Trust held 1,995,073 (2012 –
2,769,023) ordinary shares of the Company. The market value of these shares at the year end was £36m (2012 – £35m). The Trust
has waived its right to dividends. Refer to note 22 of the consolidated financial statements for further information on the group and
Company’s share-based payment plans.
6. Contingent liabilities
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group,
the Company considers these to be insurance arrangements and accounts for them as such. The guarantee contract is treated as
a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the
guarantee.
The Company has provided £117m of guarantees in the ordinary course of business as at 14 September 2013 (2012 – £107m).
Associated British Foods Annual Report and Accounts 2013
131
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7. Related parties
The Company has a controlling related party relationship with its parent company, Wittington Investments Limited, which is also its
ultimate parent company. The Company also has a related party relationship with its subsidiaries, associates and joint ventures and
directors. In the course of normal operations, related party transactions entered into by the Company have been contracted on an
arm’s length basis.
Material transactions and year end balances with related parties (excluding wholly owned subsidiaries) were as follows:
Charges to Wittington Investments Limited in respect of services provided by the Company
Charges to a fellow subsidiary
Dividends paid by the Company and received in a beneficial capacity by:
(i)
(ii) directors of Wittington Investments Limited who are not trustees of the Foundation
(iii)
directors of the Company who are not trustees of the Foundation and are not directors
of Wittington Investments Limited
trustees of the Garfield Weston Foundation
(iv) a member of the Weston family employed within the Associated British Foods group
Charges to non-wholly owned subsidiaries
Interest income earned from non-wholly owned subsidiaries
Interest paid to non-wholly owned subsidiaries
Amounts due from non-wholly owned subsidiaries
Amounts due to non-wholly owned subsidiaries
Sub note
1
1
1
1
1
2
2
2
2
2
2013
£000
338
–
8,277
1,297
30
864
1,212
1,417
202
17,009
–
2012
£000
330
48
7,143
1,120
21
746
929
568
330
58,475
33,700
1. Details of the nature of the relationships with these bodies are set out in note 27 of the consolidated financial statements.
2. Details of the Company’s subsidiaries, joint ventures and associates are set out in note 28 of the consolidated
financial statements.
8. Other information
Emoluments of directors
The remuneration of the directors of the Company is shown in the Remuneration report for the group on page 75.
Employees
The Company had an average of 122 employees in 2013 (2012 – 116).
The Company is a member of the Associated British Foods Pension Scheme, providing benefits based on final pensionable pay.
Because the Company is unable to identify its share of the scheme’s assets and liabilities on a consistent basis, as permitted by
FRS 17, the scheme is accounted for by the Company as if it were a defined contribution scheme.
On 30 September 2002 the scheme was closed to new members, with defined contribution arrangements introduced for these
members. For the defined contribution scheme, the pension costs are the contributions payable.
The last actuarial valuation of the Associated British Foods Pension Scheme was carried out as at 5 April 2011. At the valuation
date the total market value of the assets of the scheme was £2,559m and represented 101% of the benefits that had accrued to
members after allowing for expected future increases in earnings. By agreement with the trustees, the Company agreed to
eliminate the deficit identified at the time of the triennial actuarial valuation of the Scheme in 2008 with five annual payments of
£30m, and although the Scheme was in surplus at the time of the most recent valuation, the Company made the final payment
in March 2013.
The particulars of the actuarial valuation of the scheme are contained in note 12 in the consolidated financial statements. There is
no material difference in the valuation methodologies under IAS 19 and FRS 17.
Auditors’ fees
Note 2 to the consolidated financial statements of the group provides details of the remuneration of the Company’s auditors on
a group basis.
Associated British Foods Annual Report and Accounts 2013
132
PROGRESS REPORT
SATURDAY NEAREST TO 15 SEPTEMBER
i
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Revenue
Adjusted operating profit
Exceptional items
Amortisation of non-operating intangibles
Profits less losses on disposal of non-current assets
Inventory fair value adjustment
Profits less losses on sale and closure of businesses
Finance income
Finance expense
Other financial income/(expense)
Profit before taxation
Taxation
Profit for the period
Basic and diluted earnings per ordinary share (pence)
Adjusted earnings per share (pence)
Dividends per share (pence)
2009
£m
9,255
720
–
(82)
(1)
(12)
(65)
17
(95)
13
495
(112)
383
45.5
57.7
21.0
2010
£m
10,167
909
–
(81)
(9)
–
28
12
(88)
(8)
763
(194)
569
69.3
72.2
23.8
2011
£m
11,065
920
–
(83)
5
–
–
9
(101)
7
757
(180)
577
68.7
74.0
24.75
2012
£m
12,252
1,077
(98)
(100)
(6)
–
(9)
9
(114)
2
761
(178)
583
70.3
87.2
28.5
2013
£m
13,315
1,185
–
(92)
–
–
(128)
13
(100)
(2)
876
(242)
634
74.8
98.9
32.0
COMPANY DIRECTORY
Associated British Foods plc
Registered office
Weston Centre
10 Grosvenor Street
London W1K 4QY
Company registered in England, number 293262
Company Secretary
Paul Lister
Registrars and transfer office
Equiniti
Aspect House
Spencer Road
Lancing BN99 6DA
Auditors
KPMG Audit Plc Chartered Accountants
Bankers
Barclays Bank plc
Lloyds Banking Group plc
The Royal Bank of Scotland plc
Associated British Foods Annual Report and Accounts 2013
Brokers
Credit Suisse Securities (Europe) Limited
One Cabot Square
London E14 4QJ
Panmure Gordon & Co
One New Change
London EC4M 9AF
Timetable
Interim dividend paid
5 July 2013
Final dividend to be paid
10 January 2014
Annual general meeting
6 December 2013
Interim results to be announced
23 April 2014
Website
www.abf.co.uk
This report contains forward-looking statements. These have been made by the
directors in good faith based on the information available to them up to the time
of their approval of this report. The directors can give no assurance that these
expectations will prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors underlying such forward-looking
information, actual results may differ materially from those expressed or implied by
these forward-looking statements. The directors undertake no obligation to update
any forward-looking statements whether as a result of new information, future
events or otherwise.
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W1K 4QY
Tel + 44 (0) 20 7399 6500
Fax + 44 (0) 20 7399 6580
For an accessible version
of the Annual Report
and Accounts please visit
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