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ANNUAL
REPORT
AND
ACCOUNTS
2020
IS TO PROVIDE
SAFE, NUTRITIOUS,
AFFORDABLE FOOD
AND CLOTHING
THAT IS GREAT
VALUE FOR MONEY
Photographed on our cover are five of the many colleagues
who rose to the challenges faced during 2020. Read how
all of our businesses went above and beyond in our
Chief Executive’s statement and operating reviews.
Chief Executive’s statement on page 8
Operating reviews from page 22
OUR BRANDS
ARE LOVED
9/10
UK households use our brands
WE ARE
ASSOCIATED
BRITISH
FOODS
Associated British Foods is
a diversified international food,
ingredients and retail group with
sales of £13.9bn, 133,000 employees
and operations in 53 countries
across Europe, Africa, the Americas,
Asia and Australia.
OUR PRESENCE
IS GLOBAL
53 countries operated
in worldwide
OUR VALUES
ARE LIVED
We respect everyone’s dignity
We act with integrity
We progress through collaboration
We pursue with rigour
OUR BUSINESSES
ARE DIVERSE
Grocery
Our grocery brands occupy
leading positions in markets
across the globe. In the UK,
nine out of ten households use
our brands.
Sugar
AB Sugar is one of the largest
sugar producers in the world.
Illovo is the largest sugar producer
in Africa and British Sugar is the
sole processor of UK sugar beet.
OUR EMPLOYEES
ARE EMPOWERED
133,000
people worldwide
Agriculture
AB Agri is the UK’s largest
agri-food company and a global
leader in nutrition, science
and technological innovation
in animal feed.
Ingredients
Our Ingredients business
is a leader in yeast, bakery and
specialty ingredients for the
food, feed and pharmaceutical
industries.
Retail
Primark is one of the largest fashion
retailers in Europe and the largest
clothing, footwear and accessories
retailer by volume in the UK. In total,
it has 384 stores across 13 countries,
including the US.
Strategic report
PERFORMANCE
HIGHLIGHTS
Group revenue
£13.9bn
Actual down 12%
Constant currency down 11%
Adjusted operating profit
Adjusted profit before tax
£1,024m
£914m
Actual down 28%
Constant currency down 30%
Down 35%
Adjusted earnings
per share
81.1p
Down 41%
Gross investment
£641m
Dividends per share
nil
Net cash (before
lease liabilities)
£1,558m
Operating profit
Profit before tax
£810m
Down 37%
£686m
Down 42%
Basic earnings per share
57.6p
Down 48%
Review of the year online:
www.abf.co.uk/ar2020
Contents
Strategic report
1
Performance highlights
2 Our businesses at a glance
4 Chairman’s statement
8 Chief Executive’s statement
12 Group business model and strategy
14 Section 172 statement
20 Key performance indicators
22
Operating review
22 Grocery
34 Sugar
42 Agriculture
48 Ingredients
54 Retail
66 Financial review
70 Responsibility
84 Principal risks and uncertainties
90 Viability statement and going concern
Governance
92 Board of directors
94 Corporate governance
110 Directors’ Remuneration report
122 Directors’ report
125 Statement of directors’ responsibilities
126 Independent auditor’s report
Financial statements
135 Consolidated income statement
136 Consolidated statement of
comprehensive income
137 Consolidated balance sheet
138 Consolidated cash flow statement
139 Consolidated statement of changes
in equity
140 Significant accounting policies
150 Accounting estimates
and judgements
151 Notes forming part of the
financial statements
200 Company financial statements
207 Progress report
208 Glossary
IBC Company directory
The group has defined, and outlined the purpose of,
its alternative performance measures in note 30.
The 2019 results in the Strategic report have been
provided on an IFRS 16 pro forma basis in addition
to the results previously reported under IAS 17 in order
to provide a better understanding of comparison between
the 2020 results and the 2019 results. These IFRS 16
pro forma figures have been prepared using the
same data and assumptions as those used for the
transition adjustment.
Annual Report and Accounts 2020
Associated British Foods plc
1
Our businesses at a glance
OUR BREADTH IS ONE OF
OUR GREATEST STRENGTHS
With the breadth of our
businesses, brands and
global reach, Associated
British Foods plc aims to
consistently deliver value
to our stakeholders.
GROCERY
Read more on page 22
SUGAR
Read more on page 34
Household food brands enjoyed
all over the world
A world-leading sugar business
focused on excellence
27
Plants worldwide
32,000
Employees
Europe
Our UK beet sugar factories typically
produce well over 1 million tonnes of
sugar annually. Azucarera in Spain
produces beet sugar from its factories
in the north and south, and also refines
sugar from cane raws at its refinery in
the south.
Africa
Illovo is Africa’s largest sugar producer
with agricultural and production facilities
in six countries. Typical annual sugar
production is 1.7 million tonnes.
China
We operate two beet sugar factories
in the north east of China, with annual
sugar production capacity of over
180,000 tonnes.
Twinings and Ovaltine are
enjoyed in over
100
countries
16,000
Employees
Twinings and Ovaltine
Twinings and Ovaltine are our leading
global hot beverage brands enjoyed in
over 100 countries.
Europe and international
Our portfolio of recognised grocery
brands includes Mazzetti balsamic
vinegars, Jordans and Dorset cereals,
Ryvita crispbread, Kingsmill bread,
Patak’s and Blue Dragon cooking
sauces and pastes, as well as Silver
Spoon and Billington’s sugars.
The Americas
In the US, Mazola is the leader in corn
oil and we sell a range of baking brands
through retail and foodservice channels.
Capullo is a premium canola oil in
Mexico. Anthony’s Goods produces
specialty baking ingredients,
supplements, superfoods and other
functional snacks primarily for online
consumers and the organic market.
Australia
We produce ham, bacon and
smallgoods under the Don and KRC
brands. Tip Top Bakeries produces a
range of well-known breads and baked
goods. Yumi’s produces hommus,
vegetable dips and snacks.
Revenue
£3,528m
2019: £3,498m
Revenue
£1,594m
2019: £1,608m
Adjusted operating profit
Adjusted operating profit
£437m
2019: £381m
£100m
2019: £26m
2
Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
AGRICULTURE
Read more on page 42
INGREDIENTS
Read more on page 48
RETAIL
Read more on page 54
Products and services for
the agri-food industry
Yeast, bakery and specialty
ingredients supplied globally
Amazing fashion,
amazing prices
Sold into
84
countries
3,000
Employees
AB Agri
AB Agri manufactures animal feed,
nutrition- and technology-based
products and offers data services
for the agri-food industry. It operates
all along the food industry supply chain.
It produces and supplies compound
animal feed, feed enzymes, specialised
feed ingredients and a range of
value-added 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.
52
384
Plants in production for AB Mauri
Stores at year end
7,000
Employees
75,000
Employees
Yeast and bakery ingredients
AB Mauri operates globally in yeast and
bakery ingredients production, supplying
industrial and artisanal bakers and the
foodservice and wholesale channels.
It is a technology leader in bread
improvers, dough conditioners and
bakery mixes.
Specialty ingredients
ABF Ingredients produces value-added
products for food and non-food
applications.
It manufactures and markets enzymes,
specialty lipids, yeast extracts, extruded
ingredients, pharmaceutical excipients
and antacids worldwide with
manufacturing facilities in Europe,
America and India.
Primark
Primark is a major retail group
operating stores in the Republic of
Ireland, UK, Spain, Portugal, Germany,
the Netherlands, Belgium, Austria,
France, Italy, Slovenia, Poland and
the US.
It prides itself on offering something
for everyone and has a wide selection
of products available in women’s,
men’s, kids’, the home, health and
beauty and gifting.
Primark’s store environment plays
an important part in inspiring its
customers. Developing the in-store
experience has been a key enabler
in differentiating Primark from its
competitors. Its strategy is clear –
bring the same amazing value to
services as it does with fashion.
Many of its stores now have free wi-fi
and trend rooms and in the Republic
of Ireland, UK, Spain and Portugal a
number of stores have coffee shops,
food and beverage offerings and
beauty concessions, which add to
the customer experience.
Revenue
£1,395m
2019: £1,385m
Revenue
£1,503m
2019: £1,505m
Revenue
£5,895m
2019: £7,792m
Adjusted operating profit
Adjusted operating profit
Adjusted operating profit
£43m
2019: £42m
£147m
2019: £136m
£362m
2019: £913m
Annual Report and Accounts 2020
Associated British Foods plc
3
Chairman’s statement
Michael McLintock
Chairman
OUR CULTURE
CARRIED US
THROUGH
I will never be able to thank our
people enough for their extraordinary
efforts this year. I am proud to be able
to represent such a group.
4
Associated British Foods plc
Annual Report and Accounts 2020
To say that this has been
an extraordinary year
would be something of an
understatement. The rapid
spread of COVID-19 across
the globe has affected
everyone in ways which
we could not have imagined
a year ago.
When we first heard of COVID-19 our
business concerns were around the
disruption to the supply chain of goods
coming from China. However, as the
virus rapidly spread around the world
it was clear that its effect would be
more profound. For our group, we were
required to close all Primark stores in
Europe and the US in just 12 days in
March. This was not something that
we had ever envisaged.
Unable to sell anything, Primark moved
from profit to loss in a few short days,
with no visibility as to how long these
conditions would persist. Closure for
six months seemed plausible, with
the possibility of it being significantly
longer. These monthly operating losses,
together with the need to pay for
goods in transit, would place a severe
strain on the group’s cash reserves
and necessitated immediate
management action.
Measures to mitigate the cash
outflow included cutting back on
discretionary spend and non-essential
capital expenditure across the group.
Primark instigated a major cost-
reduction exercise that included
stopping further orders and accessing
government job retention schemes
across Europe. I must emphasise that
at a time of such uncertainty, these job
retention schemes provided critical
support and enabled us to preserve the
jobs of some 68,000 employees. In total
we received some £98m and we are
grateful for this support. Most Primark
employees not covered by government
schemes agreed to a temporary
reduction in salary. These actions
reduced Primark’s operating costs by
50%, but the cash outflow was still
some £100m per month.
At the same time, our food businesses
faced operational challenges of their
own. Consumer demand switched from
eating out to eating at home and in
particular, demand for home cooking
and baking products soared. At each
of our food production sites, working
practices were adapted to protect our
workforce and production was
increased, in some cases substantially,
even with higher absenteeism due to
shielding or isolation. It was of vital
importance that food businesses such
as ours continued to produce food
safely, and in sufficient quantities, to
meet the exceptional demand in retail.
At the half year, the Board decided
not to declare an interim dividend.
The directors considered that this was
prudent given the focus on managing
the group’s cash flow in the second half
with, at that time, no prospect for the
reopening of stores.
As events transpired, we were able to
reopen Primark stores much earlier than
envisaged. The Primark team performed
a remarkable job in ensuring the rapid
reopening of so many stores, including
153 stores in one day in England, in a
way that was both welcoming and
appealing to customers while also
incorporating the health and safety
measures required for customers and
colleagues alike.
We did not know how quickly, and in
what numbers, customers would return.
In the event, there were queues outside
most of our stores on reopening days.
We were very encouraged by the
strength of our sales across all markets
for the period since reopening. Primark
returned to profitability and the timing
of reopening from early May allowed
us to sell down the majority of spring/
summer stock on hand with minimal
markdowns, and so generated
significant cash in the fourth quarter.
Although later than usual, we were
pleased to be able to place substantial
orders for autumn/winter stock.
Primark still suffered a cash outflow of
some £800m while the stores were
closed after making supplier payments
and incurring the net operating losses.
When the majority of the Primark stores
had reopened, we stopped claiming
support from UK and European
government job retention schemes.
Furthermore, when the UK Government
announced a job retention bonus in July,
we felt it would be unnecessary to claim
as we were trading profitably.
Strategic report
With Primark opening earlier and trading
more strongly than we had expected,
and sales and cash flow from our food
businesses in the second half well
ahead of our expectations, our cash
reserves built quickly.
The year end net cash balance before
lease liabilities was £1.56bn, a position
we could not have possibly predicted
back in March. This outcome was driven
not only by the better trading in the
fourth quarter, but also by a much lower
level of working capital across the group
than is usual at this time of year. In
particular, it reflected later than normal
timing of orders for Primark’s autumn/
winter ranges and lower food
inventories, a consequence of higher
consumer demand. These working
capital benefits will reverse in the first
half of the 2020/21 financial year.
Results
Revenue for the group was £13.9bn,
12% lower than last year on a reported
basis. These financial statements adopt
IFRS 16 Leases in the current year and
under our chosen transition option the
prior year has not been restated.
Adjusted operating profit this year of
£1,024m was lower than the £1,421m
reported last year. Inclusion of lease
interest expense in the income
statement this year was the major driver
of the increase in the charge for net
finance expense and other financial
income from £15m last year to £110m.
A lower proportion of the group’s profit
was generated in the UK and Ireland and
consequently the group’s adjusted
effective tax rate increased from 21.5%
to 28.8% this year. Adjusted earnings
per share reduced by 41% to 81.1p.
The full year decline in group revenue
was mainly seen in the third quarter,
driven by the total loss of sales for the
period in which Primark’s stores were
closed. The decline in the full year
adjusted operating profit for the
group was a consequence of this.
We estimate that Primark lost £2bn
of sales and some £650m of profit
as a result of COVID-19.
The increase in adjusted operating profit
for Grocery, Sugar, Ingredients and
Agriculture combined was a very strong
26% at constant currency with growth
in all business segments.
Annual Report and Accounts 2020
Associated British Foods plc
5
Chairman’s statement
continued
Grocery delivered another year of
strong profit and margin improvement.
In the second half of the year this
included higher retail sales which more
than offset a decline in foodservice
as a result of COVID-19. A significant
improvement in the profits of our
European and Chinese sugar businesses
more than offset a disappointing
result for Illovo. The improvement in
Ingredients was driven by substantially
higher demand for AB Mauri’s yeast
and bakery ingredients.
Statutory operating profit for the year
reduced to £810m from £1,282m last
year, driven by the reduction in adjusted
operating profit and an increase in the
net exceptional charges to £156m this
year from £79m last year. The decline
in the statutory profit before tax was
broadly in line with the decline in
statutory operating profit. Basic earnings
per share were 57.6p, a reduction
from the reported 111.1p last year.
Leadership
COVID-19 has made the task of
leadership significantly more challenging
and I have seen so many examples of
outstanding leadership in the group over
the last six months.
I would like to pay particular tribute to
George Weston and John Bason for
their tireless commitment to the task
of navigating the group through the
unprecedented circumstances that
we faced. They led from the front and
agreed to reduce their base pay
temporarily by 50% from the beginning
of April and to forgo any bonus for this
financial year. The reduction in base pay
ran until the end of the financial year.
Paul Marchant, CEO of Primark,
and his leadership team deserve a
special mention. They demonstrated
tremendous energy and professionalism
throughout a succession of challenges.
I also want to thank the chief executives
and managing directors of all our
businesses, and the group senior
management team, for their selfless
dedication. They calmly got on with
enabling and motivating their teams
to adapt to the new conditions and
challenges and collaborated in support
of each other.
Thank you too to my non-executive
colleagues on the Board for their
invaluable counsel. They agreed to
reduce their fees by 25% from April
to the end of the financial year.
Corporate responsibility
Our purpose to provide safe, nutritious,
affordable food and clothing that is great
value for money has never been more
relevant. We are committed to being a
good neighbour and supporting the
communities in which we operate.
Our four group-wide values: acting with
integrity, respecting everyone’s dignity,
progressing through collaboration and
pursuing with rigour have proved to be
critical in determining our responses to
the challenges posed by COVID-19. The
strong culture of the group, which has
been established and then embedded in
each of our businesses over many years,
provided the firm foundation for the
ways in which decisions were
implemented.
Our businesses have always aimed to
make a lasting positive contribution to
society. Our 2020 Responsibility Update
details the actions we continue to take
to invest in our people, support society,
strengthen supply chains and respect
our environment. To see how we make
a difference, please download this
Update, at www.abf.co.uk/responsibility.
Dividends
Your Board is acutely aware of the
importance of dividends to shareholders.
Following the decision not to declare an
interim dividend, and in the light of our
subsequent profitable trading and the
group’s net cash balance at the end of
the year, the Board has given much
consideration to the payment of a
dividend for this financial year. Our
experience of the cash outflow following
government restrictions that required us
to close all of our stores in March and,
at the time of writing, the increasing
restrictions in a number of Primark’s
major markets, lead us to be cautious.
On balance, we have elected not to
propose a final dividend for the year
whilst we monitor the impact of further
COVID-19 restrictions on Primark during
this important trading season.
Outlook
We suspended earnings guidance
for the group on 16 March due to
significantly increased uncertainty
concerning the impact of COVID-19
on business performance. We have
reported on a profitable financial year
with strong cash flow and we started
our new financial year with good
sales and cash flow across the group.
However, the impact on Primark of
the increasing number of government
restrictions in the markets in which
it operates is significant.
Notwithstanding the currently
announced periods of restriction, we
expect Primark full year sales and profit
to be higher next year. There will be a
sales decline in the first half compared
to last year but higher sales in the
second half, reflecting the period of
store closures in the third quarter of
this financial year. We will continue to
expand retail selling space. Sugar is
expected to deliver a higher profit next
year with improvements in Europe
and in the performance of Illovo.
Following the UK’s exit from the EU, our
businesses have completed all practical
preparations for the end of the transition
period and contingency plans are in
place should our businesses experience
some disruption at that time.
Thank you to our employees
The strength of our culture shone
through this year and I am proud to be
able to represent such a group. Our
operating model of devolved decision
making to each business and market
enabled us to respond very quickly and
most appropriately to local challenges.
The responses are a testament to the
dedication, skills and ingenuity of our
people. Most of our employees have
had to adapt to new ways of working
and on top of that many found the time
to support important community work.
I will never be able to thank all of them
enough for their extraordinary efforts
during this time.
Michael McLintock
Chairman
6
Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
OUR
CULTURE
During the COVID-19 pandemic, employees
across the group rose to the challenge.
When all our stores were forced to close, Primark CEO,
Paul Marchant (pictured above), with Gillian Duggan (above
left) and Kelly-Ann Carroll (above right) and many others,
including Olivia Kelly (pictured left), took to the stores to
collate 450,000 care packs for health workers in the
Republic of Ireland, UK, Europe and in the US.
When our Grocery businesses had to produce more
volumes with less people to meet significantly higher
demand, people like Katie Davill and Jim O’Kane (pictured
top and top left respectively) went beyond the call of duty
to provide for our customers.
See how they, and many others, rose to the challenge in our
video stories at https://www.abf.co.uk/media/video_library.
Annual Report and Accounts 2020
Associated British Foods plc
7
Chief Executive’s
statement
George Weston
Chief Executive
OUR FINANCIAL
PERFORMANCE THIS
YEAR MORE THAN
EVER DEMONSTRATES
THE RESILIENCE OF
THE GROUP
This comes from the strength of our brands, the diversity
of our products and markets, our geographic spread,
conservative financing and an organisation design that
permits fast and flexible decision-taking.
8
Associated British Foods plc
Annual Report and Accounts 2020
I am proud of how our
people have responded
to the many challenges
presented by COVID-19 this
year. All of our people
demonstrated care, good
judgement and immense
hard work.
At the time of our half year we had lost
two of our employees to COVID-19.
Now we have lost nine. We mourn
them all.
Our financial performance this year
more than ever demonstrates the
resilience of the group. This comes from
the strength of our brands, the diversity
of our products and markets, our
geographic spread, conservative
financing and an organisation design that
permits fast and flexible decision-taking.
Group revenue reduced by 11% to
£13.9bn at constant currency, with the
reduction mainly seen in the third
quarter driven by the total loss of sales
for the three-month period in which
Primark’s stores were closed. The
decline in adjusted operating profit was
a consequence of this and at £1,024m
was 30% lower than last year on an
IFRS 16 pro forma basis at constant
currency. So far COVID-19 has cost the
group some £2bn of sales, £650m in
lost profit and a cash outflow of £800m.
Our food businesses delivered an
outstanding performance this year
and throughout the pandemic we have
provided safe, nutritious food under
the most extraordinary conditions,
proving the value and resilience of our
supply chains. The adjusted operating
profit of Grocery, Sugar, Agriculture
and Ingredients combined increased
by a very strong 26%, with each of
these business segments growing
their profits.
Sugar delivered a material increase in
adjusted operating profit, driven mainly
by our European businesses, with the
benefit of the anticipated strong
recovery in European sugar prices.
British Sugar operating profit and
return on capital employed improved
significantly from the unacceptable
levels seen over the two years after
the abolition of EU sugar quotas in
October 2017. Our Spanish and Chinese
businesses also took some good steps
forward and we have plans for further
improvement to achieve acceptable
returns. Illovo’s performance this year
was disappointing and was mainly
driven by a decline in demand in the
developed South African sugar market.
We have now closed our Umzimkulu
sugar mill in South Africa. Demand for
sugar is expected to grow in all the
developing markets in the region and we
will increase our domestic and regional
sales while benefiting from profit
improvement programmes across Illovo.
Grocery delivered a strong improvement
in adjusted operating profit with a 15%
increase at constant currency to £437m.
Over the last five years our Grocery
businesses have shown considerable
growth with operating margin improving
over that period from 9.0% to 12.4%
this year. This has been achieved
through a combination of great brands,
new product development and
innovation, cost efficiencies and
successful acquisitions. Acetum, our
Italian balsamic vinegar business
acquired in October 2017, and more
recently Yumi’s and Anthony’s Goods,
are all thriving. Twinings Ovaltine is the
biggest profit contributor to Grocery and
has long been an outstanding growth
story and this year was no exception.
George Weston Foods continued to
make good progress and ACH had an
outstanding year. Allied Bakeries
delivered a substantial cost reduction
this year, following the loss of a major
customer. A further restructuring of
our bakery and associated logistics
operations is planned for next year.
Operating profit for Ingredients was
well ahead, driven by AB Mauri which
responded to an increase in demand, in
some markets an exceptional increase,
for its yeast and bakery ingredients.
I am pleased that our joint venture in
China with Wilmar International has now
commenced operation. The combination
of our technical expertise with Wilmar’s
extensive sales and distribution
capability has great potential. ABF
Ingredients continued to invest in its
research and development capability
and the enzymes business delivered
strong growth.
Turning to Primark, the business
performed well in the first half of the
year, achieving further UK market share
growth and a much improved sales
performance in Europe. The progress in
Germany was notable. However, in
March we were required to close all our
stores due to COVID-19 and our focus
moved to managing the human and
Strategic report
operational consequences. Mitigating
the significant cash outflow was a huge
task. Every area of the business was
scrutinised. Discretionary spend was
cut, we accessed support from the UK
and European government job retention
schemes, we worked with all Primark’s
counterparties including suppliers and
landlords, and most Primark employees
took a reduction in salary while the
stores were closed. As a result monthly
overhead costs were reduced by 50%.
Great care was taken in planning for
the reopening of our estate. We
prioritised measures to safeguard the
health and wellbeing of everyone in
store and to instil confidence in our store
environment. These measures enabled
customers to move freely through our
stores, exploring the merchandise on
display, with little hindrance whilst
ensuring the maintenance of social
distancing. Primark received an
overwhelmingly positive response when
we reopened our doors. The queues
outside most of our stores on reopening
days, the excitement of our customers
and their comments about affordability
that we both heard and read, reaffirmed
the relevance and value of Primark’s
offering. We also opened nine new
stores in the second half, including our
first store in Poland.
Trading since reopening has been
robust, delivering £2bn of revenue
in the period until the end of the financial
year. Most encouraging is that despite
the disruption to our trading, UK market
share data for sales in all channels
shows that we have returned to at least
our pre-COVID-19 level. From the time
of reopening to the year end the number
of transactions has improved, driven by
increasing footfall.
Primark sales reflect the way that
people live their lives. Sales were ahead
of pre-COVID-19 levels in children’s,
leisure and nightwear and weak in
formal menswear and travel accessories.
By store, trading has varied reflecting
the current circumstances of our
customers including homeworking,
less commuting and much less tourism.
Sales at our stores in retail parks are
higher than a year ago, shopping centres
and regional high street stores are
broadly in line with last year, and large
destination city centre stores which
are heavily reliant on tourism and
commuters have, not surprisingly,
seen a significant decline in footfall.
Annual Report and Accounts 2020
Associated British Foods plc
9
Chief Executive’s
statement continued
Since reopening the lower level of sales
compared to pre-pandemic levels
reflects consumer demand.
Over the coming year Primark sales
will continue to reflect the broader trend
in consumer demand. The autumn/
winter season and the run up to
Christmas is important to the retail
sector. Our stores have exciting seasonal
ranges which are already proving a
success with our customers. However,
at the time of writing, governments
are increasing the restrictions on the
movement of people and trading activity.
In some parts of Europe and the UK this
has led to a reduction in trading hours
or the temporary closure of stores. In
England, temporary store closures are
expected from 5 November. Uncertainty
during a significant trading period remains.
Over the past six months we have
developed a flexible set of responses
across the group and are ready to deploy
these as required in response to future
government restrictions.
Our businesses have completed all
practical preparations should the UK
exit the Brexit transition period with or
without a trade deal. Primark operates
largely discrete supply chains for its
stores in each of the UK, US and Europe
and the group’s food production is
largely aligned with the end market.
As a result, there is relatively little group
cross-border trading between the UK
and the EU. Contingency plans are in
place should some of our businesses
experience disruption.
We have the people and the cash
resources to meet the challenges ahead
and we are investing for the future.
George Weston
Chief Executive
OUR PEOPLE
DEMONSTRATED
CARE, GOOD
JUDGEMENT
AND IMMENSE
HARD WORK
THIS YEAR
With fewer people working on site in our
factories, stores and offices – due to isolation,
shielding or social distancing measures – our
employees worked together to find solutions,
meet increased customer demand and deliver
for our stakeholders in the year.
200%
Many of our grocery businesses had to deliver
unprecedented volumes as demand for household
groceries increased and people found themselves
eating three meals at home every day. At peak
demand Allied Bakeries saw a 13% increase in bread
production, sales of Patak’s sauces increased by
45%, Blue Dragon meal kits by 75% and flour
demand was up by 200%.
Read more about Grocery from page 22
10
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Strategic report
375
STORES
All of Primark’s 375
stores reopened over
May, June and July,
including the reopening
of 153 stores in one day,
on 15 June, in England.
Read more about Retail from
page 54
150%
Consumer demand for yeast increased
significantly across North America
during COVID-19. By August AB Mauri
North America had increased its
production capacity by 150%.
Read more about Ingredients from page 48
WORLD
LEADING
Following the acquisition of
CowConnect, a weighing system and
feeding solution business, in March
2020, AB Agri combined CowConnect
with its existing nutrition and farm
performance platform to create a
world-leading feed management
solution for the dairy industry.
3,000
GROWERS
British Sugar completed
Europe’s longest ever
continuous sugar processing
campaign, delivering 7.8 million
tonnes of beet, in 290,000
deliveries, from more than 3,000
growers in the 208-day
campaign.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
11
11
Read more about Sugar from page 34
Read more about Agriculture from page 42
Group business model and strategy
GROUP BUSINESS
MODEL
OUR GROUP
The group is organised into
five business segments:
Grocery
Sugar
Agriculture
Ingredients
Retail
53
operating countries
40+
consumer brands
sales into
100+
countries
Strategic engagement
Disciplined capital
allocation and monitoring
Framework for
collaboration
Specialist central resources
Finance
IT
Legal
Procurement
Talent development
Tax
Insurance
Property
Treasury
Market
knowledge
Industry
expertise
Operational
capability
Customer
relationships
Innovation
Providing safe,
nutritious,
affordable food and
clothing that is
great value for
money for our
customers.
Delivering
sustainable growth
for investors over
the long term.
Developing our
talent and creating
opportunities for
employee
progression.
Making a positive
impact on the
communities in
which we operate,
wherever we can.
THE ROLE OF THE
CORPORATE CENTRE
Offers a framework in which
our business leaders have the
freedom and decision-making
authority to pursue
opportunities with
entrepreneurial flair.
The corporate centre is small
and uses short lines of
communication to ensure
prompt, incisive and
unambiguous decision-making.
It provides specialist resources
including:
OUR BUSINESSES
This enables our businesses to
focus on what they do best:
OUR STAKEHOLDERS
Which helps us to deliver value
for our stakeholders by:
OUR VALUES
Underpinning our business
model are our values:
Respecting
everyone’s
Acting
with
Progressing
through
Pursuing
with
dignity
integrity
collaboration
rigour
12
Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
Our people, culture
and values
We build and develop strong
management teams, to
whom we give high levels
of accountability and trust.
This enables us to operate a
largely devolved structure in
which each business has the
freedom to develop strategy
and deliver against their
plans. In turn, it generates
high motivation and fosters
an entrepreneurial mindset.
We pride ourselves on being
a first-class employer and we
work actively to develop our
talent and create opportunities
for employee progression. As
a result, people tend to stay
with the group for a long time
and build exciting careers.
Across all of our businesses,
we live and breathe our
values through the work we
do every day, from investing
in the health and safety of
our colleagues, promoting
diversity and respecting
human rights. Our values
are: respecting everyone’s
dignity; acting with integrity;
progressing through
collaboration; and pursuing
with rigour.
For more detail please refer
to page 70 in this report or
our 2020 Responsibility
Update.
A DIVERSIFIED
INTERNATIONAL GROUP
Group operating model
Group strategy
Growth
The group takes a long-term
approach to investment and
is committed to increasing
shareholder value through
sound commercial and
responsible business
decisions that deliver steady
growth in earnings and
dividends. We aim to operate
in a sustainable, ethical,
efficient and safe manner.
While we have grown by
acquisition, much of our
growth has been organic.
Organic growth is achieved
through investment in
marketing, the development
of existing and new products
and technologies and in
targeted capital expenditure
to improve efficiency and
expand capacity.
Acquisitions are made
to complement existing
business activities and
to exploit opportunities
in adjacent markets
or geographies.
We believe that taking a
long-term view creates
long-term value – for our
shareholders, business
partners, employees and
the communities in which
we operate. Our strategy is
to achieve sustainable growth
over the long term and the
group balance sheet is
managed to ensure long
term financial stability,
regardless of the state of
the capital markets.
Capital funding is made
available to all of our
businesses where returns
meet or exceed clearly
defined criteria.
The group focuses on
strategic engagement with
the businesses, and
disciplined budget and capital
allocation and monitoring.
We facilitate collaboration
across the businesses and
provide specialist resource in
central areas such as legal, IT,
finance, property, treasury,
tax and insurance. The group
also invests in selected
value-added capabilities to
support the businesses, such
as talent management and
development, procurement,
health and safety and
transaction execution.
This approach enables the
businesses to focus on what
they do best – running
their operations and serving
their customers.
At Associated British Foods
we believe our purpose is
to provide safe, nutritious,
affordable food and clothing
that is great value for money.
The group has operations
in 53 countries and includes
more than 40 consumer
brands, some of which have
sales into more than 100
countries. The businesses
are organised into five
segments of: Grocery, Sugar,
Agriculture, Ingredients and
Retail. These five business
segments bring together
businesses with common
industry expertise,
operational capability and
market knowledge.
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
customers and their markets
and who will implement
the plans.
The group, or corporate
centre, provides a framework
in which our business
leaders have the freedom
and decision-making authority
to pursue opportunities with
entrepreneurial flair. This
ensures decision-making
stays close to the markets
and customers, resulting
in effective, innovative
business solutions.
The centre is small and uses
short lines of communication
to ensure prompt, incisive
and unambiguous decision-
making. This ensures the
business activities are
appropriately monitored
and supported.
Annual Report and Accounts 2020
Associated British Foods plc
13
Section 172 statement |
Stakeholder engagement and principal decisions
ENGAGING WITH
OUR STAKEHOLDERS
stakeholders, those stakeholder issues
are considered at Board level both
through reports to the Board by the
Chief Executive or Finance Director and
also by the senior management of the
group’s businesses. Senior management
are requested, when presenting to the
Board on strategy and principal
decisions, to ensure that the
presentations cover what impact the
strategy/principal decision has on the
relevant stakeholders and how the views
of those stakeholders have been taken
into account.
While day-to-day operational decisions
are generally made locally, in addition to
providing input on the principal decisions
and strategy, the Board supports
individual businesses by facilitating the
sharing of best practice and know-how
between the businesses.
The Board has identified the following
stakeholder groups with whom
engagement is fundamental to the
group’s ongoing success:
The directors are required to
act in a way which they
consider, in good faith, is
most likely to promote
the success of the Company
for the benefit of its
members as a whole and, in
doing so, have regard
(amongst other matters) to
the matters set out in section
172(1)(a) to (f) of the
Companies Act 2006.
The following section
describes how the directors
take into account such
stakeholder and other
matters in carrying out their
duties and the impact on
decision-making. Regardless
of the legal duties, the
directors consider
regular engagement with
stakeholders to be part and
parcel of our value of
progressing through
collaboration and to be
fundamental to the success
of the group.
Stakeholder
engagement
The Company engages regularly with
stakeholders at group and/or business
level, depending on the particular issue.
As noted in the group business model
on page 12, the role of the corporate
centre, and therefore of the Board, is to
provide a framework in which the group
businesses have the freedom and
decision-making authority to pursue
opportunities with entrepreneurial flair.
The directors consider this to be an
important factor in the success of
the group.
Authority for the operational
management of the group’s businesses
is delegated to the Chief Executive for
execution or for further delegation by
him to the senior management teams of
the businesses. This is to ensure the
effective day-to-day running and
management of the group. The chief
executive of each business within the
group has authority for that business and
reports directly to the Chief Executive.
This approach necessarily involves a high
degree of delegation of communication
with stakeholders to the management of
the group businesses. Where the
directors of the Company have not
themselves directly engaged with
14
Associated British Foods plc
Annual Report and Accounts 2020
EMPLOYEES
SUPPLIERS
CUSTOMERS/CONSUMERS
Strategic report
The group employs 133,000
people. Our people are central
to our success.
As a diversified international
group, we have many complex
supply chains.
Key issues
• Health and safety
• Diversity and
inclusion
• Engagement
and
development
Key issues
• Payment
practices
• Responsible
sourcing
• Supply chain
sustainability
The buyers of our safe,
nutritious, affordable food and
clothing that is great value for
money.
Key issues
• Healthy and safe
• Impact on
products
• Value for money
• Availability of
products
environment
• Store
environment
• Customer
relations
How the businesses engage with
this stakeholder group
How the businesses engage with
this stakeholder group
How the businesses engage with
this stakeholder group
• Email
• Intranet
• Newsletters
• Surveys
• Training
• Notice boards
• Health and
Safety
programmes
• Town halls
• Virtual
meetings
• Conversations
(face-to-face or
virtual)
• Training
• Communications
fora
• Correspondence
• Press releases
• Audits
• Customer
surveys
• Labelling
• Social media
• Customer/
consumer
information
lines
How the Board engages and/or is
kept informed and takes matters
into account
How the Board engages and/or is
kept informed and takes matters
into account
How the Board engages and/or is
kept informed and takes matters
into account
• Richard Reid, as designated non-
executive director for engagement with
the workforce in accordance with the
UK Corporate Governance Code, has
undertaken 14 meetings and/or visits
with different business divisions.
Each business division also specifically
reports to the Board annually on
workforce engagement within that
division. See further details on pages
73 and 98.
• The Group Safety & Environment
Manager provides the Board with
updates on safety trends and progress
against key performance indicators,
supplemented by updates from the
divisions. See further details on pages
10 to 15 of the 2020 Responsibility
Update.
• The Chief Executive and Finance
Director held four virtual Town Halls in
the second half of the year to engage
with Company employees on the
impact of COVID-19 on the business,
amongst other subjects.
• The Board were briefed and provided
input on safety measures throughout
the Primark stores in response to
COVID-19 and on the UK Job
Retention Bonus – see the examples
on pages 18 and 19.
See further details on pages 73 to 77 of
this report and on pages 9 to 22 of the
2020 Responsibility Update.
• Senior management of each business
division (often with the assistance of
specialists within that division) regularly
report to the Board on key relationships
and projects with suppliers either as
part of their business updates to the
Board or through reports to the Chief
Executive.
Examples of key matters or projects on
which the Board were briefed include:
• The Primark Sustainable Cotton
Programme, which works directly with
farmers to grow more sustainably
farmed and traceable cotton.
• Dealings with banks in respect of
existing and new borrowing facilities
– see the example on page 19.
• Dealings with landlords in respect of
rent payments for stores in relation to
periods when Primark was not trading.
• Dealings with suppliers in respect of
the impact of COVID-19 and closure
of all stores – see the example on
page 18.
• Modern slavery and human rights,
including approval of the Modern
Slavery Statement – see page 78.
See further details on pages 78 to 79 of
this report and on pages 23 to 32 of the
2020 Responsibility Update.
• The Board is regularly updated by each
business division on key customers
and key issues impacting customers
and consumers.
• The group Director of Financial Control
provides the Board with an annual
paper on food and feed safety.
Key matters on which the Board were
briefed include:
• The ‘Primark Cares’ initiative
reflecting growing consumer demand
for products made using more
sustainable materials.
• Primark’s new in-store recycling
scheme in the UK allowing customers
to recycle pre-loved clothing, textiles,
footwear and bags from any brand.
See further detail on page 48 of the
2020 Responsibility Update.
• Safety measures throughout the
Primark stores in response to
COVID-19 – see the example on
page 18 regarding store reopening.
• Helping to keep people fed by
implementing safety measures to keep
production sites open and operating
safely and by careful planning and
scheduling of customer orders – see
pages 25 to 27.
See further details on page 79 of this
report and on pages 33 to 36 of the 2020
Responsibility Update.
Annual Report and Accounts 2020
Associated British Foods plc
15
Section 172 statement |
Stakeholder engagement and principal decisions continued
COMMUNITIES AND
THE ENVIRONMENT
SHAREHOLDERS
GOVERNMENTS
INSTITUTIONAL INVESTORS
Supporting society and
respecting the environment are
two of the key ways we live our
values and make a difference.
The Company has a mix of
individual and institutional
shareholders whose views
are valued.
The group is impacted by
changes in laws and public
policy.
Institutional investors’ views on
our value, strategies and culture
are important to the Company.
Key issues
• Climate change
mitigation and
adaptation
• Natural
resources
and circular
economy
Key issues
• Return on
investment
• Business
performance
• Sustainability
Key issues
• Regulatory
changes
including:
− COVID-19
− Brexit
− Tax
• Climate and
environmental
related matters
• Support of
businesses and
workers
Key issues
• Return on
investment
• Business
performance
• Sustainability
How the businesses engage with
this stakeholder group
How the businesses engage with
this stakeholder group
How the businesses engage with
this stakeholder group
How the businesses engage with
this stakeholder group
• Coaching and
• Community
training
programmes
programmes
and schemes
• Website
• Annual general
• Press releases
• Results
meeting
announcements
• Registrar
• Annual report
• Responsibility
Report/Update
and ESG
Appendix
• Meetings
• Responding to
requests for
input (e.g. on
COVID-19
guidelines)
• Applications to
participate in
government
schemes
How the Board engages and/or is
kept informed and takes matters
into account
How the Board engages and/or is
kept informed and takes matters
into account
How the Board engages and/or is
kept informed and takes matters
into account
• Senior management of the business
divisions report to the full Board at
least annually on ESG matters.
• The Board reviews risk assessments
undertaken by the businesses each
year, which consider climate change
impacts and risks.
• The Board was briefed on the work
Primark and other group businesses
have done for local communities
such as Primark donating care
packages to healthcare workers at
UK and other hospitals across
Europe and AB Sugar in Africa
preparing and equipping medical
facilities on sugar estates.
• See also the Primark Cares and
Primark in-store recycling scheme
referred to above.
See further details on pages 78 to 83 of
this report and on pages 37 to 57 of the
2020 Responsibility Update.
See also the example on page 18, in
particular the establishment of a fund to
cover the wages component of Primark
orders that had been cancelled.
• The annual general meeting provides
an opportunity for retail shareholders
to submit questions to be addressed
by the Board.
• The Company engages with
governments to contribute to, and
anticipate, important changes in
public policy.
• The Board also responds either
• The Board is briefed on engagement
with governments including on
matters specifically related to
dealing with the impacts of
COVID-19.
See the example on page 19 in relation
to the UK Job Retention Bonus.
directly or via its in-house company
secretarial team to queries raised
throughout the course of the year.
• Regulatory News Service
announcements, both scheduled
and, this year, additional
announcements to keep
shareholders updated on the impact
or actions resulting from COVID-19.
Further details of how the Board
engages with shareholders is included
on pages 102 to 103 of the corporate
governance report.
See the examples on pages 17 and 19
of principal decisions in respect of
which shareholders were considered
amongst the most affected
stakeholders and how their interests
were taken into account.
16
Associated British Foods plc
Annual Report and Accounts 2020
• Press releases
• Results
announcements
• Meetings
• Annual report
• Responsibility
Report/Update
and ESG
Appendix
How the Board engages and/or is
kept informed and takes matters
into account
• Each year, the Chairman invites the
Company’s largest institutional
shareholders to share views and
discuss any issues or concerns.
• The Chairman, Chief Executive and
Finance Director meet with investors
throughout the year.
• At each Board meeting, the directors
are briefed on meetings that have
taken place with institutional
shareholders and on feedback
received, including any significant
concerns raised. These are then
considered at the Board meeting.
• The Remuneration Committee Chair
meets with investors and analysts to
answer queries and feedback around
remuneration issues.
• The Responsibility Report and ESG
Appendix are approved by the Board
and are produced in response to
increasing requests for information
from institutional investors and ESG
ratings agencies.
See the examples on this page and
on page 19 of principal decisions in
respect of which investors were
considered amongst the most affected
stakeholders and how their interests were
taken into account.
COMMUNITIES AND
THE ENVIRONMENT
SHAREHOLDERS
GOVERNMENTS
INSTITUTIONAL INVESTORS
How the businesses engage with
How the businesses engage with
How the businesses engage with
this stakeholder group
this stakeholder group
this stakeholder group
How the businesses engage with
this stakeholder group
Institutional investors’ views on
our value, strategies and culture
are important to the Company.
Key issues
• Return on
investment
• Business
performance
• Sustainability
• Press releases
• Results
announcements
• Meetings
• Annual report
• Responsibility
Report/Update
and ESG
Appendix
How the Board engages and/or is
kept informed and takes matters
into account
• Each year, the Chairman invites the
Company’s largest institutional
shareholders to share views and
discuss any issues or concerns.
• The Chairman, Chief Executive and
Finance Director meet with investors
throughout the year.
• At each Board meeting, the directors
are briefed on meetings that have
taken place with institutional
shareholders and on feedback
received, including any significant
concerns raised. These are then
considered at the Board meeting.
• The Remuneration Committee Chair
meets with investors and analysts to
answer queries and feedback around
remuneration issues.
• The Responsibility Report and ESG
Appendix are approved by the Board
and are produced in response to
increasing requests for information
from institutional investors and ESG
ratings agencies.
See the examples on this page and
on page 19 of principal decisions in
respect of which investors were
considered amongst the most affected
stakeholders and how their interests were
taken into account.
Supporting society and
respecting the environment are
two of the key ways we live our
values and make a difference.
Key issues
• Climate change
• Natural
mitigation and
adaptation
resources
and circular
economy
The Company has a mix of
individual and institutional
shareholders whose views
are valued.
Key issues
• Return on
investment
• Business
performance
• Sustainability
The group is impacted by
changes in laws and public
policy.
Key issues
changes
including:
− Brexit
− Tax
• Regulatory
• Climate and
− COVID-19
• Support of
environmental
related matters
businesses and
workers
• Coaching and
• Community
• Website
• Press releases
• Meetings
• Applications to
training
programmes
programmes
and schemes
• Annual general
• Results
• Responding to
meeting
announcements
• Registrar
participate in
government
schemes
requests for
input (e.g. on
COVID-19
guidelines)
• Annual report
• Responsibility
Report/Update
and ESG
Appendix
How the Board engages and/or is
kept informed and takes matters
How the Board engages and/or is
kept informed and takes matters
How the Board engages and/or is
kept informed and takes matters
into account
into account
into account
• Senior management of the business
• The annual general meeting provides
• The Company engages with
divisions report to the full Board at
least annually on ESG matters.
an opportunity for retail shareholders
to submit questions to be addressed
governments to contribute to, and
anticipate, important changes in
• The Board reviews risk assessments
by the Board.
public policy.
undertaken by the businesses each
• The Board also responds either
• The Board is briefed on engagement
year, which consider climate change
directly or via its in-house company
impacts and risks.
• The Board was briefed on the work
secretarial team to queries raised
throughout the course of the year.
Primark and other group businesses
• Regulatory News Service
with governments including on
matters specifically related to
dealing with the impacts of
COVID-19.
See the example on page 19 in relation
to the UK Job Retention Bonus.
have done for local communities
such as Primark donating care
packages to healthcare workers at
UK and other hospitals across
Europe and AB Sugar in Africa
preparing and equipping medical
facilities on sugar estates.
• See also the Primark Cares and
Primark in-store recycling scheme
referred to above.
See further details on pages 78 to 83 of
this report and on pages 37 to 57 of the
2020 Responsibility Update.
See also the example on page 18, in
particular the establishment of a fund to
cover the wages component of Primark
orders that had been cancelled.
announcements, both scheduled
and, this year, additional
announcements to keep
shareholders updated on the impact
or actions resulting from COVID-19.
Further details of how the Board
engages with shareholders is included
on pages 102 to 103 of the corporate
governance report.
See the examples on pages 17 and 19
of principal decisions in respect of
which shareholders were considered
amongst the most affected
stakeholders and how their interests
were taken into account.
Principal
decisions
The extraordinary events of the latter
half of the financial year have meant that
the principal decisions of the Company
(and the group as a whole) have often
related to mitigating the adverse effects
of COVID-19. For a group whose
purpose includes providing clothing that
is great value for money, the challenge
of a complete closure of the group’s
375 Primark stores worldwide over the
course of a 12-day period in March
cannot be understated. The other
primary purpose of the group, namely
providing safe, nutritious, affordable
food, played a key role in keeping
people fed.
Such events heavily impacted the
strategic decisions made and shaped
the engagement with stakeholders
both at Board level and by the
businesses. In particular, there was a
need to ensure that the consequences
of decisions were the right thing for
promoting the success of the Company
in the long term, as well as having
regard to maintaining a reputation for
high standards of business conduct.
The Board received weekly updates on
the impact of COVID-19 on the group
from early March 2020 to mid-June.
Some examples of principal decisions
that were taken during the year and
how stakeholder views were taken
into account and impacted on
those decisions are provided in the
following examples.
Strategic report
Decision not to pay an interim
dividend in July 2020.
Which stakeholders most
affected?
• Shareholders/Investors
Consideration of stakeholder
views/interests and impact on
decision making
While the impact on shareholders/
investors of non-payment of an interim
dividend was considered, it was decided
that it was in the longer-term interests of
the Company not to pay such dividend. In
particular, notwithstanding the
encouraging performance of the group in
the first half of the year, the Board
considered non-payment of the interim
dividend to be prudent given the focus on
managing the group’s cash outflow in the
second half of the year.
The decision was taken by the Board
as part of a broader course of
action including:
• stopping non-essential capital spend
and discretionary operating
expenditure across the entire group;
• reducing fixed costs;
• accessing government employment
retention schemes in respect of
Primark retail employees;
• temporarily reducing base pay of
executive and non-executive directors,
other senior employees at the
Company and Primark employees; and
• taking steps to confirm the availability
of existing, and to agree new,
borrowing facilities to meet the
challenges ahead.
The decision was also considered to be in
the interests of employees, customers
and suppliers as well as being in the
longer-term interests of the Company.
Annual Report and Accounts 2020
Associated British Foods plc
17
Section 172 statement |
Stakeholder engagement and principal decisions continued
Primark decision to cease
placing new orders with
suppliers following worldwide
closure of all stores and
subsequent reinstatement
of orders.
Which stakeholders most
affected?
• Suppliers
• Communities/Environment
Consideration of stakeholder
views/interests and impact on
decision making
Primark’s product and sourcing teams
were in close and regular contact with
suppliers. Those teams then reported
through to the CEO of Primark, the
Director of Primark Ethical Trade and
the Director of Primark Supply Chain,
Sourcing and Quality, including on any
concerns raised by suppliers.
The CEO of Primark, Director of Primark
Ethical Trade and Director of Primark
Supply Chain, Sourcing and Quality liaised
closely with the executive directors of the
Company, who updated the Board on a
weekly basis throughout the period in
which all shops were closed.
Stakeholder views were taken into
account by the Board, alongside weekly
reports of group cash flow, in making
various decisions throughout the period
from stores closing through to their
reopening including:
• the decision, announced by Primark on
22 March 2020, to cease placing new
orders with suppliers, reflected the
need to reduce costs in order to secure
the longer-term success of the
business. This also reflected the fact
that some £1.5bn worth of stock was
already in stores, depots or in transit
with no avenue through which to sell
while stores were closed;
• the decision, announced by Primark on
3 April, to establish a fund to cover the
wages component of orders that had
been cancelled, taking into account
concerns raised by suppliers and
reflecting a reputation for high
standards of business conduct;
• the decision, announced by Primark on
20 April 2020, to commit to pay for
some £370m of additional orders,
meaning that Primark had committed
to take all product that was both in
production and finished and planned
for handover by 17 April;
• the decision, announced by Primark on
31 July 2020, to commit to pay its
garment suppliers in full for all
outstanding finished garments and to
utilise or pay for any finished fabric
liabilities; and
Consideration of stakeholder
views/interests and impact on
decision making continued
• the decision, announced by Primark on
31 July 2020, to place some £1.2bn of
orders for coming seasons, reflecting
the trading performance of stores after
reopening.
The above actions reflected the decision
to prioritise more funds to support the
supply chain, as costs began to be
mitigated and a reopening timetable could
be seen. They also recognised the longer
term need for there to be a healthy,
thriving retail environment (which is also in
customers’ interests) in order to underpin
a healthy, thriving supply chain.
Primark decision to
reopen stores.
Decision not to take advantage
Decision to repay the Revolving
of UK Government support
Credit Facility drawn down on
under the Job Retention Bonus
18 March 2020.
Which stakeholders most
affected?
• Employees
• Customers/consumers
Consideration of stakeholder
views/interests and impact on
decision making
Experience was also gained or learned
from having had our food manufacturing
businesses operating during the lockdown
period and from the food retail industry
having been open during the lockdown
period.
With safety being the highest priority in
the detailed preparations to welcome
customers and employees back to stores
(for which, see further detail on pages 58
and 59), the Board was briefed on the
steps taken to protect employees and
customers and on feedback received.
Following feedback from customers, on
top of the safety measures put in place at
the outset, additional dividers were
installed at tills in the majority of Primark’s
stores to enable more tills to be opened
and to reduce queues.
announced by the UK
Chancellor in July 2020.
affected?
• Employees
• Shareholders/Investors
• Government
Which stakeholders most
Which stakeholders most
affected?
• Suppliers (banks)
• Shareholders/Investors
Consideration of stakeholder
views/interests and impact on
decision making
Consideration of stakeholder
views/interests and impact on
decision making
Account was taken of the UK
The group treasury and legal teams liaised
Government’s Job Retention Bonus policy
closely with the lead supplier bank and its
paper published on 31 July 2020.
advisers in relation to the Revolving Credit
The Board considered that, following the
reopening of the majority of Primark’s
stores and removal of Primark employees
Facility and liaised closely with the
Finance Director, who reported to the
Board.
from the government employment
The Board took into account the terms
support schemes in the UK and Europe
offered by the supplier banks, the ongoing
once our stores in England had reopened,
liquidity requirements of the group and
it should not be necessary for Primark to
the interests of shareholders in its
apply for payment under the Job
Retention Bonus scheme.
This took into account the stabilised
financial position of the group, particularly
following the reopening of the Primark
stores, and was not thought to adversely
decision to repay in August 2020 the
money drawn down under the Revolving
Credit Facility as well as the decision to
extend the maturity date of the facility to
July 2023 taking into account the
longer-term interests of the Company.
impact the interests of employees or
The interests of shareholders/investors,
shareholders/investors.
employees and suppliers were also
considered and the decision to repay was
not thought to adversely impact their
interests.
18
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Annual Report and Accounts 2020
Strategic report
Safety was the highest
priority when making the
detailed preparations to
reopen all Primark’s stores
and welcome back both
employees and customers.
Primark decision to
reopen stores.
Which stakeholders most
affected?
• Employees
• Customers/consumers
Consideration of stakeholder
views/interests and impact on
decision making
Experience was also gained or learned
from having had our food manufacturing
businesses operating during the lockdown
period and from the food retail industry
having been open during the lockdown
period.
With safety being the highest priority in
the detailed preparations to welcome
customers and employees back to stores
(for which, see further detail on pages 58
and 59), the Board was briefed on the
steps taken to protect employees and
customers and on feedback received.
Following feedback from customers, on
top of the safety measures put in place at
the outset, additional dividers were
installed at tills in the majority of Primark’s
stores to enable more tills to be opened
and to reduce queues.
Decision not to take advantage
of UK Government support
under the Job Retention Bonus
announced by the UK
Chancellor in July 2020.
Decision to repay the Revolving
Credit Facility drawn down on
18 March 2020.
Which stakeholders most
affected?
Which stakeholders most
affected?
• Employees
• Shareholders/Investors
• Government
• Suppliers (banks)
• Shareholders/Investors
Consideration of stakeholder
views/interests and impact on
decision making
Consideration of stakeholder
views/interests and impact on
decision making
Account was taken of the UK
Government’s Job Retention Bonus policy
paper published on 31 July 2020.
The Board considered that, following the
reopening of the majority of Primark’s
stores and removal of Primark employees
from the government employment
support schemes in the UK and Europe
once our stores in England had reopened,
it should not be necessary for Primark to
apply for payment under the Job
Retention Bonus scheme.
This took into account the stabilised
financial position of the group, particularly
following the reopening of the Primark
stores, and was not thought to adversely
impact the interests of employees or
shareholders/investors.
The group treasury and legal teams liaised
closely with the lead supplier bank and its
advisers in relation to the Revolving Credit
Facility and liaised closely with the
Finance Director, who reported to the
Board.
The Board took into account the terms
offered by the supplier banks, the ongoing
liquidity requirements of the group and
the interests of shareholders in its
decision to repay in August 2020 the
money drawn down under the Revolving
Credit Facility as well as the decision to
extend the maturity date of the facility to
July 2023 taking into account the
longer-term interests of the Company.
The interests of shareholders/investors,
employees and suppliers were also
considered and the decision to repay was
not thought to adversely impact their
interests.
Annual Report and Accounts 2020
Associated British Foods plc
19
Key performance indicators
HOW WE TRACK
PROGRESS
Financial
We use key performance
indicators to measure our
progress in delivering the
successful implementation
of our strategy and to
monitor our performance.
Adjusted operating profit (£m)
Adjusted profit before tax (£m)
2020
2019
2018
2017
2016
1,024
1,421
1,404
1,363
1,118
2020
2019
2018
2017
2016
914
1,406
1,373
1,310
1,071
Adjusted profit and earnings measures provide a consistent indicator of performance year-on-year and
are aligned with incentive targets.
Group revenue (£bn)
Gross investment (£m)
2020
2019
2018
2017
2016
13.9
15.8
15.6
15.4
13.4
2020
2019
2018
2017
2016
641
837
1,165
945
1,066
Revenue is a measure of business growth.
Constant currency comparisons are also used
to provide greater clarity of performance.
A measure of the commitment to the
long-term development of the business.
Adjusted EPS (pence)
Dividend per share (pence)
2020
2019
2018
2017
2016
81.1
2020
nil
137.5
134.9
127.1
106.2
2019
2018
2017
2016
46.35
45.00
41.00
36.75
The group’s organic growth objective aims to deliver steady growth in earnings and dividends over
the long term. Adjusted earnings per share is a key management incentive measure.
The group has defined, and outlined the purpose of, its alternative performance measures in note 30.
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Annual Report and Accounts 2020
Strategic report
Non-financial
Net cash/(debt) (£m) (before lease
liabilities)
Number of employees
Tonnes of sugar produced (m)
2020
2019
2018
2017
1,558
936
614
673
2016
(315)
This measure monitors the group’s liquidity and
capital structure and is used to calculate ratios
associated with the group’s bank covenants.
2020
2019
2018
2017
2016
133,425
138,097
137,014
132,590
129,916
2020
2019
2018
2017
2016
3.328
3.443
3.681
3.410
3.080
A measure of the scale and growth of the group
– the average number of people employed
during the financial year with a contract of
employment, whether full-time, part-time,
contractor or seasonal worker.
A measure of the scale and development
of the group’s sugar operations.
Cash generation (£m)
Number of countries of
operation (Primark)
Primark selling space (sq ft 000)
2020
2019
2018
2017
2016
1,753
1,509
1,430
1,641
1,310
2020
2019
2018
2017
2016
13
12
11
11
11
2020
2019
2018
2017
2016
16,247
15,642
14,805
13,862
12,342
Net cash generated from operating activities
is monitored to ensure that profitability is
converted into cash for future investment
and as a return to shareholders.
The number of countries and the retail selling space from which Primark operates
are measures of the breadth, scale and growth of the business.
Return on capital employed (%)
Reportable injury rate (%)
Gender balance in workforce
– all employees (%)
2020
2019
2018
2017
2016
9.5
19.3
20.1
20.5
18.1
2020
2019
2018
2017
2016
0.32
0.54
0.63
0.59
0.47
A measure of the group’s management of the
health and safety of its workforce – the number
of injuries resulting from an accident arising out
of, or in connection with, work activities that
were required to be reported to external
regulatory authorities, divided by the average
number of employees.
2020
2019
2018
2017
2016
Men
Women
53
52
51
48
48
47
48
49
52
52
A measure of the gender balance of all
employees in the group with a contract of
employment, whether full-time, part-time,
contractor or seasonal worker.
Each business develops KPIs that are relevant to its operations. These are regularly monitored and, in the
case of adjusted operating profit and return on capital employed, are variously used as local management
incentive measures. Additional performance measures, both financial and non-financial, are detailed by
business segment in the operating review and in the Corporate Governance Update.
Annual Report and Accounts 2020
Associated British Foods plc
21
Operating review | Grocery
&
k e e p i n g
p e o p l e
f e d
66%
In the first week the UK
went into lockdown,
Allinson’s Mill delivered
66% more pallets of flour
to its customers than the
weekly average.
Read more about how Grocery
rose to the challenge on page 25
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Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
STRATEGY
Each of our grocery businesses
pursues an independent
strategy appropriate to its
particular market position and
stage of development. Twinings
Ovaltine, Acetum, Jordans
Dorset Ryvita and AB World
Foods have had considerable
success extending their reach
into new and emerging markets,
whilst some are focused on
developing brands in their core
domestic markets.
All of our 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.
GROCERY
Grocery comprises consumer-facing
businesses that manufacture and market
a variety of well-known household brands
both nationally and internationally.
ABOUT
Twinings Ovaltine
The largest of our grocery businesses,
Twinings Ovaltine, has broad
geographical reach. Twinings has been
blending tea since it was founded in
1706 and now sells premium teas and
infusions in more than 100 countries.
Ovaltine malted beverages and snacks
are consumed throughout the day in
countries across the globe.
Acetum
Acquired in 2017, Acetum is the leading
Italian producer of Balsamic Vinegar of
Modena. It sells vinegars, condiments
and glazes across the globe, trading
under the Mazzetti brand.
AB World Foods
AB World Foods focuses on the creation
and development of world flavours and
its Patak’s, Blue Dragon and Al’Fez
branded products are sold internationally.
Westmill Foods
Westmill Foods specialises in high-
quality foods including rice, spices,
sauces, oils, flour and noodles sold
under brands such as Rajah, Lucky Boat,
Tolly Boy and Elephant Atta.
Jordans Dorset Ryvita
Jordans Dorset Ryvita operates in the
better-for-you cereal and savoury
biscuits categories with increasing
international presence. Jordans has a
heritage of using wholegrain oats in the
production of its cereals and cereal bars.
Dorset Cereal’s award-winning muesli
and granolas are renowned for the
quality of their ingredients, which include
wholegrain oats as well as fruits, nuts
and seeds from around the world.
Ryvita has a strong reputation in healthy
snacking and is the UK category leader
in crispbreads.
Allied Bakeries
Allied Bakeries produces a range of
bakery products under the Kingsmill,
Sunblest, Allinson’s and Burgen brands,
with flour and semolina produced by
sister company, Allied Mills. Speedibake
specialises in own-label baked goods,
such as muffins and mince pies, for
retail and foodservice customers.
George Weston Foods, Australia
George Weston Foods is one of
Australia and New Zealand’s largest food
manufacturers. Tip Top is one of the
most recognised brands in Australia
with an extensive range of bread
and baked goods. The Don and KR
Castlemaine brands manufacture
a variety of bacon, ham and meat
products. Yumi’s produces hommus,
vegetable dips and snacks and is the
leader in the Australian market.
ACH Foods, 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 renowned
baking brands such as Fleischmann’s
yeast, Karo corn syrup and Argo
corn starch. Anthony’s Goods is an
organic and natural flours, meals and
food business, primarily for online.
Silver Spoon
Silver Spoon and Billington’s are
our two retail sugar brands in the UK,
complemented by a range of dessert
toppings and syrups under the Askeys
and Crusha brands.
AB Sports Nutrition
HIGH5 and Reflex Nutrition are brands
in the sports nutrition sector producing
protein supplements, recovery gels and
drinks in the UK and sold internationally.
The HIGH5 brand sponsors a wide
range of sporting events across the UK
and internationally.
Annual Report and Accounts 2020
Associated British Foods plc
23
Operating review | Grocery
Revenue
£3,528m
2019: £3,498m
Actual fx: Up 1%
Constant fx: Up 2%
Adjusted operating profit
£437m
2019: £381m
Actual fx: Up 15%
Constant fx: Up 15%
Adjusted operating
profit margin
12.4%
2019: 10.9%
2019 IFRS 16 pro forma: 10.9%
Return on average
capital employed
31.3%
2019: 27.4%
2019 IFRS 16 pro forma: 26.2%
HOUSEHOLD FOOD
BRANDS ENJOYED
ALL OVER THE WORLD
Our Grocery businesses delivered a
very strong performance with adjusted
operating profit growth of 15% and
profit margin increasing from 10.9%
to 12.4%. Their business plans, set
a year ago to achieve further margin
improvement through improved trading
and cost efficiencies, were realised. Our
businesses responded to the increased
demand for food sold through the retail
channel as a result of the restrictions
imposed by governments to contain the
spread of COVID-19. Workplaces were
rapidly adapted to ensure a safe working
environment for our employees. We
overcame the logistical and operational
challenges posed by COVID-19 and
produced higher volumes throughout
the second half. These higher volumes
more than offset the decline in those
products sold to out-of-home and
foodservice channels.
Grocery revenues were 2% ahead of
last year with growth in Twinings, UK
Grocery, ACH and George Weston
Foods in Australia. This growth was held
back by lower foodservice sales and a
decline in Allied Bakeries. Adjusted
operating profit growth of 15% was
driven by cost efficiencies and,
particularly in the second half, lower
promotional spend more than offsetting
a one-time non-cash asset write-down
in Allied Bakeries of £15m.
Twinings made good progress this year
with volume growth in black tea and
infusions in the retail channel in each of
its major markets. In the second half of
the year the benefits from an increase in
home consumption more than offset a
decline in the much smaller out-of-home
channels. A key driver was the growth in
healthy teas with the launch of a
Twinings Infusions range in France for
the first time and the expansion of the
Wellness range in the US. Sales of
Ovaltine were held back by the impact of
COVID-19 on impulse sales, particularly
in Thailand and Vietnam, partially offset
by successful new product launches in
Switzerland and Brazil. Overall margins
improved and also benefited from a full
year of production efficiencies following
the closure of our tea factory in China
last year.
Silver Spoon, Jordans, Dorset Cereals,
Ryvita and AB World Foods all benefited
from significant increases in consumer
demand in the second half of the year.
Westmill and AB Sports Nutrition saw
sales and profit declines due to the
reduction in foodservice demand and
sports events respectively. The
acquisition of the fast-growing Al’Fez
Middle Eastern brand complements
AB World Food’s existing brand portfolio
and we have already achieved new retail
listings in the UK and internationally.
Allied Bakeries revenues declined this
year following the termination of our
largest private label bread contract earlier
in the financial year. The business
implemented a significant cost reduction
programme during the year. Combined
with a COVID-19 related uplift in sales
the underlying operating result improved.
Following our announcement in July of
our exit from the Co-op contract, the
carrying values of some of our
distribution assets have been reviewed,
resulting in a write-down charge of
£15m. In the second half we received
£30m for the insurance claim relating to
the fire in February at our Speedibake
Wakefield factory. This has been treated
as exceptional and more than offsets the
exceptional charge of £25m taken in the
first half.
Acetum delivered profit growth with
increased sales of balsamic vinegar
in North America and a further
improvement in margin. ACH’s Mazola
became the leading US brand in cooking
oils earlier this year and the second half
saw extremely high demand from the
retail channel for our products. Since the
introduction of government restrictions
related to COVID-19 in North America
there has been an exceptional increase
24
Associated British Foods plc
Annual Report and Accounts 2020
HOUSEHOLD FOOD
BRANDS ENJOYED
ALL OVER THE WORLD
in the demand for ingredients for
home baking. Although successful in
significantly increasing production
capacity for baking ingredients,
demand has still exceeded our ability
to supply. Anthony’s Goods, the
supplier of high quality natural and
organic food products acquired in
September last year, performed
strongly this year also driven by this
demand for home baking products.
George Weston Foods delivered
excellent sales growth and margin
improvement, with strong sales of
bread and breakfast goods by Tip
Top more than offsetting weaker
foodservice sales of meat products
by the Don KRC business. Yumi’s
has seen continued strong sales
growth and we have invested in new
packaging equipment and marketing
activity to support the launch of a
new vegetarian burger.
Grocery in action
Strategic report
FEEDING
THE UK
Associated British Food’s grocery
businesses worked around the clock to
meet the unprecedented consumer
demand for high-quality, affordable food
during lockdown, when public
movement was severely restricted.
Orders for everyday staples surged after
lockdown began in March and at peak
demand Allied Bakeries saw a 13%
increase in bread production. Orders
for Jordans, Dorset Cereals and Ryvita
products rose by 28% and demand for
Westmill’s retail noodles, both retail
brands and own-label, rose by 97%.
Ingredients for family meals were also
highly sought after, with sales of Patak’s
sauces up 45% and Blue Dragon meal
kit purchases increasing by 75%,
reflecting the fact that more people
were eating three meals a day at home.
Speedibake made 1 million extra garlic
loaves in the first three weeks of
lockdown, with Acetum sales of
Balsamic Vinegar of Modena up by 25%
year-on-year during the peak months of
April and May.
Rising to the challenge
The grocery businesses adopted
common strategies to meet this rapid
rise in demand. Niche and specialist
lines were reduced to significantly
increase production of core ranges that
were in high demand. To extend
production time employees worked
extra shifts and increased overtime.
Procurement teams, meanwhile, found
alternatives for packaging, raw materials
and ingredients that were unavailable, as
downstream supply chains around the
world were disrupted.
Customers also helped out. Many
agreed to order full baskets rather than
single units, simplifying and speeding
up despatch, or extended their delivery
time windows, allowing logistics
teams to schedule many more and
much larger deliveries.
At peak demand
our businesses saw:
13%
rise in bread production at
Allied Bakeries
28%
rise in demand for Jordans,
Dorset Cereals and Ryvita products
45%
rise in sales of Patak’s sauces
75%
rise in demand for
Blue Dragon meal kits
97%
rise in demand for
Westmill’s retail noodles
200%
rise in flour demand
from supermarkets
Annual Report and Accounts 2020
Associated British Foods plc
25
Grocery in action
FEEDING
THE UK
Doing things differently
Such flexibility was achieved against
a backdrop of significant operational
change across all businesses. This
included introducing new ways of
working to make locations safe
and COVID-19-secure, such as
installing Perspex screens, introducing
one-way systems and enhanced
cleaning practices.
It also involved setting up food donation
programmes for local community
groups, charities, food banks and
frontline service providers and increasing
the usual donations to FareShare, which
distributes surplus, high-quality food
to vulnerable people. During just the first
four weeks of lockdown, UK Grocery
donated 150,000 products to those
in need.
Allinson’s and James Neill’s Mills
Two specific UK Grocery sites –
Allinson’s Mill in Bishop’s Stortford
and James Neill’s Mill in Belfast – faced
a particularly sharp and sudden rise in
demand. With more time at home, the
nation rediscovered its love for baking.
UK Grocery donated
150,000 products to
those in need in just
four weeks.
SIAN
Sian Owen
Process Technologist,
Food Manufacturing, Speedibake
Ensuring mince pies for Christmas
When COVID-19 hit, the New Product
Development team at Speedibake, our
own-label specialist baked goods
business, became smaller due to
absenteeism from staff shielding.
Sian, one of our newest team members,
rose to the challenge to keep product
launches on track and items on shelves.
One of those product lines was
Christmas mince pies.
Due to a devastating fire in February
at our Wakefield bakery, Sian had to
improvise. She moved into a meeting
room in our Bradford site and used
domestic ovens and some customer
facilities to conduct the time critical
annual bake tests she would usually
undertake in our own industrial
facilities. The skill needed to translate
performance from a domestic to an
industrial oven for customer trials is no
small feat.
Thanks to Sian’s can-do attitude, and
ingenuity, Speedibake will produce its
great-tasting 33 million mince pies for
Christmas this year, more than 80% of
the UK’s ‘baked in-store’ mince pies the
nation purchases from the major
supermarkets each year.
Every year our mince
pie recipes have to be
adapted for changing
fruit harvests, which
affects the mincemeat
composition. There’s a
real art to updating
our recipes, which we
trial and re-trial until
they’re ready for
approval. Timing is
crucial, as we need to
ensure we have
enough time to bake
the nation’s pies. So,
when it came down to
it, I just had to find a
way through.
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Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
James Neill’s Mill featured in BBC
Two’s ‘Keeping Britain Fed’
programme, which examined
how the national food supply
withstood the pressure of the
early days of COVID-19.
Demand for flour in supermarkets
consequently increased sharply, in April
rising 200% above usual levels.
While there was no shortage of flour itself
– with the significant amount that usually
went to restaurants and foodservice
businesses being available to retail
customers due to lockdown – there was a
lack of capacity to pack 1.5 kg bags for
stores.
Faced with this challenge, Allinson’s and
James Neill’s Mills ran at greater capacity
and for longer hours than ever before. In
the first week of lockdown, Allinson’s
provided customers with 66% more pallets
of flour than its weekly average. Meanwhile,
Neill’s took what would ordinarily have
been ten weeks’ worth of retail customers’
flour orders in one day, using up four
months of reserve packaging stock.
The two mills worked with retailers to
ensure fair and even distribution and to
devise creative ways to get flour to
consumers. This included providing stores
with 4 kg and 16 kg pack sizes that shop
staff packed into smaller bags in-store.
Even then – with all UK mills combined
producing enough 1.5 kg bags of flour for
15% of households to buy one per week
– demand significantly outstripped capacity.
Empty supermarket shelves in the home
baking section became emblematic of how
sharply and suddenly the world had
changed. Allinson’s efforts to keep shelves
stocked featured on a full day’s BBC news
schedule, with its team described as
‘hidden heroes’, while James Neill’s Mill
took part in BBC Two’s ‘Keeping Britain
Fed’ programme, which examined how the
national food supply withstood the pressure
of the early days of COVID-19.
Annual Report and Accounts 2020
Associated British Foods plc
27
Grocery in action
MAZOLA: A CENTURY-
OLD BRAND TOPPING
THE US MARKET
Mazola has taken the lead in the US branded
cooking oil sector by leveraging its health
credentials and increasing its retail profile.
Mazola corn oil was the leading US brand by
volume for the year to the end of February 2020,
with more than 11% of the market, having been
the third-leading brand as recently as 2016.
Investing in the brand
Mazola’s steady growth reflects continued
marketing investment and strong retail execution,
a new approach in a sector traditionally led by
price. After ACH-funded clinical research proved
that corn oil is significantly better than extra virgin
olive oil in lowering ‘bad’ cholesterol – findings
which were published in leading scientific journals
– Mazola has consistently targeted health-
conscious consumers with its healthy heart
message. That, along with the brand’s great taste
and versatility, has encouraged more and more
consumers to use Mazola.
The brand continues to evolve its marketing
approach to expand its consumer base. While
television advertising remains the core platform,
between 2017 and 2020 Mazola increased its
digital investment by 500%, including the regular
posting of healthy recipe ideas. Online promotion
enables a precise targeting of consumers not
always possible via television advertising. For
example, the business can connect with
consumers electronically and advise them that
corn oil is better for their heart.
Expanding retail range
Mazola’s continuing growth also follows its
success in encouraging more stores to stock its
different product sizes. In the past five years
Walmart, for example, has increased its range of
Mazola variants by 30%. As well as keeping sales
high, the brand has also lowered costs
and supported the environment by reducing
its amount of plastic packaging.
Mazola’s continuing growth story is all the more
striking given the great age of the brand, which
celebrates its 110th anniversary in 2021.
11%
Mazola was the
leading US brand by
volume for the year
to the end of
February 2020 with
more than 11% of
the market.
500%
Between 2017
and 2020 Mazola
increased its digital
investment
by 500%.
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Annual Report and Accounts 2020
VEGETARIAN
LAUNCHES DRIVE
YUMI’S GROWTH
Yumi’s, our Australian chilled dips and snacks
business, has grown strongly, benefiting from
an increasing trend for meat-free foods and its
2018 acquisition by George Weston Foods.
With post-acquisition support and investment,
Yumi’s has expanded its operational and
marketing capability, enabling it to identify key
opportunities and manufacture winning
product ranges. It has continued to grow in its
heartland of chilled dips via flavour extensions
and by meeting demand for innovative tastes
and textures.
New packing automation and filling
equipment has increased production speeds
and enabled Yumi’s to meet growing
consumer and retailer demand for a wider dip
range. Recent launches include a classic
creamy garlic dip and a textured rocket and
almond pesto hommus.
As a proud vegetarian brand, Yumi’s sees a
great opportunity in plant-based foods, which
are growing globally as consumers seek
healthier choices.
2020
Yumi’s expanded
its Veggie Bites
range; launched
vegetarian burgers;
and added new
flavours to its dip
range in 2020.
Strategic report
Research shows that almost half of Australian
adults are trying to eat less meat – as reflected
in the sustained double-digit sales growth in
major grocery retailers’ plant-based
categories.
Expanding winning ranges
Yumi’s first launch in this arena, Veggie Bites,
consisted of delicious bite-sized balls made
from fresh vegetables with no preservatives.
This first-to-market offering, with its new
product format and pouch packaging, was an
instant hit. The range has now been expanded
to five varieties including Zucchini & Lentil and
Sweet Potato & Herbs.
Building on the success of Veggie Bites and
continued category growth, Yumi’s identified
an opportunity to expand into vegetarian
burgers. Having no burger-packing capability,
it invested in a new packing machine and
expanded its frying and conveyer equipment.
Aware that the primary barrier to sampling
among the target ‘meat reducer’ audience was
concern around taste, the burgers were
crafted to delicious recipes with consumer
communication centred on taste.
Investment has enabled Yumi’s to advertise
through mass media, with the 2020 campaign
including TV, online video and outdoor and
in-store communication. This is a significant
step forward for the brand, supporting new
growth opportunities and product extensions.
Annual Report and Accounts 2020
Associated British Foods plc
29
Grocery in action
FROM HEALTH DRINK
TO INDULGENT
DESSERT: OVALTINE’S
STIRRING JOURNEY
In the early 20th century, a Swiss
chemist perfected a wholesome
powdered drink to help combat
malnutrition. Reflecting two of its key
ingredients, eggs and malt, Dr Albert
Wander named his creation Ovomaltine.
In 1906 the product reached the UK,
where it was called Ovaltine. More than
one century later, that drink – along
with numerous category and range
extensions – is enjoyed by millions of
people in over 100 countries. And while
its nutritious benefits are still a prime
attraction, it is now as likely to be
consumed as an indulgent treat or an
energy snack.
Continuous innovation
Ovaltine’s growth has been driven
by powerful innovation. The brand
introduced its first line extension, a
single-portion sachet for cafés, in 1931
with the Ovo Sport bar arriving six years
later. Fast forward to 2020 and more
than half of turnover in its home country
of Switzerland now comes from
products launched in the 21st century.
Products range from ready-to-drink
Ovaltine, muesli, ice cream and in Brazil,
even pizza.
Consumer insight teams across the
world closely monitor emerging
preferences, often from a vantage point
inside family homes. Indeed, the
genesis of the brand’s successful
Crunchy Cream spread – which includes
crispy malt granules and cocoa – came
when a Swiss consumer insight team
noticed people were sprinkling Ovaltine
on their bread at breakfast time. The
winning idea was extended recently
with the launch of Ovaltine Crunchy Roll
– a bread roll filled with the spread for
eating on the go.
Ovaltine has also introduced a palm
oil-free version of Crunchy Cream in
Europe, acknowledging demand from
some consumers for such products.
Carefully developed over three years
to ensure it has exactly the same
consistency and taste as the original
spread, the rapeseed oil-based product
has been an immediate hit.
Straight from the Swiss mountains
Regional innovations are often
subsequently rolled out into other
markets. Rocks – bite-sized chunks
of Ovaltine, originally launched in
Switzerland three years ago – were first
introduced in Brazil as a McDonald’s
McFlurry flavour. Following that
success, they have now hit retail shelves
as a standalone product ‘straight from
the Swiss mountains’. Ovaltine has also
grown by recognising differences – as
well as similarities – between regional
tastes. In Brazil, it is crunchier and
sweeter, with less malt. Its positioning
as a delicious flavouring is on a par with
chocolate, rather than a drink, giving it
a leading role in numerous categories –
from cheesecake and ice cream to
crêpes and biscuits. By contrast, in
Thailand, Ovaltine’s biggest market,
nutrition remains the focus, with a
recent innovation being a soy-flavoured
drink mix.
Partnerships have played a key part
in the brand’s growth. In Brazil, for
example, more than 25 major food
chains, from KFC to Subway, offer
an Ovaltine-branded dessert. In the
country’s supermarkets there are
numerous Ovaltine-branded products
produced by other leading food and
drink companies, from Hershey’s
chocolate bars to Unilever ice cream.
1904
Ovomaltine is founded by Swiss
chemist Dr Albert Wander.
1906
Ovomaltine reaches the UK and
is called Ovaltine.
1937
The Ovo Sport bar arrives.
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Annual Report and Accounts 2020
Strategic report
100+COUNTRIES
The Ovomaltine range was enjoyed by millions
of people in over 100 countries in 2020.
25+FOOD CHAINS
In Brazil more than 25
major food chains, from
KFC to Subway, offer an
Ovaltine-branded dessert.
Annual Report and Accounts 2020
Associated British Foods plc
31
Grocery in action
BRINGING
MIDDLE
EASTERN
FEASTS TO
FAMILY
MEALTIMES
Fuelling its goal to inspire more people to explore
diverse international cuisines, AB World Foods
has acquired Al’Fez, the leading mainstream
Middle Eastern brand in Europe.
Middle Eastern foods and flavours – such as
falafel, harissa and sumac – are becoming ever
more popular in home cooking. Al’Fez supplies
a range of traditional Middle Eastern foods
to retailers and foodservice customers in 28
countries including the UK, the Netherlands,
Belgium, Switzerland, Finland, Spain, Portugal,
Denmark, Italy and Norway. AB World Foods’
December 2019 acquisition of Al’Fez
complements its existing portfolio, including
Patak’s and Blue Dragon.
Expanding the category
Middle Eastern food crosses countries and
continents, with flavours drawn from the
southern Mediterranean, North Africa and the
Levant. While steeped in a rich history, the
region’s cuisine is at the cutting edge of many
exciting new food trends – from people wanting
to experiment more at home with fresh new
flavours to those seeking delicious alternatives
to meat.
The Al’Fez range – created by Sam Jacobi, an
entrepreneur of Iraqi descent who was born in
Israel and raised in London – is dedicated to
expanding the Middle Eastern cuisine category,
which is currently under-represented in the world
foods aisle. It aims to make the region’s complex
set of flavours widely accessible for the home
chef, through its easy-to-use products that
provide the building blocks for a feast.
Inspired by tradition
The range is inspired by authentic Middle Eastern
family dishes and flavours. It includes: tahini,
made from 100% ground roasted sesame seeds;
spices, from the fresh, zesty flavour of sumac
to the aromatic warmth of za’atar; harissa paste
varieties, each adding their own twist of flavour;
classic-flavoured tagine cooking sauces;
couscous varieties, such as Moroccan Spiced,
Giant Maftoul and Pearl; and mezze kits that bring
favourites such as tabouleh, flatbread and falafel
to the table, each cooked from scratch.
December
2019
AB World Foods’
December 2019
acquisition of Al’Fez
complements its
existing portfolio,
including Patak’s and
Blue Dragon.
28
countries
Al’Fez, available in
more than 28
countries, supplies
retailers and
foodservice
customers with a
range of traditional
Middle Eastern foods.
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Annual Report and Accounts 2020
Strategic report
JORDANS:
PURPOSEFUL
PIONEERS
4,200 ha
for wildlife
Thirty-four farmers
now grow oats for
Jordans, creating more
than 4,200 hectares of
land (or 3,000 football
pitches) for wildlife
such as barn owls,
brown hares, turtle
doves and vital
pollinating insects
including bees.
From boosting biodiversity in almond groves to
supporting Amazonian communities, Jordans has
been doing good while growing strongly for
almost five decades.
Jordans was one of the UK’s original ‘purpose-
driven’ brands. It’s hard to imagine now, but
when it was founded in 1972, the idea of using
organic oats in breakfast cereals to improve
people’s health and protect the environment was
a novel idea. However, as interest in the links
between food and health has grown, so too has
the Jordans brand.
Expanding yield while helping wildlife
In 1985, Jordans was a pioneer in working with
farmers to not only grow oats and improve yield,
but to make sure space was provided for wildlife.
This approach remains a cornerstone of the brand
today. In 2016, Jordans built on this foundation by
launching The Jordans Farm Partnership – an
improved farm partnership model working with
UK conservation charity, The Wildlife Trust and
LEAF. This requires at least 10% of each British
farm that supplies Jordans to be managed for
wildlife, overseen by an environmental adviser
and supported by agronomists. Thirty-four
farmers now grow oats for Jordans, creating
more than 4,200 hectares of land – or 3,000
football pitches – for wildlife such as barn owls,
brown hares, turtle doves and vital pollinating
insects including bees.
The brand’s purpose-driven work has grown
alongside its international footprint. In 2019,
Jordans assisted the Seeds for Bees project in
Californian almond groves, introducing
wildflowers on 512 acres of land. This practice
boosts biodiversity and improves pollination and
almond yields. The flowers also provide ground
cover, which reduces soil erosion and improves
moisture retention – a significant benefit in this
drought-hit area.
Protecting communities
Jordans also supports a programme in Bolivia
that protects Brazil nut trees and the
communities that depend upon them. Brazil nuts
– a staple in many Jordans products – are a
fascinating ingredient that are entirely ‘wild
harvested’ from the Amazon rainforest. As Brazil
nut trees depend on the forest to fruit, they are
threatened by deforestation, with the nut-
collecting communities themselves also
vulnerable to poor harvests. The programme
works with 15 harvester communities to help
grow healthy Brazil nut trees and plant new
saplings in the forest. In doing so, it
demonstrates how the rainforest can generate
economic prosperity for its communities. The
initiative also identifies new income streams for
harvester communities and provides guidance on
health and sanitation.
Annual Report and Accounts 2020
Associated British Foods plc
33
16
YEARS
Having built up skills and expertise
and developed first-rate facilities in
16 years of growing tomatoes,
when the opportunity arose British
Sugar opted to use its horticulture
capabilities to grow a key ingredient
for the pharmaceutical industry.
Read more about how British Sugar rapidly
changed one part of its business on page 38
TRANSFORMATIONAL
EFFICIENCY
A N D
Sustainability
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Annual Report and Accounts 2020
Operating review | Sugar SUGAR
AB Sugar is a leading producer of sugar and
sugar-derived co-products in southern Africa,
the UK, Spain and north east China.
ABOUT
We employ 32,000 people and
operate 27 plants in ten countries
with the capacity to produce some
4.5 million tonnes of sugar annually.
Our products are sold into industry
sectors including food and drink,
pharmaceutical, industrial, agricultural,
power and energy.
In Europe, Azucarera is the largest
producer in Iberia and British Sugar is
the sole processor of the UK beet sugar
crop. Illovo Sugar is the biggest sugar
processor in Africa, based in South
Africa and operating in the growing
markets of Eswatini, Malawi,
Mozambique, Tanzania and Zambia. We
also have a beet sugar business in north
east China which is cost-competitive
with cane sugar production.
Our success has been built on continued
development and innovation to meet the
changing priorities of our customers, to
continually improve our operations and
to work with our growers to ensure
sustainable, efficient agricultural
production.
As a global business, we operate in
a diverse and continually changing
environment with many opportunities
and challenges. Although we have a
global portfolio, we operate with a
local heart, working together to do
what is right for the location and market.
As we evolve to meet the changing
needs of customers, growers and
others, it is our role to ensure we use
resources responsibly, build strong
rural economies and ensure thriving
healthy communities.
By drawing upon everything we
have learnt over many decades as
a sugar producer, we continue to
embrace innovation and strive to
create more from less by working
collaboratively across our group and with
our stakeholders.
Strategic report
STRATEGY
AB Sugar is one of the world’s
largest and most diverse sugar
producers and has a simple
vision to be the world’s leading
sugar business.
Whilst sugar is at the heart of
what we do, the sugar
production process provides
opportunities to do more
than simply manufacture an
ingredient. We are an innovative
and advanced manufacturer,
producing a wide range of sugar
and co-products. Additionally,
we are an energy and power
supplier and, as part of the wider
agri-business value chain, we
are an important contributor to
the economy across all our
locations.
Our success has been built on
continued development and
innovation to meet the changing
needs of our customers, to
improve our operations and to
work with our growers to ensure
sustainable, efficient, agricultural
production. We seek to drive
continuous improvement in
everything we do and are
committed to developing
our people to build capability and
capacity across our business.
Annual Report and Accounts 2020
Associated British Foods plc
35
Operating review | Sugar
Revenue
£1,594m
2019: £1,608m
Actual fx: Down 1%
Constant fx: Up 5%
Adjusted operating profit
£100m
2019: £26m
Actual fx: Up 285%
Constant fx: Up 376%
Adjusted operating
profit margin
6.3%
2019: 1.6%
2019 IFRS 16 pro forma: 1.9%
Return on average
capital employed
6.3%
2019: 1.6%
2019 IFRS 16 pro forma: 1.8%
A WORLD-LEADING
SUGAR BUSINESS
FOCUSED ON
EXCELLENCE
AB Sugar revenue was 5% ahead of last
year at constant currency. Adjusted
operating profit was well ahead, driven
by further savings from the cost
improvement programme and the
expected recovery in EU sugar prices
which more than offset lower profits at
Illovo. Each business remained focused
on reducing the cost of sugar production
by identifying efficiencies in all areas
including our agricultural supply chain.
EU sugar prices increased this year with
a reduction in stocks following lower EU
sugar production in the last two
campaigns. Looking ahead, estimates
for EU sugar production in the 2020/21
campaign are lower again due to
reduced yields following adverse
weather conditions throughout the
season and the prevalence of virus
yellows disease in the beet. Production
volumes in the EU are estimated to be
below consumption in the next
marketing year. Furthermore there has
been a recovery in the world sugar price
following a sharp decline in March this
year. Our UK and Spanish businesses
have largely contracted sales for next
year at prices in line with our
expectations.
In the UK, sugar production from the
2019/20 campaign of 1.19 million tonnes
was ahead of the prior year with a strong
operating performance by the factories
overcoming a much-prolonged
campaign as a result of adverse weather.
Beet processing lasted 208 days, a
record for European sugar production.
With the higher sales price and some
improvement in sales volume the
profitability of British Sugar improved
significantly. At this early stage a
reduction of well over 10% in sugar
production is expected next year.
The operating performance in Spain
improved significantly and the business
delivered a breakeven operating result.
This was achieved by a combination of
higher sales prices, lower beet costs and
a significant reduction in operating costs.
In light of the beet volumes contracted
by Azucarera in the second crop year
after reducing the beet price, we have
revised our financial forecasts for this
business. This has resulted in a one-time
non-cash write-off of goodwill of £23m
as an exceptional charge.
Illovo delivered a much-reduced profit
which was mostly driven by our
performance in South Africa. Market
demand in South Africa reduced this
year by some 10% in response to the
recent introduction of a sugar tax and we
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Annual Report and Accounts 2020
Sugar in action
Strategic report
expect market volumes to continue
at these lower levels. Adjusted
operating profit included a £10m
charge for restructuring, including the
closure of the Umzimkulu mill in this
market, which, combined with the
cost improvement programme, is
expected to deliver benefits in the
next financial year. Illovo’s sugar
production was below last year at
1.63 million tonnes with the 2019/20
season curtailed by the early onset of
the rainy season. The operating profit
in Malawi was impacted by lower
sales volumes this year but plans are
in place to deliver an improvement
next year. Export sales across
southern Africa have been limited by
COVID-19 restrictions on cross-border
traffic between countries and on
port capacity.
In China a return to normal yields after
a very poor crop last year and higher
sugar sales prices resulted in a
much-improved operating result.
Further progress is expected next
year with a larger crop area and the
benefit of almost 80% of grower
contract payments now linked to
beet sugar content.
A laboratory employee testing sugar
samples at the new on-site factory facilities.
PARTNERING WITH
GROWERS TO
STRENGTHEN
CHINA’S SUGAR
INDUSTRY
AB Sugar China has a long history
of transforming the efficiency and
sustainability of the sugar industry
in China.
First established in the Chinese cane
sugar sector in 1995, it moved into beet
in the north with the acquisition of
businesses in 2007. Since then it has
invested heavily in the industry, leading
the way in agricultural developments
including mechanisation, so improving
rural prosperity. AB Sugar China is now
working with growers to further advance
crop quality.
Traditionally, Chinese growers have
been paid per tonne of beet, with no
adjustment for the sugar content in the
beet. Reflecting experience outside
China, the business has now moved
to Pay by Sugar (PBS), where growers
are paid a headline price per tonne of
beet with an adjustment for the actual
sugar content.
To support growers in managing this
significant shift, AB Sugar is helping
them to develop best agronomy
practices so they can increase their yield
and sugar content thereby earning
higher margins. In turn, AB Sugar China
gains from ensuring a more sustainable
beet supply, improved beet quality and
greater operational efficiency at its
two factories.
By the 2021/22 campaign, AB Sugar
China aims to contract all of its 1,130 big
growers by PBS. Already, during
2020/21, 77% of growers were
contracted in this way – far higher than
the business’s original 50% goal.
The move to PBS involves further
significant investment from AB Sugar,
including the installation of beet
sampling and testing equipment at both
factories, mobilising ‘beet academies’ to
train growers how to increase yields and
providing additional R&D capability.
Annual Report and Accounts 2020
Associated British Foods plc
37
Sugar in action
BRITISH SUGAR’S GROWTH
OPPORTUNITY IN THE
PHARMACEUTICAL SECTOR
British Sugar has reconfigured its successful UK
tomato business by growing a key ingredient for
the pharmaceutical industry.
Prior to 2016, British Sugar grew 2% of the UK’s
tomato crop at Riverside Glasshouse, 18 hectares
of glasshouse (equivalent to 13 football pitches)
that uses surplus heat and carbon dioxide from
British Sugar’s adjacent Wissington sugar factory.
Maximising the value of the high-grade facilities,
it moved out of tomatoes and now uses
Riverside to grow a non-psychoactive variety
of cannabis, specially cultivated for medical
purposes. This plant contains cannabidiol
(CBD), the active pharmaceutical ingredient in
Epidyolex®/Epidiolex® (cannabidiol), a medicine
licensed in Europe and the US for children with
severe forms of epilepsy. Some 240 miles of
piping carries hot water from the sugar factory’s
combined heat and power (CHP) plant all
year round to maintain temperatures that suit
the plants.
13
football
pitches
Riverside Glasshouse
comprises 18 hectares
of glasshouse
(equivalent to 13
football pitches), that
use surplus heat and
carbon dioxide from
British Sugar’s
adjacent Wissington
sugar factory.
Growth opportunities
British Sugar switched from its successful,
award-winning tomato crop to cannabis,
due to the significantly greater growth and
profit opportunities inherent in growing some
pharmaceutical ingredients. The decision
supported the business’s strategy of maximising
return on investment from all assets and being
open-minded about new co-product and
growth possibilities.
Riverside was reconfigured to provide the right
environment for the new crop in just 60 days.
Internal fixtures were removed; LED lights
were inserted; and blackout blinds were installed
throughout. The first cuttings were planted
in January 2017, just two months after the last
tomatoes were packed and sold, and by
May 2017 the first batch of botanical raw
materials were delivered to the client, GW
Pharmaceuticals (GW)*.
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Annual Report and Accounts 2020
Strategic report
60 days
Riverside was
reconfigured to
provide the right
environment for the
new crop in just
60 days.
British Sugar grows cannabis plants specifically
bred by GW to produce CBD. CBD is produced
naturally by microscopic resin heads (trichomes)
found on the plants. These trichomes act as a
defence mechanism to predators and harmful
UV rays.
* GW is a UK-based global biopharmaceutical company that
has established a world-leading position in cannabinoid
science and medicines over the last two decades. GW’s
pioneering work has led to the regulatory approval of
world-first, potentially life-changing, cannabis-based
medicines, which have treated thousands of patients in the
UK and around the world.
Epidyolex®/Epidiolex® is an oral solution which
contains highly purified CBD. The medicine
was approved by the U.S. Food & Drug
Administration (FDA) in June 2018, and by
the European Medicines Agency (EMA) in
September 2019. The medicine was
recommended by the National Institute for
Health and Care Excellence (NICE) to receive
routine reimbursement from NHS England in
November 2019. GW continues to research the
medicine in other forms of refractory epilepsy,
alongside autism spectrum disorders.
Riverside Glasshouse (pictured
below) is adjacent to British Sugar’s
factory in Wissington, UK (seen in
background).
Annual Report and Accounts 2020
Associated British Foods plc
39
Sugar in action
AT THE HEART OF THE
UK’S HOME-GROWN
SUGAR INDUSTRY
British Sugar is putting customers firmly at the
centre of its operations as it delivers on its
ambition to be the supplier of choice for sugar
in the UK.
The business processes around eight million
tonnes of sugar beet and produces up to 1.4
million tonnes of sugar annually. It has been
strengthening its operations for over a decade, to
succeed in the more competitive market arising
from the 2017 EU industry deregulation. This
includes continuous investment in its four
factories which has totalled £500m over the past
decade, driving efficiency improvements,
reducing energy consumption and emissions,
and improving operational flexibility.
Focused on our customers
Listening to what customers want – and
delivering it – is pivotal to British Sugar’s strategy.
Complementing the efficiency achieved via its
ongoing supply chain investment, the team is
committed to delivering quality products when
customers need them, on time and in full.
Key to this has been providing customers with
greater market insight through regular and reliable
information on UK, EU and world sugar markets.
The team has also focused on changing how it
contracts with customers to introduce more
options and to help reduce volatility in pricing
and create longer-term relationships.
208 days
The business achieved
Europe’s longest-ever
continuous sugar
processing campaign
lasting 208 days.
A focus on customers
during 2019/20 has
helped British Sugar
boost service levels
and sales volumes.
Other recent initiatives included developing a
broader range of product format and traded
sugars, investing in its customer services team,
automating warehousing for quicker response
times and extending logistics operations to allow
bespoke scheduling. In 2019/20 these changes
boosted service levels and sales volumes.
Record-breaking year with growers
In addition to focusing on customers, British
Sugar also works closely with its growers and
their representative body, NFU Sugar, to drive
improvements and innovation.
Such collaboration has helped achieve over 25%
improvement in beet sugar yields in the last ten
years and this year achieving Europe’s longest-
ever continuous sugar processing ‘campaign’.
The campaign lasted 208 days, up from 194 days
last year. It saw British Sugar process more than
7.8 million tonnes of beet, in 290,000 deliveries,
from more than 3,000 growers.
Positioned for future success
As it looks to the future, British Sugar faces
challenges and opportunities with an unswerving
customer focus; security of supply by working in
partnership with its growers; sound operations;
and a robust leadership team.
25%
Collaboration with growers has helped
achieve over 25% improvement in beet
sugar yields in the last ten years.
3,000
GROWERS
British Sugar processed more than
7.8 million tonnes of beet, in 290,000
deliveries, from more than 3,000 growers.
Newark: one of British Sugar’s four factories
in which it has invested £500 million over
the past decade.
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Strategic report
ERNEST
Dr Ernest Peresu
Group Medical Services Specialist,
Illovo Sugar Africa
Readiness of our hospitals and
clinics in Africa
Illovo owns and runs four hospitals and
27 clinics spread across our operations
in the six African countries in which we
are located.
Dr Ernest Peresu has spearheaded our
medical preparedness for the challenges
of COVID-19, leading the plan-ahead
team helping to safeguard the health
and wellbeing of our employees and
their families.
To deal with the expected increase in
the volume of patients and to ensure
dedicated lines of medical treatment to
prevent the potential for cross-over
infections, a key part of that plan was to
create two streams of care – one for
patients with respiratory symptoms and
another for those with general illnesses
– and ensuring adequate supplies of
equipment, oxygen and PPE kits.
Along with readiness
of the hospitals and
clinics, a critical part
of our COVID-19
emergency planning
has been health
communications.
Ensuring we
reached local
communities with
practical, evidence-
based information to
empower people
to stay as healthy
as possible was a
key part of the plan.
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Associated British Foods plc
41
Operating review | Agriculture
20
YEARS
With 20 years of expertise,
our data and technology
platforms deliver targeted
insights that create
continuous improvement for
agricultural supply chains.
Read more about how Intellync
delivers targeted insight on page 46
BETTER
results
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STRATEGY
AB Agri operates through a
strong network of contacts
across the entire agri-food
supply chain, influencing
progressive systems that use
expertise, technology and
insight to make a difference to
the way food is produced.
Organic growth is achieved
through innovative product
development and by extending
the business’s already broad
geographic reach into new
territories and new areas
adjacent to its core capabilities.
Using the diverse breadth of
products, services and people
within the AB Agri community,
the business develops bespoke
solutions tailored to its
customers’ needs.
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
Associated British Foods group
to harness new contacts and
technologies.
AGRICULTURE
AB Agri is a leading international agricultural
business operating across the agri-food industry,
producing and marketing animal feed, nutrition-
and technology-based products and services.
Co-product innovation
and marketing
AB Agri is one of the UK’s largest and
most progressive marketers of food and
drink co-products, having pioneered the
industry for over 30 years. Co-products
are a secondary product stream created
during the manufacture of food and
drink. They are usually cereal or plant-
based residues from industries such as
brewing, distilling and sugar production.
Supply chain, data and
technology solutions
With 20 years of expertise, our data and
technology platforms deliver targeted
insight that create continuous
improvement for agricultural supply
chains. We work exclusively with major
food processors, retailers and directly
with farmers, enabling them to:
• increase productivity and yields;
• improve animal health and husbandry;
and
• deploy robust quality assurance and
corporate responsibility programmes.
Commodity risk management
We are the UK’s leading grain trading
and crop inputs (seed, crop protection
and fertiliser products, agronomy and
precision farming advice) company
through Frontier Agriculture, our joint
venture with Cargill plc, providing
customers with in-depth insight into
global commodity markets.
ABOUT
With a detailed understanding of
agriculture’s importance in the global
food supply chain, our philosophy is to
help change it for the better; influencing
and improving food production, so that
everyone can eat nutritious food that is
produced safely and responsibly.
Across the agricultural supply chain, our
products, data insight and technological
innovation enable our customers to
produce and process high-yielding, safe
and nutritious food in a responsible way,
using fewer chemicals and antibiotics,
safeguarding natural resources and
creating less waste and lower emissions.
Employing over 3,000 people around the
world, we sell products into 84 countries
and continue to grow our global
operations. Our core capabilities include:
Specialised feed ingredients
and mixtures
A major investor in research and
development of specialty feed ingredients
and mixtures, we provide highly
specialised advice around procurement
and formulation for livestock feeds
and pet foods as well as global
manufacturing expertise. We market
pioneering feed ingredients: additive
products, high-quality, bespoke, vitamin
and mineral pre-mixes, starter feeds and
micro-ingredients developed using a
world-class expertise in feed enzymes,
nutrition and product formulation.
Compound feed
We are a major international
manufacturer and supplier of pig,
poultry and dairy feeds with 29
production sites in the UK, continental
Europe and China. We work closely
with major processors and producers
to benchmark productivity and
performance, developing tailored feeds
and new feeding regimes to improve
performance for every customer.
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43
Operating review | Agriculture
PRODUCTS AND
SERVICES FOR
THE AGRI-FOOD
INDUSTRY
Revenue
£1,395m
2019: £1,385m
Actual fx: Up 1%
Constant fx: Up 1%
Adjusted operating profit
£43m
2019: £42m
Actual fx: Up 2%
Constant fx: Up 2%
Adjusted operating
profit margin
3.1%
2019: 3.0%
2019 IFRS 16 pro forma: 3.0%
Return on average
capital employed
10.5%
2019: 10.7%
2019 IFRS 16 pro forma: 10.3%
Revenue and adjusted operating profit at
AB Agri were in line with last year. As
COVID-19 appeared in our markets the
business reacted swiftly and effectively
to ensure the safety of employees and
continued availability of animal feed to
our customers.
Sales and profit at AB Vista, our
international feed enzymes business,
were strongly ahead of last year, with
good sales growth in the Americas and
the first full year of sales from Signis, our
innovative animal digestion aid. Growth
trended lower in the second half as
customers either reduced feed
production volume or reduced their feed
enzyme inclusion rates in response to
lower foodservice demand.
Sales were lower this year at our UK
feed businesses. Sales prices were
reduced due to lower commodity costs
and the benefit of new customers only
partially offset lower compound feed
demand following a decline in
foodservice milk and poultry meat
volumes as a result of COVID-19. The
new premix production facility at Fradley
Park in Staffordshire has now been fully
commissioned. Our feed businesses in
Spain and Denmark have performed
particularly strongly and our Polish
business, acquired last year, has
performed well.
Intellync is our newly formed data and
technology-led supplier of insights that
enable more effective decision making
on farms. This will improve efficiency
and animal welfare on farms and provide
enhanced supply chain assurance.
During the year two small farm data and
technology businesses were acquired
and a new technology centre in Kilkenny,
Ireland was opened.
Profits in our Chinese feed business
benefited from lower raw material prices
and tight cost control. Growth in our
beef cattle and sheep feed business is
reducing our reliance on pig production,
which continues to suffer from the
effects of African Swine Fever. Frontier
Agriculture, our grain trading and crop
inputs joint venture, saw a reduction in
profit with unfavourable weather in the
autumn and spring leading to a much-
reduced winter cereal area and lower
demand for fertilizer and crop protection
treatments.
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Agriculture in action
Strategic report
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I’m proud of the work
our team delivered.
Thankfully, we
haven’t had to trigger
the use of the
emergency diets
because supply
chains remained
robust. But by
developing this suite
of diets the UK’s
agri-food supply
chain is even more
resilient for
the future.
BRIAN
Brian Kenyon
Senior Nutrition Manager,
AB Connect, a division of AB Agri
A ground-breaking ‘emergency
diet’ for livestock
Farmers need their livestock to have
the right amount of minerals and
nutrients to ensure a healthy, balanced
diet. AB Connect, a part of AB Agri, is
one of the top UK animal feed suppliers,
ensuring that approximately 270 million
chickens and 2.3 million pigs are fed
a healthy, nutritious diet tailored to
their needs.
When COVID-19 hit the UK, it presented
a risk to manufacturing and delivery
continuity for our compound feed mills.
Brian and his Nutrition Team set to work
on a solution to ensure livestock would
still be fed should parts of the animal
feed supply chain be interrupted. This
had never been done before and
required precision planning.
The solution they devised was a
targeted range of diets that could be
more easily supplied during a crisis,
whilst still meeting the animals’ health
and welfare needs. Brian was the driving
force behind turning complexity into
simplicity. With his guidance and
coordination, the Nutrition Team
reviewed all pig and poultry diets and
identified suitable emergency substitute
diets. They then worked with the
Commercial, Customer Services and
Formulation Teams to transform these
intricate formulas into a reality.
Annual Report and Accounts 2020
Associated British Foods plc
45
Agriculture in action
FEEDING BEST
PRACTICE IN
FARMING
A dairy farmer is preparing the daily feed
ration for their herd and needs to adjust
the formulation to account for rain and
the addition of nine extra cows. They
quickly add the correct number of
cows to an app and activate the rain
function; a new, balanced ration is sent
automatically to the mixer wagon for the
team to begin loading the exact amount
of ingredients needed that day.
A few hours later, they review the mix
precision to ensure the cows were fed
accurately. They also receive an alert
informing them that there may be an
opportunity to optimise their starch
inclusion that could improve the herd’s
milk production. The same message
goes simultaneously to the farm
nutritionist who, by the next morning,
has remotely updated the ration
calculation, adjusting the starch content.
This automatically appears on the mixer
wagon loading system, ready to be
implemented with that day’s feeding
programme. The busy farmer,
meanwhile, can continue to focus on
running their farm.
Data-driven decision-making
Such instant nutrition and farm
performance guidance is an everyday
feature of the CowConnect weighing
system and feeding software, one
of a range of technology-led tools
delivered by Intellync, a division
of AB Agri. Through products such as
CowConnect, Intellync provides its
customers with data-driven insights
that enable them to make better,
faster, more sustainable decisions on
farms – and across the supply chain –
in line with best practice.
Intellync was launched in
December 2018 to bring together
and grow AB Agri’s data, technology
and sustainability capability,
with its complement of deep
agricultural expertise.
It has three business areas:
• FarmWizard, acquired in April
2020, which provides easy-to-use
and navigate dairy farm management
software and milk processor solutions;
THE
SUPPLY
CHAIN
Through our various businesses
we cover the supply chain every
step of the way.
FarmWizard
CowConnect
Provides easy-to-use
and navigate dairy farm
management software.
Provides an innovative weighing
system and feeding solution that
transforms how dairy farms
drive feed accuracy.
Genetics & Breeding
Genetics & Breeding
Genetics & Breeding
Veterinary Services
Veterinary Services
Veterinary Services
Consultant Services
Consultant Services
Consultant Services
Feed & Agri
Feed & Agri
Feed & Agri
Inputs
Inputs
Inputs
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Annual Report and Accounts 2020
• CowConnect, an innovative weighing
system and feeding solution that
transforms how dairy farms drive feed
accuracy. Following the acquisition of
CowConnect in March 2020, it was
combined with AB Agri’s existing
nutrition and farm performance
platform to create a world-leading
feed management solution for the
dairy industry;
• Sustain, which works with food
processors and retailers to enhance
brands, drive continuous improvement
and safeguard supply chains through a
specialised combination of technology
and sustainability services.
Market-leading capability
Underpinning all Intellync’s product
lines is its recently commissioned
Technology Centre in Kilkenny, Ireland.
This new facility is central to the
business’s plans to deliver market-
leading solutions that work across the
entire supply chain. As Intellync expands
its portfolio, it will also increase the
centre’s capability to support customers
around the world and feed a growing
population in a responsible way.
Strategic report
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Strategic Report
PROTECTING
CUSTOMER
BRANDS
Sustain is helping the Co-op to protect its brand,
manage reputational risk and accelerate change by
conducting regular reviews of its agricultural supply
chain. This involves tracking the sustainability
performance of over 300 British farms across
seven food categories against indicators within
the retailer’s five agricultural pillars: animal health,
welfare and quality; community; responsible
resources; environmental practice; and people
and skills. As well as providing an instant and
accurate macro and micro performance picture,
Sustain provides the Co-op and its producers
with action plans to help underachieving
suppliers improve.
This service is helping the retailer to meet its
strategic goals of building consumer confidence in
the Co-op brand; enhancing supplier engagement
and willingness to implement improvements and
providing data-assured evidence to underpin
corporate responsibility reporting.
Sustain
Works with food processors and retailers to enhance
brands, drive continuous improvement and safeguard
supply chains through a specialised combination of
technology and sustainability services.
Farmer
Farmer
Farmer
Processor &
Processor &
Processor &
Food Services
Food Services
Food Services
Brand Owners &
Brand Owners &
Brand Owners &
Retailers
Retailers
Retailers
To the
dinner
table
Annual Report and Accounts 2020
Associated British Foods plc
47
Operating review | Ingredients
UNDERSTANDING
O U R
I S A T O U R
90
YEARS
AB Mauri’s success reflects
its trusted reputation, built
up over almost 90 years
in Brazil.
Read more about how AB Mauri has built
upon its strong reputation in Brazil on page 52
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INGREDIENTS
Our Ingredients businesses supply yeast,
bakery and specialty ingredients to food
and non-food manufacturers.
• AB Enzymes is an industrial biotech
company specialising in enzymes. Its
applications include bakery and other
foods and beverage segments, animal
feed, technical and detergent markets;
• ABITEC supplies specialty lipids and
surfactants for the pharmaceutical,
nutritional and specialty chemical
industries;
• Ohly produces a range of yeast
extracts and culinary seasoning
powders specially developed to
enhance the taste of customer
food recipes;
• PGP International produces specialty
flours and extruded ingredients for use
in a wide range of nutritional products
such as health bars; and
• SPI Pharma develops and supplies
pharmaceutical excipients and
antacids for global pharmaceutical
producers.
ABOUT
AB Mauri
AB Mauri has a global presence in
bakers’ yeast with significant market
positions in the Americas, Europe and
Asia. It is a technology leader in bakery
ingredients, supplying bread improvers,
dough conditioners and bakery mixes
to industrial and craft bakers across
the globe.
The business employs experts who
have extensive knowledge and
understanding of the yeast and bakery
ingredients business, the equipment,
the processes and the raw material. In
addition to bakers’ yeast, AB Mauri also
supplies yeast products to a wide range
of markets outside the bakery sector,
including producers of alcoholic
beverages and bioethanol.
ABF Ingredients
ABF Ingredients is a specialty
ingredients world leader, offering
innovative, differentiated and value-
added products to the food, nutrition,
pharmaceutical, animal feed and
industrial sectors. Its ingredients are
an essential part of products that are
equally likely to be found in the kitchen
and medicine cabinet as in the
laboratory. It comprises a group of
companies operating worldwide under
their own identities, serving customers
in more than 50 countries from
production facilities in Europe, the
Americas and India:
Strategic report
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Strategic Report
STRATEGY
Our Ingredients businesses are
dedicated to understanding the
key requirements of their
customers and end-use markets
in order to ensure a relevant
supply of ingredients, systems,
products and technology that
create value. We 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. The
businesses 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
strategic 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.
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49
Operating review | Ingredients
YEAST, BAKERY
AND SPECIALTY
INGREDIENTS
SUPPLIED GLOBALLY
Our yeast and bakery ingredients
joint venture in China with Wilmar
International received regulatory
approval in April and the new business
commenced operations just after the
year end. Construction of the major
new yeast plant in northern China
is well underway.
ABF Ingredients revenues were in line
with last year. Our enzymes business
delivered very strong sales growth and
record profit with strong sales in feed,
food and technical applications. Ohly, our
yeast extracts business, made excellent
progress in the food and health markets
especially in meat-free alternatives.
These revenue gains were offset by the
effects of increased competition on our
speciality lipids business, ABITEC, and
reduced demand for our protein crisp
inclusions in nutritional bars.
We continue to invest in our research
and development capability. We are
commissioning a new enzymes pilot
plant alongside our enzymes facility in
Finland which will enhance our ability
to bring innovation to market. This
year ABITEC acquired Larodan, a
manufacturer and international marketer
of high purity research-grade lipids.
Larodan will enhance ABITEC’s scientific
capabilities and expand its functional
lipid offerings to the pharmaceutical,
nutritional and industrial markets.
Revenues for Ingredients were 3%
ahead of last year at constant currency.
Strong growth by AB Mauri was partially
offset by a decline in ABF Ingredients to
deliver an increase in adjusted operating
profit of 10%. The results of AB Mauri
in Argentina continue to be reported
under IAS 29 Financial Reporting in
Hyperinflationary Economies, which
reduced operating profit by £5m
(2019 – £6m).
Underlying trading in AB Mauri was very
strong driven by its operations in China
and North America. Non-dairy toppings
are better suited to hot climates and
sales in Brazil grew strongly following
our major investment in a new
production line. Margins were strongly
ahead, with procurement savings and
operational efficiencies adding to the
benefits seen from the increased sales
volumes. The integration of our Italmill
bakery ingredients business, acquired
last year, is now complete. Investment
is underway in a new, expanded, bakery
ingredients technology centre in
the Netherlands.
As a result of COVID-19 restrictions
AB Mauri experienced a rapid and
substantial increase in retail demand
for yeast and bakery ingredients. Sales
were also strong to industrial bakery
customers but demand from
foodservice and craft bakers was lower.
Capacity was increased at a number
of production sites and included the
installation of additional retail yeast
packing lines in China and the
recruitment of additional staff in
North America.
Revenue
£1,503m
2019: £1,505m
Actual fx: In line
Constant fx: Up 3%
Adjusted operating profit
£147m
2019: £136m
Actual fx: Up 8%
Constant fx: Up 10%
Adjusted operating
profit margin
9.8%
2019: 9.0%
2019 IFRS 16 pro forma: 9.1%
Return on average
capital employed
16.7%
2019: 15.9%
2019 IFRS 16 pro forma: 15.5%
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Ingredients in action
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The benefits of VERON® MAXIMA give
AB Enzymes’ customers the opportunity to
differentiate themselves by developing innovative
new products for the baking industry.
By keeping bread fresher for longer, it is hoped
that VERON® MAXIMA will also help reduce
food waste.
Three years in development, VERON® MAXIMA
goes further than a previous trailblazing AB
Enzymes’ baking preparation, VERON® MAC.
The creation of the second-generation product
again illustrates AB Enzymes’ understanding of
the art and science of developing enzymes to
meet customers’ technical and functional needs
and aspirations.
FRESH
NEWS FOR
THE BAKING
INDUSTRY
Bread is fresh for longer thanks to an innovative
new product from our industrial biotech
ingredients business, AB Enzymes.
VERON® MAXIMA is a new enzyme solution for
bread, launched at the Paris Food Ingredients
Europe exhibition in December 2019. It delivers
long-lasting softness, resilience (or ‘springiness’)
and flexibility in bread and is aimed at the global
bread improver sector which makes bakery
ingredients and mixes.
As well as keeping the signs of staleness at bay,
VERON® MAXIMA maintains the nature of
dough and the look and texture of the loaf.
Uniquely, it remains effective at a high dosage,
meaning that customers can scale up their own
production while maintaining impact.
3 years
Three years in
development,
VERON® MAXIMA
goes further than a
previous trailblazing
AB Enzymes’
baking preparation,
VERON® MAC.
By keeping bread
fresher for longer,
it is hoped that
VERON® MAXIMA
will also help reduce
food waste.
Annual Report and Accounts 2020
Associated British Foods plc
51
Ingredients in action
EVERYTHING
BAKERS WANT
90 years
AB Mauri’s success
also reflects its
trusted reputation,
built over almost
90 years in Brazil.
This range expansion
and the greater
capacity, quality and
profile the new facility
allows, has helped
AB Mauri to
significantly grow
sales of non-dairy
cream in Brazil over
the past year.
AB Mauri’s Chantilly whipped cream offers
innovative solutions for bakers in Brazil and
is creating new export opportunities for
the business.
In its domestic market of Brazil, where a tropical
climate and a developing transport infrastructure
can make carriage or storage of conventional
cream difficult, non-dairy Chantilly offers great
value as the ultra heat treated (UHT) range stays
fresh for up to nine months.
State-of-the-art production
Chantilly is thriving in Brazil following AB Mauri’s
investment in a state-of-the-art facility in São
Paulo state, which began operating in April 2019.
Before investing in the Pederneiras facility,
AB Mauri had used a third-party manufacturer
to make its vegetable-based cream.
The new purpose-built facility, with its cutting-
edge process and product technology, is acting
as a springboard for the business’s ambitions in
non-dairy cream. In November 2019, it expanded
beyond Chantilly’s artisanal and home baker
market to launch a culinary cream for the
foodservice industry.
This was followed in October 2020 with a syrup
to keep cakes moist, again for artisanal and home
bakers. This range expansion and the greater
capacity, quality and profile the new factory
allows, has helped AB Mauri to significantly
grow sales of non-dairy cream in Brazil over the
past year.
AB Mauri’s success also reflects its trusted
reputation, built over almost 90 years in Brazil,
and its strong distribution capabilities. It also
points to the rise of a growing middle class and
the increasing sophistication of the country’s
foodservice industry. The business is now
looking to use Brazil as a platform from which
to export non-dairy cream to other parts of
the Americas.
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PAN
Pan Sukpaladisai
Regional Planning Manager,
AB Mauri, North America
Meeting the demands of a new
generation of home bakers
The spike in consumer demand for
yeast during the early days of the
COVID-19 pandemic set a new
challenge for AB Mauri, which
manufactures yeast for the north
American market.
With more time at home, a
rediscovery of baking and making
bread took off across the nation
driving increased demand for yeast
compared with pre-COVID-19 levels.
Pan was tasked with streamlining
the supply chain workstreams
which go into producing and
delivering yeast to the consumer.
This meant coordinating supply and
demand capabilities across AB
Mauri and ACH, which is also one
of its main customers.
Pan worked with AB Mauri’s
supply chain team to increase its
production capabilities, coordinate
the complex packaging supply
requirements for the consumer
yeast product and provide ACH’s
team with an optimised product mix
to keep its yeast supply chain
moving. By August the facility had
increased its production capacity for
consumer yeast products by 150%.
The pressure was on:
we needed to keep
our yeast supply
chains moving for all
of our customers,
including ACH, part
of the wider
Associated British
Foods group and
one of our major
customers. I am very
proud of how our
team worked
together to deliver
this record volume
for our customers.
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Associated British Foods plc
53
Operating review | Retail
Everyone’s
INVITED
22m
Primark has a strong digital
presence with over 22 million
followers across its social
media channels.
Read more about how Primark
stayed in touch with customers
during lockdown on page 64
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RETAIL
Primark is one of the largest fashion retailers
in Europe and the largest by volume in the UK.
ABOUT
Primark is one of the largest fashion
retailers in Europe, offering something
for everyone with a wide selection of
products available across womenswear,
menswear, kidswear, home, health &
beauty and gifting.
It has 384 stores and employs over
70,000 people in the Republic of Ireland,
UK, Spain, Portugal, Germany, the
Netherlands, Belgium, Austria, France,
Italy, Slovenia, Poland and the US.
It was founded in 1969 in the Republic
of Ireland where it continues to trade
as Penneys.
Primark entered its 13th market in
August 2020, opening its first store in
Warsaw, Poland and has announced
plans to open in two new markets:
Prague, Czechia in 2020 and Bratislava,
Slovakia in 2022.
Primark’s success is driven by the
Product team’s ability to identify and
deliver key seasonal trends, along with
the quality of our essentials ranges,
which make up more than half of the
products we sell.
Licensed merchandise continues to
drive significant growth and partnerships
with brands such as Disney and Netflix
have established Primark as a market
leader in the space. Primark’s own brand
PS… Beauty range is one of the fastest
growing categories and the team
continues to innovate and introduce new
products every season.
Strategic report
STRATEGY
Primark’s business model is
based on doing things
differently, allowing us to keep
prices low and offer the best
value on the high street. We
achieve this by doing very little
advertising, focusing instead on
marketing through our website
and popular social media
channels and store windows;
only selling our products
in-store; and making savings on
things like simple packaging.
Primark delivers a vision of
making high-quality affordable
fashion accessible to everyone,
put simply: Amazing Fashion,
Amazing Prices. Although a
bricks and mortar retailer, we
have a strong digital presence
and a high level of customer
engagement with over 22 million
followers across our social
media channels.
Primark is committed to a better
future for people and the planet
and has been working hard for
many years to make sure our
products are made with care
and respect for workers’ rights
and the environment. Standards
in our supply chain are
monitored by our Ethical Trade
and Environmental Sustainability
team, comprising over 120
specialists based in key sourcing
countries. The team visit and
review every supplier factory at
least once a year to make sure
the standards in the factories
that make Primark products are
aligned with our Code of
Conduct.
We have also been making good
progress on our journey to
becoming a more sustainable
company, with our Sustainable
Cotton Programme, ranges from
recycled materials and more
recently, launching an in-store
recycling scheme in the UK.
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Associated British Foods plc
55
Strategic Report Strategic Report AMAZING FASHION,
AMAZING PRICES
Revenue
£5,895m
2019: £7,792m
Actual fx: Down 24%
Constant fx: Down 24%
Adjusted operating profit
£362m
2019: £913m
2019 IFRS 16 pro forma: £969m
Actual fx: Down 60%
Constant fx: Down 62%
Adjusted operating
profit margin
6.1%
2019: 11.7%
2019 IFRS 16 pro forma: 12.4%
Return on average
capital employed
5.6%
2019: 28.9%
2019 IFRS 16 pro forma: 15.2%
New store openings:
UK: Manchester Trafford Centre
Belgium: Mons
France: Lens Noyelles, Strasbourg,
Paris Belle Épine, Paris Plaisir
Germany: Berlin Gropius Passagen, Kiel
Italy: Milan Fiordaliso
Poland: Warsaw Galeria Mlociny
Spain: Barcelona Plaza de Cataluña,
Seville Lagoh
The full year decline in Primark’s revenue
was mainly seen in the third quarter
driven by the total loss of sales for the
period in which our stores were closed
as a result of government restrictions to
contain the spread of COVID-19. Sales in
the first half of the year were 4% ahead
of last year at constant currency driven
by the increase in retail selling space and
supported by a substantial improvement
in like-for-like sales in continental Europe,
with a key driver being a notable
improvement in Germany. All stores
reopened by mid-July and since
reopening we have traded strongly with
a low level of markdown. We estimate
that sales were some £2bn lower as a
result of COVID-19. The reduction in
operating profit from £969m to £362m
was driven by the loss of contribution
arising from the sales shortfall, partially
offset by the benefits of mitigating
actions taken to reduce operating costs.
Compared to pre-COVID-19, sales
performance since reopening has in
aggregate been reassuring and
encouraging. By store the performance
has varied, reflecting the current
circumstances of our customers
including increased home working, less
commuting and much less tourism.
Sales at our stores in retail parks are
higher than a year ago. Shopping centre
and regional high street stores are
broadly in line with last year and large
destination city centre stores, which are
heavily reliant on tourism and
commuters, have seen a significant
decline in footfall. Our 16 largest
destination city centre stores contributed
13% of total sales pre-COVID-19 and
8% of sales after reopening.
In the UK sales since reopening to the
year end were 12% lower on a like-for-
like basis and if the four large UK
destination city centre stores are
excluded the decline was 6%. UK
market data for consumer spend on
clothing, footwear and accessories in all
channels shows that in the 12 weeks to
20 September our value market share
was in line with our pre-COVID-19 share
achieved a year ago. This reflects the
overwhelmingly positive response we
saw from customers on reopening of
stores and the ongoing relevance and
appeal of our value-for-money offering.
Sales in Europe since reopening to the
year end were 17% lower on a like-for-
like basis, reflecting increased public
health restrictions, particularly in Spain
and Portugal. If we excluded our 11
European destination city centre stores,
like-for-like sales were down 14%.
Sales in the US since reopening to the
year end were 10% lower on a like-for-
like basis. However, excluding our
Boston destination city centre store,
they were level last year. Importantly,
our US business was breakeven for the
total period while the stores were open.
Since the year end governments have
been increasing the restrictions on the
movement of people and trading activity
on both a regional and national basis.
At the time of writing, all our stores in
the Republic of Ireland, France, Belgium,
Wales, Catalonia in Spain and Slovenia
are temporarily closed, which represent
19% of our total retail selling space.
The announced period of closure varies
by market. The UK Government has
announced its intention to close
non-essential shops in England for one
month from 5 November to 2 December.
Assuming that this will be passed by the
UK Parliament on 4 November, 57% of
our total selling space will be temporarily
closed from 5 November. Our estimated
loss of sales for these stores, including
the stores in England, for the announced
periods of closure is £375m.
At the half year we recognised an
exceptional charge of £284m as a
provision against the carrying value of
Primark’s inventory. At the time of the
announcement, the dates for the
reopening of Primark stores were not
known and over half of the provision
related to stock which was on display
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We have now committed to pay for
all garments both finished and in
production as well as any fabric costs
incurred for Primark prior to the stores
closing. Orders worth £1.25bn have
been placed with our suppliers for goods
for the autumn/winter season.
In July Primark announced the rollout of
its UK recycling programme, inviting
customers to donate their pre-loved
clothes, textiles, footwear and bags from
any brand. Collection boxes are now
available in all Primark’s UK stores and
donated items will be reused, recycled
or repurposed, with nothing going to
landfill. Profit from the scheme will go to
UNICEF, Primark’s global charity partner,
in support of its education programmes
for vulnerable children around the world.
The store opening programme for the
second half of this year was delayed by
restrictions on access to complete the
fit-out of our stores. Nevertheless, we
successfully opened a total of 12 new
stores during the year, bringing the total
estate to 384 stores trading from 16.2m
sq ft of space compared to 15.6m sq ft
a year ago. We closed our small store in
Rathfarnham in Ireland and relocated
three other stores. We have seen the
benefits from the successful downsizing
of three stores in the US and three
stores in Germany; we have plans for
several more stores in these markets
and have recognised a one-time
non-cash asset write-down as an
exceptional charge of £116m. Of the
new stores opened in the final quarter,
initial trading in our new stores in Plaisir
and Belle Épine in Paris, France and
Warsaw, Poland has been very strong.
We still expect to add a net 0.7m sq ft of
additional selling space in the next
financial year even though COVID-19 has
slowed the development of our store
opening programme. This will comprise
14 new stores with four in Spain; three in
the US; two in Italy; and one each in the
UK, France, Netherlands and Poland as
well as our first store in Czechia, Prague.
We were excited by the customer
response to the opening this October
of two new stores in American Dream,
New Jersey, and Sawgrass Mills,
Florida. We are focused on building the
future pipeline of stores and France,
Italy, Spain, eastern Europe and the US
provide the most significant prospects
for further growth.
UK
Spain
Germany
Republic of Ireland
France
Netherlands
US
Belgium
Portugal
Austria
Italy
Slovenia
Poland
Total
Year ended 12 September 2020
sq ft 000
7,534
1,988
1,841
1,076
996
971
470
403
383
242
257
46
40
16,247
# of stores
190
48
32
36
19
20
9
8
10
5
5
1
1
384
Year ended 14 September 2019
sq ft 000
# of stores
7,449
189
1,850
46
1,830
30
1,085
37
776
15
971
20
470
9
372
7
348
10
242
5
203
4
46
1
–
–
15,642
373
in the closed stores. The earlier
reopening of stores and especially the
subsequent successful spring/summer
trading avoided the need for this
inventory provision and it was released
as an exceptional item. The value of
spring/summer inventory that has been
carried into next year is only some
£150m. Furthermore, Primark’s
working capital at the year end was
lower than last year. A markdown
provision of £22m was created at the
year end for inventory stored on our
behalf by suppliers for longer than usual
as a result of the pandemic.
Total customer spend on clothing,
footwear and accessories in all sales
channels in our markets has been
impacted by COVID-19. It has been
recovering from a low point in April and
the rate accelerated with the reopening
of stores. Since reopening we have
seen increasing numbers of
transactions driven by footfall. The
average basket size was initially
significantly higher than last year,
reflecting some pent-up demand, and
while this outperformance has reduced
it remains higher than a year ago.
We are prioritising the health and
wellbeing of everyone in store and have
received positive feedback from our
customers about the safety measures
in place and the welcoming store
environment. We are working
constantly to optimise the
implementation of in-store safety
measures and have recently installed
additional dividers at the tills in the
majority of our stores which has
enabled more tills to be opened and has
reduced queues.
While the stores were closed a number
of actions were taken to reduce the
overhead costs of the business and
mitigate the monthly cash outflow. This
included access to UK and European
government job retention schemes
designed to provide income for those
employees no longer working and to
preserve their continued employment.
We entered into discussions with other
counterparties, in particular landlords to
seek help with lease payments. Relief
from UK and Republic of Ireland
business rates for the calendar year
from April to March was very welcome.
As we began to mitigate costs we
prioritised more funds to support our
suppliers. We established a wages fund
to ensure workers were paid as soon as
possible for goods in production for
Primark in the most vulnerable
countries and £23m has been paid out.
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57
Retail in action
SAFETY FIRST
AT THE HEART OF
REOPENING STORES
Primark’s windows
were emblazoned with
welcome back messaging
including: ‘We Missed You’;
‘Take Care, Stay Safe’;
and ‘To Our Life-Saving
Health Workers There Are
No Words – Just Love’.
In addition to messaging throughout our
stores, Primark’s windows and social
media sites were emblazoned with
welcome back messaging including:
‘We Missed You’; ‘Take Care, Stay Safe’;
and ‘To Our Life-Saving Health Workers
There Are No Words – Just Love’.
Primark also sent thank you
messages out to store colleagues
acknowledging the commitment,
strength and resilience they had shown
through such challenging times.
Paul Marchant said: “I am particularly
proud of the incredible volunteer effort
by hundreds of our employees across
the globe who coordinated and delivered
care packs with over 450,000 everyday
items to support frontline workers and
patients during the pandemic.”
The care we took in both the measures
we put in place and in communicating
them to our customers, media and local,
regional and national government
representatives were welcomed by
the communities in which we trade.
A number of stakeholders, including
Mayors and MPs, visited new and
reopened stores, commending the
Primark team on the extensive safety
measures put in place.
In addition, the UK government
invited Primark to showcase our
safety measures through a video
and written case study to promote
the safe reopening of retail stores
around the country.
On reopening days there were queues
outside most of our stores and
customers were excited to see us back
trading again. We welcomed them back
with our appealing, value-for-money
offering in a safe store environment
and were pleased to receive positive
feedback about our safety measures.
In March this year all of Primark’s 375
stores across 12 operating markets
were closed due to COVID-19. This
unprecedented event did not stop us
working behind the scenes, to manage
the store closure impacts and to get the
business ready for when we would be
able to reopen and welcome customers
back to our stores.
From April when governments began to
confirm reopening dates, a huge effort
was already underway to ensure
extensive measures would be in place to
help safeguard employees and
customers when our doors reopened.
Those measures closely followed all
safety advice from local governments,
treating such guidance as the minimum
standard. They included strict social
distancing measures, personal
protection for colleagues and customers
and increased in-store cleaning.
All of Primark’s stores reopened over
May, June and July including the
opening of 153 stores in one day,
on 15 June, in England.
At the time, Primark CEO, Paul
Marchant, said: “As we reopen Primark,
nothing matters more than the health
and wellbeing of our colleagues and
customers. We have looked closely at
what has been working across the retail
industry and we are following all safety
advice from governments to help keep
people safe in our stores”.
375
STORES
In March this year,
all of Primark’s 375 stores
were closed in 12 days due
to COVID-19 restrictions.
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153
STORES IN
ENGLAND
All of our stores reopened over
May, June and July including the
reopening of 153 stores in one day,
on 15 June, in England.
HEALTH
& SAFETY
Primark closely followed
all safety advice from
governments, treating this
guidance as the minimum
standard. Our rigorous
health and safety measures
were put in place ahead
of reopening, are still
in place at the time of
publication of this report
and include:
• A strict social distancing protocol
limiting the number of customers
allowed in store at any one time to
allow for the appropriate distance in
between customers and employees.
It also includes clear signage and
floor decals, dedicated employees
and additional security staff, to
guide customers through the store
in a way that limits contact
with others.
• Personal protection for employees
and customers including hand
sanitiser is made available at the
entrance and on the shop floor and
back of house for employee and
customer use. Face masks and
gloves are also made available to
employees and we encourage or
mandate their use in line with all
local government guidelines.
Perspex screens have also been
installed at the tills.
• Increased in-store cleaning: the
frequency and rigour of store
cleaning has increased, particularly
around high frequency touchpoints
such as tills, escalators, lifts and
employee areas in back of house.
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59
Retail in action
The webinars we
held during COVID-19
have provided
factories with much
needed information
and have broken
misconceptions
about COVID-19. Not
only did we provide
hygiene and safety
protocols that might
otherwise not have
been offered, the
programme was able
to offer mental health
support to anyone
who needed it during
this challenging time.
ANN
Ann Sunil
Ethical Trade Project Manager,
India, Primark
Supporting workers in the Indian
supply chain
Primark partners with St John’s Medical
College in Bangalore on its My Space
project, designed to support factories in
establishing counselling services for
workers. The programme aims to reduce
stigma around mental health and
improve the working environment in the
supplier factories in south India that
manufacture products for Primark.
In the wake of COVID-19 Ann realised
we needed to refocus the existing
My Space programme to provide
accurate information about COVID-19 for
counsellors to relay to factory workers,
particularly given the stigma and myths
that were circulating about the virus.
Primark’s team in India worked with
St John’s to create new webinars,
delivered by trained medical staff from
St John’s, and to expand the programme
to reach more factories and mills in our
supply chain, recognising the urgent
need for information to support the
health of workers.
The work was all done remotely,
providing a valuable opportunity for
Primark to stay engaged virtually with
management and workers from over 130
factories and mills in our supply chain as
well as offer professional medical
support to those who might otherwise
have not been able to access it.
The programme is ongoing at the time
of publication and is expected to expand
into Pakistan to reach many more
factories and mills before the end of
the calendar year.
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THANK
TO OUR HEALTH WORKERS
While all of our Primark stores were closed due to
COVID-19, many of our teams around the world
diverted their efforts to putting together donation
packs. This work was in direct response to calls from
health authorities, including the NHS in the UK, and
charities, for urgent supplies of everyday items.
Primark care packs were given to busy health workers
and others working back-to-back shifts or who were
staying away from home, often to protect their
families from infection. They were also offered to
patients who had no means of getting a fresh change
of clothes or toiletries from home.
It was Primark’s way of saying thank you to the
healthcare heroes working tirelessly in the fight
against COVID-19.
450,000
Primark donated 450,000 products,
such as underwear, leggings, t-shirts,
footwear, toiletries and towels to
hospitals, charities and health workers.
140,000
The business also distributed 140,000
Easter food products to homeless
shelters, hospitals and charities.
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61
Retail in action
MAKING THE
CUSTOMERS’
WORLD A BETTER
PLACE
‘Primark’s brand new Wellness collection
is here and we want everything’. This one
magazine headline sums up the enthusiastic
response of customers and the wider media
to the stunning new range.
All products in the landmark Primark
Wellness collection are made from organic
cotton, recyclable fibres or other sustainable
materials, or encourage shoppers to put their
personal wellbeing first through comfort, rest
and reflection.
The 80-piece range is part of the Primark
Cares initiative, the business’s commitment
to being a responsible retailer and to offering
more products that use more environmentally-
friendly materials. Its launch reflects
growing consumer demand for more
sustainable products and a rising interest
in personal wellbeing activity, from
mindfulness to pampering.
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Amazing Primark prices
The Wellness collection marks the first time that
Primark has combined womenswear, menswear,
homeware and skincare under one range.
Constituent pieces range from 100% sustainable
cotton robes and aromatic candles, to printed
performance crop tops and matching leggings
made from recycled materials. Most items were
created specifically for the collection and, as ever,
are for sale at amazing Primark prices starting
from £2.
Primark Wellness was launched internationally at
the end of February across more than 200
Primark stores. The full collection was displayed
in a dedicated purpose-built ‘Primark Wellness’
hub in 43 of our stores across the UK, Europe
and the US. Reflecting the collection’s guiding
principles, the hubs use Forest Stewardship
Council-certified wooden fixtures, recyclable
display panels and cardboard hangers.
Pop-up preview
London shoppers got an exclusive preview of
the collection when it debuted two weeks before
the official launch, in Primark’s first-ever pop-up
store. The 1,500 sq ft store was located at
BOXPARK, in east London’s fashionable
Shoreditch, where pop-up shopping and dining
units are made entirely from refitted shipping
containers.
Customer demand for Primark Wellness products
has been extremely high, particularly in the UK
and Germany. At BOXPARK itself, Primark
extended the pop-up opening period from two to
five weeks to meet the strong interest.
Primark is now considering extending the
collection by introducing more products from
different categories.
80
pieces
There are 80 pieces
in the new Wellness
range which is part
of the Primark Cares
initiative.
What makes Primark
Wellness products
special? They:
• are made using more
sustainable materials,
whether it’s cotton
from Primark’s
Sustainable Cotton
Programme (where
farmers learn about
more sustainable
farming methods
that use less water
and chemicals) or
wood and paper
from sustainable
wood sources; or
• use organic cotton,
which has been
produced without
chemical pesticides
or fertilisers, to
reduce its
environmental
impact; or
• incorporate recycled
materials, to give
new life to used
materials that would
otherwise be thrown
away, such as
recycled polyester,
which comes from
plastic waste such as
bottles and
other single-use
containers; or
• support customers’
personal wellbeing,
by encouraging
comfort, rest,
relaxation and
reflection.
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Retail in action
CONNECTING
BRAND,
INFLUENCERS
AND
CUSTOMERS
Stars from Primark’s
collective of celebrity,
fashion and beauty
influencers hosted a
virtual pyjama party in
May using the brand’s
social media channels
and connecting
customers around the
world to our brand.
Primark’s strategy of partnering with local social
media influencers with strong social media
profiles is central to its aspiration to connect with
customers and be seen as a good friend in all
markets. This is best summed up by its core
brand message, ‘Everyone’s invited’.
By teaming up with well-known people in
countries across the international footprint,
Primark is able to tap into and focus on what
matters to each local community while also
creating a global community using some
influencers with wider appeal.
Virtual Celebrity Pyjama Party
One of the ways Primark deployed its local
influencer strategy during lockdown was via
a virtual pyjama party that went global in May.
Stars from Primark’s collective of celebrity and
fashion and beauty influencers hosted a pyjama
party, using the brand’s Instagram, Facebook and
TikTok social media channels.
Alice Liveing, fitness guru and a Primark brand
ambassador, got the party started with an
Instagram tutorial on making ‘really tasty, slightly
healthy’ banana and date flapjacks. This was
followed by: beauty blogger Sophie Hannah
Richardson revealing the secrets for a sparkling
party look; Love Island winner – and another
Primark brand ambassador – Kem Cetinay (and
his mum), opening up the family kitchen for a
cocktail class; JLS singer Aston Merrygold taking
families through a TikTok dance routine; and
reality TV personality Ashley James spinning
a live DJ set. Children were included, with
early-evening Disney singalongs and stories
keeping the little ones entertained.
Millions of people, many sharing pictures of
themselves in their favourite Primark nightwear,
viewed the videos and images posted by the
33 participating influencers. Almost 600,000
followers viewed contributions from Spanish
fashion blogger Dulceida, who partnered with
Primark on a stunning clothing range in late 2019.
Primark has around 500 influencers as part of
its local influencer strategy across all its markets.
They have differing profiles: some have tens of
thousands of followers, others millions. Each is
contracted to post an agreed number of images
and videos, to complement Primark marketing
themes and product launches.
Many post far more than required due to the
mutual goodwill developed through our
relationship with them. Themes range from
global – ‘wellness’ is a network-wide focus every
new year – to local – the US team marks 4th of
July and Labor Day public holidays.
Local empathy
Local knowledge and showing empathy was
particularly important when different countries
were at varying stages in the pandemic. During
this time, as illustrated by the Primark pyjama
party, the brand changed its influencers’ focus
from product lines to staying at home and
keeping well and safe. It also showcased a
new type of celebrity, shining the spotlight on
everyday heroes such as teachers.
When our stores reopened from early May, we
continued to encourage our influencers to explore
wellness themes relevant to each country. For
example, with people finally able to get out of the
house, Irish influencers followed a ‘Love Ireland’
theme, posting images of themselves in Primark
outfits in their favourite national location.
Primark’s supportive community ethos is
underlined by the personalities of its influencers.
It does not team up with out-of-reach superstars;
the collective is made up of people who are
genuine Primark customers, to whom customers
can relate.
600,000
FOLLOWERS
Almost 600,000
followers viewed
Spanish influencer
Dulceida during
Primark’s virtual
pyjama party.
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FOCUS ON:
STACEY SOLOMON
X PRIMARK KIDS
Stacey Solomon’s
collection for Primark
kids sold out in the
Republic of Ireland
and UK in just three
weeks.
Stacey Solomon X Primark Kids
Having collaborated with Primark on two very
successful womenswear collections, in July
2020 Stacey launched her inaugural kidswear
collection. In her characteristically down-to-
earth style, she confided to her 3.7 million
Instagram followers what this meant to her:
“I never thought in a million years a shop like
Primark, somewhere I’ve shopped in since I
was a little girl, would ever ask me to work
with them. When they asked me if I’d like to
design and create a children’s range with
them I could have burst… I’ve put my heart
and soul into it, down to every last detail and
I really hope you love it as much as I loved
making it... I love you all to the moon and
back.” #iworkwithprimark
Stacey’s aspiration that the customers love
the product “as much as I loved making it”,
was realised emphatically. The collection
sold out in both the Republic of Ireland and
UK, where she is particularly well-known,
within three weeks. It also sold strongly
in Primark’s other markets, where it was
promoted by local influencers. Many agreed
with Lauren, one of Stacey’s 1.5 million
Twitter followers, who tweeted on launch
day: “I have never been so in love with
a range like this @StaceySolomon”.
Annual Report and Accounts 2020
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65
Strategic Report Strategic Report Strategic report Financial review
John Bason
Finance Director
OUR BALANCE
SHEET REMAINS
ROBUST
When Primark’s stores were closed in March,
and with no certainty as to when they could be
reopened, immediate steps were taken to
secure the liquidity of the group with an
increased focus on central cash availability.
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This year’s tax charge on the adjusted
profit before tax was £263m at an
effective rate of 28.8% (2019 – 21.5%).
The increase in the effective tax rate
was a result of the much lower Primark
profits in the UK and Ireland. Based on
corporation tax rates at the time of
writing, we expect next year’s effective
tax rate to decrease from this level to
some 25% as Primark’s profitability is
expected to recover.
The total tax charge for the year of
£221m benefited from a credit of £42m
(2019 – £25m) for tax relief on the
amortisation on non-operating intangible
assets, amortisation of acquired
inventory fair value adjustments, profits
on disposal of non-current assets, losses
on disposal of businesses and
exceptional items.
Earnings and dividends
Earnings attributable to equity
shareholders in the current year were
£455m and the weighted average
number of shares in issue during the
year, which is used to calculate earnings
per share, was 790 million (2019 – 790
million). Given the decline in operating
profits and exceptional items charged
this year, earnings per ordinary share
were 48% lower than last year at 57.6p.
Adjusted earnings per share, which
provides a more consistent measure of
trading performance, declined by 41%
from 137.5p to 81.1p.
No interim dividend was paid this year.
As stated in the Chairman’s statement
the dividend consideration was based
on Primark’s trading experience this
year and, at the time of writing, the
increasing restrictions in a number of
Primark’s major markets. On balance the
Board has elected not to propose a final
dividend for the year.
Group performance
Group revenue reduced by 12% on a
reported basis to £13.9bn mainly as a
result of the total loss of sales for the
period in which Primark’s stores were
closed. On a reported basis adjusted
operating profit was 28% lower at
£1,024m. These financial statements
adopt IFRS 16 Leases in the current year
and under our chosen transition option
the prior year has not been restated.
Adjusted operating profit for last year on
an IFRS 16 proforma basis would have
been £61m higher than the £1,421m
reported. Comparative adjusted
operating profit for the business
segments on an IFRS 16 pro forma basis
is set out in the operating review. In
calculating adjusted operating profit, the
amortisation charge on non-operating
intangibles, profits or losses on disposal
of non-current assets, transaction costs,
amortisation of acquired inventory
fair value adjustments and exceptional
items are excluded from statutory
operating profit.
The income statement this year includes
exceptional items of £156m. £116m
relates to a one-time non-cash asset
write-down of Primark stores. At the half
year we recognised an exceptional
charge of £284m as a provision against
the carrying value of Primark’s inventory.
At the time of the announcement, the
dates for the reopening of Primark stores
were not known and over half of the
provision related to stock which was on
display in the closed stores. The earlier
reopening of the stores and subsequent
successful trading of the spring/summer
inventory avoided the need for this
provision. At the year end a markdown
provision of £22m was created for
inventory stored on our behalf by
suppliers for longer than usual as a result
of the pandemic. In the light of the beet
volumes contracted by Azucarera in the
second crop year after reducing the beet
price, we have revised our financial
forecasts for this business. This has
resulted in a one-time non-cash write-off
of goodwill of £23m as an exceptional
charge. Insurance proceeds of £30m
more than offset the £25m costs of the
closure of our Speedibake Wakefield
factory following the fire in February.
On an unadjusted basis, statutory
operating profit was 37% lower than last
year at £810m.
The strengthening of sterling this year
against some of our trading currencies
has resulted in a loss on translation of
£16m. The transactional effect in the
movement in the US dollar on Primark’s
largely dollar-denominated purchases
was negligible. Next year, based on the
current US dollar exchange rates, we
expect a positive effect on the Primark
margin in our second half.
Net finance expense increased this year
due to the inclusion of lease interest of
£84m following the adoption of IFRS 16.
The reduction in other financial income
reflected the reduction in the surplus of
our defined benefit pension schemes
between the 2018 and 2019 year ends.
Losses on the disposal of three small
businesses amounted to £14m and
profits less losses on sale of non-current
assets were £18m.
Statutory profit before tax on a reported
basis was down 42% to £686m. On our
adjusted basis profit before tax was
down by 35% to £914m.
Acquisitions and disposals
AB World Foods acquired the Al’Fez
brand, AB Agri acquired small farm data
and technology businesses in Denmark
and Northern Ireland and Ingredients
acquired Larodan for a combined
consideration of £19m.
Following regulatory approval the AB
Mauri joint venture in China with Wilmar
International commenced operations just
after the year end.
The three small businesses disposed of
this year were the Australian cake
business, Jasol New Zealand and a small
bakery in Wuhan, China. Total proceeds
were £2m.
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. Our Board-
adopted tax strategy is based on seven
tax principles that are embedded in the
financial and non-financial processes and
controls of the group. This tax strategy is
available on the group’s website at:
www.abf.co.uk/documents/pdfs/
policies/abf_tax_strategy.pdf.
Annual Report and Accounts 2020
Associated British Foods plc
67
Financial review
continued
Balance sheet
The adoption of IFRS 16 Leases at
15 September 2019 resulted in the
recognition of £3.2bn of non-current
right-of-use assets and £3.7bn of lease
liabilities, together with a reduction in
other liabilities of £0.3bn. The following
commentary reflects balance sheet
movements in the year excluding those
arising on the adoption of IFRS 16.
Non-current assets of £10.9bn were
£0.5bn lower than last year. This was
driven by a decrease in the investment
in property, plant and equipment,
right-of-use assets and intangible assets
with depreciation, amortisation and
impairments higher than capital
expenditure and acquisitions made in
the year. There was also a reduction in
employee benefits assets as the surplus
in the UK defined benefit pension
scheme declined.
Working capital at the year end was
lower than last year. Working capital in
the food businesses was much lower
than last year as a result of strong
demand for our products in the second
half. Primark’s working capital was also
lower with goods for the autumn/winter
season ordered later than usual this year.
Net cash at the year end excluding lease
liabilities was £1.56bn compared with
net cash at the end of last year of
£936m reflecting the strong operating
cash flow in the year. Net debt including
lease liabilities was £2.1bn compared
with £2.7bn at the date of transition
to IFRS 16.
The group’s net assets are broadly
unchanged at £9.4bn. Return on capital
employed for the group which is
calculated by expressing adjusted
operating profit as a percentage of the
average capital employed for the year,
was lower this year at 9.5% compared
with 13.8% last year on an IFRS pro
forma basis, driven by the reduction in
Primark’s profit.
Cash flow
Net cash inflow from operating activities
increased from £1,509m to £1,753m.
The removal of some £300m of lease
payments from this measure, following
the adoption of IFRS 16, and the
reduction in working capital described
above more than offset the lower
operating profit. Capital expenditure
reduced by £115m compared to the prior
year with some projects delayed by the
restrictions arising from COVID-19.
£30m was realised from the sale of
property, plant and equipment. The net
cash outlay on acquisitions and disposals
was £14m.
Tax paid in the year amounted to £254m
(2019 – £269m). The impact this year of
the acceleration of the phasing of
quarterly payments to HMRC, such that
all of the tax due for a year is payable in
that year, was more than offset by the
lower tax payable as a result of the
reduction in the group’s profit.
Financing and liquidity
The financing of the group is managed
by a central treasury department.
When Primark’s stores were closed in
March, and with no certainty as to when
they could be reopened, management
action was taken immediately to secure
the liquidity of the group and the focus
on central cash availability was
increased. The group’s Revolving Credit
Facility (RCF) was drawn down to
protect against the possibility of a
banking liquidity crisis. We considered it
to be prudent to seek a waiver for the
RCF covenant test for February 2021
from our relationship banks and this
was confirmed on 8 April. Access was
granted to the Bank of England Covid
Corporate Financing Facility (CCFF)
on 15 April. Our Interim Results
Announcement on 21 April confirmed
the adoption of the going concern basis
in preparing the condensed consolidated
interim financial statements.
In August a two-year extension to the
RCF was agreed, extending its maturity
to July 2023, and the facility was repaid
in full. The waiver of the RCF covenant
test for February 2021 remains in place.
The CCFF was not utilised during the
financial year. We do not intend to use it
and as a result will allow our eligibility to
lapse on 31 December 2020.
At the year end, the group had total
committed borrowing facilities
amounting to £1.5bn, comprising £1.1bn
provided under the RCF, £0.3bn of US
private placement notes, maturing
between 2021 and 2024, and £0.1bn of
local committed facilities in Africa. This
excludes the CCFF which we expect to
expire shortly. At the year end, £0.4bn
was drawn down under the private
placement notes and local committed
facilities. The group also had access to
£0.5bn of uncommitted credit lines
under which £0.1bn was drawn at the
year end.
Cash and cash equivalents totalled
£2.0bn at the year end of which available
central cash on hand amounted
to £1.6bn.
Pensions
The group’s defined benefit pension
schemes were in deficit by £66m at the
year end compared with a surplus last
year of £33m. The UK scheme, which
accounts for 91% of the group’s gross
pension assets, was in surplus by £94m
(2019 – £220m). The reduction in the UK
pension surplus was driven by the
decline in long-term UK bond yields
during the year. These yields increased
the value of the defined benefit
obligations for accounting purposes and
so decreased the UK pension surplus.
The pension deficit for the group will
result in an interest expense next year
compared to an interest income this
year, and this is reported in other
financial income.
These accounts reflect the triennial
valuation of the UK scheme undertaken
at 5 April 2017 which determined a
surplus of £176m on a funding basis.
As a result there was no requirement to
agree a recovery plan with the trustees.
The latest triennial valuation at 5 April
2020 has not yet been finalised but we
expect this valuation to lead to a
moderate deficit.
The charge for the year for the group’s
defined contribution schemes, which
was equal to the contributions made,
amounted to £79m (2019 – £80m). This
compared with the cash contribution to
the defined benefit schemes of £37m
(2019 – £50m).
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Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
We recognised lease liabilities at
transition of £3.7bn and right-of-use
assets of £3.2bn.
The pro forma effect on group and
Primark metrics for 2019 was as follows:
• The balance sheet at transition would
have shown net debt including lease
liabilities of £2.7bn.
• Adjusted operating profit in 2019
would have increased by £61m, with
rental expense replaced by
depreciation of right-of-use assets.
• Interest expense in 2019 would have
increased by £82m of interest charged
on lease liabilities.
• Adjusted profit before tax in 2019
would have reduced by £21m.
• Adjusted earnings per share would
have reduced by 2% from 137.5p to
135.4p.
• Primark’s margin would have
increased from 11.7% to 12.4% due to
higher adjusted operating profit, with
store rental expense replaced with a
depreciation charge on right-of-use
assets.
• Primark’s return on capital employed
would have decreased from 29% to
15%, as right-of-use assets are now
included in capital employed.
There is no change to overall net cash
flows and while this is a significant
change in financial reporting, our
business model remains unchanged
and our balance sheet remains robust.
John Bason
Finance Director
New accounting standards
The accounting policies applied
during this financial year, and details
of the impact of adoption of new
accounting standards in future financial
years, are set out in the Significant
accounting policies.
The following accounting standards
were adopted during the year and had
no significant impact on the group other
than IFRS 16 Leases:
• IFRS 16 Leases
• IFRIC 23 Uncertainty over income
Tax Treatments
• Prepayment Features with Negative
Compensation (Amendments to
IFRS 9)
• Plan Amendment, Curtailment or
Settlement (Amendments to IAS 19)
• Long-term Interests in Associates and
Joint Ventures (Amendments to
IAS 28)
• Annual Improvements to IFRS
2015-2017
The group adopted IFRS 16 Leases this
year, which is the most significant
accounting change for our group for
many years. It has affected many
aspects of the group’s financial
statements, including operating profit,
earnings per share and net debt, as well
as return on capital employed.
The vast majority of the lease liabilities
relate to Primark’s leasehold store
estate. The effect on our food
businesses, where many of our
properties are owned under freeholds,
is much less significant.
We transitioned using the ‘modified
retrospective’ approach, under which
the comparative period is not restated.
The effects of adopting IFRS 16 at our
transition date of 15 September 2019
and the 2019 results on an IFRS 16
pro forma basis are set out in the
Significant accounting policies.
Annual Report and Accounts 2020
Associated British Foods plc
69
Responsibility
LIVING
OUR VALUES
2020 has been a challenging
year, but one thing has remained
constant: our commitment to
operating responsibly
and ethically at all times.
Our purpose is to make millions of people’s lives
better through the provision of safe, nutritious
food and affordable clothing. Being a purpose-
driven business has helped us to navigate 2020,
a year like no other.
We achieve our purpose through living and
breathing our values every day, in how we
responded to COVID-19, particularly the way
we have treated people, in our principal business
decisions and how we continue to work for the
safe and long-term success of our group.
Our values are:
Respecting everyone’s dignity
We strive to protect the dignity of everyone
within and beyond our operations, so that the
people who make our products feel safe,
respected and included.
During the latter months of COVID-19, we
consulted with employees about their safe return
to offices and other workplaces, providing a
range of assistance including emotional and
mental health support.
Acting with integrity
We proudly promote and protect a culture of
trust, fairness and accountability that puts ethics
first. From farms and factories right through to
our boardroom, we are committed to embedding
integrity into every action.
This has been demonstrated this year by the
group’s leadership team taking salary reductions
and the Board’s decision, following the reopening
of the majority of Primark’s stores, not to take
advantage of the UK Government’s Job
Retention Bonus scheme.
Respecting
everyone’s
dignity
Acting
with
integrity
Progressing
through
collaboration
Pursuing
with
rigour
At the start of the
COVID-19 outbreak
earlier this year,
we established
a group level
steering committee
to respond in a
timely manner to
the dynamic
changes, including
reimagining working
environments for
many of our people.
Progressing through collaboration
We work with others to leverage our global
expertise for local good. Through collaboration
with our stakeholders, including non-
governmental organisations (NGOs), we’re
working to create safer, fairer working
environments and promoting thriving,
resilient communities.
Regular engagement with our stakeholders is
fundamental to the success of the group and this
year contributed to many of our businesses being
able to respond to unprecedented demand for
their products.
Pursuing with rigour
From the products we make to the way
we preserve the resources we rely on and
support the people we work with, we are
always learning and incorporating better
practices. Across our businesses, we are
partnering with industry experts to help us
work towards the highest standards.
At the start of the COVID-19 outbreak earlier this
year, we established a group level steering
committee to respond in a timely manner to the
dynamic changes, including reimagining working
environments for many of our people. We also
proudly witnessed many individuals going above
and beyond expectations to meet the changing
demands on their businesses and colleagues.
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Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
MAKING A POSITIVE
CONTRIBUTION
Our businesses aim to make a lasting contribution to society. Our values help us to articulate the long-term benefits we
can deliver for our people, suppliers, neighbours, customers and the environment.
INVESTING IN
OUR PEOPLE
We prioritise the safety and wellbeing
of our employees, contractors and
others we work with and aim to
cultivate diverse and inclusive
workplaces where everyone is
respected, supported and
empowered to fulfil their potential.
133,425
people employed
£46m
invested in safety
risk management
53%
of our total workforce and
37% of our senior management
are women
1.3m
hours of training benefitting
our employees
RESPECTING THE
ENVIRONMENT
We work hard to reduce greenhouse
gas emissions, use natural resources
efficiently and promote ecosystems,
biodiversity and animal health
and welfare.
55%
of the energy we used came
from renewables
84%
of the waste we generated was
sent for recycling, recovery or
other beneficial use
25%
of total water abstracted was
reused before being returned to
the environment
£25m
invested in environmental risk
management
SUPPORTING
SOCIETY AND
STRENGTHENING
OUR SUPPLY
CHAINS
We respect the rights of people
within and beyond our operations,
develop products that help to support
healthy lifestyles and aim to
strengthen the communities where
our suppliers live and work.
6,952
hours of social and environmental
training delivered to Primark
suppliers
475,000
people’s lives improved by the
Twinings Sourced with Care
programmes
2.6m
meals provided through surplus food
donations to foodbanks
3,234
audits of supplier factories
by Primark
see page 73
see page 78
see page 80
Annual Report and Accounts 2020
Associated British Foods plc
71
Responsibility | Reporting and stakeholders
REPORTING AND
STAKEHOLDERS
Non-financial reporting
requirements
The Companies Act 2006 requires the
Company to disclose certain non-
financial reporting information within the
annual report and accounts. Accordingly,
the disclosures required in the
Company’s non-financial information
statement can be found on the following
pages in the Strategic report (or are
incorporated into the Strategic report by
reference for these purposes from the
pages noted):
• Information on our employees
(pages 73 to 77);
• Information on diversity
(pages 75 to 76);
• Information on our Anti-bribery and
Corruption Policy (page 76–77);
• Information on our Whistleblowing
Policy (page 77);
• Information on our approach
to human rights (page 78–79) ;
• Information on social matters
(pages 78–79); and
• Information on our Environment Policy
and management (pages 80–83).
Further information on these can also
be found in our 2020 Responsibility
Update and ESG Appendix.
Further responsibility and
ESG disclosures
Our Responsibility Report has evolved
into two separate documents. In 2020,
we are publishing a Responsibility
Update, Living our Values which
showcases our values in action and
demonstrates how our businesses
make a lasting positive contribution by
investing in our people; supporting
society and supply chains; and
respecting the environment.
The second is our Environmental,
Social and Governance (ESG) Appendix.
In recognition of increasing expectations
to disclose the non-financial performance
of our material impacts, we report
here more data to complement the
Responsibility Update.
We engaged EY to provide limited
assurance over the reliability of 17
environment and safety key
performance indicators (KPIs) for the
year ended 31 July 2020. These are
marked with the symbol ∆ in these pages.
There is also further information on our
website at www.abf.co.uk/responsibility,
which includes our current and previous
responsibility reports, our Modern
Slavery and Human Trafficking
Statement and our climate, water and
deforestation reports to the CDP.
Engaging with stakeholders
Our scale, employing 133,000 people
and with operations in 53 countries
across the world means, that our
activities matter to, or have an impact
on, many people. Our reporting is
intended to provide our wide range of
stakeholders with an overview of our
approach to addressing social and
environmental issues while also creating
a positive impact where we can.
Detailed information about our approach
to stakeholder engagement and specific
activities this year can be found on
pages 14–19 of this Annual Report.
At a group level we engage with a
variety of stakeholder groups including
shareholders, governments, media and
investors through a range of methods.
As part of daily business activities and
through structured processes, our
businesses routinely engage with
customers, suppliers, regulators and
industry bodies.
In addition to the detail on pages 14–17,
below are some examples of how we
disclose information, collaborate with
others and engage with others through
our responsibility focus areas.
People
We were pleased to be one of 34
responding companies to the pilot phase
of the Workforce Disclosure Initiative and
have now submitted our response to the
fourth survey.
Society and supply chains
We engage with a number of
organisations on issues around
human rights, including the Corporate
Human Rights Benchmark (CHRB),
Ethical Trading Initiative (ETI) and
KnowTheChain. We collaborate
with suppliers, using SEDEX and
AIM-PROGRESS.
Examples of business level engagement
with NGOs on local and subject-specific
matters are shared in our 2020
Responsibility Update, Living our Values.
Environment
Through CDP reporting, we share our
annual performance in mitigating the
risks associated with climate change,
water and deforestation, as well as
maximising the business opportunities
and necessary operational adaptations.
Our reports are publicly available at
www.cdp.net and on our website.
Individuals and teams from the group
and our businesses engage with industry
bodies and others in our sectors on a
range of environmental issues. These
include energy, sustainable agriculture,
climate change and water stewardship.
This is in recognition that when we
collaborate with others, we can all learn
from each other and drive greater
positive impact.
ESG assessments
Investor interest in ESG-related issues
has grown in recent years as more
emphasis is placed on valuing the
long-term worth of companies; their
contribution to society and the
environment; and on robust and
transparent governance. We receive
multiple requests throughout the year
to complete or check assessments and
surveys and we engage with individual
investors and investor-related ESG
research agencies to provide the
information. Despite publishing accurate
and assured non-financial data, we find
that we are regularly explaining that our
business model does not fit neatly into
a survey or standard question set.
Our ESG Appendix is published in
response to these increasing requests for
performance data and is an example of
the growing importance of disclosing a
wide range of publicly available ESG data.
72
Associated British Foods plc
Annual Report and Accounts 2020
We also aim to cultivate a diverse and
inclusive working environment where
everyone’s dignity is respected, there
are equal opportunities to progress
and people are empowered to fulfil
their potential.
As a diverse, decentralised organisation,
our businesses operate in different
global contexts, so they are given the
flexibility to manage these issues at a
local level. Whilst we offer our businesses
significant autonomy when it comes
to our people, we have a clear set of
principles that are common to all:
• we provide a safe and healthy
workplace;
• we offer equal opportunities in
recruitment, career development and
promotion whatever their sex, age,
race, religion or sexual orientation;
• we proactively support employees
when pregnant or as new parents;
• we give full and fair consideration to
applicants with disabilities; the
training, career development and
promotion of disabled persons should,
as far as possible, be the same as that
of other employees;
• we do not tolerate sexual, mental or
physical harassment in the workplace;
• we brief and engage with our
employees on a regular basis to create
a common understanding of the
financial and non-financial
performance of the group and we
seek our employees’ views to take
them into account in decision making;
• we will take all steps necessary to
minimise the risks to our employees’
and customers’ safety.
Workforce engagement
Employee engagement is crucial to
embedding our Company culture and
values, and to helping our people see
how their efforts contribute to their
division’s and Associated British Foods’
strategic objectives.
Richard Reid, our designated non-
executive director for engagement with
the workforce, has undertaken various
meetings with employees over the last
year in this role. Knowledge from these
meetings and a formalised process for
communicating information about the
business level workforce are shared with
the Board to keep them informed of
employee issues including engagement
and communication, learning and
development and safety and wellbeing.
INVESTING IN
OUR PEOPLE
Our people are our greatest asset
and central to our success. The
importance we place on their safety
and wellbeing has never been more
of a priority than during the difficult
circumstances we have all
faced this year.
Annual Report and Accounts 2020
Associated British Foods plc
73
Strategic report Responsibility | Our people
continued
Effectively sharing information is key
to our success here, whether via
leadership updates and regular internal
communications (such as emails,
intranet or magazines), or employee
fora and town hall meetings where a
two-way conversation is encouraged.
We measure employee engagement
through surveys which allow us to
focus resources on the areas where
improvement would derive the most
benefit for our people.
Our engagement programmes also
include social events, opportunities to
celebrate our business successes and
employee recognition schemes.
Corporate responsibility programmes
play an important role too, by creating
opportunities for our people to volunteer
or raise money for good causes which
are important to them.
Across the group, we invest in
apprenticeships, graduate schemes,
bursaries and training for young people,
as well as extensive development
programmes for promising talent,
managers and leaders. These
programmes are bespoke, ensuring
they meet the specific needs of each
business division.
Health, safety and wellbeing
Loss of life in our operations is entirely
unacceptable and we are deeply
saddened to report three work-related
fatalities this year ∆; an Azucarera
contractor maintaining heavy machinery
in Spain and two employees working for
Illovo in Tanzania and Mozambique. One
employee was killed by a falling wall as
a result of a vehicle reversing and the
other was a security guard fatally
attacked by a criminal gang.
We investigate all fatalities and serious
accidents thoroughly, share the learnings
with all our operations and take remedial
action where possible to minimise the
risk of such events recurring.
Our approach to safety
Keeping our people safe, including
contractors and those affected by our
activities, is a priority and the leadership
team in every business division is
responsible for creating a culture that
promotes safe working practices.
All our businesses must comply with
Associated British Foods’ Health and
Safety (H&S) Policy (www.abf.co.uk/
responsibility) and to operate within the
safety framework provided by the group,
Number of employees
2020
2019
2018
2017
2016
133,425
138,097
137,014
132,590
129,916
Reportable injury rate (%)
2020
2019
2018
2017
2016
0.32
0.54
0.63
0.59
0.47
within which business division and site
level safety performance is monitored,
audited and remedial actions are tracked.
We have many safety programmes in
place to encourage our people to take
responsibility for keeping themselves
and their colleagues safe. In particular
this year we started a pilot programme
to monitor the road safety of vehicles
which transport our goods. We deliver a
wide range of training on high-risk areas
to ensure our people are equipped with
robust safety knowledge.
Our businesses invest in programmes
to drive continuous improvements in
standards for health and safety. This
year, over £46m was invested in safety
risk management, of which 31% was
dedicated to COVID-19 safety measures
for employees, customers and other
visitors to our stores and manufacturing
sites. Investments this year included in
improving working in confined spaces
and at height, fire risk assessments and
equipment upgrades, dust monitoring
and air quality, improvements to lighting
and safety signage and emergency first
aid training.
Our safety performance this year
This year, 74% of our factories and retail
operations achieved a year’s operation
without any Reportable Injuries and 66%
did not have an employee Lost Time
Injury (LTI).
In 2020, LTIs among employees
decreased by 40% from 682 last year
to 406 ∆. This equates to an LTI rate of
0.42% of our people experiencing an
injury that resulted in time off work. For
contractors, the LTI rate for the year was
0.18%. There was also a 47% decrease
in Reportable Injuries to employees from
573 in 2019 to 306 this year. This
equates to 0.32% of our employees
having a Reportable Injury.
A healthy workforce extends beyond
managing health and safety risks. Our
holistic approach includes programmes
to help employees, and in many cases
their families, to maintain and improve
their wellbeing. Sound mental health is
an essential part of this and we continue
to invest in programmes that raise
awareness and provide practical
assistance to our people.
We have a collection of programmes
that support staff health and wellbeing
such as the nomination of a team of
wellbeing champions in Jordans Dorset
Ryvita and the creation of an employee
steering group for wellbeing activities in
Silver Spoon. As a demonstration of
respecting everyone’s dignity and
personal circumstances, we have
provided additional emotional and
mental health support to help our
employees manage the impacts of
COVID-19.
Health and safety fines
During 2020, we received 3 safety fines
∆ with a cost of £212,000 ∆ which fell
within the reporting year. All the
businesses involved are required to
report to Associated British Foods’
Safety and Environment Manager on
when and how remedial actions are
implemented.
For more details on health, safety and
wellbeing across our businesses, see
our 2020 Responsibility Update and ESG
Appendix for performance data.
Product safety
Maintaining food safety and quality is
a core part of our work, both across
the group and within our individual
businesses. Each of our businesses
has clear policies, procedures and the
identification of individuals with
responsibility for food safety as part of
its quality management system. These
systems are audited annually. For more
information see pages 33–36 of our
2020 Responsibility Update.
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Annual Report and Accounts 2020
Promoting diversity and inclusion
Diversity is key to our culture, gives us a
competitive edge and is one of the ways
we live our values every day. We strive
to create diverse, inclusive working
environments in which everyone’s
dignity is respected and people are
valued regardless of ethnicity or race,
religion, gender, age, nationality, sexual
orientation or disability. We also work to
break down any bias or barriers, both
real and perceived. Over the course of
the year ahead, our non-executive
director with responsibility for workforce
engagement will spend more time to
build the picture of how each of our
division’s businesses approach diversity
and inclusion.
For details on diversity as it relates
to the Board of the Company, please
see below.
Gender metrics
We are delighted that we employ
70,397 women across the world which
demonstrates the success of our various
initiatives to achieve no barrier to talent.
Among the most senior levels, reporting
to the divisional CEOs and group
functional directors, temporary changes
in structure as some of our businesses
reshape has reduced our balance, as
reported to Hampton Alexander,
from 24% to 23% women. We
remain committed to increasing
the diversity and inclusion within our
workforce at all levels and will do this in
a way that is right for our decentralised
structure. Given our decentralised
business model, many policies that
foster diversity in the workforce are
developed and delivered locally. We also
operate initiatives across Associated
British Foods to promote diversity and
these include:
• Senior and high-potential women are
invited to join ‘Women in ABF’, which
meets three times a year providing a
chance for networking, learning and
support for personal career
development. The group currently has
over 700 members.
• Diversity and Inclusion Task Force,
through which representatives from
across the business share knowledge
and embed best practice into our core
processes and unconscious bias
training for managers.
• Two-Way Mentoring programme,
through which more than 260
individuals from 16 countries have
received mentorship and support from
a senior leader in a business different
to their own.
Strategic report
Examples from across the group:
• To strengthen the culture of inclusivity,
Westmill created community
connections and prioritised
recruitment partners with experience
in attracting talent from under-
represented race and ethnicity groups.
As a result, 55% of new starters and a
third of internal promotions belong to
such communities.
• AB Mauri’s global team is also piloting
a toolkit that includes a ‘gender
decoder’ tool that recruitment staff
can use when writing job profiles and
adverts and includes guidance on
unconscious bias and structured
interview methods.
• Our UK Grocery businesses are
removing barriers for talent who
identify as having a disability and have
created a lesbian, gay, bisexual,
transgender and intersex (LGBTI)
network, worked on intergenerational
conflict and established a Leading
Inclusively programme which has
been attended by 117 managers and
leaders to date.
Gender metrics
Associated British Foods plc Board directors are not included in the table below.
We currently have two women and six men on the Company’s Board.
Grocery
Sugar
Agriculture
Ingredients
Retail
Central
Total
Total
employees*
Men in
workforce
Women in
workforce
16,491
32,390
2,565
6,665
74,813
501
11,038
27,134
1,823
4,966
17,763
304
5,453
5,256
742
1,699
57,050
197
133,425
63,028
70,397
* Full-time, part-time and seasonal/contractors.
** Includes directorships of subsidiary undertakings.
See page 23 of ESG Appendix for definitions.
Percentage
of workforce
who are
women
Number
of senior
management
roles**
Number
of men
in senior
management
roles
Number
of women
in senior
management
roles
Percentage
of senior
management
who are
women
33%
16%
29%
25%
76%
39%
53%
803
277
346
592
282
58
498
188
201
422
131
40
2,358
1,480
305
89
145
170
151
18
878
38%
32%
42%
29%
54%
31%
37%
Annual Report and Accounts 2020
Associated British Foods plc
75
Responsibility | Our people
continued
Gender Pay Gap reporting excluding Primark (2019 figures are restated below)
At the mean, women’s hourly
pay rate is
At the median, women’s hourly
pay rate is
At the mean, women’s bonus
pay rate is
At the median, women’s
bonus pay rate is
4.0%
8.8%
higher than that of men
(2019: 1.7% higher)
higher than that of men
(2019: 8.1% higher)
50.3%
lower than that of men
(2019: 48.1% lower)
79.4%
higher than that of men
(2019: 45.9% higher)
36.3% of men received a bonus
(2019: 39.7%)
47.5% of women received a bonus
(2019: 55.8%)
Proportion of men and women in each pay quartile
Upper
Upper middle
Lower middle
Lower
29.9
28.5
2020
2019
Men
Women
70.1
71.5
2020
2019
26.7
26.6
Men
Women
73.3
73.4
2020
17.6
2019
16.9
Men
Women
82.4
2020
83.1
2019
27.5
27.5
Men
Women
72.5
72.5
Gender pay and bonus gaps are calculated by comparing the mean (average) and median (central value in the data list) measures for women to that of men and
identifying the percentage difference between the two.
Gender pay gap reporting
Overall, the gender balance of
Associated British Foods is fairly equal,
with women making up 53% of our total
global workforce. More than half of our
workforce is employed outside Great
Britain and is therefore not included in
this Gender Pay analysis.
Consistent with previous years, we
have chosen voluntarily to report on
the gender pay gap that relates to our
employee population in Great Britain as
of 5 April 2020. However, this year’s
data excludes Primark employees
because the majority were on the
Government job retention scheme or
had taken voluntary pay cuts at the
reporting date. As a result, we have also
restated the 2019 numbers on the same
basis for comparison.
In the main, the pay gap remains similar
to comparable data last year. The pay
gap remains in favour of women as we
have a significant majority of male
employees who work in a manufacturing
environment. These employees are
being compared to women who, on
average, work in middle management.
In our foods businesses in Great Britain
there are more women in the upper
quartile than any other, however they
remain underrepresented at the most
senior level of the organisation.
Gender balance at the top of the group
changes slowly because we have a
stable senior team. The greater
presence of senior men in this bonus
pool has a distorting effect on the mean
bonus gap.
The median bonus, as in previous years,
demonstrates a gap in favour of women.
This difference reflects the varying
composition of bonuses across our
different businesses and the
methodology of the gender pay
calculation which includes long service
awards and recognition awards. These
awards are typically smaller in scale,
given to men in the manufacturing
environment and are being compared
to bonuses for women in middle
management.
As required by the UK Equality Act
2010 (Gender Pay Gap Information)
Regulations 2017, we submit data for
our relevant legal entities to the UK
Government through their website.
Anti-bribery and corruption policy
Our values commit us to acting with
integrity, meaning that compliance with
relevant legislation is a given and we
hold ourselves to higher ethical
standards. Our Anti-Bribery and
Corruption Policy and related procedures
apply to all our people.
They set out the behaviours and
principles required and contain guidance
on issues such as engaging new
suppliers and other third parties and the
giving and receiving of gifts, hospitality
and entertainment.
Our approach to governance is to
respect not simply the letter, but also the
spirit, of our policy and act always with
integrity. To ensure the effective
implementation of our policy and
procedures, each business has its own
designated Anti-Bribery and Corruption
Officer and we have monitoring systems
in place at various levels within the
group including global risk assessments.
In addition, all relevant employees are
required to complete an e-learning
course on the subject when they join the
Company and at regular intervals
76
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Annual Report and Accounts 2020
Strategic report
In the year to June 2020, 136
notifications were received, of which:
• 28% were resolved, with outcomes
ranging from reviews of processes
and support for individual employees
to, where necessary, termination of
contracts;
• 40% were unsubstantiated and
required no action; and
• 32% remain under investigation.
A copy of Associated British Foods’
Whistleblowing Policy is available at:
www.abf.co.uk/responsibility.
thereafter and those who work in higher
risk roles are required to attend regular
face-to-face training.
We encourage our people to report any
concerns that they may have and
provide a confidential and independent
whistleblowing service managed by
Expolink (see following section) to
facilitate this.
A copy of Associated British Foods’
Anti-Bribery and Corruption Policy is
available at: www.abf.co.uk/
responsibility.
Whistleblowing policy
Effective and honest communication is
essential if wrongdoing is to be dealt
with effectively. Our value of pursuing
with rigour includes those engaged in
malpractice and we are serious in
wanting to hear from colleagues about
such examples.
Our Whistleblowing Policy provides
guidelines for people who feel they need
to raise certain issues in confidence. It is
designed to protect those raising a
genuine concern, in line with the Public
Interest Disclosure Act 1998 or other
jurisdictional legislation.
We have a whistleblowing telephone
hotline in place, managed by Expolink,
which can be used by our people, or
others, wherever they work in the world.
Any calls made to the hotline are
disseminated to the senior management
team responsible for investigating issues
raised. A thorough investigation is then
undertaken and any remediation agreed.
When a report is received, senior
executives are alerted so that an
investigation can begin, and appropriate
action taken. The independent and
confidential nature of this customised
hotline helps to build trust among those
who wish to speak up. In all cases,
allegations are assessed, and
appropriate action taken where required.
53%
Overall, the gender balance of
Associated British Foods is fairly
equal, with women making up
53% of our total global workforce.
Annual Report and Accounts 2020
Associated British Foods plc
77
Responsibility | Society and supply chains
SUPPORTING
SOCIETY AND
STRENGTHENING
OUR SUPPLY
CHAINS
Our scale and range of operations mean
that our positive contribution to society
is sizeable. This is amplified through our
work with our supply chains and we
seek to build a positive impression in
the communities where we operate.
Our values drive us to place considerable
importance on the long-term wellbeing
of the communities we operate in, the
benefits we can deliver to the people we
rely on in our supply chains and the
consumers who buy our products.
We are committed to respecting the
rights of everyone within our own
operations, as well as in our supply
chains and beyond. This commitment is
more important than ever during times
of crisis and we have strived to minimise
the impact of any human rights risks
associated with COVID-19.
The pandemic had a devastating impact
on the garment industry, and the effect
on the retail supply chain has been
significant. All Primark stores had to
close over the course of just 12 days in
March due to the COVID-19 outbreak.
With no idea of how long stores might
be closed, tough decisions were needed
– including the need to cancel orders.
Nonetheless, the Company took
considerable steps to support and
protect all the workers in its suppliers’
factories. By July, Primark had pledged
to pay suppliers in full for all outstanding
finished garments, and to use or pay
for any finished fabric liabilities. This
followed earlier commitments to pay, in
full, for orders that were in production,
finished and planned for handover by
17 April. Since stores reopened, by July
Primark had placed around £1.2bn of
orders. More details on these series of
decisions can be found on page 18 of
this Annual Report.
Respecting human rights
In recent years there has been a growth
in legislation and reporting requirements
on businesses’ responsibility to respect
human rights. We have welcomed this
trend towards mandating greater
disclosure about human rights impacts.
Motivated by our Company values, we
have consistently sought to provide our
stakeholders with relevant information
about the work being undertaken across
our businesses to promote and respect
human rights.
Our Modern Slavery Statement can
be found at www.abf.co.uk/modern_
slavery. A number of our businesses
have also produced independent
statements in accordance with the
UK Modern Slavery Act and links
to these can be found at
www.abf.co.uk/responsibility.
We provide opportunities that promote
human rights and dignity every day
through the employment we create,
78
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Annual Report and Accounts 2020
Strategic report
• this year Jordans Dorset Ryvita
completed its first face-to-face
supplier training on modern slavery,
which focused on traders for our
Turkish commodities.
Priority commodities
Our businesses purchase a significant
variety of different commodities to make
the food we manufacture and clothing
items we sell. Our businesses have
identified a range of priority commodities
that they will focus on sourcing
responsibly.
For example, Primark has identified
cotton as a focus commodity. Primark’s
Sustainable Cotton Programme provides
growers in three countries with training
in sustainable farming methods, helping
them to increase productivity and
improve their livelihoods; see page 28
of the 2020 Responsibility Update for
further information.
Promoting consumer health
and wellness
As a business that is proud to sell a
range of food items and ingredients,
we take seriously our responsibility to
promote healthy diets and lifestyles.
We do this in three main ways:
Education: We help educate
consumers by running campaigns that
provide them with accurate information
about aspects of their diet like fibre and
sugar. Two such examples are Jordans
Dorset Ryvita’s programme FibreFit (see
2020 Responsibility Update page 33)
and AB Sugar’s Making Sense of Sugar
campaign (see 2020 Responsibility
Update page 33).
Product labelling: Our businesses
provide clear product labelling and in
many cases this includes the addition
of enhanced nutritional information.
One example is the Tip Top brand that
features clear front-of-pack nutritional
information aligned with a national public
health campaign in Australia called ‘A
Grain of Truth’ (see 2020 Responsibility
Update page 34).
Reformulation: As a business operating
in a range of food and ingredient sectors,
we have an opportunity to reformulate
finished products and ingredients.
Allied Bakeries is a business offering
reformulated products fortified with
folic acid and more vitamins and
minerals (see 2020 Responsibility
Update page 34).
both directly and indirectly in our global
supply chains, and through the positive
contribution our products make to
people’s lives. As a group we work to
respect human rights of all the people
with whom we interact. Whether they
are direct employees, temporary
workers or those in our supply chain,
we know we can play a role in
enhancing their lives.
In line with the decentralised nature of
the group, human rights matters are
primarily managed by our individual
businesses. This also enables the most
salient human rights matters to be
tackled most effectively by those who
best understand the local context. We
engage and collaborate with a broad
range of interested and concerned
stakeholder groups, seeking to remain
sensitive to the risks of adverse human
rights impacts resulting from our
products, services and operations.
Every year we have sought to deepen
our efforts to tackle modern slavery
and respect human rights. We are proud
of the work that has gone on within
and across our businesses. However,
the last 12 months have seen
unprecedented human impact as a result
of COVID-19. This impact has touched
the lives of our employees, customers
and workers in the supply chain and we
recognise that in a time of crisis the
most vulnerable are the ones impacted
greatest. We continue to work to ensure
we have effective policy, due diligence
and remediation, and know that moving
forward our focus remains on the health
and safety of all and doing all we can to
support our suppliers.
This year, we are pleased many of our
businesses have engaged in activities
that align with the internationally
recognised framework of the United
Nations Guiding Principles on Business
and Human Rights (UNGPs):
Policy: As a group we have a suite
of policies that set the standards and
create mechanisms to respect human
rights – this includes our Supplier
Code of Conduct, Whistleblowing Policy
and business-specific human rights
policies (e.g. Twinings’ new Human
Rights Policy).
Due diligence: Twinings and AB Agri
have sought to understand the actual
and potential human rights risks
throughout the value chain and our
Sugar businesses conducted due
diligence to understand the different
risks across their various operations.
Remedy: Over the last few years,
Primark has been working to review,
revise and improve its approach to
remedy and grievance mechanisms.
To educate workers across ten supplier
factories in China about their rights and
responsibilities, Primark uses the
Company IQ mobile phone application.
Developed by Microbenefits, the app
offers access to digital wage slips, a
confidential grievance mechanism and
‘micro-training’ modules on a range
of topics.
For further information see pages 24–32
of our 2020 Responsibility Update with
additional information provided in the
ESG Appendix.
Raising awareness and training
In collaboration with Twinings, last year
we developed an online ethical training
module designed to raise awareness of
modern slavery. The course seeks to
educate our people about modern
slavery and forced labour, providing
real-life examples and highlighting the
importance of managing known
business risks. The course also outlines
how those operating in our supply chain
can help to keep it free from modern
slavery and human trafficking. This
course was made available to all our
businesses and, since it was launched,
has been completed by 972 employees.
Where risks of modern slavery are
high, we ask our suppliers to conduct
their own Modern Slavery training.
For instance, some of the agencies
that provide us with temporary labour
have conducted training internally at
our request.
In addition, a number of our businesses
have created tailored training to raise
awareness. For instance:
• Westmill provided Modern Slavery
training to 91% of those employees
whose role involves recruitment or
procurement;
• AB Agri trained its transport
managers, commercial teams and
delivery drivers (who visit more than a
thousand farms across the UK every
year) to recognise the signs of modern
slavery and forced labour;
• AB Sugar created a video to raise
awareness of the potential for modern
slavery in its supply chain and to
provide staff with advice on how to
act on concerns, such as contacting
independent whistleblowing hotlines.
AB Sugar is currently exploring how
the video can be shared with its
suppliers. So far, over 75% of those
employees invited have completed the
training; and
Annual Report and Accounts 2020
Associated British Foods plc
79
Responsibility | Environment
RESPECTING THE
ENVIRONMENT
We are committed to seeking
sustainable solutions to environmental
challenges and adapting our
operations to respond to changes
in the natural environment.
The world’s resources are under
increasing pressure from the growing
demands of a rising population, and
climate change is exacerbating these
challenges. These are global challenges
that we cannot solve by ourselves, but
we are working hard at a group and
business level to minimise our
environmental impacts through a range
of activities designed to reduce
greenhouse gas (GHG) emissions, use
energy, water and other natural
resources more efficiently and promote
biodiversity.
Acting on climate change
Increasingly unpredictable and severe
weather events are already affecting
food security, consumption habits and
the availability of natural resources. We
are also seeing and experiencing the
impact of climate change on our
operations and supply chain through
prolonged droughts, heatwaves and
flooding, leading to the need to adapt
our operations and consider the
medium- to long-term strategic impact
on our businesses. We use the Task
Force on Climate-related Financial
Disclosure’s (TCFD) recommendations
to inform our approach on climate action
and related disclosures.
Climate change is integrated into
our group risk assessments. The
Board is accountable for effective
risk management and therefore has
accountability for the management of
climate related risks. As part of our
strategic review of climate change, we
commissioned the UK’s Met Office
to model the potential impact of a 2°C
to 4°C temperature rise on our
operations and major supply chains.
This will help inform our plans for
addressing climate risks.
Our ambition to reduce our overall
environmental footprint therefore
includes business-led commitments
to reduce GHG emissions, recognising
the Paris Climate Agreement which aims
to limit global temperature rises well
below 2°C above pre-industrial levels by
the end of the century. Working
collaboratively with others in our sectors,
industry bodies and suppliers, our
businesses are investing in ways to
withstand the challenges of the
changing climate while taking advantage
of new opportunities including product
innovation and increased efficiencies.
80
Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
1,600
FEWER
JOURNEYS
Primark is extending its UK
fleet with 15 new Longer Semi
Trailers (LSTs), which will each
carry twice the stock as
existing trailers. It is estimated
that this will result in 1,600
fewer journeys every year.
Our businesses have a role to play in the
transition to a low carbon economy by
increasing the efficiency of our buildings,
operations, logistics and agricultural
activities, by using renewable energy
where feasible and by investing in new
technologies.
Our energy-intensive businesses, and
those reliant on secure crop supplies,
have initiatives to manage their impacts
and adapt to changes and have thus set
goals to reduce their emissions. For
example:
• Primark is extending its UK fleet with
15 new Longer Semi Trailers (LSTs),
which will each carry twice the stock
as existing trailers. It is estimated that
this will result in 1,600 fewer journeys
every year, 728,000 fewer kilometres
travelled and the elimination of 680
CO2e tonnes from Primark’s UK
transport operations;
• AB Sugar has made a commitment to
reduce its end-to-end supply chain
carbon footprint by 30% by 2030; and
• AB Agri is investing in environmental
life cycle assessment to support
better choices on both sourcing of
feed ingredients and for livestock
diet design.
For more information on our approach to
managing climate risk and our alignment
to the TCFD disclosure recommendation,
see our climate change section in our
2020 Responsibility Update.
We publish further detail on our
climate-related governance and risk
management through CDP’s report at
www.cdp.net.
In 2020, our total energy use was
22,877 GWh ∆, a 3% decrease on 2019.
Our sugar businesses consumed 82%
of the group’s total, or 18,883 GWh ∆.
Our total emissions (Scopes 1, 2 and 3)
have reduced again this year. For 2020,
we report a 9% reduction compared
with last year to 4.32 million tonnes
CO2e ∆. Some of this reduction can be
attributed to reduced operations during
the COVID-19 pandemic but we also
recognise that our businesses
continuously seek to reduce their
emissions. This is demonstrated by
the downward trend in our emissions
since 2017.
We also report our emissions classified
as ‘out of scope’, which are CO2
emissions resulting from the use of
renewable fuels. As these are
considered to be net zero or carbon
neutral, they are reported separately.
Reducing our energy use
As energy generation is our primary
source of GHG emissions, all our
businesses are working hard to improve
energy efficiency on a continuous basis,
as well as via investment projects.
In addition, the price volatility of the
energy we purchase means that
rigorous energy management is a key
operational focus.
In 2020, we exported 1,002 GWh ∆
of energy, which is a 3% increase
compared with last year. Some of our
sites generate energy on-site using
renewable sources of fuel and when this
is surplus to their needs, they export it to
the national grid or other organisations.
For over ten years we have reported
our group and, more recently, business
division energy use and greenhouse
gas emissions. In compliance with UK
reporting requirements, we provide on
page 82 our UK energy and greenhouse
emissions data. The principal energy
efficiency measures to reduce our
carbon emissions include the introduction
of energy monitoring systems,
conversions to LED lighting and
upgrades to production machinery such
as compressors and boilers to improve
efficiencies. For more examples of
energy efficiency actions, see our 2020
Responsibility Update on pages 43-46
and more granular performance data
included in our ESG Appendix.
Annual Report and Accounts 2020
Associated British Foods plc
81
Responsibility | Environment
continued
Our greenhouse gas emissions
Scope 1 – combustion of fuel and operation
of facilities
Scope 1 – generation and use of renewables
Scope 1 Total
Scope 2 – emissions from purchased energy
(location method)
Scope 2 – emissions from purchased energy
(market method)
Scope 3 – indirect emissions from use of third-
party transport
Total emissions (Scopes 1, 2 location method
and 3)
Out of scope emissions
2020 emissions
(000 tCO2e)
2019 emissions
(000 tCO2e)
2,719
78
2,797 ∆
758 ∆
783
764 ∆
4,319 ∆
4,045
3,087
75
3,162
831
Reporting for the
first year in 2020
753
4,746
3,962
Emission intensity (Scopes 1 and 2)
256 tonnes per
£1m of revenue
252 tonnes per
£1m of revenue
We report our GHG inventory using the WRI/WBCSD GHG Protocol Corporate Accounting and Reporting
Standard Revised Edition as our framework for calculations and disclosure. We use carbon conversion
factors published by the UK’s Department for Business, Energy and Industrial Strategy (BEIS) in July 2020,
other internationally recognised sources, and bespoke factors based on laboratory calculations at selected
locations. This includes all activities where we have operational control. Scope 2 market-based emissions
have been calculated in accordance with the GHG Protocol Scope 2 Guidance on procured renewable
energy. For 2019 and 2020, Scope 3 emissions are our third-party transport emissions only.
Streamlined energy and carbon reporting
Energy consumed (GWh)1
UK operations
Outside UK operations
2020 ∆
2019
5,292
17,585
5,826
17,740
Scope 1 and 2 emissions
(000 tCO2e)2
UK operations
Outside UK operations
1,299
2,256
1,532
2,461
1. To calculate our energy in GWh, we divide the total KWh by a million.
2. We report our scope 2 location method emissions for 2019 and 2020.
We report our energy consumed and associated GHG emissions from electricity and fuel, Scopes 1 and 2
location method using WRI/WBCSD GHG Protocol Corporate Accounting and Reporting Standard Revised
Edition as our framework for calculations. See our ESG Appendix, pages 21-22 for more detail.
We also continuously explore how we
can better use renewable energy. Of the
total energy we used this year, 55% or
12,462 GWh ∆, came from renewable
sources. This equates to a 2% increase
in the amount of renewable energy
generated and used on site compared
with last year. Most of this energy (92%)
came from bagasse – the residual fibre
left after sugar is extracted from sugar
cane – from our operations in Africa.
We also use on-site anaerobic digesters
(AD) to generate biogas from waste
streams, such as British Sugar’s AD
plant in Suffolk and AB Agri’s facility in
Yorkshire. This year biogas accounted
for 2% of the total renewable fuels
generated and used on our sites.
Water management
Our businesses invest in initiatives to
reduce water abstraction per tonne of
product and increase their ability to
reuse water for cleaning or cooling
equipment or for irrigation before
returning it to the environment. By
reusing water, we reduce the amount
which is abstracted in the first place. In
2020, we abstracted 847 million m3 ∆
of water which is a 4% decrease
compared with last year. Of the total
water abstracted, 25% was reused
within our operations before finally
returning it to the watercourse.
This year we are also reporting the
amount of waste water from our
operations; 115 million m3 of waste
water was treated and then returned
to the watercourse.
Managing waste
We look for positive ways to use the
waste we create, through reuse and
recycling or by creating by-products such
as energy, soil or animal feed. Ultimately,
we are seeking to work towards helping
to progress towards a circular economy.
This year we generated 585,000 tonnes
∆ which is a 7% decrease compared
with last year. Of the total generated,
84% was recycled, recovered or had a
beneficial use. Through the continuous
improvement on waste segregation,
working with local suppliers to manage
increasing quantities of waste which can
be recycled and reducing the inputs to
create waste in the first place, we are
demonstrating strong performance in
waste management.
Packaging and plastics
Packaging is essential for containing
and protecting our products during
transit and on the shelf and we remain
committed to initiatives that improve
recyclability and recycling rates, reduce
volume and weight and avoid waste. In
2020, Associated British Foods used
245,000 tonnes ∆ of packaging. This is
a 5% decrease compared with last year.
Opportunities to use innovative,
bio-based materials are limited, not
least due to the strict regulations
governing the materials that can be
used in contact with food. However,
we continue to explore potential new
packaging solutions. We believe that all
stakeholders need to work together to
create the recycling infrastructure
needed for a truly circular economy for
plastics and welcome initiatives which
encourage this development.
In line with The UK Plastics Pact, signed
in 2018, our UK Grocery businesses
have committed to eliminate problematic
and unnecessary single-use plastic
packaging such as PVC and polystyrene,
have 100% recyclable, reusable or
compostable plastic packaging, and
achieve 30% average recycled content
in their packaging. Furthermore, Primark
has removed 175 million units of plastic
from its business, including single-use
labels and hangers.
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Annual Report and Accounts 2020
Strategic report
Scope 1, 2 and 3 GHG emissions
(000 tonnes CO2e)
Waste generated (000 tonnes)
and proportion recycled
2020 ∆
2019
2018
2017
2016
4,319
4,746
4,966
5,057
5,258
2020
84%
2019
80%
2018
82%
2017
83%
2016
79%
585
∆
632
770
Energy consumption (GWh) and
proportion from renewable sources
Quantity of packaging used
(000 tonnes)
2020
55%
2019
2018
2017
2016
52%
50%
49%
49%
22,877
∆
2020 ∆
23,600
23,200
23,300
22,800
2019
2018
2017
2016
Water abstracted (million m3)
2020 ∆
2019
2018
2017
2016
847
880
837
811
800
1,000
1,000
245
259
256
243
248
Environmental compliance
This year we received 16 environmental
fines ∆ with a cost of £51,000 ∆ which
fell within the reporting year. These were
largely due to the treatment of waste
water, management of on-site waste,
and dust. The sites have addressed
the issues and liaised with the local
authorities and regulators to ensure
standards are met.
Biodiversity and
healthy ecosystems
From healthy soil to habitats that
encourage pollination, biodiversity is
vital to our operations. We work to
protect ecosystem services to enhance
production on the farms from which
we source our key ingredients. To
read more about our work to support
biodiversity, see pages 53–57 in our
2020 Responsibility Update.
Furthermore, as a diverse group of
businesses, we buy a wide range of
commodities and support farming and
harvesting practices that protect and
respect the environment. Where we
identify potential risks to the world
around us – such as deforestation – we
seek to mitigate or remediate them. See
our CDP Deforestation report for more
detail at www.abf.co.uk/responsibility.
As a diverse group of
businesses, we buy a wide
range of commodities, and
support farming and harvesting
practices that protect and
respect the environment.
Annual Report and Accounts 2020
Associated British Foods plc
83
Principal risks and uncertainties
RISK
MANAGEMENT
Our approach to risk management
The delivery of our strategic objectives
and the sustainable growth (or long-term
shareholder value) of our business, is
dependent on effective risk management.
We regularly face business uncertainties
and it is through a structured approach to
risk management that we are able to
mitigate and manage these risks and
embrace opportunities when they arise.
These disciplines have proved to be
effective as we navigate our way
through the challenges resulting from
the COVID-19 pandemic.
The diversified nature of our operations,
geographical reach, assets and
currencies are important factors in
mitigating the risk of a material threat
to the group’s sustainable growth and
long-term shareholder value. However,
as with any business, risks and
uncertainties are inherent in our
business activities. These risks may
have a financial, operational or
reputational impact.
The Board is accountable for effective
risk management, for agreeing the
principal, including emerging, risks
facing the group and ensuring they are
successfully managed. The Board
undertakes a robust annual assessment
of the principal risks, including emerging
risks, that would threaten the business
model, future performance, solvency or
liquidity. The Board also monitors the
group’s exposure to risks as part of
the performance reviews conducted
at each Board meeting. Financial risks
are specifically reviewed by the
Audit Committee.
Our decentralised business model
empowers the management of our
businesses to identify, evaluate and
manage the risks they face, on a timely
basis, to ensure compliance with
relevant legislation, our business
principles and group policies.
Our businesses perform risk assessments
which consider materiality, risk controls
and specific local risks relevant to the
markets in which they operate. The
collated risks from each business are
shared with the respective divisional
chief executives who present their
divisional risks to the group executive.
The group’s Director of Financial Control
receives the risk assessments on an
annual basis and, with the Finance
Director, reviews and challenges them
with the divisional chief executives, on
an individual basis.
These discussions are wide ranging and
consider operational, environmental and
other external risks. These risks and their
impact on business performance are
reported during the year and are
considered as part of the monthly
management review process.
Group functional heads including
Legal, Treasury, Tax, IT, Pensions, HR,
Procurement and Insurance also provide
input to this process, sharing with the
Director of Financial Control their view
of key risks and what activities are in
place or planned to mitigate them.
A combination of these perspectives
with the business risk assessments
creates a consolidated view of the
group’s risk profile. A summary of
these risk assessments is then
shared and discussed with the
Finance Director and Chief Executive
at least annually.
The Director of Financial Control holds
meetings with each of the non-executive
directors seeking their feedback on the
reviews performed and discussing the
key risks, which include emerging risks,
and mitigating activities identified
through the risk assessment exercise.
Once all non-executive directors have
been consulted, a Board report is
prepared summarising the full process
and providing an assessment of the
status of risk management across the
group. The key risks, mitigating controls
and relevant policies are summarised
and the Board confirms the group’s
principal risks. These are the risks which
could prevent Associated British Foods
from delivering its strategic objectives.
This report also details when formal
updates relating to the key risks will
be provided to the Board throughout
the year.
Key areas of focus this year
Effective risk management
processes and internal controls
We continued to seek improvements
in our risk management processes to
ensure the quality and integrity of
information and the ability to respond
swiftly to direct risks. During the year,
the Audit Committee on behalf of the
Board conducted reviews on the
effectiveness of the group’s risk
management processes and internal
controls in accordance with the 2018
UK Corporate Governance Code. Our
approach to risk management and
systems of internal control is in line with
the recommendations in the Financial
Reporting Council’s (FRC) revised
guidance ‘Risk management, internal
control and related financial and business
reporting’ (the Risk Guidance).
The Board is satisfied that internal
controls were properly reviewed and key
risks are being appropriately identified
and managed.
COVID-19
The COVID-19 pandemic continues to
be a worldwide crisis and the situation
is still uncertain. Authorities continue to
impose restrictions on both a regional
and local basis. Since March, when the
pandemic became apparent, the Audit
Committee, on behalf of the Board
have provided ongoing support and
challenge of management’s processes
and internal controls.
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Strategic report
• Disruption to EU-UK logistics –
The businesses that could be
impacted by this have reviewed
their exposure and where appropriate
have plans to increase inventory
levels to partially mitigate the risk.
The ability to do this is constrained
by warehouse availability and the shelf
life of the goods.
• Data – Where necessary, the
businesses have agreed Standard
Contractual Terms to enable certain
personal data to be transferred from
the EU to the UK.
• People – The businesses have
publicised the UK government’s
Settled Status Scheme and where
appropriate have assisted employees
with the application process.
Our principal risks and uncertainties
The directors have carried out an
assessment of the principal risks facing
Associated British Foods, including
emerging risks, that would threaten its
business model, future performance,
solvency or liquidity. Outlined below
are the group’s principal risks and
uncertainties and the key mitigating
activities in place to address them.
These are the principal risks of the
group as a whole and are not in any
order of priority.
Associated British Foods is exposed
to a variety of other risks related to a
range of issues such as human
resources and talent, community
relations, the regulatory environment
and competition. These are managed
as part of the risk process and a number
of these are referred to in our 2020
Responsibility Update. Here, we report
the principal risks which we believe are
likely to have the greatest current or
near-term impact on our strategic and
operational plans and reputation.
They are grouped into external risks,
which may occur in the markets or
environment in which we operate, and
operational risks, which are related to
internal activity linked to our own
operations and internal controls.
The ‘Changes since 2019’ describe
our experience and activity over the
last year.
Whilst our businesses had not planned
for a global pandemic, under extraordinary
circumstances, our teams reacted with
immediacy to adapt to the evolving
situation. Effective communication both
within the divisions and across the group
has ensured that appropriate actions
were taken to enable our food
businesses to operate fully, providing
safe, nutritious, affordable food to
customers and meeting increased
demand. Primark stores were able to
reopen safely as restrictions were lifted.
Many lessons have been learnt over
the past six months and we have
developed a flexible set of possible
responses that are ready to be deployed
in the event of further restrictions being
imposed, whether that be locally,
regionally or globally.
When this virus was first identified, our
initial concern was the supply of goods
for Primark and, to a lesser extent, some
food ingredients sourced from China. As
the pandemic progressed, the most
significant challenges we faced were
maintaining the production of essential
food and food ingredients and the cash
flow impact arising from the closure of
all Primark stores between March and
their reopening, in line with local market
regulations, throughout May, June and
July. We took immediate steps to ensure
adequate cash liquidity.
Whilst Primark stores were closed,
we paid for in full, and took delivery of,
very large amounts of completed stock.
A fund was established to ensure
everyone in a vulnerable country who
worked on a Primark garment, whether
completed or not, is paid for that
work. In July, we committed to pay
our garment suppliers in full for all
outstanding finished garments
and to utilise or pay for any finished
fabric liabilities.
A significant number of our employees
continue to work from home. To
support seamless homeworking
we modified our IT infrastructure,
increased bandwidth with our
telecommunications partners and
deployed collaboration tools.
The extent of remote working has
increased the risk of users falling victim
to phishing attacks because users rely
primarily on email communication. We
have an ongoing phishing testing regime
and there is regular communication with
all users to remind them of the risks.
We have raised the level of monitoring
for phishing attempts and other security
threats. In addition, we have issued
security awareness advice on secure
home-working best practices.
We have also increased disciplines to
ensure that user devices are regularly
patched and upgraded to reflect
changing IT security threats. Revised
guidance for laptop and desktop
patching has been issued to all
businesses to ensure that systems
are up to date and secure.
EU Exit
Following the UK’s referendum decision
to leave the EU in 2016, the group
established an EU Exit Steering
Committee which consists of a small
dedicated team. This steering
committee worked with all the
businesses to assess the risks and
opportunities arising from the UK’s
decision to leave the EU. Primark
operates largely discrete supply chains
for its stores in each of the UK, US and
Europe and the group’s food production
is largely aligned with the end market.
As a result, there is relatively little group
cross-border trading between the UK
and the EU. We therefore quickly
concluded that the overall impact of EU
exit on the group was relatively minor.
We recognise that the outcome of
the negotiations between the UK and
the EU remains uncertain. While we
would prefer a negotiated free trade
agreement, we are prepared for any of
the potential outcomes.
Over the last year the group and the
individual businesses have taken steps
to mitigate possible impacts of the
transitional period ending without a
negotiated free trade agreement. The
key risks identified, and the actions
taken are as follows:
• Imports to the UK – The UK
government has indicated the tariffs
on imports in the absence of a free
trade agreement. We expect these
to have a net positive impact on the
group. All necessary registrations have
been completed. Where goods are
imported into the UK by third parties
on behalf of the businesses,
assurances have been sought that
these will be available when required.
Annual Report and Accounts 2020
Associated British Foods plc
85
Principal risks and uncertainties
continued
External risks
MOVEMENT IN EXCHANGE RATES
Context and potential impact
Associated British Foods is a multinational
group with operations and transactions in
many currencies.
Changes in exchange rates give rise to
transactional exposures within the
businesses and to translation exposures
when the assets, liabilities and results of
overseas entities are translated into sterling
upon consolidation.
Mitigation
Our businesses constantly review their
currency exposures and their hedging
instruments and, where necessary, ensure
appropriate actions are taken to manage the
impact of currency movements.
Increased
Primark covers its currency exposure on
purchases of merchandise denominated in
foreign currencies at the time of placing
orders, with an average tenor of Primark’s
hedging activity of between 3 and 4
months. There was a minimal transactional
effect from changes in the US dollar
exchange rate on Primark’s largely dollar
denominated purchases for the year in
aggregate.
There has been a greater level of volatility
in sterling exchange rates against our major
trading currencies during the financial year,
caused in part by the impact of the
COVID-19 pandemic and by continued
EU exit uncertainty.
Board-approved policies require businesses
to hedge all transactional currency
exposures and long-term supply or purchase
contracts which are denominated in a
foreign currency, using foreign exchange
forward contracts.
Cash balances and borrowings are largely
maintained in the functional currency of the
local operations.
Cross-currency swaps are used to align
borrowings with the underlying currencies
of the group’s net assets (refer to note 26 to
the financial statements for more
information).
Changes since 2019
Sterling strengthened against some of our
major trading currencies this year, resulting
in a loss on translation of £16m.
FLUCTUATIONS IN COMMODITY AND ENERGY PRICES
Unchanged
Context and potential impact
Changes in commodity and energy prices
can have a material impact on the group’s
operating results, asset values and
cash flows.
Mitigation
The group purchases a wide range
of commodities in the ordinary course
of business.
We constantly monitor the markets in which
we operate and manage certain of these
exposures with exchange traded contracts
and hedging instruments.
Changes since 2019
EU sugar prices increased this year with a
reduction in stocks following lower EU sugar
production in the last two campaigns.
The commercial implications of commodity
price movements are continuously assessed
and, where appropriate, are reflected in the
pricing of our products.
The price of UK wheat, a key commodity for
our UK bakery business, increased during
the course of the year as a result of the
impact of poor weather conditions on yields.
OPERATING IN GLOBAL MARKETS
Increased
Context and potential impact
Associated British Foods operates in 53
countries with sales and supply chains in
many more, so we are exposed to global
market forces; fluctuations in national
economies; societal unrest and geopolitical
uncertainty; a range of consumer trends;
evolving legislation and changes made by
our competitors.
Failure to recognise and respond to any of
these factors could directly impact the
profitability of our operations.
Entering new markets is a risk to any
business.
Mitigation
Our approach to risk management
incorporates potential short-term market
volatility and evaluates longer-term
socio-economic and political scenarios.
The group’s financial control framework and
Board-adopted tax and treasury policies
require all businesses to comply fully with
relevant local laws.
Provision is made for known issues based
on management’s interpretation of
country-specific tax law, EU cases and
investigations on tax rulings and their
likely outcomes.
By their nature socio-political events are
largely unpredictable. Nonetheless our
businesses have detailed contingency plans
which include site-level emergency
responses and improved security
for employees.
We engage with governments, local
regulators and community organisations to
contribute to, and anticipate, important
changes in public policy.
AB Sugar continues to reduce its cost base
through its performance improvement
programme.
We conduct rigorous due diligence when
entering, or commencing business activities
in, new markets.
Changes since 2019
Increased uncertainty as a result of the
COVID-19 pandemic. Authorities continue
to impose restrictions on both a regional
and local basis.
High inflation continued to adversely affect
our yeast and bakery ingredients business
based in Argentina.
12 new Primark stores were opened in the
year including our first store in Poland.
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Strategic report
HEALTH AND NUTRITION
Increased
Context and potential impact
Failure to adapt to changing consumer
health choices or to address nutrition
concerns in the formulation of our products
could result in a loss of consumer base and
impact business performance.
Mitigation
Consumer preferences and market trends
are monitored continually.
Recipes are regularly reviewed and
reformulated to improve the nutritional value
of our products.
All of our grocery products are labelled with
nutritional information.
We develop partnerships with other
organisations to promote healthy options.
Pre-COVID-19, our specialist sports-
nutrition brand HIGH5 typically supports
over 600 events which promote exercise
across the UK each year, helping over
500,000 people improve their fitness levels.
These events are predominantly promoted
online, and HIGH5 assist in this promotion
by highlighting events on their website and
via social media in conjunction with
nutritional advice.
We invest in research with experts to
improve our understanding of the science
and societal trends to support policy
approach.
Changes since 2019
Our Sugar and Grocery businesses have
invested in communication linked to nutrition
and health during the year to help
consumers make informed choices about
their diet.
Notable examples include the Ryvita ‘Fibre
Fit’ campaign in the UK, through which the
business engaged over 50,000 consumers
in relation to the benefit of a high fibre diet.
In addition, our sugar business’s campaign
‘Making Sense of Sugar’ has developed into
a global platform. The aim is to provide
factual information based on robust science
to help inform and educate people about
sugar and the role it can play as part of a
healthy balanced diet.
Our businesses continue to assess
the nutritional content of their products
on an ongoing basis; and engage with
stakeholders, directly and through trade
associations, in relation to changes to the
regulatory and consumer operating
environment.
Operational risks
WORKPLACE HEALTH AND SAFETY
Increased
Context and potential impact
Many of our operations, by their nature,
have the potential for loss of life or
workplace injuries to employees,
contractors and visitors.
Mitigation
Safety continues to be one of our main
priorities. The chief executives of each
business, who lead by example, are
accountable for the safety performance of
their business.
Our Health and Safety Policy and Practices
are firmly embedded in each business,
supporting a strong ethos of workplace
safety.
We have a continuous safety audit
programme to verify implementation of
safety management and support a culture
of continuous improvement.
Best practice safety and occupational health
guidance is shared across the businesses,
co-ordinated from the corporate centre, to
supplement the delivery of their own
programmes.
Changes since 2019
The safety performance of the group is
reported in the 2020 Responsibility Update
at www.abf.co.uk/responsibility.
In 2020 there were three work-related
fatalities in our Spanish and southern Africa
operations. Our businesses have conducted
thorough root cause analyses and are
implementing safety changes.
This year, over £46m was invested in
safety risk management, of which £14m
was dedicated to COVID-19 safety
measures for employees, customers
and other visitors to our stores and
manufacturing sites. At the start of the
COVID-19 outbreak, we established a group
level steering committee to respond in a
timely manner to the dynamic changes
including reimagining working environments
for many of our people.
Other investments this year included
measures to improve working in confined
spaces and at height, fire risk assessments
and equipment upgrades, dust monitoring
and air quality, improvements to lighting
and safety signage and emergency first
aid training.
Annual Report and Accounts 2020
Associated British Foods plc
87
Principal risks and uncertainties
continued
Operational risks continued
PRODUCT SAFETY AND QUALITY
Context and potential impact
As a leading food manufacturer and retailer,
it is vital that we manage the safety and
quality of our products throughout the
supply chain.
Mitigation
Product safety is put before economic
considerations.
We operate strict food safety and
traceability policies within an organisational
culture of hygiene and product safety to
ensure consistently high standards in our
operations and in the sourcing and handling
of raw materials and garments.
Food quality and safety audits are
conducted across all our manufacturing
sites, by independent third parties and
customers, and a due diligence programme
is in place to ensure the safety of our retail
products.
Our sites comply with international food
safety and quality management standards
and our businesses conduct regular mock
product incident exercises.
All businesses set clear expectations of
suppliers, with relevant third-party
certification or other assessment a condition
of doing business. Product testing and trials
are undertaken as required and where
bespoke raw materials are purchased, the
businesses will work closely with the
supplier to ensure quality parameters are
suitably specified and understood.
Unchanged
All Primark’s products are tested to, and
must meet, stringent product safety
specifications in line with and in some
instances above legal requirements. Primark
continues to drive and improve product
performance for quality and compliance
purposes through its product approval
processes, in country inspections centres
and management of its supply base.
Changes since 2019
We did not have any major product recalls.
Businesses have continued to define and
refine KPIs in this area.
.
BREACHES OF IT AND INFORMATION SECURITY
Increased
Context and potential impact
To meet customer, consumer and supplier
needs, our IT infrastructure needs to be
flexible, reliable and secure to allow us to
interact through technology.
Our delivery of efficient and effective
operations is enhanced by the use of
relevant technologies and the sharing of
information. We are therefore subject to
potential cyber-threats such as computer
viruses and the loss or theft of data.
There is the potential for disruption to
operations from data centre failures, IT
malfunctions or external cyber-attacks.
Mitigation
In parallel to building IT roadmaps and
developing our technology systems, we
invest in developing the IT skills and
capabilities of our people across our
businesses.
We continue to actively monitor and
mitigate any cyber-threats and suspicious IT
activity.
We have established group IT security
policies, technologies and processes, all of
which are subject to regular internal audit.
Access to sensitive data is restricted and
closely monitored.
Robust disaster recovery plans are in place
for business-critical applications and are
adequately tested.
Technical security controls are in place over
key IT platforms with the Chief Information
Security Officer (CISO) tasked with
identifying and responding to potential
security risks.
Changes since 2019
The significant increase in employees
working at home, as a result of COVID-19
restrictions, has had an impact on the
delivery of IT services and increased our IT
and information security risks.
There is an ongoing programme of
investment in both technology and people to
enhance the longevity of our IT
environments.
To support seamless homeworking we have
modified our IT infrastructure, increased
bandwidth with our telecommunications
partners and deployed collaboration tools.
The extent of remote working has increased
the risk of users falling victim to phishing
attacks because users rely primarily on
email communication. We have an ongoing
phishing testing regime and there is regular
communication with all users to remind
them of the risks. We have raised the level
of monitoring for phishing attempts and
other security threats. In addition, we have
issued security awareness advice on secure
home-working best practices.
Improved cyber-security capability is in
place within the group and across the
businesses allowing us to more effectively
detect, respond and recover from disruptive
cyber-threats.
We have also increased disciplines to ensure
that user devices are regularly patched and
upgraded to reflect changing IT security
threats. Revised guidance for laptop and
desktop patching has been issued to all
businesses to ensure that systems are up
to date and secure.
During the year we have reviewed and
tested IT disaster recovery plans across the
businesses.
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Increased
As a group we continue to develop our
packaging to align with future environmental
packaging legislation in local geographies
whilst balancing the needs to minimise food
waste and carbon emissions with food
safety and integrity at the core. Our UK
Grocery Group are signatories to the
Courtauld Commitment 2025 as well as the
UK Plastics PACT, a collaborative initiative
delivered by WRAP, that will create a circular
economy for plastics.
We report our approach to climate change,
water and deforestation risk on an annual
basis via CDP at www.cdp.net.
This year 84% of the waste materials
generated by our businesses’ operations
was sent for recycling, recovery or other
beneficial uses.
Primark announced the rollout of its
nation-wide recycling programme, inviting
customers to donate their pre-loved clothes,
textiles, footwear and bags from any brand
to be ‘re-loved’ via the Primark In-Store
Recycling Scheme.
In August, Primark introduced a brand-new
fleet of 15 Longer Semi Trailers (LSTs) which
will help to significantly reduce the
environmental impact of Primark’s logistics
operations in the UK.
In September, British Sugar’s logistics
partner, Abbey Logistics, took delivery of 11
new latest generation trucks that will go into
Abbey’s core British Sugar fleet, providing
bulk sugar transport movements throughout
the UK and Ireland. The vehicles will
produce up to 20% less nitrogen oxide and
fewer particulates than previous generation
vehicles being replaced in the fleet, as
British Sugar maximises the environmental
benefits of homegrown sugar.
OUR USE OF NATURAL RESOURCES AND
MANAGING OUR ENVIRONMENTAL IMPACT
Context and potential impact
Our businesses rely on a secure supply of
natural resources, some of which are
vulnerable to external factors such as natural
disasters and climate change. Our material
environmental impacts are energy use and
resultant greenhouse gas emissions, water
abstraction and management, waste
management and packaging.
In our assessment of climate-related
business risks, we recognise that the
cumulative impacts of changes in weather
and water availability could affect our
operations at a group level. The diversified
nature of Associated British Foods means
that mitigation or adaptation strategies are
considered and implemented by individual
businesses and divisions.
Our operations generate a range of
emissions such as dust, waste water and
waste which, if not controlled, could pose a
risk to the environment, local communities
and result in additional costs.
Mitigation
We continuously seek ways to improve
the efficiency of our operations, use
technologies and techniques to reduce our
use of natural resources.
Our businesses are considering the most
effective ways of mitigating the impacts of
physical and transitional risks associated
with climate change, such as changes in
extreme weather conditions, and the
introduction of carbon price schemes.
We recognise the importance of integrating
climate related risks and opportunities into
our business decisions to help with the
transition to a low carbon economy.
We consider climate related risks and
opportunities in our business decisions and
recognise the importance of adopting the
recommendations of the Task Force on
Climate-related Financial Disclosures to
help with the zero-carbon transition/to
help with the smooth transition to a low
carbon economy.
Our packaging and product design teams
are working together to address the use of
single-use plastics and scale up solutions to
the environmental impacts of our packaging.
Our businesses aim to be a good neighbour
within their local communities. Aspects of
this include the monitoring and
management of noise, particle and odour
pollution and community engagement.
Where possible, our businesses implement
circular economy principles to use more
from less and continuously seek ways to
recycle or reuse all waste materials.
AB Sugar and AB Agri have set
commitments for their own operations
and supply chain to improve sustainability
performance.
Primark is committed to the Sustainable
Clothing Action Plan (SCAP), an industry-
wide commitment made by brands,
retailers, charities and recycling
organisations to collectively reduce the
carbon, water and waste impacts of the
clothing industry.
Through Primark’s Sustainable Cotton
Programme it has committed to train
160,000 farmers in more sustainable
farming methods by 2022. This
commitment goes some way towards
helping Primark fulfil its long-term ambition
of ensuring all the cotton used in its supply
chain is sustainably sourced.
Changes since 2019
The environmental performance of the
group is reported in the 2020 Responsibility
Update at www.abf.co.uk/responsibility.
This year we are reporting our Scope 2
market-based emissions for the first time.
Scope 2 covers indirect emissions from the
generation of purchased electricity, heat and
steam. This is a key consideration when
making energy purchasing decisions.
We continued to focus on improving
our energy efficiency and optimising the
use of renewable energy sources with
55% of energy used this year coming
from renewables, mainly from a biomass-
based fuel.
Annual Report and Accounts 2020
Associated British Foods plc
89
Principal risks and uncertainties
continued
Operational risks continued
OUR SUPPLY CHAIN
AND ETHICAL BUSINESS PRACTICES
Context and potential impact
As an international business with suppliers
and representatives the world over, people
with whom we deal and in particular our
suppliers and our representatives must live
up to our values and standards and share
that responsibility.
We therefore work with them to ensure
reliability and to help them meet our
standards of product quality and safety,
acceptable working conditions, financial
stability, ethics and technical competence.
Potential supply chain and ethical business
practice risks include:
• supply chain weaknesses such as poor
conditions for the workforce;
• unacceptable and unethical behaviour
including bribery, corruption and slavery
risk; and
• impact on reliability of supply and
business continuity due to unforeseen
incidents e.g. natural disasters.
Mitigation
Our Supplier Code of Conduct is designed
to ensure suppliers, representatives and all
with whom we deal, adhere to our values
and standards. The full Code is available at
www.abf.co.uk/supplier_code_of_conduct.
Suppliers are expected to sign and abide by
this Code.
Adherence to the Code is verified through
our supplier audit system with our
procurement and operational teams
establishing strong working relationships
with suppliers to help them meet
our standards.
All businesses are required to comply with
the group’s Business Principles including its
Anti-Bribery and Corruption Policy.
We have developed a Company-wide online
training module about modern slavery to
help accelerate awareness-raising and give
businesses the tools to train people.
Primark has been working to strengthen its
policies relating to human rights and modern
slavery and has published a revised supplier
code of conduct.
Primark, Twinings and AB Sugar have
all produced interactive sourcing maps.
AB Sugar’s map outlines where it
grows, sources and exports sugar:
www.absugar.com/sourcing-map.
Unchanged
Changes since 2019
Our Modern Slavery and Human Trafficking
Statement 2020, together with the steps we
take to try to ensure that any forms of
modern slavery are not present within our
own operations or supply chain, are reported
in detail in the 2020 Responsibility Update at
www.abf.co.uk/responsibility.
In April, we endorsed the International
Labour Organisation led COVID-19 Action in
the Global Garment Industry, working
towards a coordinated global response to
ongoing industry-wide issues. We continue
to play our part in this initiative. Whilst
Primark stores were closed, we paid for in
full, and took delivery of, very large amounts
of completed stock. We established a
wages fund to ensure workers in vulnerable
countries were paid as soon as possible for
work on products in production for Primark
when orders were cancelled in March. We
also committed to pay our suppliers in full
for all garments both finished and in
production as well as any fabric costs for
Primark prior to the stores closing.
Viability statement and going concern
Viability statement
The directors have determined that the
most appropriate period over which to
assess the Company’s viability, in
accordance with the UK Corporate
Governance Code, is three years. This
is consistent with the group’s business
model which devolves operational
decision making to the businesses, each
of which sets a strategic planning time
horizon appropriate to its activities which
are typically of three years duration. The
directors also considered the diverse
nature of the group’s activities and the
degree to which the businesses change
and evolve in the relatively short term.
The directors considered the group’s
profitability, cash flows and key financial
ratios over this period and the potential
impact that the Principal Risks and
Uncertainties set out on pages 84 to
90 could have on future performance,
solvency or liquidity of the group and its
resilience to threats to its viability posed
by severe but plausible scenarios.
Sensitivity analysis was applied to these
metrics and the projected cash flows
were stress tested against a range
of scenarios.
The directors considered the level of
performance that would cause the
group to exhaust its available liquidity; to
breach its debt covenants; the financial
implications of making any strategic
acquisitions and a variety of factors that
have the potential to reduce profit
substantially. We considered actions
which could damage the group’s
reputation for the long term, macro-
economic influences such as
fluctuations in commodity markets and
the possible implications of a no-deal
Brexit, and climate-related business
risks. Specific consideration has been
given to the potential ongoing risks
associated with COVID-19. These risks
include its impact on Primark’s trading
performance and to a lesser extent our
ability to run our factories efficiently with
the potential for disruption through
shortage of labour or logistical issues
caused by port constraints.
At the year end the group had gross
cash of £2,030m and £1,088m of
undrawn committed Revolving Credit
Facilities (RCF) which together provide
some £3,118m of liquidity. In August, a
two-year extension to the group’s RCF
was agreed with its relationship banks
extending the maturity of the facility to
90
Associated British Foods plc
Annual Report and Accounts 2020
Strategic report
There is substantial financial headroom
between this cash flow forecast and the
cash on hand and facilities available to
the group over the period. A number of
extreme, adverse assumptions were
considered and the likelihood of the
headroom being exhausted was
considered to be extremely remote.
We have operations in 53 countries
and sales into more than 100. The
diversity of our businesses, in different
sectors with different customers,
products and markets removes the
possibility of any single adverse event
having a material impact on headroom.
The importance of food production has
been highlighted by recent events and
our employees continue to work
successfully to ensure the continuity and
resilience of the food supply chain. It
would require a large number of adverse
events for there to be a collective material
impact on headroom and sales for the
whole of the period would need to
decline substantially, in every business,
and with no cost mitigation. For Primark
we considered the more extreme,
adverse scenarios in which all the Primark
stores were closed for three months over
the Christmas trading period, without
taking any of the available cost mitigation
actions that are within our control, and
the cash flow consequences did not
exhaust the financial headroom.
The Strategic report was approved by the
Board and signed on its behalf by
Michael McLintock
Chairman
George Weston
Chief Executive
John Bason
Finance Director
Viability statement and going concern
continued
July 2023. During the course of this
assessment £261m of the £336m of
outstanding private placement notes
will mature and the RCF will require
refinancing. Based on discussions with
our relationship banks and our private
placement investors, it is the opinion
of the Board that these facilities can be
renewed and that substantial further
funding could be secured should the
need arise.
We have operations in 53 countries and
sales into more than 100. The diversity
of our businesses, in different sectors
with different customers, products and
markets removes the possibility of any
single adverse event having a material
impact on headroom. The importance of
food production has been highlighted by
recent events and the resilience of the
group has been demonstrated by our
ability to ensure the continuity of the
food supply chain. While the principal
risks considered all have the potential to
affect future performance, none of them
are considered individually or collectively
to give rise to a deterioration in trading
to a level that is likely to threaten the
viability of the Company for the period
of the assessment.
The group has a track record of
delivering strong cash flows, with in
excess of £1bn of operating cash being
generated in each of the last nine years.
This has been more than sufficient to
meet not only our ongoing financing
obligations but also to fund the group’s
expansionary capital investment.
Even in a worst-case scenario, with risks
modelled to materialise simultaneously
and for a sustained period, the possibility
of the group having insufficient
resources to meet its financial
obligations is considered extremely
remote. Based on this assessment, the
directors confirm that they have a
reasonable expectation that the
Company will be able to continue in
operation and meet its liabilities as they
fall due over the three-year period to
16 September 2023.
Going concern
After making enquiries, the directors
have a reasonable expectation that the
group has adequate resources to
continue in operational existence for the
foreseeable future. For this reason they
continue to adopt the going concern
basis in preparing the consolidated
financial statements.
The forecast for the period to the end
of February 2022 has been updated for
our trading to October and is our best
estimate of future cash flow. Having
reviewed this forecast, and having
applied reverse stress tests, the
possibility that the financial headroom
could be exhausted is considered to be
extremely remote.
As stated at the half year, as a
precaution against illiquidity in the
banking market, the Revolving Credit
Facility (RCF) was drawn down. In
August the facility was repaid in full.
A two-year extension has now been
agreed with our relationship banks which
extends the maturity of the RCF to
July 2023. In April we received
confirmation from the Bank of England
that we had access to the COVID
Corporate Financing Facility (CCFF).
Since then, we have not needed to draw
upon this facility and do not expect to
draw upon it in the coming months
and as a result will allow our eligibility
to lapse. Accordingly, the CCFF has not
been taken into account in making our
assessment of financial headroom.
At the year end, the group had gross
cash of £2,030m and the undrawn RCF
of £1,088m. The directors have satisfied
themselves that the RCF will be
available for at least the period to the
end of February 2022, having assessed
the group’s projected compliance with
the terms and covenants of this facility.
In reviewing the cash flow forecast
for the period, the directors reviewed
the trading for both Primark and the
food businesses in light of the
experience gained from the last six
months of trading and emerging trading
patterns. The directors understand the
risks, sensitivities and judgements
included in the cash flow forecast and
have a high degree of confidence in
these cash flows.
Annual Report and Accounts 2020
Associated British Foods plc
91
Board of directors
Michael
McLintock
Chairman
N R
George
Weston
Chief Executive
Michael was appointed a director in November 2017 and
Chairman in April 2018. He was formerly chief executive of
M&G, retiring in 2016, having joined the company in 1992 and
been appointed chief executive in 1997. In 1999 he oversaw
the sale of M&G to Prudential plc where he served as an
executive director from 2000 until 2016. Previously he held
roles in investment management at Morgan Grenfell and in
corporate finance at Morgan Grenfell and Barings.
Other appointments:
Trustee of the Grosvenor Estate
Non-executive Chairman of Grosvenor Group Limited
Member of the advisory board of Bestport Private Equity Limited
Member of the advisory board of Spencer Stuart
Member of the Takeover Appeal Board
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:
Non-executive director of Wittington Investments Limited
Trustee of the Garfield Weston Foundation
Trustee of the British Museum
John
Bason
Finance Director
Wolfhart
Hauser
Independent
non-executive
director
N A R
John was appointed as Finance Director in May 1999. He has
extensive international business experience and an in-depth
knowledge of the industry. 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:
Senior Independent Director of Compass Group PLC
Chairman of the charity FareShare
Wolfhart was appointed a director in January 2015. Starting his
career with various research activities, he went on to establish
and lead a broad range of successful international service
industry businesses. He was chief executive of Intertek Group
plc for ten years until he retired from that role and the board
in May 2015. He was previously chief executive officer and
President of TÜV Süddeutschland AG for four years and chief
executive officer of TÜV Product Services for ten years.
He has also held other directorship roles, including as a
non-executive director of Logica plc from 2007 to 2012 and
chair of FirstGroup plc for four years from 2015 to July 2019.
KEY
Board committees
Other appointments:
Senior Independent Director of RELX PLC
N Nomination Committee
R Remuneration Committee
A Audit Committee
Committee Chair
92
Associated British Foods plc
Annual Report and Accounts 2020
Governance
Richard
Reid
Independent
non-executive
director
N A R
Emma
Adamo
Non-executive
director
Richard was appointed a director in April 2016. He was
formerly a partner at KPMG LLP (‘KPMG’), having joined the
firm in 1980. From 2008, Richard served as London chairman
at KPMG until he retired from that role and KPMG in
September 2015. Previously, Richard was KPMG’s UK
chairman of the High Growth Markets group and chairman
of the firm’s Consumer and Industrial Markets group.
Emma was appointed a director in December 2011. She was
educated at Stanford University and has an MBA from
INSEAD in France.
Other appointments:
Director of Wittington Investments Limited
Deputy Chair of the W. Garfield Weston Foundation in Canada
Other appointments:
Chairman of National Heart and Lung Institute Foundation
Deputy Chairman of Berry Bros & Rudd
Senior Advisor to Bank of China UK
Chairman of Themis International Services Limited
Graham
Allan
Independent
non-executive
director
N A R
Ruth
Cairnie
Independent
non-executive
director
N A R
Graham was appointed a director in September 2018.
Graham was formerly the group chief executive of Dairy
Farm International Holdings Limited, a pan-Asian retailer.
Prior to joining Dairy Farm, he was president and chief
executive officer at Yum! Restaurants International.
Graham has previously held various senior positions in
multinational food and beverage companies.
Other appointments:
Senior Independent Director of Intertek Group plc
Independent non-executive director of InterContinental Hotels
Group PLC
Non-executive Chairman of Bata International, a privately-owned
wholesaler and retailer
Non-executive Chairman of Nando’s Group Holdings Limited
Board member of Kuwait Food Company Americana KSCC
Member, Business Council of IKANO Pte Ltd
Ruth was appointed a director in May 2014 and has been
Senior Independent Director since 7 December 2018. Ruth
was formerly executive vice president strategy & planning
at Royal Dutch Shell plc. This role followed a number of senior
international roles within Shell, including vice president of
its Global Commercial Fuels business. Ruth has also held a
number of non-executive directorships including on the boards
of Keller Group plc, ContourGlobal plc and Rolls-Royce
Holdings plc.
Other appointments:
Director and Chair of Babcock International Group PLC
Industry Chair of POWERful Women
Annual Report and Accounts 2020
Associated British Foods plc
93
Corporate governance
Michael
McLintock
Chairman
In this section
Corporate
governance
Dear fellow shareholders
I am pleased to present the Associated British
Foods plc corporate governance report for the
year ended 12 September 2020.
Page 94 to 109
Directors’
Remuneration report
Pages 110 to 121
Directors’ report
Pages 122 to 124
Statement of
directors’
responsibilities
Page 125
Independent
auditor’s report
Pages 126 to 134
Whilst our approach of strong governance with
a focus on ethics has remained unchanged,
events in 2020 have placed unexpected demands
on the Board.
Management continues to be encouraged to take
a long-term view, but inevitably the nature of the
COVID-19 pandemic and frequently changing
government guidance has meant that swift
decisions have frequently needed to be taken.
Investing in the future also needed to be
temporarily paused while the group managed and
mitigated the urgent profit and cash flow impacts
arising from the total loss of sales resulting from
the rapid closure of Primark stores in March 2020.
Following the imposition of lockdown, physical
Board meetings became impossible and we
could only communicate by video conference or
telephone. The critical impact of the COVID-19
pandemic generally, but particularly on our retail
businesses, in practice meant that there was
even more frequent communication between the
Board than would usually be the case in order to
inform and to guide the businesses in meeting
the challenges. I am grateful to all my Board
colleagues for making themselves available
whenever required, frequently at short notice.
The Company takes its compliance with the 2018
UK Corporate Governance Code (the ‘2018
Code’) seriously. As noted in further detail in this
report, an external evaluation of the Board was
due to be carried out this year, in line with our
practice, in accordance with the UK Corporate
Governance Code, of conducting an external
evaluation every three years. The COVID-19
pandemic struck while the Board was in the
process of appointing the external facilitator and
priority had to be given to management and
support of the group businesses. The external
evaluation will therefore be undertaken in the
course of the 2020/21 financial year and the
external facilitator is in the process of being
appointed. It should be noted that the Board
has commissioned internal evaluations in each
intervening year since the last external evaluation
was conducted, and further details are included
below on progress against the priorities identified
from the 2019 internal evaluation. In respect of
the 2018 Code provision relating to alignment of
executive director pension contributions with the
workforce, an explanation of our approach is set
out on pages 112 and 116 of the Directors’
Remuneration report.
There have been no changes to the structure
or membership of the Board or its Committees
since the last financial year other than Graham
Allan being appointed to the Nomination
Committee in January 2020. However,
succession planning both at Board level and
executive level has continued to be firmly on the
agenda, as will continue to be the case in the
coming year. In this regard, we are mindful of
the Parker Review Recommendations and, in
particular, the recommendation to have at least
one director of colour on the Board by the end of
2021. As a Board, we consider on a continuous
basis how best to meet those recommendations,
as indeed is the case in respect of the Hampton-
Alexander Review target of 33% representation
of women on the Board.
We value having a Board which numbers eight
directors; we feel this is an optimum size for
the level of participation and debate that results.
As we have been fortunate to enjoy stability of
Board membership, vacancies have not arisen
frequently which would in other circumstances
have enabled us to make changes to the
Board’s composition.
We plan to meet the recommendations of the
Hampton-Alexander and Parker reviews during
the course of 2021. This is likely to result in our
Board size increasing, at least for a period of time,
to nine people. Whilst eight is our ideal number,
we believe it is right to increase to nine in order
to give effect to the reviews.
In respect of the 2020 annual general
meeting (‘AGM’), given the ongoing
COVID-19 pandemic and in order to protect
the health, safety and wellbeing of yourself,
your fellow shareholders and of the group’s
employees, this will be a closed meeting and,
regrettably, you should not attend.
We regret that the AGM will be curtailed in this
way, but in the prevailing circumstances are
grateful for your understanding. With your proxy
form you will have received details of how to
follow proceedings at the AGM through a
telephone/internet stream and how to vote by
proxy in advance of the meeting. Details are also
provided of how you can put any questions to the
Board in advance of the meeting.
You will also note that, at this year’s AGM, we
are proposing to amend our Articles to bring
them up to date with market practice and, most
importantly, to allow for hybrid meetings in order
to give the flexibility for participation via electronic
means in future physical AGMs, allowing for
94
Associated British Foods plc
Annual Report and Accounts 2020
The critical impact
of the COVID-19
pandemic generally,
but particularly
on our retail
businesses, in
practice meant that
there was even
more frequent
communication
between the Board
than would usually be
the case in order to
inform and to guide
the businesses in
meeting the
challenges.
Governance
Compliance with the UK Corporate
Governance Code
As a premium listed company on the London
Stock Exchange, the Company is reporting in
accordance with the 2018 Code. The 2018
Code applies to companies with financial years
beginning on or after 1 January 2019 and sets
out standards of good practice in relation to:
(i) board leadership and company purpose; (ii)
division of responsibilities; (iii) board composition,
succession and evaluation; (iv) audit, risk and
internal control; and (v) remuneration. The 2018
Code is published by the UK Financial Reporting
Council (‘FRC’) and a copy is available from the
FRC website: www.frc.org.uk.
The Board has received regular updates on the
2018 Code and the changes which it introduced
and the Board had already started a programme
to implement the changes suggested in the 2018
Code since before its application to the Company.
For example, the Board had already appointed
Richard Reid as designated non-executive
director for engagement with the workforce prior
the financial year ended 12 September 2020.
The Board considers that the Company has,
throughout the year ended 12 September 2020,
applied the principles and complied with the
provisions set out in the 2018 Code except in
relation to annual evaluation of the performance
of the Board (see explanation on pages 99 and
100) and alignment of executive director pension
contributions with the workforce (see explanation
on pages 112 and 116 of the Directors’
Remuneration report).
those who cannot attend (for example, because
of rules around COVID-19 or similar) to have the
ability to participate in proceedings as much as
possible. Further details on these and other
proposed amendments to the Articles are
included in the Notice of AGM.
Richard Reid, our designated non-executive
director for engagement with the workforce,
has continued to make good progress with
workforce engagement. It is predominantly
through Richard’s activities, and through business
division updates to the Board on workforce
engagement, that we assess and monitor culture.
The COVID-19 pandemic has meant that not as
much face-to-face interaction has taken place
as Richard would have liked, although use of
technology has allowed engagement in remote
form and we will look to continue to use and
embrace such technology going forward. Further
details of the progress made can be found on
pages 73 and 98.
We continue to build on what we believe are our
sound ethical foundations and strong culture as
embodied in our four values, namely respecting
everyone’s dignity, acting with integrity,
progressing through collaboration, and pursuing
with rigour. As well as being illustrated in the
case studies in this annual report, in our new
section 172 statement on pages 14 to 19 and the
Responsibility section at pages 70 to 83, further
detail can be found in our 2020 Responsibility
Update and in our updated ESG Appendix, which
highlight the way each of our businesses work
bearing these values in mind. This new Update
and Appendix are available on the Company’s
website at www.abf.co.uk/responsibility.
Michael McLintock
Chairman
The Company’s disclosures on its application of the principles of the 2018 Code can be found on
the following pages:
Board leadership and Company purpose
See pages 94 to 103
Chairman’s letter
See page 94
Leadership, values, culture and purpose
Strategy
Stakeholder and shareholder engagement
See also pages 4 to 7, 12 to 19, 70 to 71 and
inside front cover
See pages 12 to 13, 20 to 21, 96
See pages 14 to 19, 72 to 83, 98 to 99,
102 to 103
Division of responsibilities
See pages 96 to 97, 99
Commitment, development and information flow See page 99
Composition, succession and evaluation
See pages 97, 99 to 100, 103 to 104
Board evaluation
Nomination Committee report
Audit, risk and internal control
Risks, viability and going concern
Audit Committee report
Remuneration
See pages 99 to 100
See pages 103 to 104
See pages 101 to 102
See pages 84 to 91
See pages 105 to 109
Directors’ Remuneration report
See pages 110 to 121
Annual Report and Accounts 2020
Associated British Foods plc
95
Corporate governance
continued
Board leadership, company purpose
and division of responsibilities
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.
This includes setting the Company’s
purpose, which is described in the
Strategic report. The Board met regularly
throughout the year, either in person or
virtually, 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.
There are a number of matters which
are specifically reserved for the Board’s
approval. These are set out in a clearly
defined schedule and include: matters
relating to the group’s strategic plan;
approving the annual business strategy
and objectives; the nature and extent of
principal risks to be taken to achieve the
strategic objectives; changes relating to
structure and capital; approval of trading
statements, interim results, final results
and annual report; declaring interim
dividends and recommending final
dividends; the group’s policies and
systems of internal control and risk
management; approving capital projects,
acquisitions and disposals valued at over
£30m; provision of adequate succession
planning; approving major group policies;
and matters relating to the compliance
with the terms of the Relationship
Agreement between the Company
and its controlling shareholders dated
14 November 2014 (which was further
amended and restated by agreement
dated 25 June 2020). The schedule of
matters reserved is available to view on
the corporate governance section of the
Company’s website: www.abf.co.uk.
Certain specific responsibilities are
delegated to the Board Committees,
being 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 starting
on page 103.
Authority for the operational
management of the group’s business
has been delegated to the Chief
Executive for execution or further
delegation by him for the effective
day-to-day running and management
of the group. The chief executive
of each business within the group has
authority for that business and reports
directly to the Chief Executive.
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 has unfettered powers of decision.
The Chairman is responsible for the
operation and leadership of the Board,
ensuring its effectiveness and setting its
agenda. The Chief Executive is
responsible for leading and managing
the group’s business within a set of
authorities delegated by the Board and
for the implementation of Board strategy
and policy.
Senior Independent Director
The purpose of this role is to act as a
sounding board for the Chairman and
to serve as an intermediary for other
directors where necessary. The Senior
Independent Director 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.
The non-executive directors
The non-executive directors, in addition
to their responsibilities for strategy and
business results, 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 which, taken
together, cover a broad range of
jurisdictions, bringing valuable external
perspective to the Board’s deliberations
through their experience and insight
from different sectors and geographies.
This enables them to contribute
significantly to Board decision-making,
whilst the small size of the Board is
conducive to open and candid
discussions. 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 2018 Code’s
recommendations, all directors
currently in office will be proposed for
re-election at the 2020 AGM to be held
in December.
Board meetings
The Board held 11 meetings during the
financial year as well as weekly phone
updates from early March until mid-
June. Periodically, Board meetings are
held away from the corporate centre in
London although, given the outbreak
of the COVID-19 pandemic, Board
meetings from March until the end of
the financial year ended 12 September
2020 were held virtually.
The attendance of the directors at Board
and Committee meetings during the
year is shown in the table below. If a
director is unable to participate in a
meeting either in person or remotely, the
Chairman will solicit their views on key
items of business in advance of the
relevant meeting and share these with
the meeting so that they are able to
contribute to the debate.
All of the directors attended those
meetings that they were eligible to
attend. Graham Allan was only
appointed to the Nomination Committee
in January 2020 and attended the one
Nomination Committee meeting held
following his appointment.
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 a week in advance of
the meetings.
Michael McLintock
George Weston
John Bason
Emma Adamo
Graham Allan
Ruth Cairnie
Wolfhart Hauser
Richard Reid
Board
11/11
11/11
11/11
11/11
11/11
11/11
11/11
11/11
Audit
Committee
–
–
–
–
4/4
4/4
4/4
4/4
Nomination
Committee
2/2
–
–
–
1/1
2/2
2/2
2/2
Remuneration
Committee
4/4
–
–
–
4/4
4/4
4/4
4/4
96
Associated British Foods plc
Annual Report and Accounts 2020
Board Committees
The Board has established three
principal Board Committees, to which
it has delegated certain of its
responsibilities. These are the Audit,
Nomination and Remuneration
Committees. 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 Directors’ Remuneration report
which starts on page 110. Membership
of these Committees is reviewed
annually. Minutes of Committee
meetings are made available to all
directors on a timely basis.
The Chairs of the Audit, Nomination
and Remuneration Committees were
present at the 2019 AGM and the
Notice of AGM describes how questions
on the work of their respective
Committees can be submitted.
The written terms of reference for the
Audit, Nomination and Remuneration
Committees are available on the
Company’s website, www.abf.co.uk,
and hard copies are available on request.
Composition and succession
Board composition
At the date of this report, the Board
comprises the following directors:
Chairman
Michael McLintock
Executive directors
George Weston (Chief Executive)
John Bason (Finance Director)
Non-executive directors
Emma Adamo
Graham Allan
Ruth Cairnie
Wolfhart Hauser
Richard Reid
Governance
The work of the Board during the year
During the financial year, key activities of the Board included:
Strategy
• conducting regular strategy update sessions in Board meetings;
• holding a virtual 2-day meeting focused on strategy; and
• receiving a strategy update from the Chief Executive and Director of Business
Development.
Acquisitions/disposals
• considering and approving various acquisitions including CowConnect ApS,
Larodan AB and the minority stakes in Kilombero Holdings Limited and Illovo
Distillers (Tanzania) Limited; and
• receiving regular updates on proposed acquisitions and disposals.
Financial and operational performance
• receiving regular reports to the Board from the Chief Executive;
• receiving, on a rolling basis, senior management presentations from each of
the group business areas;
• considering the group budget for the 2020/21 financial year;
• approving the Company’s full year and interim results;
• recommending the 2019 final dividend and deciding not to pay an interim
dividend in July 2020;
• drawdown, repayment and amendment and extension of the revolving credit
facility;
• seeking a waiver from the covenant test for February 2021;
• seeking eligibility to access funding under the Bank of England Covid
Corporate Financing Facility;
• receiving regular reports to the Board from the Finance Director on group
cashflow and impact of COVID-19; and
• approving banking mandate updates and various other treasury-related
matters.
Governance and risk
• annual review of the material financial and non-financial risks facing the group’s
businesses;
• half yearly review of progress in implementing actions arising from the 2019
Board evaluation;
• receiving regular updates on corporate governance and regulatory matters;
• receiving reports from the Board Committee Chairs;
• confirming directors’ independence and conflicts of interest;
• reviewing and approving gender pay reporting and Modern Slavery Statement;
and
• undertaking appropriate preparations for the holding of the AGM including
considering and approving an ‘outlook’ statement and, subsequently,
discussing issues arising from the AGM.
Corporate responsibility
• approving the enhanced reporting on responsibility;
• receiving regular management reports and an annual presentation on health,
safety and environmental issues; and
• receiving updates on Primark ethical sourcing.
Investor relations and other stakeholder engagement
• receiving reports on investor relations activities and regular feedback on
directors’ meetings held with institutional investors; and
• receiving a presentation on safety measures for employees and customers
throughout Primark stores in response to COVID-19 and on supplier feedback.
People
• appointment of Graham Allan to the Nomination Committee;
• Richard Reid, independent non-executive director for engagement with the
workforce, meeting and speaking (face-to-face or virtually) with people from
across the businesses for onward reporting to the Board – see further details
on page 98; and
• receiving and considering presentations on succession planning from the
Group People and Performance Director.
Annual Report and Accounts 2020
Associated British Foods plc
97
Corporate governance
continued
Richard
Reid
Non-executive
director for
engagement with
the workforce
At Associated British
Foods plc, our people
are our greatest asset.
This is not something
we say lightly –
people are the
cornerstone of our
devolved operating
model, that ensures
decisions are made
locally where the
experience and
market knowledge
resides.
At Associated British Foods plc, our people are
our greatest asset. This is not something we say
lightly – people are the cornerstone of our devolved
operating model, that ensures decisions are
made locally where the experience and market
knowledge resides. This ethos, in turn, motivates
teams and fosters the entrepreneurial mindset we
encourage, which delivers results time and again.
It is therefore critically important that we support
the development of our people, over the long term
and that we foster an engaging, inclusive and
supportive culture that enables everyone to build
a satisfying career.
Our stakeholders are increasingly interested in
how we support our workforce and I have been
appointed to work with leaders across the business
to evolve how the Company approaches this,
increasing transparency, helping to spread good
practice and ensuring that voices are heard at
Board level.
Over the past year, I have invested time in meeting
and speaking with people across every level in the
Company, from every division. Geography and,
latterly, the pandemic have meant a number of
these conversations have had to be held virtually,
but I was pleased to visit the ABF Ingredients
(ABFI) team in Hamburg and the AB Mauri team
at Peterborough.
Since I was appointed to this role, I have held
14 meetings or conversations. I have encouraged
open conversations across a wide variety of topics,
to hear, first-hand, from individuals on their views
of Associated British Foods’ devolved structure,
approach to talent and career management, and
their experience of diversity and inclusion. I have
also sought to understand how each division
communicates with and engages its people.
This has been a fascinating experience and I have
learned a great deal to pass on to the Board
especially at our meeting on this topic, held in
September 2020, at which it was agreed that
divisions be asked to put more emphasis on two
areas for 2020/21, namely: (i) to be even more
explicit about their approach to diversity and
inclusion; and (ii) to give insight into how leadership
is enduring in a COVID-19 environment.
In addition to these individual meetings,
Associated British Foods has formalised a process
for sharing information about the workforce with
the Board. Every year, each division of the
Company is required to provide detailed information
about five key themes as part of their business
report and presentations to the Board. These are:
• Health, Safety and Wellbeing: such as Lost
Time Injury data and each division’s cultural
approach to safety;
• Diversity and Inclusion: this includes data on
the gender pay gap as well as programmes
initiated by the respective Diversity & Inclusion
steering groups such as training to recognise
unconscious bias;
• Engagement: employee engagement surveys
and approaches to internal communications are
key components, along with planned social
activities and recognition schemes;
• Demographics and Metrics: in addition to
total headcount, the divisions are increasingly
encouraged to share data on tenure, turnover
and promotions; and
• Learning and Development: from
apprenticeship and graduate schemes, through
to programmes for managers and leaders.
The Board is now better informed and therefore
better able to manage risks and address
challenges; as well as support the long-term
success of the Company.
As well as supplementing the understanding that
the team at the corporate centre has of these
people-related topics, this new process of
information sharing has also enabled good practice
to be better shared and adopted more easily
between divisions. Over the last two years,
I have joined three discussions with divisional
HR directors where these submissions have been
reviewed and discussed and I am delighted to see
how the sharing process has influenced action.
It has informed the employer branding work
conducted by Twinings and the onboarding work
delivered by George Weston Foods. Similarly,
ABFI leveraged ideas from other businesses as
it updated its talent management approach.
Over time it is planned to standardise certain
key metrics for each of these five thematic areas.
This will improve the Board’s oversight of the
similarities and differences between the divisions,
and the strengths and weaknesses of each.
It has been my pleasure to support the business
on this important subject. Over the year ahead,
I will be supporting the divisional leadership teams
as they navigate their way through the challenges
presented by COVID-19. I also intend to spend
more time understanding the divisions’ respective
approaches to diversity and inclusion, with the
intention of giving the teams’ work on this
important issue the profile it deserves.
Richard Reid
Non-executive director
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Annual Report and Accounts 2020
Governance
Composition and succession
continued
Board independence
Emma Adamo is not considered by the
Board to be independent in view of her
relationship with Wittington Investments
Limited, the Company’s majority
shareholder. Emma was appointed in
December 2011 to represent this
shareholding on the Board. The Board
considers that the other 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.
As at the date of this report, the Board
comprises the Chairman, Chief
Executive, Finance Director and five
non-executive directors. Biographical
and related information about the
directors is set out on pages 92 and 93.
Appointments to the Board
There is a formal and transparent
procedure for the appointment of
new directors to the Board. Details
are available in the Nomination
Committee report on pages 103 and
104 which also provides details of the
Committee’s activities.
Commitment
The letters of appointment for the
Chairman and the non-executive
directors set out the expected time
commitment required of them and are
available for inspection by any person
during normal business hours at the
Company’s registered office and at the
AGM. Other significant commitments
of the Chairman and non-executive
directors are disclosed prior to
appointment and subsequent
appointments require prior approval.
With the approval of the Board,
Graham Allan was appointed as
independent non-executive director
of InterContinental Hotels Group PLC
with effect from 1 September 2020.
The Board were satisfied that Graham
would still be able to commit an
appropriate amount of time to the role
and considered that this would add
to his valuable contributions through
being able to add additional insight from
a different sector.
Board induction
The Company provides all non-executive
directors with a tailored and thorough
programme of induction, which is
facilitated by the Chairman and the
Company Secretary and which takes
account of prior experience and business
perspectives and the Committees on
which he or she serves. This typically
includes training, as well as site visits
and meetings with management to get
to better know the businesses.
Training and development
The Chairman has overall responsibility
for ensuring that the directors receive
suitable training to enable them to carry
out their duties and is supported in this
by the Company Secretary. Directors are
also encouraged personally to identify
any additional training requirements that
would assist them in carrying out their
role. Training is provided in briefing
papers, such as the regular update from
the Company Secretary as part of the
Board pack ahead of each meeting
covering developments in legal,
regulatory and governance matters, and
by way of presentations and meetings
with senior executives or other external
sources. As part of the Board update on
strategy at the virtual Board meeting
held in June 2020, Graham Allan
presented to the Board on insight
regarding retail and Ruth Cairnie
presented on inspiration from ESG
activities in the oil and gas industry.
The Chief Executive encourages other
Board members to visit operations either
with him, with other directors or on their
own. The COVID-19 pandemic limited
the scope for physical visits from March
2020 until the end of the financial year,
although Richard Reid met with AB
Mauri head office staff in Peterborough
in November 2019, met with business
teams at ABF Ingredients in Hamburg in
February 2020, visited Primark in Dublin
in February 2020 (followed by a virtual
meeting with Primark Dublin in May
2020 and subsequent virtual meetings
with new starters and the Diversity &
Inclusion steering group in September
2020) and held virtual meetings with:
• new starters at ACH in the United
States in June 2020;
• the neonatal nutrition team and other
employees at AB Agri in July 2020;
and
• employees and the Diversity &
Inclusion steering group from the UK
Grocery business in July 2020.
Both the Chairman and Ruth Cairnie
attended the Women in ABF virtual
event in June 2020.
Following his appointment in
September 2018, Graham Allan’s
training and development continued
with a visit to the Don KRC Castlemaine
site in December 2019 with the chief
executive of George Weston Foods
in Australia.
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 holds informal meetings or
calls with non-executive directors,
without any of the executives being
present, to discuss issues affecting
the group, when appropriate. 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 advised of the
latest issues affecting the group. This
was particularly the case from early
March until mid-June when the Board
received weekly updates from the
Finance Director and held regular calls.
Board evaluation
An evaluation to assess the performance
of the Board as a whole, its Committees
and the individual directors is usually
conducted annually with the aim of
improving the effectiveness of the Board
and its members and the performance
of the group. It had been planned that
the Board would be subject to an
external evaluation during the course of
the financial year ended 12 September
2020, it being three years since the last
external evaluation. However, given the
rapid onset of COVID-19-related events
leading to a closure of all Primark stores
in March 2020 and triggering the urgent
need to manage and mitigate the profit
and cash flow impacts arising from the
loss of sales, it was considered that
undertaking an external Board review
in the following months would likely
suffer a number of limitations and
disadvantages, including:
• creating a distraction at a time when
the Board and executive teams were
in the midst of a crisis and dealing
with pressing priorities;
Annual Report and Accounts 2020
Associated British Foods plc
99
Corporate governance
continued
• the likelihood of participants struggling
to devote the time, and to give
thoughtful consideration, to a review
of Board and Committee performance
given that their focus would inevitably
be on crisis management issues;
• the risk that input and contribution
from participants would be less useful
and insightful if interviews needed to
be conducted by videoconference
rather than in person; and
• a risk of not getting full value and real
insights from the exercise.
The external evaluation has therefore
been deferred and it is intended that
this will occur in 2021, as soon as
circumstances permit, with such
evaluation also specifically considering
how the Board has responded to the
COVID-19 crisis.
The Senior Independent Director carried
out a performance evaluation of the
Chairman during the year, concluding
that the Chairman was unanimously
highly regarded and had refreshed and
energised the Board.
Overall, although there has been no
opportunity for the planned formal
external evaluation of the Board to be
carried out, it is considered that the
Board and its Committees continue to
be highly effective in providing oversight
of the Company and its governance, as
demonstrated through its ongoing
management of the group during the
COVID-19 pandemic.
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 director’s 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.
Progress from the 2019 evaluation
During the first half of the year, the Chairman oversaw the implementation and progression of various recommendations
arising from the 2019 evaluation, which included the objectives and actions set out below:
2019 objectives
Progress
Board composition
• To continue to emphasise generalist skills in Board
recruitment
The Board discussed and agreed the appropriateness of
creating diversity in Board membership and the potential need
to increase the size of the Board to create such diversity.
• To ensure gender and racial diversity are factors in
Board searches
Workforce engagement and organisation
• To monitor and remain open to additional steps on
workforce engagement
• To have more in-depth discussions about succession
around the group as part of the annual Board agenda
• Board directors to have oral briefings from the Group
HR Director on specific succession issues on request
and prior to any visits to businesses
Board/Committee agendas
• To ensure additional time on individual business unit
strategy issues (if required)
• To ensure Board members are fully briefed of key
developments between Board meetings
Responsibility/ESG
• To sustain momentum on progress and
communication of activities
Governance
• To continue to monitor co-ordination of IT across
divisions
Detailed reviews of succession planning were presented to
the Board by the Group People and Performance Director
(successor to the Group HR Director) and considered by the
Board at Board meetings in October 2019 and June 2020.
Additional briefings were prepared and frequent calls held
between scheduled Board meetings to ensure that Board
members were fully briefed on the impact of COVID-19 on
the group businesses.
The Board had specific focus sessions on ESG in June 2020
strategy sessions as part of the Board meeting as well as
updates from the Primark Ethics team and an update on
Health, Safety and Environmental matters in the February
2020 Board meeting.
As part of supporting seamless home-working for many, the
IT infrastructure was modified, bandwidth was increased with
telecommunications partners and extensive use was made of
collaboration software.
100
Associated British Foods plc
Annual Report and Accounts 2020
Audit, risk and internal control
Financial and business reporting
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 statutory requests.
We consider the annual report and
financial statements, taken as a whole,
are fair, balanced and understandable
and provide the information necessary
for shareholders to assess the
Company’s position and performance,
business model and strategy. The
Company produced a paper in this
respect, which was presented to the
Audit Committee.
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 12 to 13
and in the business strategy sections of
the operating review on pages 23, 35,
43, 49 and 55. 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 and viability
The 2018 Code requires the directors to
assess and report on the prospects of
the group over a longer period. This
longer-term viability statement and
statement of going concern is set out
on pages 90 to 91.
Risk management and internal
control
The Board acknowledges its overall
responsibility for monitoring the group’s
risk management and internal control
systems to facilitate the identification,
assessment and management of risk
and 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.
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.
They also confirm that they have
regularly monitored the effectiveness of
the risk management and internal
control systems (which cover all material
controls including financial, operational
and compliance controls) utilising the
review process set out below.
Standards
There are guidelines on the minimum
group-wide 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 twice yearly that
it has complied with these policies
and procedures.
High level controls
All businesses prepare annual operating
plans and budgets which are updated
regularly. Performance against budget is
monitored at business unit level and
centrally, with variances being reported
promptly. The cash position at group and
business level is monitored constantly
and variances from expected levels are
investigated thoroughly.
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
Governance
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 major accounting firms
other than the firm involved in the audit
of the group (except where expressly
permitted by the Audit Committee)) 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. The
group’s Director of Financial Control
meets with the Chair of the Audit
Committee as appropriate but at least
quarterly, without the presence of
executive management, and has direct
access to the Chairman of the Board.
Annual Report and Accounts 2020
Associated British Foods plc
101
Corporate governance
continued
Whistleblowing
The Audit Committee reports to the
full Board on the analysis of reported
allegations which is compiled by
the Director of Financial Control.
Arrangements are in place for
proportionate and independent
investigations of allegations and for
follow-up action. Further details of
the Whistleblowing Policy and
processes in place, as well as
information on the status of notifications
received in the year to June 2020 are
provided on page 77.
Assessment of principal risks
The directors confirm that, during the
year, the Board has carried out a robust
assessment of the principal risks facing
the group, including those that could
threaten its business model, future
performance, solvency or liquidity,
together with emerging risks. A
description of the principal, including
emerging, risks and how they are being
managed and mitigated is set out on
pages 84 to 90.
Annual review of the effectiveness of
the systems
During the year, the Board reviewed the
effectiveness of the group’s systems of
risk management and internal control
processes embracing all material
systems, including financial, operational
and compliance controls, to ensure that
they remain robust. The review covered
the financial year to 12 September 2020
and the period to the date of approval of
this annual report. The review included:
• the annual risk management review,
a comprehensive process identifying
the key external and operational risks
facing the group and the controls and
activities in place to mitigate them, the
findings of which are discussed with
each member of the Board individually
(refer to the risk management section
on pages 84 to 90 for details of the
process undertaken); and
• the annual assessment of internal
control, which, following consideration
by the Audit Committee, provided
assurance to the Board around the
control environment and processes
in place around the group, specifically
those relating to internal financial
control.
The Board evaluated the effectiveness
of management’s processes for
monitoring and reviewing risk
management and internal control.
No significant failings or weaknesses
were identified by the review and the
Board is satisfied that, where areas of
improvement were identified, processes
are in place to ensure that remedial
action is taken and progress monitored.
The Board confirmed that it was
satisfied that the systems and processes
were functioning effectively and
complied with the requirements of
the 2018 Code.
Please also see the Audit Committee
report on pages 105 to 109.
Remuneration
The Directors’ Remuneration report is
on pages 110 to 121 and provides details
of our remuneration policy and how it
has been implemented, together with
information on the activities of the
Remuneration Committee.
Articles and share capital
Information in relation to share capital,
the appointment and powers of
directors, the issue and buy-back of
shares and significant interests in share
capital is set out in the Directors’ report
on pages 122 to 124.
At this year’s AGM, we are proposing
to amend our Articles to bring them up
to date with market practice and, most
importantly, to allow for hybrid meetings
in order to give the flexibility for
participation in future AGMs via
electronic means, allowing for those
who cannot attend (for example,
because of rules around COVID-19 or
similar) to have the ability to participate
in proceedings as much as possible.
Further details on these and other
proposed amendments to the Articles
are included in the Notice of AGM.
Engagement with shareholders
Individual shareholders
We have a number of individual
shareholders. All shareholders are
usually invited physically to attend the
AGM (although this has changed in
respect of the 2020 AGM given the
COVID-19 pandemic), have access to
our website and receive electronic
communications. The 2020 AGM will be
live-streamed and shareholders will have
the opportunity to put their questions
to the Board in advance of the meeting.
We have a dedicated in-house team to
manage communications with our
shareholders, making sure we respond
directly, as appropriate, to any matters
regarding their shareholdings. We also
have a dedicated team at Equiniti (our
share registrar) which looks after their
needs. To improve security and
efficiency of communications and to
reduce the amount of paper we use,
our default method of communications
with shareholders is e-communications.
We also encourage the direct payment
of dividends into bank or building
society accounts.
Institutional shareholders
During the year, the Board has
maintained an active programme of
engagement with institutional investors,
the purpose of which is both to develop
shareholders’ understanding of the
Company’s strategy, operations and
performance and to provide the Board
with an awareness of the views of
significant shareholders. At each Board
meeting, the directors are briefed on
shareholder meetings that have taken
place and on feedback received,
including any significant concerns raised.
AGM
The AGM provides an opportunity for
directors to engage with shareholders,
answer their questions and, usually, to
meet them informally. The 2020 AGM
will be adapted to meet concerns
relating to the COVID-19 pandemic.
Whilst the AGM will be held on Friday
4 December 2020 at 11.00 am,
shareholders should not attend
physically but are instead asked to follow
proceedings through the telephone/
internet stream which is being set up.
We encourage all shareholders to vote
by proxy in advance of the meeting on
all resolutions put forward. Shareholders
are given the opportunity to raise
questions and receive responses in
advance of the voting deadline and
further details are included in the
Notice of AGM and documentation
accompanying the proxy form. All votes
are taken by a poll. In 2019, voting levels
at the AGM were over 80% of the
Company’s issued share capital.
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Annual Report and Accounts 2020
These views are then reported back
to the Board as a whole at the nearest
following Board meeting to ensure that
they are aware of what the Company’s
largest shareholders are concerned with,
or not as the case may be.
Press releases
We issue press releases for all
substantive news relating to Associated
British Foods. You can find these on our
website: www.abf.co.uk.
Results announcements
We release a full set of financial and
operational results at the interim and
full year stage. We release trading
statements at the first and third quarter
stages with reduced disclosure,
whilst still providing sufficient detail
to allow investors to model and value
our business.
Website (www.abf.co.uk)
Our website is regularly updated and
contains a comprehensive range of
information on our Company. There
is a section dedicated to investors
which includes our investor calendar,
financial results, presentations, press
releases and contact details. The area
dedicated to individual shareholders is
an essential communication method.
It includes information on shareholder
news, administrative services and
contact information.
Annual report
We publish a full annual report and
accounts each year which contains a
strategic report, responsibility section,
governance section and financial
statements. The annual report is
available in paper format and on our
website: www.abf.co.uk.
Responsibility/ESG
We publish a responsibility report every
three years with an update report each
year in between. We also publish an
ESG Appendix each year. The Company
Secretary acts as a focal point for
communications on matters of corporate
responsibility. During the year, the
Company responded to requests for
meetings, telephone meetings or
written information from both existing
and potential shareholders and research
bodies on a broad range of environmental,
social and governance risk matters
including matters related to climate
change, water and greenhouse gas risk
management, supply chain management,
animal welfare, sustainable agriculture,
human rights, employee welfare, gender
balance and human capital development.
Meetings
The Chairman issues an invitation
each year to the Company’s largest
institutional shareholders to hear their
views and discuss any issues or
concerns. During the year, the Chairman
held meetings with a number of
institutional shareholders (either in
person or virtually) and discussed a
range of topics including the Company’s
strategy and approach to governance
and remuneration-related matters.
On the day of the announcement of the
interim and final results, the Company’s
largest shareholders, together with
financial analysts, are invited to a
presentation with a question and answer
session by the Chief Executive and
Finance Director, with webcast
presentations of the results available for
all shareholders through the Company’s
website. Following the results, the
executive team hold one-to-one and
group meetings (virtually where
necessary) with institutional
shareholders and potential investors.
Governance
Board Committees
Nomination Committee report
Members
At the date of this report, the
following are members of the
Committee:
Michael McLintock (Chair)
Graham Allan
Ruth Cairnie
Richard Reid
Wolfhart Hauser
All members served on the
Committee throughout the year,
except for Graham Allan who was
appointed on 15 January 2020.
Meetings
The Committee met twice during
the year under review.
Primary responsibilities
In accordance with its terms
of reference, the Nomination
Committee’s primary
responsibilities include:
• leading the process for
Board appointments and
making recommendations
to the Board;
• reviewing regularly the Board
structure, size and composition
(including skills, knowledge,
independence, experience and
diversity) and recommending
any necessary 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
organisation competes
efficiently in the marketplace;
and
• being responsible for
identifying and nominating,
for the approval of the Board,
candidates to fill Board
vacancies as and when
they arise.
Annual Report and Accounts 2020
Associated British Foods plc
103
Corporate governance
continued
Committee activities during the year
Succession planning
The focus this year has continued
to be on consolidating existing Board
responsibilities. However, priorities
identified for 2019 included continuing
to emphasise generalist skills in board
recruitment and continuing to factor in
gender and racial diversity. In the
continuous consideration of these
topics, there is recognition of the
appropriateness of creating greater
diversity in Board membership and the
potential need to increase the size of the
Board in order to create such diversity.
A process is underway to engage an
external search consultancy.
Detailed reviews of succession planning
in respect of senior management were
presented to the Board by the Group
People and Performance Director, at
Board meetings in October 2019 and
June 2020.
Re-election of non-executive
directors
The Committee members considered
the composition of the Board and the
time needed to fulfil the roles of
Chairman, Senior Independent Director
and non-executive director.
The Committee members considered
the re-election of directors prior to their
recommended approval by shareholders
at the AGM.
Performance evaluation
Whilst the internal evaluation in 2019
concluded that the Committee was
continuing to function effectively, the
Committee’s effectiveness will be
further reviewed in detail as part of the
deferred external evaluation of the
Board’s performance to be carried out
in the 2020/21 financial year.
Governance
Members of the Nomination Committee
are appointed by the Board from
amongst the directors of the Company,
in consultation with the Chairman. The
Committee comprises a minimum of
three members at any time, a majority
of whom are independent non-executive
directors. A quorum consists of two
members being either two independent
non-executive directors or one
independent non-executive director
and the Chairman.
Only members of the Committee have
the right to attend Committee meetings.
Other individuals such as the Chief
Executive, members of senior
management, the Group People and
Performance Director and external
advisers may be invited to attend
meetings as and when appropriate.
The Committee may take independent
professional advice on any matters
covered by its terms of reference at the
Company’s expense.
The Committee Chair reports the
outcome of meetings to the Board.
The terms of reference of the
Nomination Committee are available on
the Investors section of the Company’s
website: www.abf.co.uk.
Board appointments process
The process for making new
appointments is led by the Chair. Where
appropriate, external, independent
consultants are engaged to conduct a
search for potential candidates, who are
considered on the basis of their skills,
experience and fit with the existing
members of the Board. The Nomination
Committee has procedures for
appointing a non-executive or an
executive director and these are set
out in its terms of reference.
As noted in previous years’ reports,
the Company has in the past engaged
Spencer Stuart, an external executive
search and leadership consulting firm
and a signatory to the ‘Voluntary Code of
Conduct for Executive Search Firms’ on
gender diversity and best practice, to
help identify potential candidates as part
of a process of progressive refreshment
of the Board. That process most recently
resulted in Graham Allan joining the
Board with effect from 5 September
2018. In March 2019, the Chairman
joined the advisory board of Spencer
Stuart. Spencer Stuart is otherwise
independent of the Company.
Diversity and inclusion
As a Board, we recognise that diversity
and inclusion is important for introducing
different perspectives into Board debate
and decision-making and that this is
a wider issue than just gender and
ethnicity. We believe that members of
the Board should collectively possess
a diverse range of skills, expertise,
industry knowledge, business and other
experience necessary for the effective
oversight of the group.
Accordingly, the Board has decided
not to set any measurable objectives
in relation to diversity and inclusion.
The Nomination Committee considers
diversity and inclusion as one of many
factors when recommending new
appointments to the Board, although
gender and ethnicity remain important
factors and are a factor in searches for
new candidates, as identified in our
priorities for 2019.
It continues to be our policy to ask
any executive search agencies engaged
to ensure that half of the candidates
they put forward for consideration
are women.
We value having a Board which numbers
eight directors in total; we believe this is
an optimum size in view of the level of
participation and quality of debate that
results. As we have enjoyed stability of
Board membership, vacancies have not
arisen frequently. This means that we
are unlikely to meet the expectations
of the Hampton-Alexander Review by
having at least 33 per cent female
representation on our Board by the
end of 2020. In order to meet both
the Hampton-Alexander Review
expectations and the recommendation
of the Parker Review that all FTSE 100
boards should have at least one person
of colour as a director by the end of
2021, we plan to make an additional
appointment to the Board during the
course of the next year. This will result
in our Board size increasing, at least
for a time, to nine directors.
For details of diversity and inclusion
as it applies to the group’s wider
workforce and the gender balance of
senior managers and direct reports,
please see page 75.
The group has for several years had a
cross-divisional Diversity and Inclusion
Taskforce and, with the support of the
Board, efforts are being made to elevate
and accelerate discussion and actions.
This includes, for example, the request
that the divisions be even more explicit
about their approach to diversity and
inclusion (see Richard Reid’s letter on
page 98) in addition to the programmes
already initiated by divisional Diversity &
Inclusion steering groups such as
training to recognise unconscious bias.
104
Associated British Foods plc
Annual Report and Accounts 2020
Audit Committee report
Members
During the year and as at the date
of this report, members and Chair
of the Committee have been
as follows:
Richard Reid (Chair)
Graham Allan
Ruth Cairnie
Wolfhart Hauser
Primary responsibilities
In accordance with its terms of
reference, the Audit Committee’s
primary responsibilities include:
Financial reporting
• 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;
• informing the Board of the
outcome of the group’s external
audit and explaining how it
contributed to the integrity of
financial reporting;
• reviewing and challenging, where
necessary, the consistency of,
and changes to, accounting and
treasury policies; whether the
group has followed appropriate
accounting policies and made
appropriate estimates and
judgements; the clarity and
completeness of disclosure;
significant adjustments resulting
from the audit; the going concern
assumption; the viability
statement; and compliance with
accounting standards;
Narrative reporting
• at the Board’s request, reviewing
the content of the annual report
and accounts and advising the
Board on whether, taken as a
whole, it is fair, balanced and
understandable and provides the
information necessary for
shareholders to assess the
Company’s position and
performance, business model
and strategy;
Governance
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.
The Committee Chair fulfilled the
requirement that there must be at least
one member with recent and relevant
financial experience and competence in
accounting or auditing (or both) during
the year. In addition, the Committee as
a whole has competence in the sectors
in which the Company operates. 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;
• key aspects of the Company’s
operations including corporate policies
and the group’s internal control
environment;
• matters which may influence the
presentation of accounts and key
figures;
• the principles of, and developments
in, company law, sector-specific
laws and other relevant corporate
legislation;
• the role of internal and external
auditing and risk management; and
• the regulatory framework for the
• where requested by the Board,
assisting in relation to the
Board’s assessment of the
principal risks facing the
Company and the prospects of
the Company for the purposes
of disclosures required in the
annual report and accounts;
Internal financial controls
• reviewing the effectiveness of
the group’s internal financial
controls, including the policies
and overall process for
assessing established systems
of internal financial control and
timeliness and effectiveness of
corrective action taken by
management;
Whistleblowing and fraud
• overseeing the group’s policies,
procedures and controls for
preventing bribery, identifying
money laundering, and the
group’s arrangements for
whistleblowing;
Internal audit
• monitoring and reviewing the
effectiveness and independence
of the group’s internal audit
function in the context of the
group’s overall financial risk
management system;
• considering and approving the
group’s businesses.
remit of the internal audit
function, ensuring it has
adequate resources and
appropriate access to
information to enable it to
perform its function effectively;
and
External audit
• overseeing the relationship with
the group’s external auditor,
including reporting to the Board
each year whether it considers
the audit contract should be put
out to tender, adhering to any
legal requirements for tendering
or rotation of the audit services
contract as appropriate,
reviewing and monitoring the
external auditor’s objectivity and
independence, agreeing the
scope of their work and fees
paid to them for audit, assessing
the effectiveness of the audit
process, and agreeing the policy
in relation to the provision of
non-audit services.
The Committee invites the Finance
Director, Group Financial Controller,
Director of Financial Control, Director
of Company Secretariat and senior
representatives of the external auditor
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 auditor
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 auditor.
The Committee may take independent
professional advice on any matters
covered by its terms of reference at the
Company’s expense.
Annual Report and Accounts 2020
Associated British Foods plc
105
Corporate governance
continued
The Committee Chairman reports the
outcome of meetings to the Board.
A review of the Committee’s
effectiveness had been planned during
the second half of the year as part of the
Board’s annual performance evaluation.
As a result of the onset of COVID-19-
related events this did not take place.
The 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. The Committee’s
agenda is 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 auditor.
Monitoring the integrity of reported
financial information
Ensuring the integrity of the financial
statements and associated
announcements is a fundamental
responsibility of the Audit Committee.
Areas of significant accounting
judgement and estimation material
to the group financial statements
Impairment of goodwill,
intangible, tangible and
right-of-use assets
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.
During the year it formally reviewed the
group’s interim and annual reports.
These reviews considered:
• COVID-19 challenges and response
assurance plan; and
• group long-term funding options.
• the description of performance in the
annual report to ensure it was fair,
balanced and understandable;
• the accounting principles, policies and
practices adopted in the group’s
financial statements, any proposed
changes to them, and the adequacy of
their disclosure. This included the
adoption of IFRS 16 Leases and the
disclosures;
• important accounting issues or areas
of complexity, the actions, estimates
and judgements of management in
relation to financial reporting and in
particular the assumptions underlying
the going concern and viability
statements;
• any significant adjustments to financial
reporting arising from the audit;
• the recommendations of the FRC
following its review of the group’s
2019 financial statements, in which
they considered compliance with
reporting requirements;
• tax contingencies, compliance with
statutory tax obligations and the
group’s tax policy;
• cyber security;
• impact of the Brydon Report;
Significant accounting issues
considered by the Audit Committee
in relation to the group’s financial
statements
A key responsibility of the Committee
is to consider the significant areas of
complexity, management judgement
and estimation that have been applied in
the preparation of the financial
statements. The Committee has, with
support from Ernst & Young LLP (‘EY’)
as external auditor, reviewed the
suitability of the accounting policies
which have been adopted and whether
management has made appropriate
estimates and judgements.
Set out below are the significant
areas of accounting judgement or
management estimation and a
description of how the Committee
concluded that such judgements and
estimates were appropriate. These are
divided between those that could
have a material impact on the financial
statements and those that are less likely
to have a material impact but
nevertheless, by their nature, required
a degree of estimation.
Audit Committee assurance
The Committee considered the reasonableness of cash flow projections which were
based on the most recent budget approved by the Board and reflected management’s
expectations of sales growth, operating costs and margins based on past experience
and external sources of information. The Committee focused on Azucarera, Allied
Bakeries, China Sugar, Australian meat, AB Mauri and certain Primark stores.
Long-term growth rates for periods not covered by the annual budget were
challenged to ensure they were appropriate for the products, industries and countries
in which the relevant cash generating units operate. The Committee also reviewed
and challenged the key assumptions made in deriving these projections: discount
rates, growth rates, and expected changes in production and sales volumes, selling
prices and direct costs. The Committee also considered the adequacy of the
disclosures in respect of the key assumptions and sensitivities. Refer to notes 8 and 9
to the financial statements for more details of these assumptions.
The Committee was satisfied that the discount rate assumptions appropriately
reflected current market assessments of the time value of money and the risks
associated with the particular assets. The other key assumptions were all considered
to be reasonable.
The external auditor undertook an independent audit of the estimates of value-in-use
and fair value less costs to sell, including a challenge of management’s underlying
cash flow projections, long-term growth assumptions and discount rates. On the
basis of its audit work, and its challenge of the key assumptions and associated
sensitivities, it considered that the £157m impairment charge against Azucarera
goodwill, Speedibake assets and some Primark stores included within exceptionals,
and the £15m asset write-down at Allied Bakeries, as detailed in notes 8, 9 and 10,
were appropriately recognised and that no further impairments were required.
106
Associated British Foods plc
Annual Report and Accounts 2020
Governance
Areas of significant accounting
judgement and estimation material
to the group financial statements
Impact of COVID-19 on the viability
statement and going concern
The COVID-19 pandemic continues
to be a worldwide crisis and the
situation is still uncertain. Authorities
continue to impose restrictions on
both a regional and local basis.
COVID-19 has had a particular
impact on the cash flow and
profitability of the retail business.
The Board considered future
performance and cash flows in its
going concern assessment, through
to February 2022, and its viability
statement over the next three years.
Management have undertaken a
detailed financial modelling exercise
that has considered the impact on
profit, cash and working capital of a
number of potential scenarios.
Tax provisions
The level of current and deferred tax
recognised in the financial
statements is dependent on
subjective judgements as to the
outcome of decisions by tax
authorities in various jurisdictions
around the world and the ability of
the group to use tax losses within
the time limits imposed by the
various tax authorities.
Leases
The group adopted IFRS 16 Leases
for the first time this financial year.
Judgement was required in
determining the term of each lease,
the discount rate used to value the
lease liabilities and right-of-use
assets disclosed and in identifying
lease arrangements under the scope
of IFRS 16.
Other accounting areas requiring
management judgement or estimation
Post-retirement benefits
Valuation of the group’s pension
schemes and post-retirement
medical benefit schemes require
various subjective judgements
to be made including mortality
assumptions, discount rates, general
and salary inflation, and the rate of
increase for pensions in payment
and those in deferment.
Audit Committee assurance
Since March, when the pandemic became apparent, the Audit Committee, on behalf
of the Board have considered the implications of COVID-19 and provided ongoing
support and challenge of management’s accounting, reporting and internal controls.
As the pandemic continues to evolve, focus has been given to the retail business
which could be impacted by future restrictions imposed by authorities.
The Committee have reviewed and challenged the scenarios considered by
management and concluded that these, and the stress testing scenarios and
assumptions, were appropriate and adequate.
The Committee have reviewed the detailed cash flow forecasts, which incorporated
the mitigating actions taken by management. The Committee also reviewed and
challenged the reverse stress assumptions to confirm the viability of the group.
The Committee has been kept informed of the impacts of COVID-19 on the group,
including accounting matters, going concern and viability considerations and UK FRC
pronouncements. The Committee have satisfied themselves that management had
adequately identified and considered all potentially significant accounting and
disclosure matters.
The Committee reviews the Company’s tax policy and principles for managing tax
risks annually.
The Committee reviewed and challenged the provisions recorded and the contingent
liabilities disclosed at the balance sheet date and management confirmed that they
represent their best estimate of the financial exposure faced by the group.
The external auditor explained to the Committee the work they had conducted during
the year, including how their audit procedures were focused on those provisions
requiring the highest degree of judgement. The Committee discussed with both
management and the external auditor the key judgements which had been made. It
was satisfied that the judgements were reasonable and that, accordingly, the
provision amounts recorded were appropriate.
The Committee received updates from management outlining the effect of the new
standard, including the judgements and key assumptions used in the estimation of
the impact.
The Committee reviewed the judgement applied in identifying lease arrangements
and the reasonableness of lease terms determined by management including their
assessments of options to terminate and extend leases. The Committee was
satisfied that the discount rate assumptions appropriately reflected current market
assessments of the incremental borrowing rate for each of the group’s subsidiaries
in respect of their lease commitments.
The external auditor undertook an assessment of management’s assumptions, and
the model used to determine values for lease related accounts. It also considered the
appropriateness of IFRS 16 transition disclosures.
Audit Committee assurance
Actuarial valuations of the group’s pension scheme obligations are undertaken every
three years by independent qualified actuaries who also provide advice to
management on the assumptions to be used in preparing the accounting valuations
each year. Details of the assumptions made in the current and previous year are
disclosed in note 12 of the financial statements together with the bases on which
those assumptions have been made.
The Committee reviewed the assumptions by comparison with externally derived
data and also considered the adequacy of disclosures in respect of the sensitivity of
the surplus or deficit to changes in these key assumptions.
Annual Report and Accounts 2020
Associated British Foods plc
107
Corporate governance
continued
Misstatements
Management reported to the
Committee that they were not aware
of any material or immaterial
misstatements made intentionally
to achieve a particular presentation.
The external auditor reported to the
Committee the misstatements that they
had found in the course of their work.
After due consideration the Committee
concurred with management that these
misstatements were not material and
that no adjustments were required.
Internal financial control and risk
management
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 2018 Code. To fulfil
these duties, the Committee reviewed:
• the external auditors’ management
letters and their Audit Committee
reports;
• internal audit reports on key audit
areas and any significant deficiencies
in the financial control environment;
• reports on the systems of internal
financial control and risk management;
• internal audit’s evaluation of the
group’s readiness for a ‘no deal’
EU exit;
• an assessment of business continuity
plans in place in the group’s
businesses;
• reports on fraud perpetrated against
the group;
• the group’s approach to anti-bribery
and corruption, and whistleblowing;
• the group’s approach to IT and
cybersecurity; and
• reports on significant systems
implementations.
Internal audit
The Audit Committee is required
to assist the Board in fulfilling its
responsibilities for ensuring the
capability of the internal audit function
and the adequacy of its resourcing
and plans.
To fulfil its 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 their resolution; and
• changes in internal audit personnel to
ensure appropriate resourcing, skills
and experience are put in place.
The Chair of the Committee met
with the Director of Financial Control
regularly during the year to monitor
the effectiveness of the internal
audit function, receiving updates
on audit progress and statistics on
outstanding issues.
Whistleblowing and fraud
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. The Audit Committee
reviewed reports from internal audit and
the actions arising therefrom. Further
details on the policy can be found
on page 77.
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. The Audit
Committee reviewed all instances
of fraud perpetrated against the group
and the action taken by management
both to pursue the perpetrators and to
prevent recurrences.
External audit
Auditor independence
The Audit Committee is responsible for
the development, implementation and
monitoring of policies and procedures on
the use of the external auditor 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 auditor, whilst also ensuring that
the auditor maintains the necessary
degree of independence and objectivity.
The Committee’s policy on the use of
the external auditor to provide non-audit
services is in accordance with applicable
laws and takes into account the relevant
ethical guidance for auditors. Any
non-audit work to be undertaken by
the auditor requires authorisation by
the Finance Director and the Audit
Committee prior to its commencement.
The Committee also ensures that fees
incurred, or to be incurred, for non-audit
services, both individually and in
aggregate, do not exceed any limits in
applicable law and take into account the
relevant ethical guidance for auditors.
The Committee is required to approve
the use of the external auditor to
provide: accounting advice and training;
corporate responsibility and other
assurance services; financial due
diligence in respect of acquisitions
and disposals; and will consider other
services when it is in the best interests
of the Company to do so, provided they
can be undertaken without jeopardising
auditor independence. Tax services
including tax compliance, tax planning
and related implementation advice may
not be undertaken by the external
auditor except in very exceptional
circumstances where specialist
knowledge is required. The aggregate
expenditure with the group auditor is
reviewed by the Audit Committee.
No individually significant non-audit
assignments that would require
disclosure were undertaken in the
financial year.
The Company has a policy that any
partners, directors or senior managers
hired directly from the external auditor
must be pre-approved by the Chief
People and Performance Officer,
and the Finance Director or Group
Financial Controller, with the Chair of
the Audit Committee being consulted
as appropriate.
108
Associated British Foods plc
Annual Report and Accounts 2020
Governance
The Audit Committee has formally
reviewed the independence of the
external auditor. EY has reported to the
Committee confirming that it believes it
remained independent throughout the
year, 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 auditor,
the Audit Committee reviewed:
• a report from the external auditor
describing arrangements to identify,
report and manage any conflicts of
interest, and policies and procedures
for maintaining independence and
monitoring compliance with relevant
requirements; and
• the extent of non-audit services
provided by the external auditor.
The total fees paid to EY for the
52 weeks ended 12 September 2020
were £8.8m, of which £0.7m
related to non-audit work. Further
details are provided in note 2 to the
financial statements.
Auditor effectiveness
To assess the effectiveness of the
external auditors, the Committee
reviewed:
• the external auditor’s 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 via
questionnaires evaluating the
performance of each assigned audit
team, planning, challenge and
interaction with the business; and
• a report on EY, as a firm, from the
Audit Quality Review Team (‘AQRT’)
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
auditor’s engagement letter;
• the overall work plan and 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.
Auditor appointment
The Audit Committee reviews annually
the appointment of the auditor, taking
into account the auditor’s effectiveness
and independence, and makes a
recommendation to the Board
accordingly. Any decision to open
the external audit to tender is taken
on the recommendation of the
Audit Committee.
The Company’s current external
auditor, EY, was first appointed at the
Annual General Meeting in December
2015, with effect from 2016, following
the conclusion of a competitive tender
process. The Audit Committee
is satisfied with the auditor’s
effectiveness and independence and
has recommended to the Board that EY
be reappointed as the Company’s
external auditor for 2020/21. The
Company has no current retendering
plans, but keeps such plans under
review in light of the applicable legal
and regulatory framework.
Compliance with the CMA Order
The Company confirms that, during the
period under review, it has complied
with the provisions of The Statutory
Audit Services for Large Companies
Market Investigation (Mandatory Use
of Competitive Tender Processes and
Audit Committee Responsibilities)
Order 2014.
Annual Report and Accounts 2020
Associated British Foods plc
109
Directors’ Remuneration report
Ruth Cairnie
Remuneration
Committee Chair
In this section
How the directors’
remuneration policy,
approved in 2019,
was implemented
in 2019/20
Page 113
How we expect to
implement the
remuneration policy
in 2020/21
Page 114
Supporting required
disclosures
Pages 115 to 121
This report is subject
to an advisory vote
at the 2020 AGM.
Annual statement
by the Remuneration
Committee Chair
In this letter I have set out how we have applied
our remuneration policy in the extremely
challenging context of COVID-19. I have also
outlined the key decisions made so far in relation
to 2020/21. Further information on these topics
can be found in the implementation report.
The first half of 2019/20 saw the group deliver an
encouraging performance. In Grocery and Sugar,
adjusted operating profit was ahead of the
previous year and further growth was expected
in the second half, particularly in Sugar. Retail
delivered a promising first half with further
market share growth in the UK and improvement
in underlying performance in Europe, including
Germany. A strong second half performance
was expected.
Towards the end of the first half we saw the early
impacts of COVID-19, which then intensified
rapidly. For most of our food businesses, the
challenge was to keep operations running; we
acted swiftly to implement measures to keep our
people safe and our operational teams worked
around the clock to meet demand. Through these
challenging conditions our food businesses
delivered a very strong financial performance
for the year.
In March we were required to close all Primark
stores within 12 days. This required an
extraordinary response, both to manage the
operational situation safely and to mitigate the
financial consequences. Shops had to be closed
safely, further orders from our suppliers were
stopped and immediate action was needed to
manage cash flow and protect the group’s
liquidity. This was achieved with very strong
leadership demonstrated from the top of the
organisation down. Significant cost management
and cash preservation actions were initiated
across the group and funding was secured.
Primark made use of various government
job retention schemes across Europe as an
important element of saving some 68,000 jobs
given the scale of the impact. Use of these
schemes stopped when the majority of our
stores had reopened. Primark was one of the
first UK employers to confirm it would not be
taking the UK Government’s subsequent Job
Retention Bonus.
There was no alternative to cancelling orders
from our suppliers, given the operational and
financial challenges. However, as we began
to mitigate costs and could see a reopening
timetable we prioritised more funds to support
the supply chain, including establishing a wages
fund and pledging to pay our garment suppliers
in full for all garments both finished and in
production as well as any fabric costs incurred for
Primark. Primark has worked diligently to protect
our suppliers and mitigate the impacts on them
and their workers.
Cost reduction and cash preservation responses
also included negotiations with landlords to reduce
or defer payments of rent, and the interim
dividend was cancelled.
Arranging for the reopening of stores was at
least as great a challenge as closing them down,
requiring great attention to the safety of both
our employees and customers. The steps we
introduced have been well received and trading
so far has been good. Throughout the pandemic
and across all our businesses, engagement and
communication with staff, and care for their
well-being, has been a high priority. No use of
government job retention schemes was made
outside of Primark.
Remuneration in 2019/20
Salaries
The Board agreed that their own remuneration
should be reduced temporarily, in light of the
impact of COVID-19 on our employees and wider
stakeholders. On 3 April 2020 we announced that
our executive directors’ salaries were being
reduced by 50% and our NED fees, including
those of the Chairman, were being reduced by
25%. At the time we did not set an end date
for these reductions. The Committee later
determined that salaries and fees for Board
members should return to normal from the start
of the new financial year, so the reduction was in
place for nearly six months and well beyond the
date we ceased drawing on government job
retention schemes.
STIP 2019/20
In April 2020, with many of our Primark stores
closed, the Committee determined that no STIP
payment would be made this year. The impact of
closures on our financial performance meant that
the financial element of performance would not
be met. However, in an exceptional year, when
much was asked of our senior leaders, we
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Associated British Foods plc
Annual Report and Accounts 2020
Governance
On 3 April 2020 we
announced that our
executive directors’
salaries were being
reduced by 50% and
that our NED fees,
including those of
the Chairman, were
being reduced by
25% in recognition
of the closure of our
Primark stores.
considered whether the personal element should
remain in place. It was decided that, despite the
very strong leadership performance, it was also
appropriate to cancel the personal performance
element of the STIP in recognition of the impact
of COVID-19 on the lives and livelihoods of so
many, as well as the cancelled interim dividend.
LTIP 2017–20
Given the financial impacts of COVID-19 in
the second half of the year, the performance
conditions for this incentive plan were not met.
No shares will vest this year.
Forward looking remuneration decisions
in 2020/21
Salaries
This year, salary increases for our wider UK
workforce will vary from 0% to 3%. The
Committee determined that salaries for the
executive directors and fees for the Chairman
should be increased by 2% in December 2020.
The Chief Executive and Chairman have decided
to waive these increases.
Pensions
We have decided to reduce John Bason’s
pension allowance to 10% of salary by the end
of 2022. This level of allowance is in line with
pension contribution rates for our UK employees.
I would like to thank John for agreeing to this
reduction to his contractual arrangements.
STIP 2020/21
In the current uncertain environment, it is very
difficult to set performance targets. For the STIP
we are setting targets now, but the ranges will be
wider than usual to reflect greater uncertainty.
This year our working capital position is
significantly affected by COVID-19. Many of our
businesses have exceptionally low stock levels
as we enter 2020/21, flattering their working
capital position. Due to the uncertainty related
to supply and demand in the year ahead, the
Committee has decided to suspend the working
capital modifier to the STIP outcome; the
financial element of STIP 2020/21 will be
measured based on profit only. We did not
consider adding other additional measures to the
STIP as we value the simplicity and consistency
of our approach. We anticipate that this change of
approach will apply for this financial year only and
we will then re-adopt a working capital measure.
LTIP 2020-23
The impact of COVID-19 on this year’s financial
results means that setting EPS growth targets
using our normal process could result in
inappropriate incentive outcomes. Using the
depressed performance in 2019/20 as the
starting point means there would be a risk
that vesting could be significantly higher than
underlying performance might justify. We
therefore plan to set the performance targets
in the second half of the 2020/21 financial year
by when we hope to have a clearer view from
which to set more meaningful and stretching
performance targets for this LTIP tranche.
We have considered whether any adjustment
should be made to the number of shares that
would be allocated based on our usual approach
to reflect the relatively low current share price.
However, we believe the share price appropriately
reflects the business environment, and that a
return of the share price to pre-COVID-19 levels
will require a strong performance from the
executives which, if achieved, would not
constitute a ‘windfall gain’. However, at the time
of vesting we will, as is our usual practice, stand
back and assess whether the outcomes are a
fair reflection of true performance, including
consideration of share price movements.
LTIP 2018–21 and 2019–22
We remain focused on strengthening our
businesses for the future and investing in our
people, our factories and our stores. The impact
of COVID-19 on Retail means that meeting
the financial performance conditions for the
2018-21 and 2019-22 LTIP tranches is very
unlikely. Given the unique nature of COVID-19
the Committee has been reflecting on how to
consider performance for these awards. The
Committee anticipates that it may be appropriate
to apply discretion in November 2021 and
November 2022 to recognise recovery from
COVID-19, progress against key strategic
ambitions and the strength of financial
performance in the reset business environment.
This is in keeping with our long history of
adjusting incentive outcomes both upwards
and downwards to reflect performance in the
round, including taking account of shareholder
experience. Should the Committee determine
that it would be appropriate to apply discretion,
we will consult our largest shareholders next
year before determining any outcome.
Investor consultation Autumn 2020
This year we have engaged with our largest
shareholders to understand their views on our
remuneration approach. We have welcomed their
feedback, particularly in relation to our approach
to incentives and will take this into consideration
in the Committee’s decision-making over the
coming year.
During the year our leadership team has made
a very significant contribution in an exceptionally
challenging period, while forgoing salary
and agreeing changes to their contractual
arrangements. I would like to thank them for this.
Ruth Cairnie
Remuneration Committee Chair
Annual Report and Accounts 2020
Associated British Foods plc
111
Directors’ Remuneration report
continued
Remuneration principles
Our remuneration approach needs to enable us to attract and retain top executive talent to promote the strategic and financial
performance of the business. The remuneration principles, shown below, informed the design of our current remuneration policy.
Line of sight
We aim to align remuneration
and business objectives
through performance measures
to which individuals have line of
sight.
Clarity and simplicity
We believe that executive pay
should be clear and simple for
participants to understand.
The best way to achieve this is
through alignment with
business performance.
Fairness
Total remuneration should
fairly reflect the performance
delivered and efforts made by
executives.
Alignment, accountability
and doing the right thing
Our Board is accountable for
ensuring that the portfolio that
we operate is the right one to
deliver optimal returns to
shareholders and for
ascertaining that the
businesses are well–run. Our
remuneration policy aims to
align executive rewards with
shareholder value creation.
How our performance framework supports our strategy
The group takes a long-term approach to investment and is committed to increasing shareholder value to deliver steady growth
in earnings and dividends.
REMUNERATION
ELEMENT
Cash STIP
150% of salary
maximum
Share STIP
50% of salary
maximum
LTIP
200% of salary
maximum
PERFORMANCE METRICS
WHAT THEY MEASURE
Adjusted operating profit
Operational performance
Working capital modifier
Personal performance
Disciplined cash management – not used in 2020/21 as explained
on page 111
Aligned to key business health and business performance goals,
including ESG measures
Adjusted operating profit
Operational performance
Working capital modifier
Disciplined cash management – not used in 2020/21 as explained
on page 111
Adjusted EPS growth in the
non-Sugar businesses
Reflects the strategy of holding a portfolio of diverse businesses
• EPS growth in our non-Sugar businesses is a key measure of
long-term success
Downwards
modifiers:
ROACE1 in the
non-Sugar businesses
ROACE in Sugar
Focus on returns in both Sugar and non-Sugar businesses:
• ROACE in the non-Sugar businesses is intended as a safety
net, and the performance range is set accordingly
• Our Sugar business is held to deliver returns to our shareholders
over the cycle, and sugar volatility is distorting in an EPS
measure
1 The return on average capital employed averaged over the performance period.
Share alignment and time horizons
Shareholdings and alignment with
shareholder interests are part of the
culture of the group and the
commitment of our leaders to the
long-term stewardship of the business.
Executive directors have very significant
shareholdings in the Company.
Incentive plan time horizons
LTIP awards vest after a three-year
performance period and are subject to
a further two-year holding period. STIP
shares are released three years after
being granted at the start of the
performance period.
Post-employment shareholding
Executive directors are required to hold,
for two years post leaving the Company,
shares at a level equal to the lower of the
shareholding requirement (currently 250%
of salary) or their actual shareholding
on departure.
Pension
The group has a wide variety of pension arrangements and a strong history of honouring the commitments we make to
individuals at appointment. For example, our UK defined benefit (DB) pension scheme remains open to future accrual for
members that joined the group before it closed to new members. This principle has also applied to our incumbent executive
directors. The Chief Executive earns benefits in an EFRBS and the Finance Director earned benefits in an EFRBS until April 2019,
at which time his pension was replaced with a cash supplement of 25% of salary. Pension contributions for newly appointed
executive directors will align to what is offered to our wider UK population with a maximum contribution rate at present of 10%
of salary. John Bason’s pension allowance will reduce to 10% of salary, in line with the UK workforce, by the end of 2022.
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Annual Report and Accounts 2020
Governance
Performance and pay outcomes for 2019/20
Business and employee context
In an extremely difficult environment, the executive directors delivered a very strong performance over the year, securing
access to funding and taking early action to preserve cash and protect the group. They ensured that we only leveraged
government schemes where necessary and we were one of the first businesses to confirm that we would not be accepting the
potential payment from the UK government of £1,000 per employee retained in the UK until January 2021. A fund was created
to ensure workers in Primark’s supply chain were paid and commitments were made for new orders, including autumn/winter
stock, as soon as the cash position was clear. In the food businesses, safety and food supply were maintained, with a focus on
the protection of our employees. Ongoing attention to the Sugar cost base has seen improved returns this year, particularly in
British Sugar, while in Agriculture we are making progress in our transformation of the business.
Remuneration approach
In line with the UK Corporate Governance Code, the following factors, which align well with our principles, were also considered:
• Clarity and simplicity – one of our key remuneration principles. This year we have refreshed our Directors’ Remuneration report
to provide clearer disclosure of our policies and practices. Our approach in response to COVID-19 in 2019/20 was disclosed
promptly to ensure clarity for all stakeholders.
• Risk and proportionality – we are aware of the risks that can result from excessive rewards and believe that our robust
target-setting and long history of applying discretion to calculated outcomes reflects this. This year we have been
particularly mindful of alignment with our workforce when considering the right and proportional approach to salary cuts
and incentive outcomes.
• Predictability – we believe that the link between individual awards, the delivery of strategy and the long-term performance
of the Company is clearly explained in this report and that our approach ensures proportionate pay outcomes that do not
reward poor performance.
• Alignment to culture – we want our executives to make decisions for the long-term performance and health of the business.
This informs our approach to target-setting, operation of discretion and personal performance measures.
Remuneration response to COVID-19
In response to the impact of COVID-19 on the Company’s earnings expectations and on the livelihoods of many, the following
changes were made to directors’ pay:
Base salary
STIP cash
STIP shares
LTIP
Non-executive directors’ fees
George Weston’s and John Bason’s salaries were reduced by 50% from 1 April 2020 to the
end of the 2019/20 financial year.
Given the impact COVID-19 has had on profit for the year, the cut-in level of financial
performance was not achieved. Executive directors will not be paid bonuses relating to
the 2019/20 financial year, with no bonus paid in respect of personal performance. We will
disclose the target ranges that applied to the 2019/20 STIP in November 2021.
The 2019/20 STIP shares will lapse as the STIP financial targets have not been met.
No shares will vest under the 2017–20 LTIP.
The Chairman and non-executive directors’ fees were reduced by 25% from 1 April 2020 to
the end of the 2019/20 financial year.
Total pay for 2020
Emoluments table can be found on page 115.
George Weston
£1,138,000 (-73% year-on-year)
John Bason
£749,000 (-74% year-on-year)
Annual Report and Accounts 2020
Associated British Foods plc
113
Directors’ Remuneration report
continued
Implementation of remuneration policy in 2020/21
Base salary
The Committee determined that it would be appropriate to increase salaries by 2% in December 2020, a level
which is in line with increases for the workforce. The Chief Executive waived his increase.
George Weston
John Bason
Increase
Salary from
1 December 2020
0%
2%
£1,090,000
£734,400
Benefits and
pension
STIP
No changes will be made to benefits and pensions for executive directors in 2020/21. John Bason has agreed that
his pension allowance will reduce to 10% of salary, in line with the UK workforce, by the end of 2022.
For 2020/21 the STIP structure will remain unchanged. Up to 150% of salary can be earned under the cash element
and up to 50% of salary can be earned under the shares element.
The split between financial and personal performance measures will be as shown in the table below. This year the
financial element will be based on profit only and will not include a working capital modifier. This is because the
impact of COVID-19 on stock levels could flatter the working capital position. The balance between financial and
personal performance measures remains unchanged.
Maximum
On-target (budget)
Threshold
Below threshold
Cash element as a % of salary
Operating
profit
130%
65%
12%
0%
Personal
element
20%
13.33%
0%
0%
Overall cash
element
150%
78.33%
12%
0%
Shares element
as a % of salary
Operating
profit
50%
25%
5%
0%
The STIP shares will be granted in November 2020 and will lapse at the end of the year to the extent to which
performance conditions have not been met. The balance of the shares will remain conditional and will be deferred
for a further two years. Malus and clawback provisions apply to STIP awards for up to two years after being paid.
Achievement against financial targets will be disclosed in our 2021 Remuneration report. Further details of the
targets and ranges used for our 2020/21 STIP will be disclosed in the 2022 Remuneration report.
LTIP
LTIP awards will be granted in November 2020. Vesting will be based on performance against the following
measures, as set out in our remuneration policy:
• group EPS without Sugar
• modifier for group ROACE without Sugar averaged over the performance period
• further modifier for Sugar ROACE (with the book value of goodwill added to the denominator) averaged over the
performance period
Discretion may be applied at vesting so that no windfall gain results from the allocation being based on the average
closing share price over the five trading days preceding the grant date.
The performance ranges will be set in the second half of the 2020/21 financial year.
Maximum award opportunities (% of salary)
George Weston
John Bason
200%
200%
A two-year post-vesting holding period applies to net of tax shares. Malus and clawback provisions apply for up to
two years after vesting.
Shareholding
requirement
Requirement to own Company shares beneficially to a value of at least 250% of salary.
Conditional awards do not count. Shares that have vested and are subject to a holding period do count. At least
50% of net shares vested under STIPs and LTIPs must be held until the shareholding requirement is met.
114
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Annual Report and Accounts 2020
Governance
Supporting required disclosures
About the Remuneration Committee
Role of the Committee
The Committee is responsible to the Board for determining:
• the remuneration policy for the executive directors and the Chairman, considering remuneration trends across the Company
and externally;
• the specific terms and conditions of employment of each individual executive director;
• the overall policy for remuneration of the Chief Executive’s first line reports;
• the design and monitoring of the operation of any Company share plans;
• stretching performance targets for executive directors to encourage enhanced performance;
• an approach that fairly and responsibly rewards contribution to the Company’s long-term success; and
• other provisions of the executive directors’ service agreements and ensuring that contractual terms and payments made on
termination are fair to the individual and Company, and that failure is not rewarded and loss is mitigated.
The Committee’s remit is set out in detail in its terms of reference, which are reviewed regularly to ensure that they are
compliant with the latest corporate governance requirements and were most recently updated in October 2019. They are
available on request from the Company Secretary’s office or at www.abf.co.uk/investorrelations/corporate_governance.
Members of the Remuneration Committee
In the financial year and as at the date of this report, members and Chair of the Committee have been as follows:
Role on Committee
Independence
Year of appointment
Meetings attended
Ruth Cairnie
Wolfhart Hauser
Richard Reid
Michael McLintock
Graham Allan
Chair
Member
Member
Member
Member
Senior Independent Director
Independent Director
Independent Director
Chairman
Independent Director
2014
2015
2016
2017
2018
4
4
4
4
4
George Weston (Chief Executive), Sue Whalley (Chief People and Performance Officer), and Julie Withnall (Group Director of
Reward) attend the meetings of the Committee. Des Pullen (former Group HR Director) also attended meetings during 2019.
No individual is present when their own remuneration is considered.
Directors’ Remuneration Policy
The Company’s remuneration policy was approved by shareholders on 6 December 2019. It is available at
www.abf.co.uk/investorrelations/corporate_governance.
Single total figure of remuneration for executive directors (audited)
Fixed pay
Variable pay
Single total figure
Salary1
Benefits2
Pension 3,4
Total fixed pay
STIP (inc deferred shares)5
LTIP 6,7
Total variable pay
George Weston
John Bason
2020
£000
813
16
309
1,138
–
–
–
1,138
2019
£000
1,063
16
309
1,388
1,574
1,242
2,816
4,204
2020
£000
554
16
179
749
–
–
–
749
2019
£000
703
21
281
1,045
1,045
818
1,863
2,868
1 Salary paid is reduced for pension related salary sacrifices. The benefit of these salary sacrifices is captured in the pension entitlements shown. Salaries for 2020
reflect the temporary 50% reduction from April 2020 to the end of the financial year.
2 Includes benefits taken in cash of £14,121 for George Weston and £14,121 for John Bason. Also includes benefits in kind of £2,043 for George Weston, and
£1,919 for John Bason. Benefits in kind include the taxable values of a company car, family private medical insurance, permanent health insurance, life assurance
and an annual medical check-up.
3 The nature of George Weston’s pension benefits has not changed during the year and the pensions number for remuneration purposes has remained the same
as last year. This reflects the impact on the calculation of changes in the Consumer Prices Index.
4 In the prior year, John Bason’s pension benefits continued until he reached his normal retirement date in April 2019, when further accrual under the EFRBS
ceased. Since that date, he has been paid a pension supplement of 25% of salary, which is reported in the pensions row on this table for clarity, although it is
strictly a taxable benefit.
5 The STIP value includes the cash and deferred share elements earned for performance in the year. In our 2018/19 disclosure, we included an amount in respect
of dividend equivalents paid on STIP shares vesting in the year of £25,422 for George Weston and £16,743 for John Bason. As these were not paid in respect of
STIP earned in the period, the numbers in the emoluments table above have been restated to exclude these amounts. For 2019/20, dividend equivalent
payments will be made on STIP deferred shares vesting based on 2017/18 financial performance. These values are not shown in the table above and are £10,137
for George Weston and £6,677 for John Bason. For 2018/19 the value disclosed for the share element is estimated using the average mid-market closing price
over the last quarter of 2018/19 of 2359.23p. For 2019/20 the performance condition has not been met. No element of the value shown for 2019/20 is
attributable to share price appreciation.
6 No shares vested this year under the 2017–20 LTIP and no element of the value shown for 2019/20 is attributable to share price appreciation.
7 The 2019 LTIP value is based on 2016–19 awards which vested on 25 November 2019 at a share price of 2536.21p. The value disclosed for this award in 2019
was estimated using the average closing price over the last quarter of 2018/19 of 2359.23p. This has now been recalculated for the actual share price on the
vesting date.
Annual Report and Accounts 2020
Associated British Foods plc
115
Directors’ Remuneration report
continued
Pensions
George Weston
In 2019/20 George Weston had an overall benefit promise of 1/45th of final pensionable pay for each year of pensionable service
up to 5 April 2016 and 1/50th of final pensionable pay for each year of pensionable service thereafter, subject to a maximum of
2/3rds of final pensionable pay.
He opted out of the Associated British Foods Pension Scheme on 5 April 2006 and has a deferred benefit in the Scheme; the
balance of the promise is provided under an EFRBS. His pension benefits are payable from age 65. There is no additional benefit
entitlement for members if they take early retirement. His accrued pension at 12 September 2020 was £670,637.
John Bason
In the period to 24 April 2019, John Bason had an overall benefit promise at age 62 of 2/3rds of final pensionable pay, less an
allowance for retained benefits from his previous employment. He opted out of the Associated British Foods Pension Scheme
on 5 April 2006 and has a deferred benefit in the Scheme; the balance of the promise was provided under an EFRBS. His
pension benefits were payable from age 62. There is no additional benefit entitlement for members if they take early retirement.
From 24 April 2019 onwards John Bason has been in receipt of a cash allowance in lieu of pension contributions of 25% of
salary. This approach was significantly more cost effective for the Company than extending the previous contract and EFRBS
membership and was consistent with the approach for other new joiners at executive level under the 2016 remuneration policy.
Our largest shareholders were consulted in late 2018 and were supportive of this approach.
John Bason has agreed that his pension allowance will reduce to 10% of salary, in line with the UK workforce, by the end
of 2022.
Executive directors’ shareholding and scheme interests
Scheme interests (audited information)
The tables below detail the conditional share interests held by the executive directors as at 12 September 2020. The awards
made were in line with the remuneration policy in place at the time.
LTIP
Vesting of LTIP awards is subject to meeting performance conditions over the performance period. A further two-year post-
vesting holding period applies to net of tax shares.
Executive
directors
George
Weston
Scheme
name
LTIP
John
Bason
LTIP
Maximum award
Shares vesting
% of
salary
200%
200%
200%
200%
200%
200%
Face value
at grant
£000
2,144
2,180
2,180
1,412
1,440
1,440
Market
price
at grant1
3076.2p
2517.2p
2507.4p
3076.2p
2517.2p
2507.4p
End of
performance
period Maximum
69,696
86,604
86,943
45,901
57,206
57,430
12/09/20
18/09/21
17/09/22
12/09/20
18/09/21
17/09/22
Target
(50% of
maximum)
34,848
43,302
43,473
22,951
28,603
28,715
Threshold
(10% of
maximum)
6,970
8,660
8,694
4,590
5,721
5,743
Release
date
20/11/20
19/11/21
21/11/22
20/11/20
19/11/21
21/11/22
Award
date
20/11/17
19/11/18
09/12/192
20/11/17
19/11/18
09/12/192
1 The share price used for determining the number of shares in an allocation is the average closing price on the five trading days immediately preceding the
award date.
2 Performance targets for awards granted in December 2019 were disclosed in our 2019 Remuneration report.
STIP – shares
The value of deferred STIP shares to be released is determined based on the achievement of the STIP performance conditions.
Executive
directors
George
Weston
Scheme
name
Deferred
Awards
John
Bason
Deferred
Awards
Award
date
20/11/17
19/11/18
09/12/19
20/11/17
19/11/18
09/12/19
% of
salary
50%
50%
50%
50%
50%
50%
Maximum award
Deferred awards
Face
value
at grant
£000
536
545
545
353
360
360
Market
price
at grant1
3076.2p
2517.2p
2507.4p
3076.2p
2517.2p
2507.4p
End of
performance
period
15/09/18
14/09/19
12/09/20
15/09/18
14/09/19
12/09/20
Maximum
shares
17,424
21,651
21,736
11,475
14,302
14,358
Shares
lapsed for
performance
9,046
5,601
21,736
5,957
3,700
14,358
Shares
subject
to service
condition
8,378
16,050
0
5,518
10,602
0
Release
date
20/11/20
19/11/21
21/11/22
20/11/20
19/11/21
21/11/22
1 The share price used for determining the number of shares in an allocation is the average closing price on the five trading days immediately preceding the
award date.
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Annual Report and Accounts 2020
Governance
LTIP 2017–20
The 2017 allocation was made under the remuneration policy approved in 2016. The table below shows details of the targets set
(as adjusted for IFRS 16) and performance achieved. No shares will vest.
Cut In
Target Maximum
Performance
Outcome
40% of award – Group
2017–20 Adjusted EPS
60% of award – Group without Sugar 2017–20 Adjusted EPS
ROACE modifier
Total element
ROACE modifier
Total element
Total vesting as % of maximum
147p
10%
126p
10%
158p
11%
137p
11%
171p
12%
81.1p
9.61%
148p
77.1p
12% 10.17%
0%
n/a
0%
0%
n/a
0%
0%
ROACE measure is defined as the three-year average of annual average return on capital employed.
Executive directors’ shareholding requirements (audited information)
The interests below as at 12 September 2020 remained the same at 30 October 2020. Both directors have met our shareholding
requirement.
Executive directors
George Weston2
Wittington Investments Limited, ordinary
shares of 50p
Associated British Foods plc, ordinary
Holding
requirement
Beneficial
Beneficial as
% of salary1
LTIP awards
subject to
performance
condition
Unvested
deferred
awards
Total
12 September
2020
Total
14 September
2019
n/a
5,940
n/a
n/a
n/a
5,940
2,660
shares of 515/22p
250% of salary 3,646,210
6,485% 243,243
60,811 3,950,264
3,908,223
John Bason
Associated British Foods plc, ordinary
shares of 515/22p
250% of salary
183,045
493% 160,537
40,135
383,717
353,568
1 Calculated using share price as at close of business on 11 September 2020 of 1938.50p and base salary as at 12 September 2020.
2 George Weston is a director of Wittington Investments Limited which, together with its subsidiary Howard Investments Limited, held 431,515,108 ordinary
shares in Associated British Foods plc as at 12 September 2020.
Annual Report and Accounts 2020
Associated British Foods plc
117
Directors’ Remuneration report
continued
Non-executive directors’ remuneration and share interests
Non-executive directors’ fees
Chairman
Additional fee for Senior Independent Director responsibilities
Additional fee for Committee Chair (Audit/Remuneration only)
Additional fee for responsibility for workforce engagement
Additional fee for chairing Primark Finance and Risk Committee
Director
Fees effective 1 Dec 2019
£410,000
£21,000
£21,000
£21,000
n/a
£74,000
Fees effective 1 Dec 2020
£410,000
£21,000
£23,500
£23,500
£19,000
£74,000
As discussed above, fees were temporarily reduced by 25% from 1 April 2020 to the end of the financial year due to the impact
of COVID-19. Fees were reviewed during 2020 and it was determined that the Committee Chair fee and the fee for workforce
engagement should be increased to £23,500 with effect from 1 December 2020. It was agreed that with effect from 13
September 2020 Richard Reid should be paid a fee of £19,000 for chairing the Primark Finance and Risk Committee. This is a
Committee reporting to the executive rather than a Board Committee. It was determined that the Chairman’s fee should
increase by 2% in December 2020 but the Chairman waived this increase.
Non-executive directors’ remuneration (audited information)
Non-executive directors
Michael McLintock
Ruth Cairnie
Richard Reid
Emma Adamo
Wolfhart Hauser
Graham Allan
Javier Ferrán1
Fees
Total fixed pay
Total variable pay
Total Single Figure
of remuneration
2020
£000
362
102
102
65
65
65
–
2019
£000
409
111
111
74
74
74
22
2020
£000
362
102
102
65
65
65
–
2019
£000
409
111
111
74
74
74
22
2020
£000
2019
£000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
£000
362
102
102
65
65
65
–
2019
£000
409
111
111
74
74
74
22
1 Javier Ferrán retired from the Board on 7 December 2018.
Non-executive directors’ shareholdings and share interests (audited information)
Non-executive directors are encouraged to hold shares to a value equal to their annual fees. The following shareholdings
are ordinary shares of Associated British Foods plc unless stated otherwise. The interests below remained the same at
30 October 2020.
Michael McLintock
Ruth Cairnie
Richard Reid
Emma Adamo1
Wittington Investments Limited, ordinary shares of 50p
Associated British Foods plc, ordinary shares of 515/22p
Wolfhart Hauser
Graham Allan
Total
12 September 2020
Total
14 September 2019
2020 total holding
as a % of annual fee2
15,000
5,223
3,347
1,322
504,465
3,918
6,000
15,000
5,223
3,347
1,322
504,465
3,918
3,000
71%
87%
56%
n/a
13,215%
103%
157%
1 Emma Adamo is a director of Wittington Investments Limited which, together with its subsidiary, Howard Investments Limited, held 431,515,108 ordinary
shares in Associated British Foods plc as at 12 September 2020.
2 Calculated using share price as at close of business on 11 September 2020 of 1938.50p and fee rate as at 12 September 2020.
Directors’ service contracts
Executive directors
George Weston
John Bason
Non-executive directors
Michael McLintock
Emma Adamo
Ruth Cairnie
Wolfhart Hauser
Richard Reid
Graham Allan
Date of
appointment
Date of current
contract/letter of
appointment
Notice from
Company
Notice from
individual
Unexpired period
of service contract
19/04/99
04/05/99
01/06/05
24/04/19
12 months
12 months
12 months Rolling contract
12 months Rolling contract
01/11/17
09/12/11
01/05/14
14/01/15
14/04/16
05/09/18
11/04/18
09/12/11
11/04/18
14/01/15
13/04/16
05/09/18
6 months
6 months
6 months
6 months
6 months
6 months
6 months Rolling contract
6 months Rolling contract
6 months Rolling contract
6 months Rolling contract
6 months Rolling contract
6 months Rolling contract
118
Associated British Foods plc
Annual Report and Accounts 2020
Governance
Copies of service contracts are available for inspection at the Company’s head office.
Directors’ pay in the context of the group’s wider pay practices
Associated British Foods is a diversified business that currently operates in 53 countries and employs over 133,000 people
working across our five business segments. Our people are central to our business and we pride ourselves on being a first-class
employer. The Committee has regard to workforce remuneration and related policies across the group and ensures alignment of
incentives and reward with the Company’s culture when determining the remuneration policy for directors.
CEO Pay Ratio
Year
2019/20
2018/19
Methodology used
Option B
Option B
Lower quartile
79:1
253:1
Median
70:1
238:1
Upper Quartile
48:1
169:1
We have chosen to use Option B of the available methodologies to calculate our CEO pay ratio. Given the complexity of
our de-centralised group, this approach enables us to use existing gender pay data as a foundation for our calculations. We
determined the hourly rates at each quartile of our 5 April 2019 data, then identified the individuals paid at each rate. We then
calculated the average annual salary and total remuneration for each quartile (as each point represents multiple individuals).
We pro-rated the data for part-time individuals to reflect full-time equivalent remuneration. The employees for each of the data
points are Primark employees. Retail is our largest business in Great Britain. This data is considered to be broadly representative
of total remuneration across our workforce in Great Britain. However, many of our early career employees are in Primark and this
is reflected in the data, with those in the food businesses typically later in their careers and with remuneration at higher levels
reflecting their skill and experience.
The median ratio has fallen since last year as George Weston’s salary was reduced for a significant part of the year and no
STIP or LTIP was earned for 2019/20 performance. Although COVID-19 also impacted pay and reward outcomes for our Retail
employees, the scale of reduction for the Chief Executive was greater. In some of our food businesses, incentive payments
increased this year as our colleagues worked hard to ensure that our product remained on supermarket shelves. This year’s
lower pay ratio reflects the relationship between the Chief Executive’s pay and the experience of UK employees as a whole.
Salary
Single figure of total remuneration
Lower quartile
£14,471
£14,175
Median
£16,299
£16,492
Upper Quartile
£23,100
£24,026
The salaries and remuneration levels above have been impacted by COVID-19, through the impact of the UK government’s job retention scheme and voluntary
salary reductions and because incentives targets were missed this year. 40% of our GB employees included in the data above are under 25 years of age, with
96.4% of those in Primark. All our GB employees are paid above the National Minimum Wage applicable for their age.
Employee engagement
We value the opinions of our people and many of our businesses undertake regular engagement surveys, encouraging their
employees to provide honest feedback about their jobs, workplaces and overall satisfaction. Our 2020 Responsibility Update
provides further details of how we develop and engage with our employees. On behalf of the Board, Richard Reid is the
designated non-executive director for engagement with the workforce. More information on this can be found on page 98.
Annual percentage change in remuneration of directors and employees
% change in salary/fees1
% change in benefits2 % change in cash STIP3
Executive directors
George Weston
John Bason
Non-executive directors
Average for non-executive directors who do not chair
Board Committees
Michael McLintock
Ruth Cairnie
Richard Reid
Average UK Associated British Foods parent employee
-23.52%
-21.19%
-12.16%
-11.49%
-8.11%
-8.11%
0.07%
0%
-23.81%
n/a
n/a
n/a
n/a
2.90%
-100%
-100%
n/a
n/a
n/a
n/a
-63%
1 Average data includes data for individuals who had COVID-19 related salary reductions.
2 Benefits data is calculated on the same basis as the benefits data in the emoluments table and includes benefits in kind and benefits taken in cash but excludes
any pension allowances.
3 Includes cash STIP payments only and for 2019/20 reflects the fact that no payment has been earned on financial performance measures and that for John
Bason and George Weston no personal STIP will be paid.
Relative importance of spend on pay
A year-on-year comparison of the relative importance of pay with significant distributions to shareholders and others is
shown below.
Pay spend for the group
Dividends relating to the period
Taxes paid
2020
£m
2,505
–
254
2019
£m
2,758
366
269
Change
%
-9%
-100%
-6%
Annual Report and Accounts 2020
Associated British Foods plc
119
Directors’ Remuneration report
continued
Additional disclosures
TSR performance and Chief Executive’s pay
The performance graph below illustrates the performance of the Company over the ten years from September 2010 to
September 2020, 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 table below the graph provides a summary of the total remuneration of the Chief Executive over the same period.
t
n
e
m
t
s
e
v
n
i
0
0
1
£
l
a
c
i
t
e
h
t
o
p
y
h
a
f
o
e
u
a
V
l
500
450
400
350
300
250
200
150
100
50
0
ABF
£222
FTSE 100
£170
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: DataStream Return Index
Single total figure remuneration
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
(£000)
3,182
3,859
5,832
7,470
3,056
3,133
4,849
3,843
4,204
1,138
Annual variable element – STIP
(% of maximum)
31.91% 60.63% 83.15% 59.49% 44.46% 86.75% 97.47%1 50.34%1 73.37%1
Long-term variable element –
LTIP (% of maximum)
83.80% 97.42% 85.00% 100% 18.54%
0% 51.02% 100% 57.13%
0%
0%
1 STIP adjusted to reflect the percentage of maximum before share price impacts.
2018/19 STIP – achievement against financial targets
This table shows our required retrospective disclosure of financial targets for 2018/19. The STIP outcome was disclosed in last
year’s annual report. We believe that making this more detailed disclosure a year after the end of the financial year enables us to
share more information that might be commercially confidential immediately at year end.
2018/19 financial performance
Adjusted operating profit £m
STIP for this level of profit (as % of salary)
Working capital as a % of revenue
Working capital modifier
Financial outcome (adjusted operating profit outcome x working capital multiplier)
STIP financial performance (% of maximum)
Threshold
1,300.07
15%
17.08
0.8
12%
9.23%
Cash Element
1,389.07
Target Maximum
1,478.07
Outcome
1,420.51
65% 108.3% 80.31%
15.96
1.0
65%
50%
14.84
1.2
14.83
1.2
130% 96.37%
100% 74.13%
Performance in 2018/19 was better than budget, driven by Primark, AB Sugar, Twinings Ovaltine and ACH. AB Sugar faced a
sharp reduction in profit due to the decline in the European sugar price but tight cost control was delivered to reduce the impact.
Primark continued to develop across its geographies: the evolution of a profitable US store model resulted in a much lower US
operating loss in the year, while there was further development of the consumer proposition which was showcased with the
opening of Birmingham High Street. Eastern Europe showed promise and the first store was opened in Slovenia. Action was
taken to address performance in Germany with a new managing director and a campaign of targeted local marketing. Twinings
Ovaltine closed its Chinese tea factory during the year and continued with the launch of successful new products. In Allied
Bakeries price increases were achieved with the major retailers. As disclosed in 2019, the loss of our largest own-label contract
led to a detailed cost reduction and efficiency improvement programme and a £65m impairment charge at the half year. The
depreciation that would otherwise have been charged on these assets did not arise so we adjusted the STIP target by this
amount so that executives did not enjoy a windfall benefit.
120
Associated British Foods plc
Annual Report and Accounts 2020
Governance
2018/19 personal performance
George Weston – outcome 13.3/20
John Bason – outcome 14/20
Divisional financial and
operational objectives
Delivery of beet price reduction ahead of plan in Azucarera.
Good work on new products in Grocery, especially with cold infusions and super blends in Twinings, growth
of Yumi’s in Australia and the growth in profitability of Acetum.
Disappointing loss of a key commercial contract in Allied Bakeries.
Development
and delivery of
strategies, including
special projects and
transactions
People and
organisation
Promising joint venture formed with Wilmar in China, which will transform the yeast cost base there and
strengthen commercial capability.
Significant progress on a much higher volume of commercially confidential M&A activity.
Successful acquisition and development of Yumi’s, also completed Anthony’s Goods, amongst others.
Action taken to address weak performance in Primark Germany with a new managing director and a
campaign of targeted local marketing.
Secured successor for Group HRD.
Supported leadership team succession in Primark.
Made progress on FRC-related employee voice work
with nominated NED appointment and processes for
gaining insights.
Successful on-boarding of Graham Allan as NED.
Secured successor for Corporate Communications.
Finance director appointments made in Twinings,
Agri and AB Mauri with further focus required in
the coming year to support their on-boarding and to
strengthen the function.
Strengthening of central performance team.
Developing long-term
business health
Addressed challenges in Retail, Allied Bakeries
and Sugar.
Good progress on Primark sustainability agenda.
New Responsibility Report in 2019.
Addressed challenges in Retail, Allied Bakeries
and Sugar.
A step-up in IT Security.
Detailed work on implications of, and actions in
response to, Brexit.
Total STIP Cash
Financial plus personal
outcome
Total STIP Shares Financial outcome
Statement on shareholder voting
Resolution
Directors’ Remuneration policy
Directors’ Remuneration report
George Weston
John Bason
George Weston
John Bason
Threshold
(% of salary)
12%
12%
5%
5%
Target
(% of salary)
78.3%
78.3%
25%
25%
Maximum
(% of salary)
Outcome
(% of salary)
150% 109.67%
150% 110.37%
37.07%
50%
37.07%
50%
Outcome (%
of maximum)
73.11%
73.58%
74.13%
74.13%
Date of AGM
December 2019
December 2019
Votes for
96.23%
96.74%
Votes against
3.77%
3.26%
Votes withheld
98,600
1,654,662
Payments to past directors and payments for loss of office (audited information)
No payments were made in the year.
Remuneration Committee advisers and fees
The Committee undertook a review of its advisers during the year. Following a competitive tender the Committee appointed
Deloitte LLP (Deloitte) to provide independent advice to the Committee. They succeeded its previous advisers, Willis Towers
Watson (WTW) in March 2020. WTW and Deloitte are members of the Remuneration Consultants Group and both adhere to
its code in relation to executive remuneration consulting. The Committee is satisfied that the advice it received in the year was
objective and independent.
The other services that WTW provides to the Company are remuneration survey provision, job evaluation and remuneration
benchmarking. The fees paid to WTW for Committee assistance over the past financial year totalled £23,550.
During the year the other services that Deloitte provided the Company were corporate and employment tax advice, advice
related to transactions, and risk-related advisory work. The fees paid to Deloitte for committee assistance over the past financial
year totalled £72,750.
Herbert Smith Freehills LLP provide the Company with legal advice. Advice from Herbert Smith Freehills is made available to the
Committee, where it relates to matters within its remit.
Compliance
Where information in this report has been audited by Ernst & Young LLP it has been clearly indicated. The report has been
prepared in line with the requirements of The Large and Medium-sized Companies Regulations (as amended), the
recommendations of the UK Corporate Governance Code (July 2018) and the requirements of the UKLA Listing Rules.
The Directors’ Remuneration report was approved by the Board and signed on its behalf by
Paul Lister
Company Secretary
3 November 2020
Annual Report and Accounts 2020
Associated British Foods plc
121
Directors’ report
Introduction
The directors of Associated British
Foods plc present their report for the
52 weeks ended 12 September 2020,
in accordance with section 415 of the
Companies Act 2006. The Financial
Conduct Authority’s Disclosure
Guidance and Transparency Rules and
Listing Rules also require the Company
to make certain disclosures, some of
which have been included in other
appropriate sections of the annual report
and accounts.
The information set out on page 125 and
the following cross-referenced material,
is incorporated into this Directors’ report:
• likely future developments in the
group’s business (pages 22 to 65);
• greenhouse gas emissions and
energy consumption (page 82);
• the Board of directors (pages 92
to 93);
• information on our employees
(pages 73 to 77);
• information on how the directors have
engaged with employees (including
those in the UK), have had regard to
employee interests and the effect of
that regard on the Company’s principal
decisions (pages 14 to 19, 73 to 77
and 98);
• information on how the directors have
had regard to the need to foster the
Company’s business relationships
with suppliers, customers and others
and the effect of that regard, including
on the principal decisions taken by the
Company during the year (pages 14
to 19); and
• corporate governance report (pages
94 to 109).
Results and dividends
The consolidated income statement is
on page 135. Profit for the financial year
attributable to equity shareholders
amounted to £455m.
Following much consideration, the
Board has elected not to propose a final
dividend for the year. As no interim
dividend was paid in July 2020, there
is no dividend related to the year ended
12 September 2020. See page 157 for
the note on dividends.
Also, the directors of a subsidiary
company that acts as trustee of a
pension scheme benefited from a
qualifying pension scheme indemnity
provision during the financial year and
at the date of this report.
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.
Directors’ share interests
Details regarding the share interests
of the directors (and their persons
closely associated) in the share capital
of the Company, including any interests
under the long-term incentive plan and
any deferred awards, are set out in the
Remuneration report on pages 117
and 118.
Disclosures required under
Listing Rule 9.8.4R
The following table is included to meet
the requirements of Listing Rule section
9.8.4R. The information required to be
disclosed by that section, where
applicable to the Company, can be
located in the annual report and accounts
at the references set out below.
Location in
annual report
Directors’
Remuneration
report on pages
110, 113 and 118
Directors’
Remuneration
report on pages
111, 114 and 118
Note 24 on
page 175
Note 24 on
page 175
Directors’ report
on page 123
Information required
(5) Director waiver
of emoluments
(6) Director waiver of
future emoluments
(12) Shareholder
waiver of dividends
(13) Shareholder
waiver of future
dividends
(14) Board statement
on relationship
agreement with
controlling
shareholder
Paragraphs (1), (2), (4), (7), (8), (9), (10) and (11) of
Listing Rule 9.8.4R are not applicable.
Directors
The names of the persons who were
directors of the Company during the
financial year and as at 3 November
2020 appear on pages 92 to 93.
Appointment of directors
The Articles give directors the 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.
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 2018 Code and it is
proposed that the Articles are amended
to meet the 2018 Code requirements.
Details of unexpired terms of directors’
service contracts are set out in the
Directors’ Remuneration report on
page 118.
Power of 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 Articles.
The Articles, for example, contain
specific provisions and restrictions
concerning the Company’s power to
borrow money. 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.
Directors’ indemnities and insurance
One director 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.
122
Associated British Foods plc
Annual Report and Accounts 2020
Governance
Share capital
Details of the Company’s share capital
and the rights attached to the Company’s
shares are set out in note 22 on page
172. The Company has one class of
share capital: ordinary shares of 515/22p.
The rights and obligations attaching to
these shares are governed by English
law and the Articles.
No shareholder holds securities carrying
special rights with regard to the control
of the Company. There are no
restrictions on voting rights.
There are no restrictions on the holding
or transfer of the ordinary shares other
than the standard restrictions for an
English incorporated company.
Authority to issue shares
At the last AGM, held on 6 December
2019, 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 4 December 2020. No such shares
have been issued.
The directors propose to renew this
authority at the 2020 AGM for the
forthcoming year. A further special
resolution passed at the 2019 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
in certain circumstances. This authority
also expires on the date of the 2020
AGM and the directors will seek
to renew this authority for the
forthcoming year.
Authority 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.
Relationship agreement with
controlling shareholders
Any person who exercises or controls,
on their own or together with any
person with whom they are acting in
concert, 30% or more of the votes able
to be cast at general meetings of a
company are known as a ‘controlling
shareholder’ under the Listing Rules.
The Listing Rules require companies
with controlling shareholders to enter
into an agreement which is intended to
ensure that the controlling shareholders
comply with certain independence
provisions in the Listing Rules and which
must contain undertakings that:
• transactions and arrangements with
the controlling shareholder (and/or any
of its associates) will be conducted at
arm’s length and on normal
commercial terms;
• neither the controlling shareholder nor
any of its associates will take any
action that would have the effect of
preventing the listed company from
complying with its obligations under
the Listing Rules; and
• neither the controlling shareholder nor
any of its associates will propose or
procure the proposal of a shareholder
resolution which is intended or appears
to be intended to circumvent the
proper application of the Listing Rules.
Wittington Investments Limited
(‘Wittington’) and, through their control
of Wittington, the trustees of the
Garfield Weston Foundation (the
’Foundation’) are controlling
shareholders of the Company. Certain
other individuals, including certain
members of the Weston family who
hold shares in the Company (and
including two of the Company’s
directors, George Weston and Emma
Adamo) are, under the Listing Rules,
treated as acting in concert with
Wittington and the trustees of the
Foundation and are therefore also
treated as controlling shareholders of the
Company. Wittington, the trustees of
the Foundation and these individuals
together comprise the controlling
shareholders of the Company and, at
12 September 2020, had a combined
interest in approximately 58.5% of the
Company’s voting rights.
The Board confirms that, in accordance
with the Listing Rules, on 14 November
2014 the Company entered into a
relationship agreement with Wittington
and the trustees of the Foundation
containing the required undertakings
(the ‘Relationship Agreement’ as further
amended and restated on 25 June 2020).
Under the terms of the Relationship
Agreement, Wittington has agreed
to procure compliance with the
undertakings by the other individuals
who are treated as controlling
shareholders (the ‘Non-signing
Controlling Shareholders’). The Board
confirms that, during the period
under review:
• the Company has complied with the
independence provisions included
in the Relationship Agreement;
• so far as the Company is aware, the
independence provisions included in
the Relationship Agreement have
been complied with by the controlling
shareholders and their associates; and
• so far as the Company is aware, the
procurement obligation included in the
Relationship Agreement as regards
compliance with the independence
provisions by the Non-signing
Controlling Shareholders and their
associates, has been complied with
by Wittington.
Major interests in shares
The Company did not receive any
formal notification, under the Disclosure
Guidance and Transparency Rules, of
any material interest in shares in the
year to 12 September 2020. As at
30 October 2020, the last such
notification received was the notification
on 19 October 2018 that The Capital
Group Companies, Inc. had a
shareholding of 39,523,864 shares,
which is 4.99% of the issued share
capital and voting rights of the Company.
Details of the Company’s controlling
shareholders for the purpose of the
Listing Rules who, as at 12 September
2020, had a combined interest in
approximately 58.5% of the voting rights
in the Company’s ordinary shares are set
out above.
Annual Report and Accounts 2020
Associated British Foods plc
123
Directors’ report
continued
Amendment to Articles
Any amendments to the Articles may be
made in accordance with the provisions
of the Companies Act 2006 by way of
special resolution of the shareholders.
The Company is proposing to amend its
Articles at this year’s AGM to reflect a
number of changes to company law and
market practice. A summary of the
principal changes is set out in Appendix
1 to the Notice of AGM. The primary
change is to give the directors power to
convene the AGM, or any other general
meeting, as a hybrid meeting, that is to
provide for shareholders to attend a
meeting which is being held at a
physical place by electronic means
as well (but not to convene a purely
electronic meeting). A marked-up
version of the proposed new Articles
is available on our website at
www.abf.co.uk
Significant agreements – change of
control
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 and could alter or terminate on
a change of control of the Company:
• 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 of
these are an amended and extended
£1.1bn syndicated loan facility signed
on 19 August 2020, maturing in July
2023, which was undrawn at the
year end. In the event of a change in
ownership of the Company, the
lenders may request cancellation
of the commitment and repayment
of any outstanding amounts;
• £340m (approximate sterling
equivalent) of private placement notes
in issue to institutional investors. 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
• cross currency swaps in place totalling
$300m to swap all of the private
placement debt denominated in
US dollars to euros.
Disclosure of information to auditor
Each of the directors who held office at
the date of approval of this Directors’
report confirms that:
There are no agreements between the
Company and its directors or employees
providing for compensation for loss of
office or employment that occurs as
a result of a takeover bid.
• so far as each director is aware, there
is no relevant audit information of
which the Company’s auditor is
unaware; and
• each director has taken all the
Political donations
During the year, the Company did not
make any political donations or incur any
political expenditure (within the ordinary
meaning of those words) in the UK or
EU. However, under the wider definition
of Part 14 of the Companies Act 2006,
a subsidiary of the Company did incur
political expenditure to the approximate
value of £1,500 during the year.
Financial risk management
Details of the group’s use of financial
instruments, together with information
on our risk objectives and policies,
including the policy for hedging each
major type of forecasted transaction for
which hedge accounting is used, and
our exposure to price, credit, liquidity,
cash flow and interest rate risks, can be
found in note 26 on page 176 onwards.
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 USA, 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.
Branches
The Company, through various
subsidiaries, has established branches
in a number of different countries in
which the group operates.
reasonable steps that they ought to
have taken as a director to make
themself aware of any relevant audit
information and to establish that the
Company’s auditor is aware of that
information.
For these purposes, relevant audit
information means information needed
by the Company’s auditor in connection
with the preparation of its report on
pages 126 to 134.
Auditor
Resolutions for the reappointment of
Ernst & Young LLP as auditor of the
Company and to authorise the
Audit Committee to determine its
remuneration are to be proposed
at the forthcoming AGM.
Annual general meeting
The AGM will be held on 4 December
2020 at 11.00 am. Details of the
resolutions to be proposed are set
out in a separate Notice of AGM
which accompanies this report for
shareholders receiving hard copy
documents and which is available at
www.abf.co.uk for those who elected
to receive documents electronically.
All resolutions for which notice has
been given will be decided on a poll.
The Directors’ report was approved by
the Board and signed on its behalf by
Paul Lister
Company Secretary
3 November 2020
Associated British Foods plc
Registered office:
Weston Centre
10 Grosvenor Street
London
W1K 4QY
Company No. 293262
124
Associated British Foods plc
Annual Report and Accounts 2020
Statement of directors’ responsibilities
Governance
• 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.
Responsibility statement of
the directors in respect of the
annual report
We confirm that to the best of our
knowledge:
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 Strategic report, 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 financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and
fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken as
a whole; and
• the Strategic report includes 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 whole, together
with a description of the principal risks
and uncertainties that they face.
On behalf of the Board
Michael McLintock
Chairman
George Weston
Chief Executive
John Bason
Finance Director
3 November 2020
Statement of directors’
responsibilities in respect of the
annual report and the financial
statements
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, including FRS
101 Reduced Disclosure Framework.
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
Annual Report and Accounts 2020
Associated British Foods plc
125
Independent Auditor’s Report
to the members of Associated British Foods plc
Opinion
In our opinion:
• Associated British Foods plc’s consolidated financial statements and parent company financial statements (the “financial
statements”) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 12 September 2020
and of the group’s profit for the 52 weeks then ended;
• the consolidated financial statements have been properly prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the EU);
• the parent company financial statements have been properly prepared in accordance with United Kingdom 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.
We have audited the financial statements of Associated British Foods plc which comprise:
Group
Parent company
Consolidated balance sheet as at 12 September 2020
Consolidated income statement for the 52 weeks then ended
Consolidated statement of comprehensive income for the
52 weeks then ended
Consolidated statement of changes in equity for the 52 weeks then ended
Consolidated cash flow statement for the 52 weeks then ended
Related notes 1 to 31 to the financial statements, including a summary of
significant accounting policies
Balance sheet as at 12 September 2020
Statement of changes in equity for the 52 weeks then
ended
Related notes 1 to 11 to the financial statements,
including a summary of significant accounting policies
The financial reporting framework that has been applied in the preparation of the consolidated financial statements is applicable
law and IFRSs as adopted by the EU. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report below. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained during the planning, execution and conclusion of our audit is sufficient and
appropriate to provide a suitable basis for our opinion.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report and accounts, in relation to which the
ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:
• the disclosures in the annual report and accounts, set out on pages 84 to 90, that describe the principal risks and explain how
they are being managed or mitigated;
• the directors’ confirmation, set out on page 102 in the annual report and accounts, that they have carried out a robust
assessment of the emerging and principal risks facing the entity, including those that would threaten its business model,
future performance, solvency or liquidity;
• the directors’ statement, set out on page 91 in the financial statements, about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s
ability to continue to do so over a period of at least 12 months from the date of approval of the financial statements;
• whether the directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the directors’ explanation, set out on pages 90 and 91 in the annual report and accounts, as to how they have assessed the
prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
Overview of our audit approach
Key audit matters
• Assessment of the carrying value of goodwill,
other intangible assets, property, plant and
equipment and right of use assets
• Going concern
• Tax provisions
• Adoption of IFRS 16 Leases
• Primark inventory valuation provisions
• Revenue recognition, including the risk
of management override
126
Associated British Foods plc
Audit scope
• We performed an audit of the complete
financial information of 123 components and
audit procedures on specific balances for a
further 28 components.
• The components where we performed full or
specific audit procedures accounted for 83%
of profit before taxation, 86% of revenue and
86% of total assets.
Materiality
• We used a group materiality of £41 million,
which represents 5% of profit before taxation
adjusted for certain exceptional items.
Annual Report and Accounts 2020
Governance
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: our overall audit strategy, the allocation of
resources in the audit and directing the efforts of our engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinions thereon, and we do not provide a separate opinion on these matters.
Key observations
communicated to the
Audit Committee
We concluded that the
impairments recorded
against Primark stores
(£116 million),
Azucarera (£23 million)
and Allied Bakeries
(£15 million) were
appropriately
recognised and that no
further impairments
were required.
For other CGUs that
were tested for
impairment, we
concluded that no
impairments were
required at the period
end, based on the
results of our work.
Of the group’s assets,
the portion relating to
certain Primark stores,
Azucarera, Allied
Bakeries, China Sugar,
Australian meat and
AB Mauri remain very
sensitive to reasonably
possible changes in
key assumptions.
Management
describes these
sensitivities
appropriately in the
intangible assets and
property, plant and
equipment notes to
the consolidated
financial statements,
in accordance with
IAS 36.
Risk
Our response to the risk
Assessment of the carrying value of
goodwill, other intangible assets, property,
plant and equipment and right of use assets
(£10,270 million, 2019: £7,450 million)
This risk has increased in the current year due to the
impact of COVID-19 on the assessment of Primark
stores’ carrying values.
The group has significant carrying amounts of
goodwill, other intangible assets, property, plant
and equipment and right of use assets that have
arisen from acquisitions and capital investments.
The Primark stores (£6,184 million), Azucarera
(£271 million), China Sugar (£74 million),
Allied Bakeries (£105 million), Australian meat
(£197 million) and AB Mauri (£650 million)
businesses all operate in challenging trading
environments.
In Primark, all 375 stores were unable to trade for
a significant period as a result of the COVID-19
pandemic. The extent and speed of recovery in
trading is dependent on consumer spending
behaviour, consumers’ willingness to visit stores
under socially distanced measures and the extent of
restrictions imposed by governments in each of the
countries in which Primark and its supply chain
operates in response to COVID-19.
Low sugar prices have contributed to a reduction in
profitability at both Azucarera and China Sugar in
recent years. This was compounded by reduced
beet supply in Azucarera.
The Allied Bakeries and Australian meat businesses
operate in environments of significant retailer
pressure on price and competitor activity.
AB Mauri’s profitability has been impacted by
competitive pricing pressures in some of its
businesses, compounded by macro-economic
conditions, including high inflation rates and
currency devaluation.
There is a risk that these cash generating units
(‘CGUs’) or groups of CGUs may not achieve the
anticipated business performance to support their
carrying value, or that the estimated fair value of the
CGUs may not support their carrying value. This
could lead to an impairment charge that has not
been recognised by management.
Significant judgement is required in forecasting the
future cash flows of each CGU or, in the case of
goodwill, group of CGUs, together with the rate at
which they are discounted, or in estimating a CGU’s
fair value less costs of disposal. For Primark stores,
uncertainty exists about the length of future store
closures arising from COVID-19 which adds to the
complexity of forecasting cash flows.
Refer to the audit committee report (page 106);
accounting policies (page 144); accounting
estimates and judgements (page 150); and notes 8,
9 and 10 to the consolidated financial statements
(pages 159 to 163).
We understood the methodology applied by management in
performing its impairment test for each of the relevant CGUs and
walked through the controls over the process.
For CGUs where there were indicators of impairment (including as a
result of COVID-19) or low levels of headroom, including the six
CGUs or groups of CGUs described, we performed detailed testing
to critically assess and corroborate the key inputs to the valuations,
including:
• Analysing the historical accuracy of budgets to actual results to
determine whether forecast cash flows are reliable based on past
experience;
• For Primark’s stores, understanding and critically evaluating the
economic recovery assumptions, comparing the forecasted sales
densities to actual experience since stores reopened, regional and
country comparatives and strategic plans for specific stores to
determine the suitability of assumptions used in store impairment
models and the £116 million impairment recognised in the period;
• For Azucarera and China Sugar, performing an independent
current and historical market analysis to assess future sugar price
and cost assumptions, with support from our valuation specialists
on future sugar prices. For Azucarera, we considered whether the
£23 million impairment recognised in the period was appropriate;
• For Allied Bakeries, where the recoverable amount is based on fair
value less costs of disposal as it is higher than value in use,
considering the evidence available as to whether the recoverable
amount represents an appropriate estimate of a market
participant’s valuation of the CGU and whether the £15 million
impairment recognised in the period was appropriate;
• For Australian meat, analysing historical data to better understand
the operations and to assess the ability to achieve forecast volume
growth, operational improvements and production yields;
• For AB Mauri, considering the historical achievement of volume
and price growth and cost savings and comparing these to
external market growth forecasts to assess the ability to achieve
forecast growth;
• In conjunction with our valuation specialists, assessing the
discount rates used by determining independently a range of
acceptable rates for each CGU, considering market data and
comparable organisations, and comparing these ranges to the
rates used by management; and
• Validating the growth rates assumed by comparing them to
economic and industry forecasts.
For all CGUs we calculated the degree to which the key inputs
and assumptions would need to fluctuate before an impairment is
triggered and we considered the likelihood of this occurring. We
performed our own sensitivities on the group’s forecasts and, for
Azucarera and China Sugar, performed our own independent
assessment of future sugar price, beet cost and area assumptions.
We then determined whether adequate headroom remained using
these sensitivities and our independent assessment.
We assessed the disclosures in notes 8, 9 and 10 against the
requirements of IAS 36 Impairment of Assets, in particular in respect
of the requirement to disclose further sensitivities for CGUs where
a reasonably possible change in a key assumption would cause
an impairment.
For the AB Mauri CGU, the audit procedures performed to address
this risk were performed by the group audit team. The Primark,
Azucarera, China Sugar, Allied Bakeries and Australian meat CGUs
were subject to full scope audit procedures by the respective
component teams and reviewed by the group team.
Annual Report and Accounts 2020
Associated British Foods plc
127
Independent Auditor’s Report
to the members of Associated British Foods plc
Risk
Our response to the risk
Going concern
This risk has increased in the current year due to the
impact of COVID-19 on the group’s trading and cash
flows, particularly in Primark.
In assessing whether the financial statements
should be prepared on the going concern basis, the
directors are required to consider all available
information about the future for a period of at least
12 months from the date of approval of the financial
statements. The directors have considered a going
concern period through to the end of February 2022.
In conducting their assessment, the directors have
concluded that there are no material uncertainties
that may cast significant doubt over the group’s
ability to continue as a going concern. A further
description of this assessment is included in the
accounting policies.
The impact on the group of COVID-19, particularly
in relation to Primark, resulted in increased
consideration of the risks to the going concern basis
of preparation compared with previous periods.
We understood the process undertaken by management to evaluate
the operational and economic impacts of COVID-19 on the group
and to reflect these in the group’s forecasts.
We tested the clerical accuracy of the model used to prepare the
group’s going concern assessment.
We obtained evidence to support the changes in the group’s
financing arrangements in the period, including the two year
extension of the group’s revolving credit facility to July 2023 and the
waivers of any potential covenant breach on this revolving credit
facility at the February 2021 test date.
We challenged the detailed assumptions underpinning the group’s
forecasts, in particular around sales in Primark, given the
uncertainties arising from COVID-19 and the group’s experience
since stores reopened in summer 2020. We also considered
whether the group’s forecasts in the going concern assessment
were consistent with other forecasts used by the group in its
accounting estimates, including impairment.
We considered, based on our own independent analysis, what
reverse stress testing scenarios could lead either to a loss of liquidity
or a covenant breach and whether these scenarios were plausible.
Tax provisions (included within the income tax
liability of £171 million, 2019: £163 million)
This risk is unchanged from the prior year.
The global nature of the group’s operations results
in complexities in the payment of and accounting
for tax.
Management applies judgement in assessing tax
exposures in each jurisdiction, which require
interpretation of local tax laws.
Given this judgement, there is a risk that tax
provisions are misstated.
Refer to the audit committee report (page 107);
accounting policies (page 142); accounting estimates
and judgements (page 150); and note 5 to the
consolidated financial statements (page 157).
We assessed the appropriateness of the group’s disclosure
concerning the going concern basis of preparation.
The audit procedures performed to address this risk were performed
by the group audit team.
We understood:
• The group’s process for determining the completeness and
measurement of provisions for tax;
• The impact of IFRIC 23 requirements on the group’s methodology
to determine provisions for tax;
• The methodology for the calculation of the tax charge; and
• Management’s controls over tax reporting.
The group audit team, including tax specialists, evaluated the tax
positions taken by management in each significant jurisdiction in the
context of local tax law, correspondence with tax authorities and the
status of any tax audits. Our work utilised additional support from
country tax specialists in jurisdictions where the group had more
significant tax exposures.
We assessed the group’s transfer pricing judgements, considering
the way in which the group’s businesses operate and the
correspondence and agreements reached with tax authorities.
In evaluating management’s accounting, we developed our own
range of acceptable provisions for the group’s tax exposures, based
on the evidence we obtained. We then compared management’s
provision to our independently determined range.
We assessed the tax accounting impact of any benefits taken by the
group as a consequence of a range of COVID-19 economic stimulus
packages implemented by governments around the world.
Key observations
communicated to the
Audit Committee
Based on our
independent
modelling, which
considered what
would have to happen
to compromise the
group’s liquidity during
the going concern
period and whether
that was plausible, we
are satisfied that the
directors’ conclusion
that there are no
material uncertainties
over the group’s ability
to continue as a going
concern is appropriate
and the associated
disclosures are in
accordance with the
accounting standards.
We have evaluated the
group’s tax provisions
and challenged the
judgements applied.
We consider the
amounts provided for
uncertain tax positions
to be within an
acceptable range in
the context of the
group’s overall tax
exposures.
128
Associated British Foods plc
Annual Report and Accounts 2020
Governance
Key observations
communicated to the
Audit Committee
We are satisfied
that the key estimates
and judgements
supporting the
transition adjustment,
as well as the
accounting and
disclosures, are
in accordance with
IFRS 16.
Risk
Our response to the risk
Adoption of IFRS 16 Leases (at 12 September
2020: right of use assets of £2,990 million and
lease liabilities of £3,655 million)
This is a new risk for the current year due to the
complexity and judgements involved in the adoption
of IFRS 16.
The group has a high value and volume of leases,
with the majority of lease value represented by retail
property leases held by Primark. The adoption of
IFRS 16 Leases in the period is complex and requires
a number of judgements, the most significant of
which relate to:
• Determination of the lease term;
• Determination of the incremental borrowing rate
(‘IBR’) where the interest rate in the lease cannot
readily be determined; and
• Identification of lease arrangements within the
scope of IFRS 16.
Determining the lease term requires judgements
to be made about future events (including lease
extension and termination options), which increases
uncertainty over the valuation of the lease liabilities,
right of use assets, interest and depreciation
recorded in the period. IBR is a key assumption
in measuring the lease liability on transition and
involves judgement and estimation due to
adjustments for security, term and currency.
The diversity of ABF’s global operations increases
the risk of lease data used to compute the transition
adjustment being inaccurate and incomplete. There
is also a risk of incorrect calculation of accounting
entries being recorded in the lease accounting
model by management.
Refer to the audit committee report (page 107);
accounting policies (pages 146 to 149); accounting
estimates and judgements (page 150); and note 10
to the consolidated financial statements (pages 163
to 164).
We understood and evaluated the design and implementation of key
controls used in estimating the transition adjustments on adoption of
IFRS 16 and the subsequent accounting.
We performed the following audit procedures, with a particular
focus on Primark, George Weston Foods and centrally held leases.
• We understood and walked through management’s model,
including controls, used to estimate the right-of-use assets and
lease liabilities, including testing the integrity and arithmetical
accuracy of management’s lease accounting model;
• We understood and walked through changes to the financial
statement close process to verify the completeness and accuracy
of lease-related accounting and disclosures made for the first time
in 2020;
• We tested a sample of leases by corroborating key data inputs to
underlying source data (original lease agreements, side
agreements, calculations prepared by management) to verify the
accuracy of those data inputs;
• In particular, we assessed whether the lease term was
appropriately determined, including whether management’s
assessment of reasonable certainty to exercise extension options
or not to exercise termination options was appropriate, considering
whether contrary evidence existed with reference to the asset,
the entity and the market;
• For the same sample we independently recalculated the
right-of-use asset and lease liability amounts, testing the
arithmetical accuracy and integrity of management’s model;
• Understood other accounting judgements and elections taken by
management in determining the transition adjustment to be
recognised and disclosed in 2020 and considered whether they
were appropriate in the context of IFRS 16 and the underlying
source data we inspected; and
• With input from our treasury specialists, we tested the
methodology used to determine the IBRs with reference to lease
term and market data on country risk and credit ratings.
We evaluated the appropriateness of the transition and period end
accounting and disclosures for compliance with IFRS criteria.
The audit procedures were designed and led by the group audit
team, with support from component teams whose work was
reviewed by the group audit team.
Annual Report and Accounts 2020
Associated British Foods plc
129
Key observations
communicated to the
Audit Committee
The group recognised
a provision of £22
million in respect of
inventory still to be
received under
commitments made
to suppliers. The
estimated provision
recognised at half year
of £284 million has
been released
following the earlier
than anticipated
reopening of stores in
May and June and
better than expected
trading performance
over the summer
months.
We are satisfied that
the judgements made
in determining the
year end inventory
provisions are
appropriate. We did
not identify any
evidence of material
misstatement in the
inventory provisions or
associated disclosures
recognised in the
consolidated financial
statements.
Based on the
procedures
performed, including
those in respect of
trade deductions and
rebates in the Grocery
segment, we did not
identify any evidence
of management
override or material
misstatement in the
revenue recognised in
the period.
Independent Auditor’s Report
to the members of Associated British Foods plc
Risk
Our response to the risk
Primark inventory valuation provisions
(inventory balance of £1,104 million, 2019:
£1,356 million)
This risk has increased in the current year due to the
impact of COVID-19 on Primark’s trading.
Inventories are recorded at the lower of cost and net
realisable value, in accordance with the group’s
accounting policy.
The prolonged closure of all Primark stores for an
extended period in 2020 due to COVID-19 lockdown
measures in all countries of operation, together with
the ongoing uncertainties over the economic
recovery, results in a risk that the cost of inventory
will not be recovered, due to product no longer being
in season when stores open and/or suffering
damage while stores were closed. In addition, there
are committed purchase contracts which could
create an onerous contract risk.
Primark’s inventory valuation provision is subject
to a significant degree of estimation, using different
inputs and assumptions. These inputs include
inventory quantities (held in stores, warehouses and
goods-in-transit where Primark bears the ownership
risk), together with estimates of realisable value at
the reporting date. Assumptions are then applied
of sell-through volumes and markdown adjustments
in stores.
Given the uncertainties over future trading in Primark
due to COVID-19, there is a risk that inventory is
misstated.
Refer to the accounting policies (page 145) and
note 16 to the consolidated financial statements
(page 169).
Revenue recognition, including the risk of
management override (£13,937 million, 2019:
£15,824 million)
This risk is unchanged from the prior year.
There continues to be pressure on the group to meet
expectations and targets. Management reward and
incentive schemes, based on achieving profit targets
and working capital as a percentage of revenue
targets, may also place pressure on management
to manipulate revenue recognition.
The majority of the group’s sales arrangements are
generally straightforward, being on a point of sale
basis and requiring little judgement to be exercised.
However, in the Grocery segment, management
estimates the level of trade promotions and rebates
to be applied to its sales to customers, adding a level
of judgement to revenue recognition. Approximately
3% (2019: 3%) of the group’s gross revenue is
subject to such arrangements.
There is a risk that management may override
controls intentionally to misstate revenue
transactions, either through the judgements made
in estimating rebates in the Grocery segment
or by recording fictitious revenue transactions
across the business.
Refer to the accounting policies (page 141);
accounting estimates and judgements (page 150);
and note 1 to the consolidated financial statements
(pages 151 to 154).
We understood the methodology applied by the group in estimating
its inventory provision and walked through the controls over the
provisioning process.
We assessed the accuracy of inputs and data used within provision
models and reperformed a sample of calculations applied by
management.
We compared our expectations to inputs and assumptions used
by management in determining the Primark inventory valuation
provisions, challenging whether the basis for the amounts recorded
was appropriate.
We focused specifically on committed purchase contracts, recent
and expected store trading patterns, changes in store selling space,
the impact of future seasonal markdowns assumed and compared
these against historical data where applicable.
We made enquiries of buying teams to understand inventory
purchasing strategy to critically evaluate against management’s
provisioning assumptions.
This included evaluating the £284 million inventory and onerous
contract provision recorded at the half year, its subsequent release
in the second half of the year and the onerous contract provision
of £22 million recorded at 12 September 2020.
We assessed whether the disclosures in the financial statements
are in accordance with IFRS.
The audit procedures performed to address this risk were performed
by the Primark component team and reviewed by the group team.
We understood each business’s revenue recognition policies and
how they are applied, including the relevant controls, and tested
controls over revenue recognition where appropriate. We considered
how the uncertainties surrounding the COVID-19 pandemic affect
contracts with customers, considering collectability, price
concessions and selling prices.
We discussed key contractual arrangements with management
and obtained relevant documentation, including in respect of rebate
arrangements. Where rebate arrangements existed, on a sample
basis, we obtained third-party confirmations or performed
appropriate alternative procedures, including reviewing contracts
and recalculating rebates. We also performed hindsight analysis
over changes to prior period rebate estimates to challenge the
assumptions made, including assessing the estimates for evidence
of management bias.
For several businesses, including Primark, as part of our overall
revenue recognition testing, we used data analysis tools on 100% of
revenue transactions in the period to test the correlation of revenue
to cash receipts to verify the occurrence of revenue. This provided
us with a high level of assurance over £11.0 billion (79%) (2019:
£13.6 billion (86%)) of revenue recognised by the group. For those
in-scope businesses where we did not use data analysis tools, we
performed alternative procedures over revenue recognition.
We performed cut-off testing for a sample of revenue transactions
around the period end date, to check that they were recognised in
the appropriate period
We performed other audit procedures specifically designed to
address the risk of management override of controls including
journal entry testing, applying particular focus to the timing of
revenue transactions.
We performed full and specific scope audit procedures over this risk
area in 84 locations, which covered 86% of the group’s revenue.
The audit procedures performed to address this risk were performed
by component teams and reviewed by the group team.
130
Associated British Foods plc
Annual Report and Accounts 2020
Governance
The key audit matters set out in the table above are consistent with those reported in 2019, except for the addition of “Primark
inventory valuation” and “Going concern”, both of which have warranted additional focus in the current period audit as a result
of the COVID-19 pandemic. In addition, the “Adoption of IFRS 16” key audit matter in the current period was “Disclosure of
impact of adoption of IFRS 16 Leases” in the 2019 audit report, reflecting the fact that the new leases standard was adopted in
the current period.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of
materiality and our allocation of performance
materiality determine our audit scope for each
entity within the group. Taken together, this
enables us to form an opinion on the consolidated
financial statements. We take into account the
level of revenue and profit before taxation, risk
profile (including country risk, controls and internal
audit findings and the extent of changes in
management, systems and processes and the
business environment) and other known factors
when assessing the level of work to be performed
at each entity.
In assessing the risk of material misstatement to
the consolidated financial statements, and to
achieve adequate quantitative coverage of
significant accounts in the financial statements, of
the 680 reporting components of the group, we
selected 151 components, which represent the
principal business units within the group.
Of the 151 components selected, we performed
an audit of the complete financial information of
123 components (“full scope components”),
which were selected based on their size or risk
characteristics. For the remaining 28 components
(“specific scope components”), we performed
audit procedures on specific accounts within that
component that we considered had the potential
for the greatest impact on the significant accounts
in the financial statements either because of the
size of these accounts or their risk profile.
The reporting components where we performed
full and specific scope procedures accounted for
83% of the group’s profit before taxation (2019:
88%), 86% of the group’s revenue (2019: 89%)
and 86% of the group’s total assets (2019: 90%).
For the current period, the full scope components
contributed 78% of the group’s profit before
taxation (2019: 67%), 80% of the group’s revenue
(2019: 78%) and 82% of the group’s total assets
(2019: 78%). The specific scope components
contributed 5% of the group’s profit before
taxation (2019: 21%), 6% of the group’s revenue
(2019: 11%) and 4% of the group’s total assets
(2019: 12%). The audit scope of these components
may not have included testing of all significant
accounts of the component but will have
contributed to the coverage of significant accounts
tested for the group.
Of the remaining 529 components (2019: 460)
that together represent 17% of the group’s profit
before taxation (2019: 12%), none is individually
greater than 1% of the group’s profit before
taxation.For these components, we performed
other procedures, including analytical review,
testing of consolidation journals and intercompany
eliminations and foreign currency translation
recalculations to respond to any potential risks
of material misstatement to the consolidated
financial statements.
The charts illustrate the coverage obtained from
the work performed by our audit teams.
Profit before taxation
Full scope components
Specific scope components
Other procedures
78%
5%
17%
Revenue
Full scope components
Specific scope components
Other procedures
80%
6%
14%
Total assets
Full scope components
Specific scope components
Other procedures
82%
4%
14%
Involvement with component teams
In establishing our overall approach to the
group audit, we determined the type of
work that needed to be undertaken at
each of the components by us, as the
group audit team, or by component
auditors from other EY global network
firms under our instruction. Of the 123
full scope components, audit procedures
were performed on 73 of these directly
by the group audit team and 50 by
component audit teams. Of the 28
specific scope components, audit
procedures were performed on 7 of
these directly by the group audit team
and 21 by component audit teams. We
determined the appropriate level of
involvement to enable us to determine
that sufficient audit evidence had been
obtained as a basis for our opinion on the
group as a whole.
During the current audit cycle, our
planned visits to component teams were
cancelled due to the travel restrictions
arising from the COVID-19 pandemic.
We performed alternative procedures,
including video meetings and live
reviews of our local audit teams’ working
papers. The Senior Statutory Auditor or
other members of the group audit team
performed virtual visits to 27 full and
specific scope components in the UK,
Argentina, Australia, Brazil, China,
Ireland, Germany, Netherlands, New
Zealand, South Africa, Switzerland and
Uruguay.
These virtual visits used video
technology and our global audit software
to meet with our component team to
discuss and direct its audit approach,
reviewing key working papers and
understanding the significant audit
findings in response to the risk areas
including asset impairment, the adoption
of IFRS 16, inventory valuation (in
Primark), tax provisions and revenue
recognition, holding meetings with local
management and obtaining updates on
IT systems implementations and local
regulatory matters including tax,
pensions and legal. The group audit team
interacted regularly with the component
teams where appropriate during various
stages of the audit, reviewed key
working papers and were responsible for
the scope and direction of the audit
process. This, together with the
additional procedures performed at
group level, gave us appropriate evidence
for our opinion on the consolidated
financial statements.
Annual Report and Accounts 2020
Associated British Foods plc
131
Independent Auditor’s Report
to the members of Associated British Foods plc
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality – ‘The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.’
We determined materiality for the group to be £41 million (2019: £66 million), which is 5% (2019: 5%) of profit before taxation
adjusted for certain exceptional items (2019: profit before taxation, adjusted for exceptional items and certain significant profits
less losses on sale and closure of businesses). Exceptional items were £139 million of impairment charges and £22 million of
inventory provisions (2019: exceptional items were £65 million of impairment charges and £14 million of Guaranteed Minimum
Pension charges; and certain significant profits less losses on sale and closure of businesses were a loss of £88 million relating
to AB Mauri’s agreement to form a yeast and bakery ingredients joint venture in China with Wilmar International).
We consider that this basis for assessing materiality provides the most relevant performance measure to the stakeholders of the
group, as exceptional items were non-recurring, sufficiently material and not related to the ongoing trading of the group. The
basis to set materiality has not changed in the current period. The decrease of £25 million (38%) in group materiality since 2019
reflects the significant reduction in profit before taxation adjusted for exceptional items, driven principally by the impact of
COVID-19 on Primark.
We determined materiality for the parent company to be £28 million (2019: £36 million), which is 2% of equity.
Performance materiality – ‘The application of materiality at the individual account or balance level. It is set at an amount to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds
materiality.’
On the basis of our risk assessments, together with our assessment of the group’s overall control environment, our judgement
was that performance materiality was 75% of our planning materiality, namely £31 million (2019: 75% of planning materiality,
being £49 million).
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is
based on the relative scale and risk of the component to the group as a whole and our assessment of the risk of misstatement
at that component. In the current period, the range of performance materiality allocated to components was £1 million to
£14 million (2019: £1 million to £27 million).
Reporting threshold – ‘An amount below which identified misstatements are considered as being clearly trivial.’
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £1 million
(2019: £1 million), which is 2% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report and accounts set out on pages 1 to 125, other
than the financial statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
132
Associated British Foods plc
Annual Report and Accounts 2020
Governance
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the
other information and to report as uncorrected material misstatements of the other information where we conclude that those
items meet the following conditions:
• fair, balanced and understandable, set out on page 101 – the statement given by the directors that they consider the annual
report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for
shareholders to assess the group’s performance, business model and strategy, is materially inconsistent with our knowledge
obtained in the audit; or
• audit committee reporting, set out on pages 105 to 109 – the section describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee; or
• directors’ statement of compliance with the UK Corporate Governance Code, set out on page 95 – the parts of the
directors’ statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance
Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial period for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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 directors’ 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
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, set out on page 125, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Annual Report and Accounts 2020
Associated British Foods plc
133
Independent Auditor’s Report
to the members of Associated British Foods plc
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial
statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement
due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected
fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both
those charged with governance of the entity and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the
most significant frameworks which are directly relevant to specific assertions in the financial statements are those that relate
to the reporting framework (IFRSs as adopted by the EU, United Kingdom Generally Accepted Accounting Practice, the
Companies Act 2006 and the UK Corporate Governance Code) and the relevant tax laws and regulations in the jurisdictions in
which the group operates. In addition, we concluded that there are certain significant laws and regulations which may have an
effect on the determination of the amounts and disclosures in the financial statements being the Listing Rules of the UK
Listing Authority, and those laws and regulations relating to health and safety, employee matters, food standards and
food safety.
• We understood how the group is complying with those frameworks by observing the oversight of those charged with
governance, the culture of honesty and ethical behaviour and whether a strong emphasis is placed on fraud prevention, which
may reduce opportunities for fraud to take place, and fraud deterrence, which could persuade individuals not to commit fraud
because of the likelihood of detection and punishment.
• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur
by meeting with management from various parts of the business to understand where it considered there was susceptibility
to fraud. We also considered performance targets and their influence on efforts made by management to manage earnings or
influence the perceptions of analysts. We considered the programmes and controls that the group has established to address
risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes
and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud
risk. These procedures included testing manual journals and were designed to provide reasonable assurance that the financial
statements were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved: journal entry testing, with a focus on manual consolidation journals and journals indicating large or
unusual transactions based on our understanding of the business; enquiries of legal counsel, group management, internal
audit, divisional management and all full and specific scope management; and focused testing, as referred to in the key audit
matters section above.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation of the Audit Committee, we were appointed as auditor by the shareholders and signed an
engagement letter on 17 April 2020. We were appointed by the company at the AGM on 6 December 2019 to audit the
financial statements for the 52 weeks ending 12 September 2020 and subsequent financial periods. The period of total
uninterrupted engagement including previous renewals and reappointments is five years, from the 53 weeks ended
17 September 2016 until the 52 weeks ended 12 September 2020.
• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we
remain independent of the group and the parent company in conducting the audit.
• The audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
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 auditor’s 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.
Andrew Walton (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
3 November 2020
134
Associated British Foods plc
Annual Report and Accounts 2020
Consolidated income statement
for the 52 weeks ended 12 September 2020
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
Acquired inventory fair value adjustments
Transaction costs
Exceptional items
Profits less losses on sale and closure of businesses
Profit before interest
Finance income
Finance expense
Other financial income
Profit before taxation
Adjusted profit before taxation
Profits less losses on disposal of non-current assets
Amortisation of non-operating intangibles
Acquired inventory fair value adjustments
Transaction costs
Exceptional items
Profits less losses on sale and closure of businesses
Taxation – UK (excluding tax on exceptional items)
– UK (on exceptional items)
– 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)
Financial statements
2020
£m
13,937
(13,046)
(156)
735
57
18
810
1,024
18
(59)
(15)
(2)
(156)
(14)
796
11
(124)
3
686
914
18
(59)
(15)
(2)
(156)
(14)
(69)
1
(189)
36
(221)
465
455
10
465
57.6
nil
2019
£m
15,824
(14,524)
(79)
1,221
57
4
1,282
1,421
4
(47)
(15)
(2)
(79)
(94)
1,188
15
(42)
12
1,173
1,406
4
(47)
(15)
(2)
(79)
(94)
(75)
12
(214)
–
(277)
896
878
18
896
111.1
46.35
Note
1
2
2
11
1
8
2
2
2
23
4
4
4
8
2
2
2
23
5
7
6
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
135
135
Consolidated statement of comprehensive income
for the 52 weeks ended 12 September 2020
Profit for the period recognised in the income statement
Other comprehensive income
Remeasurements of defined benefit schemes
Deferred tax associated with defined benefit schemes
Current 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
Movement in cash flow hedging position
Deferred tax associated with movement in cash flow hedging position
Share of other comprehensive income of joint ventures and associates
Effect of hyperinflationary economies
Deferred tax associated with hyperinflationary economies
Items that are or may be subsequently reclassified to profit or loss
Other comprehensive loss for the period
Total comprehensive income for the period
Attributable to
Equity shareholders
Non-controlling interests
Total comprehensive income for the period
2020
£m
465
(89)
15
−
(74)
(97)
(3)
1
−
(15)
−
(1)
17
−
(98)
2019
£m
896
(407)
68
2
(337)
43
3
–
(3)
(29)
7
4
38
(2)
61
(172)
(276)
293
620
296
(3)
293
601
19
620
136
136
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Consolidated balance sheet
at 12 September 2020
Financial statements
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments in joint ventures
Investments in associates
Employee benefits assets
Deferred tax assets
Other receivables
Total non-current assets
Current assets
Assets classified as held for sale
Inventories
Biological assets
Trade and other receivables
Derivative assets
Current asset investments
Income tax
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Liabilities classified as held for sale
Lease liabilities
Loans and overdrafts
Trade and other payables
Derivative liabilities
Income tax
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Loans
Other payables
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
8
9
10
11
11
12
13
14
15
16
17
14
26
25
18
15
10
19
20
26
21
10
19
20
21
13
12
22
22
22
22
2020
£m
1,629
5,651
2,990
233
56
100
212
45
10,916
43
2,150
72
1,328
102
32
30
1,996
5,753
16,669
(5)
(297)
(154)
(2,316)
(87)
(171)
(123)
(3,153)
(3,342)
(318)
−
(41)
(210)
(166)
(4,077)
(7,230)
9,439
45
175
323
(7)
8,819
9,355
84
9,439
2019
£m
1,681
5,769
–
225
50
228
160
51
8,164
43
2,386
84
1,436
99
29
24
1,495
5,596
13,760
(6)
–
(227)
(2,556)
(52)
(163)
(64)
(3,068)
–
(361)
(271)
(54)
(261)
(195)
(1,142)
(4,210)
9,550
45
175
409
(9)
8,832
9,452
98
9,550
The financial statements on pages 135 to 199 were approved by the Board of directors on 3 November 2020 and were signed
on its behalf by:
Michael McLintock
Chairman
John Bason
Finance Director
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
137
137
Consolidated cash flow statement
for the 52 weeks ended 12 September 2020
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
Transaction costs
Finance income
Finance expense
Other financial income
Share of profit after tax from joint ventures and associates
Amortisation
Depreciation (including depreciation of right-of-use assets and non-cash lease adjustments)
Impairment of property, plant & equipment and right-of-use assets
Exceptional items
Acquired inventory fair value adjustments
Effect of hyperinflationary economies
Net change in the fair value of current biological assets
Share-based payment expense
Pension costs less contributions
Decrease/(increase) in inventories
Decrease in receivables
(Decrease)/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
Lease incentives received
Sale of property, plant and equipment
Purchase of subsidiaries, joint ventures and associates
Sale of subsidiaries, joint ventures and associates
Purchase of other investments
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
Repayment of lease liabilities
Decrease in short-term loans
(Decrease)/increase in long-term loans
(Increase)/decrease in current asset investments
Purchase of shares in subsidiary undertaking from non-controlling interests
Movements from changes in own shares held
Net cash from financing activities
Net increase 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
2020
£m
2019
£m
686
(18)
14
2
(11)
124
(3)
(57)
89
827
15
156
15
5
(1)
8
10
199
81
(174)
(1)
41
2,007
(254)
1,753
43
(561)
(61)
35
30
(16)
2
(1)
11
(518)
(7)
(271)
(104)
(247)
(43)
(2)
(2)
(2)
–
(678)
1,173
(4)
94
2
(15)
42
(12)
(57)
68
544
–
79
15
6
–
22
(10)
(202)
18
44
(1)
(28)
1,778
(269)
1,509
52
(680)
(57)
–
12
(84)
6
–
20
(731)
(4)
(358)
(43)
–
(263)
2
1
(1)
(25)
(691)
557
1,358
(6)
1,909
87
1,271
–
1,358
138
138
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Consolidated statement of changes in equity
for the 52 weeks ended 12 September 2020
Financial statements
Balance as at 15 September 2018
Total comprehensive income
Profit for the period recognised in the income statement
Remeasurements of defined benefit schemes
Deferred tax associated with defined benefit schemes
Current tax associated with defined benefit schemes
Items that will not be reclassified to profit or loss
Effect of movements in foreign exchange
Net gain on hedge of net investment in foreign subsidiaries
Movements in foreign exchange on businesses disposed
Movement in cash flow hedging position
Deferred tax associated with movement in cash flow
hedging position
Share of other comprehensive income of joint ventures
and associates
Effect of hyperinflationary economies
Deferred tax associated with hyperinflationary economies
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
Acquisition and disposal of non-controlling interests
Total transactions with owners
Balance as at 14 September 2019
IFRS 16 opening balance adjustment
Balance as at 15 September 2019
Total comprehensive income
Profit for the period recognised in the income statement
Remeasurements of 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
Movement in cash flow hedging position
Share of other comprehensive income of joint ventures
and associates
Effect of hyperinflationary economies
Items that are or may be subsequently reclassified to
profit or loss
Other comprehensive income
Total comprehensive income
Inventory cash flow hedge movements
Gains transferred to cost of inventory
Total inventory cash flow hedge movements
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
Acquisition and disposal of non-controlling interests
Total transactions with owners
Balance as at 12 September 2020
Attributable to equity shareholders
Note
Issued
capital
£m
45
Other
reserves
£m
175
Translation
reserve
£m
363
Hedging
reserve
£m
13
Retained
earnings
£m
Total
£m
8,615 9,211
Non-
controlling
Total
interests
equity
£m
£m
85 9,296
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45
–
45
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
175
–
175
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45
–
–
–
–
–
–
175
–
–
–
–
–
42
3
(3)
–
–
4
–
–
46
46
46
–
–
–
–
–
409
–
409
–
–
–
–
(83)
(3)
1
–
(1)
–
(86)
(86)
(86)
–
–
–
–
–
–
–
–
323
–
–
–
–
–
–
–
–
(29)
7
–
–
–
878
878
18
896
(407)
68
2
(337)
(407)
68
2
(337)
–
–
–
–
–
–
38
(2)
42
3
(3)
(29)
7
4
38
(2)
–
–
–
–
1
–
–
–
–
–
–
–
(407)
68
2
(337)
43
3
(3)
(29)
7
4
38
(2)
(22)
(22)
(22)
36
(301)
577
60
(277)
601
1
1
19
61
(276)
620
(358)
(358)
–
(3)
(3)
–
–
–
–
1
1
–
–
(360)
(360)
(9) 8,832 9,452
(358)
–
(3)
–
(4)
(4)
(1)
(2)
(6)
(366)
98 9,550
–
(149)
(149)
(9) 8,683 9,303
(1)
(150)
97 9,400
–
–
–
–
(1)
–
–
(15)
–
–
(16)
(16)
(16)
18
18
455
455
10
465
(89)
15
(74)
–
–
–
–
–
17
(89)
15
(74)
(84)
(3)
1
(15)
(1)
17
–
–
–
(13)
–
–
–
–
–
(89)
15
(74)
(97)
(3)
1
(15)
(1)
17
17
(57)
398
(85)
(159)
296
(13)
(13)
(3)
(98)
(172)
293
–
–
18
18
–
–
18
18
(271)
(271)
–
8
8
–
1
1
–
–
–
–
–
–
–
–
(262)
(262)
(7) 8,819 9,355
(271)
–
8
–
1
–
(8)
(8)
(2)
(2)
(10)
(272)
84 9,439
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
139
139
Significant accounting policies
for the 52 weeks ended 12 September 2020
Associated British Foods plc is domiciled
in the United Kingdom. The consolidated
financial statements of the Company
for the 52 weeks ended 12 September
2020 comprise those of the Company
and its subsidiaries and the group’s
interest in joint ventures and associates.
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
12 September 2020 (2019 – 52 weeks
ended 14 September 2019).
The consolidated financial statements
were authorised for issue by the
directors on 3 November 2020.
The consolidated financial statements
have been prepared and approved by
the directors in accordance with
Adopted IFRS.
The Company has elected to prepare its
parent company financial statements
under FRS 101. These are presented
on pages 200 to 207.
Basis of preparation
The consolidated financial statements
are presented in sterling, rounded to the
nearest million. They are prepared on the
historical cost basis except that current
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 150.
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.
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 each year.
Adjustments are made as appropriate
for significant transactions or events
occurring between 12 September and
these other balance sheet dates.
The group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the Strategic report on
pages 1 to 65. The financial position of
the group, its cash flows, liquidity position
and borrowing facilities are described in
the Financial review on pages 66 to 69.
In addition, the Principal risks and
uncertainties on pages 84 to 90 and note
26 on pages 176 to 187 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.
Going concern
The going concern basis has been
applied in these consolidated financial
statements. After making enquiries, the
directors have a reasonable expectation
that the group has adequate resources
to continue in operational existence
for the foreseeable future. For this
reason they continue to adopt the
going concern basis in preparing the
consolidated financial statements.
The forecast for the period to the end
of February 2022 has been updated
for the group’s trading to October and
represents the Board’s best estimate of
future cash flow. Having reviewed this
forecast, and having applied reverse
stress tests, the possibility that the
financial headroom could be exhausted
is considered to be extremely remote.
As stated at the half year, as a
precaution against illiquidity in the
banking market, the RCF was drawn
down. In August the facility was repaid
in full. A two-year extension has now
been agreed with the Company’s
relationship banks which extends
the maturity of the RCF to July 2023.
In April the Bank of England confirmed
that the Company had access to the
CCFF. Since then, the Company has not
needed to draw upon this facility and
does not expect to draw upon it in
the coming months and as a result will
allow its eligibility to lapse. Accordingly,
the CCFF has not been taken into
account in making our assessment
of financial headroom.
At the year end, the group had gross
cash of £2,030m and the undrawn
RCF of £1,088m. The directors have
satisfied themselves that the RCF will
be available for at least the period to the
end of February 2022, having assessed
the group’s projected compliance with
the terms and covenants of this facility.
In reviewing the cash flow forecast
for the period, the directors reviewed
the trading for both Primark and the
Food businesses in light of the
experience gained from the last six
months of trading and emerging
trading patterns.
The directors understand the risks,
sensitivities and judgements included in
the cash flow forecast and have a high
degree of confidence in these cash
flows. There is substantial financial
headroom between this cash flow
forecast and the cash on hand and
facilities available to the group over the
period. A number of extreme, adverse
assumptions were considered and the
likelihood of the headroom being
exhausted was considered to be
extremely remote.
The group has operations in 53 countries
and sales into more than 100. The
diversity of its businesses, in different
sectors with different customers,
products and markets removes the
possibility of any single adverse event
having a material impact on headroom.
The importance of food production has
been highlighted by recent events and
the group’s employees continue to work
successfully to ensure the continuity
and resilience of the food supply chain. It
would require a large number of adverse
events for there to be a collective
material impact on headroom and sales
for the whole of the period would need
to decline substantially, in every
business, and with no cost mitigation.
140
140
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
In the food businesses, revenue from
the sale of goods is generally recognised
on dispatch or delivery to customers,
dependent on shipping terms. Discounts
and returns are provided for as a
reduction to revenue when sales are
recorded, based on management’s best
estimate of the amount required to meet
claims by customers, taking into account
contractual and legal obligations,
historical trends and past experience.
In the retail business, revenue from the
sale of goods is recognised when the
customer purchases goods. Returns are
provided for as a reduction to revenue
when sales are recorded, based on
management’s best estimate of the
amount required to meet claims by
customers, taking into account historical
trends and past experience.
Borrowing costs
Borrowing costs are accounted for
using the effective interest method.
The group capitalises borrowing costs
directly attributable to the acquisition,
construction or production of qualifying
items of property, plant and equipment
as part of their cost. Interest capitalised
is taxed under current or deferred tax
as appropriate.
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 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.
For Primark we considered the more
extreme adverse scenarios in which all
Primark stores were closed for three
months over the Christmas trading
period, without taking any of the
available cost mitigation actions that
are within our control, and the cash
flow consequences did not exhaust
the financial headroom.
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 direct the activities of an
entity so as to affect significantly the
returns of that entity.
Changes in the group’s ownership
interest in a subsidiary that do not result
in a loss of control are accounted for
within equity.
All the group’s joint arrangements are
joint ventures, which are 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, being
the power to participate in the financial
and operating policy decisions of the
entity, but which does not amount to
control or joint control.
Where the group’s share of losses
exceeds 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.
Control, joint control and significant
influence are generally assessed by
reference to equity shareholdings and
voting rights.
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.
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 transaction 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 value of sales
made to customers after deduction of
discounts, sales taxes and a provision for
returns. 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 performance
obligations are satisfied, goods are
delivered to customers and control
of goods is transferred to the buyer.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
141
141
Significant accounting policies
for the 52 weeks ended 12 September 2020
Pensions and other post-employment
benefits
The group’s pension arrangements
comprise defined benefit plans, 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 net interest expense
or income calculated by applying the
liability discount rate to the net pension
asset or liability. 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. Remeasurements
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 remeasurements 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, 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 equity.
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.
Deferred tax assets are 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 liabilities are
recognised in the group’s balance sheet
when the group becomes a party to the
contractual provision of the instrument.
Trade and other receivables
Trade and other receivables are recorded
initially at fair value and subsequently
measured at amortised cost. This
generally results in recognition at nominal
value less an expected credit loss
provision, which is recognised based on
management’s expectation of losses
without regard to whether or not a
specific impairment trigger has occurred.
Other non-current receivables
Other non-current receivables mainly
comprise finance lease receivables due
from a joint venture and minority
shareholdings in private companies.
Finance lease receivables are accounted
for in the same way as trade and other
receivables. Shareholdings in private
companies are classified as ‘fair value
through other comprehensive income’.
They are initially measured at fair
value, including directly attributable
transaction costs.
Gains or losses arising from changes
in fair value are recognised in other
comprehensive income until the asset
is disposed of, at which time the
cumulative gain or loss previously
recognised in other comprehensive
income is included directly in retained
earnings and is not recycled to the
income statement.
All equity investments are measured at
fair value.
Bank and other borrowings
Interest-bearing bank loans and
overdrafts are initially recorded at fair
value, which equals the proceeds
received, net of direct issue costs. They
are subsequently held at amortised cost.
Finance charges, including premiums
payable on settlement or redemption
and direct issue costs, are accounted for
using an effective interest rate method
and are added to the carrying amount
of the instrument to the extent that
they are not settled in the period in
which they arise.
Other borrowings are initially measured
at fair value net of direct issue costs and
are subsequently held at amortised
cost unless designated in a hedge
relationship, in which case hedge
accounting will apply.
142
142
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
The group economically hedges foreign
currency exposure on recognised
monetary assets and liabilities but does
not normally seek hedge accounting.
Any derivatives that the group holds to
hedge this exposure are classified as
‘fair value through profit and loss’ 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 10 years
Grower agreements – up to 10 years
Goodwill
Goodwill is defined under ‘Business
combinations’ on page 141. 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.
Trade payables
Trade payables are recorded initially at
fair value and subsequently measured
at amortised cost. This generally results
in recognition at nominal value.
During the life of the hedging
relationship, prospective effectiveness
testing is performed to ensure the
instrument remains an effective hedge
of the transaction.
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 and form an integral part of the
group’s cash management are included
as a component of cash and cash
equivalents for the purpose of the cash
flow statement.
Derivatives financial instruments
and hedging
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 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.
At the inception of a hedging
relationship, the hedging instrument and
the hedged item are documented, along
with the risk management objectives
and strategy for undertaking various
hedge transactions and prospective
effectiveness testing is performed.
Changes in the value of derivatives used
as hedges of future cash flows are
recognised through other comprehensive
income in the hedging reserve.
The element of the change in fair value
which relates to the currency spread
is recognised in the cost of hedging
reserve, with the remaining change in fair
value recognised in the hedging reserve.
Any ineffective portion is recognised
immediately in the income statement.
When the future cash flow results in the
recognition of a non-financial asset or
liability, then at the time the asset or
liability is recognised, the related gains
and losses previously recognised in the
hedging reserve are included in the initial
measurement of that asset or liability.
For hedges that do not result in the
recognition of an asset or a liability,
amounts recorded in the hedging
reserve are recognised in the income
statement in the same period in which
the hedged item affects profit or loss.
Hedges of the group’s net investment in
foreign operations principally comprise
borrowings in the currency of the
investment’s net assets.
Changes in the fair value of derivative or
non-derivative financial instruments that
are designated and effective as hedges
of net investments are recognised in
other comprehensive income in the net
investment hedging reserve. Any
ineffective portion is recognised
immediately in the income statement.
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.
Annual Report and Accounts 2020
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Significant accounting policies
for the 52 weeks ended 12 September 2020
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 least annually.
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, estimated future cash
flows are discounted to 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,
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 economic lives of
items of property, plant and equipment
sufficient to reduce them to estimated
residual value. Land is not depreciated.
Estimated useful economic lives are
generally deemed to be no longer than:
Freehold buildings
up to 66 years
Plant and equipment, fixtures and fittings
– sugar factories, yeast
up to 20 years
plants, mills and
bakeries
– other operations
Vehicles
Sugar cane roots
up to 12 years
up to 10 years
up to 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.
In the 2019 financial year, where the
group was a lessee and had substantially
all the risks and rewards of ownership
of an asset, the arrangement was
considered a finance lease. Finance
leases were 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 was
charged to the income statement on
the same basis as owned assets.
Payments made under finance leases
were apportioned between capital
repayments and interest expense
charged to the income statement.
Other leases where the group is a
lessee were treated as operating leases.
Payments made under operating
leases were recognised in the income
statement on a straight-line basis over
the term of the lease, as were the
benefit of lease incentives.
In the 2020 financial year, where the
group is a lessee, the following
accounting policy applies:
Right-of-use assets
Right-of-use assets are recognised at
the commencement date of the lease,
which is the date the underlying asset is
available for use. Right-of-use assets are
measured at cost, less any accumulated
depreciation and impairment losses,
and adjusted for subsequent
remeasurement of lease liabilities.
The cost of right-of-use assets includes
the amount of lease liabilities
recognised, initial direct costs incurred,
and lease payments made at or before
the commencement date less any lease
incentives received.
Right-of-use assets are depreciated on a
straight-line basis over the shorter of the
estimated useful life and the lease term.
Right-of-use assets are subject to
impairment.
Right-of-use assets are subsequently
measured at cost less accumulated
depreciation and any impairment losses,
adjusted for any remeasurement of the
lease liability.
Lease liabilities
Lease liabilities are recognised at the
commencement date of the lease and
are measured at the present value of
lease payments to be made over the
lease term, discounted using the
incremental borrowing rate at the lease
commencement date if the interest
rate implicit in the lease is not readily
determinable.
Lease payments include fixed
payments, including in-substance fixed
payments, and variable lease payments
that depend on an index or a rate,
less any lease incentives receivable.
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Variable lease payments that do not
depend on an index or a rate are
recognised as an expense in the period
in which the event or condition that
triggers the payment occurs.
After the commencement date of the
lease, the lease liability is subsequently
measured at amortised cost using the
effective interest rate method. The
carrying amount of lease liabilities is
increased to reflect the accretion of
interest and reduced for the lease
payments made.
In addition, the carrying amount of lease
liabilities is remeasured when there is a
change in future lease payments due to
a change in the lease term, a change in
the in-substance fixed lease payments
or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of
low-value assets
The group applies the short-term lease
recognition exemption to those leases
that have a lease term of 12 months or
less from the commencement date and
do not contain a purchase option. It also
applies the low-value asset recognition
exemption to groups of underlying
leases that are considered uniformly
low value.
Lease payments on short-term leases
and leases of low-value assets are
expensed to the income statement.
Lessor accounting
Where the group subleases assets, the
sublease classification is assessed with
reference to the head lease right-of-use
asset. This assessment considers,
among other factors, whether the
sublease represents the majority of
the remaining life of the head lease.
The ratio of rental income to head lease
rental payments is used to determine
how much of the right-of-use asset
should be derecognised. This
assessment takes into consideration
whether the sublet/head lease are
above/below market rate.
Amounts due from lessees under finance
leases are recorded as a receivable at
an amount equal to the net investment
in the lease. This is initially calculated
and recognised using the incremental
borrowing rate at the recognition
date. Any difference between the
derecognised right-of-use asset and
the newly recognised amounts due
for lessees under finance leases is
recognised in the income statement.
The group recognises finance income
over the lease term, reflecting a
constant periodic rate of return on the
net investment in the lease. Operating
lease income is recognised as earned on
a straight-line basis over the lease term.
Current biological assets
Current biological assets are measured
at fair value less costs to sell.
The basis of valuation for growing cane
is 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 the retail businesses 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 retail
inventories are finished goods.
Inventories recorded on the acquisition of
a business are recognised at fair value.
The book value of such inventories is
charged to adjusted operating profit as
they are sold or used. Any fair value uplift,
if significant, is charged below operating
profit as the inventories are sold or used.
Financial statements
Grants
Grants are recognised only when there
is reasonable assurance that the group
will comply with the conditions attached
to them and that the grants will be
received. Grants that are receivable as
compensation for expenses already
incurred are recognised in profit or loss
in the period in which they become
receivable.
Hyperinflation
The Argentinian economy was designated
hyperinflationary from 1 July 2018. The
group has applied IAS 29 Financial
Reporting in Hyperinflationary Economies
to its Argentinian operations from the
beginning of the 2019 financial year.
IAS 29 requires that hyperinflationary
adjustments are reflected from the start
of the reporting period in which it is
applied. For the group’s Argentinian
operations this is 1 September 2018. In
accordance with IAS 21 The Effects of
Changes in Foreign Exchange Rates, the
comparative figures for 2018 have not
been modified. The adjustments
required by IAS 29 are set out below:
• adjustment of historical cost non-
monetary assets and liabilities from
their date of initial recognition to the
balance sheet date to reflect the
changes in purchasing power of the
currency caused by inflation, according
to the official indices published by the
Federación Argentina de Consejos
Profesionales de Ciencias Económicas
(FACPCE);
• adjustment of the components of the
income statement and cash flow
statement for the inflation index since
their generation, with a balancing
entry in the income statement and a
reconciling item in the cash flow
statement, respectively;
• adjustment of the income statement
to reflect the impact of inflation on
holding monetary assets and liabilities
in local currency;
• the financial statements of the group’s
Argentinian operations have been
translated into sterling at the closing
exchange rate at 12 September 2020
(ARS95.82:£1); and
• the cumulative impact corresponding
to previous years has been reflected
in other comprehensive income in
the period.
Annual Report and Accounts 2020
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145
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Significant accounting policies
for the 52 weeks ended 12 September 2020
IFRS 16 Leases
IFRS 16 introduces a new model for the
identification of leases and accounting
for lessors and lessees. It replaces
IAS 17 Leases and other related
requirements. The group adopted
IFRS 16 on 15 September 2019 and
applies it for the first time in the 2020
financial year.
IFRS 16 distinguishes leases from
service contracts on the basis of control
of an identified asset. For lessees, it
removes the previous accounting
distinction between (off-balance sheet)
operating leases and (on-balance sheet)
finance leases and introduces a single
model recognising a lease liability and
corresponding right-of-use asset for all
leases except for short-term leases and
leases of low-value assets.
For lessors, IFRS 16 substantially retains
existing accounting requirements and
continues to require classification of
leases either as operating or finance
in nature.
The group engaged external experts to
support its implementation project and
established a steering committee to
oversee its governance, which reported
to the Audit Committee. The group
completed its implementation project
during the 2019 financial year.
IFRS 16 permits a choice of transition
approaches: a fully retrospective
approach with an adjustment made
to the opening retained earnings of
the comparative period; or a modified
retrospective approach with the
cumulative effect of initial application
recognised at the date of initial
application without restating prior periods.
The age, size and complexity of the
group’s lease portfolio meant that it
would have been either impossible or
extremely costly and difficult to collate
sufficient information to apply the fully
retrospective approach. The group has
therefore determined to adopt the
modified retrospective approach.
Lease liabilities are measured initially
at the present value of lease payments
yet to be paid, subsequently adjusted
for interest and lease payments as well
as a number of other changes to lease
provisions. Lease liabilities are included
in net debt.
Right-of-use assets are reported as non-
current assets and are initially measured
at either:
• carrying amount as if IFRS 16 had
been applied since the lease
commencement date, discounted by
the group’s incremental borrowing
rate as at 15 September 2019 (applied
to a majority of the group’s leases
where sufficient historical information
was available); or
• an amount equal to the lease liability,
adjusted by the amount of any prepaid
or accrued lease payments (applied to
a small number of leases where
sufficient historical information was
not available).
Right-of-use assets are subsequently
measured at cost less accumulated
depreciation and any impairment losses,
adjusted for any remeasurement of the
lease liability.
There is no change to overall cash flows.
Operating lease payments were
previously presented as operating cash
flows and finance lease payments were
allocated between payments of principal
and interest within financing cash flows.
Under IFRS 16, lease payments are
split between payments of principal
and interest, presented as financing
cash flows.
Operating lease expenses previously
charged to operating profit have been
replaced by depreciation of right-of-use
assets (within operating profit) and
interest cost (within finance expense).
Although the aggregate income
statement impact of each lease over
its life does not change, the generally
straight-line profile of operating lease
expense is now more front-loaded under
IFRS 16 because of the interest charge
on the lease liability.
The FACPCE index was 239.6077
at 31 August 2019 and 337.0632 at
31 August 2020. The inflation index
for the year is therefore 1.4067.
The Venezuelan economy has been
designated hyperinflationary for a
number of years, but the impact on the
group’s results remains immaterial.
New accounting policies
The following accounting standards and
amendments were adopted during the
year and had no significant impact on
the group, other than IFRS 16 Leases:
• IFRS 16 Leases
• IFRIC 23 Uncertainty over Income
Tax Treatments
• Amendments to IFRS 9 Prepayment
features with Negative Compensation
• Amendments to IAS 19 Plan
Amendment, Curtailment or
Settlement
• Amendments to IAS 28 Long-term
Interests in Associates and Joint
Ventures
• Annual Improvements to IFRS 2015 –
2017
The group is assessing the impact of the
following standards, interpretations and
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:
• IFRS 17 Insurance Contracts effective
2022 financial year (not yet endorsed
by the EU)
• Amendments to IFRS 3 Definition of a
Business effective 2021 financial year
• Amendments to IAS 1 and IAS 8
Definition of Material effective 2021
financial year
• Amendments to IAS 1 Presentation of
Financial Statements: Classification of
Liabilities as Current or Non-current
effective 2023 financial year (not yet
endorsed by the EU)
• Amendments to References to the
Conceptual Framework in IFRS
Standards effective 2021 financial year
The new standard with the most
significant effect on the group’s financial
statements is IFRS 16, further details
of which are set out below. The impact
of the other standards effective in
2021 and beyond have not yet been
fully assessed.
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Financial statements
No adjustment has been made to the
recognition and measurement of assets
previously recognised as finance leases
under IAS 17 which were transferred
to right-of-use assets on adoption of
IFRS 16, with the related borrowings
transferred to lease liabilities.
In applying IFRS 16, the group has
applied the following practical
expedients as of the transition date:
• reliance on the previous identification
of a lease (as defined by IAS 17) for
all contracts that existed at the date
of initial application;
• reliance on previous assessment of
whether leases are onerous instead
of performing an impairment review
(rental payments associated with
these leases are recognised in the
Income statement on a straight-line
basis over the life of the lease);
• accounting for operating leases with
a remaining lease term of less than
12 months as at the transition date as
short-term leases excluded from the
scope of IFRS 16 (rental payments
associated with these leases are
recognised in the Income statement
on a straight-line basis over the life
of the lease); and
• accounting for operating leases for
low-value items as excluded from the
scope of IFRS 16.
Impact on the group’s results and financial position
The first results published under IFRS 16 were the 2020 interim results. The impact of IFRS 16 on the group’s results and
financial position is significant. IFRS 16 affects a number of financial statement captions and ratios, including the following:
Item
Earnings
Operating profit/
operating margin
Finance expense
Taxation
Net debt
Comment
There is a marginal impact on earnings and therefore marginal impact on dividend cover.
Operating profit and operating margin have increased as operating lease expenses are replaced by the
depreciation of right-of-use assets.
Finance expense has increased significantly as a result of the interest cost on lease liabilities. Interest
cover has therefore reduced.
Taxation has changed in line with the changes in profit before tax.
Net debt has increased very significantly as lease liabilities are recorded within current and non-current
liabilities. Gearing ratios have therefore increased. The reconciliation of net debt includes more non-cash
items as new leases are entered into.
Return on capital employed The return on capital employed has reduced as a result of the changes to operating profit and
Cash flow statement
non-current assets.
There is no overall impact on cash flow, but classifications of cash flows have changed, as set out above.
Annual Report and Accounts 2020
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Associated British Foods plc
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147
147
Significant accounting policies
for the 52 weeks ended 12 September 2020
The changes set out below to the group’s assets and liabilities were recorded at the transition date of 15 September 2019 in the
2020 financial year and were charged against opening equity in this 2020 annual report.
Non-current assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets
Other current assets
Total current assets
Total assets
Liabilities
Lease liabilities
Loans and overdrafts
Provisions
Deferred tax liabilities
Other liabilities
Total liabilities
Net assets
Equity
Total equity attributable to equity shareholders
Non-controlling interests
Total equity
As reported
14 September
2019
£m
IFRS 16
adjustments
£m
15 September
2019
£m
5,769
–
160
2,235
8,164
5,596
5,596
13,760
–
(588)
(118)
(261)
(3,243)
(4,210)
9,550
9,452
98
9,550
(20)
3,204
41
–
3,225
3
3
3,228
(3,678)
14
10
–
276
(3,378)
(150)
5,749
3,204
201
2,235
11,389
5,599
5,599
16,988
(3,678)
(574)
(108)
(261)
(2,967)
(7,588)
9,400
(149)
(1)
(150)
9,303
97
9,400
The 2019 results have been provided on an IFRS 16 pro forma basis in addition to the results previously reported under IAS 17 in
order to provide a better understanding of comparison between the 2020 results and the 2019 results. These IFRS 16 pro forma
figures have been prepared using the same data and assumptions as those used for the transition adjustment.
Disclosures on transition
The following table reconciles the operating lease commitments as at 14 September 2019 disclosed in the group’s 2019 Annual
Report to the amount recognised on the consolidated balance sheet in respect of lease liabilities on adoption of IFRS 16.
Undiscounted future operating lease commitments disclosed as at 14 September 2019
Effect of assumptions on renewal options and break clauses
Effect of discounting
Accruals and prepayments
Other reconciling items (net)
IFRS 16 lease liabilities recognised as at 15 September 2019
Existing finance lease liabilities as at 14 September 2019
Total lease liabilities recognised as at 15 September 2019
£m
5,213
(490)
(1,028)
(32)
1
3,664
14
3,678
Under the modified retrospective transition method, lease payments were discounted to present value at 15 September 2019
using incremental borrowing rates derived as at that date representing the rate of interest that the group entity that entered into
the lease would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset
of a similar value to the right-of-use asset in a similar economic environment.
Given the disproportionate value and profile of property leases in the Retail segment (£3,495m, 95% of the group total at
transition), it is not appropriate to provide a single weighted average discount rate applied for the group at transition.
The weighted average incremental borrowing rate applied on transition for the Retail segment was 2.28%. For the food
businesses, the incremental borrowing rates applied to individual leases range between 0.00% and 14.56%.
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Annual Report and Accounts 2020
The 2019 results have been provided on an IFRS 16 pro forma basis in addition to the results previously reported under IAS 17 in
order to provide a better understanding of comparison between the 2020 results and the 2019 results. These IFRS 16 pro forma
figures have been prepared using the same data and assumptions as those used for the transition adjustment.
Financial statements
Continuing operations
Operating profit
Adjusted operating profit
Profits less losses on disposal of non-current assets
Amortisation of non-operating intangibles
Acquired inventory fair value adjustments
Transaction costs
Exceptional items
Profits less losses on sale and closure of businesses
Profit before interest
Finance income
Finance expense
Other financial income
Profit before taxation
Adjusted profit before taxation
Profits less losses on disposal of non-current assets
Amortisation of non-operating intangibles
Acquired inventory fair value adjustments
Transaction costs
Exceptional items
Profits less losses on sale and closure of businesses
Taxation
Profit for the period
Attributable to
Equity shareholders
Non-controlling interests
Profit for the period
Basic and diluted earnings per ordinary share (pence)
Adjusted earnings per ordinary share (pence)
52 weeks
ended
14 September
2019
(IAS 17)
£m
1,282
IFRS 16
adjustments
£m
61
1,421
4
(47)
(15)
(2)
(79)
(94)
1,188
15
(42)
12
1,173
1,406
4
(47)
(15)
(2)
(79)
(94)
(277)
896
878
18
896
111.1
137.5
61
–
–
–
–
–
–
61
–
(82)
–
(21)
(21)
–
–
–
–
–
–
4
(17)
(17)
–
(17)
(2.1)
(2.1)
52 weeks
ended
14 September
2019
(IFRS 16 pro
forma basis)
£m
1,343
1,482
4
(47)
(15)
(2)
(79)
(94)
1,249
15
(124)
12
1,152
1,385
4
(47)
(15)
(2)
(79)
(94)
(273)
879
861
18
879
109.0
135.4
IFRS 16 has the most significant impact on the Retail segment given the significant number of store leases to which Primark is a
party. The changes in other liabilities mainly relate to the elimination of lease incentives received from the landlords of stores in
the Retail segment.
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149
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 deficit of £66m
being recognised as at 12 September
2020. The size of this deficit is sensitive
to the market value of the assets held
by the schemes, to the discount rate
used in assessing 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.
Biological assets
In valuing growing cane, estimating
sucrose content requires management
to assess expected cane and sucrose
yields for the following season
considering weather conditions and
harvesting programmes. Estimating
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 17.
Taxation
The group makes provision for open
tax issues including, in a number of
jurisdictions, routine tax audits which
are by nature complex and can take a
number of years to resolve. Provisions
are based on management’s
interpretation of tax law in each country
and ongoing monitoring of the outcome
of EU cases and investigations on tax
rulings, and reflect the best estimate
of the liability. The group believes it
has made adequate provision for
such matters.
Accounting estimates and judgements
for the 52 weeks ended 12 September 2020
In applying the accounting policies
detailed on pages 140 to 149,
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 the potential
for material adjustment to the carrying
value of assets and liabilities within the
next financial year, are set out below.
IFRS 16 Leases
The adoption of IFRS 16 required the
group to make a number of estimates
and judgements.
Transition approach
The selection of transition approach is
a significant judgement. The group
adopted the modified retrospective
transition approach. The rationale for
this is set out in the Significant
accounting policies.
Lease term
IFRS 16 defines lease term as the non-
cancellable period of a lease together
with options to renew or break a lease,
if the lessee is reasonably certain to
exercise that option. The assessment
of lease term is a significant estimate.
Where leases include an option to extend
or reduce the lease term, the group
makes a lease-by-lease assessment as
to whether it is reasonably certain that
the option will be exercised.
This assessment considers the length
of the time before any renewal or break
option is exercisable, current and
forecast store trading, the remaining
useful economic life of store assets
and any planned capital investment.
Assessments for individual leases are
also considered in aggregate to ensure
consistency of approach.
Discount rate
The selection of discount rates is a
significant judgement. The incremental
borrowing rate applied to each lease
was determined based on the risk-free
rate in each country of operation
adjusted for factors such as the
estimated credit rating of the contracting
entity, guarantees given by other group
companies and the terms and conditions
of each lease. Group Treasury devised
a consistent and structured approach
using a third-party model evaluating
the following:
• external market data (e.g. risk-free
rates in each country of operation
and published financial statements);
• lease-specific data (e.g. lease dates
and payments, lease counterparties
and guarantors); and
• internal data and judgements (e.g.
assessment of business model,
judgements as to lease term).
Impairment risk associated with
COVID-19
The global spread of COVID-19 began
in the first half of the 2020 financial year.
The group has specifically considered
the impact of COVID-19 in performing its
year end assessment of impairment risk.
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.
Further details are included in note 8 for
intangible assets and note 9 for property,
plant and equipment.
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 considered
probable that sufficient taxable profits
will be available in the future.
The judgement as to whether to
recognise deferred tax assets is based
on the following year’s budget and
expectations of the future performance
of each business. Particular focus has
been given to the potential impact of
COVID-19 on the recoverability of
deferred tax assets.
Deferred tax assets are reduced to the
extent that it is no longer considered
probable that the related tax benefit will
be realised.
Further details of deferred tax assets are
included in note 13.
150
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
150
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
Financial statements
1. Operating segments
The group has five operating segments,
as described below. These are the
group’s operating divisions, based on
the management and internal reporting
structure, which combine businesses
with common characteristics, primarily in
respect of the type of products offered
by each business, but also the
production processes involved and the
manner of the distribution and sale of
goods. 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, current asset
investments and income tax assets.
Segment liabilities comprise trade and
other payables, derivative liabilities,
provisions and lease liabilities.
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, right-of-use assets, operating
intangibles and biological assets.
Businesses disposed are shown
separately and comparatives have been
re-presented for businesses sold or
closed during the year.
The group is comprised of the following
operating segments:
Grocery
The manufacture of grocery products,
including hot beverages, sugar &
sweeteners, vegetable oils, balsamic
vinegars, bread & baked goods, cereals,
ethnic foods, and meat products,
which are sold to retail, wholesale
and foodservice businesses.
Sugar
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 and
services 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:
Grocery
Ingredients
Geographical information
United Kingdom
Europe & Africa
The Americas
Asia Pacific
Businesses disposed:
The Americas
Asia Pacific
Revenue
2020
£m
Adjusted
operating profit
2019
£m
2020
£m
2019
£m
3,528
1,594
1,395
1,503
5,895
–
13,915
13
9
13,937
5,054
5,048
1,619
2,194
13,915
–
22
13,937
3,498
1,608
1,385
1,505
7,792
–
15,788
23
13
15,824
5,971
5,992
1,609
2,216
15,788
3
33
15,824
437
100
43
147
362
(63)
1,026
(1)
(1)
1,024
312
298
254
162
1,026
–
(2)
1,024
381
26
42
136
913
(76)
1,422
(1)
–
1,421
476
589
237
120
1,422
–
(1)
1,421
Annual Report and Accounts 2020
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Associated British Foods plc
Associated British Foods plc
151
151
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
1. Operating segments continued
For the 52 weeks ended 12 September 2020
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
Acquired inventory fair value adjustments
Transaction costs
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
Current asset investments
Income tax
Deferred tax assets
Employee benefits assets
Segment liabilities
Loans and overdrafts
Income tax
Deferred tax liabilities
Employee benefits liabilities
Net assets
Grocery
£m
Sugar
£m
Agriculture
£m
Ingredients
£m
3,530
(2)
3,528
13
3,541
1,658
(64)
1,594
–
1,594
1,398
(3)
1,395
–
1,395
1,685
(182)
1,503
9
1,512
404
33
(1)
436
9
(52)
(15)
–
5
(4)
379
98
2
–
100
7
–
–
–
(23)
–
84
(1)
(3)
33
10
–
43
1
(1)
–
–
–
–
43
–
132
15
(1)
146
(1)
(6)
–
(2)
–
(4)
133
Retail
£m
5,895
–
5,895
–
5,895
362
–
–
362
3
–
–
–
(138)
–
227
–
(79)
378
81
2,689
51
2,740
1,893
27
1,920
43
429
136
565
133
148
1,470
75
1,545
7,372
–
7,372
(637)
(351)
(147)
(334)
(4,523)
2,103
1,569
418
1,211
2,849
Central
£m
(251)
251
–
–
–
(63)
–
–
(63)
(1)
–
–
–
–
(6)
(70)
11
(41)
3
(221)
(318)
155
–
155
1,998
32
30
212
100
(219)
(472)
(171)
(210)
(166)
1,289
Total
£m
13,915
–
13,915
22
13,937
966
60
(2)
1,024
18
(59)
(15)
(2)
(156)
(14)
796
11
(124)
3
(221)
465
14,008
289
14,297
1,998
32
30
212
100
(6,211)
(472)
(171)
(210)
(166)
9,439
Non-current asset additions
Depreciation (including depreciation of right-of-use assets
and non-cash lease adjustments)
Amortisation
Impairment of property, plant & equipment and right-of-use
assets
Impairment of property, plant and equipment on sale and
closure of businesses
Impairment of right-of-use assets on sale and closure
of businesses
104
(109)
(62)
(15)
(1)
–
88
(85)
(2)
–
–
–
21
(16)
(2)
–
–
–
97
476
13
799
(57)
(7)
(546)
(14)
(14)
(2)
–
(1)
(2)
–
–
–
–
–
–
(827)
(89)
(15)
(2)
(2)
152
0
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
1. Operating segments continued
For the 52 weeks ended 14 September 2019
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
Acquired inventory fair value adjustments
Transaction costs
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
Current asset investments
Income tax
Deferred tax assets
Employee benefits assets
Segment liabilities
Loans and overdrafts
Income tax
Deferred tax liabilities
Employee benefits liabilities
Net assets
Grocery
£m
Sugar
£m
Agriculture
£m
Ingredients
£m
3,502
(4)
3,498
23
3,521
1,667
(59)
1,608
–
1,608
1,388
(3)
1,385
–
1,385
1,680
(175)
1,505
13
1,518
Retail
£m
7,792
–
7,792
–
7,792
348
33
(1)
380
3
(40)
(15)
(1)
(65)
4
266
26
–
–
26
–
–
–
–
–
–
26
30
12
–
42
1
(2)
–
–
–
(3)
38
122
14
–
136
–
(5)
–
(1)
–
(95)
35
913
–
–
913
–
–
–
–
–
–
913
266
26
2,732
45
2,777
2,083
26
2,109
38
408
135
543
35
913
1,422
69
1,491
4,775
–
4,775
(540)
(388)
(137)
(278)
(1,476)
2,237
1,721
406
1,213
3,299
Non-current asset additions
Depreciation
Amortisation
Impairment of goodwill on sale and closure of businesses
Impairment of property, plant and equipment on sale and
closure of businesses
132
(96)
(53)
–
–
98
(79)
(2)
–
–
14
(12)
(3)
(3)
–
93
(51)
(7)
(56)
(32)
382
(303)
(2)
–
–
–
(32)
Financial statements
Central
£m
(241)
241
–
–
–
(76)
–
–
(76)
–
–
–
–
(14)
–
(90)
15
(42)
12
(277)
(382)
129
–
129
1,495
29
24
160
228
(184)
(588)
(163)
(261)
(195)
674
13
(3)
(1)
–
Total
£m
15,788
–
15,788
36
15,824
1,363
59
(1)
1,421
4
(47)
(15)
(2)
(79)
(94)
1,188
15
(42)
12
(277)
896
11,549
275
11,824
1,495
29
24
160
228
(3,003)
(588)
(163)
(261)
(195)
9,550
732
(544)
(68)
(59)
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
153
1
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
1. Operating segments – geographical information
2020
Revenue from external customers
Segment assets
Non-current asset additions
Depreciation (including depreciation of right-of-use assets and non-cash
lease adjustments)
Amortisation
Acquired inventory fair value adjustments
Impairment of property, plant and equipment and right-of-use assets
Impairment of property, plant and equipment on sale and closure
of businesses
Impairment of right-of-use assets on sale and closure of businesses
Transaction costs
Exceptional items
2019
Revenue from external customers
Segment assets
Non-current asset additions
Depreciation
Amortisation
Acquired inventory fair value adjustments
Impairment of goodwill on sale and closure of businesses
Impairment of property, plant and equipment on sale and closure
of businesses
Transaction costs
Exceptional items
United
Kingdom
£m
Europe
& Africa
£m
The
Americas
£m
5,054
5,249
197
5,048
6,263
406
1,619
1,314
128
Asia
Pacific
£m
2,216
1,471
68
Total
£m
13,937
14,297
799
(292)
(48)
–
(15)
–
–
–
(4)
(397)
(27)
(15)
–
–
–
(1)
(108)
(70)
(6)
–
–
–
–
–
(44)
United
Kingdom
£m
Europe
& Africa
£m
The
Americas
£m
5,971
4,406
255
(191)
(41)
–
(3)
–
–
(79)
5,992
4,842
345
(247)
(16)
(15)
–
–
(1)
–
1,612
1,194
57
(45)
(4)
–
–
–
(1)
–
(68)
(8)
–
–
(2)
(2)
(1)
–
Asia
Pacific
£m
2,249
1,382
75
(61)
(7)
–
(56)
(32)
–
–
(827)
(89)
(15)
(15)
(2)
(2)
(2)
(156)
Total
£m
15,824
11,824
732
(544)
(68)
(15)
(59)
(32)
(2)
(79)
The group’s operations in the following countries met the criteria for separate disclosure:
Australia
Spain
United States
Revenue
Non-current assets
2020
£m
1,161
1,097
1,055
2019
£m
1,177
1,430
1,051
2020
£m
558
849
727
2019
£m
521
417
560
All segment disclosures are stated before reclassification of assets and liabilities classified as held for sale (see note 15).
154
2
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
2. Operating costs
Operating costs
Cost of sales (including amortisation of intangibles)
Distribution costs
Administration expenses
Exceptional items
Operating costs are stated after charging/(crediting):
Employee benefits expense
Amortisation of non-operating intangibles
Amortisation of operating intangibles
Acquired inventory fair value adjustments
Profits less losses on disposal of non-current assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets and non-cash lease adjustments
Impairment of property, plant and equipment and right-of-use assets
Transaction costs
Effect of hyperinflationary economies
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
Financial statements
Note
2020
£m
2019
£m
10,800
1,293
953
156
13,202
12,187
1,356
981
79
14,603
3
8
8
9
10
2,505
56
33
15
(18)
538
289
15
2
5
–
–
(27)
31
(97)
69
(51)
59
2,758
45
23
15
(4)
544
–
–
2
6
310
20
(18)
30
(11)
12
(46)
47
Transaction costs of £2m and amortisation of non-operating intangibles of £59m (2019 – £2m and £47m) shown as adjusting
items in the income statement, include £nil and £3m respectively (2019 – £nil and £2m respectively) incurred by joint ventures,
in addition to the amounts shown above.
Exceptional items
2020
Exceptional items of £156m comprise impairments of £116m in property, plant and equipment and right-of-use assets at
Primark, an impairment of £23m in goodwill relating to Azucarera, charges of £22m relating to inventory in Primark and a £5m
gain on the closure of our Speedibake Wakefield factory.
Our half year results were announced on 21 April and included an exceptional inventory impairment charge of £248m and an
onerous contract provision of £36m. At the time of the interim announcement, the dates for the reopening of Primark stores
were not known and more than half of the impairment charge related to stock already on display in the closed stores. The earlier
reopening of the stores and subsequent successful trading of the spring/summer inventory avoided the need for this provision.
At the year end a mark-down provision of £22m was created for inventory stored on our behalf by suppliers for longer than usual
as a result of the pandemic.
We have seen the benefits from the successful downsizing of three stores in the US and three stores in Germany; we have
plans for several more stores in these markets and have recognised non-cash write-downs of £34m against property, plant and
equipment and £82m against right-of-use assets. Further information is given in the property, plant and equipment note on
page 161.
In the light of the beet volumes contracted by Azucarera in the second crop year after reducing the beet price paid to farmers,
we have revised our forecasts for this business. This resulted in a £23m non-cash write-down of goodwill recorded in the Sugar
and Europe & Africa operating segments. Further information is given in the intangibles note on pages 159 and 160.
Our Speedibake Wakefield factory was destroyed by fire in February and an exceptional charge of £25m was recognised in
the half year results. This comprised an £18m non-cash write-down of property, plant and equipment, a £1m provision against
inventory and £6m of closure costs. Net insurance proceeds of £30m were received in the second half, more than offsetting
the exceptional charge recorded in the first half. The full year position is an exceptional gain of £5m recorded in the Grocery
and United Kingdom operating segments.
2019
The prior year included £79m of exceptional items. Following the termination of our largest private-label bread contract in
December 2018, the carrying value of the assets of the Allied Bakeries business was no longer supported by our forecasts of
its discounted future cash flows and a non-cash impairment charge of £65m was recognised. As a result of a High Court ruling
regarding the equalisation of Guaranteed Minimum Pensions in October 2018, a pension service cost of £14m was taken for
members of the Company’s UK defined benefit pension scheme for service between 1990 and 1997.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
155
3
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
2. Operating costs continued
Auditor’s 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
All other services
Total non-audit related remuneration
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
2020
£m
2019
£m
1.5
6.6
8.1
0.4
0.3
0.7
1.3
6.5
7.8
0.4
0.4
0.8
2020
2019
46,066
69,571
5,627
12,161
133,425
48,011
71,922
5,640
12,524
138,097
Note
£m
£m
12
12
24
2,093
278
79
47
8
2,505
2,298
304
80
54
22
2,758
Primark’s major cost-reduction exercise during lockdown included accessing government job retention schemes across Europe.
In total, Primark received some £98m. This has been recorded as a reduction to staff costs.
Details of directors’ remuneration, share incentives and pension entitlements are shown in the Remuneration report on pages
110 to 121.
4. Interest and other financial income and expense
Finance income
Cash and cash equivalents
Finance expense
Bank loans and overdrafts
All other borrowings
Lease liabilities
Finance leases
Other payables
Other financial income/(expense)
Interest income on employee benefit scheme assets
Interest charge on employee benefit scheme liabilities
Interest charge on irrecoverable surplus
Net financial income from employee benefit schemes
Net foreign exchange gains/(losses) on financing activities
Total other financial income
Note
12
12
12
2020
£m
11
11
(29)
(10)
(84)
–
(1)
(124)
83
(80)
(1)
2
1
3
2019
£m
15
15
(24)
(16)
–
(1)
(1)
(42)
116
(102)
(1)
13
(1)
12
156
4
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
5. Income tax expense
Current tax expense
UK – corporation tax at 19% (2019 – 19%)
Overseas – corporation tax
UK – under/(over) provided in prior periods
Overseas – over provided in prior periods
Deferred tax expense
UK deferred tax
Overseas deferred tax
UK – under/(over) provided in prior periods
Overseas – under/(over) provided 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 19% (2019 – 19%)
Effect of higher and lower tax rates on overseas earnings
Effect of changes in tax rates on income statement
Expenses not deductible for tax purposes
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
Current 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
Deferred tax associated with hyperinflationary economies
Financial statements
2020
£m
2019
£m
57
203
3
(4)
259
5
(53)
3
7
(38)
221
686
(57)
629
120
18
13
54
1
6
9
221
(15)
−
(1)
−
(1)
−
(17)
80
229
(5)
(1)
303
(7)
(11)
(5)
(3)
(26)
277
1,173
(57)
1,116
212
14
(1)
37
17
12
(14)
277
(68)
(2)
–
(7)
–
2
(75)
A UK corporation tax rate of 19% (effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. The legislation to effect these changes was enacted before the balance sheet
date and UK deferred tax has accordingly been calculated at 19%. The effect of this change was a £6m tax charge in the income
statement principally on the amortisation of non-operating intangibles and exceptional items and £3m tax charge recorded in
other comprehensive income.
In April 2019 the European Commission published its decision on the Group Financing Exemption in the UK’s controlled foreign
company legislation. The Commission found that the UK law did not comply with EU State Aid rules in certain circumstances.
The group has arrangements that may be impacted by this decision as might other UK-based multinational groups that had
financing arrangements in line with the UK’s legislation in force at the time. The group has appealed against the European
Commission’s decision, as have the UK Government and a number of other UK companies. We have calculated our maximum
potential liability to be £27m, however we do not consider that any provision is required in respect of this amount based on our
current assessment of the issue. We will continue to consider the impact of the Commission’s decision on the group and the
potential requirement to record a provision.
Deferred taxation balances are analysed in note 13.
6. Dividends
2018 final
2019 interim
2019 final
2020
pence
per share
2019
pence
per share
–
–
34.30
34.30
33.30
12.05
–
45.35
2020
£m
–
–
271
271
2019
£m
263
95
–
358
No 2020 interim dividend was paid this year and no final dividend is proposed.
There is no dividend relating to the period (2019 – 46.35p per share totalling £366m).
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
157
5
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
7. Earnings per share
The calculation of basic earnings per share at 12 September 2020 was based on the net profit attributable to equity shareholders
of £455m (2019 – £878m), and a weighted average number of shares outstanding during the year of 790 million (2019 – 790
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
the sale and closure of businesses, amortisation of acquired inventory fair value adjustments, transaction costs, amortisation
of non-operating intangibles, exceptional items and any associated tax credits, is shown to provide clarity on the underlying
performance of the group.
Transaction costs of £2m and amortisation of non-operating intangibles of £59m (2019 – £2m and £47m) shown as adjusting
items below include £nil and £3m respectively (2019 – £nil and £2m respectively) incurred by joint ventures.
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 (2019 – 790 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
Acquired inventory fair value adjustments
Transaction costs
Exceptional items
Tax effect on above adjustments
Amortisation of non-operating intangibles
Tax credit on non-operating intangibles amortisation and goodwill
Profit for the period attributable to equity shareholders
Adjusted earnings per share
Disposal of non-current assets
Sale and closure of businesses
Acquired inventory fair value adjustments
Transaction costs
Exceptional items
Tax effect on above adjustments
Amortisation of non-operating intangibles
Tax credit on non-operating intangibles amortisation and goodwill
Earnings per ordinary share
2020
£m
641
18
(14)
(15)
(2)
(156)
36
(59)
6
455
2020
pence
81.1
2.3
(1.8)
(1.9)
(0.3)
(19.7)
4.6
(7.5)
0.8
57.6
2019
£m
1,086
4
(94)
(15)
(2)
(79)
15
(47)
10
878
2019
pence
137.5
0.5
(11.9)
(1.9)
(0.3)
(10.0)
1.9
(6.0)
1.3
111.1
158
6
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
8. Intangible assets
Non-operating
Operating
Goodwill
£m
Technology
£m
Brands
£m
Customer
relationships
£m
Grower
agreements
£m
Other
£m
Other
£m
Total
£m
Cost
At 15 September 2018
Acquisitions – externally purchased
Acquired through business combinations
Disposal of businesses
Other disposals
Transfer to assets classified as held for sale
Effect of hyperinflationary economies
Effect of movements in foreign exchange
At 14 September 2019
Acquisitions – externally purchased
Acquired through business combinations
Other disposals
Effect of hyperinflationary economies
Effect of movements in foreign exchange
At 12 September 2020
Amortisation and impairment
At 15 September 2018
Amortisation for the year
Impairment on sale and closure of business
Other disposals
Effect of movements in foreign exchange
At 14 September 2019
Amortisation for the year
Impairment
Other disposals
Effect of movements in foreign exchange
At 12 September 2020
Net book value
At 15 September 2018
At 14 September 2019
At 12 September 2020
1,239
–
30
(8)
–
–
11
21
1,293
–
6
–
4
(22)
1,281
29
–
59
–
2
90
–
23
–
2
115
1,210
1,203
1,166
204
–
–
–
–
–
–
3
207
–
7
–
–
(4)
210
204
–
–
–
3
207
–
–
–
(3)
204
–
–
6
393
–
39
–
–
–
–
5
437
–
7
–
–
(3)
441
316
21
–
–
4
341
24
–
–
(2)
363
77
96
78
260
–
17
–
–
–
–
3
280
–
1
–
–
–
281
126
24
–
–
3
153
32
–
–
(3)
182
134
127
99
114
–
–
–
–
–
–
8
122
–
–
–
–
(19)
103
114
–
–
–
8
122
–
–
–
(19)
103
–
–
–
6
–
–
–
–
–
–
–
6
–
–
–
–
(1)
5
6
–
–
–
–
6
–
–
–
(1)
5
–
–
–
429
75
–
–
(14)
(2)
–
4
492
74
–
(29)
–
10
547
218
23
–
(6)
2
237
33
–
(6)
3
267
211
255
280
2,645
75
86
(8)
(14)
(2)
11
44
2,837
74
21
(29)
4
(39)
2,868
1,013
68
59
(6)
22
1,156
89
23
(6)
(23)
1,239
1,632
1,681
1,629
Amortisation of non-operating intangibles of £59m (2019 – £47m) shown as an adjusting item in the income statement includes
£3m (2019 – £2m) incurred by joint ventures in addition to the amounts shown above.
In addition to the amounts disclosed above, there are £2m (2019 – £2m) net book value of intangible assets classified as assets
held for sale (see note 15).
Impairment
As at 12 September 2020, the consolidated balance sheet included goodwill of £1,166m (2019 – £1,203m). 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
Acetum
ACH
AB Mauri
Twinings Ovaltine
Azucarera
Illovo
AB World Foods
Other (not individually significant)
Primary reporting segment Discount rate
Grocery
Grocery
Ingredients
Grocery
Sugar
Sugar
Grocery
Various
12.5%
11.5%
13.9%
9.7%
12.1%
20.0%
11.6%
Various
2020
£m
98
187
285
119
–
98
78
301
1,166
2019
£m
94
186
281
119
24
117
78
304
1,203
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
159
159
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
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 in the most recent annual budget on which the cash flow projections 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 the group’s pre-tax weighted average cost of capital adjusted for country,
industry and market risk. The rates used were between 9.7% and 20.0% (2019 – between 9.2% and 22.2%).
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 6.5%, consistent with the inflation factors included in the discount rates applied (2019 – between 0% and 6%).
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 headroom
under the annual impairment review.
Azucarera’s operating performance improved significantly during the year and the business delivered a breakeven operating
profit. This was achieved by a combination of higher sales prices, lower beet costs and a significant reduction in operating costs.
In light of the beet volumes contracted by Azucarera in the second crop year after reducing the beet price, management has
revised its forecasts for the business and has again undertaken an impairment review. Detailed forecasts for a period of five
years were prepared, to reflect the time required for implementation of the business plan, and management concluded that an
impairment of the goodwill of €26m was required. CGU carrying value after impairment was €293m (2019 – headroom of €14m
on a CGU carrying value of €307m). Estimates of long-term growth rates beyond the forecast periods were 2% (2019 – 2%).
The CGU carrying value is sensitive to assumptions around sugar prices, recovery of beet crop area and discount rate. Applying
sensitivities to these assumptions, a sensitivity of plus or minus 1% applied to sugar prices impacts value-in-use by plus or
minus €13m (2019 – €9m); a change of 5% on long-term beet crop area impacts value-in-use by €15m (2019 – €25m); and
increasing the discount rate used of 12.1% (2019 – 11.7%) to 12.3% causes value-in-use to reduce by €7m.
Trading in AB Mauri was very strong during the year and margins were strongly ahead. As a result of COVID-19 restrictions
AB Mauri experienced a rapid and substantial increase in retail demand for yeast and bakery ingredients. Sales were also strong
to industrial bakery customers but demand from foodservice and craft bakers was lower. Nevertheless, AB Mauri continues
to experience competitive pricing pressure in a number of markets around the world as well as challenging macroeconomic
conditions in some markets, including high inflation rates and currency devaluations. Accordingly, management has again
undertaken an impairment review. Detailed forecasts for a period of five years to reflect the time required for completion of
the business plan were prepared and management concluded that the assets were not impaired. Key drivers of the forecast
improvement in performance include achievement of price increases in high inflation environments, improved reach and
competitiveness in the global dry yeast market, implementation of a number of margin improvement initiatives, particularly in
cost reduction, and continuing growth in the global bakery ingredients business. Headroom was $202m on a CGU carrying value
of $831m (2019 – headroom of $361m on a CGU carrying value of $815m). The geographic diversity and varying local economic
environments of AB Mauri’s operations mean that the critical assumptions underlying the detailed forecasts used in the
impairment model are wide-ranging. It is therefore impractical to provide meaningful sensitivities to these assumptions other
than the discount rate. The discount rate used was 13.9% (2019 – 12.9%) and would have to increase to more than 16.2%
(2019 – 16.8%) before value in use fell below the CGU carrying value. Estimates of long-term growth rates beyond the forecast
periods were 2–3% (2019 – 2–3%) per annum dependent on location.
160
160
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
9. Property, plant and equipment
Cost
At 15 September 2018
Acquisitions – externally purchased
Acquired through business combinations
Businesses disposed
Other disposals
Transfers from assets under construction
Transfer to assets classified as held for sale
Effect of hyperinflationary economies
Effect of movements in foreign exchange
At 14 September 2019
IFRS 16 opening balance adjustment
Acquisitions – externally purchased
Other disposals
Transfers from assets under construction
Effect of movements in foreign exchange
At 12 September 2020
Depreciation and impairment
At 15 September 2018
Depreciation for the year
Impairment
Impairment on sale and closure of business
Businesses disposed
Other disposals
Transfer to assets classified as held for sale
Effect of movements in foreign exchange
At 14 September 2019
IFRS 16 opening balance adjustment
Depreciation for the year
Impairment
Impairment on sale and closure of business
Other disposals
Effect of movements in foreign exchange
At 12 September 2020
Net book value
At 15 September 2018
At 14 September 2019
At 12 September 2020
Financial statements
Land and
buildings
£m
Plant and
machinery
£m
Fixtures and
fittings
£m
Assets under
construction
£m
Sugar cane
roots
£m
2,665
58
7
(2)
(9)
52
(17)
–
5
2,759
(28)
22
(20)
12
(2)
2,743
637
46
3
11
(1)
(7)
(4)
5
690
(10)
50
5
–
(15)
1
721
2,028
2,069
2,022
3,842
47
13
(20)
(66)
148
(37)
7
33
3,967
(1)
90
(76)
127
(72)
4,035
2,395
194
59
19
(17)
(60)
(22)
17
2,585
(1)
186
26
2
(73)
(43)
2,682
1,447
1,382
1,353
3,421
326
–
–
(6)
27
(1)
–
10
3,777
(6)
147
(7)
34
69
4,014
1,466
296
3
2
–
(6)
–
7
1,768
(4)
292
34
–
(4)
62
2,148
1,955
2,009
1,866
276
212
–
–
–
(227)
–
–
1
262
–
278
–
(173)
2
369
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
276
262
369
73
14
–
–
–
–
–
–
–
87
–
10
–
–
(13)
84
32
8
–
–
–
–
–
–
40
–
10
–
–
–
(7)
43
41
47
41
Total
£m
10,277
657
20
(22)
(81)
–
(55)
7
49
10,852
(35)
547
(103)
–
(16)
11,245
4,530
544
65
32
(18)
(73)
(26)
29
5,083
(15)
538
65
2
(92)
13
5,594
5,747
5,769
5,651
In addition to the amounts disclosed above, there are £30m (2019 – £29m) of property, plant and equipment classified as assets
held for sale (see note 15). Of this, £13m (2019 – £13m) is freehold land and buildings.
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
2020
£m
–
1,661
102
259
2,022
334
2019
£m
12
1,673
111
285
2,069
469
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
161
161
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
9. Property, plant and equipment continued
Impairment
The methodology used to assess property, plant and equipment for impairment is the same as that described for impairment
assessments of goodwill. See note 8 for further details.
In December 2018, Allied Bakeries received notice of the termination of its largest private label manufacturing contract. This was
expected to result in a significant reduction in bread volumes from late 2019, with limited opportunity to mitigate this volume
loss in the short term. Accordingly, a detailed impairment assessment was performed in the first half of 2019, which resulted in
an exceptional impairment charge of £65m, allocated to the property, plant and equipment of the business. There is no goodwill
associated with Allied Bakeries.
Following our announcement in July 2020 of the loss of the Co-op contract we reviewed the carrying values of our distribution
assets, which resulted in a non-cash asset write-off of certain assets of £15m recorded in adjusted operating profit with £13m
allocated to plant and equipment and £2m to right-of-use-assets.
Of the methodologies available to assess impairment, the group applied the ‘fair value less costs of disposal’ approach in the
current and prior year to identify its best estimate of the impairment. This method uses inputs that are unobservable, using the
best information available in the circumstances for valuing the CGU, and therefore falls into the level 3 category of fair value
measurement.
The key assumptions used were bread volumes, bread prices and long-term growth in the market, discount rates, as well as
logistical and other savings from restructuring. The discount rate used was 10.5%. Management concluded that no impairment
was required.
Headroom was £15m on a CGU carrying value of £105m (2019 – headroom of £9m on a CGU carrying value of £160m).
Estimates of long-term growth rate beyond the forecast periods were 0.4% per annum. A sensitivity of plus or minus 1% on
bread prices impacts headroom by plus or minus £18m (2019 – £12m). A sensitivity of plus or minus 1% on bread volumes
impacts headroom by plus or minus £7m (2019 – £8m).
Our Speedibake Wakefield factory was destroyed by fire in February and part of the exceptional item recognised was an £18m
impairment of the related property, plant and equipment.
For AB Sugar China, a return to normal yields after a very poor crop in 2019 and higher sugar sales prices resulted in a much-
improved operating result, although still a marginal loss, resulting in the continuing need for an impairment assessment. There
is no goodwill associated with AB Sugar China. Detailed forecasts for a period of five years were prepared, to reflect the time
required for implementation of the business plan, and management concluded that the assets were not impaired.
Headroom was £16m on a CGU carrying value of £74m (2019 – headroom of £14m on £81m). Estimates of long-term growth
rates beyond the forecast periods were 2% (2019 – 2%). The discount rate used was 10.0% (2019 – 11.9%) and would have to
increase to 11.7% (2019 – 13.3%) before the value in use fell below the carrying value. Key assumptions include the Chinese
domestic sugar sales price, beet purchase price and beet volume, with a recovery in beet quality with grower payments being
increasingly linked to the sugar content of beet. A sensitivity of plus or minus 2% in the sugar sales price impacts headroom by
plus or minus £16m (2019 – £14m). A sensitivity of plus or minus 5% on beet price impacts headroom by plus or minus £22m
(2019 – £22m). A change of 1% on long-term beet crop area increases or decreases headroom by £2m (2019 – £10m).
An impairment of A$150m (£98m) was recorded in 2012 in the Australian meat business. Following a detailed assessment,
management has concluded that the carrying value of the assets in the meat business is not further impaired. Headroom was
A$61m on a CGU carrying value of A$346m (2019 – headroom of A$120m on a CGU carrying value of A$304m). The discount
rate used was 10.7% (2019 – 10.4%). Estimates of long-term growth rates beyond the forecast periods were 2.0% (2019 –
2.0%) per annum. A sensitivity of plus or minus 1% on the discount rate decreases/increases headroom by A$38m and A$47m
respectively (2019 – A$63m and A$63m respectively).
In Primark, we have seen the benefits from the successful downsizing of three stores in the US and three stores in Germany;
we have plans for several more stores in these markets and have considered impairment risk accordingly. Detailed forecasts
for a period of five years were prepared on a store-by-store basis. The impairment models assume an improvement in sales
densities in year 2 with further growth in years 3-5. Estimates of long-term growth rates beyond the forecast periods were 2.0%
per annum. Key assumptions were revenue growth, sales density projections, assumptions on operating costs and discount
rates. Management no longer expects to realise the sales densities required to generate sufficient levels of operating cash flows
to support the carrying value of certain store assets.
The discount rates used were 7.1% for the US and between 6.7% and 8.3% for Germany. An aggregate exceptional impairment
charge of £116m was recorded in the income statement, with £34m allocated to plant and equipment and £82m
to right-of-use-assets. The remaining carrying value of these stores after impairment was £62m.
A sensitivity of plus or minus 5% on operating cash flows impacts value-in-use by plus or minus £3m. A sensitivity of plus or
minus 1% on the discount rate decreases/increases value-in-use by £7m and £10m respectively.
162
162
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
10. Leases
The group adopted IFRS 16 Leases on 15 September 2019. Refer to the Significant accounting policies.
Most of the group’s right-of-use assets are associated with our leased property portfolio in the Retail segment.
Right-of-use assets
Cost
IFRS 16 opening balance adjustment at 15 September 2019
Additions
Lease incentives
Other movements
Effect of movements in foreign exchange
At 12 September 2020
Depreciation and impairment
Depreciation for the year
Impairment
Effect of movements in foreign exchange
At 12 September 2020
Net book value
IFRS 16 opening balance adjustment at 15 September 2019
At 12 September 2020
Land and
buildings
£m
Plant and
machinery
£m
Fixtures and
fittings
£m
3,170
165
(35)
(18)
63
3,345
291
85
9
385
3,170
2,960
33
13
–
1
–
47
16
1
–
17
33
30
1
–
–
–
–
1
1
–
–
1
1
–
Total
£m
3,204
178
(35)
(17)
63
3,393
308
86
9
403
3,204
2,990
Impairment
The methodology used to assess right-of-use assets for impairment is the same as that described for impairment assessments
of goodwill. See note 8 for further details.
In the year there was an £86m impairment charge, of which £82m related to Primark (included within exceptional items),
£2m related to Allied Bakeries (included within operating profit) and £2m related to Jasol New Zealand (included within loss
on closure of business). See note 9 for further details.
Lease liabilities
Cost
IFRS 16 opening balance adjustment at 15 September 2019
Additions
Interest expense
Repayments
Other movements
Effect of movements in foreign exchange
At 12 September 2020
Current
Non-current
Land and
buildings
£m
Plant and
machinery
£m
Fixtures and
fittings
£m
3,641
165
83
(299)
(36)
66
3,620
36
13
1
(15)
–
–
35
1
–
–
(1)
–
–
–
Total
£m
3,678
178
84
(315)
(36)
66
3,655
313
3,342
3,655
Lease liabilities comprise £3,639m capital payable and £16m interest payable; the interest payable is all current and disclosed
within trade and other payables on the face of the balance sheet. Repayments comprise £247m capital and £68m interest.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
163
163
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
10. Leases continued
10. Leases continued
Other information
The group had the following expense relating to short-term and low value leases:
Land and buildings
Plant and machinery
Fixtures and fittings
Total expense
2020
£m
2
2
1
5
£1m of variable lease payments, which are not part of lease liabilities, were expensed in the year. £1m of variable lease
payments are expected to be made in the next 12 months.
Rental receipts of £7m (2019 – £8m) were recognised in the income statement in the period relating to operating leases. The
total of future minimum rental receipts expected to be received is £38m (2019 – £50m). £9m of this is due to be received in
respect of sub-leasing right-of-use assets.
11. Investments in joint ventures and associates
At 15 September 2018
Profit for the period
Dividends received
Effect of movements in foreign exchange
At 14 September 2019
Acquisitions
Profit for the period
Dividends received
Effect of movements in foreign exchange
At 12 September 2020
Joint ventures
£m
219
49
(45)
2
225
–
46
(38)
–
233
Associates
£m
47
8
(7)
2
50
1
11
(5)
(1)
56
Details of joint ventures and associates are listed in note 29.
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:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Goodwill
Net assets
Revenue
Profit for the period
Joint ventures
Associates
2020
£m
145
372
(258)
(45)
19
233
2019
£m
149
383
(259)
(67)
19
225
1,445
1,507
46
49
2020
£m
33
224
(199)
(3)
1
56
792
11
2019
£m
22
188
(157)
(4)
1
50
589
8
164
164
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
12. Employee entitlements
The group operates a number of defined benefit and defined contribution retirement benefit schemes in the UK and overseas.
The defined benefit schemes expose the group to a variety of actuarial risks including demographic assumptions such as
mortality and financial assumptions such as discount rate, inflation risk and market (investment) risk. The group is not exposed
to any unusual, entity-specific or scheme-specific risks. All schemes comply with local legislative requirements.
UK defined benefit scheme
The group’s principal UK defined benefit scheme is the Associated British Foods Pension Scheme (the ‘Scheme’), which is
a funded final salary scheme that is closed to new members. Defined contribution arrangements are in place for other employees.
The UK defined benefit schemes represent 91% (2019 – 91%) of the group’s defined benefit scheme assets and 88%
(2019 – 87%) of defined benefit scheme liabilities. The Scheme is governed by a trustee board which is independent of the
group and which agrees a schedule of contributions with the Company each time a formal funding valuation is performed.
The most recent triennial funding valuation of the Scheme was carried out as at 5 April 2017, using the current unit method,
and revealed a surplus of £176m. The market value of the Scheme assets was £3,789m, representing 105% of members’
accrued benefits after allowing for expected future salary increases. The latest triennial valuation at 5 April 2020 has not yet
been finalised.
The Scheme’s assets are managed using a risk-controlled investment strategy, which includes a liability-driven investment
policy that seeks to match, where appropriate, the profile of the liabilities. This includes the use of derivative instruments to
hedge inflation, interest and foreign exchange risks. The Scheme utilises both market and solvency triggers to develop the
level of hedges in place. To date, the Scheme is fully hedged for 73% of inflation sensitivity and 25% of interest rate risk.
It is intended to hedge 80% of total exposure.
The Scheme is forbidden by the trust deed from holding direct investments in the equity of the Company, although it is possible
that the Scheme may hold indirect interests through investments in some equity funds.
The Guaranteed Minimum Pension (GMP) is the minimum pension which a UK occupational pension scheme must provide for
those employees who were contracted out of the State Earnings-Related Pension Scheme between 6 April 1978 and 5 April
1997. On 26 October 2018, the High Court of Justice of England and Wales ruled that GMPs must be equalised in respect of
retirement ages for men and women for all pensionable service after 17 May 1990. This impacted the group’s UK defined
benefit scheme and the ruling set out a number of methodologies that could be used to calculate the impact. The group adopted
method C2 to identify its best estimate of the additional liabilities. These were charged as a past service cost in the income
statement in the prior year, with subsequent changes accounted for in other comprehensive income. The past service cost was
treated as an exceptional item since the liabilities relate to employee service between 1990 and 1997 and they have no link to
current business performance. The increase in liabilities was estimated at £14m, assessed using market conditions at the date
of the ruling as required by IAS 19.
Overseas defined benefit schemes
The group also operates defined benefit retirement schemes in a number of overseas businesses, which are primarily funded
final salary schemes, as well as a small number of unfunded post-retirement medical benefit schemes, which are accounted
for in the same way as defined benefit retirement schemes.
Defined contribution schemes
The group operates a number of defined contribution schemes for which the charge was £40m in the UK and £39m overseas,
totalling £79m (2019 – UK £39m, overseas £41m, totalling £80m).
Actuarial assumptions
The principal actuarial assumptions for the group’s defined benefit schemes at the year end were:
Discount rate
Inflation
Rate of increase in salaries
Rate of increase for pensions in payment
Rate of increase for pensions in deferment (where provided)
2020
UK
%
1.6
2.2-3.3
3.2-4.3
2.0-3.1
2.2-2.3
2020
Overseas
%
0-14.8
0-12.0
0-12.0
0-12.0
0-2.0
2019
UK
%
2.0
2.3-3.3
3.3-4.3
2.1-3.1
2.3
2019
Overseas
%
0.1-13.7
0-15.0
0-20.0
0-28.0
0-2.0
The UK inflation assumption includes assumptions on both the Retail Price Index and Consumer Price Index measures of
inflation on the basis that the gap between the two measures is expected to remain stable in the long term.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
165
165
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
12. Employee entitlements continued
The mortality assumptions used to value the UK defined benefit schemes in both years are derived from the S2 mortality tables
with a 106% weighting for males and a 96% weighting for females, and future improvements in line with the CMI-2018
projections model for the 2020 year end (compared to the CMI-2017 projections model for the 2019 year end) prepared
by the Continuous Mortality Investigation of the UK actuarial profession, both with a long-term trend of 1.5% (2019 – 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 in the UK defined benefit schemes are as follows:
Life expectancy from age 65 (in years)
Member aged 65 in 2020 (2019)
Member aged 65 in 2040 (2039)
2020
Male
21.6
23.3
Female
24.3
26.1
2019
Male
21.8
23.5
Female
24.5
26.3
An allowance has been made for cash commutation in line with emerging scheme experience. Other demographic assumptions
for the UK defined benefit schemes are 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 funding valuation of the schemes.
For the overseas schemes, regionally appropriate assumptions for mortality, financial and demographic factors have been used.
A sensitivity analysis on the principal assumptions used to measure UK defined benefit scheme liabilities at 12 September 2020 is:
Discount rate
Inflation
Rate of real increase in salaries
Rate of mortality
Change in assumption
Impact on scheme liabilities
decrease/increase by 0.25%
increase/decrease by 0.25%
increase/decrease by 0.25%
reduce/increase by one year
increase by 4.5%/decrease by 4.2%
increase by 3.3%/decrease by 3.2%
increase/decrease by 0.7%
increase/decrease by 4.2%
A sensitivity to the rate of increase in pensions in payment and pensions in deferment is represented by the inflation sensitivity,
as all pensions increases and deferred revaluations are linked to inflation.
The sensitivity analysis above has been determined based on reasonably possible changes in the respective assumptions
occurring at the end of the period and may not be representative of the actual change. It is based on a change in the specific
assumption while holding all other assumptions constant. When calculating the sensitivities, the same method used to calculate
scheme liabilities recognised in the balance sheet has been applied. The method and assumptions used in preparing the
sensitivity analysis have not changed since the prior year.
Balance sheet
Equities
Government bonds
Corporate and other bonds
Property
Cash and other assets
Scheme assets
Scheme liabilities
Aggregate net surplus/(deficit)
Irrecoverable surplus*
Net pension asset/(liability)
Analysed as
Schemes in surplus
Schemes in deficit
2020
UK
£m
Overseas
£m
1,115
755
715
345
831
3,761
(3,705)
56
–
56
94
(38)
56
189
52
62
26
63
392
(501)
(109)
(13)
(122)
6
(128)
(122)
2019
UK
£m
Overseas
£m
Total
£m
1,304
807
777
371
894
4,153
(4,206)
(53)
(13)
(66)
1,346
693
433
350
1,000
3,822
(3,640)
182
–
182
100
(166)
(66)
220
(38)
182
Total
£m
1,526
744
500
373
1,063
4,206
(4,164)
42
(9)
33
228
(195)
33
180
51
67
23
63
384
(524)
(140)
(9)
(149)
8
(157)
(149)
Unfunded liability included in the present
value of scheme liabilities above
(38)
(64)
(102)
(38)
(67)
(105)
* 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.
The UK pension plan scheme assets include £235m (2019 – £270m) of derivative instruments, £440m (2019 – £393m) of
corporate debt instruments and £710m (2019 – £759m) of government debt.
Corporate and other bonds relating to UK schemes of £715m (2019 – £433m) include £187m (2019 – £nil) of assets whose
valuation is not derived from quoted market prices. The valuation for all other equity assets, government bonds, corporate
and other bonds is derived from quoted market prices. The carrying value of UK property assets is based on a 30 June market
valuation, adjusted for purchases, disposals and price indexation between the valuation and the balance sheet dates. Cash and
other assets contains £570m (2019 – £514m) of assets whose valuation is not derived from quoted market prices.
166
166
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
12. Employee entitlements continued
For financial reporting in the group’s financial statements, liabilities are assessed by actuaries using the projected unit method.
The accounting value is different from the result obtained using the funding basis, mainly due to different assumptions used
to project scheme liabilities.
The defined benefit scheme liabilities comprise 25% (2019 – 30%) in respect of active participants, 24% (2019 – 21%) for
deferred participants and 51% (2019 – 49%) for pensioners.
The weighted average duration of the defined benefit scheme liabilities at the end of the year is 18 years for both UK and
overseas schemes (2019 – 18 years for both UK and overseas schemes).
Income statement
The charge to the income statement for employee benefit schemes comprises:
Charged to operating profit:
Defined benefit schemes
Current service cost
Past service cost
Defined contribution schemes
Total operating cost
Reported in other financial income/(expense):
Net interest income on the net pension asset
Interest charge on irrecoverable surplus
Net impact on profit before tax
2020
£m
2019
£m
(47)
–
(79)
(126)
3
(1)
(124)
(41)
(13)
(80)
(134)
14
(1)
(121)
Cash flow
Group cash flow in respect of employee benefits schemes comprises contributions paid to funded schemes of £34m
(2019 – £36m) and benefits paid in respect of unfunded schemes of £3m (2019 – £14m). Contributions to funded defined benefit
schemes are subject to periodic review. Contributions to defined contribution schemes amounted to £79m (2019 – £80m).
Total contributions to funded schemes and benefit payments by the group in respect of unfunded schemes in 2021 are
currently expected to be approximately £31m in the UK and £11m overseas, totalling £42m (2019 – UK £30m, overseas £10m,
totalling £40m).
Other comprehensive income
Remeasurements of the net asset recognised in other comprehensive income are as follows:
Return on scheme assets excluding amounts included in net interest in the income statement
Actuarial losses arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Experience gains on scheme liabilities
Change in unrecognised surplus
Remeasurements of the net pension asset
Reconciliation of change in assets and liabilities
At beginning of year
Current service cost
Employee contributions
Employer contributions
Benefit payments
Past service cost
Interest income/(expense)
Return on scheme assets less interest income
Actuarial losses arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Experience gains on scheme liabilities
Businesses acquired
Effect of movements in foreign exchange
At end of year
2020
assets
£m
4,206
–
7
34
(165)
–
83
(13)
–
–
–
–
1
4,153
2019
assets
£m
2020
liabilities
£m
2019
liabilities
£m
4,082
–
9
50
(179)
–
116
119
–
–
–
–
9
4,206
(4,164)
(47)
(7)
–
168
–
(80)
–
(144)
44
29
–
(5)
(4,206)
(3,630)
(41)
(9)
–
179
(13)
(102)
–
(585)
28
20
(1)
(10)
(4,164)
2020
£m
(13)
(144)
44
29
(5)
(89)
2020
net
£m
42
(47)
–
34
3
–
3
(13)
(144)
44
29
–
(4)
(53)
2019
£m
119
(585)
28
20
11
(407)
2019
net
£m
452
(41)
–
50
–
(13)
14
119
(585)
28
20
(1)
(1)
42
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
167
167
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
12. Employee entitlements continued
Reconciliation of change in irrecoverable surplus
At beginning of year
Change recognised in other comprehensive income
Interest charge on irrecoverable surplus
Effect of movements in foreign exchange
At end of year
13. Deferred tax assets and liabilities
2020
£m
2019
£m
(9)
(5)
(1)
2
(13)
(17)
11
(1)
(2)
(9)
At 15 September 2018
Amount credited to the income statement
Amount credited to equity
Acquired through business combinations
Effect of changes in tax rates on income
statement
Effect of hyperinflationary economies taken
to operating profit
Effect of hyperinflationary economies taken to
other comprehensive income
Effect of movements in foreign exchange
At 14 September 2019
IFRS 16 opening balance adjustment
Amount credited to the income statement
Amount credited to equity
Acquired through business combinations
Effect of changes in tax rates on income
statement
Effect of changes in tax rates on equity
Effect of hyperinflationary economies taken
to operating profit
Effect of movements in foreign exchange
At 12 September 2020
Property,
plant and
equipment
£m
Intangible
assets
£m
Leases
(IFRS 16)
£m
Employee
benefits
£m
Financial
assets and
liabilities
£m
Provisions
and other
temporary
differences
£m
Tax value of
carry-
forward
losses
£m
151
(16)
–
–
1
1
2
3
142
–
(5)
–
–
13
–
2
(11)
141
89
(3)
–
7
–
–
–
2
95
–
(9)
–
2
3
–
–
(1)
90
–
–
–
–
–
–
–
–
–
(62)
(28)
–
–
(1)
–
–
(2)
(93)
70
(1)
(68)
–
–
–
–
(1)
–
–
–
(19)
–
(1)
4
–
–
(16)
5
–
(7)
–
–
–
–
–
(2)
–
–
–
–
–
–
–
–
(2)
(92)
(4)
–
–
(2)
–
–
(2)
(100)
21
(8)
(2)
–
(1)
–
–
–
(90)
(32)
(2)
–
–
–
–
–
–
(34)
–
(1)
–
1
–
–
–
2
(32)
Total
£m
191
(26)
(75)
7
(1)
1
2
2
101
(41)
(51)
(21)
3
13
4
2
(12)
(2)
Provisions and other temporary differences include provisions of £(91)m, biological assets of £27m, tax credits of £(21)m and
other temporary differences of £(5)m.
Certain deferred tax assets and liabilities have been offset in the table above. The following is the analysis of the deferred tax
balances (after offset) for financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
2020
£m
(212)
210
(2)
2019
£m
(160)
261
101
Deferred tax assets have not been recognised in respect of tax losses of £238m (2019 – £281m) and other temporary differences
of £119m (2019 – £101m). Of the total tax losses, £162m (2019 – £205m) will expire at various dates between 2020 and 2025.
These deferred tax assets have not been recognised on the basis that their future economic benefit is not probable.
In addition, the group’s overseas subsidiaries have net unremitted earnings of £2,497m (2019 – £3,136m), resulting in temporary
differences of £1,010m (2019 – £1,127m). 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 foreseeable future.
168
168
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
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
Financial statements
2020
£m
39
6
45
1,022
159
15
1,196
132
1,328
2019
£m
44
7
51
1,080
150
14
1,244
192
1,436
In addition to the amounts disclosed above, there are £4m (2019 – £6m) of trade and other receivables classified as assets held
for sale (see note 15).
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 26.
Trade and other receivables include £40m (2019 – £44m) in respect of finance lease receivables, with £35m in non-current
loans and receivables and £5m in current other receivables (2019 – £39m in non-current loans and receivables and £5m in
current other receivables). Minimum lease payments receivable are £5m within one year, £18m between one and five years
and £17m in more than five years (2019 – £5m within one year, £18m between one and five years and £21m in more than
five years).
The finance lease receivables relate to property, plant and equipment leased to a joint venture of the group (see note 28).
15. Assets and liabilities classified as held for sale
In the prior year we signed an agreement to form a yeast and bakery ingredients joint venture in China with Wilmar International,
with completion subject to regulatory approval. The joint venture will see us build a major new low-cost yeast plant in the
north east of China and will combine AB Mauri’s existing commercial activities and technical expertise in China with Wilmar’s
extensive sales and distribution capability. Completion is expected early in the new financial year. As a consequence, the
businesses were classified as a disposal group at year end and in the prior year. It does not qualify as a discontinued operation.
Assets classified as held for sale
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities classified as held for sale
Trade and other payables
16. Inventories
Raw materials and consumables
Work in progress
Finished goods and goods held for resale
Write-down of inventories
2020
£m
2019
£m
2
30
5
4
2
43
5
5
2
29
6
6
−
43
6
6
2020
£m
429
53
1,668
2,150
(96)
2019
£m
387
69
1,930
2,386
(115)
In addition to the amounts disclosed above, there are £5m (2019 – £6m) of inventories classified as assets held for sale
(see note 15).
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
169
169
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
17. Biological assets
At 15 September 2018
Transferred to inventory
Purchases
Changes in fair value
Effect of movements in foreign exchange
At 14 September 2019
Transferred to inventory
Purchases
Changes in fair value
Effect of movements in foreign exchange
At 12 September 2020
Growing
cane
£m
Other
£m
76
(65)
–
70
(1)
80
(93)
–
93
(14)
66
8
(14)
1
9
–
4
(10)
1
11
–
6
Total
£m
84
(79)
1
79
(1)
84
(103)
1
104
(14)
72
Growing cane
The fair value of growing cane is determined using inputs that are unobservable, using the best information available in the
circumstances for valuing the growing cane, and therefore falls into the level 3 category of fair value measurement. The following
assumptions were used in the determination of the estimated sucrose tonnage at 12 September 2020:
South Africa
Malawi
Zambia
Eswatini
Tanzania Mozambique
Expected area to harvest (hectares)
Estimated yield (tonnes cane/hectare)
Average maturity of growing cane
6,834
68.7
46.5%
19,019
107.0
67.4%
17,167
108.5
65.7%
8,549
102.0
67.0%
9,076
77.5
46.2%
5,724
87.0
71.6%
The following assumptions were used in the determination of the estimated sucrose tonnage at 14 September 2019:
South Africa
Malawi
Zambia
Eswatini
Tanzania Mozambique
Expected area to harvest (hectares)
Estimated yield (tonnes cane/hectare)
Average maturity of growing cane
7,401
67.8
49.9%
18,545
105.0
67.4%
15,843
121.9
65.7%
8,704
101.6
67.0%
9,307
74.9
46.2%
5,724
83.0
71.6%
A 1% change in the unobservable inputs could increase or decrease the fair value of growing cane as follows:
Estimated sucrose content
Estimated sucrose price
18. 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
Cash and cash equivalents on the face of the balance sheet
Cash and cash equivalents classified as held for sale
2020
+1%
£m
1.0
1.3
-1%
£m
(1.0)
(1.3)
2019
+1%
£m
1.1
1.4
-1%
£m
(1.1)
(1.4)
Note
2020
£m
2019
£m
26
19
15
718
1,280
1,998
(89)
1,909
1,996
2
1,998
643
852
1,495
(137)
1,358
1,495
–
1,495
Cash at bank and in hand generally earns interest at rates based on the daily bank deposit rate.
Cash equivalents generally comprise deposits placed on money markets for periods of up to three months which earn interest
at a short-term deposit rate; and 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.
170
170
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
19. Loans and overdrafts
Current loans and overdrafts
Secured loans
Unsecured loans and overdrafts
Finance leases
Non-current loans
Secured loans
Unsecured loans
Finance leases
Secured loans
– Other floating rate
Unsecured loans and overdrafts
– Bank overdrafts
– GBP fixed rate
– USD floating rate
– USD fixed rate
– EUR floating rate
– Other floating rate
– Other fixed rate
Finance leases (fixed rate)
Note
26
Note
18
Financial statements
2020
£m
4
150
–
154
1
317
–
318
472
2020
£m
2019
£m
9
217
1
227
1
347
13
361
588
2019
£m
5
10
89
101
6
235
13
21
2
–
472
137
104
29
241
29
23
1
14
588
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.
20. Trade and other payables
Current – trade and other payables
Trade payables
Accruals
Deferred income and other non-financial payables
Non-current – other payables
Accruals
2020
£m
909
943
1,852
464
2,316
2019
£m
1,153
1,023
2,176
380
2,556
–
271
In addition to the amounts disclosed above, there are £5m (2019 - £6m) of trade and other payables classified as liabilities held
for sale (see note 15).
For payables with a remaining life of less than one year, carrying amount is deemed to reflect fair value.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
171
171
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
21. Provisions
At 14 September 2019
IFRS 16 opening balance adjustment
Created
Utilised
Released
Effect of movements in foreign exchange
At 12 September 2020
Current
Non-current
Restructuring
£m
Deferred
consideration
£m
74
(10)
58
(31)
(5)
–
86
70
16
86
18
–
6
(1)
(3)
–
20
4
16
20
Other
£m
26
–
74
(3)
(40)
1
58
49
9
58
Total
£m
118
(10)
138
(35)
(48)
1
164
123
41
164
Financial liabilities within provisions comprised deferred consideration in both years (see note 26).
Restructuring
Restructuring provisions include onerous leases and the cash costs, including redundancy, associated with the group’s announced
reorganisation plans.
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 onerous contract provisions, 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.
22. Share capital and reserves
Share capital
At 14 September 2019 and 12 September 2020, the Company’s issued and fully paid share capital comprised 791,674,183
ordinary shares of 515⁄22p, each carrying one vote per share. Total nominal value was £45m.
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 2 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.
172
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Annual Report and Accounts 2020
Financial statements
23. Acquisitions and disposals
Acquisitions
2020
In December 2019, the group’s Grocery business in the UK acquired Al’Fez, a Middle Eastern food brand with customers in the
UK and Europe. In the second half of the year the group acquired two small Agriculture businesses in Europe and the group’s
Ingredients business acquired Larodan, a Swedish manufacturer and international marketer of state-of-the-art, high-purity
research-grade lipids that will expand our research and product development capabilities to better serve the pharmaceutical,
nutritional and industrial market sectors.
Total consideration for these acquisitions was £19m, comprising £16m cash consideration and £3m deferred consideration.
Net assets acquired comprised non-operating intangible assets of £15m, which were recognised with their related deferred tax
of £3m, and £1m of other operating assets. Goodwill of £6m resulted from these acquisitions.
2019
The group’s Grocery business completed the acquisitions of 100% of Yumi’s Quality Foods, a chilled food manufacturer in
Australia and Anthony’s Goods, a California-based blender and online marketer of speciality baking ingredients, to further develop
our presence in the faster growing segments of the grocery market. The group also acquired a small manufacturer of piglet
starter feed in Poland as part of the Agriculture business and Italmill, an Italian bakery ingredients producer as part of the
Ingredients business.
The acquisitions had the following effect on the group’s assets and liabilities:
Net assets
Intangible assets
Property, plant and equipment
Other receivables (non-current)
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Loans
Taxation
Employee benefit liabilities
Net identifiable assets and liabilities
Goodwill
Total consideration
Satisfied by
Cash consideration
Deferred consideration
Net cash
Cash consideration
Cash and cash equivalents acquired
Deferred consideration paid in respect of previous acquisition
Pre-acquisition
carrying values
£m
Recognised
values on
acquisition
£m
–
20
2
7
14
2
(11)
(15)
(1)
(1)
17
56
20
2
7
14
2
(11)
(15)
(8)
(1)
66
30
96
85
11
96
85
(2)
1
84
Pre-acquisition carrying amounts were the same as recognised values on acquisition apart from £56m of non-operating intangible
assets in respect of brands and customer relationships, which were recognised together with related deferred tax of £7m. The
cash outflow of £84m on the purchase of subsidiaries, joint ventures and associates in the cash flow statement comprises cash
consideration of £85m for these acquisitions less cash acquired with the businesses of £2m and £1m payment of deferred
consideration in respect of previous acquisitions.
The acquisitions contributed aggregate revenues of £42m and operating profit of £4m to the group’s result for the period from
the date of acquisition to 14 September 2019.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
173
173
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
23. Acquisitions and disposals continued
Disposals
2020
In 2020 the group announced the closure of the Cake business in the Grocery segment in Australia and the Jasol New Zealand
business in the Ingredients segment, with £10m included in loss on closure of business, comprising £2m non-cash impairment
of property, plant and equipment, £2m non-cash impairment of right-of-use assets and £6m of restructuring provisions.
The group also sold a small business in China, reported within the Asia Pacific and Grocery segments. Cash proceeds amounted
to £2m on £1m of net assets disposed, resulting in a pre-tax profit on disposal of £1m.
Warranty provisions of £1m relating to disposals made in previous years were no longer required and were released to sale and
closure of business in the Americas and Ingredients segments. The group also charged a £6m onerous lease provision to sale
and closure of business (in the Central and UK segments) in respect of guarantees given on property leases assigned to third
parties that the group expects to be required to honour.
2019
The group disposed of its torula facility and associated torula whole cell business in Hutchinson, Minnesota, reported within the
US and Ingredients segments. Cash proceeds amounted to £5m, net assets disposed were £5m and the associated goodwill
was £8m. Provisions for transaction and associated restructuring costs were £2m, with a gain of £3m on recycling foreign
exchange differences. The pre-tax loss on disposal was £7m.
We signed an agreement to form a yeast and bakery ingredients joint venture in China with Wilmar International, with
completion subject to regulatory approval. The joint venture will see us build a major new low-cost yeast plant in the north east
of China and will combine AB Mauri’s existing commercial activities and technical expertise in China with Wilmar’s extensive
sales and distribution capability. As a consequence, a non-cash impairment charge of £88m was included in loss on closure of
businesses, comprising £56m of goodwill and £32m of property, plant and equipment.
In addition £4m of warranty and restructuring provisions relating to disposals made in previous years were no longer required
and were released to sale and closure of businesses during the year in Grocery (The Americas). In the Agriculture segment,
goodwill with a carrying value of £3m was written off on sale and closure of a small business in the UK.
174
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Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
24. Share-based payments
The group had the following principal equity-settled share-based payment plans in operation during the period:
Associated British Foods Long Term Incentive Plan (‘the LTIP’)
The LTIP was approved and adopted by the Company at the annual general meeting held on 6 December 2013. It takes the form
of conditional allocations of shares which are released if, and to the extent that, performance targets are satisfied, typically over
a three-year vesting period.
Associated British Foods 2016 Long Term Incentive Plan (‘the 2016 LTIP’)
The 2016 LTIP was approved and adopted by the Company at the annual general meeting held on 9 December 2016. It takes
the form of conditional allocations of shares which are released if, and to the extent that, performance targets are satisfied,
typically over a three-year vesting period.
Associated British Foods Short Term Incentive Plan (‘the 2016 STIP’)
The 2016 STIP was approved and adopted by the Board on 2 November 2016. It takes the form of conditional allocations of
shares which are released at the end of a three-year vesting period if, and to the extent that, performance targets are satisfied,
over a one-year performance period.
Further information regarding the operation of the above plans can be found in the Remuneration report on pages 110 to 121.
Total conditional allocations under the group’s equity-settled share-based payment plans are as follows:
2020
2019
Balance
outstanding at
the beginning
of the year
Granted/
awarded
Vested
Expired/
lapsed
Balance
outstanding
at the end
of the year
4,660,667
3,675,370
1,970,377
1,922,795
(993,955)
(475,947)
(606,729)
(461,551)
5,030,360
4,660,667
Employee Share Ownership Plan Trust
Shares subject to allocation under the group’s equity-settled share-based payment plans are held in a separate Employee Share
Ownership Plan Trust 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 12 September 2020 the Trust held
1,787,959 (2019 – 2,781,914) ordinary shares of the Company. The market value of these shares at the year end was £35m
(2019 – £65m). The Trust has waived its right to dividends. Movements in the year were releases of 993,955 shares and no
purchases (2019 – releases of 475,947 shares and purchases of 1,032,156 shares).
Fair values
The weighted average fair value of conditional grants made 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
conditional shares allocated during the year was 2,327p (2019 – 2,335p) and the weighted average share price was 2,502p
(2019 – 2,511p). The dividend yield used was 2.5% (2019 – 2.5%).
25. Analysis of cash/(debt)
At
14 September
2019
£m
IFRS 16
transition
£m
Cash flow
£m
Disposals
£m
New leases
and non-cash
items
£m
Exchange
adjustments
£m
At
12 September
2020
£m
Cash at bank and in hand, cash equivalents
and overdrafts
Current asset investments
Short-term loans
Long-term loans
Lease liabilities
1,358
29
(90)
(361)
–
936
–
–
1
13
(3,678)
(3,664)
557
2
43
2
247
851
–
–
–
–
1
1
–
–
(23)
23
(143)
(143)
(6)
1
4
5
(66)
(62)
1,909
32
(65)
(318)
(3,639)
(2,081)
Cash and cash equivalents comprise bank and cash balances, call deposits and short-term investments with original maturities of
three months or less. £89m (2019 – £137m) of bank overdrafts that are repayable on demand form an integral part of the group’s
cash management and are included as a component of cash and cash equivalents for the purpose of the cash flow statement.
Current asset investments comprise term deposits and short-term investments with original maturities of greater than three
months but less than one year.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
175
175
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
26. Financial instruments
Financial instruments include £3m (2019 – £5m) of trade and other receivables and £5m (2019 – £5m) of trade and other
payables which are classified as held for sale, see note 15. All disclosures in this note are given gross, before the held for sale
reclassification is made.
a) Carrying amount and fair values of financial assets and liabilities
Financial assets
Financial assets at amortised cost
Cash and cash equivalents
Current asset investments
Trade and other receivables
Other non-current receivables
At fair value through other comprehensive income
Investments
At fair value through profit or loss
Derivative assets not designated in a cash flow hedging relationship:
– currency derivatives (excluding cross-currency swaps)
Designated cash flow hedging relationships
Derivative assets designated and effective as cash flow hedging instruments:
– currency derivatives (excluding cross-currency swaps)
– cross-currency swaps
– commodity derivatives
Total financial assets
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Secured loans
Unsecured loans and overdrafts (fair value 2020 – £498m; 2019 – £599m)
Lease liabilities (fair value 2020 – £3,807m)
Finance leases (fair value 2019 – £20m)
Deferred consideration
At fair value through profit or loss
Derivative liabilities not designated in a cash flow hedging relationship:
– currency derivatives (excluding cross-currency swaps)
– commodity derivatives
Designated net investment hedging relationships
Derivative liabilities designated as net investment hedging instruments:
– cross-currency swaps
Designated cash flow hedging relationships
Derivative liabilities designated and effective as cash flow hedging instruments:
– currency derivatives (excluding cross-currency swaps)
– commodity derivatives
Total financial liabilities
Net financial liabilities
Except where stated, carrying amount is equal to fair value.
2020
£m
2019
£m
1,998
32
1,199
39
6
10
14
60
18
3,376
1,495
29
1,249
44
7
12
17
64
6
2,923
(1,857)
(5)
(467)
(3,639)
–
(20)
(2,452)
(10)
(564)
–
(14)
(18)
(16)
(1)
(2)
(1)
(27)
(23)
(22)
(21)
(6,075)
(2,699)
(18)
(8)
(3,110)
(187)
176
176
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
26. Financial instruments continued
Valuation of financial instruments carried at fair value
Financial instruments carried at fair value on the balance sheet comprise derivatives. The group classifies these financial
instruments using a fair value hierarchy that reflects the relative significance of both objective evidence and subjective
judgements 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 (excluding cross-currency swaps)
Cross-currency swaps
Commodity derivatives
Financial liabilities
Currency derivatives (excluding cross-currency swaps)
Cross-currency swaps
Commodity derivatives
2020
2019
Contractual/
notional
amounts
£m
Level 1
£m
Level 2
£m
Total
£m
Contractual/
notional
amounts
£m
Level 1
£m
Level 2
£m
Total
£m
814
254
183
1,251
1,113
217
139
1,469
–
–
6
6
–
–
(4)
(4)
24
60
12
96
(38)
(27)
(18)
(83)
24
60
18
102
(38)
(27)
(22)
(87)
1,268
271
149
1,688
905
214
103
1,222
–
–
1
1
–
–
–
–
29
64
5
98
(20)
(23)
(9)
(52)
29
64
6
99
(20)
(23)
(9)
(52)
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
177
177
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
26. 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.
2020
2019
Currency
derivatives
(excluding
cross-
currency)
£m
Cross-
currency
swaps
£m
Commodity
derivatives
£m
Opening balance
(Gains)/losses recognised in the
hedging reserve
Ineffective hedges recognised in the
income statement
Amount removed from the hedging
reserve and included in the
income statement:
– revenue
– cost of sales
– other financial income/expense
Amount removed from the hedging
reserve and included in a non-
financial asset:
– inventory
Deferred tax
Effect of movements in foreign
exchange
Closing balance
Cash flows are expected to occur:
– within six months
– between six months and one
year
– between one and two years
– between two and five years
– after five years
1
(4)
21
(1)
–
–
(12)
(1)
2
6
6
–
–
–
–
6
1
4
–
–
–
(6)
–
–
–
(1)
–
–
–
(1)
–
(1)
Currency
derivatives
(excluding
cross-
currency)
£m
Cross-
currency
swaps
£m
Commodity
derivatives
£m
(3)
(54)
–
(1)
–
–
60
(1)
–
1
(1)
2
–
–
–
1
9
(22)
–
–
–
12
–
2
–
1
–
–
1
–
–
1
(20)
33
–
–
(3)
–
4
(8)
–
6
5
1
–
–
–
6
Total
£m
(14)
(43)
–
(1)
(3)
12
64
(7)
–
8
4
3
1
–
–
8
Total
£m
8
18
21
6
18
–
1
(18)
–
–
(18)
(6)
(6)
1
(18)
–
–
2
1
1
–
–
–
2
2
7
7
1
–
(1)
–
7
Of the closing balance of £7m, £7m is attributable to equity shareholders and £nil to non-controlling interests (2019 – £8m, £9m
is attributable to equity shareholders and £(1)m to non-controlling interests). Of the net movement in the year of £(1)m, £(2)m is
attributable to equity shareholders and £1m to non-controlling interests (2019 – £22m, £22m is attributable to equity
shareholders and £nil to non-controlling interests).
The balance remaining in the commodity cash flow hedge reserve from hedging relationships for which hedge accounting is no
longer applied is £2m (2019 – £2m).
The balance in the cost of hedging reserve was not significant as at 14 September 2019 or at 12 September 2020.
178
178
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
26. Financial instruments continued
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, swaps, and, where appropriate, options. These teams work closely with group
Treasury and report regularly to executive management.
Treasury operations and commodity procurement and hedging 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.
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. At year end, the group had $nil of borrowings
(2019 – $nil) that were designated as hedges of its net investment in foreign operations in US dollars.
The group also holds cross-currency interest rate swaps to hedge its fixed rate non-sterling debt. These are reported as cash
flow hedges and net investment hedges. The change in fair value of the hedging instrument, to the degree effective, is retained
in other comprehensive income. Under IFRS 9, the currency basis on the cross-currency swaps is excluded from the hedge
designation and recognised in other comprehensive income – cost of hedging. The value of the currency basis is not material.
Effectiveness is measured using the hypothetical derivative approach. The hypothetical derivative is based on the critical terms
of the debt and therefore the only ineffectiveness that may arise is in relation to credit risk. Credit risk is monitored regularly and
is not a significant factor in the hedge relationship.
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).
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.
A net foreign exchange gain of £1m (2019 – gain of £1m) on retranslation of these loans has been taken to the translation
reserve on consolidation, all of which was attributable to equity shareholders. The group also held cross currency swaps that
have been designated as hedges of its net investments in euros, whose change in fair value of £4m has been debited to the
translation reserve, all of which was attributable to equity shareholders (2019 – £2m has been credited to the translation reserve).
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
179
179
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
26. Financial instruments continued
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, lean hog, soya beans, sugar raws, cocoa, rice, tea and energy is
managed through the use of forward physical contracts and hedging instruments, including futures, swaps and options primarily
to convert floating 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 forward contracts are classified as ‘own use’ contracts, since they are entered into, and
continue to be held, for the purposes of the group’s ordinary operations. In this instance the group takes physical delivery of the
commodity concerned. ‘Own use’ contracts do not require accounting entries until the commodity purchase actually crystallises.
Where possible, commodity derivatives are accounted for as cash flow hedges (typically with a one to one hedge ratio), but
there are some commodity derivatives for which the strict requirements of hedge accounting cannot be satisfied. 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 maturities of less than one year.
The group’s sensitivities in respect of the accounting commodity derivatives for a +/- 20% movement in underlying commodity
prices is £15m (2019 - £28m) and (£14m) (2019 – (£23m)) respectively.
(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.
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 12 September 2020, £338m (72%) (2019 – £360m and 61%) of total debt was subject to fixed rates of interest, the majority
of which is the US private placement loans of £336m (2019 – £345m).
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) on page 179.
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.
180
180
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
26. Financial instruments continued
Economic (forecast) risk
The group principally 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
designates currency derivatives used to hedge its highly probable forecast transactions as cash flow hedges. Under IFRS 9, the
spot component is designated in the hedging relationship and forward points and currency basis are excluded and recognised in
other comprehensive income – cost of hedging. The cost of hedging value during the period and at the balance sheet date was
not material. The economic relationship is based on critical terms and a one-to-one hedge ratio. 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 sales in British Sugar to movements in the sterling/euro exchange rate;
• 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.
The below table illustrates the effects of hedge accounting on the consolidated statement of financial position and consolidated
income statement by disclosing separately by risk category, and each type of hedge, the details of the associated hedging
instrument and hedged item.
Current
Designated cash flow hedging relationships
– currency derivatives (excluding cross-currency swaps)
– commodity derivatives
Non-current
Designated cash flow hedging relationships
– currency derivatives (excluding cross-currency swaps)
– cross-currency swaps
– commodity derivatives
Designated net investment hedging relationships
– currency derivatives (cross-currency swaps)
2020
Contract
notional
£m
Carrying
amount assets/
(liabilities)
£m
Furthest
maturity
date
£m
Hedge ratio
£m
Change in fair
value of hedging
instrument
used to
determine
hedge
ineffectiveness
£m
Change in
fair value of
hedge item
used to
determine
hedge
effectiveness
£m
1,205
317
(8)
1
Sep 21
Sep 21
100%
100%
(10)
1
10
(1)
25
254
1
217
–
Feb 22
60 Mar 24
Jan 22
–
100%
100%
100%
(27) Mar 24
100%
2019
–
(3)
–
(5)
–
3
–
5
Contract
notional
£m
Carrying amount
assets/
(liabilities)
£m
Furthest
maturity
date
£m
Hedge ratio
£m
Change in fair
value of hedging
instrument
used to
determine hedge
ineffectiveness
£m
Change in fair
value of hedge
item used to
determine
hedge
effectiveness
£m
Current
Designated cash flow hedging relationships
– currency derivatives (excluding cross-currency swaps)
– commodity derivatives
Non-current
Designated cash flow hedging relationships
– currency derivatives (excluding cross-currency swaps)
– cross-currency swaps
– commodity derivatives
1,482
209
79
271
16
(1)
(4)
Sep 20
Aug 20
100%
100%
–
Aug 21
64 Mar 24
Sep 21
–
100%
100%
100%
(3)
(8)
–
20
(3)
3
8
–
(20)
3
Designated net investment hedging relationships
– currency derivatives (cross-currency swaps)
214
(23) Mar 24
100%
–
–
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
181
181
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
26. Financial instruments continued
Hedging relationships are typically based on a one-to-one hedge ratio. The economic relationship between the hedged item
and the hedging instrument is analysed on an ongoing basis. Sources of possible ineffectiveness include changes in forecast
transactions as a result of timing or value or, in certain cases, different indices linked to the hedged item and the hedging
instrument. As at 12 September 2020, FX forwards designated as cash flow hedges equal to £1,230m were outstanding. These
are largely in relation to purchases of USD (£695m) and sales of EUR (£223m) with varying maturities up to February 2022.
Weighted average hedge rates for these contracts are GBPUSD: 1.287, EURUSD: 1.165 and GBPEUR: 1.112. Weighted average
hedge rates for the cross-currency swaps are GBPUSD: 1.699 and GBPEUR: 1.262. Commodity derivatives designated as cash
flow hedges related to a range of underlying hedged items, with varying maturities out to January 2022.
The analysis of the group’s foreign currency exposure to financial assets and liabilities by currency of denomination is as follows:
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
Sterling
£m
US dollar
£m
1
–
1
(21)
–
(21)
69
(6)
63
43
103
39
142
(351)
(235)
(586)
1,353
(211)
1,142
698
Sterling
£m
US dollar
£m
1
–
1
(17)
–
(17)
74
(4)
70
54
87
43
130
(525)
(241)
(766)
1,578
(119)
1,459
823
2020
Euro
£m
11
50
61
(34)
–
(34)
58
(504)
(446)
(419)
2019
Euro
£m
26
63
89
(40)
–
(40)
129
(537)
(408)
(359)
The following major exchange rates applied during the year:
US dollar
Euro
Rand
Renminbi
Australian dollar
Average rate
Closing rate
2020
1.27
1.14
20.53
8.94
1.88
2019
1.28
1.13
18.32
8.78
1.81
2020
1.28
1.08
21.40
8.74
1.76
The following sensitivity analysis illustrates the impact that a 10% strengthening of the group’s transactional 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.
182
182
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Other
£m
74
15
89
(8)
–
(8)
Total
£m
189
104
293
(414)
(235)
(649)
232
(103)
129
1,712
(824)
888
210
532
Other
£m
42
16
58
(12)
–
(12)
154
(63)
91
137
Total
£m
156
122
278
(594)
(241)
(835)
1,935
(723)
1,212
655
2019
1.25
1.12
18.08
8.82
1.81
26. Financial instruments continued
Sensitivity analysis
10% strengthening against other currencies of
Sterling
US dollar
Euro
Other
Financial statements
2020
impact on
profit for
the year
£m
2020
impact on
total equity
£m
2019
impact on
profit for
the year
£m
2019
impact on
total equity
£m
(1)
(4)
–
10
3
79
(44)
20
–
23
7
3
6
96
(35)
18
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
2020
impact on
profit for
the year
£m
2019
impact on
profit for
the year
£m
(14)
(1)
1
(2)
(4)
(17)
(37)
–
10
(4)
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 12 September 2020. The group considers its maximum exposure to credit risk to be:
Cash and cash equivalents
Current asset investments
Trade and other receivables
Other non-current receivables
Investments
Derivative assets at fair value through profit and loss
Derivative assets in designated cash flow hedging relationships
2020
£m
1,998
32
1,199
39
6
10
65
3,349
2019
£m
1,495
29
1,249
44
7
12
64
2,900
The significant 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 metrics to identify significant changes to the financial
profile of its counterparties.
Counterparty risk profile and management
The table below analyses the group’s current asset investments, cash equivalents and derivative assets by credit exposure:
Standard & Poors rating
A+
AA-
A
BBB+
BBB
BB-
As at 12 September 2020
Current asset
investments
£m
–
30
–
–
–
–
30
Cash
equivalents
£m
–
–
–
–
3
–
3
Derivatives
Currency
derivative
assets
£m
–
3
–
1
–
1
5
Cross-
currency
swaps
£m
16
–
17
–
–
–
33
Commodity
£m
–
–
–
1
–
–
1
Total
£m
16
33
17
2
3
1
72
Cash of £718m, cash equivalents of £1,277m and current asset investments of £2m have been excluded from this analysis as
they are available on demand.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
183
183
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
26. Financial instruments continued
Trade and other receivables
Significant concentrations of credit risk are very 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.
To measure expected credit losses, gross trade receivables are assessed regularly by each business locally with reference to
considerations such as the current status of the relationship with the customer, the geographical location of each customer,
and days past due (where applicable).
Expected losses are determined based on the historical experience of write-offs compared to the level of trade receivables.
These historical loss expectations are adjusted for current and forward-looking information where it is identified to be significant.
The group considers factors such as national economic outlooks and bankruptcy rates of the countries in which its goods are
sold to be the most relevant factors. Where the impact of these is assessed as significant, the historical loss expectations are
amended accordingly.
The group considers credit risk to have significantly increased for debts aged 180 days or over and expects these debts to be
provided for in full. Where the group holds insurance or has a legal right of offset with debtors who are also creditors, the loss
expectation is applied only to the extent of the uninsured or net exposure.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there may be no reasonable
expectation of recovery may include the failure of the debtor to engage in a payment plan, and failure to make contractual payments
within 180 days past due.
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 one month past due
Between one and two months past due
Between two and three months past due
More than three months past due
Expected loss provision
Trade receivables are stated net of the following expected loss provision:
Opening balance
Increase charged to the income statement
Amounts released
Amounts written off
Effect of movements in foreign exchange
Closing balance
No trade receivables were written off directly to the income statement in either year.
2020
£m
408
319
160
313
1,200
2020
£m
934
66
12
8
31
(27)
1,024
2019
£m
425
340
175
309
1,249
2019
£m
965
82
16
8
37
(24)
1,084
2020
£m
2019
£m
24
9
(1)
(4)
(1)
27
23
7
(3)
(3)
–
24
184
184
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
26. Financial instruments continued
The geographical and business line complexity of the group, combined with the fact that expected loss assessments are all
performed locally, means that it is not practicable to present further analysis of expected losses.
In relation to other receivables not forming part of trade receivables, a similar approach has been taken to assess expected
losses. No significant expected loss has been identified.
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.
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) on page 186.
The following table analyses the contractual undiscounted cash flows relating to financial liabilities at the balance sheet date and
compares them to carrying amounts:
Note
20
19
19
10
21
Non-derivative financial liabilities
Trade and other payables
Secured loans
Unsecured loans and overdrafts
Lease liabilities
Deferred consideration
Derivative financial liabilities
– Currency derivatives (excluding cross-
currency swaps) (net payments)
– Commodity derivatives (net payments)
Total financial liabilities
Due
between
6 months
and 1 year
£m
Due
between
1 and 2
years
£m
Due within
6 months
£m
2020
Due
between
2 and 5
years
£m
Due after
5 years
£m
Contracted
amount
£m
Carrying
amount
£m
(1,837)
(4)
(110)
(186)
(2)
(33)
(20)
(2,192)
(20)
–
(58)
(189)
(1)
(4)
(2)
(274)
–
–
(245)
(385)
(3)
–
(1)
(85)
(1,099)
(15)
–
–
–
(2,883)
–
(1,857)
(5)
(498)
(4,742)
(21)
(1,857)
(5)
(467)
(3,639)
(20)
–
–
(633)
–
–
(1,200)
–
–
(2,883)
(37)
(22)
(7,182)
(38)
(22)
(6,048)
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
185
185
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
26. Financial instruments continued
Note
20
19
19
10
21
Non-derivative financial liabilities
Trade and other payables
Secured loans
Unsecured loans and overdrafts
Finance leases
Deferred consideration
Derivative financial liabilities
– Currency derivatives (excluding cross-
currency swaps) (net payments)
– Commodity derivatives (net payments)
Total financial liabilities
Due
between
6 months
and 1 year
£m
Due
between
1 and 2
years
£m
Due within
6 months
£m
2019
Due
between
2 and 5
years
£m
Due after
5 years
£m
Contracted
amount
£m
Carrying
amount
£m
(2,074)
(5)
(187)
(1)
–
(10)
(8)
(2,285)
(100)
(4)
(43)
(1)
(1)
(4)
(1)
(154)
(27)
–
(38)
(1)
–
(1)
–
(67)
(80)
(1)
(328)
(2)
(15)
–
–
(426)
(171)
–
–
(35)
(2)
–
–
(208)
(2,452)
(10)
(596)
(40)
(18)
(2,452)
(10)
(564)
(14)
(18)
(15)
(9)
(3,140)
(20)
(9)
(3,087)
The above tables do not include forecast data for liabilities which may be incurred in the future but which were not contracted
at 12 September 2020.
The principal reasons for differences between carrying values and contractual undiscounted cash flows are coupon payments on
the fixed rate debt to which the group is already committed, future interest payments on the group’s lease liabilities, and cash
flows on derivative financial instruments which are not aligned with their fair value.
i) Borrowing facilities
The group has substantial borrowing facilities available to it. The undrawn committed facilities available at 12 September 2020,
in respect of which all conditions precedent have been met, amounted to £1,146m (2019 – £1,235m):
Syndicated facility
US private placement
Illovo
Other
Facility
£m
1,088
336
86
7
1,517
2020
Drawn
£m
–
336
32
3
371
Uncommitted facilities available at 12 September 2020 were:
Money market lines
Illovo
Azucarera
China banking
Other
Facility
£m
2020
Drawn
£m
100
160
49
40
167
516
–
63
11
–
27
101
Undrawn
£m
1,088
–
54
4
1,146
Undrawn
£m
100
97
38
40
140
415
Facility
£m
1,200
345
98
4
1,647
2019
Drawn
£m
Undrawn
£m
–
345
65
2
412
1,200
–
33
2
1,235
2019
Facility
£m
Drawn
£m
Undrawn
£m
100
206
66
40
153
565
–
90
29
–
43
162
100
116
37
40
110
403
In addition to the above facilities there are also £98m (2019 – £75m) of undrawn and available credit lines for the purposes of
issuing letters of credit and guarantees in the normal course of business.
In 2019 the group also had £14m 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 19.
The group has a £1.1bn syndicated facility which matures in July 2023. In addition to the bank debt, the Company has £336m of
private placement notes in issue to institutional investors in the US and Europe. At 12 September 2020, these had an average
remaining duration of 1.8 years and an average fixed coupon of 4.4%. The other significant core committed debt facilities
comprise local committed facilities in Illovo.
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 27 for a summary of the group’s guarantees.
An assessment of the group’s current liquidity position is given in the Financial review on pages 67 to 69.
186
186
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
26. Financial instruments continued
j) Capital management
The capital structure of the group is presented in the balance sheet. For the purpose of the group’s capital management, capital
includes issued capital and all other reserves attributable to the equity shareholders of the Company, totalling £9,355m (2019 −
£9,452m). The statement of changes in equity provides details on equity and note 19 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 incentive plans. 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.
27. Contingencies
Litigation and other proceedings against companies in the group are not considered material in the context of these financial
statements.
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 12 September 2020, group companies have provided guarantees in the ordinary course of business amounting to £2,046m
(2019 – £1,902m).
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
187
187
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
28. Related parties
The group has a controlling shareholder relationship with its parent company, Wittington Investments Limited, with the trustees
of the Garfield Weston Foundation and with certain other individuals who hold shares in the Company. Further details of the
controlling shareholder relationship are included in note 29. The group has a related party relationship with its associates and joint
ventures (see note 29) 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
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 and
trustees of the Garfield Weston Foundation and their close family
their close family
(iii) directors of the Company who are not trustees of the Foundation and are not directors of
Wittington Investments Limited
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 companies 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
2020
£000
2019
£000
1
2
3
4
4
4
1,095
1,143
9,151
12,083
3,632
5,941
73
96
18,404
557
2,237
14,154
28,249
323,860
12,863
41,722
3,497
26,745
1,272
82
75
16,014
1,103
1,880
12,744
31,174
380,176
15,739
46,102
2,620
27,962
1,282
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 12 September 2020 was the beneficial owner
of 683,073 shares (2019 – 683,073 shares) in Wittington Investments Limited representing 79.2% (2019 – 79.2%) of that
company’s issued share capital and is, therefore, the Company’s ultimate controlling party. At 12 September 2020 trustees
of the Foundation comprised four 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 92 and 93. Their interests, including family interests, in the Company and its
subsidiary undertakings are given on pages 117 and 118. Key management personnel are considered to be the directors,
and their remuneration is disclosed within the Remuneration report on pages 110 to 121.
3. The fellow subsidiary undertakings are Fortnum and Mason plc and Heal & Son Limited.
4. The companies with common key management personnel are the George Weston Limited group, in Canada, and Selfridges
& Co. Limited.
Amounts due from joint ventures include £40m (2019 – £44m) of finance lease receivables (see note 14). The remainder of the
balance is trading balances. All but £5m (2019 – £5m) of the finance lease receivables are non-current.
188
188
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
29. 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
(‘Wittington’), 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 12 September 2020 Wittington, together with its subsidiary, Howard Investments Limited, held 431,515,108 ordinary
shares (2019 – 431,515,108) representing in aggregate 54.5% (2019 – 54.5%) of the total issued ordinary share capital of
Associated British Foods plc.
Wittington, and, through their control of Wittington, the trustees of the Garfield Weston Foundation (‘the Foundation’) are
controlling shareholders of the Company. Certain other individuals, including certain members of the Weston family who hold
shares in the Company (and including two of the Company’s directors, George Weston and Emma Adamo) are, under the
Listing Rules, treated as acting in concert with Wittington and the trustees of the Foundation and are therefore also treated
as controlling shareholders of the Company. Wittington, the trustees of the Foundation and these individuals together comprise
the controlling shareholders of the Company and, at 12 September 2020, have a combined interest in approximately 58.5%
(2019 – 59.53%) of the Company’s voting rights. Information on the relationship agreement between the Company and its
controlling shareholders is set out on page 123 of the Directors’ report.
Subsidiary undertakings
A list of the group’s subsidiaries as at 12 September 2020 is given below. The entire share capital of subsidiaries is held
within the group except where the group’s ownership percentages are shown. These percentages give the group’s ultimate
interest and therefore allow for the occasional situation where subsidiaries are owned by partly-owned intermediate subsidiaries.
Where subsidiaries have different classes of shares, this is largely for historical reasons and the effective percentage
holdings given represent both the group’s voting rights and equity holding. Shares in ABF Investments plc are held directly
by Associated British Foods plc. All other holdings in subsidiaries are owned by members of the Associated British Foods plc
group. All subsidiaries are consolidated in the group’s financial statements.
Subsidiary undertakings
United Kingdom
Weston Centre, 10 Grosvenor Street, London,
W1K 4QY, United Kingdom
A.B. Exploration Limited
A.B.F. Holdings Limited
A.B.F. Nominees Limited
A.B.F. Properties Limited
AB Agri Limited
AB Foods Australia Limited
AB Ingredients Limited
AB Mauri (UK) Limited
AB Mauri China Limited
AB Mauri Europe Limited
AB Sugar China Holdings Limited
AB Sugar China Limited
AB Sugar China North Limited
AB Sugar Limited
AB Technology Limited
AB World Foods (Holdings) Limited
AB World Foods Limited
ABF (No. 1) Limited
ABF (No. 2) Limited
ABF (No. 3) Limited
ABF BRL Finance Ltd
ABF Europe Finance Limited
ABF European Holdings Limited
ABF Finance Limited
ABF Food Tech Investments Limited
ABF Funding
ABF Grain Products Limited
ABF Green Park Limited
ABF Grocery Limited
ABF HK Finance Limited
ABF Ingredients Limited
ABF Investments plc
ABF Japan Limited
ABF MXN Finance Limited
ABF Overseas Limited
ABF PM Limited
ABF UK Finance Limited
ABF US Holdings Limited
% effective holding
if not 100%
% effective holding
if not 100%
Subsidiary undertakings
ABN (Overseas) Limited
ABNA Feed Company Limited
ABNA Limited
Agrilines Limited
Allied Bakeries Limited
Allied Grain (Scotland) Limited
Allied Grain (South) Limited
Allied Grain (Southern) Limited
Allied Grain Limited
Allied Mills (No.1) Limited (previously Allied Mills
Limited)
Allied Mills Limited (previously Allied Mills (No.1)
Limited)
Allied Technical Centre Limited
Allinson Limited
Associated British Foods Pension Trustees Limited
Atrium 100 Properties Limited
Atrium 100 Stores Holdings Limited
Atrium 100 Stores Limited
B.E. International Foods Limited
Banbury Agriculture Limited
British Sugar (Overseas) Limited
British Sugar plc
BSO (China) Limited
Cereal Industries Limited
Cereform Limited
Davjon Food Limited
Dorset Cereals Limited
Eastbow Securities Limited
Elsenham Quality Foods Limited
Fishers Feeds Limited
Fishers Seeds & Grain Limited
Food Investments Limited
G. Costa (Holdings) Limited
G. Costa and Company Limited
Germain’s (U.K.) Limited
H 5 Limited
Illovo Sugar Africa Holdings Limited
John K. King & Sons Limited
Kingsgate Food Ingredients Limited
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
189
189
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
29. Group entities continued
Subsidiary undertakings
LeafTC Limited
Mauri Products Limited
Mitra Sugar Limited
Mountsfield Park Finance Limited
Nere Properties Limited
Nutrition Trading (International) Limited
Nutrition Trading Limited
Patak (Spices) Limited
Patak Food Limited
Patak’s Breads Limited
Patak’s Foods 2008 Limited
Premier Nutrition Products Limited
Pride Oils Public Limited Company
Primark (U.K.) Limited
Primark Austria Limited
Primark Mode Limited
Primark Pension Administration Services Limited
Primark Stores Limited
Primary Diets Limited
Primary Nutrition Limited
Pro-Active Nutrition Limited
R. Twining and Company Limited
Reflex Nutrition Limited
Roses Nutrition Ltd
Seedcote Systems Limited
Serpentine Securities Limited
Sizzlers Limited
Sizzles Limited
Spectrum Aviation Limited
Speedibake Limited
Sunblest Bakeries Limited
The Bakery School Limited
The Billington Food Group Limited
The Home Grown Sugar Company Limited
The Jordans & Ryvita Company Limited
The Natural Sweetness Company Limited
The Roadmap Company Limited
The Silver Spoon Company Limited
Tip Top Bakeries Limited
Trident Feeds Limited
Twining Crosfield & Co. Limited
Vivergo Fuels Limited
W. Jordan & Son (Silo) Limited
W. Jordan (Cereals) Limited
Wereham Gravel Company Limited (The)
Westmill Foods Limited
Weston Biscuit Company Limited (The)
Weston Foods Limited
Weston Research Laboratories Limited
Worldwing Investments Limited
1 College Place North, Belfast, BT1 6BG,
United Kingdom
James Neill, Limited
Unit 4, 211 Castle Road, Randalstown,
Co. Antrim, BT41 2EB, United Kingdom
Jordan Bros. (N.I.) Limited
Nutrition Services (International) Limited
Vistavet Limited
180 Glentanar Road, Glasgow, G22 7UP,
United Kingdom
ABN (Scotland) Limited
Miller Samuel LLP, RWF House,
5 Renfield Street, Glasgow, G2 5EZ,
United Kingdom
Korway Foods Limited
Korway Holdings Limited
Patak’s Chilled Foods Limited
Patak’s Frozen Foods Limited
% effective holding
if not 100%
% effective holding
if not 100%
Subsidiary undertakings
Argentina
Mariscal Antonio José de Sucre 632 – 2nd
Floor, Buenos Aires 1428, Argentina
AB Mauri Hispanoamerica S.A.
Surgras S.A (in liquidation)
Av. Raul Alfonsin, Monte Chingolo,
Buenos Aires 3145, Argentina
Compañía Argentina De Levaduras S.A.I.C.
Australia
Building A, Level 2, 11 Talavera Road,
North Ryde, NSW 2113, Australia
AB Mauri Overseas Holdings Limited
AB Mauri Pakistan Pty Limited
AB Mauri ROW Holdings Pty Limited
AB Mauri South America Pty Limited
AB Mauri South West Asia Pty Limited
AB Mauri Technology & Development Pty Limited
AB Mauri Technology Pty Limited
AB World Foods Pty Ltd
Anzchem Pty Limited
Dagan Trading Pty Ltd
Food Investments Pty. Limited
George Weston Foods (Victoria) Pty Ltd
George Weston Foods Limited
Indonesian Yeast Company Pty Limited
Mauri Fermentation Brazil Pty Limited
Mauri Fermentation Chile Pty Limited
Mauri Fermentation China Pty Limited
Mauri Fermentation India Pty Limited
Mauri Fermentation Indonesia Pty Limited
Mauri Fermentation Malaysia Pty Limited
Mauri Fermentation Philippines Pty Limited
Mauri Fermentation Vietnam Pty Limited
Mauri Yeast Australia Pty Limited
N&C Enterprises Pty Ltd
NB Love Industries Pty Ltd
Serrol Ingredients Pty Limited
The Jordans and Ryvita Company Australia Pty Ltd
Yumi's Quality Foods Pty Ltd
35-37 South Corporate Avenue, Rowville,
VIC 3178, Australia
AB Food & Beverages Australia Pty. Limited
170 South Gippsland Highway, Dandenong,
VIC 3175, Australia
ABF Wynyard Park Limited Partnership
Austria
Schottenring 19, 1010 Wien, Austria
Primark Austria Ltd & Co KG
Bangladesh
Level 13 Shanta Western Tower, Bir Uttam Mir
Shawkat Road, 186 Tejgaon I/A, Dhaka 1208,
Bangladesh
Twinings Ovaltine Bangladesh Limited
Belgium
Industriepark 2d, 9820 Merelbeke, Belgium
AB Mauri Belgium NV
Boulevard Raymond Poincare 07/113,
4020 Liege, Belgium
Primark SA
Brazil
Avenida Tietê, L-233 Barranca do Rio Tietê,
City of Pederneiras, State of Sao Paulo,
CEP 17.280-000, Brazil
AB Brasil Indústria e Comércio de Alimentos Ltda
Alameda Madeira 328, 20th Floor, Room 2005,
Alphaville – Barueri, Sao Paulo 06454-010, Brazil
AB Enzimas Brasil Comercial Ltda
190
190
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
% effective holding
if not 100%
90%
29. Group entities continued
Subsidiary undertakings
Rua Cardeal Arcoverde. 1641 9th Floor,
Sao Paulo, 05407002, Brazil
AB Vista Brasil Comércio De Alimentação
Animal Ltda
Canada
Blake, Cassels & Graydon LLP, 199 Bay Street,
Suite 4000, Toronto, Ontario M5L 1A9, Canada
AB Mauri (Canada) Limited
Chile
Miraflores Street No. 222, 28 Floor, Santiago,
Chile
Calsa Chile Inversiones Limitada
China
No. 1 Tongcheng Street, A Cheng District,
Harbin, Heilongjiang Province, China
AB (Harbin) Food Ingredients Company Limited
Harbin Mauri Yeast Co., Ltd.
North Huang He Road, Rudong
New Economic Development Zone,
Nantong City, Jiangsu Province, China
AB Agri Animal Nutrition (Nantong) Co., Ltd
AB Agri Animal Nutrition (Rudong) Co., Ltd.
No 28. South Shunjin Road, Yintai District,
Tongchuan, Shaanzi Province, China
AB Agri Animal Nutrition (Shaanxi) Co., Ltd.
Chuangxin Road, Tonggu Industry Zone, Sandu
Town, Tonggu County, Jiangxi Province, China
AB Agri Pumeixin Tech (Jiangxi) Co. Ltd.
Room 2802, Raffles City Changning, No. 1189
Changning Road, Changning District, Shanghai,
200051, China
AB Enzymes Trading (Shanghai) Co., Ltd
Room 2803, Raffles City Changning, No. 1189
Changning Road, Changning District, Shanghai,
200051, China
ABNA Management (Shanghai) Co., Ltd.
ABNA Trading (Shanghai) Co., Ltd
Room 2906, Raffles City Changning, No. 1189
Changning Road, Changning District, Shanghai,
200051, China
Associated British Foods Holdings (China) Co., Ltd
Suite 702, Fosun International Center, No. 237
Chaoyangbei Road, Beijing, Chaoyang District,
China
AB Mauri (Beijing) Food Sales and
Marketing Company Limited
Xinsha Industrial Zone, Machong Town,
Dongguan, Guangdong Province, China
AB Mauri Food (Dongguan) Co., Ltd.
Building 1, 35 Chi Feng Road , Yangpu District,
Shanghai 200092, China
AB Mauri Foods (Shanghai) Company Limited
868 Yongpu Road, Pujiang Town,
Minhang District, Shanghai 201112, China
ABNA (Shanghai) Feed Co., Ltd.
14 Juhai Road, Jinghai Development Zone,
Tianjin, China
ABNA (Tianjin) Feed Co, Ltd
Shu Shan Modern Industrial Zone of Shou
County, Huainan City, Anhui Province, China
ABNA Feed (Anhui) Co., Ltd.
145 Xincheng Road, Tengao Economic
Development Zone, Anshan, Liaoning 114225,
China
ABNA Feed (Liaoning) Co., Ltd.
17 Xiangyang Street, Tu Township, Chayou
Qianqi , Inner Mongolia, China
Botian Sugar Industry (Chayou Qianqi) Co., Ltd.
Financial statements
% effective holding
if not 100%
92%
60%
60%
60%
60%
Subsidiary undertakings
No. 1 Botian Road, Economic Development
Zone, Zhangbei County, Zhangjiakou City,
Hebei Province, China
Botian Sugar Industry (Zhangbei) Co., Ltd.
Development Zone Administration Tower,
No. 368 Changjiang Road, Nangang District,
Haibin, Hieilongjiang Province, China
Botian Sugar Industry Co., Ltd.
1 Industrial North Street, Zhangjiakou,
Zhangbei County, Hebei Province, China
Hebei Mauri Food Co., Ltd.
Meishan Industrial Estate, Huangge Town,
Nansha District, Guangzhou City, Guangdong
Province, China
Panyu Mauri Food Co., Ltd. (in liquidation)
8 Lancun Road, Economic and Technical
Development Zone, Minhang, Shanghai
200245, China
Shanghai AB Food & Beverages Co., Ltd
Jie Liang Zi,Huo Cheug, Yi Li, Xinjiang, China
Xinjiang Mauri Food Co., Ltd.
No. 68-1, Shuanglong Road, Fushan District,
Yantai City, Shandong Province, China
Yantai Mauri Yeast Co., Ltd.
Colombia
Cra 35# 34A-64, Palmira, Valle, Colombia
Fleischmann Foods S.A.
Czech Republic
Nádražní 523, 349 01 St íbro, Czech Republic
Bodit Tachov s.r.o.
Karolinská 661/4, Karlín, 186 00 Praha 8, Czech
Republic
Primark Prodejny s.r.o.
Denmark
Skjernvej 42, Trøstrup, 6920 Videbæk, Denmark
Agro Korn A/S
Middelfartveg 77, Baring, 5466 Asperup,
Denmark
Cowconnect ApS
Ecuador
Medardo Ángel Silva 13 y Panamá, Manzana
12, El Recreo, Eloy Alfaro, Durán, Guayas,
Ecuador
ABCALSA S.A.
Eswatini
Ubombo Sugar Limited, Old Main Road,
Big Bend, Eswatini
Bar Circle Ranch Limited
Illovo Swaziland Limited
Moyeni Ranch Limited
Ubombo Sugar Limited
Finland
Tykkimäentie 15b (PO Box 26), Rajamäki,
FI-05200, Finland
AB Enzymes Oy
Tykkimäentie 15b (PO Box 57), Rajamäki,
FI-05201, Finland
Enzymes Leasing Finland Oy
France
40/42, avenue Georges Pompidou, 69003,
à Lyon, France
AB Mauri France SAS
75 Square Haussmann, 75008, Paris, France
ABFI France SAS
5 Boulevard de l'Oise, Immeuble Le Rond Point,
95000 Cergy Pontoise, Cédex, France
Foods International S.A.S.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
191
191
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
% effective holding
if not 100%
29. Group entities continued
Subsidiary undertakings
3/5 Rue Saint-Georges, 75009, Paris, France
Primark France SAS
Chemin du Vallon du maire, 13240,
Septemes les Vallons, France
SPI Pharma SAS
Germany
Feldbergstrasse 78, 64293, Darmstadt, Germany
AB Enzymes GmbH
Wandsbeker Zollstrasse 59, 22041,
Hamburg, Germany
ABF Deutschland Holdings GmbH
Ohly GmbH
Ohly Grundbesitz GmbH
Rheinische Presshefe- und Spritwerke GmbH
Kennedyplatz 2, 45127, Essen, Germany
Primark Mode Ltd. & Co. KG
Primark Property GmbH
Westendstrasse 28, 60325, Frankfurt am Main,
Germany
Wander GmbH
Marie-Kahle-Allee 2, D-53113, Bonn, Germany
Westmill Foods Europe GmbH
Guernsey
Dorey Court, Admiral Park, St. Peter Port,
GY1 2HT, Guernsey
Talisman Guernsey Limited
Hong Kong
7/F DCH Building, 20 Kai Cheung Road,
Kowloon Bay, Kowloon, Hong Kong
Associated British Foods Asia Pacific
Holdings Limited
India
#218 & #219, Bommasandra – Jigani Link Road,
Anekal Taluk, Bangalore, 560105, India
AB Mauri India (Private) Limited
First Floor, Regent Sunny Side, 80 Ft Road,
8th Block, Koramangala Bengaluru, Karnataka,
560030, India
SPI Specialties Pharma Private Limited
8, Acharya Jagadish Chandra Bose Road,
Kolkata, 700017, India
Twinings Private Limited
Indonesia
Wisma GKBI Lt.39, Suite 3901, No.28 Jl. Jend,
Sudirman, Jakarta , Indonesia
PT AB Food & Beverages Indonesia (in liquidation)
Ireland
47 Mary Street, Dublin 1, Ireland
Abdale Finance Limited
Primark Holdings
Primark Pension Trustees Limited
Somers & Murphy & Earl Limited, 46 Mount
Street Upper, Dublin 2, Ireland
Vistavet (Ireland) Limited (in liquidation)
1 Stokes Place, St. Stephen’s Green, Dublin 2,
Ireland
Allied Mills Ireland Limited
Intellync Technology Limited
Arthur Ryan House, 22-24 Parnell Street,
Dublin 1, Ireland
Primark Limited
25-28 North Wall Quay, Dublin 1, Ireland
Primark Mode Limited
Italy
Viale Monte Nero, 84, 20135, Milan, Italy
AB Agri Italy S.r.l
Via Milano 42, 27045, Casteggio, (Pavia), Italy
AB Mauri Italy S.p.A.
Subsidiary undertakings
ABF Italy Holdings S.r.l.
Primark Italy S.r.l.
Via Rizzotto 46, 41126, Modena (MO), Italy
Acetaia Fini Modena S.r.l.
Via Sandro Pertini 440, 401314, Cavezzo (MO), Italy
Acetum S.p.A.
Via Allende 9/D, 41032, Cavezzo (MO), Italy
Antica Acetaia Simonini S.r.l.
Via Ettore Bugatti 11, 20142, Milan, Italy
Italmill S.p.A
Japan
36F Atago Green Hills Mori Tower, 2-5-1 Atago,
Minato-ku, Tokyo 105-6236, Japan
Twinings Japan Co Ltd
Jersey
CTV House, La Pouquelaye, St Helier,
JE2 3TP, Jersey
Bonuit Investments Limited
Luxembourg
69, Boulevard de la Pétrusse, L-2320,
Luxembourg
ABF European Holdings & Co SNC (in liquidation)
Malawi
Illovo House, Churchill Road, Limbe, Malawi
Dwangwa Sugar Corporation Limited
Illovo Sugar (Malawi) plc
Malawi Sugar Limited
Malaysia
No 118, Jalan Pudu, 1st Floor,
55100 Kuala Lumpur, Malaysia
AB Mauri Malaysia Sdn. Bhd.
Malta
171 Old Bakery Street, Valletta, VLT 1455, Malta
Relax Limited
Mauritius
10th Floor, Standard Chartered Tower,
19 Cybercity, Ebene, Mauritius
Illovo Group Financing Services
Illovo Group Holdings Limited
Illovo Group Marketing Services Limited
Kilombero Holdings Limited
Sucoma Holdings Limited
Mexico
Paseo de la Reforma No 2620, Edificio Reforma
Plus, piso 8, 803, 804 y 805, Col. Lomas Atlas,
DF 11950, Mexico
AB CALSA S.A. de C.V.
AB CALSA SERVICIOS, S. DE R.L. DE C.V.
Avenida Javier Barros Sierra 495, piso 7 oficina
07-102, Col. Santa Fe, Alvaro Obregón, Ciudad
de México, 01219, México
ACH Foods Mexico, S. de R.L. de C.V.
Servicios Alimentos Capullo, S. de R.L. de C.V.
Mozambique
KM75 EN1, Maçiana, Distrito de Manhiça,
Provincia de Maputo, Mozambique
Maragra Açucar, S.A.
Netherlands
Mijlweg 77, 3316 BE, Dordrecht, Netherlands
AB Mauri Netherlands B.V.
Luna ArenA, Herikerbergweg 238, 1101 CM,
Amsterdam Zuidoost, Netherlands
AB Mauri Netherlands European Holdings B.V.
Foods International Holding B.V.
Primark Fashion B.V.
Primark Netherlands B.V.
Primark Stil B.V.
% effective holding
if not 100%
50%
76%
76%
52%
70%
73%
90%
192
192
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
% effective holding
if not 100%
29. Group entities continued
Subsidiary undertakings
Weena 505, 3013AL Rotterdam, Netherlands
AB Vista Europe B.V.
7122 JS Aalten, Dinxperlosestraatweg 122,
Netherlands
Germains Seed Technology B.V.
Brieltjenspolder 16, 4921 PJ Made, Netherlands
Mauri Technology B.V.
Stadhuisstrat 3, 5038XZ, Tilburg, Netherlands
Primark Austria B.V.
Primark Germany B.V.
Dalsteindreef 141, Diemen, 1112XJ,
Netherlands
Westmill Foods Europe B.V.
New Zealand
Building 3, Level 2, 666 Great South Road,
Ellerslie, Auckland 1051, New Zealand
Allied Foods (NZ) Ltd
Anzchem NZ Limited
George Weston Foods (NZ) Limited
Nigeria
23 Oba Akinjobi Street, GRA, Ikeja, Lagos,
Nigeria
Twinings Ovaltine Nigeria Limited
Pakistan
21KM Ferozepur Road, 2 KM Hadyara Drain,
Lahore, Pakistan
AB Mauri Pakistan (Private) Limited
Peru
Av. Republica de Argentina No. 1227, Z.I. La
Chalaca, Callao, Peru
Calsa Perú S.A.C.
Philippines
86 E Rodriguez Jr. Ave., Ugong Norte, QC,1604,
Pasig City, Metro Manila, Philippines
AB Food & Beverages Philippines, Inc.
1201-1202 Prime Land Building, Market Street,
Madrigal Business Park, Ayala Alabang,
Muntinlupa,1770, Philippines
AB Mauri Philippines, Inc.
Poland
Przemysłowa 2, 67-100 Nowa Sól, Lubuskie,
Poland
AB Foods Polska Spólka z ograniczona
odpowiedzialnoscia (AB Foods Polska Sp. z o.o.)
ul. Rabowicka 29/31, 62-020, Swarzędz – Jasin,
Poland
Primark Sklepy spolka z ograniczona
odpowiedzialnoscia (Primark Sklepy sp. z.o.o)
R. Twining and Company Spółka z ograniczona
odpowiedzialnoscia (R. Twining and Company
Sp. z o. o.)
ul. Główna 3A, Bruszczewo, 64-030, migiel,
Poland
AB Agri Polska spolka z organiczona
odpowiedzialnoscia (AB Agri Polska sp.z.o.o)
Portugal
Avenida Salvador Allende, n.º 99, Lisboa Oeiras,
Julião da Barra, Paço de Arcos e Caxias,
2770-157, Paco de Arcos, Portugal
AB Mauri Portugal, S.A.
Praça Marquês de Pombal, 1-8°, 1250 – 160
Lisbon, Portugal
Lojas Primark Portugal – Exploracao, Gestao e
Administracao de Espacos Comerciais S.A.
% effective holding
if not 100%
60%
99%
96%
Rwanda
Shop number E002B, 1st Floor, CHIC Building, Nyarugenge
District, Nyarugenge Sector, Kigali City, Rwanda
Illovo Sugar (Kigali) Limited
Subsidiary undertakings
Singapore
80 Robinson Road, #02-00, 068898 Singapore
AB Mauri Investments (Asia) Pte Ltd
112 Robinson Road #05-01, 068902 Singapore
AB Vista Asia Pte. Limited
Slovakia
Dvorakovo nabrezie 4, Bratislava 811 02, Slovakia
Primark Slovakia s.r.o.
Slovenia
Cesta v Mestni log 88A, Ljubljana 1000,
Slovenia
Primark Trgovine, trgovsko podjetje, d.o.o.
South Africa
1 Nokwe Avenue, Ridgeside, Umhlanga Rocks,
Kwazulu Natal, 4320, South Africa
CGS Investments (Pty) Limited
East African Supply (Pty) Limited
Glendale Sugar (Pty) Ltd
Illovo Distributors (Pty) Limited
Illovo Sugar (South Africa) Proprietary Limited
Illovo Sugar Africa Proprietary Limited
Illprop (Pty) Limited
Lacsa (Pty) Limited
Noodsberg Sugar Company (Pty) Ltd
Reynolds Brothers (Pty) Ltd
S.A. Sugar Distributors (Pty) Limited
Smithchem (Pty) Limited
Umzimkulu Sugar Company (Pty) Ltd
Spain
Calle Cardenal Marcelo Spínola, 42, 28016,
Madrid, Spain
AB Azucarera Iberia, S.L. Sociedad Unipersonal
Calle Levadura, 5 14710, Villarrubia, Córdoba
AB Mauri Food, S.A
AB Mauri Spain, S.L.U.
Avenida de Manoteras 46 3º B, Edificio Delta
Norte, 28050, Madrid, Spain
AB Vista Iberia, S.L.
Levadura 5, Villarrubia 14710, Cordoba, Spain
ABF Iberia Holding S.L.
C/ Escultor Coomonte nº. 2, Entreplanta,
Benavente, Zamora, Spain
Agroteo S.A.
Calle Comunidad de Murcia, Parcela LIE-1-03,
Plataforma Logistica de Fraga, 22520, Huesca, Spain
Alternative Swine Nutrition, S.L.
Avienda Virgen de Montserrat, 44 Castelloli,
08719, Barcelona, Spain
Germains Seed Technology, S.A.
Plaza Pablo Ruiz Picasso S/N, Torre Picasso,
Planta 37, Madrid, Spain
Illovo Sugar Espana, S.L.
Gran Via, 32 5o 28013, Madrid, Spain
Primark Tiendas, S.L.U.
8, 2 Calle Via Servicio I, 2 CP, 19190 Torija,
Guadalajara, Spain
Primark Logistica, S.L. Sociedad Unipersonal
Sri Lanka
124 Templers Road, Mount Lavinia, Sri Lanka
AB Mauri Lanka (Private) Limited
Sweden
Nobels väg 16, 171 65 Solna, Sweden
Larodan AB
Switzerland
Fabrikstrasse 10, CH-3176, Neuenegg, Switzerland
Wander AG
Taiwan
5F, No. 217, Sec 3, Nanking E Rd, Taipei City,
104, Taiwan (R.O.C.)
AB Food and Beverages Taiwan, Inc.
Tanzania
Msolwa Mill Office, Kidatau, Kilombero District, Tanzania
Illovo Distillers (Tanzania) Limited
Illovo Tanzania Limited
Kilombero Sugar Company Limited
Thailand
11th Floor, 2535 Sukhumvit Road, Kwaeng
70%
53%
80%
55%
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
193
193
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
29. Group entities continued
% effective holding
% effective holding
if not 100%
if not 100%
% effective holding
% effective holding
if not 100%
if not 100%
80%
50%
76%
76%
Subsidiary undertakings
Subsidiary undertakings
Bangchak, Khet Prakhanong, Bangkok, 10260,
3/5 Rue Saint-Georges, 75009, Paris, France
Thailand
Primark France SAS
AB Food & Beverages (Thailand) Ltd.
Chemin du Vallon du maire, 13240,
ABF Holdings (Thailand) Ltd.
Septemes les Vallons, France
SPI Pharma SAS
AB World Foods Asia Ltd
Germany
229/110 Moo 1, Teparak Road,
Feldbergstrasse 78, 64293, Darmstadt, Germany
T. Bangsaothong, A. Bangsaothong,
AB Enzymes GmbH
Samutprakarn, 10540, Thailand
Wandsbeker Zollstrasse 59, 22041,
Jasol Asia Pacific Limited
Hamburg, Germany
Turkey
ABF Deutschland Holdings GmbH
Aksakal Mahallesi, Kavakpinari, Kume Evleri
Ohly GmbH
No. 5, Bandirma- Balikesir, 10245, Turkey
Ohly Grundbesitz GmbH
Mauri Maya Sanayi A.S.
Rheinische Presshefe- und Spritwerke GmbH
United Arab Emirates
Kennedyplatz 2, 45127, Essen, Germany
Office 604ª, Jafza LOB 15, Jebel Ali Freezone,
Primark Mode Ltd. & Co. KG
Dubai, PO BOX 17620, United Arab Emirates
Primark Property GmbH
AB Mauri Middle East FZE
Westendstrasse 28, 60325, Frankfurt am Main,
United States
Germany
CT Corporation System, 818 West Seventh
Wander GmbH
Street, Suite 930, Los Angeles CA 90017,
Marie-Kahle-Allee 2, D-53113, Bonn, Germany
United States
Westmill Foods Europe GmbH
AB Mauri Food Inc.
Guernsey
The Corporation Trust Company, Corporation
Dorey Court, Admiral Park, St. Peter Port,
Trust Center, 1209 Orange Street, Wilmington
GY1 2HT, Guernsey
DE 19801, United States
Talisman Guernsey Limited
AB Enzymes, Inc.
Hong Kong
AB Vista, Inc.
7/F DCH Building, 20 Kai Cheung Road,
AB World Foods US, Inc.
Kowloon Bay, Kowloon, Hong Kong
ABF North America Corp.
Associated British Foods Asia Pacific
ABF North America Holdings, Inc.
Holdings Limited
Abitec Corporation
India
ACH Food Companies, Inc.
#218 & #219, Bommasandra – Jigani Link Road,
ACH Jupiter LLC
Anekal Taluk, Bangalore, 560105, India
B.V. ABF Delaware, Inc.
AB Mauri India (Private) Limited
BakeGood, LLC
First Floor, Regent Sunny Side, 80 Ft Road,
Germains Seed Technology, Inc.
8th Block, Koramangala Bengaluru, Karnataka,
PGP International, Inc.
560030, India
Primark US Corp.
SPI Specialties Pharma Private Limited
SPI Pharma, Inc.
8, Acharya Jagadish Chandra Bose Road,
SPI Polyols, LLC
Kolkata, 700017, India
Twinings North America, Inc.
Twinings Private Limited
Indonesia
Wisma GKBI Lt.39, Suite 3901, No.28 Jl. Jend,
Lusaka Stock Exchange (LuSE) regulations require all listed companies in Zambia to have a minimum of 25% of their shares held
Sudirman, Jakarta , Indonesia
PT AB Food & Beverages Indonesia (in liquidation)
by public investors to constitute a free float. As a result, Illovo Sugar was required to reduce its shareholding in Zambia Sugar plc
Ireland
by 6.6%. Effective 26 September 2014, 5.1% of the shares were sold to local Zambian institutional investors. Further, as agreed
47 Mary Street, Dublin 1, Ireland
with the LuSE, the remaining 1.5% were offered and sold to a local Zambian institutional investor on 5 December 2017. The
Abdale Finance Limited
shareholding for Illovo Sugar at 12 September 2020 was 75% of the total shareholding.
Primark Holdings
The results and balance sheet of Primark Mode Ltd. & Co. KG, seated in Essen, are included in these financial statements
Primark Pension Trustees Limited
and these financial statements will be filed in Germany. As a consequence, Primark Mode Ltd. & Co. KG is exempt from the
Somers & Murphy & Earl Limited, 46 Mount
Street Upper, Dublin 2, Ireland
requirement to file its own financial statements under section 264b HGB.
Vistavet (Ireland) Limited (in liquidation)
Associated British Foods plc has irrevocably guaranteed all commitments entered into by each of the Irish incorporated subsidiary
1 Stokes Place, St. Stephen’s Green, Dublin 2,
undertakings listed below, including amounts shown as liabilities in the statutory financial statements of these companies, in
Ireland
respect of the financial year ended 12 September 2020. As a consequence, these subsidiary undertakings may qualify for the
Allied Mills Ireland Limited
exemption under section 357 of the Companies Act 2014 (Ireland) from the provisions of sections 347 and 348 of that Act.
Intellync Technology Limited
Arthur Ryan House, 22-24 Parnell Street,
Abdale Finance Limited
Dublin 1, Ireland
Primark Limited
Primark Limited
Primark Holdings
25-28 North Wall Quay, Dublin 1, Ireland
Primark Pension Trustees Limited
Primark Mode Limited
Primark Mode Limited
Italy
Viale Monte Nero, 84, 20135, Milan, Italy
AB Agri Italy S.r.l
Via Milano 42, 27045, Casteggio, (Pavia), Italy
AB Mauri Italy S.p.A.
Subsidiary undertakings
Subsidiary undertakings
101 Arch Street, Floor 3, Boston MA 02110,
ABF Italy Holdings S.r.l.
United States
Primark Italy S.r.l.
Primark GCM LLC
Via Rizzotto 46, 41126, Modena (MO), Italy
158 River Road, Unit B, Clifton, NJ 07014,
Acetaia Fini Modena S.r.l.
United States
Via Sandro Pertini 440, 401314, Cavezzo (MO), Italy
Balsamic Express LLC
Acetum S.p.A.
158 River Road, Unit A, Clifton, NJ 07014,
Via Allende 9/D, 41032, Cavezzo (MO), Italy
United States
Antica Acetaia Simonini S.r.l.
Modena Fine Foods, Inc.
Via Ettore Bugatti 11, 20142, Milan, Italy
Registered Agent Solutions, 1220 S St Ste 150,
Italmill S.p.A
Sacramento Ca 95811
Japan
PennyPacker, LLC
36F Atago Green Hills Mori Tower, 2-5-1 Atago,
Registered Agent Solutions Inc., 9 E
Minato-ku, Tokyo 105-6236, Japan
Loockerman Street Suite 311, Dover, Kent DE
Twinings Japan Co Ltd
19901, United States
Jersey
Prosecco Source, LLC
CTV House, La Pouquelaye, St Helier,
Uruguay
JE2 3TP, Jersey
Cno. Carlos Antonio Lopez 7547,
Bonuit Investments Limited
Montevideo, Uruguay
Luxembourg
Levadura Uruguaya S.A.
69, Boulevard de la Pétrusse, L-2320,
Venezuela
Luxembourg
Oficinas Once 3 (N° 11-3) y Once 4 (N° 11-4),
ABF European Holdings & Co SNC (in liquidation)
Torre Mayupan, Centro Comercial San Luis,
Malawi
Av.Principal Urbanización San Luis, cruce con
Illovo House, Churchill Road, Limbe, Malawi
Calle Comercio, Caracas, Bolivarian Republic
Dwangwa Sugar Corporation Limited
of Venezuela
Illovo Sugar (Malawi) plc
Alimentos Fleischmann, C.A.,
Malawi Sugar Limited
Compañía de Alimentos Latinoamericana
Malaysia
de Venezuela (CALSA) S.A.
No 118, Jalan Pudu, 1st Floor,
Vietnam
55100 Kuala Lumpur, Malaysia
Unit 2, 100 Nguyen Thi Minh Khai Street,
AB Mauri Malaysia Sdn. Bhd.
Ward 6, District 3, Ho Chi Minh City, Vietnam
Malta
AB Agri Vietnam Company Limited
171 Old Bakery Street, Valletta, VLT 1455, Malta
Km 102, Highway 20, La Nga Commune –
Relax Limited
Dinh Quan District, Dong Nai Province, Vietnam
Mauritius
AB Mauri Vietnam Limited
10th Floor, Standard Chartered Tower,
Zambia
19 Cybercity, Ebene, Mauritius
Nakambala Estates, Plot No. 118a
Illovo Group Financing Services
Lubombo Road, Off Great North Road, Zambia
Illovo Group Holdings Limited
Illovo Sugar (Zambia) Limited
Illovo Group Marketing Services Limited
Nanga Farms PLC
Kilombero Holdings Limited
Tukunka Agricultural Limited
Sucoma Holdings Limited
Zambia Sugar plc
Mexico
Paseo de la Reforma No 2620, Edificio Reforma
Plus, piso 8, 803, 804 y 805, Col. Lomas Atlas,
DF 11950, Mexico
AB CALSA S.A. de C.V.
AB CALSA SERVICIOS, S. DE R.L. DE C.V.
Avenida Javier Barros Sierra 495, piso 7 oficina
07-102, Col. Santa Fe, Alvaro Obregón, Ciudad
de México, 01219, México
ACH Foods Mexico, S. de R.L. de C.V.
Servicios Alimentos Capullo, S. de R.L. de C.V.
Mozambique
KM75 EN1, Maçiana, Distrito de Manhiça,
Provincia de Maputo, Mozambique
Maragra Açucar, S.A.
Netherlands
Mijlweg 77, 3316 BE, Dordrecht, Netherlands
AB Mauri Netherlands B.V.
Luna ArenA, Herikerbergweg 238, 1101 CM,
Amsterdam Zuidoost, Netherlands
AB Mauri Netherlands European Holdings B.V.
Foods International Holding B.V.
Primark Fashion B.V.
Primark Netherlands B.V.
Primark Stil B.V.
75%
73%
75%
75%
66%
70%
90%
52%
194
192
194
Associated British Foods plc
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
29. Group entities continued
Joint ventures
A list of the group’s joint ventures as at 12 September 2020 is given below. All joint ventures are included in the group’s financial
statements using the equity method of accounting.
Joint ventures
United Kingdom
Weston Centre, 10 Grosvenor Street, London,
W1K 4QY, United Kingdom
Frontier Agriculture Limited
Boothmans (Agriculture) Limited
Forward Agronomy Limited
G F P (Agriculture) Limited
GH Grain Limited
Grain Harvesters Limited
Intracrop Limited
Nomix Limited
North Wold Agronomy Limited
Phoenix Agronomy Limited
SOYL Limited
The Agronomy Partnership Limited
Fine Lady Bakeries Ltd, Southam Road, Banbury,
Oxfordshire, OX16 2RE, United Kingdom
Chiltern Bakeries Limited
Berth 36, Test Road, Eastern Docks, Southampton,
Hampshire, SO14 3GG, United Kingdom
Southampton Grain Terminal Limited
Kingseat, Newmacher, Aberdeenshire,
AB21 0UE, Scotland, United Kingdom
Euroagkem Limited
Lothian Crop Specialists Limited
1st Floor Offices, 10 Hereford Road, Abergavenny,
Monmouthshire, NP7 5PR, United Kingdom
Brian Lewis Agriculture Limited
47, Beaumount Seymour & Co, Butt Road, Colchester,
Essex CO3 3BZ, United Kingdom
Anglia Grain Holdings Limited
Riverside, Wissington Road, Nayland, Colchester,
Essex, CO6 4LT, United Kingdom
Anglia Grain Services Limited
Unit 8, Burnside Business Park, Burnside Road, Market
Drayton, TF9 3UX, United Kingdom
B.C.W (Agriculture) Limited
Witham St Hughs, Lincoln, LN6 9TN, United Kingdom
Nomix Enviro Limited
Australia
Building A, Level 2, 11 Talavera Road, North Ryde
NSW 2113, Australia
Fortnum & Masons Pty Limited
Chile
Ave. Balmaceda 3500, Valdivia, Chile
Levaduras Collico S.A.
% holding
Joint ventures
% holding
China
1828 Tiejueshan Road, Huangdao District, Qingdao,
Shandong Province, China
Qingdao Xinghua Cereal Oil and Foodstuff Co., Ltd
Room 608, 6th Floor, 1379, Bocheng Road, Pudong
New District, Shanghai, China
AB Mauri Yihai Kerry Food Marketing (Shanghai) Co., Ltd
Room 607, 6th Floor, 1379, Bocheng Road, Pudong
New District, Shanghai, China
AB Mauri Yihai Kerry Investment Company Limited
Finland
Tykkimäentie 15b (PO Box 57), Rajamäki,
FIN-05201, Finland
Roal Oy
France
59, Chemin du Moulin, 695701, Carron, Dardilly, France
Synchronis
Germany
Brede 4, 59368, Werne, Germany
UNIFERM GmbH & Co. KG
INA Nahrmittel GmbH
UNIFERM Verwaltungs GmbH
Brede 8, 59368, Werne, Germany
UNILOG GmbH
Poland
ul. Wybieg, nr 5, lok 9, miesjsc, KOD 61-315, Poznan,
Poland
Uniferm Polska Sp Z.o.o
South Africa
1 Nokwe Avenue, Ridgeside, Umhlanga Rocks,
Kwazulu Natal 4320, South Africa
Glendale Distilling Company
Spain
C/ Raimundo Fernández, Villaverde 28, Madrid, Spain
Compañía de Melazas, S.A.
United States
The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington DE 19801,
United States
Stratas Foods LLC
Stratas Receivables I LLC
25%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
44%
25%
50%
50%
50%
50%
50%
50%
50%
33%
50%
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
195
195
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
29. Group entities continued
Associates
A list of the group’s associates as at 12 September 2020 is given below. All associates are included in the group’s financial
statements using the equity method of accounting.
Associates
United Kingdom
6th Floor 10 Bloomsbury Way, London, England,
WC1A 2SL, United Kingdom
Bakers Basco Limited
Paternoster House, 65 St. Paul's Churchyard,
London, EC4M 8AB, United Kingdom
C. Czarnikow Limited
Czarnikow Group Limited
C. Czarnikow Sugar Futures Limited
C. Czarnikow Sugar Limited
Sugarworld Limited
Vernon House, 40 New North Road, Huddersfield, West
Yorkshire, HD1 5LS, United Kingdom
Proper Nutty Limited
Australia
283 Flagstaff Road, Brinkley SA 5253, Australia
Big River Pork Pty Ltd
Murray Bridge Bacon Pty Ltd
32 Davis Road, Wetherill Park, Sydney NSW 2164,
Australia
New Food Coatings Pty Ltd
Bahrain
Suite No. 1959 Diplomatic Commercial Office, Tower B,
Building No. 1565, Road 1722, Diplomatic Area/Manama
317, Bahrain
Czarnikow Supply Chain Sales for Food & Beverage
Ingredients Bahrain S.P.C.
Brazil
Rua Fidêncio Ramos, 308, cj64, Torre A, Vila Olímpia,
São Paulo, SP, Cep 04551-010, Brasil
Czarnikow Brasil Ltda
Cz Energy Comercializado Ra De Etanol S.A
China
Room 17A01, 232 Zhong Shan 6th Road, Guangzhou
City, Guangdong Province, 510180, China
C. Czarnikow Sugar (Guangzhou) Company Ltd
India
House No. 1-8-373/A, Chiran Fort Lane, Begumpet,
Hyderabad, 500003, India
C. Czarnikow Sugar (India) Private Limited
Indonesia
Komplex Puri Mutiara Blok A21-22, JL. Griya Utama,
Sunter Agung, Jakarta, 14350, Indonesia
PT Indo Fermex
P.T. Jaya Fermex
PT Sama Indah
Israel
3 Golda Meir St. Ness Ziona, 74-036, Israel
Sucarim (Czarnikow Israel Sugar Trading) Ltd
8th Galgalay haplada, Herzlia, Israel
Sucris Limited
Italy
Via Borgogna, 2-20122, Milan, Italy
Czarnikow Italia Srl
%
holding
Associates
%
holding
Kenya
I & M Bank House, Second Ngong Avenue,
P.O. Box 10517, Nairobi 00100, Kenya
20%
C. Czarnikow Sugar (East Africa) Limited
43%
Mauritius
No 5 President John Kennedy Street, Port Louis,
Mauritius
Sukpak Limited
Mexico
Descartes #54 Int. 101, Col. Nueva Anzures Ciudad de
Mexico, 11590, Mexico
C. Czarnikow Sugar (Mexico), S.A. de C.V.
Czarnikow Servicios de Personales (Mexico), S.A. de C.V.
New Zealand
c/o KPMG, 18 Viaduct Harbour Avenue, Maritime
Square, Auckland, New Zealand
New Food Coatings (New Zealand) Limited
Philippines
Unit A, 103 Excellence Avenue, Carmelray
Industrial Park 1, Canlubang, Calamba, Laguna,
Philippines
New Food Coatings (Philippines) Inc.
Singapore
3 Phillip Street, #14-01 Royal Group Building, Singapore
048693
C. Czarnikow Sugar Pte. Limited
South Africa
1 Gledhow Mill Road, Gledhow, Kwadukuza, 4450,
South Africa
Gledhow Sugar Company (Pty) Limited
Tanzania
7th Floor Amani Place, Ohio Street, PO Box 38568,
Dar-es-Salaam, Tanzania
Czarnikow Tanzania Limited
Msolwa Mill Office, Kidatau, Tanzania
Kilombero Sugar Distributors Limited
Thailand
909 Moo 15, Teparak Road, Tambol Bangsaothong, King
Amphur Bangsaothong, Samutprakarn, Thailand
Newly Weds Foods (Thailand) Ltd
Newly Weds Foods (Trading) Limited
1203, 12th Floor, Metropolis Building, 725 Sukhumvit
Road, North Klongton, Wattana, Bangkok, 10110,
Thailand
Czarnikow (Thailand) Limited
United States
333 SE 2nd Avenue, Suite 2860, Miami, FL 33131, USA
C. Czarnikow Sugar Inc.
Vietnam
5th Floor, IMC Tower, 62 Tan Quang Khai, Tan Dinh
Ward, District 1, Ho Chi Minh City, Vietnam
Czarnikow (Vietnam) Limited
30%
43%
43%
50%
50%
43%
30%
43%
20%
50%
50%
43%
43%
43%
43%
43%
43%
43%
43%
40%
20%
20%
50%
43%
43%
21%
43%
43%
49%
49%
49%
43%
21%
43%
196
196
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
30. Alternative performance measures
In the reporting of financial information, the Board uses various APMs which they believe provide useful additional information
for understanding the financial performance and financial health of the group. These APMs should be considered in addition to
IFRS measures and are not intended to be a substitute for them. As they are not defined by IFRS, they may not be directly
comparable with other companies who use similar measures.
APMs are also used to improve the comparability of information between reporting periods and geographical units (such as like-
for-like sales) by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid users in understanding
the group’s performance.
Consequently, APMs are used by the Board and management for performance analysis, planning, reporting and incentive-setting
purposes.
APM
Closest equivalent
IFRS measure
Definition/purpose
Like-for-like
sales
No direct
equivalent
The like-for-like sales metric enables measurement of the performance of
our retail stores on a comparable year-on-year basis.
Reconciliation/calculation
Consistent with the definition given
This measure represents the change in sales at constant currency in our
retail stores adjusted for new stores, closures and relocations. Refits,
extensions and downsizes are also adjusted for if a store’s retail square
footage changes by 10% or more. For each change described above, a
store’s sales are excluded from like-for-like sales for one year.
No adjustments are made for disruption during refits, extension or
downsizes, for cannibalisation by new stores, or for the timing of national
or bank holidays.
It is measured against comparable trading days in each year subsequent
to reopening after lockdown.
Operating (profit) margin is adjusted operating profit as a percentage of
revenue.
This year, the comparative operating (profit) margin is calculated using
2019 IFRS 16 pro forma data.
Operating
(profit) margin
No direct
equivalent
Operating profit Adjusted operating profit is stated before amortisation of non-operating
Adjusted
operating
profit
Adjusted
profit before
tax
Profit before
tax
Earnings and
earnings per
share
Adjusted
earnings and
adjusted
earnings per
share
Exceptional
items
No direct
equivalent
intangibles, transaction costs, amortisation of fair value adjustments made
to acquired inventory, profits less losses on disposal of non-current assets
and exceptional items.
Items defined above which arise in the group’s joint ventures and
associates are also treated as adjusting items for the purposes of adjusted
operating profit.
Adjusted profit before tax is stated before amortisation of non-operating
intangibles, transaction costs, amortisation of fair value adjustments made
to acquired inventory, profits less losses on disposal of non-current assets,
exceptional items and profits less losses on sale and closure of businesses.
Items defined above which arise in the group’s joint ventures and
associates are also treated as adjusting items for the purposes of adjusted
profit before tax.
Adjusted earnings and adjusted earnings per share are stated before
amortisation of non-operating intangibles, transaction costs, amortisation
of fair value adjustments made to acquired inventory, profits less losses
on disposal of non-current assets, exceptional items and profits less losses
on sale and closure of businesses together with the related tax effect.
Items defined above which arise in the group’s joint ventures and
associates are also treated as adjusting items for the purposes of adjusted
earnings and adjusted earnings per share.
Exceptional items are items of income and expenditure which are material
and unusual in nature and are considered of such significance that they
require separate disclosure on the face of the income statement.
Constant
currency
Revenue and
adjusted
operating profit
(non-IFRS)
measure
Constant currency measures are derived by translating the relevant prior
year figure at current year average exchange rates, except for countries
where CPI has escalated to extreme levels, in which case actual exchange
rates are used. There are currently two countries where the group has
operations in this position – Argentina and Venezuela.
This year, adjusted operating profit at constant currency is calculated
against the 2019 IFRS 16 pro forma adjusted operating profit measure.
Reconciliation/calculation see
Note A below.
A reconciliation of this measure
is provided on the face of the
consolidated income statement
and by operating segment in note 1
of the financial statements
A reconciliation of this measure
is provided on the face of the
consolidated income statement
and by operating segment in note 1
of the financial statements
Reconciliations of these measures
are provided in note 7 of the
financial statements
Exceptional items are included
on the face of the consolidated
income statement with further
detail provided in note 2 of the
financial statements
Reconciliation/calculation see
Note B below.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
197
197
Notes forming part of the financial statements
for the 52 weeks ended 12 September 2020
30. Alternative performance measures continued
APM
Closest equivalent
IFRS measure
Definition/purpose
Effective tax
rate
Income tax
expense
The effective tax rate is the tax charge for the year expressed as a
percentage of profit before tax.
Adjusted
effective tax
rate
No direct
equivalent
The adjusted effective tax rate is the tax charge for the year on adjusted
profit before tax expressed as a percentage of adjusted profit before tax.
Dividend cover is the ratio of adjusted earnings per share to dividends per
share relating to the year.
Capital expenditure is a measure of investment each year in non-current
assets in existing businesses. It comprises cash outflows from the
purchase of property, plant and equipment and intangibles.
Gross investment is a measure of investment each year in non-current
assets of existing businesses and acquisitions of new businesses.
It includes capital expenditure (see above) as well as cash outflows from
the purchase of subsidiaries, joint ventures and associates, additional
shares in subsidiary undertakings from non-controlling interests and other
investments, as well as net debt assumed in acquisitions.
This measure comprises cash, cash equivalents and overdrafts, current
asset investments and loans.
This measure comprises cash, cash equivalents and overdrafts, current
asset investments, loans and lease liabilities.
Capital employed is derived from the management balance sheet and does
not reconcile directly to the statutory balance sheet. All elements of capital
employed are calculated in accordance with Adopted IFRS.
Average capital employed for each segment and the group is calculated by
averaging the capital employed for each period of the financial year based
on the reporting calendar of each business.
The return on (average) capital employed measure divides adjusted
operating profit by average capital employed. Also referred to as ROCE
and ROACE.
Working capital is derived from the management balance sheet and does
not reconcile directly to the statutory balance sheet. All elements of
working capital are calculated in accordance with Adopted IFRS.
Average working capital for each segment and the group is calculated by
averaging the working capital for each period of the financial year based
on the reporting calendar of each business.
This measure expresses average working capital as a percentage
of revenue.
Dividend
cover
Capital
expenditure
No direct
equivalent
No direct
equivalent
Gross
investment
No direct
equivalent
Net cash/debt
excluding
lease liabilities
Net cash/debt
including
lease liabilities
(Average)
capital
employed
No direct
equivalent
No direct
equivalent
No direct
equivalent
Return on
(average)
capital
employed
(Average)
working
capital
No direct
equivalent
No direct
equivalent
No direct
equivalent
(Average)
working
capital as a
percentage
of revenue
Note A
Reconciliation/calculation
Whilst the effective tax rate is not
disclosed, a reconciliation of the tax
charge on profit before tax at the
UK corporation tax rate to the
actual tax charge is provided in
note 5 of the financial statements
The tax impact of reconciling items
between profit before tax and
adjusted profit before tax is shown
in note 7 of the financial
statements
Reconciliation/calculation see
Note C below.
Reconciliation/calculation see
Note D below.
Reconciliation/calculation see
Note E below.
A reconciliation of this measure
is in note 25 of the financial
statements
A reconciliation of this measure
is in note 25 of the financial
statements
Consistent with the definition given
Consistent with the definition given
Consistent with the definition given
Consistent with the definition given
Grocery
£m
Sugar
£m
Agriculture
£m
Ingredients
£m
Retail
£m
Central and
disposed
businesses
£m
2020
External revenue from continuing businesses
Adjusted operating profit
Operating margin %
2019
External revenue from continuing businesses
Adjusted operating profit (IFRS 16 pro forma comparatives)
Operating margin %
3,528
437
12.4%
3,498
381
10.9%
1,594
100
6.3%
1,608
30
1.9%
1,395
43
3.1%
1,385
42
3.0%
1,503
147
9.8%
5,895
362
6.1%
1,505
137
9.1%
7,792
969
12.4%
22
(65)
36
(77)
Total
£m
13,937
1,024
7.3%
15,824
1,482
9.4%
198
198
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Financial statements
30. Alternative performance measures continued
Note B
2020
External revenue from continuing businesses at actual rates
2019
External revenue from continuing businesses at actual rates
Impact of foreign exchange
External revenue from continuing businesses at
Grocery
£m
Sugar
£m
Agriculture
£m
Ingredients
£m
Disposed
businesses
£m
Retail
£m
Total
£m
3,528
1,594
1,395
1,503
5,895
22
13,937
3,498
(38)
1,608
(91)
1,385
(7)
1,505
(44)
7,792
(33)
36
(1)
15,824
(214)
constant currency
3,460
1,517
1,378
1,461
7,759
35
15,610
% change at constant currency
+2%
+5%
+1%
+3%
-24%
-11%
2020
Adjusted operating profit at actual rates
2019
Adjusted operating profit at actual rates
Impact of foreign exchange
Adjusted operating profit at constant currency
Grocery
£m
Sugar
£m
Agriculture
£m
Ingredients
£m
Retail
£m
Central and
disposed
businesses
£m
Total
£m
437
100
43
147
362
(65)
1,024
381
−
381
30
(9)
21
42
−
42
137
(3)
134
969
(4)
965
(77)
−
(77)
1,482
(16)
1,466
-30%
% change at constant currency
+15% +376%
+2%
+10%
-62%
Note C
Adjusted earnings per share (pence)
Dividends relating to the year (pence)
Dividend cover
Note D
From the cash flow statement
Purchase of property, plant and equipment
Purchase of intangibles
Note E
From the cash flow statement
Purchase of property, plant and equipment
Purchase of intangibles
Purchase of subsidiaries, joint ventures and associates
Purchase of shares in subsidiary undertaking from non-controlling interests
Purchase of other investments
Net debt assumed in acquisitions (from the reconciliation of net debt)
2020
81.10
−
n/a
2019
137.50
46.35
2.97
2020
£m
561
61
622
2020
£m
561
61
16
2
1
−
641
2019
£m
680
57
737
2019
£m
680
57
84
1
−
15
837
31. Subsequent events
We consider the government decisions to close temporarily certain Primark stores to be a non-adjusting post-balance sheet
event, given the timing of the announcements after the year end. Any financial implications arising from these closures will be
reflected in financial results for the year ended September 2021.
Our yeast and bakery ingredients joint venture in China with Wilmar International received regulatory approval in April and the
new business commenced operations just after the year end. Construction of the major new yeast plant in northern China is
well underway.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
199
199
Company balance sheet
at 12 September 2020
Fixed assets
Intangible assets
Right-of-use assets
Investments in subsidiaries
Current assets
Debtors
– due within one year
– due after one year
Employee benefits assets – due after one year
Derivative assets
Cash and cash equivalents
Creditors: amounts falling due within one year
Bank loans and overdrafts – unsecured
Lease liability
Other creditors
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Bank loans – unsecured
Lease liability
Amounts owed to subsidiaries
Employee benefits liabilities
Deferred tax liabilities
Net assets
Capital and reserves
Issued capital
Capital redemption reserve
Hedging reserve
Profit and loss reserve
Equity shareholders’ funds
Note
1
2
3
4
4
5
2
7
2
7
5
6
8
8
8
8
2020
£m
17
15
708
740
2,660
152
94
61
1,454
4,421
(23)
(3)
(3,096)
(3,122)
1,299
2,039
(317)
(14)
(253)
(38)
−
(622)
1,417
45
2
4
1,366
1,417
2019
£m
19
−
703
722
2,858
151
220
64
931
4,224
(3)
−
(2,466)
(2,469)
1,755
2,477
(346)
−
(252)
(38)
(21)
(657)
1,820
45
2
2
1,771
1,820
The Company’s loss for the 52 weeks ended 12 September 2020 was £39m (52 weeks ended 14 September 2019 was £36m).
The financial statements on pages 200 to 207 were approved by the Board of directors on 3 November 2020 and were signed
on its behalf by:
Michael McLintock
Chairman
John Bason
Finance Director
200
200
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Company statement of changes in equity
for the 52 weeks ended 12 September 2020
Financial statements
Balance as at 15 September 2018
Total comprehensive income
Loss for the period recognised in the income statement
Remeasurement of defined benefit schemes
Deferred tax associated with defined benefit schemes
Movement in cash flow hedging position
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners
Dividends paid to equity shareholders
Net movement in own shares held
Total transactions with owners
Balance as at 14 September 2019
IFRS 16 opening balance adjustment
Balance as at 15 September 2019
Total comprehensive income
Loss for the period recognised in the income statement
Remeasurement of defined benefit schemes
Deferred tax associated with defined benefit schemes
Movement in cash flow hedging position
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners
Dividends paid to equity shareholders
Net movement in own shares held
Deferred tax associated with share based payments
Total transactions with owners
Balance as at 12 September 2020
Share
capital
£m
45
–
–
–
–
–
–
–
–
–
45
–
45
–
–
–
–
–
–
–
–
–
–
45
Capital
redemption
reserve
£m
Hedging
reserve
£m
Profit
and loss
reserve
£m
Total
£m
2
–
–
–
–
–
–
–
–
–
2
–
2
–
–
–
–
–
–
–
–
–
–
2
(9)
2,470
2,508
–
–
–
11
11
11
–
–
–
2
–
2
–
–
–
2
2
2
–
–
–
–
4
(36)
(361)
59
–
(302)
(338)
(358)
(3)
(361)
1,771
1
1,772
(39)
(124)
19
–
(105)
(144)
(271)
8
1
(262)
1,366
(36)
(361)
59
11
(291)
(327)
(358)
(3)
(361)
1,820
1
1,821
(39)
(124)
19
2
(103)
(142)
(271)
8
1
(262)
1,417
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
201
201
Accounting policies
for the 52 weeks ended 12 September 2020
Basis of preparation
The financial statements are presented
in sterling, rounded to the nearest
million. They are prepared under the
historical cost basis, except that
derivative financial instruments are
stated at their fair value, and in
accordance with Financial Reporting
Standard 101 Reduced Disclosure
Framework (FRS 101) and the
Companies Act 2006.
As permitted by FRS 101, the Company
has taken advantage of the disclosure
exemptions available under that
standard in relation to share-based
payments, financial instruments,
capital management, presentation of
comparative information in respect of
certain assets, presentation of a cash
flow statement, standards not yet
effective, impairment of assets and
certain related party transactions.
Where required, equivalent
disclosures are given in the
consolidated financial statements.
As permitted by section 408(4) of
the Companies Act 2006, a separate
income statement and statement
of comprehensive income for the
Company has not been included in
these financial statements. The
principal accounting policies adopted
are described below. They have
all been applied consistently to all
years presented.
Intangible assets
Intangible assets comprise goodwill
arising on business combinations and
operating intangibles. Goodwill is
defined under ‘Business combinations’
on page 141 of the consolidated
financial statements. The Companies
Act 2006 requires goodwill to be
amortised on a systematic basis over
its useful economic life. Under FRS 101
goodwill is not amortised, but is instead
reviewed for impairment on an annual
basis or whenever there are indicators
of impairment. The Company is
therefore invoking a ‘true and fair view
override’ to overcome the requirement
to amortise goodwill in the Companies
Act 2006. Had the Company amortised
goodwill, a period of three years would
have been chosen as its useful life from
the date of transition. The loss for the
year would have been no different as
the goodwill would already have been
fully amortised.
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 economic lives of
intangible assets from the date they are
available for use. The estimated useful
lives are generally deemed to be no
longer than five years.
Investments in subsidiaries
Investments in subsidiaries are stated
at cost less any provision for impairment.
Impairment
The carrying amount of the Company’s
investments in subsidiaries and other
assets 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, the recoverable amount
is estimated at least annually. An
impairment charge is recognised in
the income statement whenever the
carrying amount of an asset exceeds
its 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, estimated
future cash flows are discounted to
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.
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.
Financial assets and liabilities
Financial assets and financial liabilities,
except for derivatives, are measured
initially at fair value, plus directly
attributable transaction costs, and
thereafter at amortised cost.
Derivatives
Derivatives are used to manage the
Company’s economic exposure to
financial risks. The principal instruments
used are foreign exchange contracts
and swaps. 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.
Pensions and other post-
employment benefits
The Company operates one defined
contribution and two defined benefit
pension schemes. The Company is the
principal employer of the Associated
British Foods Pension Scheme, which
is a funded final salary scheme that is
closed to new members, as well as a
small unfunded final salary scheme.
For the defined benefit schemes,
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 Company during
the year. It also includes net interest
expense or income calculated by
applying the liability discount rate to
the net pension asset or liability. 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.
Remeasurements are recognised
immediately in other comprehensive
income. Surpluses are recognised only
to the extent that they are recoverable.
Contributions payable by the group
in respect of defined contribution
plans are charged to operating profit
as incurred.
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 equity.
202
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
202
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, using tax
rates enacted or substantively enacted
at the balance sheet date, providing
for temporary differences between
the carrying amounts of assets
and liabilities for financial reporting
purposes and the amounts used for
taxation purposes.
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.
Share-based payments
The fair value of the share awards at
grant date is recognised as an employee
expense with a corresponding increase
in equity, 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.
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 equity.
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.
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.
In the 2019 financial year, the Company
was a lessee under a number of
operating leases.
Payments made under operating
leases were recognised in the income
statement on a straight-line basis over
the term of the lease, as were the
benefit of lease incentives.
In the 2020 financial year, where the
Company is a lessee, the following
accounting policy applies:
Right-of-use assets
Right-of-use assets are recognised at
the commencement date of the lease,
which is the date the underlying
asset is available for use. Right-of-use
assets are measured at cost, less
any accumulated depreciation and
impairment losses, and adjusted for
subsequent remeasurement of lease
liabilities.
The cost of right-of-use assets
includes the amount of lease liabilities
recognised, initial direct costs incurred,
and lease payments made at or before
the commencement date less any
lease incentives received.
Right-of-use assets are depreciated on
a straight-line basis over the shorter of
the estimated useful life and the lease
term. Right-of-use assets are subject
to impairment.
Right-of-use assets are subsequently
measured at cost less accumulated
depreciation and any impairment losses,
adjusted for any remeasurement of the
lease liability.
Lease liabilities
Lease liabilities are recognised at the
commencement date of the lease and
are measured at the present value of
lease payments to be made over the
lease term, discounted using the
incremental borrowing rate at the lease
commencement date if the interest
rate implicit in the lease is not readily
determinable.
Lease payments include fixed
payments, including in-substance fixed
payments, and variable lease payments
that depend on an index or a rate,
less any lease incentives receivable.
Variable lease payments that do not
depend on an index or a rate are
recognised as an expense in the period
in which the event or condition that
triggers the payment occurs.
After the commencement date of the
lease, the lease liability is subsequently
measured at amortised cost using the
effective interest rate method. The
carrying amount of lease liabilities is
increased to reflect the accretion of
interest and reduced for the lease
payments made.
Financial statements
In addition, the carrying amount of
lease liabilities is remeasured when
there is a change in future lease
payments due to a change in the lease
term, a change in the in-substance
fixed lease payments or a change
in the assessment to purchase the
underlying asset.
Short-term leases and leases of
low-value assets
The Company applies the short-term
lease recognition exemption to
those leases that have a lease term
of 12 months or less from the
commencement date and do not
contain a purchase option. It also
applies the low-value asset recognition
exemption to groups of underlying
leases that are considered uniformly
low value.
Lease payments on short-term leases
and leases of low-value assets are
expensed to the income statement.
Lessor accounting
Where the Company subleases assets,
the sublease classification is assessed
with reference to the head lease
right-of-use asset. This assessment
considers, among other factors,
whether the sublease represents the
majority of the remaining life of the
head lease.
The ratio of rental income to head lease
rental payments is used to determine
how much of the right-of-use asset
should be derecognised. This
assessment takes into consideration
whether the sublet/head lease are
above/below market rate.
Amounts due from lessees under
finance leases are recorded as a
receivable at an amount equal to the
net investment in the lease. This is
initially calculated and recognised
using the incremental borrowing rate
at the recognition date. Any difference
between the derecognised right-of-use
asset and the newly recognised
amounts due for lessees under
finance leases is recognised in the
income statement.
The Company recognises finance
income over the lease term, reflecting
a constant periodic rate of return
on the net investment in the lease.
Operating lease income is recognised
as earned on a straight-line basis over
the lease term. The impact of the
transition adjustment was a £1m
increase to the net assets.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
203
203
Notes to the company financial statements
for the 52 weeks ended 12 September 2020
1. Intangible assets
Cost
At 14 September 2019
Acquisitions
At 12 September 2020
Amortisation
At 14 September 2019
Amortisation
At 12 September 2020
Net book value
At 14 September 2019
At 12 September 2020
2. Leases
Right-of-use assets
Cost
IFRS 16 opening balance adjustment at 15 September 2019
Other movements
At 12 September 2020
Depreciation and impairment
Depreciation for the year
At 12 September 2020
Net book value
IFRS 16 opening balance adjustment at 15 September 2019
At 12 September 2020
Lease liabilities
Cost
IFRS 16 opening balance adjustment at 15 September 2019
Repayments
Other movements
At 12 September 2020
Current
Non-current
3. Investments in subsidiaries
At 14 September 2019
Additions
At 12 September 2020
Goodwill
£m
Operating
intangibles
£m
Total
£m
14
–
14
–
–
–
14
14
9
–
9
(4)
(2)
(6)
5
3
23
–
23
(4)
(2)
(6)
19
17
Land and
buildings
£m
Total
£m
17
1
18
(3)
(3)
17
15
Land and
buildings
£m
19
(3)
1
17
3
14
17
17
1
18
(3)
(3)
17
15
Total
£m
19
(3)
1
17
3
14
17
£m
703
5
708
The additions relate to the allocation of shares under equity-settled share-based payment plans to employees of the Company’s
subsidiaries. There were no provisions for impairment in either year.
204
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
204
4. 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
Financial statements
2020
£m
2,596
18
46
2,660
2019
£m
2,800
13
45
2,858
152
151
The directors consider that the carrying amount of debtors approximates their fair value.
5. Employee entitlements
Reconciliation of changes in assets and liabilities
At beginning of year
Current service cost
Employee contributions
Employer contributions
Benefit payments
Past service cost
Interest income/(expense)
Return on scheme assets less interest income
Actuarial losses arising from changes in financial
assumptions
Actuarial gains arising from changes in demographic
assumptions
Experience gains on scheme liabilities
At end of year
2020
assets
£m
3,822
–
5
29
(150)
–
75
(20)
2019
assets
£m
2020
liabilities
£m
2019
liabilities
£m
3,714
–
7
41
(160)
–
104
116
(3,640)
(35)
(5)
–
150
–
(71)
–
(3,184)
(30)
(7)
–
160
(14)
(89)
–
2020
net
£m
182
(35)
–
29
–
–
4
(20)
2019
net
£m
530
(30)
–
41
–
(14)
15
116
–
–
(172)
(507)
(172)
(507)
–
–
3,761
–
–
3,822
40
28
(3,705)
23
8
(3,640)
40
28
56
23
8
182
The net pension asset of £56m comprises a funded scheme with a surplus of £94m and an unfunded scheme with a deficit
of £38m.
Further details of the Associated British Foods Pension Scheme are contained in note 12 of the consolidated financial statements.
6. Deferred tax assets and liabilities
At 14 September 2019
Amount credited to the income statement
Amount charged to equity
Effect of changes in tax rates on income statement
At 12 September 2020
7. 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
Employee
benefits
£m
Share-based
payments
£m
(31)
–
19
1
(11)
3
(2)
1
1
3
Other
£m
7
–
–
1
8
2020
£m
1
65
3,030
3,096
Total
£m
(21)
(2)
20
3
–
2019
£m
1
66
2,399
2,466
253
252
The directors consider that the carrying amount of creditors approximates their fair value.
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
205
205
Notes to the company financial statements
for the 52 weeks ended 12 September 2020
8. Capital and reserves
Share capital
At 14 September 2019 and 12 September 2020, the Company’s issued and fully paid share capital comprised 791,674,183
ordinary shares of 515⁄22p, each carrying one vote per share. Total nominal value was £45m.
Capital redemption reserve
The non-distributable capital redemption reserve arose following redemption of 2 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.
Share-based payments
Details of the Company’s equity-settled share-based payment plans are provided in note 24 to the consolidated financial statements.
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.
9. 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 had provided £949m of guarantees in the ordinary course of business as at 12 September 2020 (2019 – £888m).
10. Related parties
The Company has a controlling shareholder relationship with its parent company, Wittington Investments Limited, with the
trustees of the Garfield Weston Foundation and with certain other individuals who hold shares in the Company. Further details
of the controlling shareholder relationship are included in note 29 to the consolidated financial statements. The Company 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
Dividends paid by the Company and received in a beneficial capacity by:
trustees of the Garfield Weston Foundation and their close family
(i)
(ii) directors of Wittington Investments Limited who are not trustees of the Foundation
and their close family
(iii) directors of the Company who are not trustees of the Foundation and are not directors of
Wittington Investments Limited
Charges to fellow subsidiary undertakings
Charges to non-wholly owned subsidiaries
Interest income earned from non-wholly owned subsidiaries
Amounts due from non-wholly owned subsidiaries
Sub note
1
1
1
2
2
2
2
2020
£000
1,095
2019
£000
1,143
9,151
12,083
3,632
5,941
73
62
–
85
4,299
82
35
251
203
3,734
1. Details of the nature of the relationships with these bodies are set out in note 28 of the consolidated financial statements.
2. Details of the Company’s subsidiaries, joint ventures and associates are set out in note 29 of the consolidated financial statements.
11. Other information
Emoluments of directors
The remuneration of the directors of the Company is shown in the Remuneration report for the group on pages 110 to 121.
Employees
The Company had an average of 213 employees in 2020 (2019 – 197).
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.
206
206
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Progress report
Saturday nearest to 15 September
Revenue
Adjusted operating profit
Exceptional items
Transaction costs
Amortisation of non-operating intangibles
Acquired inventory fair value adjustments
Profits less losses on disposal of non-current assets
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)
Financial statements
2019
£m
15,824
1,421
(79)
(2)
(47)
(15)
4
(94)
15
(42)
12
1,173
(277)
896
111.1
137.5
46.35
2020
£m
13,937
1,024
(156)
(2)
(59)
(15)
18
(14)
11
(124)
3
686
(221)
465
57.6
81.1
nil
2016
£m
13,399
1,118
–
(5)
(21)
–
11
(14)
6
(56)
3
1,042
(221)
821
103.4
106.2
36.75
2017
£m
15,357
1,363
–
(5)
(28)
–
6
293
9
(59)
(3)
1,576
(365)
1,211
151.6
127.1
41.0
2018
£m
15,574
1,404
–
(2)
(41)
(23)
6
(34)
15
(50)
4
1,279
(257)
1,022
127.5
134.9
45.0
Annual Report and Accounts 2020
Annual Report and Accounts 2020
Associated British Foods plc
Associated British Foods plc
207
207
Glossary
Alternative performance measure
Annual General Meeting
Articles of Association of the Company
Associated British Foods plc
Associated British Foods plc, its subsidiaries and the group’s
interest in joint ventures and associates.
the Board of Associated British Foods plc
Carbon dioxide equivalent
Consumer Price Inflation
Employee Share Ownership Plan
Employer-financed Retirement Benefits Scheme
Financial Reporting Standard 101 Reduced Disclosure Framework
IAS 17 Leases
IFRS 16 Leases
International Financial Reporting Standards as adopted by the EU
International Financial Reporting Interpretations Committee
Key performance indicator
Long-term incentive plan
Net finance expense
Non-executive director
Revolving Credit Facility
Short-term incentive plan
2019 results prepared on an IFRS 16 pro forma basis
APM
AGM
the Articles
the Company
the group
the Board
CO2e
CPI
ESOP
EFRBS
FRS 101
IAS 17
IFRS 16
Adopted IFRS
IFRIC
KPI
LTIP
the sum of finance income, finance expense and other financial
income on the face of the consolidated income statement
NED
RCF
STIP
2019 IFRS 16 pro forma results
208
208
Associated British Foods plc
Associated British Foods plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
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
Registrar
Equiniti
Aspect House
Spencer Road
Lancing BN99 6DA
Timetable
Annual general meeting
4 December 2020
Interim results to be announced
20 April 2021
Website
www.abf.co.uk
Auditor
Ernst & Young LLP Chartered Accountants
Bankers
Barclays Bank PLC
Lloyds Banking Group plc
The Royal Bank of Scotland plc
Brokers
Credit Suisse Securities (Europe) Limited
One Cabot Square
London E14 4QJ
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
Warning about share fraud
From time to time, companies, their subsidiary companies, and shareholders can be the subject of investment scams.
The perpetrators obtain lists of shareholders or subsidiaries and make unsolicited phone calls or correspondence concerning
investment matters. They may offer to sell worthless or high risk shares and may offer to buy your current shareholdings at an
unrealistic price. They will often also inform you of untrue scenarios to make you think that you need to sell your shares or to
justify an offer that seems too good to be true. These operations are commonly known as ‘boiler rooms’.
Shareholders are advised to be very wary of any offers of unsolicited advice, discounted shares, premium prices for shares they
own or unsolicited investment opportunities. If you receive any such unsolicited calls, correspondence or investment advice:
• ensure you get the correct name of the person and firm;
• check that the firm is on the Financial Conduct Authority (FCA) Register to ensure they are authorised at
www.register.fca.org.uk;
• use the details on the FCA Register to contact the firm;
• call the FCA Consumer Helpline (0800 111 6768) if there are no contact details in the Register or you are told they are out
of date; and
• if you feel uncomfortable with the call or the calls persist, simply hang up.
Forward-looking statements
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.
Design and production
This document is printed on Nautilus
SuperWhite using vegetable oil-based
inks. Made in Austria, the stocks comprise
100% de-inked post-consumer waste.
Pulps used are totally chlorine-free.
The Forest Stewardship Council® (FSC®)
is dedicated to the promotion of
responsible forest management
worldwide. The forest-based material in
this product is recycled and the FSC® label
on this product ensures responsible use
of the world’s forest resources.
Annual Report and Accounts 2019
Associated British Foods plc
209
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ASSOCIATED BRITISH FOODS PLC
Weston Centre
10 Grosvenor Street
London
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 our website
www.abf.co.uk