Associated British Foods Annual Report 2021

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FY2021 Annual Report · Associated British Foods

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Annual Report 2021

Creating value

2021 GROUP FINANCIAL HIGHLIGHTS

INTRODUCTION

Group revenue

£13.9bn

(2020: £13.9bn)

Adjusted earnings
per share

80.1p

(2020: 81.1p)

Gross investment

£721m

(2020: £641m)

Adjusted operating
profit

£1,011m

(2020: £1,024m)

Dividends per share

26.7p

(2020: Nil)

Adjusted profit
before tax

£908m

(2020: £914m)

Special dividend
per share

13.8p

Net cash before
lease liabilities

£1,901m

(2020: £1,558m)

Net debt including
lease liabilities

£1,380m

(2020: £2,081m)

Operating profit

Profit before tax

£808m

(2020: £810m)

£725m

(2020: £686m)

Basic earnings
per share

60.5p

(2020: 57.6p)

CONTENTS

Strategic report
IFC 2021 Group financial highlights
IFC At a glance
1
Introduction
12 Chairman's statement
16 Chief Executive's statement
18 Our business model and strategy
20
Key performance indicators
22 Operating review
Grocery
22
Sugar
32
Agriculture
40
Ingredients
46
52
Retail
62
65
72 Responsibility
86 Climate-related Financial Disclosures

Financial review
Section 172 and our stakeholders

(TCFD)
Principal risks and uncertainties
Viability statement and going concern

88
95

Governance
96 Chairman’s introduction
98 Board of Directors
100 Corporate governance
117 Directors’ Remuneration Report
136 Directors’ Report
139 Statement of directors’ responsibilities
140 Independent Auditor’s Report

Financial statements
150 Consolidated income statement
151 Consolidated statement of
comprehensive income
152 Consolidated balance sheet
153 Consolidated cash flow statement
154 Consolidated statement of changes

in equity

155 Significant accounting policies
161 Accounting estimates and judgements
162 Notes forming part of the
financial statements

214 Company financial statements
222 Progress report
223 Glossary
224 Company directory

Creating value
together

Associated British Foods is a highly
diversified group, with a wide range of
food and ingredient businesses as well
as our flagship retail brand, Primark. We
are united by our purpose to provide safe,
nutritious and affordable food, and clothing
that is great value for money.

Together, as ABF, we work hard every day to
create long-term value for our stakeholders,
from our customers, employees and suppliers
to our shareholders.

In our annual report this year we highlight
how we create value across our businesses –
innovating, growing, collaborating and
investing to ensure we continue to deliver
ever more sustainable growth.

All photographs in this report complied with the relevant COVID-19 guidelines at the time in the
countries in which they were taken.

Associated British Foods plc Annual Report 2021

AT A GLANCE

Our operating businesses

Grocery

Sugar

Agriculture

Ingredients

Retail

Our grocery brands occupy leading
positions in markets across the globe.
In the UK, nine out of 10 households
use our brands.

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.

AB Agri is a leading international
agri-food business operating across
the supply chain, producing and
marketing animal feed, nutrition and
technology-based products.

Revenue

£3,593m
(2020: £3,528m)

Adjusted operating
profit
£413m
(2020: £437m)

Revenue

£1,650m
(2020: £1,594m)

Adjusted operating
profit
£152m
(2020: £100m)

Revenue

£1,537m
(2020: £1,395m)

Adjusted operating
profit
£44m
(2020: £43m)

Our Ingredients businesses are leaders
in yeast and bakery ingredients and
supply specialty ingredients to the
food, nutrition, feed and
pharmaceutical industries.

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,
we have 398 stores in 14 countries,
including the United States.

Revenue

£1,508m
(2020: £1,503m)

Adjusted operating
profit
£151m
(2020: £147m)

Revenue

£5,593m
(2020: £5,895m)

Adjusted operating
profit
£321m
(2020: £362m)

Our values

i n g everyone’s
d i gnity

g
n
i
r
e
v

r
u
o
g
i
r

e
g
r
i
t
y

n
g
w
i
t
h

g h

Progressing t h r
o
collabora t i o n

See pages 18 to 19 for more on our
values and how we operate.

About us

countries operated in,
across Europe, Africa,
the Americas, Asia and
Australia

128,000

employees

9 out
of 10

UK households use
our grocery brands

One of
the largest

sugar producers in
the world

community clinics and
hospitals serving
communities adjacent
to our Illovo Sugar
plants in Africa

One of
the largest

fashion retailers in
Europe

100%

of the UK’s sugar
beet crop processed
by British Sugar

£39m

invested in safety risk
management, of which
24% was dedicated to
COVID-19 safety
measures

UK’s
largest

animal feed
business

2.8m

meals provided through
surplus food donations
to foodbanks

53%

of our total workforce
are women

One
of the
leading

suppliers of specialty
yeast ingredients
globally

Our brands

One of
the largest

food manufacturers
in the UK

79%

of the waste we
generated was sent for
recycling, recovery or
other beneficial use

544,000

people’s lives improved
since the launch of
Twinings’ Sourced with
Care programme

>1m

people in the Primark
supply chain

Innovating
together

Grocery

Twinings

As interest in health and wellbeing grows
among consumers across the globe,
we have continued to expand our range
of Twinings teas, with innovative new
blends and flavours to meet this demand.
Retailing as Twinings Superblends in the
UK and US, Twinings Live Well in Australia
and La Tisanière in France, performance
is exceeding our expectations.

In the UK, Superblends is growing strongly
year-on-year and in the US we expanded
our offering with a new range, fortified with
vitamins or minerals. In Australia, we are
well-placed to become a leading brand for
wellbeing drinks and in France we became
the leader in the ‘teas and herbs’ category,
driven by our organic benefit-led range
including herbs such as guarana, turmeric,
basil and lemongrass.

See pages 22 to 31 for more on Superblends
and Grocery performance this year.

Associated British Foods plc Annual Report 2021

Growing
together

Sugar

Illovo Sugar Africa

Illovo Sugar Africa delivered an
exceptional performance this year, driven
by operational efficiencies and capitalising
on strong market growth opportunities
across our six countries of operation –
Eswatini, Malawi, Mozambique, South
Africa, Tanzania and Zambia.

Domestic market sales increased
by 60,000 tonnes to approximately
1.2 million tonnes in the year. Regional
sales were also strong, with a further
245,000 tonnes of sugar delivered to
neighbouring countries, building our
#AfricanSugar4AfricanMarkets strategy
of becoming the supplier of choice in the
markets of central and southern Africa.

1.45m
tonnes

sold in domestic
and regional
African markets

See pages 32 to 39 for more on Illovo and
Sugar performance this year.

Associated British Foods plc Annual Report 2021

Collaborating
together

Agriculture

AB Neo

In September 2020, AB Agri launched a
specialist neonate nutrition business – AB
Neo – which focuses on the essential
and very particular needs of young
farm animals.

AB Neo manufactures a range of products
for piglets, calves and poultry, helping our
customers provide the best start in life for
their animals.

We currently produce over 200,000 tonnes
of animal feed for young animals every
year, with manufacturing in Denmark,
Poland, Spain and the UK. Our growth
strategy is focused on moving into
new geographies.

200,000
tonnes

of feed for young
animals produced
this year

See pages 40 to 45 for more on AB Neo
and Agriculture performance this year.

Associated British Foods plc Annual Report 2021

Investing
together

Ingredients

AB Mauri and
ABF Ingredients

Our specialty ingredients businesses,
AB Mauri and ABF Ingredients, continued
to invest this year with the opening of two
new state-of-the-art facilities to support
their future growth and development.

AB Mauri opened a new Global Technology
Centre in the Netherlands (pictured right),
which provides an international hub for our
research and development in bakery and
yeast ingredients. It is at the cutting edge
of bakery capability and reinforces
AB Mauri’s position as a market leader in
bakery and yeast ingredients.

AB Enzymes, part of ABF Ingredients,
opened a pilot plant at the manufacturing
site in Rajamäki, Finland. This new plant
significantly increases our capability
and capacity to validate and optimise a
wider range of new concepts before
full-scale production.

2 new

research and
development
facilities opened
in the year

See pages 46 to 51 for more on the research
and development centres and Ingredients
performance this year.

Associated British Foods plc Annual Report 2021

More sustainable
together

Retail

Primark

More sustainable fashion,
affordable for all
At Primark, we believe that more
sustainable fashion should not have to
come with a high price tag for people or
our planet. We have been on a journey
for more than a decade to build a more
sustainable business, but we will go
further and faster, using our size and
scale to make a real difference.

That is why this year we have launched
the Primark Cares sustainability strategy.
Our priorities are to minimise fashion
waste, reduce our impact on the planet
and improve the lives of the people who
make our clothes.

See pages 52 to 61 for more on Primark Cares
and Retail peformance this year.

Associated British Foods plc Annual Report 2021

CHAIRMAN’S STATEMENT

Chairman’s statement

The economic effects of the measures taken by governments
to restrict the COVID-19 pandemic were evident in the financial
results for our last financial year and in the results for this
financial year. The Board recognises that a Group of our scale
and significance has responsibilities to many stakeholders.
I want to say thank you once again to every employee for
their hard work and determination in these difficult times.

Sales and profit for the Group this
financial year were again below pre-
COVID levels and this was driven by the
results for Primark, where a third of its
available trading days were lost as a
result of store closures due to the public
health measures taken in our major
markets. The Primark management and
operational teams demonstrated agility in
responding to both the fast changing and
wide range of trading restrictions applied
to our stores over the year. The strength
of Primark’s sales after the reopening of
all our stores in the spring demonstrated
the relevance and appeal of our value-for-
money offering. Growth in our food
businesses continued this year with a
combined increase in revenue of 5%
and increase in adjusted operating
profit of 10% this financial year, at
constant currency.

Importantly, during this difficult trading
year, we maintained our focus on building
for the future.

In Grocery, we continued to build our
brands with a number of new product
introductions and wider international
distribution. We made significant
progress with the expansion of Twinings
in Wellness teas, Ovaltine growth in
China, Brazil and Switzerland, the
overseas development of Patak’s and
Mazzetti and the continuing development
of Yumi’s in Australia. In Ingredients,
we made major steps to build our
development capability and opened new
technology development centres for our
bakery ingredients and enzyme
businesses. Our yeast joint venture with
Wilmar International in China became
operational this year, progress was made
on building a major new yeast facility and
we expect strong growth from this
business in the future.

We invested £721m in our businesses
this year. We made good progress with a
number of major capital projects: work to
recommission the Vivergo bioethanol
plant in the UK; a major new animal feed
mill in Western Australia; and a number
of capacity increases including bakery
production in Australia and yeast
production in Brazil. In Primark, we
continued to increase retail selling space
with the opening of 15 new stores and
developed our presence in the important
US and Central European markets. We
made progress in the development and
implementation of new inventory
management and point of sale systems
across the store estate. The expansion
of our state-of-the art warehouse in
Roosendaal in the Netherlands
was completed.

This year we have extensively engaged
with our investors on the key ESG factors
for the Group and our strategy and
governance in relation to these. We
provided an in-depth review of Primark’s
processes to provide assurance of its
supplier practices and of Primark’s
sustainability strategy, Primark Cares,
designed to reduce its impact on the
environment and to improve the lives of
people in its supply chain. A new
customer campaign was launched in
September to highlight Primark’s
commitment to make more sustainable
fashion affordable for all. The March and
September presentations are available on
our website. A further briefing is due to
be held in early 2022 and will focus on
the environmental factors that are most
material for the Group.

Our Responsibility and ESG
Our Company was founded with a
conviction that acting responsibly and
with integrity is the only way to build and
manage a business over the long term.
The belief that companies do well when
they act well is deeply ingrained in all of
us, from the Board and the leadership
team, across all our businesses and at all
levels of our workforce. We have a clear
sense of our social purpose. We exist to
provide safe, nutritious and affordable
food and to provide quality, affordable
clothing to hundreds of millions of
customers worldwide.

We have a strong belief in our duty to
respect the dignity of everyone who
works for us, both within our workforce
and in our supply chains. We have a firm
commitment to operating under the
highest standards of corporate
citizenship, acting as a good and
supportive neighbour to the communities
around us while recognising our wider
obligations to society as a whole. Our
2021 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.

Results
Revenue for the Group of £13.9bn was in
line with last year at actual exchange
rates and was 1% ahead at constant
currency. All our food businesses
delivered growth and in aggregate sales
were 5% ahead of last year at constant
currency. Primark sales in both years
were impacted by trading restrictions and
store closures as a result of government
measures taken to contain the spread of
COVID-19. The periods of closure were
longer this year compared to the last
financial year and sales declined by 5% at
constant currency as a result.

Adjusted operating profit this year of
£1,011m was broadly in line with last
financial year. For the full year the
strengthening of sterling against our
major currencies has led to a translation
loss of some £36m. The adjusted
operating profit for Grocery, Sugar,
Agriculture and Ingredients combined
increased by a strong 10% at
constant currency. Primark operating
profit margin improved this year with an
adjusted operating profit of £415m,
before repayment of job retention
scheme monies of £94m, which
compared to £362m last financial year.

Associated British Foods plc Annual Report 2021

CHAIRMAN’S STATEMENT continued

The charge for net finance expense and
other financial income declined to £103m
following the repayment of £25m of the
private placement debt and there were
no RCF interest charges since the facility
was not drawn down this year. This was
another year where a lower proportion of
the Group’s profit was generated in the
UK and Ireland because of the lower
Primark profitability and the Group’s
adjusted effective tax rate was therefore
again elevated, at 28.1%, a small
decrease from 28.8% last year.

The Group’s net cash before lease
liabilities of £1.9bn this year compared to
£1.6bn at the same time last year even
after another year in which the pandemic
adversely impacted Primark’s trading.
This outturn reflects the strong cash
generating capability of the Group and
good working capital management.

The statutory operating profit for the year
at £808m was broadly in line with last
year. It is stated after a net exceptional
non-cash charge of £151m this year
which mainly comprises impairments of
£141m in property, plant and equipment
at our Spanish Sugar business,
Azucarera, and other Sugar businesses,
and was marginally lower than the
£156m net exceptional charge last year.
Basic earnings per share were 60.5p, an
increase from the reported 57.6p
last year.

Board
We welcomed Dame Heather Rabbatts
as a non-executive director of the
Company with effect from 1 March 2021.
Heather brings a wealth of experience
having held a number of executive and
non-executive roles across local
government, infrastructure, media and
sports. She was the first woman to join
the board of the Football Association. She
continues to work in film and sports and
is a non-executive director of Kier
Group plc.

Dividends
The Board decided not to pay any
dividends relating to the 2020 financial
year. This was due to the uncertainty of
cash flow for the Group as a result of the
economic impact of COVID-19 on our
businesses, especially driven by the
unknown duration and extent of Primark
store closures. The scale of this
uncertainty was demonstrated by the
cash outflow of some £800m
experienced in the period March to May
2020. Uncertainty was particularly acute
in April and November 2020 when the
Board considered the payment of an
interim and then a final dividend for the
2020 financial year.

Although uncertainty remained at the
2021 half year, it was substantially lower
as a result of the extensive roll-out of
vaccinations, and so the Board decided to
declare an interim dividend. The dividend
of 6.2p per share was based on the
proforma adjusted earnings per share in
the first half of 18.5p which was net of a
£79.4m charge for the job retention
scheme repayments in respect of that
period.

All our stores are now open, and are
mostly free of trading restrictions, and
the food businesses are trading well. The
uncertainty around future cash flows is
considerably lower than a year ago
although the possibility of further trading
restrictions cannot be ruled out. Our net
cash before lease liabilities was £1.9bn at
the year end. The Board is proposing a
final dividend of 20.5p per share which
together with the interim dividend of 6.2p
per share makes a total of 26.7p per
share for the year, which is three times
covered by the adjusted earnings per
share of 80.1p for the year, in line with
previous practice. The Board intends to
continue to have regard to a cover of
three times for regular dividends in the
ordinary course.

The Board is pleased by the recovery in
trading across the Group’s activities and
the highly effective management of cash
and reduction in financial leverage. As a
sign of our confidence, the Board is also
declaring a special dividend of 13.8p per
share, to be paid as a second interim
dividend at the same time as the
payment of the final dividend. We
determined the amount of this special
dividend such that, taken with the final
dividend proposed for the 2021 financial
year, the aggregate equates to the final
dividend of 34.3p per share paid in
respect of the 2019 financial year which
was our highest ever final dividend
and was based on the Group’s
pre-COVID profitability. Total dividends
for the year are 40.5p per share.

The payment date for the 2021 final
dividend and second interim dividend will
be 14 January 2022 to shareholders on
the register on 17 December 2021.

A strong capital base
The Board’s treasury policies are in place
to maintain a strong capital base and
manage the Group’s balance sheet and
liquidity to ensure long-term financial
stability. These policies are the basis for
investor, creditor and market confidence
and enable the successful development
of the business.

The financial leverage policy is that, in the
ordinary course of business, the Board
prefers to see the Group’s ratio of net
debt including lease liabilities:Adjusted
EBITDA to be well under 1.5 times at
each half year and year end reporting
date. In exceptional circumstances, the
Board will be prepared to see leverage
above that level for a short period of
time. At the end of this financial year, the
financial leverage ratio was 0.7 times.
The Group also holds substantial net cash
balances which ensure that it has
sufficient liquidity to meet unforeseen
requirements and at this financial year
end net cash balances, before lease
liabilities, amounted to £1.9bn.

We are seeing significant cost increases
in energy, logistics and commodities in
addition to the impact of widely reported
port congestion and road freight
limitations. Our businesses are working
to offset the impact of these through
cost savings. Where necessary, our
food businesses will also implement
price increases.

With the recovery in Primark’s
profitability, we expect the Group’s
effective tax rate to fall next year to a
level closer to pre-COVID rates.

We will continue to invest in building the
capacity and capabilities of all our
businesses. We expect the improvement
in Group profitability to deliver another
year of strong cash generation.

Taking these factors into account, we
expect significant progress, at both the
half and full year, in adjusted operating
profit and adjusted earnings per share for
the Group.

Michael McLintock
Chairman

The events of the last two years have
clearly demonstrated the importance of
having sufficient financial resources and
the credit strength to meet the
operational challenges faced by our
businesses, and in particular Primark. We
are pleased that S&P Global announced
that they had assigned to the Group an
‘A’ grade long-term issuer credit rating,
with a stable outlook, which reflects the
strength of each of the Group’s
businesses, their diversity and ABF’s
strong credit metrics underpinned by a
conservative financial policy.

Capital allocation policy
Our priority is always to invest in our
businesses, both organically and by
acquisition, at an appropriate pace and
wherever attractive returns on capital can
be generated. We see considerable
opportunities to do this, both over the
short and the medium term, and across
all our businesses. Nevertheless, the
ability to invest our capital is inevitably
subject to the timing of opportunities and
practical limits as to the amount that can
be invested within a given timeframe. As
a result, the Board may from time to time
conclude that it has surplus cash and
capital. In making this assessment, the
Board will be mindful that financial
leverage consistently below 1.0 times
and substantial net cash balances at both
half and full year ends may indicate such
a surplus position.

Surplus capital may be returned to
shareholders by special dividend or share
buy-backs.

It is not possible to anticipate every
possible set of circumstances and this
policy must be subject to the Board’s
discretion. Currently, uncertainty remains
over the possible reintroduction of trading
restrictions related to COVID-19 and the
decision to declare a special dividend at
the indicated level is made with this
in mind.

Thank you to our employees
At the end of another challenging year I
am proud of how our people have
continued to respond to the many
challenges presented by COVID-19,
whilst at the same time taking action and
seizing opportunities for our future. The
strength of our culture shone through and
our operating model of devolved decision
making to each business and market
enabled us to respond very quickly and
appropriately to local challenges. The
responses this year were again a
testament to the dedication, skills and
ingenuity of our people. I will never be
able to thank all of them enough for their
extraordinary efforts during this time.

Outlook
The lower Group profit in the last two
financial years compared to the 2019
financial year was driven by the extensive
closure of Primark stores. All of our
stores are now open and are mostly free
of trading restrictions. There has been an
extensive roll-out of vaccinations against
COVID-19 in all of the markets where
Primark operates and customers have
returned to our stores in large numbers.
Absent the reimposition of significant
restrictions, we expect Primark trading to
continue to improve and for sales to
increase by at least the estimated £2bn
of sales lost due to store closures last
financial year. Primark will continue to
expand its selling space next year, with
the most stores being added in two of
our key markets, Italy and Spain. The
expected significant increase in sales
should lead to a sharp improvement in
Primark’s adjusted operating margin,
recovering to above 10%. Primark is not
immune to the challenges of supply
chain, raw material cost and labour rate
inflation. However, we currently expect
the impact of these to be broadly
mitigated by the transaction currency
gain arising from the weaker US dollar,
improved store labour efficiency and
lower operating costs.

Associated British Foods plc Annual Report 2021

CHIEF EXECUTIVE’S STATEMENT

Chief Executive’s statement

We have the people and the cash resources
to seize the opportunities ahead and look to
the future with confidence.

I am proud of how we responded to the
many challenges presented by COVID-19
this year. All of our people demonstrated
care, good judgement and immense
hard work.

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 was in line with last year
at £13.9bn at constant currency, with the
reduction compared to pre-pandemic
levels driven by the loss of sales for the
periods in which Primark’s stores were
closed. Adjusted operating profit of
£1,011m was broadly in line with last
year, which was also impacted by lost
sales during the closures of
Primark stores.

Our food businesses delivered another
strong 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 10%,
building on an increase of 26% last year,
at constant currency.

Sugar delivered another year of very
strong improvement with profit margin
reaching 9.2% and a 75% increase in
adjusted operating profit at constant
currency. Our focus in this business has
been to deliver an acceptable shareholder
return on capital over the cycle and return
on average capital employed reached
10.2% this year. The profit improvement
was underpinned by significant savings
from our ongoing cost improvement and
efficiency programmes. Notably, after a
disappointing performance last year,
Illovo recovered strongly, benefiting from
higher sales as a consequence of our
long-term drive to develop African
domestic and regional volumes.

Grocery revenues were 3% ahead of last
year at constant currency. This was
achieved despite a small decline in some
retail volumes this year compared to the
elevated levels seen last year. Twinings
Ovaltine delivered strong sales growth,
supported by increased marketing
investment and driven by Ovaltine
growth in emerging markets and a
programme of new product development

in existing markets. The international
development of a number of our brands,
notably Patak’s and Mazzetti, continued.
The adjusted operating profit for Grocery
declined marginally, mainly due to
weaker corn oil margins at ACH. The
development of our brands over the
medium term is demonstrated by an
increase in adjusted operating profit of
12% over the pre-COVID levels of 2019,
following a very strong profit increase of
15% last year, at constant currency.

AB Agri performed well with progress in
both revenue and adjusted operating
profit. Growth was notable in China, our
UK feed business AB Connect and in AB
Neo, which specialises in feed for
animals in the early stages of life, driven
by higher volumes and commodity prices.
Ingredients’ sales were 4% ahead, and
adjusted operating profit was 8% ahead
of last year at constant currency driven by
strong trading at AB Mauri.

Primark
As we look back on two years of
disruption to Primark trading caused by
the COVID-19 pandemic, our confidence
in the Primark business model is
unaltered.

There is no doubt that Primark, with its
reliance on a highly efficient store retail
model, has been seen to be vulnerable to
the pandemic. The closure of its stores
for long periods and restrictions on
trading inevitably led to significant loss of
sales and profit.

We believe that Primark’s proposition of
providing customers with a wide
selection of products at great value prices
is highly sustainable. The low-cost
retailing model is driven by structural
advantages: purchasing quantities on a
large scale leads to efficient production; a
broad supplier base with long-term
relationships; very low distribution costs
throughout the supply chain from supplier
to store; and high store sales densities.
These characteristics provide Primark
with a differentiated business model with
real competitive advantage.

Primark is a compelling brand proposition.
It offers customers a wide selection of
products, from everyday essentials to the
latest trends, for all age groups and at
prices everyone can afford, ranged across
attractive up-to-date stores. There is
strong supporting evidence that, for a
substantial share of customers, the
in-store shopping experience will have
enduring appeal. Primark is uniquely

placed on the High Street to take
advantage of this as it continually evolves
its store design and in-store services
and expands into new product ranges
attracting existing and new customers to
the business.

At the time of writing, all our stores have
reopened and are trading with only
limited restrictions in some countries.
There has been an extensive roll-out of
vaccinations against COVID-19 in all the
markets where Primark operates, and
customers have returned to our stores in
large numbers. A post-pandemic
equilibrium has not yet been reached.
However, like-for-like sales, compared to
pre-COVID levels, are steadily improving
as customers’ appetite to return to
shopping and city centres increases and,
over the medium term, as foreign and
domestic tourism recovers.

Next year, we expect Primark to increase
sales significantly along with a sharp
improvement in adjusted operating
margin, recovering to above 10%, absent
the reimposition of further restrictions on
store trading. We see opportunities to
reduce costs further, with lower
operating costs from reduced lease costs
and the harnessing of technology in our
warehouses and stores. Additionally,
Primark is investing to upgrade its digital
presence and online visibility and is on
track to launch a redesigned customer
facing website in the UK in the first
quarter of 2022. In September, Primark
launched a wide-reaching new
sustainability strategy aiming to position
the business as a pioneer for making
more sustainable fashion affordable for
all, engaging a new generation of
customers. We believe this strategy can
be implemented without any significant
movements in the Primark profit margin
over the longer term.

Primark sees further growth potential in
all of its existing markets, and in some
new markets besides. In particular, it
will accelerate the expansion of its
selling space in the major markets of the
US, France, Italy and Iberia, building on
its established brand recognition, proven
track record of successful store openings
and strengthening relationships with
key landlords.

George Weston
Chief Executive

Associated British Foods plc Annual Report 2021

OUR BUSINESS MODEL AND STRATEGY

Creating value together

Our way of operating – entrepreneurial but also financially
prudent and focused on the long term – has achieved growth
over many years and creates long-term value for our
shareholders and other stakeholders alike.

Our Group strategy and
devolved operating
model…

…applied across our five
business segments…

…creates long-term
value for all our
stakeholders.

Role of the centre

R e t a il

Gro

oration

b
lla
o
c
r
o
f
k
r
o
w
e
m

i
s

I
n
g

c
i
p

t
i

s o
v

Agricult u r e

d capital allocation
ersight and support by G r o u p E x

M a

Customers

Employees

Investors and
shareholders

Suppliers

Communities

Governments

a
g
e

m
e
n
t

t
n
e

r
a
g
u
S

t e rial risk assessm
n d the Board

e a

ti v

Long-term view

Organic and
acquisition growth

Devolved
operating model

Entrepreneurial flair

Capital discipline

Prudent balance
sheet management

Commitment to
ethical conduct

Sustainable
business practice

For business segment
strategies please see:

Grocery: page 24

Sugar: page 34

Agriculture: page 42

Ingredients: page 48

Retail: page 54

Associated British Foods is a highly diversified group with
a wide range of food and ingredients businesses, more than
40 well-known grocery brands, and our flagship retail brand,
Primark. We have a strong social purpose: to provide safe,
nutritious and affordable food, and clothing that is great value
for money.

We are a global organisation with 128,000 employees,
operations in 53 countries, suppliers in many more, and
customers in more than 100 countries. More than half of our
senior leaders are non-UK citizens, representing 23 different
nationalities between them.

Devolved operating model
We operate a devolved operating model
across our five business segments of
Grocery, Sugar, Agriculture, Ingredients
and Retail and believe the best way to
create enduring value involves setting
objectives from the bottom up rather
than the top down. We make operational
decisions locally, because in our
experience they are most successful
when made and owned by the people
with the best understanding of their
customers and markets. This
accountability is highly motivating for our
strong local management teams,
encouraging an entrepreneurial approach
that drives innovative business thinking.

The Group, or corporate centre, provides
a framework for sharing of ideas and best
practice. The Group is in constant
dialogue with the people who run our
businesses, giving our corporate leaders
a detailed understanding of their material
opportunities and risks and enabling us to
collaborate when making material
decisions. Because the centre is small
and uses short lines of communication,
we can also ensure prompt and
unambiguous decision-making.

The chart to the left shows how our
business model works, from the
discussion and scrutiny of each business
by the Group leadership team to
oversight by the Board through our
structured governance framework.

Creating long-term value
We take a long-term view to create
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. We are committed
to increasing shareholder value through
sound commercial and responsible
business decisions that deliver steady
growth in earnings and dividends.

Our ownership structure provides us with
the stability to invest in businesses that
we believe in and to support the growth
of those businesses over the long term.
Our growth has been mostly organic,
achieved through investment in
marketing, development of existing and
new products and technologies, and
through targeted capital expenditure to
improve efficiency and expand capacity.
Acquisitions are carefully targeted to
complement existing business activities
and exploit opportunities in adjacent
markets or geographies.

Our long-established, disciplined
approach to capital investment underpins
our growth. We manage our balance
sheet to provide the headroom necessary
to fund long-term investment and we
make funding available to all our
businesses, providing the returns on their
investment proposals meet or exceed a
set of clearly defined criteria. We believe
that this approach, coupled with a
rigorous commitment to ethical conduct
and sustainable business practice, is the
best way to create enduring value for all
our stakeholders.

Our unique ownership structure
The Group’s majority shareholder is
Wittington Investments Limited, a
privately owned company which in turn is
majority owned by the Garfield Weston
Foundation. The Foundation is one of the
UK’s leading grant-making charitable
institutions and is mainly funded by the
dividends from Associated British Foods.
The returns we generate therefore
matter not only for shareholders, they
also provide essential funding for many
charities. In the last financial year to 5
April 2021, the Foundation donated
around £98m to some 2,000 charities
across the UK and in the 63 years since
the Foundation was created it has
disbursed more than £1bn in grants.

Our people, culture and values
We understand the value of good people,
strong and accountable teams, the power
of brands, the need for continuous
investment and the need to maintain
strong and enduring relationships with
customers and suppliers.

Across all 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, to
promoting diversity and respecting
human rights. Our values are: respecting
everyone’s dignity; acting with integrity;
progressing through collaboration; and
delivering with rigour.

We pride ourselves on being a first-class
employer, working actively to develop our
people and create opportunities for
progression. As a result, our employees
tend to stay with us for a long time,
building exciting careers that help them
fulfil their goals at work, at home and in
the community.

We believe that most people are
inherently good and that with
encouragement, engagement and
support they will do the right thing in the
right way. Our high standards of integrity
enable us to drive a strong culture,
recognising that acting responsibly is the
only way to build and manage a business
over the long term.

Associated British Foods plc Annual Report 2021

KEY PERFORMANCE INDICATORS

How
we track
progress

We use key
performance
indicators (KPIs) to
measure our progress
in delivering the
successful
implementation of
our strategy and to
monitor our
performance

We have defined and explained
our alternative performance
measures in note 30.

Each business develops KPIs
relevant to its operations. These
are monitored regularly. In the
case of adjusted operating profit
and return on capital employed,
we use them as metrics to
incentivise our management
teams.

Financial

Non-financial

Adjusted operating proﬁt
(£m)

Group revenue (£bn)

Gross investment (£m)

Number of employees

Workforce gender balance
(%)

Reportable injury rate (%)

,
,

1
1
4
4
0
0
4
4

,
,

1
1
4
4
2
2
1
1

,
,

1
1
3
3
6
6
3
3

1
1
5
5
4
4

.
.

1
1
5
5
6
6

.
.

1
1
5
5
8
8

.
.

1
1
3
3
9
9

.
.

1
1
3
3
9
9

.
.

9
9
4
4
5
5

,
,

1
1
0
0
2
2
4
4

,
,

1
1
0
0
1
1
1
1

,
,

1
1
1
1
6
6
5
5

8
8
3
3
7
7

7
7
2
2
1
1

6
6
4
4
1
1

1
1
3
3
7
7
0
0
1
1
4
4

,
,

1
1
3
3
8
8
0
0
9
9
7
7

,
,

1
1
3
3
2
2
5
5
9
9
0
0

,
,

1
1
3
3
3
3
4
4
2
2
5
5

,
,

1
1
2
2
7
7
9
9
1
1
2
2

,
,

4
4
8
8

5
5
1
1

5
5
2
2

5
5
3
3

5
5
2
2

4
4
9
9

4
4
8
8

4
4
7
7

.
.

0
0
6
6
3
3

.
.

0
0
5
5
9
9

.
.

0
0
5
5
4
4

W
o
m
e
n

M
e
n

.
.

0
0
3
3
2
2

.
.

0
0
2
2
8
8

Adjusted profit and earnings
measures provide a consistent
indicator of performance
year-on-year and are aligned with
incentive targets.

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 earnings per
share (pence)

Dividends per share
(pence)

Cash generation (£m)

1
1
3
3
4
4
.
.
9
9

1
1
3
3
7
7
.
.
5
5

1
1
2
2
7
7
.
.
1
1

4
4
6
6
.
.
3
3
5
5

4
4
5
5
.
.
0
0
0
0

4
4
1
1
.
.
0
0
0
0

1
1
,
,
6
6
4
4
1
1

1
1
,
,
5
5
0
0
9
9

1
1
,
,
4
4
3
3
0
0

1
1
,
,
7
7
5
5
3
3

1
1
,
,
4
4
1
1
3
3

8
8
1
1
.
.
1
1

8
8
0
0
.
.
1
1

2
2
6
6
.
.
7
7
0
0

i
l

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.

Net cash generated from
operating activities is monitored
to ensure that profit is converted
into cash for future investment
and to return to shareholders.

Net cash before lease
liabilities (£m)

Return on capital
employed (%)

Financial leverage

1
1
,
,
9
9
0
0
1
1

,
,

1
1
5
5
5
5
8
8

2
2
0
0
.
.
5
5

2
2
0
0
.
.
1
1

1
1
9
9
.
.

3
3

1
1
2
2

.
.

1
1
.
.
1
1

0
0
7
7

.
.

9
9
3
3
6
6

6
6
7
7
3
3

6
6
1
1
4
4

9
9
5
5

.
.

9
9
.
.
8
8

This measure monitors the
Group’s liquidity and capital
structure and is used to calculate
ratios associated with the Group’s
banking covenants.

This measure monitors the level
of return generated by the
Group’s investment in its
operating assets. It is also a key
part of management incentive
targets.

This measure is only provided
since the implementation of
IFRS16. This measure monitors
the Group’s financial strength to
ensure long-term financial stability.

The 2019 figure is given on an
IFRS 16 pro forma basis.

A measure of the scale and
growth of the Group.

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.

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.

Primark selling space
(sq ft 000) and number of
countries of operation

Primark Scope 1, 2, 3 GHG
emissions (000 tonnes
CO2e)

Proportion of units sold
being Primark Cares
product (%)

,
,

1
1
6
6
8
8
4
4
2
2

1
1
4
4

,
,

1
1
6
6
2
2
4
4
7
7

1
1
3
3

,
,

1
1
5
5
6
6
4
4
2
2

1
1
2
2

,
,

1
1
3
3
8
8
6
6
2
2

,
,

1
1
4
4
8
8
0
0
5
5

1
1
1
1

6
6
,
,
2
2
4
4
6
6

5
5
,
,
1
1
1
1
4
4

4
4
,
,
6
6
0
0
6
6

2
2
5
5
.
.
2
2

1
1
5
5
.
.
9
9

6
6
.
.
9
9

These two measures represent
the retail space growth and
breadth of Primark’s presence.

The amount of greenhouse gases
arising from Primark’s Scope 1, 2
and 3 emissions.

The Primark Cares range covers
products made with recycled
fibres or more sustainably
sourced materials, (see page 58
for further details).

Tonnes of sugar produced
(m)

.
.

3
3
6
6
8
8
1
1

.
.

3
3
4
4
1
1
0
0

3
3
.
.
4
4
4
4
3
3

3
3
.
.
3
3
2
2
8
8

2
2
.
.
9
9
6
6
8
8

A measure of the scale and
development of the Group’s sugar
operations.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW

Grocery

Household food brands
enjoyed around the world

Associated British Foods plc Annual Report 2021

Our grocery brands
occupy leading positions
in markets across the
globe. In the UK, nine
out of 10 households use
our brands – a selection
of these are pictured
here.

OPERATING REVIEW | GROCERY

Grocery comprises brands which
occupy leading positions in markets
across the globe. In the UK, nine out of
10 households use our brands.

The Silver Spoon Company
Silver Spoon and Billington’s are our retail
sugar brands in the UK. These are
complemented by a range of dessert
toppings, syrups and ice-cream cones
under the Askeys and Crusha brands.

Allied Bakeries
Allied Bakeries produces a range of
bread and bakery products under the
Kingsmill, Sunblest, Allinson’s and
Burgen brands. Speedibake provides a
range of own-label baked goods for retail
and foodservice customers.

Tip Top
Tip Top is one of the most recognised
brands in Australia and New Zealand
with an extensive range of bread and
baked goods.

Don
The Don and KR Castlemaine brands
produce a variety of bacon, ham and
meat products in Australia.

Yumi’s
Yumi’s is the leading producer of a
premium range of hummus, vegetable
dips and snacks in the Australian market.

ACH Foods, North America
ACH Foods markets leading US,
Mexican and Canadian cooking and
baking branded products. These
mainly comprise Mazola cooking oils,
Fleischmann’s yeast, Karo corn syrup,
and Argo corn starch, as well as
Anthony’s Goods, a leading online
brand of organic and natural specialty
baking ingredients.

About Grocery

Twinings Ovaltine
Twinings Ovaltine has broad geographical
reach. Twinings has been blending
teas since it was founded in London
in 1706 and now sells premium teas
and infusions in more than 100
countries. Ovaltine malted beverages
and snacks are consumed in countries
across the globe.

Acetum
Acquired in 2017, Acetum is the leading
Italian producer of Balsamic Vinegar of
Modena PGI. We sell vinegars,
condiments and glazes across the globe
and Mazzetti is our leading brand.

AB World Foods
AB World Foods focuses on the creation
and development of world flavours and
our Patak’s, Blue Dragon and Al’Fez
brands are sold internationally.

Westmill Foods
Westmill Foods serves communities
across the UK whose cultural heritage
originates from east and south Asia,
Africa and the Caribbean. We are a
leading supplier of food products to the
Indian, Chinese and Thai foodservice
sectors with our well-known brands
including Lucky Boat noodles, Rajah
spices, Habib and Tolly Boy rice and
Elephant Atta flour.

Jordans Dorset Ryvita
Jordans Dorset Ryvita operates in the
better-for-you cereal and savoury biscuits
categories. Jordans has a heritage of
using wholegrain oats in the production
of our cereals and cereal bars. Dorset
Cereals’ award-winning muesli and
granolas are renowned for the high
quality of their ingredients. Ryvita has a
strong reputation in healthy snacking and
is the UK leader in crispbreads.

Strategy

Each of our grocery businesses pursues a
strategy appropriate to their particular
market position and stage of
development. Twinings Ovaltine,
Acetum, Jordans Dorset Ryvita and AB
World Foods have had considerable
success in 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 our
brands and consumer research is
conducted locally and internationally to
establish consumer needs and ensure
appropriately targeted investment. 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.

100

Twinings and
Ovaltine products
are enjoyed in
more than 100
countries

15,000

employees

Revenue

£3,593m

2020: £3,528m
Actual currency: up 2%
Constant currency: up 3%

Adjusted operating proﬁt

£413m

2020: £437m
Actual currency: down 5%
Constant currency: down 2%

Adjusted operating proﬁt margin

11.5%

2020: 12.4%

Return on average capital
employed

31.4%

2020: 31.3%

Operating Review

Grocery revenues were 3% ahead of last
year at constant currency with particularly
strong growth in Twinings Ovaltine more
than offsetting expected decline in sales
at Allied Bakeries. Adjusted operating
profit however declined, primarily driven
by weaker corn oil margins at ACH,
lower margins at George Weston
Foods and a one-off charge of £5m for
further restructuring in Allied Bakeries.
The improvement in return on average
capital employed was mainly driven by
lower working capital in our Don meat
business in Australia and lower assets
employed in Allied Bakeries.

Twinings and Ovaltine continued to make
strong progress. Ovaltine sales growth
was primarily in Thailand, China and
Switzerland, and was supported by the
continuing success of new product
launches in a number of countries.
Twinings revenue growth was driven by
strong new product launches and good
performances in France and North
America. Twinings has become the
leading tea brand in France.

At Allied Bakeries, sales reduced
following our decision to exit the supply
of bread to the Co-op in April this year.
We continued to drive significant cost
reductions with savings from a further
consolidation of our operations, the most
material being delivered in the distribution
network. At the end of the year we
successfully commenced a partnership to
supply premium bakery products to a
leading UK multiple retailer.

AB World Foods delivered a record sales
year and international progress continued
to be particularly strong supported by
new distribution gains this year in North
America. We increased marketing
investment in Patak’s and Blue Dragon to
levels significantly ahead of pre-COVID.

Al’Fez continued to perform strongly with
further distribution gains in both UK and
international markets. Silver Spoon and
Westmill sales were also significantly
ahead and maintained the sales uplifts
achieved last year.

At Acetum, our leading Balsamic Vinegar
producer, revenues continued to increase
with the Mazzetti brand performing very
strongly. We increased the marketing
support for this brand, and good
commercial performance, with new
listings, delivered international growth
in the US, the UK, the Netherlands
and Germany.

As expected adjusted operating profit for
ACH declined this year, with margins
impacted by the later phasing of price
increases following a sharp increase in
the cost of corn oil. Substantial price
increases were implemented over the
year to offset cost pressures while
keeping our brand equity relevant for
consumers. A further price increase has
been announced.

Revenue at George Weston Foods in
Australia, excluding the benefit of the
53rd week this year, was ahead of last
year. Adjusted operating profit was
lower, mainly driven by a margin decline
in the Don meat business. Despite
operating restrictions imposed by
regional government arising from
COVID-19, the Don factory performed
well delivering excellent labour utilisation
and meat yields, as well as controlling
fixed overhead costs. Although we have
seen some recovery in foodservice, we
are still experiencing volumes lower than
last year. In Tip Top Australia, The One
and Abbotts bread brands continued to
perform strongly and benefited from a
consumer trend to buy trusted brands.
Yumi’s delivered strong growth with
share gains in its existing products and
successful new product launches.

Associated British Foods plc Annual Report 2021

Yumi’s delivered strong
growth with share gains
in existing products and
new product launches.

OPERATING REVIEW | GROCERY

As interest in health and
wellbeing grows across
the globe, we have
continued to expand our
range of Twinings teas to
meet this demand.
Performance in our key
markets of the UK, US,
Australia and France is
exceeding our
expectations.

Grocery in action:
Twinings – targeting the fast-growing health
and wellbeing consumer segment

For more than 300 years the Twinings name has been
synonymous with the best teas and botanicals the world has
to offer. Over those years we have expanded our product
range to more than 200 teas from around the world and we
continue to evolve to meet consumer needs.

As consumers across the globe have
become increasingly interested in health
and wellbeing, Twinings has developed
an innovative range of teas to appeal to
these new customers. Our brand is
highly trusted and we are recognised
globally for our innovative approach to
product development.

In the UK, market research shows that
80% of adults want to improve their
health and wellbeing. The health and
wellbeing sector is also growing in other
markets around the world. Our plans for
the coming years are to significantly
expand our share of this market to
benefit consumers and our business
alike. Indeed, we are already exceeding
our own expectations in the UK, US,
Australia and France.

Superblends: the UK launch
We launched our first Superblends range
of fortified wellbeing drinks in the UK in
2018 with a unique range of blends
containing green teas and botanicals,
natural fruit flavours and added vitamins
or minerals.

Since that time, consumers have
responded very well to our range of
great-tasting wellbeing products,
demonstrated by strong repeat purchase
rates. In the last year, Superblends grew
strongly through improved distribution
across the major supermarkets as well
as selling for the first time through two
well-known high street health and
wellbeing retailers. We also launched
our innovative Bioblends range of teas
and infusions with adaptogens and
probiotic bacteria.

We plan to build on this success by
accelerating our innovation and marketing
plans in 2022.

Expanding our wellness position
in the US
In 2018 we launched a range of wellness
teas in the US, focusing on wellbeing
attributes that come from the goodness
of herbs. Using insights into the US
consumer, these teas contained herbs
such as turmeric, which supports healthy
digestion, and matcha, for energising the
body and mind.

In summer 2021, we further enhanced
our wellbeing offer by launching a
Superblends dietary supplement range of
teas, fortified with vitamins or minerals,
including products aimed at immune
support (with Vitamin C), better sleep
(melatonin), supporting a healthy heart
(Vitamin B1) and energy (Vitamin B6).

Selling through major retailers,
Superblends is now offered in almost
40% of all major grocery outlets across
the country. Early sales have exceeded
our expectations and consumer research
has already validated Superblends’
positioning as a premium brand in the
health and wellbeing sector.

In France, we have
become the leader in the
‘tea and herbs’ category,
thanks to the recent
launch of Twinings’
flavoured herbal infusions
and our local herbs brand
La Tisanière.

Pushing the boundaries of tea
in Australia
In Australia, we have developed a new
range to meet the specific wellbeing
needs of this market, where the ‘benefit-
led’ teas category has grown by more
than 25% over the last five years.

Launching as ‘Live Well’ in April 2021,
with a seven-strong product line-up
through Australia’s two biggest grocery
chains, we are well-placed to become a
leading brand for wellbeing drinks.

Supported by a fully integrated, multi-
channel communications campaign
including screens (TV and online video),
social media, digital partnerships with
health and wellbeing publications and
influencers and outdoor billboards,
the launch has been highly successful
to date.

The Australian consumer has responded
very positively to the products and their
benefits and we will continue supporting
and innovating to extend Twinings Live
Well over the coming year, including new
and efficacious blends.

Becoming the leader in France
In France, we have now become the
leader in the ‘tea and herbs’ category,
thanks to Twinings’ recent launch of
flavoured herbal infusions, as well as the
strong and sustainable growth of our
local herbs brand, La Tisanière. This
success is mainly driven by our organic
‘benefit-led’ range, launched in 2018.

The key to the organic range success is
the delicious and creative blends (with
ingredients in the segment such as
guarana, turmeric, basil and lemongrass),
appealing wellness benefits such as
“Brûle-Graisse” (Fat Burner), which has
the best performance in the whole
organic ‘benefit-led’ segment and a
modern, authentic pack design.

We plan to further strengthen our
positions, launching our new La Tisanière
organic range, using ‘super ingredients’
naturally fortified with vitamins or
minerals and supporting both Twinings
and La Tisanière in the coming years with
communication campaigns.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW | GROCERY

Mazzetti has shown
sustained growth in our
key export markets of
Germany and the
Netherlands and has
made inroads in new
focus markets including
the UK and the US.

Grocery in action:
Growth in
e-commerce
underpins
strongest year at
Anthony’s Goods

Our team was able to swiftly respond
with a substantial increase in production
to meet the increase in demand.

The nature of the online grocery market
requires a business to be able to respond
to the rapidly changing demands of its
customers. The entrepreneurial culture at
Anthony’s Goods enables us to perform
strongly in this market, evidenced by the
30 new products we launched in the year.

The combination of accelerated demand
and new product launches led the
business to record its strongest year for
both sales and production.

In September 2019, ACH, our
US-based grocery business
acquired Anthony’s Goods, a
fast-growing digital-first
company specialising in
organic flours, vegan foods,
whole-grain snacks and many
other natural goods.

Many of Anthony’s Goods products are
category top-selling items on Amazon
in North America and the brand has
built a strong consumer following
over recent years.

In early 2020, before COVID-19 struck in
the US, online grocery was growing at
approximately 35% year-on-year. This
accelerated during the pandemic as more
consumers turned to online shopping.

Grocery in action: Acetum’s unique history
is helping propel growth into the future

Acetum, the world’s largest
producer of certified Balsamic
Vinegar of Modena PGI, was
acquired in 2017 as part of
our strategy to add premium
consumer propositions with
growth potential to our
Grocery portfolio.

Balsamic vinegar has been produced in
the Modena region since Roman times,
and today it is found in homes and
professional kitchens all around the world.
Acetum has a particularly rich heritage and
a strong reputation for industry-leading
quality, creating some of the finest quality
of branded and own-label ranges of
Balsamic Vinegars and associated
condiments. All produced in Modena,
these ranges carry the sought-after
Protected Geographical Indication (PGI) or
Protected Designation of Origin (PDO)
status, meaning that they are produced
according to recognised, authentic and

time-honoured traditions within the
Modena region of northern Italy.

One of the great attractions of Acetum
was the strength of its brand presence
and the opportunity for growth in several
key export markets, including Germany,
the Netherlands and Australia. From the
outset we have sought to work with the
experienced management team in
Acetum to expand this further and
develop the company’s branded
offering, Mazzetti l’Originale, which
proudly bears the name of one of the
founders of the business.

Through the appointment of new
marketing specialists, we have continued
to support and further strengthen the
Mazzetti brand by making it more
distinctive, with a stylish new yellow and
black design. We have also increased our
investment in marketing
communications, with a focus on building
brand awareness and inspiring people to
try the product through a combination of
social media, print and public relations in
an eye-catching campaign promoting ‘The
Italian Art of Dressing’.

Our newly designed range has helped us
gain additional listings in premium
grocery retailers and on leading
e-commerce sites.

The brand has shown sustained growth
across our key export markets,
particularly in Germany and the
Netherlands where we are seeing
double-digit growth. We have also made
inroads into the new focus markets
including the UK and the US, where
revenues have increased significantly.

As we continue to grow our brand
presence, we have launched a new
e-commerce website in the US
us.mazzettioriginale.com that will provide
a hub to inspire and educate people
about the craft, tradition and versatility of
this Italian culinary icon. The site will
feature the full Mazzetti l’Originale range
including our premium Tradizionale DOP
12- and 25-year aged products and a new
‘gifting’ range of premium Balsamic
Vinegar of Modena PGI that we are
launching in time for Christmas 2021.

The entrepreneurial
culture at Anthony’s
Goods was
demonstrated by the
launch of 30 new
products in the year.

Associated British Foods plc Annual Report 2021

We issued our
Restaurant Survival
Guide in five languages
to help our customers
set up takeaway and
delivery services during
the pandemic.

OPERATING REVIEW | GROCERY

Grocery in action:
Westmill Foods – supporting customers
and communities during the pandemic

Our own workforce comprises people of
diverse cultural heritages and they play a
key role in our connection with the
communities we serve. Over the last
year, they have come together and
actively participated in a range of
community-focused events.

We distributed more than 370,000
meals to local centres across the
country as people struggled to cope
with the pandemic.

Elephant Atta sponsored Heart UK to
raise awareness of healthy eating,
including devoting a section of the Heart
UK website to south Asian recipes. We
worked with Michelin-starred chef Atul
Kochhar to create ‘heart healthy’ recipes
using Elephant atta chakki flour.

Earlier this year we also supported the
British Asian Trust’s Oxygen for India
Emergency Appeal. Our Rajah and
Elephant Atta brand teams hosted
online cooking demonstrations to
build awareness of the significant
challenges faced by the people of India
due to COVID-19 and to raise money
for the appeal.

We have been serving
communities across the
UK whose cultural heritage
originates from east and
south Asia, Africa and
the Caribbean for more than
30 years. We are a leading
supplier of food products
to the Indian, Chinese and
Thai foodservice sectors
with our well-known brands
including Lucky Boat noodles,
Rajah spices, Habib and Tolly
Boy rice and Elephant
Atta flour.

During the lockdowns our customers
who own restaurants had to rapidly shut
their doors. Our team at Westmill
mobilised to help them adapt their
businesses to conform with the UK
Government’s COVID-19 guidelines. We
created a Restaurant Survival Guide to
support them in setting up takeaway and
delivery services, which in turn helped
many of them to withstand the
commercial shocks caused by the
pandemic. It was issued in five languages
(Bengali, English, Hindi, Mandarin and
Urdu) and had an estimated reach of
20,000 restaurants.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW

Sugar

A world-leading sugar
business focused on
excellence

Associated British Foods plc Annual Report 2021

In Europe, Azucarera is
the largest sugar
producer in Iberia. An
Azucarera team member
is pictured here with a
local beet farmer.

OPERATING REVIEW | SUGAR

AB Sugar is a leading producer of sugar
and sugar-derived co-products in Africa,
the UK, Spain and north east China.

British Sugar is the sole
processor of the UK beet
sugar crop.

32,000

employees

plants worldwide

About Sugar

We employ 32,000 people
and operate 27 plants in
10 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 Africa is the biggest sugar
processor in Africa and has operations in
Eswatini, Malawi, Mozambique, South
Africa, Tanzania and Zambia. We also
have a beet sugar business in north east
China which is cost-competitive with
cane sugar 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 on 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 AB Sugar
and with our stakeholders.

Strategy

AB Sugar is one of the world’s largest
and most diverse sugar producers and
has a vision to be the world’s leading
sugar business.

While 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.

Illovo Sugar Africa is the
biggest sugar processor
in Africa and has
operations in Eswatini,
Malawi, Mozambique,
South Africa, Tanzania
and Zambia.

Revenue

£1,650m

2020: £1,594m
Actual currency: up 4%
Constant currency: up 8%

Adjusted operating proﬁt

£152m

2020: £100m
Actual currency: up 52%
Constant currency: up 75%

Adjusted operating proﬁt margin

9.2%

2020: 6.3%

Return on average capital
employed

10.2%

2020: 6.3%

Operating Review

AB Sugar delivered another year of
strong trading performance with big
improvements in adjusted operating
profit, profit margin and return on average
capital employed. Revenue was 8%
ahead of last year at constant currency
with higher domestic and regional
volumes for Illovo as well as higher prices
in Europe and Africa. The commercial
performance in Illovo, together with
continued savings from our cost
improvement and efficiency programmes,
resulted in a 75% increase in adjusted
operating profit to £152m.

The world sugar price continued to rise
through the year. European sugar prices
also increased with a reduction in stocks
following lower EU sugar production in
the last two campaigns. Looking ahead,
estimates for EU sugar production in next
year’s campaign are marginally higher,
with a recovery in yields combined with a
slight reduction in the planted area, but
are still estimated to be broadly in line
with EU consumption in the next
marketing year.

UK sugar production of 0.9 million tonnes
this year was well down on the 1.19
million tonnes produced last year, due to
adverse weather conditions at the time of
planting and the severe impact of virus
yellows, a disease transmitted by aphids
on sugar beet. Difficult processing
conditions and limited beet availability
increased costs further during the
campaign and were an offset to the
higher sales prices achieved. Looking
ahead, our production forecast for next
year is marginally over 1.0 million tonnes
with a reversion to normal yields more
than offsetting a reduced planting area.
We expect our UK sales to continue to be
strong next year although significant cost
increases in gas, carbon and logistics are
likely to limit an improvement in year-on-
year profitability. Work to restart the
Vivergo bioethanol plant next calendar
year is on track and the recent transition
to E10 in blended petrol underpins the
strong demand for bioethanol from
fuel blenders.

In Spain, strong demand and higher
prices resulted in a significant increase in
revenues. The operating profit margin,
however, was impacted by lower
volumes from the northern beet crop.
Our current view for yield and sugar
content from beet sugar and lower
margins due to the expected increase in
future raw refining volumes, has resulted
in a non-cash exceptional charge of
€136m in these accounts to write-down
the net asset value of this business.

Illovo revenues were ahead of last year
driven by both strong domestic sales,
particularly in Zambia and Malawi, and
regional sales. Sugar production was
ahead of last year with better production
in Tanzania and Mozambique compared
to last year but was held back by
disruption to the operations in South
Africa and Eswatini as a result of civil
unrest. The recovery in profit this year is
very strong, with adjusted operating
profit exceeding that delivered in recent
years. This was driven by improved sales,
the benefits from restructuring activities
last year and further efficiency activities
this year.

The campaign in China completed with
sugar production ahead of last year
although poor agronomic conditions held
back the yield from a larger planted area.

Given the on-going trading challenges in
some of our smaller sugar businesses we
have reviewed our outlook for these
cash-generating units, including the
forecast evolution of beet area and yields.
As a result, we have made a one-time
non-cash adjustment of £21m to the
relevant net asset values as an
exceptional charge this year.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW | SUGAR

We are increasingly
serving our customers
with sugar in branded
packs that are affordable
and accessible for
consumers in deep rural
areas at preferred pack
sizes. A store in Malawi
is pictured here.

Illovo Sugar Africa: Focus on
performance delivers exceptional
profit growth

The exceptional
performance this year in
Illovo Sugar Africa was driven
by two factors: operational
efficiencies and strong
domestic and regional sales.

#AfricanSugar4AfricanMarkets strategy,
which is aimed at being the supplier of
choice in these markets. We were also
able to take action to benefit from higher
commodity prices across a number of
international markets in which our range
of co-products, such as furfural and
potable alcohol, are sold.

The performance across Illovo Sugar
Africa has been delivered in what has
been an unsettling time for our people.
Since the global pandemic began, our aim
has been to help protect our people, their
families and the communities in which
we operate, from COVID-19 infection.
We repurposed our medical infrastructure
and services and aligned with
governments, NGOs and other
organisations to support public education
and awareness programmes. More
recently, we have launched a Group
Vaccination Roll-out Campaign which has
seen almost 20,000 employees,
dependants, growers and community
members vaccinated to date. We plan to
continue the campaign in the coming
months to reach many more.

Through an effective leadership effort
from everyone across Illovo Sugar Africa,
coupled with the right resources and
trust in our local teams, we have
delivered for our customers and driven
our revenues and operating profit to
levels significantly ahead of last year.

Operational efficiencies were achieved
through the ongoing implementation of
cost and performance improvement
plans. The significant improvement in
sugar recovery at our Sezela plant in
South Africa is a very good example of
this, with further process standardisation
and automation. This best practice is now
being adopted across Illovo Sugar Africa,
raising overall operational efficiency.

We also increased revenues through
strong domestic and regional growth.
Over recent years we have been building
our commercial capability in each of our
markets. We are increasingly serving our
customers with sugar in branded packs
that are affordable and accessible for
consumers in deep rural areas at
preferred pack sizes.

Domestic market sales increased by
60,000 tonnes to 1.2 million tonnes, as
we were able to meet increased demand
caused by supply shortages due to the
pandemic. Local sales in Malawi and
Zambia were exceptionally strong.

Despite the logistical challenges we
experienced in bulk sugar exports over
this period, regional sales were also
strong, with a further 245,000 tonnes of
sugar delivered to neighbouring
countries, building our

A selection of our branded
brown sugar, sold in
Zambia in packet sizes of
195g, 330g and 1kg.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW | SUGAR

We have introduced
digital tools to automate
a number of time-
intensive processes to
improve efficiency and
reduce costs.

Sugar in action: Going digital to
transform operations in Azucarera

Azucarera, our sugar
business in Spain, has
continually developed and
implemented innovative ways
to simplify and automate
processes, reduce costs and
improve efficiencies. We
have achieved this across
the supply chain, from
field to factory, to
customer deliveries.

In the field, we have significantly increased
the use of mobile applications to integrate
the activities of our growers and agricultural
teams, allowing both parties to prioritise
and focus on how best to use their time,
including when managing crop growth
plans. The field satellite images and
real-time data we now have enable us to
make immediate decisions in partnership
with our growers. These include the ability
to make informed decisions about the
required quantity and location for fertiliser
application. The ability to monitor water
levels and climatic conditions also informs
our irrigation decisions and allows us to
make transport arrangements without
having to visit the fields.

The ability to respond to varying crop
sizes and changing customer demand is
also crucial across our factories in both
the north and south of Spain. To support
this and our leaner factory teams, we
have introduced tools to automate
various time-intensive processes, such as
managing shift changes, maintenance
planning and storage and warehousing
controls. For example, digitised
maintenance planning has delivered
benefits such as the ability to create
alerts on areas that need immediate
attention or require investigation. This
has led to us halving our maintenance
costs in the past six years, with no
impact on the high reliability levels in our
factories. Managing maintenance in this
manner allows our engineers to focus on
projects that can improve our
sustainability performance, particularly
energy efficiency and decarbonisation.

The wide range of sugar products and
co-products leaving our factories makes
the way we work with our logistics
suppliers a key factor in our ability to
deliver quality products on time.
Together with our suppliers, we are
using technology to automatically map
routes that match our customers’
demand-planning requirements. This also
gives our customers all vehicle and order
data automatically.

The tools we have introduced for our
commercial teams and customers help
position us as a supplier of choice. These
include a central Customer Relationship
Management (CRM) tool, which stores
customer data, interactions and market
analysis as well as all online contracting
and documentation information. This has
further enhanced our data analysis
capability, improving our insight and
ability to serve our customers.

As we operate across multiple factory
sites and office locations, we have
streamlined processes to reduce the time
people spend on administrative tasks.
We now have two new mobile
applications, one of which covers
processes like travel requests and
approvals, timesheet submissions,
absence and holiday reporting. The other
covers invoice management, managing
factory KPIs, monitoring various parts of
the factories and approving customer
orders. In the past five years, digitisation
has enabled us to reduce 40% of
administrative tasks.

Our approach to digitisation is improving
operational efficiency and allowing our
people to focus on the work that drives
most value for the business. It underlines
the importance of team effort and a
culture which embraces continual change,
with people and technology working hand
in hand.

Sugar in action: Making more
from less at British Sugar

At British Sugar, we are
constantly exploring ways to
optimise our factory
operations at every point of
the sugar-making process.

In 2020, the UK sugar beet crop faced
significant challenges. Aphids spread the
virus yellows disease to sugar beet and
this, combined with extreme weather,
resulted in well below-average crop
yields and a big reduction in our sugar
production.

We developed an ambitious plan to
minimise the impact of this through a
fundamental process change in the
sugar-making process at our factory at
Wissington in Norfolk, UK, aimed at
increasing sugar production.

The plan involved the introduction of a
further boiling stage for the sugar juice
extracted from the sugar beet which,
combined with modifications to our
on-site chromatography plant, resulted in
increased operational efficiency and the
ability to extract an additional 25,000
tonnes of sugar from the crop. From
concept through design, build,
commissioning and operational success
took less than nine months and our
targeted production volumes were
achieved within the first five weeks
of operation.

The project’s success relied on quick
decisions, engineering excellence and a
customer-led approach from the teams.
The investment not only drove increased
production of white sugar by using the
sugar molasses we produce from sugar

beet differently, it also increased the
amount of betaine we produced for
other markets.

Jeff Nan (pictured below right), who
joined our Chemical Engineering
Graduate Scheme in 2018, was integral
to the success of this project, bringing his
process engineering experience to deliver
against a challenging timeline. The
benefits were seen almost immediately.

We will continue to invest in our
engineering ingenuity to drive our
efficiency and use as much of our raw
material as possible.

Doing more with less is at the heart
of our circular economy approach, as
we strive to maximise value and
minimise waste.

We extracted an
additional 25,000 tonnes
of sugar from this year’s
crop through operational
efficiencies.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW

Agriculture

Products for the agri-food
industry

Associated British Foods plc Annual Report 2021

AB Agri is a major investor
in innovation of specialty
feed ingredients, providing
highly specialised advice
around procurement and
formulation. Pictured here
is a colleague at one of
our Premier Nutrition
manufacturing facilities.

AB Agri is a leading international agri-
food business operating across the
supply chain, producing and marketing
animal feed, nutrition and technology-
based products.

Our core capabilities include:

• creating nutrition and technology-

based products – as a major investor in
innovation of specialty feed ingredients,
we provide highly specialised advice
around procurement and formulation
for livestock, aqua, equine and pet
foods. We develop pioneering feed
ingredients including additive products,
high-quality, bespoke vitamin and
mineral pre-mixes, starter feeds and
micro-ingredients developed using
world-class excellence to solve
challenges. These include commercial
alternatives to soya, improving animal
protein efficiency and extracting
valuable nutrients from co-products;
• making animal feed – AB Agri is one of

the UK’s largest marketers of co-
products from the food and drink
industries and is a major international
manufacturer and supplier of pig,
poultry and dairy feeds with 29
production sites in the UK, continental
Europe and China; and

• offering data services for the agri-food
industry – with 20 years of expertise,
our data and technology platforms
deliver targeted insights 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 sustainably;

– improve animal health and

husbandry; and

– develop quality assurance
and corporate responsibility
programmes.

Strategy

We are focused on inspiring excellence in
the way the agricultural industry
produces food for people and animals,
pioneering ways to build a more
responsible food chain.

Global population growth means higher
demand for food, including meat and
dairy and there is a growing need to feed
more animals. Doing this in ways that
reduce environmental pressures is
important for us all. We have an exciting
opportunity to help our customers
achieve this and we have clear ambitions:

• responsibility in everything we do –
creating value from reducing waste,
investing in ways of producing proteins
more sustainably, improving the gut
health of animals and being smart in
the way we use technology, innovating
constantly and, through our people,
driving valuable farm management
insight for our customers;

• growing internationally – rolling out our
AB Agri business platform into other
countries, expanding our sphere of
influence and becoming a leading
player in more countries, increasing our
profit from outside of the UK; and

• inspiring and empowering our people

– ensuring we have a culture in which
we all thrive. We want AB Agri to be a
consistently great place to work, across
every business and team.

OPERATING REVIEW | AGRICULTURE

About AB Agri

With an expert understanding
of agriculture and animal
nutrition, our philosophy is
to improve feed production,
so that nutritious and
affordable food 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 85 countries and
continue to grow our global operations.

Sales in 85
countries

3,000

employees

Operating Review

Trading at AB Agri was strongly ahead of
last year with revenue and adjusted
operating profit increases of 11% and 7%
respectively at constant currency.

The revenue growth was delivered by
higher commodity prices and an increase
in feed volumes. Growth was notable in
China, our UK feed business AB Connect
and in AB Neo, which specialises in feed
for animals in the early stages of life.

China delivered a much-improved trading
performance and benefited from a
recovery from the effects of African
Swine Fever. We developed feed sales
for other species and supported our
margins with good procurement. The
regionalisation of the nutrition technical
team and increased technical talent has
supported the launch of new products.
Adjusted operating profit at Frontier was
ahead with a much-improved result from

grain trading as a result of increased
commodity price volatility driven by
reduced UK wheat availability, Brexit
uncertainty and tightening global supply
and demand. AB Neo was also ahead
driven by the performance in Spain due
to increased demand for starter feed
and additives, as well as favourable
buying gains.

Sales and adjusted operating profit at AB
Vista, our international feed enzymes
business, were broadly in line with last
year. Sales in Asia Pacific and the
Americas were ahead and offset a
decline in EMEA as lockdowns affected
meat consumption and consequently
feed production.

Our UK pig and poultry animal feed
business has announced its intention to
build a state-of-the-art animal feed mill in
the east of England. This substantial
investment will provide much needed
capacity and will also ensure
consistent quality.

Revenue

£1,537m

2020: £1,395m
Actual currency: up 10%
Constant currency: up 11%

Adjusted operating proﬁt

£44m

2020: £43m
Actual currency: up 2%
Constant currency: up 7%

Adjusted operating proﬁt margin

2.9%

2020: 3.1%

Return on average capital
employed

10.6%

2020: 10.5%

AB Agri is a major
international manufacturer
and supplier of pig,
poultry and dairy feeds,
with 29 production sites in
the UK, continental
Europe and China.
Sampling at one of our UK
sites is pictured here.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW | AGRICULTURE

Agriculture in action:
AB Agri launches animal neonate
specialist business AB Neo

We produced over 200,000 tonnes
of animal feed in the year and our
growth strategy is focused on moving
into new geographies.

Our aim is to become a leading business
in piglet nutrition in our home territories
and elsewhere in Europe while expanding
our non-piglet businesses and calf
nutrition across newer markets including
the US, Brazil and China.

With environmental and animal welfare
considerations top of mind, AB Neo is
building an innovation farm in Spain,
which will be the largest dedicated piglet
research centre in Europe. The farm will
incorporate a cloud-based environmental
and production control system, using
smart ‘insight’ feeders and electronic
tagging to record data to monitor the
health and wellbeing of more than 50,000
piglets a year. It will improve our insights
into pre-weaning nutrition needs, helping
us create better solutions in early-life
animal husbandry.

We will also continue to work
with farmers and customers to improve
how we source ingredients sustainably
and produce healthy, safe and
environmentally responsible
animal protein.

In September 2020, AB Agri
launched a specialist neonate
nutrition business – AB Neo
– which focuses on the
essential and very particular
needs of young farm animals.

Neonate nutrition is a critically important
area of animal husbandry. The lifetime
health of an animal is heavily dependent
on how well it is cared for and fed during
its first few weeks. AB Neo
manufactures a range of products for
piglets, calves and poultry, helping our
customers – mainly medium-sized to
large farmers – provide the best start in
life for their animals. This in turn helps
the animals to be healthy and productive.

To achieve this, we brought together
three of our existing businesses – Agilia,
ASN and Primary Diets – with four sites
in Denmark, Poland, Spain and the UK,
to create a single, unified centre of
excellence. This brought together highly
entrepreneurial businesses and more
than 35 technical experts.

AB Neo has significant capability in:

• high-quality nutrition solutions, with a

primary focus on milk replacers,
specialist ingredients, early feeds and
additives;

• research, development and innovation;
• production, including supply chain

management and quality assurance;
and

• sales and marketing.

The lifetime health of an
animal is heavily
dependent on how well
the animal is cared for
and fed during its first
few weeks.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW

Ingredients

Yeast, bakery and
specialty ingredients
supplied globally

Associated British Foods plc Annual Report 2021

AB Enzymes’ pilot plant
in Finland (pictured)
significantly increases
our capability and
capacity to validate and
optimise new concepts
before full-scale
production.

OPERATING REVIEW | INGREDIENTS

About Ingredients

AB Mauri

AB Mauri has a global
presence in bakers’ yeast with
significant market positions in
the Americas, Europe and
Asia. We are 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 functionality of yeast and bakery
ingredients and of the raw materials and
processes to produce them.

In addition to bakers’ yeast, AB Mauri
supplies specialty yeast products to a
wide range of other markets. AB Biotek
is dedicated to providing yeast,
associated technologies and fermentation
capability to the alcoholic beverages,
bioethanol, animal nutrition and human
nutrition and health markets. Our health
market proposition was strengthened this
year by the acquisition of a small
biomedical company specialising in
medical nutrition.

Our Ingredients businesses are
leaders in yeast and bakery ingredients
and supply specialty ingredients to
the food, nutrition, feed and
pharmaceutical industries.

ABF Ingredients

Strategy

ABF Ingredients is a global
leader in specialty
ingredients, offering
innovative, differentiated and
value-added products to the
food, nutrition, animal feed,
pharmaceutical and industrial
sectors. Our ingredients are
an essential part of products
that are equally likely to be
found in the kitchen and
medicine cabinet as in
production units and research
laboratories.

We serve customers in more than
50 countries from production facilities
in Europe, the Americas and India.
ABF Ingredients comprises five
businesses which operate worldwide
with distinct identities:

• AB Enzymes is an industrial biotech
business specialising in enzymes.
Applications include bakery and other
food 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 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 energy bars; and

• SPI Pharma supplies antacids,

pharmaceutical excipients and drug
delivery solutions for the
pharmaceutical industry.

Our Ingredients businesses are dedicated
to addressing the key requirements of
our customers and end-use markets
to ensure a relevant supply of quality
ingredients, systems, products and
technology that creates value. We
develop partnership relationships with
customers to achieve a genuine
understanding of their products,
formulations, raw materials, equipment
and processes, and the market and
regulatory environment in which their
products are sold. Our businesses strive
to provide outstanding quality products
and service, supported by a high level
of investment in technology, innovation
and expert teams.

Each business focuses on differentiating
across the full range of potential sources
of competitive advantage: innovative
ingredients with unique functionalities;
sustainable, efficient and proprietary
production processes; and compelling
value-add customer propositions.

production plants
for AB Mauri and
ABF Ingredients

7,000

employees

Significant inflationary pressures
emerged across many areas of our cost
base during the final months of the year,
and these are anticipated to continue in
the new financial year. Price increases
will be implemented to preserve margins.

ABF Ingredients businesses delivered
revenue and profit growth despite the
challenges of COVID-19 and the supply
chain. A recovery of customer demand
for our products was particularly
noticeable in the last quarter.

Our enzymes business delivered a record
year in its bakery, food and textiles
platforms driven by strong growth
outside Europe, where we continued to
enhance our local application and
commercial capabilities. Innovative new
products and operational efficiencies will
be facilitated by the new state-of-the-art
pilot plant which was commissioned
during the year. We maintained share in
the animal feed enzyme market despite
competitive pricing pressures.

ABITEC grew its sales in the
pharmaceutical and nutritional lipids
markets. Our yeast extracts business
delivered a record year in sales and profit
driven by increased sales to the fast-
growing market for meat analogues, new
product introductions in human and
animal nutrition and demand recovery in
the US foodservice industry. Our antacids
and pharmaceutical excipients business,
SPI Pharma, also delivered good growth
fuelled by price and volumes, global
momentum in antacids and the promising
initial success of a new excipient product
line for oral dosage forms.

Operating Review

Ingredients sales were 4% ahead of last
year and strong trading by AB Mauri
delivered an increase in adjusted
operating profit of 8%, all at constant
currency. The results of AB Mauri in
Argentina continue to be reported under
IAS 29 Financial Reporting in
Hyperinflationary Economies, which
reduced operating profit by £7m
(2020 - £5m).

The sales growth in AB Mauri was led by
our operations in Latin America, with
Brazil benefiting from a recovery in the
craft channel and new non-dairy creamer
product launches. Argentina delivered
good growth despite difficult ongoing
economic conditions. Strong growth was
also achieved in the South and South
East Asia region, supported by the
implementation of a strong technical
service and route-to-market model.
The easing of COVID-19 restrictions in
the EMEA region allowed product
development activities to resume and
sales increased as a result. The Italian
business has now completed a new,
centralised bakery ingredients centre that
will consolidate and enhance our
competitiveness and innovation in
production and product development.
Last year, the demand for retail yeast and
bakery ingredients generally remained
elevated compared to pre-COVID levels.
However, some declines to pre-COVID
volumes were noted in countries as
pandemic restrictions have been lifted.

During the year, we opened our new
Global Technology Centre in the
Netherlands. This provides an upgraded
international hub for the research and
development of bakery solutions, as well
as accommodating a pilot plant,
laboratories and training facilities.

Revenue

£1,508m

2020: £1,503m
Actual currency: in line
Constant currency: up 4%

Adjusted operating proﬁt

£151m

2020: £147m
Actual currency: up 3%
Constant currency: up 8%

Adjusted operating proﬁt margin

10.0%

2020: 9.8%

Return on average capital
employed

16.9%

2020: 16.7%

AB Mauri’s new Global
Technology Centre in the
Netherlands (pictured
right) includes a test
bakery where we can
trial new technology on
a small scale before
scaling up to full
industrial production.

Associated British Foods plc Annual Report 2021

The new state-of-the-art
facility in Rajamäki,
Finland (pictured), is a
key part of AB Enzymes’
growth strategy which
will see us expand into
new markets and attract
new customers.

OPERATING REVIEW | INGREDIENTS

Ingredients in action:
Investment in research and
development to support growth

In the past year we have
made further investment into
our capability for innovation
in AB Mauri and AB Enzymes,
to support product
development, applications
support, closer customer
relationships and to drive
growth across our markets.

New AB Mauri Global
Technology Centre
We opened our Global Technology
Centre in March 2021, which will provide
an international hub for research and
development for bakery ingredients in
AB Mauri.

The purpose-built facility in Etten-Leur in
the Netherlands is at the cutting edge of
bakery capability. The facility comprises a
suite of laboratories where pioneering
research takes place in areas such as
fermentation and microbiology and a test
bakery where we can trial new
technology on a small scale before
scaling up to full industrial production.
This enables us to replicate customer
processes and requirements in our
research and development. There is
also a sensory team who test the
taste and quality of the products
under development.

Our 50 food scientists, who represent 18
nationalities, work in collaboration with
customers from around the world to
bring innovations to local markets.

This investment reinforces AB
Mauri’s position as a technology-led
business and market leader in bakery
and yeast ingredients.

New pilot plant for AB Enzymes
The new pilot plant in Rajamäki, Finland,
was opened in early 2021 by our joint
venture, Roal. It provides a bridge
between research and development and
full-scale production on this site. The
expert teams at AB Enzymes, who
develop new solutions for customers,
can now test, validate and optimise a
wider range of new concepts much
faster and with greater predictability than
was possible previously.

The facility will improve our capabilities
in fermentation, enzyme separation,
purification and formulation, in particular
utilising ultrafiltration, crystallisation
and granulation.

With this enhanced, state-of-the-art
innovation capability, we can develop
more, new and improved enzyme
solutions for our customers.

Other benefits include eradicating
bottlenecks in our product development
process with a significant increase in our
capacity to work on optimising the
production parameters to upscale
production from laboratory, to pilot, to full
plant scale together with increased
downstream processing capabilities.
Investments in automation and remote
monitoring enable better process control
and parallel processing.

The new capabilities further strengthen
our ability to meet increasingly stringent
regulations and requirements in the
production and use of enzymes.

Maximising the usage of the new
pilot plant is a key part of AB Enzymes’
growth strategy which will see us
expand into new markets and attract
new customers as we develop our
product portfolio.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW

Retail

Amazing fashion,
amazing prices

Associated British Foods plc Annual Report 2021

We opened 15 new
stores in this financial
year, including our
80,000 sq ft flagship
store in Rotterdam
Forum, the Netherlands
(pictured here).

OPERATING REVIEW | RETAIL

Primark is one of the largest fashion
retailers in Europe and the largest by
volume in the UK.

About Primark

Primark is an international
fashion retailer with 16.8
million sq ft of selling space
in 398 stores in 14 countries
and has more than 70,000
employees. We are serviced
by a network of nine depots
covering 7.1 million sq ft. We
are famous for offering great
value to customers and pride
ourselves on our wide
selection of products, from
everyday essentials to the
latest trends, and all at prices
everyone can afford.

398

stores at
year end

71,000

employees

Amid an ever-changing retail landscape,
Primark is always looking for new ways
to create the best customer experience.
We are constantly evolving to offer an
exciting and innovative retail environment
that serves as a destination everyone in
the family can enjoy. Primark’s latest
store design includes features like free
Wi-Fi and trend rooms, with an increasing
number of stores also offering a range of
food and drink outlets. These include the
Primarket Café as well as flagship
destinations like the Primark Café with
Disney in Birmingham and the Friends
Central Perk Café in Manchester.

We launched our first own-brand Beauty
Studio in April 2019, offering customers a
mix of beauty services at amazing prices.
We also celebrated the launch of our
Wellness Collection in 2020 with the
opening of our first ever pop-up store in
BOXPARK Shoreditch, London.
Meanwhile, Primark’s licensed offering
continues to grow, establishing the
business as a market leader in the space
through partnerships with brands such as
Warner Brothers, Disney and Netflix.

In September 2021, Primark unveiled a
wide-reaching new Primark Cares
sustainability strategy aimed at
minimising fashion waste, reducing our
impact on the planet and improving the
lives of the people who make our
clothes. Building on the progress we
have made over a decade to become a
more ethical and sustainable business,
the new commitments include making all
our clothes recyclable by design by 2027,
ensuring all clothes are made from 100%
recycled fibres or more sustainably
sourced materials by 2030 and halving
carbon emissions across our entire value
chain by 2030.

Strategy

Primark’s business model is based on
doing things differently, allowing us to
keep prices low and offer great value on
the high street. We achieve this by doing
very little advertising, focusing instead on
marketing through our 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. We have a
strong digital presence and a high
level of customer engagement with over
24 million followers across our social
media channels.

At Primark we believe that more
sustainable fashion should not have to
come with a high price tag either for
people or the planet. We have been on a
journey to build a more sustainable
business for more than a decade and
have now committed to going further and
faster, using our size and scale to make a
real difference. In September 2021, we
unveiled a wide-reaching new
sustainability strategy aimed at
minimising fashion waste, reducing the
impact we have on the planet and
improving the lives of the people who
make our clothes.

We care about the welfare of the people
who make our products. We are very
selective about who we work with and
require every supplier factory to sign up
to the internationally recognised
standards set out in the Primark Code of
Conduct before we place any orders.
Based on the Ethical Trade Initiative’s
(ETI) base code, this ensures workers in
the supply chain have good working
conditions and their workplace rights are
respected. We have a rigorous process to
check these standards are being met: our
team of 130 specialists based in key
sourcing countries inspect every supplier
factory at least once a year. We are proud
that the ETI has ranked us as a ‘leader’ in
how we monitor our supply chain.

Revenue

£5,593m

2020: £5,895m
Actual currency: down 5%
Constant currency: down 5%

Adjusted operating profit (before
repayment of job retention
scheme monies)

£415m

Adjusted operating proﬁt

£321m

2020: £362m
Actual currency: down 11%
Constant currency: down 11%

Adjusted operating proﬁt margin
(before repayment of job
retention scheme monies)

7.4%

2020: 6.1%

Return on average capital
employed (before repayment of
job retention scheme monies)

6.6%

2020: 5.6%

Operating Review

Sales at Primark, including a 53rd week
this financial year, were 5% below last
year at both actual and constant currency
exchange rates. This year a third of the
available trading days were lost as a
result of store closures due to the public
health measures in our major markets to
control the spread of COVID-19. This
compared with the loss of one quarter of
the available trading days in the previous
financial year. Despite this decreased
level of trading days, adjusted operating
profit, before repayment of job retention
scheme monies, increased 15% to
£415m representing an adjusted
operating profit margin of 7.4% for the
full year. Operating profit margin
improved during the year from 1.9% in
the first half to 10.6% in the second half,
excluding the 53rd week. The repayment
of monies received from the job retention
schemes in the UK, Republic of Ireland,
Portugal, Czechia and Slovenia this year
has been charged in the second half
at £94m.

This year has been characterised by
greater than expected restrictions on the
ability of Primark to trade. For this
financial year we estimate the loss of
sales, while stores were closed, to be
some £2bn. When stores were open, full
year like-for-like sales were 12% below
two years ago and were 7% lower
excluding destination city centre stores.
In the first half, the like-for-like
performance reflected lower category
spend and lower footfall due to trading
restrictions. When the stores reopened in
the third quarter, customers came back
to our stores in large numbers and sales
were 3% ahead on a like-for-like basis
compared to the same period two years
ago. Like-for-like sales declined by 17%
in the fourth quarter and were affected
by the impact on footfall of the changes
in public health measures. Trading varied
considerably across the estate. In the UK,
sales were affected by the number of
people required to self-isolate following
contact tracing alerts – the ‘pingdemic’.
The self-isolation rules were then eased
in early August with like-for-like sales
showing a corresponding improvement
through the period from a decline of 24%
in the first four weeks of the quarter to a
decline of 11% in the last four weeks of
the quarter. In Continental Europe,
like-for-like sales were impacted by the
performance of our stores in Spain and
Portugal with the decline in foreign
tourism at that time.

Our US business performed well this
financial year and delivered a good profit
margin. Like-for-like sales consistently
improved during the year and for the full
year were 6% up on the same period two
years ago excluding the city centre
Boston store. Six years after our first
store openings, Primark is clearly
resonating with the US customer and
brand awareness continues to build. This
was especially evident in the strong
trading at all the new stores opened
during the year: Sawgrass Mills Florida,
American Dream New Jersey, State
Street Chicago and Fashion District
Philadelphia. The performance of both
our existing and newly opened stores,
combined with the profitability, gives us
confidence to increase the pace of
expansion in this important market.

We continue to extend our product
offering to meet changing customer
needs. In September we launched an
expanded Primark Home department at
Merry Hill in the West Midlands, with
increased in-store selling space to offer
an all-new range of quality, affordable
home and lifestyle products. The new
space enabled us to offer a much wider
range including new categories such as
cookware, ceramics, rugs and furniture.
Following a very positive customer
response, we are rolling this extended
range out to a total of 40 stores over the
coming months.

Sales of our autumn/winter ranges have
started well and sales densities continue
to improve. Primark has capitalised on
the continued trend for ‘comfort living’
with the launch of its range of ‘snuddies’,
attracting a strong response from
customers across all markets. Bestsellers
include the avocado print for men and,
under our licence collection, Minnie
Mouse for kids. The Primark Edit of
quality investment pieces for women has
proven very popular since launch in
September, with strong sales of its
seasonal staples such as cotton
cashmere jumpers and a classic
trenchcoat driven by promotion on
Primark’s social channels. Another trend
which came through strongly in the
second half was the desire by more
customers to get outside and get active.
We launched the Great Outdoors range
with a collection of waterproof jackets,
boots and breathable trousers spanning
womenswear, menswear and kids. It has
also extended the range of product under
the Primark Cares label with 65% of the
Outdoors collection made from recycled
or more sustainably sourced materials.
Overall, sales of the Primark Cares range,
made from recycled and more
sustainably sourced materials, continue
to perform strongly since the customer
launch of our sustainability strategy
in September.

Following the strong trading after the
reopening of our stores in the spring,
inventory, which had built up during the
lockdown, reduced. All spring/summer
inventory brought forward from last year
has been sold and the autumn/winter
inventory held over from last season will
be sold in the coming months. In recent
weeks, we have experienced further
supply chain disruption including
temporary closures at dispatch ports,
limited sea container availability and
congestion at destination ports. These
disruptions have delayed both the
handover of inventory from suppliers and
the shipping and delivery of inventory to
store. We are closely managing this with
the support of our logistics providers,
taking advantage of our scale and
efficient warehouses, and we are
prioritising the product most in demand.
Although, at this point, the disruption is
causing limited availability on a small
number of lines, our warehouse
inventories give us stock cover on the
majority of lines for the important
Christmas trading period.

Margin in the second half benefited from
a significant reduction in store operating
costs, driven by lower employee
headcount, improved labour scheduling,
and savings in other operating costs.
Looking ahead to our next financial year,
operating profit margin will continue to
benefit from these store labour
efficiencies and lower operating costs.
Our forecast is for the effect on margin of

Associated British Foods plc Annual Report 2021

Poland, as well as our first store in
Czechia. We relocated to new premises
in Southend. One of our first stores to
open in the Netherlands, a small store in
Alkmaar, was closed. Downsizing of the
Downtown Crossing store in Boston was
successfully completed in September.
Encouragingly sales in the three German
stores which were downsized last year
have remained in line with pre-
downsizing levels.

In the next financial year, we are planning
to add a net 0.5 million sq ft of additional
selling space. Eleven store openings have
been confirmed: four new stores in Italy,
four new stores in Spain and one store in
each of US, Czechia and Ireland.

We see growth in all our existing
markets. Over the next five years we
expect our store estate to grow to some
530 stores from 398 at the financial year
end. In particular, we will accelerate the
expansion of our selling space in the
major markets of the US, France, Italy
and Iberia, building on our established
brand recognition, proven track record of

successful store openings and
strengthening relationships with key
landlords. Reflecting this, we are
expanding our team of in-market
specialist acquisition surveyors. We are
increasing the use of technology and
demographic data to inform our decisions
about new store locations. Additionally,
we expect to benefit from more store
opportunities with the revival of property
sector development as we emerge from
the pandemic.

In the US, the potential for new stores
is considerable. We successfully
opened four stores in the last financial
year, including new stores well beyond
our existing north-east footprint, in Florida
and Chicago. This financial year we are
committed to opening a store on Jamaica
Avenue, Queens and have already
signed four further leases to expand
our reach in the greater New York area
and a lease for a store in Tyson’s
Corner, Washington.

In Western Europe, our major
opportunities for growth are in Iberia,

Italy and France. In Spain, our second
biggest market, we opened four new
stores during this financial year, including
flagships in the city centres of Barcelona
and Bilbao, bringing our total number to
52 at the year end. We have confirmed
plans to open many more locations in this
important country in the coming years,
including four in the new financial year.
We plan to add four new stores in Italy,
the largest being Milan Via Torino.

We are also expanding into Central and
Eastern Europe (CEE). A milestone was
the opening of our 46,000 sq ft store in
Prague’s historic Wenceslas Square in
June, building on our recently opened
stores in Ljubljana Slovenia and in Poland.
Our reception from CEE shoppers has
been very positive. We are opening our
second store in Czechia next summer
and we have signed leases for our first
store in Bratislava, Slovakia and four
further stores in Poland.

In addition, we will continue to explore
opportunities in new markets.

We opened 15 new
stores during the
financial year, including
Chicago (left),
Philadelphia (top right)
and Miami (bottom right)
in the US.

OPERATING REVIEW | RETAIL

the increased costs relating to supply
chain and raw material inflationary
pressures to be broadly mitigated by
these lower store operating costs and the
transaction currency gain from the
weaker US dollar exchange rate. We
expect the adjusted operating profit
margin to be above 10%.

In September, Primark unveiled a
wide-reaching new sustainability
strategy, pledging to make more
sustainable fashion choices affordable for
all. It is designed to reduce fashion
waste, halve carbon emissions across its
value chain and improve the lives of
people who make Primark products. The
new strategy was launched with a new
customer campaign, ‘How Change
Looks’, setting out the key commitments
in prominent locations across all stores
and digital channels in all our 14 markets.
The nine-year programme includes
commitments to ensure all Primark
clothing is made from recycled or more
sustainably sourced materials by 2030,
increasing from 25% of all clothes sold at
the time of launch; the elimination of all
single-use plastics in Primark’s own
operations by 2027; and the commitment
to pursue a living wage for workers in the

supply chain by 2030. Primark will report
annually on its progress against the nine
high-level targets in the new strategy.

This sustainability transition is expected
to lead to only a modest increase in costs
in some areas of the business, net of
mitigating actions, over the period to
2030. We are confident of our ability to
mitigate these increased costs without
any material impact on Primark’s
operating profit margin in the short term
and without any significant movements in
the margin over the longer term.
Additionally, we believe that this is an
opportunity to drive further sales growth
from both existing and new customers.

Digital is becoming increasingly important
in Primark. We expect the roll-out of the
enabling stock management system,
Oracle, across all our stores in the current
financial year and for all stores to be
equipped with state-of-the-art point of
sale terminals by the end of calendar year
2022. Following the announcement in
July of our plans to launch a new
customer-facing website, the design and
development of the new digital platform
is progressing well. We are on track to
launch the new website in the UK in the

first quarter of 2022. The new site will
showcase those products which
customers expect to be able to browse
online, before they come into our stores,
with much richer product information and
imagery for every product shown. We
expect this to be around 70% of our total
range, substantially up from some 20%
on the current site. The new site will then
enable customers to research product
availability in their local store and this
responds to what we know is a clear
customer demand. The initial response
from consumer testing has been positive.
In addition, we are building digital
marketing capability to enable us to start
to capture and manage customer data
and to begin to communicate directly
with customers with relevant
marketing messages.

At year end we were trading from 398
stores and 16.8 million sq ft of retail
selling space, after our latest new store
in the Fashion District of Philadelphia in
the US was opened on 16 September.
This represents an increase of 0.6 million
sq ft over the year. Fifteen stores were
added this year: four stores in the US;
four in Spain; two in Italy, and one each in
France, the UK, the Netherlands and

New store openings in the year ended 18 September 2021

Czechia

France

Prague Wenceslas Square

Coquelles

Poland

Poznan

Spain

Barcelona Sant Cugat
Espacio León
Bilbao Gran Via
Marbella

Italy

Roma Maximo
Roma – Est

Tamworth

UK
Spain
Germany
Republic of Ireland
France
Netherlands
US
Belgium
Portugal
Italy
Austria
Poland
Czechia
Slovenia
Total

# of stores
191
52
32
36
20
20
13
8
10
7
5
2
1
1
398

Year ended 18 September 2021
sq ft 000
7,597
2,143
1,841
1,076
1,044
1,016
563
403
383
361
242
77
50
46
16,842

Netherlands

Rotterdam Forum

Sawgrass Mills Florida
American Dream New Jersey
Chicago State Street
Philadelphia Fashion District

# of stores
190
48
32
36
19
20
9
8
10
5
5
1
n/a
1
384

Year ended 12 September 2020
sq ft 000
7,534
1,988
1,841
1,076
996
971
470
403
383
257
242
40
n/a
46
16,247

Associated British Foods plc Annual Report 2021

OPERATING REVIEW | RETAIL

Retail in action: Primark Cares –
how real change looks

Our new sustainability
strategy, Primark Cares,
is a clear and committed
statement that tells our
customers, employees,
partners and suppliers that
we take our responsibility
as a large retailer seriously.
The strategy is designed to
minimise fashion waste,
reduce our impact on the
planet and improve the
lives of the people who
make our clothes.

In 2020, we renewed our ambition to
accelerate our sustainability goals, with
commitments to:

• eliminate single-use plastics from

our business;

• significantly increase the use of
recycled materials across all our
product ranges; and

• grow the number of sustainable cotton
products we sell through the Primark
Sustainable Cotton Programme.

This year, we are now supercharging this
work. Our ambition is to make more
sustainable fashion affordable for all and
we are doing this with a set of
commitments that will transform our
business to become more sustainable
and circular over the next nine years:

• Product: Giving clothing a longer life
We will change the way we make our
clothes to ensure they are recyclable by
design by 2027 and, by 2030, made
from recycled fibres or more
sustainably sourced materials. We will
also put all items through more rigorous
testing to make sure our clothing is
made to last.

• Planet: Protecting life on the planet
We have committed to halving carbon
emissions across our entire value chain
by 2030. Additionally, we will eliminate
single-use plastics and all non-clothing
waste by 2027 and will work with
cotton farmers to deliver better soil
health, biodiversity and water quality
in the regions where their cotton
is grown.

• People: Enhancing the lives of the

people who make our clothes
We will go further to improve the lives
of people in our supply chain by 2030,
pursuing a living wage for all, providing
access to social protection and financial
education and services. We will also
increase opportunities for women
through skills development and
widen access to physical and mental
health support.

We know our scale means we can have a
real impact with every change we make.
We want to get this right and will be
sharing more on our strategy in the
coming months. At Primark, we have
always been about making great fashion
affordable for everyone. Now we are
doing the same for more sustainable
fashion, without compromising on the
low prices for which we are famous.

More sustainable products:
continuing to innovate
Our Primark Cares label, denoting
products made with recycled fibres or
more sustainably sourced materials, can
now be found on a quarter of all the
clothes we sell. We have grown this by
almost 10 percentage points in just a
year – growth that is set to continue in
the coming months and years as we
work towards becoming a more
sustainable business.

Products carrying the Primark Cares label
include jeans made using cotton grown
by farmers trained through our Primark
Sustainable Cotton Programme, as well
as items made using recycled materials

across our women’s, men’s, kidswear
and home departments. Customers can
now buy swimwear, activewear, shoes,
pyjamas, lingerie, denim, duvets and
much more, all made from recycled or
more sustainably sourced materials.

We added a series of exciting new
ranges to our Primark Cares label during
the last financial year, developed in
partnership with some of the most
innovative leaders in more sustainable
fashion. Highlights include:

• our Cradle to Cradle Certified® Gold

jeans, Primark’s most sustainably made
jeans yet. Low on environmental
impact but big on style, these 100%
organic cotton mom jeans, available in
two styles, are fully recyclable and
independently certified as a safe, more
sustainable product, with a lower
impact on people and the planet. We
are incredibly proud of the Gold status,
which gives our customers the
confidence that what they are buying is
responsibly sourced;

• our new sustainable women’s

leisurewear collection, launched in May
and produced in partnership with
Recover, the recycled cotton innovator.
Each item in this eight-piece collection
of classic and on-trend leisurewear is
made using between 15% and 25%
recycled cotton. The remainder
comprises a mix of materials including
sustainable cotton from our Primark
Sustainable Cotton Programme, organic
cotton and polyester; and

• our first fashion and home collection

made using natural dyes from plant and
food waste, in partnership with
Archroma, the global specialty chemical
company. The range uses waste
generated by the food and plant
industry to create a selection of
beautiful, earthy fabric dyes that are
both neutral and natural. Made using
organic cotton and cotton from the
Primark Sustainable Cotton
Programme, the 22-piece collection will
span menswear, womenswear,
kidswear, nightwear and homeware.

Working in partnership with
others to achieve our goals
Making our business more sustainable
involves collaboration between teams
right across Primark, from ethical trade to
sourcing; from buying and merchandising
to the dedicated Primark Cares team
itself. But we know that real change is
only possible when we work with others
across and beyond our industry. For
many years we have worked with
multiple partners, including charities,
international development organisations,
government agencies and recycling
companies. Here are three of the key
partnerships we forged or extended in
the last year:

• in October 2020 we joined the United
Nations’ Fashion Industry Charter for
Climate Action, supporting its net zero
ambition and committing to a 30%
reduction in our greenhouse gas
emissions by 2030. In joining the
Charter, we have committed to tackling
emissions from across our entire value
chain. This includes Scope 3 emissions
from outside our own operations,
which make up the vast majority of our
carbon footprint;

• in May 2021 we signed up to the
Textiles 2030 initiative, a new
sustainable textiles action plan led by
the charity WRAP and supported by the
UK Government. This important
initiative aims to accelerate the fashion
and textile industry’s move toward
circularity over the next decade, making
practical interventions to significantly
reduce the environmental impact of UK
clothing and home fabrics. We will be
reporting annually on our progress; and

• in July 2021 we were delighted to

extend our relationship with the Ellen
MacArthur Foundation by becoming a
network partner, having first joined the
Foundation’s ‘Make Fashion Circular’
initiative in 2018. Over the next three
years, we will work with other leading
organisations from across the world to
accelerate the transition toward a
circular economy.

We launched our Primark
Cares sustainability strategy
with a new campaign, How
Change Looks. Campaign
materials, including a
selection above, were
displayed in stores and used
on social media to promote
our commitments across
product, planet and people.

Associated British Foods plc Annual Report 2021

OPERATING REVIEW | RETAIL
OPERATING REVIEW | RETAIL

Retail in action:
Working together
to create product
ranges for new and
expectant parents

At Primark, we are
continually working to
expand what we offer in
store, pushing into new areas
and innovating to keep pace
with our customers’ ever-
changing needs.

In the last year alone, our teams across
Primark, including specialists in design,
buying and merchandising, have
collaborated closely to develop two
exciting new ranges: Primark’s Baby
Collection and Primark Parenthood.

These clothing and lifestyle products for
new and expectant parents have been
flying off the shelves in their first season.
While we have long been known for our
babywear, with the new collections we
now aim to offer a full range of products,
including lifestyle, nursery items, gifts
and even clothing for parents.

Welcome to Primark’s Baby
Collection
Primark’s Baby Collection is the first zone
that we have dedicated to all things
baby-related. Today, it is a one-stop shop
that brings together five different product
categories for the first time, all at the
same location in store. Launched in April
2021 and now available in 162 stores, the
collection takes our customers on the
entire new parenthood journey, from the
excitement of packing a hospital bag to
the moment their child takes their first
precious steps.

Highlights include our unisex range of
co-ordinated baby clothing, nursery items
and gifts featuring farmyard animal prints
and organic fruit. Our novelty lamb rocker
was a star performer and, at £28, is an
example of how we are extending the
price range of Primark collections while
ensuring we maintain the great value for
which we are so well known.

We are also proud of our range of
wooden nursery toys made from FSC
(Forest Stewardship Council) wood,

Customers have snapped
up our licensed ‘Jungle
Book’ collection of
new-born and toddler
clothing, Primark’s first
ever extensive range of
licensed lifestyle
products for the nursery.

which is a more environmentally friendly
alternative to plastic. Customers have
snapped up our licensed ‘Jungle Book’
collection of new-born and toddler
clothing, Primark’s first ever extensive
range of licensed lifestyle products for
the nursery. Featuring watercolour
artwork that Disney has redrawn
exclusively for us, products such as our
Baloo Play Mat (made from recycled
materials and priced at £30) are proving
exceptionally popular.

The Parenthood Collection:
inspired by customers
Our new Parenthood Collection was
inspired by customers’ conversations
with our own colleagues in-store about
their desire for affordable, stylish and
comfortable fashion for expectant and
new parents. The 44-piece range,
designed with functionality, fit and quality
front of mind, launched in January. More
than half the range falls under the
Primark Cares label and it is already a
huge hit with our customers.

Parenthood features wardrobe essentials
such as mom jeans, as well as trend
products including denim dungarees and
knitted dresses. Our designers have
placed an emphasis on comfortable
fabrics, and have ensured that tops,
dresses and nightwear are all easily
adjustable for nursing.

We have worked hard to make the range
as functional as possible for new parents.
Details like the zipper feature on the
two-pack sleepsuit make these really
easy to get on and off. Adding popper
details on the rompers make changing
time that much easier for parents. Our
new-born starter set is a great giftable
item that also has room-to-grow features
like its turned waistband.

The collection is currently available in 82
stores across Europe. We are now
excited about the upcoming launch of
new products under the Parenthood
banner, including cosmetics, sleep spray
and essential body oils, all staying true to
the Primark strategy of affordable prices.

Retail in action: Licensed
products – sparking excitement
and business growth

Licensed products such as our
Disney, Netflix and Warner
Brothers ranges have become
a familiar sight in Primark
stores in recent years. Since
2013 our licensed offering has
grown strongly to encompass
areas such as music, film and
TV, gaming and toys. We are
proud of our work to make
Primark the go-to destination
for licensed products across
an ever-increasing range of
categories in clothing, lifestyle
and in-store experiences
like cafés.

For our customers, these exclusive
collections and collaborations are a
much-loved part of the Primark offer.
However, our partnerships with popular
global brands, from PlayStation to the
NBA, are also increasingly important to
us from a strategic perspective. Licensed
ranges are an effective way to drive
online engagement, create enticing
physical environments in our stores and
help Primark’s growth in new markets
such as the US.

Focus on sports
Sports brands have been just one
example of this over the last year.
Our collection of NBA products –
produced in partnership with the world’s
leading professional basketball league
– has been hugely popular since its launch
in May 2021, particularly in the US.
The range is street fashion-led across
jersey t-shirts, leisure and accessories,
offering products that connect with our
US customers whatever their team,
whether it’s the Chicago Bulls, the
LA Lakers or the Brooklyn Nets.

Our collection of NBA
products – produced in
partnership with the
world’s leading
professional basketball
league – has been hugely
popular since its launch
in May 2021, particularly
in the US.

Licensed product posts
on Instagram drove over
1 million clicks to the
Primark website this
year and included our
best-performing post
featuring Lilo & Stitch
(pictured left).

This autumn/winter we are building on
the success of the NBA range with our
American football collection with the
NFL. We are also delighted to have
launched partnerships with a string of
classic sportswear brands including Penn
and Lotto.

In addition, we have announced a series
of new lifestyle collaborations which
include partnerships with Pineapple
Dance Studios and The Stronghold,
the heritage LA denim brand. Primark
is an attractive partner for potential
licensors in a diverse array of sectors
and we will continue to create new
collaborations with the widest possible
range of brands to offer our customers
exclusive products.

Using licensed products to
enhance stores and drive
engagement online
This October we launched a branded
menswear sports zone in a selection of
our stores as part of our strategy of using
licensing partnerships to enhance our
experience-led shopping environment.
The Primark store experience is a key
part of our business strategy and we
have been working hard to ensure we are
at the forefront of experience-led retail
with dedicated areas in our flagship
stores, including Disney and Friends
zones, which have experiences like the
Friends Central Perk Café. The new
sports zone is the latest step on
this journey.

Social media posts featuring licensed
product generate some of the highest
engagement on Primark’s social channels
and drive significant traffic to our
website. Between August 2020 and
August 2021 we reached 278 million
people on Instagram with our licensed
product campaigns, with our best
performing post – featuring Lilo & Stitch
products – reaching over 2.5 million
people and receiving 122,000 likes. In
total, our licensed products posts on
Instragram drove over 1 million clicks
through to the Primark website during
this 12-month period.

Associated British Foods plc Annual Report 2021

FINANCIAL REVIEW

Financial review

Group performance
Group revenue was in line with last year
on a reported basis at £13.9bn. On a
reported basis adjusted operating profit
of £1,011m was 1% lower than last
financial year. In calculating adjusted
operating profit, the amortisation charge
on non-operating intangibles, profits less
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 included
a net charge for exceptional items of
£151m. This mainly comprised the
impairment of certain plant and
equipment in our sugar business. In
Spain, our current view for yield and
sugar content from beet sugar and lower
margins due to the expected increase in
future raw refining volumes, resulted in a
non-cash exceptional charge of €136m to
write-down the net asset value of this
business. Given the ongoing trading
challenges in some of our smaller sugar
businesses, following a review of our
projections for the forecast evolution of
beet area and yields, we have made a
non-cash adjustment of £21m to the
relevant net asset values as an
exceptional charge this year. An inventory
charge of £21m in Primark was taken at
the half year which related to the
clearance from our stores before
reopening after lockdown of certain
seasonal items on display and which
could not be sold before the end of the
season. This provision was used during
the second half of the year. Prior year
exceptional items included a mark-down
provision of £22m for potential damage
to Primark inventory stored on our behalf
by suppliers for longer than usual as a
result of the pandemic. Minimal damage
was found and the majority of the
provision was released this year.

On an unadjusted basis, statutory
operating profit was in line with last year
at £808m.

The strengthening of sterling this year
against some of our trading currencies
resulted in a loss on translation of £36m.

Net finance expense decreased this year
due to the repayment of £25m of private
placement debt and no RCF interest
charges following the repayment of the
facility at the end of the last financial
year. Profits on the sale and closure of
businesses amounted to £20m and
profits less losses on sale of non-current
assets were £4m.

Statutory profit before tax on a reported
basis was up 6% to £725m. On our
adjusted basis profit before tax was
down by 1% to £908m.

Acquisitions and disposals
In May 2021, the Group’s Ingredients
business acquired DR Healthcare España,
a Spanish enzymes producer for a total
consideration of £14m.

During the period the Group contributed
£43m to the bakery ingredients joint
venture in China with Wilmar
International. These businesses were
classified as a disposal group and held for
sale at the previous year end. In August
2021, the Group agreed the sale, subject
to regulatory approval, of a further factory
in China to this joint venture and a
non-cash reversal of £10m for the
impairment of these assets has been
included in profit on sale and closure
of business.

Closure provisions of £3m relating to
disposals made in previous years which
are no longer required were released to
sale and closure of business in
Ingredients and Grocery, both in
Asia Pacific.

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.

This year’s tax charge on the adjusted
profit before tax was £255m at an
effective rate of 28.1% (2020 – 28.8%).
Based on current tax rates at the time of
writing and with the recovery in Primark’s
profitability, we expect the Group’s
effective tax rate to fall next year to a
level closer to pre-COVID rates.

Looking ahead beyond next year, we
anticipate upward pressure on the
effective tax rate due to the impact of
corporation tax increases, notably the
increase enacted in the UK, and the
proposed increase recently announced in
Ireland. We continue to monitor
developments in other jurisdictions and
also in respect of the OECD’s BEPS
2.0 proposals.

The total tax charge for the year of
£227m benefited from a credit of £27m
(2020 - £42m) for tax relief on the
amortisation of 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
£478m and the weighted average
number of shares in issue during the
year, which is used to calculate earnings
per share, was 790 million (2020 – 790
million). Given the marginal decline in
operating profits and the reduction in the
adjusted effective tax rate from 28.8% to
28.1%, earnings per ordinary share were
5% higher than last year at 60.5p.
Adjusted earnings per share, which
provides a more consistent measure of
trading performance, declined by 1%
from 81.1p to 80.1p.

We decided not to declare an interim
dividend nor propose a final dividend
relating to the last financial year. This was
due to the impact of COVID-19 on the
Group’s cash flow driven by the duration
and number of Primark store closures.
This year the Board declared an interim
dividend of 6.2 pence per share (2020:
nil) which was paid on 9 July 2021 to
shareholders registered at the close of
business on 4 June 2021.

For the full year, the Board has proposed
a final dividend of 20.5p per share giving
a full year dividend of 26.7p per share.
Further, the Board has declared the
payment of a special dividend, to be paid
as a second interim dividend, of 13.8p
per share. The payment date for the 2021
final dividend and second interim
dividend will be 14 January 2022 to
shareholders on the register on 17
December 2021.

Total dividends for the 2021 financial year
would therefore be 40.5p per share at a
total cost of £320m.

Balance sheet
Non-current assets of £10.8bn were
£0.1bn lower than last year. This was
driven by a decrease in the investment in
property, plant and equipment and
right-of-use assets with depreciation,
amortisation and impairments higher than
capital expenditure and acquisitions made
in the year. This was mostly offset by an
increase in employee benefits assets as
the surplus in the UK defined benefit
pension scheme improved significantly.

Associated British Foods plc Annual Report 2021

FINANCIAL REVIEW continued

SECTION 172 STATEMENT | OUR STAKEHOLDERS

Engaging with our stakeholders

The following section describes
how the directors take into
account 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
fundamental to the success of
the Group and that it reflects
our value of progressing
through collaboration.

The charge for the year for the Group’s
defined contribution schemes, which was
equal to the contributions made,
amounted to £81m (2020 - £79m). This
compared with the cash contribution to
the defined benefit schemes of £42m
(2020 - £37m).

New accounting policies
The following accounting standards and
amendments were adopted during the
year and had no significant impact on
the Group:

• Amendments to IFRS 3 Definition of a

Business

• Amendments to IAS 1 and IAS 8

Definition of Material

• Amendments to IFRS 9, IAS 39, IFRS 7,

IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform – Phase 1

• Amendments to References to the
Conceptual Framework in IFRS
Standards

John Bason
Finance Director

Working capital at the year end was
marginally higher than last year.

Net cash at the year end excluding lease
liabilities was £1.9bn compared with net
cash at the end of last year of £1.6bn
reflecting the strong operating cash flow
in the year. Net debt including lease
liabilities was £1.4bn compared with
£2.1bn last year.

The Group’s net assets of £10bn were
£0.6bn higher than last year. 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 higher this year at 9.8% compared
with 9.5% last year.

Cash flow
Net cash inflow from operating activities
decreased from £1,753m last year to
£1,413m this year mainly as a result of
the increase in the change in working
capital compared to the prior year. Capital
expenditure increased by £5m compared
to the prior year and £21m was realised
from the sale of property, plant and
equipment. The net cash outlay on
acquisitions and disposals was £23m.

Tax paid in the year amounted to £298m
(2020 - £254m). The increase in tax paid
was primarily due to the state aid
payment of £23m and tax top up
payments made due to strong final
quarter results at the end of 2020.

Financing and liquidity
The financing of the Group is managed by
a central treasury department.

The Board’s treasury policies are in place
to maintain a strong capital base and
manage the Group’s balance sheet to
ensure long-term financial stability. They
are the basis for investor, creditor and
market confidence and enable the
successful future development of
the business.

The Board has approved a financial
leverage policy for the Group. In the
ordinary course, the Board prefers to see
the Group’s ratio of net debt including
lease liabilities: Adjusted EBITDA to be
well under 1.5 times at each half-year and
year-end reporting date. In exceptional
circumstances, it will be prepared to see
leverage above that level for a short
period of time.

We are pleased that S&P Global
announced that they had assigned to the
Group an ‘A’ grade long-term issuer
credit rating, with a stable outlook, which
reflected the strength of each of the
Group’s businesses, their diversity, and
ABF’s strong credit metrics underpinned
by a conservative financial policy.

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. At the year
end, £0.3bn 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
£2.3bn at the year end, of which centrally
available cash on hand was £1.9bn.

The Group holds substantial net cash
bank balances, which reduce its net debt,
which include lease liabilities, and most
importantly ensure that it has sufficient
liquidity to meet unforeseen
requirements.

Pensions
The Group’s defined benefit pension
schemes were in surplus by £493m at
the year end compared with a deficit last
year of £66m. The UK scheme, which
accounts for 91% of the Group’s gross
pension assets, was in surplus by £633m
(2020 - £94m). The increase in the UK
pension surplus was driven by large asset
gains on the pension assets, whereas the
defined benefit obligations increased
marginally driven by adverse changes in
inflation assumptions. The pension
surplus for the Group will result in an
increased interest income compared to
last year, and this will be reported in
other financial income.

The last triennial valuation of the UK
scheme was undertaken at 5 April 2020
which determined a deficit of £302m.
This valuation was performed just after
the first COVID-19 measures were
introduced. Although we were required
to agree a recovery plan with the
trustees, in the light of the subsequent
asset performance, we do not currently
expect to make any payments.

Stakeholder engagement

We engage regularly with stakeholders at
Group and/or business level, depending
on the particular issue.

As illustrated in our Group business
model and strategy section on pages 18
and 19, 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
and to manage risks at the level at which
the businesses operate. We consider this
to be an important factor in the success
of the Group both generally and also in
navigating the COVID-19 pandemic.

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 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. In the following pages, we
set out the key stakeholder groups with
whom engagement is fundamental to
the Group’s ongoing success.

Associated British Foods plc Annual Report 2021

SECTION 172 STATEMENT | OUR STAKEHOLDERS continued

Employees

Suppliers

Customers/Consumers

The Group employs 128,000 people.
Our people are central to our success.

As a diversified international Group,
we have many complex supply chains.

The buyers of our safe, nutritious,
affordable food, and clothing that is
great value for money.

Communities and the
environment

Shareholders and 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.

Governments

The Group is impacted by changes in
laws and public policy.

Key issues

• Health and safety
• Diversity and inclusion
• Engagement and development

• Payment practices
• Responsible sourcing
• Supply chain sustainability

• Healthy and safe products
• Value for money
• Availability of products
• Impact on environment
• Store environment
• Customer relations

Key issues

• Climate change mitigation and

adaptation

• Natural resources and circular economy

• Return on investment
• Business and financial performance
• Sustainability

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 sessions
• Correspondence
• Audits

• In-store signage (Primark)
• Customer surveys
• Labelling
• Social media
• Customer/consumer information lines

• Coaching and training programmes
• Community programmes and schemes
• Dealings with NGOs and other expert

programmes and schemes

• Website
• Annual general meeting
• Annual report
• Responsibility Update and ESG Insights
• Press releases
• Results announcements
• Meetings
• Registrar

How the Board engages and/or is kept informed and takes matters into account

• Senior management of each business
division (often with the assistance of
specialists from 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 was briefed include:

• Primark supplier sentiment in the wake
of the COVID-19 pandemic and major
events impacting suppliers;

• dealings with suppliers, including

landlords, in respect of the impact of
COVID-19 and temporary closure of
stores;

• communications with suppliers in
respect of the new Primark Cares
sustainability strategy; and

• modern slavery and human rights,
including approval of the Modern
Slavery and Human Trafficking
Statement.

• 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
report on food and feed safety.

Key matters on which the Board was
briefed include:

• the wide-reaching Primark Cares new
sustainability strategy founded on a
commitment to make more sustainable
fashion affordable for all;

• ongoing safety measures throughout
the Primark stores in response to
COVID-19, including through extended
opening hours and the use of booking
systems in some countries; and

• helping to continue to keep people fed
by implementing safety measures to
keep production sites open and
operating safely during the pandemic
and by careful planning and scheduling
of customer orders.

See further details on pages 75 to 76.

See further details on pages 84 to 85.

• Richard Reid, as designated Non-

Executive Director for engagement
with the workforce in accordance with
the UK Corporate Governance Code,
continued to assess the best way that
communication processes can work
through the businesses to ensure that
the ‘voice’ of each workforce is heard
- please see Richard’s letter on this on
page 102. As well as Richard Reid
meeting with employees from a
selection of businesses, each business
division also specifically reports to the
Board annually on workforce
engagement within that division. The
Board also receives two specific
updates each year on progress on
workforce engagement.

• The Group Safety and Environment
Manager provides the Board with
updates on safety trends and progress
against key performance indicators,
supplemented by updates from the
divisions.

• The Chief Executive and Finance

Director continued to engage with
Company employees at the corporate
centre through virtual town halls
covering issues such as business
updates and ESG topics.
• Nearly 400 employees from

headquarters and across the Group
were invited to attend virtual events
following the ESG investor events and
had the opportunity to ask questions.

See further details on pages 80 to 84 and

page 102.

• 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 now receives separate
updates on environmental matters
reflecting additional focus on climate
and sustainability issues (previously
dealt with in a broader Health,
Safety and Environmental update),
the most recent update being in
September 2021.

• In addition to the Group Safety and

Environment Manager engaging with
the Board on operational safety and
environmental issues in our direct
manufacturing operations, the Director
of Legal Services and Company
Secretary and Group Corporate
Responsibility Director also present to
the Board on the broader corporate
responsibility issues that sit beyond our
direct manufacturing operations e.g. in
the supply chain.

• See also the new Primark Cares

sustainability strategy (see pages 58
to 59).

See further details on pages 77 to 79 and

84 to 87.

• The annual general meeting provides an
opportunity for retail shareholders to
ask the Board questions.

• The Board also responds either directly
or via its in-house company secretarial
team to queries raised throughout the
course of the year.

• Regulatory News Service (RNS)

announcements, both scheduled as well
as additional announcements, keep
investors updated on business and
financial performance and other matters.

• Each year, the Chairman invites the

Company’s largest institutional
shareholders to share views and
discuss any issues or concerns.

• The Chief Executive and/or 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.

• The Remuneration Committee Chair
meets with investors and analysts to
answer queries and feedback around
remuneration issues.

• The Responsibility Update and ESG

Insights are approved by the Board and
are produced to provide greater
transparency and in response to
increasing requests for information
from investors.

• All shareholders are treated equally and
a Relationship Agreement is in place
with the Company’s controlling
shareholders (see page 137).

See further details on page 103, which

includes details on this year’s annual
general meeting.

• Corporate governance and audit reform
• COVID-19
• Tax and business rates
• Agricultural policy
• Climate and environment-related matters
• Public health
• Support of businesses and workers
• Job retention schemes

• Meetings, calls and correspondence

(e.g. on COVID-19 guidelines)

• Responding to consultations
• Applications to participate in

government schemes

• The Company engages with

governments to contribute to,
and anticipate, important changes in
public policy.

• The Board is briefed on engagement

with governments including on matters
specifically related to dealing with the
impacts of COVID-19 and job retention
schemes.

• The Board takes into account the
interplay between commercial
decisions and government policies and
aims, for example with the reopening
of the Vivergo bioethanol plant assisting
with the country reaching its climate
change goals.

See the example on page 70 in

relation to the reopening of the
Vivergo bioethanol plant.

Associated British Foods plc Annual Report 2021

SECTION 172 STATEMENT | OUR STAKEHOLDERS continued

The Group employs
128,000 people, central
to our success. Pictured
here are two colleagues
at AB Enzymes’ new
pilot plant in Rajamäki,
Finland.

Principal decisions

The ongoing impact of COVID-19 for
much of the financial year has 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. However,
learnings from handling the pandemic in
the last financial year meant that other
important decisions could also be taken.

As was the case for the previous
financial year, there was a need to

ensure that the consequences of
decisions were the right thing for
promoting the long-term success of the
Company, as well as having regard to
maintaining a reputation for high
standards of business conduct.

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.

Queues outside
Primark’s Liverpool
store when it reopened
in April 2021.

Decision not to pay a final
dividend in January 2021 and to
pay an interim dividend in July
2021.

Which stakeholders most affected?
• Shareholders/Institutional investors

Consideration of stakeholder
views/interests and impact on
decision-making
Being acutely aware of the importance
of dividends to our shareholders and
institutional investors, we gave much
consideration in November 2020 to the
declaration of a final dividend relating to
the 2019/20 financial year (having
previously also decided not to pay an
interim dividend relating to that year).
The increasing restrictions at that time in
a number of Primark’s major markets led
us to be cautious due to the impact of
COVID-19 on the Group’s cash flow
driven by the duration and number of
Primark store closures. On balance, we
therefore decided not to propose a final
dividend for the 2019/20 financial year
while we monitored the impact of further
COVID-19 restrictions on Primark during
the important Christmas trading season.

That degree of uncertainty was
substantially lower by April 2021 due to a
large proportion of the UK adult
population having been vaccinated and
the successful reopening of Primark’s
English and Welsh stores, these stores
reaching record sales in the week after
reopening on 12 April 2021. Shareholder
sentiment on payment of an interim
dividend was sought through
engagement with our brokers. These
factors and this engagement provided
more certainty and gave us additional
confidence to decide, in April 2021, to
declare an interim dividend of 6.2 pence
per share in respect of the 2020/21
financial year.

Considerations leading to these
decisions, including the amount of the
interim dividend, took into account the
likely long-term consequences of these
decisions. The decision to pay an interim
dividend factored in the net cash position
before lease liabilities for the Group of
£705m reported at the half year and
our cash flow projections demonstrating
the substantial headroom available to
the Group.

Associated British Foods plc Annual Report 2021

SECTION 172 STATEMENT | OUR STAKEHOLDERS continued

Decision to repay job retention
scheme money in various
countries.

Which stakeholders most affected?
• Governments
• Shareholders/Institutional investors
• Employees

Decision to reopen the Vivergo
bioethanol plant in Hull.

Which stakeholders most affected?
• Communities/Environment
• Government
• Customers/Consumers
• Employees

Decision to invest in a
market-leading digital platform
for Primark.

Which stakeholders most affected?
• Customers/Consumers
• Employees
• Communities/Environment

Consideration of stakeholder
views/interests and impact on
decision-making
With a substantially higher degree of
certainty around Primark trading by April
2021, due to a large proportion of the UK
adult population having been vaccinated
and the successful reopening of
Primark’s English and Welsh stores, we
made the decision to stop receiving job
retention scheme monies from that time
and to repay job retention scheme
monies received in the 2020/21 financial
year in various countries where
repayment was possible.

Repayments amounting to £94m were
made in the UK, Republic of Ireland,
Portugal, Czechia and Slovenia. The
largest amount related to the UK, being
the country in which we had most
employees benefitting from the scheme,
and in relation to which we engaged with
HM Treasury. The decision to repay
reflected the greater certainty as to the
Group’s financial position at that time, the
greater comfort that the repayment
would not be detrimental to its long-term
success, and reflected what the
Company considered to be the
responsible course of action.

Consideration of stakeholder
views/interests and impact on
decision-making
The UK Department for Transport
announced in February 2021 that it had
increased the mandated inclusion levels
of renewable ethanol from a nominal 5%
inclusion, E5, up to a nominal 10%
inclusion, E10. Following this
announcement, we announced in our pre-
close trading update in February 2021 our
plans to reopen our Vivergo facility in
Hull, UK, which uses domestic feed-
grade wheat to produce bioethanol.

The project to reopen the plant included
engagement with multiple stakeholders,
including the UK Department for Transport.
The Board also took into account the
contribution of the project towards the
UK’s carbon reduction commitments.
As well as the creation of additional
employment, the plant is estimated to
help cut transport CO2 emissions by
more than 550,000 tonnes per year,
which is estimated to be the equivalent
of taking 260,000 cars off the road.

Consideration of stakeholder
views/interests and impact on
decision-making
Digital continues to have a critical role to
play as part of Primark’s marketing mix
and we have grown our following across
Primark’s social media channels to 24
million from 22 million since the end of
the last financial year.

As announced in the July 2021 trading
update, and in response to customer
insights, we are now investing in a
market-leading digital platform. A key
component of this will be the launch of a
new customer-facing Primark website
early in the next calendar year with
improved functionality. This will allow us
to showcase a much larger proportion of
the Primark range and provide to
customers range availability by store.
We are also strengthening our digital
marketing capability to enable us to
deliver more personalised content
to customers.

Vivergo’s bioethanol
plant in Hull, the
reopening of which
was announced in
February 2021.

Decision to launch the
Primark Cares sustainability
strategy.

Which stakeholders most affected?
• Shareholders/Institutional investors
• Communities/Environment
• Customers/Consumers
• Employees
• Suppliers

Consideration of stakeholder
views/interests and impact on
decision-making
On 15 September 2021, we announced
Primark’s wide-reaching new
sustainability strategy founded on a
commitment to make more sustainable
fashion affordable for all. The nine-year
programme addresses Primark’s most
material ESG factors with commitments
across product, planet and people. The
commitments include all clothes being
made using recycled or more sustainably
sourced materials, halving carbon
emissions across the value chain and
pursuing a living wage for workers in our
global product supply chain by 2030.

The Board was briefed by Primark senior
management on engagement with
suppliers on reducing their carbon
emissions, on the results of customer
insights data and on testing of the
strategy with stakeholders such as the
charity WRAP and the Ellen MacArthur
Foundation, as well as a variety of
other organisations.

The Board had the opportunity to ask
questions about the sustainability
strategy and to provide feedback,
including on the importance of
understanding how others would react to
the launch of the Primark Cares strategy
and the various commitments made.

ABF’s ESG investor
briefing on Primark and
Sustainability was held in
September 2021 (left to
right: John Bason, Katharine
Stewart, George Weston,
Paul Marchant, Lynne Walker
and Paul Lister).

Decision to hold a series of ESG
investor events.

Which stakeholders most affected?
• Shareholders/Institutional investors
• Communities/Environment
• Employees

Consideration of stakeholder
views/interests and impact on
decision-making
We decided to launch a series of ESG
investor events in 2021 to better
articulate our values and actions in this
area. Our decision to do so took into
account feedback from investors and
increasing numbers of questions around
our stance on ESG matters.

The first event was held in March 2021,
with presentations by the Chairman,
Chief Executive, Finance Director,
Director of Legal Services and Company
Secretary, Group Corporate Responsibility
Director and Chief People and
Performance Officer. Investors had
the opportunity to ask questions and
three subsequent events were held
for banks, insurers and employees
respectively, giving them the
opportunity to ask questions.

A second investor event was held
on 17 September 2021, focusing on the
Primark Cares sustainability strategy and
included presentations from the Chief
Executive, Finance Director, Director of
Legal Services and Company Secretary,
Group Corporate Responsibility Director,
Primark CEO and Primark Cares Director
(see photo above). As with the first
event, investors had the opportunity to
ask questions and three subsequent
events were held for banks, insurers and
employees, respectively, giving them the
opportunity to ask questions. Separately,
Primark also held a supplier event and an
event for its employees.

A third investor event is currently planned
to be held in 2022 focusing on
sustainability and climate-related issues
across a broader range of companies in
the Group, with similar opportunities to
ask questions.

As stated at the first ESG investor event,
these events are the beginning of what
we hope will develop into a deeper
engagement with stakeholders as we
continue to integrate ESG factors into our
financial calendar. Feedback from these
sessions can then be factored into our
future decision-making.

Associated British Foods plc Annual Report 2021

RESPONSIBILITY

Creating value together

2021 has been another
challenging year, but one
thing has remained constant:
our commitment to operating
responsibly at all times.

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.

Our purpose is to provide safe, nutritious
and affordable food, and clothing that is
great value for money. In doing these
things well, we know we are doing good,
helping to make millions of people’s
lives better.

We live and breathe our values through
the work we do every day. They guide
our behaviour and help us deliver
long-term benefits for our people,
suppliers, communities, customers and
the environment.

These do not replace each business’s
own values, but rather consolidate and
summarise the most common themes
found across the Group.

o n e ’ s

cting e v e r y
dignit y

e
p
s
e
R

ring
ur

i
t

l
i
v

rig

Delivering 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.

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.

ctin

int

i
t

h
g
u

s sing thro
o lla b oratio

Progressing
through
collaboration
We work with others
to leverage our global
expertise for local good.

P r o g r

Through collaboration
with our stakeholders, including

non-governmental organisations
(NGOs), we are working to create
safer, fairer working environments
and promoting thriving,
resilient communities.

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, communities, 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.

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.

Respecting the environment

We work hard to reduce greenhouse
gas emissions, use natural resources
efficiently and promote ecosystems,
biodiversity and animal health
and welfare.

128,000

people employed

£39m

invested in safety risk
management

53%

of our total workforce and
37% of our senior management
are women

2.8m

2,200

54%

hours of social and
environmental training delivered
to Primark suppliers

of the energy we used came
from renewables*

544,000

people’s lives improved since
the launch of Twinings’ Sourced
with Care programme

meals provided through surplus
food donations to foodbanks

79%

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

1,206

£34m

audits of supplier factories
by Primark

invested in environmental risk
management

We work to
understand and
focus our actions
on what matters
most; what is
material to our
businesses and
our stakeholders,
including society
and the planet.

Our supply chains
• Respecting human
rights and labour
rights

• Increasing

traceability and
transparency

• Improving farming
• Improving

standards in our
suppliers’
factories

Our operations
• Focusing on

climate change
• Becoming more
energy efficient

• Making finite
resources
go further
• Valuing water

Our people
• Prioritising safety
• Supporting health

and wellbeing

• Embracing diversity,
and encouraging
equity and inclusion

• Building

engagement
and supporting their
development

Our products,
consumers
and communities
• Offering safe,
healthier and
affordable products
• Helping others cut

their carbon
emissions
• Widening
customer
awareness
• Adding value

to local
communities

>70%

of our people have access to an
employee assistance programme

Associated British Foods plc Annual Report 2021

* This renewable energy is mainly generated on our sites from biogenic sources.

RESPONSIBILITY continued

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

80 to 83);

• information on diversity (page 81);
• information on our Anti-bribery and

Corruption Policy (page 83);

• information on our Whistleblowing

Policy (page 84);

• information on our approach to human

rights (pages 75 and 76);

• information on social matters (pages

75, 76, 84 and 85); and

• information on our Environment Policy
and management (pages 77 to 79).

Further information on these can also be

found in our 2021 Responsibility Update
and our ESG Insights.

Further responsibility and ESG
disclosures
This year we have continued to evolve
our responsibility reporting to better
address the requirements of different
stakeholders. We are publishing our
Responsibility Update, Creating Value
Together, which showcases our values in
action and demonstrates how our
businesses make lasting positive
contributions across their value chains by
investing in supply chains; in operations;
in people; and in products and the
customers and communities who
use them.

In recognition of increasing expectations
to disclose the non-financial performance
of our material impacts, we will report
more detailed information to complement
the Responsibility Update. Last year this
information was contained in the ESG
Appendix. This year we are replacing the
ESG Appendix with our ESG Insights.
Our ESG Insights will more clearly
provide information relating to the
commitments, approach, performance
and impact of ABF and our businesses.

We engaged Ernst and Young (EY) to
provide limited assurance over the
reliability of 18 environment and safety
key performance indicators (KPIs) for the
year ended 31 July 2021. 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
Statement and our climate, water and
forests reports to CDP.

Engaging with stakeholders
We employ 128,000 people across
operations in 53 countries, and our scale
means that our activities matter to, or
have an impact on, many people and the
planet. Our reporting is intended to
provide all stakeholders with an overview
of our approach to addressing social and
environmental issues.

Detailed information about our approach
to stakeholder engagement and specific
activities this year can be found on pages
65 to 85 of this annual report.

At a Group level we engage with a variety
of stakeholder groups including
shareholders, governments, media and
investors. Also as part of daily business
activities and through structured
processes, our businesses routinely
engage with customers, suppliers,
regulators and industry bodies.

Below are some examples of how we
disclose information, collaborate and
engage with others through our
responsibility focus areas.

People
We were pleased to be one of 141 global
companies to join the pilot phase of the
Workforce Disclosure Initiative and are in
the process of submitting our response
to its fifth survey.

Society and supply chains
The Group and our businesses engage
with a number of organisations on issues
around human rights, including the
Corporate Human Rights Benchmark
(CHRB), Ethical Trading Initiative (ETI) and
KnowTheChain. Our non-Retail
businesses collaborate with suppliers,
through SEDEX and AIM-PROGRESS.

Examples of business-level engagement
with NGOs on local and subject-specific
matters are shared in our 2021
Responsibility Update.

Twinings’ Sourced
with Care
programme is
designed to
improve the
quality of life in
the communities
the business
sources from.

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 any necessary operational
adaptations. Our reports are publicly
available at www.cdp.net and on
our website.

The Group and our businesses also
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
recognises that when we collaborate
with others, we can all learn from each
other and drive greater positive
industry 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
and we engage with individual investors
and investor-related ESG research
agencies to provide the information they
require.

This year, to better support our
stakeholders’ understanding of our
business model and our approach to
responsibility and sustainability, we
have structured our reporting in line with
our value chain, breaking it down into
four chapters.

These focus on:

• our supply chains;
• our operations;
• our people; and
• our products, consumers, and our
support for local communities.

Our ESG Insights are also
published online in response to
increasing requests for ESG-related
information such as business
commitments and performance data.

Our supply chains

Together with our suppliers,
from large businesses to
smallholder farmers, we are
working hard to build more
equitable, ethical and
sustainable supply chains.

We are focused on what really matters:

• respecting human rights and labour
rights, because when you respect
people, treat them with dignity and
make sure they can make a good living,
you can build mutually beneficial
relationships;

• addressing modern slavery, a global

issue that requires global action;

• increasing traceability and transparency,

so that we, our customers, and
consumers can make choices based
on quality, sustainability and
ethical factors;

• improving farming, working together

with farmers and nature to help
develop more sustainable farming
practices, now and for the future; and
• improving standards in our suppliers’

factories, tackling social, environmental
and safety issues.

Our values drive us to place considerable
importance on the long-term wellbeing of
the communities in which we operate,
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 worked to minimise
the impact of any human rights risks
associated with COVID-19.

Respecting human rights and
labour 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 Group’s 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.

Tackling modern slavery
ABF produces a statement on behalf of
itself and relevant entities in the Group, in
accordance with the UK Modern Slavery
Act. A number of our businesses have
also produced statements containing
further details in respect of their own
operations. Links to these can be found
at: www.abf.co.uk

We provide opportunities that respect
human rights and dignity every day
through the employment we create, 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 the 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 risks to be tackled
most effectively by those who best
understand the local context. We engage
and collaborate with a broad range of
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 is being undertaken
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 in
place, and our focus remains on doing all
we can to support our suppliers.

This year, we are pleased that 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): for example;

• policy: as a Group we have policies

that set out our standards with
respect to human rights, such as our
Supplier Code of Conduct and our
Speak Up Policy;

Associated British Foods plc Annual Report 2021

RESPONSIBILITY continued

• 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 operations; and
• remedy: over the last few years,

Primark has been working to review,
revise and improve its approach to
remedy and grievance mechanisms.
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 to 20 supplier factories
in China.

For further information see pages 13 to
21 of our 2021 Responsibility Update
with additional information provided in
the ESG Insights.

Raising awareness and training
In collaboration with Twinings, we
developed an online ethical training
module designed to raise awareness of
modern slavery. The training 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
training also outlines how those operating
in our supply chain can help to keep it
free from modern slavery. This training
was made available to all our businesses
and, since it was launched, has been
completed by almost 1,000 employees.

A number of our businesses have created
tailored training to raise awareness.
For example:

• all newly appointed Westmill
employees with recruitment
responsibility completed the
Stronger2gether e-learning training
within their first three months in role;

• AB Agri trained nearly 200 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 online training to
raise awareness of the potential for
modern slavery in their 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 training can be shared with
suppliers. So far, over 75% of those
employees invited have completed the
training; and

By 2027, Primark
will ensure that
all the cotton
used to make
their clothes will
be organic,
recycled or
sourced from
the Primark
Sustainable
Cotton
Programme
(PSCP).

• this year Jordans Dorset Ryvita

completed their first face-to-face
supplier training on modern slavery,
with traders for their Turkish
commodities, and rolled out an online
e-learning module in modern slavery
beyond the buying team to over 50
colleagues in sales and marketing.

Increasing traceability and
transparency
We want to make sure our products are
manufactured, sourced and transported
responsibly. Growing numbers of
customers and consumers share our
concerns, and increasing traceability and
transparency ensures they have better
information to inform their actions. Better
traceability enables us to understand
more about our supply chains. Many of
our businesses are doing this by making
supply chain data publicly available
through online global sourcing maps.

Our businesses purchase a significant
variety of different commodities to
make the food we manufacture and
the clothing we sell. Our businesses
have identified a range of priority
commodities that they will focus on.

Primark prioritised the traceability of
cotton as it is the most commonly used
fibre in their products. Through the
Primark Sustainable Cotton Programme
(PSCP) the business works directly with
cotton farmers and suppliers to achieve
traceability from the communities
where it is grown, through to the
products in store.

Improving farming
We want to work with farmers and
nature to produce the food and fibres
we need now and for the future.
This collaboration can work for farmers,

their families and communities, for
consumers and for our planet.

Some of our businesses are encouraging
and helping farmers to explore
regenerative farming techniques,
designed to naturally support soil
quality and enhance biodiversity,
including crop pollinating insect species.
These techniques can help farmers
become more climate resilient, for
example, by using more water-efficient
irrigation methods, while also reducing
greenhouse gas emissions.

Improving standards in our
suppliers’ factories
Our businesses often use their influence
as customers to support better ethical,
environmental and safety standards in
their suppliers’ factories. In many
instances, these factories fulfil
contracts for other customers, so it is
not simply a case of demanding change.
Our businesses have to help suppliers
to see the benefits to them of making
positive changes.

Primark has made a significant impact on
supplier factory practices through the
work of their Ethical Trade and
Environmental Sustainability team.
Primark was one of the first brands to
sign up to the Accord on Fire and Building
Safety and recently to the International
Accord for Health and Safety in the
Textile and Garment Industry, which
replaced the prior agreements. Primark
launched its own structural integrity
programme in 2013, drawing on
expertise provided by the engineering
firm Mott MacDonald. This programme
now covers Bangladesh, Pakistan and
Myanmar.

Our operations

A growing global population
needs more accessible,
ethical and affordable food
and clothing but with less cost
to our planet’s finite resources
and climate. We play a role
in meeting people’s present
needs but we also aim to
shape a more sustainable
future. This means cutting
carbon emissions in our
operations, making them
more energy efficient, and
using resources, such as
water, in more circular ways
to reduce the impact of
serving our customers.

We are focused on what really matters:

• climate change: because it presents an
existential risk and the world needs to
cut emissions to secure a net zero
future. Becoming more energy
efficient, by producing more from less
energy, and switching to renewable
options are key to cutting carbon and
costs in the long run;

• making finite resources go further:
because the future is circular, with
resources used, re-used, recycled, and
reconstituted for as long as possible;
and

• valuing water: because we recognise

water is a valuable, shared resource for
our operations and the communities in
which we operate.

Focusing on climate change
For us and for many of our stakeholders,
climate change is not a new challenge.
We have factored the implications
of climate change, its associated risks
and opportunities, into our commercial
decision-making. For example, we assess
the annual risk that drought poses for
our wheat supply to our Australian
bakery business.

Our businesses and supply chains
operate in many areas subject to climate
change risks and opportunities as we
transition to a lower-carbon world.

Our businesses are committed to cutting
carbon emissions from their operations.
For example, from combined heat and
power plants or using machinery and
vehicles (Scope 1) and their indirect
emissions, including those from any
energy, such as the electricity they buy
(Scope 2). In addition, our businesses are
currently making progress to calculate
the indirect emissions upstream in their
supply chains and downstream through
their products (Scope 3).

Climate change presents various
economic, business and social risks and
opportunities, which all have the potential
to affect our businesses in the near,
medium and long-term.

This year, we engaged formally with
each division on the Taskforce for
Climate-related Financial Disclosure
(TCFD), building on existing awareness
and action on climate change issues.

We decided to undertake a detailed
assessment of our most financially
material businesses, AB Sugar, Primark
and Twinings, which account for 73% of
Group adjusted operating profit and 69%
of Scope 1 and 2 GHG emissions. We
will also review our other businesses
to ensure we capture all material risks
and opportunities.

Managing climate risks effectively and
taking advantage of the opportunities in
transitioning to a lower-carbon world
requires us to develop robust action plans
for the near-term. We must also be able
to adapt rapidly, as governments in the
countries where we operate consider
carbon taxes and other regulatory
responses that could affect our future.

We support policies that are aligned with
the goals of the Paris Climate Agreement,
to limit the rise in global temperatures to
well below 2 degrees Celsius above
pre-industrial levels and to pursue efforts
to limit the temperature increase even
further to 1.5 degrees Celsius.

The high level of diversity across our
businesses means that it is not
appropriate to set groupwide targets for
different elements of climate change risk.
Our businesses are responsible for
setting targets appropriate to their
specific business and taking action to
achieve these. AB Sugar, Primark and
Twinings have all set emissions
reductions targets appropriate to their
operations. AB Sugar has a target of a
30% reduction in its end-to-end carbon
emissions by 2030. Primark, where GHG
emissions arise primarily in Scope 3, has
targeted a 50% reduction in absolute
terms by 2030. Twinings has set a target
of carbon neutrality from bush to shelf for
tea and herbal infusions by 2030.

For more information on our approach to
managing climate risk and opportunities,
see pages 86 and 87 on The Climate-
related Financial Disclosures, page 93,
and further details in our 2021
Responsibility Update.

Our total emissions (Scopes 1 and 2)
have reduced again this year. For 2021,
we report an 11% reduction compared
with last year from 3.55 million tonnes
CO2e to 3.16 million tonnes CO2e ∆.

We publish further detail on our climate-
related governance and risk management
through CDP’s report at www.cdp.net.

AB Mauri’s
Veracruz site, in
Mexico, installed
205 solar panels,
which generate
half of all the
energy used by
their site offices.

Associated British Foods plc Annual Report 2021

RESPONSIBILITY continued

Our greenhouse gas emissions

Scope 1
Combustion of fuel and operation of machinery (000 tCO2e)
Generation and use of renewables (000 tCO2e)
Total Scope 1 (000tCO2e)

Scope 2
Emissions from purchased energy - location method (000 tCO2e)
Emissions from purchased energy - market method (000 tCO2e)
Total Scopes 1 and 2 - location method (000 tCO2e)

Scope 3
Indirect emissions from use of third-party transport (000 tCO2e)
Primark’s scope 3 emissions (000 tCO2e)
Total Scope 3 (000 tCO2e)
Biogenic carbon (000 tCO2e)

Emission intensity (Scopes 1 and 2)

Tonnes per £1m of revenue

2021

2020

2,370
80
2,450∆

711∆
777∆
3,161∆

621∆
4,606∆
5,227∆*
4,208

2,719
78
2,797

758
783
3,555

764
–
–
4,045

228

256

* 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
2021, 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 2020 and 2021, the Group’s Scope 3 emissions are our third-party transport emissions only. For 2021, we have excluded Primark’s
third-party transport emissions from the Group figure as these are accounted for in the reported Primark Scope 3 emissions. See our ESG Insights 2021
Climate Change for more details.

Streamlined energy and carbon reporting

Energy consumed (GWh)1

UK operations

Outside UK operations

Scope 1 and 2 emissions (000 tCO2e)2 UK operations

Outside UK operations

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, 2020 and 2021.

2021 ∆

4,692

17,298

1,130
2,031

2020

5,292

17,585

1,299
2,256

2019

5,826

17,740

1,532
2,461

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 Insights for more detail.

Reducing our energy use
As energy generation is our primary
source of GHG emissions in our own
operations, our businesses are working
hard to improve their energy efficiency on
a continuous basis, as well as through
investment projects. In addition, the price
volatility of the energy we purchase
means that rigorous energy management
is a key operational focus.

In 2021, our total energy use was 21,990
GWh ∆, a 4% decrease on 2020. Our
sugar businesses consumed 82% of the
Group’s total, or 17,950 GWh ∆.

In 2021, we exported 910 GWh ∆ of
energy, which is a 9% decrease
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 10 years we have reported our
Group and, more recently, business
division energy use and greenhouse gas
emissions. In compliance with UK
reporting requirements, we have
provided in the table above our UK
energy and greenhouse gas 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 2021
Responsibility Update and more detailed
performance data included in our
ESG Insights.

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 Insights for more detail.

We also continuously explore how we
can better use renewable energy. Of the
total energy we used this year, 54% or
11,855 GWh ∆, came from renewable
sources. This equates to a 5% decrease.
This 5% decrease relates to the
reduction in all renewable sources
(bagasse, wood, trash and biogas).
This energy comes mainly from on site
renewables generated from biogenics.
Specifically, 89% came from bagasse,
the residual fibre left after sugar is
extracted from our sugar cane 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.

Making finite resources
go further
We look for ways to re-use or re-purpose
the waste we create, through recycling
or by creating by-products such as
energy, soil or animal feed. Ultimately,

we are seeking to work towards a
circular economy.

This year we generated 571,000 tonnes ∆
of waste which is a 2% decrease
compared with last year. Of the total
generated, 79% was recycled, or
recovered and re-used. Through the
continuous improvement in waste
segregation, working with local suppliers
to manage increasing quantities of waste
which can be recycled, whilst reducing
the inputs that create waste in the first
place, we are achieving meaningful
progress in waste management.

Valuing water
We recognise water as a valuable shared
resource that can be scarce in some
parts of the world. Where we have
operations, our approach focuses on
reducing the amount of water we
abstract from local sources to make our
products, while reusing process water for
cleaning or cooling and in certain
locations using wastewater for irrigation.

We have carried out our third iteration of
water risk assessments using
internationally recognised methodologies
to identify the operational sites that may
have a high or extremely high water risk.
This definition includes water availability,
for example droughts and floods, water
quality issues, legal risks and reputational
risks. We provide a more detailed report
about water risks in our CDP submission.

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 2021, we abstracted
864 million m3 ∆ of water which is a 2%
increase compared with last year. Of the
total water abstracted, 25% was reused
within our operations before finally
returning it to the watercourse.

Our sites managed 127million m3 ∆ of
waste water which was treated and then
returned to the watercourse. This is an
11% increase compared with last year,
which is a reflection of improved
collection of this data as well as an
increase in the amount of water brought
onto our sites.

Environmental compliance
This year we received 15 environmental
fines ∆ with a cost of £75,000 ∆ which fell
within the reporting year. These were
largely due to the treatment of waste
water, management of on-site waste
and dust. All the sites have addressed
the issues and liaised with the local
authorities and regulators to ensure
standards are met.

Waste generated (000 tonnes)
and proportion recycled

9
9
9
9
8
8

7
7
7
7
0
0

6
6
3
3
2
2

5
5
8
8
5
5

5
5
7
7
1
1
∆
∆

8
3
%

8
2
%

8
0
%

8
4
%

7
9
%

Scope 1 and 2 GHG emissions
(000 tonnes CO2e)

Quantity of packaging used
(000 tonnes)

4
4
,
,
2
2
4
4
3
3

4
4
,
,
1
1
5
5
3
3

3
3
,
,
9
9
9
9
3
3

3
3
,
,
5
5
5
5
5
5

3
3
,
,
1
1
6
6
1
1
∆
∆

2
2
5
5
6
6

2
2
5
5
9
9

2
2
4
4
3
3

2
2
4
4
5
5

2
2
3
3
3
3

Energy consumption (GWh) and
proportion from renewable sources

Water abstracted (million m3)

2
2
3
3
,
,
3
3
1
1
6
6

2
2
3
3
,
,
2
2
1
1
6
6

2
2
3
3
,
,
5
5
6
6
6
6

2
2
2
2
,
,
8
8
7
7
7
7

2
2
1
1
,
,
9
9
9
9
0
0
∆
∆

8
8
3
3
7
7

8
8
1
1
1
1

8
8
8
8
0
0

8
8
4
4
7
7

8
8
6
6
4
4
∆
∆

4
9
%

5
0
%

5
2
%

5
5
%

5
4
%

Associated British Foods plc Annual Report 2021

RESPONSIBILITY continued

Our people

Our people are exceptional.
We benefit every day from
the breadth of their
backgrounds, ideas, opinions
and skills. We invest in their
development and prioritise
their safety, health and
wellbeing.

We are focused on what really matters:

• prioritising health, safety and wellbeing,
because nothing matters more than our
people. It is as simple and fundamental
as that. We must keep them safe at
work and support their health and
wellbeing;

• embracing diversity and encouraging
equity and inclusion to break down
barriers to talent and welcome talented
people whatever their unique
characteristics and irrespective of their
ethnicity or race, religion, gender, age,
nationality, sexual orientation, disability
or socio-economic background; and
• building engagement and supporting
development, because people as
proactive, passionate and productive
as ours deserve to be heard and
supported at every stage of
their careers.

Prioritising health, safety and
wellbeing
We want everyone who works for us to
be, and feel, safe at work. Their health
and wellbeing has been more important
than ever during this second year of the
COVID-19 pandemic.

Loss of life in our operations is entirely
unacceptable and we are deeply
saddened to report two work-related
fatalities this year ∆.

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 is responsible for
creating a culture that promotes safe
working practices. All our businesses
must comply with the Associated British
Foods Health and Safety (H&S) Policy
(www.abf.co.uk/responsibility) and work
within the safety framework provided by
the Group, against 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 £39m was invested in safety risk
management, of which 24% was
dedicated to COVID-19 safety measures
for employees, customers and other
visitors to our stores and manufacturing
sites. Investments this year included
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, 77% of our factories and retail
operations achieved a year’s operation
without any Reportable Injuries and 67%
did not have an employee Lost Time
Injury (LTI).

In 2021, LTIs among employees
decreased by 15% from 406 last year to
346 ∆. This equates to an LTI rate of
0.39% of full time equivalent (FTE)
employees experiencing an injury that
resulted in time off work. For contractors,
the LTI rate for the year was 0.18%.
There was also an 18% decrease in
Reportable Injuries to employees from
306 in 2020 to 250 this year. This
equates to 0.28% 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. This has been an even greater
priority during the pandemic.

Health and safety fines
During 2021, we received three safety
fines ∆ with a cost of £67,000∆ which fell
within the reporting year. All the
businesses involved are required to
report to Associated British Foods’
Group 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
2021 Responsibility Update and our ESG
Insights for performance data.

Number of employees

Reportable injury rate (%)

1
1
3
3
7
7
,
,
0
0
1
1
4
4

1
1
3
3
8
8
,
,
0
0
9
9
7
7

1
1
3
3
2
2
5
5
9
9
0
0

,
,

1
1
3
3
3
3
4
4
2
2
5
5

,
,

1
1
2
2
7
7
,
,
9
9
1
1
2
2

.
.

0
0
6
6
3
3

.
.

0
0
5
5
9
9

.
.

0
0
5
5
4
4

.
.

0
0
3
3
2
2

0
0
.
.
2
2
8
8

Embracing diversity and
encouraging equity and
inclusion
Our businesses benefit by embracing
diversity, equity and inclusion (DEI). It
widens their talent pools, makes them
more attractive employers and connects
them to the diverse communities they
serve. Their DEI activities are
underpinned by the ethos ‘no barriers to
talent’. Many of our businesses have
their own policies, programmes and
teams in addition to our Group-wide
initiatives. Our Group DEI Network brings
together people from across the Group to
share knowledge, best practices and
ideas. We also provide unconscious bias
training for people in our businesses.

For details on diversity as it relates to
the Board of the Company, please
see page 108.

Gender metrics
We are delighted that 53% of the people
we employ across our global business
are women, which demonstrates the
success of our various initiatives to
achieve no barrier to talent. Among the
most senior levels, reporting to the
divisional chief executives and Group
functional directors, our gender balance,
as reported to Hampton Alexander, has
remained at 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:

• many of our managerial and

professional 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 900 members;
• the Group DEI Network, through which

representatives from across the
business share knowledge and embed
best practice into our core processes
and unconscious bias training for
people in our business; and

• a two-way mentoring programme,

through which more than 100
individuals from 13 countries have
received mentorship and support from
a senior leader in a business different
to their own.

Examples from across the Group:

• AB Agri and George Weston Foods ran
activities to support International Day
for People with Disability as part of
their ongoing programme. AB Agri also
marked Purple Light Up, a UK-focused
initiative, by turning the lights on its
trucks and sites purple;

• AB World Foods’ leadership team has
an equal gender balance and 144 line
managers have completed unconscious
bias workshops;

• Westmill Foods is offering 20

employees career coaching with senior
leaders – with 75% of those being
coached from under-represented
groups. The business has also reduced
its gender pay gap from 4.9% to 0.4%
for 2021; and

• George Weston Foods’ ‘Wear it purple

day’ was attended by around 400
colleagues, helping to raise awareness
and inclusion of LGBT+ people.

Gender pay gap reporting
Overall, the gender balance of ABF is
fairly equal, with women making up 53%
of our total global workforce. 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
2021. However, more than half of our
workforce is employed outside Great
Britain and therefore not included in this
Gender Pay analysis.

Gender metrics

Associated British Foods plc Board directors are not included in the table below.
We currently have three women and six men on the Company’s Board. The Board are pleased that we now meet the requirements
of both Hampton Alexander and the Parker Review.

Grocery
Sugar
Agriculture
Ingredients
Retail
Central
Total

Total
employees*
15,815
31,960
2,622
6,344
70,667
504
127,912

Men in
workforce
10,499
26,342
1,834
4,725
15,955
306
59,661

Women in
workforce
5,316
5,618
788
1,619
54,712
198
68,251

* Full-time, part-time and seasonal/contractors.
** Includes directorships of subsidiary undertakings.

See the ESG Insights for definitions.

Percentage
of workforce
who are
women
34%
18%
30%
26%
77%
39%
53%

Number
of senior
management

roles**
782
290
378
564
185
68
2,267

Number of
men in
senior
management
roles
494
200
218
401
111
50
1,474

Number of
women in
senior
management

roles
288
90
160
163
74
18
793

Percentage of
senior
management
who are
women
37%
31%
42%
29%
40%
26%
35%

Associated British Foods plc Annual Report 2021

RESPONSIBILITY continued

Last year’s data excluded 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
compared the 2021 numbers with the
2019 numbers, which are on the same
basis, and have also reported the data for
the Group without Primark to enable
comparison with 2020.

Group
In the main, the pay gap remains similar
to prior years. The overall Group pay gap
is in favour of men as we have a
significant number of female employees
who work as retail assistants. 75% of
roles in the lower quartile of the pay data
are taken by women. Men on the
other hand take up more of the
highest-paid roles.

One of our strengths is that the leaders
of our businesses have detailed
knowledge of every aspect of the
organisations they lead. That knowledge
often comes from many years in role.
This is a Group with very long average
tenure, which means that the gender
balance at the top of the Group changes
slowly. For example, Twinings has had
two Managing Directors in 47 years and
George Weston is only the fourth Chief
Executive since ABF was founded in
1935. In those years since his
appointment, there have been only two
changes in his direct head office reports.

Long tenure is not just at the leadership
level. Across all of our businesses, there
are numerous examples of colleagues
who have spent years immersed in the
details of our operations. Institutional
memory is critical. We benefit from this
tenure with a perspective on what will
make the business successful over time.
When opportunities do emerge for
succession, we appoint the best person
for the role, and when appropriate, bring
in expertise from the outside to
complement internal experience
and knowledge.

The greater presence of senior men in
the 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.
Recognition awards are typically smaller
in quantum and given to men in the
manufacturing environment. They are
compared to bonuses for women in
middle management.

2021 Gender Pay Gap Reporting
ABF Group

ABF Group (excluding Primark)

Proportion of men and women
in each pay quartile

2021

34.1%

24.3%
23.6%

36.0%

20.2
5.7

2019

34.2% Women’s mean hourly pay rate

28.0% Women’s median hourly pay rate
38.2% Women’s mean bonus pay rate

95.9% Women’s median bonus pay rate

20.9 % Men received bonus

6.3 % Women received bonus

Key:

2021

5.4%

11.5%
23.7%

36.3%

40.8
57.0

2020

4.0%

8.8%
50.3%

79.4%

36.3
47.5

Higher than that of men

Lower than that of men

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.

Non-retail businesses
In the non-retail businesses the pay gap
remains in favour of women as we have
a significant majority of male employees
in the food businesses who work in a
manufacturing environment. These
employees are being compared to
women who, on average, work in middle
management. In our food 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. The bonus picture for these
businesses is affected by the distorting
effect of recognition awards mentioned
previously. We are acting to address this
gap at the top, both at Group level, for
example by providing women with
mentoring opportunities, and at local
business level. In AB Agri for example,
the ‘Good Recruitment Campaign’ uses a
gender decoder to ensure that
advertisements are suitable and
appealing to all. They also offers a
Women’s Sponsorship Programme
aimed at their most talented women,
and Thrive projects to allow all
colleagues to share and develop their
skills and build their networks on
cross-functional projects.

Primark
Primark cares about the careers and
wellbeing of their colleagues. The data
for Primark for 2020 can be found on
their website, and the 2021 data will also
be shared online in April 2022, ahead of
their reporting deadline. In Primark, roles
have either a fixed rate of pay, or a scale,
or a salary that is determined by a robust
job evaluation system. At median we
have no pay gap in Primark and at mean,
the gap reflects the fact that over 90% of
colleagues are retail assistants and
supervisors, 75% of these colleagues
being women. This means we have more
women in junior roles than men. Our aim
is to continue successfully to operate in a
post-COVID world in a way that all
colleagues, regardless of their gender,
ethnicity or other characteristics can
grow and progress in.

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 its website.

Upper

7
7
1
1
.
.
8
8
%
%

6
6
9
9
.
.
3
3
%
%

2
2
8
8
.
.
2
2
%
%

3
3
0
0
.
.
7
7
%
%

Group

Group ex-Primark

Upper middle

.
.

5
5
3
3
5
5
%
%

.
.

4
4
6
6
5
5
%
%

7
7
2
2
.
.
9
9
%
%

.
.

2
2
7
7
1
1
%
%

Group

Group ex-Primark

Lower middle

.
.

8
8
0
0
3
3
%
%

.
.

8
8
0
0
9
9
%
%

.
.

1
1
9
9
7
7
%
%

.
.

1
1
9
9
1
1
%
%

Group

Group ex-Primark

Lower

7
7
4
4
.
.
8
8
%
%

7
7
4
4
.
.
3
3
%
%

2
2
5
5

.
.

2
2
%
%

Group

Men

2
2
5
5
.
.

7
7
%
%

Group ex-Primark

Women

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 Group
and at regular intervals thereafter and
those who work in higher-risk roles are
required to attend regular face-to-face
training.

A copy of the ABF Anti-Bribery and
Corruption Policy is available at:
www.abf.co.uk/responsibility.

Building engagement and
supporting development
We need to attract the most talented
people available into our businesses and
work with them throughout their careers
with us. This means constantly engaging
them in what we are doing and why, and
providing them with opportunities to
learn and grow as they develop
their careers.

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.

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 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 generate the most
benefit for our people.

Our engagement programmes also
include opportunities to celebrate our
business successes, employee
recognition schemes and social events.
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.

Associated British Foods plc Annual Report 2021

RESPONSIBILITY continued

Whistleblowing Policy
Effective and honest communication is
essential if wrongdoing is to be dealt with
effectively. We are serious in wanting to
hear from colleagues about any examples
of malpractice.

Our Whistleblowing Policy provided
guidelines for people who feel they need
to raise certain issues in confidence.
It was designed to protect those raising a
genuine concern, in line with the Public
Interest Disclosure Act 1998 or other
jurisdictional legislation.

We had a whistleblowing telephone line
which could be used by our people, or
others, wherever they work in the world.
Any contact made was disseminated to
the senior management team responsible
for investigating the issues raised.
A thorough investigation was then
undertaken and any remediation agreed.

In the year to June 2021, 79 notifications
were received, of which:

• 21% were resolved, with outcomes

ranging from reviews of processes and
support for individual employees to,
where necessary, termination of
contracts;

• 49% were unsubstantiated and

required no action; and

• 30% remain under investigation.

Launched in September 2021, Speak Up
is our new approach for reporting and
dealing with concerns about inappropriate
behaviour at work. This includes both a
telephone line and a web reporting
device managed by People Intouch. As
previously, any contact made is
disseminated to the senior management
team responsible for investigating the
issues raised. A thorough investigation is
then undertaken and any remediation
agreed.

Our Speak Up Policy replaces the
Whistleblowing Policy and is designed to
protect our culture of fairness, trust,
accountability and respect, encouraging
effective and honest communication at all
levels.

Speak Up empowers our people to tell us
whenever they see anything
inappropriate, improper, dishonest, illegal
or dangerous and ensures that their
concerns will be handled confidentially
and professionally.

A copy of the ABF Speak Up Policy is
available at: www.abf.co.uk/documents/
pdfs/policies/abf_speakup_policy.pdf.

Our products, customers
and communities

We are united by our purpose
to provide safe, nutritious,
and affordable food, and
clothing that offers great
value for money. We also
want to support the local
communities in which
consumers enjoy our
products because their
strength feeds our success.

We are focused on what really matters:

• product safety is non-negotiable, and

increasingly consumers want products
that support their health and overall
sense of wellbeing, including their
environmental and social expectations;
• helping customers and consumers to

cut their carbon emissions, from seeds
that reduce the need for fertilisers to
enzymes that enable clothes to be
successfully washed at lower
temperatures;

• widening customer and consumer

awareness, helping them make more
informed choices about our products;
and

• adding value to local communities,
because our stores, operations and
products connect us to the places
where consumers live and their
strength feeds our success.

Offering safe, nutritious and
more sustainable products that
consumers can afford
As a Group 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
five main ways:

Guaranteeing food 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.

Product reformulation
This is driven by customers’
specifications, consumers’ preferences,
evolving legislation, supply chain
availability and our own responsibility and
sustainability agendas. A great example
of proactive, health-supporting
reformulation is Jordans Dorset Ryvita’s
Good Food Commitment to make more
naturally healthy food with minimally
processed ingredients. All products are
assessed against a recognised nutritional
modelling profile to increase their fibre,
wholegrain, fruit, nut and seed content
while reducing added saturated fat,
sugars and salt.

More sustainable fashion
Fashion is increasingly in the spotlight
due to its environmental impact.
Primark’s ambition is to make more
sustainable fashion affordable for all, and
they are doing this with a set of
commitments that will transform the
business to become more sustainable
and circular over the next nine years. One
of the three pillars of the sustainability
strategy is ‘Product: Giving clothing a
longer life’.

Primark will change the way their clothes
are made to ensure they are recyclable
by design by 2027 and made from
recycled fibres or more sustainably
sourced materials by 2030. They will also
put all items through more rigorous
testing to make sure their clothing is
made to last.

Labelling our products
We are transparent about the ingredients
our products contain and their potential to
be recycled. We understand that
‘transparency’ in this context means
using language, graphics and icons that
consumers understand. This can be
challenging as labelling regulations vary
from market to market and are evolving
all the time. Our customers sometimes
have their own ingredient labelling
programmes for food, which can also
add another level of complexity.

Many products now carry recycling
information and provenance details,
including their point of origin and
sustainability credentials. We have to
incorporate this information alongside
ingredients labelling on our product
packaging, in ways that makes all
elements visible and understandable.

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 2021, ABF
used 233,000 tonnes ∆ of packaging.
This is a 4% 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, in 2021 Primark removed
316 million units of single-use plastic
from the business, including single-use
labels and hangers.

Kingsmill has
started using
recycled content in
Kingsmill No
Crusts 50/50 bread
bags, a first for any
bakery brand.

Helping customers and
consumers to cut their carbon
emissions
Our customers are increasingly looking to
their suppliers to provide ways to reduce
their carbon footprint. Our responses to
this demand include seeds that reduce
the need for fertilisers, and enzymes that
enable clothes to be successfully washed
at lower temperatures.

At our Vivergo plant, near Hull in the UK,
we are set to become one of Europe’s
biggest bioethanol producers and the
UK’s largest single-source supplier of
animal feed. The UK and EU are
committed to reducing emissions from
transport through the Renewable
Transport Fuel Obligation (RTFO) and
Fuel Quality Directive, and sustainable
biofuels will be the main approach for
achieving this target.

In September 2021, the UK Government
introduced E10 petrol, a cleaner, greener
fuel at UK petrol forecourts up and down
the country.

Vivergo Fuels’ production capacity will
represent around one third of the current
UK demands under the RTFO,
contributing to a more diverse energy
mix, and helping to tackle energy security
and climate change. The inclusion of
Vivergo bioethanol is anticipated to save
more than 554,000 tonnes of CO2e
emissions, equivalent to the emissions
from more than 260,000 cars per year.

Widening customer and
consumer awareness
A balanced diet is important to overall
health and wellbeing. We want to help
consumers to enjoy our products as part
of a balanced diet. We also want to help
to educate customers and consumers
about the sustainability credentials of
our products.

Health education focused on food starts
with the way we label our products, but
we can also inform consumers through
other communication and engagement
channels. Some good examples of this
include the Ryvita FibreFit campaign and
AB Sugar’s Making Sense of Sugar
campaign, which has recently been
expanded to a global audience.

Adding value to local
communities
Our operations, stores and people are
part of local communities and we want to
do the right thing for them. We add value
directly through the products we provide
for residents; as an employer; potential
customer for local suppliers; and as a
tax-payer.

We also invest to help communities
thrive through targeted social
investments, financial donations and by
giving products to charities and other
organisations that benefit from them.
This year UK Grocery donated around 316
tonnes of surplus food, equivalent to
more than 747,000 meals for distribution
to those in need through FareShare,
while AB World Foods’ Leigh operation
sent around 21,500 jars of sauce to food
banks, local NGOs and workers in
the NHS.

For more details on our products,

customers and communities, see our 2021
Responsibility Update and ESG Insights.

Associated British Foods plc Annual Report 2021

CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)

Climate-related Financial Disclosures (TCFD)

We recognise that climate
change is a material risk,
posing challenges for some of
our businesses worldwide
and throughout our supply
chains. We support policies
that are aligned with the goals
of the Paris Climate
Agreement to limit the rise in
global temperatures to well
below 2 degrees Celsius
above pre-industrial levels
and to pursue efforts to
limit the temperature
increase even further to
1.5 degrees Celsius.

The diversified nature of our businesses
means we do not set Group targets.
However, our most financially material
businesses, which accounted for 73% of
Group adjusted operating profit (and 69%
of Scope 1 and 2 GHG emissions) – AB
Sugar, Primark and Twinings – have all
set emissions reductions targets
appropriate to their operations. AB Sugar
has a target of a 30% reduction in its
end-to-end carbon emissions by 2030.
Primark, where GHG emissions arise
primarily in Scope 3, has targeted a 50%
reduction across the value chain in
absolute terms by 2030. Twinings has set
a target of carbon neutrality from bush to
shelf for tea and herbal infusions
by 2030.

We have made climate-related financial
disclosures consistent with elements of
the TCFD framework as our
implementation progresses to enable us
to assess and report our climate-related
risks and opportunities. We have begun
scenario analysis for those businesses
where climate is likely to have the most
material impact, as well as a groupwide
analysis to identify where there is
exposure across our other businesses
that could be material.

Governance
The Board is responsible for overseeing
climate-related issues. The governance
process is set out in the table below.

The Board receives an annual update
from the Group Corporate Responsibility
Director and the Chief People and
Performance Officer on environmental
issues, which includes climate-related
topics. Specific and routine Board agenda
items also address environmental issues.

Each business also updates the Board
regularly on key issues which may
include climate-related matters:

• in January, the Board approved

Vivergo’s plan to recommission its
bioethanol facility in Hull to help meet
the demand for increased bioethanol
inclusion in UK petrol supplies; and
• Primark reported to the Board in June
2021, on detailed plans for reducing
Primark’s carbon footprint.

The Audit Committee and the Board have
received specific briefings on climate
change matters and on TCFD. Further
briefings will be provided as appropriate.
We have engaged external experts to
support our TCFD programme and
established a steering committee to
oversee its governance. Given that
climate change runs across all businesses
and functions, the steering committee
includes senior group functional
representation from Corporate Social
Responsibility, EHS, Finance, Risk
Management and Corporate Affairs,
together with senior representation from
AB Sugar and Primark.

The Director of Legal Services and
Company Secretary has overall
accountability to the Chief Executive for
corporate responsibility issues and acts
as the focal point for communications to
the Board and with shareholders on
corporate responsibility matters.

The Group Corporate Responsibility
Director, who reports to the Director of
Legal Services and Company Secretary,
is responsible for monitoring climate-
related activities across the Group and for
reviewing the robustness of external
non-financial targets set by each of our
businesses. She leads the Corporate
Responsibility Hub, which supports all
our businesses on environmental and
human rights issues and brings together
all the professionals in our businesses
working in these areas to share
knowledge and best practice.

Continuous oversight and support by Group Executive and the Board

Director of Legal Services
and Company Secretary

Chief People and
Performance Officer

Group Corporate
Responsibility Director

Grocery

Sugar

Agriculture

Ingredients

Retail

Outline action plan for 2022

Scenario analysis

Outputs

Model impacts using 4º Celsius and well below 2º Celsius scenarios

• Quantify risks and opportunities

Physical risks/opportunities

• Cotton, sugar, tea

• Review impacts of climate on

Group locations

• Assess other potentially material

climate impacts

• Assess resilience of divisional

strategies to hypothetical scenarios

• Refine climate mitigation/adaptation

actions

• Define key metrics

Transition risks/opportunities

• lmpact of carbon taxes in <1.5º, <2º and

<3º Celsius scenarios

• Assess other potentially material

climate impacts

We decided to do a deep dive into businesses where climate change is likely to
have the most material impact on the Group – Primark, AB Sugar and Twinings. We
will focus in particular on agriculture where risks can be more challenging to
mitigate. We will undertake a review of risks and opportunities in other divisions.

2025 (short term), 2030 (medium term), 2050 (long term)

The Chief People and Performance
Officer, who reports to the Chief
Executive, is responsible for
measuring and reporting our
environmental performance.

Strategy and action
Climate change, with its associated risks
and opportunities, is not a new issue. It
has long been important to us and our
stakeholders. Although we have not
previously completed formal scenario
analysis, taking action to address the
effect of material climate change impacts
has been embedded into our businesses
as part of normal commercial decision-
making. Primark’s longstanding
Sustainable Cotton Programme and the
assessment of drought risk to the wheat
supply in our Australian bakery business
are just two examples.

This year, we engaged formally with each
business on TCFD, building on existing
awareness and action on climate
change issues.

We decided to undertake a detailed
assessment of climate risks and
opportunities in Primark, AB Sugar and
Twinings as the businesses where
climate change is likely to have the most
material impacts. These three businesses
comprise in aggregate 73% of adjusted
operating profit, 69% of Scope 1 and 2

emissions and 97% of water usage. We
will also perform a review of our other
businesses to ensure we capture
material risks and opportunities.

Risk management
The Board is responsible for all risk-
related matters including climate risk.
Climate risk has been identified as a
material risk, recognising the impact it
may have on our business in the short,
medium and long term (2025, 2030 and
2050, respectively).

We operate a diversified and
decentralised business model. The
process for identifying, assessing and
managing climate-related risks is the
same as for other risks and sits with the
business where the risk resides.

The Group undertakes an annual
assessment to identify and assess
material risks. These risks, including
climate risks, are collated and reviewed
at both a business and divisional level,
and then reported to the Director of
Financial Control who reviews the key
risks with the Board.

The Board also monitors the Group’s
exposure to risks as part of performance
reviews with the businesses.

Metrics and targets
The high level of diversity across our
businesses means that it is not
appropriate to set groupwide targets for
different elements of climate change risk.
Our businesses are responsible for
setting targets appropriate to their

specific business and taking action to
achieve these.

Primark has completed significant work
on identifying its material Scope 3
emissions, which have been assured by
the Carbon Trust. Primark reports on this
for the first time this year.

Our latest emissions figures can be found
on page 78.

Primark has recently launched its
market-leading sustainability strategy,
Primark Cares. Primark’s primary
commitments (including those on climate
change) are set out below:

• Primark will halve its absolute carbon
footprint by 2030 across the whole
supply chain;

• Primark will be carbon neutral in its

own operations by 2025;

• Primark’s Sustainable Cotton

Programme will use regenerative
agricultural practices by 2030; and
• by 2030, Primark will reduce the
aggregate water footprint of new
products sold by 30% as part of a
broader water management strategy.

AB Sugar has committed to reduce its
end-to-end supply chain water and CO2
footprints by 30% by 2030 compared
to 2019.

By 2030, Twinings will make all tea and
herbal infusions carbon neutral from bush
to shelf.

We will continue to build our
understanding and take action to
manage the risks and opportunities that
will come as a result of decarbonising
economies and the physical impacts of
climate change.

Associated British Foods plc Annual Report 2021

PRINCIPAL RISKS AND UNCERTAINTIES

Managing our risks

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 remain effective as we
continue to navigate our way through the
ongoing challenges resulting from
COVID-19 and the changing risk
landscape as the world starts to emerge
from the 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.

Emerging risks are identified and
considered at both a Group and individual
business level, with key management
being close to their geographies. These
risks are identified, as part of the overall
risk management process, through a
variety of horizon-scanning methods
including geopolitical insights; ongoing
assessment of competitor activity and
market factors; workshops and
management meetings focused on risk
identification; analysis of existing risks
using industry knowledge and experience
to understand how these risks may affect
us in the future; and representation and
participation in key industry associations.

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
the Group 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 maintained and
that key and emerging risks are being
appropriately identified and managed.

COVID-19
Effective communication both within our
businesses and across the Group has
ensured that our food businesses
continued to operate, providing safe,
nutritious and affordable food to
customers. Primark’s leadership
demonstrated agility in responding to
store activities being restricted at short
notice. In addition, its effective planning
ensured that the UK stores were well
prepared for a safe reopening from
12 April.

COVID-19 has resulted in increased
volatility and uncertainty in almost all of
our markets, particularly the UK, Europe
and the US, where there is a high risk of
inflation impacting on energy,

commodities and wages. During the year,
changes in public health measures in our
major markets to control the spread of
COVID-19, and the Delta variant in
particular, have impacted both our
customers and employees. Whilst the UK
now has an advanced vaccination
programme and the majority of COVID-19
restrictions have been lifted, the outlook
is currently more mixed in a number of
countries in which we operate. For
example, there continue to be ongoing
lockdowns in place across Australia and
New Zealand. In addition, our retail
business continues to adapt to localised
restrictions and special arrangements for
shoppers in some of our markets, for
example in Portugal and Slovenia.

As the world starts to emerge from the
COVID-19 pandemic, there are continuing
impacts our consumers, customers,
retailers, suppliers and our employees.
Across a number of our businesses,
there is the risk of increased pressure on
the supply chains resulting from labour
shortages as economies reopen which
are exacerbated by employee health and
safety concerns. The closure of the Suez
Canal in March compounded some
supply chain challenges that resulted
from the pandemic and increased buying
as economies have reopened. We have
contracts in place for major parts of our
business to ensure that we have the
cost, stability and interim security of
volumes in the volatile inbound market.
Our businesses are reliant on the
availability of skilled HGV drivers. Whilst
there is currently a shortage of drivers in
other parts of Europe, the USA and
Australia, the situation has been
exacerbated in the UK as a result of the
EU exit. We continue to work closely
with our major carriers and logistics
partners to minimise supply chain
disruption. The situation remains fluid and
is being closely managed and monitored.

Throughout the pandemic, the Audit
Committee, on behalf of the Board has
provided ongoing support and challenge
to management’s processes and internal
controls. Numerous lessons have been
learnt 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.

EU exit
Our businesses were well prepared for
the end of the Brexit transition period and
we have seen no material disruption to
our supply chains. We have experienced
a small increase in the administrative
costs of trading and in limited cases
duties related to our trading with the EU.

Regulatory changes
Our businesses are facing a large number
of regulatory changes over the coming
years with new requirements being
developed in a number of areas including
the Task Force on Climate-related
Financial Disclosures (TCFD),
Environmental, Social and Governance
(ESG), extended producer responsibility
regarding packaging and plastics and the
potential requirements resulting from the
BEIS White Paper: Restoring Trust in
Audit and Corporate Governance. For
each of these areas, groupwide initiatives
are well advanced to meet the specific
requirements. The extent of change will
have an impact on the capacity of
management at the time when they are
dealing with the ongoing challenges
resulting from COVID-19, alongside the
day-to-day growth of our businesses.

Environment
We have a clear sense of social purpose:
it exists to provide safe, nutritious and
affordable food, and clothing that is great
value for money. We are set on a
mission: to continue to make food and
clothes available and affordable and also
carbon neutral as quickly as we can. The
people in our businesses are motivated
by the excitement that comes from
driving social and environmental
improvement. ESG isn’t simply a matter
of risk mitigation. ESG factors, including
the potential implications of climate
change, are considered as part of our
well-established risk management
framework and they also frame
opportunities for our businesses to
become better. Our leaders are
empowered to include the prioritisation
of mitigation of environmental impacts as
a central aspect of their business plans,
sharing learnings from the leaders in
other Group businesses and from the
Group and applying industry best
practice. The Board reviews each
business segment in depth every year,
and ESG factors are central to the
analysis and discussion.

Our culture and values, and particularly
our devolved decision-making model,
empower the people closest to risks to
make the right judgements to mitigate
risks. In respect of ESG, each of our
businesses has prioritised and is devoting
most resources to those ESG factors
which are of greatest relevance and will
make the greatest long-term difference.
They are also challenged by the centre
through detailed reviews of the Group’s
environmental performance, health and
safety performance, and its diversity,
equity and inclusion and workforce
engagement programmes.

Our principal risks and uncertainties
The directors have carried out an
assessment of the principal risks facing
the Group, 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.

The Group 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
2021 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 2020’ describe our
experience and activity over the last year.

Associated British Foods plc Annual Report 2021

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.

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 2020
Sterling strengthened against most of our
trading currencies this year, resulting in a
loss on translation of £36m.

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
three and four months. There was a
positive transactional effect from
changes in the US dollar exchange rate
on Primark’s largely dollar-denominated
purchases for the year in aggregate.

The strengthening of sterling against our
major trading currencies during the
financial year has largely been a result of
better certainty with the EU exit
completion at the end of 2020 and
improved confidence as the UK’s
roadmap out of the COVID-19 lockdown
was developed and restrictions
subsequently eased.

Fluctuations in commodity and energy prices

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.

The commercial implications of
commodity price movements are
continuously assessed and, where
appropriate, are reflected in the pricing of
our products.

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 2020
Commodity price inflation has been a
global factor throughout the year. A
number of our food and agriculture
businesses have seen increases in
energy and agricultural commodity prices
in the latter part of the financial year, with
expectations of further increases in the

new financial year. The price of corn oil,
in particular, has increased, impacting
profit margins in ACH. Energy prices,
particularly in the UK and Europe, have
recently increased materially as a result
of significant market uncertainty.
Businesses continue to manage price risk
under their existing risk management
frameworks and, where appropriate,
reflect this in pricing of products.

Sugar prices in Europe and Africa have
increased during the year, with a positive
impact on profitability.

Operating in global markets

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.

We conduct rigorous due diligence when
entering or commencing business
activities in new markets.

Changes since 2020
COVID-19 has resulted in increased
volatility and uncertainty in a number of
our markets, particularly the UK, Europe
and the US, where there is a high risk of
inflation impacting on energy,
commodities and wages.

There is continued uncertainty as a result
of the COVID-19 pandemic. Authorities
continue to impose restrictions on both a
regional and local basis.

High inflation continues to be a challenge
for our yeast and bakery ingredients
business based in Argentina.

Fifteen new Primark stores were opened
in the year including our first store in
Czechia.

Health and nutrition

Context and potential impact
Failure to adapt to changing consumer
health choices or to address nutrition
concerns in the formulation of our
products, related to consumer
preferences or government public health
policies, 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 actively consider consumer health in
the context of brand development and
merger and acquisition activity, for
example, the launch of the Twinings
wellness range. Branded grocery
acquisitions over the past decade include
Acetum, producers of Balsamic Vinegar
of Modena, that is typically consumed as

Operational risks

Workplace health and safety

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.

We are saddened that since the start of
the pandemic in March 2020, we have
lost 43 colleagues to COVID-19. We
deeply mourn their passing and our
hearts go out to their families and
colleagues.

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

Increased

Unchanged

Decreased

an accompaniment to salads; and Dorset
Cereals, producers of high-fibre breakfast
cereals made from whole grains and
dried fruits, nuts and seeds.

Our brands develop partnerships with
other organisations to promote healthy
options, for example, Ryvita has
partnered with Cancer Research UK on a
campaign to promote fibre consumption
in the UK.

Before COVID-19, our specialist sports-
nutrition brand HIGH5 typically supported
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 assists in
this promotion by highlighting events on
its 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.

Changes since 2020
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 has continued to
engage 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
continued to develop 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 nutrition
science and changes to the regulatory
and consumer operating environment.

business, supporting a strong ethos of
workplace safety.

conducted thorough root cause analyses
and have implemented safety changes.

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 2020
The safety performance of the Group is
reported in the 2021 Responsibility
Update at www.abf.co.uk/responsibility.

We are saddened to report that in the
year there were two work-related
fatalities in our southern Africa sugar
operations. Our businesses have

This year over £39m was invested in
reducing the safety and health risks
across a wide range of operational
hazards. As part of this, we invested
£9.3m dedicated to COVID-19 safety
measures for employees, customers and
other visitors to our stores and
manufacturing sites. A Group-level
steering committee has shared best
practice for minimising the risk of
infection across all of our businesses.

In Illovo, we launched a Group
Vaccination Roll-out Campaign which has
seen almost 20,000 employees,
dependants, growers and community
members vaccinated against COVID-19
to date. We plan to continue the
campaign in the coming months to reach
many more.

Associated British Foods plc Annual Report 2021

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.

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.

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.

All Primark’s products are tested to, and
must meet, stringent product safety

Changes since 2020
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

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 2020
As the number of employees working at
home as a result of COVID-19 restrictions
remains high, the impact on the delivery
of IT services and the need for increased
information security has been enveloped
into our daily practices.

There is an ongoing programme of
investment in both technology and
people to enhance the longevity of our IT
environments for both on-site and remote
working.

To maintain the support for seamless
homeworking we continue to modify our
IT infrastructure, manage bandwidth with
our telecommunications partners and
improve our 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
homeworking best practices.

As cybersecurity risks evolve, we
continue to invest in our security
capabilities at a Group level and across
the businesses allowing us to more
effectively detect, respond to and recover
from disruptive cyber-threats.

We have improved and developed the
existing 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.

Our use of natural resources and managing our environmental impact

Context and potential impact
Our businesses and their supply chains
rely on a secure supply of finite natural
resources, some of which are vulnerable
to external factors such as natural
disasters and climate change and others
are vulnerable based on the operational
choices we take. Our material
environmental impacts come from fuel
use, energy use and agricultural
operations giving rise to greenhouse gas
emissions, use of land related to
agricultural operations, the abstraction
and management of water in water-
stressed areas and waste which is not
yet eliminated at source, reused or
recycled, including single-use plastics.

Our businesses and supply chains
operate in many areas subject to climate
change risks and opportunities as we
transition to a lower-carbon world. Our
ongoing success depends on mitigating
these risks and making the most of the
opportunities. 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 and decentralised
nature of the Group 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, wastewater and
waste which, if not controlled, could pose
a risk to the environment and local
communities, potentially creating risk to
our licence to operate and resulting in
additional costs.

Mitigation
We continuously seek ways to improve
the efficiency of our operations, using
technologies and techniques to reduce
our use of natural resources and
subsequent impact on the environment.

Climate change, with its associated risks
and opportunities, is not a new issue. It
has long been important to us and our
stakeholders. We have considered some
of these issues for many years as part of
normal commercial decision-making, for
example Primark’s long-standing
Sustainable Cotton Programme, the
assessment of drought risk to the wheat
supply in our Australian bakery business,

and long-standing progress in reducing
energy in sugar refining. It is not a
separate and parallel discipline; it is
already part of the ordinary course of
business and we are working to
understand and improve this further.

The Board receives a formal update from
the Group Corporate Responsibility
Director, the Chief People and
Performance Officer and the Group
Safety and Environment Manager on
environmental issues annually including
on GHG emissions and carbon
management. In addition, environmental
issues are addressed as part of both
specific and routine Board agenda items.
As an example, Primark reported to the
Board in June 2021 on its carbon
reduction footprint.

The Audit Committee and the Board have
received specific briefings on climate
change matters and on our approach to
achieving TCFD compliance. We have
engaged external experts to support our
TCFD implementation and established a
steering committee to oversee its
governance, which reports to the Audit
Committee. The steering committee
comprises senior functional leaders from
Corporate Social Responsibility,
Environment, Finance, Risk Management,
Corporate Affairs and HR, together with
senior representation from AB Sugar and
Primark.

Our packaging and product design teams
are working together to address the use
of single-use plastics and scale up
innovative solutions to the environmental
impacts of single-use plastic.

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 Textiles
2030 Initiative, to accelerate the whole
fashion and textiles industry’s move
towards circularity and system change in
the UK.

Through Primark’s Sustainable Cotton
Programme we have committed to train
160,000 farmers in more sustainable
farming methods by 2022. This is a
significant commitment towards helping
Primark fulfil our long-term ambition of
ensuring all the cotton used in our supply
chain is sustainably sourced.

Changes since 2020
The environmental performance of the
Group is reported in the 2021
Responsibility Update at www.abf.co.uk/
responsibility.

This year, we began engaging formally
with each business in respect of TCFD,
building on existing awareness of climate
change issues. This will continue in the
coming year until full reporting under
TCFD begins for ABF in 2022 and
thereafter on an ongoing basis. We are
currently reviewing the governance of
climate-related risks and opportunities to
ensure the Board is enabled to fully
consider these while setting our strategy
and overseeing major decisions.

To better understand how the potential
long-term impacts of climate change
might affect our businesses, our
performance and our balance sheet, this
year we began scenario analysis. Our
overall focus is on the specific
businesses and raw materials with the
greatest identified climate risk exposure,
and those that offer the greatest
transition opportunities. We identified
Primark, AB Sugar and Twinings as the
businesses with the most material
climate-related risks and opportunities. In
2020, these three businesses comprised
in aggregate 73% of adjusted operating
profit, 69% of Scope 1 and 2 emissions
and 97% of water usage.

This year, we also performed a high-level
exercise to establish an overview of our
Scope 3 emissions. These same three
businesses comprised a significant
proportion of those emissions. Further
details can be found on page 78.

Associated British Foods plc Annual Report 2021

PRINCIPAL RISKS AND UNCERTAINTIES continued

VIABILITY STATEMENT AND GOING CONCERN

Operational risks continued

Viability statement and going concern

Our use of natural resources and managing our environmental impact continued

We continued to focus on improving our
energy efficiency and optimising the use
of renewable energy sources with 54%
of energy used this year coming from
renewables, mainly from a biomass-
based fuel.

This year 79% of the waste materials
generated by our businesses’ operations
was sent for recycling, recovery or other
beneficial uses.

Twinings in the UK is a carbon neutral
business thanks to energy efficiency projects
and the greater use of renewable energy.

GWF achieved its GHG and water reduction
targets of 20% reduction by 2020, against a
2010 baseline as set by the Australian Food
& Grocery Council.

As a Group we continue to develop our
single-use plastic packaging solutions 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
business is a signatory 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.

GWF is a member of the Australian
Packaging Covenant Organisation (APCO)
and has committed that by 2025 its
packaging will be designed to be 100%
recyclable, reusable or compostable to help
‘close-the-loop’.

Primark launched the Primark Cares
sustainability strategy focused on People,
Planet and Product with targets of halving its
carbon footprint across our entire Primark
value chain by 2030 and changing the way
we make clothes to ensure they are
recyclable by design by 2027 and, by 2030,
made from recycled fibres or more
sustainably sourced materials. Additionally,
we will eliminate single-use plastics and all
non-clothing waste by 2027 and already
work with cotton farmers to deliver better
soil health, biodiversity and water quality in
the regions where our cotton is grown.

We report our approach to climate change,
water and deforestation risk on an annual
basis via CDP at www.cdp.net.

Our supply chain and ethical business practices

Context and potential impact
As an international business we understand
that we have both a role to play in delivering
on the UN sustainable agenda and also that
we are expected to abide by internationally
agreed rules of business conduct. Doing so
means we are managing risks to our
business and to all those involved in our
supply chains, and so we expect that our
supply chain partners will work within the
same framework as us. We work with our
supply chain partners to help them meet our
standards of acceptable working conditions,
financial stability, ethics and technical
competence. Potential supply chain and
ethical business practice risks include:

• the vulnerability of workers in our supply
chains and the amplification of this as a
result of the ongoing impacts of
COVID-19;

• inconsistent adoption of a rigorous

human rights due diligence approach
across the Group; and

• low transparency of Group human

rights impact.

Mitigation
Our businesses ask their suppliers to work
in line with recognised standards,
including the UN Guiding Principles on
Business and Human Rights, International
Labour Organization’s Declaration on
Fundamental Principles and Rights at work
and our Supplier Code of Conduct. This
code, which incorporates the Ethical
Trading Initiative Base Code, underpins
any relevant policies or standards the
businesses set themselves. We have
developed a groupwide online training
module about modern slavery to help
accelerate awareness-raising and give
businesses the tools to train people.

Primark has strengthened our policies
around modern slavery and published a

revised Supplier Code of Conduct. This is
a combination of the ABF Group Code of
Conduct and the Base Code of the Ethical
Trading Initiative, of which Primark is a
member. Our new Code is tailored
specifically to some of the risks Primark
perceives in our supply chains. We
are internationally recognised for
our ethical trade programme.
More information is available at
https://corporate.primark.com/en.

Twinings uses a comprehensive
Community Needs Assessment
Framework, which has been developed in
consultation with expert organisations to
help understand what supply chain
communities really need. In addition to
human and labour rights, it covers housing,
water and sanitation, health and nutrition,
gender and children’s rights, land rights,
farming practices and more.

Primark, Twinings and AB Sugar have all
produced interactive sourcing maps to
better understand and address the
challenges in their supply chain operations.

Primark’s map shows suppliers’ production
sites covering 95% of Primark products for
sale in stores: https://corporate.primark.
com/en/our-approach/our-standards/
global-sourcing-map.

Twinings’ map outlines where we source
tea and ingredients: https://www.
sourcedwithcare.com/en/our-approach/
sourcing-map.

AB Sugar’s map outlines where we grow,
source and export sugar: www.absugar.
com/sourcing-map.

Changes since 2020
Our Modern Slavery and Human Trafficking
Statement 2021, together with the steps
we take to try to ensure that any forms of

Associated British Foods plc Annual Report 2021

modern slavery are not present within
our own operations or supply chains,
are reported in detail in the 2021
Responsibility Update at
www.abf.co.uk/responsibility.

In June 2021, the UK Government’s
Business Against Slavery Forum coalition
hosted a Ministerial Forum at which the
chief executives of member companies
discussed relevant issues with ministers.
Our Chief Executive, George Weston,
attended this event and contributed to
discussions on several themes, including
the UK Government’s forthcoming
Modern Slavery Strategy Review, the
challenges involved in modern slavery
due diligence and how to harness the
power of transparency and other levers
for positive change.

AB Agri’s Human Rights Policy
addresses modern slavery and other
issues in line with the Universal
Declaration of Human Rights.

AB Sugar have further developed their
modern slavery policy and created their
‘We Listen, We Act, We Remedy’ toolkit.

Primark has reviewed and updated their
Code of Conduct, strengthening the
requirements that guard against forced
labour and adding a new clause that
requires all their suppliers to have
effective grievance procedures for
workers in place.

Twinings published their Human Rights
Policy in 2021.

Twinings set a target in 2016 to positively
impact 500,000 people through Sourced
with Care. The programme has now
reached almost 544,000 people and
delivered lasting change.

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 business sets
a strategic planning time horizon appropriate to
its activities and 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 88 to 94 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 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
£2,307m and £1,088m of undrawn committed
Revolving Credit Facilities (RCF) which together
provide some £3,395m of liquidity. In August
2020, a two-year extension to the Group’s RCF
was agreed with its relationship banks
extending the maturity of the facility to July
2023. During the course of this assessment all
of the £297m of outstanding private placement
notes will mature and the RCF will require
refinancing. It is the opinion of the Board based
on the credit rating and the strength of the
balance sheet that this facility can be renewed,
and that substantial further funding could be
secured should the need arise. Events of
COVID-19 and the last year show that there
was a value in having sufficient financial
resources and credit strength to manage the
operational challenges faced across our
businesses. ABF has sought an external
validation of our credit strength and the A grade
credit rating from S&P Global reflects this.

The diversity of the Group is such that we have
some 60 different businesses operating in
different markets, sectors, customers,
geographies and products. 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 likely to
give rise to a deterioration in trading to a level
that might 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 ten 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 14
September 2024.

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 going concern
assessment period to 28 February 2023 has
been updated for the business’s latest trading
in October and is our best estimate of cashflow
in the period. Having reviewed this forecast
and having applied a downside sensitivity and
performed a reverse stress test, we consider it
a remote possibility that the financial headroom
could be exhausted.

At the full year, the Group had net cash before
lease liabilities of £1,901m and had an
undrawn, committed RCF of £1,088m for the
coming year. The directors have satisfied
themselves that the RCF is available for at least
the going concern assessment period, having
assessed the Group’s projected compliance
with the remaining terms and covenants of
these facilities. Events of COVID-19 and the
last year show that there was a value in having
sufficient financial resources and credit
strength to manage the operational challenges
faced across our businesses. ABF has sought
an external validation of our credit strength and
the A grade credit rating from S&P Global
reflects this.

In August 2020, a two-year extension to the
Group’s RCF was agreed with its relationship
banks, extending the maturity of the facility to
July 2023. Whilst this maturity date is beyond
the going concern assessment period, it is the
opinion of the Board, based on the credit rating
and the strength of the balance sheet, that this

facility can be renewed, and that substantial
further funding could be secured should the
need arise.

In reviewing the cash flow forecast for the
period, the directors reviewed the trading for
both Primark and the non-Primark businesses
in light of the experience gained from the last
eighteen months of trading and emerging
trading patterns. The directors have a thorough
understanding of the risks, sensitivities and
judgements included in these elements of the
cash flow forecast and have a high degree of
confidence in these cash flows.

The diversity of the Group is such that we have
some 60 different businesses operating in
different markets, sectors, customer groups,
geographies and products. 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 likely to
give rise to a deterioration in trading to a level
that might threaten the viability of the
Company for the period of the assessment.

As a downside scenario, the directors
considered the extreme adverse scenario in
which half of the Primark estate was closed for
six months including the forthcoming
Christmas trading period, without taking any of
the available cost mitigation actions within their
control and assuming no available job retention
scheme support. Under this downside scenario
the Group has a forecast net cash position
throughout the period and forecast compliance
with the covenants in the debt facilities.

In addition, we also considered the
circumstances which would be needed to
exhaust the Group’s cash resources over the
assessment period - a reverse stress test. This
would indicate that all Primark stores would
need to remain completely closed for more
than 12 months, including the peak Christmas
sales period. The likelihood of these
circumstances is considered remote for two
reasons. Firstly, over such a long period,
management could take substantial mitigating
actions, such as cost cutting measures and
reducing capital investment. Secondly, we
have seen governments develop a number of
measures to contain the virus, including
widespread vaccination programmes, which
make it likely that any future lockdowns would
be regional.

The Strategic report was approved by
the Board and signed on its behalf

Michael McLintock
Chairman

George Weston
Chief Executive

John Bason
Finance Director

Associated British Foods plc Annual Report 2021

CORPORATE GOVERNANCE

Chairman’s introduction

Michael McLintock
Chairman

We continue to adopt an
approach of strong
governance with a focus on
ethics. In this Corporate
Governance Report we
provide an update on our
activities during the year.

We were delighted to welcome Dame
Heather Rabbatts to join as our newest
member of the Board in March 2021.
Dame Heather also joined the Audit and
Remuneration Committees. Succession
planning, both at Board level and
executive level, has continued to be
firmly on the agenda and this will
continue to be the case in the coming
years. I am also happy to say that the
Board meets the recommendations of
both the Parker Review and the
Hampton-Alexander Review, with
diversity and inclusion having been
identified in previous Board evaluations
as an area of focus.

The Company takes its compliance with
the 2018 UK Corporate Governance Code
(the ‘2018 Code’) seriously. As noted in
further detail in last year’s annual report,
an external evaluation of the Board was
due to be carried out in 2020 but had to
be postponed as a result of the
pandemic. I am glad to say that, despite
the ongoing uncertainty caused by the
pandemic, it was possible for the external
evaluation to take place in the course of
the 2020/21 financial year and further
details on this are given below.

In respect of the 2018 Code provision
relating to alignment of executive director
pension contributions with the workforce,
an explanation of our progress to date
and our plans towards bringing the
Company into line with the 2018 Code is
set out on pages 118, 120 and 123 of the
Directors’ Remuneration Report.

The Board meets the
recommendations of both
the Parker Review and the
Hampton-Alexander Review,
with diversity and inclusion
having been identified in
previous Board evaluations
as an area of focus.

This year we held our first ESG investor
days in response to increasing requests
from investors to understand more about
what we do as a Group in respect of ESG
matters. The feedback received on these
has been very positive.

Richard Reid, our designated Non-
Executive Director for engagement with
the workforce, has continued to lead our
journey on workforce engagement.
Further details on this are provided in
Richard’s letter on page 102. Richard’s
activities, and the business divisions’
updates to the Board on workforce
engagement, are a key way that we

Dear fellow shareholders
I am pleased to present the Associated
British Foods plc Corporate Governance
Report for the year ended 18 September
2021.

Your Company has a clear sense of social
purpose, existing to provide safe,
nutritious and affordable food, and
clothing that is great value for money, to
millions of customers worldwide. With
this clear sense of purpose also come
high standards of integrity, with a
recognition that acting responsibly is the
only way to build and manage a business
over the long term. The belief that
businesses do well when they act well is
ingrained in the Group and management
are encouraged to take a long-term view
and to invest in the future.

From a strategic perspective, we
consider that our devolved decision-
making model empowers senior
management of the businesses. They are
the people closest to the risks and
opportunities, as well as closest to those
businesses’ stakeholders, and therefore
in the best position to make the right
judgements to mitigate those risks,
exploit the opportunities and take
stakeholder views into account. The
senior management of the businesses
are supported with resources and
expertise from across the Group. The
Board is kept informed and engaged
through regular updates to the executive
directors by senior management and
through the annual updates to the full
Board, which gives opportunities to
provide challenge. We believe that this
approach better contributes to strategy
than a top-down approach, particularly in
a Group as diverse as ours.

assess and monitor culture. Our new and
updated Speak Up Policy and procedures
were rolled out in September 2021.
Further details are provided on page 84
and these are another way by which we
can continue better to assess and
monitor culture.

As you will recall, in light of the
pandemic, the 2020 annual general
meeting (‘AGM’) was held as a closed
meeting for which general attendance
was not permitted in order to protect the
health, safety and wellbeing of everyone.
We hope this year to have some return to
normality and plan to hold a physical
AGM but will also stream the event
online for those shareholders who do not
feel comfortable attending in person.
Should you not be able to attend the
2021 AGM in person, with your proxy
form you will have received details of
how to follow proceedings at the 2021
AGM through an 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 if you are not
able to attend in person on the day.

It has been another year where our
sound ethical foundations and strong
culture have continued to stand us in
good stead. Our four values, namely
respecting everyone’s dignity, acting with
integrity, progressing through
collaboration, and delivering with rigour
are illustrated through the various case
studies in this annual report, through our
Section 172 Statement on pages 65 to 71
and through the Responsibility section at
pages 72 to 85. Further examples can be
found in our 2021 Responsibility Update
and in our ESG Insights, which are
available on the Company’s website at
www.abf.co.uk/responsibility.

Michael McLintock
Chairman

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 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 considers that the Company
has, throughout the year ended 18
September 2021, applied the principles
and complied with the provisions set
out in the 2018 Code except provision
38 in relation to alignment of executive
director pension contributions with the
workforce. In this regard, please see
the explanation on pages 118, 120 and
123 of the Directors’ Remuneration
Report, which explains our progress to
date and our plans towards bringing the
Company in line with the 2018 Code in
this respect.

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

Composition, succession and
evaluation

See pages 96 to 103

See page 106

Chairman’s introduction

Board evaluation

See pages 96 to 97

See page 106

Leadership, values, culture and
purpose

See pages 18 to 19; 72 to 73; 100

Nomination Committee Report

See pages 107 to 108

to 101

Strategy

Audit, risk and internal control

See pages 109 to 116

See pages 18 to 21; 100

Risks, viability and going concern

Stakeholder and shareholder
engagement

See pages 65 to 71; 72 to 85; 101

to 103; 105

Division of responsibilities

See pages 104 to 105

Commitment, development and
information flow

See pages 104 to 105

See pages 88 to 95; 110

Audit Committee Report

See pages 111 to 116

Remuneration

Directors’ Remuneration Report

See pages 117 to 135

Associated British Foods plc Annual Report 2021

CORPORATE GOVERNANCE continued

Board of Directors

1. Michael McLintock
Chairman

N R

2. 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

• Chairman of The Investor Forum CIC
• Member of the advisory board of
Bestport Private Equity Limited

• 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

3. John Bason
Finance Director

John was appointed as Finance Director
in May 1999. He has extensive
international business experience and an
in-depth knowledge of both the food and
retail industries. 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:
• Non-Executive Director of Compass

Group PLC

• Chairman of FareShare

4. Ruth Cairnie N A R
Independent Non-Executive Director

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

5. Emma Adamo
Non-Executive Director

Emma was appointed a director in
December 2011. She was educated at
Stanford University and has an MBA from
INSEAD. She has served as a director/
trustee on a number of non-profit and
Foundation boards in the UK and Canada.

Other appointments:
• Director of Wittington Investments Limited
• Director of Wittington Investments,

Limited (Canada)

• Chair of the Weston Family Foundation

6. Graham Allan N A R
Independent Non-Executive Director

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

• Non-Executive Director of

InterContinental Hotels Group PLC

• Non-Executive Chairman of Bata

International

• Board member of Kuwait Food

Company Americana KSCC

• Director of IKANO Pte Ltd
• Strategic Advisor to Nando’s Group

Holdings Limited

7. Wolfhart Hauser N A R
Independent Non-Executive Director

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 10 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 10 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.

Other appointments:
• Senior Independent Director of

RELX PLC

8. Dame Heather
Rabbatts A R
Independent Non-Executive Director

Dame Heather Rabbatts was appointed a
director on 1 March 2021. Heather has
held a number of executive and non-
executive roles including in local
government, infrastructure, media and
sports. She has previously been a
Non-Executive Director of Grosvenor
Britain & Ireland and was the first woman
on the Board of the Football Association
in over 150 years. She continues to work
in film and sports.

Other appointments:
• Non-Executive Director of

Kier Group plc

• Chair of Soho Theatre
• Chair of Four Communications

9. Richard Reid N A R
Independent 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.

Other appointments:
• Chairman of National Heart and Lung

Foundation

• Deputy Chairman of Berry Bros & Rudd
• Senior Advisor to Bank of China UK
• Chairman of Themis International

Services Limited

Key to Board Committees

N Nomination Committee
A Audit Committee
R Remuneration Committee

Committee Chair

Associated British Foods plc Annual Report 2021

CORPORATE GOVERNANCE continued

Board leadership and company purpose

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 which 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 Nomination, Audit and
Remuneration Committees, which
operate within clearly defined terms of
reference and report regularly to the
Board. Membership of these Committees
is reviewed annually. Minutes of
Committee meetings are made available
to all directors on a timely basis. For
further details, please see the Reports of
each of these Committees below.

Purpose, business model and
strategy
The purpose of the Company is to
provide safe, nutritious and affordable
food, and clothing that is great value for
money. A description of the Company’s
business model for sustainable growth in
support of this purpose is set out in the
Group business model and strategy
section on pages 18 to 19 and in the
business strategy sections of the
operating review on pages 24, 34, 42, 48
and 54. 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.

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 two-day meeting focused

on strategy; and

• receiving a strategy update from the

Chief Executive and Director of
Business Development.

Acquisitions/disposals/projects
• considering and approving various
projects including the reopening of
our Vivergo bioethanol facility in Hull
and the expansion of our sugar
operations in Tanzania; 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
segments;

• considering the Group budget for the

2021/22 financial year;

• approving the Company’s full year

and interim results;

• deciding to repay various job

retention scheme payments received
in the UK and elsewhere;

• deciding not to recommend a 2020
final dividend and deciding to pay an
interim dividend in July 2021;

• receiving regular reports to the Board
from the Finance Director on Group
cash flow and the impact of
COVID-19;

• approving a financial leverage policy

for the Group; 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;

• receiving regular updates on

corporate governance and regulatory
matters;

• deciding to update the Articles of
Association of the Company for
approval by shareholders at the 2020
AGM;

• participation in, as well as review and

discussion of, recommendations
from the external Board evaluation;

• receiving reports from the Board

Committee Chairs;

• confirming directors’ independence

and conflicts of interest;

• reviewing and approving gender pay

reporting and the Modern Slavery and
Human Trafficking Statement; and
• undertaking appropriate preparations
for the holding of the AGM including
considering and approving an
‘outlook’ statement and,
subsequently, discussing any issues
arising from the AGM.

Corporate responsibility
• supporting the enhanced reporting

activity on ESG matters;

• receiving regular management

reports as well as annual
presentations on health and safety
and on environmental issues; and
• receiving updates on Primark ethical

sourcing and the Primark Cares
initiative.

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 Dame Heather

Rabbatts to the Board and to the
Audit and Remuneration
Committees;

• 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 102; and

• receiving and considering

presentations on succession
planning and talent management
from the Chief People and
Performance Officer.

Whistleblowing
The Group’s new Speak Up Policy,
updating the existing Whistleblowing
Policy, contains arrangements for an
independent external service provider to
receive, in confidence (where legally
permitted), reports of any inappropriate,
improper, dishonest, illegal or dangerous
behaviour for reporting to the Audit
Committee as appropriate. The Audit
Committee reviews reports from internal
audit and the actions arising therefrom
and reports on these to the Board.

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
Speak Up Policy and processes in place,
as well as information on the status of
notifications received under the previous
Whistleblowing Policy in the year to June
2021 are provided on page 84.

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.

Engagement with stakeholders
Our scale, employing 128,000 people and
with operations in 53 countries across
the world, means that our activities
matter to, or have an impact on, many
people. As a result, the Company
engages regularly with its stakeholders at
Group and/or business level, depending
on the particular issue.

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.

Detailed information about our approach
to stakeholder engagement and specific
activities this year can be found on pages
65 to 71 (which contains our Section 172
Statement on engaging with our
stakeholders), pages 72 to 85 (on
responsibility) and in the following
letter from Richard Reid, our Non-
Executive Director for engagement with
the workforce.

Our values (respecting
everyone’s dignity, acting
with integrity, progressing
through collaboration, and
delivering with rigour) and
culture essentially centre
around doing the right thing.

Culture and values
Our values (respecting everyone’s
dignity, acting with integrity, progressing
through collaboration, and delivering with
rigour) and culture essentially centre
around doing the right thing. Our
devolved decision-making model
empowers the people closest to risks to
make the right judgements to mitigate
those risks and to find opportunities, but
importantly with encouragement,
engagement and support from the
centre. That support can take the form of
resources and expertise or it can be
provided through challenge. We believe
the route to enduring value creation lies
in our focus on building objectives from
the bottom up rather than from the
top down.

Culture is monitored by the Board
through a number of different methods.
Richard Reid’s work on workforce
engagement (described in more detail on
page 102), with the support of the Chief
People and Performance Officer, is a key
method. This is supported by business
presentations by senior management of
each business division to the Board
(which will include sections on health and
safety and on the businesses’ own
workforce engagement work, including
reporting on health and wellbeing
initiatives, and results and actions arising
from people surveys). In addition, there
are site visits and other engagement
events attended by the directors,
further details of which can be found
on page 105.

The Board has also recently approved
changes to the Whistleblowing Policy and
processes with the introduction of a new
Speak Up Policy and processes. The
Speak Up Policy and processes (and the
Whistleblowing Policy and processes it
replaces) help to ensure that workforce
policies and practices are consistent with
the Company’s values and that they
support the long-term success of the
Company by providing an easy way for
the workforce to raise any matters
of concern.

100

Associated British Foods plc Annual Report 2021

101

CORPORATE GOVERNANCE continued

Board leadership and company purpose continued

Non-Executive Director
for engagement with
the workforce

I continue to believe that our people are
our greatest asset and are critical to the
success of our devolved business model.
Ensuring all our people have a voice and a
way of sharing their views and opinions is
not only the right thing to do, but critical
to our business success.

Since my appointment as Non-Executive
Director for engagement with the
workforce I have engaged with
leadership teams across the businesses
to understand how the voices of their
workforces are heard at all levels,
engaged directly with groups of
employees and ensured two-way
feedback with the Board. I have also
worked with the Executive to ensure
processes are in place for the voices of
all our employees to be heard, action to
be taken as a result and for good
practices to be spread across the Group.

The complexity, spread and scale of the
Group requires that my approach to
workforce engagement not only
incorporates my personal interactions
with our businesses and people, but also
supports the collective commitment of
the wider Board and senior management
in the businesses to setting a clear
expectation that we engage and listen to
our people.

Since we published the 2020 annual
accounts, I have spoken with all our
divisional and head office leadership
teams, including chief executives and
divisional People and HR directors, as
they have navigated through the
continued challenges of COVID-19,
hearing first-hand how businesses were
responding and adapting to the
pandemic, and engaging with their
people throughout. Building on sessions
in the previous year, I have met with a
number of businesses (and in some
cases also experienced virtual tours of

our facilities), further details of which are
provided on page 105. There has also
been direct engagement by members of
our Board with our people across the
Group, including regular attendance at
the virtual ‘Women in ABF’ network
events in October 2020 and May 2021,
with each event being attended by more
than 270 people from across the
businesses. At least one Board member
spoke, presented or took questions at
each of these events. For example,
Dame Heather Rabbatts, our newest
Board member, shared the expectations
she had for ABF and the engagement of
our people at the May 2021 event.

In addition to this direct engagement with
our people, workforce engagement
updates are provided to the Board by
each business division throughout the
course of the year. Eight of these
updates were held virtually with chief
executives and divisional HR directors in
discussion with the Board, and two
updates were written. Overall progress
on workforce engagement has included
approaches to hearing the employee
voice, such as surveys or listening
groups, and sharing of feedback and how
such feedback has been taken into
account. We have been pleased to see
progress on inclusion initiatives, training,
engagement and communication during
COVID-19, as well as seeing some
excellent responses across the Group on
mental health and wellbeing, working
from home and factory/store safety.

Each year the Chief People and
Performance Officer talks to the Board
about our people, including progress on
workforce engagement. This year’s focus
included: the Group’s overall responses
during COVID-19; processes in place to
engage talent, up-and-coming or
under-represented groups; and building
skills and capabilities among functional
talent areas.

Last year I mentioned standardising
certain key measures to improve the
Board’s oversight of how the divisions
are engaging with their people and
responding accordingly. We are gathering
data this year which will provide an
overview of engagement coverage
across the businesses and any emerging
key themes. It is intended that this be
shared with the Board in January 2022.

Across the Group we have many
examples of where listening to
employees has led to practical actions to
improve engagement and experience in
the workplace. For example, feedback
from inclusion and pulse surveys at the
head office led to changes in physical
layouts to improve interaction between
all functions and levels. In Twinings

Ovaltine, feedback from their online
continuous employee engagement
survey tool has led to a growth and
career development programme
specifically for the International Markets
Group, and to boosting levels of feedback
and informal recognition for great
contributions in the UK and Ireland. The
Mauri team in GWF understood from
their engagement survey that people
wanted more clarity and communication
on strategy and purpose and
consequently launched a programme
which incorporates fortnightly ‘strategy
drops’ webinar briefings, small discussion
groups and recorded podcasts of senior
leaders discussing their thoughts on the
strategy. They are also engaging people
in re-crafting or re-energising their
purpose. Tip Top in Australia learned that
some of their people were experiencing
fatigue and work overload during the
pandemic and responded with wellbeing
checks and adjustments to workload and
resourcing. In AB Agri’s Global
Technology Services team, insights from
their intelligent continuous listening
platform ‘The Pulse’ identified a need to
support growth, recognition, and
workload balance. This led to actions
being taken to improve the team's
organisation, career and training plan,
launch a local recognition scheme to
show appreciation for great work, and
increase team connection through social
events such as their ‘online Olympics’.

We aspire that every employee voice is
welcomed and heard by their line
managers and leaders. However, we
know that sometimes other channels can
be important for raising concerns. I am
pleased that, in September 2021 we
launched our new Speak Up Policy,
which replaces our Whistleblowing
Policy. This was launched with
groupwide communication to all
employees. Further details on this can be
found on page 84.

Moving forward, we are enhancing the
divisional updates to the Board and
enhancing follow-up discussions with the
leadership teams to expand the
conversations and insights the Board can
offer. After the proposed review in
January 2022 of the measurements and
data captured this year, the Board will
share observations and insights with the
senior management across the
businesses and discuss our expectations
and aspirations for the Group overall.

I and the Board are looking forward to
continuing the focus and rigour around
workforce engagement into the year
ahead, meeting with our people and
understanding their insights and
experiences.

Richard Reid
Non-Executive Director

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,
ESG 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 holds one-to-one and
group meetings (virtually where
necessary) with institutional shareholders
and potential investors. These views are
then reported back to the Board as a
whole at the 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.

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.

Engagement with
shareholders

Individual shareholders
We have a number of individual
shareholders. All shareholders are usually
invited to attend the AGM in person
(although this changed in respect of the
2020 AGM given the COVID-19
pandemic), have access to our website
and receive electronic communications.
The 2021 AGM is planned to be a
physical event which will be live-
streamed. It is intended that shareholders
will have the opportunity to put their
questions to the Board either at the
meeting (if attending in person) or 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, we seek to use
e-communications to communicate with
shareholders wherever possible. We also
encourage the direct payment of
dividends into bank or building
society accounts.

Institutional investors
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 to meet them
informally. The 2021 AGM will be
adapted as appropriate to meet any
concerns relating to the COVID-19
pandemic. The AGM will be held on
Friday 10 December 2021 at 11.00 am at
the Congress Centre, 28 Great Russell
Street, London WC1B 3LS. It is currently
planned that shareholders will be able to
attend physically. There will also be the
possibility to follow proceedings through
a live-stream. We encourage all
shareholders not attending in person on
the day to vote by proxy in advance of
the meeting on all resolutions put
forward. Shareholders not attending on
the day are given the opportunity to raise
questions and receive responses in
advance of the voting deadline. Further
details are included in the Notice of AGM
and documentation accompanying the
proxy form. All votes are taken by a poll.
In 2020, voting levels at the AGM were
over 80% of the Company’s issued share
capital.

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 published an
ESG Appendix each year, which this year
will be replaced by our ESG Insights. 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.

102

Associated British Foods plc Annual Report 2021

103

CORPORATE GOVERNANCE continued

Division of responsibilities

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
Ruth Cairnie (Senior Independent
Director)
Emma Adamo
Graham Allan
Wolfhart Hauser
Dame Heather Rabbatts
Richard Reid

Biographical and related information
about the directors is set out on pages 98
to 99.

We consider the size of the Board to be
large enough to ensure diversity and an
appropriate variety of skills whilst still
being small enough to ensure a good
quality of debate. This view is supported
by the outcome of the external Board
evaluation, further details of which are
set out below.

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.
Copies are available on request.

The Chairman is responsible for the
operation and leadership of the Board,
ensuring its effectiveness and setting its
agenda. The Chairman works with the
Company Secretary to set the agenda for
Board meetings. The Chairman promotes
a culture of openness and debate, which
has been a key factor in seeking to keep
the size of the Board relatively small, and
facilitates constructive Board relations
and contribution from all non-executive
directors, as well as ensuring that
directors receive accurate, timely and
clear information. The Chairman was
independent on appointment.

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. Authority for the operational
management of the Group’s business
has been delegated to the Chief

Michael McLintock
George Weston
John Bason
Emma Adamo
Graham Allan
Ruth Cairnie
Wolfhart Hauser
Dame Heather Rabbatts
Richard Reid

Board
9/9
9/9
9/9
9/9
9/9
9/9
9/9
4/4
9/9

Audit
Committee

Nomination
Committee
3/3

Remuneration
Committee
5/5

4/4
4/4
4/4
2/2
4/4

3/3
3/3
3/3

3/3

5/5
5/5
5/5
2/2
5/5

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.

increased in size during the course of the
financial year, it is still of a sufficiently
small size to be 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.

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 role of the Senior
Independent Director is set out in writing
and a copy is available on request.

In addition to meeting with non-executive
directors without the Chairman present
to appraise the Chairman’s performance
(for which, see further details on page
106), the Senior Independent Director
meets with the non-executive directors
on other occasions as necessary.

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 perspectives 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 by providing constructive
challenge and holding to account both
management and individual executive
directors against agreed performance
objectives. Whilst the Board has

Board Committees
The written terms of reference for the
Nomination, Audit and Remuneration
Committees are available on the
Company’s website, www.abf.co.uk, and
hard copies are available on request.
Further details on the work of each of the
Committees is included later in this
Corporate Governance Report.

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. Further details
of their independence are included in the
Notice of AGM.

At least half the Board, excluding
the Chairman, are independent non-
executive directors.

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.

Board meetings
The Board held nine meetings during the
financial year as well as receiving weekly
business updates from mid-January 2021
through to the end of March 2021 via the
Board portal. Periodically, Board meetings
are held away from the corporate centre
in London.

The attendance of the directors at Board
and Committee meetings during the year
is shown in the table on page 104. 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. Dame Heather Rabbatts was
appointed to the Board, the Audit
Committee and the Remuneration
Committee on 1 March 2021 and
attended all Board, Audit Committee and
Remuneration Committee meetings
since that date.

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.

Information flow
The Company Secretary manages the
provision of information to the Board at
appropriate times in consultation with the
Chairman and Chief Executive and
ensures that the Board has the policies,
processes, time and resources it needs in
order to function effectively and
efficiently. This includes the provision of
corporate governance updates to all
Board members in the Board pack for
each meeting. 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 as appropriate 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 mid-January 2021 until late March
2021 when the Board received weekly
business updates via the Board portal. All
directors have access to the Company
Secretary, who is responsible for advising
the Board on all governance matters.

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
know the businesses better.

Dame Heather Rabbatts
Dame Heather joined the Board on 1
March 2021. As part of the induction to
the Company, in addition to attending
Board, Audit Committee and
Remuneration Committee meetings,
Dame Heather has had either face-to-face
or virtual meetings with:

• the Chairman;
• the Chief People and Performance

Officer;

• the Director of Financial Control;
• the Director of Corporate Governance;

and

• the CEO of Primark.

She also has meetings/visits planned
with AB World Foods in Leigh and the
ABF Shared Service Centre. Meetings are
also being arranged with some of our
other businesses in Europe.

Dame Heather also joined the Company’s
ESG Investor Day in March 2021 and
spoke at the virtual ABF Women in
Business Forum in May 2021.

Training, development and
engagement
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 Board meeting held in
June 2021, as well as presentations from
Primark, the Board received a written
update on the food strategy for the Group
(including a refresher analysis on the
Group businesses by type) as well as
analysis of various different food and
beverage brands outside the Group.

The Chief Executive encourages other
Board members to visit operations either
with him, with other directors, or on
their own.

The ongoing implications of the
COVID-19 pandemic have continued to
limit the scope for physical visits. As part
of his role as Non-Executive Director for
engagement with the workforce, in
October 2020, Richard Reid had virtual
meetings with people from the George
Weston Foods business and the
Twinings business in Australia. Richard
also attended a virtual training meeting
with ABF Ingredients employees on
leading in a pandemic in January 2021,
had a virtual visit of British Sugar Newark
in February 2021, had a virtual meeting
with people from the ABF Shared Service
Centre and had virtual meetings with
people from AB Mauri Global Bakery
Ingredients business in the Netherlands
and Argentina in September 2021.

Ruth Cairnie attended the ABF Women in
Business virtual forum in October 2020
and, as referred to above, Dame Heather
Rabbatts spoke at the event in May 2021.
George Weston and John Bason have
each also given business updates at
the events.

The Chairman met with management and
attended a factory tour at the Jordans
Dorset Ryvita plant in Bardney,
Lincolnshire in August 2021 as well as
attending a tour of the Silver Spoon site.
Both the Chairman and Ruth Cairnie met
with management and had site visits to
the Vivergo Fuels plant and the AB Mauri
yeast production plant in Hull in
September 2021.

104

Associated British Foods plc Annual Report 2021

105

CORPORATE GOVERNANCE continued

Composition, succession and evaluation

Nomination Committee Report

Board succession
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 107 to 108 which also
provides details of the Committee’s
activities, including the appointment
of Dame Heather Rabbatts to the Board
on 1 March 2021, as well as on Board
and senior management succession
plans and diversity.

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 2021 AGM to be held
in December. This will be in addition to
the election of Dame Heather Rabbatts
as a director.

Board evaluation
Further to its postponement in 2020 as a
result of COVID-19, a formal and rigorous
externally facilitated Board evaluation
was carried out in March to May 2021.
The objective of the review was to
assess all aspects of the effectiveness of
the Board as a whole and its
Committees, the Chairman and the
individual directors.

The Director of Company Secretariat and
Director of Corporate Governance drew
up a shortlist of two potential candidates
to carry out the external Board evaluation
based on discussions with the Chairman
and Senior Independent Director and
based on previous experience of the
candidates or recommendations. The
Director of Company Secretariat and
Director of Corporate Governance met
with each of the two potential
candidates. The preferred candidate,
Belinda Hudson Limited (BHL), was put
forward to meet with the Chairman. The
appointment of BHL as the external
Board evaluator was decided by the
Chairman and agreed at a meeting of the
Board. The Director of Corporate
Governance was responsible for
providing BHL with the necessary access
and support to conduct the review.

BHL had not previously carried out an
evaluation of the Board but BHL has
carried out board evaluations for a FTSE
100 company of which our Senior
Independent Director, Ruth Cairnie, was
previously a non-executive director. This
also assisted in supporting the Board’s
decision as to why BHL was qualified to
carry out the review. Other than this
recommendation based on prior
knowledge of the quality of BHL’s work,
there is no connection between BHL and
the Company or its individual directors.

Notwithstanding that the report
considered that the Board performance
was strong, a number of ways were
identified in which the governance
relating to the Board and Committees
could be strengthened. The Chair is
acting on the specific key suggestions
set out in the table below.

The outcome of the evaluation will not
have any impact on Board composition,
taking into account that the composition
of the Board has only recently changed
with the appointment of Dame Heather
Rabbatts as a director in March 2021,
such appointment itself being related
to the outcome of previous
Board evaluations.

The sections of the report describing
the process followed and outcome of
the review have been agreed with BHL.

In addition to and separately from the
external Board evaluation, the Senior
Independent Director, with the input of
the non-executive directors and without
the Chairman present, carried out an
appraisal of the performance of the
Chairman during the year. This
concluded that the Chairman had led the
Board through the COVID-19 pandemic
in an exemplary fashion, combining
gravitas and a focused response with
lightness and a high degree of
emotional intelligence.

Although the Code of Practice of
Independent Board Reviewers was not in
effect at the time the engagement was
entered into, BHL has confirmed that it
intends to become a signatory to the
Code of Practice. Further, the Company
confirms that it considers that it has
abided by the Principles of Good Practice
for listed companies using external
board reviewers.

How the Board evaluation was
conducted
The main strands of work were as
follows:

• review of Board and Committee papers
for a 12-month period up to April 2021
and of various governance documents;

• one-to-one virtual interviews with all

Board members as well as the
Company Secretary and Director of
Legal Services, the Director of
Company Secretariat (retired), the
Director of Corporate Governance, the
Director of Financial Control, the Chief
People and Performance Officer, the
Group Director of Reward and the
former Lead Audit Partner;

• observation of the Board meeting held

in April 2021; and

• preparation of the report.

The report was then included in the
Board pack for the Board meeting in
May 2021, discussed in detail by the
Board and the results presented by
the reviewer.

The headline outcome of the review was
that the Board of the Company was a
high quality one that was effective and
that it was universally regarded as a very
positive asset, with the non-executive
directors providing a good balance of
support and challenge, influencing the
executives and adding value.

Suggestion

Action

Ensure that the Board’s tolerance for risk
is articulated and a set of risk appetites
developed.

Review the information and presentations
made by the business unit leaders at
Board meetings to ensure that they make
best use of the time devoted to them in
the boardroom.

Review whether the Board would benefit
from more formal information concerning
the views of external shareholders.

Engaging the Director of Business
Development to help develop a set of
risk appetites and to consider better
articulating the Board’s tolerance for
risk.

Engaging the Director of Business
Development to undertake a review
of the information and presentations
provided by the business divisions
and to make proposals as to how
these can better meet the needs of
the Board.

Arranging for the provision of more
formal feedback to the Board of the
views of external shareholders,
particularly following results
announcements.

Board appointments process
The process for making new
appointments is led by the Chairman.
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.

Appointment of a new independent
non-executive director
During the year, the Chairman led the
process for the appointment of a new
non-executive director following the
statements last year that we would be
looking to expand the Board by adding
one new member.

Lygon Group, an external executive
search consulting firm, was engaged to
help identify potential candidates. Lygon
Group is independent of the Company,
with no other connection to it or to its
individual directors. The firm is one of the
initial signatories to the ‘Voluntary Code
of Conduct for Executive Search Firms’
on gender diversity and best practice as
well as being a member of the CBI’s
Change the Race Ratio and is accredited
by the Hampton-Alexander Committee
for promoting diversity in the make-up of
boards. Potential candidates were
considered on the basis of their skills and
experience in the context of the range of
skills and experience held within the
existing Board as a whole. Following a
rigorous process of interviews and
assessments and, on the
recommendations of the Nomination
Committee, the Board approved the
appointment of Dame Heather Rabbatts
with effect from 1 March 2021 both to
the Board of the Company and to the
Audit and Remuneration Committees.

Election/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
election/re-election of directors prior to
their recommended approval by
shareholders at the AGM.

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 Chief People and
Performance Officer 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.

Committee activities during
the year

Succession planning
Priorities previously identified and carried
through into the 2020/21 financial year
included continuing to emphasise
generalist skills in Board recruitment and
continuing to factor in gender and ethnic
diversity. In the continuous consideration
of these topics, there was 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.

We announced in last year’s annual
report that a process was underway to
engage an external search consultancy
with a view to appointing a new director
and further details of the successful
outcome of that process are
included below.

A detailed review of succession planning
in respect of senior management was
presented to the Board by the Chief
People and Performance Officer at the
Board meeting in May 2021. This
included focus on people review
processes, functional talent development,
specific emerging talent pipelines,
diversity, equity and inclusion, and
learning and development initiatives.

Michael McLintock
Nomination Committee Chair

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.

Meetings

The Committee met three times 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.

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107

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 81.

The Group DEI Network, with the support
of the Board, is additional to the
ownership of diversity and inclusion
strategies and plans within the
businesses, acting as a network to
leverage the knowledge and scale of the
Group. Details of other initiatives across
the Group to promote diversity are
provided on page 81.

Whilst there is no groupwide diversity
policy, some of our businesses choose to
have their own written diversity and
inclusion policies, such as the AB Agri
Equality, Diversity & Inclusion policy.

CORPORATE GOVERNANCE continued

Nomination Committee Report continued

Performance evaluation
The performance of the Nomination
Committee was considered in the
external Board evaluation. It was noted
that the Nomination Committee had kept
the composition of the Board under
review and that the Board had addressed
executive succession planning on an
ongoing basis.

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. We publish below
a director skill sets matrix which seeks to
provide a snapshot of that diversity
of skills.

We operate under a principle that we
must be a Group where anyone with
ambition and talent can have a great
career, regardless of their gender, race,
sexual orientation or any of the other
things that make people unique. We
believe that this approach promotes
diversity of gender, social and ethnic
backgrounds, cognitive and
personal strengths.

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 and carried on beyond
then. The Board now meets the
expectations of the Hampton-Alexander
Review by having at least 33 per cent
female representation and the
recommendation of the Parker Review
that all FTSE 100 boards should have at
least one person from an ethnic minority
background as a director. Further, Ruth
Cairnie has occupied the position of
Senior Independent Director since 2018.

Inclusion is intrinsic to our values as a
Group. We strongly believe that everyone
has a right to belong, be listened to,
respected and supported – at all levels
– and that everyone has the right to
develop their careers subject to their own
ambitions and talent, regardless of
gender, ethnicity or any other
characteristic. Diversity and inclusion was
a topic of discussion at the Chief
Executive’s (virtual) conference with the
divisional chief executives in October
2020 and progress on diversity and
inclusion is written into the objectives of
the divisional chief executives, as well as
those of the Chief Executive and
Finance Director.

Director skill sets

Food/
Retail

Financial/
Audit/
Risk

Legal/
Public
Policy

Senior
Executive

Cybersecurity/ IT

Comms/
Marketing/
Customer
Service

Environmental/
Social

International
Markets

Technical/
Engineering

Health &
Safety

Manufacturing/
Supply Chain

Director

Michael McLintock

George Weston

John Bason

Ruth Cairnie

Emma Adamo

Graham Allan

Wolfhart Hauser
Dame Heather
Rabbatts

Richard Reid

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 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.

Audit, risk and internal control

Financial and business reporting
Please see the Audit Committee Report
starting on page 111.

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, performance, business model
and strategy. The Company produced a
paper in this respect, prepared by the
Director of Financial Control and the
Group Financial Controller, containing
an assessment of the annual report
and financial statements, including
a summary by division of performance
issues in the year and one-off items
which benefitted performance.
This paper was presented to the
Audit Committee.

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
groupwide requirements for health and
safety and environmental standards.
There are also guidelines on the
minimum level of internal control that
each of the divisions should exercise over
specified processes. Each business has
developed and documented policies and
procedures to comply with the minimum
control standards established, including
procedures for monitoring compliance
and taking corrective action. The board of
each business is required to confirm
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 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.

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109

CORPORATE GOVERNANCE continued

Audit, risk and internal control continued

Audit Committee Report

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 111 to 116.

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 page 95.

Assessment of principal risks
The directors confirm that, during the
year, the Board has carried out a robust
assessment of the principal and
emerging risks facing the Group,
including those that could threaten its
business model, future performance, and
solvency or liquidity. A description of
these principal and emerging risks and
how they are being managed and
mitigated is set out on pages 88 to 94.

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 18 September 2021
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 88 to 94 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.

Richard Reid
Audit Committee Chair

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
Dame Heather Rabbatts

Meetings
The Committee met four times in the
year under review.

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;

• where requested by the Board,

assisting in relation to the Board’s
robust assessment of the principal and
emerging risks facing the Company and
the prospects of the Company for the
purposes of disclosures required in the
annual report and accounts;

• reviewing and approving statements to

be included in the annual report
concerning the going concern
statement and viability statement;

Internal financial controls
• reviewing the effectiveness of the

Group’s internal financial controls and
internal control and risk management
systems (including the systems to
identify, manage and monitor financial
risks), 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
• reviewing and reporting to the Board on

the Group’s arrangements for its
employees and contractors to raise
concerns, in confidence, about possible
improprieties in financial reporting,
financial and management accounting,
or any other matters. The objective is to
ensure that arrangements are in place
for the proportionate and independent
investigation of such matters and
appropriate follow-up action;
• reviewing 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 risk
management system;

• considering and approving the 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.

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:

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111

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.

CORPORATE GOVERNANCE continued

Audit Committee Report continued

• 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

Group’s businesses.

The Committee invites the Finance
Director, Group Financial Controller,
Director of Financial Control 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.

The Committee Chairman reports the
outcome of meetings to the Board.

The performance of the Audit Committee
was considered in the external Board
evaluation, which found that the
Committee was universally well-regarded
as being strong and effective. It was
noted that members came to the
meetings well prepared and offered
robust challenge and that the agenda of
meetings was broad-ranging, well-
structured and covered all the matters in
the Audit Committee’s remit.

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.

During the year it formally reviewed the
Group’s interim and annual reports.
These reviews considered:

• 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;

• 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;

• tax contingencies, compliance with
statutory tax obligations and the
Group’s tax policy;

• cybersecurity;
• consideration of the potential

implications of the BEIS White Paper:
Restoring Trust in Audit and Corporate
Governance;

• COVID-19 challenges and response

assurance plan;

• consideration of the implications of the

FCA’s listing rules, published in
November 2020, on the Task Force on
Climate-related Financial Disclosures
(TCFD). These rules on TCFD will apply
to ABF in the annual report for 2022;

• treasury policies; and
• Group long-term funding options.

Areas of significant accounting judgement and
estimation material to the Group financial statements

Audit Committee assurance

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.

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 2023, and its viability
statement over the next three years.

Management has undertaken a detailed
financial modelling exercise that has
considered the impact on profit, cash and
working capital of a number of potential
scenarios.

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, and AB Mauri.

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.

On the basis of the key assumptions and associated sensitivities, an
impairment charge of £141m in property, plant and equipment at Azucarera
and other sugar businesses was appropriately recognised and included within
exceptional items as detailed in notes 8 and 9.

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 work, and its challenge of
the key assumptions and sensitivities, it considered that the impairment
charges as detailed in notes 8 and 9 were appropriately recognised.

Since March last year, when the pandemic became apparent, the Audit
Committee, on behalf of the Board, has 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 is most likely to be
adversely impacted by any future restrictions imposed.

The Committee has 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 has reviewed the detailed cash flow forecasts, which
incorporate the mitigating actions proposed 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 and FCA pronouncements. The Committee has
satisfied itself that management has adequately identified and considered all
potentially significant accounting and disclosure matters.

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Audit Committee Report continued

Areas of significant accounting judgement and
estimation material to the Group financial statements

Audit Committee assurance

Taxation
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
various tax authorities.

The Committee reviews the Group’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. The Committee was satisfied that
the judgements were reasonable and that, accordingly, the provision
amounts recorded were appropriate.

Other accounting areas requiring management
judgement or estimation

Audit Committee assurance

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.

Actuarial valuations of the Group’s pension scheme obligations are
undertaken every three years in the UK by an independent qualified actuary
who also provides advice to management on the assumptions to be used in
preparing the accounting valuations each year. Actuarial valuations in other
jurisdictions are performed as required. 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 to changes in these key assumptions.

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’ summary of

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;
• 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 approach to whistleblowing
was reviewed during the year. The
Whistleblowing Policy has been
rebranded and relaunched as ‘Speak Up’.
It is designed to protect ABF’s culture of
fairness, trust, accountability and respect,
encouraging effective and honest
communication at all levels. In addition, a
new independent external service
provider was appointed to receive, in
confidence, complaints on accounting,
risk issues, internal controls, auditing
issues and related matters for reporting
to the Audit Committee as appropriate.
Further details on the policy can be found
on page 84. The Committee reviewed
reports from internal audit and the
actions arising therefrom and reported
this to the Board.

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 reoccurrences.

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 above a certain
threshold, by 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.

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 its
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 53
weeks ended 18 September 2021
were £9.1m, of which £0.7m related
to non-audit work. Further details
are provided in note 2 to the
financial statements.

114

Associated British Foods plc Annual Report 2021

115

CORPORATE GOVERNANCE continued

Audit Committee Report continued

Auditor effectiveness
To assess the effectiveness of the
external auditor, 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 auditor 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
auditor 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 2021/22. In accordance with
applicable law and regulation, the
Company is required to conduct a
competitive audit tender during 2025.
The Audit Committee has discussed the
most appropriate time to carry out the
external audit tender process, taking into
account the independence, objectivity
and quality of EY’s external audit and has
concluded that, based on current
performance, it is anticipated that a
competitive tender process will
commence in 2025. The Audit
Committee considers that a competitive
tender is in the best interests of the
Company’s shareholders as it will allow
the Company to appoint the audit firm
that will provide the highest quality, most
effective and efficient audit.

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.

DIRECTORS’ REMUNERATION REPORT

Annual statement by the Remuneration Committee Chair

Ruth Cairnie
Remuneration Committee Chair

In this section

How the Directors’
Remuneration Policy,
approved in 2019, was
implemented in 2020/21

page 120

How we expect to
implement the Directors
Remuneration Policy in
2021/22

page 121

Required supporting
disclosures

pages 122 to 135

This report is subject to
an advisory vote at the
2021 AGM

2021 has required exceptional
care and judgement by the
Committee in considering
appropriate performance-
related outcomes, taking into
account the challenging
circumstances we continued
to face due to the pandemic.

Our role as a Committee includes
encouraging enhanced performance and
rewarding contribution to the Company’s
long-term success. This year a major
consideration for the Committee has
been to address the question, “what is
the appropriate performance-related pay
for senior management taking into
account the impacts of COVID-19?”.

Last year, our pay outcomes reflected the
immediate impact of COVID-19 – no
annual bonus (STIP) being paid; no
Long-term Incentive Plan (LTIP) vesting;
and executive directors volunteered
salary cuts of 50% of salary for a
substantial part of the year. As a
Committee we were comfortable that,
given the widespread societal impacts on
multiple stakeholder groups, this was
appropriate. However, we were also
strongly of the view that our
remuneration approach for the following
years would need to support actions and
performance that would benefit
shareholders and wider stakeholders, in
line with our key remuneration principle
of alignment, accountability and doing the
right thing. This would need to address a
strong likelihood that the vesting targets
for the in-flight LTIPs would no longer be
achievable; the critical impact here was
the potential effect of enforced closure of
Primark stores, with Primark operating
profit of £969m in 2018/19 (on an IFRS
16 pro forma basis) having been
expected to continue on a strong growth
trajectory to drive the LTIP targets, but
being reduced by store closures to
£362m in 2019/20 and £321m in 2020/21.

Addressing these challenges has
required an exceptional approach and
more than the usual level of judgement
to arrive at outcomes that we believe
are well aligned to the interests of
all stakeholders.

Shareholder consultation 2020
and 2021

I consulted extensively with shareholders
a year ago to raise with them the
dilemmas we faced and the possibility
that we would seek to use the
Committee’s discretion to allow the
in-flight LTIPs to vest based on our
performance, despite the pandemic
having made the targets unachievable.
The conversations last year were

constructive and thoughtful, providing
some helpful insights and suggestions.
There was a broad willingness to engage
again on the subject once we knew what
approach we wished to follow.

Over recent months we have again
consulted our largest shareholders on the
approach outlined on these pages. I would
like to thank those involved for taking the
time to help us develop and challenge our
thinking. In the main, feedback has been
supportive of the rationale for applying
discretion, recognising the challenging
context and the importance of our
remuneration decisions aligning to
reasonable performance expectations and
our accountability model.

Many shareholders asked us to give as
much clarity as possible on how the
proposed quantum of discretionary
outcomes was arrived at. This is provided
in this letter and in the report on pages 124
to 125 for the 2020/21 STIP and pages 126
to 128 for the 2018-21 LTIP. However, I
want to be clear that, in a number of areas,
a high level of judgement was required,
with a number of decisions having to be
based entirely on a ‘feels right’ basis.

Remuneration in 2020/21

STIP 2020/21
As a Committee we have a track record,
built up over many years, of taking fair and
balanced decisions on performance pay,
including exercising discretion.

When setting the performance range for
the STIP this year, we wanted to take
account of the potential for some store
closures to occur and developed a
mechanism so that the Primark target
would reflect the estimated impacts of
any closures that occurred in practice.
We considered this to be a more robust
approach than making arbitrary
assumptions about the potential level of
closures, which was clearly impossible to
predict. The approach is explained further
on page 124. At the time of setting the
approach, a year ago, our expectation was
for some closures to occur but that they
would be more localised and short-term
than what had been experienced in the
spring of 2020.

In practice, the impact of COVID-19 on
Primark trading this year has been far
greater than expected. This had the
unanticipated consequence of trading
being much stronger when stores were
open, with the result that the STIP
outcome calculated using the mechanism
we set at the beginning of the year is
at maximum.

Looking in the round, the Committee does
not feel this is an appropriate outcome and
has decided to apply downwards
discretion, reducing the STIP payment for
financial performance to an on-target level.

116

Associated British Foods plc Annual Report 2021

117

DIRECTORS’ REMUNERATION REPORT continued

This is an entirely judgement-based
decision. In our recent consultation
meetings, shareholders appreciated us
taking this approach.

LTIP 2018-21
At the start of this financial year we felt
that it would not be right for the LTIPs for
2018-21 and 2019-22 to be entirely out of
reach for reasons outside the executives’
control. We wanted to align executives’
pay with critical actions to develop and
strengthen the business, preserving and
creating value for shareholders. Having
the LTIPs predestined not to vest did not
feel aligned to the principles of our
performance-based approach, nor would
it support the recruitment and retention
of senior leaders in a very competitive
talent market.

Across the Group some 170 employees
participate in the share-based LTIP, with
around 55% of these individuals having
some or all of their payout based on
Group or Primark performance.

Taking into account the feedback from our
investors, the Committee decided in
October 2020 that in order to apply
discretion, the maximum incentive available
should be reduced. The scale of reduction
needed to recognise the highly unusual
situation and approach, whilst ensuring that
an incentive effect was maintained; we
decided to reduce the maximum vesting to
60% of the original award.

We then created a framework that the
Committee would use to consider
whether and to what extent discretion
might be applied. The purpose of the
framework was to ensure that vesting
would only be permitted if good progress
was made against key financial and
strategic targets for the year. The
framework was shared with the
executives at that time and included the
following three themes, with the first and
third to be used mostly as filtering
elements that would determine the
appropriateness of activating a
discretionary award, while the second –
performance across the portfolio – would
be the main determinant of the eventual
award quantum:

1. Immediate actions – recognition of
the positive impact that our COVID-19
actions have had on preserving value for
our shareholders.

2. Performance across the portfolio
– the Committee set out objectives to be
achieved, which were a mix of financial
measures and achievement of critical
strategic actions that would strengthen
the business. Given the varied impacts of
COVID-19, this was most meaningfully
done by component of the portfolio: Food
excluding Sugar; Sugar; and Primark.

3. Wider stakeholders – underpinning all
our considerations was ensuring fairness
across our stakeholders and making
sure executives and senior managers
were not treated more favourably than
other groups. This included the safety of
our employees, fairness to suppliers,
repayment where possible of job
retention scheme monies received in
2020/21 to governments and restoring
the dividend to our shareholders as well
as paying a special dividend this year end.

Details of our assessment of
performance against the framework we
had established are set out on pages 126
to 128. However, the framework was not
intended to give definitive answers and,
at the end of the year, the Committee
has assessed performance against the
framework and has then stood back and
looked across all of the evidence to
determine a ‘feels fair’ outcome. On this
basis, we determined that 40% of the
shares originally awarded should vest.

Remuneration decisions for
2021/22

Proposed salary and fee increases
In our decentralised model, each business
is given flexibility to set its own salary
increase rates, which means that there is
no one budgeted increase rate for our UK
employees. UK salary increases this year
will be in the range of 2% to 3.5% for
those delivering an acceptable
performance in role, with several of our
largest businesses making increases of
3%. In Primark UK, a 3% increase will
apply for office and management roles,
including store department managers.
Increases for store assistants and
supervisors reflect local factors such as
collective bargaining agreements. In the
UK, increases for this population are
expected to be at least 6% in 2021/22.
After several years of salary freeze for
George Weston, we intend to increase his
salary by 2.7% this year, with an
equivalent increase for John Bason. This is
in line with increases for our wider
employee population.

The fee paid to Michael McLintock has
not increased since his appointment. We
intend to make an adjustment to move
his fee to £425,000.

Pensions
As previously disclosed, it has been
agreed with John Bason that his cash
allowance in lieu of pension will align
with that of other employees from the
end of 2022.

The Committee is mindful of the
Employer Funded Retirement Benefit
Scheme (EFRBS) for George Weston. His
treatment is in line with that of other
employees in a similar position. However,
as outlined on pages 120 and 123 we will

review our approach during the policy
review next year.

STIP 2021/22
In 2020/21 we removed the working
capital modifier from the STIP as
COVID-19 uncertainty had the potential to
drive large swings in inventory. This was
intended to be a one-year change, but we
now view the disruption risk to global
supply chains as presenting an ongoing
high level of uncertainty about inventory
levels. We have therefore decided to
remove the modifier this year as well.

LTIP 2020-23 and 2021-24
We delayed setting the LTIP performance
range for 2020-23 to enable us to set a
more stretching performance range. This
range is shown on page 128.

The performance range for the 2021-24
LTIP has been set and is intended to be
stretching whilst recognising the
continuing uncertainty that COVID-19
brings. This range is shown on page 128.

LTIP 2019–22
In line with the approach taken for the
2018-21 LTIP, the Committee anticipates
that it may be appropriate to apply
discretion to allow some portion of this
award to vest in November 2022. While
we remain hopeful that widespread or
long-lasting closures of Primark stores
are now behind us, it is quite unrealistic
to envisage Primark performance
recovering yet to the sort of level it would
have been at on its pre-COVID-19
trajectory. We are therefore creating a
framework now that can inform the
application of discretion at the end of the
period. Any discretion would be
exercised on the reduced 60%
maximum. We will consult our largest
shareholders before determining the
appropriate outcome in 2022.

The approach to performance outlined
above has required more than the usual
level of Committee judgement, with both
upwards and downwards discretion
exercised. The Committee’s perspective
is that the resultant outcomes ‘feel fair’
given the circumstances and the
achievements across the portfolio, and
are in line with the principles of our
established approach to performance
assessment. The remainder of this report
provides further details of the decisions
the Committee has made, and I hope that
our investors will be able to support our
approach at the 2021 AGM.

Ruth Cairnie
Remuneration Committee Chair

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.

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 our
businesses are well run. Our
Remuneration Policy aims to
align executive rewards with
shareholder value creation.

Line of sight

Clarity and simplicity

Fairness

We aim to align remuneration
and business objectives
through performance
measures to which
individuals have line of sight.

We believe that executive
pay should be clear and
simple for participants to
understand.

Total remuneration should
fairly reflect the performance
delivered and efforts made
by executives.

The best way to achieve this
is through alignment with
business performance.

The factors that the UK Corporate Governance Code identifies as important to consider are well covered by these principles:
‘clarity and simplicity’ is one of our key remuneration principles; predictability and alignment to culture are key threads through all
of the principles; and risk and proportionality are particularly reflected in the importance that we attach to doing the right thing for
the business for the long term, our focus on fair outcomes that consider wider stakeholders and our approach to the operation
of discretion.

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

Performance
metrics

What they measure

Cash STIP

Adjusted operating profit

Operational performance

150% of salary
maximum

Working capital modifier

Personal performance

Disciplined cash management – temporarily removed in
2020/21 and 2021/22 due to significant supply chain
disruption that would have a distorting effect. It is expected
to be applied in 2022/23

Aligned to key business health and business performance
goals, including ESG measures

Share STIP

50% of salary
maximum

LTIP

200% of salary
maximum

Adjusted operating profit

Operational performance

Working capital modifier

Disciplined cash management – temporarily removed in
2020/21 and 2021/22 as explained above

Adjusted earnings per share growth in
the non-Sugar businesses

Reflects the strategy of holding a portfolio of diverse
businesses

Downwards
modifiers

ROACE1 in the
non-Sugar
businesses
ROACE2 in Sugar

• Adjusted earnings per share growth in our non-Sugar
businesses is a key measure of long-term success

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 earnings per share measure

1 The return on average capital employed in the non-Sugar businesses averaged over the performance period (see note 30 for a further definition)
2 The return on average capital employed in Sugar includes the book value of goodwill added to the denominator, for incentive purposes only

Share alignment and time horizons
Shareholding and alignment with
shareholder interests are part of our
culture and the commitment of our
leaders to the long-term stewardship of
the business. The Executive Directors
have very significant shareholdings in the
Company, well in excess of our
shareholding requirement.

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.

Track record of applying discretion
The Committee has a long history of
applying discretion both to increase and
reduce incentive outcomes consistent
with the principles of fairness and of
alignment, accountability and doing the
right thing.

118

Associated British Foods plc Annual Report 2021

119

DIRECTORS’ REMUNERATION REPORT continued

Remuneration outcomes

Base salary

Pension

STIP

LTIP

George Weston asked not to be considered for any salary increase in the 2020/21
financial year. His last salary increase was in 2017.

John Bason’s salary was increased 2% to £734,000 on 1 December 2020. This was his
first salary increase since 2017.

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 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.

As we have disclosed in the past, employees who were in our UK defined benefit
pension scheme when it closed to new members continue to accrue benefits under the
scheme. George Weston participates in an EFRBS designed to replicate benefits under
the UK defined benefit scheme and therefore his treatment is in line with the treatment
of employees who were in a similar position. However the Committee recognises that
this is different from the broad workforce of more recent recruits who participate in a
defined contribution scheme and will make a decision on the future approach in the policy
review next year.

The Finance Director received a cash supplement of 25% of salary in lieu of pension
contributions. This allowance will reduce to 10% of salary, in line with the UK workforce,
by the end of 2022.

As outlined in Ruth Cairnie’s letter on page 117, the Committee has decided to apply
discretion to reduce payment on the financial element of the STIP from 100% to 50% of
maximum. The resulting STIP payments, taking into account personal performance, will
be 80% of salary for George Weston and 81% of salary for John Bason.

As outlined in Ruth Cairnie’s letter on page 117, the Committee reduced the maximum
number of shares that could vest to 60% of those allocated under the 2018-21 LTIP. The
Committee then applied discretion to allow 40% of the allocated shares to vest based on
the Committee's assessment of performance.

Non-executive directors’ fees

Michael McLintock asked not to be considered for a fee increase in the 2020/21 financial
year. His fee has not changed since his appointment in April 2018.

Total pay for 2021

The emoluments table can be found on page 123.

George Weston total remuneration
(£000)

John Bason total remuneration
(£000)

,
,

4
4
8
8
4
4
9
9

4
4
,
,
2
2
0
0
4
4

3
3
,
,
8
8
4
4
3
3

3
3
,
,
3
3
9
9
0
0

1
1
,
,
1
1
3
3
8
8

3
3
,
,
2
2
9
9
8
8

2
2
,
,
8
8
6
6
8
8

2
2
,
,
7
7
2
2
6
6

2
2
,
,
2
2
2
2
1
1

7
7
4
4
9
9

Implementation of Remuneration Policy in 2021/22

Base salary

Salaries for the executive directors will increase as shown below in December 2021, in line with
increases for the workforce. See pages 130 to 132 for more details on alignment between executive
and wider employee pay.

George Weston
John Bason

Increase

Salary from
1 December
2021
2.7% £1,119,000
£754,000
2.7%

Benefits and
pension

No changes will be made to the structure of benefits and pensions for executive directors in 2021/22.

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.

As set out on the previous page, George Weston participates in an EFRBS.

STIP

For 2021/22 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.
The working capital modifier, has again been removed for 2021/22.

The balance between financial and personal performance measures remains unchanged.

Cash element as
a % of salary

Shares element as
a % of salary

Maximum
On-target (budget)
Threshold
Below threshold

Operating
profit (A)
130%
65%
12%
0%

Working
capital
(B)
x1
x1
x1
x1

Financial
element
(AxB)

Personal
element
(C)

Overall
cash
element
(AxB)+C
130% 20% 150%
65% 13.33% 78.33%
12%
0%
12%
0%
0%
0%

Operating
profit (A)
50%
25%
5%
0%

Working
capital
(B)
x1
x1
x1
x1

Total
(AxB)
50%
25%
5%
0%

The STIP shares will be granted in November 2021 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 2022 Remuneration Report.

LTIP

LTIP awards will be granted in November 2021. Vesting will be based on performance against the
following measures, as set out in our Remuneration Policy:

• adjusted earnings per share growth in the non-Sugar businesses;
• modifier for ROACE in the non-Sugar businesses averaged over the performance period; and
• further modifier for Sugar ROACE (with the book value of goodwill added to the denominator)

averaged over the performance period.

The performance ranges are set out on page 128.

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.

120

Associated British Foods plc Annual Report 2021

121

DIRECTORS’ REMUNERATION REPORT continued

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 direct 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 in the corporate governance section of our website at
www.abf.co.uk.

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

Heather Rabbatts

Chair

Member

Senior Independent Director

Independent Director

Chairman

Independent Director

2014

2015

2016

2017

2018

2021

5/5

2/2

George Weston (Chief Executive), Sue Whalley (Chief People and Performance Officer), and Julie Withnall (Group Director of
Reward) attend the meetings of the Committee. No individual is present when their own remuneration is considered.

Board review feedback on the Committee
The performance of the Remuneration Committee was considered in the external Board evaluation, which found that the
Committee was universally regarded as being strong and effective. The Committee was found to benefit from excellent
support, quality papers that are concise and clear, a forward agenda that is concise and useful, a practice of addressing issues at
an early stage, good external support and good knowledge of current developments and trends in the external market. The
general consensus from feedback given in the evaluation was that the Committee had navigated well through the various
challenges posed by difficult COVID-related issues.

Directors’ Remuneration Policy

The Company’s Remuneration Policy was approved by shareholders on 6 December 2019. It is available in the corporate
governance section of our website at www.abf.co.uk.

Single total figure of remuneration for executive directors (audited)

Fixed pay

Salary2
Benefits3
Pension4,5

Variable pay

STIP (inc deferred shares)6,7
LTIP8,9

Single total figure

George Weston

2021
£000
1,0821
16
387
1,485
1,153
752
1,905
3,390

2020
£000
8131
16
309
1,138
–
–
–
1,138

John Bason
2021
£000
744
16
186
946
780
495
1,275
2,221

2020
£000
554
16
179
749
–
–
–
749

1 Salary paid is reduced for pension-related salary sacrifices. The benefit of these salary sacrifices is captured in the pension entitlements shown.
2 Salaries for 2020 reflect the temporary 50% reduction from April 2020 to the end of the financial year whilst salaries for 2021 reflect a 53rd week in the

financial year.
Includes benefits taken in cash in 2021 of £14,437 for George Weston and £14,437 for John Bason. Also includes benefits in kind in 2021 of £2,008 for
George Weston and £1,714 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.

4 While the nature of George Weston's pension benefits has not changed during the year, the pensions number for remuneration purposes has increased.

This year’s amount is higher than last year’s due to a reduction in CPI to 0.5% at the start of this year from 1.7% at the start of last year.
5 John Bason is paid a pension allowance of 25% of salary, which is reported in the pensions row on this table for clarity, although it is strictly a

taxable benefit.

6 The STIP value includes the cash and deferred share elements earned for performance in the year. For George Weston this comprises a cash element of

£872,000 and a deferred award value of £280,977. For John Bason this comprises a cash element of £594,864 and a deferred award value of £185,602. For
2020/21 the financial performance outcome was at 50% of maximum. These calculations are based on the salary rates for the executives of £1,090,000 for
George Weston and £734,400 for John Bason. The value disclosed for the deferred award is estimated using the average closing price over the last quarter
of the 2020/21 financial year of 2083.78p. This will be recalculated for the actual share price on the vesting date and disclosed in next year’s annual report.
None of the value shown for 2020/21 is attributable to share price appreciation. For 2019/20 the performance condition was not met.

7 The directors are also paid dividend equivalents in respect of STIP shares. These are not included in the single total figure as the amounts do not relate to

the periods being reported on. For George Weston this payment will be £13,779. For John Bason this payment will be £8,444.

8 On exercise of Remuneration Committee discretion, 40% of the shares under the LTIP for 2018–21 will vest on 19 November 2021. George Weston will
receive 34,642 shares plus a dividend equivalent payment of £29,740 and John Bason will receive 22,882 shares plus a dividend equivalent payment of
£18,226. As required by UK regulations, the vesting value under the LTIP for 2018-21 has been estimated using the average closing price over the last
quarter of the 2020/21 financial year of 2083.78p. This will be recalculated for the actual share price on the vesting date and disclosed in next year’s annual
report. None of the value shown for 2020/21 is attributable to share price appreciation.

9 The 2020 LTIP value is based on 2017–20 awards which lapsed in November 2020 as the performance measure was not met.

Pensions

In 2020/21 George Weston had an overall benefit promise of 1/45th of final pensionable earnings for each year of pensionable
service up to 5 April 2016 and 1/50th of final pensionable earnings for each year of pensionable service thereafter, subject to a
maximum of 2/3rds of final pay (basic salary during the last 12 months before retirement, plus if applicable, the average of the last
three years’ fluctuating earnings).

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. No alternative defined benefit
arrangements are available to any member who chooses to take their benefits early. His accrued pension at 18 September 2021
was £693,361 per annum.

As we have disclosed in the past and as set out on page 120, employees who were in our UK defined benefit pension scheme
when it closed to new members continue to accrue benefits under the scheme. George Weston’s EFRBS participation is
consistent with this approach. However the Committee will review George Weston’s pension provision as part of the executive
Remuneration Policy review.

In the period to 24 April 2019, John Bason had an overall benefit promise at age 62 of 2/3rds of final pay, less the value of retained
benefits from his previous employment. He opted out of the Associated British Foods Pension Scheme on 5 April 2006 and
subsequently drew his benefits in the scheme; the balance of the promise was provided under an EFRBS. His pension benefits
were payable from age 62 and have been settled.

Since then, he has been in receipt of a cash supplement of 25% of salary in lieu of pension contributions. This approach was
significantly more cost effective for the Company than extending the previous arrangements 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 cash supplement in lieu of pension contributions will reduce to 10% of salary, in line with the UK
workforce, by the end of 2022.

122

Associated British Foods plc Annual Report 2021

123

DIRECTORS’ REMUNERATION REPORT continued

2020/21 STIP – achievement against financial targets

At the start of 2020/21, when the Committee was setting the STIP performance range, there was great uncertainty about the likely
impact of COVID-19 on Primark’s trading in the coming year. In developing the STIP profit targets, our Food businesses were
treated in the usual way, but for Primark we wanted to take account of the potential for some store closures to occur. We
developed a mechanism so that the Primark part of the adjusted operating profit target would reflect the estimated impacts of any
closures that occurred in practice. We considered this to be a more robust approach than making arbitrary assumptions about the
potential level of closures, which was clearly impossible to predict.

Once the status of each store (open or closed) is known for each day, it is straightforward to calculate the corresponding operating
profit target under the mechanism. However, there are a vast number of potential outcomes. The table below provides a selection
of scenarios to illustrate how the mechanism was expected to work. This includes the operating profit required to achieve a
maximum payout in the case of no store closures through the year (deemed highly unlikely); the level required to achieve
maximum given the actual level of store closures in Period 2; the same for the actual closures in Period 3; and finally, the impact of
the full year level of closures.

Profit if all stores had
been open all year
£m

Period1
Period 2
1,364 Period 3
Full year

% of store
days lost
in period
14%
53%
35%

Impact on profit of
store closures
£m
(29)
(116)
(642)

Maximum profit
using mechanism
£m
1,335
1,248
722

Actual profit performance
£m

1,011

1 ABF reports internally based on 13 periods, each of four weeks.

When the mechanism was set, the expectation was that store closures in the year would most likely be on a local and fairly
short-lived basis. In practice, the number and duration of closures greatly exceeded that expectation. A consequence, not foreseen
in the mechanism, was that when stores were open the sales that we did have were concentrated into fewer trading days,
resulting in higher profitability than the mechanism anticipated. Thus, at high levels of store closures, the mechanism did not work
as we had intended. As shown above, after a year when 35% of the trading days were lost, the actual profit performance was
significantly ahead of the calculated maximum.

Our Food businesses delivered a very strong financial performance in 2020/21. All divisions were ahead of budget. At constant
currency the combined adjusted operating profit for our Food businesses was 10% ahead of the 2020 financial year, which in turn
was 26% ahead of 2018/19. We have also seen strong strategic progress this year across the portfolio including continuous
improvement programmes in Illovo, delivering strong commercial outcomes and exceptional profit levels, while Agriculture has
been reshaping its business for the future.

Management and the Committee did not think it appropriate for the STIP to be paid at maximum. The financial element of the STIP
will be paid at an on-target level in Primark rather than using the calculated maximum outturn. While the STIP financial outcome in
our Food businesses in aggregate is ahead of target, on balance the Committee has determined that an on-target payment is
appropriate for the financial performance element of the STIP for those measured on Group performance, including the executive
directors. Accordingly, the Committee exercised downwards discretion to reduce payments on the STIP financial element.

2020/21 STIP – personal performance

Business
performance

Divisional
financial and
operational
objectives

George Weston – outcome 15/20

John Bason – outcome 16/20

• Excellent cash and balance sheet management to deliver £1.9bn of net cash excluding

lease liabilities at the end of the year despite ongoing COVID-19 uncertainty and
store closures.

• Reopening of the Vivergo bioethanol plant to support the UK Government’s E10 agenda.
• AB Mauri’s joint venture with Wilmar in China now up and running and delivering to plan.
• Excellent management of Primark store reopenings and closures. UK market share was
retained; data for the clothing, footwear and accessories markets for the 12 weeks from
31 May to 22 August showed that Primark had the same value share of the total market
compared to the same period two years ago.

Development
and delivery
of strategies

• Dividend payments have been

resumed following a period of very
strong cash management

Business
health

People and
organisation

Developing
long-term
business
health

• Work underway on significant investment
projects in China, Australia, India, USA
and Europe across the Food businesses
to support growth, business
improvement and the ESG agenda

• High investment-grade rating achieved to

support any future financing strategy
• Completion of a number of acquisitions

in the Ingredients and Agriculture divisions
to strengthen propositions and
emerging businesses

• Extensive communication and

• Onboarding of new Group Financial

engagement with leadership teams and
small groups of colleagues throughout
the Group to provide context and support
during COVID-19

• New structures and ways of working in
place to support ESG agenda, including
the establishment of a new Corporate
Responsibility Hub

• Increased profile of diversity, equity and

inclusion initiatives in all businesses
underpinned by enhanced strategies and
plans. Expansion of Women in ABF
across the Americas

• Enhanced dialogues with businesses on
how employee engagement processes
and resulting actions are progressing
• Progress on safety continues with lost

time injuries now seven times lower than
in 2005

Controller

• New finance development programme in
place across the Group against refreshed
vision and priorities for finance talent

• Diversity, equity and inclusion has become a

key factor for all Group-led finance
development work with equal
gender representation in the new
finance programme

• Work to prepare for Brexit was rewarded
with no surprises and a relatively smooth
transition. We continue working to influence
the post-Brexit agenda.

• Significant preparatory work to put the

Group in a strong position for the first year
of TCFD reporting in 2021/22, with
extensive research on scenario impacts
across the Group and development of
approaches to measurement

124

Associated British Foods plc Annual Report 2021

125

DIRECTORS’ REMUNERATION REPORT continued

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 18 September 2021. 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.

George Weston LTIP

Scheme

John Bason

LTIP

Award
date
19/11/18
09/12/19
20/11/202
19/11/18
09/12/19
20/11/202

Maximum award

% of
salary
200%
200%
200%
200%
200%
200%

Face value
at grant
£000
2,180
2,180
2,180
1,440
1,440
1,440

Market
price at
grant1
2517.2p
2507.4p
2020.9p
2517.2p
2507.4p
2020.9p

End of
performance

period Maximum
86,604
86,943
107,873
57,206
57,430
71,255

18/09/21
17/09/22
16/09/23
18/09/21
17/09/22
16/09/23

Shares vesting
Target
(50% of
maximum)
43,302
43,473
53,937
28,603
28,715
35,628

Threshold
(10% of
maximum)

Release
date
8,660 19/11/21
8,694 21/11/22
10,787 20/11/23
5,721 19/11/21
5,743 21/11/22
7,126 20/11/23

1 The share price used to determine the number of shares allocated is the average closing price on the five trading days immediately preceding the award
2 The performance range for this award is set out on page 128

STIP – shares
The value of deferred STIP shares released is determined based on the achievement of the STIP performance conditions.

Scheme

Award date

% of
salary

Face value
at grant
£000

Market
price at
grant1

End of
performance
period

Maximum
shares

Shares
lapsed for
performance

Shares
subject to
service
condition

Release
date

Maximum award

Deferred awards

George Weston Deferred

awards

John Bason

Deferred
awards

19/11/18
09/12/19
20/11/20

50%
50%
50%

545
545
545

360
360
360

2517.2p
2507.4p
2020.9p

14/09/19
12/09/20
18/09/21

2517.2p
2507.4p
2020.9p

14/09/19
12/09/20
18/09/21

21,651
21,736
26,968

14,302
14,358
17,814

5,601
21,736
13,484

3,700
14,358
8,907

16,050 19/11/21
– 21/11/22
13,484 20/11/23

10,602 19/11/21
– 21/11/22
8,907 20/11/23

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.

LTIP 2018–21

The table below shows details of the targets set (adjusted for the impact of IFRS 16) and performance achieved.

Threshold

Target

Maximum

Performance

Calculated
outcome

Discretionary
outcome

40% of award

60% of award

Group adjusted earnings per
share
ROACE downward modifier

Group adjusted earnings per
share in the non-Sugar
businesses
ROACE downward modifier

Vesting as % of maximum

154p
167p
10% 11%

181p
12%

80.1p
9.88%

147p
159p
10% 11%

173p
12%

72.1p
10.30%

0%
n/a
0%

0%
n/a
0%
0%

40%

The default position would be that no shares vest. However, as explained in the Committee Chair’s letter on page 117, we
considered at the start of 2020/21 the possibility of applying the Committee’s discretion to allow a part of the award to vest. We
capped any such discretionary vesting at 60% of the allocated shares and defined a framework to inform our potential application
of discretion. The framework was shared with executives at the start of 2020/21. At the end of the year, we assessed performance
and progress against the framework we had set and decided, for the reasons set out below, that 40% of the allocated shares
should vest. This outcome was informed by the framework but not calculated mechanically and the final decision was based on the
Committee’s judgement, recognising that this approach lies outside normal practice. However, we believe that exceptional
performance in exceptional circumstances merits an exceptional approach.

Performance taken into account

Immediate actions to preserve and deliver value for our shareholders
The actions listed here, taken in 2019/20 but continued in 2020/21, were a filtering factor to determine whether the application of
discretion was appropriate.

• Fast and decisive management action in 2019/20 reduced the impact of cash outflows from Primark closures, requiring careful
work with suppliers and partners. Preparing for reopenings was equally challenging and this cycle was repeated in 2020/21.
• Cash needed to be conserved in the Food businesses even as many were under extreme pressure to produce higher volumes

while investing in PPE and equipment to ensure all our factories were safe places for our people to work.

• Overall careful management of cash led to a healthy closing cash balance of £1.6bn in September 2020 and £1.9bn in September
2021, enabling continued progress and investment in growth across the businesses as well as payment of a special dividend to
be paid on 14 January 2022.

Performance across the portfolio – strengthening and developing the business
This assessment provided the main input to the Committee’s determination of an appropriate quantum for vesting. The
performance elements were determined and shared with the senior executives at the start of this financial year.

Performance
element

Food
excluding
Sugar

Sugar

Performance context and outcome

The Food businesses have delivered average annual growth of 5% over the past 15 years,
founded on selective and well-executed acquisitions, strengthening market positions and
sustaining key brands.

This trajectory has continued over the LTIP performance period. Average annual growth in Food
profitability excluding Sugar was affected by the recent impacts of commodity price inflation,
especially in corn oil, but still reached compound annual growth of 4.5% over the last three
years, in line with its expected contribution to groupwide LTIP targets. Examples of strategic
progress include:

• the successful integration and nurturing of Acetum, Anthony’s Goods and Yumi’s;

• implementation of successful wellness branding in Twinings and revised brand positioning in

Ovaltine’s key markets; and

• progress in delivering an extensive series of investment opportunities to drive future growth in

the Foods businesses.

The critical objective for Sugar has been to achieve above cost-of-capital returns over the cycle,
following the disruption caused by deregulation in Europe. The outcome in 2020/21 was 9.5% on
a comparable basis to the target set for the year of 7.5%. There has been significant progress
compared with a return of below 2% in 2018/19 (on an IFRS 16 pro forma basis), driven over the
period by actions to maintain cost competitiveness particularly in British Sugar, the adoption of
cost-improving initiatives in Illovo, and in the past year work on route to market and pricing
strategy in Africa that have delivered higher sales and an improved sales mix. We assess this
progress as ahead of our expectations, and the impairments this year in Azucarera and elsewhere
as necessary steps to recognise and address structural long-term challenges. The return of 9.5%
includes the book value of goodwill, which we include for remuneration purposes only, and
reverses the impact of impairments out of the capital employed, which reduces ROACE for
remuneration purposes. The reported ROACE of 10.2% excludes impairments in the
denominator.

Outcome

Around
target

Exceeds

Primark

With enforced store closures, Primark could not deliver the performance anticipated in the Group
LTIP targets, which assumed a Primark operating profit of more than £1bn compared to the
£321m achieved. This outcome was seen as very creditable in the circumstances, but Primark’s
performance has been assessed against a mix of operational, financial and strategic measures:

Around
target

• Primark like-for-like sales compared with 2018/19 were 85% in the first half and 91% in the

second half, against a target set for the year of 85% (reflecting some ongoing restrictions and
the impacts of COVID-19 on footfall and customers’ buying behaviour).

• Primark second half margins before repayment of job retention scheme monies were above

10%, against a target of 9%, achieved through great attention to detail in managing the
shopping experience, the offer and inventory levels.

• 15 new stores opened in the year, with successful store re-sizing and improved in-store experience

in the US. We were able to initiate moving ahead with a substantial US expansion plan.

• We have accelerated investment in a new and improved customer-facing website to respond to

changing customer behaviours and needs resulting from COVID-19. The new website will
showcase much more of the Primark range and provide customers with information on ranges
by store. We are also improving the underlying business through a programme of warehouse
automation that is progressing well, and through the implementation of the Oracle programme
across the whole supply chain.

126

Associated British Foods plc Annual Report 2021

127

DIRECTORS’ REMUNERATION REPORT continued

Performance
element

ESG

Performance context and outcome

Primark Cares was launched successfully. This is a new holistic positioning that communicates
Primark’s ESG ambition related to the products we sell, reducing our carbon impact and improving
the lives of people in our supply chain. Notable elements include an increased proportion of items
made from sustainable, organic and recycled materials, a reduction in plastic and a commitment
to reduce significantly greenhouse gas emissions in our supply chain. The launch included
extensive implementation plans and proof points.

ESG progress was supported by two ESG days for investors. The first outlined our Group-level
approach and how this fits with our operating model, and showcased the breadth and depth of
ESG activity underway across the Group. The second communicated our launch of Primark Cares.

Outcome
(of reduced
maximum)

Exceeds

Interests of our wider stakeholders
These actions were also primarily intended as a filter to assess whether application of discretion would be appropriate.

• Our people – we rapidly established and maintained safe working conditions, supporting physical and mental health. We have not

instigated redundancy programmes related to the pandemic and are creating new jobs as we open new Primark stores.

• Our shareholders – we have resumed dividend payments.
• Our customers – by keeping our factories running we played a critical role in keeping food supply chains operating.
• Governments – we were one of the first companies to decide not to use the UK Job Retention Bonus. All job retention scheme

monies received this year have been repaid wherever possible.

• Suppliers – we have engaged to provide financial support to suppliers as we reinstated orders and deliveries step-by-step.

LTIP – 2020/21 awards (vesting in 2023) and 2021/22 awards (vesting in 2024)

The performance ranges for the 2020-23 LTIP are below:

Shares vesting as % of award
Modifier
Performance range

Group adjusted earnings per
share without Sugar in 2022/23

Threshold
10%

Target
50%

Maximum
100%

125p

132p

142p

Modifier – Group ROACE without
Sugar over four years
Threshold

Maximum

Modifier – Sugar ROACE
over four years

Threshold

Maximum

80%
10%

100%
12%

80%
5%

100%
8%

Executive directors’ shareholding requirements (audited information)
The interests below as at 18 September 2021 remained the same at 5 November 2021. Both directors have met our shareholding
requirement.

Holding requirement

Beneficial

Beneficial
as % of
salary1

LTIP awards
subject to
performance
condition

Unvested
deferred
awards

Total 18
September
2021

Total 12
September
2020

George Weston2
Wittington Investments Limited,
ordinary shares of 50p
Associated British Foods plc,
ordinary shares of 515/22p
John Bason
Associated British Foods plc,
ordinary shares of 515/22p

n/a

6,328

n/a

6,328

5,940

250% of salary

3,768,790

6,537% 281,420

70,355 4,120,565 3,950,264

250% of salary

187,550

483% 185,891

46,474

419,915

383,717

1 Calculated using share price as at close of business on 17 September 2021 of 1890p and base salary as at 18 September 2021.
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 18 September 2021.

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 2021
£425,000
£21,000
£23,500
£23,500
£19,000
£76,000

Fees effective
1 Dec 2020
£410,000
£21,000
£23,500
£23,500
£19,000
£74,000

Fees were reviewed during 2021 and it was determined that the fee for the Chairman should be increased to £425,000 and for the
non-executive directors should be increased by £2,000. The Chairman’s fee had not been increased since his appointment as
Chairman in 2018.

The performance ranges for the 2021-24 LTIP are below:

Non-executive directors’ remuneration (audited information)

Shares vesting as % of award
Modifier
Performance range

Group adjusted earnings per
share without Sugar in 2023/24

Threshold
10%

Target
50%

Maximum
100%

132p

142p

152p

Modifier – Group ROACE without
Sugar over five years
Threshold

Maximum

Modifier – Sugar ROACE
over five years

Threshold

Maximum

80%
10%

100%
12%

80%
5%

100%
9%

The adjusted earnings per share performance ranges above are intended to be stretching. The Committee conducted an analysis of
the growth potential and challenges facing each of the divisions over the performance period. These ranges were tested to ensure
they were sufficiently stretching.

The Group ROACE without Sugar modifiers are set at a level intended to guard against poor investment decisions. It is not set at a
level that is intended to drive growth in returns and acts only as a downward modifier to the calculated incentive outcomes.

The Sugar return range is measured over four years for the 2020/21 award and increases to five years for the 2021/22 award to
capture highs and lows in world sugar prices. This modifier acts only as a downward modifier to incentive outcomes. The Sugar
performance for incentive payments will have the impairments taken in 2020/21 added back into the denominator to ensure that
there is no unintended benefit for executives from taking these write downs.

Michael McLintock
Ruth Cairnie
Richard Reid
Emma Adamo
Wolfhart Hauser
Graham Allan
Heather Rabbatts1

Fees

2021
£000
417
120
145
75
75
75
41

20202
£000
362
102
102
65
65
65
–

Fixed pay
2021
£000
417
120
145
75
75
75
41

2020
£000
362
102
102
65
65
65
–

Variable pay
2021
£000
–
–
–
–
–
–
–

2020
£000
–
–
–
–
–
–
–

Single total figure of
remuneration
2020
£000
362
102
102
65
65
65
–

2021
£000
417
120
145
75
75
75
41

1 Heather Rabbatts joined the Board on 1 March 2021.
2 Fees were temporarily reduced by 25% from 1 April 2020 to the end of the 2020 financial year due to the impact of COVID-19.

128

Associated British Foods plc Annual Report 2021

129

DIRECTORS’ REMUNERATION REPORT continued

Non-executive directors’ shareholdings and share interests (audited information)

Directors’ pay in the context of the Group’s wider pay practices

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 remained the same at 9 November 2021.

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.

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
Heather Rabbatts

Total

18 September 2021
24,000
5,223
3,347

12 September 2020
15,000
5,223
3,347

2021 total holding as
% of annual fee2
111%
83%
45%

1,322
504,465
3,918
6,000
–

n/a
12,884%
100%
153%
0%

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 18 September 2021.

2 Calculated using share price as at close of business on 17 September 2021 of 1890p and fee rate as at 18 September 2021.

Directors’ service contracts

Executive directors
George Weston
John Bason
Non-executive directors
Michael McLintock
Emma Adamo
Ruth Cairnie
Wolfhart Hauser
Richard Reid
Graham Allan
Heather Rabbatts

Date of
appointment

19/04/99
04/05/99

01/11/17
09/12/11
01/05/14
14/01/15
14/04/16
05/09/18
01/03/21

Date of current
contract/letter of
appointment

01/06/05
19/08/19

11/04/18
09/12/11
11/04/18
14/01/15
13/04/16
05/09/18
16/02/21

Notice from
Company

Notice from
individual

Unexpired period of
service contract

12 months
12 months

12 months Rolling contract
12 months Rolling contract

6 months
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
6 months Rolling contract

Copies of service contracts are available for inspection at the Company’s head office.

Fair pay

Associated British Foods is a diversified business that currently operates in 53 countries and employs 128,000 people working
across our five business segments. Our people are central to our business and we pride ourselves on being a first-class employer.

As an international business we have a duty to operate responsibly and want to ensure that the people who work in our businesses
are paid fairly. We support the work of governments to ensure that minimum wages are sufficient to allow employees to have an
acceptable standard of living. Our businesses, each of which is responsible for setting and managing its own remuneration
approach, operate in line with the principles set out below and in compliance with all local laws.

Pay should be appropriate and market-competitive
• Appropriate for the employee’s role, experience and skills.
• Local market conditions (industry/location/cost of living) should be considered when setting pay levels.

Pay should be free from discrimination
• Pay should not be impacted by an individual’s age, gender, sexual orientation, ethnicity or other characteristics.

Pay should be intuitive and explainable
• Fixed pay will meet or exceed all legal minimum standards and appropriate industry standards (such as collective bargaining

agreements).

• The business should be able to explain how employees’ pay has been calculated so that it is easy to understand.
• Employees should always receive compensation regularly, in full and on time.

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. Through this mechanism, as well as by
talking to their HR colleagues, works councils and unions, employees can also feed back their views on executive remuneration.

Our 2021 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 can be found
on page 102.

The table below summarises the remuneration structure for the wider workforce:

Below the Board

Salary

Salary increase budgets are determined by each of the businesses for each
country, taking into account country-specific conditions such as inflation. Salary
increases are then determined by line managers based on factors such as
development in role and local market practice. Salaries are benchmarked against
the wider market to ensure that we are able to recruit and retain talented people.

We review the ratio of the Chief Executive’s pay to that of our UK employees in
the next section of this Remuneration Report.

STIP

In our decentralised model the approach to incentives varies by division. This is
consistent with our line of sight approach and ensures that the design is
appropriate for the strategy of each business and takes account of local market
practice.

There is a common governance framework, with central oversight, for signing off
all changes to incentive design to ensure that risks are mitigated and cultural
considerations are appropriately taken into account.

The key performance measures of adjusted operating profit, working capital and
personal performance are commonly used across the Group. Where appropriate,
other measures, including ESG goals, are used to drive focus on strategic
imperatives.

As employees progress and are promoted, their target and maximum bonus
increase.

Executive directors

Salary increases are normally
aligned with those of the wider
workforce.

Consistent with the wider
workforce, salaries are also set
competitively against peers in
support of the recruitment and
retention of executive directors.

The STIP for executive directors
is primarily based on the
financial performance of the
Company.

STIP share awards are made for
25% of the total STIP payment
and are deferred for a further
two years after the performance
condition has been met.

LTIP

We make share-based LTIP awards to around 170 of our most senior managers
across the Group to support the remuneration philosophy of incentivising superior
long-term business results and shareholder value creation.

The performance measures for around a third of participants are aligned fully or
partially to those of the executive directors. For other participants, the appropriate
measures are agreed with the individual business.

We also operate a cash LTIP in some regions and divisions to ensure long-term
incentivisation for a wider population of senior managers.

All of our LTIPs have a performance period of at least three years with some being
up to five years. Awards are made as a percentage of base salary.

Pension A pension/provident fund is offered to our employees in line with local market

requirements and practices, including, in some cases, defined benefit
arrangements. Exceptions to this are countries where pension provision is not
prevalent in the local market and/or is provided by the state.

In the UK, newly appointed employees and executives of all ABF companies are
entitled to receive a company pension contribution that matches their own
contribution to a maximum of 10% of salary. They are eligible to take some or all
of this as a cash alternative if subject to the lifetime or annual allowance.

In certain countries, including the UK and Ireland, longer-serving employees
continue to participate in and accrue benefits under defined benefit pension
schemes which are closed to new members.

Executive directors’ LTIP grants
are performance share awards,
granted by reference to a
percentage of salary. Awards
vest subject to achievement of
performance conditions.

In addition to the LTIP’s
three-year performance period,
executive directors are subject
to an additional two-year
holding period.

Newly appointed executive
directors are eligible to receive
a company pension contribution
of up to 10% of salary in line
with the wider workforce in the
UK. They are eligible to take
some or all of this as a cash
alternative if subject to the
lifetime or annual allowance.

Benefits In our decentralised model, we expect our businesses to ensure that core benefits

provided to employees in each country remain appropriate and local market
competitive. For example, in our African sugar businesses, outside South Africa,
we have onsite clinics/hospitals (dependent on country) available to our employees
and their families to ensure that they have access to healthcare. In other locations
such provision may be state provided or may be covered by insurances that we
offer as a benefit to employees.

Executive directors receive
benefits which consist primarily
of the provision of a company
car/allowance and healthcare.

In addition, executive directors
are eligible for benefits available
to the wider workforce.

130

Associated British Foods plc Annual Report 2021

131

DIRECTORS’ REMUNERATION REPORT continued

CEO Pay Ratio

Year
2020/21
2019/20
2018/19

Methodology used
Option B
Option B
Option B

Lower quartile
171:1
79:1
253:1

Median
155:1
70:1
238:1

Upper quartile
115:1
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
Group, this approach enables us to use existing gender pay data for Great Britain (GB) as a foundation for our calculations. We
determined the hourly rates at each quartile of our 5 April 2020 gender pay data 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 the lower quartile data point are Primark employees, at median they are from Primark and Allied Bakeries and at
upper quartile they are from nine of our businesses. This data is considered to be broadly representative of total remuneration
across our workforce in the UK. 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 skills
and experience.

The median ratio has increased since last year as George Weston’s salary was reduced for a significant part of 2019/20 and no
STIP or LTIP was earned for that year, whereas this year he will be paid an STIP and the LTIP will vest. Compared with 2018/19,
the pay ratio has decreased, reflecting increases in salaries for the workforce in this period and a lower level of incentive paid to
George Weston this year than in 2018/19. Whilst based on data for GB only, this year’s 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
£18,381
£19,775

Median
£19,384
£21,888

Upper quartile
£27,774
£29,422

Annual percentage change in remuneration of directors and employees

Executive directors
George Weston1
John Bason2
Non-executive directors
Average for non-executive directors
who do not chair Board Committees3
Michael McLintock4
Ruth Cairnie5
Richard Reid5
Average UK Associated
British Foods parent employee

2021
% change in
salary/fees

2021
% change in
benefits6

2021
% change in
cash STIP7

2020
% change in
salary/fees8

2020
% change in
benefits2

2020
% change in
cash STIP3

33.09%
34.30%

15.38%
15.19%
17.65%
42.16%

0%
0%

n/a
n/a
n/a
n/a

100%
100%

-23.52%
-21.19%

0%
-23.81%

-100%
-100%

n/a
n/a
n/a
n/a

-12.16%
-11.49%
-8.11%
-8.11%

n/a
n/a
n/a
n/a

4.7%

3.9%

167%

0.7%

2.90%

-63%

1 George Weston’s rate of salary did not increase between 2019/20 and 2020/21
2 John Bason’s rate of salary increased by 2.0% in line with other UK-based employees.
3 There has been no change to the base fee rate in this period.
4 There has been no change to the Chairman’s fee in this period.
5

In 2020 the Committee Chair fee increased and, in addition, Richard Reid took on additional responsiblities in the period, which is reflected in the numbers
above.

6 Benefits data is calculated on the same basis as the benefits data in the single figure table on page 123 and includes benefits in kind and benefits taken in

cash but excludes any pension allowances.
Includes cash STIP payments only and for 2019/20 reflects the fact that no payment was earned on financial performance measures and that for John
Bason and George Weston no personal STIP was paid.

8 Average data for 2019/20 includes data for individuals who had COVID-19 related salary reductions. George Weston and John Bason’s salaries were

reduced by 50% for nearly half of 2019/20. The Chairman and non-executive directors had their fees reduced by 25% for a significant portion of 2019/20.

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

Additional disclosures

2021
£m
2,639
211
298

2020
£m
2,505
–
254

Change

%
5%
100%
17%

Total Shareholder Return (TSR) performance and Chief Executive’s pay
The performance graph below illustrates the performance of the Company over the 10 years from September 2011 to September
2021, 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

0
0
1
£

a
c
i
t
e
h
t
o
p
y
h

f
o
e
u
a
V

ABF
£224
FTSE
£187

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

ABF

FTSE 100

Source: DataStream Return Index

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Single total
figure
remuneration
(£000)
Annual variable
element – STIP
(% of maximum)
Long-term
variable element
– LTIP
(% of maximum)

3,859

5,832

7,470

3,056

3,133

4,849

3,843

4,204

1,138

3,390

60.63% 83.15% 59.49% 44.46% 86.75% 97.47%1

50.34%1

73.37%1

0% 52.50%

97.42% 85.00%

100% 18.54%

0% 51.02%

100% 57.13%

0% 40.00%

1 STIP reflects the percentage of maximum before share price impacts.

132

Associated British Foods plc Annual Report 2021

133

DIRECTORS’ REMUNERATION REPORT continued

2019/20 STIP – achievement against financial targets

This table shows our required retrospective disclosure of financial targets for 2019/20. The STIP outcome was disclosed in last
year’s annual report.

2019/20 financial performance

Statement on shareholder voting

Resolution
Directors’ Remuneration Policy
Directors’ Remuneration Report

Date of AGM
December 2019
December 2020

Votes for
96.23%
99.00%

Votes against
3.77%
1.00%

Votes withheld
98,600
89,350

Cash element

Threshold

Target Maximum

Outcome
(% of
salary)

Outcome
(% of
maximum)

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)

Personal performance (as % of salary)

Total cash STIP

1,463
15%

1,543
1,623
65% 108.3%

1,024
0%

17.71% 16.55% 15.39% 14.62%
1.2

0.8

1.2

1.0

George Weston and
John Bason
George Weston and
John Bason

12%
9.23%

65%
50%

130%
100%

0% 13.3%

20%

12% 78.3%

150%

Shares element

0%
0%

100%

0%
0%

Total 2019-22 STIP shares (financial performance
only)

George Weston and
John Bason

25%

50%

2019/20 was a year unlike any other. As the pandemic struck and its likely impact became clearer, it was essential to assess the
impact of extensive store closures on the cash flows of the business. Prompt action needed to be taken to ensure access to
funding as needed through the various loan facilities available to us to ensure going concern status.

A set of actions then needed to be developed to preserve cash within Primark while not penalising suppliers. The executives
developed plans for managing stock into the business, recognising it would not be sold as planned, and worked with suppliers on
stock management, including setting up a supplier fund to support workers and providing commitments to taking autumn/winter
stock once cash positions and store reopenings became clearer.

Consistent with our values, government schemes were only used where absolutely necessary in Primark where stores were
closed, but not in the Food businesses despite some colleagues being asked to shield and not being able to work.

Actions were also taken to preserve cash in the Food businesses. Throughout, support was provided across our businesses to
protect the safety and wellbeing of our people. The executive and non-executive directors took salary cuts during the second half
of the financial year. All these actions contributed to the strong cash position at the end of the year of £1.6bn.

As a result of COVID-19, a number of actions in the original personal targets for the executives reduced in importance. However,
despite COVID-19, progress was made on a number of key fronts. A small number of acquisitions were made including of Larodan
to bring in polar lipids capability to the Ingredients group. Sugar returns improved as a result of restructuring and cost management
initiatives in both British Sugar and Illovo. Initiatives were established to improve Primark’s brand positioning in northern Europe.
On the people side, the new Chief People and Performance Officer was successfully onboarded and recruitment was completed
for a Group Financial Controller. The transition to IFRS 16 was well managed and additional capability established in the Group on
cybersecurity.

In spite of the above, no personal incentive payments were made as both executive directors waived any payment.

Payments to past directors and payments for loss of office (audited information)
No payments were made in the year.

Remuneration Committee advisers and fees
Following a competitive tender the Committee appointed Deloitte LLP (Deloitte) in March 2020 to provide independent advice to
the Committee. Deloitte are members of the Remuneration Consultants Group and 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.

During the year, the other services that Deloitte provided to 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 £71,975.

Herbert Smith Freehills LLP provide the Company with legal advice. Their advice 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

9 November 2021

134

Associated British Foods plc Annual Report 2021

135

Directors’ Report

The directors of
Associated British
Foods plc present their
report for the 53 weeks
ended 18 September
2021, 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.

require all directors to retire and seek
re-election at each AGM in line with the
2018 Code. Details of unexpired terms of
directors’ service contracts are set out in
the Directors’ Remuneration Report on
page 130.

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
The directors of a subsidiary company
that acts as trustee of a pension scheme
benefitted 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
Directors’ Remuneration Report on pages
126, 129 and 130.

The information set out on page 139 and
the following cross-referenced material,
is incorporated into this Directors’ Report:

• likely future developments in the

Group’s business (pages 22 to 61);
• greenhouse gas emissions and energy

consumption (pages 78 to 79);

• the Board of Directors (pages 98 to 99);
• information on our employees (pages

80 to 84);

• 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 65 to 71, 80 to 84,
102 and 105);

• 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 65 to
71 and 72 to 85); and

• the Corporate Governance Report

(pages 96 to 135).

Results and dividends
The consolidated income statement is on
page 150. Profit for the financial year
attributable to equity shareholders
amounted to £478m.

The directors recommend a final dividend
of 20.5p per ordinary share to be paid,
subject to shareholder approval, on 14
January 2022. Together with the interim
dividend of 6.2p per share paid on 9 July
2021, this amounts to 26.7p for the year.
The directors have also declared a special
interim dividend of 13.8p per share also
to be paid on 14 January 2022, which is
not subject to shareholder approval. See
page 169 for the note on dividends.

Directors
The names of the persons who were
directors of the Company during the
financial year and as at 5 November 2021
appear on pages 98 to 99.

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

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.

Information
required

Location in
annual report

Note 24 on pages
184 and 185

Directors’ Report
on page 137
(below)

(12) Shareholder
waiver of
dividends

(13) Shareholder
waiver of future
dividends

(14) Board
statement on
relationship
agreement with
controlling
shareholder

Paragraphs (1), (2), (4), (5), (6), (7), (8), (9), (10)
and (11) of Listing Rule 9.8.4R are not
applicable.

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 18 September
2021, had a combined interest in
approximately 58.3% 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
18 September 2021. As at 5 November
2021, 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 18 September
2021, had a combined interest in

approximately 58.3% of the voting rights
in the Company’s ordinary shares are set
out above.

The Company is a premium listed
company on the London Stock Exchange
and, under the Listing Rules, is required
to carry on an independent business as
its main activity. This requirement is
reinforced by the existence of the
Relationship Agreement as described in
more detail in the previous column.

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
183. The Company has one class of share
capital: ordinary shares of 5 15/22p. 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 4 December
2020, 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 10 December 2021. No such
shares have been issued.

The directors propose to renew this
authority at the 2021 AGM for the
forthcoming year. A further special
resolution passed at the 2020 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 2021 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.

136

Associated British Foods plc Annual Report 2021

137

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 10 December
2021 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

9 November 2021

Associated British Foods plc
Registered office:
Weston Centre
10 Grosvenor Street
London W1K 4QY

Company No. 293262

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.

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 is a £1.1bn syndicated loan
facility, last extended 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;

• £297m (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.

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.

Political donations
During the year, the Company did not
make any political donations nor incur any
political expenditure.

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 starting on page 186.

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 (including
the new Global Technology Centre
opened in the Netherlands in March
2021), AB Enzymes in Germany and the
new pilot plant in Rajamäki, Finland
opened in early 2021 by our joint venture,
Roal. 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.

Disclosure of information to
auditor
Each of the directors who held office at
the date of approval of this Directors’
Report confirms that:

• 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

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 140 to 149.

Statement of directors’ responsibilities

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.

Responsibility statement of the
directors in respect of the annual
report
We confirm that to the best of our
knowledge:

• 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

9 November 2021

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 Adopted IFRS and have
elected to prepare the parent company
financial statements in accordance with
UK Accounting Standards, including
FRS 101.

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 Adopted IFRS;

• for the parent company financial

statements, state whether applicable
UK Accounting Standards have been
followed, subject to any material
departures disclosed and explained in
the parent company financial
statements; and

• prepare the financial statements on the

going concern basis unless it is
inappropriate to presume that the
Group and the parent company will
continue in business.

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

138

Associated British Foods plc Annual Report 2021

139

INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report to the members
of Associated British Foods plc

Opinion
In our opinion:

• Associated British Foods plc’s Group

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 18
September 2021 and of the Group’s
profit for the 53 weeks then ended;
• the Group financial statements have

been properly prepared in accordance
with International Accounting Standards
in conformity with the requirements of
the Companies Act 2006 and
International Financial Reporting
Standards adopted pursuant to
Regulation (EC) No. 1606/2002 as it
applies in the European Union;

• 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.

We have audited the financial statements
of Associated British Foods plc (the
‘parent company’) and its subsidiaries
(the ‘Group’) for the 53 weeks ended 18
September 2021 which comprise:

Group

Parent company

Consolidated
balance sheet as at
18 September 2021

Balance sheet as at
18 September 2021

Consolidated
income statement
for the 53 weeks
then ended

Statement of
changes in equity
for the 53 weeks
then ended

Consolidated
statement of
comprehensive
income for the 53
weeks then ended

Related notes 1 to
11 to the financial
statements,
including significant
accounting policies

Consolidated
statement of
changes in equity
for the 53 weeks
then ended

Consolidated cash
flow statement for
the 53 weeks then
ended

Related notes 1 to
30 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 International
Accounting Standards in conformity with
the requirements of the Companies Act
2006 and International Financial
Reporting Standards adopted pursuant to
Regulation (EC) No. 1606/2002 as it
applies in the European Union. 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 going
concern
In auditing the financial statements, we
have concluded that the directors’ use of
the going concern basis of accounting in
the preparation of the financial
statements is appropriate. Our evaluation
of the directors’ assessment of the
Group and parent company’s ability to
continue to adopt the going concern
basis of accounting included:

• Challenging the detailed assumptions

underpinning the Group’s forecasts for
the going concern period until February
2023, in particular around sales in
Primark, given the uncertainties arising
from COVID-19 and the Group’s
experience since stores reopened. 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.

• Understanding 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.

• Considering the downside scenario
identified by management in their
assessment on page 95, assessing
whether there are any other scenarios
which should be considered, and
assessing whether the quantum of the
impact of the downside scenario in the
going concern period was sufficiently
severe whilst remaining plausible;
• Testing the clerical accuracy of the
model used to prepare the Group’s
going concern assessment.

• Performing a reverse stress test to

establish the reduction in revenue and
the related impact on the cash flows
that could lead either to a loss of
liquidity or a covenant breach and

considering whether this scenario was
plausible.

• Obtaining evidence to support the

availability of financing outside of the
going concern period after the
expiration of the group’s revolving
credit facility in July 2023.

• Assessing 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.

Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the Group
and parent company’s ability to continue
as a going concern until the end of
February 2023.

In relation to the Group and parent
company’s reporting on how they have
applied the UK Corporate Governance
Code, we have nothing material to add or
draw attention to in relation to the
directors’ statement in the financial
statements about whether the directors
considered it appropriate to adopt the
going concern basis of accounting.

Our responsibilities and the
responsibilities of the directors with
respect to going concern are described in
the relevant sections of this report.
However, because not all future events
or conditions can be predicted, this
statement is not a guarantee as to the
Group’s and parent company’s ability to
continue as a going concern.

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
company 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 adjusted profit
before taxation, risk profile (including
country risk, controls and internal audit

Overview of our audit approach
Audit scope – We performed an audit of the complete financial information of 104
components and audit procedures on specific balances for a further
27 components.

– The components where we performed full or specific audit

procedures accounted for 85% of adjusted profit before taxation,
85% of revenue and 86% of total assets.

Key audit
matters

– Assessment of the carrying value of goodwill, other intangible
assets, property, plant and equipment and right of use assets

– Tax provisions
– Primark inventory valuation provisions
– Revenue recognition, including the risk of management override

Materiality

– We used a Group materiality of £39 million, which represents 4%

of adjusted profit before taxation

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 Group financial
statements, and to ensure we had
adequate quantitative coverage of
significant accounts in the financial
statements, of the 693 reporting
components of the Group, we selected
131 components, which represent the
principal business units within the Group.

Of the 131 components selected, we
performed an audit of the complete
financial information of 104 components
(‘full scope components’), which were
selected based on their size or risk
characteristics. For the remaining 27
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 audit procedures accounted
for 85% of the Group’s adjusted profit
before taxation (2020: 83% of profit
before tax), 85% of the Group’s revenue
(2020: 86%) and 86% of the Group’s

total assets (2020: 86%). For the current
period, the full scope components
contributed 74% of the Group’s adjusted
profit before taxation (2020: 78% of profit
before tax), 80% of the Group’s revenue
(2020: 80%) and 82% of the Group’s
total assets (2020: 82%). The specific
scope components contributed 11% of
the Group’s adjusted profit before
taxation (2020: 5% of profit before tax),
5% of the Group’s revenue (2020: 6%)
and 4% of the Group’s total assets (2020:
4%). 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 562 components that
together represent 15% of the Group’s
adjusted profit before taxation, none are
individually greater than 1% of the
Group’s adjusted 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 Group
financial statements.

The charts illustrate the coverage
obtained from the work performed by our
audit teams.

Adjusted Proﬁt before taxation

Revenue

Total assets

Full scope
components
74%
Speciﬁc scope
components
11%

Other
procedures
15%

Full scope
components
80%
Speciﬁc scope
components
5%

Other
procedures
15%

Full scope
components
82%
Speciﬁc scope
components
4%

Other
procedures
14%

140

Associated British Foods plc Annual Report 2021

141

INDEPENDENT AUDITOR’S REPORT continued

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
primary audit engagement team, or by
component auditors from other EY global
network firms under our instruction. Of
the 104 full scope components, audit
procedures were performed on 40 of
these directly by the Group audit team
and 64 by component audit teams. For
the 25 specific scope components,
where the work was performed by
component auditors, 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, we were
unable to physically visit component

teams due to the travel restrictions
arising from the COVID-19 pandemic. We
performed alternative oversight
procedures, including video meetings and
live reviews of our local audit teams’
working papers based on the risk and
size of our components. Our oversight
procedures focused on 49 full and
specific scope components in the UK,
Argentina, Australia, Brazil, China, Ireland,
Italy, Malawi, South Africa, Spain, the US
and Zambia.

These alternative procedures 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, 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 primary 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 Group
financial statements.

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.

Risk

Our response to the risk

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 but did not test the
operating effectiveness of them.
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;

Assessment of the carrying value of
goodwill, other intangible assets,
property, plant and equipment and right
of use assets (£9,516 million, 2020:
£10,270 million)
The Group has significant carrying amounts
of goodwill, other intangible assets,
property, plant and equipment and right of
use assets. The impaiment tests covered
the Primark stores (£5,408 million),
Azucarera (£248 million), China Sugar (£65
million), Allied Bakeries (£113 million),
Australian meat (£159 million) and AB Mauri
(£687 million) as these businesses all
operate in challenging trading
environments.
An impairment of £141m was recorded as
an exceptional item in the year.
In Primark, all 398 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 operate in response to
COVID-19.

Key observations
communicated to the
Audit Committee

We concluded that the
impairments recorded were
appropriately recognised
and were not materially
misstated.
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 Azucarera,
Australian meat and AB
Mauri remain 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

Key observations
communicated to the
Audit Committee

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.
There has been no significant change in this
overall risk during the period.
Refer to the audit committee report (page
113); accounting policies (page 158 to 159);
accounting estimates and judgement
(page 161) and notes 8,9 and 10 to the
consolidated financial statements (pages
170 to 174).

–

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 Allied Bakeries, where the recoverable amount
is based on fair value less costs of disposal,
considering the evidence available as to whether
the recoverable amount represents an appropriate
estimate of a market participant’s valuation of the
CGU;
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;

– validating the growth rates assumed by comparing
them to economic and industry forecasts; and
– considering contra evidence obtained during the

course of the audit.

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, Azucarera and China Sugar CGUs,
the audit procedures performed to address this risk
were performed by the Group audit team. The
Primark, Allied Bakeries and Australian meat CGUs
were subject to full scope audit procedures by the
respective component teams and reviewed by the
group team.

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Associated British Foods plc Annual Report 2021

143

Key observations
communicated to the
Audit Committee

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.

INDEPENDENT AUDITOR’S REPORT continued

Risk

Our response to the risk

Tax provisions (included within the
income tax liability of £172 million,
2020: £171 million)
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.
This risk is unchanged from the
prior year.

Refer to the audit committee report (page
114); accounting policies (page 157);
accounting estimates and judgement
(page 161); and note 5 to the
consolidated financial statements
(page168).

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, but

did not test the operating effectiveness of them.

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

We did not identify any
evidence of material
misstatement in the
inventory provisions or
associated disclosures
recognised in the
consolidated financial
statements.

Risk

Our response to the risk

We understood the methodology applied by the
Group in estimating its inventory provision and
walked through the controls over the provisioning
process, but did not test the operating effectiveness
of them.
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 inquiries of buying teams to
understand the inventory purchasing strategy to
critically evaluate against management’s
provisioning assumptions.
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.

Primark inventory valuation provisions
(inventory balances of £1,143 million,
2020: £1,104 million)
Inventories are recorded at the lower of
cost and net realisable value, in
accordance with the Group’s accounting
policy. The prolonged closure of Primark
stores for extended periods throughout
2021 due to COVID-19 lockdown
measures in many 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 products 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.
At the prior year end a mark-down
provision of £22 million was held for
inventory stored on the Group’s behalf by
suppliers for longer than usual as a result
of the pandemic. The majority of this
stock has been sold, and the provision
has been released. A further £5 million
was provided for other COVID-19
related items.
An inventory provision of £21million was
recorded in Primark at the half year,
which related to certain autumn/winter
seasonal items already on display in
stores closed due to COVID-19
lockdowns which could not be sold
before the end of the autumn winter
season. This inventory was cleared from
the stores to allow spring/summer stock
to be displayed as stores prepared to
reopen, and the provision has been fully
used during the financial year. With the
reopening of the stores and the level of
inventory held by Primark having returned
to a normal level the risk of overstated
inventory has reduced and no provision is
recorded at the year end.
The risk has decreased in the current year
due to the reopening of the Primark
stores.
Refer to the accounting policies (page
159) and note 16 to the consolidated
financial statement (page 180).

144

Associated British Foods plc Annual Report 2021

145

Key observations
communicated to the
Audit Committee

Based on the procedures
performed, including those
in respect of trade
promotions 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 continued

Risk

Our response to the risk

Revenue recognition, including the risk
of management override (£13,884
million, 2020: £13,937 million)
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% (2020:
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.
This risk is unchanged from the prior
year.
Refer to the accounting policies
(page 156) and note 1 to the consolidated
financial statement (pages 162 to 165).

We understood each business’s revenue
recognition policies and how they are applied,
including the relevant controls, we did not test the
operating effectiveness of these controls. 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 journals, and sample tested to cash receipts to
verify the occurrence of revenue. This provided us
with assurance over £11.0 billion (80%) (2020:
£11.0 billion (79%)) 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 other audit procedures specifically
designed to address the risk of management
override of controls including journal entry testing,
applying particular focus to manual journals.
We performed full and specific scope audit
procedures over this risk area in 82 locations, which
covered 85% of the Group’s revenue.
The audit procedures performed to address this risk
were performed by component teams and reviewed
by the Group team.

In the prior year, our auditor’s report
included a key audit matter in relation to
‘Going concern’, which warranted
additional focus in the prior period audit
as a result of the COVID-19 pandemic but
this risk has decreased as lockdown
measures have been eased by many
governments. In addition, the ‘Adoption
of IFRS 16 Leases’ was a key audit
matter in the prior period reflecting the
fact that the new leases standard was
adopted in the prior period.

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 £39 million (2020: £41 million),
which is 4% of adjusted profit before
taxation. In 2020 materiality was set at
5% of profit before taxation, adjusted for
the exceptional items of £139 million of
impairment charges and £22 million of
inventory provisions. We believe that
adjusted profit before tax provides us
with the most relevant performance
measure to the stakeholders of the entity
and therefore have determined
materiality based on this number.

We determined materiality for the parent
company to be £35 million (2020: £28
million), which is 2% (2020: 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% (2020: 75%) of our
planning materiality, namely £29 million
(2020: £31 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 (2020: £1 million to
£14 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 (2020: £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 139,
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.

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
themselves. 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.

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.

146

Associated British Foods plc Annual Report 2021

147

INDEPENDENT AUDITOR’S REPORT continued

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.

Corporate Governance
Statement
The Listing Rules require us to review
the directors’ statement in relation to
going concern, longer-term viability
and that part of the Corporate
Governance Statement relating to
the Group and company’s compliance
with the provisions of the UK
Corporate Governance Code specified
for our review.

Based on the work undertaken as part of
our audit, we have concluded that each
of the following elements of the
Corporate Governance Statement is
materially consistent with the financial
statements or our knowledge obtained
during the audit:

• Directors’ statement with regards to
the appropriateness of adopting the
going concern basis of accounting and
any material uncertainties identified set
out on page 95;

• Directors’ explanation as to its
assessment of the company’s
prospects, the period this assessment
covers and why the period is
appropriate set out on page 95;

• Directors’ statement on fair, balanced
and understandable set out on page
109;

• Board’s confirmation that it has carried

out a robust assessment of the
emerging and principal risks set out on

page 110;

• The section of the annual report that

describes the review of effectiveness
of risk management and internal control
systems set out on page 110; and;

• The section describing the work of the
audit committee set out on pages 111
to 116.

Responsibilities of directors
As explained more fully in the directors’
responsibilities statement, set out on
page 139, 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.

Explanation as to what extent
the audit was considered
capable of detecting
irregularities, including fraud
Irregularities, including fraud, are
instances of non-compliance with laws
and regulations. We design procedures in
line with our responsibilities, outlined
above, to detect irregularities, including
fraud. The risk of not detecting a material
misstatement due to fraud is higher than

the risk of not detecting one resulting
from error, as fraud may involve
deliberate concealment by, for example,
forgery or intentional misrepresentations,
or through collusion. The extent to which
our procedures are capable of detecting
irregularities, including fraud is detailed
below. 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 (International
Accounting Standards in conformity
with the requirements of the
Companies Act 2006 , 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 Associated British

Foods plc 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,

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.

Simon O’Neill (Senior Statutory
Auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor

Birmingham

9 November 2021

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 material
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 23
April 2021. We were appointed by the
company at the AGM on 4 December
2020 to audit the financial statements
for the 53 weeks ending 18 September
2021 and subsequent financial periods.
The period of total uninterrupted
engagement including previous
renewals and reappointments is six
years, from the 53 weeks ended 17
September 2016 until the 53 weeks
ended 18 September 2021.

• 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.

148

Associated British Foods plc Annual Report 2021

149

FINANCIAL STATEMENTS

Consolidated income statement

for the 53 weeks ended 18 September 2021

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 (expense)/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)
Special dividend per share proposed for the period (pence)

Note
1
2
2

8
2
2
2

4
4
4

8
2
2
2
23

7
6
6

2021
£m
13,884
(13,008)
(151)
725
79
4
808

1,011
4
(50)
(3)
(3)
(151)

2020
£m
13,937
(13,046)
(156)
735
57
18
810

1,024
18
(59)
(15)
(2)
(156)

20
828
9
(111)
(1)
725

908
4
(50)
(3)
(3)
(151)
20
(68)
3
(196)
34
(227)
498

478
20
498

60.5
26.7
13.8

(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
nil

Consolidated statement of comprehensive income

for the 53 weeks ended 18 September 2021

Profit for the period recognised in the income statement

Other comprehensive income

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
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
Items that are or may be subsequently reclassified to profit or loss

Other comprehensive income/(loss) for the period

Total comprehensive income for the period

Attributable to
Equity shareholders
Non-controlling interests
Total comprehensive income for the period

2021
£m
498

559
(144)
415

(355)
14
–
(6)
39
(14)
(10)
18
(314)

101

599

579
20
599

2020
£m
465

(89)
15
(74)

(97)
(3)
1
–
(15)
–
(1)
17
(98)

(172)

293

296
(3)
293

150

Associated British Foods plc Annual Report 2021

151

FINANCIAL STATEMENTS

Consolidated balance sheet

at 18 September 2021

Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments in joint ventures
Investments in associates
Employee benefits assets
Income tax
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
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
5
13
14

15
16
17
14
26
25

15
10
19
20
26

10
19
21
13
12

22
22
22
22

2021
£m

1,581
5,286
2,649
278
60
640
23
218
55
10,790

13
2,151
85
1,367
124
32
58
2,275
6,105
16,895

−
(289)
(330)
(2,386)
(34)
(172)
(71)
(3,282)

(2,992)
(76)
(31)
(363)
(147)
(3,609)
(6,891)
10,004

45
175
(34)
43
9,692
9,921
83
10,004

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

Consolidated cash flow statement

for the 53 weeks ended 18 September 2021

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 expense/(income)
Share of profit after tax from joint ventures and associates
Amortisation
Depreciation (including of right-of-use assets)
Impairment of property, plant and 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
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Purchases less sales of current biological assets
(Decrease)/increase in provisions
Cash generated from operations
Income taxes paid
Net cash generated from operating activities

Cash flow 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 used in investing activities

Cash flow 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 in long-term loans
Increase in current asset investments
Purchase of shares in subsidiary undertaking from non-controlling interests
Net cash used in 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

2021
£m

725
(4)
(20)
3
(9)
111
1
(79)
74
823
–
151
3
7
(12)
17
4
(120)
(98)
175
(1)
(40)
1,711
(298)
1,413

63
(551)
(76)
10
21
(57)
34
(14)
9
(561)

(4)
(49)
(116)
(290)
(10)
(18)
(2)
(23)
(512)

2020
£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)

340
1,909
(60)
2,189

557
1,358
(6)
1,909

The financial statements on pages 150 to 213 were approved by the Board of Directors on 9 November 2021 and were signed on
its behalf by:

Michael McLintock
Chairman

John Bason
Finance Director

152

Associated British Foods plc Annual Report 2021

153

FINANCIAL STATEMENTS

Consolidated statement of changes in equity

for the 53 weeks ended 18 September 2021

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 of non-controlling interests
Total transactions with owners
Balance as at 12 September 2020
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 gain on hedge of net investment in foreign subsidiaries
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
Items that are or may be subsequently reclassified to

profit or loss

Attributable to equity shareholders

Note

Issued
capital
£m
45
–
45

Other
reserves
£m
175
–
175

Translation
reserve
£m
409
–
409

Hedging
reserve
£m
(9)
–
(9)

Retained
earnings
£m
8,832
(149)
8,683

Non-
controlling
interests
£m
98
(1)
97

Total
£m
9,452
(149)
9,303

Total
equity
£m
9,550
(150)
9,400

–
–
–
–
–
–
–
–

–
–

–
–
–

–
–

–
–
–
–
–
–
45

–
–
–
–
–
–

–
–

–

–
–

–
–
–

–
–

–
–
–
–
–
–
–
–

–
–

–
–
–

–
–

–
–
–
–
–
–
175

–
–
–
–
–
–

–
–

–

–
–

–
–
–

–
–

–
–
–
–
–
45

–
–
–
–
–
175

–
–
–
–
(83)
(3)
1
–

(1)
–

(86)
(86)
(86)

–
–

–
–
–
–
–
–
323

–
–
–
–
(355)
14

(6)
–

–

(10)
–

(357)
(357)
(357)

–
–

–
–
–
–
–
(34)

–
–
–
–
(1)
–
–
(15)

–
–

(16)
(16)
(16)

18
18

–
–
–
–
–
–
(7)

–
–
–
–
–
–

–
39

(14)

–
–

25
25
25

25
25

–
–
–
–
–
43

455
(89)
15
(74)
–
–
–
–

–
17

17
(57)
398

–
–

(271)
8
1
–
–
(262)
8,819

478
559
(144)
415
–
–

–
–

–

–
18

18
433
911

–
–

455
(89)
15
(74)
(84)
(3)
1
(15)

(1)
17

(85)
(159)
296

18
18

(271)
8
1
–
–
(262)
9,355

478
559
(144)
415
(355)
14

(6)
39

(14)

(10)
18

(314)
101
579

25
25

10
–
–
–
(13)
–
–
–

–
–

(13)
(13)
(3)

–
–

–
–
–
(8)
(2)
(10)
84

20
–
–
–
–
–

–
–

–

–
–

–
–
20

–
–

465
(89)
15
(74)
(97)
(3)
1
(15)

(1)
17

(98)
(172)
293

18
18

(271)
8
1
(8)
(2)
(272)
9,439

498
559
(144)
415
(355)
14

(6)
39

(14)

(10)
18

(314)
101
599

25
25

(49)
17
–
(6)
(38)
9,692

(49)
17
–
(6)
(38)
9,921

–
–
(4)
(17)
(21)
83

(49)
17
(4)
(23)
(59)
10,004

Significant accounting policies

for the 53 weeks ended 18 September 2021

Associated British Foods plc is domiciled in the United Kingdom.
The Company’s consolidated financial statements for the 53
weeks ended 18 September 2021 comprise those of the
Company, its subsidiaries and its interest in joint ventures
and associates.

The directors authorised the consolidated financial statements
for issue on 9 November 2021.

The directors prepared and approved the consolidated financial
statements in accordance with Adopted IFRS (see glossary).

The Company has elected to prepare the parent company
financial statements under FRS 101. These are presented on
pages 214 to 221.

Basis of preparation
The Company presents its consolidated financial statements in
sterling, rounded to the nearest million, prepared on the
historical cost basis except that current biological assets and
certain financial instruments are stated at fair value, and 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 161.

The estimates and underlying assumptions are reviewed
regularly. Revisions to accounting estimates are recognised
prospectively from when the estimates are revised.

The accounting policies set out below apply to all periods
presented, except where stated otherwise.

Details of accounting standards which came into force in the
year are set out at the end of this note.

The Group’s consolidated financial statements are prepared to
the Saturday nearest to 15 September. Accordingly, they have
been prepared for the 53 weeks ended 18 September 2021
(2020 – 52 weeks ended 12 September 2020).

To avoid delay in the preparation of the consolidated financial
statements, the results of certain subsidiaries, joint ventures
and associates are included to 31 August each year.

Adjustments have been made where appropriate for significant
transactions or events occurring between 31 August and
18 September.

The Group’s business activities, together with factors likely to
affect its future development, performance and position are set
out in the Strategic report on pages 1 to 61. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial review on
pages 62 to 64.

In addition, the Principal risks and uncertainties on pages 88 to
94 and note 26 on pages 186 to 197 provide details of the
Group’s policy on managing its financial and commodity risks.

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 going concern assessment period to 28
February 2023 has been updated for the business’s latest
trading in October and is our best estimate of cash flow in the
period. Having reviewed this forecast, and having applied a
downside sensitivity and performed a reverse stress test, we
consider it a remote possibility that the financial headroom
could be exhausted.

At the full year, the Group had net cash of £1,901m and had an
undrawn, committed RCF of £1,088m for the coming year. The
directors have satisfied themselves that the RCF is available for
at least the going concern assessment period, having assessed
the Group’s projected compliance with the remaining terms and
covenants of these facilities. Events of COVID-19 and the last
year show that there was a value in having sufficient financial
resources and credit strength to manage the operational
challenges faced across our businesses. ABF has sought an
external validation of our credit strength and the A grade credit
rating from S&P Global reflects this.

In August 2020, a two-year extension to the Group’s RCF was
agreed with its relationship banks extending the maturity of the
facility to July 2023. Whilst this maturity date is beyond the
going concern assessment period, it is the opinion of the Board
based on the credit rating and the strength of the balance sheet
that this facility can be renewed and that substantial further
funding could be secured should the need arise.

In reviewing the cash flow forecast for the period, the directors
reviewed the trading for both Primark and the non-Primark
businesses in light of the experience gained from the last
eighteen months of trading and emerging trading patterns. The
directors have a thorough understanding of the risks,
sensitivities and judgements included in these elements of the
cash flow forecast and have a high degree of confidence in
these cash flows.

The diversity of the Group is such that we have some 60
different businesses operating in different markets, sectors,
customers, geographies and product. 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 a deterioration in trading to a level that is
likely to threaten the viability of the Group for the period of
the assessment.

As a downside scenario the directors considered the extreme
adverse scenario in which half of the Primark estate was closed
for six months including the forthcoming Christmas trading
period, without taking any of the available cost mitigation
actions within their control and assuming no available job
retention scheme support. Under this downside scenario the
Group has a forecast net cash position throughout the period
and forecast compliance with the covenants in the
debt facilities.

154

Associated British Foods plc Annual Report 2021

155

FINANCIAL STATEMENTS

Significant accounting policies

for the 53 weeks ended 18 September 2021

In addition, we also considered the circumstances which would
be needed to exhaust the Group’s cash resources over the
assessment period – a reverse stress test. This would indicate
that all Primark stores would need to remain completely closed
for more than 12 months, including the peak Christmas sales
period. The likelihood of these circumstances is considered
remote for two reasons. Firstly, over such a long period,
management could take substantial mitigating actions, such as
cost cutting measures, and reducing capital investment.
Secondly, we have seen governments develop a number of
measures to contain the virus, including widespread vaccination
programmes, which make it likely that any future lockdowns
would be regional.

Basis of consolidation
These consolidated financial statements include the results of
the Company and its subsidiaries from the date that control
commences to the date that control ceases.

They 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 acquisitions
On acquisition of a business, the Group attributes fair values to
the identifiable assets, liabilities and contingent liabilities
acquired, reflecting conditions at the date of acquisition. These
include aligning accounting policies with those of the Group.

The Group finalises provisional fair values within 12 months of
the date of acquisition and, where significant, reflects them by
restatement of the comparative period in which the
acquisition occurred.

The Group measures non-controlling interests at the
proportionate share of the net identifiable assets acquired.

The Group remeasures existing equity interests in the acquiree
to fair value at the date of acquisition, with any resulting gain or
loss taken to the income statement.

Goodwill arising on acquisition of a business 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 the Group expenses
as incurred.

The Group measures contingent consideration at fair value at
the date of acquisition, classified as a liability or equity (usually
as a liability).

Other than for the finalisation of provisional fair values, the
Group accounts for changes in contingent consideration
classified as a liability 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, some promotional activities and similar items.
Revenue does not include sales between Group companies.

The Group recognises revenue when performance obligations
are satisfied, goods are delivered to customers and control of
goods is transferred to the buyer.

In the Food businesses, the Group generally recognises
revenue from the sale of goods on dispatch or delivery to
customers, dependent on shipping terms, and provides for
discounts and returns 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, the Group generally recognises revenue
from the sale of goods when a customer purchases goods, and
provides for returns 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
The Group accounts for borrowing costs 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.

Foreign currencies
Individual Group companies record transactions in foreign
currencies at the exchange rate at the date of the transaction,
and translate monetary assets and liabilities in foreign
currencies at the exchange rate at the balance sheet date, with
any resulting differences taken to the income statement, unless
designated in a hedging relationship, in which case hedge
accounting applies.

On consolidation, the Group translates the assets and liabilities
of operations denominated in foreign currencies into sterling at
the exchange rate at the balance sheet date. The Group
translates the income statements of those operations into
sterling at average exchange rates.

The Group records 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 exchange rates to those at the
balance sheet date, in the translation reserve in equity.

Pensions and other post-employment benefits
The Group’s pension and other post-employment benefit
arrangements comprise defined benefit plans, defined
contribution plans and other unfunded post-employment plans.

Financial assets and liabilities
The Group recognises financial assets and liabilities when it
becomes a party to the contractual provision of the relevant
financial instrument.

For defined benefit plans, the income statement charge
comprises the cost of benefits earned by members and benefit
improvements granted to members during the year, as well as
net interest income/(expense) calculated by applying the liability
discount rate to the opening net pension asset or liability.

The Group records the difference between the market value of
scheme assets and the present value of scheme liabilities on a
scheme-by-scheme basis as net pension assets (to the extent
recoverable) or liabilities.

The Group recognises remeasurements and movements in
irrecoverable surpluses in other comprehensive income.

The Group charges contributions payable in respect of defined
contribution plans to operating profit as incurred.

The Group accounts for other unfunded post-employment plans
in the same way as defined benefit plans.

Share-based payments
The Group recognises the fair value of share awards at grant
date 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 Group adjusts the amount recognised 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. The Group recognises income tax 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.

The Group provides for deferred tax 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 tax purposes.

The Group does not provide for the following temporary
differences: 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 Group bases the amount of deferred tax provided 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.

The Group recognises deferred tax assets only to the extent
that it is probable that future taxable profits will be available
against which the asset can be utilised.

The Group recognises income tax arising from dividend
distributions at the same time as the liability to pay the
related dividend.

Trade and other receivables
The Group records trade and other receivables initially at fair
value and subsequently 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 comprise finance lease
receivables due from a joint venture and minority shareholdings
in private companies. The Group accounts for finance lease
receivables in the same way as for trade and other receivables.

The Group records minority shareholdings in private companies
initially at fair value, including directly attributable transaction
costs, and subsequently at fair value through other
comprehensive income.

On disposal of a minority shareholding, the cumulative gain or
loss previously recognised in other comprehensive income is
included directly in retained earnings, without recycling it to the
income statement.

Bank and other borrowings
The Group records bank and other borrowings initially at fair
value, which equals the proceeds received, net of direct issue
costs, and subsequently at amortised cost. The Group accounts
for finance charges, including premiums payable on settlement
or redemption and direct issue costs, using the effective
interest rate method.

Trade payables
The Group records trade payables initially at fair value and
subsequently at amortised cost. This generally results in
recognition at nominal value.

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.

For the purposes of the cash flow statement, the Group
includes bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management as a
component of cash and cash equivalents.

Derivative financial instruments and hedging
The Group primarily uses derivatives to manage economic
exposure to financial and commodity risks. The principal
instruments used are foreign exchange and commodity
contracts, futures, swaps or options. The Group does not use
derivatives for speculative purposes.

The Group recognises derivatives at fair value based on market
prices or rates, or calculated using discounted cash flow or
option pricing models.

The Group recognises changes in the fair value of derivatives in
the income statement unless the derivative is designated in a
hedging relationship, when recognition of the change in fair
value depends on the nature of the item being hedged.

156

Associated British Foods plc Annual Report 2021

157

FINANCIAL STATEMENTS

Significant accounting policies

for the 53 weeks ended 18 September 2021

The purpose of hedge accounting is to mitigate the impact on
the Group of changes in foreign exchange or interest rates and
commodity prices.

At the inception of each hedging relationship, the Group
documents the hedging instrument, the hedged item, the risk
management objectives and strategy for undertaking the hedge,
and assesses hedge effectiveness.

During the life of each hedging relationship, the Group performs
testing to demonstrate that the hedge remains effective.

For derivatives used as hedges of future cash flows, the Group
recognises the change in fair value through other
comprehensive income in either the the cost of hedging reserve
(for the element of the change in fair value relating to the
currency spread) or in the hedging reserve (for the remaining
change in fair value). 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 that asset or
liability is recognised, the Group includes the associated gains
and losses previously recognised in the hedging reserve in the
initial measurement of that asset or liability.

When the future cash flow does not result in the recognition of
a non-financial asset or liability, the Group includes the
associated gains and losses previously recognised in the
hedging reserve 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.

For derivative or non-derivative financial instruments used as
hedges of the Group’s net investment in foreign operations, the
Group recognises the change in fair value through other
comprehensive income in the net investment hedging reserve.
Any ineffective portion is recognised immediately in the
income statement.

The Group discontinues hedge accounting when a hedging
instrument expires or is sold, terminated, exercised, or no
longer qualifies for hedge accounting. At that time, the Group
retains the cumulative associated gain or loss recognised 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.

The Group economically hedges foreign currency exposure on
recognised monetary assets and liabilities but does not normally
seek hedge accounting. The Group records any derivatives held
to hedge this exposure at fair value through profit and loss.

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. The
Group acquires operating intangible assets in the ordinary
course of business, typically including computer software, land
use rights and emissions trading licences.

The Group records intangible assets other than goodwill at cost
less accumulated amortisation and impairment charges.

158

Associated British Foods plc Annual Report 2021

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. 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 acquisitions’ on page 156.
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 subject to an annual impairment review.

Research and development
The Group expenses research and development expenditure as
incurred, unless development expenditure relates to products or
processes which are technically and commercially feasible, in
which case it is capitalised. The Group records capitalised
development expenditure at cost less accumulated amortisation
and impairment charges.

Impairment
The Group reviews the carrying amounts of its intangible assets
and property, plant and equipment at each balance sheet date
to determine whether there is any indication of impairment. If
any such indication exists, the Group estimates the indicated
asset’s recoverable amount. For goodwill and intangibles
without a finite life, the Group does this at least annually.

The Group recognises an impairment charge in the income
statement whenever the carrying amount of an asset or its CGU
exceeds its recoverable amount.

The Group allocates impairment charges recognised in respect
of CGUs first to reduce the carrying amount of any goodwill
relating to that CGU and then to reduce the carrying amount of
the other assets in the CGU on a pro rata basis.

Calculation of recoverable amount
The recoverable amount of assets is the greater of their fair
value less costs to sell and their value in use. In assessing value
in use, the Group discounts estimated future cash flows to
present value using a pre-tax discount rate reflective of current
market assessments of the time value of money and the risks
specific to the asset.

For an asset that does not generate largely independent cash
inflows, the Group determines recoverable amount for the CGU
to which the asset belongs.

Reversals of impairment
The Group does not subsequently reverse impairments of
goodwill. For other assets, the Group does reverse an
impairment charge 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
previously been recognised.

Property, plant and equipment
The Group records property, plant and equipment at cost less
accumulated depreciation and impairment charges.

The Group charges depreciation to the income statement on a
straight-line basis over the estimated useful economic lives of
each item sufficient to reduce it to its estimated residual value.
Land is not depreciated. Estimated useful economic lives are
generally deemed to be no longer than:

Freehold buildings
Plant and equipment, fixtures and fittings
– sugar factories, yeast plants, mills and

bakeries

– other operations
Vehicles
Sugar cane roots

up to 66 years

up to 20 years
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 2020 financial year, the opening balance sheet was
drawn up under IAS 17 Leases, with the adoption of IFRS 16
Leases on 15 September 2019 reflected as an opening balance
adjustment in the 2020 financial year.

Since that date, where the Group is a lessee, the following
accounting policy applied.

Right-of-use assets
The Group records right-of-use assets at cost at the
commencement date of the lease, which is the date the
underlying asset is available for use, less any accumulated
depreciation and impairment losses, and adjusted for
subsequent remeasurement of lease liabilities.

Cost 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.

The Group charges depreciation to the income statement on a
straight-line basis over the shorter of the estimated useful life
and the lease term.

Lease liabilities
The Group records lease liabilities at the commencement date
of the lease at the present value of lease payments to be made
over the lease term, discounted using the incremental
borrowing rate at the commencement date of the lease 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.

The Group subsequently measures lease liabilities at amortised
cost using the effective interest rate method. The Group
records the accretion and settlement of interest through
accruals and reduces the carrying amount of lease liabilities for
the capital element of lease payments made.

The carrying amount of lease liabilities is also 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 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 considered uniformly low-value.

The Group expenses lease payments on short-term leases and
leases of low-value assets in the income statement.

Lessor accounting
When subleasing assets, the Group assesses the sublease
classification with reference to the head lease right-of-use
asset, which considers, among other factors, whether the
sublease represents a 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, taking into account whether the sublet/head
lease are above or below market rate.

The Group records amounts due from lessees under finance
leases as a receivable at an amount equal to the net investment
in the lease, calculated using the incremental borrowing rate at
the date of recognition. The Group recognises any difference
between the derecognised right-of-use asset and the newly
recognised amounts due from lessees under finance leases 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.

The Group recognises operating lease income as earned on a
straight-line basis over the lease term.

Current biological assets
The Group records current biological assets 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, the Group transfers growing cane to inventory
at fair value less costs to sell.

Inventories
The Group records inventories 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.

The Group records retail inventories 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.

On acquisition of a business, the Group records inventories at
fair value. Subsequently, the Group charges the book value of
the inventories to adjusted operating profit as they are sold or
used. Any fair value uplift, if significant, is charged below
adjusted operating profit as the inventories are sold or used.

Grants
The Group recognises grants only when there is reasonable
assurance that the Group will comply with the conditions
attached and that the grants will be received. Grants receivable
as compensation for expenses already incurred are recognised
in profit or loss in the period in which they become receivable.

Associated British Foods plc Annual Report 2021

159

FINANCIAL STATEMENTS

Significant accounting policies

for the 53 weeks ended 18 September 2021

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 was 1 September 2018.
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 18 September 2021 (ARS135.23:£1); and

– the cumulative impact corresponding to previous years has
been reflected in other comprehensive income in the year.

The FACPCE index was 337.0632 at 31 August 2020 and
510.3942 at 31 August 2021. The inflation index for the year is
therefore 1.5142.

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:

– Amendments to IFRS 3 Definition of a Business;

– Amendments to IAS 1 and IAS 8 Definition of Material;

– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

Interest Rate Benchmark Reform - Phase 1; and

– Amendments to References to the Conceptual Framework in

IFRS Standards.

The Group is assessing the impact of the following standards,
interpretations and amendments that are not yet effective.
Where already endorsed by the UKEB, these changes will be
adopted on the effective dates noted. Where not yet endorsed
by the UKEB, the adoption date is less certain:

– IFRS 17 Insurance Contracts effective 2023 financial year

(not yet endorsed by the UKEB);

– 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 UKEB);

– Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2) effective 2024 financial year (not
yet endorsed by the UKEB);

– Amendments to IAS 8 Definition of Accounting Estimates

effective 2024 financial year (not yet endorsed by the UKEB);

– Amendments to IAS 12 Deferred Tax related to Assets and
Liabilities arising from a Single Transaction effective 2024
financial year (not yet endorsed by the UKEB);

– Amendments to IAS 16 Property, Plant and Equipment —

Proceeds before Intended Use effective 2023 financial year
(not yet endorsed by the UKEB);

– Amendments to IAS 37 Onerous Contracts — Cost of

Fulfilling a Contract effective 2023 financial year (not yet
endorsed by the UKEB);

– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform - Phase 2 effective 2022
financial year (endorsed by the UKEB). Financial authorities
have announced the timing of key interest rate benchmark
replacements such as LIBOR in the UK, the US and the EU
and other territories expected at the end of 2021, with
remaining USD tenors expected to cease in 2023. We are
primarily exposed to USD LIBORs that will be available until
June 2023; and

– Annual Improvements to IFRS 2018-2020 effective 2023

financial year (not yet endorsed by the UKEB).

Accounting estimates and judgements

Post-retirement benefits
The Group’s defined benefit pension schemes and similar
arrangements are assessed annually in accordance with IAS 19
Employee Benefits. The accounting valuation, which has been
assessed using assumptions determined with independent
actuarial advice, resulted in a net surplus of £493m being
recognised as at 18 September 2021. The size of this surplus 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 to 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 may take a number of years to resolve. The Group
bases provisions 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.

for the 53 weeks ended 18 September 2021

In applying the accounting policies detailed on pages 155 to
160, the directors have made estimates in a number of areas.
The actual outcome may differ from those estimates. 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.

Impairment risk associated with COVID-19
The global spread of COVID-19 began in the first half of the
2020 financial year and continues to the date of these financial
statements. 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.

160

Associated British Foods plc Annual Report 2021

161

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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, income tax
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 are re-presented for businesses sold or closed during the year.

The Group comprises the following operating segments:

Grocery
The manufacture of grocery products, including hot beverages, sugar and sweeteners, vegetable oils, balsamic vinegars, bread and
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
Asia Pacific

Revenue

2021
£m

3,593
1,650
1,537
1,508
5,593
–
13,881

2
1
13,884

4,982
4,944
1,678
2,277
13,881

3
13,884

2020
£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

Adjusted operating profit

2021
£m

413
152
44
151
321
(70)
1,011

–
–
1,011

293
302
259
157
1,011

–
1,011

2020
£m

437
100
43
147
362
(63)
1,026

(1)
(1)
1,024

312
298
254
162
1,026

(2)
1,024

2021

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
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
3,594
(1)
3,593
2
3,595

Sugar
£m
1,714
(64)
1,650
–
1,650

Agriculture
£m
1,539
(2)
1,537
–
1,537

Ingredients
£m
1,687
(179)
1,508
1
1,509

Retail
£m
5,593
–
5,593
–
5,593

Central
£m

Total
£m
(246) 13,881
–
246
– 13,881
–
3
– 13,884

364
49
413
2
(41)
(3)
–
–
–
371

149
3
152
1
–
–
–
(141)
–
12

(1)

(2)

370

2,541
53
2,594

1,776
28
1,804

31
13
44
–
(2)
–
–
–
–
42

–

441
139
580

134
17
151
1
(7)
–
(2)
–
19
162

321
–
321
–
–
–
–
(6)
–
315

(1)

(80)

161

235

1,480
118
1,598

6,919
–
6,919

(601)

(361)

(151)

(340)

(4,142)

1,993

1,443

429

1,258

2,777

(70)
–
(70)
–
–
–
(1)
(4)
1
(74)
9
(27)
(1)
(227)
(320)

929
82
1,011
4
(50)
(3)
(3)
(151)
20
828
9
(111)
(1)
(227)
498

–

154 13,311
338
154 13,649
2,275
32
81
218
640
(5,803)
(406)
(172)
(363)
(147)
2,104 10,004

2,275
32
81
218
640
(208)
(406)
(172)
(363)
(147)

Non-current asset additions
Depreciation (including of right-of-use assets)
Amortisation
Reversal of impairment of property, plant and equipment and

right-of-use assets

113
(110)
(48)

134
(82)
(4)

–

21
(16)
(3)

–

118
(56)
(9)

343
(549)
(8)

16
(10)
(2)

745
(823)
(74)

–

162

Associated British Foods plc Annual Report 2021

163

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

1. Operating segments continued

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

Non-current asset additions
Depreciation (including of right-of-use assets)
Amortisation
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

Grocery
£m
3,530
(2)
3,528
13
3,541

Sugar
£m
1,658
(64)
1,594
–
1,594

Agriculture
£m
1,398
(3)
1,395
–
1,395

Ingredients
£m
1,685
(182)
1,503
9
1,512

Retail
£m
5,895
–
5,895
–
5,895

Central
£m

Total
£m
(251) 13,915
–
251
– 13,915
22
–
– 13,937

404
33
(1)
436
9
(52)
(15)
–
5
(4)
379

98
2
–
100
7
–
–
–
(23)
–
84

(1)

(3)

378

2,689
51
2,740

1,893
27
1,920

33
10
–
43
1
(1)
–
–
–
–
43

–

429
136
565

132
15
(1)
146
(1)
(6)
–
(2)
–
(4)
133

362
–
–
362
3
–
–
–
(138)
–
227

–

(79)

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

(63)
–
–
(63)
(1)
–
–
–
–
(6)
(70)
11
(41)
3
(221)
(318)

966
60
(2)
1,024
18
(59)
(15)
(2)
(156)
(14)
796
11
(124)
3
(221)
465

–

155 14,008
289
155 14,297
1,998
32
30
212
100
(6,211)
(472)
(171)
(210)
(166)
9,439

1,998
32
30
212
100
(219)
(472)
(171)
(210)
(166)
1,289

104
(109)
(62)

(15)

(1)

–

88
(85)
(2)

–

21
(16)
(2)

–

97
(57)
(7)

–

(1)

(2)

476
(546)
(14)

13
(14)
(2)

–

799
(827)
(89)

(15)

(2)

1. Operating segments – geographical information
2021

Revenue from external customers
Segment assets
Non-current asset additions
Depreciation (including of right-of-use assets)
Amortisation
Acquired inventory fair value adjustments
Reversal of impairment of property, plant and equipment on

sale and closure of businesses

Transaction costs
Exceptional items

2020

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

United Kingdom
£m
4,982
5,178
200
(288)
(35)
–

Europe & Africa
£m
4,944
5,754
382
(406)
(26)
(3)

The Americas
£m
1,678
1,324
74
(62)
(7)
–

Asia Pacific
£m
2,280
1,393
89
(67)
(6)
–

Total
£m
13,884
13,649
745
(823)
(74)
(3)

–
(2)
(13)

–
–
(117)

–
–
–

10
(1)
(21)

10
(3)
(151)

United Kingdom
£m
5,054
5,249
197
(292)
(48)
–

Europe & Africa
£m
5,048
6,263
406
(397)
(27)
(15)

The Americas
£m
1,619
1,314
128
(70)
(6)
–

Asia Pacific
£m
2,216
1,471
68
(68)
(8)
–

Total
£m
13,937
14,297
799
(827)
(89)
(15)

(15)

–

–
–
(4)

–

–
(1)
(108)

–

–
–
(44)

–

(2)

(2)
(1)
–

(15)

(2)

(2)
(2)
(156)

The Group’s operations in the following countries met the criteria for separate disclosure:

Australia
Spain
United States

Revenue

Non-current assets

2021
£m
1,209
1,190
1,098

2020
£m
1,161
1,097
1,055

2021
£m
533
670
672

2020
£m
558
849
727

All segment disclosures are stated before reclassification of assets and liabilities classified as held for sale (see note 15).

164

Associated British Foods plc Annual Report 2021

165

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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
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

Note

3
8
8

9
10

2021
£m

10,753
1,303
952
151
13,159

2,639
48
26
3
(4)
535
288
–
3
7
(23)
34
(15)
12
(31)
33

2020
£m

10,800
1,293
953
156
13,202

2,505
56
33
15
(18)
538
289
15
2
5
(27)
31
(97)
69
(51)
59

Transaction costs of £3m and amortisation of non-operating intangibles of £50m (2020 – £2m and £59m) shown as adjusting items
in the income statement, include £nil and £2m respectively (2020 – £nil and £3m respectively) incurred by joint ventures, in addition
to the amounts shown above.

Exceptional items
2021
Exceptional items of £151m comprise impairments of £141m in property, plant and equipment at Azucarera and other sugar
businesses, a £21m inventory charge in Primark, the reversal of £20m of the £22m Primark inventory provision raised last year, a
£5m provision for excessive stock of COVID-19 related items in Primark and a £4m pension past service cost following a further
High Court ruling on 20 November 2020 regarding the equalisation of Guaranteed Minimum Pensions.

In our sugar business in Spain we have seen a significant increase in revenues reflecting strong demand and higher prices,
although the operating profit margin was impacted by lower volumes from the northern beet crop, as well as a one-off charge from
a court arbitration. Our current view for yield and sugar content from beet sugar and our lower estimated margins due to the
expected increases in raw refining volumes in the future has resulted in a non-cash exceptional charge of €136m to write down the
net asset value of this business. Given the ongoing trading challenges in some of our smaller sugar businesses we have reviewed
our forward projections for these units, including the forecast evolution of beet area and yields. As a result, we have made a
non-cash adjustment of £21m to the relevant net asset values as an exceptional charge this year.

Our half year results included an inventory charge of £21m in Primark, which related to certain seasonal items already on display in
closed stores and which could not be sold before the end of the season. This inventory had been cleared from our stores to allow
spring/summer stock to be displayed as stores prepared to reopen, and an exceptional provision of £21m was charged to reflect
the write-down of this inventory to net realisable value, which has subsequently been utilised.

The prior year end exceptional items included a £22m markdown provision which was created for potential damage of inventory
stored on our behalf by suppliers for longer than usual as a result of the pandemic. In large part, this damage did not arise and
£20m of the provision has been released. £5m has been provided for excessive stock of COVID-19 related items.

2020
The prior year included exceptional items of £156m. Impairments of £116m in property, plant and equipment and right-of-use
assets at Primark were recognised related to downsizing of a number of stores in the US and Germany. Beet volumes contracted
by Azucarera in the second crop year after reducing the beet price paid to farmers resulted in revised business forecasts and a
£23m non-cash write-down of goodwill. A charge of £22m related to a markdown provision in Primark for inventory stored on our
behalf by suppliers for longer than usual as a result of the pandemic. A £5m gain was recorded related to the closure of our
Speedibake Wakefield factory where the net proceeds received from the insurance claim raised for the factory being destroyed by
a fire in February 2020 exceeded the losses recorded earlier in the year.

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

2021
£m

1.4
7.0
8.4

0.4
0.3
0.7

2020
£m

1.5
6.6
8.1

0.4
0.3
0.7

2021
£m

2020
£m

42,696
67,681
6,081
11,454
127,912

46,066
69,571
5,627
12,161
133,425

2021
£m

2,209
282
81
50
17
2,639

2020
£m

2,093
278
79
47
8
2,505

Note

12
12
24

Primark’s major cost-reduction exercises during lockdowns included accessing government job retention schemes across Europe.
In total this year, Primark received some £123m (2020 – £98m), recorded as a reduction to staff costs. £94m of these job retention
scheme monies was repaid to the governments of the UK, the Republic of Ireland, Portugal, Czechia and Slovenia where there was
an established process for repayment of these monies. This has been recorded in the income statement.

Details of directors’ remuneration, share incentives and pension entitlements are shown in the Remuneration Report on pages 117
to 135.

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
Other payables

Other financial (expense)/income
Interest income on employee benefit scheme assets
Interest charge on employee benefit scheme liabilities
Interest charge on irrecoverable surplus
Net financial (expense)/income from employee benefit schemes
Net foreign exchange gains on financing activities
Total other financial (expense)/income

Note

12
12
12

2021
£m

9
9

(16)
(10)
(84)
(1)
(111)

69
(69)
(1)
(1)
–
(1)

2020
£m

11
11

(29)
(10)
(84)
(1)
(124)

83
(80)
(1)
2
1
3

166

Associated British Foods plc Annual Report 2021

167

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

5. Income tax expense

Current tax expense
UK – corporation tax at 19% (2020 – 19%)
Overseas – corporation tax
UK – under provided in prior periods
Overseas – over provided in prior periods

Deferred tax expense
UK deferred tax
Overseas deferred tax
UK – (over)/under provided in prior periods
Overseas – under 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% (2020 – 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
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

2021
£m

2020
£m

46
208
9
(9)
254

13
(37)
(3)
–
(27)
227

725
(79)
646

123
33
17
51
(3)
9
(3)
227

144
–
14
–
158

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)

The UK corporation tax rate of 19% is set to increase to 25% from 1 April 2023. The legislation to effect these changes was enacted
before the balance sheet date and UK deferred tax has been calculated accordingly. The effect of this change was a £15m charge to
the income statement principally on the amortisation of non-operating intangibles and exceptional items and a £39m charge to other
comprehensive income relating to the deferred tax liability on the pension surplus.

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
£26m (2020 – £27m), however we do not consider that any provision is required in respect of this amount based on our current
assessment of the issue. Following receipt of charging notices from HM Revenue & Customs (‘HMRC’) during the year, we made
payments to HMRC. Receipt of the charging notices marginally changed our assessment of the maximum potential liability, but did
not change our assessment that no provision is required in respect of this amount. 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

2019 final
2020 interim
2020 final
2021 interim

2021
pence per share
–
–
–
6.20
6.20

2020
pence per share
34.30
–
–
–
34.30

2021
£m
–
–
–
49
49

2020
£m
271
–
–
–
271

The 2021 interim dividend was declared on 20 April 2021 and was paid on 9 July 2021. As a sign of our confidence in our improved
trading we have declared the payment of a special dividend, to be paid as a second interim dividend of 13.8p per share at a cost of
£109m.

The Board has proposed a final dividend of 20.5p per share at a cost of £162m which together with the interim dividend of 6.2p per
share makes a total of 26.7p per share for the year.

The combined 2021 final and special dividend of 34.3p, with a total value of £271m, will be paid on 14 January 2022 to
shareholders on the register on 17 December 2021.

No interim or final dividend was proposed or paid for 2020.

7. Earnings per share
The calculation of basic earnings per share at 18 September 2021 was based on the net profit attributable to equity shareholders of
£478m (2020 – £455m), and a weighted average number of shares outstanding during the year of 790 million (2020 – 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 £3m and amortisation of non-operating intangibles of £50m (2020 – £2m and £59m) shown as adjusting items
below include £nil and £2m respectively (2020 – £nil and £3m 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 (2020 – 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

2021
£m
633
4
20
(3)
(3)
(151)
23
(50)
5
478

2021
pence
80.1
0.5
2.5
(0.4)
(0.4)
(19.1)
3.0
(6.3)
0.6
60.5

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

168

Associated British Foods plc Annual Report 2021

169

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

8. Intangible assets

Goodwill
£m

Technology
£m

Brands
£m

Non-operating
Customer
relationships
£m

Grower
agreements
£m

Operating

Other
£m

Total
£m

Cost
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
Acquisitions – externally purchased
Acquired through business combinations
Other disposals
Effect of hyperinflationary economies
Effect of movements in foreign exchange
At 18 September 2021

Amortisation and impairment
At 14 September 2019
Amortisation for the year
Impairment
Other disposals
Effect of movements in foreign exchange
At 12 September 2020
Amortisation for the year
Impairment
Effect of movements in foreign exchange
At 18 September 2021
Net book value
At 14 September 2019
At 12 September 2020
At 18 September 2021

1,293
–
6
–
4
(22)
1,281
–
–
–
4
(49)
1,236

90
–
23
–
2
115
–
–
(3)
112

1,203
1,166
1,124

207
–
7
–
–
(4)
210
–
16
–
–
(12)
214

207
–
–
–
(3)
204
2
–
(11)
195

–
6
19

437
–
7
–
–
(3)
441
–
–
–
–
(12)
429

341
24
–
–
(2)
363
20
–
(11)
372

96
78
57

280
–
1
–
–
–
281
–
3
–
–
(13)
271

153
32
–
–
(3)
182
26
–
(8)
200

127
99
71

122
–
–
–
–
(19)
103
–
–
–
–
6
109

122
–
–
–
(19)
103
–
–
6
109

–
–
–

6
–
–
–
–
(1)
5
–
–
–
–
–
5

6
–
–
–
(1)
5
–
–
–
5

–
–
–

492
74
–
(29)
–
10
547
96
1
(20)
–
(33)
591

237
33
–
(6)
3
267
26
2
(14)
281

255
280
310

2,837
74
21
(29)
4
(39)
2,868
96
20
(20)
4
(113)
2,855

1,156
89
23
(6)
(23)
1,239
74
2
(41)
1,274

1,681
1,629
1,581

Amortisation of non-operating intangibles of £50m (2020 – £59m) shown as an adjusting item in the income statement includes
£2m (2020 – £3m) incurred by joint ventures in addition to the amounts shown above.

Impairment
As at 18 September 2021, the consolidated balance sheet included goodwill of £1,124m (2020 – £1,166m). 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
Illovo
AB World Foods
Other (not individually significant)

Primary reporting
segment
Grocery
Grocery
Ingredients
Grocery
Sugar
Grocery
Various

Discount
rate
13.0%
14.9%
14.1%
11.3%
25.7%
11.3%
Various

2021
£m
90
174
267
119
104
78
292
1,124

2020
£m
98
187
285
119
98
78
301
1,166

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. There has been no change in CGUs or group of
CGUs from the prior year.

The carrying value of goodwill is assessed by reference to its value in use 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 a pre-tax weighted average cost of capital for each business, adjusted for
country, industry and market risk. The rates used were between 9.8% and 25.7% (2020 – between 9.7% and 20.0%).

The long-term growth rates 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
8.3%, consistent with the inflation factors included in the discount rates applied (2020 – between 0% and 6.5%).

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.

AB Mauri full year trading was ahead of the prior year and globally our markets experienced some improving trends but remain
challenging. 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 $232m on a CGU carrying value of
$1,003m (2020 – headroom of $202m on a CGU carrying value of $831m). 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 14.1% (2020 – 13.9%) and would have to increase to more than 16.3% (2020 – 16.2%) before
value in use fell below the CGU carrying value. Estimates of long-term growth rates beyond the forecast periods were 2–3%
(2020 – 2–3%) per annum dependent on location.

170

Associated British Foods plc Annual Report 2021

171

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

9. Property, plant and equipment

Cost
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
Acquisitions – externally purchased
Other disposals
Transfers from assets under construction
Transfer to assets classified as held for sale
Effect of movements in foreign exchange
At 18 September 2021

Depreciation and impairment
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
Depreciation for the year
Impairment
Reversal of impairment on sale and closure of business
Other disposals
Transfer to assets classified as held for sale
Effect of movements in foreign exchange
At 18 September 2021
Net book value
At 14 September 2019
At 12 September 2020
At 18 September 2021

Land and
buildings
£m

Plant and
machinery
£m

Fixtures and
fittings
£m

Assets under
construction
£m

Sugar cane
roots
£m

2,759
(28)
22
(20)
12
(2)
2,743
56
(15)
10
(6)
(81)
2,707

690
(10)
50
5
–
(15)
1
721
51
24
(3)
(7)
(3)
(24)
759

2,069
2,022
1,948

3,967
(1)
90
(76)
127
(72)
4,035
50
(40)
126
(25)
(138)
4,008

2,585
(1)
186
26
2
(73)
(43)
2,682
180
112
(7)
(36)
(18)
(86)
2,827

1,382
1,353
1,181

3,777
(6)
147
(7)
34
69
4,014
119
(8)
77
–
(183)
4,019

1,768
(4)
292
34
–
(4)
62
2,148
296
3
–
(6)
–
(98)
2,343

2,009
1,866
1,676

262
–
278
–
(173)
2
369
304
–
(213)
–
(20)
440

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

262
369
440

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 addition where the fair value less costs of disposal is higher than value
in use, this methodology has been used to determine the recoverable amount. 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.

In our sugar business in Spain, we have seen a significant increase in revenues reflecting strong demand and higher prices,
although the operating profit margin was impacted by lower volumes from the northern beet crop, as well as a one-off charge from
a court arbitration. As in prior years, management has conducted an impairment assessment using projections over five years. Our
current view for yield and sugar content from beet sugar and our lower estimated margins due to expected increases in raw
refining volumes in the future has resulted in a non-cash exceptional charge of €136m to write down the book value of property,
plant and equipment and operating intangibles from €193m to €57m (2020 – no impairment of plant, property and equipment but
there was a €26m impairment of goodwill). €134m of the impairment charge relates to property, plant and equipment and the
remaining €2m relates to operating intangibles. Estimates of long-term growth rates beyond the forecast period were 2% (2020 –
2%). The carrying value is sensitive to assumptions around beet crop area, discount rate and long-term carbon pricing (where
climate change is addressed by creating financial incentives for companies to lower their emissions), and sugar price. A sensitivity
of +/- 5% on long-term beet area affects carrying value by +/- €18m, and a movement in carbon pricing of +/- €5 per tonne changes
carrying value by +/- €3m. Applying sensitivity of +/- 1% to the sugar price will change the carrying value by €9m. Increasing the
discount rate used from 11.7% (2020 – 12.1%) to 11.9% reduces carrying value by €3m.

Given the ongoing trading challenges in some of our smaller sugar businesses, we have reviewed our forward projections for these
units, including the forecast evolution of beet area and yields. As a result, we have made a non-cash adjustment of £21m to the
relevant net asset values as an exceptional charge this year.

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$63m on a CGU carrying value of A$292m (2020 – headroom of A$61m on a CGU carrying value of A$346m). The discount rate
used was 8.5% (2020 – 10.7%). Estimates of long-term growth rates beyond the forecast periods were 2.0% (2020 –2.0%) per
annum. A sensitivity of +/- 1% on the discount rate decreases/increases headroom by A$51m either way (2020 – A$38m and
A$47m respectively).

Total
£m

10,852
(35)
547
(103)
–
(16)
11,245
539
(63)
–
(31)
(424)
11,266

5,083
(15)
538
65
2
(92)
13
5,594
535
139
(10)
(49)
(21)
(208)
5,980

5,769
5,651
5,286

2020
£m
334

87
–
10
–
–
(13)
84
10
–
–
–
(2)
92

40
–
10
–
–
–
(7)
43
8
–
–
–
–
–
51

47
41
41

2021
£m
307

Capital expenditure commitments – contracted but not provided for

In addition to the amounts disclosed above, there are £10m (2020 – £30m) of property, plant and equipment classified as assets
held for sale (see note 15). Of this, £3m (2020 – £13m) is freehold land and buildings.

172

Associated British Foods plc Annual Report 2021

173

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

10. Leases
Most of the Group’s right-of-use assets are associated with our leased property portfolio in the Retail segment.

Right-of-use assets

Current
Non-current

2021
£m
304
2,992
3,296

2020
£m
313
3,342
3,655

Land and buildings
£m

Plant and machinery
£m

Fixtures and fittings
£m

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
Additions
Lease incentives
Other movements
Effect of movements in foreign exchange
At 18 September 2021

Depreciation and impairment
Depreciation for the year
Impairment
Effect of movements in foreign exchange
At 12 September 2020
Depreciation for the year
Other movements
Effect of movements in foreign exchange
At 18 September 2021
Net book value
At 12 September 2020
At 18 September 2021

3,170
165
(35)
(18)
63
3,345
97
(18)
(6)
(157)
3,261

291
85
9
385
279
–
(20)
644

2,960
2,617

33
13
–
1
–
47
18
–
–
(2)
63

16
1
–
17
17
(1)
(1)
32

30
31

1
–
–
–
–
1
1
–
–
–
2

1
–
–
1
–
–
–
1

–
1

Total
£m

3,204
178
(35)
(17)
63
3,393
116
(18)
(6)
(159)
3,326

308
86
9
403
296
(1)
(21)
677

2,990
2,649

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 no impairment of right-of-use assets. In 2020 there was an £86m impairment charge, of which £82m related to
Primark (in exceptional items), £2m related to Allied Bakeries (in operating profit) and £2m related to Jasol New Zealand (in loss on
closure of business).

Lease liability

Land and buildings
£m

Plant and machinery
£m

Fixtures and fittings
£m

Cost
IFRS 16 opening balance adjustment at 15 September 2019
Additions
Interest expense relating to lease liabilities
Repayment of lease liability
Other movements
Effect of movements in foreign exchange
At 12 September 2020
Additions
Interest expense relating to lease liabilities
Repayment of lease liability
Other movements
Effect of movements in foreign exchange
At 18 September 2021

3,641
165
83
(299)
(36)
66
3,620
91
83
(354)
(11)
(167)
3,262

36
13
1
(15)
–
–
35
18
1
(19)
1
(2)
34

1
–
–
(1)
–
–
–
1
–
(1)
–
–
–

Total
£m

3,678
178
84
(315)
(36)
66
3,655
110
84
(374)
(10)
(169)
3,296

Lease liabilities comprise £3,281m (2020 – £3,639m) capital payable and £15m (2020 – £16m) interest payable. The interest
payable is all current and disclosed within trade and other payables. Repayments comprise £290m (2020 – £247m) capital and
£84m (2020 – £68m) interest.

Other information relating to leases
The Group had the following expense relating to short-term leases and low-value leases:

Land and buildings
Plant and machinery
Fixtures and fittings

2021
£m
1
1
2
4

2020
£m
2
2
1
5

The Group expensed £1m (2020 – £1m) of variable lease payments that do not form part of the lease liability. Cash outflows of
£2m (2020 – £2m) that do not form part of the lease liability are expected to be made in the next 12 months.

Rental receipts of £6m (2020 – £7m) were recognised relating to operating leases. The total of future minimum rental
receipts expected to be received is £45m (2020 – £38m). £17m (2020 – £9m) is due to be received in respect of sub-leasing
right-of-use assets.

11. Investments in joint ventures and associates

At 14 September 2019
Acquisitions
Profit for the period
Dividends received
Effect of movements in foreign exchange
At 12 September 2020
Acquisitions
Profit for the period
Dividends received
Effect of movements in foreign exchange
At 18 September 2021

Joint ventures
£m
225
–
46
(38)
–
233
43
66
(58)
(6)
278

Associates
£m
50
1
11
(5)
(1)
56
–
13
(5)
(4)
60

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

2021
£m
160
441
(285)
(57)
19
278

2020
£m
145
372
(258)
(45)
19
233

Associates
2021
£m
38
302
(278)
(3)
1
60

2020
£m
33
224
(199)
(3)
1
56

1,566

1,445

914

792

174

Associated British Foods plc Annual Report 2021

175

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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 scheme represents 91% (2020 – 91%) of the Group’s defined benefit scheme assets and 88% (2020
– 88%) 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 2020, using the current unit method, and
revealed a deficit of £302m. The market value of the Scheme assets was £3,317m, representing 92% of members’ accrued
benefits after allowing for expected future salary increases.

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 75% of inflation sensitivity and 48% 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 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. This was charged as an exceptional past service cost in the income statement in the 2019
financial year, since the liabilities related to employee service between 1990 and 1997 and had no link to current business
performance. Subsequent changes were accounted for in other comprehensive income.

Following a further High Court ruling on 20 November 2020 regarding the equalisation of GMPs, a further £4m exceptional past
service cost was charged in the income statement in the current financial year, 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 £41m overseas,
totalling £81m (2020 – UK £40m, overseas £39m, totalling £79m).

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)

2021
UK
%
1.8
2.6-3.4
3.7-4.3
2.1-3.2
2.5-2.7

2021
Overseas
%
0-14.1
0-12.4
0-12.0
0-12.0
0-2.0

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

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.

The mortality assumptions used to value the UK defined benefit schemes in 2021 are derived from the S3 mortality tables with
improvements in line with the 2019 projection model prepared by the Continuous Mortality Investigation of the UK actuarial
profession (2020 – S2 mortality tables with improvements in line with the 2018 projection model), with a 0-year rating movement
for males and females (2020 – 0-year rating movement for males and females), both with a long-term trend of 1.5% (2020 – 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 2021 (2020)
Member aged 65 in 2041 (2040)

2021

Male
22.1
23.7

Female
24.3
26.1

2020

Male
21.6
23.3

Female
24.3
26.1

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 18 September 2021 is:

Discount rate
Inflation
Rate of real increase in salaries
Rate of mortality

Change in assumption
decrease/increase by 0.25%
increase/decrease by 0.25%
increase/decrease by 0.25%
reduce/increase by one year

Impact on scheme liabilities
increase by 4.5%/decrease by 4.2%
increase by 2.7%/decrease by 2.8%
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

UK
£m
1,246
840
812
360
1,057
4,315
(3,719)
596
–
596

2021

Overseas
£m
194
86
49
29
55
413
(490)
(77)
(26)
(103)

Total
£m
1,440
926
861
389
1,112
4,728
(4,209)
519
(26)
493

UK
£m
1,115
755
715
345
831
3,761
(3,705)
56
–
56

2020
Overseas
£m
189
52
62
26
63
392
(501)
(109)
(13)
(122)

Total
£m
1,304
807
777
371
894
4,153
(4,206)
(53)
(13)
(66)

633
(37)
596

7
(110)
(103)

640
(147)
493

94
(38)
56

6
(128)
(122)

100
(166)
(66)

Unfunded liability included in the present value of scheme
liabilities above

(37)

(66)

(103)

(38)

(64)

(102)

* 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.

UK Scheme
Scheme assets include £345m (2020 – £235m) of derivative instruments, £482m (2020 – £440m) of corporate debt instruments
and £1,394m (2020 – £710m) of government debt.

Corporate and other bonds assets of £812m (2020 – £715m) include £225m (2020 – £187m) of assets whose valuation is not
derived from quoted market prices. The valuation for all other equity assets, government bonds, and 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 date. Cash and other assets includes
£697m (2020 – £547m) of assets whose valuation is not derived from quoted market prices.

176

Associated British Foods plc Annual Report 2021

177

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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 26% (2020 – 25%) in respect of active participants, 23% (2020 – 24%) for deferred
participants and 51% (2020 – 51%) for pensioners.

The weighted average duration of the defined benefit scheme liabilities at the end of the year is 17 years for both UK and overseas
schemes (2020 – 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 (expense)/income:
Net interest income on the net pension asset
Interest charge on irrecoverable surplus
Net impact on profit before tax

2021
£m

(46)
(4)
(81)
(131)

–
(1)
(132)

2020
£m

(47)
–
(79)
(126)

3
(1)
(124)

Cash flow
Group cash flow in respect of employee benefits schemes comprises contributions paid to funded schemes of £39m (2020
– £34m) and benefits paid in respect of unfunded schemes of £3m (2020 – £3m). Contributions to funded defined benefit schemes
are subject to periodic review. Contributions to defined contribution schemes amounted to £81m (2020 – £79m).

Total contributions to funded schemes and benefit payments by the Group in respect of unfunded schemes in 2022 are currently
expected to be approximately £30m in the UK and £10m overseas, totalling £40m (2020 – UK £31m, overseas £11m, totalling
£42m).

Other comprehensive income
Remeasurements of the net pension 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 (losses)/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 (losses)/gains arising from changes in demographic
assumptions
Experience gains on scheme liabilities
Effect of movements in foreign exchange
At end of year

2021
assets
£m
4,153
–
7
39
(179)
–
69
664
–

–
–
(25)
4,728

2020
assets
£m
4,206
–
7
34
(165)
–
83
(13)
–

–
–
1
4,153

2021
liabilities
£m
(4,206)
(46)
(7)
–
182
(4)
(69)
–
(101)

(4)
12
34
(4,209)

2020
liabilities
£m
(4,164)
(47)
(7)
–
168
–
(80)
–
(144)

44
29
(5)
(4,206)

2021
£m
664
(101)
(4)
12
(12)
559

2021
net
£m
(53)
(46)
–
39
3
(4)
–
664
(101)

(4)
12
9
519

2020
£m
(13)
(144)
44
29
(5)
(89)

2020
net
£m
42
(47)
–
34
3
–
3
(13)
(144)

44
29
(4)
(53)

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

2021
£m
(13)
(12)
(1)
–
(26)

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
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 18 September 2021

Property,
plant and
equipment
£m
142
–
(5)
–
–

Intangible
assets
£m
95
–
(9)
–
2

Employee
benefits
£m
–
–
–
(19)
–

Financial
assets and
liabilities
£m
(2)
–
–
–
–

Leases
£m
–
(62)
(28)
–
–

Provisions
and other
temporary
differences
£m
(100)
21
(8)
(2)
–

Tax value of
carry-
forward
losses
£m
(34)
–
(1)
–
1

13
–

2
(11)
141
(36)
–
–

29
–

2
1
137

3
–

–
(1)
90
(6)
–
5

6
–

–
(5)
90

(1)
–

–
(2)
(93)
(8)
–
–

(6)
–

–
6
(101)

(1)
4

–
–
(16)
(1)
105
–

(3)
39

–
1
125

–
–

–
–
(2)
–
14
–

–
–

–
–
12

(1)
–

–
–
(90)
5
–
–

(5)
–

–
6
(84)

–
–

–
2
(32)
2
–
–

(4)
–

–
–
(34)

2020
£m
(9)
(5)
(1)
2
(13)

Total
£m
101
(41)
(51)
(21)
3

13
4

2
(12)
(2)
(44)
119
5

17
39

2
9
145

Provisions and other temporary differences include provisions of £(93)m, biological assets of £29m, tax credits of £(15)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

2021
£m
(218)
363
145

2020
£m
(212)
210
(2)

Deferred tax assets have not been recognised in respect of tax losses of £310m (2020 – £238m) and other temporary differences
of £107m (2020 – £119m). Of the total tax losses, £170m (2020 – £162m) will expire at various dates between 2021 and 2026.
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 £2,537m (2020 – £2,497m), resulting in temporary
differences of £1,167m (2020 – £1,010m). 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.

178

Associated British Foods plc Annual Report 2021

179

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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

2021
£m

32
23
55

1,021
178
16
1,215
152
1,367

2020
£m

39
6
45

1,022
159
15
1,196
132
1,328

17. Biological assets

At 14 September 2019
Transferred to inventory
Purchases
Changes in fair value
Effect of movements in foreign exchange
At 12 September 2020
Transferred to inventory
Purchases
Changes in fair value
At 18 September 2021

Growing
cane
£m
80
(93)
–
93
(14)
66
(92)
–
105
79

Other
£m
4
(10)
1
11
–
6
(13)
1
12
6

Total
£m
84
(103)
1
104
(14)
72
(105)
1
117
85

As a result of this proposed sale and as the proceeds are in excess of the carrying value of the assets after they were impaired in
2019, £10m of the impairment recorded against the property, plant and equipment has been reversed through profits less losses
on sale and closure of businesses.

Estimated sucrose content
Estimated sucrose price

2021
£m

2020
£m

18. Cash and cash equivalents

In addition to the amounts disclosed above, there are no trade and other receivables (2020 – £4m) 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 £32m (2020 – £40m) in respect of finance lease receivables, with £28m in non-current loans
and receivables and £4m in current other receivables (2020 – £35m in non-current loans and receivables and £5m in current other
receivables). Minimum lease payments receivable are £4m within one year, £17m between one and five years and £11m in more
than five years (2020 – £5m within one year, £18m between one and five years and £17m 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

Following the creation of a joint venture in China with Wilmar International, AB Mauri sold two yeast and bakery ingredients
companies to the joint venture, which was completed in the second quarter of 2021. At year end, AB Mauri agreed the sale of a
further yeast company to the joint venture, which is conditional upon regulatory approvals and is expected to be completed in the
first half of 2022. The business has been classified as an asset held for sale.

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

–
10
3
–
–
13

–
–

2
30
5
4
2
43

(5)
(5)

2021
£m
411
55
1,685
2,151
(95)

2020
£m
429
53
1,668
2,150
(96)

In addition to the amounts disclosed above, there are £3m (2020 – £5m) of inventories classified as assets held for sale
(see note 15).

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 18 September 2021:

Expected area to harvest (hectares)
Estimated yield (tonnes cane/hectare)
Average maturity of growing cane

South Africa
6,363
66.9
46.1%

Malawi
18,911
108.4
67.4%

Zambia
16,584
115.7
65.7%

Eswatini
8,664
102.0
67.7%

Tanzania Mozambique
5,545
83.6
71.6%

9,526
73.9
46.2%

The following assumptions were used in the determination of the estimated sucrose tonnage at 12 September 2020:

Expected area to harvest (hectares)
Estimated yield (tonnes cane/hectare)
Average maturity of growing cane

South Africa
6,834
68.7
46.5%

Malawi
19,019
107.0
67.4%

Zambia
17,167
108.5
65.7%

Eswatini
8,549
102.0
67.0%

Tanzania Mozambique
5,724
87.0
71.6%

9,076
77.5
46.2%

A 1% change in the unobservable inputs could increase or decrease the fair value of growing cane as follows:

2021

+1%
£m
1.1
1.4

-1%
£m
(1.1)
(1.4)

2020

+1%
£m
1.0
1.3

-1%
£m
(1.0)
(1.3)

Note

2021
£m

759
1,516
2,275

(86)
2,189

2,275
–
2,275

2020
£m

718
1,280
1,998

(89)
1,909

1,996
2
1,998

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

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.

180

Associated British Foods plc Annual Report 2021

181

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

19. Loans and overdrafts

Current loans and overdrafts
Secured loans
Unsecured loans and overdrafts

Non-current loans
Secured loans
Unsecured loans

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

Note

2021
£m

–
330
330

1
75
76
406

2021
£m

86
80
3
217
7
7
5
406

2020
£m

4
150
154

1
317
318
472

2020
£m

89
101
6
235
13
21
2
472

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

Trade payables
Accruals

Deferred income and other non-financial payables

2021
£m
938
997
1,935
451
2,386

2020
£m
909
943
1,852
464
2,316

In addition to the amounts disclosed above, there are no trade and other payables (2020 – £5m) 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.

In a small number of businesses, the Group utilises supplier financing arrangements to enable participating suppliers, at each
supplier’s sole discretion, to sell any or all amounts due from the Group to a third party bank earlier than the invoice due date, at
better financing rates than the supplier alone could achieve.

Payment terms for suppliers are identical, irrespective of whether they choose to participate. The Group receives no benefit from
these arrangements.

Contractual terms and invoice due dates are unchanged and the Group considers amounts owed to the third party bank as akin to
amounts owed to the supplier. Such amounts are therefore included within trade payables and associated cash flows are included
within operating cash flows, as they continue to be part of the Group’s normal operating cycle.

At year end, the value of invoices sold by suppliers under supply chain financing arrangements was £27m (2020 – £10m).

21. Provisions

At 12 September 2020
Created
Utilised
Released
Effect of movements in foreign exchange
At 18 September 2021

Current
Non-current

Restructuring
£m
86
24
(41)
(15)
(2)
52

Deferred
consideration
£m
20
4
(2)
(7)
(1)
14

41
11
52

6
8
14

Other
£m
58
22
(14)
(26)
(4)
36

24
12
36

Total
£m
164
50
(57)
(48)
(7)
102

71
31
102

Financial liabilities within provisions comprised deferred consideration in both years (see note 26).

Restructuring
Restructuring provisions include business restructure costs, including redundancy, associated with the Group’s announced
reorganisation plans. These restructuring provisions are largely expected to be utilised in the next financial year.

Deferred consideration
Deferred consideration comprises estimates of amounts due to the previous owners of businesses acquired by the Group which
are often linked to performance or other conditions.

Other
Other provisions mainly comprise litigation claims and warranty claims arising from the sale and closure of businesses. The extent
and timing of the utilisation of these provisions is more uncertain given the nature of the claims and the period of the warranties.

22. Share capital and reserves

Share capital
At 12 September 2020 and 18 September 2021, 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 two million £1 deferred shares at par. Both are
non-distributable.

Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations, as well as from the translation of liabilities that hedge the Group’s net investment in foreign subsidiaries.

Hedging reserve
The hedging reserve comprises all changes in the value of derivatives to the extent that they are effective cash flow hedges, net of
amounts recycled from the hedging reserve on occurrence of the hedged transaction or when the hedged transaction is no longer
expected to occur.

182

Associated British Foods plc Annual Report 2021

183

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

23. Acquisitions and disposals

Acquisitions

Total conditional allocations under the Group’s equity-settled share-based payment plans are as follows:

Balance
outstanding at
the beginning
of the period
5,030,360
4,660,667

Granted/
awarded
2,498,918
1,970,377

Vested
(440,870)
(993,955)

Expired/
lapsed
(1,669,171)
(606,729)

Balance
outstanding
at the end
of the period
5,419,237
5,030,360

2021
In May 2021, the Group’s Ingredients business acquired DR Healthcare España, a Spanish enzymes producer. Total consideration
for this transaction was £14m, comprising £12m cash consideration and £2m deferred consideration. Net assets acquired included
non-operating intangible assets of £19m, which were recognised with their related deferred tax of £5m.

2021
2020

During the period, the Group contributed £43m to the bakery ingredients joint venture in China with Wilmar International and also
paid £2m of deferred consideration on acquisitions made in prior years.

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.

Disposals

2021
In the first half of 2021, the Group sold a number of Chinese yeast and bakery ingredients businesses into a new Chinese joint
venture with Wilmar International. These businesses were classified as a disposal group and held for sale at the previous year end.
Gross cash consideration was £39m with £5m of cash disposed with the businesses. The joint venture also assumed £11m of
debt, resulting in net proceeds of £45m. Net assets disposed were £33m with provisions of £6m for associated restructuring costs
and a £6m gain on the recycling of foreign exchange differences. The gain on disposal was £6m.

In August, the Group agreed the sale of a further factory in China to the same joint venture, subject to regulatory approval. These
factory assets were fully written down in 2019 when the proposed joint venture with Wilmar was first announced. A non-cash
reversal of impairment of £10m has been included in profit on sale and closure of business.

Closure provisions of £3m relating to disposals made in previous years were no longer required and were released to sale and
closure of business in Ingredients and Grocery, both in Asia Pacific. Property provisions of £1m held in previous years were also no
longer required and were released in the Central and UK segments.

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.

24. Share-based payments

The annual charge in the income statement for equity-settled share-based payments schemes was £17m (2020 – £8m). The Group
had the following principal equity-settled share-based payment plans in operation during the period:

Associated British Foods 2016 Long-term Incentive Plan (‘the 2016 LTIP’)
The 2016 LTIP was approved and adopted by the Company at the AGM 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 2016 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 117 to 135.

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 18 September 2021 the Trust held
1,347,089 (2020 – 1,787,959) ordinary shares of the Company. The market value of these shares at the year end was £25m (2020
– £35m). The Trust has waived its right to dividends. Movements in the year were a release of 440,870 shares (2020 – release of
993,955 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 1,879p (2020 – 2,327p) and the weighted average share price was 2,021p (2020
– 2,502p). The dividend yield used was 2.5% (2020 – 2.5%).

25. Analysis of net debt

Short-term loans
Long-term loans
Lease liabilities
Total liabilities from financing activities
Cash at bank and in hand, cash equivalents and
overdrafts
Current asset investments

At
12 September
2020
£m
(65)
(318)
(3,639)
(4,022)

1,909
32
(2,081)

At
14 September
2019
(after IFRS 16
transition)
£m
(89)
(348)
(3,678)
(4,115)

1,358
29
(2,728)

Cash flow
£m
10
18
290
318

Acquisitions
and disposals
£m
10
–
–
10

New leases
and non-cash
items
£m
(202)
202
(100)
(100)

Exchange
adjustments
£m
3
22
168
193

At
18 September
2021
£m
(244)
(76)
(3,281)
(3,601)

340
2
660

–
–
10

–
–
(100)

(60)
(2)
131

2,189
32
(1,380)

New leases
and non-cash
items
£m
(23)
23
(143)
(143)

Exchange
adjustments
£m
4
5
(66)
(57)

At
12 September
2020
£m
(65)
(318)
(3,639)
(4,022)

Disposals
£m
–
–
1
1

–
–
1

–
–
(143)

(6)
1
(62)

1,909
32
(2,081)

Cash flow
£m
43
2
247
292

557
2
851

Cash and cash equivalents comprise bank and cash balances, call deposits and short-term investments with original maturities of
three months or less. £86m (2020 – £89m) 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 (see
note 18 for a reconciliation).

Net cash excluding lease liabilities is £1,901m (2020 – £1,558m).

£86m (2020 – £89m) of bank overdrafts plus the £244m (2020 – £65m) of short-term loans shown above comprise the £330m
(2020 – £154m) of current loans and overdrafts shown on the face of the balance sheet.

Current and non-current lease liabilities shown on the face of the balance sheet of £289m and £2,992m respectively (2020 –
£297m and £3,342m respectively) comprise the £3,281m (2020 – £3,639m) of lease liabilities shown above.

Current asset investments comprise term deposits and short-term investments with original maturities of greater than three
months but less than one year.

184

Associated British Foods plc Annual Report 2021

185

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

26. Financial instruments

Financial instruments include £nil (2020 – £3m) of trade and other receivables and £nil (2020 – £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 2021 – £417m; 2020 – £498m)
Lease liabilities (fair value 2021 – £3,293m; 2020 – £3,807m)
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.

2021
£m

2020
£m

2,275
32
1,215
32

22
44
49
3,701

1,998
32
1,199
39

14
60
18
3,376

(1,935)
(1)
(405)
(3,281)
(14)

(1,857)
(5)
(467)
(3,639)
(20)

(1)
–

(16)
(1)

(12)

(27)

(5)
(16)
(5,670)
(1,969)

(22)
(21)
(6,075)
(2,699)

Valuation of financial instruments carried at fair value
Financial instruments carried at fair value on the balance sheet comprise derivatives and investments. 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

2021

2020

Contractual/
notional
amounts
£m

Level 1
£m

Level 2
£m

Total
£m

Contractual/
notional
amounts
£m

Level 1
£m

Level 2
£m

Total
£m

1,360
228
188
1,776

702
196
166
1,064

–
–
4
4

–
–
(1)
(1)

31
44
45
120

(6)
(12)
(15)
(33)

31
44
49
124

(6)
(12)
(16)
(34)

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)

186

Associated British Foods plc Annual Report 2021

187

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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.

Opening balance
Losses/(gains) 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 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

2021

2020

Currency
derivatives
(excluding
cross-
currency)
£m
6

Cross-
currency
swaps
£m
(1)

Commodity
derivatives
£m
2

Total
£m
7

Currency
derivatives
(excluding
cross-
currency)
£m
1

Cross-
currency
swaps
£m
1

Commodity
derivatives
£m
6

–

8
–
–

(37)
6
–
(14)

(9)
(4)
(1)
–
(14)

–

–
–
(16)

–
–
–
(1)

–
–
–
(1)
(1)

(55)

(36)

–

(4)
9
–

12
8
–
(28)

(25)
(2)
(1)
–
(28)

4
9
(16)

(25)
14
–
(43)

(34)
(6)
(2)
(1)
(43)

(4)

(1)
–
–

(12)
(1)
2
6

6
–
–
–
6

–

–
–
(6)

–
–
–
(1)

–
–
–
(1)
(1)

–

1
(18)
–

(6)
1
–
2

1
1
–
–
2

Total
£m
8

–
(18)
(6)

(18)
–
2
7

7
1
–
(1)
7

Of the closing balance of £43m, £43m is attributable to equity shareholders and £nil to non-controlling interests (2020 – £7m, £7m
attributable to equity shareholders and £nil to non-controlling interests). Of the net movement in the year of £(50)m, £(50)m is
attributable to equity shareholders and £nil to non-controlling interests (2020 – £(1)m, £(2)m attributable to equity shareholders and
£1m 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 £(1)m (2020 – £2m).

The balance in the cost of hedging reserve was not significant at 12 September 2020 or 18 September 2021.

d) Financial risk identification and management
The Group is exposed to the following financial risks from the 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. Group Treasury works closely with the Group’s
procurement teams to manage commodity risks. Group Treasury policy seeks to ensure that adequate financial resources are
available 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 no borrowings (2020
– none) that were designated as hedges of its net investment in foreign operations.

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 significant. 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 might 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 £nil (2020 – 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 £14m has been credited to the translation
reserve, all of which was attributable to equity shareholders (2020 – £4m has been debited to the translation reserve).

188

Associated British Foods plc Annual Report 2021

189

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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, other 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 commodity derivatives for a +/- 20% movement in underlying commodity prices are £24m
(2020 – £15m) and (£24m) (2020 – (£14m)), 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 18 September 2021, £303m (75%) (2020 – £338m and 72%) of total debt was subject to fixed rates of interest, the majority of
which is the US private placement loans of £297m (2020 – £336m).

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 189.

Transaction risk
Currency transaction exposure occurs where a business makes sales and purchases in a currency other than its functional
currency. It also arises where monetary assets and liabilities of a business are not denominated in its functional currency, and
where dividends or surplus funds are remitted from overseas. The Group’s policy is to match transaction exposures wherever
possible, and to hedge actual exposures and firm commitments as soon as they occur by using forward foreign currency contracts.
All foreign currency instruments contracted with non-Group entities to manage transaction exposures are undertaken by Group
Treasury or, where foreign currency controls restrict Group Treasury acting on behalf of subsidiaries, under its guidance.
Identification of transaction exposures is the responsibility of each business.

The Group uses derivatives (principally forward foreign currency contracts and time options) to hedge its exposure to movements
in exchange rates on its foreign currency trade receivables and payables. The Group does not seek formal fair value hedge
accounting for such transaction hedges. Instead, such derivatives are classified as held for trading and marked to market through
the income statement. This offsets the income statement impact of the retranslation of the foreign currency trade receivables and
payables.

Economic (forecast) risk
The Group 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; and

– sourcing for Primark – costs are denominated in a number of currencies, predominantly sterling, euros and US dollars.

Elsewhere, a number of businesses make sales and purchase a variety of raw materials in foreign currencies (primarily US dollars and
euros), giving rise to transaction exposures. In all other material respects, businesses tend to operate in their functional currencies.

The table below illustrates the effects of hedge accounting on the consolidated balance sheet 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.

2021

Carrying
amount
assets/
(liabilities)
£m

Contract
notional
£m

Furthest
maturity
date
£m

Hedge
ratio
%

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)

– cross-currency swaps
– commodity derivatives

1,367
150
350

16
Sep 22
28 Mar 22
33 Aug 22

100%
100%
100%

Designated net investment hedging relationships:
– currency derivatives (cross-currency swaps)

129

(8) Mar 22

100%

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)

34
78
4

Dec 22
16 Mar 24
Jan 23

–

100%
100%
100%

(4) Mar 24

100%

2020

16
(11)
34

1
(6)
–

(16)
11
(34)

(10)

(1)
6
–

(5)

Carrying
amount
assets/
(liabilities)
£m

Furthest
maturity
date
£m

Contract
notional

£m

Hedge
ratio
%

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

1,205
317

(8) Sep 21
Sep 21
1

100%
100%

25
254
1

–

Feb 22
60 Mar 24
Jan 22

–

100%
100%
100%

Designated net investment hedging relationships:
– currency derivatives (cross-currency swaps)

217

(27) Mar 24

100%

(10)
1

–
(3)
–

(5)

10
(1)

–
3
–

190

Associated British Foods plc Annual Report 2021

191

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

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 18
September 2021, £1,401m of forward foreign currency contracts designated as cash flow hedges were outstanding (2020 –
£1,230m), largely in relation to purchases of USD (£864m) and sales of EUR (£199m) with varying maturities up to December 2022.
Weighted average hedge rates for these contracts are GBPUSD: 1.39, EURUSD: 1.19 and GBPEUR: 1.12. Weighted average hedge
rates for the cross-currency swaps are GBPUSD: 1.70 and GBPEUR: 1.26. Commodity derivatives designated as cash flow hedges
related to a range of underlying hedged items, with varying maturities up to January 2023.

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

The following major exchange rates applied during the year:

US dollar
Euro
Rand
Renminbi
Australian dollar

Sterling
£m

US dollar
£m

2021

Euro
£m

1
–
1

(19)
–
(19)

62
(2)
60

81
39
120

(381)
(218)
(599)

1,374
(133)
1,241

762

22
45
67

(36)
–
(36)

197
(431)
(234)

(203)

Sterling
£m

US dollar
£m

2020

Euro
£m

1
–
1

(21)
–
(21)

69
(6)
63

103
39
142

(351)
(235)
(586)

1,353
(211)
1,142

698

11
50
61

(34)
–
(34)

58
(504)
(446)

(419)

Other
£m

40
19
59

(8)
(3)
(11)

221
(50)
171

219

Other
£m

74
15
89

(8)
–
(8)

232
(103)
129

210

Average rate

Closing rate

2021
1.37
1.14
20.34
8.90
1.82

2020
1.27
1.14
20.53
8.94
1.88

2021
1.38
1.17
20.27
8.89
1.89

Total
£m

144
103
247

(444)
(221)
(665)

1,854
(616)
1,238

820

Total
£m

189
104
293

(414)
(235)
(649)

1,712
(824)
888

532

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.

Sensitivity analysis

10% strengthening against other currencies of
Sterling
US dollar
Euro
Other

2021
impact on
profit for
the period
£m
–
(2)
12
12

2021
impact on
total
equity
£m
5
87
(24)
24

2020
impact on
profit for
the period
£m
(1)
(4)
–
10

2020
impact on
total
equity
£m
3
79
(44)
20

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

2021
impact on
profit for
the period
£m
(19)
3
–
–
(4)

2020
impact on
profit for
the period
£m
(14)
(1)
1
(2)
(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 18 September 2021. 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

2021
£m
2,275
32
1,215
32
23
9
103
3,689

2020
£m
1,998
32
1,199
39
6
10
65
3,349

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.

192

Associated British Foods plc Annual Report 2021

193

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

26. Financial instruments continued

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
A-
BBB+
BBB
Not rated
As at 18 September 2021

Standard & Poors rating
A+
AA-
A
BBB+
BBB
BB-
As at 12 September 2020

Current asset
investments
£m
–
29
–
–
–
–
–
29

Cash
equivalents
£m
–
–
–
11
–
1
–
12

Current asset
investments
£m
–
30
–
–
–
–
30

Cash
equivalents
£m
–
–
–
–
3
–
3

Currency
derivative
assets
£m
2
–
3
16
3
–
–
24

Derivatives

Cross-
currency
swaps
£m
16
–
–
11
5
–
–
32

Currency
derivative
assets
£m
–
3
–
1
–
1
5

Derivatives

Cross-currency
swaps
£m
16
–
17
–
–
–
33

Commodity
£m
–
2
1
–
–
–
37
40

Commodity
£m
–
–
–
1
–
–
1

Total
£m
18
31
4
38
8
1
37
137

Total
£m
16
33
17
2
3
1
72

Cash of £759m (2020 – £718m), cash equivalents of £1,504m (2020 – £1,277m) and current asset investments of £3m (2020 –
£2m) have been excluded from this analysis as they are available on demand.

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 on a prepayment basis. Aggregate exposures are monitored at Group level.

Many 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 of which 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

2021
£m
442
306
164
303
1,215

2021
£m
899
100
16
6
24
(24)
1,021

2021
£m
27
4
(2)
(3)
(2)
24

2020
£m
408
319
160
313
1,200

2020
£m
934
66
12
8
31
(27)
1,024

2020
£m
24
9
(1)
(4)
(1)
27

No trade receivables were written off directly to the income statement in either year.

The geographical and business line complexity of the Group, combined with the fact that expected credit 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 credit
losses. No significant expected credit 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.

The Board’s treasury policies are in place to maintain a strong capital base and manage the Group’s balance sheet to ensure
long-term financial stability. They are the basis for investor, creditor and market confidence and enable the successful development
of the business.

Details of the Group’s borrowing facilities are given in section i) on page 197.

194

Associated British Foods plc Annual Report 2021

195

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

26. Financial instruments continued

The following table analyses the contractual undiscounted cash flows relating to financial liabilities at the balance sheet date and
compares them to carrying amounts:

Non-derivative financial liabilities
Trade and other payables
Secured loans
Unsecured loans and overdrafts
Lease liabilities
Deferred consideration
Derivative financial liabilities
– Currency derivatives (excluding

cross-currency swaps) (net payments)
– Commodity derivatives (net payments)
Total financial liabilities

Note

20
19
19
10
21

Note

20
19
19
10
21

Due
between
6 months
and 1 year
£m

Due
between
1 and 2
years
£m

Due within
6 months
£m

(1,915)
–
(320)
(173)
(6)

(5)
(12)
(2,431)

(20)
–
(9)
(189)
–

(2)
(4)
(224)

–
(1)
(13)
(381)
(8)

–
–
(403)

Due
between
6 months
and 1 year
£m

Due
between
1 and 2
years
£m

Due within
6 months
£m

(1,837)
(4)
(110)
(186)
(2)

(33)
(20)
(2,192)

(20)
–
(58)
(189)
(1)

(4)
(2)
(274)

–
–
(245)
(385)
(3)

–
–
(633)

2021

Due
between
2 and 5
years
£m

–
–
(75)
(1,048)
–

–
–
(1,123)

2020

Due
between
2 and 5
years
£m

–
(1)
(85)
(1,099)
(15)

Due after
5 years
£m

Contracted
amount
£m

Carrying
amount
£m

–
–
–
(2,515)
–

(1,935)
(1)
(417)
(4,306)
(14)

(1,935)
(1)
(405)
(3,281)
(14)

–
–
(2,515)

(7)
(16)
(6,696)

(6)
(16)
(5,658)

Due after
5 years
£m

Contracted
amount
£m

Carrying
amount
£m

–
–
–
(2,883)
–

(1,857)
(5)
(498)
(4,472)
(21)

(1,857)
(5)
(467)
(3,639)
(20)

–
–
(1,200)

–
–
(2,883)

(37)
(22)
(7,182)

(38)
(22)
(6,048)

The above tables do not include forecast data for liabilities which may be incurred in the future but which were not contracted
at 18 September 2021.

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 18 September 2021, in
respect of which all conditions precedent have been met, amounted to £1,145m (2020 – £1,146m):

Syndicated facility
US private placement
Illovo
Other

Facility
£m
1,088
297
65
3
1,453

Uncommitted facilities available at 18 September 2021 were:

Moneymarket lines
Illovo
Azucarera
China
Other

Facility
£m
100
157
30
37
161
485

2021

Drawn
£m
–
297
10
1
308

2021

Drawn
£m
–
63
5
–
30
98

Undrawn
£m
1,088
–
55
2
1,145

Undrawn
£m
100
94
25
37
131
387

Facility
£m
1,088
336
86
7
1,517

Facility
£m
100
160
49
40
167
516

2020

Drawn
£m
–
336
32
3
371

2020

Drawn
£m
–
63
11
–
27
101

Undrawn
£m
1,088
–
54
4
1,146

Undrawn
£m
100
97
38
40
140
415

In addition to the above facilities there are also £114m (2020 – £98m) of undrawn and available credit lines for the purposes of
issuing letters of credit and guarantees in the normal course of business.

The Group has a £1.1bn syndicated facility which matures in July 2023. The Group also has £297m of private placement notes in
issue to institutional investors in the US and Europe. At 18 September 2021, these had an average remaining duration of 0.9 years
and an average fixed coupon of 4.1%. The other significant core committed debt facilities are 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 62 to 64.

j) Capital management
The capital structure of the Group is presented in the consolidated balance sheet. For the purpose of the Group’s capital
management, capital includes issued capital and all other reserves attributable to equity shareholders, totalling £9,921m (2020 –
£9,355m). The consolidated 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 is subject to externally-imposed capital requirements.

27. Contingencies

Litigation and other proceedings against 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 18 September 2021, Group companies have provided guarantees in the ordinary course of business amounting to £1,513m
(2020 – £2,046m).

During the year, a Thai court ruled in favour of the Group’s Ovaltine business in Thailand in a legal action it brought against one of
its suppliers in respect of a contractual dispute. The court concluded that between 2009 and 2019 the supplier had overcharged
Ovaltine Thailand and should pay compensation of 2.2 billion Thai baht (£48m). The relevant contractual relationship between the
Group and its supplier terminated at the end of 2019. The Group has not yet recorded an asset in respect of this matter as the
defendant is appealing the judgment.

196

Associated British Foods plc Annual Report 2021

197

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

28. Related parties

29. Group entities

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 plc and received in a beneficial capacity by:

(i) trustees of the Garfield Weston Foundation and their close family
(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

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

2
3
4

4
4

2021
£000

895

2020
£000

1,095

1,570

9,151

300

3,632

14
55
14,980

–
1,705
44,405
46,407
361,287
16,524
35,941
4,033
22,960
1,615

73
96
18,404

557
2,237
14,154
28,249
323,860
12,863
41,722
3,497
26,745
1,272

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 18 September 2021 was the beneficial owner of 683,073 shares (2020 – 683,073 shares) in Wittington
Investments Limited representing 79.2% (2020 – 79.2%) of that company’s issued share capital and is, therefore, the Company’s ultimate controlling party.
At 18 September 2021 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 98 and 99. Their interests, including family interests, in the Company and its subsidiary undertakings are given on
pages 129 and 130. Key management personnel are considered to be the directors, and their remuneration is disclosed within the Remuneration Report on
pages 117 to 135.

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 £32m (2020 – £40m) of finance lease receivables (see note 14). The remainder of the
balance is trading balances. All but £4m (2020 – £5m) of the finance lease receivables are non-current.

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 18 September 2021 Wittington, together with its subsidiary, Howard Investments Limited, held 431,515,108 ordinary shares
(2020 – 431,515,108) representing in aggregate 54.5% (2020 – 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 18 September 2021, have a combined interest in approximately 58.3% (2020 – 58.5%) of the
Company’s voting rights. Information on the relationship agreement between the Company and its controlling shareholders is set
out on page 137 of the Directors’ Report.

Subsidiary undertakings
A list of the Group’s subsidiaries as at 18 September 2021 is given below. The entire share capital of subsidiaries is held within the
Group except where ownership percentages are shown. These percentages give the Group’s ultimate interest and therefore allow
for situations 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 Energy Limited

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

% effective holding
if not 100%

Subsidiary undertakings

% effective holding
if not 100%

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
ABF ZMW Finance Limited
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

198

Associated British Foods plc Annual Report 2021

199

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

29. Group entities continued

Subsidiary undertakings

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
LeafTC Limited
Kingsgate Food Ingredients Limited
Mauri Products 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

% effective holding
if not 100%

Subsidiary undertakings

% effective holding
if not 100%

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
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

% effective holding
if not 100%

Subsidiary undertakings

% effective holding
if not 100%

90%

92%

Associated British Foods Holdings (China) Co., Ltd
Unit 006, Room 401, Floor 4, Building 1, No. 15
Guanghua Road, Chaoyang District, Beijing, China
AB Mauri (Beijing) Food Sales and
Marketing Company Limited
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.
No. 1 Botian Road, Economic Development Zone,
Zhangbei County, Zhangjiakou City,
Hebei Province, China
Botian Sugar Industry (Zhangbei) Co., Ltd.
Development Zone Administration Tower,
Room 1110, No. 368, Changjiang Road, Nangang
Concentrated District, Economic Development Zone,
Harbin, China
Botian Sugar Industry Co., Ltd.
1 Industrial North Street, Zhangjiakou, Zhangbei
County, Hebei Province, China
Hebei Mauri Food Co., Ltd.
8 Lancun Road, Economic and Technical Development
Zone, Minhang, Shanghai 200245, China
Shanghai AB Food & Beverages 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 Stříbro, Czech Republic
Bodit Tachov s.r.o.
Palladium, Na Poříří 1079/3a, Prague 1, 110 00, Czech
Republic
Primark Prodejny s.r.o.
Denmark
Skjernvej 42, Trøstrup, 6920 Videbæk, Denmark
AB Neo 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.

Subsidiary undertakings

Austria
Wollzeile 11/2. OG, 1010 Vienna, 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
Chaussée de la Hulpe 177/20, 1170 Bruxelles, 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
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. (in liquidation)
No. 9 Third Row, Baxian Community-new village,
Chengjiang Town, Du’an County, Hechi City,
Guangzi, China
AB Agri Animal Nutrition (Guangzi) Co., Ltd (in
liquidation)
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,
Shaanxi 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

200

Associated British Foods plc Annual Report 2021

201

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

29. Group entities continued

Subsidiary undertakings

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
11 Rue de Milan, 75009, Paris, France
ABFI France SAS
5 Boulevard de l'Oise, Immeuble Le Rond Point, 95000
Cergy Pontoise, Cédex, France
Twinings & Co S.A.S. (previously Foods
International SAS)
3-5 Rue Saint-Georges, 75009, Paris, France
Primark France SAS
845 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
Workshop D, 8th Floor, Reason Group Tower, No.403
Castle Peak Road, Kwai Chung, New Territories, Hong
Kong
Associated British Foods Asia Pacific
Holdings Limited
Hungary
Károlyi utca 12. 3. em., Budapest, 1053, Hungary
PSH Violet Korlátolt Felelősségő Társaság
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

% effective holding
if not 100%

Subsidiary undertakings

% effective holding
if not 100%

60%
60%
60%
60%

SPI Specialties Pharma Private Limited
G3/41, New Budge Budge Trunk Road, Old Dakghar,
Kolkata, West Bengal, 700141, 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
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
Primark Austria 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.
ABF Italy Holdings S.r.l.
Largo Francesco Richini 2/A, 20122, Milan, Italy
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.
Jersey
First Floor, Durell House, 28 New Street, St. Helier,
JE2 3RA, 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
Unit 30-01, Level 30, Tower A, Vertical Business Suite,
Avenue 3, Bangsar South, No.8, 59200 Jalan Kerinchi,
Kuala Lumpur, Malaysia
AB Mauri Malaysia Sdn. Bhd.
Malta
171 Old Bakery Street, Valletta, VLT 1455, Malta
Relax Limited

76%
76%

52%

70%

Subsidiary undertakings

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.
Avenida Javier Barros Sierra 495, piso 7 oficina 07-103,
Col. Santa Fe, Alvaro Obregón, Ciudad de México,
01219, México
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.
AB Mauri Netherlands European Holdings B.V.
Foods International Holding B.V.
Van Oldenbarneveltplaats 36, 3012 AH, Rotterdam,
Netherlands
Primark Fashion B.V.
Primark Netherlands B.V.
Primark Stil B.V.
Weena 505, 3013AL Rotterdam, Netherlands
AB Vista Europe B.V.
7122 JS Aalten, Dinxperlosestraatweg 122,
Netherlands
Germains Seed Technology B.V.
Oude Kerkstraat 55 4878 AK, Etten-Leur, Netherlands
Mauri Technology 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

% effective holding
if not 100%

Subsidiary undertakings

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.)
Towarowa 28,00-839 Warsaw, Poland
Primark Sklepy spolka z ograniczona
odpowiedzialnoscia (Primark Sklepy sp. z.o.o)

ul. Rabowicka 29/31, 62-020, Swarzędz – Jasin, Poland
R. Twining and Company Spółka z ograniczona
odpowiedzialnoscia (R. Twining and Company
Sp. z o. o.)

ul. Główna 3A, Bruszczewo, 64-030, Śmigiel, 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.
Rua Castilho 50, 1250-071, Lisbon, Portugal
Lojas Primark Portugal – Exploracao, Gestao e
Administracao de Espacos Comerciais S.A.
Romania
Sectorul 1, Strada Tipografilor, Nr. 11-15, S-Park, Corp
B3-B4, Birou 38, Etaj 4, Bucureřti, Romania
PSR Indigo S.R.L.
Rwanda
Shop number E002B, 1st Floor, CHIC Building,
Nyarugenge District, Nyarugenge Sector,
Kigali City, Rwanda
Illovo Sugar (Kigali) Limited
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
Staromestska 3, 811 03 Bratislava - Stare Mesto,
Slovakia
Primark Slovakia s.r.o.
Slovenia
Bleiweisova cesta 30, 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

60%

% effective holding
if not 100%
99%

96%

70%

202

Associated British Foods plc Annual Report 2021

203

Subsidiary undertakings

Vietnam
Unit 2, 100 Nguyen Thi Minh Khai Street,
Ward 6, District 3, Ho Choi Minh City, Vietnam
AB Agri Vietnam Company Limited
La Nga Commune, Dinh Quan District, Dong Nai
Province, Vietnam
AB Mauri Vietnam Limited

% effective holding
if not 100%

Subsidiary undertakings

% effective holding
if not 100%

Zambia
Nakambala Estates, Plot No. 118a Lubombo Road,
Off Great North Road, Zambia
Illovo Sugar (Zambia) Limited
Nanga Farms PLC
Tukunka Agricultural Limited
Zambia Sugar plc

66%

75%
75%
75%

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

29. Group entities continued

Subsidiary undertakings

Spain
Calle Cardenal Marcelo Spínola, 42, 28016,
Madrid, Spain
AB Azucarera Iberia, S.L. Sociedad Unipersonal
AB Vista Iberia, S.L.
Calle Levadura, 5 14710, Villarrubia, Córdoba
AB Mauri Food, S.A
AB Mauri Spain, S.L.U.
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.
Calle Escoles Pies 49, Planta Baja, 08017 Barcelona,
Spain
DR Healthcare España, S.L.U.
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 Bangchak,
Khet Prakhanong, Bangkok, 10260, Thailand
AB Food & Beverages (Thailand) Ltd.
ABF Holdings (Thailand) Ltd.
1 Empire Tower, 24th Floor, Unit 2412-2413,
South Sathorn Road, Yannawa, Sathorn, Bangkok,
10120, Thailand
AB World Foods Asia Ltd
229/110 Moo 1, Teparak Road, T. Bangsaothong,
A. Bangsaothong, Samutprakarn, 10540, Thailand
Jasol Asia Pacific Limited

% effective holding
if not 100%

Subsidiary undertakings

% effective holding
if not 100%

Turkey
Aksakal Mahallesi, Kavakpinari, Kume Evleri
No. 5, Bandirma- Balikesir, 10245, Turkey
Mauri Maya Sanayi A.S.
United Arab Emirates
Office 604ª, Jafza LOB 15, Jebel Ali Freezone, Dubai,
PO BOX 17620, United Arab Emirates
AB Mauri Middle East FZE
United States
CT Corporation System, 818 West Seventh Street,
Suite 930, Los Angeles CA 90017, United States
AB Mauri Food Inc.
The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington DE 19801,
United States
AB Enzymes, Inc.
AB Vista, Inc.
AB World Foods US, Inc.
ABF North America Corp.
ABF North America Holdings, Inc.
Abitec Corporation
ACH Food Companies, Inc.
ACH Jupiter LLC
B.V. ABF Delaware, Inc.
BakeGood, LLC
Germains Seed Technology, Inc.
PGP International, Inc.
Primark US Corp.
SPI Pharma, Inc.
SPI Polyols, LLC
Twinings North America, Inc.
101 Arch Street, Floor 3, Boston MA 02110,
United States
Primark GCM LLC
158 River Road, Unit B, Clifton, NJ 07014,
United States
Balsamic Express LLC
158 River Road, Unit A, Clifton, NJ 07014,
United States
Modena Fine Foods, Inc.
Registered Agent Solutions, 1220 S St Ste 150,
Sacramento CA 95811
PennyPacker, LLC
Registered Agent Solutions Inc., 9 E Loockerman
Street Suite 311, Dover, Kent DE 19901, United States
Prosecco Source, LLC
Uruguay
Cno. Carlos Antonio Lopez 7547,
Montevideo, Uruguay
Levadura Uruguaya S.A.
Venezuela
Oficinas Once 3 (N° 11-3) y Once 4 (N° 11-4), Torre
Mayupan, Centro Comercial San Luis, Av.Principal
Urbanización San Luis, cruce con Calle Comercio,
Caracas, Bolivarian Republic of Venezuela
Alimentos Fleischmann, C.A.,
Compañía de Alimentos Latinoamericana
de Venezuela (CALSA) S.A.

53%

75%

80%

204

Associated British Foods plc Annual Report 2021

205

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

29. Group entities continued

Joint ventures
A list of the Group’s joint ventures as at 18 September 2021 is given below. All joint ventures are included in the Group’s financial
statements using the equity method of accounting.

Joint ventures

% holding

Joint ventures

% Holding

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
GH Grain (No. 2) Limited
Grain Harvesters Limited
Intracrop Limited
Nomix Limited
North Wold Agronomy Limited
Phoenix Agronomy Limited
SOYL Limited
The Agronomy Partnership 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

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
Brayton, 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

50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%

50%

50%
50%

50%

33%

Chile
Ave. Balmaceda 3500, Valdivia, Chile
Levaduras Collico S.A.
China
1828 Tiejueshan Road, Huangdao District, Qingdao,
Shandong Province, China
Qingdao Xinghua Cereal Oil and Foodstuff Co., Ltd
Jie Liang Zi, Huo Cheug, Yi Li, Xinjiang, China
Xinjiang Mauri Food Co., Ltd.
Room 607, 6th Floor, 1379, Bocheng Road, Pudong
New District, Shanghai, China
AB Mauri Yihai Kerry Investment Company Limited
Room 608, 6th Floor, 1379, Bocheng Road, Pudong
New District, Shanghai, China
AB Mauri Yihai Kerry Food Marketing (Shanghai)
Co., Ltd
Ta Ha Comprehensive Industrial Park, Fuyu County
Economic Development Area, Qiqihar, Heilongjiang
Province, China
AB Mauri Yihai Kerry (Fu Yu) Yeast Tehcnology Co.,
Ltd
Xinsha Industrial Zone, Machong Town, Dongguan,
Guangdong Province, China
AB Mauri Yihai Kerry (Dongguan) Food Co., Ltd
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
Japan
36F Atago Green Hills Mori Tower, 2-5-1 Atago, Minato-
ku, Tokyo 105-6236, Japan
Twinings Japan Co Ltd
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

50%

25%

50%

50%
50%
50%

50%

50%
50%

Associates
A list of the Group’s associates as at 18 September 2021 is given below. All associates are included in the Group’s financial
statements using the equity method of accounting.

Associates

% holding

United Kingdom
Pacioli House, Duncan Close, Moulton Park Industrial
Estate, Northampton, NN3 6WL, 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
The Cook Kitchen, Eurolink Way, Sittingbourne, Kent,
ME10 3HH, United Kingdom
Cook Trading 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 Pork River (Australia) Pty Ltd
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
Avenida Presidente Juscelino Kubitschek, n.º 2.041,
11º andar- Vila Olímpia, CEP 04.543-011, São Paulo,
Brasil
Czarnikow Brasil Ltda
Rua Fidêncio Ramos, 308, cj64, Torre A, Vila Olímpia,
São Paulo, SP, Cep 04551-010, Brasil
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

20%

43%
43%
43%
43%
43%

16%

40%

20%
20%
20%

50%

43%

21%

43%

49%
49%
49%

43%

21%

43%

Associates
Kenya
I & M Bank House, Second Ngong Avenue,
P.O. Box 10517, Nairobi 00100, Kenya
C. Czarnikow Sugar (East Africa) Limited
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 (in liquidation)
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

% Holding

43%

30%

43%

50%

43%

30%

43%

20%

50%
50%

43%

206

Associated British Foods plc Annual Report 2021

207

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

30. Alternative performance measures

In reporting financial information, the Board uses various APMs which it believes 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. Since IFRS does not define APMs, they may not be directly comparable
to similar measures used by other companies.

The Board also uses APMs 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, the Board and management use APMs for performance analysis, planning, reporting and incentive-setting.

APM

Closest equivalent
IFRS measure

Definition/purpose

Reconciliation/calculation

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.

Consistent with the
definition given

APM

Adjusted
operating
profit before
repayment of
job retention
scheme
monies

Adjusted
profit before
tax

See Adjusted
operating
profit
(non-IFRS)
measure

Profit before
tax

Closest equivalent
IFRS measure

Definition/purpose

Adjusted operating profit before repayment of job retention scheme
monies is adjusted operating profit adjusted for repayment of job
retention scheme monies.

Reconciliation/calculation

See note A

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.

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

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, extensions or
downsizes if a store’s retail square footage changes by less than
10%, for cannibalisation by new stores, or for the timing of national
or bank holidays.

It is measured against comparable trading days in each year.

The like-for-like sales metric expressed over two years enables
measurement of the performance of our retail stores compared to
our experience in 2019, which was before any of the economic
effects of COVID-19.

It is calculated as described above for like-for-like sales, but with
2019 data as the comparator.

Two year
like-for-like
sales

No direct
equivalent

Adjusted
earnings and
adjusted
earnings per
share

Earnings and
earnings per
share

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.

Reconciliations of these
measures are provided in
note 7 of the financial
statements

Consistent with the
definition given

Exceptional
items

No direct
equivalent

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.

Exceptional items are
included on the face of
the consolidated income
statement with further
detail provided in note 2
of the financial
statements

Adjusted
operating
(profit) margin

Adjusted
operating
profit

No direct
equivalent

Adjusted operating (profit) margin is adjusted operating profit as a
percentage of revenue.

See note A

Operating
profit

Adjusted operating profit 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 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.

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

208

Associated British Foods plc Annual Report 2021

209

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

30. Alternative performance measures continued

APM

Constant
currency

Closest equivalent
IFRS measure

Definition/purpose

Revenue and
see adjusted
operating
profit
(non-IFRS)
measure

Constant currency measures are derived by translating the relevant
prior year figures 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.

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
excluding tax on adjusting items expressed as a percentage of
adjusted profit before tax.

Dividend
cover

No direct
equivalent

Dividend cover is the ratio of adjusted earnings per share to
dividends per share relating to the year.

Capital
expenditure

No direct
equivalent

Capital expenditure is a measure of the 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

No direct
equivalent

Gross investment is a measure of the investment each year in
non-current assets in existing businesses and acquisitions of new
businesses. It includes capital expenditure as well as cash outflows
from the purchase of subsidiaries, joint ventures and associates,
additional shares in subsidiary undertakings purchased from
non-controlling interests and other investments, as well as net debt
assumed in acquisitions.

Reconciliation/calculation

See note B

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

See note C

See note D

See note E

Net cash/debt
before lease
liabilities

No direct
equivalent

This measure comprises cash, cash equivalents and overdrafts,
current asset investments and loans.

A reconciliation of this
measure is shown in
note 25 of the financial
statements

APM

Net cash/debt
including
lease
liabilities

Adjusted
EBITDA

Closest equivalent
IFRS measure

Definition/purpose

No direct
equivalent

This measure comprises cash, cash equivalents and overdrafts,
current asset investments, loans and lease liabilities.

Reconciliation/calculation

A reconciliation of this
measure is shown in
note 25 of the financial
statements

Adjusted EBITDA is stated before depreciation, amortisation and
impairments charged to adjusted operating profit.

See note F

See Adjusted
operating
profit
(non-IFRS)
measure

Financial
leverage ratio

No direct
equivalent

Financial leverage is the ratio of net cash/debt including lease
liabilities to adjusted EBITDA.

See note F

(Average)
capital
employed

No direct
equivalent

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 for the Group is
calculated by averaging the capital employed for each period of the
financial year based on the reporting calendar of each business.

Consistent with the
definition given

No direct
equivalent

The return on (average) capital employed measure divides adjusted
operating profit by average capital employed.

Consistent with the
definition given

No direct
equivalent

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.

Consistent with the
definition given

Average working capital for each segment and for the Group is
calculated by averaging the working capital for each period of the
financial year based on the reporting calendar of each business.

No direct
equivalent

This measure expresses (average) working capital as a percentage of
revenue.

Consistent with the
definition given

Return on
(average)
capital
employed

(Average)
working
capital

(Average)
working capital
as a percentage
of revenue

210

Associated British Foods plc Annual Report 2021

211

FINANCIAL STATEMENTS

Notes forming part of the financial statements

for the 53 weeks ended 18 September 2021

30. Alternative performance measures continued

Note A

2021
External revenue from continuing businesses
Adjusted operating profit
Repayment of job retention scheme monies
Adjusted operating profit before repayment of job
retention scheme monies
Adjusted operating margin %
2020
External revenue from continuing businesses
Adjusted operating profit
Adjusted operating margin %

Note B

2021
External revenue from continuing businesses
at actual rates
2020
External revenue from continuing businesses
at actual rates
Impact of foreign exchange
External revenue from continuing businesses
at constant currency

Grocery
£m

Sugar
£m

Agriculture
£m

Ingredients
£m

3,593
413
–

413
11.5%

3,528
437
12.4%

1,650
152
–

152
9.2%

1,594
100
6.3%

1,537
44
–

44
2.9%

1,395
43
3.1%

1,508
151
–

151
10.0%

1,503
147
9.8%

Central and
disposed
businesses
£m

3
(70)
–

(70)

22
(65)

Retail
£m

5,593
321
94

415
5.7%

5,895
362
6.1%

Total
£m

13,884
1,011
94

1,105
7.3%

13,937
1,024
7.3%

Grocery
£m

Sugar
£m

Agriculture
£m

Ingredients
£m

Disposed
businesses
£m

Retail
£m

Total
£m

Note C

Adjusted earnings per share (pence)
Dividends relating to the year (pence) – excluding special dividend proposed
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

3,593

1,650

1,537

1,508

5,593

13,884

Note F

3,528
(29)

1,594
(70)

1,395
(8)

1,503
(49)

5,895
(14)

3,499

1,524

1,387

1,454

5,881

% change at constant currency

+3%

+8%

+11%

+4%

-5%

2021
Adjusted operating profit at actual rates
2020
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

413

152

437
(16)
421

100
(13)
87

43
(2)
41

151

147
(7)
140

321

362
–
362

% change at constant currency

-2%

+75%

+7%

+8%

-11%

22
1

Central and
disposed
businesses
£m

13,937
(169)

13,768

+1%

Total
£m

(70)

1,011

(65)
2
(63)

1,024
(36)
988

+2%

Adjusted operating profit
Charged to adjusted operating profit:

Depreciation of property, plant and equipment
Amortisation of operating intangibles
Depreciation of right-of-use assets and non-cash lease adjustments
Impairment of property, plant and equipment and right-of-use assets

Adjusted EBITDA

Net debt including lease liabilities

Financial leverage ratio

2021
£m
80.1
26.7
3.00

2021
£m
551
76
627

2021
£m
551
76
57
23
14
721

2020
£m
81.1
–
n/a

2020
£m
561
61
622

2020
£m
561
61
16
2
1
641

2019
(IFRS 16 pro
forma basis)
£m
1,482

544
23
281
–
2,330

2020
£m
1,024

538
33
289
15
1,899

2021
£m
1,011

535
26
288
–
1,860

(1,380)

(2,081)

(2,728)

0.7

1.1

1.2

212

Associated British Foods plc Annual Report 2021

213

FINANCIAL STATEMENTS

Company balance sheet

at 18 September 2021

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 liabilities
Other creditors

Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Bank loans – unsecured
Lease liabilities
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

2021
£m

15
12
720
747

2,576
146
633
44
1,653
5,052

(229)
(3)
(3,322)
(3,554)
1,498
2,245

(74)
(11)
(243)
(37)
(137)
(502)
1,743

45
2
4
1,692
1,743

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

The Company’s loss for the 53 weeks ended 18 September 2021 was £44m (52 weeks ended 12 September 2020 was £39m).

The financial statements on pages 214 to 221 were approved by the Board of directors on 9 November 2021 and were signed on
its behalf by:

Michael McLintock
Chairman

John Bason
Finance Director

Company statement of changes in equity

for the 53 weeks ended 18 September 2021

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
Items that will not be reclassified to profit or loss

Movement in cash flow hedging position
Items that are or may be subsequently reclassified to profit or

loss

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

Total comprehensive income
Loss for the period recognised in the income statement

Remeasurement of defined benefit schemes
Deferred tax associated with defined benefit schemes
Items that will not be 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
Total transactions with owners
Balance as at 18 September 2021

Share
capital
£m
45
–
45

Capital
redemption
reserve
£m
2
–
2

Hedging
reserve
£m
2
–
2

Profit
and loss
reserve
£m
1,771
1
1,772

–

–
–
–

–

–
–
–

–
–
–
–
45

–

–
–
–
–
–

–
–
–
45

–

–
–
–

–

–
–
–

–
–
–
–
2

–

–
–
–
–
–

–
–
–
2

–

–
–
–

2
2
2

–
–
–
–
4

–

–
–
–
–
–

–
–
–
4

(39)

(124)
19
(105)

–

–
(105)
(144)

(271)
8
1
(262)
1,366

(44)

544
(142)
402
402
358

(49)
17
(32)
1,692

Total
£m
1,820
1
1,821

(39)

(124)
19
(105)

2
(103)
(142)

(271)
8
1
(262)
1,417

(44)

544
(142)
402
402
358

(49)
17
(32)
1,743

214

Associated British Foods plc Annual Report 2021

215

FINANCIAL STATEMENTS

Accounting policies

for the 53 weeks ended 18 September 2021

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 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 acquisitions’ on page 156 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 Company 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.

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.

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 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.

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.

Since that date, where the Company is a lessee, the following
accounting policy applied:

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.

216

Associated British Foods plc Annual Report 2021

217

FINANCIAL STATEMENTS

Notes to the Company financial statements

for the 53 weeks ended 18 September 2021

1. Intangible assets

Cost
At 12 September 2020
At 18 September 2021

Amortisation
At 12 September 2020
Amortisation
At 18 September 2021

Net book value
At 12 September 2020
At 18 September 2021

2. Leases

Right-of-use assets

Cost
At 12 September 2020
At 18 September 2021

Depreciation and impairment
At 12 September 2020
Depreciation for the year
At 18 September 2021
Net book value
At 12 September 2020
At 18 September 2021

Lease liability

Cost
At 12 September 2020
Repayment of lease liability
At 18 September 2021

Current
Non-current

3. Investments in subsidiaries

At 12 September 2020
Additions
At 18 September 2021

Goodwill
£m

Operating
intangibles
£m

14
14

–
–
–

14
14

9
9

(6)
(2)
(8)

3
1

Land and
buildings
£m

18
18

(3)
(3)
(6)

15
12

Land and
buildings
£m

17
(3)
14

3
11
14

Total
£m

23
23

(6)
(2)
(8)

17
15

Total
£m

18
18

(3)
(3)
(6)

15
12

Total
£m

17
(3)
14

3
11
14

£m
708
12
720

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.

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

2021
£m

2,545
18
13
2,576

2020
£m

2,596
18
46
2,660

146

152

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

2021
assets
£m

3,761
–
6
30
(159)
–
60
617
–
–
–
4,315

2020
assets
£m

2021
liabilities
£m

2020
liabilities
£m

3,822
–
5
29
(150)
–
75
(20)
–
–
–
3,761

(3,705)
(33)
(6)
–
161
(4)
(59)
–
(75)
(9)
11
(3,719)

(3,640)
(35)
(5)
–
150
–
(71)
–
(172)
40
28
(3,705)

2021
net
£m

56
(33)
–
30
2
(4)
1
617
(75)
(9)
11
596

2020
net
£m

182
(35)
–
29
–
–
4
(20)
(172)
40
28
56

The net pension asset of £596m comprises a funded scheme with a surplus of £633m and an unfunded scheme with a deficit
of £37m.

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 12 September 2020
Amount charged to the income statement
Amount charged to equity
Effect of changes in tax rates on income statement
At 18 September 2021

Employee
benefits
£m
(11)
1
(142)
3
(149)

Share-based
payments
£m
3
1
–
(1)
3

Other
£m
8
(1)
–
2
9

Total
£m
–
1
(142)
4
(137)

218

Associated British Foods plc Annual Report 2021

219

FINANCIAL STATEMENTS

Notes to the Company financial statements

for the 53 weeks ended 18 September 2021

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

2021
£m

–
60
3,262
3,322

2020
£m

1
65
3,030
3,096

243

253

The directors consider that the carrying amount of creditors approximates their fair value.

8. Capital and reserves

Capital redemption reserve
The non-distributable capital redemption reserve arose following redemption of two million £1 deferred shares at par in 2010.

Dividends
Details of dividends paid and proposed are provided in note 6 to the consolidated financial statements.

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 £473m of guarantees in the ordinary course of business as at 18 September 2021 (2020 – £949m).

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:
(i) trustees of the Garfield Weston Foundation and their close family
(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
Interest income earned from non-wholly owned subsidiaries
Amounts due from non-wholly owned subsidiaries

Sub note

2021
£000

2020
£000

895

1,095

1,570

9,151

300

3,632

14
7
165
7,868

73
62
85
4,299

1
2
2
2

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 117 to 135.

Employees
The Company had an average of 217 employees in 2021 (2020 – 213).

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.

220

Associated British Foods plc Annual Report 2021

221

FINANCIAL STATEMENTS

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 (expense)/income
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)

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

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

2021
£m
13,884
1,011
(151)
(3)
(50)
(3)
4
20
9
(111)
(1)
725
(227)
498

60.5
80.1
26.7

Glossary

(in accordance with) Adopted IFRS

AGM
APM
the Board
CDP
CGU
the Company
CPI
ESG
ESOP
EY

FCA
FRC
FRS 101

GMP
the Group

HSE
IFRIC
IFRS
LIBOR
LTIP
Net finance expense

RCF
SBTi
STIP
TCFD
UKEB

(in accordance with) international accounting standards in
conformity with the requirements of the Companies Act 2006
and (in accordance with) international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as
it applies in the European Union
Annual General Meeting
Alternative Performance Measure
the board of Associated British Foods plc
Carbon Disclosure Project
Cash-generating unit
Associated British Foods plc
Consumer Price Inflation (UK)
Environmental, Social and Governance
Employee Share Ownership Plan
Ernst & Young LLP, the Company’s statutory auditor (also refers
to associated firms of Ernst & Young LLP worldwide who work
on the audit of the consolidated financial statements)
Financial Conduct Authority
Financial Reporting Council
Financial Reporting Standard 101 Reduced Disclosure
Framework
Guaranteed Minimum Pension
Associated British Foods plc, its subsidiaries and its
interests in joint ventures and associates
Health, Safety and Environment
International Financial Reporting Interpretations Committee
International Financial Reporting Standard(s)
the London Inter-Bank Offered Rate
Long-term incentive plan
the sum of finance income, finance expense and other financial
income on the face of the consolidated income statement
Revolving Credit Facility
the Science Based Targets initiative
Short-term incentive plan
The Task Force for Climate-related Financial Disclosures
UK Endorsement Board

222

Associated British Foods plc Annual Report 2021

223

Company directory

Associated British Foods plc
Registered office
Weston Centre
10 Grosvenor Street
London W1K 4QY

Company registered in
England and Wales,
number 293262

Company Secretary
Paul Lister

Registrar
Equiniti
Aspect House
Spencer Road
Lancing BN99 6DA

Auditor
Ernst & Young LLP
Chartered Accountants

Bankers
Barclays Bank PLC
Lloyds Banking Group plc
NatWest Group plc

Brokers
Credit Suisse Securities (Europe) Limited
One Cabot Square
London E14 4QJ

Barclays Bank PLC
5 The North Colonnade
Canary Wharf

Timetable
Annual general meeting
10 December 2021

Interim results to be announced
26 April 2022

Website
www.abf.co.uk

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.

224

Associated British Foods plc Annual Report 2021

This report is printed on paper certified in
accordance with the FSC® (Forest Stewardship
Council®) and is recyclable and acid-free. Pureprint
Ltd is FSC certified and ISO 14001 certified showing
that it is committed to all round excellence and
improving environmental performance is an
important part of this strategy. Pureprint Ltd aims to
reduce at source the effect its operations have on
the environment and is committed to continual
improvement, prevention of pollution and
compliance with any legislation or industry
standards. Pureprint Ltd is a Carbon / Neutral®
Printing Company.

Designed and produced by Black Sun plc

www.blacksunplc.com

Associated British Foods plc
Weston Centre
10 Grosvenor Street
London W1K 4QY

Tel + 44 (0) 20 7399 6500

For an accessible version of the
Annual Report and Accounts please
visit our website www.abf.co.uk