FDBusiness.com

Associated British Foods has reported a 1% increase in group revenue to £15.6 billion for year ended 15 September 2018. Statutory operating profit rose 1% to £1.34 billion. Taking into account the benefit of a one-time profit on the sale of businesses last year, statutory profit before tax was down 19% to £1.279 billion and basic earnings per share fell 16% to 127.5p. At constant currency, group revenue increased by 3% and adjusted operating profit of £1.404 billion was 5% higher than the previous year.

ABF’s Primark, Grocery, Ingredients and Agriculture businesses each had very successful and profitable years, delivering significant increases in adjusted operating profit at constant currency which, combined, were 15% ahead of the previous year. The end of the EU sugar regime, which been expected for some years, resulted in the decline in operating profit for AB Sugar during the year, primarily as a consequence of the transition to a deregulated EU sugar market, which is now much more competitive.

In Grocery the largest profit contributor was Twinings Ovaltine and this business increased its profit significantly. George Weston Foods in Australia continued to improve its margin through cost reduction and successful new products and Acetum made a meaningful first year contribution. However, Allied Bakeries made an unacceptable loss, as the cost of wheat rose significantly during the summer, and ABF is working to mitigate this loss through cost savings and price discussions with customers.

Improvement in Ingredients continued during the year with a 23% increase in profit and margin reached 9.7%. Since 2015, profit at the Ingredients business has nearly doubled.

ABF is continuing to prepare for the future with gross investment of £1.165 billion during the year. Capital expenditure in existing businesses reached £868 million, including selling space expansion at Primark, and investment to increase capacity and enhance efficiency in ABF’s food businesses. ABF acquired Acetum, the leading producer of high-quality balsamic vinegar from Modena, Italy, in October 2017 for £284 million on a debt-free basis.

George Weston, chief executive of Associated British Foods, comments: “This was another year of progress for the group. We continued to pursue the opportunities to grow our businesses with a gross investment of £1.2 billion. Strong profit performances were delivered by each of Primark, Grocery, Agriculture and Ingredients. These more than offset the decline in Sugar profit which was caused primarily by low prices in the first year after the structural change in the EU sugar regime. Looking ahead, management have clear plans for further investment and for pursuing opportunities for business improvement.”