Annual Report and Accounts 2020 Accounts and Report Annual
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ASSOCIATED BRITISH FOODS PLC ANNUAL REPORT AND ACCOUNTS 2020 ANNUAL REPORT AND ACCOUNTS 2020 IS TO PROVIDE SAFE, NUTRITIOUS, AFFORDABLE FOOD AND CLOTHING THAT IS GREAT VALUE FOR MONEY Photographed on our cover are five of the many colleagues who rose to the challenges faced during 2020. Read how all of our businesses went above and beyond in our Chief Executive’s statement and operating reviews. Chief Executive’s statement on page 8 Operating reviews from page 22 OUR BRANDS WE ARE ARE LOVED ASSOCIATED BRITISH FOODS 9/10 UK households use our brands Associated British Foods is a diversified international food, ingredients and retail group with sales of £13.9bn, 133,000 employees and operations in 53 countries across Europe, Africa, the Americas, Asia and Australia. OUR PRESENCE IS GLOBAL countries operated 53 in worldwide OUR VALUES ARE LIVED We respect everyone’s dignity We act with integrity We progress through collaboration We pursue with rigour OUR BUSINESSES Agriculture AB Agri is the UK’s largest ARE DIVERSE agri-food company and a global leader in nutrition, science and technological innovation in animal feed. Grocery Ingredients Our grocery brands occupy Our Ingredients business leading positions in markets is a leader in yeast, bakery and across the globe. In the UK, specialty ingredients for the nine out of ten households use food, feed and pharmaceutical our brands. industries. Sugar Retail AB Sugar is one of the largest Primark is one of the largest fashion sugar producers in the world. retailers in Europe and the largest Illovo is the largest sugar producer clothing, footwear and accessories in Africa and British Sugar is the retailer by volume in the UK. In total, sole processor of UK sugar beet. it has 384 stores across 13 countries, including the US. OUR EMPLOYEES ARE EMPOWERED 133,000 people worldwide Strategic report Contents PERFORMANCE HIGHLIGHTS Strategic report Group revenue 1 Performance highlights 2 Our businesses at a glance 4 Chairman’s statement £13.9bn 8 Chief Executive’s statement Actual down 12% 12 Group business model and strategy Constant currency down 11% 14 Section 172 statement 20 Key performance indicators Adjusted operating profit Adjusted profit before tax 22 Operating review 22 Grocery 34 Sugar 42 Agriculture £1,024m £914m 48 Ingredients Actual down 28% Down 35% 54 Retail Constant currency down 30% 66 Financial review 70 Responsibility Adjusted earnings 84 Principal risks and uncertainties per share Dividends per share 90 Viability statement and going concern Governance 92 Board of directors 81.1p nil 94 Corporate governance Down 41% 110 Directors’ Remuneration report 122 Directors’ report Net cash (before 125 Statement of directors’ responsibilities Gross investment lease liabilities) 126 Independent auditor’s report Financial statements 135 Consolidated income statement £641m £1,558m 136 Consolidated statement of comprehensive income 137 Consolidated balance sheet 138 Consolidated cash flow statement 139 Consolidated statement of changes Operating profit Profit before tax in equity 140 Significant accounting policies 150 Accounting estimates £810m £686m and judgements 151 Notes forming part of the Down 37% Down 42% financial statements 200 Company financial statements Basic earnings per share 207 Progress report 208 Glossary IBC Company directory 57.6p Down 48% The group has defined, and outlined the purpose of, its alternative performance measures in note 30. Review of the year online: The 2019 results in the Strategic report have been www.abf.co.uk/ar2020 provided on an IFRS 16 pro forma basis in addition to the results previously reported under IAS 17 in order to provide a better understanding of comparison between the 2020 results and the 2019 results. These IFRS 16 pro forma figures have been prepared using the same data and assumptions as those used for the transition adjustment. Annual Report and Accounts 2020 Associated British Foods plc 1 Our businesses at a glance OUR BREADTH IS ONE OF OUR GREATEST STRENGTHS With the breadth of our businesses, brands and GROCERY SUGAR Read more on page 22 Read more on page 34 global reach, Associated British Foods plc aims to Household food brands enjoyed A world-leading sugar business consistently deliver value all over the world focused on excellence to our stakeholders. Twinings and Ovaltine are enjoyed in over 100 27 countries Plants worldwide 16,000 32,000 Employees Employees Twinings and Ovaltine Europe Twinings and Ovaltine are our leading Our UK beet sugar factories typically global hot beverage brands enjoyed in produce well over 1 million tonnes of over 100 countries. sugar annually. Azucarera in Spain Europe and international produces beet sugar from its factories Our portfolio of recognised grocery in the north and south, and also refines brands includes Mazzetti balsamic sugar from cane raws at its refinery in vinegars, Jordans and Dorset cereals, the south. Ryvita crispbread, Kingsmill bread, Africa Patak’s and Blue Dragon cooking Illovo is Africa’s largest sugar producer sauces and pastes, as well as Silver with agricultural and production facilities Spoon and Billington’s sugars. in six countries. Typical annual sugar The Americas production is 1.7 million tonnes. In the US, Mazola is the leader in corn China oil and we sell a range of baking brands We operate two beet sugar factories through retail and foodservice channels. in the north east of China, with annual Capullo is a premium canola oil in sugar production capacity of over Mexico. Anthony’s Goods produces 180,000 tonnes. specialty baking ingredients, supplements, superfoods and other functional snacks primarily for online consumers and the organic market. Australia We produce ham, bacon and smallgoods under the Don and KRC brands. Tip Top Bakeries produces a range of well-known breads and baked goods. Yumi’s produces hommus, vegetable dips and snacks. Revenue Revenue £3,528m £1,594m 2019: £3,498m 2019: £1,608m Adjusted operating profit Adjusted operating profit £437m £100m 2019: £381m 2019: £26m 2 Associated British Foods plc Annual Report and Accounts 2020 Strategic report AGRICULTURE INGREDIENTS RETAIL Read more on page 42 Read more on page 48 Read more on page 54 Products and services for Yeast, bakery and specialty Amazing fashion, the agri-food industry ingredients supplied globally amazing prices Sold into 84 52 384 countries Plants in production for AB Mauri Stores at year end 3,000 7,000 75,000 Employees Employees Employees AB Agri Yeast and bakery ingredients Primark AB Agri manufactures animal feed, AB Mauri operates globally in yeast and Primark is a major retail group nutrition- and technology-based bakery ingredients production, supplying operating stores in the Republic of products and offers data services industrial and artisanal bakers and the Ireland, UK, Spain, Portugal, Germany, for the agri-food industry. It operates foodservice and wholesale channels. the Netherlands, Belgium, Austria, all along the food industry supply chain. It is a technology leader in bread France, Italy, Slovenia, Poland and It produces and supplies compound improvers, dough conditioners and the US. animal feed, feed enzymes, specialised bakery mixes. It prides itself on offering something feed ingredients and a range of Specialty ingredients for everyone and has a wide selection value-added services to farmers, feed ABF Ingredients produces value-added of products available in women’s, and food manufacturers, processors products for food and non-food men’s, kids’, the home, health and and retailers. It also buys grain from applications. beauty and gifting. farmers and supplies crop inputs It manufactures and markets enzymes, Primark’s store environment plays through its joint venture arable specialty lipids, yeast extracts, extruded an important part in inspiring its operation, Frontier Agriculture. ingredients, pharmaceutical excipients customers. Developing the in-store and antacids worldwide with experience has been a key enabler manufacturing facilities in Europe, in differentiating Primark from its America and India. competitors. Its strategy is clear – bring the same amazing value to services as it does with fashion. Many of its stores now have free wi-fi and trend rooms and in the Republic of Ireland, UK, Spain and Portugal a number of stores have coffee shops, food and beverage offerings and beauty concessions, which add to the customer experience. Revenue Revenue Revenue £1,395m £1,503m £5,895m 2019: £1,385m 2019: £1,505m 2019: £7,792m Adjusted operating profit Adjusted operating profit Adjusted operating profit £43m £147m £362m 2019: £42m 2019: £136m 2019: £913m Annual Report and Accounts 2020 Associated British Foods plc 3 Chairman’s statement Michael McLintock Chairman OUR CULTURE CARRIED US THROUGH I will never be able to thank our people enough for their extraordinary efforts this year. I am proud to be able to represent such a group. 4 Associated British Foods plc Annual Report and Accounts 2020 Strategic report To say that this has been particular, demand for home cooking With Primark opening earlier and trading an extraordinary year and baking products soared. At each more strongly than we had expected, of our food production sites, working and sales and cash flow from our food would be something of an practices were adapted to protect our businesses in the second half well understatement. The rapid workforce and production was ahead of our expectations, our cash spread of COVID-19 across increased, in some cases substantially, reserves built quickly. even with higher absenteeism due to The year end net cash balance before the globe has affected shielding or isolation. It was of vital lease liabilities was £1.56bn, a position everyone in ways which importance that food businesses such we could not have possibly predicted as ours continued to produce food we could not have imagined back in March. This outcome was driven safely, and in sufficient quantities, to a year ago. not only by the better trading in the meet the exceptional demand in retail.