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BOARD OF DIRECTORS
John Bason Finance Director (age 58) John was appointed as Finance Director in May 1999. He was previously the finance director of Bunzl plc and is a member of the Institute of Chartered Accountants in England and Wales. Other appointments: He is a non-executive director of Compass Group PLC, a trustee of Voluntary Service Overseas and chairman of the charity FareShare.
Charles Sinclair George Weston Chairman (age 67) Chief Executive (age 51) Charles was appointed a non-executive director George was appointed to the board in 1999 in October 2008 and as Chairman in April 2009. and took up his current appointment as Chief With wide business experience of both the UK Executive in April 2005. In his former roles at and overseas, his executive career was previously Associated British Foods, he was Managing with Daily Mail and General Trust plc, where he Director of Westmill Foods, Allied Bakeries was chief executive from 1989 until he retired and George Weston Foods Limited (Australia). from that role and the board in September 2008. Other appointments: He was elected Warden of Winchester College He is a non-executive director of Wittington in 2014. Investments Limited and a trustee of the Committee membership: Garfield Weston Foundation. Chairman of the Nomination and Remuneration committees. Emma Adamo Non-executive director (age 52) Emma was appointed as a director in December 2011. She was educated at Stanford University and INSEAD in France. Other appointments: She is a director of Wittington Investments Limited, and of the W Garfield Weston Foundation in Canada.
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Javier Ferrán Javier director Independent non-executive (age 59) Javier was appointed a director in November 2006. He spent the earlier part of his career with Bacardi Group, where latterly he served as president and chief executive officer. He has in-depth knowledge of consumer brands on an international basis and in international financing. Other appointments: He is a partner at Lion Capital a LLP, London-based private equity firm, and a non-executive director of SABMiller plc. Committee membership: Member of the Nomination and committees. Remuneration Peter Smith director Independent non-executive (age 69) Peter was appointed a director in February 2007 and brings broad experience of international partner senior was he financial matters. Formerly, at PricewaterhouseCoopers (PwC) in the UK. He served for two years as chairman of Coopers & Lybrand International and as a member of the global leadership team of PwC. He was also chairman of RAC plc and a non-executive director of Safeway plc. Other appointments: He is chairman of Savills plc and Templeton Emerging Markets Investment plc, Trust and a member of the supervisory board of Rothschild & Co SCA. He is also chairman of the Land Trust. Restoration Committee membership: Chairman of the Audit committee and a member committees. Remuneration and Nomination the of
Lord Jay was appointed a director in November 2006 and has broad experience of government and international business. During his career Franceto from 1996 2001 to and Permanent Under Secretary at the Foreign & Commonwealth Office from 2002 2006. to He was previously Member of the Nomination and Lord Jay of Ewelme GCMG director Independent non-executive (age 69) in public service he was British Ambassador a non-executive director of Candover Investments plc, Valeo (the French-based Electricite of parts and company) automobile France. de Other appointments: He has been an independent member of the House of Lords since 2006. He is also chairman of the British Library Advisory Council and a trustee of Thomson Founders Company. the Share Reuters Committee membership: Member of the Audit, Nomination and committees. Remuneration the position of chief executive. Previously he had been a partner of Panmure Gordon & Co also Point Triple VCT PLC. 2011 Committee membership: committees. Remuneration Timothy Clarke Timothy director Independent non-executive (age 58) Tim was appointed a director in November 2004 and has been Senior Independent Director since December 2007. Tim has extensive experience of retailing. Until 2009, he was chief executive of Mitchells & Butlers plc, following its demerger from Six Continents PLC where he also held before joiningBass PLC in 1990. Other appointments: He is a non-executive director of two pub and brewing companies, Hall & Woodhouse Limited, and Timothy Company & Taylor Limited, and
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Board of directors
| Governance Wolfhart Hauser director Independent non-executive (age 65) Wolhart was appointed a director in January 2015. activities,Starting research various with career his he went on establish to and lead a broad range of successful international service industry businesses. He was chief executive of Intertek Group plc for ten years until he retired from that role and the board in May 2015. He was previously chief executive TÜV of officer president and forSüddeutschland four AG years and chief executive officer of TÜV Product Services for ten years. Other appointments: He is chairman of FirstGroup plc. He is also a non-executive director of RELX Group plc and its listed parent companies RELX PLC and RELX NV. Committee membership: Member of the Audit and committees. Remuneration Associated British Foods plc Ruth was appointed a director in May 2014. Ruth Cairnie Ruth director Independent non-executive (age 61) She has extensive overseas experience including international marketing and supply chain. 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 their Global Commercial business. is She Fuels qualification. by physicist a Other appointments: She is a non-executive director of Keller Group plc and of Rolls-Royce Holdings plc. Committee membership: Member of the Audit, Nomination and committees. Remuneration Governance | Corporate governance | 62
CORPORATE GOVERNANCE
Dear fellow shareholders I am pleased to present the Associated British Foods corporate governance report for the year ended 12 September 2015. One of the key responsibilities in my role as Chairman is to promote good corporate governance, which is a vital element in ensuring our future as a successful and sustainable company. Good governance requires the right leadership. While the current board is made up of directors from a variety of international backgrounds and sectors, we continue to assess its composition with the aim of maintaining an effective balance and diversity of skills and experience to meet the Company’s present needs but with a view to refreshing board membership over the coming years so that it evolves along with the group. As I have highlighted in my Chairman’s statement on page 5, in January 2015, we were delighted to welcome Wolfhart Hauser to the board as an independent non-executive director. Wolfhart brings a strong track record of driving profitable growth and value creation in a large international organisation, as well as having extensive board experience of several major UK listed companies. We report on the formal process by which Wolfhart was appointed in the Nomination committee report on page 68. In May 2014, the Financial Conduct Authority introduced changes to the listing regime as part of a series of measures to strengthen minority shareholder protection in companies such as ours with a controlling shareholder. During the year under review, in compliance with the provisions, we entered into a relationship agreement with the Company’s controlling shareholders. Details about the relationship agreement can be found on page 91 of the Directors’ report. Following the introduction of these measures, the board undertook a detailed review of its corporate governance framework and has updated and enhanced, where necessary, its processes and documentation. I am pleased to report that we made good progress against a number of actions agreed following the 2014 board performance evaluation exercise and which we identified in last year’s report. Our 2015 board evaluation was externally facilitated by consultants from Bvalco Limited and this provided both positive and constructive feedback. The board evaluation process and a summary of the key outcomes are described on page 66. In the following pages, we explain in greater detail our approach to governance – how the board and its committees have fulfilled their governance responsibilities during the year to ensure that robust governance practices are embedded across the group. As always, we welcome questions or comments from shareholders either via our website www.abf.co.uk or in person at the annual general meeting. Charles Sinclair Chairman
Compliance with the UK Corporate on or after 1 October 2014 (the ‘2014 Code’). The board met regularly throughout the Governance Code The Company will therefore report in year to approve the group’s strategic As a premium listed company on the accordance with the 2014 Code in its objectives, to lead the group within a London Stock Exchange, the Company 2016 annual report. framework of effective controls which is reporting in accordance with the UK enable risk to be assessed and managed The board considers that the Company has, Corporate Governance Code published in and to ensure that sufficient resources throughout the year ended 12 September September 2012 (the ‘Code’) which sets are available to meet the objectives set. 2015, applied the main principles and out standards of good practice in relation complied with the provisions set out in There are a number of matters which to board leadership and effectiveness, the Code, with the exception of the are specifically reserved for the board’s remuneration, accountability and relations chairmanship of the Remuneration approval. These are set out in a clearly with shareholders. The Code is published committee (see below). defined schedule, which includes: matters by the UK Financial Reporting Council relating to the group’s strategic plan; (‘FRC’) and a copy of the Code is available Leadership approving the annual business strategy from the FRC website (www.frc.org.uk). The board and objectives; the nature and extent of The board of directors is collectively An updated version of the UK Corporate principal risks to be taken to achieve the responsible to the Company’s shareholders Governance Code was published in strategic objectives; changes relating to for the direction and oversight of the September 2014 and first applies to structure and capital; approval of trading Company to ensure its long-term success. companies with financial years commencing statements, interim results, final results and annual report and accounts; declaring Code provision Status Explanation interim dividends and recommending final dividends; the group’s policies and systems D.2.1 – The Chairman Charles Sinclair is The board of Associated British Foods plc of internal control and risk management, should not chair both Chairman of continues to consider that Charles Sinclair, approving capital projects, acquisitions the Remuneration the Company and due to his experience, is best suited to and disposals valued at over £30m; committee chairman of the chair this committee. No director has any provision of adequate succession planning, Remuneration involvement in the determination of his own approving major group policies and matters committee. remuneration. The board believes that the relating to the compliance with the terms Company has maintained robust governance of the Relationship Agreement between while at the same time benefiting from having Charles Sinclair as the chairman the Company and its controlling of the Remuneration committee. shareholders dated 14 November 2014.
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3/4 4/4 4/4 4/4 4/4 4/4 3/3 committee Remuneration – – – – – 1/1 1/1 1/1 1/1 1/1 committee Nomination – – – – – 5/5 5/5 5/5 3/3 4/5 Audit Senior below executives board are level invited, when appropriate, attend to board meetings presentations make and to on the results and strategies their of business units. Papers board for and committee meetings generally are provided to directors board for and committee meetings a week in advance. The attendance the of directors at board and committee meetings during the year September is shown in the 2015 12 to table Where below. a director is unable participateto in a meeting either in person the Chairmanor solicited remotely, their business of items views in advance on key meeting, theof relevant so that these could be shared with the meeting and contribute the debate. to Boardcommittees The board has established principal three board committees, which to it has delegated certain its of responsibilities. These are the Audit committee, the Nomination committee, and the Remuneration committee. The membership, responsibilities and activities these of committees described are later in this corporate governance report and, in the case the Remuneration of committee, in the Remuneration report on page 88. Membership these of committees is Minutes committee of annually. reviewed meetings made are available all to directors on a timely basis. The chairman the Audit, of Nomination and Remuneration committees to intend be at the present annual general meeting answer questionsto on the work their of committees.respective committee
9/9 9/9 9/9 9/9 9/9 9/9 9/9 9/9 8/9 6/7 Board
4 1 3 2 Emma Adamo was unable attend to the additional, unscheduled, board meeting that was held during the year because of prior business and personal commitments. However, she reviewed the relevant information and provided comments as appropriate the to Chairman. Ruth Cairnie was unable unableto attend to one Remuneration committee meeting because of other business and personal commitments. However, she reviewed the relevant papers and provided feedback as appropriate the to Chairman. Wolfhart Hauser was appointed as a director and member of the Remuneration committee on January14 2015, and as a member of the Audit Committee from April 13 2015. He was unable However, year. the additional, during held the attend unscheduled, was that boardto meeting he reviewed the relevant information and provided comments as appropriate the to Chairman. Javier Ferrán was unable attend to one Audit committee meeting because of other business and personal commitments. However, he reviewed the papers circulated and provided feedback Chairman. the to
Tim Clarke Javier Ferrán 4 1 2 3 George Weston Bason John Emma Adamo Charles Sinclair Charles Wolfhart Hauser Peter Smith Lord Jay Ruth CairnieRuth decision-making. They each or occupy, occupied,have senior positions in industry or public bringing life, valuable external perspective the board’s to deliberations through their experience and insight from other sectors enabling contribute them to significantly board to decision-making. The formal letters appointment of of non-executive directors available are inspectionfor at the Company’s registered office. re-electionElection and directors of In accordance with the Code’s recommendations, all directorswill be proposed election for orre-election at the annual general2015 meeting be to held in December with the Lord exception of Jay who, as indicated the in Chairman’s statement on page 5 will be as retiring a non-executive director with effect from 30 November 2015. Board meetings The board held nine meetings of a total eight scheduledduring the year, and one board Periodically, meeting. additional meetings place take from the away corporate in London. centre During the one the meetings of year under review, was held in Berlin where the board visited the two Primark located stores there, providing the non-executive directors in particular with the opportunity meet to local employees. management other and The board also held one its of meetings in Hampshire and visited the Jordans & Ryvita premises in Poole a site for andtour business presentation from local management.
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Annual Report and Accounts 2015 Corporate governance Corporate
| Governance Associated British Foods plc The schedule matters of reserved the for board was during reviewed the year and an updated versionthe of document was approved and adopted at the September board meeting.2015 The schedule can be section governance corporate the on found the of Company’s website (abf.co.uk). Certain specific responsibilities are delegated the board to committees, notably the Audit, Remuneration and Nomination committees, which operate within clearly defined terms reference of and report regularly the board. to For further details, please see ‘Board below. section committees’ management operational the Authority for business has the beenof group’s delegated the Chief Executiveto execution or for further delegation the effective for by him day-to-day running and management of the group. The each of chief executive business within the group has authority for thatfor business and reports directly the Chief Executive.to Executive Chief and Chairman The roles the of Chairman and the Chief Executive separately are held and the division their of responsibilities is clearly established, out set in writing, and agreed by the board that ensure no one to has powersunfettered decision. of The Chairman, Charles is responsible Sinclair, for the operation and leadership the of board, ensuring its effectiveness and setting its agenda. The Chief Executive, George Weston, is responsible leading for and managing business within the group’s a set authoritiesof delegated by the board and the implementation board of strategy and policy. Independent Director Senior Tim Clarke is the Company’s recognised Senior Independent The role Director. theof Senior Independent Director is to act as a sounding board the Chairman for serveand to as an intermediary other for directors where necessary. He is also available shareholders to should a need concernsarise convey to the board to which been they have unable convey to through the Chairman or through the directors.executive led During the year, by the Senior Independent the Director, non-executive directors without met have the presence the of Chairman (including appraiseto performance). the Chairman’s directors non-executive The In addition their responsibilities to for strategy and business results, the non-executive directors role play a key in providing a solid foundation good for corporate governance and that ensure no individual or group dominates the board’s Governance | Corporate governance | 64
CORPORATE GOVERNANCE
The written terms of reference for the Effectiveness Wolfhart Hauser (appointed on Nomination, Audit and Remuneration Board composition 14 January 2015) committees, all of which were reviewed At the date of this report, the board Peter Smith and updated during the year, are comprises the following directors: Emma Adamo is not considered to available on the Company’s website Chairman be independent by the board in view (www.abf.co.uk) and hard copies are Charles Sinclair of her relationship with Wittington available on request. Investments Limited, the Company’s Executive directors Directors’ insurance majority shareholder. She was appointed George Weston (Chief Executive) The Company has in place appropriate in December 2011 to represent this John Bason (Finance Director) directors’ and officers’ liability insurance shareholding on the board of the cover in respect of legal action against Non-executive directors Company. The board considers that the its executive and non-executive directors, Emma Adamo other six non-executive directors are amongst others. Ruth Cairnie independent in character and judgement Tim Clarke and that they are each free from any The work of the board during the year Javier Ferrán business or other relationships which During the financial year, key activities Lord Jay would materially interfere with the of the board included: exercise of their independent judgement.
Strategy The Code requires that, if a director has served on the board for more than • Annual ‘away-day’ focus on strategy. nine years, the board should state the • Conducting regular strategy sessions in board meetings. reasons why it considers the director, notwithstanding his or her length of Acquisitions/disposals service, to be independent. Accordingly, • Approving the increased ownership in Vivergo. the board has considered the independence • Receiving regular updates on acquisitions/disposals. of Tim Clarke and Javier Ferrán as follows: • as at 3 November 2015, Tim Clarke Performance monitoring has served 11 years as a director of the • Receiving regular reports to the board from the Chief Executive. Company. The board has continued to • Receiving, on a rolling basis, senior management presentations from each of the group keep Tim’s independence under close business areas. review given his length of service. • Approving the group budget for the 2015/16 financial year. Having given careful consideration to • Receiving regular feedback on directors’ meetings held with institutional investors. the matter, the board is satisfied that • Receiving reports from the board committee chairmen. Tim Clarke continues to demonstrate the qualities of independence in carrying Governance and risk out his role as a non-executive director • Approving the Company’s full year and interim results. and Senior Independent Director, • Recommending the 2014 final dividend and approving the 2015 interim dividend. supporting the team in an objective and independent manner. The board • Annual review of the material financial and non-financial risks facing the group’s businesses. considers that he continues to be • Receiving regular divisional food safety updates. independent in character and judgement • Half yearly review of progress in implementing actions arising from the 2014 board evaluation. and that there are no relationships or • Participating in the 2015 annual board performance evaluation and receiving a report on circumstances which are likely to affect, that evaluation. or could appear to affect, his judgement. • Reviewing and approving updated schedule of matters reserved for the board, terms of reference for the Audit, Nomination and Remuneration committees and other policies, Tim retains his role as Senior Independent procedures and guidance relating to the Company’s governance framework. Director and will offer himself for • Receiving regular updates on regulatory matters. re-election at this year’s annual general meeting. The board will continue to Corporate responsibility keep his independence under review.
• Approving Corporate Responsibility 2014 updates. • as at 1 November 2015, Javier Ferrán • Receiving regular management reports on health, safety and environment issues. has served nine years as a director • Receiving updates on Primark’s ethical sourcing. of the Company. Javier’s service and consequent knowledge and experience People of the group, together with the invaluable • Appointment of Wolfhart Hauser as an independent non-executive director. retail experience he brings to the role, are highly regarded by the board. • Receiving update on and considering senior succession planning and people activities. In recognition of this length of service, • Confirming directors’ independence. however, he stepped down from the Various Audit committee on 26 October 2015. Notwithstanding his length of service • Receiving updates on procurement, information technology and communications from and, having given due deliberation to the heads of the relevant functions. the matter, the board is satisfied that • Undertaking appropriate preparations for the holding of the annual general meeting and, Javier Ferrán continues to demonstrate subsequently, discussing issues arising from that meeting. the qualities of independence and
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visits various to Primark stores accompanied by senior management; a half-day London-based ‘baking tour’ accompanied by senior AB Mauri theexecutives purpose which of was to illustrate the spectrumto the baking of and world; individual meetings with the Head of Executive Development, Director of Financial Control, and Director Legal of Services. Ruth also attended sessions Business Women’s theof group’s Education Forum (a senior forum for women in ABF worldwide develop, to through networking, business education personaland development). Following her appointment in May 2014, inductionRuth Cairnie’s programme continued during the year under review with a number further of visits site and management meetings, which included: • • • development and Training The board up-to-date is kept on legal, regulatory and governance matters through regular papers from the Company Secretary and by presentations from internal andexternal advisors. During the board receivedthe year, guidance on procedures regarding related-party transactions transactions and with controlling shareholders, updates on changes in corporate governance regulation and practice, including the 2014 edition the of Corporate Governance Code, the Competition & Markets Audit EU Authority and Order Audit Regulation, a reminder their of continuing obligations under the Company’s share dealing policy as as well regular updates on other developments on matters of governance. corporate flow Information The Company Secretary manages the provision information of the board to at appropriate times in consultation with the Chairman and Chief Executive. In addition formalto meetings, the Chairman and Chief Executive maintain regular contact with all directors. The Chairman also holds informal meetings with non-executive directors, without the of executives any being present, discuss to issues any affecting the group, if this is thought necessary. Regular management updates directors the keep to sent are to non-executive directors informed of events throughout the group between board meetings that ensure and to fully advised kept they are the of latest issues affecting the group.
a tour the of ABF IT Shared Service IT (which delivers infrastructure Centre and services group to companies). Group with briefing committee Audit Financial Controller. with briefing committee Remuneration Group HR Director and Head of Reward. Site visit Allied to Bakeries factory of reference. dealingRestrictions procedures for and Visit George to Weston Foods in with meetings including Australia management.senior meetings review budget Attending for Twinings and Grocery. members with Individual meetings of the senior management team at the centre including Director of Legal Services & Company Secretary, Group Head of ExternalTreasurer, Affairs, AB Agri and the IS Director, including in Stockport and meeting with senior management. Site visit the to Wissington sugar factory accompanied meetings and the by AB Sugar CEO. Visit Primark to offices in Dublin and store visits with Primark senior management. Legal and regulatory duties of a UK listed director. company including framework governance Group matters reserved theto board for its decision and committee terms shares. Company’s the in Procedure for dealing with board conflicts. corporate to approach The group’s responsibility. DirectorGroup Tax and International Tax Manager, Director of Financial Control and Director of Business Development. Meeting with the UK Grocery CEO. Visit the to Peterborough site for meetings with senior management of AB Mauri, Management meetings and site visits site and meetings Management Board and governance and Board group by visitinga number its of businesses and operations. elementsKey the induction of programme and visits site undertaken by Wolfhart to date following his appointment set are below: out serves. New directors encouraged are accelerateto their knowledge the of • • • • • • • • • • • • • • •
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Annual Report and Accounts 2015 Corporate governance Corporate
| a non-executive The board director. considers that he continues to be independent in character and judgement and that no are there relationships or circumstances which affect, to likely are or could appear affect,to his judgement. Javier will offer himself re-election for at this annual generalyear’s meeting and the board will his continue keep to independence under review. objectivity in carrying out his role as Governance Associated British Foods plc Following Lord of Jay the retirement as a non-executive director on 30 November the board2015, will comprise the Chairman, Chief Executive, Finance Director and six non-executive directors. Biographical and related information about the directors out is set on pages 60 and 61. Appointments to the board rigorous formal, transparent and a There is procedure the appointment for new of directors the board. to Details available are in the Nomination committee report outset on page 69 which also provides details role the of committee’s and activities. Commitment The letters appointment of the for Chairman and the non-executive directors outset the expected time commitment required them of and available are for inspection person by any during normal business hours at the Company’s registered office and at the annual general Othermeeting. significant commitments theof Chairman and non-executive directors disclosed are on appointment and approval require thereafter. development Board The Chairman, with the support the of for responsible is Secretary, Company the induction directors new of and the continuing development directors. of inductionBoard Wolfhart Hauser joined the board as a non-executive January director on 14 2015 andundertook formal, a tailored programme induction.of This was facilitated by the Chairman and the Company Secretary. The induction programme aimed to familiarise Wolfhart with the way the group operates through its five strategic business segments and with its governance arrangements. The programme account took into his experience perspectives, business and and the committees on which he Governance | Corporate governance | 66
CORPORATE GOVERNANCE
Board performance evaluation During the year, implementation of A list of action points arising from An evaluation to assess the performance a number of recommended action the 2015 review on how the board can of the board as a whole, its committees points arising from the 2014 evaluation become even more effective was offered and that of the individual directors was overseen by the Chairman and by Bvalco and subsequently agreed by is conducted annually with the aim included the actions set out in the the board. These agreed action points of improving the effectiveness of table below. in the form of a board development plan the board and its members and the are being implemented under the direction performance of the group. 2014 Objectives of the Chairman and include actions identified in the table below. In accordance with the Code requirement Board impact that the evaluation should be conducted There was an increased focus by the 2015 Objectives by an external facilitator at least every board on Primark at each board meeting three years, Bvalco Limited (Bvalco) including fuller details of Primark’s Role of the board was engaged to undertake a review of performance metrics and the progress Following acknowledgement that board the board. The review took place in the of Primark’s expansion into the US. strategy sessions had continued to develop final quarter of the financial year. Bvalco Particular board focus was given to the very positively, it is proposed that in future is independent with no other connection Sugar division in light of the forthcoming there should be a greater emphasis on with the Company. EU sugar regime reform. ‘portfolio management’ of the group and development of a longer-term financial Following a scoping exercise with the More structured discussion took place at the board, after each divisional plan, with a similar approach to be adopted Chairman and the Senior Independent presentation, to discuss the performance on considerations of group risk. Director to agree the priority areas and of that division and to allow comparison issues to be addressed in the review, with the performance of other divisions Engagement with divisional Bvalco undertook a confidential interview within the group. level executive with each of the directors and a number Divisional presentations to the board have The regular programme of presentations of senior executives including the provided an increased level of information by divisional heads to be made more Company Secretary. The discussion in on respective key competitors and dynamic by a number of means, including each case centred on key themes and, market demand. prior disclosure of the presentation to the board, more time at the board being among the topics discussed, were Regular ‘one to one’ discussions have the strengths and values of the board, set aside to be spent discussing issues taken place between board members, and strategic choices arising from the quality of succession planning, and separately, with the Chairman and the presentation. the interaction of the board members the Chief Executive. with the group’s various businesses, Succession and resource the process of managing strategic Risk management Various actions identified, to be actioned planning and the management of risk. The handling of risk continued to be a through the Nomination committee, priority for the Audit committee and the to enhance the formal succession Following the conclusion of the board, and each business division has planning process in the group. interviews, Bvalco produced a written been encouraged to cover risk routinely report, which was discussed with in their presentations to the board. Board support the Chairman, the Chief Executive, Use of electronic board papers and the Senior Independent Director Corporate responsibility to be trialled. before being sent to board members Given the growing importance of environmental issues to the group, and was discussed at the following the annual report to the board on the Conflicts of interest procedure board meeting. environment was separated from The Company has procedures in place, the report on health and safety. which were reviewed and updated during the year, to deal with the situation Based on the outcome of the 2015 where a director has a conflict of interest. review, it was concluded that the board As part of this process, the board: continues to work very effectively • considers each conflict situation as a cohesive body with a good balance separately on its particular facts; of support, challenge and mutual trust between the executives and the • considers the conflict situation non-executives. in conjunction with the rest of the conflicted directors’ duties under It was also the board’s view that, overall, the 2006 Act; the principal committees continued to function efficiently and effectively. • keeps records and board minutes as Each of the directors was considered to authorisations granted by directors to be making a valuable contribution and the scope of any approvals and with proper commitment, including given; and of time, to their respective roles. • regularly reviews conflict authorisation.
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of accountingof provisions. auditInternal businessesThe employ group’s internal resources and (both employees auditors whereprovided by Ernst & Young appropriate) with skills and experience the operation to relevant each of business. These under currently arrangements are the in light of selectionreview Ernst of & LLP as the Company’sYoung auditor, new following a formal tender process, details Financial reporting Financial Detailed management accounts are prepared every weeks, four consolidated in a single system and by senior reviewed management and the board. They include a comprehensive financial of set reports performanceand key indicators covering commercial, operational, environmental and people issues. Performance against budgets and forecasts is discussed regularly at board meetings and at and operational between meetings All regularly. is reviewed chief executives and finance directors the of group’s operations sign to an annual asked are confirmation that their business has complied with the Group Accounting Manual in the preparation consolidated of financial statements and specifically confirmto the adequacy and accuracy whichof out set are in the Audit committee 73. All page on report of the internal audit activities co-ordinated are centrally by the Director Financial of group’s Control, who is accountable the Audit to committee. All group businesses required are to comply financial with the group’s control framework that sets out minimum control standards. function A key the of group’s internal audit resources undertake is to audits compliance ensure to with the financial control framework and make recommendations in improvement for Internal appropriate. where controls audit also conducts regular to reviews management risk that proceduresensure and controls observed. are The Audit reports on regular receives committee group management. The adequacy and management. group suitability performance key of indicators the results internal work audit’s of and monitors the status recommendations of arising. The committee annually reviews the adequacy, qualifications and experience internal audit the of group’s resources and the nature and scope of internal audit activity in the context overall
to guardto against their unauthorised use and achieve business to the failure objectives. Internal controls can only provide assurancereasonable absolute not and against material misstatement or loss. The directors confirm that is there a process identifying, for evaluating and managing the risks faced by the group that the consolidated accounts preparation and financial reporting processes comply with regulatory all relevant reporting requirements. The dynamics the of group and the environment within which it operates continually are evolving together with its risk. exposure to The system is designed manage, to rather than eliminate, the risk assets of being unprotected and and the operational effectiveness the of related controls,which has been in place the yearfor under and the up review to approvaldate of the of annual report and accounts. They also confirm that they system the regularly have reviewed internal controlsof utilising the review process out set below. Standards There guidelines are on the minimum groupwide requirements health for and safety and environmental standards. There also are guidelines on the minimum internal control of level that each the of divisions specified over should exercise processes. Each business has developed and documented policies and procedures complyto with the minimum control standards established, including compliance monitoring for procedures and taking corrective action. The board eachof business confirm is required to twice yearly that it has complied with policies procedures. and these controls level High All businesses prepare annual operating plans and budgets which updated are Performanceregularly. against budget is monitored at operational and level with variances being reportedcentrally, Thepromptly. cash position at group and operational is monitored level constantly are variancesand expected levels from investigated thoroughly. Clearly defined guidelines been have established capital for expenditure and decisions.investment These include the preparation budgets, of appraisal procedures,and review and delegated authority levels.
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Annual Report and Accounts 2015 Corporate governance Corporate
| Governance Associated British Foods plc Accountability reporting business and Financial The board is required by the Code to balanced a fair, present and understandable assessment the Company’s of position and prospects. In relation this to isrequirement, made the reference to statement directors’ of responsibilities for preparingfor the financialstatements set out on page 93 this annual of report and accounts. The board recognises that its responsibility balanced a fair, present to understandableand extends assessment and interim other price-sensitiveto public reports, reports regulators, to and information be required by to presented statutory requests. Business model A description the of Company’s business model sustainable for growth out is set in the group business model and strategy section on pages 8 and 9 and in the business strategies section on pages These sections provide an and 11. 10 explanation the of basis on which the group generates value and preserves it the longover term and its strategyfor delivering its objectives. concernGoing After making enquiries the directors have a reasonable expectation that the Company and the group adequate have resources continueto in operational existence for and Accordingly, future. foreseeable the consistent with the guidance contained in the document titled ‘Going Concern and Liquidity Risk: Guidance Directors for UKof Companies 2009’ published by the FRC, they continue adopt to the going concern basis in preparing the annual financial statements. Internal control and risk management The board acknowledges its responsibilities internal control system of the group’s for facilitateto the identification, assessment and management risk, of the protection of shareholders’ investments and the group’s assets. The directors recognise that they responsibleare providing for to a return shareholders, which is consistent with mitigation and assessment responsible the risks.of Effective controls that ensure the group’s avoidableexposure to risk is minimised, that proper accounting records are maintained, that the financial information used within the business is reliable and Governance | Corporate governance | 68
CORPORATE GOVERNANCE of the group’s risk management system. The Senior Independent Director is NOMINATION COMMITTEE REPORT The Director of Financial Control meets available to shareholders in the event with the chairman of the Audit committee that communication with the Chairman, as appropriate but at least annually, Chief Executive or Finance Director Members without the presence of executive has failed to resolve concerns or During the year and at the date of this report: management, and has direct access where such contact is inappropriate. Charles Sinclair (Chairman) to the Chairman of the board. The Senior Independent Director Ruth Cairnie (appointed 1 November 2015) attended sufficient meetings with a Remuneration Tim Clarke range of major shareholders to listen A separate Remuneration report is set Javier Ferrán to their views in order to help develop out on pages 74 to 89 and provides details Lord Jay a balanced understanding of their Peter Smith of our remuneration policy and how it issues and concerns. has been implemented, together with the Key duties activities of the Remuneration committee. The Company Secretary acts as a focal point for communications on In accordance with its terms of reference, Articles of association and matters of corporate governance the Nomination committee’s key share capital duties include: and corporate responsibility. Information in relation to share capital, • leading the process for board appointments the appointment and powers of directors, Annual general meeting (AGM) and making recommendations to the board; and the issue and buy back of shares The AGM will be held on Friday, • regularly reviewing the board structure, and significant interests in share capital 4 December 2015 at 11.00 am at the size and composition (including the skills, is set out in the Directors’ report on Congress Centre in London. The board knowledge, independence, experience pages 90 to 92. views the AGM as a valuable opportunity and diversity), recommending any to communicate with private shareholders necessary changes; Relations with shareholders in particular, for whom it provides the • considering plans for orderly succession Engaging with shareholders opportunity to hear about the general for appointments to the board and to senior The board works to engage effectively development of the business and to ask management to maintain an appropriate with the Company’s shareholders questions of the Chairman and, through balance of skills and experience within so that both its objectives and those him, the chairmen of the key committees the Company and to ensure progressive of shareholders are understood. and other directors. refreshment of the board; The Company announces its achievements • keeping under review the leadership The practice has been for a short film and prospects to shareholders by way needs of the group, both executive and to be shown at the meeting explaining of the interim results and annual report non-executive, to ensure the continued a particular area of the group’s business. ability of the group organisation to and accounts. Significant matters At this year’s AGM, the film will focus compete efficiently in the marketplace; relating to the trading or development on Primark and the lengths to which • making recommendations to the board of the business are disseminated to the business goes in preparing to enter about suitable candidates for the role the market by way of Stock Exchange new markets. For its arrival in the of senior independent director, and announcements and by press release north-east of the USA, this approach membership of the audit and remuneration and postings on the Company’s website. has been raised to another level with committees in consultation with the The board continues to promote effective local research, high attention to detail chairman of the relevant committee; engagement with its shareholders. and tailored execution. • making recommendations to the board The Chairman invites larger institutional about the re-election of directors by The Notice of AGM, which sets out in shareholders each year to discuss their shareholders in accordance with the full the resolutions for consideration by Company’s articles of association views on the group’s approach on shareholders together with explanatory and the Code; and governance, strategy and remuneration. notes, has been sent to shareholders • ensuring that the Company offers an The Chief Executive and Finance Director and is also available on the Investors appropriate dialogue with shareholders have met institutional shareholders section of the Company’s website about succession planning, the and financial analysts on a regular basis (www.abf.co.uk). appointment of directors and the throughout the year to discuss the work of the Committee. Company’s business strategy and current performance. At each board meeting, Governance the directors are briefed on shareholder Members of the Nomination committee meetings that have taken place and on are appointed by the board from the feedback received. 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.
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group’s overall financial risk management management risk financial overall group’s and system; monitoring the integrity of the group’s formal any financial and statements Company’s the to announcements relating performance, significant financial reviewing reporting judgements contained them in before their submission the to board for approval; on matters of financial reporting: reviewing challengingand necessary, where the consistency and any changes of, to, accounting treasury and whether policies; appropriate followed has group the appropriate made and policies accounting estimates and judgements; the clarity and significant disclosure; of completeness audit; the the from adjustments resulting compliance and assumption concern going with auditing standards; at the request of the board, reviewing the content of the annual report and accounts advisingand board whether, the on taken as a whole, balanced it is fair, understandableand the provides and information necessary for shareholders assessto the Company’s position and performance, model strategy; business and where requested by the board, assisting in relation the to board’s assessment of the principalCompany the risks facing of prospects the the and Company for the purposes of disclosures required in report annual the and accounts; reviewing the effectiveness of the group’s financial including controls, the internal policies and overall process for assessing financial internal established of systems effectiveness and timeliness and control arrangements for group’s the and whistleblowing; monitoring and reviewing the role and effectiveness of the internal group’s audit function in the context the of of corrective action taken by management; overseeing the policies, group’s procedures and controls for preventing bribery, identifying money laundering, Members duties Key AUDIT COMMITTEE REPORT COMMITTEE AUDIT During the year and atthe date of this report: Smith (Chairman) Peter Lord Jay Javier Ferrán (until 26 October 2015) CairnieRuth Wolfhart Hauser April (from 13 2015) In accordance with its terms of reference, the Audit committee’s duties key include: • • • • • • •
to creatingto an optimal board in terms A genuinely diverse board comprises individuals with a range personal of experience skills, perspectives, attributes, and backgrounds, as as well representing differences in nationality, race and gender. It is the board’s policy new make to appointments based on merit, recognising that gender remains an important aspect the diversityof overall which is crucial Candidates composition. and balance of board future for appointments will be considered from the widest possible pool, although search executive any agencies engaged that ensure will half be to asked theof candidates they put forward for women. consideration are directorsRe-election non-executive of The committee the results reviewed of board annual the performance evaluation thethat composition related to the of board and whether the time needed and is a signatory the‘Voluntary to Code Conductof Executive for Search Firms’ on gender diversity and best practice. candidatesPotential considered were interviews and assessments and, on the recommendation the Nomination of committee, the board approved the Wolfhartappointment of Hauser with Januaryeffect from 14 2015. Diversity policy at board level As a board, recognise we that diversity is introducing for differentkey perspectives boardinto debate and decision-making. fulfil theto roles Chairman, of Senior non-executive and Director Independent director was appropriate. It was satisfied that all members the of board are on the basis their of skills and experience in the context the range of skills of and experience the of existing boardas a whole. Following a rigorous process of devoting sufficient their time duties. to The committee considered the re-election directorsof prior their recommended to approval by shareholders at the AGM. The non-executive directors who have been on the board more thanfor six years subject were particularly to rigorous review. Performance review The performance the committee of was evaluated as part the of annual board performance evaluation and it was found to beto operating effectively.
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Annual Report and Accounts 2015 Corporate governance Corporate
| Governance Associated British Foods plc search consulting firm, Spencer Stuart, retained helpwere identify to potential candidates. Spencer Stuart is independent, with no other connection the Company, to have thehave right attend to committee meetings. Other individuals such as the Chief Executive, members senior of management, resources human head of and external advisors may be invited to attend meetings as and when appropriate. The Chairman does chair not the Nomination committee when it is dealing with the appointment hissuccessor. of of reference. Meetings The committee once met during the year under review. Committee activities during the year independent new of Appointment director non-executive The Nomination committee and the board theadhere principle to that appointments the boardto should be made on the basis merit. of the ChairmanDuring the led year, the process the appointment for a new of independent non-executive director as part an ongoing of programme the for progressive the of board. refreshing The services external of executive Only members the of committee In these circumstances the committee is chaired by an independent non-executive director elected by the remaining members. The committee independent may take professional advice on matters any atcovered by its terms reference of expense. Company’s the The committee chairman reports the outcome meetings of the board. to The the Nomination of terms reference of committee, which and reviewed were updated availableare during on the year, sectionthe Investors’ the of Company’s website (www.abf.co.uk). process appointments Board The process making for new appointments is led by the Chairman. independent external, appropriate, Where consultants engaged are conduct to a search potential candidates, for who are considered on the basis their of skills, experience and fit with the existing members the of board. The Nomination committee has procedures appointing for a non-executive or director an executive and out these set in its are terms Governance | Corporate governance | 70
CORPORATE GOVERNANCE
Key duties continued • matters which may influence the Activities during the year presentation of accounts and key figures; In order to fulfil its terms of reference, • overseeing the relationship with the group’s the Audit committee receives and • the principles of, and developments external auditors, reporting to the board reviews presentations and reports in, company law, sector-specific laws each year whether it considers the audit from the group’s senior management, and other relevant corporate legislation; contract should be put out to tender taking consulting as necessary with the into account any legal requirements for • the role of internal and external external auditors. tendering or rotation of the audit contract, auditing and risk management; and reviewing and monitoring their objectivity Monitoring the integrity of and independence including seeking • the regulatory framework for the reported financial information information from the external auditor group’s businesses. Ensuring the integrity of the financial on an annual basis about its policies and statements and associated The committee invites the Group Finance procedures for maintaining independence, announcements is a fundamental agreeing the scope of their work and Director, Group Financial Controller, responsibility of the Audit committee. fees paid to them for audit, assessing Director of Financial Control and senior the effectiveness of the audit process, representatives of the external auditors During the year it formally reviewed and agreeing the policy in relation to to attend its meetings in full, although it the group’s interim and annual reports, the provision of non-audit services. reserves the right to request any of these including the associated pre-close individuals to withdraw. Other senior period trading updates, and the trading Governance managers are invited to present such updates issued for the first and third The Audit committee comprises a reports as are required for the committee quarters. These reviews considered: minimum of three members, all of whom to discharge its duties. • the accounting principles, policies are independent non-executive directors During the year, the committee held and practices adopted in the group’s of the Company. Two members constitute four meetings with the external auditors financial statements, any proposed a quorum. Appointments are for a period without any executive members of the changes to them, and the adequacy of three years after which they are subject board being present. of their disclosure in the annual report; to annual review, extendable by two further three-year periods so long as The committee has unrestricted access • important accounting issues, areas of members continue to be independent. to Company documents and information, complexity and the actions, estimates Any term beyond six years is subject as well as to employees of the Company and judgements of management in to particularly rigorous review. The and the external auditors. relation to financial reporting; membership of the Audit committee has The committee may take independent • any significant adjustments to financial been refreshed over the last few months: professional advice on any matters reporting arising from the audit; Wolfhart Hauser was appointed as a covered by its terms of reference at member of the committee on 13 April • litigation and contingent liabilities the Company’s expense. 2015, Javier Ferrán stepped down as a affecting the group; and member on 26 October 2015. Lord Jay will The committee chairman reports the • potential tax contingencies, compliance cease to be a member of the committee outcome of meetings to the board. with statutory tax obligations and the on his retirement as a non-executive The committee’s effectiveness is reviewed group’s tax policy. director on 30 November 2015. on an annual basis as part of the board’s Significant accounting issues The committee structure requires performance evaluation process. considered by the Audit the inclusion of one financially qualified The terms of reference of the Audit committee in relation to the member (as recognised by the Consultative committee were reviewed and updated group’s financial statements Committee of Accountancy Bodies) with during the year and can be viewed on In the preparation of these financial recent and relevant financial experience. the Investors section of the Company’s statements a number of areas required Currently, the committee chairman fulfils website (www.abf.co.uk). the exercise of management judgement this requirement. All committee members or a degree of estimation. Set out opposite are expected to be financially literate Meetings are the areas considered by the Audit and to have an understanding of the The Audit committee met five times committee to be the most significant following areas: during the year including an additional accounting issues and how the committee meeting related to the tendering of the • the principles of, and developments concluded that such judgements and external audit. The committee agenda in, financial reporting including the estimates were appropriate. These are linked to events in the group’s applicable accounting standards and are divided into those that could have financial calendar. statements of recommended practice; a material impact on the financial statements and those that are less • key aspects of the Company’s operations likely to have a material impact but including corporate policies and the nevertheless, by their nature, required group’s internal control environment; a degree of estimation.
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the key assumptionsthe key 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 notes to 8 and the 9 to financial statements for more assumptions. these of details The committee was satisfied that the discount rate assumptions appropriately reflected the particular assets. The other assumptions key were all considered be to reasonable. The externalauditor explained the results of their own review of the estimate of value in use, including their challenge of management’s underlying cash flow projections as well the judgements were reasonable and that, accordingly, the provision amounts recorded of total assets and of net assets, 2% 1% material misstatement of the financial statements Actuarial valuations of the pension group’s schemes are undertaken every three years by independent qualified actuaries who also provide advice management to on the assumptions beto used in preparing the accounting valuations each Details year. of the assumptions made in the current and previous two years are disclosed of the financial in note 12 statements together with the bases on which those assumptions have been made. The committee reviewed the assumptions by comparison with externally derived data and also considered the adequacy of disclosures in respect of the sensitivity of the surplus or deficit changes to in these assumptions. key on the most recentbudget approved by the board and reflected management’s expectations the relevant cash generating unitsoperate. The committee also reviewed and challenged current market assessments of the time value of money and the risks associated with as the long-term growth assumptions and discount rates. On the basis of their audit work, with management’s conclusion that no impairments were required. date and management confirmed that they represent their best estimate of the likely financial exposure faced by the group. The external auditor explained the to committee the work they had conducted during the the highest degree of judgement. The committee discussed with both management and the external auditor judgements the key which had been made. It was satisfied that appropriate. were The sugar business has a good track record of calculating reliable estimates and any significant over or under-estimation becomes apparent in subsequent profit realisation. Actual results were reviewed for consistency of measurement in the light of profit budgets and forecasts and the actual results prior of periods. The committee was satisfied that appropriate assumptions had been made and consistently applied. As biological assets represent just unlikely. considered was The committee also reviewed the adequacy of disclosures in respect of the sensitivities The committee annually reviews the Company’s principles for managing tax risks. The committee reviewed and challenged the provisions recorded at the balance sheet The committee considered thereasonableness of cash flow projections which were based of sales growth, operating costs and margins based on past experience and external sources of information. Long-term growth rates for periods notwere covered budget by the annual challenged ensure to they were appropriate for the products, industries and countries in which and their challenge assumptions of the key and associated sensitivites, they concurred includingyear, how their audit procedures were focused on those provisions requiring unobservableto inputs on the fair valuation of biological assets (note 10). Audit committee assurance committee Audit Audit committee assurance committee Audit
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Annual Report and Accounts 2015 Corporate governance Corporate
| the sucrose content in the cane the and in content sucrose the the sucrose price, which depends on the markets which to the forthcoming crop the expected yields canethe sucrose and for the following season taking into conditions,account weather harvesting programmes, and an assessment of maturity balancethe cane the the at of sheet and date; is likely be to sold, the probable domestic and export prices, and related foreign rates. exchange currency in deferment. in Post-retirement benefits Post-retirement Valuation of the pension group’s schemes medical schemes post-retirement and benefit require various subjective judgements to mortality including made assumptions, be general and inflation, discount rates salary inflation, and the rate of increase for pensions in payment and those Biological assetsBiological The valuation of growing sugar cane estimate: management to requires • • Other accounting areas requiring areas accounting Other estimation or judgement management Tax provisions Tax The level of current and deferred tax financialrecognised the statements in is dependent on subjective judgements as the to outcome of decisions by tax variousauthorities jurisdictions in around the world and the ability of the group useto tax losses within the time limits variousimposed tax the by authorities. See also references taxation to on page 46. with its recoverable amount (being the higher of value in use and fair value less costs sell). to Value in use isdetermined with reference projected to future cash flows discounted at an appropriate rate. discount the cash and the flows Both rate involve a significant degree of estimation uncertainty. Assessment for impairment involves comparing the book value of an asset Significant accounting issues material goodwill, of Impairment assets tangible and intangible to the group financial statements Governance Associated British Foods plc Governance | Corporate governance | 72
CORPORATE GOVERNANCE
Misstatements • changes since the last annual disposals; certain specified tax services Management reported to the Committee assessment of the significant financial including tax compliance, tax planning that they were not aware of any material risks and the group’s ability to respond and related implementation advice; and or immaterial misstatements made to changes in its business and the certain other services when it is in the intentionally to achieve a particular external environment. best interests of the Company to do presentation. The auditors reported to so and they can be undertaken without Whistleblowing and fraud the committee the misstatements that jeopardising auditor independence. The group’s ‘whistleblowing’ policy they had found in the course of their work. No individually significant non-audit contains arrangements for an independent After due consideration the committee assignments that would require disclosure external service provider to receive, in concurred with management that no were undertaken in the financial year. confidence, complaints on accounting, adjustments were required. The extent to which non-audit services risk issues, internal controls, auditing may be provided by the group auditor Internal financial control and risk issues and related matters for reporting will be kept under review in light of management to the Audit committee as appropriate. new restrictions to be introduced by The committee is required to assist the The Audit committee reviewed reports EU legislation which comes into effect board to fulfil its responsibilities relating from internal audit and the external service in 2016. to the adequacy and effectiveness provider and the actions arising therefrom. of the control environment, controls The Company has a policy that any The group’s anti-fraud policy has been over financial reporting and the group’s recruits hired directly from the external communicated to all employees and states compliance with the UK Corporate auditors must be pre-approved by the that all employees have a responsibility Governance Code. To fulfil these duties, Group HR Director, and the Group Finance for fraud prevention and detection. Any the committee reviewed: Director or Group Financial Controller, suspicion of fraud should be reported with the chairman of the Audit committee • the external auditors’ management immediately and will be investigated being consulted as appropriate. letters and their Audit committee vigorously. The Audit committee reviewed memoranda; all instances of fraud perpetrated against The Audit committee has formally the Company and the action taken reviewed the independence of its • internal audit reports on key audit by management both to pursue the auditors. KPMG LLP has provided a letter areas and significant deficiencies in perpetrators and to prevent recurrences. confirming that it believes it remained the financial control environment; independent throughout the year, within External audit • reports on the systems of internal the meaning of the regulations on this Auditor independence financial controls and risk management; matter and in accordance with their The Audit committee is responsible for professional standards. • reports on fraud perpetrated against the development, implementation and the group; and monitoring of policies and procedures To fulfil its responsibility to ensure the on the use of the external auditors for independence of the external auditors, • the group’s approach to IT, cyber non-audit services, in accordance with the Audit committee reviewed: security and whistleblowing. professional and regulatory requirements. • changes in external audit executives Internal audit These policies are kept under review to in the audit plan for the current year; The Audit committee is required to meet the objective of ensuring that the assist the board to fulfil its responsibilities group benefits in a cost-effective manner • a report from the external auditors relating to the adequacy of the resourcing from the cumulative knowledge and describing their arrangements to and plans of internal audit. To fulfil these experience of its auditors whilst also identify, report and manage any duties, the committee reviewed: ensuring that the auditors maintain the conflicts of interest; and necessary degree of independence and • internal audit’s reporting lines and • the extent of non-audit services objectivity. Consequently, any non-audit access to the committee and all provided by the external auditors. work to be undertaken by the auditor in members of the board; excess of £300,000 requires authorisation The total fees paid to KPMG LLP for • internal audit’s plans and its by the chairman of the Audit committee the year ended 12 September 2015 achievement of the planned activity; and the Group Finance Director prior to its were £8.0m of which £2.3m related commencement. Individual assignments to non-audit work. Further details are • the results of key audits and other less than £300,000 are approved by the provided in note 2 to the financial significant findings, the adequacy of Group Finance Director. The aggregate statements. management’s response and the expenditure with the group auditors is timeliness of their resolution; Consideration is also given by the reviewed by the Audit committee. Audit committee to the need to include • statistics on staff numbers, The committee is required to approve the risk of the withdrawal of the external qualifications and experience and the use of the external auditors to provide: auditors from the market in its risk timeliness of reporting; accounting advice and training; employee evaluation and planning. • the nature and extent of non-audit benefit plan audits; corporate responsibility, activity performed by internal IT and other assurance services; due audit; and diligence in respect of acquisitions and
Associated British Foods plc Annual Report and Accounts 2015 Governance 73
As indicated the in light of last year, requirements the of UK Corporate Governance Code recent other and changes regulatory the EU to framework, undertook competitive a committee the tenderthe external for audit, KPMG having auditor been since the group’s 1935. KPMG did participate not in the tender process. This process involved: presentations the Audit to committee by the tendering three firms, addressing the key business risks and their proposed theof Audit committee; the presentation of written final a and documents; tender a selectionto committee presentation chaired by the chairman theAudit of and executive comprising and committee non-executive directors and the Group Financial The this of Controller. result comprehensive tender process was that, on the recommendation the of committee, the board LLP selected as Ernst & Young Septemberauditor the year for ending 17 approval shareholder Accordingly, 2016. will be sought confirm to the appointment LLP as Ernst auditorof the & Young of Company at the AGM on 4 December 2015. audit approach; individual meetings the of tendering firms with the all divisional of functionaland management teams, management members and executive
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Annual Report and Accounts 2015 Corporate governance Corporate
| the external auditors’ fulfilment the of agreed audit plan and variations from it; reports highlighting the major issues that arose during the course of the Financial of Review Team the audit; audit; the feedback from the businesses evaluating the performance each of and team; audit assigned a report from the Audit Quality Reporting Council. the terms, areas responsibility, of associated duties and scope of the audit out as set in the external auditors’ engagement letter; auditors’ the work overall plan and proposal; fee the major issues that arose during the course the of audit and their resolution; accountingkey and audit judgements; errors of the level identified during the audit; and recommendations made by the external auditors in their management letters and the adequacy management’s of response. Governance Associated British Foods plc • Auditor effectivenessAuditor assess the effectivenessTo the of external reviewed: committee the auditors, • • • The Audit committee holds private meetings with the external auditors after each committee key meeting review to issues within their sphere interest of responsibility. and fulfil its responsibilityTo oversight for Audit the process, audit external the of committee reviewed: • • • • • • appointment Auditor The Audit committee annually reviews the taking appointment the of auditor, accountinto effectiveness the auditor’s and independence, a and makes recommendation the board to accordingly. Any decision open to the external audit tender on isto taken the recommendation theof Audit committee. There no are contractual obligations that restrict the company’s current choice of auditor. external Governance | Remuneration report | 74
REMUNERATION REPORT
Annual statement by the Remuneration Committee Chairman Dear fellow shareholders 2014/15 performance and incentive outcomes As you know, our range of activities is broad and our portfolio of businesses diverse. We aim to achieve strong and sustainable positions and have a focus on the longer-term growth of the Company. As referred to in my Chairman’s statement, the two major challenges facing the group have been food commodity deflation and substantial movements in currency markets. Against this background, earnings per share has seen a slight decrease. This year no changes have been made to our remuneration policy, which is re-presented on the following pages for reference but is not subject to a shareholder vote. The committee has dedicated time in two meetings in 2014/15 to considering whether incentive outcomes are a fair reflection of performance. The conclusions that we reached are outlined below. Short Term Incentive Plan (STIP) Operating results this year were significantly affected by lower sugar prices and the negative translation impact of currency movements, both factors being outside the control of management. However, having regard to the fact that previous performance has benefited from higher sugar prices, and that the STIP has always been measured against profits translated into sterling at actual average foreign exchange rates for the year rather than at constant currency, the committee concluded that the incentive payout of 49.44% on the financial element of the STIP was a fair reflection of the performance outcome. The original STIP targets were increased for the additional profit made by businesses acquired during the year, in line with our normal policy for acquisitions. As previously disclosed, in November 2012, the committee reduced vesting on the 2009–12 Long Term Incentive Plan from 100% to 97.42% to reflect an asset impairment charge relating to the Australian meat business, Don KRC. Continuing property development deals relating to the Don KRC site, which are not included in the annual operating profit calculation, mean that the committee now feels it is appropriate to return to the executive directors the balance of the value which was reduced in 2012. A partial repayment was made in 2014 and the remaining balance due of £23,963 for George Weston and £16,073 for John Bason will be paid this year. No further payments will be made in respect of this previous reduction in vesting as the aggregate outcome is now as it would have been had no impairment charge been taken. For 2015/16 there has been no change in the setting of our STIP financial targets which are based on a performance range around budget for both the profit measure and the working capital measure. The reasons for adoption of these financial metrics are detailed in the policy report on page 88. Long Term Incentive Plan (LTIP) In the Chairman’s statement I have noted a strong performance despite currency and commodity challenges, and that we expect currency pressures to lead to a modest decline in adjusted operating profit and adjusted earnings for the group for the coming year. In view of this and having regard to the adjusted earnings per share (adjusted eps) performance in 2014/15, the level of growth required to achieve the performance targets on existing awards vesting in 2016 and 2017 is now extremely challenging. The committee made no discretionary changes to the targets already set. However, recognising that the shape of the group has changed greatly in recent years, and in view of the fact that the LTIP is designed to motivate and retain some 150 senior managers across the group, the committee has decided that it would be appropriate to undertake a complete review of the group’s incentive arrangements over the course of the next year. If this review concludes that changes are required, the committee will present a revised executive remuneration policy to investors at the 2016 AGM, one year earlier than originally anticipated. If approved by shareholders, any changes to policy will become effective in the 2016/17 financial year. As part of this review, we will be seeking input from our major shareholders in May/June 2016. In setting the targets for the 2015/18 LTIP, the committee has taken into account the outlook for a modest decline in adjusted eps in the 2016 financial year and the consequential implications of this for 2017. Accordingly, the committee has decided that the LTIP targets will assume no growth for the first year of the 2015/18 LTIP. Thereafter, the compound annual growth rates of 5% to achieve threshold, 8% to achieve target and 11% to achieve maximum will be applied. We believe that this approach is appropriate and in the best interests of our shareholders. Charles Sinclair Remuneration Committee Chairman
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Maximum Long-term variable element variable Long-term (LTIP) On-target Threshold Annual variable element Annual variable (STIP) (£000) Minimum 0 Fixed elements Fixed 4,000 3,000 2,000 John BasonJohn 1,000 6,000 5,000
Maximum Long-term variable element variable Long-term (LTIP) On-target |
Annual Report and Accounts 2015 Threshold Annual variable element Annual variable (STIP) (£000) Remuneration report Remuneration
| Minimum 0 Fixed elements Fixed on-target and maximum performance. Long-term variable element – value is calculated on base salary at the date of allocation and excludes share price movement.Minimum – No STIP or LTIP payment for failure achieve to threshold performance. Threshold – STIP of base of 12% salary of base (12% salary for threshold financial performance and for0% failureto achieve threshold personalLTIP vesting performance). of at maximum 10% (i.e. an allocation of shares worth 20% of base salary at the grant date) following achievement of threshold performancetargets. On-target – STIP of 78.3% of base salary (65% for target financial performance 13.3%and for target personal(i.e. an allocationperformance).LTIP of shares vesting worth at 100%50% of maximum of base salary at the grant date) for target performance. Maximum – STIP of 150% of base salary (130% for maximum financial performance and 20%for achieving maximum personalat 100% performance). of maximumLTIP (i.e. vesting an allocation of shares worth 200% of base salary at the grant date). Fixed elements for George Weston comprise salary of £1,023,708, benefits of £15,000 and andpension applies of to minimum,£711,100 threshold, Fixed elements for John Bason comprise salary of £666,533, benefits of £19,000 and pension of £575,780 and appliesto minimum, threshold, on-target Annual variable element – bonus is calculated on base salary at the end of the financial year. and maximum performance.
Governance 2,000 3,000 4,000 1,000 5,000 6,000 Associated British Foods plc 8 5 6 7 2 3 4 Notes: 1 George Weston Remuneration policyRemuneration The remuneration policy directors executive for has applied since it was approved by shareholders AGM. at the The 2014 wording is unchanged provided below, policy, as reference necessary for except from thatin the approved 2014 in update to references clarityand increase example, for changing by the reader, for dates and including current salary numbers in scenario charts. For the provisions the share remunerationof awards only, unvested policy Remuneration in the presented 2013 report will continue such until timeto apply as all long-term incentive awards granted under that policy vested. have The committee the approved reviews remuneration policy annually that ensure it remains to aligned with the Company’s strategic objectives. the committee Thisyear, has determined that no changes should be made. As outlined on the previous page, the committee expects a revised present remuneration to policy AGM approval for and investors at the will 2016 to discuss its proposals with major shareholders finalising before the proposed policy. 2015/16 policy remuneration of illustration – potential directors’reward Executive Governance | Remuneration report | 76
REMUNERATION REPORT REMUNERATION POLICY FOR EXECUTIVE DIRECTORS
Element and purpose Operation and link to business strategy Maximum opportunity
Base salaries are normally reviewed on an annual basis or following Increases will usually be limited BASE SALARY a significant change in responsibilities. Factors taken into account to those available for other (100% CASH) include market pay movements, the level of increases awarded UK employees. In line with To provide core reward for the to UK employees across the group and the impact of any increase other employees, if there is role, recognising responsibility on the total remuneration package. a significant change in role for setting and delivering responsibility, increases will the strategy. reflect this.
Benefits are restricted to typical UK market levels for executive The cost of these benefits is BENEFITS (EXCLUDING directors and include, but are not limited to, death in service payment, not expected to exceed 10% RELOCATION) permanent health insurance, company car plus private fuel, family of salary but is dependent To provide a competitive and healthcare and, where relevant, fees to maintain professional on factors, such as insurance cost-effective benefits package memberships. Executives are provided with the technology they premium rates, that can vary. appropriate to the role. require to carry out their roles efficiently and effectively.
SHORT-TERM INCENTIVE Performance measures 150% of base salary: Group financial performance is assessed against prime financial • 130% based on financial PLAN (STIP) (100% CASH) measures, such as adjusted operating profit and working capital, results; and To encourage and reward used across the group on a day-to-day basis to drive and • 20% on personal performance. the attainment of challenging monitor performance. financial targets and the The personal element of the STIP is calculated as a percentage of achievement of personal base salary on achieving certain personal targets set by the Company performance objectives Chairman for the Chief Executive and by the Chief Executive for the over a one-year period. Finance Director. Target setting Budget performance is set as the ‘on-target’ performance level at the start of each financial year. The committee sets a range around target to incentivise delivery of truly stretching performance. Individual personal objectives are also set each year. These may be specific short-term goals or milestones towards medium or long-term objectives, but are closely aligned to the overall strategy of the group. Following the end of the financial year, the Chairman reviews the performance of the Chief Executive against these objectives and makes a recommendation to the Remuneration committee about the appropriate level of payout for the personal element. Similarly, the Chief Executive makes a recommendation to the Remuneration committee regarding the Finance Director following an assessment of his performance. Discretion, clawback and malus In specific circumstances the Remuneration committee retains discretion, including in relation to malus and clawback, as set out in the notes that follow this table.
Associated British Foods plc Annual Report and Accounts 2015 Governance 77 Maximum opportunityMaximum 200% of base salary at achievement allocation on of maximum vesting.
the results of the long-term incentive plan date; to market expectations and internal forecasts for the next years; few and advisors. remuneration appointed its advice from reflects the objective group’s of sustained long-term earnings growth; is a measure which is well understood both by participants and shareholders; is a published figure with limited adjustments; and encompasses the diverse nature of the group. Operation andlink to business strategy Discretion, clawback and malus Discretion, and clawback When the Company approved introduced by the new LTIP, shareholders in 2013, malus and clawback were introduced the into plan rules. specific In circumstances Remuneration committee the plan. Further the can to information relation in discretion retains be found in the notes this to table. plan Previous Conditional shares already allocated and 2013–16 for 2012–15 will vest, or not, under the terms of the Executive Share Incentive Plan 2003. These allocations were subject earnings to per share performance targets and, in contrast the to new plan, do not have clawback in place. Target setting Target are set by theTargets committee at the beginning of each three-year performance period, taking account into the state of the markets in which the group operates as well as the scale of investments made in the pursuit of long-term growth. In determining a fair but stretching target, committee the considers: also • • • For maximum performance 100% of the shares vest; for target performance 50% vest; for threshold performance vest; 10% and below threshold level awards lapse. A mandatory two-year holding period applies for any shares allocated under the from LTIP AGM the 2014 onwards. Performance measures Group performance is measured against an absolute range of compound annual growth in adjusted earnings per share (eps). This measure was chosen because it: • • • • An absolute, rather than a relative measure is used, as the group is a global business for which UK inflation factors are of limited impact. Other financial measures have been considered, but found be to inappropriate. or unhelpful Executive directors are eligible participate to in the Associated British Foods Long-Term Incentive Plan (the Annual LTIP). allocations of conditional shares vest over a three-yearperiod, subjectagreed to performance targets being satisfied. Allocations are granted over shares to the value of 200% of base salary at allocation. |
Annual Report and Accounts 2015 Remuneration report Remuneration
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LONG-TERM INCENTIVE INCENTIVE LONG-TERM PLAN (LTIP) Element and purposeElement and To reward long-termTo business growth, promote executive interests the align and retention of executives and shareholders. Governance
Associated British Foods plc REMUNERATION POLICY FOR EXECUTIVE DIRECTORS CONTINUED Governance | Remuneration report | 78
REMUNERATION REPORT REMUNERATION POLICY FOR EXECUTIVE DIRECTORS CONTINUED
Element and purpose Operation and link to business strategy Maximum opportunity
Executive directors are required to build and maintain a shareholding Shareholding of 100% of salary. SHAREHOLDING in the Company to a value at least equal to their pre-tax base salary. REQUIREMENT In order to achieve this target, executives are required to retain at To demonstrate commitment to, least 50% of the post-tax value of any shares vesting each year and align personal interests with, and then to manage their shareholding in such a way as to continue the success of the Company to meet the requirement. and its shareholders.
Defined benefit pension arrangements – For directors entitled to benefits PENSION closed to new members under the Company’s defined To provide a competitive The current executive directors are members of the Company’s benefit pension scheme and/or retirement benefit in line with HMRC approved defined benefit pension scheme, which closed to EFRBS, a retirement benefit best practice standards adopted new entrants in October 2002. Both executive directors opted out target of around two-thirds by major companies in the United of the scheme on 5 April 2006, but retain their accrued benefits up of final pensionable salary is Kingdom and continental Europe. to that date. The scheme is designed to provide retirement benefits payable at normal retirement age. of around two-thirds of final pensionable salary at age 65 (62 for For directors entitled to John Bason). defined contribution pension The current executive directors have, since 5 April 2006, earned arrangements, executives may benefits in an Employer-Financed Retirement Benefit Scheme receive Company contributions (EFRBS). The EFRBS is unregistered, but is designed to broadly (or cash equivalent) up to a mirror the provisions of the defined benefit pension scheme by maximum of 25% of base salary. providing retirement benefits of around two-thirds of final pensionable salary at normal retirement age. Defined contribution pension arrangements Future executive directors, who are not already entitled to defined benefit pension arrangements at the time of appointment, would benefit from an HMRC approved defined contribution arrangement, with a Company contribution (or cash equivalent) of 25% of base salary. Cash alternative Where a UK-based pension arrangement is not possible, or is not tax efficient, a cash supplement equivalent to the normal pension contribution may be paid in lieu of pension contributions.
Associated British Foods plc Annual Report and Accounts 2015 Governance 79
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Annual Report and Accounts 2015 Remuneration report Remuneration
| the belief that employees should be encouraged do the to right thing the long-term for benefit and success the of organisation; the belief that individuals should their performance sight line to of have targets; and the belief in combining profit and measures return with personal measures in the STIP. Governance Associated British Foods plc • • The committee operates share-based long-term incentives approximately for senior 150 individuals across the group. directors non-executive directors serving as Executive encourage self-developmentTo and allow external insight and practice, the committee has determined that, with the consent of Notes to the Remuneration policy table policy Remuneration the to Notes sensitivity commercial and Target-setting The committee selected the performance conditions shown in the preceding table because measures used these the key by are directors manage to thethe executive business. The performance targets by the set committee are annually taking account into their of advisorsthe views and management. The committee the is opinion of that performance targets the annual for bonus commercially are sensitive and that it would be detrimental the Company of the interests to disclose to the them start before Achievement the against of financial financial year. targets will be disclosed after the financial end the of relevant year Remuneration in that year’s report. clawback and Discretion, malus The time committee at any within two (under award may, years the the plan) of vesting new an date LTIP or of payment an STIP of award, determine that clawback shall apply if the committee determines that performance outcomes misstated; were an erroneous calculation was made in assessing which the to extent performance targets met; or the were participant committed, have is found to timeat any prior vesting/payment,to including prior grant, to an act or omission which in the opinion justifies, theRemuneration of or, committee, justified, would have summary dismissal. As a condition participating of in the STIP financial from the 2014/15 and year LTIP onwards, all participants been have required to agree that the committee may cause STIP any in which award or they participate LTIP lapse to (in whole or in part) and may operate clawback under share scheme any or bonus scheme in which they participate operated by a group company and may operate clawback reducing by amounts any payable the participant to and/or by requiring the participant immediately to transfer shares the Company. to or cash back The committee will apply discretion, where necessary that no and ensure unintended are there by exception, to consequences from the operation the of remuneration The policy. committee has a robust principles of set that it applies that ensure the outcome to is consistent with business performance and aligned with shareholder Any interests. discretion of material by the exercises committee in relation the STIP to will be and in line with LTIP scheme rules or other applicable contractual documentation and will be fully disclosed and explained report year’s in the relevant on the implementation remuneration of policy and will scheme exceed not maxima. Remuneration for other employees compared with that of executive directors First line reports the Chief Executive to and other senior rewarded are broadly executives within the same remuneration overall policy directors, fairness in order ensure to as executive and common purpose across the group. In general, therefore other executives participate in incentive arrangements similar those directors, the to of executive but with potentialpayout. of lower levels The proportion variable of base pay to salary ‘on-target’ 1 for first to for is line around executives 1.2 performance and 2.25 1 for to maximum performance. The Remuneration committee regularly package the reward reviews other groups for senior of executives below board that ensure sufficient they remain at a level to level attract to and high-calibre retain individuals. Associated British Foods is geographically dispersed subject and very therefore to different pay markets, so it is difficultmake to sensible comparisons with all employees across the group. The salaries directors in line executive with of reviewed are UK employees group. In Decemberof the when the 2014, salary including increase and 3.0%, employees a 3% for in the UK was between 1.75% increase in the minimum wage, the Chief Executive received a salary increase 2.6%. of In order drive to performance, and reward align and to better and executives shareholders, of the interests directors the executive proportion greater have a package their reward of total at risk than other employees. This means that in years very of good performance, package the Chief Executive’s increases proportionately more than that most of other employees and conversely lower performance of in years the structure it may decrease. and principles However, incentives of consistent are further down the organisation including: • the Chairman and the Chief Executive, directors executive may serve as non-executive directors other companies of in an individual capacity earned. fees any and will retain Governance | Remuneration report | 80
REMUNERATION REPORT
Remuneration policy – consideration of employment conditions elsewhere in the Company How pay and conditions of employees were taken into account when setting directors’ remuneration policy The committee considered the salary increases proposed for the employee population generally and other changes to the remuneration policy within the Company when reviewing executive salaries at its September and October meetings. As outlined in the policy table, the committee typically limits the range of increases for executive directors to the range of increases available to employees unless there has been a change of role. The design of incentives is broadly consistent across the group. The committee is provided with data on the remuneration structure for senior management in the two tiers below executive director and uses this information to work with the Company to ensure consistency of approach. In addition, the committee approves all share-based LTIP awards across the group. Consideration of employees’ views In setting the remuneration policy, the committee seeks to act in the best interests of the Company. Whilst the views of employees are not explicitly sought, employees are able to feed back their opinions through employee opinion surveys or directly to the Company’s management. Remuneration policy – executive director contracts, recruitment, retention and loss of office Recruitment arrangements – all executive directors As we may need to recruit future executive directors from outside the UK or from companies with more aggressive incentive policies than our own, and as our long-term incentive plans do not give us significant headroom to make awards to new joiners above the levels set out in the policy table, the arrangements below are intended to give us the flexibility to recruit the right individuals should we need to. Core package – in line with remuneration policy table on pages 76 to 78 Salary – Based on a combination of market information, internal relativities and individual experience. Benefits – In line with remuneration policy. Pension – Defined contribution pension or cash alternative to pension in line with policy. STIP – Pro rata in year of recruitment. Part of STIP may be guaranteed to reduce the need for additional cash payments to hire new joiners. LTIP – Prorated grant for the year of recruitment. A mandatory two-year holding period will apply for any shares vesting under the LTIP for all newly appointed executive directors. Buy-out arrangements – in addition to remuneration policy table on pages 76 to 78 The committee may, when it considers this to be in the best interest of the Company, make a one-off award of additional cash and/or shares to replace incentives foregone from a previous company. The committee would seek validation of the value of incentives foregone, including the nature, time horizon and performance requirements attaching to that remuneration. Additional awards will not exceed the committee’s advisors’ calculation of the value of the original awards. If possible, additional incentive awards will be tied to group performance targets. Other elements – in addition to remuneration policy table on pages 76 to 78 The committee may, when it considers this to be in the best interest of the Company, make a one-off additional award of cash and/or shares as an incentive to join. This may, for example, be necessary if recruiting an individual from overseas. If possible, additional incentive awards will be tied to group performance targets. Total maximum additional incentive value will not exceed 200% of salary. Internal appointments For internal appointments, awards in respect of the prior role may be allowed to vest according to the terms of the scheme, adjusted as relevant to take account of the new appointment. In addition, ongoing prior remuneration obligations may continue. Relocation If a new executive director needs to relocate, the Company may pay: • actual relocation costs and other reasonable expenses relating to moving house; • disturbance allowance of up to 5% of salary, some of which may be tax-free for qualifying expenditure; • school fees for dependent children where there are cultural or language considerations; • medical costs for the overseas family, where relevant; • one business class return fare per annum each for the executive, his/her partner and dependent children in order to maintain family or other links where an executive is recruited from outside the UK; • reasonable fees and taxes for buying and/or selling a family home and/or appropriate rental costs; and • any tax due, grossed up, on any relocation related payments listed above.
Associated British Foods plc Annual Report and Accounts 2015 Governance 81
If an executive was recruited from overseas and relocated the to UK at the start of his/her employment, his/her repatriation may be paid. Not paid. Not paid. Repatriation The committee will consider allowing awards due vest to in relation the to financial year of termination vest. to Other awards committeelapse the unless uses its discretion allow to them to vest. The committee has never this. done previously Vesting will take place on the usual vesting date, subject performance to conditions committee the unless should award the that determines vest earlier pro rata, in which case committeethe determine may notice executive’s the whether period will be taken account into prorating. in any All conditional share awards will be cancelled unless the committee otherwise.determines The committee has never previously otherwise.determined All conditional share awards will be cancelled. LTIP The committee will consider making a pro rata payment for the financial year in which the termination/death took place. Any agreed payment will be made in the December following the year end. In the case of death, payment may be accelerated. If an executive director ceases be to employed notice under before/is results year when full are published, no award will be made unless the committee determines otherwise. The committee previously never has otherwise.determined No award will be made. STIP
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Annual Report and Accounts 2015 Salary and and Salary contractual benefits Paid up date to of termination or death. The committee has discretion pay to in lieu of notice as set out above. Paid up to termination date. Paid up to termination date.
Remuneration report Remuneration
| death the committeethe redundancy retirement employing or company undertaking being outside transferred group the reason other determined by ill health/injury/ill disability • • • • • Reason for Good leaver including: • termination Resignation Gross misconductGross Governance Associated British Foods plc Service contracts and payments for loss of office It is the Company’s policy that directors executive rolling have contracts with 12-month notice periods. This is in accordance with Corporatethe UK Governance Code and contracts available are inspection for at the Company’s offices. Contracts and service agreements reissued not are when basesalaries changed. or are fees Pension arrangements both for the current executive been amended,directors have asdescribed in the policy table, without reissuing their contracts. The directors’ service executive contracts the allow Company for the terminate employment to by paying the director some in lieu of or his notice all of period. The Company may determine that a payment notice in lieu of is made in monthly instalments or as a lump sum. A payment notice in lieu of will comprise the salary, benefitsand pension provision that the director would otherwise have received during period. the relevant The Company is committed the principle to mitigation. of If the committeedetermines that a payment notice in lieu of will be paid in monthly payments, it would reduce the instalments account take to amounts of received from alternative employment. In addition, director the executive may be entitled a payment to in respect his statutory of rights. The committee may also determine that a contribution will be made legal the director’s to in connection fees with his termination and reasonable may agree make to payments in respect him to outplacement. of In limited circumstances, in addition making to a full payment notice, in lieu of the Company may permit director stay an executive to employed after the announcement his departure of a limited period for ensure to hand-overan effective and/or allow time a successor for to be to appointed. It would be open the Company to consider to terminating service director’s an executive agreement a payment in breach notice) in lieu him make a payment of and to to (i.e. not make instead to damagesof which him to compensates the loss for him he will suffer the as of termination a result his contract, of taking account into his duty mitigate to his loss. There is no automatic entitlement accrued to STIP/LTIP awards on termination; the approach determining to whether or a payment not might be made out is set in the table Prorated STIP below. awards will usually not and LTIP account take notice of periods, but the committee retains the discretion determine that to they will. The committee would expect not do so to in the case poor of performance. Governance | Remuneration report | 82
REMUNERATION REPORT
Remuneration policy for non-executive directors Summary of remuneration policy for non-executive directors Non-executive directors’ fees are reviewed periodically in the light of fees payable in comparable companies and the importance attached to the retention and attraction of high-calibre individuals as non-executive directors. Fees are paid on a per annum basis and are not varied for the number of days worked. Non-executive directors receive no other benefits and take no part in any discussion or decision concerning their own fees. The Remuneration committee (under the chairmanship of the Senior Independent Director) reviews the Chairman’s fees. In addition to his fee, the Chairman also receives private medical insurance for himself and his spouse.
Element Purpose Operation Chairman Fees To attract and retain a high-calibre The Chairman is paid a single fee for all his responsibilities. chairman by providing a competitive The level of this fee is reviewed every other year by the committee (in the core reward for the role. absence of the Chairman) and the executive directors in the light of fees payable in comparable companies. Fees are paid in cash on a monthly basis.
Benefits To provide market-competitive benefits. Private medical insurance (for Chairman and spouse).
Other non-executive directors Fees To attract and retain high-calibre Fees are paid on a per annum basis and are not varied for the number of days worked. non-executive directors by offering The Chairman and executive directors review non-executive directors’ fees every market-competitive fees. other year in the light of fees payable in comparable companies. The Senior Independent Director and chairman of the Audit committee are paid an additional fee to reflect their extra responsibilities. Fees, paid in cash on a quarterly basis, were last reviewed on 3 September 2014.
Non-executive directors’ terms of appointment It is the Company’s policy that all non-executive directors are subject to specified terms of appointment. Appointment is for an initial term of three years unless terminated by either party on six months’ notice. Continuation of the contract of appointment is contingent on satisfactory performance and re-election at forthcoming annual general meetings. Non-executive directors are typically expected to serve two three-year terms, although the board may invite a non-executive director to serve for an additional period. The Company’s Articles of Association require that all directors retire from office if they have not retired at either of the preceding two annual general meetings. In any event, at this year’s annual general meeting, all directors are standing for election or re-election in compliance with the UK Corporate Governance Code, except for Lord Jay who will retire on 30 November 2015. Where an individual retires at the annual general meeting and does not stand for re-election, they are not paid in lieu of notice. Approach to recruitment for non-executive directors The approach to fees outlined above would apply to new non-executive directors. We would not pay to relocate a non-executive director to the head office location but would reimburse reasonable expenses incurred in travelling on behalf of the business. In the first year, such expenses may be higher than usual as part of the individual’s induction into the business. Remuneration policy – statement of consideration of shareholders views Each year the chairman of the committee invites our larger institutional shareholders to discuss with him their views on the group’s remuneration, strategy and governance. Ahead of the 2014 AGM, we received feedback from some investors who did not feel that our earnings per share targets were sufficiently stretching. The committee robustly reviews targets each year, with detailed input from our advisors and from the Company. We have satisfied ourselves, in the context of the challenges facing the sugar business, that the targets that we set for the LTIP in 2013 and 2014 were extremely challenging and that delivering this level of performance would represent a very good performance by the executive directors on behalf of shareholders. The Chairman’s statement on page 74 sets out more information on our approach to setting LTIP targets for 2015-18. In light of the changing scale and shape of the business, we are planning to review remuneration policy in 2015/16 and seek shareholder approval for this at the 2016 AGM. The committee chairman remains happy to discuss any remuneration matters at any time to help shape our policy and practice. Annual report on directors’ remuneration The annual report on directors’ remuneration sets out the elements of remuneration paid to directors in respect of the financial year 2014/15. The notes to the single figure table provide further detail, including measures and outcomes for 2014/15, where relevant, for each of the elements that make up the total single figure of remuneration in respect of each of the executive directors. This report is subject to an advisory vote at the 2015 AGM.
Associated British Foods plc Annual Report and Accounts 2015 Governance – 83 9 24 82 82 65 65 65
350 2014 £000
7,470 4,990
Dec 2014 Dec
£677,000 £1,028,000 Single total figure total 71 71 71 71 90 90 48 381 2015 £000 2,114 3,057 7,8 2014 £000 5,110 3,362 Long-term incentive 766 504 2015 £000 2.6% 2.6% 6 582 894 2014 £000 Increase in Dec 2014 Annual bonus 456 686 2015 £000 th of final pensionable earnings for each year of th of final pensionable earnings for each year of 45 45 / / 1 1 5 478 395 2014 £000 Pensions 592 486 2015 £000 rds of final pay or rds of final pay or Dec 2013 Dec 3 3 – – – – – – – 1 / / £660,000 2 2 15 18 £1,002,000 2014 £000 2 3 4 – – – – – – – 1 19 15 2015 £000 Taxable benefits Taxable – 24 82 82 65 65 65 973 633 349 2014 £000 1 1 1 1 1 1 1 71 71 71 71 90 90 48 Salary or fees | 380 998 649
2015 £000 Annual Report and Accounts 2015 11 Remuneration report Remuneration
10 | The single total figurefor has2014 been updatedto reflect LTIPthe adjustment noted in 7 above. The value of George Weston’s benefits comprised £13,704 taken in cash and £1,676 taxed as benefits-in-kind. The value of John Bason’s benefits comprised £13,704 taken in cash and £5,242 taxed as benefits-in-kind. The value of Charles Sinclair’s benefits are taxed a as benefit-in-kind. Pensions remuneration for 2014 has been amended be to presented consistently with the current year’s remuneration. The annual bonus is paid in December in respect of the preceding financial year. None of the incentive is subjectto deferral. As required by UK regulations, vesting under the long-term incentive plan for has 2011–2014 been recalculated update to last year’s estimatesprice that using of 3067.1p applied the actual on vesting. share Information relating performance to targets, weightings and outcomescan be found on page of the 2014 74 annual report.Vesting under the long-term incentive plan for 2012–2015 has been estimated using the average mid-market closing priceover thefinancial last quarter 12 yearJuneSeptember(12 to of the 2014/15Vesting 2015) of 3116p. will be on 23 November and2015 a figure recalculated for the actual share price on that date will be presented in the 2016 Remuneration report. Information relating performance to targets, weightings and outcomes can be found on pages 84 and 85. The value shown reflects the split across the year from the previousfee rateto the revised rates of £72,500for non-executive directors, £92,500for the Senior Independent Director and Chairman of the Audit committee and £390,000 for the Chairman. Ruth Cairnie joined the board on 1 May 2014. Wolfhart Hauser joined the board January on 14 2015. in the Scheme; the balance of the promise is provided under an EFRBS. The director’s benefits are payable from age 65. There is no additional benefit entitlement for the members if they take early retirement. The pension accrued by the director September at 12 2015 was £512,670. pensionable service, less an allowance for the director’s retained benefits from previous employment. The director opted out of the Associated British Foods Pension Scheme on 5 April 2006, andhas a deferred benefit in the Scheme; the balance of the promise is provided under an EFRBS. The director’s benefits are payable from age 62. There is no additional benefit entitlement for the members pensionable service. The director opted out of the Associated British Foods Pension Scheme on 5 April 2006, and has a deferred benefit if they take early retirement. The pension accrued by the director September at 12 was 2015 £311,787. John Bason John The director has an overall benefit promise of a minimum of George Weston The director has an overall benefit promise of a minimum of
Governance Tim Clarke John Bason John Javier Ferrán Peter Smith CairnieRuth Associated British Foods plc Single total figure of remuneration – executive directors(audited information) Single total figure – benefits The taxable values a fully of expensed company private medical car, insurance, assurance life and an annual medical check-up are included in the table directors’ of remuneration. Pensions Both directors opted out the of Associated British Foods Pension Scheme, a defined benefit scheme, on 5 April 2006, and since earned benefitsthen have in an Employer-Financed Benefit Retirement Scheme (EFRBS). George Weston Additional notes to the single total figure of remuneration – executive directors(audited information) This section sets out supporting information the single for figure total columns. In particular, it provides information on the extent performanceto which conditions been have satisfied the STIP for and LTIP. Single total figure – base salary Executive directors’ salaries on 1 December reviewed were in accordance 2014 with normal policy increased and were in line with average increases the company’s for UK-based employees. 9 10 11 7 8 2 3 4 5 6 1 Executive directors Executive George Weston Lord Jay Emma Adamo Wolfhart Hauser John Bason John Non-executive directors Non-executive Sinclair Charles Governance | Remuneration report | 84
REMUNERATION REPORT
Short-Term Incentive Plan – 2014/15 The table below shows outcomes against the specific measures in the year. None of the incentive is subject to deferral.
Measures Achievements against performance measures Threshold 15% salary Target 65% salary Maximum 108.3% salary
50%
A – Operating profit 15.0 108.3 Threshold x 0.8 Target x 1 Maximum x 1.2
x 0.9887
B – Working capital as % of sales 0.8 1.2 Threshold 12% salary Target 65% salary Maximum 130% salary
49.44%
A x B – Total financial 12 130 Threshold 0% salary Target 13.3% salary Maximum 20% salary
C – Personal – George Weston 14.93% 2.33% 15.50% 2.37%
C – Personal – John Bason 0 20 Threshold 12% salary Target 78.3% salary Maximum 150% salary
(A x B) + C – Total STIP – George Weston 66.70% 67.31%
(A x B) + C – Total STIP – John Bason 12 150
The committee considered whether it would be in the best interests of the Company and its shareholders to disclose the precise targets agreed for each of the performance measures for 2014/15. The conclusion was that retrospective detail on financial targets set will not be disclosed at this stage as it is, in the opinion of the committee, commercially sensitive. During 2016, we will consider, as part of the wider review of our approach on incentives, what further transparency we can provide to shareholders without disadvantaging the business. Following a review of personal performance against specific objectives for the 2014/15 financial year, the committee determined that George Weston will receive 14.93% of salary in relation to performance that was slightly ahead of target against set objectives, with performance improvements in our ingredients businesses and in Australia, ongoing continuous improvement in the sugar business, a strengthened balance sheet and continuing successful growth of Primark. John Bason will receive 15.50% of base salary for the individual element of the annual bonus, reflecting overall performance that is ahead of target with most objectives having been attained, the review of auditors having been well managed and a good focus on investor relations during the year. Personal objectives set for each of the executive directors were closely aligned to the overall strategy of the group but will not be disclosed because of commercial sensitivity. In addition to the above percentages, the committee has determined to increase the personal element of the incentive payment by a further £23,963 for George Weston and £16,073 for John Bason in relation to a previous discretionary reduction in vesting of the 2009–12 LTIP to reflect an asset impairment charge in our Australian meat business. In 2014, the committee returned to the executive directors some, but not all, of the previously reduced value to recognise the value delivered from property development deals relating to the site. These deals have continued to recapture the impaired value for the business and its shareholders this year. No further payment will be made in respect of this previous reduction in vesting as the aggregate outcome is now as it would have been had no impairment charge been taken.
Value reduced in 2012 Amount returned to Balance to be (share price of 1442.65p) executives in 2014 returned in 2015 George Weston £48,011 £24,048 £23,963 John Bason £32,243 £16,170 £16,073
Long-Term Incentive Plan – 2012–2015 The performance measures for each three-year LTIP cycle are set by the committee. Awards are made annually, at the discretion of the committee, and eligible executives receive shares at the end of the performance period, subject to achievement of the performance measures. For the 2012–2015 cycle the threshold level of compound adjusted eps growth was 5% per annum with on target at 8% and maximum at 11%. The adjusted eps range, adjusted for the impact of IAS 19, was 100.1p at threshold, 109.0p at target and 118.5p at maximum. Actual eps was 102.0p. In November 2015 executive directors will therefore receive 18.54% of the conditional shares allocated in 2012 – George Weston will receive 24,575 shares and John Bason 16,168 shares. No further deferral will be applied to these shares, as they were granted before December 2014.
Associated British Foods plc Annual Report and Accounts 2015 Governance 0 0
85
Total 2014 period Below (0% of 2,446 threshold 17.09.16 17.09.16 12.09.15 12.09.15 364,945 maximum) 3,844,221 13 September 13 End of performance of End 4,256 6,462 (10% of 2015 Total Threshold
2,613 maximum) 309,220 £000 3,830,300 1,250 1,286 1,954 1,900 12 September September 12 Face value value Face Target Shares vesting Shares 21,282 32,310 (50% of maximum)
2 n/a 2015 185,171 281,353 84,181 87,205 42,564 64,620 55,402 132,552 Conditional Maximum 12 September September 12 1 Maximum (shares) as n/a
at grant 3101.2p 3101.2p 565% Market price 10,654% Beneficial
% of salary of % at award 2321.2p 2321.2p 1433.4p 1433.4p
£000 Market price 1,320 2,004 2015 Face value value Face 2,613 124,049 Beneficial 3,548,947 12 September September 12 Maximum award and vesting and 200% 200% % salary% n/a Dates of award salary salary Holding 100%of 100%of 25/11/13 – 25/11/16 – 25/11/13 25/11/16 – 25/11/13 23/11/12 – 23/11/15 – 23/11/12 23/11/12 – 23/11/15 – 23/11/12 requirement 24/11/17 24/11/17 Vesting date Vesting
Scheme name |
24/11/14 24/11/14
Award date Annual Report and Accounts 2015 Share incentive plan incentive Share Share incentive plan incentive Share Share incentive plan incentive Share plan incentive Share p p 22 / 22 / 15 15 3 Remuneration report Remuneration
| Calculated using share price September as at 12 2015 of 3086p and base salary September as at 12 2015. These awards, detailed in the preceding and following tables are conditional allocations under the long-term incentiveGeorge Weston plans is a director described of Wittington in the policy Investments section. Limited which, together with its subsidiary, Howard Investments Limited,in Associated held 431,515,108 ordinary British shares Foods plc September as at 12 2015. the volatility the in many present in which markets of the group operates; the scale investments made of in the pursuit long-term of growth; the results the long-term of incentive date; to expectations;market internal forecasts and the years; next for few advice from their appointed remuneration advisors.
Governance Associated British Foods plc, ordinary shares of 5 Associated British Foods plc George Weston In addition directors the executive the have following awarded the interests conditional to in the year, in ABF interests shares. 1 2 3 John Bason John Executive directors Executive WestonGeorge The committee determined compound that performance this should award for be measured against an 11% absolute to range 5% of annual growth in adjusted earnings per The share. committee believes that the range is extremely the three-year over stretching performance period given sugar profitability and exchange foreign rates. In setting thistarget, the committee account: took into • • • • • • As outlined in the remuneration will there be policy, a further two-year holding period in place these for shares after vesting. information) interests (audited share and requirements directors’ shareholding Executive The directors executive build required are to up a beneficially owned shareholding 100% salary. of of This requirement hasbeen met. No share option awards from earlier years outstanding. are The below interests remained the same at 3 November 2015. Executive director Executive George Weston Grant policy for share plans Conditional share awards granted are each following year at the announcement end November, of the of Company’s results. In addition, furtherawards made, are following approval by the committee, between the end November of and 1 June each year starters orto new newly promoted individuals who eligible are participate. to The share price used determine the to number of an allocationshares in is the average the of closing share prices on the five trading days immediately preceding the date. award All awards settled are using shares bought in the market. Scheme interests awarded (audited in 2014/15 information) The table below details the conditional awarded The directors the share interests executive to during awards made the year. were in line with policy our normal and subject are performance to conditions the vesting over period. Wittington Limited, Investments ordinary shares of 50p ordinary shares of 5 Associated British Foods plc, John Bason John John Bason John Governance | Remuneration report | 86
REMUNERATION REPORT
Non-executive directors’ shareholding requirements and share interests (audited information) There is no shareholding requirement for non-executive directors. The following shareholdings are ordinary shares of Associated British Foods plc unless stated otherwise.
Beneficial Beneficial Total Total 12 September 2015 13 September 2014 12 September 2015 13 September 2014 Charles Sinclair 12,760 12,760 12,760 12,760 Tim Clarke 4,000 4,000 4,000 4,000 Lord Jay 1,000 1,000 1,000 1,000 Javier Ferrán 2,400 2,400 2,400 2,400 Peter Smith 2,000 2,000 2,000 2,000 Emma Adamo1 Wittington Investments Limited, ordinary shares of 50p 1,322 1,322 1,322 1,322 Associated British Foods plc, ordinary shares of 515/22p 504,465 504,465 504,465 504,465 Ruth Cairnie 1,500 – 1,500 – Wolfhart Hauser2 1,283 n/a 1,283 n/a
1 Emma Adamo is a director of Wittington Investments Limited which, together with its subsidiary, Howard Investments Limited, held 431,515,108 ordinary shares in Associated British Foods plc as at 12 September 2015. 2 Wolfhart Hauser was appointed a director on 14 January 2015.
Payments to past directors (audited information) No payments were made to past directors in 2014/15. Payments for loss of office (audited information) No payments were made for loss of office in 2014/15. TSR performance and Chief Executive’s pay The performance graph below illustrates the performance of the Company over the past six years from September 2009 to September 2015, 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 six-year summary of the total remuneration of the Chief Executive over the same period showing a breakdown of each of the elements of variable pay within the total remuneration figure. For the purpose of calculating the value of the remuneration of the Chief Executive, data has been collated on a basis consistent with the ‘single figure’ methodology as defined in the applicable UK directors’ reporting regulations.
500 450 400 ABF £444 350 300 250 200 150 FTSE 100 £178 100 50 Value of a hypothetical £100 investment 0 2009 2010 2011 2012 2013 2014 2015 Source: DataStream Return Index
Single total figure remuneration variable element (£000) 3,886 3,182 3,859 5,832 7,470 3,057 Annual variable element (£000) 1,266 438 864 1,219 894 686 Potential maximum annual variable element (£000) 1,310 1,373 1,425 1,466 1,503 1,542 Annual variable element (% of maximum) 96.68% 31.91% 60.63% 83.15% 59.49% 44.46% Long-term variable element – shares vesting as % of maximum 99.12% 83.80% 97.42% 85.00% 100.00% 18.54%
At close of business on 11 September 2015, the last trading day before the end of the financial year, the market value of the Company’s ordinary shares was 3086p. During the previous 12 months, the market value ranged from 2466p to 3284p.
Associated British Foods plc Annual Report and Accounts 2015 Governance
3% 3% 87 -7%
0.0% 12.0% 78.3% Change 150.0% Dec 2015
£692,200 Total bonus Total
£1,051,000 £m = 246 269 2014 2,006
0.0% 0.0% 13.3% 20.0% element Personal £m £15,200 Dec 2015 2015 Dec £23,000 277 230 2015 Increase in 2,058 +
12% 65%
0.0% payout 130% Overall financial 2.24% 2.25% Dec 2015 2015 Dec Increase in x1.0 x1.2 x0.8 x0.8 on average average on payout based payout Modification to working capitalworking 0.0% 15.0% 65.0% 108.3% Dec 2014 Dec profit only £677,000 on operatingon £1,028,000 Payout based Payout |
Annual Report and Accounts 2015 Remuneration report Remuneration
| Governance Below threshold Below that our targets and level will at a stretching disclose set are achievement against financial targets retrospectively in our 2016 Remuneration report done have as we in this report 2014/15. for Associated British Foods plc As detailed in our remuneration believe that we the policy, detailed targets used our for STIP commercially are sensitive. believe We Maximum a fee of £105,875 Hea fee of also financial served in the 2014/15 year. astrustee a Voluntary of Service Overseas and as chairman of the charity FareShare, but received no compensation in respect either of these of roles. Relative importance of spend on pay A year-on-year comparison the of relative importance pay of and significant income distributions shareholders to and others is shown below. Benefits and pension No change current operation. to IncentiveShort-Term Plan – 2015/16 The STIP will be operated in line with the in 2015/16 remuneration policy and with previous Company practice on implementation. Implementation of policy 2015/16 changes any make do to We in the intend not implementation our of policy other than the in 2015/16 change in approach target to setting as award detailed the LTIP for on page 88. salaryBase Executive directors’ salaries subject are on 1 December review to and will be increased 2015 as shown in the table below. Expenditure Pay spend for the group for all of our employees was 3%. These numbers are based on aggregate data presented on page 111 as it is our very all of employees numbersfor based was are difficult, 3%. These on aggregate data in a on presented page 111 decentralised group separate the to of Company’s the increase size, in expenditure on incentives and benefits. director non-executive directors serving as Executive GeorgeDuring served Weston the year, as a non-executive directorWittington of Investments Limited, which for he received no compensation. John Bason is a non-executive director and chairman the of audit committee Compass of Group PLC, which for he received Dividends relating the to period Income taxes paid On-target (budget) Percentagechange in remuneration of the Chief Executive theincrease Between and salary 2015, in the Chief Executive’s 2014 was 2.6% and the average increase in salaries our for UK employees was between 1.75–3%. The the Chief Executive for reward total reduced by 59%, reflecting 18.54% vesting on the LTIP, reduced from 100% vesting in the previous year as as well reduced a STIP payment. The increase overall in expenditure on reward Threshold George Weston John Bason John Governance | Remuneration report | 88
REMUNERATION REPORT
Long-Term Incentive Plan – 2015–18 The LTIP will be operated in line with the remuneration policy and with the continuing Company grant policy (see page 77). Each year the committee reflects carefully on a number of Company and external data points and on feedback from our shareholders in setting the eps targets for the LTIP. For 2015–18 we have taken into account the very significant impact of sugar pricing and foreign exchange movements on the expected profitability of a number of our divisions in 2015/16. This means that in the first year of the LTIP we anticipate a reduction in adjusted eps compared with 2014/15, as reflected in the outlook paragraph of the Chairman’s statement on page 5. In setting the targets for the 2015–18 LTIP, the committee has taken into account the outlook for a modest decline in adjusted eps in the 2016 financial year and the consequential implications of this for 2017. Accordingly, the committee has decided that the LTIP targets will assume no growth for the first year of the 2015/18 LTIP. Thereafter, the compound annual growth rates of 5% to achieve threshold, 8% to achieve target and 11% to achieve maximum will be applied. We believe that this approach is appropriate and in the best interests of our shareholders. Service contracts
Date of current contract/ Unexpired period of Date of appointment letter of appointment Notice from Company Notice from individual service contract Executive directors George Weston 19.04.99 01.06.05 12 months 12 months Rolling contract John Bason 04.05.99 16.03.99 12 months 12 months Rolling contract Non-executive directors Charles Sinclair 01.10.08 21.04.09 6 months 6 months Rolling contract Tim Clarke 03.11.04 03.11.04 6 months 6 months Rolling contract Lord Jay 01.11.06 01.11.06 6 months 6 months Rolling contract Javier Ferrán 01.11.06 01.11.06 6 months 6 months Rolling contract Peter Smith 28.02.07 28.02.07 6 months 6 months Rolling contract Emma Adamo 09.12.11 09.12.11 6 months 6 months Rolling contract Ruth Cairnie 01.05.14 01.05.14 6 months 6 months Rolling contract Wolfhart Hauser 14.01.15 14.01.15 6 months 6 months Rolling contract
Non-executive directors’ fees for 2015/16
Increase in Dec 2014 Dec 2015 Dec 2015 Chairman £390,000 £0 £390,000 Senior Independent Director £92,500 £0 £92,500 Chairman of Audit committee £92,500 £0 £92,500 Director £72,500 £0 £72,500
The non-executive directors’ fees were last revised in December 2014 and will next be reviewed in December 2016. Annual report on remuneration – governance Remuneration committee The committee comprises the Chairman, who was independent on appointment, and the following members, all of whom are independent non-executive directors:
Meetings attended Name Role on committee Independence Year of appointment (total of 4) Charles Sinclair Chairman Chairman 2008 4 Tim Clarke Member Senior Independent Director 2004 4 Lord Jay Member Independent Director 2006 4 Peter Smith Member Independent Director 2007 4 Javier Ferrán Member Independent Director 2006 4 Ruth Cairnie Member Independent Director 2014 3 Wolfhart Hauser1 Member Independent Director 2015 3
1 Wolfhart Hauser attended all meetings from his date of appointment.
All committee members, George Weston (Chief Executive), Des Pullen (Group HR Director) and Julie Withnall (Group Head of Reward) attended all of the meetings of the committee except as detailed above. No individual was present when their own remuneration was being considered.
Associated British Foods plc Annual Report and Accounts 2015 Governance 89
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Annual Report and Accounts 2015 Remuneration report Remuneration
| the cast number total votes of in relation the resolution to was 659,736,109: 619,982,274 ‘for’ and 39,753,835 ‘against’ the percentage ‘for’ was 93.97% and the percentage ‘against’ was 6.03% the number abstentions of was 1,672,922 the cast number total votes of in relation the resolution to was 660,191,206: 598,077,621 ‘against’ ‘for’ and 62,113,585 the percentage ‘for’ was 90.59% and the percentage ‘against’ was 9.41% the number abstentions of was 1,216,643 the remuneration policy directors the executive for and Chairman taking account into remuneration trends across the Company; the specific terms and conditions employment of each of individual director; the policy overall remuneration first for the and Chief Executive’s for second line reports; the design and monitoring the of operation Company any of share plans; encourage targets to enhanced incentive performance;stretching an approach that fairly rewards and responsibly contribution the Company’s to long-term success; and other provisions directors’ the service executive of agreements and ensuring that contractual terms on termination, and payments made, the individual fair to are and the Company and that is rewarded not failure and loss is mitigated. provide alignment between remuneration and the Company’s business objectives; align with rewards executive shareholder value; attract and high-calibre retain directors; executive directorsmotivate executive achieve challenging to performance them so and doing; levels for reward recognise both individual and group achievement; and reflect the diversity interests. the of group’s Governance Associated British Foods plc • • • • • • The out is remit set committee’s in detail which regularly in its reviewed terms are reference, of updated and were in September 2015. They available are on the website at www.abf.co.uk/investorrelations under corporate governance/board committees, or from the Company Secretary’s office on request. principlesRemuneration The remuneration overall policy the Company of aims to: • • • • • • Statement shareholder on voting theAt last AGM in December the results voting on resolution 2014 two, receive and to approve the Remuneration report the year for Septemberended as follows: were 13 2014, (i) (ii) (iii) The results voting on resolution approve the directors’ to three, remuneration as follows: were policy, (i) (ii) (iii) statement Compliance The remuneration policy was annual subject general a binding at the 2014 to meeting It the is that vote of Company. our intention Remuneration committee advisors and fees Following a competitive tender in 2003, Perrin) was selected Watson provide to (then independent Towers Towers information market and remuneration advice the Remuneration to committee. The committee Watson in this role because has retained Towers it values the robust data provided and continuity advice of thelong over term. The committee remains satisfied that the advice from Towers Watson is independent, thoughtful and challenging. Watson is a member the Remuneration of Towers Consultants Group and adheres its to code remuneration in relation executive to consulting. The only Watson other adviceprovides the Company to that Towers is in survey provision and remuneration benchmarking. Watson committee for The paid fees assistance Towers to the past over financial year totalled £72,593. Role of the committee The Remuneration committee is responsible the board to determining: for • the policy will be during and will reviewed we seek 2015/16 shareholder approval making before changes any the policy to at the annual general meeting The the will of Company. advisory have vote status in respect remuneration overall of packages and will not be specific individual to remuneration. of levels KPMG LLP has audited the report the required extent to by the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). By order the of board Lister Paul SecretaryCompany 3 November 2015 AGM in 2016. The report on directors’ remuneration section contained within this report will be subject an advisory to at the forthcoming vote Governance | Directors’ report | 90
DIRECTORS’ REPORT
Introduction be appointed as a director where details Employees The directors of Associated British Foods of that director have been provided at least During the year under review, the group plc (the ‘Company’) present their report seven and not more than 35 days prior employed an average of 124,036 people for the 52 weeks ended 12 September to the relevant meeting by at least two worldwide (2014: 118,209) of whom 2015, in accordance with section 415 members of the Company. The Articles 42,416 were employed in the UK. The of the Companies Act 2006. The UKLA’s require directors to retire and submit group’s business priority is to safeguard Disclosure and Transparency Rules and themselves for election at the first AGM the wellbeing, development and safety Listing Rules also require the Company to following appointment and all directors of its employees and those who work make certain disclosures, some of which who held office at the time of the two with it. It also wants employees to have have been included in other appropriate preceding AGMs and, in any event, not opportunities to grow and progress as part sections of the annual report and accounts. less than one-third of the relevant directors of an enjoyable career. While the group’s (excluding those directors who retire other approach to human resource management The information set out on page 93, and than by rotation), to submit themselves for is decentralised, with flexibility given to the following cross-referenced material, re-election. The Articles notwithstanding, each of the businesses, as a group it is incorporated into this Directors’ report: all directors, with the exception of Lord Jay, abides by the following principles: • likely future developments in the will stand for election or re-election at the • equal opportunities – the group group’s business (pages 12 to 45); AGM this year in compliance with the is committed to offering equal UK Corporate Governance Code. Details • greenhouse gas emissions opportunities in recruitment, training, of unexpired terms of directors’ service (page 50); and career development and promotion to all contracts are set out in the Remuneration people, including those with disabilities, • the board of directors and the Corporate report on page 88. having regard for their particular governance report (pages 60 to 73). Power of directors aptitudes and abilities. As a matter of Results and dividends The directors are responsible for managing policy, full and fair consideration is given The consolidated income statement is the business of the Company and may to applicants with disabilities and every on page 96. Profit for the financial year exercise all the powers of the Company effort is made to give employees who attributable to equity shareholders subject to the provisions of relevant become disabled whilst employed by amounted to £532m. statutes, to any directions given by special the group an opportunity for retraining resolution and to the Company’s Articles. and for continuation in employment. The directors recommend a final dividend The Articles, for example, contain specific It is group policy that the training, career of 25.0p per ordinary share to be paid, provisions and restrictions concerning development and promotion of disabled subject to shareholder approval, on the Company’s power to borrow money. persons should, as far as possible, be 8 January 2016. Together with the interim As indicated above, powers relating to the the same as that of other employees; dividend of 10.0p per share paid on 3 July issuing of shares are also included in the 2015, this amounts to 35.0p for the year. • health and safety – health and safety Articles and such authorities are renewed Dividends are detailed on page 112. are considered as equal in importance by shareholders at the AGM each year. to that of any other function of the Directors Directors’ indemnities group and its business objectives and The names of the persons who were Three directors of operating subsidiaries the group is committed to providing directors of the Company during the benefited from qualifying third-party a safe and healthy workplace to protect financial year and as at 3 November 2015 indemnity provisions provided by the all employees, visitors and the public appear on pages 60 and 61. All the Company’s wholly owned subsidiary, from foreseeable work hazards. The directors, with the exception of Lord Jay ABF Investments plc, during the financial health and safety policy is available who is retiring as a non-executive director year and at the date of this report. on the Company’s website at with effect from 30 November 2015, www.abf.co.uk; are standing for election or re-election The directors of a subsidiary company that at this year’s AGM in December. acts as trustee of a group pension scheme • harassment – sexual, mental or benefited from a qualifying pension physical harassment in the workplace Appointment of directors scheme indemnity provision during the will not be tolerated. It is expected The Company’s articles of association financial year and at the date of this report. that incidents of harassment are (the ‘Articles’) give the directors power reported to the appropriate human to appoint and replace directors. Under Directors’ share interests resources director; the terms of reference of the Nomination Details regarding the share interests of the committee, any appointment must directors and their connected persons in • human rights – the group provides be recommended by the Nomination the share capital of the Company, including opportunities that promote human committee for approval by the board any interests under the long-term incentive rights and dignity every day through of directors. A person who is not plan, are set out in the Remuneration the employment created, both directly recommended by the directors may only report on pages 85 and 86. and indirectly in its global supply chains and through the positive
Associated British Foods plc Annual Report and Accounts 2015 Governance
12
91
2014
Date of of interest of
notification December p.
22 / 15 % of 8.03 share share capital issued
shares Number of ordinaryof 63,562,102 in the Relationship Agreement; so far as the Company the is aware, included provisions independence in the Relationship Agreement have been complied with by the controlling shareholders and their associates; and so far as the Company the is aware, procurement obligation included in the Relationship Agreement as regards independence the with compliance provisions by the Non-Signing Controlling Shareholders and their associates, has been complied with by Wittington. the Company has complied with the included provisions independence • • Major interests in shares As at 28 October the Company 2015, had received formal notification, under the the of Rules, Transparency and Disclosure following material in its shares: interest The board confirms that, accordance in with the Listing November Rules, on 14 the Company a2014 into entered relationship agreement with Wittington and the trusteesthe of Foundation containing the required undertakings (the ‘Relationship Agreement’). Under the terms the Relationship of Agreement, Wittington has agreed procure to compliance with the undertakings by the other individuals who treated as are controlling shareholders (the ‘Non-Signing Controlling Shareholders’).The board confirms that, during the period under that is, from entry thereview, into Relationship November Agreement on 14 September 2015: 12 until 2014 • Shareholder The Capital Group Companies, Inc. capital Share Details the of Company’s share capital and the rights attached the Company’s to 20 out set shares on are in note page 125. The Company has one class share of capital: ordinary 5 shares of and the Company’s Articles. No shareholder holds securities carrying special rights with regard the control to There theof Company. no restrictions are on rights. voting The rights and obligations attaching to these governed shares are by UK law
Directors’ report Directors’ on page 91 Note 22 on page 128 Location in annual report
or procure the proposal a shareholder of resolution which is intended or appears the be proper circumvent to intended to application the of Listing Rules. transactions arrangements and with the controlling shareholder (and/or its of any associates) will be conducted at arm’s length normal on and commercial terms; neither the controlling shareholder nor its of any associates action will any take that would the have effect preventing of the listed company from complying with its obligations under the Listing and Rules; neither the controlling shareholder nor its of any associates will propose on relationship with agreement shareholder controlling Board statement Board statement with agreement Relationship shareholders controlling Any person or who controls, exercises on their own or together with person any with whom acting they are in concert, 30% able or be the more of votes to LimitedWittington Investments (‘Wittington’) and, through their control of Wittington, Garfield the of trustees the FoundationWeston (‘the Foundation’) are controlling shareholders the of Company. Certaincertain other individuals, including members the family of Weston who hold shares in the Company (and including two the of Company’s directors, George andWeston Emma Adamo) under are, the Listing Rules, treated as acting in concert the of trustees the and Wittington with Foundation also treated and therefore are as controlling shareholders the of the of trustees the Wittington, Company. together Foundation individuals and these comprise the controlling shareholders of September and, 2015, at 12 Company the combined a have in approximately interest 59.06% the of Company’s rights. voting Information required Information Dividend waiver cast at general meetings a company of is known shareholder’ as a ‘controlling under Listingthe Rules. The Listing Rules require companies with controlling shareholders an agreement into which enter isto that ensure intended the controlling to shareholders comply with certain independence provisions in the Listing Rules and which must contain undertakings that: • • •
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Annual Report and Accounts 2015 Directors’ report
| to remain sensitive theto risks to of impacts rights human adverse and operations. Further details on rights human to approach group’s the can Corporate be found in the 2015 Responsibility Update which is available on the Company’s website at www.abf.co.uk/responsibility; communication – employees and their representatives briefedand are consulted matterson all relevant on a regular basis account theirin order views take into to with regard decision-making to and achieve a commonto awareness of all the financial and economic factors affecting the performance the of group. Information the employees to relevant will be provided systematically to and employees; security – the security our of staff and paramount group is the and customers will at all times the necessary take minimise their risks steps safety. to to contribution its products to make lives.people’s Ongoing engagement and collaboration with a broad range of and concernedinterested stakeholder groups is valued and the group is active in its collaborative approach, seeking resulting from its products, services from resulting Governance Associated British Foods plc • • Employees provided are with information on the performance their of local business and their is encouraged involvement in a variety ways, of such as through engagement surveys, forums, business leadershipexecutive programmes and management presentations. The group encourages an open culture in all its dealings between employees and people with whom it comes contact. into Effective and honest communication is essential if malpractice and wrongdoing be to dealtare with The effectively. whistleblowinggroup’s procedure sets out guidelines individuals for who they feel need raise to certain issues in confidence with the Company or their own business. Every effort is made protect the to confidentiality those who of raise come may employees and concerns, forward without their position. for fear under required Disclosures Listing Rule 9.8.4R The following table is included meet to Listing of Rule section requirements the 9.8.4R. The information required to be disclosed by that section, where applicable can the Company, to be located in the annual report and accounts at the out set below. references Governance | Directors’ report | 92
DIRECTORS’ REPORT
There are no restrictions on the transfer withdrawal. The most significant of Disclosure of information to auditors of the ordinary shares other than the these are the £1.2bn syndicated loan Each of the directors who held office at standard restrictions for a UK-quoted facility signed on 15 July 2014 which the date of approval of this Directors’ company set out in article 32 of the was undrawn at the year end; and report confirm that: Company’s Articles. • in addition to these bank facilities, the • so far as he/she is aware, there is no Authority to issue shares Company has in issue US$680m of relevant audit information of which the At the AGM held on 5 December 2014, private placement notes to institutional Company’s auditors are unaware; and authority was given to the directors to investors. In the event of a change • each director has taken all the allot unissued relevant securities in the in ownership of the Company, the reasonable steps that he/she ought Company up to a maximum of an amount Company is obliged to make an offer to have taken as a director to make equivalent to two-thirds of the shares in of immediate repayment to the himself/herself aware of any relevant issue (of which one-third must be offered remaining note holders. audit information and to establish that by way of rights issue). This authority There are no agreements between the the Company’s auditors are aware expires on the date of this year’s AGM Company and its directors or employees of that information. to be held on 4 December 2015. No such providing for compensation for loss of shares have been issued. The directors For these purposes, relevant audit office or employment that occurs as propose to renew this authority at the information means information needed a result of a takeover bid. 2015 AGM for the forthcoming year. by the Company’s auditors in connection Political donations with the preparation of their report on A further special resolution passed at that The Company did not make any political pages 94 and 95. meeting granted authority to the directors donations during the year. to allot equity securities in the Company Auditors for cash, without regard to the pre-emption Financial risk management Ernst & Young LLP have agreed to be provisions of the Companies Act 2006. Details of the group’s use of financial appointed as auditors of the Company This authority also expires on the date instruments, together with information with effect from 4 November 2015 in of the 2015 AGM and the directors will on our risk objectives and policies and our place of KPMG LLP. Resolutions for the seek to renew this authority for the exposure to price, credit, liquidity, cash appointment of Ernst & Young LLP as forthcoming year. flow and interest rate risks, can be found auditors of the Company and to authorise in note 24 on pages 129 to 138. the Audit committee to determine their Authority to purchase own shares remuneration are to be proposed at the The Companies Act 2006 empowers Research and development forthcoming AGM. the Company to purchase its own shares Innovative use of existing and emerging subject to the necessary shareholder technologies will continue to be crucial Annual general meeting approval. The Company has no existing to the successful development of new The AGM will be held on 4 December authority to purchase its own shares. products and processes for the group. 2015 at 11.00 am at Congress Centre, 28 Great Russell Street, London Amendment to Company’s articles The Company has a major technical WC1B 3LS. Details of the resolutions of association centre in the UK at the Allied Technical to be proposed are set out in a separate Any amendments to the Articles may be Centre. Facilities also exist at ACH Notice of meeting which accompanies made in accordance with the provisions Food Companies in the US, Weston this report for shareholders receiving of the Companies Act 2006 by way of Technologies and AB Mauri in Australia hard copy documents and which is special resolution of the shareholders. and the Netherlands, and AB Enzymes available at www.abf.co.uk for those in Germany. These centres support Significant agreements – change who have elected to receive documents the technical resources of the trading of control electronically. At the 2015 AGM, all voting divisions in the search for new technology The group has contractual arrangements will be by poll using electronic handsets. and in monitoring and maintaining high with many parties including directors, standards of quality and food safety. On behalf of the board employees, customers, suppliers and banking groups. The following Branches Paul Lister arrangements are considered to be The Company, through various subsidiaries, Company Secretary significant in terms of their potential has established branches in a number 3 November 2015 impact on the business of the group as of different countries in which the a whole and could alter or terminate group operates. Associated British Foods plc on a change of control of the Company: Registered office: Post-balance sheet events Weston Centre • the group has a number of borrowing There have been no significant events 10 Grosvenor Street facilities provided by various banking affecting the group from 12 September London W1K 4QY groups. These facility agreements 2015 to the date of this report generally include change of control requiring disclosure. Company No. 293262 provisions which, in the event of a change in ownership of the Company, could result in their renegotiation or
Associated British Foods plc Annual Report and Accounts 2015 Governance
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and provides the information necessary shareholdersfor assess to the Company’s performance, business and position model and strategy. On behalf the of Board Sinclair Charles Chairman George Weston Executive Chief BasonJohn Director Finance 3 November 2015 We considerWe the annual report and financial statements, as a whole, taken balancedis fair, and understandable
the financial statements, prepared in accordance with the applicable set accountingof standards, give a true and fair view the of assets, liabilities, financial position and profit or loss of theof 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 the of business and the position the of Company and the undertakings included in the consolidation as a whole, taken together with a description the of principal risks and uncertainties that they face. that complies with that law and The directors responsible are keeping for adequate accounting records that are sufficient show and explain to the parent disclose and transactions company’s with reasonable accuracy time at any the financial position the of parent company and enable that ensure them its to financial statements comply with the Companies Act 2006. They general have responsibility taking for such steps as reasonablyare open safeguard them to to the assets the of group prevent and to and detect fraud and other irregularities. Under applicable law and regulations, the directors also are responsible for preparing a Strategic report, Directors’ report, Remuneration report and Corporate governance statement regulations. those The directors responsible are the for maintenance and integrity the of corporate and financial information included on the company’s Legislation website. in the UK governing the preparation and dissemination financial of statements may differ from legislation in other jurisdictions. of statement Responsibility the directors in respect of the reportannual confirmWe the that best to of our knowledge: our • • |
Annual Report and Accounts 2015 Statement of directors’ responsibilities
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select suitable accounting policies apply then and consistently; them estimates and judgements make that reasonable are and prudent; the groupfor financial statements, state whether been they have prepared in accordance with IFRSs as adopted by the EU; company financial parent the for statements, state whether applicable UK Accounting Standards been have followed, subject material any to departures disclosed and explained in the parent company financial and statements; prepare the financial statements on the going concern basis unless it is group the that presume to inappropriate and the parent company will continue in business. Governance Statement of directors’ responsibilities directors’ of Statement inrespect of the annual report and the financial statements The directors responsible are preparing for the annual report and the group and company financialparent statements in accordance with applicable law regulations. and Company law requires the directors prepareto group and parent company financial statementseach for financial Under that required law they are toyear. prepare the group financial statements in accordance with IFRSs as adopted by the andEU applicable law and elected have company financial parent the prepare to statements in accordance withUK Accounting Standards. Under company law the directors must approvenot the financial statements unless satisfied they are that they give a true and fair view the of stateaffairs of theof group and parent company and theirof profit or loss that for period. In preparing each the of group and company financialparent statements, the directors required are to: • • • • •
Associated British Foods plc STATEMENT OF DIRECTORS’ RESPONSIBILITIES DIRECTORS’ OF STATEMENT Governance | Independent auditor’s report | 94
INDEPENDENT AUDITOR’S REPORT
Opinions and conclusions arising The risk Our response continued from our audit 1. Our opinion on the financial AB Mauri, Australian meat, European sugar This assessment covered key inputs such statements is unmodified and UK Bakeries have all experienced difficult as projected economic growth, operational We have audited the financial statements trading environments in recent years. improvement in factory performance, of Associated British Foods plc for the AB Mauri’s profitability has been impacted cost inflation, selling prices, volumes, 52 week period ended 12 September 2015 by competitive pricing pressures in some and discount rates, as well as performing break-even analysis on the assumptions set out on pages 96 to 151. of its businesses compounded by macro- economic conditions, including high inflation to assess the sensitivity of them on the In our opinion: rates and currency devaluations. headroom of each CGU. We tested the sensitivity of the impairment • the financial statements give a true The Australian meat and UK Bakery businesses operate in environments of calculations to changes in key assumptions and fair view of the state of the group’s used by the directors to evaluate the impact and of the parent company’s affairs as significant retailer pressure on price and competitor activity. on the headroom for each CGU and to assess at 12 September 2015 and of the the reasonableness of the disclosures made. group’s profit for the 52 weeks Uncertainty surrounding the impact of regime reform abolishing EU sugar quotas We also assessed whether the group’s then ended; in 2017 and low world sugar prices have disclosures about the sensitivity of the • the group financial statements have led to a significant decline in profitability outcome of the impairment assessment to changes in key assumptions reflected the key been properly prepared in accordance of the group’s European sugar businesses. Improvement in profitability is dependent risks inherent in the valuation of goodwill, other with International Financial Reporting intangibles and property, plant and equipment. Standards as adopted by the European on recovery in sugar prices and maintaining competitive advantage through optimising Union (IFRSs as adopted by the EU); factory performance. Tax provisioning (included within • the parent company financial In light of these trading challenges and the income tax creditor of £126m) statements have been properly sensitivity to improvement in profitability, Refer to pages 71 (Audit committee prepared in accordance with UK there is a risk that the group’s significant report), 106 (accounting policy) and 112 Accounting Standards; and goodwill, other intangibles and property (financial disclosures). plant and equipment balances in respect • the financial statements have been of AB Mauri, Australian meat, UK Bakeries prepared in accordance with the and European sugar businesses may not The risk requirements of the Companies be recoverable. Accruals for tax contingencies require the Act 2006; and, as regards the group The recoverability of these assets’ carrying directors to make judgements and estimates financial statements, Article 4 of value is therefore dependent on forecasting in relation to tax issues and exposures given and discounting future cash flows, which the IAS Regulation. that the group operates in a number of tax is inherently uncertain. 2. Our assessment of risks jurisdictions, the complexities of transfer North China which was previously considered of material misstatement pricing and other international tax legislation to be at risk of impairment is no longer and the time taken for tax matters to be In arriving at our audit opinion above included following the disposal of two of agreed with the tax authorities. on the financial statements the risks the four factories and the associated losses of material misstatement that had on disposals recognised in the current year. Our response the greatest effect on our audit were as follows: Our response In this area our audit procedures included the use of our own international and local Carrying value of goodwill, other Our audit procedures included testing tax specialists to assess the group’s tax intangibles and property plant the principles and integrity of the group’s positions, its correspondence with the and equipment of £1,404m discounted cash flow model for each relevant tax authorities, and to analyse highlighted cash generating unit (CGU). and challenge the assumptions used Carrying value non-current assets of To assess the reasonableness of the cash to determine tax provisions based on AB Mauri (£531m), Australian meat flow model’s principal assumptions we our knowledge and experiences of the (£84m), UK Bakeries (£258m) and compared them to externally derived data application of the international and local European sugar (£531m). such as inflation, GDP growth forecasts, legislation by the relevant authorities future commodity price indicators as and courts. Refer to pages 71 (Audit committee well as our own assessments which took We also considered the adequacy of the report), 106 (accounting policy) and into account historic trends and other group’s disclosures in respect of tax and 114 to 117 (financial disclosures). corroborative evidence available. uncertain tax positions.
Associated British Foods plc Annual Report and Accounts 2015 Governance
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the parent company financialparent the statements and the part the of Remuneration report be to audited are not in agreement not are with the accounting records or and returns; certain disclosures directors’ of remuneration specified by law are the directors’ statement, out set on page 67 in relation going to not made;not or received not have we all the information and explanations we our for require audit. and concern; the part the of Corporate Governance Statement on page 62 the relating to company’s compliance with the ten UK Corporateprovisions the of 2012 Governance Code specified for our review. • is provided on the Financial Reporting Council’s website at www.frc.org.uk/ auditscopeukprivate. This report is made solely the company’s to members as a body and is subject important to explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/ are which auditscopeukco2014a, incorporated this report into as if out set in full and should be provide read to an understanding the purpose of this of report, the work undertaken have we and the basis our of opinions. Richard Pinckard Statutory(Senior Auditor) andfor on behalf KPMG of LLP, Statutory Auditor Chartered Accountants Canada15 Square London E14 5GL 3 November 2015 • to review: • A descriptiontrue and fair view. theof scope an audit of financial of statements • Under the Listing Rules required are we • report nothing have to We in respect theof above responsibilities. responsibilities and Scope As explained more fully in the Directors’ responsibilities statement out set on page 93, the directors responsible are thefor preparation the financial of statements and beingfor satisfied that they give a
6%
Total
91% 85%
assets
4% 90% 86% before tax Group profit 7% 91% 84% Group revenue 40 202 242 and financial statements as a taken balanced whole isfair, and understandable and provides the information necessary group’s the assess to shareholders for performance, model business and strategy; or the Governance section the of annual address appropriately report not does matters communicated the by us to committee. Audit adequate accounting records have or adequate returns our for audit have beennot received from branches audit and the directors’ statement that they consider that the annual report beennot by the parent company, kept or visitednot by us; Our opinion on other matters the part the Remuneration of report to prepared properly been has audited be in accordance with the Companies Act 2006; and the information given in the Strategic report and the Directors’ report for the financial which year for the financial statements prepared are is consistent with the financial statements. have We nothing to report in identified have we material the between inconsistencies knowledge acquired we during our Number of Number of components • Under the Companies Act 2006 are we reportrequired to in our opinion: if, you to • discussed in more detail, and further any work required by the group and divisional audit team was then performed by the auditor. component 4. prescribed the by Companies Act 2006 is unmodified In our opinion: • • 5. respect of the matters on which we exception report by to required are Under ISAs (UK and Ireland) are we reportrequired to based if, you on the to knowledge acquired we during our audit, identified have we other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement fact, of or that is otherwise misleading. In particular, report required are to we if: you to •
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† Annual Report and Accounts 2015 Independent auditor’s report auditor’s Independent
| Our application of materiality and Audit coverage Governance Specified risk focused audit procedures Total Associated British Foods plc Audits for group reporting purposes group for Audits † to beto reported back. The group audit team approved the component materialities which ranged £35m, to from £0.01m having and regard the risk mix size to of theprofile of group across the components. The work on 84 the components of 242 was performed by component auditors and the the by rest group audit team. The group audit team visited 55 components in Ireland, UK, the US, Brazil, SpainGermany, and China. were meetings conference Telephone also held with these component auditors and the majority the of others that were physicallynot visited. these At visits and meetings, the findings reported the to were team audit divisional and group The group audit team instructed component auditors the significant as to beareas to covered, including the relevant risks detailed above and the information £50m, determined to with reference a benchmark group tax of profit before normalised impairment exclude to charges £98m of as disclosed 2 and losses in note on disposal and closures businesses of as disclosed of 21 £172m of in note £987m which (of it represents 5%). reportWe the Audit to Committee identified uncorrected or corrected any misstatements exceeding £0.5m itemsfor impacting the income statement and £2m in respect items for balance of sheet misclassifications in addition other to warrant that identified misstatements reporting on qualitative grounds. 598Of the group’s reporting components, subjectedwe 202 audit group to for reporting purposes and40 specified to risk-focused audit procedures. The latter individually not were financially significant an require auditto group for reporting purposes, but included were in the scope ourof group reporting work in order to furtherprovide the coverage over identified results. risks and the group’s The components within the scope ourof audit work accounted the for percentages results as the of group’s shown in the table below. an overview of the scope of our audit The materiality the group for financial statements as a whole was at set 3.