2010 Annual Report and Accounts

A Measure of our Success Annual Report and Accounts 2010 DIRECTORS’ REPORT // BUSINESS REVIEW // THE YEAR’S HIGHLIGHTS The year’s highlights • Group revenue over £10bn for the first time Group revenue Adjusted operating profit* • Step change in the scale of Sugar • 10% increase in Primark selling space with £10.2bn £909m 13 new stores • 25% increase in adjusted earnings Up 10% Up 26% • Cash generated from operations more Adjusted profit before tax** Adjusted earnings per share** than doubled in two years • Strong balance sheet and substantial £825m 72.2p financial resources * before amortisation of non-operating intangibles and profits less losses Up 26% Up 25% on disposal of non-current assets. * * before amortisation of non-operating intangibles, profits less losses on Dividends per share Net capital investment disposal of non-current assets, and profits less losses on the sale and closure of businesses. 23.8p £699m Up 13% Net debt Operating profit £816m £819m Up 31% Profit before tax Basic earnings per share £763m 69.3p Up 54% Up 52% DIRECTORS’ REPORT // BUSINESS REVIEW // THE YEAR’S HIGHLIGHTS Directors’ report Business review IFC The year’s highlights Associated British Foods is a 2 Our group at a glance 4 Chairman’s statement diversified international food, 6 Operating review 28 Financial review ingredients and retail group with Directors’ report Governance sales of £10.2bn, and 97,000 30 Corporate responsibility 32 Board of directors 34 Corporate governance employees in 44 countries. 45 Remuneration report 51 Other disclosures 54 Statement of directors’ responsibilities in respect of the annual report and the financial statements We aim to achieve strong, 55 Independent auditors’ report sustainable leadership positions Financial statements 56 Consolidated financial statements 56 Consolidated income statement in markets that offer potential 57 Consolidated statement of comprehensive income for profitable growth, and deliver 58 Consolidated balance sheet 59 Consolidated cash flow statement 60 Consolidated statement of changes in equity quality products and services 61 Significant accounting policies 68 Notes forming part of the financial statements that are central to people’s lives. 110 Company financial statements 115 Progress report Shareholder information IBC Company directory Associated British Foods Annual Report and Accounts 2010 1 DIRECTORS’ REPORT // BUSINESS REVIEW // OUR GROUP AT A GLANCE Our group at a glance 19% 9% 27% of total of total of total revenue revenue revenue Adjusted Adjusted Adjusted Revenue operating profit Revenue operating profit Revenue operating profit £1,941m £240m £954m £33m £2,730m £341m Sugar Agriculture Retail Sugar, Europe Agriculture Primark British Sugar’s UK beet sugar factories produce over AB Agri sells animal feed to farmers and purchases Primark is a major retail group employing over one million tonnes of sugar annually. Its Spanish grain from them. It also provides sustainable supply 31,500 people. It operates stores in the UK, Republic business, Azucarera, produces around 400,000 tonnes chain solutions to food, drink and biofuel producers. of Ireland, Spain, the Netherlands, Portugal, Germany of beet sugar each year and has a cane refining It has facilities in the UK and China and markets and Belgium. capacity of a further 400,000 tonnes. products in over 40 countries worldwide. Targeted at the fashion-conscious under 35s, Primark Sugar, China offers customers high-quality merchandise at value We have majority interests in five cane sugar mills for money prices. Primark prides itself on its loyal in Guangxi Province and operate seven beet sugar customer base. factories in the north east of the country. Continuous investment has raised annual sugar capacity to Buying and merchandising teams in Dublin (Republic 850,000 tonnes. of Ireland) and Reading (UK) travel internationally to source and buy up-to-the-minute fashion items Sugar, southern Africa that best reflect each season’s key fashion trends. Illovo is Africa’s largest sugar producer with Primark’s range of departments includes womenswear, agricultural and production facilities in six countries. lingerie, childrenswear, menswear, footwear, accessories, Illovo grows 6.1 million tonnes of sugar cane itself hosiery and homeware. and its annual sugar production is 1.9 million tonnes. 2 Associated British Foods Annual Report and Accounts 2010 DIRECTORS’ REPORT // BUSINESS REVIEW // OUR GROUP AT A GLANCE The group operates through five strategic business segments: Sugar; Agriculture; Retail; Grocery; and Ingredients. 34% 11% of total of total revenue revenue Adjusted Adjusted Revenue operating profit Revenue operating profit £3,406m £229m £1,067m £104m Grocery Ingredients Go online for more… Hot beverages, sugar and sweeteners Yeast and bakery ingredients For more information on our year, our approach Twinings and Ovaltine comprise our global hot AB Mauri operates globally in yeast and bakery to corporate responsibility and shareholder beverages business. We are market leaders in ingredient production with 49 plants in 25 countries information go to www.abfreports.co.uk UK sugar with Silver Spoon and Billington’s. supplying plant and artisanal bakers and the foodservice and wholesale channels. It is a technology Vegetable oils leader in bread improvers, dough conditioners and Mazola is the leader in premium corn oil in the US. bakery mixes. In Mexico, Capullo is a premium canola oil. Speciality ingredients Bread, baked goods and cereals ABF Ingredients focuses on high-value ingredients for We produce Jordans cereals in the UK and leading food and non-food applications. It manufactures and bakery brands, Kingsmill, Ryvita, and Tip Top in the markets enzymes, yeast extracts, speciality proteins UK and Australia. and lipids. World Foods World Foods comprises our authentic pan-Asian food brands, Patak’s and Blue Dragon. Herbs and spices We are a leading US producer of herbs and spices through the Tone’s, Spice Islands and Durkee brands. Meat In Australia we are a leading supplier of ham, bacon and smallgoods through the Don and KRC brands. Associated British Foods Annual Report and Accounts 2010 3 DIRECTORS’ REPORT // BUSINESS REVIEW // CHAIRMAN’S STATEMENT Chairman’s statement Adjusted operating profit increased by 26%. Grocery A major feature of these results is the significant I am pleased to report margins improved, there was an excellent result for increase in the cash generation capability of the Sugar and an outstanding performance from Primark. group. Adjusted operating profit before depreciation a record year for Our Chinese sugar operations made a significant and amortisation increased by £228m to £1,241m recovery from the difficulties reported last year and provided the resources for investment. Even Associated British Foods. and there was no repeat of the losses incurred on after capital expenditure of £694m during the year, vegetable oil futures in the US. Growth in adjusted net debt at the end of the year was £183m lower Revenue grew across the earnings of 25%, particularly in the prevailing than last year at £816m, although the £115m raised economic climate, is a fine achievement by the at the beginning of the year from Illovo’s rights issue group by 10% to over whole group. contributed to this reduction. The strength of the group’s balance sheet, the reliability of its cash A number of capital projects were completed during generation and the newly negotiated bank facilities £10bn for the first time the year and have begun to yield results. Several that extend to 2015, provide the financial resources projects are still in progress and will continue to drive to fund our investment ambitions. with strong underlying the group’s growth as they come on stream, notably the restructuring of our meat business in Australia, Corporate responsibility trading from all of our sugar capacity expansions in southern Africa and We have always sought to run our business in ways the building of the Vivergo biofuels plant in the UK. that are socially and environmentally responsible. business segments. Encouragingly, we have identified a number of It is part of our culture and we have been reporting further investment opportunities, particularly in the the group’s performance on health, safety and developing markets of China and Africa and in new the environment for the past seven years. Some of stores for Primark across Europe. The high level of the highlights over the last year are included in the capital investment is therefore planned to continue. corporate responsibility section of this year’s annual report. However the limited space available here does not do justice to the variety of initiatives under way and the progress we have made. We are therefore launching our first corporate responsibility report which details our business principles, explains how we manage our corporate responsibility and contains a comprehensive review of our performance. This report is available for download from our website at www.abf.co.uk/corporate-responsibility.aspx 4 Associated British Foods Annual Report and Accounts 2010 DIRECTORS’ REPORT // BUSINESS REVIEW // CHAIRMAN’S STATEMENT We have always sought to run our business in ways that are socially and environmentally responsible . this year we are launching our first corporate responsibility report. Employees Dividends This year’s success is in large part attributable to A final dividend of 16.2p is proposed, to be paid the dedication of our employees who have shown on 14 January 2011 to

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