Associated British Foods plc
Interim Results Announcement
24 weeks ended 27 February 2021
For release 20 April 2021
ASSOCIATED BRITISH FOODS PLC RESULTS FOR THE 24 WEEKS ENDED 27 FEBRUARY 2021
Exceptional delivery in food; retail strong when stores open
Financial headlines
|
|
| Actual | Constant currency |
| · Group revenue | £6,313m | -17% | -18% |
| · Adjusted operating profit | £369m | -46% | -46% |
| · Adjusted profit before tax | £319m | -50% |
|
| · Adjusted earnings per share | 25.1p | -59% |
|
| · Dividend per share | 6.2p |
|
|
| · Gross investment | £382m |
|
|
| · Net cash (before lease liabilities) | £705m |
|
|
| · Net debt (including lease liabilities) | £2,715m |
|
|
| · Statutory operating profit | £320m | -8% |
|
| · Statutory profit before tax | £275m | -8% |
|
| · Basic earnings per share | 20.5p | -25% |
|
Statutory operating profit is stated after exceptional charges and other items shown on the face of the condensed consolidated income statement. Exceptional charges of £25m this year compare to £309m in the last financial half year.
George Weston, Chief Executive of Associated British Foods, said:
"I am proud of how our people have responded to the many challenges presented by COVID-19. Our food businesses delivered an exceptional increase in adjusted operating profit of 30% and we have provided safe and nutritious food under the most demanding of conditions.
With most of the Primark stores closed for more than half the period, the management team demonstrated operational agility in response to the measures employed by governments to tackle the pandemic. Primark sales after store reopenings demonstrate the relevance and appeal of our value-for-money offering. We are excited about welcoming customers back into our stores as the lockdowns ease and are delighted with record sales in England and Wales in the week after reopening on 12 April. With our success in a number of new markets, as wide-ranging as Poland and Florida, we are as convinced as we have ever been in the long-term growth prospects for Primark.
Looking ahead, with stores reopening and Primark once again becoming cash generative, our confidence is reflected in our decisions to repay the job retention scheme monies in respect of this financial year and to declare an interim dividend."
The group has defined, and outlined the purpose of, its Alternative Performance Measures in note 12. These measures are used within the Financial headlines and in this Interim Results Announcement.
For further information please contact:
Associated British Foods: |
| John Bason, Finance Director |
| Catherine Hicks, Corporate Affairs Director |
| Tel: 020 7399 6545 |
Citigate Dewe Rogerson: | |
| Tel: 020 7638 9571 |
|
| Chris Barrie | Tel: 07968 727289 |
| Jos Bieneman | Tel: 07834 336650 |
INTERIM RESULTS ANNOUNCEMENT
For the 24 weeks ended 27 February 2021
CHAIRMAN'S STATEMENT
A year ago the human tragedy of COVID-19 was unfolding on a scale that both shocked and saddened us. None of us could have anticipated the profound global impact on people's lives and livelihoods over this past year.
The economic effects of the measures taken by governments to restrict the pandemic were evident in the financial results for our last financial year and in the results for this financial half year. The Board recognises that a group of our scale and significance has responsibilities to many stakeholders. I want to say thank you once again to every employee for their hard work and determination in these difficult times. So many have continued to go beyond the ordinary call of duty and I am proud of the many examples of this that I have seen.
Our food businesses worldwide have adapted to working safely in this environment and continued to provide safe, nutritious and affordable food to customers. During this first half, with most stores closed for more than half of the time, the Primark team have demonstrated operational agility in responding to the fast changing and wide range of measures employed by governments to tackle the pandemic.
Revenue in Grocery, Sugar, Agriculture and Ingredients was ahead of the first half last year at constant currency. Adjusted operating profit in each of these food businesses was well ahead of both expectations and last year, and in aggregate were an exceptional 30% up on last year. Primark's performance in the first half was materially lower than expected impacted, as outlined above, by extensive store closures and restrictions on trading. We have been very encouraged by Primark's trading when the stores were open.
Revenue for the group of £6.3bn was 17% behind last year at actual exchange rates driven by the loss of Retail sales as a consequence of the trading restrictions placed on Primark. Adjusted operating profit of £369m was 46% lower than last year at actual exchange rates as a result of the contribution lost at Primark. Net finance expense was in line with last year, but the adjusted effective tax rate increased substantially to 35% as a result of lower profitability for Primark expected for the full year which will now include the repayment of job retention scheme monies relating to the current financial year. Adjusted earnings per share decreased by 59% to 25.1p per share.
The statutory operating profit for the period reduced by 8% to £320m, a much lower reduction than the decline in adjusted operating profit. Statutory operating profit is stated after exceptional items which decreased from a charge £309m last year to £25m this year. To ensure that Primark greets its customers with fresh spring/summer collections in its stores when they reopen this month, exceptional items this year include an inventory charge of £21m which relates to the clearing of some autumn/winter seasonal items in those stores which have been closed since December.
The cash outflow for the group in the first half was £860m. We normally have a seasonal outflow in this period for our Sugar businesses in the northern hemisphere and payment was made for Primark orders delayed from last financial year. The major part of the cash outflow, some £650m, is a result of the Primark store closures and relates to both the loss of revenue and the consequent increase in stocks.
The group's net cash before lease liabilities of £705m at this half year compared to £801m at the same time last year. The cash outflow as a result of the periods for which Primark's stores were closed over the last year has been substantially offset by higher cash generation by our food businesses, targeted cost control initiatives and the non-payment of dividends for our last financial year. Our balance sheet has been strengthened this half year by a substantial increase since the start of the financial year in the aggregate net assets of the group's defined benefit pension schemes. The aggregate net assets reached £382m at the half year end and the improvement was driven by the main UK pension scheme.
We are delighted that our stores in England and Wales delivered record sales in the first week after reopening on 12 April. We welcomed our customers back with our value-for-money offering, exciting new season ranges and a safe store environment.
Government job retention schemes
To contain the spread of COVID-19 over the past year governments have taken unprecedented measures which have had drastic economic effects on many businesses and their employees. In turn governments have provided economic support for those most affected.
Primark has been required to close its stores several times over the past year, with a consequent loss of over £3bn of sales and over £1bn of profit over the past 12 months. We have also seen huge cash outflows with a £650m outflow in the first half of this year alone. During this time we have accessed the job retention schemes offered by the UK and European governments to pay those employees not working while the stores were closed. These schemes have enabled us to preserve all the jobs in Primark's 65,000 workforce.
Last financial year we took measures to protect the business and its liquidity which included stopping discretionary spend. All Primark employees saw a reduction in their income either through being placed on a job retention scheme or through voluntary salary reduction. As reported last year, senior management at Primark and at group level elected to take material reductions in their pay, and no bonuses were paid. No dividends were paid to shareholders. We received £98m from job retention schemes in that year.
This financial year, we were eligible for a further £79m from job retention schemes in respect of the first half and at the date of this announcement this has reached £121m. Although uncertainty remains, a large proportion of the UK adult population has now been vaccinated and last week we saw the successful reopening of Primark's English and Welsh stores which represent some 40% of our total retail selling space. On the assumption that our English and Welsh stores remain open, Primark will return to cash generation. Accordingly, we do not plan to make any further claims from government job retention schemes for which we would be eligible from this date, and we intend to repay the £121m referred to above. This includes the repayment of £72m to the UK government.
Board
I am delighted to welcome Dame Heather Rabbatts as a non-executive director of the Company with effect from 1 March 2021. Heather brings a wealth of experience having held a number of executive and non-executive roles across local government, infrastructure, media and sports. She was the first woman to join the board of the Football Association. She continues to work in film and sports and is a non-executive director of Kier Group plc. We very much look forward to working with her.
Dividends
We decided not to declare an interim dividend nor propose a final dividend relating to the last financial year. This was due to the impact of COVID-19 on the group's cash flow driven by the duration and number of Primark store closures. The scale of this was demonstrated by the cash outflow of some £800m experienced in the period from March to May 2020. Uncertainty was particularly acute in April and again in November 2020 when the Board considered the payment of dividends.
The degree of uncertainty is now substantially lower than last year due to a large proportion of the UK adult population having been vaccinated and the successful reopening of Primark's English and Welsh stores. In the light of the net cash position before lease liabilities for the group of £705m reported at the half year and our cash flow projections, which demonstrate the substantial headroom available to the group, the Board has decided to declare an interim dividend for this financial year.
The dividend per share has been based on the adjusted earnings per share for the first half. The decision to repay the monies received from the job retention schemes has been taken after the half year and so the first half income statement does not include the repayment of the £79m in respect of that period. Therefore, for the purpose of this dividend calculation, a deduction of the repayment amount has been taken into account which on a pro-forma basis would reduce the adjusted earnings per share for the first half from 25.1p to 18.5p.
The Board has declared an interim dividend of 6.2 pence per share (2020: nil, 2019: 12.05 pence per share) totalling £49m. This will be paid on 9 July 2021 to shareholders registered at the close of business on 4 June 2021.
In due course, the Board will consider whether to pay a final dividend determined by the trading of the group in the second half and the outlook at that time.
ESG
It is our belief that businesses that have a sound culture and balance the interests of their many stakeholders will be both more sustainable and successful than businesses which do not. In addressing Environmental, Social and Governance (ESG) factors, every company has to prioritise and apply most resources to those ESG factors which are of greatest relevance to its businesses. Last month the group held the first in a series of investor events designed to set out our approach to this important topic. This first presentation is available on our website www.abf.co.uk and our second event will be held in the summer with the date to be confirmed in due course.
Outlook
Following the exceptional performance of our Grocery, Sugar, Agriculture and Ingredients businesses in the first half, we expect a softer performance in the second half. Full year profit at AB Sugar will be ahead of last year and in line with expectation. The profit recovery in Illovo primarily benefited the first half but further recovery in the second half will offset the one-time costs associated with the recommissioning of Vivergo, our bioethanol plant in Hull, UK. Full year profits at Ingredients and Agriculture are expected to be in line with last year with the impact of higher commodity costs affecting the second half. Grocery volumes are expected to be softer in the second half compared to the very strong retail channel sales experienced last year at this time and margins will be impacted by significantly higher US commodity vegetable oil costs.
In the first half further peaks of COVID-19 infections led to additional restrictions and store closures for Primark. At the half year, 22% of its selling space was open. With the reopening of stores in England and Wales last week, and expected reopenings in some markets over the coming weeks, we will be trading at the end of April from 68% of our retail selling space, which increases to 79% if stores with restricted trading are included. The reopening dates for France, the Republic of Ireland and the remaining stores in Germany are yet to be confirmed. We will increase our retail selling space with an additional nine stores opening in the second half. We continue to expect the profit for Primark to be somewhat lower than last year. The repayment of the job retention scheme monies will be treated as an expense in adjusted operating profit in the full year.
For the full year the recent strengthening of sterling against our major currencies would lead to a translation loss of some £30m and the group's effective tax rate is expected to be 35%.
Michael McLintock
Chairman
CHIEF EXECUTIVE'S STATEMENT
COVID-19
In the past twelve months we have lost 30 employees to COVID-19 and we mourn them all. I am proud of how our people have responded to the many challenges presented by the pandemic. We have provided safe and nutritious food under the most demanding of conditions and when permitted to be open, we have safely served millions of customers in our Primark stores.
Over the past year Primark stores have been closed for extended periods of time in most markets and our retail operations teams have had to react to changes at short notice. As a business we have faced huge uncertainty and our financial results starkly demonstrate the economic consequences. Primark has accessed the job retention schemes made available by governments in those markets where we operate. These funds provided income for employees while work was not available. Operationally these schemes have been critical in enabling us to preserve the skills and capability within the business and to preserve all the jobs in Primark.
Vaccinations are now underway, and progress has been made in many countries in controlling the spread of the virus. However the pandemic is still very much present in many parts of the world and will continue to affect our businesses for some time. We have seen a number of Primark stores reopen since the half year and we now expect to be trading from 68% of our retail selling space at the end of April, which rises to 79% if stores with restricted trading are also included. We are looking forward to the time when all restrictions have been lifted in our markets and all of our Primark stores are open once again.
Review of the first half
Group revenue of £6.3bn was 18% behind the same period last year at constant currency reflecting the material impact on Retail of the measures taken to control the spread of COVID-19. The majority of Primark stores were closed for more than half of this period. The decline in adjusted operating profit was a consequence of this and at £369m was 46% lower than last year.
Each of our food businesses: Sugar, Grocery, Agriculture and Ingredients delivered exceptional performances in this first half. In aggregate they delivered an increase in adjusted operating profit of 30%.
Sugar continued to deliver a much-improved performance driven in this first half by Illovo. Grocery delivered a strong increase in adjusted operating profit through a combination of successful new product launches and increased volumes through retail sales channels. Twinings Ovaltine is the biggest profit contributor to Grocery and delivered strong growth in this period. Our recent acquisitions have all performed well. Acetum, our Italian premium balsamic vinegar business, Yumi's in Australia and Anthony's Goods in the US are all thriving. Profits at both AB Agri and Ingredients were well ahead of last year. Agriculture delivered growth in its high value markets. AB Mauri experienced increased demand for yeast and bakery ingredients and our joint venture in China with Wilmar International is now operational. ABF Ingredients saw further growth in demand for its nutritional and pharmaceutical products.
Our businesses have worked hard to overcome the many challenges presented by COVID-19 over the past year. Throughout this period however, we have maintained a focus on developing plans for the future. Substantial new capital investment projects are underway in many of our businesses and in a difficult environment for opening stores Primark added 0.7m sq ft of retail selling space. Our ambition is now to accelerate the pace of new store openings, particularly in France, Spain, Italy, the US and eastern Europe. With our success over the last year in entering a number of new markets, as wide ranging as Poland and Florida, we are as convinced as we have ever been in the long-term growth prospects for Primark.
OPERATING REVIEW
Grocery
| Ongoing businesses | 2021 | 2020 | Actual fx | Constant fx |
| Revenue £m | 1,834 | 1,689 | +9% | +8% |
| Adjusted operating profit £m | 199 | 189 | +5% | +6% |
Grocery performance in the first half was strong. Revenue was significantly ahead of last year, 8% at constant currency, with increased retail sales more than offsetting weaker foodservice as a result of COVID-19. Adjusted operating profit was up by 6% at constant currency, driven by Twinings Ovaltine and our UK Grocery businesses.
Twinings and Ovaltine both had a strong first half despite weaker demand in out-of-home channels. Twinings revenue was ahead of last year, driven by growth in herbal and fruit infusions with an outstanding performance in France, which delivered a significant improvement in market share. Volume benefited from an increase in home consumption as a result of COVID-19, as well as successful new product launches. Ovaltine delivered growth in its major markets with a much-improved performance in Thailand and Brazil, further expansion in Switzerland and excellent progress in e-commerce and foodservice in China.
Jordans, Dorset Cereals, Ryvita, Patak's and Blue Dragon all delivered growth as they benefited from international development and significant increases in consumer demand through the retail channel. Consumer demand for home baking products in the UK continued and Silver Spoon was well ahead as a result. Revenue in Allied Bakeries was in line with last year and following our decision last year to exit the Co-op contract, cost reductions have been delivered to mitigate the loss in contribution. Sales at Acetum, our premium balsamic vinegar business in Modena, continued to progress as distribution gains and successful marketing increased the reach of the Mazzetti brand in many markets.
At ACH, our baking businesses, ACH Mexico, and Anthony's Goods all continued to deliver profit growth. However, the profit contribution from Mazola declined due to significantly higher commodity costs and reduced availability of corn oil in the US.
At George Weston Foods in Australia, our bakery business Tip Top continued to make strong progress with both market share gains and tight cost control. Successful new product launches and higher consumer demand in both the dips and vegetarian categories delivered substantially increased volumes at Yumi's. However, total operating profit at George Weston Foods was lower with reduced volumes in the Don meat business as a result of COVID-19. Weston Animal Nutrition has announced plans to build a large state-of-the-art feed mill in Western Australia that will provide additional capacity, reduce costs and will ensure that the latest strict feed safety and quality standards are met.
Sugar
|
| 2021 | 2020 | Actual fx | Constant fx |
| Revenue £m | 763 | 803 | -5% | +1% |
| Adjusted operating profit £m | 66 | 12 | +450% | +633% |
AB Sugar revenue was marginally ahead of last year in the first half at constant currency. Adjusted operating profit was significantly ahead, driven by Illovo, which benefited from increased domestic demand and higher prices. All businesses continued to deliver savings from the ongoing performance improvement programme.
UK sugar production for the 2020/21 campaign was 0.9m tonnes, well down on last year's 1.19m tonnes, due to wet weather conditions at the time of planting and the severe impact of virus yellows, which is transmitted by aphids, on the sugar beet. As a result of prolonged cold temperatures this February which substantially reduced the likelihood of virus yellows this summer, the conditional permit for the use of neonicotinoids was not needed. We continue to work to secure a neonicotinoid-free long-term solution in partnership with sugar beet growers and seed producers. Looking ahead to the 2021/22 campaign good progress was made in drilling the crop in March due to favourable planting conditions. Sugar production is expected to be just over 1.0m tonnes with a reduced planting area compensated by more normal yields.
The UK Department for Transport has announced an increase in the mandated inclusion levels of renewable ethanol in petrol moving from E5 to E10. We now plan to reopen the Vivergo facility in Hull, which uses domestic feed-grade wheat to produce bioethanol and supply to UK fuel blenders is expected from early 2022.
Sugar production in Spain this financial year is expected to be in line with last year. The beet campaigns have progressed successfully in the north and the area planted in the south was ahead again this year. The volume of raw sugar refined at the Guadalete facility is likely to be ahead of last year.
Illovo margins and adjusted operating profit were well ahead of last year. Major contributors to this improvement were a non-repeat of the restructuring costs taken last year, significant cost reductions this year from the performance improvement programme and a recovery from the operational difficulties experienced in Mozambique last year. We saw some recovery of sugar prices in many markets and exports benefited from the higher world sugar price. The sales mix improved with higher domestic volumes, including those in South Africa, and regional market volumes.
The campaign in China has now been completed with sugar production ahead of last year. Although revenue was lower in the first half, with reduced sales ahead of Chinese New Year, the profit impact has been partially offset by strong factory performances. Domestic sugar prices have risen, supported by higher world prices.
For the full year, our expectation remains for operating profit to be well ahead of last year with the major driver being the strong recovery in Illovo. We expect nonetheless a softer performance in the second half compared to last year with the earlier profit phasing by Illovo this year and the recommissioning costs for Vivergo now included in the second half.
Agriculture
|
| 2021 | 2020 | Actual fx | Constant fx |
| Revenue £m | 746 | 692 | +8% | +8% |
| Adjusted operating profit £m | 19 | 16 | +19% | +27% |
Revenue and adjusted operating profit were well ahead at AB Agri in the first half. The revenue growth was delivered by higher commodity prices and increase in feed volumes with notable growth in China. AB Neo, which specialises in feed for animals in the early stages of life, increased sales, particularly in Spain.
Adjusted operating profit was significantly ahead of last year. China delivered a much-improved performance with the benefit of a recovery from the effects of African Swine Fever, strong feed sales for other species, good procurement, the earlier phasing of sugar beet sales and the non-recurrence of restructuring costs taken last year. Frontier was ahead with a much-improved result from grain trading with increased commodity price volatility driven by reduced UK wheat availability, Brexit uncertainty and tightening global supply and demand.
Profit at AB Vista was ahead of last year, with improved feed enzyme volumes.
Our UK pig and poultry animal feed business has announced its intention to build a state-of-the-art animal feed mill in the East of England. This substantial investment will provide much needed capacity and will also ensure consistent quality at a lower cost.
Ingredients
| Ongoing businesses | 2021 | 2020 | Actual fx | Constant fx |
| Revenue £m | 735 | 737 | in line | +2% |
| Adjusted operating profit £m | 78 | 62 | +26% | +28% |
Adjusted operating profit was significantly ahead of last year driven by increased margins in both AB Mauri and ABF Ingredients.
AB Mauri benefited from increased sales and margins in yeast. Demand for retail yeast and retail bakery ingredients have been particularly high driven by the popularity of home baking. Our joint venture with Wilmar in China became fully operational in October and the business integration of our production and technology assets with Wilmar's wider distribution is progressing well. Despite the difficult conditions in South America, our businesses continue to make good progress with continued growth in Non-Dairy Toppings.
We have just opened our new Global Technology Centre in the Netherlands. This provides an upgraded international hub for the research and development of bakery solutions, as well as accommodating a pilot plant, laboratories and training facilities.
Profit growth at ABF Ingredients was driven by our nutritional and pharmaceutical lipids business and further good progress in yeast extracts.
Retail
|
| 2021 | 2020 | Actual fx | Constant fx |
| Revenue £m | 2,232 | 3,710 | -40% | -41% |
| Adjusted operating profit £m | 43 | 441 | -90% | -90% |
This period has been characterised by greater than expected restrictions on the ability of Primark to trade as a consequence of the measures taken by UK and European governments to limit the spread of COVID-19. The extent and timing of these restrictions have varied by market, with different approaches taken by each government. Nonetheless, at no time were all of our stores closed during this first half, unlike the first lockdown. The majority of our stores were closed during November and from December to the end of the period. We estimate the loss of sales while stores were closed to be some £1.1bn and when stores were open, the restrictions resulted in like-for-like sales of -15% compared to last year.
We consider this like-for-like performance to be strong and it should be seen in the context of lower category spend, lower footfall reflecting government advice to limit journeys from home and, in many eurozone markets, more severe trading restrictions while open. Like-for-like performance in the UK was -6% in the first half and -1% excluding four major city centre stores. Although stores remained open in a number of eurozone countries, in many cases they were subject to restrictions on trading hours and allowed travelling distances from home. In some cases, the range of merchandise we were permitted to sell was limited. Consequently, the like-for-like performance in the first half in the eurozone was -20%.
Performance has varied by store reflecting the prevailing circumstances of our customers including home working, less commuting and very little tourism. Like-for-like sales at our stores in retail parks were higher than a year ago, shopping centre and regional high street stores were lower than last year, and large destination city centre stores, which are heavily reliant on tourism and commuters, continued to see a significant decline in footfall. Excluding our 16 major city centre stores like-for-like sales were -11%.
Our US business performed well and is now profitable. No stores were required to close during the period and like-for-like sales performance was -11%, and -3% excluding the city centre Boston store, which we consider to be strong given that customers were limiting their journeys from home. We are particularly pleased with the strong trading at the recently opened stores of Sawgrass Mills Florida, American Dream New Jersey and, during March, State Street Chicago. Primark is clearly resonating with the US customer and brand awareness continues to build.
Sales in those stores open during the festive season reflected the excitement and broad appeal of the Primark offering. All Christmas and gifting lines were sold out and the performance for "stay at home" product categories was strong, especially in nightwear and loungewear. The level of markdown was substantially lower than the same period last year. Some £260m of autumn/winter regular seasonal stock, which was not delivered to the stores, will be held over and sold later this calendar year. All orders placed with our suppliers have been honoured.
For the period while stores were closed, measures to reduce operating costs included savings in logistics, store variable costs, central overheads and access to government job retention schemes. Combined these have been delivering savings of some 25%.
Retail selling space has increased by 0.3m sq ft since the last financial year end and at the half year, we had 390 stores with 16.5m sq ft of retail selling space which compared to 15.8m sq ft a year ago. Six new stores were opened in the period, Coquelles near Calais in France, Barcelona Sant Cugat and Espacio León in Spain, Sawgrass Mills Florida and American Dream New Jersey in the US and Roma Maximo in Italy. In addition, we relocated to larger premises in Southend UK. We had a very positive customer reaction to all these store openings and Roma Maximo in particular has traded well beyond expectation.
At the time of our last trading update on 25 February we were trading from 77 stores representing 22% of our retail selling space. Our stores in England and Wales reopened on 12 April, which we expect to be followed by our 20 stores in Scotland on 26 April, following the roadmap laid out by the UK authorities at the end of February. However, progress in the eurozone has been mixed. Some store reopening dates have been delayed and some stores have reopened albeit with restricted trading as the authorities have endeavoured to find ways to keep stores trading. A pre-booking system which controls the number of customers in the store at any one time, "click and meet", has been introduced in our reopened stores in the Netherlands, Germany and Belgium. This format allows trading to continue albeit at a much-reduced level, where otherwise stores might have been closed. As of the end of April, we expect 275 stores representing 68% of our retail selling space to be open, which increases to 79% of our retail selling space if stores with restricted trading are included.
On the basis of published expected reopening dates, our estimate for the sales which will be lost during the second half of our financial year in respect of the remaining periods of store closures is now some £700m.
Our stores in England and Wales delivered record sales in the first week after reopening. Over half of the stores broke their own sales records. After such a challenging year, this performance demonstrates that the relevance and appeal of our value-for-money offering continues to resonate strongly with customers. A notable feature of our performance after reopening in June and December was an increase in basket size compared to pre-COVID-19 levels. The performance last week was driven not only by increased basket sizes but more importantly by an improvement in footfall across all our high street, shopping centre and retail park locations to bring footfall for the whole estate back to pre- COVID-19 levels. Demand for nightwear, lingerie and leisurewear continued to be strong. However, compared to previous reopenings, this time we have seen excellent demand for our fashion ranges, particularly in womenswear. Customer response to the new trends for spring/summer, which have featured on our digital social media channels, has been very strong. Safety remains our priority so that colleagues and customers can return to our stores with confidence as we have maintained the high safety standards implemented over the past year. Extended opening hours were offered across most stores to help reduce queues, spread demand and give customers more time to shop safely.
We expect the period after the reopening of stores to be very cash generative as we sell the higher than normal inventory on hand. In line with our normal practice, we have placed substantial orders for merchandise for the coming autumn/winter season.
| Status | Country | Reopening Date | Stores |
| Space |
|
|
| m sq ft |
| ||||
| Open by end of April 2021 | ||||||
|
| Austria |
| 3 |
| 0.1 |
|
|
| Italy |
| 5 |
| 0.3 |
|
|
| Spain |
| 44 |
| 1.8 |
|
|
| US |
| 12 |
| 0.6 |
|
|
| Germany |
| 1 |
| 0.1 |
|
|
| Slovenia | 12-Apr | 1 |
| 0.0 |
|
|
| England | 12-Apr | 153 |
| 6.3 |
|
|
| Wales | 12-Apr | 8 |
| 0.3 |
|
|
| Portugal | 19-Apr | 10 |
| 0.4 |
|
|
| Poland | 19-Apr | 1 |
| 0.1 |
|
|
| Belgium | 26-Apr | 8 |
| 0.4 |
|
|
| Scotland | 26-Apr | 20 |
| 0.7 |
|
|
| Northern Ireland | 30-Apr | 9 |
| 0.2 |
|
|
| Subtotal |
| 275 | 70% | 11.3 | 68% |
| Open restricted trading |
|
|
|
|
|
|
|
| Italy |
| 1 |
| 0.0 |
|
|
| Spain |
| 6 |
| 0.2 |
|
|
| Netherlands |
| 20 |
| 1.0 |
|
|
| Germany |
| 11 |
| 0.6 |
|
|
| Subtotal |
| 38 | 10% | 1.8 | 11% |
|
| Cumulative Total | 313 | 80% | 13.1 | 79% | |
| Opening dates to be confirmed | ||||||
|
| Austria |
| 2 |
| 0.1 |
|
|
| France |
| 20 |
| 1.0 |
|
|
| Republic of Ireland | 36 |
| 1.1 |
| |
|
| Germany |
| 20 |
| 1.2 |
|
|
| Total |
| 391 | 100% | 16.5 | 100% |
We expect to add a net 0.7m sq ft of selling space in this financial year. Following the opening of our store in Chicago in March we plan to open a further eight stores in the remainder of this financial year: Prague Wenceslas Square in Czechia, Poznań in Poland, Roma Est in Italy, three further stores in Spain, Tamworth in the UK and Rotterdam Forum, the Netherlands.
We continue to feel very optimistic about the opportunities for growth in the Primark business. We have a strong pipeline of store openings across a number of growth markets for the brand, with a particular focus on southern Europe and eastern Europe. We see further opportunity to expand our selling space in France, Spain, Portugal and Italy, where the Primark brand resonates strongly with consumers. We are opening three further stores in Spain this financial year, and a second store in Rome, the first of eight new store openings in Italy by 2022. We are in the early stages of our expansion into eastern Europe, with a second store to open in Poland and our first store in Czechia, as we build our pipeline of new stores across the region. In addition, we have plans to accelerate our growth in the US over the next five years. This builds on strong trading in our first twelve stores including a great response to our latest opening in Chicago last month. Further to the leases already announced for stores in Queens, New York and Green Acres Mall in Long Island, New York, we have also now signed a lease for a new store in Tysons Corner, just outside Washington DC. With more than 22 million highly engaged followers across the Primark social channels, digital plays an important role in our business, showcasing our latest ranges, building engagement and driving customers into store. As we look ahead, we are actively exploring ways to leverage our digital channels to support our plans for growing our store estate. This will involve investing in our website and digital marketing to help us target content and communications to customers.
George Weston
Chief Executive
PRINCIPAL RISKS AND UNCERTAINTIES
The delivery of our strategic objectives is dependent on effective risk management. There are a number of potential risks and uncertainties which could have a material impact on the group's performance and could cause actual results to differ materially from expected and historical results. Details of the principal risks facing the group's businesses at an operational level were included on pages 84 to 91 of the group's Annual Report and Accounts for the 52 weeks ended 12 September 2020, as part of the Strategic Report.
We have reassessed our principal risks and uncertainties as the COVID-19 pandemic continues to be a worldwide crisis and uncertainty remains in a number of our markets. Whilst the UK now has an advanced vaccination programme and a roadmap for exiting the COVID-19 lockdown, the outlook is currently more mixed in a number of countries in which we operate.
Effective communication both within our businesses and across the group has ensured that our food businesses continued to operate, providing safe, nutritious and affordable food to customers. Primark's leadership demonstrated agility in responding to store activities being restricted at short notice. In addition, their effective planning ensured that the UK stores were well prepared for a safe reopening from 12 April.
Throughout the pandemic, the Audit Committee, on behalf of the Board has provided ongoing support and challenge to management's processes and internal controls. Numerous lessons have been learnt and we have developed a flexible set of possible responses that are ready to be deployed in the event of further restrictions being imposed, whether that be locally, regionally or globally.
The purchase of merchandise denominated in foreign currencies by Primark is the most material currency transaction risk for the group but Primark is now fully bought for this financial year. Sterling has strengthened in recent months against a number of our major trading currencies, which will likely lead to a translation loss in the second half of the financial year.
The group purchases a wide range of commodities in the ordinary course of business. We constantly monitor the markets in which we operate and manage certain of these exposures with exchange traded contracts and hedging instruments. The commercial implications of commodity price movements are continuously assessed and, where appropriate, are reflected in the pricing of our products. Margins in our ACH oils business are likely to be adversely affected in the second half following a significant increase in US vegetable oil costs.
The number of employees working from home continues to be very high and are supported by effective collaboration tools with appropriate IT infrastructure and bandwidth. Remote working has increased the exposure to phishing attacks, which together with socially engineered fraud, have become more sophisticated. In response to this we have worked on increasing user awareness and have implemented higher levels of monitoring.
Our businesses were well prepared for the end of the Brexit transition period and we have seen no material disruption to our supply chains. We have experienced a small increase in the administrative costs of trading and in limited cases duties related to our trading with the EU.
Going concern
After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Condensed Consolidated Interim Financial Statements. See note 9 to the Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INCOME STATEMENT
For the 24 weeks ended 27 February 2021
|
Continuing operations |
Note | 24 weeks ended 27 February 2021 £m | 24 weeks ended 29 February 2020 £m | 52 weeks ended 12 September 2020 £m |
| Revenue | 1 | 6,313 | 7,646 | 13,937 |
| Operating costs before exceptional items |
| (5,996) | (7,024) | (13,046) |
| Exceptional items | 2 | (25) | (309) | (156) |
|
|
| 292 | 313 | 735 |
| Share of profit after tax from joint ventures and associates |
| 26 | 27 | 57 |
| Profits less losses on disposal of non-current assets |
| 2 | 9 | 18 |
| Operating profit |
| 320 | 349 | 810 |
| Adjusted operating profit | 1 | 369 | 682 | 1,024 |
| Profits less losses on disposal of non-current assets |
| 2 | 9 | 18 |
| Amortisation of non-operating intangibles |
| (24) | (24) | (59) |
| Acquired inventory fair value adjustments |
| (1) | (8) | (15) |
| Transaction costs |
| (1) | (1) | (2) |
| Exceptional items |
| (25) | (309) | (156) |
|
Profits less losses on sale and closure of businesses |
6 |
5 |
(5) |
(14) |
| Profit before interest |
| 325 | 344 | 796 |
| Finance income |
| 5 | 7 | 11 |
| Finance expense |
| (52) | (54) | (124) |
| Other financial (expense)/income |
| (3) | 1 | 3 |
| Profit before taxation |
| 275 | 298 | 686 |
| Adjusted profit before taxation |
| 319 | 636 | 914 |
| Profits less losses on disposal of non-current assets |
| 2 | 9 | 18 |
| Amortisation of non-operating intangibles |
| (24) | (24) | (59) |
| Acquired inventory fair value adjustments |
| (1) | (8) | (15) |
| Transaction costs |
| (1) | (1) | (2) |
| Exceptional items |
| (25) | (309) | (156) |
| Profits less losses on sale and closure of businesses |
| 5 | (5) | (14) |
|
Taxation - UK (excluding tax on exceptional items) |
|
(18) |
(34) |
(69) |
| - UK (on exceptional items) |
| 3 | 25 | 1 |
| - Overseas (excluding tax on exceptional items) |
| (90) | (103) | (189) |
| - Overseas (on exceptional items) |
| 2 | 35 | 36 |
|
| 3 | (103) | (77) | (221) |
| Profit for the period |
| 172 | 221 | 465 |
|
Attributable to |
|
|
|
|
| Equity shareholders |
| 162 | 217 | 455 |
| Non-controlling interests |
| 10 | 4 | 10 |
| Profit for the period |
| 172 | 221 | 465 |
|
Basic and diluted earnings per ordinary share (pence) |
4 |
20.5 |
27.5 |
57.6 |
| Dividends per share paid and proposed for the period (pence) | 5 | 6.2 | nil | nil |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 24 weeks ended 27 February 2021
|
|
24 weeks ended 27 February 2021 £m |
24 weeks ended 29 February 2020 £m | 52 weeks ended 12 September 2020 £m |
| Profit for the period recognised in the income statement | 172 | 221 | 465 |
| Other comprehensive income |
|
|
|
| Remeasurements of defined benefit schemes | 448 | 17 | (89) |
| Deferred tax associated with defined benefit schemes | (84) | (3) | 15 |
| Items that will not be reclassified to profit or loss | 364 | 14 | (74) |
| Effect of movements in foreign exchange | (335) | (283) | (97) |
| Net gain/(loss) on hedge of net investment in foreign subsidiaries | 11 | 10 | (3) |
| Deferred tax associated with movements in foreign exchange | - | - | 1 |
| Reclassification adjustment for movements in foreign exchange on subsidiaries disposed | (6) | - | - |
| Movement in cash flow hedging position | (26) | 18 | (15) |
| Deferred tax associated with movement in cash flow hedging position | (1) | (3) | - |
| Share of other comprehensive income of joint ventures and associates | (10) | (6) | (1) |
| Effect of hyperinflationary economies | 12 | 12 | 17 |
| Items that are or may be subsequently reclassified to profit or loss | (355) | (252) | (98) |
| Other comprehensive income/(loss) for the period | 9 | (238) | (172) |
|
|
|
|
|
| Total comprehensive income/(loss) for the period | 181 | (17) | 293 |
|
Attributable to |
|
|
|
| Equity shareholders | 177 | (15) | 296 |
| Non-controlling interests | 4 | (2) | (3) |
| Total comprehensive income/(loss) for the period | 181 | (17) | 293 |
CONDENSED CONSOLIDATED BALANCE SHEET
At 27 February 2021
|
| 27 February 2021 £m | 29 February 2020 £m | 12 September 2020 £m |
| Non-current assets |
|
|
|
| Intangible assets | 1,570 | 1,631 | 1,629 |
| Property, plant and equipment | 5,417 | 5,620 | 5,651 |
| Right-of-use assets | 2,772 | 3,057 | 2,990 |
| Investments in joint ventures | 256 | 216 | 233 |
| Investments in associates | 59 | 54 | 56 |
| Employee benefits assets | 531 | 247 | 100 |
| Deferred tax assets | 217 | 183 | 212 |
| Other receivables | 58 | 50 | 45 |
| Total non-current assets | 10,880 | 11,058 | 10,916 |
|
Current assets |
|
|
|
| Assets classified as held for sale | - | 42 | 43 |
| Inventories | 2,596 | 2,025 | 2,150 |
| Biological assets | 96 | 96 | 72 |
| Trade and other receivables | 1,381 | 1,379 | 1,328 |
| Derivative assets | 64 | 96 | 102 |
| Current asset investments | 33 | 29 | 32 |
| Income tax | 13 | - | 30 |
| Cash and cash equivalents | 1,112 | 1,320 | 1,996 |
| Total current assets | 5,295 | 4,987 | 5,753 |
| Total assets | 16,175 | 16,045 | 16,669 |
|
Current liabilities |
|
|
|
| Liabilities classified as held for sale | - | (6) | (5) |
| Lease liabilities | (290) | (273) | (297) |
| Loans and overdrafts | (213) | (204) | (154) |
| Trade and other payables | (1,931) | (2,134) | (2,316) |
| Derivative liabilities | (48) | (40) | (87) |
| Income tax | (101) | (69) | (171) |
| Provisions | (102) | (108) | (123) |
| Total current liabilities | (2,685) | (2,834) | (3,153) |
|
Non-current liabilities |
|
|
|
| Lease liabilities | (3,130) | (3,279) | (3,342) |
| Loans | (227) | (344) | (318) |
| Provisions | (47) | (33) | (41) |
| Deferred tax liabilities | (300) | (248) | (210) |
| Employee benefits liabilities | (149) | (194) | (166) |
| Total non-current liabilities | (3,853) | (4,098) | (4,077) |
| Total liabilities | (6,538) | (6,932) | (7,230) |
| Net assets | 9,637 | 9,113 | 9,439 |
|
Equity |
|
|
|
| Issued capital | 45 | 45 | 45 |
| Other reserves | 175 | 175 | 175 |
| Translation reserve | (11) | 136 | 323 |
| Hedging reserve | - | 6 | (7) |
| Retained earnings | 9,359 | 8,662 | 8,819 |
| Total equity attributable to equity shareholders | 9,568 | 9,024 | 9,355 |
| Non-controlling interests | 69 | 89 | 84 |
| Total equity | 9,637 | 9,113 | 9,439 |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the 24 weeks ended 27 February 2021
|
| 24 weeks ended 27 February 2021 £m | 24 weeks ended 29 February 2020 £m | 52 weeks ended 12 September 2020 £m |
| Cash flow from operating activities |
|
|
|
| Profit before taxation | 275 | 298 | 686 |
| Profits less losses on disposal of non-current assets | (2) | (9) | (18) |
| Profits less losses on sale and closure of businesses | (5) | 5 | 14 |
| Transaction costs | 1 | 1 | 2 |
| Finance income | (5) | (7) | (11) |
| Finance expense | 52 | 54 | 124 |
| Other financial expense/(income) | 3 | (1) | (3) |
| Share of profit after tax from joint ventures and associates | (26) | (27) | (57) |
| Amortisation | 34 | 33 | 89 |
| Depreciation (including depreciation of right-of-use assets and non-cash lease adjustments) | 409 | 386 | 827 |
| Impairment of property, plant & equipment and right-of-use assets | - | - | 15 |
| Exceptional items | 25 | 309 | 156 |
| Acquired inventory fair value adjustments | 1 | 8 | 15 |
| Effect of hyperinflationary economies | 2 | 4 | 5 |
| Net change in the fair value of current biological assets | (32) | (20) | (1) |
| Share-based payment expense | 8 | 7 | 8 |
| Pension costs less contributions | 4 | 3 | 10 |
| (Increase)/decrease in inventories | (565) | 29 | 199 |
| (Increase)/decrease in receivables | (113) | 3 | 81 |
| Decrease in payables | (269) | (318) | (174) |
| Purchases less sales of current biological assets | - | - | (1) |
| (Decrease)/increase in provisions | (16) | (14) | 41 |
| Cash generated from operations | (219) | 744 | 2,007 |
| Income taxes paid | (160) | (151) | (254) |
| Net cash from operating activities | (379) | 593 | 1,753 |
| Cash flows from investing activities |
|
|
|
| Dividends received from joint ventures and associates | 27 | 29 | 43 |
| Purchase of property, plant and equipment | (263) | (315) | (561) |
| Purchase of intangibles | (44) | (43) | (61) |
| Lease incentives received | 12 | 12 | 35 |
| Sale of property, plant and equipment | 9 | 18 | 30 |
| Purchase of subsidiaries, joint ventures and associates | (39) | (3) | (16) |
| Sale of subsidiaries, joint ventures and associates | 34 | 2 | 2 |
| Purchase of other investments | (13) | (2) | (1) |
| Interest received | 6 | 6 | 11 |
| Net cash from investing activities | (271) | (296) | (518) |
| Cash flows from financing activities |
|
|
|
| Dividends paid to non-controlling interests | (2) | (4) | (7) |
| Dividends paid to equity shareholders | - | (271) | (271) |
| Interest paid | (56) | (42) | (104) |
| Repayment of lease liabilities | (131) | (115) | (247) |
| Increase/(decrease) in short-term loans | 4 | (18) | (43) |
| Decrease in long-term loans | - | - | (2) |
| Increase in current asset investments | (2) | (3) | (2) |
| Purchase of shares in subsidiary undertaking from non-controlling interests | (23) | (2) | (2) |
| Net cash from financing activities | (210) | (455) | (678) |
|
Net (decrease)/increase in cash and cash equivalents |
(860) |
(158) |
557 |
| Cash and cash equivalents at the beginning of the period | 1,909 | 1,358 | 1,358 |
| Effect of movements in foreign exchange | (23) | (17) | (6) |
| Cash and cash equivalents at the end of the period | 1,026 | 1,183 | 1,909 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 24 weeks ended 27 February 2021
| Attributable to equity shareholders |
|
| Non- controlling interests £m |
| |||||
|
|
Note | Issued capital £m | Other reserves £m | Translation reserve £m | Hedging reserve £m | Retained earnings £m |
Total £m | Total equity £m | |
| Balance as at 12 September 2020 |
| 45 | 175 | 323 | (7) | 8,819 | 9,355 | 84 | 9,439 |
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
| Profit for the period recognised in the income statement |
| - | - | - | - | 162 | 162 | 10 | 172 |
| Remeasurements of defined benefit schemes |
| - | - | - | - | 448 | 448 | - | 448 |
| Deferred tax associated with defined benefit schemes |
| - | - | - | - | (84) | (84) | - | (84) |
| Items that will not be reclassified to profit or loss |
| - | - | - | - | 364 | 364 | - | 364 |
| Effect of movements in foreign exchange |
| - | - | (329) | - | - | (329) | (6) | (335) |
| Net gain on hedge of net investment in foreign subsidiaries |
| - | - | 11 | - | - | 11 | - | 11 |
| Movements in foreign exchange on businesses disposed |
| - | - | (6) | - | - | (6) | - | (6) |
| Movement in cash flow hedging position |
| - | - | - | (26) | - | (26) | - | (26) |
| Deferred tax associated with movements in cash flow hedging position |
| - | - | - | (1) | - | (1) | - | (1) |
| Share of other comprehensive income of joint ventures and associates |
| - | - | (10) | - | - | (10) | - | (10) |
| Effect of hyperinflationary economies |
| - | - | - | - | 12 | 12 | - | 12 |
| Items that are or may be subsequently reclassified to profit or loss |
| - | - | (334) | (27) | 12 | (349) | (6) | (355) |
| Other comprehensive income |
| - | - | (334) | (27) | 376 | 15 | (6) | 9 |
| Total comprehensive income |
| - | - | (334) | (27) | 538 | 177 | 4 | 181 |
| Inventory cash flow hedge movements |
|
|
|
|
|
|
|
|
|
| Gains transferred to cost of inventory |
| - | - | - | 34 | - | 34 | - | 34 |
| Total inventory cash flow hedge movements |
| - | - | - | 34 | - | 34 | - | 34 |
| Transactions with owners |
|
|
|
|
|
|
|
|
|
| Net movement in own shares held |
| - | - | - | - | 8 | 8 | - | 8 |
| Dividends paid to non-controlling interests |
| - | - | - | - | - | - | (2) | (2) |
| Acquisition and disposal of non-controlling interests |
| - | - | - | - | (6) | (6) | (17) | (23) |
| Total transactions with owners |
| - | - | - | - | 2 | 2 | (19) | (17) |
| Balance as at 27 February 2021 |
| 45 | 175 | (11) | - | 9,359 | 9,568 | 69 | 9,637 |
|
|
|
|
|
|
|
|
|
|
|
| Balance as at 14 September 2019 |
| 45 | 175 | 409 | (9) | 8,832 | 9,452 | 98 | 9,550 |
| IFRS 16 opening balance adjustment |
| - | - | - | - | (149) | (149) | (1) | (150) |
| Balance as at 15 September 2019 |
| 45 | 175 | 409 | (9) | 8,683 | 9,303 | 97 | 9,400 |
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
| Profit for the period recognised in the income statement |
| - | - | - | - | 217 | 217 | 4 | 221 |
| Remeasurements of defined benefit schemes |
| - | - | - | - | 17 | 17 | - | 17 |
| Deferred tax associated with defined benefit schemes |
| - | - | - | - | (3) | (3) | - | (3) |
| Items that will not be reclassified to profit or loss |
| - | - | - | - | 14 | 14 | - | 14 |
| Effect of movements in foreign exchange |
| - | - | (277) | - | - | (277) | (6) | (283) |
| Net gain on hedge of net investment in foreign subsidiaries |
| - | - | 10 | - | - | 10 | - | 10 |
| Movement in cash flow hedging position |
| - | - | - | 18 | - | 18 | - | 18 |
| Deferred tax associated with movements in cash flow hedging position |
| - | - | - | (3) | - | (3) | - | (3) |
| Share of other comprehensive income of joint ventures and associates |
| - | - | (6) | - | - | (6) | - | (6) |
| Effect of hyperinflationary economies |
| - | - | - | - | 12 | 12 | - | 12 |
| Items that are or may be subsequently reclassified to profit or loss |
| - | - | (273) | 15 | 12 | (246) | (6) | (252) |
| Other comprehensive income |
| - | - | (273) | 15 | 26 | (232) | (6) | (238) |
| Total comprehensive income |
| - | - | (273) | 15 | 243 | (15) | (2) | (17) |
| Transactions with owners |
|
|
|
|
|
|
|
|
|
| Dividends paid to equity shareholders | 5 | - | - | - | - | (271) | (271) | - | (271) |
| Net movement in own shares held |
| - | - | - | - | 7 | 7 | - | 7 |
| Dividends paid to non-controlling interests |
| - | - | - | - | - | - | (4) | (4) |
| Acquisition and disposal of non-controlling interests |
| - | - | - | - | - | - | (2) | (2) |
| Total transactions with owners |
| - | - | - | - | (264) | (264) | (6) | (270) |
| Balance as at 29 February 2020 |
| 45 | 175 | 136 | 6 | 8,662 | 9,024 | 89 | 9,113 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONTINUED
For the 24 weeks ended 27 February 2021
| Attributable to equity shareholders |
|
| Non- controlling interests £m |
| |||||
|
|
Note | Issued capital £m | Other reserves £m | Translation reserve £m | Hedging reserve £m | Retained earnings £m |
Total £m | Total equity £m | |
| Balance as at 14 September 2019 |
| 45 | 175 | 409 | (9) | 8,832 | 9,452 | 98 | 9,550 |
|
IFRS 16 opening balance adjustment |
|
- |
- |
- |
- |
(149) |
(149) |
(1) |
(150) |
| Balance as at 15 September 2019 |
| 45 | 175 | 409 | (9) | 8,683 | 9,303 | 97 | 9,400 |
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
| Profit for the period recognised in the income statement |
| - | - | - | - | 455 | 455 | 10 | 465 |
| Remeasurements of defined benefit schemes |
| - | - | - | - | (89) | (89) | - | (89) |
| Deferred tax associated with defined benefit schemes |
| - | - | - | - | 15 | 15 | - | 15 |
| Items that will not be reclassified to profit or loss |
| - | - | - | - | (74) | (74) | - | (74) |
| Effect of movements in foreign exchange |
| - | - | (83) | (1) | - | (84) | (13) | (97) |
| Net loss on hedge of net investment in foreign subsidiaries |
| - | - | (3) | - | - | (3) | - | (3) |
| Deferred tax associated with movement in foreign exchange |
| - | - | 1 | - | - | 1 | - | 1 |
| Movement in cash flow hedging position |
| - | - | - | (15) | - | (15) | - | (15) |
| Share of other comprehensive income of joint ventures and associates |
| - | - | (1) | - | - | (1) | - | (1) |
| Effect of hyperinflationary economies |
| - | - | - | - | 17 | 17 | - | 17 |
| Items that are or may be subsequently reclassified to profit or loss |
| - | - | (86) | (16) | 17 | (85) | (13) | (98) |
| Other comprehensive income |
| - | - | (86) | (16) | (57) | (159) | (13) | (172) |
| Total comprehensive income |
| - | - | (86) | (16) | 398 | 296 | (3) | 293 |
| Inventory cash flow hedge movements |
|
|
|
|
|
|
|
|
|
| Gains transferred to cost of inventory |
| - | - | - | 18 | - | 18 | - | 18 |
| Total inventory cash flow hedge movements |
| - | - | - | 18 | - | 18 | - | 18 |
| Transactions with owners |
|
|
|
|
|
|
|
|
|
| Dividends paid to equity shareholders | 5 | - | - | - | - | (271) | (271) | - | (271) |
| Net movement in own shares held |
| - | - | - | - | 8 | 8 | - | 8 |
| Deferred tax associated with share-based payments |
| - | - | - | - | 1 | 1 | - | 1 |
| Dividends paid to non-controlling interests |
| - | - | - | - | - | - | (8) | (8) |
| Acquisition and disposal of non-controlling interests |
| - | - | - | - | - | - | (2) | (2) |
| Total transactions with owners |
| - | - | - | - | (262) | (262) | (10) | (272) |
| Balance as at 12 September 2020 |
| 45 | 175 | 323 | (7) | 8,819 | 9,355 | 84 | 9,439 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the 24 weeks ended 27 February 2021
1. Operating segments
The group has five operating segments, as described below. These are the group's operating divisions, based on the management and internal reporting structure, which combine businesses with common characteristics, primarily in respect of the type of products offered by each business, but also the production processes involved and the manner of the distribution and sale of goods. The board is the chief operating decision-maker.
Inter-segment pricing is determined on an arm's length basis. Segment result is adjusted operating profit, as shown on the face of the consolidated income statement. Segment assets comprise all non-current assets except employee benefits assets and deferred tax assets, and all current assets except cash and cash equivalents, current asset investments and income tax assets. Segment liabilities comprise trade and other payables, derivative liabilities, provisions and lease liabilities.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and expenses, cash, borrowings, employee benefits balances and current and deferred tax balances. Segment non-current asset additions are the total cost incurred during the period to acquire segment assets that are expected to be used for more than one year, comprising property, plant and equipment, right-of-use assets, operating intangibles and biological assets. Businesses disposed are shown separately and comparatives have been re-presented for businesses sold or closed during the period.
The group is comprised of the following operating segments:
| Grocery | The manufacture of grocery products, including hot beverages, sugar & sweeteners, vegetable oils, balsamic vinegars, bread & baked goods, chilled foods, cereals, ethnic foods and meat products, which are sold to retail, wholesale and foodservice businesses. |
| Sugar | The growing and processing of sugar beet and sugar cane for sale to industrial users and to Silver Spoon, which is included in the Grocery segment. |
| Agriculture | The manufacture of animal feeds and the provision of other products and services for the agriculture sector. |
| Ingredients | The manufacture of bakers' yeast, bakery ingredients, enzymes, lipids, yeast extracts, cereal specialities and pharmaceutical excipients. |
| Retail | Buying and merchandising value clothing and accessories through the Primark and Penneys retail chains. |
Geographical information
In addition to the required disclosure for operating segments, disclosure is also given of certain geographical information about the group's operations, based on the geographical groupings: United Kingdom; Europe & Africa; The Americas; and Asia Pacific.
Revenues are shown by reference to the geographical location of customers. Profits are shown by reference to the geographical location of the businesses. Segment assets are based on the geographical location of the assets.
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| Revenue |
| Adjusted operating profit | |||
|
| 24 weeks ended 27 February 2021 £m | 24 weeks ended 29 February 2020 £m | 52 weeks ended 12 September 2020 £m |
| 24 weeks ended 27 February 2021 £m | 24 weeks ended 29 February 2020 £m | 52 weeks ended 12 September 2020 £m |
| Operating segments |
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|
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|
|
|
| Grocery | 1,834 | 1,689 | 3,528 |
| 199 | 189 | 437 |
| Sugar | 763 | 803 | 1,594 |
| 66 | 12 | 100 |
| Agriculture | 746 | 692 | 1,395 |
| 19 | 16 | 43 |
| Ingredients | 735 | 737 | 1,503 |
| 78 | 62 | 147 |
| Retail | 2,232 | 3,710 | 5,895 |
| 43 | 441 | 362 |
| Central | - | - | - |
| (37) | (37) | (63) |
|
| 6,310 | 7,631 | 13,915 |
| 368 | 683 | 1,026 |
| Businesses disposed: |
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|
|
|
|
|
|
| Grocery | 2 | 10 | 13 |
| 1 | (1) | (1) |
| Ingredients | 1 | 5 | 9 |
| - | - | (1) |
|
| 6,313 | 7,646 | 13,937 |
| 369 | 682 | 1,024 |
| Geographical information |
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|
|
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|
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| United Kingdom | 2,186 | 2,881 | 5,054 |
| 99 | 254 | 312 |
| Europe & Africa | 2,180 | 2,882 | 5,048 |
| 69 | 241 | 298 |
| The Americas | 801 | 804 | 1,619 |
| 130 | 122 | 254 |
| Asia Pacific | 1,143 | 1,064 | 2,194 |
| 70 | 66 | 162 |
|
| 6,310 | 7,631 | 13,915 |
| 368 | 683 | 1,026 |
| Businesses disposed: |
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|
|
|
|
|
|
| Asia Pacific | 3 | 15 | 22 |
| 1 | (1) | (2) |
|
| 6,313 | 7,646 | 13,937 |
| 369 | 682 | 1,024 |
1. Operating segments for the 24 weeks ended 27 February 2021
|
| Grocery £m | Sugar £m | Agriculture £m | Ingredients £m | Retail £m | Central £m | Total £m |
| Revenue from continuing businesses | 1,835 | 798 | 747 | 825 | 2,232 | (127) | 6,310 |
| Internal revenue | (1) | (35) | (1) | (90) | - | 127 | - |
| External revenue from continuing businesses | 1,834 | 763 | 746 | 735 | 2,232 | - | 6,310 |
| Businesses disposed | 2 | - | - | 1 | - | - | 3 |
| Revenue from external customers | 1,836 | 763 | 746 | 736 | 2,232 | - | 6,313 |
|
Adjusted operating profit before joint ventures and associates |
186 |
64 |
16 |
69 |
43 |
(37) |
341 |
| Share of profit after tax from joint ventures and associates | 13 | 2 | 3 | 9 | - | - | 27 |
| Businesses disposed | 1 | - | - | - | - | - | 1 |
| Adjusted operating profit | 200 | 66 | 19 | 78 | 43 | (37) | 369 |
| Finance income |
|
|
|
|
| 5 | 5 |
| Finance expense | - | (1) | - | - | (37) | (14) | (52) |
| Other financial expense |
|
|
|
|
| (3) | (3) |
| Adjusted profit before taxation | 200 | 65 | 19 | 78 | 6 | (49) | 319 |
| Profits less losses on disposal of non-current assets | 1 | - | - | 1 | - | - | 2 |
| Amortisation of non-operating intangibles | (20) | - | (1) | (3) | - | - | (24) |
| Acquired inventory fair value adjustments | (1) | - | - | - | - | - | (1) |
| Transaction costs | - | - | - | (1) | - | - | (1) |
| Exceptional items | - | - | - | - | (21) | (4) | (25) |
| Profits less losses on sale and closure of businesses | - | - | - | 5 | - | - | 5 |
| Profit before taxation | 180 | 65 | 18 | 80 | (15) | (53) | 275 |
| Taxation |
|
|
|
|
| (103) | (103) |
| Profit for the period | 180 | 65 | 18 | 80 | (15) | (156) | 172 |
|
Segment assets (excluding joint ventures and associates) |
2,585 |
1,925 |
466 |
1,394 |
7,417 |
167 |
13,954 |
| Investments in joint ventures and associates | 36 | 27 | 139 | 113 | - | - | 315 |
| Segment assets | 2,621 | 1,952 | 605 | 1,507 | 7,417 | 167 | 14,269 |
| Cash and cash equivalents |
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|
|
|
| 1,112 | 1,112 |
| Current asset investments |
|
|
|
|
| 33 | 33 |
| Income tax |
|
|
|
|
| 13 | 13 |
| Deferred tax assets |
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|
|
| 217 | 217 |
| Employee benefits assets |
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|
|
| 531 | 531 |
| Segment liabilities | (609) | (334) | (153) | (302) | (3,924) | (226) | (5,548) |
| Loans and overdrafts |
|
|
|
|
| (440) | (440) |
| Income tax |
|
|
|
|
| (101) | (101) |
| Deferred tax liabilities |
|
|
|
|
| (300) | (300) |
| Employee benefits liabilities |
|
|
|
|
| (149) | (149) |
| Net assets | 2,012 | 1,618 | 452 | 1,205 | 3,493 | 857 | 9,637 |
|
Non-current asset additions |
44 |
50 |
10 |
59 |
162 |
8 |
333 |
| Depreciation (including depreciation of right-of-use assets and non- cash lease adjustments) |
(56) |
(47) |
(8) |
(27) |
(266) |
(5) |
(409) |
| Amortisation | (24) | (1) | (2) | (4) | (2) | (1) | (34) |
1. Operating segments for the 24 weeks ended 29 February 2020
|
| Grocery £m | Sugar £m | Agriculture £m | Ingredients £m | Retail £m | Central £m | Total £m |
| Revenue from continuing businesses | 1,690 | 833 | 694 | 824 | 3,710 | (120) | 7,631 |
| Internal revenue | (1) | (30) | (2) | (87) | - | 120 | - |
| External revenue from continuing businesses | 1,689 | 803 | 692 | 737 | 3,710 | - | 7,631 |
| Businesses disposed | 10 | - | - | 5 | - | - | 15 |
| Revenue from external customers | 1,699 | 803 | 692 | 742 | 3,710 | - | 7,646 |
|
Adjusted operating profit before joint ventures and associates |
173 |
10 |
14 |
54 |
441 |
(37) |
655 |
| Share of profit after tax from joint ventures and associates | 16 | 2 | 2 | 8 | - | - | 28 |
| Businesses disposed | (1) | - | - | - | - | - | (1) |
| Adjusted operating profit | 188 | 12 | 16 | 62 | 441 | (37) | 682 |
| Finance income |
|
|
|
|
| 7 | 7 |
| Finance expense | - | (1) | - | - | (37) | (16) | (54) |
| Other financial income |
|
|
|
|
| 1 | 1 |
| Adjusted profit before taxation | 188 | 11 | 16 | 62 | 404 | (45) | 636 |
| Profits less losses on disposal of non-current assets | 9 | - | - | - | - | - | 9 |
| Amortisation of non-operating intangibles | (22) | - | - | (2) | - | - | (24) |
| Acquired inventory fair value adjustments | (8) | - | - | - | - | - | (8) |
| Transaction costs | (1) | - | - | - | - | - | (1) |
| Exceptional items | (25) | - | - | - | (284) | - | (309) |
| Profits less losses on sale and closure of businesses | (6) | - | - | 1 | - | - | (5) |
| Profit before taxation | 135 | 11 | 16 | 61 | 120 | (45) | 298 |
| Taxation |
|
|
|
|
| (77) | (77) |
| Profit for the period | 135 | 11 | 16 | 61 | 120 | (122) | 221 |
|
Segment assets (excluding joint ventures and associates) |
2,674 |
2,120 |
444 |
1,444 |
7,158 |
156 |
13,996 |
| Investments in joint ventures and associates | 36 | 27 | 137 | 70 | - | - | 270 |
| Segment assets | 2,710 | 2,147 | 581 | 1,514 | 7,158 | 156 | 14,266 |
| Cash and cash equivalents |
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|
|
|
| 1,320 | 1,320 |
| Current asset investments |
|
|
|
|
| 29 | 29 |
| Deferred tax assets |
|
|
|
|
| 183 | 183 |
| Employee benefits assets |
|
|
|
|
| 247 | 247 |
| Segment liabilities | (561) | (394) | (140) | (296) | (4,263) | (219) | (5,873) |
| Loans and overdrafts |
|
|
|
|
| (548) | (548) |
| Income tax |
|
|
|
|
| (69) | (69) |
| Deferred tax liabilities |
|
|
|
|
| (248) | (248) |
| Employee benefits liabilities |
|
|
|
|
| (194) | (194) |
| Net assets | 2,149 | 1,753 | 441 | 1,218 | 2,895 | 657 | 9,113 |
|
Non-current asset additions |
55 |
35 |
11 |
54 |
251 |
8 |
414 |
| Depreciation (including depreciation of right-of-use assets and non- cash lease adjustments) |
(52) |
(49) |
(8) |
(27) |
(246) |
(4) |
(386) |
| Amortisation | (26) | (1) | (1) | (3) | (1) | (1) | (33) |
| Impairment of property, plant and equipment on sale and closure of businesses |
(2) |
- |
- |
- |
- |
- |
(2) |
1. Operating segments for the 52 weeks ended 12 September 2020
|
| Grocery £m | Sugar £m | Agriculture £m | Ingredients £m | Retail £m | Central £m | Total £m |
| Revenue from continuing businesses | 3,530 | 1,658 | 1,398 | 1,685 | 5,895 | (251) | 13,915 |
| Internal revenue | (2) | (64) | (3) | (182) | - | 251 | - |
| External revenue from continuing businesses | 3,528 | 1,594 | 1,395 | 1,503 | 5,895 | - | 13,915 |
| Businesses disposed | 13 | - | - | 9 | - | - | 22 |
| Revenue from external customers | 3,541 | 1,594 | 1,395 | 1,512 | 5,895 | - | 13,937 |
|
Adjusted operating profit before joint ventures and associates |
404 |
98 |
33 |
132 |
362 |
(63) |
966 |
| Share of profit after tax from joint ventures and associates | 33 | 2 | 10 | 15 | - | - | 60 |
| Businesses disposed | (1) | - | - | (1) | - | - | (2) |
| Adjusted operating profit | 436 | 100 | 43 | 146 | 362 | (63) | 1,024 |
| Finance income |
|
|
|
|
| 11 | 11 |
| Finance expense | (1) | (3) | - | - | (79) | (41) | (124) |
| Other financial income |
|
|
|
|
| 3 | 3 |
| Adjusted profit before taxation | 435 | 97 | 43 | 146 | 283 | (90) | 914 |
| Profits less losses on disposal of non-current assets | 9 | 7 | 1 | (1) | 3 | (1) | 18 |
| Amortisation of non-operating intangibles | (52) | - | (1) | (6) | - | - | (59) |
| Acquired inventory fair value adjustments | (15) | - | - | - | - | - | (15) |
| Transaction costs | - | - | - | (2) | - | - | (2) |
| Exceptional items | 5 | (23) | - | - | (138) | - | (156) |
| Profits less losses on sale and closure of businesses | (4) | - | - | (4) | - | (6) | (14) |
| Profit before taxation | 378 | 81 | 43 | 133 | 148 | (97) | 686 |
| Taxation |
|
|
|
|
| (221) | (221) |
| Profit for the period | 378 | 81 | 43 | 133 | 148 | (318) | 465 |
|
Segment assets (excluding joint ventures and associates) |
2,689 |
1,893 |
429 |
1,470 |
7,372 |
155 |
14,008 |
| Investments in joint ventures and associates | 51 | 27 |