AB Foods Regulatory News (ABF)

22 Apr 2008 07:01

Associated British Foods PLC22 April 2008 Associated British Foods plc announces its interim report for the 24 weeks ended 1 March 2008 Earnings growth of 8% and further substantial investment at ABF Highlights • Group revenue up 15% to £3,706m • Adjusted operating profit up 9% to £296m* • Adjusted profit before tax up 5% to £282m ** • Adjusted earnings per share up 8% to 25.2p ** • Interim dividend per share up 4% to 6.75p • Net investment in capital and acquisitions of £363m • Net debt of £848m • Operating profit up 17% to £281m, profit before tax up 35% to £267m and basic earnings per share up 33% to 25.6p George Weston, Chief Executive of Associated British Foods, said: "These good results demonstrate that the group remains on track with stronggrowth from Grocery, Ingredients and Agriculture and another excellentperformance from Primark. The development of our businesses continued apace,most notably with further substantial investment in Sugar and expansion atPrimark." * before amortisation of non-operating intangibles, profits less losses on the sale of PP&E and exceptional items ** before amortisation of non-operating intangibles, profits less losses on the sale of PP&E, profits less losses on the sale and closure of businesses and exceptional items All figures stated after amortisation of non-operating intangibles, profits lesslosses on the sale of PP&E, profits less losses on the sale and closure ofbusinesses and exceptional items are shown on the face of the consolidatedincome statement. For further information please contact: Associated British Foods: Until 1500 onlyGeorge Weston, Chief Executive Geoff Lancaster, Head of External AffairsJohn Bason, Finance Director Mobile: 07860 562 659Tel: 020 7638 9571 Jonathan Clare/Chris Barrie/Hannah Seward, Citigate Dewe RogersonTel: 020 7638 9571 After 1500John Bason, Finance DirectorTel: 020 7399 6500 ASSOCIATED BRITISH FOODS plcINTERIM REPORTFOR THE 24 WEEKS ENDED 1 MARCH 2008 CHAIRMAN'S STATEMENT The first half of the year saw a strong performance by most of our businesses inan environment of rising commodity prices and volatile currencies. This waspartially offset by the impact on our European sugar businesses of the increasedrestructuring levy and quota cut arising from the reform of the EU sugar regime. In our interim management statement issued on 17 January 2008 we reported thattrading in the first 16 weeks had been fully up to our expectations. This trendcontinued and our interim results show an increase of 9% in the group's adjustedoperating profit over the same period last year. Strong growth in Grocery,Agriculture and Primark more than offset the previously reported decline inSugar. Recent investments, higher working capital and higher interest rates haveincreased the group's net financing costs. However, this impact is largelyoffset by the lower underlying tax rate of 25.5% compared with 26.9% in thefirst half last year. Adjusted earnings show good progress, ahead by 8%. The European Commission announced in February that a total of 2.6 million tonnesof sugar quota had been permanently renounced across the EU in the first phaseof its enhanced restructuring scheme. This brought the total quota for sugar,inulin and isoglucose renounced to 4.8 million tonnes. The income statementincludes an exceptional gain of £17m following our decision to renouncepermanently 191,000 tonnes of UK and Polish sugar quota from October 2008 aspart of this first phase. The gain comprises the compensation receivable fromthe EU restructuring fund less both the write-off of the unamortised cost ofquota purchased in 2006 and costs relating to the closure of the York andOstrowite factories. The European Commission is expected to confirm that afurther 0.8 million tonnes of quota has been permanently renounced in thesecond, and final, phase of restructuring. The total quota renounced would thensubstantially achieve the target set by the Commission to balance theconsumption and production of sugar within the EU. Sugar results were sharply down due to not only the anticipated negative impactof regime reform in Europe but also adverse weather conditions. The very goodimprovement in Agriculture experienced in the second half of last year continuedinto this year. Grocery performed well with Allied Bakeries delivering a majorimprovement. It is also encouraging that the integration of the recentlyacquired Patak's business with Blue Dragon is proceeding on schedule with goodunderlying operational performance. Further excellent results from Primarkreflected the benefit of a substantial increase in retail selling space and goodlike-for-like sales growth. We continue to develop a pipeline for new storeopenings in all of the countries in which we operate although openings over thenext year are likely to be at a slower rate than in 2006 and 2007. During the half year we have spent £125m on acquisitions, primarily onestablishing a major presence in the beet sugar industry in north east China andon certain of the European assets of Gilde Bakery Ingredients for AB Mauri.Investment in existing businesses continued at a rate similar to last year withnet capital expenditure of £238m, of which £64m was spent on new stores andrefits for Primark. At the half year the group's net debt was substantiallyahead of the corresponding period last year at £848m. This reflects theseinvestments, a £48m payment for the additional sugar quota acquired in 2006 andconsiderably higher working capital as a consequence of substantially highercommodity prices. The higher level of net debt was financed by use of ourexisting $1.2bn syndicated loan facility which we negotiated last year inanticipation of further investment. Board Changes In the Annual Report and Accounts last year I noted that two of ournon-executive directors had indicated that they would not seek reappointment atthe annual general meeting. Accordingly John MacGregor and Mike Alexander leftthe Board. Lord MacGregor was succeeded as senior non-executive director by TimClarke. Dividends The Board has decided that the interim dividend will be 6.75p, an increase of 4%on last year. This dividend will be paid on 3 July 2008 to shareholdersregistered at the close of business on6 June 2008. Outlook The trading environments of many of our businesses are being affected by anunusual degree of economic uncertainty. Rising commodity prices and energycosts as well as volatile currencies affect our businesses directly and theseand other economic factors impact on consumers. The increased restructuringlevy and quota cut will continue to have a negative effect on this year's sugarprofit. However, the process of reform of the EU sugar regime is nowessentially complete and sets the scene for a return to market equilibrium. Weexpect profit for the rest of the group to show progress in the second halfdespite the difficult economic conditions. Martin AdamsonChairman 22 April 2008 OPERATING REVIEW These good results demonstrate that the group remains on track. Revenueincreased by 15% to £3,706m and adjusted operating profit by 9% to £296m.Despite the challenge of rapidly rising commodity and energy costs faced by manyof our businesses, revenue and profit from Grocery, Ingredients and Agricultureall grew strongly. Primark produced another set of excellent resultsparticularly against a background of difficult trading for UK clothingretailers. The rise in commodity prices, mainly cereals and soy, has had a significant andvarying impact on the different sectors of UK agriculture. Our Agriculturebusiness benefited from firmer pricing in animal feed and from the supply ofcrop inputs and grain trading at Frontier. A much improved performance atAllied Bakeries contributed to strong profit growth in Grocery which also sawexcellent contributions from Twinings and Ovaltine and from our business inAustralia. Progress in a number of key markets by our yeast and bakeryingredients business, AB Mauri, was the driver behind the growth in Ingredients. In Sugar, profit from our EU operations suffered from the well-documented impactof regime reform, and adverse weather prevented the realisation of the fullpotential of the crop. During the half year the development of our businesses continued apace.Highlights include the establishment of a major beet sugar business in China,sugar capacity expansion in Zambia, the integration of Patak's and Blue Dragonto create World Foods, the expansion of our European presence in yeast andfurther new stores for Primark in Ireland, UK and Spain. SUGAR & AGRICULTURE Sugar 2008 2007Revenue £m 567 579Operating profit £m 58 87 Sugar profit in the UK and Poland was much lower than last year mainly as aresult of the further effects of the EU sugar regime changes. The restructuringlevy per tonne has been increased from €126 last year to €173 this year and thetemporary reduction of quota increased from 152,000 tonnes to 191,000 tonnes.As a consequence of the acceptance of our renunciation applications therenounced quota will not be subject to the restructuring levy in the 2007/8marketing year. This benefit had been anticipated in our expectation for thecurrent year. Profit in the UK was also impacted by higher energy costs and asmaller crop of 1.05 million tonnes which was affected by heavy mid-summerrains. Poland had an exceptionally good campaign with production of 227,000tonnes and Glinojeck again set new operating records. The strengthening of theeuro has benefited the UK business. British Sugar received confirmation in February that its application to renouncepermanently 191,000 tonnes of UK and Polish sugar quota from October 2008, inthe first phase of the enhanced restructuring scheme to enable EU reform, hadbeen accepted. An application to renounce a further 15,000 tonnes of Polishquota has been made as part of the second phase. Wissington is now fully operational in the production of bioethanol with yieldsahead of our expectation. In Vivergo Fuels the detailed design of theworld-scale bioethanol plant, using wheat as feedstock, is nearing completion. At Illovo, profits were lower than the same period last year. Sugar productionwas affected by very high rainfall making it impossible to harvest all availablecane at the end of the season. Volumes in both South Africa and Zambia werelower than previously forecast although the total sugar production estimate of1.8 million tonnes is still above the previous year. Operating performance waspositive with good plant availability and sugar extraction in most areas. Themajor expansion programme at the Nakambala mill in Zambia is well underway whichwill nearly double its capacity to 440,000 tonnes of sugar. This major projectinvolves not only expansion of the mill but also investment in the irrigationsystems necessary to support the larger cane growing area required. As in Africa the market for sugar in China is growing significantly andconsumption now exceeds domestic supply. Since August last year, when weannounced our initial investment in beet sugar production in north east China,we have made a further substantial investment in acquiring another sevenfactories bringing the total to 11. This year's beet processing campaignprogressed well with 245,000 tonnes of sugar produced. Plans are beingdeveloped to increase production significantly over the coming years. BoTianhas already started a major expansion of the Yi'an factory in Heilongjiangprovince. In southern China an unusually late frost has reduced our expectation of sugarproduction to 500,000 tonnes and production next year will be lower againbecause of the damage to the cane. However, further growth can be expectedfollowing the construction of a new cane sugar mill in Jianchenjiang, with acapacity of 120,000 tonnes, completion of which is expected at the end of thiscalendar year. Agriculture 2008 2007Revenue £m 396 322Operating profit £m 19 7 Agriculture performed extremely well with revenue and profit sharply ahead oflast year. Strong trading in the markets for cereals, nitrogen-basedfertilisers and other crop inputs led to an excellent result from Frontier.Volatility is now an established feature of cereal markets and Frontier isbenefiting from a unique position with its investment in systems, a low costbase, national trading and strong financial resources. Further investmentenabled KW Trident to benefit from high demand for sugar beet feed andco-products from the cereal, distilling and brewing sectors. However, in China,recovery of the dramatic increase in the cost of raw materials and energy hasproved challenging. Our feed ingredients business, AB Vista, has continued todevelop. It now operates in 35 countries and combines the provision of newgeneration micro-ingredients for the animal feed industry with respectedtechnical expertise in optimising livestock development. GROCERY 2008 2007Revenue £m 1,438 1,226Operating profit £m 88 64 Grocery revenue increased by 17% to £1,438m and profit was up 38% to £88m. Thisstrong growth was primarily a result of a recovery and substantial improvementby Allied Bakeries and excellent performances by Twinings, Ovaltine and ourbusiness in Australia. As expected, profit at ACH has been impacted by the effects of the sharpincreases in the cost of corn, soy and canola oils. These commodities more thandoubled in cost over the year. Price increases have now been achieved, althoughdelayed until after the high demand period running up to Christmas, but volumeshave been affected. Foodservice margins continued to be impacted by the marketturmoil arising from changes to formulations containing no trans fatty acids andalso from the steep commodity price increases. Spices, however, continued toperform well following last year's introduction of new products with a newpackaging format, grinders, and a new line of gourmet grilling spices under thelicensed Weber Grill brand. Allied Bakeries in the UK benefited from higher volumes, continued improvementin operational performance and increased bread prices in the autumn whichrecovered the higher wheat costs. Volumes have responded to the Kingsmilllrelaunch in February last year, particularly in the products with improvedrecipes: Great Everyday white and 50/50, a white bread with wholemeal flour. Our international hot beverages business had a very good half year. Twiningsdelivered strong sales growth particularly in the UK where Everyday Tea,infusions, speciality and green teas performed well and contributed to theachievement of a record UK market share. Market share continued to increase inthe US benefiting from increased distribution and the new packaging launchedlast year. Our everyday proposition was launched in Australia as "SimplyTwinings" and has been well received. New product launches and strong demandfor Ovaltine in Thailand resulted in sales being well ahead. The developingmarkets of Brazil and Nigeria delivered good growth following improveddistribution. In World Foods the combination of the businesses of Patak's and Blue Dragon isproceeding to plan and full integration of the retail sales force, distributionand administration will be completed by the end of this financial year. The newBlue Dragon factory in Poland is operational and the closure of the twofactories in Wales now completed. The Grocery result includes a charge forthese closures. Trading for both the Blue Dragon and Patak's brands has beenstrong and prices have been increased to recover ingredient cost increases,particularly wheat and certain spices. Profit was strongly ahead at Westmill Foods, the leading supplier of ethnicfoods to the UK ethnic wholesale channel. Price increases have recovered thesharp rise in the cost of commodities, particularly basmati rice and soy oil.The business has been further strengthened by the addition of the foodservicesales of the Patak's brand. Ryvita benefited from increased sales of premium varieties, such as Wholeseedand Muesli Crunch, and from Snack packs. Growth was also achieved ininternational markets. The UK retail sugar market continued to be intenselycompetitive but Silver Spoon was able to offset some of the pressure on marginsby supply chain efficiencies. Speciality sugars performed well with strongsales by Billington's and significant listings achieved for Fairtrade sugarsproduced by Illovo. In Australia, milling and baking performed well with the successful recovery ofhigher wheat costs and further improvements in efficiencies at the flagshipbakery in Sydney. Profitability improved in the meat business, which will befurther strengthened by the acquisition of KR Castlemaine which completed at theend of March. The acquired business brings a modern, low-cost factory atCastlemaine, Victoria, and the regional KR brand. INGREDIENTS 2008 2007Revenue £m 406 345Operating profit £m 35 33 Ingredients achieved a revenue increase of 18% over last year to £406m. Thisgrowth was largely driven by the yeast business which benefited from acombination of organic growth in all regions and the acquisition of the Gildebusiness in Italy. Profit was up 6% to £35m with lower prices for lactose, aprotein co-product, adversely impacting margin. Very good progress was made in our yeast and bakery ingredients business, ABMauri. There was further recovery in North America, a substantial improvementin Brazil, which benefited from lower operating and molasses costs, and growthin the China and Pacific region. Signficant investments include expansion ofthe Argentinian plant, which has created one of our lowest cost plants, furtheradditional capacity being added in north east China and a yeast and bakeryingredients plant has been completed in Mexico. The newly acquired plant inItaly is now our largest. Competition clearance on the acquisition of some ofthe remaining European assets of Gilde Bakery Ingredients is awaited. At ABF Ingredients, growth in enzymes was achieved by an increase in salesresource, with a wider geographical reach, and the introduction of new products.However, the protein business was adversely affected by much lower prices forthe co-product lactose. Increased demand has led to further investment inadditional enzyme capacity in Finland and the building of a new yeast extractplant alongside our yeast facility in north east China. We sold our smallUK-based emulsifier business at the beginning of February with completion beingsubject to competition clearance. RETAIL 2008 2007 Revenue £m 899 721Operating profit £m 111 91 Primark's results were excellent with a revenue increase of 25% to £899m andprofits ahead 22% to £111m. There was a substantial increase in retail selling space during the first halfof last year when a large number of the former Littlewoods stores were opened.Since then there has been a steady stream of new store openings in the UK,Ireland and Spain. At the half year we were operating from 173 stores and 5million sq ft of selling space. Since last year end we have opened new storesin Jerez and Madrid, bringing the number of stores in Spain to four. In Irelandwe opened in the Wilton Shopping Centre in Cork and relocated to a larger storein Tralee. In the UK we opened a new, larger store in Brighton and extended ourManchester store by the opening of another floor. We continue to develop apipeline for new store openings in all of the countries in which we operate andexpect to open a further eight stores in the second half including four in Spainwhich, with store extensions, will add a further 300,000 sq ft of retail sellingspace. Revenues over Christmas were ahead of our expectations and against a backgroundof tough trading for UK clothing retailers we achieved a 4% increase inlike-for-like sales for the first half. We are very encouraged by theperformance of our stores in Spain which have already achieved sales densitiesahead of the average for the UK and Ireland. Latest UK market share data shows that Primark now has over 10% of the market byvolume ranking it the second largest clothing retailer. George WestonChief Executive CONSOLIDATED INCOME STATEMENT Before Exceptional Exceptional items item Total 24 weeks 24 weeks 24 weeks 24 weeks ended ended ended ended 52 weeks ended 1 March 1 March 1 March 3 March 15 September 2008 2008 2008 2007 2007 £m £m £m £m £mContinuing operations Note Revenue 1 3,706 - 3,706 3,220 6,800Operating costs before exceptional items (3,450) - (3,450) (2,994) (6,262)Renunciation of sugar quota 2 - 17 17 - - 256 17 273 226 538Share of profit after tax from joint ventures and associates 7 - 7 3 10Profits less losses on sale of property, plant & equipment 1 - 1 12 8 Operating profit 264 17 281 241 556 Adjusted operating profit 1 296 - 296 272 622Profits less losses on sale of property, plant & equipment 1 - 1 12 8Amortisation of non-operating intangibles (33) - (33) (43) (74)Exceptional item - 17 17 - - Profits less losses on sale of businesses - - - (39) (39)Profit before interest 264 17 281 202 517Finance income 11 - 11 8 20Finance expense (35) - (35) (23) (55)Other financial income 10 - 10 11 26 Profit before taxation 250 17 267 198 508 Adjusted profit before taxation 282 - 282 268 613Profits less losses on sale of property, plant & equipment 1 - 1 12 8Amortisation of non-operating intangibles (33) - (33) (43) (74)Exceptional item - 17 17 - -Profits less losses on sale of businesses - - - (39) (39)Taxation - UK (20) 3 (17) (25) (46) - Overseas (42) - (42) (18) (62) 3 (62) 3 (59) (43) (108)Profit for the period 188 20 208 155 400 Attributable to:Equity shareholders 182 20 202 152 369Minority interests 6 - 6 3 31Profit for the period 188 20 208 155 400 Basic and diluted earnings per ordinary share (pence) 4 25.6 19.2 46.7Dividends per share for the period (pence) 5 6.75 6.50 19.50 CONSOLIDATED BALANCE SHEET At At At 1 March 3 March 15 September 2008 2007 2007 Note £m £m £m Non-current assetsIntangible assets 1,629 1,454 1,570Property, plant & equipment 2,817 2,548 2,642Biological assets 48 46 48Investments in joint ventures 53 39 46Investments in associates 36 18 33Employee benefits assets 337 193 308Deferred tax assets 63 87 70Other receivables 105 5 2 Total non-current assets 5,088 4,390 4,719 Current assetsAssets classified as held for sale 6 59 3 48Inventories 1,102 895 765Biological assets 55 52 53Trade and other receivables 1,055 781 967Other financial assets 66 36 17Cash and cash equivalents 309 364 411 Total current assets 2,646 2,131 2,261 TOTAL ASSETS 7,734 6,521 6,980 Current liabilitiesLiabilities classified as held for sale 6 (10) - (7)Interest-bearing loans and overdrafts (239) (80) (125)Trade and other payables (1,173) (991) (1,167)Other financial liabilities (40) (25) (26)Income tax (107) (71) (82)Provisions (46) (42) (36) Total current liabilities (1,615) (1,209) (1,443) Non-current liabilitiesInterest-bearing loans (921) (654) (598)Provisions (22) (26) (14)Deferred tax liabilities (434) (407) (430)Employee benefits liabilities (33) (41) (31) Total non-current liabilities (1,410) (1,128) (1,073) TOTAL LIABILITIES (3,025) (2,337) (2,516) NET ASSETS 4,709 4,184 4,464 EquityIssued capital 47 47 47 Other reserves 173 173 173Translation reserve 70 (58) (49)Hedging reserve 16 (5) (1)Retained earnings 4,169 3,819 4,074 4,475 3,976 4,244Minority interests 234 208 220 TOTAL EQUITY 9 4,709 4,184 4,464 CONSOLIDATED CASH FLOW STATEMENT 24 24 52 weeks weeks weeks ended ended ended 1 March 3 March 15 September 2008 2007 2007 Note £m £m £m Cash flow from operating activitiesProfit before taxation 267 198 508Profits less losses on sale of property, plant & equipment (1) (12) (8)Profits less losses on sale of businesses - 39 39Exceptional items (17) - -Finance income (11) (8) (20)Finance expense 35 23 55Other financial income (10) (11) (26)Share of profit from joint ventures and associates (7) (3) (10)Amortisation 33 43 79Depreciation 114 109 214Change in the fair value of biological assets (58) (54) (59)Share-based payment expense 3 3 6Pension cost less contributions (17) (14) (14)Increase in inventories (229) (170) (38)(Increase)/decrease in receivables (56) 108 (58)(Decrease)/increase in payables (2) 51 151Increase/(decrease) in provisions 8 (18) (17) Cash generated from operations 52 284 802Income taxes paid (29) (48) (106) Net cash from operating activities 23 236 696 Cash flows from investing activitiesDividends received from joint ventures - - 1Dividends received from associates - - 2Purchase of property, plant & equipment (193) (227) (420)Purchase of intangibles (60) (7) (7)Sale of property, plant & equipment 15 22 30Purchase of subsidiaries, joint ventures and associates (116) (1) (150)Sale of subsidiaries - 60 58Purchase of minority interests (9) - -Interest received 8 7 20 Net cash from investing activities (355) (146) (466) Cash flows from financing activitiesDividends paid to minorities (8) (9) (26)Dividends paid to equity shareholders (103) (99) (150)Interest paid (34) (24) (58)(Increase)/decrease in other current investments (2) 32 52FinancingDecrease in short-term loans (62) (360) (307)Increase in long-term loans 278 479 417Increase in own shares held (3) (9) (9) Net cash from financing activities 66 10 (81) Net (decrease)/increase in cash and cash equivalents (266) 100 149Cash and cash equivalents at the beginning of the period 349 198 198Effect of movements in foreign exchange (2) (1) 2Cash and cash equivalents at the end of the period 8 81 297 349 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 24 24 52 weeks weeks weeks ended ended ended 1 March 3 March 15 September 2008 2007 2007 £m £m £m Actuarial (losses)/gains on defined benefit schemes (1) - 110Deferred tax associated with defined benefit schemes - - (25)Effect of movements in foreign exchange 142 (40) (32)Net (loss)/gain on hedge of net investment in foreign subsidiaries (27) 1 4Movement in cash flow hedging position- effective portion of gains or losses on hedging instruments 24 (10) (20)- gains or losses on hedging instruments transferred to the income statement within sales/operating expenses (2) 10 19- gains or losses on hedging instruments transferred to inventory 3 1 8Deferred tax associated with movement in cash flow hedging position (8) - (2) Net gain/(loss) recognised directly in equity 131 (38) 62Profit for the period 208 155 400 Total recognised income and expense for the period 339 117 462 Attributable to:Equity shareholders 337 124 439Minority interests 2 (7) 23 339 117 462 NOTES TO THE INTERIM REPORT 1. Segmental analysis Revenue Adjusted operating profit 24 weeks 24 weeks 52 weeks 24 weeks 24 weeks 52 weeks ended ended ended ended ended ended 1 March 3 March 15 September 1 March 3 March 15 September 2008 2007 2007 2008 2007 2007Business segments £m £m £m £m £m £m Grocery 1,438 1,226 2,605 88 64 153Sugar 567 579 1,151 58 87 199Agriculture 396 322 687 19 7 18Ingredients 406 345 728 35 33 75Retail 899 721 1,602 111 91 200Central - - - (15) (13) (26) 3,706 3,193 6,773 296 269 619Businesses disposed:Grocery - 7 7 - - -Ingredients - 20 20 - 3 3 - 27 27 - 3 3 3,706 3,220 6,800 296 272 622 Geographical segments United Kingdom 1,745 1,503 3,216 152 114 255Europe, Middle East & Africa 708 614 1,251 60 62 158The Americas 581 544 1,142 44 58 113Asia Pacific 672 532 1,164 40 35 93 3,706 3,193 6,773 296 269 619Businesses disposed:Europe, Middle East & Africa - 7 7 - - -The Americas - 20 20 - 3 3 - 27 27 - 3 3 3,706 3,220 6,800 296 272 622 1. Segmental analysis - 24 weeks ended 1 March 2008 Business segments Elimina- Grocery Sugar Agriculture Ingredients Retail Central tions Total £m £m £m £m £m £m £m £m Revenue from continuing businesses 1,442 603 396 424 899 - (58) 3,706Internal revenue (4) (36) - (18) - - 58 - Revenue from external customers 1,438 567 396 406 899 - - 3,706 Adjusted operating profit 88 58 19 35 111 (15) - 296Exceptional items - 17 - - - - - 17Amortisation of non-operating intangibles (8) (12) - (13) - - - (33)Profits less losses on sale of property, plant & equipment 1 - - - - - - 1 Profit before finance income, finance expense, other financialincome and taxation 81 63 19 22 111 (15) - 281Finance income 11 - 11Finance expense (35) - (35)Other financial income 10 - 10Taxation (59) - (59) Profit for the period 81 63 19 22 111 (88) - 208 Segment assets (excluding investments in associates and jointventures) 2,115 1,983 206 1,150 1,457 22 - 6,933Investments in associates and joint ventures 27 11 36 15 - - - 89 Segment assets 2,142 1,994 242 1,165 1,457 22 - 7,022Cash and cash equivalents 309 - 309Employee benefits assets 337 - 337Deferred tax assets 63 - 63Other current investments 3 - 3Segment liabilities (416) (436) (73) (137) (196) (28) - (1,286)Interest-bearing loans and overdrafts (1,160) - (1,160)Income tax (107) - (107)Deferred tax liabilities (438) - (438)Employee benefits liabilities (34) - (34) Net assets 1,726 1,558 169 1,028 1,261 (1,033) - 4,709 Capital additions 35 76 4 16 61 - - 192 Depreciation 38 27 3 13 33 - - 114 Amortisation 8 12 - 13 - - - 33 Geographical segments Europe, United Middle East The Asia Elimina- Kingdom & Africa Americas Pacific tions Total £m £m £m £m £m £m Revenue from external customers 1,745 708 581 672 - 3,706Segment assets 3,356 1,579 941 1,146 - 7,022Capital additions 48 106 11 27 - 192Depreciation 67 18 10 19 - 114Amortisation 4 16 10 3 - 33 1. Segmental analysis - 24 weeks ended 3 March 2007 Business segments Elimina- Grocery Sugar Agriculture Ingredients Retail Central tions Total £m £m £m £m £m £m £m £m Revenue from continuing businesses 1,231 624 323 368 721 - (74) 3,193Businesses disposed 7 - - 20 - - - 27Internal revenue (5) (45) (1) (23) - - 74 - Revenue from external customers 1,233 579 322 365 721 - - 3,220 Adjusted operating profit from continuing businesses 64 87 7 33 91 (13) - 269Businesses disposed - - - 3 - - - 3 Adjusted operating profit 64 87 7 36 91 (13) - 272Amortisation of non-operating intangibles (6) (24) - (13) - - - (43)Profits less losses on sale of property, plant & equipment 4 - - - 8 - - 12Profits less losses on sale of businesses 6 - - (39) (6) - - (39) Profit before finance income, finance expense, other financialincome and taxation 68 63 7 (16) 93 (13) - 202Finance income 8 - 8Finance expense (23) - (23)Other financial income 11 - 11Taxation (43) - (43) Profit for the period 68 63 7 (16) 93 (60) - 155 Segment assets (excluding investments in associates and jointventures) 1,804 1,497 184 949 1,352 14 - 5,800Investments in associates and joint ventures 9 7 28 13 - - - 57Segment assets 1,813 1,504 212 962 1,352 14 - 5,857Cash and cash equivalents 364 - 364Employee benefits assets 193 - 193Deferred tax assets 87 - 87Other current investments 20 - 20Segment liabilities (339) (339) (54) (130) (190) (38) - (1,090)Interest-bearing loans and overdrafts (734) - (734)Income tax (71) - (71)Deferred tax liabilities (407) - (407)Employee benefits liabilities (35) - (35) Net assets 1,474 1,165 158 832 1,162 (607) - 4,184 Capital additions 38 48 3 18 94 - - 201 Depreciation 36 30 3 13 27 - - 109 Amortisation 6 24 - 13 - - - 43 Geographical segments Europe, United Middle East The Asia Elimina- Kingdom & Africa Americas Pacific tions Total £m £m £m £m £m £m Revenue from external customers 1,503 621 564 532 - 3,220 Segment assets 2,705 1,398 936 818 - 5,857 Capital additions 125 39 19 18 - 201 Depreciation 66 15 12 16 - 109 Amortisation 2 27 12 2 - 43 1. Segmental analysis - 52 weeks ended 15 September 2007 Business segments Elimina- Grocery Sugar Agriculture Ingredients Retail Central tions Total £m £m £m £m £m £m £m £m Revenue from continuing businesses 2,616 1,250 689 775 1,602 - (159) 6,773Businesses disposed 7 - - 20 - - - 27Internal revenue (11) (99) (2) (47) - - 159 - Revenue from external customers 2,612 1,151 687 748 1,602 - - 6,800 Adjusted operating profit from continuing businesses 153 199 18 75 200 (26) - 619Businesses disposed - - - 3 - - - 3 Adjusted operating profit 153 199 18 78 200 (26) - 622Amortisation of non-operating intangibles (14) (32) - (28) - - - (74)Profits less losses on sale of property, plant & equipment - - - - 8 - - 8Profits less losses on sale of businesses 7 - 1 (40) (7) - - (39) Profit before finance income, finance expense, other financial income andtaxation 146 167 19 10 201 (26) - 517Finance income 20 - 20Finance expense (55) - (55)Other financial income 26 - 26Taxation (108) - (108) Profit for the period 146 167 19 10 201 (143) - 400 Segment assets (excluding investments in associates and joint ventures) 1,949 1,609 172 924 1,436 21 - 6,111Investments in associates and joint ventures 25 10 31 13 - - - 79 Segment assets 1,974 1,619 203 937 1,436 21 - 6,190Cash and cash equivalents 411 - 411Employee benefits assets 308 - 308Deferred tax assets 70 - 70Other current investments 1 - 1Segment liabilities (391) (427) (56) (119) (217) (35) - (1,245)Interest-bearing loans and overdrafts (723) - (723)Income tax (82) - (82)Deferred tax liabilities (434) - (434)Employee benefits liabilities (32) - (32) Net assets 1,583 1,192 147 818 1,219 (495) - 4,464 Capital additions 85 113 6 44 139 - - 387Depreciation 75 52 7 24 56 - - 214Amortisation 14 37 - 28 - - - 79 Geographical segments Europe, United Middle East The Asia Elimina- Kingdom & Africa Americas Pacific tions Total £m £m £m £m £m £mRevenue from external customers 3,216 1,258 1,162 1,164 - 6,800Segment assets 2,858 1,601 905 826 - 6,190Capital additions 230 79 37 41 - 387Depreciation 124 33 23 34 - 214Amortisation 10 39 25 5 - 79 NOTES TO THE INTERIM REPORT continued 2. Exceptional item In February 2008, British Sugar received confirmation that its application to renounce permanently 191,000 tonnes of UK and Polish sugar quota from October 2008 had been accepted. Compensation receivable of £82m (£75m on a discounted basis) is offset by the impact of writing off the unamortised cost of the additional 83,000 tonnes of quota purchased in 2006 of £43m. The compensation debtor is included within non-current other receivables. Restructuring costs of £15m have been provided for relating to the closure of the York and Ostrowite sugar factories. 3. Income tax expense 24 weeks 24 weeks 52 weeks ended ended ended 1 March 3 March 15 September 2008 2007 2007 £m £m £m Current tax expense UK - corporation tax 12 15 37 Overseas - corporation tax 42 20 71 Over-provided in prior periods - - (7) 54 35 101 Deferred tax expense UK deferred tax 5 10 14 Overseas deferred tax - (2) (12) Under-provided in prior periods - - 5 Total income tax expense in income statement 59 43 108 Reconciliation of effective tax rate Profit before taxation 267 198 508 Less share of profit from joint ventures and associates (7) (3) (10) Profit before taxation excluding share of profit from joint ventures and associates 260 195 498 Nominal tax charge at UK corporation tax rate 76 59 149 (29%/30%/30%) Lower tax rates on overseas earnings (16) (17) (46) Expenses not deductible for tax purposes 8 5 7 Utilisation of losses (9) (4) - Adjustments in respect of prior periods - - (2) 59 43 108 4. Earnings per ordinary share 24 weeks 24 weeks 52 weeks ended ended ended 1 March 3 March 15 September 2008 2007 2007 Pence Pence Pence Adjusted earnings per share 25.2 23.3 52.9 Earnings per share on: Sale of property, plant & equipment 0.1 1.5 1.0 Sale of businesses - (4.9) (4.9) Exceptional items 2.2 - - Tax effect on above 0.4 2.0 1.9 Amortisation of non-operating intangibles (4.2) (5.4) (9.4) Tax credit on non-operating intangibles amortisation and goodwill 1.3 1.6 3.8 Minority share of amortisation of non-operating intangibles net of tax 0.6 1.1 1.4 Earnings per ordinary share 25.6 19.2 46.7 5. Dividends 24 weeks 24 weeks 52 weeks ended ended ended 1 March 3 March 15 September 2008 2007 2007Per share Pence Pence Pence 2006 final - 12.50 12.502007 interim - - 6.502007 final 13.00 - - 13.00 12.50 19.00 Total £m £m £m2006 final - 99 992007 interim - - 512007 final 103 - - 103 99 150 The 2007 final dividend of 13.0p per share was approved on 7 December 2007 and totalled £103m when paid on11 January 2008. The 2008 interim dividend of 6.75p per share will be paid on 3 July 2008 to shareholders on theregister on6 June 2008. 6. Assets held for sale The acquisition of certain of the European assets of Gilde Bakery Ingredients ("Gilde"), and the disposal of the group's existing German yeast business, were agreed on 2 October 2007. Certain elements of the acquisition are conditional on clearances by the relevant competition authorities. The existing German yeast business is classified as a disposal group held for sale and the disposal was completed on 31 March 2008. The disposal of Abitec Limited ("Abitec") was agreed on 22 January 2008, is conditional on the approval of the relevant competition authorities, and it is classified as a disposal group held for sale. The existing German yeast business and Abitec are included in the Ingredients and Europe, Middle East & Africa segments. The disposal of neither business constitutes a discontinued operation. At 1 March 2008 £m Assets classified as held for sale Intangible assets 34 Property, plant & equipment 16 Inventories 3 Trade and other receivables 6 59 Liabilities classified as held for sale Trade and other payables 5 Deferred tax 4 Employee benefits liability 1 10 7. Acquisitions and disposals During the period the group acquired 11 beet sugar factories in north east China and completed part of the acquisition of the European assets of Gilde. Costs associated with these acquisitions are included within cash consideration. The acquisitions had the following effect on the group's assets and liabilities: Pre-acquisition Recognised carrying values on amounts acquisition £m £m Net assets Intangible assets 3 26 Property, plant & equipment 56 44 Inventories 28 29 Trade and other receivables 15 14 Cash and cash equivalents 2 2 Trade and other payables (18) (18) Interest-bearing loans and borrowings (30) (30) Taxation (1) (4) Net identifiable assets and liabilities 55 63 Goodwill on acquisitions 59 Minority interests acquired (4) Total consideration 118 Satisfied by Cash consideration 89 Deferred consideration 8 Interest in subsidiary 21 Net cash Cash consideration 89 Cash acquired (2) Cash consideration in respect of prior year acquisitions 5 92 There were no material differences between pre-acquisition carrying amounts and amounts recognised on acquisition, which include provisional fair value adjustments to the assets and liabilities acquired, with the exception of £23m of intangibles, a £12m downward adjustment to property, plant & equipment and a £3m adjustment to deferred tax. Goodwill arising on the acquisitions is attributable to the anticipated profitability from the sale of the group's existing products in new markets, and the anticipated future technological and operational synergies from the combinations. The acquisitions contributed revenue of £53m but no profit before tax for the periods between the dates of acquisition and 1 March 2008. Contributions to revenue and profit before tax had the acquisitions occurred at the beginning of the period have not been disclosed, as appropriately consolidated financial information prepared under IFRS is not available. The net cash of £92m in the acquisition table above differs from the cash flow on purchase of subsidiaries, joint ventures and associates shown in the cash flow statement by £24m. This difference relates to the Gilde businesses in Spain, Portugal and Germany, which require competition clearance before completion can take place. The assets and liabilities of those businesses are not included in the table above. The amounts paid for these businesses are included within non-current other receivables in the consolidated balance sheet. At 15 Cash flow Acquisitions Exchange At September adjustments 1 March 2007 2008 £m £m £m £m £m8. Analysis of net debt Cash at bank and in hand, 349 (266) - (2) 81 cash equivalents and overdrafts Short-term borrowings (63) 62 (8) (2) (11) Investments 1 2 - - 3 Loans over one year (598) (278) (22) (23) (921) (311) (480) (30) (27) (848) Cash and cash equivalents comprise cash balances, call deposits and investments with original maturities of threemonths or less. Bank overdrafts that are repayable on demand and form an integral part of the group's cashmanagement are included as a component of cash and cash equivalents for the purpose of the cash flow statement.Investments comprise current asset investments which are included within other financial assets in the consolidatedbalance sheet. 24 weeks 24 weeks 52 weeks ended ended ended 15 1 March 3 March September 2008 2007 2007 £m £m £m9. Summary of movements in equity Opening equity 4,464 4,182 4,182 Total recognised income and expense for the period 339 117 462 Dividends paid to shareholders (103) (99) (150) Net increase in own shares held - (7) (3) Minority interests acquired/(disposed) 17 - (1) Dividends paid to minorities (8) (9) (26) Closing equity 4,709 4,184 4,464 Attributable to: Equity shareholders 4,475 3,976 4,244 Minority interests 234 208 220 4,709 4,184 4,464 10. Related party transactions Transactions between the company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote. Full details of the group's other related party relationships, transactions andbalances are given in the group's financial statements for the year ended 15September 2007. There have been no material changes in these relationships inthe 24 weeks ended 1 March 2008 or up to the date of this report. No related party transactions have taken place in the first 24 weeks of thecurrent financial year that have materially affected the financial position orthe performance of the group during that period. 11. Basis of preparation This financial information has been prepared in accordance with the accountingpolicies set out in the group's statutory financial statements for the yearended 15 September 2007, and in accordance with International AccountingStandard 34 Interim Financial Reporting. In the current financial year, the group will adopt International FinancialReporting Standard 7 Financial Instruments: Disclosures ("IFRS 7") for the firsttime. As this is a disclosure standard, the change in accounting policy has noimpact on this financial information. Full details of the change will bedisclosed in the group's annual report for the year ending 13 September 2008. The interim results are unaudited but have been subject to an independent reviewby the auditors, and were approved by the board of directors on 22 April 2008.They do not constitute statutory financial statements as defined in section 240of the Companies Act 1985. The comparative figures for the financial year ended15 September 2007 have been abridged from the group's 2007 financial statementsand are not the company's statutory financial statements for that period. Thosefinancial statements have been reported on by the company's auditors anddelivered to the Registrar of Companies. The report of the auditors wasunqualified, did not include a reference to any matters to which the auditorsdrew attention by way of emphasis without qualifying their report and did notcontain a statement under Section 237(2) or (3) of the Companies Act 1985. This interim report has been prepared solely to provide additional informationto shareholders as a body to assess the group's strategies and the potential forthose strategies to succeed. This interim report should not be relied upon byany other party or for any other purpose. 12. Subsequent events The group completed the sale of its existing German yeast business on 31 March(see note 6 for details) and also completed the acquisition of a meat businessin Australia, KR Castlemaine, on 31 March. CAUTIONARY STATEMENTS This interim report contains forward-looking statements. These have been madeby the directors in good faith based on the information available to them up tothe time of their approval of this report. The directors can given no assurancethat these expectations will prove to have been correct. Due to the inherentuncertainties, including both economic and business risk factors underlying suchforward-looking information, actual results may differ materially from thoseexpressed or implied by these forward-looking statements. The directorsundertake no obligation to update any forward-looking statements whether as aresult of new information, future events or otherwise. There are a number of potential risks and uncertainties which could have amaterial impact on the group's performance over the remainder of the financialyear and could cause actual results to differ materially from expected andhistorical results. These include, but are not limited to, competitor activityand competition risk, commercial relationships with customers and suppliers,changes in foreign exchange rates and commodity prices. Details of the keyrisks facing the group's businesses at an operational level are included onpages 36-39 of the group's statutory financial statements for the year ended15 September 2007, as part of the Corporate governance report. Details offurther potential risks and uncertainties arising since the issue of theprevious statutory financial statements are included within the Chairman'sstatement and the operating review as appropriate. RESPONSIBILITY STATEMENT The directors confirm that to the best of their knowledge: • this financial information has been prepared in accordance with IAS 34; • this interim management report includes a fair review of theinformation required by DTR 4.2.7R (indication of important events during thefirst half and description of principal risks and uncertainties for theremaining half of the year); and • this interim management report includes a fair review of theinformation required by DTR 4.2.8R (disclosure of related party transactions andchanges therein). George Weston John Bason Martin AdamsonChief Executive Finance Director Chairman22 April 2008 22 April 2008 22 April 2008 On behalf of the board This information is provided by RNS The company news service from the London Stock Exchange