FDBusiness.com

Associated British Foods, the UK-based diversified international food, ingredients and retail group, has reported a 5% rise in revenue to £13.4 billion and a 3% increase in adjusted operating profit to £1.118 billion for the year ended 17 September 2016.

Revenues at ABF’s grocery business were ahead by 3% to £3.274 billion, including the benefit of a 53rd week but were again held back by commodity price deflation, and adjusted operating profit increased by 7% to £304 million with a further improvement in margin.

ABF’s ingredients revenues at £1.294 billion were 4% ahead of last year and operating profit was again substantially ahead by 22% to £93 million with a further improvement in operating profit margin from 6.1% to 7.2%. Cost reduction was a driver of the continued recovery of the yeast and bakery ingredients business which was the major contributor to the 22% growth in adjusted operating profit.

Reported revenue at AB Sugar was down 1% to £1.798 billion and adjusted operating profit was up 3% at £34 million for the period, which was in line with last year, and substantially ahead at constant currency as a result of the weakness of the African currencies. Indeed, 2016 marked a turning point for AB Sugar as the profit decline of recent years was arrested as EU and world sugar prices improved and the business achieved further cost reduction and efficiency gains.

Gross investment across the group was just over £1 billion which included capital expenditure increases both for the Primark retail operation and the food businesses and the £247 million consideration to acquire the minority shareholdings in Illovo Sugar. This was funded by another strong cash flow and was the fifth consecutive year of operating cash generated in excess of £1 billion.

George Weston, chief executive of Associated British Foods.

Attaining full ownership of Illovo, at a time when increasing populations and rising incomes are driving growth in the African sugar market, is expected to accelerate its performance improvement and commercial development. AB Sugar has also announced the sale of its south China cane sugar operations with completion expected later in this calendar year.

Primark continued its development during the year with a further 1.2 million sq ft of selling space opened. Ten years ago Primark first moved beyond the UK and Ireland by opening its first store in Spain. Since then it has expanded into a further eight countries and has achieved a fivefold increase in retail selling space.

“This has been a year of progress for all of our businesses with a substantial expansion in Primark’s selling space, increased margins in all of the food businesses and fundamental structural changes at AB Sugar,” comments George Weston, chief executive of Associated British Foods. “The recent decline in the value of sterling presents both benefits and challenges to the group. The diversity of our operations and our broad geographical footprint, combined with a strong balance sheet, equip us well to take advantage of these opportunities as they arise.”