Creating value - Associated British Foods
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Annual Report 2021 Creating value
2021 GROUP FINANCIAL HIGHLIGHTS
Group revenue Adjusted operating Adjusted profit
profit before tax
£13.9bn £1,011m £908m
(2020: £13.9bn) (2020: £1,024m) (2020: £914m)
Adjusted earnings Dividends per share Special dividend
per share per share
80.1p 26.7p 13.8p
(2020: 81.1p) (2020: Nil)
Gross investment Net cash before Net debt including
lease liabilities lease liabilities
£721m £1,901m £1,380m
(2020: £641m) (2020: £1,558m) (2020: £2,081m)
Operating profit Profit before tax Basic earnings
per share
£808m £725m 60.5p
(2020: £810m) (2020: £686m) (2020: 57.6p)
CONTENTS
Strategic report Governance
IFC 2021 Group financial highlights 96 Chairman’s introduction
IFC At a glance 98 Board of Directors
1 Introduction 100 Corporate governance
12 Chairman's statement 117 Directors’ Remuneration Report
16 Chief Executive's statement 136 Directors’ Report
18 Our business model and strategy 139 Statement of directors’ responsibilities
20 Key performance indicators 140 Independent Auditor’s Report
22 Operating review
22 Grocery
32 Sugar
Financial statements
150 Consolidated income statement
40 Agriculture
151 Consolidated statement of
46 Ingredients
comprehensive income
52 Retail
152 Consolidated balance sheet
62 Financial review
153 Consolidated cash flow statement
65 Section 172 and our stakeholders
154 Consolidated statement of changes
72 Responsibility
in equity
86 Climate-related Financial Disclosures
155 Significant accounting policies
(TCFD)
161 Accounting estimates and judgements
88 Principal risks and uncertainties
162 Notes forming part of the
95 Viability statement and going concern
financial statements
214 Company financial statements
222 Progress report
223 Glossary
224 Company directory
INTRODUCTION
Creating value
together
Associated British Foods is a highly
diversified group, with a wide range of
food and ingredient businesses as well
as our flagship retail brand, Primark. We
are united by our purpose to provide safe,
nutritious and affordable food, and clothing
that is great value for money.
Together, as ABF, we work hard every day to
create long-term value for our stakeholders,
from our customers, employees and suppliers
to our shareholders.
In our annual report this year we highlight
how we create value across our businesses –
innovating, growing, collaborating and
investing to ensure we continue to deliver
ever more sustainable growth.
All photographs in this report complied with the relevant COVID-19 guidelines at the time in the
countries in which they were taken.
Associated British Foods plc Annual Report 2021 1
AT A GLANCE
Our operating businesses
Grocery Sugar Agriculture
Our grocery brands occupy leading AB Sugar is one of the largest sugar AB Agri is a leading international
positions in markets across the globe. producers in the world. Illovo is the agri-food business operating across
In the UK, nine out of 10 households largest sugar producer in Africa and the supply chain, producing and
use our brands. British Sugar is the sole processor of marketing animal feed, nutrition and
UK sugar beet. technology-based products.
Revenue Adjusted operating Revenue Adjusted operating Revenue Adjusted operating
profit profit profit
£3,593m £413m £1,650m £152m £1,537m £44m
(2020: £3,528m) (2020: £437m) (2020: £1,594m) (2020: £100m) (2020: £1,395m) (2020: £43m)
About us
53 128,000 9 out One of
countries operated in,
across Europe, Africa,
employees
of 10 the largest
the Americas, Asia and UK households use sugar producers in
Australia our grocery brands the world
UK’s 2.8m One 53%
largest meals provided through
surplus food donations of the of our total workforce
are women
animal feed
business
to foodbanks
leading
suppliers of specialty
yeast ingredients
globally
Our brands
Our values
ev
cting eryone
s pe dignity ’s
Re
Actin
rigour
Delivering
integrity
g with
with
Pr gh
og
Ingredients Retail ressing throu
collab ration
o
Our Ingredients businesses are leaders Primark is one of the largest fashion
in yeast and bakery ingredients and retailers in Europe and the largest
See pages 18 to 19 for more on our
supply specialty ingredients to the clothing, footwear and accessories
values and how we operate.
food, nutrition, feed and retailer by volume in the UK. In total,
pharmaceutical industries. we have 398 stores in 14 countries,
including the United States.
Revenue Adjusted operating Revenue Adjusted operating
profit profit
£1,508m £151m £5,593m £321m
(2020: £1,503m) (2020: £147m) (2020: £5,895m) (2020: £362m)
31 One of 100% £39m
community clinics and
hospitals serving the largest of the UK’s sugar
beet crop processed
invested in safety risk
management, of which
communities adjacent fashion retailers in by British Sugar 24% was dedicated to
to our Illovo Sugar Europe COVID-19 safety
plants in Africa measures
One of 79% 544,000 >1m
the largest of the waste we
generated was sent for
people’s lives improved
since the launch of
people in the Primark
supply chain
food manufacturers recycling, recovery or Twinings’ Sourced with
in the UK other beneficial use Care programme
Innovating
together
Grocery
Twinings
As interest in health and wellbeing grows
among consumers across the globe,
we have continued to expand our range
of Twinings teas, with innovative new
blends and flavours to meet this demand.
Retailing as Twinings Superblends in the
UK and US, Twinings Live Well in Australia
and La Tisanière in France, performance
is exceeding our expectations.
In the UK, Superblends is growing strongly
year-on-year and in the US we expanded
our offering with a new range, fortified with
vitamins or minerals. In Australia, we are
well-placed to become a leading brand for
wellbeing drinks and in France we became
the leader in the ‘teas and herbs’ category,
driven by our organic benefit-led range
including herbs such as guarana, turmeric,
basil and lemongrass.
See pages 22 to 31 for more on Superblends
and Grocery performance this year.
2 Associated British Foods plc Annual Report 2021
Associated British Foods plc Annual Report 2021 3
Growing
together
Sugar
Illovo Sugar Africa
Illovo Sugar Africa delivered an
exceptional performance this year, driven
by operational efficiencies and capitalising
on strong market growth opportunities
across our six countries of operation –
Eswatini, Malawi, Mozambique, South
Africa, Tanzania and Zambia.
Domestic market sales increased
by 60,000 tonnes to approximately
1.2 million tonnes in the year. Regional
sales were also strong, with a further
245,000 tonnes of sugar delivered to
neighbouring countries, building our
#AfricanSugar4AfricanMarkets strategy
of becoming the supplier of choice in the
markets of central and southern Africa.
1.45m
tonnes
sold in domestic
and regional
African markets
See pages 32 to 39 for more on Illovo and
Sugar performance this year.
4 Associated British Foods plc Annual Report 2021
Associated British Foods plc Annual Report 2021 5
Collaborating
together
Agriculture
AB Neo
In September 2020, AB Agri launched a
specialist neonate nutrition business – AB
Neo – which focuses on the essential
and very particular needs of young
farm animals.
AB Neo manufactures a range of products
for piglets, calves and poultry, helping our
customers provide the best start in life for
their animals.
We currently produce over 200,000 tonnes
of animal feed for young animals every
year, with manufacturing in Denmark,
Poland, Spain and the UK. Our growth
strategy is focused on moving into
new geographies.
200,000
tonnes
of feed for young
animals produced
this year
See pages 40 to 45 for more on AB Neo
and Agriculture performance this year.
6 Associated British Foods plc Annual Report 2021Associated British Foods plc Annual Report 2021 7
Investing
together
Ingredients
AB Mauri and
ABF Ingredients
Our specialty ingredients businesses,
AB Mauri and ABF Ingredients, continued
to invest this year with the opening of two
new state-of-the-art facilities to support
their future growth and development.
AB Mauri opened a new Global Technology
Centre in the Netherlands (pictured right),
which provides an international hub for our
research and development in bakery and
yeast ingredients. It is at the cutting edge
of bakery capability and reinforces
AB Mauri’s position as a market leader in
bakery and yeast ingredients.
AB Enzymes, part of ABF Ingredients,
opened a pilot plant at the manufacturing
site in Rajamäki, Finland. This new plant
significantly increases our capability
and capacity to validate and optimise a
wider range of new concepts before
full-scale production.
2 new
research and
development
facilities opened
in the year
See pages 46 to 51 for more on the research
and development centres and Ingredients
performance this year.
8 Associated British Foods plc Annual Report 2021Associated British Foods plc Annual Report 2021 9
More sustainable
together
Retail
Primark
More sustainable fashion,
affordable for all
At Primark, we believe that more
sustainable fashion should not have to
come with a high price tag for people or
our planet. We have been on a journey
for more than a decade to build a more
sustainable business, but we will go
further and faster, using our size and
scale to make a real difference.
That is why this year we have launched
the Primark Cares sustainability strategy.
Our priorities are to minimise fashion
waste, reduce our impact on the planet
and improve the lives of the people who
make our clothes.
See pages 52 to 61 for more on Primark Cares
and Retail peformance this year.
10 Associated British Foods plc Annual Report 2021Associated British Foods plc Annual Report 2021 11
CHAIRMAN’S STATEMENT Chairman’s statement 12 Associated British Foods plc Annual Report 2021
The economic effects of the measures taken by governments
to restrict the COVID-19 pandemic were evident in the financial
results for our last financial year and in the results for this
financial 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.
Sales and profit for the Group this We invested £721m in our businesses This year we have extensively engaged
financial year were again below pre- this year. We made good progress with a with our investors on the key ESG factors
COVID levels and this was driven by the number of major capital projects: work to for the Group and our strategy and
results for Primark, where a third of its recommission the Vivergo bioethanol governance in relation to these. We
available trading days were lost as a plant in the UK; a major new animal feed provided an in-depth review of Primark’s
result of store closures due to the public mill in Western Australia; and a number processes to provide assurance of its
health measures taken in our major of capacity increases including bakery supplier practices and of Primark’s
markets. The Primark management and production in Australia and yeast sustainability strategy, Primark Cares,
operational teams demonstrated agility in production in Brazil. In Primark, we designed to reduce its impact on the
responding to both the fast changing and continued to increase retail selling space environment and to improve the lives of
wide range of trading restrictions applied with the opening of 15 new stores and people in its supply chain. A new
to our stores over the year. The strength developed our presence in the important customer campaign was launched in
of Primark’s sales after the reopening of US and Central European markets. We September to highlight Primark’s
all our stores in the spring demonstrated made progress in the development and commitment to make more sustainable
the relevance and appeal of our value-for- implementation of new inventory fashion affordable for all. The March and
money offering. Growth in our food management and point of sale systems September presentations are available on
businesses continued this year with a across the store estate. The expansion our website. A further briefing is due to
combined increase in revenue of 5% of our state-of-the art warehouse in be held in early 2022 and will focus on
and increase in adjusted operating Roosendaal in the Netherlands the environmental factors that are most
profit of 10% this financial year, at was completed. material for the Group.
constant currency.
Importantly, during this difficult trading Our Responsibility and ESG Results
year, we maintained our focus on building Our Company was founded with a Revenue for the Group of £13.9bn was in
for the future. conviction that acting responsibly and line with last year at actual exchange
In Grocery, we continued to build our with integrity is the only way to build and rates and was 1% ahead at constant
brands with a number of new product manage a business over the long term. currency. All our food businesses
introductions and wider international The belief that companies do well when delivered growth and in aggregate sales
distribution. We made significant they act well is deeply ingrained in all of were 5% ahead of last year at constant
progress with the expansion of Twinings us, from the Board and the leadership currency. Primark sales in both years
in Wellness teas, Ovaltine growth in team, across all our businesses and at all were impacted by trading restrictions and
China, Brazil and Switzerland, the levels of our workforce. We have a clear store closures as a result of government
overseas development of Patak’s and sense of our social purpose. We exist to measures taken to contain the spread of
Mazzetti and the continuing development provide safe, nutritious and affordable COVID-19. The periods of closure were
of Yumi’s in Australia. In Ingredients, food and to provide quality, affordable longer this year compared to the last
we made major steps to build our clothing to hundreds of millions of financial year and sales declined by 5% at
development capability and opened new customers worldwide. constant currency as a result.
technology development centres for our We have a strong belief in our duty to Adjusted operating profit this year of
bakery ingredients and enzyme respect the dignity of everyone who £1,011m was broadly in line with last
businesses. Our yeast joint venture with works for us, both within our workforce financial year. For the full year the
Wilmar International in China became and in our supply chains. We have a firm strengthening of sterling against our
operational this year, progress was made commitment to operating under the major currencies has led to a translation
on building a major new yeast facility and highest standards of corporate loss of some £36m. The adjusted
we expect strong growth from this citizenship, acting as a good and operating profit for Grocery, Sugar,
business in the future. supportive neighbour to the communities Agriculture and Ingredients combined
around us while recognising our wider increased by a strong 10% at
obligations to society as a whole. Our constant currency. Primark operating
2021 Responsibility Update details the profit margin improved this year with an
actions we continue to take to invest in adjusted operating profit of £415m,
our people, support society, strengthen before repayment of job retention
supply chains and respect our scheme monies of £94m, which
environment. To see how we make a compared to £362m last financial year.
difference, please download this update,
at www.abf.co.uk/responsibility.
Associated British Foods plc Annual Report 2021 13CHAIRMAN’S STATEMENT continued
The charge for net finance expense and The Board is pleased by the recovery in
other financial income declined to £103m
Dividends trading across the Group’s activities and
following the repayment of £25m of the The Board decided not to pay any the highly effective management of cash
private placement debt and there were dividends relating to the 2020 financial and reduction in financial leverage. As a
no RCF interest charges since the facility year. This was due to the uncertainty of sign of our confidence, the Board is also
was not drawn down this year. This was cash flow for the Group as a result of the declaring a special dividend of 13.8p per
another year where a lower proportion of economic impact of COVID-19 on our share, to be paid as a second interim
the Group’s profit was generated in the businesses, especially driven by the dividend at the same time as the
UK and Ireland because of the lower unknown duration and extent of Primark payment of the final dividend. We
Primark profitability and the Group’s store closures. The scale of this determined the amount of this special
adjusted effective tax rate was therefore uncertainty was demonstrated by the dividend such that, taken with the final
again elevated, at 28.1%, a small cash outflow of some £800m dividend proposed for the 2021 financial
decrease from 28.8% last year. experienced in the period March to May year, the aggregate equates to the final
2020. Uncertainty was particularly acute dividend of 34.3p per share paid in
The Group’s net cash before lease in April and November 2020 when the respect of the 2019 financial year which
liabilities of £1.9bn this year compared to Board considered the payment of an was our highest ever final dividend
£1.6bn at the same time last year even interim and then a final dividend for the and was based on the Group’s
after another year in which the pandemic 2020 financial year. pre-COVID profitability. Total dividends
adversely impacted Primark’s trading.
Although uncertainty remained at the for the year are 40.5p per share.
This outturn reflects the strong cash
generating capability of the Group and 2021 half year, it was substantially lower The payment date for the 2021 final
good working capital management. as a result of the extensive roll-out of dividend and second interim dividend will
vaccinations, and so the Board decided to be 14 January 2022 to shareholders on
The statutory operating profit for the year declare an interim dividend. The dividend the register on 17 December 2021.
at £808m was broadly in line with last of 6.2p per share was based on the
year. It is stated after a net exceptional proforma adjusted earnings per share in
non-cash charge of £151m this year the first half of 18.5p which was net of a A strong capital base
which mainly comprises impairments of £79.4m charge for the job retention The Board’s treasury policies are in place
£141m in property, plant and equipment scheme repayments in respect of that to maintain a strong capital base and
at our Spanish Sugar business, period. manage the Group’s balance sheet and
Azucarera, and other Sugar businesses, liquidity to ensure long-term financial
and was marginally lower than the All our stores are now open, and are
stability. These policies are the basis for
£156m net exceptional charge last year. mostly free of trading restrictions, and
investor, creditor and market confidence
Basic earnings per share were 60.5p, an the food businesses are trading well. The
and enable the successful development
increase from the reported 57.6p uncertainty around future cash flows is
of the business.
last year. considerably lower than a year ago
although the possibility of further trading The financial leverage policy is that, in the
restrictions cannot be ruled out. Our net ordinary course of business, the Board
Board cash before lease liabilities was £1.9bn at prefers to see the Group’s ratio of net
We welcomed Dame Heather Rabbatts the year end. The Board is proposing a debt including lease liabilities:Adjusted
as a non-executive director of the final dividend of 20.5p per share which EBITDA to be well under 1.5 times at
Company with effect from 1 March 2021. together with the interim dividend of 6.2p each half year and year end reporting
Heather brings a wealth of experience per share makes a total of 26.7p per date. In exceptional circumstances, the
having held a number of executive and share for the year, which is three times Board will be prepared to see leverage
non-executive roles across local covered by the adjusted earnings per above that level for a short period of
government, infrastructure, media and share of 80.1p for the year, in line with time. At the end of this financial year, the
sports. She was the first woman to join previous practice. The Board intends to financial leverage ratio was 0.7 times.
the board of the Football Association. She continue to have regard to a cover of The Group also holds substantial net cash
continues to work in film and sports and three times for regular dividends in the balances which ensure that it has
is a non-executive director of Kier ordinary course. sufficient liquidity to meet unforeseen
Group plc. requirements and at this financial year
end net cash balances, before lease
liabilities, amounted to £1.9bn.
14 Associated British Foods plc Annual Report 2021The events of the last two years have We are seeing significant cost increases
clearly demonstrated the importance of
Thank you to our employees in energy, logistics and commodities in
having sufficient financial resources and At the end of another challenging year I addition to the impact of widely reported
the credit strength to meet the am proud of how our people have port congestion and road freight
operational challenges faced by our continued to respond to the many limitations. Our businesses are working
businesses, and in particular Primark. We challenges presented by COVID-19, to offset the impact of these through
are pleased that S&P Global announced whilst at the same time taking action and cost savings. Where necessary, our
that they had assigned to the Group an seizing opportunities for our future. The food businesses will also implement
‘A’ grade long-term issuer credit rating, strength of our culture shone through and price increases.
with a stable outlook, which reflects the our operating model of devolved decision
making to each business and market With the recovery in Primark’s
strength of each of the Group’s
enabled us to respond very quickly and profitability, we expect the Group’s
businesses, their diversity and ABF’s
appropriately to local challenges. The effective tax rate to fall next year to a
strong credit metrics underpinned by a
responses this year were again a level closer to pre-COVID rates.
conservative financial policy.
testament to the dedication, skills and We will continue to invest in building the
ingenuity of our people. I will never be capacity and capabilities of all our
Capital allocation policy able to thank all of them enough for their businesses. We expect the improvement
Our priority is always to invest in our extraordinary efforts during this time. in Group profitability to deliver another
businesses, both organically and by year of strong cash generation.
acquisition, at an appropriate pace and
wherever attractive returns on capital can
Outlook Taking these factors into account, we
be generated. We see considerable The lower Group profit in the last two expect significant progress, at both the
opportunities to do this, both over the financial years compared to the 2019 half and full year, in adjusted operating
short and the medium term, and across financial year was driven by the extensive profit and adjusted earnings per share for
all our businesses. Nevertheless, the closure of Primark stores. All of our the Group.
ability to invest our capital is inevitably stores are now open and are mostly free
subject to the timing of opportunities and of trading restrictions. There has been an
practical limits as to the amount that can extensive roll-out of vaccinations against
be invested within a given timeframe. As COVID-19 in all of the markets where Michael McLintock
a result, the Board may from time to time Primark operates and customers have Chairman
conclude that it has surplus cash and returned to our stores in large numbers.
capital. In making this assessment, the Absent the reimposition of significant
Board will be mindful that financial restrictions, we expect Primark trading to
leverage consistently below 1.0 times continue to improve and for sales to
and substantial net cash balances at both increase by at least the estimated £2bn
half and full year ends may indicate such of sales lost due to store closures last
a surplus position. financial year. Primark will continue to
expand its selling space next year, with
Surplus capital may be returned to the most stores being added in two of
shareholders by special dividend or share our key markets, Italy and Spain. The
buy-backs. expected significant increase in sales
It is not possible to anticipate every should lead to a sharp improvement in
possible set of circumstances and this Primark’s adjusted operating margin,
policy must be subject to the Board’s recovering to above 10%. Primark is not
discretion. Currently, uncertainty remains immune to the challenges of supply
over the possible reintroduction of trading chain, raw material cost and labour rate
restrictions related to COVID-19 and the inflation. However, we currently expect
decision to declare a special dividend at the impact of these to be broadly
the indicated level is made with this mitigated by the transaction currency
in mind. gain arising from the weaker US dollar,
improved store labour efficiency and
lower operating costs.
Associated British Foods plc Annual Report 2021 15CHIEF EXECUTIVE’S STATEMENT Chief Executive’s statement 16 Associated British Foods plc Annual Report 2021
We have the people and the cash resources
to seize the opportunities ahead and look to
the future with confidence.
I am proud of how we responded to the in existing markets. The international placed on the High Street to take
many challenges presented by COVID-19 development of a number of our brands, advantage of this as it continually evolves
this year. All of our people demonstrated notably Patak’s and Mazzetti, continued. its store design and in-store services
care, good judgement and immense The adjusted operating profit for Grocery and expands into new product ranges
hard work. declined marginally, mainly due to attracting existing and new customers to
weaker corn oil margins at ACH. The the business.
Our financial performance this year more
development of our brands over the
than ever demonstrates the resilience of At the time of writing, all our stores have
medium term is demonstrated by an
the Group. This comes from the strength reopened and are trading with only
increase in adjusted operating profit of
of our brands, the diversity of our limited restrictions in some countries.
12% over the pre-COVID levels of 2019,
products and markets, our geographic There has been an extensive roll-out of
following a very strong profit increase of
spread, conservative financing and an vaccinations against COVID-19 in all the
15% last year, at constant currency.
organisation design that permits fast and markets where Primark operates, and
flexible decision-taking. AB Agri performed well with progress in customers have returned to our stores in
both revenue and adjusted operating large numbers. A post-pandemic
Group revenue was in line with last year
profit. Growth was notable in China, our equilibrium has not yet been reached.
at £13.9bn at constant currency, with the
UK feed business AB Connect and in AB However, like-for-like sales, compared to
reduction compared to pre-pandemic
Neo, which specialises in feed for pre-COVID levels, are steadily improving
levels driven by the loss of sales for the
animals in the early stages of life, driven as customers’ appetite to return to
periods in which Primark’s stores were
by higher volumes and commodity prices. shopping and city centres increases and,
closed. Adjusted operating profit of
Ingredients’ sales were 4% ahead, and over the medium term, as foreign and
£1,011m was broadly in line with last
adjusted operating profit was 8% ahead domestic tourism recovers.
year, which was also impacted by lost
of last year at constant currency driven by
sales during the closures of Next year, we expect Primark to increase
strong trading at AB Mauri.
Primark stores. sales significantly along with a sharp
improvement in adjusted operating
Our food businesses delivered another
strong performance this year and
Primark margin, recovering to above 10%, absent
As we look back on two years of the reimposition of further restrictions on
throughout the pandemic we have
disruption to Primark trading caused by store trading. We see opportunities to
provided safe, nutritious food under the
the COVID-19 pandemic, our confidence reduce costs further, with lower
most extraordinary conditions, proving
in the Primark business model is operating costs from reduced lease costs
the value and resilience of our supply
unaltered. and the harnessing of technology in our
chains. The adjusted operating profit of
warehouses and stores. Additionally,
Grocery, Sugar, Agriculture and There is no doubt that Primark, with its Primark is investing to upgrade its digital
Ingredients combined increased by 10%, reliance on a highly efficient store retail presence and online visibility and is on
building on an increase of 26% last year, model, has been seen to be vulnerable to track to launch a redesigned customer
at constant currency. the pandemic. The closure of its stores facing website in the UK in the first
Sugar delivered another year of very for long periods and restrictions on quarter of 2022. In September, Primark
strong improvement with profit margin trading inevitably led to significant loss of launched a wide-reaching new
reaching 9.2% and a 75% increase in sales and profit. sustainability strategy aiming to position
adjusted operating profit at constant We believe that Primark’s proposition of the business as a pioneer for making
currency. Our focus in this business has providing customers with a wide more sustainable fashion affordable for
been to deliver an acceptable shareholder selection of products at great value prices all, engaging a new generation of
return on capital over the cycle and return is highly sustainable. The low-cost customers. We believe this strategy can
on average capital employed reached retailing model is driven by structural be implemented without any significant
10.2% this year. The profit improvement advantages: purchasing quantities on a movements in the Primark profit margin
was underpinned by significant savings large scale leads to efficient production; a over the longer term.
from our ongoing cost improvement and broad supplier base with long-term Primark sees further growth potential in
efficiency programmes. Notably, after a relationships; very low distribution costs all of its existing markets, and in some
disappointing performance last year, throughout the supply chain from supplier new markets besides. In particular, it
Illovo recovered strongly, benefiting from to store; and high store sales densities. will accelerate the expansion of its
higher sales as a consequence of our These characteristics provide Primark selling space in the major markets of the
long-term drive to develop African with a differentiated business model with US, France, Italy and Iberia, building on
domestic and regional volumes. real competitive advantage. its established brand recognition, proven
Grocery revenues were 3% ahead of last Primark is a compelling brand proposition. track record of successful store openings
year at constant currency. This was It offers customers a wide selection of and strengthening relationships with
achieved despite a small decline in some products, from everyday essentials to the key landlords.
retail volumes this year compared to the latest trends, for all age groups and at
elevated levels seen last year. Twinings prices everyone can afford, ranged across
Ovaltine delivered strong sales growth, attractive up-to-date stores. There is
supported by increased marketing George Weston
strong supporting evidence that, for a
investment and driven by Ovaltine Chief Executive
substantial share of customers, the
growth in emerging markets and a in-store shopping experience will have
programme of new product development enduring appeal. Primark is uniquely
Associated British Foods plc Annual Report 2021 17OUR BUSINESS MODEL AND STRATEGY
Creating value together
Our way of operating – entrepreneurial but also financially
prudent and focused on the long term – has achieved growth
over many years and creates long-term value for our
shareholders and other stakeholders alike.
Our Group strategy and …applied across our five …creates long-term
devolved operating business segments… value for all our
model… stakeholders.
Role of the centre
Long-term view Customers
Employees
n
Organic and Gr
St
a il
tio
oc
ra
acquisition growth
et
ora
Investors and
teg
er
Devolved shareholders
R
l ab
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y
operating model
eng
ework for col
Suppliers
Entrepreneurial flair
agement
Communities
Capital discipline
Governments
Ingredi
Prudent balance
gar
sheet management
Fram
Su
Commitment to
en
ent
ethical conduct
ts
sm
Sustainable
s
Di
business practice
se
Agriculture
sc
as
in
ip
Co
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Ma th
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port by Group
For business segment
strategies please see:
Grocery: page 24
Sugar: page 34
Agriculture: page 42
Ingredients: page 48
Retail: page 54
18 Associated British Foods plc Annual Report 2021Associated British Foods is a highly diversified group with Our unique ownership structure
a wide range of food and ingredients businesses, more than The Group’s majority shareholder is
40 well-known grocery brands, and our flagship retail brand, Wittington Investments Limited, a
privately owned company which in turn is
Primark. We have a strong social purpose: to provide safe, majority owned by the Garfield Weston
nutritious and affordable food, and clothing that is great value Foundation. The Foundation is one of the
for money. UK’s leading grant-making charitable
institutions and is mainly funded by the
dividends from Associated British Foods.
We are a global organisation with 128,000 employees, The returns we generate therefore
operations in 53 countries, suppliers in many more, and matter not only for shareholders, they
customers in more than 100 countries. More than half of our also provide essential funding for many
charities. In the last financial year to 5
senior leaders are non-UK citizens, representing 23 different April 2021, the Foundation donated
nationalities between them. around £98m to some 2,000 charities
across the UK and in the 63 years since
the Foundation was created it has
disbursed more than £1bn in grants.
Devolved operating model Creating long-term value Our people, culture and values
We operate a devolved operating model We take a long-term view to create We understand the value of good people,
across our five business segments of long-term value for our shareholders, strong and accountable teams, the power
Grocery, Sugar, Agriculture, Ingredients business partners, employees and the of brands, the need for continuous
and Retail and believe the best way to communities in which we operate. Our investment and the need to maintain
create enduring value involves setting strategy is to achieve sustainable growth strong and enduring relationships with
objectives from the bottom up rather over the long term and the Group balance customers and suppliers.
than the top down. We make operational sheet is managed to ensure long-term Across all our businesses, we live and
decisions locally, because in our financial stability, regardless of the state breathe our values through the work we
experience they are most successful of the capital markets. We are committed do every day, from investing in the health
when made and owned by the people to increasing shareholder value through and safety of our colleagues, to
with the best understanding of their sound commercial and responsible promoting diversity and respecting
customers and markets. This business decisions that deliver steady human rights. Our values are: respecting
accountability is highly motivating for our growth in earnings and dividends. everyone’s dignity; acting with integrity;
strong local management teams, progressing through collaboration; and
Our ownership structure provides us with
encouraging an entrepreneurial approach delivering with rigour.
the stability to invest in businesses that
that drives innovative business thinking.
we believe in and to support the growth We pride ourselves on being a first-class
The Group, or corporate centre, provides of those businesses over the long term. employer, working actively to develop our
a framework for sharing of ideas and best Our growth has been mostly organic, people and create opportunities for
practice. The Group is in constant achieved through investment in progression. As a result, our employees
dialogue with the people who run our marketing, development of existing and tend to stay with us for a long time,
businesses, giving our corporate leaders new products and technologies, and building exciting careers that help them
a detailed understanding of their material through targeted capital expenditure to fulfil their goals at work, at home and in
opportunities and risks and enabling us to improve efficiency and expand capacity. the community.
collaborate when making material Acquisitions are carefully targeted to
decisions. Because the centre is small complement existing business activities We believe that most people are
and uses short lines of communication, and exploit opportunities in adjacent inherently good and that with
we can also ensure prompt and markets or geographies. encouragement, engagement and
unambiguous decision-making. support they will do the right thing in the
Our long-established, disciplined right way. Our high standards of integrity
The chart to the left shows how our approach to capital investment underpins enable us to drive a strong culture,
business model works, from the our growth. We manage our balance recognising that acting responsibly is the
discussion and scrutiny of each business sheet to provide the headroom necessary only way to build and manage a business
by the Group leadership team to to fund long-term investment and we over the long term.
oversight by the Board through our make funding available to all our
structured governance framework. businesses, providing the returns on their
investment proposals meet or exceed a
set of clearly defined criteria. We believe
that this approach, coupled with a
rigorous commitment to ethical conduct
and sustainable business practice, is the
best way to create enduring value for all
our stakeholders.
Associated British Foods plc Annual Report 2021 19KEY PERFORMANCE INDICATORS
How Financial
we track Adjusted operating profit
(£m)
Group revenue (£bn) Gross investment (£m)
progress
1,421
1,404
1,363
1,165
15.8
15.6
15.4
945
13.9
13.9
1,024
We use key
1,011
837
performance
721
641
indicators (KPIs) to
measure our progress
in delivering the
successful
implementation of
17 18 19 20 21 17 18 19 20 21 17 18 19 20 21
our strategy and to
monitor our Adjusted profit and earnings
measures provide a consistent
Revenue is a measure of A measure of the commitment
business growth. Constant to the long-term development of
performance indicator of performance currency comparisons are also the business.
year-on-year and are aligned with used to provide greater clarity
incentive targets. of performance.
Adjusted earnings per Dividends per share Cash generation (£m)
share (pence) (pence)
46.35
137.5
134.9
45.00
1,753
127.1
41.00
1,641
1,509
1,430
1,413
81.1
80.1
26.70
nil
17 18 19 20 21 17 18 19 20 21 17 18 19 20 21
The Group’s organic growth objective aims to deliver steady growth in Net cash generated from
earnings and dividends over the long term. Adjusted earnings per share operating activities is monitored
is a key management incentive measure. to ensure that profit is converted
into cash for future investment
and to return to shareholders.
Net cash before lease Return on capital Financial leverage
liabilities (£m) employed (%)
1,901
1.2
1.1
20.5
20.1
1,558
19.3
0.7
936
9.8
9.5
673
614
We have defined and explained
our alternative performance
measures in note 30.
Each business develops KPIs 17 18 19 20 21 17 18 19 20 21 19 20 21
relevant to its operations. These
are monitored regularly. In the This measure monitors the This measure monitors the level This measure is only provided
case of adjusted operating profit Group’s liquidity and capital of return generated by the since the implementation of
and return on capital employed, structure and is used to calculate Group’s investment in its IFRS16. This measure monitors
we use them as metrics to ratios associated with the Group’s operating assets. It is also a key the Group’s financial strength to
incentivise our management banking covenants. part of management incentive ensure long-term financial stability.
teams. targets. The 2019 figure is given on an
IFRS 16 pro forma basis.
20 Associated British Foods plc Annual Report 2021Non-financial
Number of employees Workforce gender balance Reportable injury rate (%)
(%)
138,097
137,014
133,425
132,590
48
51
52
53
53
Women
127,912
0.63
0.59
0.54
52
49
48
47
47
Men
0.32
0.28
17 18 19 20 21 17 18 19 20 21 17 18 19 20 21
A measure of the scale and A measure of the gender balance A measure of the Group’s
growth of the Group. of all employees in the Group with management of the health and
a contract of employment, safety of its workforce – the
whether full-time, part-time, number of injuries resulting from
contractor or seasonal worker. an accident arising out of, or in
connection with, work activities
that were required to be reported
to external regulatory authorities,
divided by the average number
of employees.
Primark selling space Primark Scope 1, 2, 3 GHG Proportion of units sold
(sq ft 000) and number of emissions (000 tonnes being Primark Cares
countries of operation CO2e) product (%)
16,842
16,247
25.2
15,642
6,246
14,805
13,862
14
13
5,114
12
4,606
11
11
15.9
6.9
17 18 19 20 21 19 20 21 19 20 21
These two measures represent The amount of greenhouse gases The Primark Cares range covers
the retail space growth and arising from Primark’s Scope 1, 2 products made with recycled
breadth of Primark’s presence. and 3 emissions. fibres or more sustainably
sourced materials, (see page 58
for further details).
Tonnes of sugar produced
(m)
3.681
3.443
3.410
3.328
2.968
17 18 19 20 21
A measure of the scale and
development of the Group’s sugar
operations.
Associated British Foods plc Annual Report 2021 21OPERATING REVIEW
Grocery
Household food brands
enjoyed around the world
22 Associated British Foods plc Annual Report 2021Our grocery brands
occupy leading positions
in markets across the
globe. In the UK, nine
out of 10 households use
our brands – a selection
of these are pictured
here.
Associated British Foods plc Annual Report 2021 23OPERATING REVIEW | GROCERY
Grocery comprises brands which
occupy leading positions in markets
across the globe. In the UK, nine out of
10 households use our brands.
The Silver Spoon Company
About Grocery Silver Spoon and Billington’s are our retail Strategy
sugar brands in the UK. These are Each of our grocery businesses pursues a
Twinings Ovaltine
complemented by a range of dessert strategy appropriate to their particular
Twinings Ovaltine has broad geographical
toppings, syrups and ice-cream cones market position and stage of
reach. Twinings has been blending
under the Askeys and Crusha brands. development. Twinings Ovaltine,
teas since it was founded in London
in 1706 and now sells premium teas Acetum, Jordans Dorset Ryvita and AB
Allied Bakeries
and infusions in more than 100 World Foods have had considerable
Allied Bakeries produces a range of
countries. Ovaltine malted beverages success in extending their reach into new
bread and bakery products under the
and snacks are consumed in countries and emerging markets, whilst some are
Kingsmill, Sunblest, Allinson’s and
across the globe. focused on developing brands in their
Burgen brands. Speedibake provides a
core domestic markets.
range of own-label baked goods for retail
Acetum
and foodservice customers. All of our businesses are committed to
Acquired in 2017, Acetum is the leading
the consistent development of our
Italian producer of Balsamic Vinegar of Tip Top brands and consumer research is
Modena PGI. We sell vinegars, Tip Top is one of the most recognised conducted locally and internationally to
condiments and glazes across the globe brands in Australia and New Zealand establish consumer needs and ensure
and Mazzetti is our leading brand. with an extensive range of bread and appropriately targeted investment. We
baked goods. take a long-term approach to capital
AB World Foods
AB World Foods focuses on the creation investment, recognising the merits of
Don building for the future. Acquisitions are
and development of world flavours and The Don and KR Castlemaine brands
our Patak’s, Blue Dragon and Al’Fez undertaken when opportunities are
produce a variety of bacon, ham and presented to either strengthen or
brands are sold internationally. meat products in Australia. complement existing businesses.
Westmill Foods Yumi’s
Westmill Foods serves communities Yumi’s is the leading producer of a
across the UK whose cultural heritage premium range of hummus, vegetable
originates from east and south Asia, dips and snacks in the Australian market.
Africa and the Caribbean. We are a
leading supplier of food products to the ACH Foods, North America
Indian, Chinese and Thai foodservice ACH Foods markets leading US,
sectors with our well-known brands Mexican and Canadian cooking and
including Lucky Boat noodles, Rajah baking branded products. These
spices, Habib and Tolly Boy rice and mainly comprise Mazola cooking oils,
Elephant Atta flour. Fleischmann’s yeast, Karo corn syrup,
and Argo corn starch, as well as
100
Jordans Dorset Ryvita Anthony’s Goods, a leading online
Jordans Dorset Ryvita operates in the brand of organic and natural specialty
better-for-you cereal and savoury biscuits baking ingredients.
categories. Jordans has a heritage of Twinings and
using wholegrain oats in the production Ovaltine products
of our cereals and cereal bars. Dorset are enjoyed in
Cereals’ award-winning muesli and
more than 100
granolas are renowned for the high
quality of their ingredients. Ryvita has a countries
strong reputation in healthy snacking and
is the UK leader in crispbreads.
15,000
employees
24 Associated British Foods plc Annual Report 2021Al’Fez continued to perform strongly with
Revenue Operating Review further distribution gains in both UK and
international markets. Silver Spoon and
£3,593m
Grocery revenues were 3% ahead of last
year at constant currency with particularly Westmill sales were also significantly
strong growth in Twinings Ovaltine more ahead and maintained the sales uplifts
2020: £3,528m than offsetting expected decline in sales achieved last year.
Actual currency: up 2% at Allied Bakeries. Adjusted operating At Acetum, our leading Balsamic Vinegar
Constant currency: up 3% profit however declined, primarily driven producer, revenues continued to increase
by weaker corn oil margins at ACH, with the Mazzetti brand performing very
Adjusted operating profit lower margins at George Weston strongly. We increased the marketing
Foods and a one-off charge of £5m for support for this brand, and good
£413m
further restructuring in Allied Bakeries. commercial performance, with new
The improvement in return on average listings, delivered international growth
capital employed was mainly driven by in the US, the UK, the Netherlands
2020: £437m lower working capital in our Don meat and Germany.
Actual currency: down 5% business in Australia and lower assets
Constant currency: down 2% employed in Allied Bakeries. As expected adjusted operating profit for
ACH declined this year, with margins
Twinings and Ovaltine continued to make impacted by the later phasing of price
Adjusted operating profit margin strong progress. Ovaltine sales growth increases following a sharp increase in
was primarily in Thailand, China and the cost of corn oil. Substantial price
11.5% Switzerland, and was supported by the
continuing success of new product
launches in a number of countries.
increases were implemented over the
year to offset cost pressures while
2020: 12.4% keeping our brand equity relevant for
Twinings revenue growth was driven by consumers. A further price increase has
Return on average capital strong new product launches and good been announced.
performances in France and North
employed America. Twinings has become the Revenue at George Weston Foods in
leading tea brand in France. Australia, excluding the benefit of the
31.4% At Allied Bakeries, sales reduced
following our decision to exit the supply
53rd week this year, was ahead of last
year. Adjusted operating profit was
2020: 31.3% lower, mainly driven by a margin decline
of bread to the Co-op in April this year. in the Don meat business. Despite
We continued to drive significant cost operating restrictions imposed by
reductions with savings from a further regional government arising from
consolidation of our operations, the most COVID-19, the Don factory performed
material being delivered in the distribution well delivering excellent labour utilisation
network. At the end of the year we and meat yields, as well as controlling
successfully commenced a partnership to fixed overhead costs. Although we have
supply premium bakery products to a seen some recovery in foodservice, we
leading UK multiple retailer. are still experiencing volumes lower than
AB World Foods delivered a record sales last year. In Tip Top Australia, The One
year and international progress continued and Abbotts bread brands continued to
to be particularly strong supported by perform strongly and benefited from a
new distribution gains this year in North consumer trend to buy trusted brands.
America. We increased marketing Yumi’s delivered strong growth with
investment in Patak’s and Blue Dragon to share gains in its existing products and
levels significantly ahead of pre-COVID. successful new product launches.
Yumi’s delivered strong
growth with share gains
in existing products and
new product launches.
Associated British Foods plc Annual Report 2021 25OPERATING REVIEW | GROCERY As interest in health and wellbeing grows across the globe, we have continued to expand our range of Twinings teas to meet this demand. Performance in our key markets of the UK, US, Australia and France is exceeding our expectations. 26 Associated British Foods plc Annual Report 2021
Grocery in action:
Twinings – targeting the fast-growing health
and wellbeing consumer segment
For more than 300 years the Twinings name has been Pushing the boundaries of tea
synonymous with the best teas and botanicals the world has in Australia
to offer. Over those years we have expanded our product In Australia, we have developed a new
range to more than 200 teas from around the world and we range to meet the specific wellbeing
needs of this market, where the ‘benefit-
continue to evolve to meet consumer needs. led’ teas category has grown by more
than 25% over the last five years.
As consumers across the globe have Launching as ‘Live Well’ in April 2021,
become increasingly interested in health
Expanding our wellness position with a seven-strong product line-up
and wellbeing, Twinings has developed in the US through Australia’s two biggest grocery
an innovative range of teas to appeal to In 2018 we launched a range of wellness chains, we are well-placed to become a
these new customers. Our brand is teas in the US, focusing on wellbeing leading brand for wellbeing drinks.
highly trusted and we are recognised attributes that come from the goodness Supported by a fully integrated, multi-
globally for our innovative approach to of herbs. Using insights into the US channel communications campaign
product development. consumer, these teas contained herbs including screens (TV and online video),
such as turmeric, which supports healthy social media, digital partnerships with
In the UK, market research shows that
digestion, and matcha, for energising the health and wellbeing publications and
80% of adults want to improve their
body and mind. influencers and outdoor billboards,
health and wellbeing. The health and
wellbeing sector is also growing in other In summer 2021, we further enhanced the launch has been highly successful
markets around the world. Our plans for our wellbeing offer by launching a to date.
the coming years are to significantly Superblends dietary supplement range of The Australian consumer has responded
expand our share of this market to teas, fortified with vitamins or minerals, very positively to the products and their
benefit consumers and our business including products aimed at immune benefits and we will continue supporting
alike. Indeed, we are already exceeding support (with Vitamin C), better sleep and innovating to extend Twinings Live
our own expectations in the UK, US, (melatonin), supporting a healthy heart Well over the coming year, including new
Australia and France. (Vitamin B1) and energy (Vitamin B6). and efficacious blends.
Selling through major retailers,
Superblends: the UK launch Superblends is now offered in almost Becoming the leader in France
We launched our first Superblends range 40% of all major grocery outlets across
the country. Early sales have exceeded In France, we have now become the
of fortified wellbeing drinks in the UK in leader in the ‘tea and herbs’ category,
2018 with a unique range of blends our expectations and consumer research
has already validated Superblends’ thanks to Twinings’ recent launch of
containing green teas and botanicals, flavoured herbal infusions, as well as the
natural fruit flavours and added vitamins positioning as a premium brand in the
health and wellbeing sector. strong and sustainable growth of our
or minerals. local herbs brand, La Tisanière. This
Since that time, consumers have success is mainly driven by our organic
responded very well to our range of ‘benefit-led’ range, launched in 2018.
great-tasting wellbeing products, The key to the organic range success is
demonstrated by strong repeat purchase the delicious and creative blends (with
rates. In the last year, Superblends grew ingredients in the segment such as
strongly through improved distribution guarana, turmeric, basil and lemongrass),
across the major supermarkets as well appealing wellness benefits such as
as selling for the first time through two “Brûle-Graisse” (Fat Burner), which has
well-known high street health and the best performance in the whole
wellbeing retailers. We also launched organic ‘benefit-led’ segment and a
our innovative Bioblends range of teas modern, authentic pack design.
and infusions with adaptogens and
probiotic bacteria. In France, we have We plan to further strengthen our
become the leader in the positions, launching our new La Tisanière
We plan to build on this success by ‘tea and herbs’ category, organic range, using ‘super ingredients’
accelerating our innovation and marketing thanks to the recent naturally fortified with vitamins or
plans in 2022. launch of Twinings’ minerals and supporting both Twinings
flavoured herbal infusions and La Tisanière in the coming years with
and our local herbs brand communication campaigns.
La Tisanière.
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