AB Foods: announces strong H1-2024 performance

London / UK. (abf) British Associated British Foods PLC (ABF) issued its trading update for the 24 weeks to 02 March (on 2024/04/23) summarising the trading developments since the last update. Overview:

Financial Headlines	H1-2024		H1-2023		Actual change		Constant change
Group revenue	9,734	mio.GBP	9,560	mio.GBP	+2	%	+5	%
Adjusted operating profit	951	mio.GBP	684	mio.GBP	+39	%	+46	%
Adjusted profit before tax	911	mio.GBP	667	mio.GBP	+37	%
Adjusted earnings per share	90.4	GBPence	62.0	GBPence	+46	%
Operating profit	931	mio.GBP	663	mio.GBP	+40	%
Profit before taxation	881	mio.GBP	644	mio.GBP	+37	%
Basic earnings per share	87.4	GBPence	67.0	GBPence	+30	%
Gross investment	571	mio.GBP	527	mio.GBP	+8	%
Free cash flow	468	mio.GBP	(510)	mio.GBP
Net cash before lease liabilities	668	mio.GBP	586	mio.GBP
Total net debt	(2,496)	mio.GBP	(2,601)	mio.GBP
Interim dividend	20.7	GBPence	14.2	GBPence	+46	%

Group performance

• Revenue growth, up 5 percent, driven by continued good momentum in Retail and food businesses
• Significant growth in adjusted operating profit, up 46 percent, reflecting strong margin recovery
• Investment of GBP 571 million, including a number of strategic initiatives to improve capacity, capability and sustainability
• Free cash flow of GBP 468 million, reflecting profit growth and a significant reduction in working capital outflow

Segmental performance

• Strong Retail sales growth and further margin recovery
  • Revenue up 7.5 percent to GBP 4.5 billion, reflecting continued growth in selling space
  • Like-for-like sales up 2.1 percent, driven by good performance across most markets due to pricing and well-received product
  • ranges
  • Significant increase in adjusted operating profit, up 46 percent to GBP 508 million, with margin recovery to 11.3 percent
  • Rolling out Click + Collect service more broadly in the UK
• Significant profitability improvement in Grocery led by US-focused brands and reduction of losses in Allied Bakeries
• Strong profitability improvement in Sugar, driven by better Vivergo performance
• Good profit growth in Ingredients, driven by continued strong performance in AB Mauri
• Higher profitability in Agriculture due to lower input costs

Shareholder returns

• Significant increase in interim dividend, to 20.7p, reflecting growth in earnings
• Final GBP 56 million of first GBP 500 million and GBP 225 million of the second GBP 500m share buyback programmes completed in the period

Full year outlook

The Group has delivered a strong first half performance and is on track to deliver significant growth in both profitability and cash generation ahead of expectations at the start of this financial year.

We expect Grocery to continue to perform well, supported by a step-up in marketing investment, although the strong profitability of our US-focused brands is expected to normalise somewhat towards the end of the second half. In Sugar, we continue to expect a substantial improvement in profitability, benefitting from a more typical beet crop and production level at British Sugar and the reduced losses in Vivergo. Following a better than expected first half, we now expect Ingredients to perform well this financial year, driven by AB Mauri. We continue to expect Agriculture to move forward as markets improve and it integrates and leverages the acquisitions of the last two years.

We expect Primark to continue to perform well in the second half driven by our store expansion programme and the modest levels of like-for-like growth, as we focus on driving volumes. While the consumer environment remains soft, we expect to benefit from the strength of our value proposition, our product relevance and category stretch and our increasingly effective digital engagement. We expect a moderate improvement in adjusted operating margin in Primark in the second half compared to the first half, albeit with a step-up in investment to support medium-term growth.

The Group continues to prioritise investment in its businesses and we continue to expect to increase spend in each of the next few years to slightly above last year’s level.