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.