Associated British Foods plc

George Weston - Chief Executive Officer, Executive Director John Bason - Chief Financial Officer

Warren Ackerman - Societe Generale James Grzinic - Jefferies Jeremy Fialko - Redburn Richard Chamberlain - RBC Jamie Merriman - Bernstein Jack Gorman - Davy Andy Hughes - UBS Georgina Johanan - JPMorgan Geoff Ruddell - Morgan Stanley Charles Pick - Numis Securities Warwick Okines - Deutsche Bank Bob Waldschmidt - Liberum

Okay. Let’s get started.

I’m aware that some of you may well want to get up to the road at 10:00. So at 10:00 we’ll have a pause if there are questions that are still going on at that point, we’ll stop, let some of you leave and then come back.

Welcome to this review of the Annual Results for the 53 Weeks Ended 17, September 2016. The financial highlights are these Group revenues up 5% to £13.4 billion, adjusted operating profit up, 3% to just over £1.1 billion; and adjusted profit before tax up 5% to £1.07 billion.

Adjusted earnings per share they’re now 5% as well to 106.2 pence. And we’re recommending to shareholders that dividends go up by 5% to 36.75%.

It is, we think these results are good particularly given that year ago we were standing up here talking about the forecast. So modest decline in profitability and EPS, so we think we’ve had a good year.

The highlights then of these progress in all our businesses, so Primark, we put on market share in nine out of the 10 European markets in which we trade. The 10th with Belgium and was affected by the terrorism in Brussels.

Significant space expansion 9% space expansion and good mitigation of the Euro/Dollar exchange impact that we’re talking about a year ago. We’ve delivered structural changes as AB Sugar.

We’ve seen significant profit increase once more in our ingredients businesses and then grocery and agriculture we’ve seen margins improve. Before I pass over to John, let me just say a few words about the implications of the EU referendum.

We have, ABF is a business where food production is aligned quite tightly with end-markets. Primark operates discreet supply chains.

And we have a natural currency hedge between sterling and other currencies. So not much cross Euro Sterling borders and in our earnings, as I say half in sterling, half in other currencies, we are if not indifferent at least quite balance between whatever happens to the level of sterling.

There are potential benefits there are also potential challenges for ABF in the changes that may come about because of Brexit. Two areas of notice are clothing tariffs and also of course the British government will have to develop its own sugar policy.

Not surprisingly we’re engaging with the U.K. government departments on these and other issues that affect us.

With that, over to you, John.

Thanks George. Okay, so group revenue £13.4 billion, an increase of 5% to natural rates.

Adjusted operating profit was just over £1.1 billion up 3%. Acquisitions and disposals have no material effect on the results this year.

Our adjusted operating profit measure reflects the underlying performance of the business and as usual excludes profits or losses on the disposal of non-current assets, the amortization of non-operating intangibles and exceptional items. The amortization of non-operating intangibles reduced significantly from £55 million last year to £21 million this year, with some of the acquired assets now fully amortized.

I think you were expecting that. Last year’s exceptional charge of £98 million related to the non-cash impairments of the group’s shareholder loans to Vivergo Fuels.

And this year’s £5 million arose on the buyouts of the Illovo minorities. For those businesses in APF that accounts on a full weekly basis, rather than by calendar month, and that’s British Sugar, the U.K.

grocery businesses, GWF, AB Agri and Primark, this was a 53-week year. And so their results include an extra week’s trading compared with last year.

Following the buyouts of the minority shareholders in Illovo Sugar Limited that’s just in South Africa, not the other businesses, we’ve taken the opportunity to move Illovo’s March year-end to the 31 August, to align it with the rest of the group. And in this transition year, we’re therefore consolidated only 11 months of their results.

This change and the 53rd week benefits broadly offset each other in the group’s revenue on profit. The currency markets in this financial year were more volatile than last year, especially for Sterling, which was strong in the first half of all year, our financial year and had an adverse translation effect on our interim results.

In the second half, sterling weakened considerably and there was a positive translation effect. As you can see on this slide, there was little translational effect for the year as a whole.

However the impact is greater in some of our segments. I’m going to go into currency in a bit more detail in a few moments.

Following the amendment of IS41, we changed our accounting policy for sugarcane roots. These are now stated at depreciated historic cost rather than fair value.

The affect has been to reduce the 2016 operating profit by £8 million and the prior year by £10 million. And so, references throughout this presentation too restated relate to this accounting policy change.

Unadjusted operating profit was 18% higher at £1.103 billion. Last year’s loss on disposal of businesses of £172 million comprised the withdrawal from beet sugar operations in Heilongjiang in China and a non-cash charge which arose on the assumption of BP share in Vivergo Fuels.

The larger part of the £14 million charge this year related to a provision for the potential reversion of leases on stores that were previously assigned to another retailer. The net interest expense was slightly lower than last year.

Profit before taxes, 47% higher than last year at £1.042 billion but adjusted for the items referred to earlier, the increase was 5% to WON107. Right, well, coming on to currency effects, as I’ve already said, the impact of translation in the 2015/2016 financial year was not significant.

The most significant transactional effects just to remind you of currency movements in ABF are in Primark and in British Sugar. In this financial year that we’re reporting on, the adverse transaction effect on Primark’s margin was actually from the decline in the Euro U.S.

dollar rate. There was also an adverse transaction effect in British Sugar’s margin from a weaker average Euro/Sterling rate.

But if we now look forward to 2016/2017 financial year, the current exchange rate for sterling is obviously significantly weaker than it was last year. This has the following effects on ABF.

A translation benefit on non-U.K. businesses, which I remind you; make up over half of the group’s profit, a transactional benefit to British Sugar’s margins and an adverse transaction effect on Primark margins.

Because Primark takes out forward currency contracts when orders are placed, this adverse effect will be second-half weighted. Sterling has weakened further since our pre-closed trading update.

But at current exchange rates, so that’s about 124 against the dollar. And our expectation of full-year earnings for the group is unchanged.

In other words, the forecast that we’re giving take the current exchange rates since we can’t. Coming on to tax.

The underlying tax rate was 21.2%, in line with the rate used at the half-year and last year-end. This takes into account the beneficial effect of revaluing U.K.

deferred tax balances following the announced reductions in the U.K. Corporation tax rate from the current 20% to 19% from the 1 April 2017 and 17% with effect from 1 April 2020.

The benefit will clearly not be repeated next year, and with profits expected to increase in businesses with the corporation tax rate higher than the U.K. I expect our effective tax rate for next year to increase by some 100 basis points.

Last year’s £22 million exceptional credit arose on the Vivergo Fuels loan impairment. Adjusted earnings per share increased by 5% to 106.2 pence.

Earnings per share were 55% higher at 103.4 pence reflecting the non-repeat of last year’s exceptional charge on the loss on disposal businesses. A final dividend of 26.45 pence has been proposed making total dividends for the year of 36.75 pence, a 5% increase.

Dividend cover on unadjusted basis remains at 2.9 times. Moving now to the balance sheet.

Net assets increased by £611 million to £7.122 billion and the majority of that, was a translation gain following sterling’s weakness at the balance sheet date. Intangible assets were in line with last year with translation gains being offset by the transfer out of assets held for sale.

The increase in PP&E and other non-current assets was driven by translation gains and capital additions which exceeded depreciation. There was an increase in year-end working capital but average working capital as a percentage of sales at 8.4% was a full percentage point lower than last year and that’s obviously reflecting tight margins.

The net debt shown here at £330 million reconciles to our headline figure that you’ll see £315 million after allowing for a net £15 million of cash which is included in assets held for sale. Net debt was higher than last year, and that’s primarily because of the acquisition during the year of the Illovo minorities.

And deferred tax, assets and liabilities coincidentally offset each other this year, and compared with last year’s net liability of £95 million. With the change largely, attributable to the deferred tax assets arising on the increase in the group’s net pension liability.

The deficit in the group’s defined benefit pension schemes on an accounting basis increased this year. At the year-end the deficit in the U.K.

scheme was a £138 million with the increase mainly driven by a full in U.K. long-term bond yields.

These bond yields are used to determine the interest cost and service charge for next year. And so they will increase as a result, although it should be noted that bond yields have improved somewhat since our year-end, so it’s just within the timing by year-end on that.

The deficit in the group’s schemes should be considered really in the context of gross pension assets of £4 billion, and with the group’s strong balance sheet and substantial cash generating ability it’s clearly well within the group’s capacity to fund the future cash requirements of all of these schemes. The reduction in non-controlling interest reflects the buyout of the minorities in Illovo Sugar.

Now, the last number on that is the £237 million of net assets which are held for sale. And they relate to the U.S.

herbs and spices business, and the China South cane sugar business. Just giving you the status of these, anti-trust clearance has been received for the U.S.

herbs and spices business. And completion for a $365 million cash consideration is expected next month - later this month sorry.

ACH has undertaken a review of its overheads. And after rationalization of those overheads I expect a minimal effect on operating profit arising from this disposal, in other words there is no point in really adjusting your EBIT expectation after that disposal.

Regulatory approval is awaited for the sale of the China South cane sugar business, with completion expected by the calendar year-end and with gross proceeds of some £300 million. So, proceeds from these two transactions net of related costs and I include the only taxes paid of that will be over £0.5 billion.

And so, clearly that would be cash that will be on our balance sheet in the new calendar year. So, after receipt of these proceeds, and with the cash generated by the business next year, which we do every year, the group will clearly move into a net cash position.

But the thing to do here is to remind ourselves of the lease obligations of Primark. And I think we need to look at it in that context.

And the context is our estimation of probably some £3 billion net present value of future lease obligations which of course the new accounting standard for leasing will require us to recognize in a few years’ time. Basically what this is saying is that we can take those lease obligations onto the balance sheet and I think will have a sensible level of gearing for the group.

And that’s the way we should look at it. Cash flow, the group generated a free cash flow of £483 million in the financial year.

This was de-levered after funding a higher level of capital expenditure which included a number of expansionary projects in the food businesses, and an increased rate of store development to Primark, whose increasing scale can be expected to drive a higher level of expenditure. The tight management to working capital is evident here and the modest outflow of £10 million.

The year-on-year movement in the other caption which is £74 million is largely explained by a lower level of dividends received this year from joint ventures and associates. Actually last year we did get a special dividend from Stratas Foods.

And then also to a lesser extent the purchase this year of shares to satisfy future obligations under, the group’s long-term incentive scheme. The £247 million purchase consideration for the minorities of Illovo Sugar Limited resulted in a small net cash outflow for the group before financing.

So, turning now to the performance analysis by business segment. The growth in the group’s revenues was driven by Primark.

So, sales in our food businesses were held back I think again this year by lower commodity prices. The progress that George has made reference to by our food businesses is evidence I think specifically here by the improvements in the margins.

And albeit nominal this year, we expect sugar margins to improve very substantially next year. Primark’s profit for the full-year was ahead, with the margin decline resulting from the weakness of the euro.

And that was mitigated in good part by an excellent buying performance and tight inventory management. I’m pleased with the improvement in the group’s return on capital employed, driven there by the increased profit in the food businesses.

Notably, look at ingredients where they’ve now achieved a return of capital employed of over 13% this year. Even after Primark’s capital investment in the year and the margin decline, its return remained above 30%.

The £45 million central cost in 2015 included some one-time benefits, actually that compared to central cost of £49 million in 2014. So the 2015 charge probably was somewhat lower than you would expect and that’s really accounted for that big increase to the 2016 number that we’re looking at here.

So, the 2016 charge reflects the non-repeat of the benefits that we had in 2015, and a modest increase in overheads. Coming on to by geography, U.K.

revenues declined marginally, and that was driven mainly by a decline in U.K. animal fees.

This was partly offset by a full-year’s consolidation of Vivergo Fuels and an increase in Primark’s U.K. sales.

The U.K. profit decline was driven by a combination of British Sugar, agriculture and the higher central cost already referred to.

Europe and Africa, the Americas and Asia Pacific, all made progress in revenue and profit. Europe and Africa was driven primarily by Primark’s strong European development.

Revenue in the Americas benefited from the new Primark stores in the Northeast of the U.S. and the improvements in profit was driven by AB Mauri across the region, across the Americas and by Stratas Foods in the U.S.

The revenue increase in Asia Pacific represents progress in George Weston Foods, and North China beet sugar, partly offset by lower sales in South China, which were a result of poor cane sugar yields last year. The higher profits of our grocery businesses in Australia and actually a much improved profitability in the North China beet sugar business, which were retaining they were the main drivers of the increase in Asia Pacific’s profit.

At that point I’ll hand over to George. Thank you.

Thank you very much. Starting then with sugar, where this year marks a turning point for the business.

We expect as John said to make a lot more money next year than this year. And thank you very much for your patience.

The performance improvement program that we’ve talked about for a number of years has continued through the year, tens and tens of millions, stripped out of the cost base once again. The Illovo, the buyout of the Illovo minority interest of course took place in the year.

And John mentioned to the sale of the China South cane sugar business, which should pay for the buyout of the Illovo minority. And then some, and then of course last but not least and I think we’re revising it as two higher EU Chinese and world prices which we’re now enjoying.

If I can just then turn to these prices, when we last saw each other in May, our prices were around the £0.16 per pound mark, they’re now between £0.22 and £.023. The world has enjoyed a second year of sugar production not meeting sugar consumption and therefore stock levels have come down.

And most important for us, EU stock levels are also now low. As we go into the end of the EU current regime and the removal of tariffs, which at some point - one point we thought would lead to quite a big decline in European prices.

We’re going to go into that point with European stock levels very low and therefore we don’t expect to see much movement downwards in price if any at the end of, in September 2017. The other thing worth mentioning of course in relation to Brexit is that the U.K.

will have to have its own sugar regime in the future we will be disentangling ourselves from the European one. Performance improvement program, a little bit more detail.

The fourth year of the ongoing program, we’re up over £200 million of cost reduction now over the four years. It’s delivery by all the sugar businesses and its limit in all areas of the sugar businesses.

So, agricultural productivity, this slide is just an example of the detail. We’re seeing that there are one, two, three, four, five lorries or wagons behind one truck that is an example of just reducing the cost of getting cane in Africa from the field to the factory that’s one of just an example of the sort of detail.

So, agricultural productivity, sugar extraction work continues, energy reduction is probably, has probably been the largest part of the cost reduction programs that continues. And then overhead reductions, head-office costs in all the businesses, China, Spain, U.K.

and Africa as well. The reshaping of the business then and starting with the purchase of the minorities of Illovo, Illovo is a business with low production costs.

And production costs which we think we can drive lowest still. It also serves markets in Southern Africa which are growing nicely and we think as ABF, we’ve experienced some servicing markets like these and we have quite a lot to add to thinking around roots to market in African markets.

The sale of the Chinese South sugarcane business then, it does remain subject to regulatory approval. John said we hope to get that by the end of December.

Why have we done it? We think that having improved or having helped to improve the efficiency of the sugarcane industry in the 20 years in which we’ve been in the South of China that that industry now is - really needs to consolidate around fewer bigger players.

And we think it’s in the interest of everyone that Nanning Province buys our business; and this is who we’re hoping to sell it to. Moving on to operations in the U.K.

then, we saw much reduced beet costs last year and we’ll see lower costs this year. Production was just short of 1 million tonnes, that was the consequence of our decision to cut back on acreage planted if you remember couple of years ago, we had a very big stock overhang in both quota and non-quota sugar.

And we needed to get through it. Production in 2016 and 2017 will be lowest still, second year of that program of stock reduction but also consequence on that very cold May and June this year which held back the sugar beet crop in the U.K.

Looking ahead, we will be increasing the acreage contracts with growers. We will also be moving from single-year contracts with growers to multi-year.

I think it’s a statement of our commitment to growers and theirs back to us, our commitment and a belief in the long-term future sustainability of the Sugar beet industry in the U.K. We really are a very low-cost producer.

Now we think we believe we compete with anyone under any circumstances. In Spain, lower beet costs, again, and higher sugar beet production, particularly in the South of Spain, that was good to see as well.

Illovo suffered from a drought particularly across South Africa, Swaziland, and Mozambique. We think that drought at least in Quartalszahlen tow [ph] is coming to an end.

And there should be crop upside this year. And then finally, we’ve completed an important new sugar refinery to produce white sugar for growing industrial markets in Zambia during the course of the year and it is the green building in the center of that photo of Nakambala.

If I move then, next onto our agricultural businesses, lower commodity prices globally inevitably reduced revenues in the commodity part of the business. There also of cost plus contracts in animal feed.

The profitability of the sector, of this group of business was held back in turn by the smaller U.K. sugar beet crop, the agricultural businesses, take sugar beet feeds, of what you got left after you extracted the sugar to market, and 1.4 million tonnes of sugar reducing to 1 million caused the amount of sugar beet feed to come down by a similar percentage.

We saw another year after many previous of strong growth by AB Vista, particularly again around animal feed enzymes. This is specialty ingredients for the mono-gastric sector.

And we spend a fair amount of effort during the course of the year pushing all those developments of other specialist areas in animal feed particularly proteins. And then finally, I have to salute the good progress that’s been made in China over the last 12 months too.

Moving on then to our grocery portfolio. Once again, Twinings Ovaltine showed strong profit growth.

We can really cut and paste that comment from one year to the next. Continued recovery at George Weston Foods, great to see, and then last but not least, the negotiation to sell our U.S.

herbs and spices business. We’ve done this it allows us to create a much more focused grocery business in the U.S.

And as a consequence of the focus that we can bring to that business as John has said we expect to see very little EBIT impact from the sale of our herbs and spices business. Looking at more detail in grocery.

Twinings Ovaltine good to see progress this year in Thailand, it’s been a more difficult market for us for a couple of years. It’s our largest market for Ovaltine.

Secondly, so, when it hits its stride, the profit impact is encouraging. Crunchy cream, you will have in your nice Twinings bags, don’t eat it all at one go.

It’s absolutely delicious. And we’ve installed manufacturing capability in our factory in Switzerland to manufacture a lot of it.

Sales have been growing very encouragingly, not least in Germany. Twinings brand saw record market shares in the U.K., in the U.S.

and Australia, so it’s three biggest markets. And that’s on the back of once more good marketing, good packaging good advertising.

I want to show you just an example of this advertising. Tealand was a film I made for the Italian market, important market for us we had very hard market shares in Italy.

Its success encourages to, use the same format in both France and Japan. And again, it’s had a good impact in both.

So, perhaps we can show Tealand. [Video Presentation] The magic of tea the variety of Twinings.

Allied Bakeries, life in bakeries is always a bit more difficult, continued margin pressure probably after 50 years of margin pressure. But Kingsmill did very well to substantially increase its volume into the U.K.

trade wind, installed the sandwich thins line, after filling up the first one. And we’ve redesigned the packaging both Kingsmill now and they’ve gone down well as well.

You have some Kingsmill thins I think in your pack also. Jordans Dorset Ryvita, you’ll remember we bought Dorset a couple of years ago now, and this year we saw the profit benefits of the integration of that business into ABF and into Jordans Dorset Ryvita and specifically.

We’ve seen good international growth in Jordans and Dorset, Dorset is doing very well in Australia, muesli to Australia. And with these new exchange rates, I think we have a lot of oxygen to drive that further.

Ryvita has had a difficult time, not at least over the last couple of years with imported crisp bread from the continent, again these exchange rates I think give us oxygen perhaps to replace imported product with home produce. Staying in grocery, World Foods had a very good year, Patak’s and Blue Dragon domestically had a good year and, is expanding and both brands are expanding internationally.

Patak’s and Blue Dragon Canada is a major market, we’re getting going in the States. And Patak’s in Australia again is leading brand in cooking sauces.

Again, exchange rates will help us. And then, if I’ve mentioned it before, but Lucky Boat noodles are the leading brand of noodles into particularly the Chinese restaurant sector in the U.K.

And growth there again was really, really good. Turning to ACH in North America, we had margin pressures in Mazola, the price gap between corn oil, which is what we use and soy oil which is what other people use, opened up to our disadvantage.

But on the back of the continued Plant Sterol campaign for Mazola, we saw further distribution gains, further sales gains there. And then Stratas Foods, as John mentioned didn’t pay us a dividend this year.

But they performed very strongly, and actually I have just used the money that it would have otherwise have paid us to buy another regional oil packer in New Jersey. Australia, Tip Top is going well, re-launched and particularly in breakfast, so fruit breads, trumpets and muffins all good.

And our meat business in Victoria Don KRC made us a profit, which came as a very welcome change to John and me who’ve watched the improvement come quite slowly over a number of years. But profitable, it’s now, is why, well, volumes continue to increase we did well in our negotiations and our service of the trade.

Production efficiencies continue to come through at the big factory in Castlemaine. Meat costs were lower this year after spiking the year before and that clearly helped.

There is, quite a long way still to go. We can see considerable efficiency opportunities ahead of us in Castlemaine, so we’re quite encouraged by where Don has got it’s off to.

Turning then on to ingredients, AB Mauri, which is our yeast and other baker ingredients, saw another year of significant profit improvement. Major contribution as John mentioned from the Americas, South America but also North, South America s more with yeasts, North America with other baker ingredients and then China which has given us some difficulties, good progress in the year.

ABF ingredients, the portfolio of specialist food ingredients had another good year and a year characterized by further management changes. So a new leadership, new finance director, new heads of several of the businesses within it.

Specialty lipids, which are oil derivatives, had a particularly good year, in North America, and then enzymes the factory Rajamaki supplies AB Vista but also other categories like bakery and cleaning. It also grew well once more.

So, let me start my piece on Primark with an online film we’ve made to highlight the fashion for autumn winter based around a theme of American street fashion, which we’re of course now more qualified to share. And if can go straight onto that.

[Video Presentation] Great clothes, great fashion and of course still great prices. So the sweater on the left-hand side, knitted check sweater, €14, £12 and the jackets, denim jacket on the right-hand side, €28, $32, £23.

We are planning on with being the best value fashion brand on the high-street or for that matter anywhere else you choose to shop. The trading year, though, was mixed with a 2% like-for-like decline in sales.

I know I’m not meant to comment on weather but it really was terrible, through the course of the year. And the whole of the European clothing sector suffered I think largely in consequence of the weather.

The total U.K. market was down as was the German market, the Dutch market and so on.

Our sales and market shares in nine out of 10 markets were actually up. That’s not just against other high-street brand, that’s against clothing however sold.

By markets, Ireland had a banner year, Spain and Austria traded really well. We increased market share in the Netherlands and Germany and sales also went up in both.

Italy, and France remain extremely exciting and the U.S. is progressing well with lots of learnings and with brand awareness growing.

Margins came down because of the Euro decline against the dollar but by less I think than we had anticipated this time last year that was a consequence of good buying. The margin holding up was also a consequence of tight stock management throughout the year.

We are of course to be affected by the U.S. sterling exchange rate, in the second half of this year and that is a fact of life.

We’re committed as Primark to price leadership and I’m sure that that will come at the expense of margin for the business in the second half of this year. Let me turn now to, to spend a couple of minutes talking about Primark’s digital and social media strategy and the success of it.

Our following now exceeds 8.6 million people across all channels. Three years ago, this was 1.4 million.

So there has been very rapid and very large increase in our following. That social media following is growing by over 100,000 a month.

It’s operating across all geographies in which we trade all languages, in which where we have Primark stores. For the last year, it’s all been about mobile, getting our imagery optimized for mobile users.

Key channels are Instagram, Facebook, Twitter, Snapchat of course. Last week, Primark was named the second most influential brand on Instagram.

So, what are we doing, we’re using social media to bring people to the Primark website and from the website into the stores. And it’s working.

The website had over 8 million visits during September this year and last week alone we had 2.4 million people visiting the website. And then they choose to come into our stores, hence our market shares increasing.

Let me just give you some examples, here are some screen grabs from Instagram, Gran Via, on the left-hand side with 57,000 likes, shoes inevitably from Italy, 41,000 likes and shoes and bags from Spain as well. Continuing and making things a bit more fun, from November 18, we’re launching a Primark emoji keyboard, particularly for Christmas, especially for Christmas, you can download all these emojis for Android and iOS devices free from relevant app stores.

And then you can make all your Christmas messaging a whole lot more fun. So, the digital strategy is this.

We engage with our customer base, we drive them to the website. We build brand, we build relationship.

It leads to us gaining market shares. People choose to come to our stores because others, in other channels can’t compete at our price points.

And we firmly believe that this is the right approach for the business, it’s successful and it’s sustainable. If we want people to come to the stores then, we need to make the stores as attractive as we can.

Here are the external views of Gran Via and Madrid, Arese in Milan, in one of the most gorgeous shopping centers I’ve ever seen. And then as I was about to say more prosaically but then John said, he comes from near Broughton Park, Broughton Park in Chester.

But the most attractive stores in town. If you then go to the in-store experience, Gran Via, I’ve shown you before, but I still love the spectrum, I so love the store, that I’ll show you again.

Linz in Austria, on the right-hand side; and then very importantly freehold Raceway in New Jersey, a regional mall, the store looks so much better than anyone else in that - anyone else’s in that mall in New Jersey. It’s part of the mix.

Another part of the mix then is the engagement of our staff we do a lot of training of our staff. We obsess around, the willingness of our staff to engage with our customers.

And we provide really great facilities in back of house to match the youthfulness of the stalls and the youthfulness of the staff themselves. So, we’re powering on with expanding our space on high streets.

We had 1.2 million square feet during the year that was an average of 9%, 22 new stores two new locations for extensions. The first store in Italy which of anything was even better received than our first store in France, that big flagship on Gran Via which opened this time last year or just before and then, of course four stores in the Northeast of the United States.

This is where we end up, at the end of the year with our store portfolio. And looking forward into next year, then we’ve got 1.3 million square feet that we expect to open this year, including 400,000 square feet in the U.K.

notably the Oxford Street extension. And for those of you who think that we must be just about completing the U.K.

the largest areas, basically expansion in the next two years will be the U.K. Four more stores, in the States and the extension of Boston, more stores in Germany and France, two new stores in Italy, and then our flagship in the center of Amsterdam which opens in December.

So, let me summarize these results, going back to where I started. We made progress in all our businesses Primark’s had an important year but a difficult trading year.

The profitability of sugar is transformed ingredients going well and grocery ingredients, grocery and agriculture improving their margins. Looking ahead, we will see very significant profit benefit from sugar price increases and these are the developments in sugar.

We also have translation benefits from the Sterling depreciation which offset the transaction effects on Primark margin in the U.K. And we have of course a very strong balance sheet, we’re very well placed to protect Primark’s margin, market position in all its market but particularly in the U.K.

and we will do exactly that. Primark expansion will continue in all its major markets.

I think that there is significant potential for U.K. food manufacturers to benefit from lower exchange rates both in import substitution and also in exports.

And on top of it all, we expect to make more money this year, next year than we did this. So, thank you very much and if we can take some questions.

Shall we start with Warren?

Yes, okay.

Good morning guys, its Warren Ackerman here from SocGen, a couple of questions. First one, on Primark, so minus 2% like-for-like in the year, and margins down 100 bps, what’s your expectation for like-for-like and margin in 2017 for Primark?

First one. Secondly, George, you talked about two uncertainties: clothing tariffs for Primark, and also U.K.

Government policy on sugar. I appreciate its early days, but how are you thinking about those two uncertainties?

And maybe you can just sketch out for us a best and worst-case scenario on those two. And just finally, on currency, John, you talked about three different buckets of currency on translation, and then transaction on British sugar, and on Primark.

I think, net-net it sounds like it’s pretty flat, but can you maybe quantify each of those three buckets for us for 2017, as best you can, given current spot prices on FX? Thanks.

Okay. We expect to see Primark like-for-likes go up.

We expect the deposit for like-for-likes. And the year has started well with exception of the first two weeks where it was 30 degrees we’ve been trading very solidly across almost all of our markets.

So we expect to see like-for-likes return to positive. On clothing tariffs, first, there are maybe three buckets.

The first one is; our countries which already have tariff reduced quotas into Europe, Bangladesh in particular, but also Pakistan and Burma or Myanmar. We hope to see that those tariffs will be grandfathered across to the U.K.

so we won’t lose the benefit of those tariff reduced quotas. The second bucket then is our countries which don’t currently enjoy tariff reduced quotas, Vietnam doesn’t, India doesn’t China doesn’t.

I think there is an opportunity to reduce the cost, reduce those tariffs in the future once if and when we’re out of the EU. The third specific is Turkey, which benefits from zero tariff because it’s part of the - our customs’ union for clothes.

And there we would like to see again tariffs remain at zero in the future. Sugar, early days.

And we are talking to the government to defer in particular as you would expect about what a future U.K. sugar regime might look like.

I’m sure it will be more open than the past in Europe, and we certainly welcome the fact that we will no longer have a quota that applies to us we can produce more sugar not the 1.1 million tonnes that we’ve been quoting to in the past.

On currency, obviously it depends on where you start and what rates you’re looking at. Translation first of all I think is really quite straight forward.

We’ve got £600 million plus of earnings which is non-sterling. So, you can apply a percentage to that.

So now it seems to me that you’re probably looking at getting on for £100 million of benefit that from that alone. The thing to remember is that, sterling has declined at the beginning of the year; we get the benefit of that for the whole of the financial year.

I think in terms of transaction, British Sugar, probably mid-10s of millions of benefit. And then Primark, well over £150 million would be the sort of gross effect.

But obviously it’s how that is mitigated within the business.

Yes, James Grzinic, yes.

Thank you, good morning. It’s James Grzinic from Jefferies.

I appreciate you don’t want to give us an exact feel for the Primark margin outlook for the year to come. But can you perhaps clarify whether you expect that margin decline to be greater than the year just passed.

And by your comments it sounds as if you expect Half Two to be much more weighted to the decline than Half One. So, if you could distinguish the Half One and the Half Two mechanics would be really helpful?

In addition to that, step back and look structurally at the ambition in terms of how much space you want to open a Primark. Is £1.3 million what we should expect or are you working actively towards accelerating that because presumably as the U.K.

winds down, something else will take over from that. Thank you.

I think taking the margin point first. The guidance that we’ve given before is probably around 200 basis points so, from the 11.6 that we’ve got this year.

I think that also takes into account importantly the dollar at 1.24 against sterling. That’s obviously a bigger impact that the Euro/Dollar effect this year and the reason for that is we’re going back to the same suppliers.

And it’s the same dollar price which they took down last year, and you’re saying, not only thank you very much for that lower price but we’d like you to take it down again. So that’s the reason for that.

But obviously we’re working hard at that. But I think the important piece for this morning is; it’s still around 200 basis points for the year at these current exchange rates.

We’ve been growing space give or take at about 10% net annually and last year was 9%, this year it was going to be about 10%. I would expect we would continue at that sort of raise.

The important thing to note is that we have, we do discipline ourselves to get the right stores in the right locations and rather than chasing a target, we’ll chase the right stores. I think we’ve got another couple of years of learning in the States we’re getting into 10 stores.

That is a market where depending on what we learn at this stage, you could perhaps go faster. But in Europe that historic level of about 10% feels to me like a pretty good benchmark.

I just had one quick follow-up. You mentioned you will defend Primark’s market position in the U.K.

Is that because you feel that you have to do more so that was the case in the past, and can you perhaps explain why you position in that way?

Why did we put it that way? Simply, the time of a lot of cost pressure, I think one has a choice between trying to protect your margins, are you trying to protect your business for the long-run.

And we’re doing the latter.

Okay, so let’s go to Jeremy in the middle here. Jeremy?

Good morning, Jeremy Fialko with Redburn. So two sort of disparate questions, so the first one is on Illovo.

Now that you’ve got full ownership of Illovo, how useful do you think that will be in terms of let’s say modulating the EBA sugar flows into Europe i.e. using Illovo’s wave let’s say swinging capacity in Europe and helping to keep the markets high.

Is there any sort of strategic value in that for you?

You’ll get us into jail.

And then the - and the second question is just on Primark in the U.K. You talk about doing lot of expansion in the U.K.

And clearly non-online sales are relatively flat. Do you think the industries getting a problem for itself by people like you’re carrying on growing square footage in the U.K.

when non-online sales aren’t really growing a lot? So, everybody is essentially condemning themselves to negative like-for-likes in a similar way so the food retail is at albeit at slightly slower pace?

Illovo, the answer is no. That business will place its sugar will sell its sugar wherever it makes sense for it.

But I do go back to what I said earlier, which is, it’s the sales into Southern Africa, which are of most interest to us. There is good growth there the markets are protected by geography and sometimes by regime.

And the more sugar that we can place, the higher percentage of the sugar that Illovo produces that we place near to home for them, the better. So that’s the focus for us.

No, we’re going to keep on expanding Primark in U.K. until we’ve got the footprint that we want.

We are not, there is not just one clothing business that either has too much for the U.K. that either has too much capacity or too little.

We think we’re the winners on the high street and we’ll keep pushing on with our expansion until we’ve got the coverage that we need.

Okay, thank you. We shall go to Richard Chamberlain.

Thank you. Good morning, Richard Chamberlain, RBC.

So, just a couple on quick ones on Primark. Are you seeing any signs of the sort of cannibalization you were seeing I think in markets in mainland Europe like Germany and the Netherlands, are you starting to see that ease off a little bit or are you expecting to see that in the coming year?

Maybe also just a little bit of color in the U.S., what sort of box is working there, is it the mid-size, are they I know I mentioned, each one is a different market. But maybe just give a little bit more color on that.

And then, just final one, John, I mean, it just sounds like you’re becoming generally a little bit more mindful about the lease accounting provisions and so on that are coming. I mean, is that, obviously that’s non-cash.

I mean, is that or it’s not really changing anything from a cash perspective and I thought we already bank raising agencies analysts are making that adjustment. But is that actually changing, anything in terms of approach to dividend policy, capital allocation, just sounds like you’re becoming a little bit more mindful of that, some of those accounting changes?

Shall I pick that last one our first? No, I don’t think there will be, I’m actually trying to reassure that there will be no change to maybe add, as a result of this.

And the fact that we’re looking ahead, is we’re taking it into account. So it’s as simple as that Richard, it really is.

The comment that I would make is - it was like pension deficits coming on balance all of those years ago. It does change the perception of the market.

And I’m saying hopefully we’re ahead of the curve and we’re fine. That’s what that’s saying I’m not concerned about it.

Okay, fine, thanks.

Okay. In Europe, we expect to see less cannibalization in Germany, we’ve only got I think two stores to open next year.

And they’re both quite separate from existing ones. Holland, we will see quite a lot of cannibalization I suspect as a consequence to the Damrak opening in Amsterdam that will cannibalize those stores there.

So, Germany yes, less and Holland still quite a lot. What’s working in the U.S.

those 50,000-square foot stores in regional malls are working quite well. At the moment it feels like the 90,000 square feet in King of Prussia is pretty large.

Boston feels like it’s about right. We have to be careful though.

This brand is still not well known. And therefore just as reminder, when we first opened 75,000 square feet in Manchester back in 2003 whenever it was, it felt enormous.

And we said, what on earth are we doing trying to trade that amount of space? Three or four years later, we’re up over 100,000 and now we’re at 150,000 and feeling pretty cramped.

So, that analogy to the earlier days of Primark big stores is probably a pretty good one. As awareness builds, what feels like, it’s too big now, may well not.

So, it is part of the learning, just be careful that we don’t learn the first year, we think we have to open 20,000 square feet because 50,000 is too big, that’s not right.

How big was Boston?

I think it goes up to about 110,000.

Yes, that’s about right.

It is quite Trunkey.

Okay, thank you. Jamie Merriman in the middle, this lady.

Thanks. Jamie Merriman from Bernstein.

Just continuing on the theme of Primark in the U.S. Can you just talk a little bit about what competitive response you’re seeing from local U.S.

retailers, Wal-Mart of specific interest? And then also, can you just remind us of how the sales density of your U.S.

stores is performing and how that’s compared to your expectations? Thanks.

Okay. Competitive response we’ve seen some.

We haven’t seen a great deal. And we remain convinced that not only on price do we have an advantage but store design, fashion-ability of the clothing, they all differentiate us hugely from the Wal-Marts of this world also came out and the likes.

So, we think we’ve got really good price position, really good fashionable position and so forth.

Should I talk? Yes.

In terms of sales density, so I think we always expected lower sales densities in the U.S. and also at the beginning because of the awareness of the brand.

I would say Boston is doing very well because their sales densities are ahead of the group average. And then the other stores are around the group average, okay.

Shall we go with Jack at the front, Jack Gorman.

Thank you. Just two clarification questions really on Primark.

Firstly, do you think at this point you’d expect the U.S. to reach breakeven in the current year?

And the second question is just on the margin guidance John, and should we take that assumes that there is no price inflation across the Primark network? Thanks.

Breakeven in U.S., no I don’t think so this year. We’re not budgeting for it, and then the price inflation…

And yes, there is no assumption of price inflation.

Can we take at that if there is inflation in the market you will potentially follow?

I think we would look closely at that.

Okay, so, go with Andy up in the front here.

Thanks. Just to follow-on from the Primark margin question, get my head around the 200 basis points hit.

You’re implying it’s mainly a second half problem, so second half would be down 400?

There will be some in the first half, I mean, James asked the question. So without sort of quantifying it exactly there will be some margin erosion in the first half, but basically second half.

And I think you said that Primark profit is sort of 50-50 U.K. so it’s implying second half U.K.

it will be down 700 basis points, it seems a very high figure?

It will be quite that sort of scale. But it is a big effect.

And aside that does assume again, I guess we can get to that number with no price inflation?

Correct.

Just absorbing, all of the currency hit.

Yes, no price inflation in this current financial year for us.

Yes. And just going back to maybe what, you give us some clues for next year on the margin, so the 100 basis points last year, was that all currency or are there any other, ins and outs?

I know you mentioned double running costs and a bit of living wage and some pre-opening cost. Was there anything notable within that, 100 basis points which might reverse out?

There was a small increase in mark-down percentage which we would hope to reverse out.

Okay, right. And just finally online, you seem to quite cheer up I suppose the best way of going through your online strategy in driving customers to the store.

Should we rule out any of your own transactional efforts or any partnerships in terms of getting product to the customer?

I think, I mean, our strategy is to drive people into the stores to make stores as attractive as they can be, to make people’s awareness of what’s in the stores as clear as it can be. And yes, the economics of the stores are just much better than the economics of online clothing retail.

Even under some sort of JV?

Sure.

Shall we take the lady in the middle please? Thank you.

Thanks, it’s Georgina Johanan from JPMorgan. Just very briefly please, you’ve obviously talked about most of the FX pressure coming through in the second half of fiscal ‘17 for Primark.

So, I appreciate it’s quite far out, we don’t know what’s happening with pricing in the market. But as a base case, it should be there for remodeling sort of another 50 to 80 basis points of pressure coming in, in fiscal ‘18 to account for the annualization please?

Everything else being equal, yes, there is a flow-through to next year, correct.

Thank you.

Everything else being equal. Yes, right at the back, thank you.

Hi, it’s Geoff Ruddell, Morgan Stanley. Just one question, is the 9.5% operating margin at Primark next year a new normal or is that a temporary depressed number?

The net margin has moved around a lot over the last years. It’s based on it’s the results of everything else we do.

And so, I think there is no normal for Primark’s net margin. I think we’ll see where we have to price our clothes, not remain the most capacitive on High Street.

Quite clearly currency effects, affects everyone.

Do you mean, at the time the market will price the currency through, that’s not going to change forever?

We’ll see what people do.

Thank you.

It’s worth reminding ourselves when that margin went down to 10.2%, not that many years ago, in the wake of the recovering price increase. Okay, any more questions, yes, Charles Pick.

Thanks very much. Charles Pick, Numis.

I had a few questions on rate. Just on the lease of obligations, previously you quoted £2 billion for the figure, just wonder why that?

Yes, that’s exactly possible Charles.

Exactly when does it come on to the balance sheet do you think?

Sorry.

Exactly when does it come on to the balance sheet?

Well, I’ll speak to Russell I think we’re still two or three years away. I think in terms of requiring it.

The problem we’ve always had on this one Charles is, before the standard came out, so when I was talking about before the standard came out, it was what methodology would be applied. So the scale of the capitalized amount was affected by that.

The other thing you should recognize is, Primark is growing. So, it probably was 2 to 2.5 before and now it’s probably getting on for 3.

Okay, thanks. China South, the cane sugar operation is about to be divested.

Is it possible to clarify please what the loss was there last year?

A small handful of millions.

Okay, thanks. CapEx this year, any guidance there?

Over £700,000.

Okay. And final one, rate revaluations, any sort of sense of what the impact could be on Primark in the U.K.

pretty viscously and crazy by the look of it?

It’s more it’s a rebalancing towards London, so London up, everywhere else down. I think that’s a small increase.

Thanks.

Okay, thank you.

Hi there, just two, firstly on the sugar business you delivered about £200 million of cost savings over the last four years. Can we expect a similar level of cost savings going forward out to the sugar business, firstly?

And then secondly, on CapEx in Primark, is the trend square-foot up and can you sort of give us the magnitude if it is what’s the general trend as we could expect given the sort of investment and attractiveness that you’re trying to make?

The answer to the sugar question is yes. We have multi-year, we have a set of projects that go out multiple years and so we’ve got some degree of visibility of the projects that we don’t deliver.

Primark CapEx, if anything has edged down a bit, and that’s the consequence of sort of value engineering some parts of the fit-out and also increasing level of capital contributions from landlords.

Okay, so, Warren, sorry, Warwick Okines.

Good morning Warwick Okines from Deutsche Bank. That’s right.

And I had just a quick question on sugar please it seems to be the biggest driver of profit growth in the year ahead. Could you just walk through maybe by segments, just gives a little bit more help, you talked about currency effects being around £50 million I think of British Sugar.

Are you expecting progress in Illovo other than obviously the 12-month consolidation? And also what do you expect out of Spain and Northern China?

Okay. So the U.K.

is driven by pricing in currency and offset to an extent by this lower crop. Illovo, yes, we expect to see good improvement that will be cost reduction volume increase as we come out of the drought and also good pricing through the year.

Spain, I’m sorry, and Spain, benefits from lower prices again and sorry, lower costs of beet and price upside and cost reduction.

And China North, I would give the number I think we’ll probably make a profit of over £10 million there this year.

And that is driven by volume, efficiency and price.

So, there is quite a nice little business, that’s supposed we’re trying to make I think of the, let’s go with Bob at the front please.

Two questions, one, you’ve had two notable disposals which are pending. Do you foresee any future business disposals which could be envisage going forward or are you pretty much there where you want to be?

And then secondly, I know clearly there is continued improvement in the digital offer and the desires to drive traffic in stores. Is it possible in future that a click-n-collect policy could be congruent with that strategy?

Thank you.

Disposals, we are where we wanted to get to, one never rules anything out in the future. And then the digital offer, we keep our eye very closely on things like click-n-collect, whether it’s compatible with our store operations is something that we’re spending some time thinking about but it’s not a priority at the moment.

Okay, any more questions.

Thanks, just one quick follow-up. All of your U.K.

peers are taking pricing at the moment because of currency weakness. We heard from one of your tea competitors that their costs have gone up by 50% and they’re looking for quite substantial pricing in the U.K.

Can you say what your pricing strategy is in the U.K. grocery business whether you think you’ll be able to take pricing and maybe what percentage of your costs in the U.K.

are U.K.-based versus kind of dollar related costs? Thanks.

Okay. It differs by different categories.

So what we don’t do is say, well, all our grocery products are going to go up by 10% or whatever the number was. And the cost pressures are very different by different business, most of the flower that goes into our bread business is sourced from U.K.

wheat. Of course there has been a currency impact on wheat prices.

But it’s not that great. Other categories, very so, usually the oats are U.K.

based but the nuts are not. So, there is cost pressure in some of the ingredients in our cereals business but not all.

And where we’ve got significant cost pressure, yes, of course we’re going to try to recover it from the trade. We haven’t seen that level of cost increase.

Again, the U.K. market is largely but not entirely supplied from a U.K.

factory. So, a significant amount of our cost base is sterling denominated in tea.

And the actual tea cost in dollars has gone up a little but not hugely. And the translation factor is a translation fact.

Thank you very much, all.

It’s precisely 10:00, you can get to Paddington.

Yes. Thank you.