Associated British Foods plc

George Weston - CEO John Bason - CFO

Warren Ackerman - SocGen Jeremy Fialko - Redburn Georgina Johanan - JP Morgan James Grzinic - Jefferies Richard Chamberlain - RBC Jon Cox - Kepler Cheuvreux Geoff Ruddell - Morgan Stanley Simon Irwin - Credit Suisse Warwick Okines - Deutsche Bank

You’re all here. Thanks to all of you for coming to this review of the annual results for the 52 weeks, which ended on the 16th of September 2017.

Many of you will already have seen financial our highlights. Here they are.

At constant currency, group revenue was up 6%; adjusted operating profit, up 13%; adjusted profits before tax then, up 22%; adjusted earnings per share, up 20%; dividends, we’ve announced will be rising by 12% for the year. Gross investments is a very high number of £945 million, driven in particular by CapEx.

And despite that, cash generation has been strong and we end the year with net cash of £673 million. So very good financial results for the year.

The business highlights then are these excellent progress across the group, it really is across the group. Good underlying growth in so many different places, and there is, of course, some benefit of currency translation on top of that.

Primark, very strong sales performance, particularly in the second half. On a comparable basis, Primark’s sales of 14%, ahead 10% in the U.K.

And it’s been a year of significant expansion of retails based of 1.5 million square feet of new space, 30 new stores. And if that’s not the record, it’s pretty close to.

We’ve been talking about a step change coming in Sugar profitability, it came this year. It’s not just the consequence of better pricing, it’s also the consequence of 5 years’ work on our cost base.

We’ve reduced the cost base in our Sugar businesses by a long way north of a £100 million through that period, and I think turned that business from a good Sugar business into a great one. Further improvements in profits and ingredients, further margin progress there in particular.

Grocery also ahead. And then, as John will show you in a moment, we strong cash flow even after record capital investment.

So John, for the financials, please.

George, thank you very much. Group revenue was £15.4 billion, an increase of 15%, and adjusted operating profit was £1.36 billion, up 22% at actual exchange rates.

Acquisitions and disposals had only a very small effect on operating profit again this year. Our adjusted profit measure reflects the underlying performance of the businesses, and as usual, excludes profits or losses on the disposal of noncurrent assets, the amortization of non-operating intangibles and transaction costs.

The amortization of non-operating intangibles increased to GBP 28 million this year, reflecting the acquisitions made. Transaction costs and acquisitions amounted to £5 million in both years.

We had some changes to accounting periods between the two years, the net results of which was immaterial. So last year was a 53-week year for British Sugar, the U.K.

Grocery businesses GWF, AB Agri and Primark. And so 2016 included an extra week’s trading compared with this year.

This was broadly offset by last year’s change in Illovo’s year end, which resulted in the consolidation of only 11 months’ results in 2016. Following the results of the U.K.

referendum on EU membership in June 2016, sterling devalued against all of our major currencies. The increase in adjusted operating profit that we see here year-on-year of £245 million included a translation benefit of £85 million, most of which arose because of the timing of devaluation in the first three quarters of our financial year.

The increase of £160 million in adjusted operating profit at constant exchange rates clearly demonstrates the strength in the underlying growth of our businesses. Sterling weakness against the U.S.

dollar had an adverse transactional effect on Primark’s margin. And I will make more specific comments on that later.

A table of average and year-end exchange rates for our major currencies is included at the end of your slide pack. And you will see that the major effect arose in average rates, which affected the income statement.

There were only minor differences in closing rates, and so currency translation had little less effect on the balance sheet. This year’s unadjusted or statutory operating profit was £1,336,000,000, 21% higher than last year.

The profit of £293 million from the sale of businesses arose on the disposal of our U.S. herbs and spices business and the cane sugar operations in South China, with very little impact on the group’s trading profit.

The larger parts of the £14 million charge last year related to a provision for the future costs associated with the reversion of leases on stores that were previously assigned to another retailer. The net interest expense was level with last year, despite the improvements in our net cash position, as a result of the group’s longer-term financing, that’s mainly through the U.S.

private placement, and local borrowings maintained as a hedge against assets in high inflation countries. The movements in other financial expense reflects the change from a net surplus in our defined benefit pension schemes at the beginning of 2016 to a deficit at the beginning of 2017 following the decline in UK bond yields in September 2016.

I’ll bring you up-to-date with where the pension schemes are now because it’s moved back into surplus, so just you need to follow the time line. Profit before tax was 51% higher than last year at £1,576,000,000 and 22% higher on an adjusted basis.

The underlying tax rate was 22.4%, higher than last year’s 21.2% and broadly in line with where we said it would be a year ago. As a reminder, the calculation of deferred tax liabilities last year benefited from the announced reductions in the UK corporation tax rate to 19% on the 1st of April 2017 and 17% with effect from the 1st of April 2020.

At this stage, I expect the underlying tax rates for the new financial year to be similar to this year, so around the 22.4%. The credit on intangible amortization is higher this year, reflected changes in deferred tax and the higher amortization charge.

The tax charge of £87 million relates to the business disposals. Adjusted earnings per share increased by 20% to 127.1 pence.

On an unadjusted basis they were 47% higher at 151.6 pence, which includes the profit on disposal of businesses. A final dividend of 29.65 pence per share has been proposed, making total dividends for the year of 41 pence, a 12% increase.

Dividend cover on an adjusted basis will increase slightly to 3.1 times. Moving now on to the balance sheet.

Net assets increased by 1.3 billion this year to 8.4 billion. So what were the drivers of this big increase?

Well, the first one is the move from net debt of 330 million last year to net cash of 673 million this year. And that’s a result of strong profit from operations, which I’ll show you later, and the proceeds from the business disposals.

And the second is the movement from a defined benefit pension liability last year to a net surplus this year. Both of these movements have strengthened our financial position significantly.

As a reminder, last year’s net debt showed here of 330 million reconciles to the headline figure of 315 million after allowing for a net 15 million of cash, which was included in assets held for sale. The increase in intangibles and PP&E were driven by capital investment ahead of depreciation.

Year-end working capital fell by 92 million, and average working capital as a percentage of sales was substantially improved, moving from 8.4% to 6.5%. This was largely the consequence of a reduction in sugar inventories, especially of British Sugar and tight stock management at Primark.

In the coming year, I expect some reversal with an increase in sugar inventories. Other net financial liabilities this year primarily relate to mark-to-market losses on forward purchases of U.S.

dollars by Primark as a hedge against their input costs when orders were placed. When these currency forwards were valued at the year-end, exchange rates have moved against us, resulting in mark-to-market losses, which will have an adverse effect on profit in the first half of the new financial year when the related inventory is sold.

Net deferred tax liabilities were higher this year, with the most significant increase being those relating to the UK pension scheme moving from a deficit to a surplus. The UK defined benefit pension scheme accounts for some 90% of the group’s pension liabilities.

This was the main reason for the move from a net pension deficit for the group last year of 290 million to a surplus of 126 million this year-end. That improvement in the UK scheme was driven by higher investment returns than expected and experienced gains since the last triennial valuation in 2014.

Since our financial year-end, the trustees of the UK pension scheme have approved the 2017 triennial valuation, which revealed a surplus of 176 million on a funding basis. So obviously, the pension scheme is in good shape.

Last year, 237 million of net assets were held for sale relating to the U.S. herbs and spices and the South China cane sugar businesses.

Cash flow. I think, by any measure, this was a very strong measure.

Had a very strong year for cash generation with the free cash flow of 924 million compared with last year’s 483 million. This was delivered after funding a record level of capital expenditure with some very strong investments in food, but driven really by an increase at Primark.

I’ve already explained the reduction in working capital and this is evidenced by the cash inflow of 126 million here. I expect a working capital outflow next year.

The tax outflow of 264 million is the cash tax paid on trading operations and is higher than last year, reflecting higher profits. The increase in dividends received from joint ventures and associates relates to our highly successful U.S.

commodity oils joint venture, Stratas Foods. The gross proceeds from business disposals were some £500 million.

Cash tax of 92 million was paid on these disposals and 103 million of debt was assumed by the purchaser of the China sugar business. After pension liabilities assumed by the purchaser of the U.S.

business and related transaction costs, this leaves us with the 278 million of cash that you see here. Turning now to the performance analysis by business segment.

Here are the highlights for me on this page. Group revenues increased by £2 billion this year, with every business segment contributing to the growth and half of it coming from currency translation.

We delivered the expected step change in profit for sugar with an increase of 188 million to £223 million. In Grocery, the progress in Twinings Ovaltine, ACH and George Weston Foods was partially offset by the loss sustained by U.K.

bakeries and the margin declined for the segment from 9.5% to 9.0%. Ingredients clearly had an impressive year with excellent revenue and profit growth.

Profit growth and the margin of 10.4% for Primark were better than expected. The margin decline of 120 basis points was the result of the transactional effect of the devaluation of sterling against the U.S.

dollar on input costs, offset to a considerable degree by effective input margin litigation and a lower than normal level of markdown following the strength of our summer trading. With most of next year’s first half U.K.

purchases contracted at a weaker sterling-U.S. dollar exchange rate, there will be an adverse effect on margin in the first half.

However, the strengthening of the euro against the U.S. dollar in recent months will have a beneficial transaction effect on Primark’s eurozone margins, particularly in the second half of the year if these prevail.

Net-net currency, probably transaction for Primark, will be a positive in the coming year. Together with a more typical level of markdowns and the absorption of cost increases, we expect full year margins for Primark for the new financial year to be similar to the 10.4% that we achieved this year.

Margin for the group increased from 8.5% to 8.9% for continuing businesses and return on capital employed increased from 18.4% to 20.5%. Importantly for me, every business segment now has a strong return on capital employed.

By geography, finally. The international breadth of the group, I think, is demonstrated here with a reduction to some 37% of both revenue and profit being generated by the U.K.

The strong growth of Primark in Continental Europe and Illovo in Africa has resulted in the Europe and Africa segment becoming the group’s largest geographic segment by revenue and by profit. The increase in revenues in the U.K.

was driven by British Sugar and Primark. The increase in Europe and Africa was driven by Primark, Illovo and currency translation gains.

The major driver of revenue increase in the Americas and Asia Pacific was currency. In the U.K., British Sugar’s profit more than offset a decline in Primark’s margin and the losses at Allied Bakeries.

Profit increased by more than 50% in Europe and Africa, with a strong contribution from each of Primark, Illovo and also Ingredients, importantly. George Weston Foods and Twinings Ovaltine were the main drivers of profit growth in Asia Pacific, but a higher level of rationalization costs just held back the margin there.

At that point, I’ll hand it back to George.

Thank you very much, John. Starting with Sugar, well done the Sugar teams.

I can’t emphasize enough the importance and the success of the ongoing profit improvement program. It contributed -- this year’s savings contributed significantly to that £223 million outturn.

And taken as a whole across now five years, the performance improvement program, the cost reduction has left us in a very strong position in the -- particularly as we start to see the consequences of European quotas falling away. We are one of the world’s lowest-cost producers now and there’s more to come on that cost base, too.

Illovo in its first full year of our ownership delivered strongly for us, and you’ll remember that this was the first year without South China cane sugar. So we did see higher prices globally and in Europe.

Profits were up both in the U.K. and Spain.

Production in the U.K. was only 900,000 tons.

That was the consequence of us wanting to get through the stock overhang over a couple years ago. We’re now through that.

In Spain though, volumes we’re well ahead. We’ve entered into multiyear contracts with now the majority of our U.K.

beet growers. We’ve also had multiyear contracts in Spain.

To have them in the U.K., I think, gives us a level of security, both for ourselves and also for our customers, which in more uncertain times without quotas, I think is a good place to be. In Illovo, we’ve seen product improvement coming through.

Remember, we’re trying to grow domestic markets that require higher-quality sugar than that, which we would previously put in the boat and send to a refinery. Those domestic markets in Southern Africa continue to grow.

The weather has come back in a number of the countries which we operate. So the yields have come back.

It was a good first year within Illovo. And then in our two remaining sugar factories in China in the north of the country, we’ve seen a record sugar beet crop and profits are ahead in that excellent business as well.

So just to show you what’s been happening in sugar pricing, World New York number 11 is the major traded part of the sugar market, we’ve come off the levels of $0.18 to $0.20, which we enjoyed for a period of time, and that was hitting $0.14, $0.145. More significant for our business, the spot prices in Europe have come down significantly in the last few months, both as world production has moved into surplus or stayed in the surplus, and then most recently when the reality of a truly huge EU sugar crop, including in the UK, has become apparent.

We think, we’ll be processing more than 1.4 million tons of sugar this year in the UK alone. Difficult in the first year of deregulation, I think, that big crop is likely to put welcome pressure on the inefficiencies across Europe pretty smartly.

Agriculture then had a more difficult year with profits reducing £58 million to £50 million. On revenues, that we’re well ahead is a consequence of commodity price inflation in UK But that’s a cost plus business, much of the UK business.

We had with a lower sugar beet crop that 9000,000 tons of sugar. We had less sugar beet feed to sell in the UK.

That’s an important part of the agriculture business. And we saw the financial consequences of that.

AB Vista, the specialty part of agriculture, continued to see growth and we continued to invest in new business opportunities, particularly in specialty feed. The large beet crop this year will see a large sugar beet -- sorry, quantity of sugar beet available for sale.

So agriculture, I think, looking forward, should see a reversal of the declines of this year. Moving next on to Grocery.

Twinings Ovaltine, we always put that first, it’s always growing and it did so again. We saw welcome margin improvement at ACH and George Weston Foods.

Difficult trading environments in the UK bakeries, which I’ll come back to. And then, two nice acquisitions -- actually three acquisitions, two in Sports Nutrition and then Acetum, the balsamic vinegar company in Modena.

And let me just dwell on those two for a moment. They’re both differentiated businesses.

They both give us opportunities to grow, but obviously for different reasons. So Sports Nutrition is a nascent market in the UK It’s a growing market.

We bought two brands, High5 and Reflex. They’re good brands, they’re well recognized in the marketplace, and both are based on good nutritional science.

Our job is to grow the brand saliency, and with that, sales. It started well and it’s two nice business that we are integrating together into one at the moment.

Acetum, it’s a lovely business in the area of flavor, in which we’re already well invested. It has great products, particularly the one on the left-hand side.

You will find -- some of you, I think, will find examples of it in your pack in front of you. It’s the closest we’ve ever got to a bribe.

It’s actually -- I’m assured it’s really not.

They’re in the middle of the room...

They’re in the middle of the room. You might want to -- so the product on the left-hand side, which is aged is, I think, is absolutely fantastic.

It’s a well invested business. It has PGI status, which means that you can’t put Balsamic Vinegar of Modena on anything that doesn’t come from Modena.

And what we like, I think, most about this business is its good international position. So 90% of what Acetum makes is sold outside Italy across 60 markets, and we think we can grow many of those markets over time.

We’ve done it before, and we think we’ll do it again. Moving then on to the businesses that we had a year ago and starting with Twinings Ovaltine hot beverages.

Twinings brand self-performed very well in its major markets and other markets too. We’ve expanded the range of infusions and green teas.

We consistently -- we compete in a number of areas, but particularly product quality, quality of advertising and packaging. And I’d just like to point out some of this packaging innovations we’ve seen this year, which where we continued to add to our premium credentials.

Moving across to Ovaltine. The largest market, as you know, is Thailand.

We saw good growth in Thailand last year, and in a country which has been characterized by a certain amount of political instability, that was very reassuring. And then I have to mention my favorite product, Crunchy Cream, every time I stand up.

Here, production is now in-house and we’ve got plenty of capacity to produce for our markets with another good year of growth for Crunchy Cream in both Switzerland and Germany in particular, and no surprise there. It’s lovely.

Staying on Grocery in Australia. We launched Thins there.

You’re maybe aware of them in the UK market. We’re the only producer in Australia.

We built a small factory to produce them. We advertised this new product category heavily when we launched them earlier this year, and they’re going well.

And Don KRC, the meat business based north of Melbourne, we saw higher volumes of the factory and good production efficiencies and an increase in the profitability of that business. In North America, having sold the spices business, we now have two categories that make up ACH.

The first one is Mazola and the second is bakery ingredients, which are the three products there on the right. I’ve talked in the past about Mazola plant sterols advertising driving sales and also driving margins over time in corn oil.

And let me just show you now an example of that advertising, which is being aired over the last 12 months. [Audio/Video Presentation]

Very clear, and it’s a campaign, a positioning for the brand that we will continue to push year after year after year. Going back to North America then, we had a good year in home baking.

We saw growth in, I think, all our categories, yeast being domestic yeast being the largest of them, but also corn starch and corn syrup. And then another strong year by our joint venture Stratas Foods.

It’s a business that has really delivered us -- for us over a number of years. So taking George Weston and North America together, a good year for both businesses and margin improvements in both of these businesses.

The U.K. has been -- it’s been a very difficult trading environment for all our businesses as a consequence of the commodity price inflation that followed devaluation.

Obviously, the real -- the really difficult area has been bakery, which I’ll talk to in a moment. But life hasn’t been easy for anyone, and despite that, our Jordans Dorset Ryvita and AB Well Foods and Westmill had good years.

Jordans and Dorset continue to grow internationally. It’s one of the things that offsets some of the margin squeeze that we’ve seen in the U.K.

And those international sales, I say, are growing, growing well. The U.K.

has become a good place to manufacture, I think, anything but food included. And lower sterling rates have certainly helped our international sales growth, both in Jordans and also in World Foods.

And it helped us with, in the first instance, with import substitution. And we are very competitive.

We are well through the building phase for the new Ryvita crispbread factory. It’s just outside Lincoln, important new facility for us that will be finished this year.

And it’s another example of us investing in our cost base. Major, major, major project.

And then World Foods. We’ve rebranded and re-launched Blue Dragon with great success.

Patak’s and Blue Dragon, they both increased the U.K. market share.

And then one I don’t think I mentioned in the past, we have a Super Noodles business in the U.K. Noodles are, by and large, in the past have come from China.

They don’t anymore, they come from Stockport. We have a lovely supply chain, we have a big flour mill in Manchester, which turns U.K.

wheat very efficiently into noodle flour, and then a big noodle plant just up the road in Trafford Park. We’ve increased market share in the U.K.

There’s been trend away from rice to noodles in the U.K, particularly in the Chinese sector, and we benefit from that. And we’re beginning to export noodles too.

There are still a few Chinese noodles coming into the U.K. and we’re after them.

Nice differentiated business. We have a product advantage.

We have real efficiency in the supply chain, and it’s gone really well over the last few years. It’s now big enough to mention in this audience.

Bakeries are doing it tough. We really are doing everything we can with this business.

We control costs as well as anyone and I think probably better than anyone. I think we are the low cost producer in the U.K.

We are very well invested. As you all remember, we spent over £200 million over a number of years rebuilding the our U.K.

bakery network. We have a super plant and equipment.

We’re investing in our brands, that’s Kingsmill, Allinson and Burgen. But with commodity inflation, flour prices in particular not being recovered in the marketplace, this business has become loss-making and it’s not sustainable in that position.

As you would expect, we’re in negotiations and discussions with our customers around the range of items and let me leave it at that. But the position can’t go on indefinitely.

Moving across to Ingredients. We’ve had a number of years of good improvements in both our Ingredients businesses, being yeast and bakery ingredients on one hand and then specialty -- range of specialty ingredients on the other.

Mauri continues to improve its profit and its margin; progress in all geographies, particularly in the north -- in North America. We have bought a medium-sized blending facility in the Midwest, a company called Specialty Blending, which improves our capability in bakery ingredients other than yeast.

And then I think it’s worthwhile calling out the performance of the teams in South America, where I was just couple of weeks ago. Argentina and Brazil have really difficult macroeconomic situations, high levels of unemployment, big decreases in disposable wealth, and it’s all flowing through into every part of the marketplace.

Nonetheless, in Brazil in particular, they actually managed to increase the profitability of the business, and Argentina has fought really hard to limit the potential downside of operating in Argentina at the moment. Those two markets, they’re both evidence of some improvement in consumer sentiment, but really good work by the teams there.

As indeed, there has been across the specialty ingredients’ part of our portfolio strong sales growth, good increase in margins, particularly in enzymes and specialty lipids. Enzyme production, we’ve given ourselves about 40% more capacity by increasing -- by investing in our plant in Rajamäki in Finland.

That work is now being completed, so we have capacity for growth. We were right up against our capacity constraints, and so we did that work.

We have two particular focuses at the moment. We will create more in the future.

But human nutrition and pharmaceutical excipients, these are both areas of good growth, considerable focus and quite a lot of capability in our Ingredients businesses. From enzymes to Primark.

Very strong sales growth across the business, particularly but not exclusively in the U.K. So U.K., up 10%; and Continental Europe, up 16%.

Summer trading was very, very strong and was largely -- sales were largely made at full margin, hence the -- a reduction in the markdown percentage that we saw, particularly in the second half. We opened 30 new stores in the area, 1.5 million square feet of space.

That is a recent record. I think you need to go back to the Littlewoods expansion years in 2006 to see something equivalent.

And it’s worth pointing out through all the success in the U.K., 15 out of the top 20 stores by sales densities are now in Continental Europe. We’ve seen market share growth in all countries, and I think in this year in particular, you’ve seen -- we’ve all seen just how committed Primark is to price leadership.

In the area of inflation, in the U.K. in particular, we actually brought prices down on average.

Now, that, I think, demonstrates how committed we are to price leadership and to our consumers. I think, this year has also demonstrated that Primark is a lot -- is about a lot more than simply price.

Let me show you through some of the illustrations what I mean by that. Autumn/winter ranges are selling strongly.

October was quieter, as it was for the whole high street, but we got off to a really good start in August in these last few days. This last week when the weather has gone colder, we’ve seen very good sales performance.

Same mixture of fashionability and price. So statement t-shirts for £5.

The hoodie -- red is an important color for the fashion Easter’s this year. The hoodie, at £7; and then the cord jacket, great sales reaction to that product, for £15.

We’ve also been, I think, increasing or deepening our fashion credentials. We formed a link in the UK with Glamour magazine and we brought out a range of nine must-have fashion items.

And we’ve promoted them through Glamour Magazine. The aviator jacket on the right-hand side for £30 has been a phenomenal success.

We’re great value, both for basics and evermore for great fashion. Both are integrated more and more with our digital and social media activities.

I showed you last time some of what we do on social media and let me go back over that and update you on it. So we’re followed by now 10.7 million people on social media, including over 5 million on Instagram.

That’s versus 8.6 million a year ago. We get over 10 million visits monthly to our website.

That’s up 8 million -- sorry, up from 8 million a year ago. It’s across all geographies, all languages.

I mentioned last year that we had been particularly focusing on mobile last year. This year, there’s been a lot of focus on video, both instructional videos and also just product awareness videos delivered increasingly, as I say, through mobile.

Womenswear product is the top department on social media, but over the last 12 months in particular, there’s been a great focus on both beauty and also home, our two categories which have grown strongly over the last year. Let me show you this.

This was our top post on Instagram, 118,000 likes, and it was about home, not about any of the fashion ranges. The most-watched video, with over 800,000 views, over 40,000 comments, was -- well, it was within license and it was Harry Potter, and here it is.

[Audio/Video Presentation]

Great reaction to Harry Potter. Licensed product is another part of the important part of the mix.

We had particular successes this year with Beauty and the Beast. Started in March with the Chip cup, we’ve now sold almost 0.5 million of them.

We moved then on to purses and bags, and they have similarly sold in extraordinary numbers. And then Harry Potter, just to dwell on that again, we turned the Trend Room into perhaps one of our most important stores, Oxford Street East, into a magic area and given over entirely to Harry Potter.

That’s the bottom right. It’s source of some fascination for me that in terms of participation, so percentage of sales, the best market for Harry Potter is not the UK, it’s Italy.

Moving now into what is in store, now other themes. For those of you who are not aware of this, hygge is a Danish lifestyle trend.

It’s all about being warm and cozy at home, at night, and being glued, I think, to box sets. I just described my life.

We’ve done our own affordable take on hygge. We brought together both homewear but also nightwear in two areas where it will be shopped together and we’ve put it in our windows and online, and the reaction has been very, very strong indeed.

And because we’re coming up to Christmas, here is a great photo of some of the ranges, which are available for Christmas parties and Christmas celebrations in the coming month. We’re about a lot more, I hope you can see than simply price.

We’re about a lot more in ranges, we’re also about a lot more in stores. Now I’ve picked these three out from the 30 that we opened, because I’ve got a little bit of a twist to them.

Zwolle is a lovely medieval town in Holland where we have, I think, blended in as sensibly as we can into that market, and I think have done a good job there. Bracknell is a secondary market in the UK We’ve opened Bracknell this year.

This is a significant store and it’s the best looking retailer in town. So we continued to invest in high-quality appealing stores.

Top right is Val d’Europe, which is in Euro Disney, or near Euro Disney. We opened it, it’s our most recent French opening and hugely successful.

It has been not leased around licensed -- Disney license. We have a big Disney license in that store.

The in-store experience. Just as the outside of the stores, the windows, get ever more attractive, so the in-store experience improves out too.

This is Verona, in the heart of fashionable Italy. I think, it shows you the quality of our in-store display and the merchandising.

If we move across then into other stores, it doesn’t really matter where they are. This happens to be Algarve, a new store in Portugal, this is -- we work to continue improving the in-store experiences at the jean shop with what we call the Denim Kitchen.

You can see real confidence and shopability and range in our jeans offer. This is Beauty, in Colchester.

A year ago we wouldn’t been able to show a picture like this. We’re getting ever better at Beauty.

We’re giving it more space. We’ve got a lot of confidence in it, as do our customers, and Beauty has been a great driver of sales performance over the last 12 months.

Back to Val d’Europe. This is part of the Disney themed area in that store.

Again, eclectic range of Disney merchandise. Back to some numbers than 1.5 million square feet of new space was opened; net 30 new stores, three of them were in Italy.

And Italy and France, our two newest markets in Europe, have been very, very successful over the last two years. France, as you can see from this next slide, we’re now up to 11 stores.

Italy, only four. We opened a significant number of new stores in the U.K., as you can see.

So actually, that 4.5% like-for-like growth through the year in the U.K. would have been 5.5% without cannibalization.

And lots more space for new stores in Europe, and we’re up to 345. Primark U.S.A.

We’ve now got eight stores opened and we’ve added three during the year. We’ve extended Boston by 20%.

We’ve done a good job, I think, fine-tuning the product ranges. I think we’ve got product, more or less, rights there.

The average store size, I can’t remember -- so age. Reminding myself it’s less than a year.

So we’ve still got a lot of learning to do. You’ve all seen the announcement that we are reducing the size of a couple of stores.

We have a wide range of store sizes everywhere else. In the U.K.

-- in the U.S., we opened everything at about 50,000 square feet in the malls, and I think we’ve got an opportunity to reduce costs in a couple, or maybe three, of the stores simply by taking some space down. We think that we wouldn’t lose sales for doing so.

We opened the Braintree store, which I think was our 7th, and successfully from a slightly smaller space, 40,000 square feet rather than 50,000. And what last to be said?

Brooklyn, we’re looking forward to it. It opens next summer.

Customers love us, they come back. I was talking to someone just earlier on today who in our Staten Island store, met someone who couldn’t wait for us to open in Brooklyn because he was traveling all the way.

But by and large, we’re still fighting about -- against awareness -- or lack of awareness. In the malls in which we’re operating, we are selling well.

And -- but we -- outside the catchment area of those malls, I think brand awareness remains quite low. We’re happy with the progress we’re making.

Knowledge of brands takes a while. Looking forward, we’re going to open -- in Primark, we’re going to open about 1.2 billion square feet of space this year.

The biggest markets -- sorry, markets which will have most added space are France, Germany and the U.K. And there will be a number of important new stores, Stuttgart; Munich, first store in Munich; Toulouse, Bordeaux and Antwerp.

So perhaps more than 15 out of 20 will be top sellers. Our top sold sales density stores will be in Europe this time in a year.

Back to the group as a whole. Excellent progress across the group, really has been a good year.

Primark, very strong sales; particularly in the U.K., significant expansion; step change in sugar profitability; profit improvements in a lot of other places in the group too; and then this very cash flow that John has taken you through. Looking ahead, more space expansion in Primark.

That rollout continues unabated. Margins, we think -- after two years, the margin pressure will be in line with the current year, the year just gone.

More progress from Grocery, Agriculture, Ingredients. Sugar, there will be higher volumes, particularly in the U.K., lower costs again, but those 2 benefits will only partially mitigate the lower EU prices that we’ve seen in this negotiating round.

We don’t expect -- at the moment, we’re not factoring in any material currency effects that, again, is the first time in three years that we’ve been able to say that. And we’d expect to see further progress in adjusted operating profit and earnings in the coming year.

Thank you, very much.

And so, we’ll open it up to questions. Warren Ackerman.

Warren Ackerman of SocGen. Couple of questions.

First one on sugar profits; you did //223 million. John, given the low sugar price charts you showed us, can you give us your best guesstimate quantum of how big a reduction we should expect in sugar profits in 2018?

That’s the first question. The second one for George is on the balance sheet.

You’re now net cash. Can you just talk about the uses of cash going forward?

Do you expect CapEx to go up even more than it already did this year, because we’ve been in periods of net cash in the past, how do you feel about the balance net cash? Could we maybe hope for bigger returns of shareholders in terms of dividend payouts, et cetera.

I noted that dividend was lower -- dividend growth was lower than the earnings growth, so your cap is rebuilding. And just finally, if I can squeeze the third one in on Primark.

John, you said that margins would flat for the year. Can you give us some idea of the quantum of the first half, second half phasing?

Obviously down in the first half, up in the second half, and maybe isolate the mark-to-market losses on those currencies forwards that you talked about in your prepared remarks.

Okay. Let’s start with the sugar.

So Warren, as you said, compared to the number just over £220 million for every sugar. I mean, it would not be right for me to give exactly a number for the forecast for the coming year, but I think it’s some tens of millions off from that.

I think it’s below the £200 million mark, but not by more than a few tens of millions. So this is not going all the way back down again.

So it’s that -- which I think it’s important. And just a reminder, we’ve got that, if I can describe it, that bedrock of Illovo profitability, which is over £100 million.

And so we are seeing more volatility clearly in the EU sugar profit, but nevertheless it will still be profitable for next year. So that’s probably where I am.

So a bit softer than maybe where we thought it was, just because of where -- but we’ve got good visibility now for the EU with most of British Sugar contracted. So I think that’s a good call.

Balance sheet and use of cash. Yes, the dividend is going up by only 12%, still 12%, and it is -- that comes after two years where the dividend increase was greater than the earnings per share growth, which was actually negative.

So we’d much rather have a sort of constant and reliable dividend progression than one that bounced around. That’s the first thing about dividend.

And dividends have increased consistently for years now. On to the balance sheet.

We’re never going to apologize for being conservatively financed. I think two things, and we’re never going to apologize for taking our time.

That balance sheet strength is both a source of security, but more importantly it’s a source of strength and flexibility. The balance sheet in ABF is there to serve the needs of the business, not to meet some particular ratio.

So having just spent quite a lot of money on [indiscernible] having spent quite a lot of money on CapEx, I’m very comfortable that -- whether we’re £600 million in the black or whether we’re £300 million -- doesn’t really matter. We’re conservatively financed and we’ve got balance sheet strength for opportunities that may come our way.

So don’t expect any great change in how we operate with our balance sheet or with our dividend policy. Coming back to Primark.

It feels not many a few tens of basis points down, I think, in the first half and then some offset to that, similar set of number of tens of basis points in the second half. The mark-to-market losses, just as a reminder, that’s really because the sterling-U.

S. dollar has moved from about £125 to about £130.

So it’s that -- that’s the mark-to-market losses. So I’m factoring the -- those coming through in the first half in that guidance.

So it’s just how it showed up in the balance sheet is really what I was highlighting there. Thank you.

Second one. Okay.

So we’ll go with Jeremy Fialko.

Jeremy Fialko at Redburn. So two questions, first one is on the UK bread business.

Has the business got a lot of, let’s say, pension liabilities or other degrees of fixed cost absorption within its P&L that make it more difficult for you to do something, let’s say, a little bit more radical with that business if the situation didn’t improve? And then the second question is on the European sugar market.

Just a sense of where you think the price might actually bottom in terms of the European sugar price. Or do you think this sort of high 300s is where it is or whether this -- whether you think it’s got another few tens of euros to go before the oversupply might clear?

I think just taking you -- the European sugar market one first. With this very big crop, the market -- that crop has to clear through exports.

The UK -- the European market is not going to grow significantly because sugar is cheap. So it has to clear by it through exports, which makes it seem likely that the bottom will be sort of export parity for the European market.

And so I think it can go lower and probably will go lower than the sort of high 300s. Having said that, the sugar round takes a while to operate and our average number is just that.

It’s an average of sales made over a several-month period. The bread business, no, there is no reason why we can’t.

If the right thing to do was to restructure that business more radically, we could do it.

Okay, I think you mentioned something like pension cost or whatever, actually remember, we think we’ve got some of the most productive bakeries anywhere. So that’s what the capital investment, Jeremy, was about.

So in terms of that cost, I think it’s a smaller part of it. Okay, Johanan -- Georgina, right, I beg your pardon.

It’s Georgina Johanan from JP Morgan. I have three questions on Primark please.

The first one just in terms of pricing. You mentioned that you have actually sort of moved average prices lower.

I was just wondering if you could share, has that been in line with the market in terms of prices coming down at the lower end of the architecture and perhaps even nudging up at the top, or how you have kind of structured that? And indeed, was it in response to others moving their entry price points lower?

Second question just on Germany. I know you have mentioned in the past that you thought you could improve there, perhaps in terms of ranges or may be in terms of store locations, if you could give us some color on how Primark’s sort of trading in Germany and around that, that would be great.

And then, finally, I think at the last results, you just kind of mentioned click and collect and you were exploring and looking into it for Primark. So any update on that would be really helpful, please.

So price points, so two generic comments which are true of every year. The first one is that competitors challenge us the whole time and we respond the whole time.

And this year, perhaps it was bit more of that and so we moved prices down in some categories in response to that. Secondly, no, there hasn’t been any offsetting kind of push top end up to fund.

We took those price reductions out of our margins. We didn’t mix.

Sorry, the generic point is, of course, there is so much newness in Primark every year that complete like-for-like comparison on price is awfully difficult. But no, we just moved prices down.

So part of the reduction in margin, as we started the year was obviously currency, some that was actions that we took. And I supposed we’ve got a mindset in Primark that over time we bring prices down, we don’t push them up, and it was another year of that.

Germany had a better year this year than in prior years. The building program still continues and as you see market that will be -- the Munich store is our first store in Munich.

Stuttgart, which is a big market for us, that will be our second market. There is always adoption to local tastes, I think in Germany, we’re better than perhaps we were a couple of years ago.

And they will have benefited -- so German purchasing comes out of really buying offers, which had such success in the UK and some of that flowed across into Germany too. So Germany better.

And just one comment when you talk about Germany, we sometimes lose track of, perhaps, our scale already in Germany. So our sales are probably about €0.75 billion.

That’s a sizable business by any, and our sales densities remain above the company average. Going on to click and collect, yes, we keep our eye on it, we work out where it might be relevant to us.

The most important part of online for us is the communication piece. Our job is to send people -- is to attract people into the stores because of what they see online ever more.

It’s whether you can -- another thing that we work on is increasingly is in-store availability, whether in the future click and collect will play a role in that is a moot point at this stage. I think there’s probably more to be gained in the short run, short and medium term by sort of installed discipline and ordering disciplines being better.

On a Saturday afternoon, our availability isn’t where we’d like it to be.

James?

It’s James Grzinic from Jefferies. Two quick ones.

George, firstly, at what point does the gross cash balance becomes so embarrassingly big that it goes from -- becomes more of an enabler for businesses because potentially that’s going to be the case in a couple of years in time. And just wondering the scale of that.

And secondly, should we conclude from what you said on Braintree that is doing 20% higher sales than the other regional mall locations in the U.S.?

The sales potential in Braintree by opening 40,000 rather than 50,000. On the cash balance, I don’t -- I’d be surprised if the cash balance went up this year.

We spent quite a lot of money on acquisitions, the working capital -- there’ll be working capital demand from sugar -- that sugar crop. I’m comfortable where it is, I’d be comfortable with a lot -- with a bit higher.

I’d be comfortable with it going down. It’s sort of in the right place, big range, but I think I have nothing more to add really at this stage.

I always believed in the capability. Look, I’m not about -- I don’t think either of us are about just building up huge cash balances and putting it in a piggy bank.

But we are a company that, first and foremost, believes in reinvesting in our business. And yes.

Do you generally sense that valuations for M&A are starting to move more in favor of you? Is that starting to change?

I don’t think I will particularly say that, but I think you’ve got to be smart in what you look out for. I still believe that some of the valuations are extremely high in food.

It’s something that we looked at this year. There will be no surprises if we look at the big transactions.

It’s just, blimey.

Yes, exactly. Whereas I can assure you the Acetum acquisition was for us a very sensible multiple.

So we’ll maintain our capital disciplines looking at this process. Okay.

Richard Chamberlain over here.

Richard Chamberlain, RBC. So just a couple more on Primark, please.

On the mainland Europe side, should we expect cannibalization do you think to ease off a little bit this year? I think it was a factor again, particularly in the Netherlands.

So should we expect that to ease off as maybe space growth is a little bit less? And then the other one is around Beauty.

I mean clearly you’re getting a very strong volume growth. Is that having any kind of diluted mix effect on margin?

Or is -- are actually margins broadly comparable with the rest of the business?

So on cannibalization, we’ll continue to see cannibalization in France. Not in Italy this year because there are no store openings.

Germany, the second Stuttgart opening will affect. It’s more of the same.

It’s more of the same. This year, the country of highest cannibalization was Netherlands.

We won’t have that one this year, but by and large, you shouldn’t look for particular -- for anything but some cannibalization going in Europe as we increase the number of stores. And then Beauty, no, it doesn’t cannibalize margin.

One of the joys of Beauty is that it doesn’t take up a huge amount of space.

And John, just on your point about working capital outflow will be like in fiscal ‘18, is that all around the sugar crop [indiscernible] Is there anything on the Primark there?

Yes. We do have a focus on management of working capital across the group.

I mean, but clearly, George said there’s a huge crop coming through in Europe and by any imaginings that’s going to mean an increase in sugar stocks. So that’s really what I’m saying.

Take Jon Cox right there.

Jon Cox, Kepler Cheuvreux. Just back to Primark and the rate of expansion going forward this year.

You’re talking 1.2 million square feet, obviously decelerating from the 1.5 million we saw this year. What are your thoughts going forward?

Why is it little a bit slower? You just need to sort of pause for a breath or what are your thoughts on that?

And just on expansion in the U.S., probably you’re not expanding as quickly as maybe many of us thought. Is that really you’re not quite happy with the way things are going there?

Are you’re talking about reducing space? What are your thoughts on there as well going forward?

Or is it really about opportunities in Europe compared to North America?

Okay. John, let me answer the first question.

Emphatically, no. This is not about a slowdown or pause for breath.

So it’s a reminder. How do we approach the acquisition of stores.

It’s on a one-by-one basis. So it isn’t top-down, it’s all about the quality of the store location and size of store and a discipline that Primark’s had for decades in terms of going for the right stores.

So we’re looking across all of the countries where we’re operating, and it really is just how those -- how the buses arrive. There should be a law to this, and I’m not quite sure what law of mathematics it is, but you’re looking at all of these stores and sometimes it’s 1.5, sometimes it’s 1.2, but it’s not top-down pulling back.

And so that’s why, looking forward for the medium term it still seems to me, excluding the U.S., the compound space growth for Primark of some 10% still is as good as any. What’s medium term, our visibility is in the next few years.

And the other thing, can I just say? Sometimes, oh is it 1.2 or 1.3.

or is there something around that? It really is around just the timing of those stores.

So the thing we gave you on that 1.2, we own the properties or we’ve got the leases and we’re fitting them out. So it’s as cast iron a number that we can give you.

Could the number creep up a little bit? Sometimes, people say, "Well, you always hold out a little bit."

Yes, we could actually sign a store now and open it up in 9 months’ time. But that’s how we give that sort of guidance, if that’s helpful.

On the U.S., no, don’t read anything to this space contraction in the couple of stores other than we know more about those specific markets. And we’re putting the size -- making the size appropriate for the market in which they’re trading.

I’ll remind you, Downtown Crossing is going up in size. We think we can successfully trade for more space.

Brooklyn is opening in the year. So net-net, the total amount of space in the States will be well up this year, and then we’ve got another store coming later on.

We said from the beginning, we’d get to about 10 stores. We’d learned as much as we can.

The average store is less than a year old. We’re not in a rush.

And -- but we’re confident that we’ll succeed.

Yes. Let’s go for Geoff over the front here.

Geoff Ruddell, Morgan Stanley. Two questions for me.

Just firstly on Primark U.S., how many stores do you need in the U.S. to breakeven in the U.S.

market given the infrastructure you have put down there? That’d be question number one.

And second question on sugar. Obviously, you referred a number of times about the very large crop this year.

Is that simply a weather issue or is it something more structural behind this at all?

No. The weather was perfect.

It -- sorry, taking sugar first. Every time it rained that was followed by sunshine and then the sunshine would go on for a while and then it would rain again.

And then it was warm in -- and something like that. It was just weather.

So the crop area was slightly up from that, that produced us the 900,000 last year. We deliberately took it out.

We let it go back up to historic norms, which should have given us 1.1 to 1.2. It hasn’t.

It’s given us a lot more. Sorry, the first question was?

About the minimum through the efficient scan in these...

15 to 20, and the optimization of existing sales densities which is what we’re talking about.

Just follow up on that. So how much are you losing in the U.S.

at the moment?

We’re getting on from about $20 million. Okay.

Simon Irwin.

Simon Irwin from Credit Suisse. Three more on Primark, I’m afraid.

Firstly, just on logistics. You haven’t opened any DCs this year, I think, so presumably there are some kind of coming down the track.

So it must be the first time in a while that there hasn’t been anything. Secondly, a lot of the outperformance this year at Primark was presumably driven by new product ranges, such as Beauty coming in, licensing deals, and generally good execution.

How confident are you that you can kind of repeat similar exercises like that in the year ahead? I mean, presumably you know projects are being launched over the next six months or so.

And on the U.S. presumably, once you have proof of concept, you will start thinking a little bit more tactically around the sourcing side of the business to make better use of tariffs into the U.S.

et cetera. I mean, how far off is that?

We’ve opened a lot of DCs and expanded a lot of DCs over the last couple of years. We have nothing more actually being worked on at the moment.

The next one coming at some point, but it’s probably two or three years off, would be a DC to supply the Italian market. Licensing new product growth -- new products areas have been very important to us this year.

We think there’s a lot of growth left in those categories. One of the areas of significant growth over the last three years also has been sports, so at-leisure.

We think that just maybe that trend is weakening or coming -- maybe the growth has gone out or maybe it will start to decline. We think probably that will be a good thing because we wonder and there can only be speculation where there’s some of the difficulties that women’s fashion has had across the UK markets in particular over the last couple of years may have been driven out by at-leisure.

If that starts to decline, the substitutions, I think, will be good for us, alternatively will be good for us. Sourcing in the U.S., yes, it’s already started looking at other markets.

Vietnam is a particularly good place to supply North America from and the Central Americas on short lead times goods, they are also areas where we’ve been exploring.

So excluding weather, do you think there’s any evidence in autumn/winter? The good start of autumn/winter, generally that kind of softening of at-leisure has actually brought people back to womenswear, or is it just too volatile to tell?

I think, no, no. Womenswear, we delivered this really strong like-for-like performance and good gains in market shares, particularly in women’s, despite seeing actually like-for-like declines in our womenswear business.

Womenswear has been very difficult. We’ve seen, I think, the first glimpses of growth going out of at-leisure, but it’s too early to say therefore.

But good starts to autumn/winter, but it’s been around across the whole of the range, outerwear in particular started very well. And I showed you some of the top sellers going into autumn/winter.

Yes. Go ahead, Warwick.

Warwick Okines from Deutsche Bank. In the second half of the current year, are you anticipating bringing prices down in Primark as well?

It would strike me that you’re either assuming a very big increase in markdown rates, or you’re anticipating prices to come down because of material benefits in H2.

You can have that.

No, we’re not. I think the broad assumption on pricing is that prices remain broadly where they are.

So I mean, it’s a moot point for us to -- what size of markdown. Remember there is also increased cost as well.

So if you’re not moving your pricing, then there is some inflationary cost coming through. And that’s not in sourcing, but it’s in the overhead and so forth.

So factor that in. So those are really the two things.

So it’s the markdown percentage reverting a little to the average of the last five or six years. It is the absorption of some overhead costs, very little pricing coming through, and then probably currency, net-net, I believe, is actually now a positive for the coming year, particularly with back-end waiting.

Okay. Second one is on Primark.

Should we anticipate you opening any other markets in Europe over the next two or three years?

I think we will see some, yes is the answer to that, but not in major markets. And I mean sort of Slovakia, Slovenia, these sorts of.

Okay. I think, That’s probably it.

Thank you very much, indeed.

Thank you, everyone.