Associated British Foods plc Annual Report & Accounts 1999

Associated British Foods plcAnnual Report & Accounts 1999

Brought to you by Global Reports

Financial highlights

1999 1998

Turnover £m 4,308 4,202 +3%

Operating profit* £m 326 316 +3%

Profit before tax* £m 389 410 -5%

Earnings per share* p 31.7 31.7 0%

Dividends per share p 10.75 10.50 +2%

Special dividend per share p 50.00

*before exceptional items and amortisation of goodwill

01 Associated British Foods02 Chairman’s statement04 Group at a glance06 Chief executive’s report16 Finance director’s report18 Board of directors

19 Directors’ report32 Directors’ responsibilities33 Auditors’ report34 Financial statements39 Accounting policies41 Notes to the financial statements

57 Principal subsidiary undertakings58 Investments59 Progress report60 Company directory61 Notice of meeting


Report of the DirectorsAssociated British Foods

01 Annual Report and Accounts 1999

Associated British Foods is a multinational business with interests in agriculture, ingredients and oils, grocery, and retail and packaging.

The group is one of Europe’s largest food companies which alsooperates in the US, Australia, New Zealand and Asia employing 34,000 people with sales of over £4.3 billion.

ABF’s core skills are in adding value to natural productsthrough the large scale processing of food crops throughout the world and increasingly in the development of high technology food ingredients.


Chairman’s statement

02 Associated British Foods plc

Garry Weston Chairman

Shareholders will have read that in early September the chairman, Garry Weston, suffered a mild stroke. It was originally expected that his recovery would beaccomplished in a period of several weeks. This is notnow the case and, although he is progressing, the Boardare advised that Mr Weston’s return to health will takeseveral months. I am sure that shareholders will join withme and my fellow directors in forwarding our very bestwishes to him for a return to full health.

The Board met on 6 September 1999 and it wasunanimously agreed that I would fulfil the role of acting chairman for this interim period. I have agreedwith my colleagues that I will be available in that role at least until December 2000.

At the 1998 annual general meeting Garry Westonannounced his intention to separate the roles of chairmanand chief executive and the appointment of Peter Jacksonas chief executive. Mr Jackson took up his new duties inJune this year. John Bason was appointed finance directorin May 1999 and the following report is the first to bepresented by the new management team.

The past year has been one of zero or negative food price inflation in virtually all the markets in which thegroup operates, both in the UK and overseas. In such an environment it is a considerable achievement thatprofits of £326 million at the operating level, beforeexceptional items and amortisation of goodwill, are up by £10 million, an increase of 3 per cent.

In the interim report reference was made to the impact of the new FRS 11 accounting standard on the carryingvalue of fixed assets. The charge of £84 million in respectof the resulting reduction in fixed asset carrying valuesshows an increase of £10 million over the charge includedat the half year and has been treated as an exceptionalitem. In addition, changes to the accounting standardconcerning the treatment of goodwill give rise to afurther charge of £5 million in respect of the amortisationof capitalised goodwill.

Investment income has, in recent years, formed asignificant part of group income at the pre-tax level,particularly in 1998 when at £119 million it contributedno less than 30 per cent of pre-tax profit. The currentyear was notable for a drop in the level of UK short-terminterest rates from 7.5 per cent to 5 per cent and this,together with the return of £448 million in cash toshareholders in May 1999 by way of the special dividend, accounted for substantially all of the decline in investment income to £84 million in the current year.

Group profit on ordinary activities before taxation, butafter charging the above mentioned exceptional item

and amortisation of goodwill of £89 million, totalled £300 million. At the post-tax level earnings per sharedeclined from 29.6p to 21.4p but adjusted forexceptional items and amortisation of goodwill earnings per share were level at 31.7p.

It has been the consistent policy of the group to write offagainst the profits of the year the costs of restructuringand reorganising its business activities and meeting thenon-recurring exceptional costs of dealing with suchextraneous factors as the millennium bug. In total thecharge against profit in respect of these costs for thecurrent year amounted to £35 million.

Despite the intense pressure on operating margins, group cash flow, before the payment of dividends and acquisition expenditure, remained strongly positive. Capital expenditure of £259 million was the highest in the group’s history and investment in new subsidiariestotalled a further £153 million.

It has been your Board’s strategy in recent years to directnew investment to regions and areas of activity wherelong-term prospects offer the opportunity for profitablegrowth. Supported by the group’s strong cash flow wehave been able to invest in these selected areas both at home and overseas.

Whilst we have largely eschewed new investment intothe packaged food industry in the United Kingdom wehave committed substantial funds in a focus on highadded value ingredients and processes for the food andpharmaceutical markets. From this UK base we have builtup Abitec Corporation in the US. Abitec is now a leadingsupplier of a wide range of personal care products tosome of the largest consumer product companies in theworld. In the past 12 months we have further expandedour presence in the food and pharmaceutical area by theacquisition of SPI Holdings, one of the leading suppliers of polyols in North and South America. At the same timeAC Humko has been building on its base business in the US edible oils market by expanding its presence in the manufacture and sale of high value nutritionalingredients. We believe that this is an area which willoffer long-term enhanced shareholder value.

Although we have had an increasing investment in textileretailing for some time, our rate of investment and profitgrowth has accelerated in the past five years. At a timewhen much of the retail clothing industry has sufferedfrom falling sales and profitability, our Penneys/Primarkbusiness, offering good value merchandise with a policyof every day low prices, has gone from strength tostrength. Before the end of the current year we shall have opened our 100th store and will be trading from 1.5 million square feet of selling space. We shall continue


Report of the Directors


Harry Bailey Acting Chairman

to follow a policy of selective expansion of this divisionand we are budgeting for further profit growth.

In the Far East, principally in China, we now havea significant presence in the sugar refining, glucoseand animal feed industries. In the past year, we havecompleted and successfully commissioned a newpharmaceutical dextrose plant at Lianhua and a newanimal feeds facility at Liaohe. The economic problemsof this region are well documented and our presentpolicy is to ensure the operational and profitabledevelopment of our existing activities. Neverthelessour sugar investments made good progress and brokeeven in a difficult over-supplied market environment.We believe that these investments will achieve thelong-term plans set for them.

In total, in the last five years we have invested some £530 million in the areas of activity outlined above. All of this additional investment has been made from the group’s internal cash flow.

Nevertheless, the need to sharpen further the focus of our traditional food manufacturing operations in the UK and Australia has increased in recent months. The UK food manufacturing industry has struggled inrecent years to meet the increased costs of doing business in an economic environment of zero food price inflation whilst endeavouring to service thedemands of the powerful food retailers. In Australiaconditions are equally difficult.

Your company has consistently invested to reduce costand improve efficiencies both at the manufacturing leveland in the supply chain. The further consolidation of foodretailing and the competition to preserve or increase sharein a mature retail market will place increased pressure on suppliers. In such a climate even the largest globalmanufacturers are being forced to reassess their productlines and brand strategies.

The requirement to protect shareholder value whereperformance levels are inadequate has resulted inmanagement undertaking a rigorous review of both our branded and own label product strategies. In someinstances this may lead to decisions to rationalise certainsectors of our existing activities, particularly in marketssuffering from over capacity and where the group doesnot have a leading presence.

At the time of writing this statement we are some twomonths away from the arrival of year 2000. Our programmeto address the group’s exposures has enabled all divisionsto prepare, we believe, adequately for the event. Equipmentand systems checks were completed for the most part onschedule and recent months have been spent preparing and

testing contingency plans. It has been stated that therecan be no absolute guarantees that the group will not besubject to a year 2000 failure. We have, however, takenevery action to ensure that if failures do occur they willnot be critical to any of our operations.

I have referred to the pressures on food manufacturers ofoperating in a non-inflationary environment. Despite thesepressures we continue to generate a strong cash flow andto maintain a powerful balance sheet. In the past fiveyears, including the £448 million returned to shareholdersin 1999, we have generated over £1 billion in additionalshareholders’ equity, an almost 50 per cent increase onshareholders’ funds since 1994. This financial strength willbe used not only to improve the competitiveness of ourexisting core activities but also to accelerate the acquisitionand development of new growth opportunities.

Board changesShareholders were informed in the interim report of theappointment to the Board of John Bason as financedirector and George Weston as the chief executive of our Allied Bakeries division. In October of this year theappointment of an additional non-executive director,Martin Adamson, was announced. Mr Adamson, aged60, was until he retired in 1996, a senior partner ofKPMG and a member of that firm’s board. He brings a great depth of knowledge and experience of thecommercial environment and will make a valuablecontribution to the Board’s decision making processes.

After 27 years’ service Trevor Shaw will be retiring inDecember from his full time executive position ascompany secretary with responsibility for legal matters.On behalf of the Board I would like to thank Mr Shaw for the significant contribution he has made to thecompany in this role.

DividendsThe directors have declared a second interim dividend of 6.50p per share (1998 – 6.25p) which will be paid on 21 February 2000 to shareholders registered at the close ofbusiness on 28 January 2000. This makes a total dividendfor the year of 10.75p, an increase of 2 per cent on theprevious year excluding the special dividend payment.

EmployeesThe results of the company and its future depend on theinvolvement of all who work for it. I would like to expressmy gratitude to all my fellow employees for their effortsin the past year and their commitment to the continuedsuccess of the company.

Harry BaileyActing Chairman


Group at a glance


The group’s food businesses canbe broadly categorised into theagricultural sector, ingredients andoils and grocery.

Other businesses are retail, glasspackaging, and the Australian andNew Zealand operations within thegroup’s 78% owned subsidiary,George Weston Foods.

AgricultureABF processes primary agriculturalproducts as well as producinganimal feeds.

Sugar:British SugarBoqing/Bo Hua (China)Sugarpol (Poland)

Flour milling:Allied Mills

Vegetable oil & rice processing:AC Humko (US)

Animal feeds & breeding:ABNFishersHuinong (China)Liaohe (China)BQPSullivans

Seed processing & merchanting:Allied GrainFishersGermains/IST/Seed SystemsJohn K King

Ingredients and oilsABF has a growing business in the fast developing, high technologyfood ingredients sector.

Baking & confectionery ingredients,yeast & fats:AB IngredientsKingsgateMauri ProductsRowallan

Oils, emulsifiers, fractionated fats,analogue cheeses, sterols, esters &antacid ingredients:AB TechnologyAbitec (US)AC Humko (US)Barcroft (US and France)

Starch, glucose & polyols:ABRBBBP (Indonesia)Lianhua (China)SPI Polyols (US)Getec (Brazil)



Retail and packagingABF has a significant presence in retailing through its Primarkfashion and clothing chain.

Retail:Penneys (Ireland)Primark

Glass packaging:Gregg & CoLax & Shaw

GroceryABF is a major supplier of bothbranded and private label groceryproducts.

Sugar:Silver Spoon

Bread, biscuits & crispbreads:AllinsonsKingsmillSpeedibakeBurtonsRyvita

Teas:TwiningsJacksons of PiccadillyNambarrie Tea Co.

Ice-creams, preserves & packagedgroceries:Allied Frozen FoodsNelsons of AintreeWestmill Foods

Australia and New ZealandGeorge Weston Foods is a majorfood processor in both Australiaand New Zealand.

Flour milling, bread, biscuits & baking products:BurgenCereformSpeedibakeTip TopWeston MillingWeston’s Biscuits

Meat & dairy:Chapman’sDon’sMelosiWatsonia

Starch & cleaning materials:Harper Love JasolWeston Bioproducts


Chief executive’s report


Peter Jackson Chief Executive

“ We will look to invest heavily in growth opportunities, either from within our existing portfolio or, where appropriate, by acquisition.”

Sales for the group increased 3 per cent to £4,308 millionand operating profit, before exceptional items andamortisation of goodwill, increased 3 per cent to £326 million. The textile retail business demonstratedremarkable growth and the manufacturing businesseshave held up well in the face of difficulties in a numberof markets.

We recognise that in certain of our traditional marketsconditions will remain difficult for the foreseeablefuture. As a result, those businesses affected by theseconditions must constantly adapt if they are to satisfythe company’s requirement for continual improvement in results from all sectors.

An emphasis on product development and costreduction, supported by selective capital expenditure,will continue to be a feature of some of our more maturemarkets. At the same time we will look to invest heavilywhere necessary in growth opportunities, either fromwithin our existing portfolio or, where appropriate, by acquisition.

The group’s food businesses can be broadly categorisedinto the agricultural sector, ingredients and oils andgrocery. Businesses covered separately from these are retail, glass packaging and our Australian and New Zealand operations within our 78% ownedsubsidiary, George Weston Foods. Accordingly thisreview of the businesses follows this format.

Agricultural sector – primary processing and services

Many of our businesses interface closely with the farmingworld, either as major processors of agricultural crops,such as sugar and grain milling, or as providers of services to the agricultural community in the form of seed processing, the manufacture of animal feed or the provision of a range of other services. Despite thedifficulties facing agriculture across the world, ourbusinesses have, in the main, performed well.

Amongst our sugar processing interests, British Sugaragain had an excellent harvest resulting in a sugarproduction of 1.44 million tonnes which was higher thanthe five year average but lower than the previous year’srecord. This benefit was, however, offset by a steep fall in world sugar prices and a reduction in domestic pricescaused by a relative weakening against sterling of theeuro, which in Europe is the currency that governs allsugar’s institutional prices.

Sales levels remained high and the company had majorefficiency gains, including the first year’s contributionfrom the new combined heat and power plant at ourWissington factory which, as well as providing power for our own operations, sells energy into the NationalGrid and therefore provides a further source of income. A similar plant has now been installed at Bury St Edmundsand will give further savings and revenue during the1999/2000 beet processing season.

Sugar operations in Poland, including the newly acquiredMichalow and Ciechanow factories, and China were alsohit by the fall in world sugar prices. However, the effectwas reduced by successful campaigns at all factories andefficiency gains in China.



ABR, our wheat starch and glucose business based in Corby, had a disappointing year which saw prices fall as a result of excess supply throughout Europe. However, the impact of this fall in prices was again somewhatmitigated by cost savings obtained from our investment in a new combined heat and power plant at its site. Further action is being taken to reduce the cost base to make sure it is in line with our expectation of lower long-term output prices.

Allied Mills continues to perform well although sellingprices in general for flour declined throughout the year.The mills sought to offset this by improving their salesmix. Action included a successful launch of a range ofcertified organic flours. Capital expenditure continued with investments in new flour and semolina mills at Tilbury which will be commissioned during the current year.

Despite a poor 1998 harvest in Scotland, Allied Grainmaintained profits, exporting large quantities of grainmostly through the Tilbury facility. Capital expenditure toincrease throughput and productivity at the seed plant atDiss was completed and a grain storage and drying plantnear Aberdeen has been acquired. Allied Grain continuedto develop its John K King business with the acquisition ofan oil extraction plant which will add value to oil seedcrops. One of the unique aspects of John K King is itsexpertise in managing the contract growing of specialistcrops, often for the pharmaceutical and personal careindustries. New customers were won in North Americaand New Zealand as well as in the UK.

Fishers is a major contributor to the group’s animal feedsbusiness and was strengthened by the acquisition of theFridaythorpe mill from Dalgety in November 1998 and bygrowing its blended feeds business, which specialises in

processing cereal based food factory by-products into anefficient source of animal nutrition. The poultry businessof Fishers increased both turnover and profits despite themarket conditions. Product quality and animal welfare areissues that are central to the retail sector and attention tothese issues has led to an increase of 20% in its poultrycustomer base.

Overall, our animal feeds business had a better year withABN, which produces and markets Bibby, KW and Tridentproducts, continuing to grow both in the UK and China.Increased profits and increased market share in the pig,poultry and cattle food sectors were obtained in the home market despite difficult conditions for farmers andincreasingly strict hygiene regulations. ABN acquired millsin Dorset and Carmarthen, made a major investment at itsKnockmore facility in Northern Ireland and established anew trials farm in Suffolk. The year also saw the successfullaunch of a range of organic feeds from the Enstone andMaldon mills.

After the year end the animal feeds businesses of Fishersand ABN were strengthened by the acquisition of six millsfrom Dalgety Feed Limited. This will consolidate thegroup’s position as a major producer in the UK market.

ABN is also one of the country’s most efficient pig farmers.It has a unique production system in terms of quality andtraceability and has been able to capture the added valuein these processes through its most recent investment inmeat processing.

In China, following two years of talks, ABN announced a joint venture investment with Liaohe Feed Group in the north-east of the country. The joint venture, whichoperates six manufacturing sites, currently producesaround 400,000 tonnes of animal feed each year, making

Seeds and seed processingform an increasinglyimportant part of thegroup’s agriculturaloperations.

The group is the largestsupplier of animal feeds toBritish farmers.

Capital investment incombined heat and powerat British Sugar and ABRprovides excellent financialand environmental returns.



Around eight million tonnes ofBritish sugar beet is used toproduce over a million tonnes ofsugar. A major customer forsugar is the soft drinks industry.


it amongst China’s largest producers. The company also has interests in animal nutrition research. Theseoperations in China are profitable and it is anticipatedthat profit growth will continue due to increased marketshare and production efficiency.

It is important to highlight our Germains seed coatingoperation which has achieved consistent profit growth inrecent years as a result of using its unique technologicalskills in a wider range of vegetable crops and a broaderrange of geographical regions. By acquisition and organicgrowth, it now has successful seed processing facilitiesthroughout North America and Europe.

Ingredients and oils

During the early part of the year, the company purchasedSPI, an ingredients company based in Delaware US thatsupplies products from factories in the US, France andfrom a joint venture in Brazil. This business has performedto expectations, with the market for polyols beingparticularly strong. It has now been streamlined into two divisions, SPI Foods and SPI Pharma.

SPI Foods supplies a range of polyols, which arealternative sweeteners, and has traditionally servedmanufacturers of sugarless chewing gum and toothpaste.It has a strong position in North America and during theyear its products were introduced to four new markets –sugar free cookies, therapeutic chewing gum, flavourencapsulation and hard candy. The company’s technologyallows customers to improve the shelf life of their product by reducing the calorific content. SPI Pharmaconcentrates on selling products based on the activeingredients in antacids, which are used in thepharmaceutical industry.

Our increasing focus on high added value ingredientsand processes for the food and pharmaceutical markets

has been further reinforced by the success of the AbitecCorporation in North America which is now a leadingsupplier of a wide range of ingredients for personal careproducts to market leaders world-wide. This business,which has had an excellent year, has reinforced itsposition by the completion of a new warehouse atJanesville, Wisconsin and a cosmetics applicationslaboratory at Columbus, Ohio. Work has started on new production facilities and a laboratory and officecomplex at Janesville.

Abitec Corporation in North America is a sister companyto AB Ingredients and AB Technology in the UK. AB Ingredients is a leader in Europe in its provision of bakery ingredients and is in the process of transferring its European technology into the North American market.AB Technology maintained sales volumes in the face ofstiff competition. Strong sales growth was achieved inSouth Africa and Canada and this is expected to continue.During the year, the company became the only producerof emulsifiers and speciality ingredient chemicals in Europeto have kosher registration of its entire product range, a strong selling point in the US.

Recently, Abitec’s business has been reinforced by theacquisition of Röhm Enzymes, one of the world’s leadingenzyme producers for the food, industrial and animal feedmarkets. This technically advanced business will providean excellent fit with the group’s other food ingredientbusinesses. The combination of enzymes with our existingoperations will allow the company to substantiallyimprove its product offering and enhance its geographicalspread. The business is headquartered in Darmstadt inGermany, with production and industrial enzyme facilitiesin Rajamäki, Finland.

AC Humko, based in Memphis, with a core business inedible oils, has increased its product range to include riceproducts, non-dairy cheeses, bakery mixes and icings,

The group adds value to its overseas investments insugar, starch and animal feedsby transferring technologyand expertise.

The group’s new acquisition,SPI Polyols, made a strongfirst year contribution to the US results.

Abitec in Europe and the USis leading the group’s driveinto the high added valueingredients sector, servicingthe food, pharmaceutical andpersonal care sectors.




Sunflower oil is one of themany raw materials used bythe group for processing intoedible oils and fats.



encapsulated flavour systems and a newly emergingpresence in the manufacturing and sale of high valuenutritional ingredients. AC Humko’s development this year has been somewhat marred by operational problemsat two of its main sites but we are confident that we now have management of the calibre to remedy theseteething difficulties and push forward to further profit growth.

Grocery

Our UK based grocery businesses experienced tightmarket conditions with on-going pressures on margins.We see no reason for this situation to change.

Price competition in the UK bread industry was wellpublicised during the year, with retailers reducing theshelf price of a loaf of economy bread to 7p for a periodof eight weeks. This activity distorted market pricedifferentials and generated increased sales of economybread at the expense of the standard and premiumsectors. Allied Bakeries felt the full impact of this butresponded positively by streamlining its business andlooking to further improve customer service.

Production ceased entirely at Nottingham and Norwichand bread production finished at Chester whilst the new bread plant at West Bromwich, installed during the previous year, became fully operational. A similar new plant was installed in Glasgow which will beoperational during the current year and will lead tosubstantial cost savings.

Kingsmill continues to be developed into the marketleading brand, with the addition of new variants includinga longer life sandwich loaf and the addition to the portfolioof Kingsmill Country Gold. The Allinson brand was

re-launched to give an added boost to its traditionalportfolio whilst introducing an organic range under thesame name.

Our Twinings tea business had a good year, increasingsales both in the UK and overseas. Strong competitionfrom local manufacturers and the consolidation ofmajor retail groups in many markets placed pressureon margins. However, profits increased as a result ofrelatively stable input costs and improved productivity.Brand leadership increased in the UK as a result ofsubstantial marketing support and an extension of theproduct range with the launch of green, organic andherbal teas. Flavoured green teas in liquid form werelaunched in Continental Europe.

Sales in Russia, which had collapsed along with thecountry’s economy in late 1998, are recovering toprevious levels using a new distributor. Danish fooddistributor, Carl Lange AS, was acquired in December1998. This, together with the previous purchase ofHaugen Gruppen in Norway, permits consolidation ofTwinings Scandinavian food business and adds to itsthriving distribution business.

In contrast to our tea business, Allied Frozen Foods, the second largest producer of ice-creams in the UK by volume, had a poor year. The market for own labelice-cream was squeezed as a result of the increased shelfspace being given to both new and established brands.New value added products were launched during the yearand overheads were reduced. New cold stores wereopened at both Ashford and Calne and new lines installedat Ashford, Devon and Calne. This business is one of themost innovative own label grocery suppliers in thecountry, developing many of the luxury products thathave become so much a part of the ice-cream market

AC Humko is the largestsupplier of own label oils tothe US market and it alsohas a strong presence inrice and high valuenutritional ingredients.

Silver Spoon is the firstmajor brand to launch an organic sugar foreveryday use.

AB Technology havedevised a solution to enableKingsmill to introduce along life loaf.


Teas from all the major growingareas of the world are blendedby Twinings and are available inover 100 countries.



in recent years. It also has excellent facilities for theproduction of less differentiated ice-cream products.

High raw materials prices in the early part of the yeardepressed margins at Rowallan Creamery, the fats andmargarines business. It was not until the second half ofthe year that lower input prices, lower packing costs,improved stock handling systems and reduced overheadsenabled margins to be improved.

The group’s jams and preserves business, Nelsons ofAintree, maintained its return on investment by increasingUK sales of industrial jams and fillings to compensate forsome loss of export trade. This business, which producesa range of products from the highest value retail jams totechnically advanced industrial products, also benefitedfrom the previous year’s capital expenditure.

Some of our largest recent investments have been madewithin Burton’s Biscuits. New plant has been installed in Edinburgh in response to market demand for fingershortbread and at the Blackpool confectionery factory toproduce both gums and jellies. Both these investmentswill allow further innovation in this sector which, togetherwith further cost reductions, is essential to provide thenecessary returns. Throughout the year, Wagon Wheelvolumes remained strong and a new double chocolatevariant was launched from the Llantarnam bakery.

Sales volumes at Ryvita were marginally lower than inprevious years but profits were improved by control ofcosts and improvement in factory operating procedures.

Westmill Foods, supplying packed flour and rice productsto the retail and ethnic sectors, also had a difficult yearbut showed notable progress towards the year end. A Chinese noodle business was purchased which,

together with the acquisition of a basmati rice mill inEssex, added significantly to our ethnic foods portfolio.This will complement the improvements that will followon from the launch during the past year of a range ofAllinson organic flours which is already showing signs ofoffsetting the fall in demand for plain and self-raisingflour in the retail market.

Australia and New Zealand

George Weston Foods produced improved results from its trading in the second half of the year despitecontinuing competitive conditions and sales in localcurrency increased by 4%. However £13 million of costs associated with upgrading its informationtechnology resulted in a decline in operating profit from £25 million to £17 million.

The milling division enjoyed strong domestic and exportsales, although there was considerable pressure onmargins following generally good harvests of animal feed grains. A number of major capital projects werecompleted during the year, including commissioning of a semolina mill at Brisbane, a new distribution centre in Sydney and refurbishment of the Narrandera mill.Investment is to continue with refurbishment of theAdelaide mill and construction of a new mill in Brisbane.

Strong competition in the bread market continuedthroughout the year. In Australia, the key brands of thebaking division, Tip Top, Golden and The White Stuffwere successfully re-launched in new packaging with newadvertising campaigns. Other brands also benefited fromnew promotional activity.

Results from Speedibake were disappointing mainly as aresult of production difficulties but these problems have

Profits increased at Ryvitaas a result of efficiencygains in production.

Wagon Wheels, which hasbecome symbolic of thegroup's popular brands,added a double chocolatevariant to the range.

In Australia, the Tip Toprange was relaunched to improve sales andstrengthen its image.




In Australia, as in the UnitedKingdom, the group is a majorprocessor of cereals for themilling and baking industries.


now been solved and performance is improving. The NewZealand baking and milling division produced improvedresults following the opening of its new ‘state of the art’bakery in Auckland.

This year was especially challenging for the biscuit and cake division where deep discounting affectedmargins and a programme of rationalisation and product innovation has been implemented to restorelong-term profitability.

The meat and dairy division enjoyed sales growth in spiteof strong competition. The Don Smallgoods business,based in Melbourne, was acquired on 5 October 1999.Don’s is one of Australia’s best known brands. Thisbusiness complements the strong existing presencealready enjoyed in Australia with Watsonia in WesternAustralia and Melosi in New South Wales.

Retail

The group’s textile retailing operations in Ireland, togetherwith Primark in the UK, reported another excellent resultwith sales up 23% to £364 million and operating profitup 87% to £43 million. This result not only reflects thesteady expansion of the store base over recent years,including the One-Up stores acquired some three yearsago, but also the growth in contribution from theincreased sales far exceeding the overheads needed tosupport them. The remarkable growth is a tribute to themanagement of these businesses who have shown anability to stay close to their market despite having tomanage a major store growth programme.

New stores added to the portfolio during the year includesites at Lisburn, Clydebank and Reading, as well as afurther 10 stores purchased from the Co-op. Of these,only the store at Clydebank opened during the year andall but two of the remainder should be open beforeChristmas 1999. Although we have incurred substantialexpenditure in acquiring and refitting these new storesand in investment in working capital no benefit wasreflected in this excellent result. We look forward toincreased sales and profit when these stores are trading.The group continues to invest in the refurbishment of existing stores with major work taking place at anumber of sites.

Glass Packaging

Our glass packaging business based at two plants inYorkshire, Lax & Shaw and Gregg & Company, is a majorsupplier to the UK grocery sector. This year it increased its production of containers despite a decline in the UKmarket. The main event this year was a £15 millioncapital spend on new furnace equipment at Gregg’swhich will significantly improve the business’ ability torespond flexibly and quickly to the market. We expect to see the benefit to shareholders of this investment inthe coming year and over the next few years.

Peter JacksonChief Executive

Quality fashion goods at down to earth prices are the recipe for retailingsuccess at Primark andPenneys.

Unusual and distinctivedesigns feature in the range of glass packagingproduced by Lax & Shaw at Leeds.

The range of baked, frozenand part-baked breadproducts has expandedthrough the innovativedevelopment of good ideas.



Finance director’s report


Group performanceSales for the group including its share of joint venturesincreased by 3%, or £106 million, to £4,308 million. Sales were not materially affected by currency translation.

Operating profit before exceptional items and theamortisation of goodwill increased by 3%, or £10 million,to £326 million. The exceptional item of £84 million arises from the write down of fixed assets following the adoption of Financial Reporting Standard 11 in thisfinancial year. This comprises £74 million relating to thecereal processing and baking businesses, which wasreported in the interim accounts, and a further £10 million in grocery.

Investment income decreased from £119 million in 1998 to £84 million this year. Profit before tax reducedfrom £391 million to £300 million reflecting the higherlevel of exceptional charges in 1999 and the lower investment income.

The tax charge of £115 million represents an effective tax rate of 29.6% (1998 – 30.2%) on the profits fromunderlying operations. The reduction in the tax ratereflects the lower rates of corporation tax payable in theUK and Republic of Ireland. No tax relief is available onthe exceptional items and amortisation of goodwill.

Special dividend and share consolidationOn 7 May 1999 a special dividend of 50p per share wasdeclared on the company’s ordinary 5p shares. It was paid on 14 May 1999 and cost the group £448 million.This return of surplus funds to shareholders will notinhibit the group’s ability to pursue attractive investmentopportunities when they materialise. On 7 May 1999 88new ordinary shares of 5 15/ 22p were issued in exchangefor each 100 existing ordinary shares of 5p. This shareconsolidation will allow earnings per share comparability.

Earnings and dividendsAfter the effect of the exceptional charges and lowerinvestment income, earnings decreased by £81 million to £184 million. The weighted average number of shares in issue decreased from 897 million to 860 millionas a result of the share consolidation that took placeduring the year. Earnings per ordinary share decreasedfrom 29.6p to 21.4p. However, after adjusting forexceptional items and amortisation of goodwill, earningsper share were unchanged from last year at 31.7p. The first interim dividend of 4.25p and a second interim dividend of 6.50p will produce an increase of

2% for the year, excluding the special dividend, at atotal cost of £85 million. Dividend cover, after adjustingfor exceptional items and amortisation of goodwill, is 2.9 times (1998 – 3.0). £349 million will be transferred from reserves.

Balance sheetTotal assets less current liabilities, excluding cash andcurrent asset investments, increased by £241 million to £1,889 million mainly as a result of acquisition ofbusinesses, including £108 million of goodwill, andinvestment in fixed assets. Cash and current assetinvestments declined by £559 million to £1,081 millionfollowing the payment of the special dividend of £448 million and a net cash outflow in the year withinvestment in capital expenditure and acquisition ofbusinesses exceeding the free cash flow of the business.As a result of these movements, total assets less currentliabilities declined by £318 million to £2,970 million.

A currency gain of £26 million arose on the translationinto sterling of the group’s non-sterling net assets and partly reverses the negative translation effect of £59 million at last year end. The gain principally relatedto the group’s net assets in Australia.

Cash flowNet cash flow from operating activities was £420 million.The £28 million reduction on last year was mainly theresult of the increased working capital in Primarkreflecting both the sales growth in that business and thelater date of the year end this year compared to 1998.

Capital expenditure during the year was £259 million andhas been used principally to upgrade, modernise andexpand existing manufacturing facilities and also forinvestment in new stores for Primark.

The acquisition spend during the year was £153 millionwhich included £126 million for the SPI Polyols businessin the US and £27 million for other businesses acquired to expand the product lines and capabilities of existinggroup businesses.

GoodwillFollowing the introduction of FRS 10 – ‘Goodwill andintangible assets’, goodwill relating to the acquisitionsduring the year has been capitalised and is being amortisedover a period of no more than 20 years. As permitted bythe accounting standard, goodwill arising on acquisitionsmade in previous years remains written off against

John Bason Finance Director



Exchange rates: Average Year end

1999 1998 1999 1998

US$ : £ 1.63 1.65 1.62 1.68

AUS$ : £ 2.56 2.54 2.50 2.80

Irish £ : £ 1.16 1.16 1.23 1.14

reserves. £108 million has been capitalised in the balancesheet and the effect on the current year’s profit and lossaccount is an amortisation charge of £5 million.

Treasury policy and controlsThe group’s cash and current asset investments totalled £1,081 million at the year end including some£800 million placed with professional investmentmanagers who have full discretion to act within closelymonitored and agreed guidelines.

The investment objective is to preserve the underlyingassets, whilst achieving a satisfactory return. Theinvestment guidelines are kept under constant reviewwith the objective of monitoring and controlling risklevels. The guidelines require that investments must carry a minimum credit rating of AA- and also set down conditions relating to sovereign risk, length ofmaturity, exchange rate exposure and type of investmentinstrument. Aggregate limits for each category ofinvestment and risk exposure are set for each manager.

The group’s United Kingdom working cash balances aremanaged by a central treasury department operatingunder strictly controlled guidelines, which also arrangesterm bank finance, as and when necessary, to finance the short-term working capital requirements particularlyfor the sugar beet and wheat harvests.

Futures contracts used as hedges in commodity tradingoperations are tightly controlled within set limits andtransactions of a speculative nature are not undertaken.

Foreign currencyThe group’s divisions operate mainly in their localcurrency and as a result the group’s transaction exposureto exchange rate movements is minimal. Significant cross-border transactions are covered by forward purchases andsales of foreign currency.

The group does not hedge the translation effect of exchangerate movements on the profit and loss account. The groupregards its interest in its overseas subsidiary undertakings aslong-term investments and does not hedge the translationeffect of exchange rate movements on these.

Year 2000The group initiated a formal programme in 1996/7designed to achieve year 2000 compliance and this hasbeen centrally guided and monitored. Each division hasmanaged comprehensive projects to achieve year 2000

compliance and internal and external reviews have been undertaken to confirm their reported progress.Replacement and testing programmes both for internalsystems and for embedded systems and process controlswere complete by the year end except for a very smallnumber of non-critical systems which have subsequentlybeen completed. Each division has maintained closeliaison with all significant customers and suppliers overthe last 18 months to ensure, so far as is possible, thecontinuity of key supplies and services.

There can be no absolute guarantees that the group will not be subject to a year 2000 failure and there still remains a risk that year 2000 failures will occur.Accordingly, the group has developed operatingprocedures for December 1999 to minimise this risk and contingency arrangements have also been developedshould such a failure occur.

The cost of implementing the year 2000 complianceprogramme is £24 million for the current year. £19 millionhas been charged against operating profits and thebalance has been capitalised in accordance with groupaccounting policies.

EuroThe group’s businesses which operate in the countriesthat have adopted the euro have made the necessaryadministrative and accounting changes to handle non-cash transactions. Euro notes and coins are currently notexpected to be in circulation until 1 January 2002 andarrangements for dealing with the conversion to the newcurrency are well advanced. Businesses in other countriesthat may adopt the euro in the future, principally theUnited Kingdom, also have the capability of handlingnon-cash euro transactions. All businesses are capable of dealing with the evolving euro requirements of thegroup’s customers and suppliers.

Financial reporting standards and accounting policiesFRS 10 – ‘Goodwill and intangible assets’, FRS 11 –‘Impairment of fixed assets and goodwill’, FRS 12 –‘Provisions, contingent liabilities and contingent assets’,FRS 13 – ‘Derivatives and other financial instruments:Disclosures’ and FRS 14 – ‘Earnings per share’ have been adopted in the current year’s financial statements.There have been no other changes to the group’saccounting policies from the previous year.

John BasonFinance Director



Executive Directors

Garry H Weston (age 72)A director since 1949, he has been chairman of thecompany since 1967. Between 1962 and 1967 he was an executive director of George Weston Foods Limited, Australia.

Harold W Bailey (age 63)A director since 1979, he was appointed deputy chairmanin 1996. He is a member of the Institute of CharteredAccountants of Scotland.

Peter J Jackson (age 52)A director since 1992, he was appointed chief executive on 1 June 1999. He was previously chief executive of British Sugar.

Trevor HM Shaw (age 65)A director since 1979, he is also company secretary, an office that he will resign in December 1999. He is a solicitor and his principal responsibilities are the legal,environmental and secretarial functions of the group.

George G Weston (age 35)Appointed to the Board on 19 April 1999, he first joinedthe company in 1988 as manager of the group’s flourmilling operations in Melbourne, Australia. He is chiefexecutive of Allied Bakeries.

John G Bason (age 42)Appointed finance director on 4 May 1999, he waspreviously the finance director of Bunzl plc and is amember of the Institute of Chartered Accountants inEngland and Wales.

Non-Executive Directors

WG Galen Weston OC (age 59)A director since 1964, he is chairman of George WestonLimited, Canada, a director of Canadian Imperial Bank ofCommerce and chairman of Holt, Renfrew & Co.

Professor Sir Roland Smith (age 71)†A director since 1994, he is Emeritus Professor ofManagement Science in the University of Manchesterand Chancellor of the University of Manchester Institute of Science and Technology. He is a director of several prominent public companies includingManchester United plc.

Rt. Hon. John RR MacGregor (age 62)†A director since 1994, he is a Member of Parliament and Privy Councillor and has held several Cabinet posts.He is a director of Slough Estates plc, Unigate plc andFriends Provident.

Martin G Adamson (age 60)†Appointed a non-executive director on 11 October 1999,he was a senior partner of KPMG and a member of thatfirm’s board until 1996. He is a member of the Instituteof Chartered Accountants of Scotland.

Board of directors

†Independent non-executive director

Professor Sir Roland Smith is the senior independent director.

Garry H Weston, Professor Sir Roland Smith, Rt. Hon. John RR MacGregor and Martin G Adamson are members of the Audit and Nomination committees.

Garry H Weston, Professor Sir Roland Smith and Rt. Hon. John RR MacGregor are members of the Remuneration committee.



Directors’ report

The directors submit to the members their sixty fourth annual report together with the financial statements of thecompany for the 53 weeks ended 18 September 1999.

Profits and dividendsThe group profit and loss account is on page 34. Profit for the financial year amounted to £184 million and the dividendsto £533 million. Dividends are detailed in note 8 on page 44. The special dividend of 50p per share, paid on 14 May1999, was combined with a share consolidation described below.

Review of activitiesThe activities of the group principally concern the processing and manufacture of food in Europe, the US, Australia,New Zealand and Asia, and textile retailing in the United Kingdom and the Republic of Ireland. Comments on thedevelopment of the business during the period under review and on the future outlook are contained within thechairman’s statement, chief executive’s report and finance director’s report on pages 2 to 17.

Tangible fixed assetsThe majority of the group’s tangible fixed assets are included in the financial statements at cost less depreciation. The properties are employed in the business and many of them were acquired when market values were substantiallylower than at present. The directors consider that a surplus over book value exists, but are unable to quantify the excess.

Share capitalOn 7 May 1999, a share capital consolidation was approved by shareholders, whereby 88 new ordinary shares of 5 15/ 22p were issued in exchange for each 100 existing ordinary shares of 5p.

Substantial shareholdingsDetails of a controlling interest in the shares of the company are given in note 30 on page 55.

At 8 November 1999, The Patrimony Fund Limited is the beneficial owner of 24,466,150 shares representing 3.09% of the issued ordinary shares in the company. So far as is known, no other person holds or is beneficially interested in a disclosable interest in the company.

Power to issue sharesAt the last annual general meeting held on 4 December 1998, authority was given to the directors to allotunissued relevant securities in the company up to a maximum of an amount equivalent to one third of the sharesin issue at any time up to 3 December 2003. No such shares have been issued. The directors propose to renew this authority at the annual general meeting to be held on 9 December 1999 for a further period of five years. A further special resolution passed at that meeting granted authority to the directors to allot equity securities inthe company for cash, without regard to the pre-emption provisions of the Companies Act 1985. This authorityexpires on the day after the annual general meeting to be held on 9 December 1999 and the directors will seek to renew this authority for a further period of one year.



Directors’ report continued

Associated British Foods plc 1994 Share Option Scheme (“The Scheme”)The Scheme was established by the company in 1994. Under the terms of The Scheme, options to purchase ordinaryshares in the company may be granted to selected qualifying employees over the ten years from November 1994. The grant of options is not subject to specified performance criteria.

Research and developmentThe trading divisions and Weston Research Laboratories develop existing technology, research new products andcontinuously monitor the maintenance of standards. Major facilities exist at Weston Research at Maidenhead, British Sugar at Norwich, George Weston Foods in Australia and at AC Humko in the US.

United Kingdom charitable and political contributionsContributions to charitable organisations by the group during the year totalled £0.3 million. No political contributionswere made by the group during the year.

Payments to suppliersThe group does not have a formal code that it follows with regard to payments to suppliers. It agrees payment terms with its suppliers at the time it enters into binding purchasing contracts for the supply of goods and services. Its suppliers are, in that way, made aware of these terms. The group seeks to abide by these payment terms wheneverit is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions.

Associated British Foods plc has no trade creditors.

AuditorsIn accordance with section 384 of the Companies Act 1985, a resolution for the re-appointment of KPMG Audit Plc as auditors of the company is to be proposed at the forthcoming annual general meeting.

EmployeesThe directors recognise the benefits which accrue from keeping employees informed of the development of thebusiness and involving them in the group’s progress.

The group is organised on a divisional basis and directors or managers of each division continue to evolve proceduresappropriate to their size and organisation, designed to keep employees and their representatives briefed on all relevant matters.

The group is committed to a policy to offer equal opportunities to all persons in their recruitment, training and careerdevelopment, having regard for their particular aptitudes and abilities. Full and fair consideration is given to applicantswith disabilities and every effort is made to give employees who become disabled whilst employed by the group anopportunity for retraining.



DirectorsThe names of the persons who were directors of the company as at 8 November 1999 appear on page 18.

George G Weston was appointed to the Board on 19 April 1999, John G Bason on 4 May 1999 and since the year end,Martin G Adamson on 11 October 1999. In accordance with the Articles of Association these directors now retire and,being eligible, offer themselves for re-election.

David NC Garman resigned from the Board on 16 April 1999.

In accordance with the Articles of Association, Harold W Bailey and Trevor HM Shaw retire from the Board by rotationand, being eligible, offer themselves for re-election.

Company secretaryTrevor HM Shaw will resign as company secretary in December 1999 and David Wilson will be appointed in his place.David Wilson joins the company having previously been company secretary and general counsel of Debenhams plc.

Directors’ remuneration reportRemuneration levels are set by reference to individual performance, experience and market conditions with a view to providing a package which is appropriate for the responsibilities involved. With the exception of Peter J Jacksonperformance-related bonuses are not awarded, other than in exceptional circumstances. Peter J Jackson is entitled to an award in the event that the quoted mid-market share price of the company’s ordinary shares reaches pre-determined targets.

Subject to the rules of the company’s Share Option Scheme, Peter J Jackson and John G Bason are both entitled toreceive an allocation of share options for each of the next five years and each of the next three years respectivelycommencing December 1999.

The company operates an executive pension scheme for senior executives, which is incorporated in the main groupscheme. John G Bason and George G Weston are members of that scheme. Peter J Jackson is a member of the British Sugar pension scheme. These schemes are defined benefit schemes whereby retirement benefits based on final remuneration and length of service are funded through a trustee administered scheme. The company payscontributions to the schemes on behalf of executives, based on the recommendations of the independent actuary who carries out a valuation every three years.

Other than as disclosed in the financial statements, at no time during the year has any director had any materialinterest in a contract with the company, being a contract of significance to either party.

The service contracts of all directors with the company are terminable on 12 months’ notice.



Directors’ remuneration report continuedThe remuneration of the directors was as follows:

Salary 1999 1998or fees Benefits Total Total £’000 £’000 £’000 £’000

Garry H Weston 385 14 399 394Harold W Bailey 110 8 118 120Peter J Jackson 289 13 302 268Trevor HM Shaw 182 15 197 185George G Weston 67 4 71John G Bason 103 5 108David NC Garman 135 11 146 222WG Galen Weston – – – –Professor Sir Roland Smith 20 – 20 20Rt. Hon. John RR MacGregor 20 – 20 20

1,311 70 1,381 1,229

Benefits include the value attributed to benefits such as company cars, fuel and medical insurance.

Pension benefits earned by the directors (1):Directors’ Increase in accrued Accumulated total

contributions pension entitlement accrued pensionin the year (2) during the year (3) at year end

(or resignation date)Age at Retirement 1999 1998 1999 1998 1999 1998

year end age £’000 £’000 £’000 £’000 £’000 £’000

Peter J Jackson 52 60 – – 13 10 121 105Trevor HM Shaw 65 65 – 8 – 7 110 110George G Weston 35 65 3 2 13 John G Bason 42 62 5 – – David NC Garman 47 62 6 10 3 3 25 21

(1) The pension entitlement shown is that which would be paid annually on retirement based on service to the end ofthe year, or date of retirement if earlier. David NC Garman left service on 30 April 1999. Trevor HM Shaw started todraw his pension on 28 September 1998.

(2) These relate to the contributions paid or payable in the year by the directors under the terms of the scheme.

(3) The increase in accrued pension during the year excludes any increase for inflation.




The company paid a pension to a former director of £91,000 (1998 – £19,000).

Dependants’ pensions – A 50% spouse’s pension is payable on death before or after retirement. In respect of Peter J Jackson the spouse’s pension is 66.66%.

Early retirement rights – The directors may retire before their normal retirement age, subject to an early retirement penalty.

Pension increases – Pensions are guaranteed to increase in line with the increases in RPI, restricted each year to 5%.Additional discretionary increases have been granted in the past.

At 18 September 1999, the following directors had outstanding options to acquire ordinary shares of Associated British Foods plc.

The option granted to David NC Garman to acquire 50,000 ordinary shares of Associated British Foods plc at 561.5plapsed on his resignation as a director of the company. His option to acquire 100,000 ordinary shares at 278.5p can beexercised between 17 November 1999 and 16 November 2000.

No other directors had any options during the year and no options lapsed or were exercised during the year.

The mid-market price of the shares at 18 September 1999 was 420.5p. The highest mid-market price during the yearwas 638.0p and the lowest mid-market price was 400.0p.

At 13.9.98 Dateor date of appointment At 18.9.99 Exercise from which Expiry

Number Granted Number price exercisable date

Peter J Jackson 100,000 – 100,000 561.5p 28.4.2003 27.4.2008George G Weston 15,000 – 15,000 561.5p 28.4.2003 27.4.2008John G Bason – 100,000 100,000 467.0p 11.5.2004 10.5.2009




Directors’ beneficial interestsThe directors of the company at the year end had the following beneficial interests, including family interests, in theshares and debentures of the company, its holding company, and its subsidiary and fellow subsidiary undertakings.

18 September 12 September1999 1998

Garry H WestonWittington Investments Limited, ordinary shares of 50p 4,925 4,925Associated British Foods plc, ordinary shares of 515/ 22p 610,124 610,124George Weston Foods Limited, ordinary shares of 50 cents 2,017 2,017

Harold W BaileyAssociated British Foods plc, ordinary shares of 515/ 22p 140,800 140,800Fortnum & Mason PLC, ordinary shares of 5p 1,000 1,000

Peter J JacksonAssociated British Foods plc, ordinary shares of 515/ 22p 17,600 17,600

Trevor HM ShawAssociated British Foods plc, ordinary shares of 515/ 22p 84,224 84,224

George G WestonWittington Investments Limited, ordinary shares of 50p 5,862 5,862Associated British Foods plc, ordinary shares of 515/ 22p 3,146,761 3,146,761

John G BasonAssociated British Foods plc, ordinary shares of 515/ 22p 1,500 –

WG Galen WestonWittington Investments Limited, ordinary shares of 50p 37,953 37,953Associated British Foods plc, ordinary shares of 515/ 22p 5,672,560 5,672,560

Rt. Hon. John RR MacGregorAssociated British Foods plc, ordinary shares of 515/ 22p 2,045 2,045

12 September 1998 or date of appointment if later. The number of shares held in Associated British Foods plc at 12 September 1998 havebeen restated to reflect the share consolidation that took place during the year.

*

*



Controlling interestThe ultimate holding company of Associated British Foods plc is Wittington Investments Limited, which, with itssubsidiary undertaking, Howard Investments Limited, held 52.7% of the total issued ordinary share capital.

Non-beneficial interestsThe directors of the company at the end of the year had the following non-beneficial interests:

1 Garry H Weston, WG Galen Weston and George G Weston are trustees of a trust, in which they have no beneficialinterest, which at 18 September 1999 held 683,073 ordinary shares of 50p (1998 – 683,073) in WittingtonInvestments Limited.

2 Harold W Bailey is a trustee of a trust, in which he has no beneficial interest, which at 18 September 1999 held 38,665 ordinary shares of 5 15/ 22p (1998 – Harold W Bailey was a trustee of two trusts holding 1,583,938 5p shares) in Associated British Foods plc.

3 Garry H Weston is a trustee of trusts, in which he has no beneficial interest, which at 18 September 1999 held1,358,665 ordinary shares of 5 15/ 22p (1998 – 1,983,938 5p shares) in Associated British Foods plc.

Subsequent changesThe interests shown above remained the same at 8 November 1999. Martin G Adamson was appointed to the Boardon 11 October 1999 and has a beneficial interest in 10,000 ordinary shares of 5 15/ 22p in Associated British Foods plc.

The environmental policy

The group is committed to enhancing its environmental performance through programmes of continual review. These programmes are devised and implemented by individual group divisions and reflect their specific tradingactivities. As a minimum, the divisions have adopted procedures so that:

• Relevant legislation is met.

• Emissions to air, releases to water and landfilling of solid wastes do not cause unacceptable environmentalimpacts and do not offend the community. Significant plant and process changes are assessed and positivelyauthorised in advance to prevent adverse environmental impacts.

• Energy is used efficiently and its consumption per tonne of product is monitored.

• Raw material consumption is minimised.

• Solid waste is reduced, reused and recycled where practicable.




• The amount of packaging used for group products is minimised, consistent with requirements for food safetyand product protection.

• Products are transported efficiently to minimise fuel usage, consistent with customers’ demands, productionarrangements and vehicle fleet operations.

• Uncontrolled releases and accidents are prevented so far as is reasonably practicable. Effective emergencyresponse procedures are in place to minimise the impact of foreseeable incidents.

Trevor HM Shaw is the Board director responsible for environmental performance.

The group will report annually on its environmental performance.

Environmental activities during 1999During the last year, group divisions have continued their commitment to minimise the environmental impact of theiroperations and examples of achievements are:

British Sugar achieved ISO14001 registration at its nine sugar beet processing sites for its environmental managementsystem. This system is subject to external audit.

A gas turbine combined heat and power (CHP) plant was installed at British Sugar’s Bury St Edmunds factory at a cost of £27 million. The plant uses clean natural gas to satisfy the site’s steam and electrical needs and provides up to 50MW of electricity for the national grid. This is British Sugar’s second such plant, the first having been built at itsWissington factory in 1998. CHP plants are the most efficient method of generating steam and electricity from fossil fuel converting some 80% of the energy in the fuel to usable power. The plants save 95,000 tonnes of carbon dioxideemissions per year and significantly contribute to the government’s climate change commitments. The potential forexpanding CHP operations to two further sites is being reviewed.

ABR previously satisfied its production needs by importing electricity and by generating steam in three gas fired boilers.It replaced its boilers with a gas turbine CHP scheme which now supplies the Corby site’s steam and electrical power.The excess electricity generated is exported to the national grid providing a source of revenue to offset the cost ofconversion. Site energy costs and emissions of acid gasses have fallen by 75% and overall the emissions of carbondioxide have fallen by 35%.

The glass packaging business has achieved an increase of over 20% in glass recycling. The funds generated have beeninvested in equipment to facilitate further increases. The new furnace at Gregg’s will improve energy efficiency by40%, similar to that from the new furnace at Lax & Shaw which was commissioned in 1996.




‘State of the art’ milling equipment at Allied Mills has already shown energy savings of over 5% and the latest mills areover 30% more energy efficient than the ones they replace.

In line with government policy, British Sugar completed a two year programme to remove all PCB (polychlorinatedbiphenyls) contaminated electrical equipment from their sites at a cost of £0.5 million.

As a result of plant operational changes and process improvements, water consumption has been reduced by 25% at AB Technology.

Food by-products from Allied Bakeries and Fishers are now being recovered for use in the production of animal feed.

A pilot scheme to segregate waste materials at the Primark store in Belfast has resulted in 90% of this waste beingrecycled and disposal costs being halved. It is expected that this scheme will be extended to other Primark storesduring the coming year.

New cold stores at the Ashford and Calne sites of Allied Frozen Foods now use ammonia as the refrigerant, replacingozone depleting substances such as chlorofluorocarbons.

Twinings has reduced its paper and plastic packaging tonnage by utilising thinner gauge materials and has achieved5% reductions in both water consumption and solid waste.

Environmental actions for 2000One of the group’s strategic objectives is to reduce, reuse and recycle waste where feasible. During 1999 anindependent survey of our manufacturing sites was commissioned with the objective of identifying waste andpromoting waste minimisation. During the year the results of the survey will be used to identify best practices andimprove group performance.

Each division will review its environmental performance and produce an annual summary for the Board. Reports from2001 will contain data on relevant key performance indicators.



Corporate governance

Corporate governance has been and remains the responsibility of the whole Board. The Combined Code – Principles ofGood Governance and Code of Best Practice (“the Combined Code”) was published by the London Stock Exchange inJune 1998. This statement describes how the company applies the principles and complies with the provisions of theCombined Code.

ComplianceFollowing publication, the Board took steps to achieve compliance with the Code provisions set out in Section 1 of theCombined Code. In particular:

• Peter J Jackson was appointed chief executive on 1 June 1999.

• Professor Sir Roland Smith was appointed senior independent director on 30 June 1999.

• Martin G Adamson was appointed as an independent non-executive director on 11 October 1999.

• A Nomination committee was established on 30 June 1999 comprising any two of the three independent non-executive directors and is chaired by Garry H Weston.

• A resolution proposing an amendment to the company’s Articles of Association, requiring all directors to besubject to re-election every three years, will be put to the forthcoming annual general meeting. The results ofproxy votes on each resolution will be announced at the forthcoming annual general meeting.

After implementation of these changes on 11 October 1999, the Board considers that it was and continues to be in full compliance with the Code provisions set out in Section 1 of the Combined Code with the following exceptions:

• The Combined Code recommends that the Audit and Remuneration committees should only comprise non-executive directors. The Board does not accept this recommendation as it considers that Garry H Weston,executive chairman, should serve on both committees in view of his unique knowledge of the business and its people.

• The Combined Code recommends that the performance related elements of remuneration should form asignificant proportion of the total remuneration of executive directors. The Board does not accept thisrecommendation as it considers its existing policies in this regard to be in the best interests of the company and its shareholders.

The statement of directors’ responsibilities for preparing the financial statements is set out on page 32.




The Board

The Board of directors generally meets on a quarterly basis, with additional meetings to consider specific issues when required, and concentrates mainly on strategy, direction and financial performance. The Board is chaired by Garry H Weston and Peter J Jackson is chief executive. Details of the full Board are set out on page 18. Professor Sir Roland Smith is the recognised senior independent director. For the purposes of the Combined Code, WG GalenWeston is not regarded as independent. The Board has a formal schedule of matters reserved for its decision, but alsodelegates specific responsibilities to Board committees, notably the Audit, Remuneration and Nomination committees.Directors receive Board and committee papers in advance of Board and committee meetings and also have access tothe advice and services of the company secretary. The Board has adopted a procedure whereby directors may, in thefurtherance of their duties, take independent professional advice on any matter at the company’s expense.

The group’s organisational structure is decentralised, based on short lines of communication. Managementresponsibilities for major operating divisions are devolved to divisional chief executives reporting directly to the chief executive. George Weston Foods Limited is a quoted Australian public company having its own board chaired by Garry H Weston.

Board committees

Remuneration committeeThe Remuneration committee sets the remuneration and other terms of employment of executive directors and the company’s policy on remuneration of the senior executives within terms of reference agreed by the Board.

Nomination committeeThe Nomination committee reviews the composition of the Board and recommends to the Board appointments of newexecutive and non-executive directors. Garry H Weston chairs the committee, which also comprises any two of theindependent non-executive directors of the company.

Group audit committeeThe group Audit committee has terms of reference modelled closely upon those recommended in the Combined Code.It comprises the independent non-executive directors and Garry H Weston and is chaired by Professor Sir RolandSmith. It meets regularly to receive and review reports from the external auditors and from management. As part of itsduties, the committee receives and considers reports on the system of internal financial control.

Communication with shareholdersApart from the annual general meeting, the company communicates with its shareholders by way of the annual reportand accounts, the half-yearly interim report and the company’s web site.



Internal financial controls

The Combined Code introduced a new requirement that the directors review and report on the effectiveness of thegroup’s internal controls, including operational controls. This affects the existing requirements to report on internalfinancial controls. However, as permitted by the London Stock Exchange, the directors have restricted their review tointernal financial controls in accordance with existing guidelines.

The directors are responsible for the group’s systems of internal financial control, which are directed to safeguardingthe assets of the group, ensuring proper accounting records are maintained and that financial information used withinthe business or for publication is reliable. Any system of internal financial control can, however, only provide reasonableand not absolute assurance against mistakes or loss.

The group’s system of internal financial controls includes:

• Standards

There are group-wide guidelines on the minimum level of internal financial control that each of the divisionsshould exercise over specified processes. Each business has developed and documented policies and proceduresin order to comply with the minimum control standards established, including procedures for monitoringcompliance and taking corrective action. The board of each business is required to confirm annually that thepolicies and procedures it has established have been complied with.

• High level controls

All businesses prepare annual plans and budgets for operational and cash performance, which are updatedregularly. Performance against budget is monitored at operational level and centrally, with variances beingreported promptly. The cash position at group and operational level is monitored constantly and variancesfrom expected levels thoroughly investigated.

A significant part of the group’s cash reserves is managed by independent fund managers operating withindetailed guidelines specified by the group relating to, inter alia, permitted investments and counter parties,currency exposures and approved instruments. The balance of the group’s cash reserves is managed by itstreasury function in accordance with guidelines referred to in the financial review.

There are clearly defined guidelines for capital expenditure and investment decisions encompassing budgets,appraisal and review procedures and levels of authority.

• Review

The detailed policies and internal financial control procedures established at operational level are reviewed bygroup personnel. The Audit committee receives reports on internal financial control issues from managementand from the external auditors. The directors confirm that they have reviewed the effectiveness of the systemof internal financial control utilising the review process set out above.




Going concern

After making due enquiries, the directors have a reasonable expectation that the group has adequate resources tocontinue in operational existence for the foreseeable future. For this reason they continue to adopt the going concernbasis for preparing the financial statements on pages 34 to 56.

By order of the BoardTHM Shaw, Secretary8 November 1999


Directors’ responsibilities


Company law requires the directors to prepare financial statements for each financial year which give a true and fairview of the state of affairs of the company and of the group and of the profit or loss for that period. In preparingthose financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departuresdisclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that thegroup will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at anytime the financial position of the company and to enable them to ensure that the financial statements comply withthe Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them tosafeguard the assets of the group and to prevent and detect fraud and other irregularities.

in respect of the preparation of financial statements



Auditors’ report to the members of Associated British Foods plc

We have audited the financial statements on pages 34 to 56. We have also examined the amounts disclosed relating toemoluments, share options and directors’ pension entitlements which form part of the Directors’ Report on pages 21 to 23.

Respective responsibilities of directors and auditorsThe directors are responsible for preparing the Annual Report and Accounts, including, as described on page 32, thefinancial statements. Our responsibilities, as independent auditors, are established by statute, the Auditing PracticesBoard, the Listing Rules of the London Stock Exchange, and by our profession’s ethical guidance.

We report to you our opinion as to whether the financial statements give a true and fair view and are properlyprepared in accordance with the Companies Act. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we havenot received all the information and explanations we require for our audit, or if information specified by law or theListing Rules regarding directors’ remuneration and transactions with the company is not disclosed.

We review whether the statement on page 28 reflects the company’s compliance with those provisions of the CombinedCode specified for our review by the London Stock Exchange, and we report if it does not. We are not required to forman opinion on the effectiveness of the company’s corporate governance procedures or internal controls.

We read the other information contained in the annual report and accounts, including the corporate governancestatement, and consider whether it is consistent with the audited financial statements. We consider the implications forour report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.

Basis of audit opinionWe conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An auditincludes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements.It also includes an assessment of the significant estimates and judgements made by the directors in the preparation ofthe financial statements, and of whether the accounting policies are appropriate to the group’s circumstancesconsistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements arefree from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we alsoevaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion the financial statements give a true and fair view of the state of affairs of the company and the group asat 18 September 1999 and of the profit of the group for the year then ended and have been properly prepared inaccordance with the Companies Act 1985.

KPMG Audit PlcChartered AccountantsRegistered AuditorLondon8 November 1999


Consolidated profit and loss account

Continuing Continuingoperations operations

before beforeexceptional Exceptional Total exceptional Exceptional Total

items items 1999 items items 1998Note £m £m £m £m £m £m

Turnover of the group including its share of joint ventures 4,308 – 4,308 4,202 – 4,202

Less share of turnover of joint ventures (9) – (9) (7) – (7)

Group turnover 1 4,299 – 4,299 4,195 – 4,195Operating costs 2 (3,982) (84) (4,066) (3,878) (19) (3,897)

Group operating profit 317 (84) 233 317 (19) 298 Share of operating results of – joint ventures 2 – 2 (3) – (3)

– associates 2 – 2 2 – 2

Total operating profit 1 321 (84) 237 316 (19) 297

Operating profit before exceptional items and amortisation of goodwill 326 – 326 316 – 316

Exceptional items – (84) (84) – (19) (19)Amortisation of goodwill (5) – (5) – – –

Profits less losses on sale of properties 4 – 4 (3) – (3)Investment income 5 84 – 84 119 – 119

Profit on ordinary activities before interest 409 (84) 325 432 (19) 413 Interest payable 6 (25) – (25) (22) – (22)

Profit on ordinary activities before taxation 384 (84) 300 410 (19) 391 Tax on profit on ordinary activities 7 (115) – (115) (124) – (124)

Profit on ordinary activities after taxation 269 (84) 185 286 (19) 267Minority interests – equity (1) – (1) (2) – (2)

Profit for the financial year 268 (84) 184 284 (19) 265Dividends – interim 8 (85) – (85) (94) – (94)

– special interim 8 (448) – (448) – – –

Transfer (from)/to reserves 21 (265) (84) (349) 190 (19) 171

Basic and diluted earnings per ordinary share 9 31.1p (9.7)p 21.4p 31.7p (2.1)p 29.6pEarnings per ordinary share before

amortisation of goodwill 9 31.7p (9.7)p 22.0p 31.7p (2.1)p 29.6p

The group has made no material acquisitions nor discontinued any operations within the meaning of the Financial Reporting Standards during either1999 or 1998.


for the year ended 18 September 1999



1999 1998Note £m £m

Fixed assetsIntangible assets – goodwill 10 108 –Tangible assets 11 1,528 1,439

1,636 1,439

Interest in net assets of – joint ventures 13 7 3– associates 13 8 6

Other investments 13 16 17

Total fixed asset investments 31 26

1,667 1,465

Current assetsStocks 14 464 428 Debtors 15 491 481Investments 16 1,030 1,570Cash at bank and in hand 51 70

2,036 2,549

Creditors amounts falling due within one yearShort term borrowings 17 (53) (44)Other creditors 18 (680) (682)

(733) (726)

Net current assets 1,303 1,823

Total assets less current liabilities 2,970 3,288Creditors amounts falling due after one yearLoans 17 (157) (157)Other creditors 18 (10) (13)

(167) (170)Provisions for liabilities and charges 19 (50) (55)

2,753 3,063

Capital and reservesCalled up share capital 20 47 47Revaluation reserve 21 3 3 Other reserves 21 173 173Profit and loss account 21 2,451 2,774

Equity shareholders’ funds 2,674 2,997Minority interests in subsidiary undertakings – equity 79 66

2,753 3,063

These financial statements were approved by the Board of directors on 8 November 1999 and were signed on its behalf by:

Harry Bailey DirectorJohn Bason Director

Consolidated balance sheet

at 18 September 1999


Consolidated cash flow statement

1999 1998Note £m £m

Cash flow from operating activities 25 420 448

Dividends from joint ventures 1 1

Dividends from associates 2 1

Return on investments and servicing of financeDividends and other investment income 90 113 Interest paid (24) (22)Dividends paid to minorities (2) (2)

64 89

Taxation (120) (127)

Capital expenditure and financial investmentPurchase of tangible fixed assets (259) (226)Sale of tangible fixed assets 16 10Purchase of equity investments (1) (3)Sale of equity investments 10 3Purchase of own shares (1) (8)

(235) (224)

Acquisitions and disposalsPurchase of new subsidiary undertakings 26 (153) (57)Purchase of joint ventures and associates (3) (1)

(156) (58)

Equity dividends paid (538) (135)

Net cash outflow before use of liquid funds and financing (562) (5)

Management of liquid funds 28 (423) (107)Financing 27 (1) (11)(Decrease)/increase in cash 28 (138) 113

(562) (5)





Consolidated statement of total recognised gains and lossesfor the year ended 18 September 1999

1999 1998£m £m

Profit for the financial year 184 265Currency translation differences on foreign currency net assets 26 (59)

Total recognised gains and losses 210 206

Consolidated statement of historical cost profitsfor the year ended 18 September 1999

There is no material difference between the group results as reported and on an unmodified historical cost basis. Accordingly, no note of historicalcost profits and losses has been prepared.

Reconciliation of movements in shareholders’ fundsfor the year ended 18 September 1999

Company Group1999 1998 1999 1998

£m £m £m £m

Profit for the financial year 408 166 184 265Dividends – interim (85) (94) (85) (94)

– special interim (448) – (448) –

Transfer (from)/to reserves (125) 72 (349) 171Other recognised gains and losses relating to the year – – 26 (59)Goodwill acquired and written off to reserves – – – (32)

Net (decrease)/increase in shareholders’ funds (125) 72 (323) 80Opening shareholders’ funds 304 232 2,997 2,917

Closing shareholders’ funds 179 304 2,674 2,997


Company balance sheet

1999 1998Note £m £m

Fixed assetsInvestment in own shares 13 12 14Shares in subsidiary undertakings 24 253 171

265 185

Current assetsDebtors 15 996 1,024Investments 16 80 57Cash at bank and in hand 20 23

1,096 1,104

Creditors amounts falling due within one year 18 (1,182) (985)

Net current (liabilities)/assets (86) 119

179 304

Capital and reservesCalled up share capital 20 47 47 Profit and loss account 21 132 257

Equity shareholders’ funds 179 304

These financial statements were approved by the Board of directors on 8 November 1999 and were signed on its behalf by:

Harry Bailey DirectorJohn Bason Director


at 18 September 1999



Accounting policies

Basis of preparationThese financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets, and inaccordance with applicable accounting standards and the Companies Act 1985.

Basis of consolidationThe group accounts comprise a consolidation of the accounts of the company and its subsidiary undertakings, together with the group’s share ofthe results and net assets of its joint ventures and associates. The financial statements of the company and its subsidiary undertakings are made up for the 53 weeks ended 18 September 1999, except that, to avoid delay in the preparation of the consolidated financial statements, those ofthe Australian and New Zealand group and China and Poland are made up to 31 July 1999, and the North American subsidiary undertakings aremade up to 31 August 1999.

AcquisitionsThe consolidated profit and loss account includes the results of new subsidiary undertakings, joint ventures and associates attributable to theperiod since change of control.

DisposalsThe results of subsidiary undertakings, joint ventures and associates sold are included up to the dates of change of control. The profit or loss onthe disposal of an acquired business takes into account the amount of any related goodwill previously written off directly to reserves, or the netamount of goodwill remaining unamortised, as appropriate.

Intangible fixed assetsIntangible fixed assets consist of goodwill arising on acquisitions since 13 September 1998, being the excess of the fair value of the purchaseconsideration of new subsidiary undertakings, joint ventures and associates over the fair value of net assets acquired. Goodwill is capitalised inaccordance with FRS 10 and amortised over its useful economic life, not exceeding 20 years. Goodwill previously written off against reserves hasnot been reinstated.

Foreign currenciesAssets and liabilities denominated in foreign currencies are converted into sterling at rates of exchange ruling at the balance sheet date, or at thecontracted rate as appropriate. The assets and liabilities of overseas operations are converted into sterling at the rates of exchange ruling at thebalance sheet date. The results of overseas operations have been translated at the average rate prevailing during the year. Exchange differencesarising on consolidation are taken directly to reserves. Other exchange differences are dealt with as part of operating profits.

PensionsThe group has established separately funded pension schemes for the benefit of permanent staff, which vary with employment conditions in thecountries concerned. Net pension costs are charged to income over the expected average remaining service lives of employees. Any differencesbetween the charge for pensions and total contributions are included within pension provisions or debtors as appropriate.

Research and developmentExpenditure in respect of research and development is written off against profits in the period in which it is incurred.

Fixed asset investmentsJoint ventures and associates are accounted for in the financial statements of the group under the equity method of accounting. Other fixed assetinvestments in the group’s accounts, and all fixed asset investments in the accounts of the company, are stated at cost less amounts written off inrespect of any permanent diminution in value.

DepreciationDepreciation, calculated on cost or on valuation, is provided on a straight line basis to residual value over the anticipated life of the asset. No depreciation is provided on freehold land or payments on account. Leaseholds are written off over the period of the lease. The anticipated lifeof other assets is generally deemed to be not longer than:

Freehold buildings 66 yearsPlant, machinery, fixtures and fittings

– sugar factories 20 years– other operations 12 years

Vehicles 8 years


Accounting policies continued

LeasesAll material leases entered into by the group are operating leases, whereby substantially all of the risks and reward of ownership of an asset remainwith the lessor. Rental payments are charged against profits on a straight-line basis over the life of the lease.

StocksStocks are valued at the lower of cost or net realisable value, after making due provision against obsolete and slow-moving items. In the case ofmanufactured goods the term “cost” includes ingredients, production wages and production overheads.

Current asset investmentsCurrent asset investments are stated at the lower of cost or market value.

Financial instrumentsForward foreign exchange contracts and currency options are used to hedge forecast transactional cash flows and accordingly, any gains or losseson these contracts are recognised in the profit and loss account when the underlying transaction is settled. Derivative commodity contracts areused to hedge committed purchases or sales of commodities and accordingly, any gains or losses on these contracts are recognised in the profitand loss account in the same accounting period as the underlying purchase or sale. Gains or losses arising on hedging instruments which arecancelled due to the termination of the underlying exposure are taken to the profit and loss account immediately.

Deferred taxDeferred tax represents corporation tax in respect of accelerated taxation allowances on capital expenditure and other timing differences, to theextent that a liability is anticipated in the foreseeable future.




Notes forming part of the financial statements

1. Analysis of turnover, profits and net assets1999 1998

£m £m

TurnoverGeographical analysis (by origin and destination):European Union, mainly United Kingdom and Ireland 2,962 3,023 Australia and New Zealand 548 534 North America 665 557Elsewhere 124 81

Group turnover 4,299 4,195

Business sector:Manufacturing 3,935 3,900Retail 364 295

Group turnover 4,299 4,195

ProfitsGeographical analysis (by origin):European Union, mainly United Kingdom and Ireland 284 268Australia and New Zealand 17 25North America 26 22Elsewhere (1) 1

Total operating profit before exceptional items and amortisation of goodwill 326 316Exceptional items – European Union (84) (13)

– elsewhere – (6)Amortisation of goodwill – North America (5) –

Total operating profit 237 297

Business sector:Manufacturing 283 293Retail 43 23

Total operating profit before exceptional items and amortisation of goodwill 326 316Exceptional items – manufacturing (84) (19)Amortisation of goodwill – manufacturing (5) –

Total operating profit 237 297Other net income 63 94

Profit on ordinary activities before taxation 300 391

Exceptional items in the year relate to an FRS 11 impairment charge in respect of fixed assets within the group’s UK manufacturing activities, basedon their estimated value in use, using a weighted average cost of capital of 12.5%. In the previous year, exceptional items related to an increase inprovisions of £13 million for the British Sugar European Commission fine and a charge of £6 million for a write down within our joint ventures.

Net assetsGeographical analysis (by origin):European Union, mainly United Kingdom and Ireland 1,320 1,303Australia and New Zealand 241 209North America 331 188Elsewhere 115 84

2,007 1,784



Notes forming part of the financial statements continued

1. Analysis of turnover, profits and net assets continued1999 1998

£m £m

Net assets continued Business sector:Manufacturing 1,861 1,696Retail 146 88

2,007 1,784Net financial assets 746 1,279

2,753 3,063

2. Operating costs1999 1998

£m £m

Cost of sales (including exceptional items and amortisation of goodwill) 3,283 3,183Distribution costs 568 537Administration expenses 215 177

Operating costs 4,066 3,897

Operating costs are stated after charging:Staff costs 553 543Impairment of fixed assets 84 –Amortisation of goodwill 5 –Depreciation of fixed tangible assets 142 151Hire of plant and machinery 6 6Rentals payable under property leases 18 18Research and development 7 9

The remuneration of the auditors in respect of audit services provided to the group during the year was £1.9 million (1998 – £2.0 million) and £0.2 million (1998 – £0.2 million) in respect of audit services provided to the company. The remuneration of the auditors and their associates inrespect of non-audit services to the company and its UK subsidiaries was £1.4 million (1998 – £1.3 million).

3. Employees1999 1998

Average number of employees:European Union, mainly United Kingdom and Ireland 20,994 21,825Australia and New Zealand 7,147 7,115North America 2,157 1,577Elsewhere 3,888 2,195

34,186 32,712

£m £m

Staff costs – wages and salaries 513 502– social security costs 30 31– other pension costs 10 10

553 543




4. Pension costs

The group operates pension schemes, the majority of which are of the defined benefit type. The pension cost charge for the year was £10 million(1998 – £10 million). The two main United Kingdom schemes provide benefits based on final pensionable earnings. The pension costs in the UnitedKingdom are assessed in accordance with the advice of independent qualified actuaries using the projected unit method. The last actuarial valuationsof the two major schemes were carried out as at 5 April 1996 and 1 October 1998. In these valuations it was assumed that the investment returnwould exceed price inflation by 4%, that salary increases would exceed price inflation by 2% and that increases in dividends would either keep pacewith price inflation or fall behind it by 0.75%. At the valuation dates the total market value of the two major schemes’ assets was £1,473 millionand the actuarial value of these assets represented 125% of the benefits that had accrued to members after allowing for expected future increasesin earnings.

The group also operates pension schemes in Australia and New Zealand, the United States and the Republic of Ireland. The charge for the year isbased on recommendations by qualified local actuaries.

5. Investment income1999 1998

£m £m

Dividends from current asset equity investments 2 2 Interest from other current asset investments – listed 8 3

– unlisted 70 112 Profit on sale of current asset equity investments 4 2

84 119

6. Interest payable1999 1998

£m £m

Bank loans and overdrafts 1 1Other loans 24 21

25 22

7. Tax on profit on ordinary activities1999 1998

£m £m

The charge for the year is as follows:United Kingdom – corporation tax at 30.5% (1998 – 31.0%) 89 93Overseas – income and corporation tax 23 26

– deferred tax 2 3 Joint ventures and associates 1 2

115 124

The charge for United Kingdom corporation tax is stated after no deduction for double taxation relief (1998 – £1 million) on dividends receivedfrom overseas subsidiaries.



8. Dividends of Associated British Foods plc1999 1998

£m £m

First interim dividend of 4.25p per share (1998 – 4.25p) 34 38Second interim dividend of 6.50p per share (1998 – 6.25p) 51 56

85 94 Special interim dividend of 50.00p per share (1998 – nil) 448 –

533 94

The special interim dividend was declared on the ordinary shares of 5p, prior to their consolidation, and was paid on 14 May 1999. The first interimdividend was paid on 1 September 1999. The second interim dividend will be paid on 21 February 2000. Both ordinary interim dividends arepayable following the consolidation of the shares.

9. Earnings per ordinary share1999 1998

£m £m

Profit for the financial year attributable to shareholders 184 265Exceptional items 84 19Amortisation of goodwill 5

Profit for the financial year before exceptional items and amortisation of goodwill 273 284

Earnings per ordinary share 21.4p 29.6pEarnings per ordinary share on exceptional items 9.7p 2.1pEarnings per ordinary share on amortisation of goodwill 0.6p

Earnings per ordinary share before exceptional items and amortisation of goodwill 31.7p 31.7p

The calculation is based on available profit for the financial year of £184 million (1998 – £265 million). 860 million shares (1998 – 897 million) wasthe weighted average number of ordinary shares in issue during the year and has been calculated taking into account the special dividend and shareconsolidation that took place during the year. The calculation of the weighted average number of shares excludes the shares held by the EmployeeShare Option Scheme on which the dividends are being waived.

Earnings per ordinary share before exceptional items and amortisation of goodwill has been provided so that the effects of exceptional items and theamortisation of goodwill on reported earnings can be fully appreciated.

The diluted earnings per share calculation takes into account the effect of dilutive share options. The weighted average fully diluted number ofshares is 860 million (1998 – 897 million).




10. Intangible fixed assets – goodwill£m

Cost at 12 September 1998 –Goodwill arising on acquisitions 113

Cost at 18 September 1999 113

Amortisation at 12 September 1998 –Provided during year 5

Amortisation at 18 September 1999 5

Net book value at 18 September 1999 108

Net book value at 12 September 1998 –

11. Tangible fixed assetsLand Plant Fixtures Paymentsand and and on

buildings machinery fittings account Total£m £m £m £m £m

Cost or valuation at 12 September 1998 603 1,588 165 64 2,420 Effect of currency changes 6 27 1 1 35New subsidiary undertakings 19 26 1 4 50Additions 65 149 24 19 257Disposals (9) (39) (12) – (60)

Cost or valuation at 18 September 1999 684 1,751 179 88 2,702

Depreciation at 12 September 1998 103 780 98 981Effect of currency changes 1 13 – 14Provided during year 16 108 18 142Impairment of fixed assets 5 76 3 84On disposals (2) (33) (12) (47)

Depreciation at 18 September 1999 123 944 107 1,174

Net book value at 18 September 1999 561 807 72 88 1,528

Net book value at 12 September 1998 500 808 67 64 1,439

1999 1998£m £m

Analysis of land and buildings at net book valueFreehold 488 450Long leasehold 47 42Short leasehold 26 8

561 500

Land and buildings stated at valuation had a net book value at 18 September 1999 of £18 million (1998 – £17 million) based on valuations carriedout principally in 1981/82. On a historical cost basis the net book value of these assets at 18 September 1999 would have been £14 million (1998 – £13 million). The book value of land as at 18 September 1999 not amortised in the financial statements was £67 million (1998 – £66 million).



12. Capital commitments

There are commitments for capital expenditure by the group of approximately £48 million (1998 – £51 million) for which no provision has beenmade in these financial statements.

13. Fixed asset investmentsJoint Other Own

ventures Associates investments shares Total£m £m £m £m £m

At 12 September 1998 3 6 3 14 26Effect of currency changes – – 1 – 1Additions 1 2 – – 3Write down of investments – – – (3) (3)New subsidiary undertakings 3 – – – 3Purchase of own shares – – – 1 1

At 18 September 1999 7 8 4 12 31

Details of the principal joint ventures and associates are given on page 58. Interests in the net assets of joint ventures include the group’s share oftheir gross assets of £12 million (1998 – £8 million) and the group’s share of their gross liabilities of £5 million (1998 – £5 million).

Other investments are stated at cost.

Ordinary shares of the company already issued and subject to option under the Associated British Foods plc 1994 Share Option Scheme are held ina separate trust. The trust is funded by an interest free loan from the company, repayable from the proceeds of the exercise of options granted.

At 18 September 1999 the Scheme held 2,905,753 (1998 – 2,764,612) ordinary shares of the company. The prior year figure has been restated to reflect the share consolidation that took place during the year. The cost of these shares has been included within fixed asset investments. The market value of the shares at the year end was £12 million (1998 – £16 million). The Scheme has waived its right to dividends. At the year end there were options outstanding over 2,940,000 (1998 – 2,945,000) ordinary shares.

All revenue costs relating to the Scheme have been charged against operating profit.

14. Stocks1999 1998

£m £m

Raw materials and consumables 192 172Finished goods and goods for resale 272 256

464 428

15. DebtorsCompany Group

1999 1998 1999 1998£m £m £m £m

Trade debtors – – 413 410Amounts owed by subsidiary undertakings 967 989 – –Other debtors 2 1 46 38 Prepayments and accrued income 1 1 32 33Tax recoverable from subsidiary undertakings 26 33 – –

996 1,024 491 481




16. Current asset investmentsCompany Group

1999 1998 1999 1998£m £m £m £m

Listed on a recognised stock exchange– equity investments 1 1 27 22 – other listed investments – – 86 84

Unlisted investments 79 56 917 1,464

80 57 1,030 1,570

The market value of the group’s listed equity investments was £35 million (1998 – £32 million). Other listed and unlisted investments compriseinterest bearing instruments and deposits. Listed investments include £1 million (1998 – £1 million) quoted on overseas stock exchanges.

17. Loans and short term borrowings1999 1998

£m £m

Bank loans and overdrafts 10 10Other loansWholly repayable within five years51/ 2% unsecured loan stock 1987/2002 2 271/ 2% unsecured loan stock 1987/2002 5 5Other unsecured loans 5 6Secured loans 34 24Wholly or partly repayable after five years103/ 4% redeemable debenture stock 2013 (secured) 150 150Other unsecured loans 4 4

210 201

Creditor analysisRepayable:in one year or less – bank loans and overdrafts 10 10

– other loans 43 34

53 44

beyond one year – between one and two years 3 3– between two and five years 1 1– in more than five years 153 153

157 157

The secured loans are secured by floating charges over the assets of subsidiary undertakings.



18. CreditorsCompany Group

1999 1998 1999 1998£m £m £m £m

Amounts falling due within one yearTrade creditors – – 234 227Taxation on profits 12 15 123 127Other taxation and social security – – 15 20 Accruals and deferred income 6 5 257 252Dividends 51 56 51 56Amounts owed to subsidiary undertakings 1,113 909 – –

1,182 985 680 682

Amounts falling due after one yearTaxation on profits – – 10 13

Taxation falling due after one year of £10 million includes £8 million payable on or before 30 September 2000.

19. Provisions for liabilities and chargesEuropean

Commissionfine Restructuring Other Total£m £m £m £m

At 12 September 1998 28 7 20 55Effect of currency changes (2) – – (2)Profit and loss account – charged – 1 1 2Utilised – (4) (1) (5)

At 18 September 1999 26 4 20 50

The provision in respect of the European Commission (“EC”) fine represents the full amount of the fine imposed by the EC on British Sugar plcpursuant to Article 85 of the European Treaty. This was imposed by the EC in respect of matters which occurred between 1986 and 1990, prior toAssociated British Foods plc acquiring British Sugar. British Sugar has lodged an appeal against this decision on a number of grounds, including thatthe fine is out of proportion to the alleged offence, and is awaiting a hearing date.

Restructuring provisions relate to the redundancy costs associated with the group’s announced reorganisation plans principally in respect of its UKmanufacturing operations.

Other provisions mainly comprise potential warranty claims arising from businesses disposed of in prior periods.

No provision for deferred tax is required (1998 – £nil). The full potential liability in respect of accelerated capital allowances and other timingdifferences at 18 September 1999 was £96 million (1998 – £89 million).

No deferred tax provision has been made in these financial statements for the additional tax which may be payable on the remittance to thiscountry of the group’s share of profits retained by overseas subsidiary undertakings since there is no intention to repatriate these reserves to the UK in the foreseeable future.




20. Share capital of Associated British Foods plcDeferred Ordinaryshares of shares of Nominal£1 each 5 15/ 22p each value

’000 ’000 £m

AuthorisedAt 18 September 1999 and at 12 September 1998 2,000 1,054,950 62

IssuedAt 18 September 1999 and at 12 September 1998 2,000 791,674 47

The ordinary shares’ prior year figures have been restated to reflect the share consolidation that took place on 7 May 1999, whereby 88 newordinary shares of 5 15/ 22p were issued in exchange for every 100 old ordinary shares of 5p.

The deferred shares became redeemable on 1 August 1997. The amount payable by the company on redemption is the amount paid up on thedeferred shares.

Deferred shares carry no voting rights and have no rights to dividends or other income distributions. In the event of a winding up, repayment inrespect of the deferred shares ranks after repayment of amounts paid up on the ordinary shares of the company. The deferred shares are entitled torepayment of amounts paid up, but have no entitlement to any surplus.

21. ReservesGroup Company

Group Group profit profitrevaluation other and loss and loss

reserve reserves account account£m £m £m £m

At 12 September 1998 3 173 2,774 257 Effect of currency changes – – 26 –Transfer from reserves – – (349) (125)

At 18 September 1999 3 173 2,451 132

As permitted by Section 230 of the Companies Act, 1985, no profit and loss account has been presented for the company.

The cumulative amount of goodwill written off as a result of acquisitions made in earlier financial periods is £534 million (1998 – £542 million).

22. Contingent liabilities

Associated British Foods plc has guaranteed overdrafts and other liabilities of certain subsidiary undertakings, the amount outstanding at 18 September 1999 being £15 million (1998 – £10 million). Litigation and other proceedings against companies in the group are not considered material in the context of these financial statements.



23. Leases

The group has minimum annual commitments under non-cancellable operating leases as follows:

Operating leases which expire: Within Two to Overone year five years five years Total

£m £m £m £m

Land and buildings 4 4 11 19Other 1 3 – 4

At 18 September 1999 5 7 11 23

Land and buildings 2 3 11 16 Other 1 2 1 4

At 12 September 1998 3 5 12 20

24. Shares in subsidiary undertakings£m

At 12 September 1998 171 Additions 82

At 18 September 1999 253

Investments in subsidiary undertakings are shown at cost less amounts written off. A list of the principal trading subsidiary undertakings is given onpage 57. None of the companies shown is a direct subsidiary undertaking of Associated British Foods plc.

The entire share capital of the companies listed are held within the group except where percentages are shown. These percentages give the group’s ultimate interest and therefore allow for the position where subsidiary undertakings are owned by partly owned intermediate subsidiary undertakings.

25. Cash flow from operating activities1999 1998

£m £m

Operating profit 233 298Impairment of fixed assets 84 –Amortisation of goodwill 5 –Depreciation 142 151(Increase)/decrease in working capital

– stocks (17) (16)– debtors 1 7– creditors (25) 6

Provisions (3) 2

Net cash from operating activities 420 448




26. Acquisitions and disposalsAcquisitions

1999 1998£m £m

Net assets Tangible fixed assets 50 39 Fixed asset investments 3 –Stocks 14 12 Debtors 11 14 Cash at bank and in hand 16 1Creditors (19) (24)Bank overdrafts (37) (1)Loans and finance leases (8) (8)Minority interests (11) (8)

Net assets acquired 19 25Goodwill 113 32

Total consideration 132 57

Satisfied byCash 132 57

Net cashCash consideration 132 57Cash and borrowings acquired 21 –

153 57

There have been no material fair value adjustments on acquisitions.

There have been no disposals during the current or the prior year.

27. Analysis of changes in financing

1999 1998£m £m

Issue of short term loans (46) (32)Repayment of short term loans 46 24Issue of loans over one year (3) –Repayment of loans over one year 2 2Shares issued to minority shareholders – (5)

(1) (11)



28. Net fundsLoans

Cash at Short term over oneInvestments bank borrowings year Total

£m £m £m £m £m

Increase in cash 70 24 19 – 113Financing (note 27) – (5) (8) 2 (11)Management of liquid funds (107) – – – (107)Shares issued to minority shareholders – 5 – – 5Purchase of equity investments 1 – – – 1 Sale of equity investments (1) – – – (1)Changes in market value 3 – – – 3Arising on acquisition of subsidiary undertakings – – (5) (3) (8)Effect of currency changes (14) (4) 1 1 (16)

Movement in net funds in the year – 1997/98 (48) 20 7 – (21)Net funds at 13 September 1997 1,618 50 (51) (157) 1,460

Net funds at 12 September 1998 1,570 70 (44) (157) 1,439

Decrease in cash (118) (20) – – (138)Financing (note 27) – – – (1) (1)Management of liquid funds (423) – – – (423)Purchase of equity investments 1 – – – 1Sale of equity investments (6) – – – (6)Changes in market value 9 – – – 9Arising on acquisition of subsidiary undertakings – – (8) – (8)Effect of currency changes (3) 1 (1) 1 (2)

Movement in net funds in the year – 1998/99 (540) (19) (9) – (568)Net funds at 12 September 1998 1,570 70 (44) (157) 1,439

Net funds at 18 September 1999 1,030 51 (53) (157) 871

Liquid funds comprise interest bearing instruments and deposits.




29. Financial instruments

Disclosures on financial risk management, treasury policies and use of financial instruments are also included in the Financial Review. As permittedby FRS 13, comparative figures are not disclosed. Short term debtors and creditors have been excluded from the following disclosures except for theanalysis of net currency exposures.

Interest rate risk profile of financial assetsThe interest rate profile of the financial assets of the group at 18 September 1999 was:

Fixed ratefinancial assets

Financial Weightedassets Floating Fixed Weighted average

on which rate rate average period forno interest financial financial interest which rateis received assets assets Total rate is fixed

£m £m £m £m % Months

CurrencySterling 28 805 77 910 5.3 60Australian dollar – 35 – 35 – –US dollar 2 22 – 24 – –Euro – 82 14 96 4.0 22Other 1 19 – 20 – –

31 963 91 1,085 5.0 54

The floating rate financial assets comprise cash, short term deposits and other financial instruments, bearing interest fixed in advance, based on local prevailing rates.

Interest rate risk profile of financial liabilitiesThe interest rate profile of the financial liabilities of the group as at 18 September 1999 was:

Fixed ratefinancial liabilities

WeightedFloating Fixed Weighted average

rate rate average period forfinancial financial interest which rateliabilities liabilities Total rate is fixed

£m £m £m % Months

CurrencySterling 12 157 169 10.6 159Australian dollar 1 – 1 – –US dollar 5 4 9 8.4 179Euro 1 – 1 – –Other 25 5 30 6.8 39

44 166 210 10.4 156

The floating rate financial liabilities comprise short term bank borrowings bearing interest fixed in advance, based on local prevailing rates.



29. Financial Instruments continued

Currency exposureThe analysis below shows the net monetary assets and liabilities of the group that are not denominated in their functional currency and therefore give rise to exchange gains and losses in the profit and loss account. The amounts shown below take into account the effect of forward currency contracts.

Functional currency of group operationNet foreign currency monetary Sterling Euro Other Totalassets/(liabilities) £m £m £m £m

Sterling – (1) (3) (4)US dollar 3 – 7 10Euro 52 – (1) 51Other 2 – – 2

57 (1) 3 59

Borrowing facilitiesThe group has various borrowing facilities available to it. The undrawn committed facilities available at 18 September 1999 in respect of which allconditions precedent have been met were as follows:

£m

Expiring within one year 19Expiring in years one to two –Expiring thereafter 1

20

Fair valueThe estimated fair value of the group’s financial instruments are summarised below:

Carrying Estimatedamount fair value

£m £m

Primary financial instruments held or issued to finance the group’s operationsCash 51 51Fixed asset investments 4 4Current asset investments 1,030 1,042Loans due within one year (53) (53)Loans due after one year (157) (215)The fair value of current asset investments is based on market value.

Derivative financial instruments held to manage currency and commodity exposureForward foreign exchange contracts – –Currency options – 1Commodity instruments – –The value of these contracts is the estimated amount which the group would expect to pay or receive on the termination of these contracts.

HedgesGains and losses on hedging instruments are not recognised until the underlying assets or liabilities are realised.




29. Financial instruments continued

Unrecognised gains and losses on hedges Net gains/Gains Losses (losses)

£m £m £m

At 12 September 1998 1 (3) (2)Arising in previous years and recognised during the year (1) 3 2

Arising before 12 September 1998 and not recognised during the year – – –Arising in the year and not recognised during the year 2 (1) 1

At 18 September 1999 2 (1) 1

Expected to be recognisedIn one year or less 2 (1) 1In later years – – –

2 (1) 1

30. Holding company information

The largest group in which the results of the company are consolidated is that headed by Wittington Investments Limited, the accounts of which areavailable at Companies House, Crown Way, Cardiff, CF4 3UZ. It is the ultimate holding company and is incorporated in Great Britain and registeredin England.

At 18 September 1999 Wittington Investments Limited together with its subsidiary undertaking, Howard Investments Limited, held 416,955,671ordinary shares (1998 – 403,341,215) representing in aggregate 52.7% (1998 – 50.9%) of the total issued ordinary share capital of AssociatedBritish Foods plc. The number of shares held at 12 September 1998 has been restated to reflect the share consolidation that took place during the year.



31. Related party transactions

The Associated British Foods group’s (“ABF”) related parties, as defined by Financial Reporting Standard 8, the nature of the relationship and theextent of the transactions with them, are summarised below :

Sub 1999 1998note £’000 £’000

Management charge from Wittington Investments Limited, principally in respect of directors and staff paid by them 1 450 450

Charges to Wittington Investments Limited in respect of services provided by ABF and its subsidiary undertakings 1 (43) (44)

Dividends paid by ABF and received in a beneficial capacity by:(i) Trustees of The Garfield Weston Foundation 2 19,768 4,926

(ii) Directors of Wittington Investments Limited who are not Trusteesof The Foundation 3,568 892

(iii) Directors of ABF who are not Trustees of The Foundation and are not directors of Wittington Investments Limited 3 71 18

(iv) a member of the Weston family employed within the ABF group 4 1,985 496

Sales to fellow subsidiary undertakings on normal trading terms 5 7 6

Amounts due from fellow subsidiary undertakings 5 1 1

Sales to joint ventures and associates on normal trading terms 6 50 21

Purchases from joint ventures and associates on normal trading terms 6 6 16

Amounts due from joint ventures and associates 6 5 5

Amounts due to joint ventures and associates 6 1 2

Sub notes1. At 18 September 1999 Wittington Investments Limited together with its subsidiary undertaking , Howard Investments Limited, held

416,955,671 ordinary shares (1998 – 403,341,215) representing in aggregate 52.7% (1998 – 50.9%) of the total issued ordinary share capitalof ABF. The comparative figure for 1998 has been restated to reflect the share consolidation that took place during the year.

2. The Garfield Weston Foundation (“The Foundation”) is an English charitable trust, established in 1958 by the late W Garfield Weston. The foundation has no direct interest in ABF, but as at 18 September 1999 held 683,073 shares in Wittington Investments Limited representing 79.2% of that company’s issued share capital and is, therefore, ABF’s ultimate controlling party. The trustees of the Foundationcomprise six of the late W Garfield Weston’s children, including Garry H Weston who acts as chairman of the board of trustees, and four ofGarry H Weston’s children.

3. Details of the directors of ABF are given on page 18. Their beneficial interests, including family interests, in ABF and its subsidiary undertakingsare given on page 24. Directors’ remuneration, including share options, is disclosed on pages 21 to 23.

4. A member of the Weston family who is employed by the group and is not a director of ABF or Wittington Investments Limited and is not aTrustee of the Foundation.

5. The fellow subsidiary undertaking is Fortnum & Mason PLC.

6. Details of the group’s principal joint ventures and associates are set out on page 58.




Principal subsidiary undertakings

Manufacturing activities Country of incorporationAB Ingredients Limited (95%) United KingdomABN Limited United KingdomABR Foods Limited United KingdomAB Technology Limited United KingdomAbitec Corporation USAAC Humko Incorporated USAAllied Bakeries Limited United KingdomAllied Foods Co Limited (78%) New ZealandAllied Foods Limited United KingdomAllied Grain Limited United KingdomAllied Mills Limited United KingdomBarcroft Company USABritish Sugar plc United KingdomBritish Sugar (Overseas) Limited United KingdomBurtons Gold Medal Biscuits Limited United KingdomCarl Lange AS DenmarkCereal Industries Limited United KingdomCukrownia Glinojeck SA (53%) PolandErik Haugen AS NorwayFishers Agricultural Holdings Limited United KingdomFoods International SA FranceGeorge Weston Foods Limited (78%) AustraliaGermains (UK) Limited United KingdomGermains (Ireland) Limited Republic of IrelandGermains Sp zoo (65%) PolandGregg & Company (Knottingley) Limited United KingdomGrosvenor Marketing Limited USAGuangxi Bo Hua Food Company (71%) ChinaGuangxi Boqing Food Co. Limited (60%) ChinaHenan Lianhua – BSO Pharmaceutical Co. Limited (57%) ChinaJacksons of Piccadilly Limited United KingdomJordan’s (NI) Limited United KingdomLax & Shaw Limited United KingdomLiaoning Liaohe Ai Min Feed Company Limited (55%) ChinaLiaoning Liaohe Yingpeng Feed Company Limited (55%) ChinaNambarrie Tea Company Limited United KingdomProvincial Merchants Limited United KingdomR Twining & Company Limited United KingdomR Twining & Co. Limited USASeed Systems Incorporated USAShanghai ABN – Huinong Feed Company Limited (60%) ChinaSPCA Barcroft SA FranceSPI Polyols Incorporated USASugarpol (Torun) Sp zoo (72%) PolandThe Ryvita Company Limited United KingdomTrident Feeds United KingdomWestmill Foods Limited United KingdomWeston Research Laboratories Limited United Kingdom

Retailing activitiesPrimark Republic of IrelandPrimark Stores Limited United Kingdom

Investment and other activitiesBonuit Investments Limited Jersey, Channel IslandsEastbow Securities Limited United KingdomPortelet Investments Limited Jersey, Channel IslandsSerpentine Securities Limited United KingdomTalisman (Guernsey) Limited Guernsey, Channel Islands

Group interest is 100% except where indicated.

British Sugar (Overseas) Limited operates subsidiary undertakings and joint ventures in Europe and Asia. Other than this company, each subsidiaryundertaking operates mainly in its country of incorporation.


Investments

Issued ordinary share capitalCountry of Group

incorporation Total percentage

Principal joint ventures and associatesC Czarnikow Sugar Limited United Kingdom £1,000,000 42Getec Guanabara Quimica Industrial SA Brazil BRR 14,254,370 24.75Harper-Love Adhesives Corporation USA US$12,200 50Incon Technologies Incorporated USA US$6,400,000 50Mauri Products Limited United Kingdom £1,375,001 50New Food Coatings Pty Limited Australia A$150,000 50Proofex Limited Republic of Ireland IEP800,000 30PT Associated British Budi Indonesia IDR 41,814 million 49.9PT Budi British Bahan Pangan Indonesia IDR 9,524 million 49.9WA Country Bakers Pty Limited Australia A$1,000,000 50

There is no significant loan capital in any of the joint ventures or associates. Each joint venture and associate carries out manufacturing and foodprocessing activities and operates mainly in its country of incorporation.




Progress report

Year ended1990 Saturday nearest to 15 September 1995 1996 1997 1998 1999

£m £m £m £m £m £m

Turnover2,027 Continuing operations 3,699 4,443 4,437 4,195 4,299

748 Discontinued operations 1,195 1,264 766 – –

2,775 4,894 5,707 5,203 4,195 4,299

Operating profit before exceptional items and amortisation of goodwill

107 Continuing operations 285 339 342 316 32630 Discontinued operations 50 56 28 – –

137 335 395 370 316 326 – Exceptional items – – – (19) (84)– Amortisation of goodwill – – – – (5)9 Profit less losses on sale of properties – 6 6 (3) 4

Profit less losses on sale or termination89 of businesses – – 424 – –

132 Investment income 69 54 72 119 84

367 Profit on ordinary activities before interest 404 455 872 413 325(7) Interest payable (29) (25) (22) (22) (25)

360 Profit on ordinary activities before taxation 375 430 850 391 300(87) Tax on profit on ordinary activities (119) (144) (161) (124) (115)

273 Profit on ordinary activities after taxation 256 286 689 267 185 (6) Minority interests (6) (8) (8) (2) (1)

267 Profit for the financial year 250 278 681 265 184

21.0p Earnings per share 27.8p 31.0p 75.6p 29.6p 21.4p

Earnings per share before exceptional 21.0p items and amortisation of goodwill 27.8p 31.0p 32.4p 31.7p 31.7p

British Sugar plc was acquired in January 1991.

The above figures exclude the results of operations disposed of as part of the group reorganisation in 1994.

The earnings per share for 1995 and prior have been restated following the one for one bonus issue in December 1995.


Company directory

Associated British Foods plc

Registered office Weston CentreBowater House68 KnightsbridgeLondon SW1X 7LQ

Company registered in England, number 293262

Secretary Trevor HM Shaw

Registrar’s and transfer office Lloyds TSB RegistrarsWorthingWest Sussex BN99 6DA

Auditors KPMG Audit PlcChartered Accountants

Bankers Bank of ScotlandBarclays Bank plcLloyds TSB Bank plcNational Westminster Bank plc

Timetable First interim dividend paid 1 September 1999

Second interim dividend to be paid 21 February 2000

Annual general meeting 9 December 1999

Interim results to be announced April 2000

Internet site http://www.ABF.co.uk




Notice of meeting

Notice is hereby given that the sixty-fourth annual general meeting of the company will be held at The Park Lane Hotel, Piccadilly, London W1at 11.00 am on Thursday 9 December 1999.

1. To receive and consider the financial statements for the period ended 18 September 1999 and the reports of the directors and auditors thereon.

2. To re-elect Mr T H M Shaw as a director.

3. To re-elect Mr H W Bailey as a director.

4. To re-elect Mr G G Weston as a director.

5. To re-elect Mr J G Bason as a director.

6. To re-elect Mr M G Adamson as a director.

7. To re-appoint KPMG Audit Plc as auditors of the company to hold office from the conclusion of this meeting until the conclusion of the nextgeneral meeting at which accounts are laid before the shareholders, and to authorise the directors to determine their remuneration.

As special business to consider and, if thought fit, to pass the following resolutions of which number 8 and number 10 will be proposed asspecial resolutions and resolution number 9 will be proposed as an ordinary resolution.

8. That, with effect from the conclusion of this Meeting, the Articles of Association of the company be amended by:

(a) the deletion of Article 91 and the insertion of the following as a new Article 91:

“ 91. At the annual general meeting in every year there shall retire from office by rotation:

(i) all directors who held office at the time of the two preceding annual general meetings and who did not retire by rotation at either ofthem; and

(ii) if the number of directors retiring under (i) above is less than one-third of the directors or, if their number is not three or a multiple ofthree, less than the number which is nearest to but does not exceed one-third, such additional number of directors as shall togetherwith the directors retiring under (i) above equal one-third of the directors or, if their number is not three or a multiple of three, thenumber which is nearest to but does not exceed one-third, but so that if there is only one director who is subject to retirement byrotation, he shall retire”; and

(b) the deletion of Article 92 and the insertion of the following as a new Article 92:

“ 92. Subject to the provisions of the Act and to the following provisions of these articles, the directors to retire under sub-paragraph (ii) ofArticle 91 shall be those who have been longest in office since their last appointment or re-appointment, but as between persons whobecame or were last re-appointed directors on the same day those to retire shall (unless they otherwise agree among themselves) bedetermined by lot.”

9. That the directors be and they are hereby generally and unconditionally authorised in accordance with section 80 of the Companies Act1985 (“the Act”) to exercise all the powers of the company to allot relevant securities (within the meaning of section 80 of the act) up to amaximum of 263 million ordinary shares of 515/ 22p each during the period from the date of the passing of this resolution up to and including 8 December 2004 on which date such authority will expire, provided that the company may before such expiry make an offer or agreementwhich would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities pursuant to anysuch offer or agreement as if the authority conferred hereby had not expired.


Notice of meeting continued


10. That, subject to the passing of the preceding resolution number 9, the directors be and they are hereby empowered, pursuant to section 95of the Companies Act 1985 (“the Act”), to allot equity securities (within the meaning of section 94(2) of the Act) for cash pursuant to theauthority conferred by resolution number 9 as if section 89(1) of the Act did not apply to any such allotment, provided that this power shallbe limited to:

(a) the allotment of equity securities in connection with a rights issue, open offer or other offer of securities in favour of the holders ofordinary shares on the register of members at such record date(s) as the directors may determine where the equity securities respectivelyattributable to the interests of the ordinary shareholders are proportionate (as nearly as can be) to the respective numbers of ordinaryshares held by them on any such record date(s), but subject to such exclusions or other arrangements as the directors may deem necessaryor expedient to deal with legal or practical problems in respect of overseas shareholders, fractional entitlements or otherwise;

(b) the allotment (otherwise than pursuant to sub-paragraph (a) above) to any person or persons of equity securities up to an aggregate of39 million ordinary shares of 515/ 22p each, and shall expire on the date of the next annual general meeting of the company after thepassing of this resolution or 31 December 2000, whichever is sooner, save that the company may, before such expiry, make an offer oragreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities inpursuance of such offer or agreement as if the power conferred had not expired.

By order of the BoardTHM Shaw SecretaryWeston Centre, Bowater House,68 Knightsbridge, London SW1X 7LQ

8 November 1999


Notes


Notes1. Resolution number 8

The present Articles of Association of the company provide that one third of the directors or the number of directors nearest to but notexceeding one third of the directors should retire at each annual general meeting. This can result in a situation where a director is not re-elected for four years.

“The Combined Code – Principles of Good Governance and Code of Best Practice” recommends that all directors should be required to submitthemselves for re-election at least once every three years.

It is proposed that the Articles of Association of the company be amended to comply with this while retaining the requirement that one third(or the number nearest to but not exceeding one third) of the directors should retire by rotation each year.

2. Resolutions number 9 and 10The Companies Act 1985 prevents directors allotting unissued shares without the authority of shareholders in general meeting.At the annual general meeting held in December 1998 shareholders gave the directors a general authority to allot shares up to a limitapproximately equivalent to one third of the number of shares in issue. The authority is valid for the maximum period of five years aspermitted by the Companies Act and expires in December 2003. The directors, however, propose to renew this authority every year asking,on each occasion, for the authority to be granted for a further period of five years. Resolution number 9 will authorise the directors to allotsubstantially all of the present unissued ordinary share capital, which represents approximately 25% of the company’s authorised capital(and is again therefore equivalent to approximately one third of the number of shares in issue), at any time within the next five years.

The proposed renewal of the authority should not be taken as an indication that the directors have any current plans to make an issue of shares.

Where shares are allotted pursuant to a general authority as provided in resolution number 9 and they are to be subscribed in cash,that allotment is subject to section 89 of the Companies Act, which requires new shares to be offered first to existing shareholders inproportion to their existing holdings. There may, however, be circumstances where directors wish to allot shares for cash other than toexisting shareholders strictly pro rata to their holdings and this cannot be done unless shareholders have first waived their pre-emptionrights. Resolution number 10 asks shareholders to do this by allowing the directors to allot for cash (a) by way of a rights issue, openoffer or similar issue (subject to certain exclusions) and (b) a number of shares equivalent to approximately 5% of the company’s presentissued ordinary share capital to persons other than existing shareholders. By setting the 5% limit, interests of existing shareholders areprotected as their holdings cannot, without their agreement, be diluted by more than 5% by the issue of new shares to new shareholders.

HYDE PARKCORNER

CONSTITUTION HILL

HYDE PARK

The Park Lane Hotel



Notes continued

3. The company, pursuant to regulation 34 of the Uncertificated Securities Regulations 1995, specifies that only those shareholders registered inthe register of members of the company at 6 pm on Tuesday 7 December 1999 shall be entitled to attend or vote at the annual general meetingin respect of the number of shares registered in their name at that time. Changes to entries on the relevant register of securities after 6 pm on7 December 1999 shall be disregarded in determining the rights of any person to attend or vote at the meeting.

4. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and, on a poll, to vote in his place.A proxy need not be a member of the company.

5. To be effective, the instrument appointing a proxy must be deposited at the registered office of the company or with the company’s registrar, notlater than 11 am on Tuesday 7 December 1999.

6. The register of directors’ interests in the ordinary shares of the company will be available for inspection during normal business hours on anyweekday (Saturdays excepted) from the date of this notice until the date of the annual general meeting at the registered office of the companyand at The Park Lane Hotel 15 minutes prior to and during the meeting.

7. No director has a contract of service with the company which is not determinable within one year without payment of compensation or whichcontains provisions for predetermined compensation on termination of an amount which equals or exceeds one year’s salary and benefits in kind.

8. Appointment of a proxy will not prevent a member from attending and voting at the annual general meeting should he decide to do so.

9. This notice is sent to holders of the company’s deferred shares for information only.


Associated British Foods plc Annual Report & Accounts 1999

Documents

Transcript of Associated British Foods plc Annual Report & Accounts 1999