Average exchange rates of our principal currencies remained very similar to the first quarter last year with the exception of the South African rand which weakened against sterling and the Australian dollar which strengthened further. The percentage increase in revenue for the group on a constant currency basis is the same as that using actual exchange rates, and there is no material difference for any of the segments.
Revenues were 21% ahead of last year with higher regional sugar prices, particularly in Europe.
The campaign in the UK is progressing well, with 75% of the crop processed and a further 18% harvested, and sugar production for the year is estimated at 1.25 million tonnes compared with just under one million tonnes last year. Good volumes, high sugar content in the beet, a strong factory performance and high prices are expected to result in a strong profit delivery for the financial year. Construction of the Vivergo bioethanol plant is nearing completion with commissioning scheduled to commence in the late spring.
In Spain, record levels of extraction and throughput are being achieved in the northern campaign while plantings are now complete in the south. Profit is well ahead of last year benefiting from higher sugar prices and improvements in operating efficiency.
At Illovo, sales benefited from favourable regional pricing and profit has improved in all countries. Plant operations have been satisfactory but crop yields were disappointing.
Cane yields in south China continued to be affected by the drought of last year, but sugar production in the north east is expected to be significantly ahead again as a result of the additional beet acreage under cultivation. Sugar prices have fallen from last year’s record highs but are still well above their historic average.
Revenue was 22% ahead of last year. Each of the agriculture businesses achieved good revenue growth in the period led by K W Trident’s strong sales of sugar beet feed and another excellent performance from AB Vista, our international micro-ingredients feed business. Frontier’s sales were also ahead of last year although lower grain prices have seen a fall in trading volumes and profit from this joint venture is not expected to reach last year’s very strong level.
Revenue was 4% ahead of last year. Twinings Ovaltine continued to perform very well with good growth for tea in the US and Ovaltine in developing markets. Sales by the UK grocery businesses were also encouraging, particularly in Allied Bakeries where Kingsmill achieved growth. However, strong competition driven by a high level of promotion has affected Kingsmill margins. The business has continued to invest and is reviewing its cost base. Trading remained difficult for George Weston Foods and revenues in the period were in line with last year. The half year result will include the cost of restructuring currently in progress. The costs of operating the new Castlemaine meat factory continued to be too high but progress was made in improving productivity. Revenue at ACH was level with last year.
Although revenue was 2% ahead of last year, the difficulties in the yeast and bakery ingredients business, particularly in last year’s second half, continued during the period. This reflected raw material cost increases and a highly competitive trading environment in many of our markets. As a result we expect some operating profit margin decline in the first half. Progress was made in improving productivity at the yeast extracts factory in Harbin, China which, combined with growth in enzymes, delivered some improvement at ABF Ingredients.
Sales at Primark were 16% ahead of the same period last year. Like-for-like sales growth was good, with particularly strong trading over the Christmas period after a slower start to the financial year as a result of the unusually warm autumn. This was also a very active period for new store openings. At 7 January 2012, 232 stores were trading with 7.8 million sq ft of selling space, an increase of 0.5 million sq ft since the financial year end. Nine new stores were opened including two in Spain, three in Germany, one in each of Portugal and the Netherlands, and two in the UK including our flagship store in Scotland which opened on Princes Street in Edinburgh just before Christmas. We also relocated the store in the Metro Centre in Gateshead to a larger site and extended the store in Bexleyheath. Two concessions were opened in Selfridges stores in Birmingham and Manchester in the period. Further openings are planned for the second half including three stores in Spain, in March. Capital expenditure on new stores and refits for the full year is expected to be similar to last year.
As expected, operating margin was lower than in the same period last year reflecting the continued absorption of higher cotton costs. Cotton prices have fallen somewhat from their high point last year and we will begin to see the benefit of lower input costs in the second half.
The operating cash outflow in the period was in line with last year. The working capital outflow was higher, mainly driven by sugar prices, and as expected capital expenditure was lower than last year despite continued investment in new stores for Primark. Net debt at 7 January 2012 was a little higher than last year end at £1.4bn.
Over all group trading results for the period were in line with expectations. Economic uncertainty, particularly in the eurozone, and continued pressure on consumer disposable incomes are expected to remain key features of this financial year. Input commodity costs are subsiding which will now start to benefit the group. However, AB Sugar is already benefiting from higher sugar prices. We expect growth in sales and adjusted operating profit in the coming year, with the profit improvement weighted towards the second half.