AB Foods share price: Primark owner posts trading update

on Feb 27, 2017
Updated: Oct 21, 2019

Associated British Foods (LON:ABF) has updated investors on its recent performance this morning.

**Highlights from the company statement:**
For the half year we expect excellent progress in adjusted operating profit and adjusted earnings per share for the group. The trading outlook for the group for the full year is unchanged with progress expected in adjusted operating profit and adjusted earnings per share.

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Cash flow and funding

We expect a stronger cash flow, before acquisitions and disposals, in the first half of this year compared to last year. This will be driven by a higher profit before depreciation and amortisation, and a lower working capital outflow. Capital expenditure will be higher, driven by Primark’s expansion.

Acquisitions in the year to date amount to £60m and with the benefit of net proceeds of £0.5bn from the sale of the US herbs and spices business and the south China cane sugar operations, we expect a net cash balance of some £200m at the half year.

Phasing of profit recognition

We continue to expect substantially all of the full year increase in adjusted operating profit to be generated in the first half. This is for the following reasons:

· the benefit arising from the translation of overseas results in the first half is expected to be some £50m but, with the weakening of sterling in June last year, and at current exchange rates, there will be less translation benefit in the second half;
· the full effect of sterling weakness against the US dollar on Primark’s purchases will result in a greater margin decline in the second half because our currency hedges were at more advantageous exchange rates in the first half; and
· last year’s change in Illovo’s financial year end has benefited the first half.

Revenue and operating profit in the first half are expected to be ahead of last year at constant currency and substantially ahead at actual exchange rates. Margin is expected to make further progress.

AB Sugar revenue from continuing operations will be well ahead of last year on a comparable basis taking into account the change in Illovo’s year end. Higher sugar prices, increased production in Africa, and further benefit from the performance improvement programme will deliver a substantial increase in profit.

Revenue growth in the first half will have been achieved largely as a result of higher commodity prices but also with the benefit of last year’s acquisition of a Danish producer of alternative proteins and other speciality feed ingredients. Operating profit is expected to be marginally down in the first half with a continued strong performance from AB Vista, particularly in Asia, almost offsetting the impact of margin pressure in UK feed.

Revenues in the first half are expected to be ahead of last year at constant currency and substantially ahead at actual exchange rates. Operating profit growth for the half year will be strong on both measures, with further recovery in yeast and bakery ingredients and another excellent performance from ABF Ingredients.

Sales at Primark are expected to be 11% ahead of last year at constant currency, driven by increased retail selling space, and 21% ahead at actual exchange rates.
As of 07:11 GMT, Monday, 27 February, Associated British Foods plc share price is 3,030.50p.


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