AB Foods Grows 16-Week Revenue as Primark Boost Offsets Sugar Fall


Shares in Associated British Foods are offside this morning after the release of its key Christmas trading update, despite flagship Primark stores bucking a wider retail slowdown on the United Kingdom high street.

The food, ingredients and retail group said it delivered revenue growth across all businesses apart from sugar, which saw revenue fall 13%.

It said that a revenue and profit reduction greater than previously forecast is expected for the full year, largely as a result of "significantly lower European Union sugar prices, which adversely affected our United Kingdom and Spanish businesses".

However AB Foods said it still expected "progress" in group adjusted operating profit and adjusted earnings in 2017-18 year.

Sales in the United States also reportedly made progress.

Sales in the group's grocery division were 4 per cent ahead at constant currency and 1 per cent ahead of past year at actual rates.

However the retail sales growth across Europe was held back by unseasonably warm weather in October.

Retail selling space increased by 0.3 million sq. ft. since the financial year-end and at January 6, 2018, Primark operated 350 stores.

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Primark still expects to open 1.2 million sq ft in this financial year.

Primark's operating margins in the first half were now expected to be close to those in the same period previous year.

Quarterly sales grew across each business except sugar, which slumped by 12 per cent.

Shares in ABF were down 2.4pc to £39.31 in early trade.

Looking ahead, Royal Mail said it expects United Kingdom parcels performance for the full-year to be broadly in line with the performance in the first nine months, while United Kingdom addressed letter volumes are expected to be in the middle of the range of 4% to 6% decline. This was followed by good trading in the five weeks leading up to Christmas.

The company's effective tax rate for financial 2018 is expected to fall by 100 basis points, following the recent US tax reforms.

Henry Croft, research analyst at Accendo Markets, said: "Overall, the company has left its guidance unchanged amid a mixed Christmas stocking".

First quarter trading from ABF confirmed sales at the key Primark division were slightly behind consensus, although going forward margins look be better than expected.

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