Jan 15, 2015
's strong Christmas helps to offset ABF's sugar troubles Primark
Jan 15, 2015
LONDON, United Kingdom - Robust Christmas trading at Primark, the discount fashion chain owned by Associated British Foods, helped to make up for falls in revenue at the group's sugar business in the first quarter, which will weigh on full-year earnings.
AB Foods said on Thursday it expected a marginal decline in adjusted earnings per share for its 2014-15 year from the 104.1 pence made in 2013-14. Growth at Primark and progress at its grocery, ingredients and agriculture businesses would offset sugar, hurt by a fall in European Union sugar prices and weakness in the world sugar price.
The group had said previously that it saw limited opportunity to grow EPS in 2014-15, given the sugar outlook.
Sales from the company's 287 Primark stores were up 15 percent in the 16 weeks to Jan. 3, partly a reflection of strong trading over the last five weeks of that period, which included Christmas. Primark contributes about half of AB Foods' profit.
Factoring in a 12 percent increase in selling space, analysts estimated a same-store sales rise of about 4 percent for the five week festive period, much stronger than Christmas trading performances at rivals Marks & Spencer and Debenhams.
Discount fashion chains like Primark have benefited from consumers' efforts to keep a tight grip on spending against a backdrop of muted growth in disposable income.
Finance Director John Bason said trading at the five stores Primark opened in France last year was "sensational", though he noted Primark's overall operating margin in the period was, as expected, lower than last year due to more mark downs.
ABF's total group revenue in the 16 weeks to Jan. 3 rose 3 percent at constant exchange rates.
The company forecast another large reduction in profit from AB Sugar. But it also said this would put much of the effect of the structural changes in European Union prices seen over the last three years behind it.
"We've had two years of big profit declines in sugar. The rest of the business has been growing strongly and so the EPS has been pausing for breath," Bason said.
He said he was looking for the absence of sugar as a negative in 2015-16 because then the growth in the other parts of the business would shine through.
The company will close two Chinese sugar beet plants which will result in a 128 million pound charge in interim results.
AB Foods also said sterling's strength against other currencies would have a negative translation impact on year profit, currently estimated at 15 million pounds.
Analysts at Citi said they expected consensus pretax profit expectations for 2014-15 to fall 10 million pounds to 1.06 billion pounds.
Shares in AB Foods, 55 percent owned by the Weston family and up 14 percent over the last year, were up 1.3 percent at 3,072 pence at 1052 GMT, valuing the business at about 24.3 billion pounds ($37 billion).
$1 = £0.66
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