In a pre-close trading update for its first-half period, Associated British Foods (ABF) said revenue and profit in each of its Grocery, Sugar, Agriculture and Ingredients businesses will come in ahead of both expectations and last year. However, this will be dragged back by its Primark clothing chain which has been hit hard by the pandemic-related closure of its stores in the UK and Europe in recent months.
Revenue in its Grocery division is expected to be 7% ahead of last year with adjusted operating profit growth after “strong performances” by its Twinings Ovaltine and UK grocery businesses. The performance of Twinings Ovaltine was said to have reflected the changes in consumption patterns as a result of the pandemic. Retail and online sales increased but on-the-go and foodservice volumes continued to be adversely affected.
ABF’s Silver Spoon, Jordans, Dorset Cereals, Ryvita, Patak’s and Blue Dragon brands all delivered growth as they benefited from increases in consumer demand through the retail channel.
Revenue in its Allied Bakeries business was said to be in line with last year. ABF revealed that a cost reduction programme will be implemented this year to mitigate the contribution loss related to the recent end of its bread contract with the Co-op.
The group’s AB Sugar revenue is expected to be marginally ahead of last year in the first half primarily due to higher average sugar prices for British Sugar and higher prices in its Illovo business. Operating profits are expected to be “significantly” ahead, boosted by higher prices and sales, along with cost savings. Similar performances are expected from its Agriculture and Ingredients divisions.
Meanwhile, ABF’s Primark business is on track to lose £1.1bn in sales over the first half to 27 February having been forced to close its stores during lockdowns, with a further £480m lost in its second half.
The discount fashion chain, which does not sell online, expects to generate sales of only £2.2bn in the period, with adjusted operating profit only marginally above breakeven compared with £441m during its first half last year.
ABF expects to reopen 233 of its stores, which will boost its retail space trading to 83%, by 26 April. It will reopen 153 stores in England on 12 April, as permitted under the government’s plan unveiled this week to bring the country out of lockdown.
The group is hopeful that Primark will trade strongly when stores are allowed to re-open. Its finance chief John Bason said today: “We know that people will welcome us back.” He noted that in Austria, where Primark stores re-opened three weeks ago, like-for-like sales year-on-year were already positive.
As a consequence of Primark’s trouble, ABF expects the overall group’s adjusted operating profit and earnings per share to be lower than last year.
