Primark Lifts ABF's Full Year Guidance

Primark model

Issuing a trading update on the eve of the statutory close period ahead of the planned announcement of full-year results on 7 November, ABF says it expects to report good growth in adjusted operating profit and adjusted earnings per share for the group.

Adjusted EBIT is due to be well ahead of last year, with net interest expense expected to be at a similar level to last year.

Strong trading at Primark has allowed the owner of the discount clothing chain, Associated British Foods, to raise its full-year results outlook.

On Monday, the company said: "Since that time we have experienced an even lower level of markdown which has further improved our full-year outlook". On the same comparable basis but at actual exchange rates, sales are expected to be 20 percent ahead. With 1.2 million sq ft of additional selling space expected next year, Primark could continue to be ABF's growth engine in my view.

A total of 30 new Primark stores have opened across nine countries during the financial year so far and AB Foods said that it expects to open 19 more over the next financial year, with most of the expansion happening in France, Germany and the UK.

AB Sugar's revenue and adjusted operated profit will be well ahead of a year ago, according to the company. Contributing to this are significantly lower sugar stocks and tight management during the year.

Illovo's 2016/17 season, which ended in March 2017, finished strongly and this has been followed by better growing conditions in the new season.

It said that because of this, the devaluation will result in a translation benefit of some £85m this financial year, most of which materialised during the first three quarters.

The company added that with most of next year's first half United Kingdom purchases contracted at the weaker sterling/US dollar exchange rate than the same period last year, there will be an adverse effect on margin in the first half. In the next year, sugar prices are anticipated to fall below those achieved in the current year, however, this will be mitigated by higher production volumes and the strength of the euro against the pound. Expenditure in the food businesses remained at the same level as past year, AB Foods said.

Some of this cash will be absorbed by the purchase of Acetum, the Italian producer of Balsamic Vinegar of Modena, whose brands include Mazzetti, Acetum and Fini, that was also announced on Monday. In the year ended December 31, 2016 the business generated net sales of EUR103 million.

AB Foods regards the acquisition as an opportunity to broaden its worldwide presence in speciality foods, developing it alongside its Patak's, Blue Dragon, Jordans and Dorset Cereals businesses.



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