TIDMABF
RNS Number : 3494P
Associated British Foods PLC
20 June 2022
20 June 2022
Trading update
Associated British Foods plc today issues a trading update for
the 36 weeks to 28 May 2022 summarising the significant trading
developments since the last market update.
Highlights
-- Group trading in line with expectations, outlook unchanged
Revenue increases at Food demonstrate ongoing price
-- actions to date
Recovery of Grocery margin remains on target for next
o year
o Strong trading at Sugar despite production disruption
at Illovo this quarter
o AB Agri and ABF Ingredients trading well in current
environment
Primark uplift in sales in the quarter, full year margin
-- in line with expectations
Primark to launch UK trial of Click & Collect service
-- on children's products
o up to 25 stores in the northwest
o wider product range offered to satisfy unfulfilled
demand
o builds on enhanced digital capability
o expected to drive higher footfall and incremental
sales in stores
Conference call
There will be an analyst and investor conference call at 8.30
BST today with George Weston, John Bason and Paul Marchant. A short
presentation to accompany the call is available on the Investor
Relations section of our website.
Trading performance
The following table sets out revenues by business segment for
the third quarter of the financial year and for year to date. For
Primark the third quarter is the 12-week period from 6 March to 28
May 2022 and the prior year has been adjusted to a comparable
12-week period.
Change at Change at
Third quarter constant Year to constant
GBPm currency date GBPm currency
============ ============= ========= ========== =========
Grocery 932 +4% 2,753 +3%
Sugar 457 +7% 1,371 +15%
Agriculture 441 +10% 1,250 +9%
Ingredients 489 +24% 1,287 +16%
Total Food 2,319 +10% 6,661 +9%
Retail 1,727 +81% 5,267 +69%
Group 4,046 +32% 11,928 +29%
============ ============= ========= ========== =========
Group revenue for the quarter increased by 32%. Sales in our
Food businesses increased 10% which reflected price actions to
recover input cost inflation and volume increases in Ingredients.
All Primark stores traded during the period in contrast to last
year when most stores were closed until the middle of April.
Sales and adjusted operating profit in the period were in line
with our expectations. Our full year outlook remains unchanged with
significant progress expected in adjusted operating profit and
adjusted earnings per share for the Group.
References to growth in the following commentary are based on
constant currency.
Grocery
Revenue growth picked up in the third quarter and was 4% ahead
of last year. Sales benefited from price increases implemented
earlier this year and further pricing action is underway. We
continue to expect recovery in the margin run-rate in our next
financial year.
Twinings sales declined marginally with a return to more normal
levels of retail demand after the COVID lockdowns last year,
partially offset by successful new product launches. Ovaltine sales
were ahead with continued strong performance in Switzerland,
Thailand and Nigeria.
Allied Bakeries sales were ahead of the same period last year
but higher input costs continued to adversely affect margins.
Westmill benefited from the continued improvement in restaurant and
take-away trade sales. Sales at Jordans Dorset Ryvita continued to
progress.
Revenue growth at ACH was strong in the quarter with the benefit
of price actions taken over the last year more than offsetting a
decline in the US retail yeast volumes from COVID-elevated levels.
George Weston Foods in Australia delivered strong sales growth
despite COVID-related operational challenges in our Tip Top bread
and Don KRC meat businesses.
Sugar
AB Sugar revenue for the quarter was 7% ahead of last year.
British Sugar's energy business sales prices were strong and
Azucarera benefited from higher sugar and co-product prices. Illovo
volumes in the quarter were held back with a later start to the new
production season as a result of significant disruption from heavy
rains. Sugar production in South Africa, Eswatini and Malawi was
significantly lower than last year.
The re-commissioning of our Vivergo bioethanol plant is
progressing although production volumes are being held back by
delays in delivery of some critical equipment. Current commodity
prices and costs are delivering the expected margins.
Looking ahead we continue to expect European sugar demand to be
in excess of production with production in 2021/22 only slightly
higher than the prior year with a lower crop area offset by a
recovery in yields to more normal levels. World sugar prices are
also expected to remain strong.
Agriculture
AB Agri sales for the third quarter were 10% ahead of last year
with higher selling prices more than mitigating higher commodity
and energy costs. This has driven higher profitability and we now
expect full year profit to be broadly in line with last year.
Sales at Frontier were ahead of last year predominantly due to
the strengthening of agricultural commodity prices and strong
demand for crop protection products in the spring as farmers looked
to maximise yields whilst grain prices are at record highs. AB
Vista, our international feed enzymes business, was ahead of the
prior year due to growth in South East Asia and the Americas.
However, increased supply chain costs and adverse currency
movements impacted profitability.
Ingredients
Revenue in the third quarter was strongly ahead of last year
driven by both AB Mauri and ABF Ingredients. The revenue increase
reflected the price increases implemented to date and an increase
in volumes in ABF Ingredients.
Although revenue growth for AB Mauri in this period was strong,
margin continued to be impacted by the timing of customer price
actions. Sales at ABF Ingredients reflected strong underlying
demand, new business, and price recovery to offset inflation and
margins improved.
Retail
All Primark stores were open during this period, in contrast to
last year when the majority of stores were closed until the middle
of April. As a consequence, sales in the quarter were 81% ahead of
last year and year to date were 69% ahead of the comparable period
last year. Sales in the quarter were 4% higher than the comparable
pre-COVID period three years ago. Like-for-like sales have been
improving since the half year and for the quarter were 9% below
pre-COVID levels three years ago. In the UK and Republic of Ireland
like-for-like sales have improved markedly while in Continental
Europe performance only started to improve at the end of the
quarter following the removal of remaining COVID restrictions.
Primark remains on track to deliver a full year adjusted operating
profit margin of some 10%.
Trading in the UK was much improved this quarter. Total sales
were well ahead of last year, with a 61% increase, and 2% ahead of
pre-COVID levels three years ago with like-for-like sales 4% below.
Destination city centre stores improved with a marked return of
tourism accompanied by more office working. Primark's share of the
UK clothing, footwear and accessories market by value, comprising
online and offline, for the 12 weeks ending 1 May was broadly in
line with the comparable period three years ago.
Sales in the quarter in Continental Europe were 106% ahead of
last year and 7% above the comparable period three years ago with a
20% increase in retail selling space and like-for-like sales down
15%. Total sales in the US in the quarter were 34% ahead of
pre-COVID levels with the benefit of new store openings.
The return of tourism and more office working combined with an
improvement in the weather across all our markets was reflected in
a strong customer reaction to our fashion ranges. Our spring/summer
women's fashion ranges were well received with their focus on
brightly coloured dresses, heels and blouses. Sales of luggage and
holiday essentials such as swimwear, sliders and beach towels
strengthened over the quarter as customers looked to holiday travel
and leisure activities. Licensed product remained in great demand.
Lilo & Stitch proved to be one of the top performing ranges
from our ongoing partnership with Disney while our new Stranger
Things collection, timed for the launch of the fourth season of the
hit show on Netflix, met an exceptionally strong customer
response.
Retail selling space has increased by a net 0.3 million sq ft
since the beginning of the financial year and at the end of the
period we were trading from 403 stores and 17.1 million sq ft of
retail selling space, compared to 16.7 million sq ft a year ago.
Since the half year, an enthusiastic customer reception greeted
both our newly opened flagship store in Milan city centre, Italy,
and our relocated store in Carlow in the Republic of Ireland. We
expect to add a net total of 0.5 million sq ft of retail selling
space this financial year. Five further stores are expected to be
opened before the financial year end: Chieti and Bologna in one of
our strongest growth markets, Italy; Brno in Czechia; Tallaght in
the Republic of Ireland; and Jamaica Avenue, Queens NY, in the US.
We are making good progress in developing a strong pipeline of new
stores for the next financial year and to deliver our ambition to
grow our store estate to some 530 stores by the end of our 2026
financial year.
We continue to transform Primark's digital capability and a
modern and scalable technology platform is now in place. We have
seen a positive customer reaction to the April launch of our new
website in the UK which showcases many more products and offers
stock availability by store. To date, traffic to the new site is up
by around 60%, customers on average are viewing twice as many pages
per session, and almost 15% of visitors to the site are using the
new stock checker facility.
We now plan to enhance the customer journey even further with
the UK launch of a trial Click & Collect service towards the
end of this calendar year. We have chosen a much expanded range of
children's products for this trial, which we believe has the
potential to satisfy unfulfilled demand, driving footfall from both
existing and new customers to deliver incremental sales in store.
The trial will take place in up to 25 stores in the northwest,
which will provide a representative sample of store sizes and
formats in our UK estate.
The Click & Collect service will build to offer customers
some 2,000 options across clothing, accessories and lifestyle
products, which will cater for a broad range of family needs from
furnishing a nursery to clothing children of all ages. Around 40%
of these options will be exclusive to Click & Collect. The
expansion of the offering will be particularly attractive for our
customers who do not regularly shop in our larger stores. Our
average size stores are only able to stock a limited range and for
these customers the number of options available to them will
broadly double, increasing even more for customers of our small
stores. This trial will enable us to provide more fashion, licence
and lifestyle products to more customers and more often. In store
collection will be available from designated areas, designed to be
welcoming and situated in the heart of the store.
Click & Collect orders will be processed and dispatched to
store from a dedicated UK distribution centre. Our product
suppliers will prepare the stock in cartons in a way which will
enable simple and efficient picking at the distribution centre.
This pick and pack operation will be manual during this trial with
plans to automate in due course. Orders will be free to collect for
our customers, and returns will be accepted free of charge in
store.
For further information please contact:
Associated British
Foods:
Tel: 020 7399 6545
John Bason, Finance
Director
Chris Barrie, Corporate
Affairs Director
Citigate Dewe Rogerson:
Tel: 020 7638 9571
Jos Bieneman Tel: 07834
336650
Holly Gillis Tel: 07940
797560
Notes:
- Definitions of the alternative performance measures referred
to in this announcement can be found in note 30 of our Annual
Report and Accounts 2021.
- Our third quarter statement last year was based on the 16-week
period from 28 February to 19 June 2021.
The following table sets out revenues for Primark for the third
quarter and change to prior year at actual currency based on
12-week period for the last five years:
Third quarter Change at
GBPm actual currency
===== ============================ ================
2022 1,727 81%
2021 955 223%
2020 296 -82%
2019 1,672 2%
2018 1,645 6%
===== ============================ ================
In future our reporting will follow this pattern.
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END
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