TIDMABF
RNS Number : 6100N
Associated British Foods PLC
24 January 2023
24 JANUARY 2023
Trading update
Associated British Foods plc today issues a trading update for
the 16 weeks to 7 January 2023 summarising the significant trading
developments since the last market update.
Group revenue
Group revenue for the 16 weeks ended 7 January 2023 was
GBP6,698m, 20% higher than the comparable period last year at
actual exchange rates and 16% higher at constant currency. The
difference in revenue growth between actual exchange rates and
constant currency was mainly driven by the significant
strengthening of the US dollar in this period. The following table
sets out revenue by business segment.
Year to date Last year Change Change at
constant
GBPm GBPm currency
------------ ------------ --------- ------ ---------
Grocery 1,389 1,215 +14% +9%
Sugar 795 609 +31% +27%
Agriculture 651 545 +19% +17%
Ingredients 718 528 +36% +26%
Total Food 3,553 2,897 +23% +17%
Retail 3,145 2,672 +18% +15%
Group 6,698 5,569 +20% +16%
Trading summary and outlook
We continue to encounter significant cost pressures but
inflation has become less volatile and recently some commodity
costs have declined. Consumer spending has proven to be more
resilient in this trading period than anticipated at the start of
the financial year.
Pricing actions taken by our Food businesses to recover the
significant inflation in input costs are more evident this period.
For the full year we continue to expect the aggregate profit of our
Food businesses to be ahead of our last financial year but with a
lower margin. We now expect the operating result at AB Sugar to be
broadly in line with last year as a result of a much-reduced UK
sugar crop, and for trading at Ingredients to be better.
To date, Primark trading has been good in all our markets and
was ahead of expectation. We had a very strong Christmas period. We
believe our proposition of great quality at affordable prices and
attractive store experience is proving increasingly appealing to
both existing and new customers. Early trading in this new calendar
year has been encouraging but macro-economic headwinds remain and
may weigh on consumer spending in the months ahead. We had an
accelerated programme of store openings in the period and remain on
track to add a net 1 million sq ft of retail selling space in this
financial year.
For the full year, our expectation for the Group result overall
is unchanged with a significant growth in sales, and adjusted
operating profit and adjusted earnings per share to be lower than
the previous financial year.
Food
Aggregate revenue from our Food businesses was 23% ahead of the
comparable period last year at actual currency and 17% ahead at
constant currency. This increase was primarily driven by price
actions to recover significant input cost inflation in our Grocery,
Ingredients and Agriculture businesses while Sugar revenues
reflected higher sugar and co-product prices in Europe and
Africa.
Input cost inflation is becoming less volatile and recently some
commodity costs have declined. However, all our businesses continue
to work hard to restore margins which have been and remain under
pressure.
In AB Sugar, UK sugar production from the 2022/2023 campaign is
now expected to be some 0.74 million tonnes, lower than our
previous forecast of 0.9 million tonnes and compares to 1.03
million tonnes from our last campaign. This reflects lower beet
sugar yields following adverse weather conditions, especially
recently. Profitability at British Sugar will be lower than
expected as a result. Sugar production at Illovo is expected to be
higher than forecast and will be above last year's 1.45 million
tonnes. Vivergo, our bioethanol plant in Hull, has been operating
well but made a loss in the period due to volatility in its energy
and other input costs and bioethanol prices.
In our Grocery businesses, inflation in input costs continued to
run ahead of pricing to recover margins and for the full year we
continue to expect some erosion of adjusted operating profit
margin.
Our Ingredients businesses performed very strongly in the period
and we now expect full year operating profit to be ahead of last
year. AB Mauri exceeded expectation with both recovery of input
cost inflation and volume growth delivering good revenue growth in
all its major regions. ABF Ingredients, our speciality ingredients
businesses, continued to trade strongly.
Retail
To date, Primark trading has been good in all our markets and
was ahead of expectation. We had a very strong Christmas
period.
This year footfall was strong in both the UK and the Eurozone,
unit volumes increased, and sales were 18% ahead of last year at
actual exchange rates and 15% ahead at constant currency. Last year
the omicron pandemic impacted footfall.
Primark like-for-like sales were 11% ahead, supported by higher
unit volumes, higher average selling prices and a normalised level
of markdown. Sales in the week leading up to Christmas Day reached
a new record. Retail selling space increased from 17.0 million sq
ft to 17.7 million sq ft year on year and all the new stores are
performing well.
In the UK there was a step-up in performance with sales 15%
ahead of last year, nearly all of which was like-for-like growth.
Primark's share of the total UK clothing, footwear and accessories
market by value, which includes online sales, for the 12 weeks
ended 11 December 2022 reached 7.0%, up from 6.5% in the comparable
period last year, and was very close to the record trading when
stores reopened in June 2021 after a prolonged lockdown. Of note,
footfall is now strong in major city centres as well as on high
streets and retail parks.
Trading in Europe, excluding the UK, was very encouraging with
sales up 16% with growth in all markets. Like-for-like sales were
8% higher. We have had a very extensive store opening programme in
this region, opening 12 stores over the last 12 months. The new
stores in Bucharest, Romania, and in Caserta, near Naples in Italy,
are both performing particularly strongly.
We are encouraged by sales growth of 4% in the US given the
strength of prior year comparatives which were supported by COVID
related government stimulus. We plan to nearly double selling space
in the US in this financial year and opened three stores towards
the end of the period - Roosevelt Field, Long Island; Jamaica
Avenue, Queens; City Point, Brooklyn - and all are performing well.
We also extended our recently opened store at Sawgrass Mills in
Florida.
Adjusted operating profit margin in the period was better than
expected as a consequence of the sales performance. As expected,
the margin was somewhat lower than in the same period last year as
a result of inflation in the cost of bought-in goods driven by the
significant strengthening of the US dollar against sterling and the
euro, and higher freight rates, labour and energy costs.
Primark's digital capability continues to develop. With improved
functionality and better customer experience, the new UK website's
traffic has increased some 85% since last year, with double the
average pages viewed per session. The new site has just been
launched in the Republic of Ireland, to be followed in the coming
months by Germany, Spain, and the US, with remaining markets
expected by the middle of the calendar year. We are encouraged by
our Click and Collect trial of children's products in 25 stores in
the UK.
We had a strong programme of store openings in the period and
retail selling space increased by 0.4 million sq ft. At 7 January
2023, 416 stores were trading from 17.7 million sq ft which
compared to 17.0 million sq ft a year ago. Ten new stores were
opened in the period: our first store in Romania, Primark's 15th
market, three in the US, two in Italy, two in Poland, one in
France, and one in Northern Ireland. Following the devastating fire
in 2018, we were delighted to reopen fully our Bank Buildings store
in the heart of Belfast. We extended our stores at Sawgrass Mills,
Florida, and Galway Eyre Square, Republic of Ireland. We closed our
store in Weiterstadt, Germany as planned and, after the reopening
of Bank Buildings, our temporary store in Donegal Place,
Belfast.
In this financial year we will open a further 17 stores: seven
in the US, three in France, three in Spain, two in Italy, one in
Romania, and our first store in Slovakia, which becomes Primark's
16th market, in Bratislava. Taken with a small number of
relocations, extensions and a further planned store closure in
Germany, we continue to expect to add a net 1 million sq ft of
retail selling space in the financial year. We have recently signed
a lease for our first store in Hungary, which will become Primark's
17th market, in Budapest.
Notes:
- The like-for-like Retail metric reflects the measurement of the
performance of our retail stores on a comparable year-on-year basis.
This measure represents the change in sales at constant currency
excluding new stores, closures and relocations. It is measured against
comparable trading days in each year.
- Definitions of the alternative performance measures referred to
in this announcement can be found in note 30 of our Annual Report
and Accounts 2022.
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
Holly Gillis Tel: 07940 797560
Angharad Couch Tel: 07507 643004
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END
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