TIDMABF
RNS Number : 7318X
Associated British Foods PLC
16 January 2014
16 January 2014
Associated British Foods plc
Interim management statement
Associated British Foods plc today issues an interim management
statement for the 16 weeks to 4 January 2014, in accordance with
the requirements of the UK Listing Authority's Disclosure and
Transparency rules.
Headlines
-- Excellent Christmas trading at Primark
-- Encouraging performance from Grocery and Ingredients
-- Sugar performance weaker than expected
-- Adverse translation impact of recent sterling strength
-- No change in full year earnings' expectations
Trading performance
Group revenue for the first 16 weeks was in line with last year.
Revenue growth by business segment was:
16 weeks to 4 January 2014
----------------------------------
Actual rates Constant rates
Sugar -28% -27%
Agriculture level level
Grocery -1% +2%
Ingredients -2% +3%
Retail +14% +12%
Total group level +1%
Compared with the first quarter last year, sterling weakened
against the euro but has strengthened against most other major
currencies, particularly in recent weeks. As a result, group
revenue for the quarter would have been 1% higher at constant
currency. If sterling remains at current rates the impact for the
rest of the year will be more significant.
Sugar
Revenues in the period were 27% below last year at constant
currency, and 28% lower at actual rates as the strength of the euro
was broadly offset by the weakness of the South African rand. EU
sugar prices, as previously indicated, were lower in the period
which will lead to lower revenues and margins for both the UK and
Spain in the full year. The further recent fall in world sugar
prices may put further pressure on revenues and margins,
particularly in China. Sales volumes for Illovo and China were
lower than last year and reduced sugar production in Spain led to
the elimination of non-quota exports this year.
The UK campaign is progressing to plan. Beet quality and sugar
content are encouraging and all factories are operating well. Sugar
production for the current year is now estimated to be 1.28 million
tonnes compared with last year's 1.15 million tonnes. Production
consistency has improved at the Vivergo bioethanol plant in Hull
and volumes have increased. In Spain, the northern campaign was
delayed to maximise beet development from the reduced area under
cultivation in the 2013 crop year and has achieved an improved
start-up performance compared with last year.
Illovo's revenues were weaker with lower domestic volumes and
regional prices. The Malawian kwacha has continued to decline
against both the rand and sterling since last financial year
end.
All five factories in south China made a good start to their
campaign with sugar content and extraction both ahead of last year.
Production volumes in the north were held back by flooding in
Heilongjiang and fewer factories in operation following the
rationalisation last year. With the benefit of recent cost
reduction measures and improved factory performance in the north,
we expect the China sugar business to deliver a substantial
improvement in profitability this year.
Agriculture
Revenue was level with last year at both constant currency and
actual rates. Lower UK feed volumes were offset by growth in China,
and a strong performance at AB Vista where Quantum Blue in South
America and Econase in Asia were the main contributors. Frontier
traded at similar levels to last year with good sales of crop
inputs and fertilisers.
Grocery
Revenue at constant currency was 2% ahead of last year but at
actual rates was 1% below, largely as a result of a weaker
Australian dollar. Twinings Ovaltine again performed well with
strong growth for tea in the US and the UK. Sales by the UK grocery
businesses were in line with last year. Volumes and margins at
Allied Bakeries were ahead of last year but continued to face
strong competition. Sales at Silver Spoon declined as a result of
lost contracts and reduced UK sugar pricing but the profit impact
has been partially mitigated by overhead cost reduction. Sales
increased in local currency at George Weston Foods in Australia,
profitability has improved and further progress was made in the Don
KRC meat business with increased volumes and improved cost control.
Revenue at ACH was ahead of last year with higher corn oil
volumes.
Ingredients
Revenue at constant currency was 3% ahead of last year at
constant currency but 2% lower at actual rates. In yeast and bakery
ingredients, cost inflation in South America was successfully
recovered with improvement in volumes and margins in Brazil.
Revenues in North America were ahead driven by increased volumes.
Profit in AB Mauri is improving. At ABF Ingredients, the new
extrusions factory at Evansville in the US has been successfully
commissioned, products have been approved by key customers and the
factory is fully operational.
Retail
Sales at Primark were 12% ahead at constant currency and, with
the benefit of a stronger euro, were 14% ahead of the same period
last year at actual rates. This was driven by an 8% increase in
selling space, strong like-for-like growth and higher sales
densities from new stores. Trading in the year to date has built
upon the exceptional like-for-like growth delivered in the same
period last year. Although like-for-like sales in the first eight
weeks were held back by the unseasonably warm weather and the
strong comparatives in the previous year, the second half of the
period was characterised by excellent Christmas trading with very
strong like-for-like growth.
Operating profit margin was higher than in the same period last
year, reflecting the Christmas trading, and was better than
expected.
Retail selling space increased by 0.6 million sq ft since the
financial year end. At 4 January 2014, 268 stores were trading from
9.6 million sq ft of selling space. We opened 14 new stores in the
period including our first in France which began trading on 16
December from 63,000 sq ft in Marseille. Early signs suggest that
Primark has captured the imagination of French consumers, with one
of our best store openings to date. In Spain we opened five new
stores and closed the smaller of our two stores in La Coruña,
bringing the total there to 39. Three further stores were added in
the UK, including Crawley where we relocated to a larger site, and
we also closed our small store in Leytonstone. Two new stores were
added in the Netherlands and one each in Germany, Austria and
Portugal, all of which have begun trading exceptionally well.
We expect to add a further 0.5 million sq ft of selling space in
this financial year, bringing the net additions for the year to 1.1
million sq ft which is substantially more than that achieved in
2013. The additional stores will include a further four in France,
three located in shopping centres in the suburbs of Paris and one
in Dijon; two additional German stores, our second in Berlin and
one in Cologne; three new UK stores including a relocation in
Cardiff; and we will also relocate our Plenilunio store, our first
in Spain, to a location twice its size. This additional space will
be opened more evenly through this financial year and the 8%
increase in selling space achieved in the first quarter will
increase as the year progresses. Capital expenditure for the full
year is planned to be ahead of last year.
Financial position
Operating cash flow in the period was better than last year
driven by a strong working capital inflow, particularly at Primark,
compared with last year's outflow. Capital expenditure continued at
a level similar to last year with lower expenditure in the food
businesses offset by a higher investment at Primark. Net debt at 4
January 2014 was GBP392m lower than last year end at GBP412m.
Trading outlook
Lower sugar prices, as the market rapidly adjusts ahead of EU
regime reform in 2017, will result, as previously indicated, in a
substantial reduction in profit from our sugar businesses this
year. With the further recent fall in world sugar prices this
reduction will now be greater than previously expected. Building
upon the like-for-like growth already achieved, and with the
further store expansion planned for the remainder of the year,
Primark's profit will be well ahead of last year with a higher
margin than expected. Given the current strength of sterling, when
these factors are combined with revenue growth and margin
improvement in Grocery, and a lower interest charge, we continue to
expect adjusted earnings per share for the current financial year
to be similar to 2013.
For further enquiries please contact:
Associated British Foods
John Bason, Finance Director Tel: 020 7399 6500
Citigate Dewe Rogerson
Chris Barrie, Eleni Menikou Tel: 020 7638 9571
Jonathan Clare Tel: 07770 321 881
This information is provided by RNS
The company news service from the London Stock Exchange
END
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