26th Jun 2023 10:37
(Alliance News) - Associated British Foods PLC said on Monday that it now expects its full-year adjusted operating profit to be "moderately" ahead of last year, following a solid performance in its third quarter.
AB Foods is a London-based fast-fashion retailer via the Primark store chain, and food manufacturer.
In the 12 weeks ended May 27, AB Foods reported group revenue of GBP4.7 million, up 16% against the prior year at constant currency.
The company attributed this to double-digit percentage revenue growth at constant currency across all its businesses, apart from in Agriculture, which saw 4% growth year-on-year.
Following the update, Davy Research said it predicts a "modest upside" to its current forecasts and Shore Capital signalled an around 6.5% earnings per share upgrade for financial 2023, ending September 17.
Analysts Clive Black and Darren Shirley said Shore is signalling an upgrade to its financial 2023 earnings before interest and tax forecast of around 4.5% to GBP1.48 billion. This, assuming a 24% tax charge, also yields adjusted earnings per share of 140.3 pence for financial 2023, the analysts added, which is 6.5% ahead of Shore's prior forecast and up 7.0% from 131.1p in financial 2022.
"[AB Foods] stock is, therefore, trading on a financial 2023 [enterprise-value-to-earnings before interest tax, depreciation and amortization ratio] rating of 7.4 times and a [price-to-earnings ratio] of 13.9 times, which we continue to feel is far from overly demanding," the Shore analysts noted.
"[AB Foods] has a lot going for it in our view and externalities around inflation, its non-discretionary and value retail credentials, plus rising base rates play to its strengths, with notable cash balances evident," Black and Shirley continued.
AB Foods on Monday added that trading across its food businesses has continued to be strong, with strong constant currency sales growth driven by the "necessary pricing actions" taken earlier in the year to offset cost increases.
As for retail, AB Foods said Primark has continued to trade in line with its expectations, with 13% sales growth on the back of higher average selling prices.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said AB Food's "upbeat" results showed that the company's lower price points are a "big draw" as belts are tightened.
"It's also fresh evidence of consumer resilience amid the pain of high inflation, with shoppers defying expectations of drawing their purse-strings tighter...But if consumers do keep splashing the cash, it's likely the Bank of England will have to keep raising rates to try and reduce demand. Amid this still uncertain outlook, [AB Foods'] shares dipped in early trade."
Shares in AB Foods were down 1.1% at 1,931.00 pence on Monday morning in London. The stock is up 17% over the last 12-months, however.
By Heather Rydings, Alliance News senior economics reporter
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