14th Jan 2021 09:03
(Alliance News) - Associated British Foods PLC on Thursday posted a drop in revenue for the 16 weeks ended January 2, as it warned on further huge losses should its Primark stores remain closed until the end of February.
The FTSE 100 food processing and retailing company said that for the 16 weeks ended January 2, revenue was 13% lower than the same period last year, at constant currency.
AB Foods said its Retail performance - comprising the Primark clothing store chain - was materially hurt by the increased restrictions on the movement of people and trading activity put in place again by UK and European governments, mainly during November and late December, to limit the spread of Covid-19.
Primark sales were 30% lower than last year at constant currency and 28% lower at actual exchange rates. The company's estimate for the loss of sales in the periods of closure during these 16 weeks is GBP540 million. While stores were open, AB Foods said trading was strong given the circumstances, with sales down 14% on a like-for-like basis compared to last year.
In a blow to its near term prospects, AB Foods said uncertainty about store closure periods in the short term has increased. Making the assumption that all of the stores currently closed remain closed until the financial half year point, on February 27, the loss of sales caused by temporary store closures would reach around GBP1.05 billion. This is up from the previous estimate of GBP650 million, it said.
"The impact of store closures on Primark's performance is significant. We now expect full year sales and adjusted operating profit for Primark to be somewhat lower than last year. We will continue to expand retail selling space. The lower profitability of Primark, and the consequent change in the weight of profit by tax jurisdiction for the group will result in an increase in the group's effective tax rate for the year from the 25% previously advised," the company said.
The company noted 305 stores are currently closed, representing 76% of its retail selling space.
Turning to its food business, the London-based firm noted trading across its other businesses during the 16-week period was ahead of expectations.
Total food revenue rose 6.5% to GBP2.77 billion from GBP2.60 billion. This was as Agriculture income rose 9.5% to GBP507 million, Grocery increased 7.0% to GBP1.22 billion, Sugar rose 6.4% to GBP545 million and Ingredients inched up 2.7% to GBP497 million.
The increase in sugar sales was driven by higher average sugar prices for British Sugar, combined with record bioethanol prices and higher sugar prices at African sugar producer Illovo Sugar Ltd.
Grocery sales were aided by a strong performance in Twinings Ovaltine and its UK Grocery businesses, which benefited from higher sales to international customers ahead of the Brexit transition deadline and higher volumes in retail grocery as people spent more time at home during lockdown.
Looking ahead, AB Foods said it expects to see little impact from changes in tariffs following the end of the Brexit transition period, adding that it has not yet seen any material disruption to its supply chains.
Shares in AB Foods were trading 0.4% higher at 2,229.00 pence each on Thursday morning in London.
By Ife Taiwo; [email protected]
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