2nd Jul 2020 08:28
(Alliance News) - Associated British Foods PLC on Thursday reported a double-digit revenue fall for the past nine months and said it expects profit at low-cost fashion retailer Primark to be a third of what was achieved a year ago.
However, nearly all Primark stores have now reopened and early sales have been strong.
The stock was trading 7.5% higher on Thursday in London at 2,111.00 pence, though it remains down 18% so far in 2020.
AB Foods group revenue for the 40 weeks to June 20 was down 13% on a year ago at constant currency, with sales down 39% in the third quarter alone. Among divisions in the third quarter, grocery was the stand-out performer, with revenue up 9%, while retail sales at Primark slumped a sharp 75%.
Primark stores were closed for most of the third quarter, with revenue recorded in the period relating to two short periods of trading before stores closed in mid-March and after they started to reopen at the end of the quarter.
The net cash outflow for Primark in the 12 week period to May 23 - when trading was non-existent or minimal - was around GBP800 million. This comprised payments to suppliers and operating expenses.
Grocery, meanwhile, benefited in the third quarter from increased sales volumes through the retail channel, and this more than offset weaker foodservice demand. Following flat revenue in the first half, third quarter revenue was 9% ahead of last year, AB Foods said.
Ingredients revenue in the third quarter was 3% ahead of last year, driven by both AB Mauri and ABF Ingredients.
AB Agri revenue was in line with last year in the third quarter, with higher sales of feed enzymes offsetting lower poultry feed volumes due to reduced foodservice demand for chicken.
Turning to AB Sugar, AB Foods said revenue was held back by lower Illovo export volumes in the quarter due to Covid-19-related logistical constraints at borders and ports in Africa.
Looking ahead, AB Foods said: "For the full year we continue to expect strong progress in the aggregate adjusted operating profit of our Sugar, Grocery, Agriculture and Ingredients businesses. This will be mainly driven by a material increase in profit at AB Sugar and another year of good margin and profit growth in Grocery."
Nearly all Primark stores are now trading again, the company said, and absent a significant number of further store closures, adjusted operating profit for Primark, excluding exceptional charges, will be in the range of GBP300 million to GBP350 million for the full year, compared to GBP913 million reported for the last financial year.
AB Foods said Primark stores have reopened more quickly than expected, particularly in Ireland, since its June 1 trading update. A total of 367 stores now have reopened, with the remain 8 expected to follow in the near future, it said.
Since the reopening of the first stores on May 4, cumulative sales for the seven-week period to June 20 were GBP322 million, just 12% lower than last year on a like-for-like basis, AB Foods said.
Sales in the week ended June 20, with over 90% of the company's selling space reopened, were GBP133 million, and trading in England and Ireland was ahead of the same week last year.
"With Primark trading again, our current expectation is that the year end net cash balance, before lease liabilities, will be in excess of GBP750 million," AB Foods said.
AB Foods said, in the remainder of this financial year, it expects to add five further new stores, which will bring its retail selling space at the financial year end to 16.3 million square feet.
By Evelina Grecenko; [email protected]
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