Primark gives surprise boost to ABF finals

<p>Primark owner Associated British Foods said full-year earnings per share advanced 6%, confounding a fashion sector wobbling due to the mild autumn and signalling stabilisation […]</p>

Primark owner Associated British Foods said full-year earnings per share advanced 6%, confounding a fashion sector wobbling due to the mild autumn and signalling stabilisation of ABF’s troublesome sugar business too.

Whilst the group, which is the world’s second-largest producer of sugar, expects profit from the refined commodity to sift away further in 2014-15, it said strong performances in its Primark discount fashion chain and grocery business would offset sugar weakness.

With ABF noting it expected Primark’s expansion to continue, and further progress in groceries and ingredients (a large proportion of which is sugar-related), these results may the best sign yet of a floor under ABF’s recent troubles.

Another plus is that the firm this morning confounded a spate of weather-blighted earnings which have hampered the fashion sector following a warm autumn, according to the likes of Next Plc. and SuperGroup, Plc.

By contrast, ABF’s CEO, George Weston decried any recent weather impact.

“I’m really not concerned (by the weather) and we haven’t had to delay or cancel any orders,” he said in a media interview.

“Yes, there’s been an (weather) effect, but … every year you get unseasonal weather at some point.”

ABF’s balance sheet strength has not been at issue as far as I can see, even as the challenges in its ingredients business seemed to verge on chronic.

 

ABF QUICK RATIO_FY 4TH NOV 2014

Associated British Foods quick ratio 2008-2013, source: Thomson Reuters

 

Still this morning, ABF has gone out of its way to stress it expects the strength of its balance sheet and strong cash generation to underpin further earnings progress.

 

Quick figures

  • Adjusted EPS 104.1p vs. 98.9p last full year
  • Group revenue down 3% to £12.9bn
  • Adjusted operating profit down 1% to £1.16bn
  • Dividend up 6% to 34p per share
  • Guidance:  full-year earnings to be “ahead of the previous year”

 

 

Stock could break recent trend

These relatively robust results from a company which, after all, has announced several profit warnings in the last few years, seemed to take the market off guard.

The FTSE 100-listed stock looked set to rise at the open, judging by the pre-opening auction quoted on the London Stock Exchange.

But ABF initially dropped more than 2.5%, before eventually erasing the loss and grinding 3 percentage points into the black.

The stock still seems to be struggling with its moving averages as a first hurdle, though momentum on a very short-term basis looks promising. Today’s trading would appear to offer the best chance for weeks for the stock to break out of the downward channel it’s traded in since early July, but no guarantees, of course.

 

ABF HALF HOURLY POST FY 4TH NOV 2014

 

The stock traded 0.1% lower at 2669p at the time of writing.

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