REG - Assoc.British Foods - Trading Update

Associated British FoodsAnnouncement

24/01/2023 07:00

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RNS Number : 6100N  Associated British Foods PLC  24 January 2023

24 JANUARY 2023

Trading update

 

Associated British Foods plc today issues a trading update for the 16 weeks to
7 January 2023 summarising the significant trading developments since the last
market update.

 

Group revenue

Group revenue for the 16 weeks ended 7 January 2023 was £6,698m, 20% higher
than the comparable period last year at actual exchange rates and 16% higher
at constant currency. The difference in revenue growth between actual exchange
rates and constant currency was mainly driven by the significant strengthening
of the US dollar in this period. The following table sets out revenue by
business segment.

 

              Year to date  Last year  Change  Change at constant
              £m            £m                 currency
 Grocery      1,389         1,215      +14%    +9%
 Sugar        795           609        +31%    +27%
 Agriculture  651           545        +19%    +17%
 Ingredients  718           528        +36%    +26%
 Total Food   3,553         2,897      +23%    +17%
 Retail       3,145         2,672      +18%    +15%
 Group        6,698         5,569      +20%    +16%

 

Trading summary and outlook

We continue to encounter significant cost pressures but inflation has become
less volatile and recently some commodity costs have declined. Consumer
spending has proven to be more resilient in this trading period than
anticipated at the start of the financial year.

Pricing actions taken by our Food businesses to recover the significant
inflation in input costs are more evident this period. For the full year we
continue to expect the aggregate profit of our Food businesses to be ahead of
our last financial year but with a lower margin. We now expect the operating
result at AB Sugar to be broadly in line with last year as a result of a
much-reduced UK sugar crop, and for trading at Ingredients to be better.

To date, Primark trading has been good in all our markets and was ahead of
expectation. We had a very strong Christmas period. We believe our proposition
of great quality at affordable prices and attractive store experience is
proving increasingly appealing to both existing and new customers. Early
trading in this new calendar year has been encouraging but macro-economic
headwinds remain and may weigh on consumer spending in the months ahead. We
had an accelerated programme of store openings in the period and remain on
track to add a net 1 million sq ft of retail selling space in this financial
year.

For the full year, our expectation for the Group result overall is unchanged
with a significant growth in sales, and adjusted operating profit and adjusted
earnings per share to be lower than the previous financial year.

 

Food

Aggregate revenue from our Food businesses was 23% ahead of the comparable
period last year at actual currency and 17% ahead at constant currency. This
increase was primarily driven by price actions to recover significant input
cost inflation in our Grocery, Ingredients and Agriculture businesses while
Sugar revenues reflected higher sugar and co-product prices in Europe and
Africa.

Input cost inflation is becoming less volatile and recently some commodity
costs have declined. However, all our businesses continue to work hard to
restore margins which have been and remain under pressure.

In AB Sugar, UK sugar production from the 2022/2023 campaign is now expected
to be some 0.74 million tonnes, lower than our previous forecast of 0.9
million tonnes and compares to 1.03 million tonnes from our last campaign.
This reflects lower beet sugar yields following adverse weather conditions,
especially recently.  Profitability at British Sugar will be lower than
expected as a result. Sugar production at Illovo is expected to be higher than
forecast and will be above last year's 1.45 million tonnes. Vivergo, our
bioethanol plant in Hull, has been operating well but made a loss in the
period due to volatility in its energy and other input costs and bioethanol
prices.

In our Grocery businesses, inflation in input costs continued to run ahead of
pricing to recover margins and for the full year we continue to expect some
erosion of adjusted operating profit margin.

Our Ingredients businesses performed very strongly in the period and we now
expect full year operating profit to be ahead of last year. AB Mauri exceeded
expectation with both recovery of input cost inflation and volume growth
delivering good revenue growth in all its major regions. ABF Ingredients, our
speciality ingredients businesses, continued to trade strongly.

 

Retail

To date, Primark trading has been good in all our markets and was ahead of
expectation. We had a very strong Christmas period.

This year footfall was strong in both the UK and the Eurozone, unit volumes
increased, and sales were 18% ahead of last year at actual exchange rates and
15% ahead at constant currency. Last year the omicron pandemic impacted
footfall.

Primark like-for-like sales were 11% ahead, supported by higher unit volumes,
higher average selling prices and a normalised level of markdown. Sales in the
week leading up to Christmas Day reached a new record. Retail selling space
increased from 17.0 million sq ft to 17.7 million sq ft year on year and all
the new stores are performing well.

In the UK there was a step-up in performance with sales 15% ahead of last
year, nearly all of which was like-for-like growth. Primark's share of the
total UK clothing, footwear and accessories market by value, which includes
online sales, for the 12 weeks ended 11 December 2022 reached 7.0%, up from
6.5% in the comparable period last year, and was very close to the record
trading when stores reopened in June 2021 after a prolonged lockdown. Of note,
footfall is now strong in major city centres as well as on high streets and
retail parks.

Trading in Europe, excluding the UK, was very encouraging with sales up 16%
with growth in all markets. Like-for-like sales were 8% higher. We have had a
very extensive store opening programme in this region, opening 12 stores over
the last 12 months.  The new stores in Bucharest, Romania, and in Caserta,
near Naples in Italy, are both performing particularly strongly.

We are encouraged by sales growth of 4% in the US given the strength of prior
year comparatives which were supported by COVID related government stimulus.
We plan to nearly double selling space in the US in this financial year and
opened three stores towards the end of the period - Roosevelt Field, Long
Island; Jamaica Avenue, Queens; City Point, Brooklyn - and all are performing
well. We also extended our recently opened store at Sawgrass Mills in Florida.

Adjusted operating profit margin in the period was better than expected as a
consequence of the sales performance. As expected, the margin was somewhat
lower than in the same period last year as a result of inflation in the cost
of bought-in goods driven by the significant strengthening of the US dollar
against sterling and the euro, and higher freight rates, labour and energy
costs.

Primark's digital capability continues to develop. With improved functionality
and better customer experience, the new UK website's traffic has increased
some 85% since last year, with double the average pages viewed per session.
The new site has just been launched in the Republic of Ireland, to be followed
in the coming months by Germany, Spain, and the US, with remaining markets
expected by the middle of the calendar year. We are encouraged by our Click
and Collect trial of children's products in 25 stores in the UK.

We had a strong programme of store openings in the period and retail selling
space increased by 0.4 million sq ft. At 7 January 2023, 416 stores were
trading from 17.7 million sq ft which compared to 17.0 million sq ft a year
ago. Ten new stores were opened in the period: our first store in Romania,
Primark's 15th market, three in the US, two in Italy, two in Poland, one in
France, and one in Northern Ireland. Following the devastating fire in 2018,
we were delighted to reopen fully our Bank Buildings store in the heart of
Belfast.  We extended our stores at Sawgrass Mills, Florida, and Galway Eyre
Square, Republic of Ireland. We closed our store in Weiterstadt, Germany as
planned and, after the reopening of Bank Buildings, our temporary store in
Donegal Place, Belfast.

In this financial year we will open a further 17 stores: seven in the US,
three in France, three in Spain, two in Italy, one in Romania, and our first
store in Slovakia, which becomes Primark's 16th market, in Bratislava. Taken
with a small number of relocations, extensions and a further planned store
closure in Germany, we continue to expect to add a net 1 million sq ft of
retail selling space in the financial year. We have recently signed a lease
for our first store in Hungary, which will become Primark's 17th market, in
Budapest.

 

Notes:

 -  The like-for-like Retail metric reflects the measurement of the performance of
    our retail stores on a comparable year-on-year basis. This measure represents
    the change in sales at constant currency excluding new stores, closures and
    relocations. It is measured against comparable trading days in each year.
 -  Definitions of the alternative performance measures referred to in this
    announcement can be found in note 30 of our Annual Report and Accounts 2022.

 

For further information please contact:

 

 Associated British Foods:
 Tel: 020 7399 6545
 John Bason, Finance Director
 Chris Barrie, Corporate Affairs Director
 Citigate Dewe Rogerson:
 Tel: 020 7638 9571
 Holly Gillis    Tel: 07940 797560
 Angharad Couch  Tel: 07507 643004

 

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