ABF’s trading update: Allied Bakeries is increasing its volumes
Allied Bakeries is successfully increasing its volumes and is rebuilding Kingsmill’s presence in Tesco, although its margins remain under pressure – shows the trading update from Associated British Foods for the 40 weeks to 20 June 2015.
Regarding sugar business, the report mentions that the UK campaign in 2014/15 produced 1.45 million tonnes of sugar and benefited from a large crop, excellent factory performances and good extraction rates. The new crop for the 2015/16 season has made good progress but, with a reduction in the area under cultivation in excess of 20 per cent, sugar production is expected to be closer to 1.0 million tonnes leading to a fall in quota stock levels. Quota stocks are now reducing across the EU and with lower production forecasts generally across the region, further reduction is expected next year.
As quota sugar stocks reduce, EU sugar prices, as reported by the European Commission, have shown some signs of recovery, albeit moderated by continued low world sugar prices. Delivered beet costs for the 2015/16 campaign will be some 20 per cent lower than the current year. Negotiations for the 2016/17 UK beet price are now complete which will see a further substantial cost reduction.
Retail data
Regarding retail, the reports shows that sales at Primark in the 40 weeks of the year to date were 13 per cent ahead of last year at constant currency, driven by an increase in selling space of 8 per cent and by very high sales densities in stores opened in the last year. As a result of the weakening of the euro against sterling, total sales were 9 per cent ahead of the same period last year at actual exchange rates.
Sales on a like-for-like basis in the last 16 weeks were in line with last year’s very strong comparatives and continue to be held back by the impact that opening new stores in the Netherlands and Germany has had on existing stores in the region. Spain, Portugal and Ireland all performed very strongly and the UK continued to deliver a positive like-for-like performance. The stores in France, which are excluded from the like-for-like measure, have also continued to trade very strongly.
Retail selling space has increased by 0.6 million sq ft since the beginning of the financial year and at 20 June 2015, 287 stores were trading from 10.8 million sq ft of retail selling space.
The report mentions that group revenue for the 40 weeks ended 20 June 2015 was 2 per cent ahead of the same period last year at constant currency, and was level at actual exchange rates.
During the current financial year, against a basket of currencies, the euro has weakened significantly and the US dollar and sterling have both strengthened. Movements in currency exchange rates in the current financial year have primarily affected the translation of overseas results into sterling, the full year impact of which is still expected to be in the order of GBP 25m if current rates persist.
The earnings expectation for this financial year is unchanged and reflects a modest decline in adjusted earnings per share for the group for the full year.
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