Primark owner AB Foods maintains earnings guidance

Associated British Foods maintained its full-year earnings guidance on Monday, with sales growth at its Primark (known as Penneys in Ireland) discount fashion retailer supported by better performances in its sugar, grocery and ingredients businesses.

The firm said on Monday it still expected progress in adjusted operating profit and adjusted earnings per share in its 2016-2017 year.

AB Foods made adjusted operating profit of £1.12 billion (€1.3 billion) in 2015-16, with adjusted earnings per share of 106.2 pence.

For its half year to March 4th the group forecast "excellent progress" in adjusted operating profit and adjusted EPS.

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It said first-half sales at Primark were expected to be 11 per cent ahead of last year at constant currency, driven by increased retail selling space, and 21 per cent ahead at actual exchange rates.

Strong cash generation

In a note, Davy said all divisions at the company are performing as expected.

Primark margins declined and a further decline is anticipated for H2 given USD sourcing costs – this expectation is unchanged, it said.

“Sugar division revenues will be well ahead year-on-year accompanied by a substantial increase in profit. Grocery division revenue and profit will be substantially ahead with margins up year-on-year.

“Agriculture was affected by the margin pressure in UK feed so operating profit will be marginally down for the division. Strong revenue and operating profit growth was generated in the ingredients division.”

The company also expects strong cash generation in the first half which, when allied with the £0.5 billion net proceeds from recent divestments, will move the group into a net cash position of £200 million at the end of the half year.