At Primark, sales rose 17 per cent to £3.5bn on a constant exchange rate basis, driven by new store openings. Even without the new stores, like-for-like sales grew by a respectable 3 per cent. Moreover, the divisional operating margin was maintained at 10.2 per cent as second-half cotton prices eased. Expanding the chain cost £326m and management expects a similar investment in the coming year.
Firmer prices and decent growing conditions underpinned the UK beet sugar sector, with production here up from 1m tonnes to 1.3m. But, at the ingredients business, the operating margin fell from 5.6 per cent to 2.9 per cent - mainly reflecting higher raw material costs. The grocery division, meanwhile, was hit by restructuring costs associated with George Weston Foods in Australia and Allied Bakeries in the UK.
Panmure Gordon expects 2013 adjusted pre-tax profit of £1.03bn, giving EPS of 92p (from £974m and 87.2p in 2012).
|ASSOCIATED BRITISH FOODS (ABF)|
|ORD PRICE:||1,359p||MARKET VALUE:||£10.8bn|
|TOUCH:||1,358-1,359p||12-MONTH HIGH:||1,406p||LOW: 1,067p|
|DIVIDEND YIELD:||2.1%||PE RATIO:||19|
|NET ASSET VALUE:||737p*||NET DEBT:||17%|
Primark should generate more decent growth this year, but management expects lower sugar profits going forward. Add that to tough trading in the grocery and ingredients operations and the shares, trading on hardly cheap 15 times forecast earnings, look up with events. Hold
Last IC view: Hold, 1,233p, 24 April 2012