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ABF takes Primark to America

RESULTS: Associated British Foods wants to launch retail chain Primark in the US.
April 23, 2014

Associated British Foods (ABF) is to bring its fast-growing retail business Primark to the US consumer, with a flagship store set to open in Boston by the end of 2015.

IC TIP: Hold at 2,949p

The announcement came as ABF reported another period of bumper trading at the cheap clothes chain. Retail sales were 13 per cent ahead in the first half to £2.28bn, driven by 4 per cent underlying growth and a huge increase in space. As a result, operating profit soared 26 per cent to £298m - 60 per cent of the group total. Retail selling space will swell in the second half too, as further stores open across the UK and continental Europe.

This strong performance from Primark, coupled with a 31 per cent rise in profit from the grocery division, offset a significant deterioration in the sugar business. Lower prices and volumes, driven by competition ahead of the abolition of the European Union sugar quotas in 2017, saw the unit's sales tumble 22 per cent to £1.03bn and operating profit more than halve to £64m. These challenging conditions will persist throughout the second half.

Overall, group adjusted pre-tax profit rose 4 per cent to £468m, helped by lower borrowing costs. Despite currency headwinds, Numis Securities expects EPS of 103p for the full year, up from 98p in 2013.

ASSOCIATED BRITISH FOODS (ABF)
ORD PRICE:2,949pMARKET VALUE:£23bn
TOUCH:2,947-2,951p12-MONTH HIGH:3,030pLOW: 1,657p
DIVIDEND YIELD:1.1%PE RATIO:37
NET ASSET VALUE:766p*NET DEBT:13%

Half-year to 1 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20136.3341138.59.35
20146.2143443.29.7
% change-2+6+12+4

Ex-div: 4 Jun

Payment: 4 Jul

*Includes intangible assets of £1.48bn, or 187p a share