Year of "correction" for ABF

Finance director John Bason has dubbed it the “year of the big correction” after EU sugar prices fell by about a quarter, and he expects more volatility now it's linked to the global market price. ABF’s sugar division reported a 12 per cent decline in sales at constant currency to £938m during the first half, while operating profit fell by a quarter to £90m. Prospects don’t look any sweeter in the second half, either. Sales growth is expected in all areas of the business – apart from sugar.

Elsewhere, ABF reported sales and profit growth across all its other divisions. Primark continued to be the biggest contributor to group revenue, with sales up 7 per cent at constant currency to £3.5bn and a 4 per cent improvement in adjusted operating profit to £341m. This performance was driven by an increase in selling space of 0.4m sq ft over the period, bringing the total number of stores to 352 across 14.3m sq ft of space.

Strip out the impact of this added square footage, and like-for-like sales fell 1.5 per cent at Primark, which was blamed on unseasonably warm weather in October and freezing temperatures in late February. Profits are expected to accelerate during the second half, as is margin improvement; operating margins contracted from 10 per cent to 9.8 per cent during the reported period. Mr Bason said the improvement should stem from more favourable currency rates as the pound and the euro strengthen against the US dollar.

Analysts at Liberum expect EPS of 134p in the year to September 2018, compared with 127p in FY2017.