The future is finally beginning to look sweeter for Associated British Foods (ABF). The end of the European Union’s sugar regime, combined with oversupply in the region, weighed heavily on the group’s sugar business last year and caused adjusted operating profits to fall more than three-quarters. Yet lower sugar production caused stock levels to fall in 2018-19, and indications are that this will continue into 2020, which should cause prices to recover.
On the retail side, management has been investing heavily in expanding Primark stores, adding 14 in the UK and Europe, including Birmingham, where it opened its largest ever store. The increased selling space led to a 4.1 per cent constant-currency increase in sales, but that was offset by poor trading in Germany. That meant like-for-like sales declined by 2 per cent overall. The group has appointed a new managing director for the German retail business and is planning a marketing drive to turn performance around. The retail adjusted operating margin edged up to 11.7 per cent, from 11.3 per cent, thanks to better buying, stock management and a weaker US dollar on contracted purchases. However, management warned that a reversal of the latter against sterling would lead to a modest margin drop in the coming year.
Bloomberg consensus forecasts are for adjusted EPS of 151.4p in 2020, up from 137.5p this year.
| ASSOCIATED BRITISH FOODS (ABF) | ||||
| ORD PRICE: | 2,361p | MARKET VALUE: | £18.7bn | |
| TOUCH: | 2,360-2,361p | 12-MONTH HIGH: | 2,659p | LOW: 2,011p |
| DIVIDEND YIELD: | 2% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 1,194p | NET CASH: | £936m | |
| Year to 14 Sep | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 12.8 | 0.71 | 67 | 35.0 |
| 2016 | 13.4 | 1.04 | 103 | 36.8 |
| 2017 | 15.4 | 1.58 | 152 | 41.0 |
| 2018 | 15.6 | 1.28 | 128 | 45.0 |
| 2019 | 15.8 | 1.17 | 111 | 46.4 |
| % change | +2 | -8 | -13 | +3 |
| Ex-div: | 12 Dec | |||
| Payment: | 10 Jan | |||
