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(Alliance News) - Associated British Foods on Tuesday said interim earnings have returned to pre-virus levels, but the company warned that its Primark discount fashion stores will need to raise prices in order to offset cost inflation.
AB Foods said revenue in the financial first half ended March 5 rose 25% to GBP7.88 billion from GBP6.31 billion a year prior.
Pretax profit more than doubled to GBP635 million from GBP275 million. Operating profit jumped to GBP686 million from GBP320 million.
The company also more than doubled its interim payout to 13.8 pence from 6.2p.
Fortunes were helped by the Primark retail business trading "largely" restriction free.
Chief Executive George Weston said: "This half year sales and operating profit for the group returned to pre-Covid levels. Our people have responded well to the many challenges we faced.
Our food businesses have once again proved their operational resilience and Sugar had another strong period, building on its recent track record of recovery. Measures to mitigate higher costs in all our businesses have been taken and more are planned. Primark delivered a significant increase in sales and profit, with stores now open and trading largely free of restrictions."
Weston warned that Primark will need to raise prices to customers in order to offset rampant cost increases.
"Looking further ahead, inflationary pressures are such that we are unable to offset them all with cost savings, and so Primark will implement selective price increases across some of the autumn/winter stock. However, we are committed to ensuring our price leadership and everyday affordability," Weston said. "Notwithstanding the inflationary pressures we are experiencing, our outlook for the year is for significant progress in adjusted operating profit and adjusted earnings per share for the group."
All the company's food units are "experiencing increasing inflationary pressures", it said.
AB Foods shares were down 6.5% early Tuesday, while the wider FTSE 100 index was slightly higher.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.9% at 7,442.99
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Hang Seng: up 0.4% at 19,948.22
Nikkei 225: closed up 0.4% at 26,700.11
S&P/ASX 200: closed down 2.1% at 7,318.00
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DJIA: closed up 238.06 points, or 0.7%, at 34,049.46
S&P 500: closed up 24.34 points, or 0.6%, at 4,296.12
Nasdaq Composite: closed up 165.56 points, or 1.3%, at 13,004.85
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EUR: soft at USD1.0703 (USD1.0715)
GBP: firm at USD1.2733 (USD1.2715)
USD: up at JPY127.87 (JPY127.70)
Gold: up at USD1,902.44 per ounce (USD1,898.25)
Oil (Brent): up at USD102.77 a barrel (USD100.33)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's key economic events still to come
0830 EDT US advance report on durable goods
0900 EDT US house price index
1000 EDT US new residential sales
1000 EDT US consumer confidence index
1630 EDT US API weekly statistical bulletin
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UK public sector borrowing for the financial year that ended in March came in markedly lower than the year earlier, figures from the Office for National Statistics showed. However, borrowing remains at a historically high level and the full financial year figure topped forecasts set out by the Office for Budget Responsibility. UK public sector net borrowing - excluding public sector banks - amounted to GBP151.8 billion, around 6.4% of gross domestic product for the year ended March. It was the third-highest borrowing figure since records began in 1947, but less than half the GBP317.6 billion from the previous financial year. It was above the OBR's most recent GBP127.8 billion forecast, however. The OBR is non-departmental body which sets out forecasts for UK public finances. In March alone, net borrowing came in at GBP17.32 billion, halved from GBP26.08 billion a year earlier. The figure topped FXStreet cited consensus of GBP15.0 billion. It also was above February's GBP9.85 billion net borrowing figure.
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BROKER RATING CHANGES
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Barclays cuts Rio Tinto to 'underweight' (equal-weight) - price target 4,800 (4,400) pence
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Berenberg cuts AJ Bell price target to 300 (400) pence - 'hold'
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Jefferies raises CVS Group to 'buy' (hold) - price target 2,110 (2,370) pence
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COMPANIES - FTSE 100
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Housebuilder Taylor Wimpey said that, for now, the higher cost of mortgages has not hurt demand. "The UK housing market remains healthy, underpinned by continued strong customer demand, low interest rates and good mortgage availability. The recent increase in interest rates, from 0.5% to 0.75%, has not impacted customer appetite and the mortgage market remains competitive, with good availability of low-cost fixed rate mortgage products," the company said. Its net private sales rate for 2022 up to April 17 was 0.96 per week, down a touch from 1.00 a year prior. The value of its order book stands at GBP2.97 billion, up 5.8% year-on-year. Taylor Wimpey is on track to meet annual guidance, it said. Flammable cladding has been in focus in recent weeks, with several housebuilders signing pledges to commit to the UK Building Safety Fund. Taylor Wimpey said it has paid GBP245 million for fire safety remediation works so far. On Tuesday, Jennie Daly succeeds Pete Redfern as CEO. Redfern steps down after 15 years in the role.
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COMPANIES - FTSE 250
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National Express said revenue in the first quarter of 2022 clawed back to levels seen in 2019, before the onset of the pandemic. Quarterly revenue climbed 30% annually at constant currency, helped by a 33% hike at the transport provider's UK & Germany arm. It is confident of securing 2022 revenue in line with the 2019 level, as well as delivering on more further out guidance of GBP1.25 billion worth of free cash flow between 2022 and 2027. "The cost of living crisis is starting to bite for many people, and our bus services offer an attractive low cost alternative form of travel to help offset higher prices elsewhere," CEO Ignacio Garat said. National Express repeated that it believes its all-share combination with smaller peer Stagecoach remains the better choice for Stagecoach shareholders, after being spurned by the Stagecoach board in favour of a cash offer from DWS Infrastructure.
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COMPANIES - GLOBAL
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UBS reported a rise in profit in a "strong" first quarter, as the Swiss lender was able to capitalise on "volatile" markets to book record Global Markets revenue. In the three months to March 31, the investment bank and financial services firm recorded a net profit of USD2.14 billion, rising from USD1.82 billion the year prior. The bank set aside USD18 million for expected credit losses, reversed from a USD28 million gain the year prior. Operating income increased to USD9.36 billion from USD8.71 billion. Net interest income increased to USD1.77 billion from USD1.61 billion, while net fee & commission income fell to USD5.35 billion from USD5.69 billion. UBS noted its direst risk exposure to Russia was USD400 million at the end of the first quarter, down from USD600 million at the end of 2021.
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Tuesday's shareholder meetings
Aquis Exchange PLC - AGM
Elementis PLC - AGM
GlobalData PLC - AGM
Oriole Resources PLC - AGM
RPS Group PLC - AGM
SigmaRoc PLC - AGM
Taylor Wimpey PLC - AGM
Tissue Regenix Group PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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