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(Alliance News) - Associated British Foods said Thursday it expects profit at low-cost fashion retailer Primark to be a third of what was achieved a year ago.
AB Foods group revenue for the 40 weeks to June 20 was down 13% on a year ago at constant currency, with sales down 39% in the third quarter alone. Among divisions in the third quarter, grocery was the stand-out performer, with revenue up 9%, while retail sales at Primark slumped a sharp 75%.
Primark stores were closed for most of the third quarter, with revenue recorded in the period relating to two short periods of trading before stores closed in mid-March and after they reopened at the end of the quarter.
The net cash outflow for Primark in the 12 week period to May 23 - when trading was non-existent or minimal - was around GBP800 million. This comprised payments to suppliers and operating expenses.
Looking ahead, AB Foods said: "For the full year we continue to expect strong progress in the aggregate adjusted operating profit of our Sugar, Grocery, Agriculture and Ingredients businesses. This will be mainly driven by a material increase in profit at AB Sugar and another year of good margin and profit growth in Grocery."
Nearly all Primark stores are now trading again, the company said, and absent a significant number of further store closures, adjusted operating profit for Primark, excluding exceptional charges, will be in the range of GBP300 million to GBP350 million for the full year, compared to GBP913 million reported for the last financial year.
AB Foods said Primark stores have reopened more quickly than expected, particularly in Ireland, since its June 1 trading update. A total of 367 stores now have reopened, with the remain 8 expected to follow in the near future, it said.
"With Primark trading again, our current expectation is that the year end net cash balance, before lease liabilities, will be in excess of GBP750 million," AB Foods said.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 53.84 points, 0.9% at 6,211.80
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Hang Seng: up 2.2% at 24,952.68
Nikkei 225: closed up 0.1% at 22,145.96
DJIA: closed down 77.91 points, 0.3%, at 25,734.97
S&P 500: closed up 0.5% at 3,115.86
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GBP: up at USD1.2495 (USD1.2459)
EUR: up at USD1.1274 (USD1.1260)
Gold: up at USD1,767.31 per ounce (USD1,764.23)
Oil (Brent): up at USD42.28 a barrel (USD41.80)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1100 CEST EU unemployment
1100 CEST EU producer price index
0830 EDT US initial jobless claims
0830 EDT US international trade in goods & services
0830 EDT US jobs report for June
0945 EDT US ISM-NY report on business
1030 EDT US EIA weekly natural gas storage report
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Australia is actively considering providing safe haven to Hong Kong residents in response to China's sweeping new security law, it said, a move likely to further inflame tensions with Beijing. Prime Minister Scott Morrison said the situation in Hong Kong was "very concerning" and his government was "very actively" considering proposals to welcome in residents of the former British territory. Asked by a reporter whether Australia could extend an offer of safe haven, Morrison responded "yes". He said the measures would soon be considered by his Cabinet, hinting strongly that it would be approved. "We think that's important and very consistent with who we are as a people." It comes a day after the UK announced a new route for those with British National Overseas status and their families to move there and eventually apply for citizenship. Hong Kong was under UK jurisdiction until Britain handed it back to China in 1997 with a guarantee that Beijing would preserve the city's judicial and legislative autonomy for 50 years.
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BROKER RATING CHANGES
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DEUTSCHE BANK CUTS BHP GROUP TO 'HOLD' (BUY) - PRICE TARGET 1650 (1750) PENCE
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DEUTSCHE BANK RAISES RIO TINTO TO 'BUY' (HOLD) - PRICE TARGET 4900 (4600) PENCE
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LIBERUM CUTS AUTO TRADER GROUP TO 'HOLD' ('BUY') - TARGET 515 (640) PENCE
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COMPANIES - FTSE 100
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Packaging firm DS Smith said it saw a limited impact from Covid-19 in its recently ended financial year, with the firm confident in its prospects. Revenue for the year to April 30 was down 2% to GBP6.04 million but pretax profit rose 5% to GBP368 million. Box volumes in the first five months of the second half grew as anticipated, "significantly" ahead of the first half of the year and ahead of the market. The company said its performance over the first 10 months of the year was "robust" with a limited impact - of around GBP15 million - in the final two months from Covid-19. "In the medium-term, the growth drivers of e-commerce and sustainability are as strong as ever. The Covid-19 crisis is also expected to accelerate a number of the structural drivers for corrugated packaging, and our scale and innovation-led customer offering positions us well and gives us confidence for the future," said DS Smith.
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COMPANIES - FTSE 250
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Pub chain Mitchells & Butlers swung to an interim loss as trading was dealt a blow in the first half from Covid-19 lockdowns. Total revenue in the 28 weeks to April 11 fell to GBP1.04 billion from GBP1.19 billion and the firm swing to a pretax loss of GBP121 million from a GBP75 million profit. Trading in the first half included nearly four weeks of enforced closure due to Covid-19, the firm highlighted, with like-for-like sales growth of 0.9% before closure remaining "consistently ahead of the market". "The business was performing very well before the enforced closure in response to Covid-19, building on the strengths of our estate of mainly freehold properties, our diversified and well-loved brands and our team's industry leading operational skills. These assets, coupled with our early experience of re-opening in Germany, give us a clear plan for re-opening," said Chief Executive Phil Urban.
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COMPANIES - MAIN MARKET AND AIM
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Ryanair said June traffic was down 97% year-on-year to 400,000 passengers from 14.2 million a year ago. The low-cost airline operated just over 2,800 scheduled flights in June out of its budget of 79,600. Austrian subsidiary Lauda flew no passengers at all in June. Ryanair's figures do, though, mark an improvement on May. The Irish budget airline reported a 99.5% dive in May traffic to just 70,000 passengers. Peer Wizz Air on Thursday had reported a 86% decrease in passengers in June, carrying 502,253 versus the year-ago figure of 3.6 million. Load factor slumped to 52.2% from 95.0%.
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WH Ireland says Phillip Shelley has been approved by the UK Financial Conduct Authority to be non-executive chair, starting immediately.
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COMPANIES - GLOBAL
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Netflix has named as its new marketing chief tech industry veteran Bozoma Saint John, who becomes one of the few black women in the top executive ranks in Silicon Valley. Saint John, who has worked at Uber Technologies and Apple, will start in August as chief marketing officer at the streaming entertainment giant, it said. The appointment comes amid intensifying calls for improved representation for black people in board rooms, and in the wake of a reckoning over racial injustice in the US led by the "Black Lives Matter" movement, which California-based Netflix has openly supported.
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Thursday's Shareholder Meetings
J Sainsbury
JPMorgan Multi-Asset Trust
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By Tom Waite; thomaslwaite@alliancenews.com
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