(Alliance News) - Associated British Foods on Monday said it expect sales growth and expects adjusted operating profit to be ahead of last year on both a lease-adjusted and reported basis in the half-year to this coming Saturday.
On a lease-adjusted basis, it expects adjusted earnings per share to be ahead of last year, with lower net financial expenses offsetting an increase in the effective tax rate. However, on a reported basis, the dilutive effect of the adoption of accounting standard IFRS 16 on earnings will result in a "small reduction in adjusted earnings per share in the first half".
AB Foods said it anticipates strong growth in adjusted operating profit in the second half, driven by profit growth for retailer Primark and a second half weighting of an expected AB Sugar profit recovery.
"As a result, our outlook for the full year for the group is unchanged with progress expected, on both a reported and a lease-adjusted basis, in adjusted earnings per share," the company said.
In its Retail unit, AB Foods expects sales at fast-fashion store chain Primark to be 4.2% ahead of last year at constant currency and 2.5% ahead at actual exchange rates, driven by increased retail selling space and level like-for-like sales.
AB Foods added, as a result of an expected decline in margin, operating profit at Primark is expected to be marginally down on last year at constant currency and on a lease-adjusted basis. On a reported basis, operating profit will be ahead of last year, it said.
AB Foods said its AB Mauri, AB Agri and Ovaltine factories in China are operating at reduced capacity due to labour and logistics constraints as a result of the coronavirus.
"Primark sources a broad assortment of its product from China. We typically build inventories in advance of Chinese New Year and, as a consequence, are well stocked with cover for several months and do not expect any short-term impact. We are working closely with our suppliers in China to assess the impact on their factories and supply chains and their ability to fulfil our current orders. If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases. We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions," AB Foods added.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 1.6% at 7,286.00
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Hang Seng: down 1.7% at 26,853.42
Nikkei 225: Tokyo market closed for holiday.
DJIA: closed down 227.57 points, 0.8%, at 28,992.41
S&P 500: closed down 1.1% at 3,337.75
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GBP: soft at USD1.2945 (USD1.2970)
EUR: down at USD1.0814 (USD1.0863)
Gold: up at USD1,668.20 per ounce (USD1,643.10)
Oil (Brent): down at USD56.84 a barrel (USD57.80)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
Japan Emperor's Birthday observed. Financial markets closed.
1000 CET Germany Ifo business climate index
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An elderly cancer patient became the third person known to be infected with the coronavirus to die in Italy, health officials said on Sunday, as the number of people contracting the virus continued to mount. The death of the woman in a hospital in the small city of Crema in Lombardy, the centre of Italy's coronavirus scare, followed that of a 77-year-old woman on Saturday and a 78-year-old man on Friday, the first European victim of coronavirus. Prime Minister Giuseppe Conte urged people "not to give in to panic and follow the advice of health authorities". The head of Italy's civil protection department, Angelo Borrelli, told a news conference that 152 people had now tested positive for the virus in the country, including the three deceased. The spread of the virus has disrupted high profile events including Milan Fashion Week and the Venice Carnival while Serie A football matches were postponed. Operas have also had to be cancelled at Milan's famed La Scala.
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Chinese authorities on Monday slightly relaxed their month-long quarantine measures in Wuhan, allowing some people to leave the epicentre of the country's virus epidemic under certain conditions. The city of 11 million has been under lockdown since January 23 after authorities shut down transport links into and out of the city in an effort to contain the new coronavirus outbreak. The decision comes as the official number of new cases has been in the hundreds for the past five days, after being in quadruple digits every day for weeks. Non-residents may leave the central city of 11 million people if they show no symptoms of the new coronavirus and have never had contact with patients, the city said in a statement.
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The deadly coronavirus epidemic could put an already fragile global economic recovery at risk, the IMF warned Sunday, as G20 financial chiefs voiced "real concern" over its economic ripple effects. Global growth was poised for a modest rebound to 3.3% this year, up from 2.9% last year, International Monetary Fund chief Kristalina Georgieva said after a two-day meeting of G20 finance ministers and central bank governors in Riyadh. But the projected recovery was "fragile", she warned, amid global alarm over rising coronavirus cases in multiple countries even as Chinese authorities lock down millions of people to prevent its spread, with major knock-on effects for the world economy.
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Snow falls are expected to cause problems across Scotland, Northern Ireland and northern England as warnings of further flooding are issued. Even Scotland's lower regions are expected to get a covering of snow on Monday – with traffic disruption predicted for the morning commute – as the new working week begins with more stormy weather. Further south, a fresh severe flood warning – meaning an imminent danger to life – has been issued for the River Severn in Shrewsbury, as the Environment Agency warned of ongoing flooding dangers across England. The gloomy forecast came as Environment Secretary George Eustice defended Prime Minister Boris Johnson for defying calls to visit flood-stricken areas despite a third consecutive weekend of storms.
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US President Donald Trump arrived in India on Monday for a lightning visit featuring a huge rally at the world's biggest cricket stadium and other high-profile photo opportunities, but likely short on concrete achievements. Trade tensions have grown between the world's two biggest democracies as Trump's "America First" drive collides with fellow protectionist strongman Prime Minister Narendra Modi's "Make in India" mantra. While sharing concerns about China and deepening defence ties, India has bristled at Trump's offer to mediate over the Kashmir dispute with Pakistan, and at unease in Washington over a citizenship law criticised as anti-Muslim. The billionaire and the tea seller's son were due to address a huge rally of around 100,000 people at the world's biggest cricket stadium in Modi's home state before Trump and First Lady Melania fly to the Taj Mahal to watch sunset.
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BROKER RATING CHANGES
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JEFFERIES RAISES RENTOKIL INITIAL TO 'BUY' ('HOLD') - TARGET 620 (425) PENCE
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PEEL HUNT INITIATES NATIONAL EXPRESS WITH 'HOLD'
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LIBERUM RESUMES FEVERTREE DRINKS WITH 'BUY' - TARGET 1675 PENCE
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COMPANIES - FTSE 100
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Bunzl said it delivered a "resilient performance" for 2019 in the face of mixed macroeconomic and market conditions across the countries and sectors in which it operates. For 2019, revenue was GBP9.33 billion, up 2.8% from GBP9.08 billion in 2018, up up 1.0% at constant currency. Pretax profit was up 6.7% to GBP453.3 million from GBP424.8 million. Bunzl declared a total dividend for the year of 51.3 pence, up 2.2% from 50.2p in 2018. "Looking forward, although we continue to see challenging trading conditions in many of our markets, our strong competitive position, diversified and resilient businesses and ability to consolidate our fragmented markets further should lead to improved growth at constant exchange rates principally due to the impact of the good level of recent acquisition activity. Bunzl has a strong balance sheet with significant financial capacity and acquisitions remain a key element of our strategy. The acquisition pipeline is promising, and a number of discussions are ongoing," said Chief Executive Frank van Zanten.
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Barclays is preparing to launch the search for a new chief executive to replace Jes Staley, the Financial Times newspaper reported, citing two people briefed on the bank's plans.Sources told the newspaper that Staley could stand down at the bank's annual meeting in May 2021. One of the sources told FT that a probe by UK's Financial Conduct Authority into links between Staley and financier Jeffrey Epstein has injected a sense of urgency into the process to replace Staley. Earlier in February, Barclays backed Staley despite his relationship with Esptein, as it revealed that the relationship between Staley and Epstein was the subject of an enquiry by the FCA. Barclays is about to appoint headhunting firm, probably Spencer Stuart or Egon Zehnder, to identify potential external successors given the lack of internal candidates, sources told FT.
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Jean Pierre Mustier, the chief executive of Italian bank UniCredit, has ruled himself out of the running to be the next chief executive of HSBC Holdings, with the race to lead Europe's largest lender set to enter its seventh month without conclusion, the Financial Times reported on Sunday.
The newspaper said Mustier had been identified as the preferred external candidate by HSBC's board of directors, setting up what would have been a two-horse contest between the UniCredit CEO and internal contender Noel Quinn, who has been acting as interim chief executive since August. However, Mustier phoned Mark Tucker, HSBC's chairman, on Sunday to tell him he was no longer interested in the job and had decided to stay at UniCredit, Italy's largest lender by assets, the FT reported, citing two people briefed on the discussion.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Residential property services provider LSL Property Services and estate agency Countrywide confirmed they are in discussions regarding a possible all-share combination. LSL and Countrywide said discussions between the two companies are ongoing, but "there can be no certainty that any offer will ultimately be made".
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Ryanair Holdings chief Michael O'Leary has said that Boeing aircraft will be the "safest, most checked planes" once the manufacturer overcomes its issues with its 737 MAX models following two deadly crashes. Speaking to the Times, the Irish businessman criticized the US manufacturer for doing a "seriously bad job of explaining their new planes," but also cast a vote of confidence in the company's new aircraft. "People will love the plane when it's back, but we have a customer confidence issue," the budget airline boss told the newspaper in an interview published on Saturday. O'Leary faced criticism for claiming in the Times interview that terrorists "will generally be males of a Muslim persuasion". The airline boss has been accused of making "racist and discriminatory" remarks, PA reported. O'Leary also criticised UK Prime Minister Boris Johnson over the decision to rescue Flybe, with the 58-year-old questioning why taxpayers were left to foot the bill for a company owned by three of the industry's richest billionaires. Flybe is owned by Connect Airways, a consortium made up of Cyrus Capital Partners, Stobart Group and Richard Branson's Virgin Atlantic – which itself is half-owned by US giant Delta Airlines. "If Branson and Delta won't put their hands in their pockets, why should the taxpayer?" O'Leary told The Times.
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Monday's Shareholder Meetings
Two Shields Investments
Impax Environmental Markets (re share issue)
Standard Life Private Equity Trust
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By Tom Waite; thomaslwaite@alliancenews.com
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