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(Alliance News) - Associated British Foods on Thursday said its outlook remains unchanged as input cost inflation has been offset by sales growth and strong margins at fast-fashion retailer Primark.
Total sales for the 16 weeks to January 8 stood at GBP5.57 billion, up 16% on a year ago. Driving the growth was AB Foods' retail arm, which houses Primark, where sales jumped 32% to GBP2.67 billion.
Grocery, Sugar, Agriculture and Ingredients revenue rose 5% in total to GBP2.90 billion.
"All businesses have experienced inflationary pressures in raw materials, commodities, supply chain and energy. Margins in Grocery and Ingredients were impacted where sales price actions have lagged the effects of input cost inflation," said AB Foods.
In Retail, however, operating profit margin was ahead of expectations and is expected to be over 10% at the half-year. Inflationary pressures were broadly mitigated by a favourable US dollar exchange rate and a reduction in store operating costs and overheads. AB Foods added that supply chain pressures have alleviated somewhat.
Taking all of its diverse business units into consideration, AB Foods said its outlook is unchanged.
The FTSE 100 firm expects reduced adjusted margins in Grocery and Ingredients at the half year, due to phasing in fully recovering cost but a recovery in the run rate of these margins by the financial year end. Primark sales from now to April should be "significantly better" than a year ago, when the estate was largely closed.
Meanwhile, Primark said it is looking to simplify its UK store retail management structure and make it consistent across its estate of over 190 stores in the UK. While it is creating a new management level role as part of the move, it expects the changes to leave it with around 400 fewer retail managers.
AB Foods shares were down 1.7% early Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,611.03
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Hang Seng: up 3.3% at 24,917.92
Nikkei 225: closed up 1.1% at 27,772.93
S&P/ASX 200: closed up 0.1% at 7,342.40
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DJIA: closed down 339.82 points, or 1.0%, at 35,028.65
S&P 500: closed down 44.35 points, or 1.0%, at 4,532.76
Nasdaq Composite: closed down 166.64 points, or 1.2%, at 14,340.26
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EUR: up at USD1.1365 (USD1.1345)
GBP: flat at USD1.3632 (USD1.3630)
USD: up at JPY114.40 (JPY114.25)
Gold: firm at USD1,840.84 per ounce (USD1,840.20)
Oil (Brent): down at USD88.12 a barrel (USD88.68)
(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 CET EU consumer price index
0830 EST US jobless claims
1000 EST US existing home sales
1030 EST US EIA weekly natural gas storage report
1100 EST US EIA weekly petroleum status report
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Commuters across England are set to travel in to work for the first time since Plan B measures to curb the spread of Omicron were axed on Wednesday. Prime Minister Boris Johnson told MPs in the Commons that work-from-home guidance would be dropped immediately and rules on face coverings in classrooms would also be scrapped in England from Thursday. Other measures including the requirement to wear face masks on public transport and in shops will end next Thursday. The legal requirement for people with coronavirus to self-isolate will also be allowed to lapse when the regulations expire on March 24, and that date could be brought forward. The move could help appease Johnson's Tory critics at a time when he has been under pressure over Downing Street parties.
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Japan posted a narrowed trade deficit in December, according to provisional data from the Ministry of Finance. The nation reported a trade deficit of JPY582.35 billion in December, about USD5.09 billion, compared to a JPY708.28 billion deficit recorded in the same month in 2020. Japan's exports rose by 18% to JPY7.881 trillion in December from JPY6.706 trillion the year before, while imports jumped 41% year-on-year to JPY8.463 trillion from JPY5.998 trillion. For 2021 as a whole, Japan reported a JPY1.472 trillion deficit, swinging from a JPY388.28 billion surplus in 2020. Exports for the year increased 22% to JPY83.093 trillion from JPY68.399 trillion, while imports rose 24% to JPY84.565 trillion from JPY68.010 trillion.
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BROKER RATING CHANGES
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JPMorgan cuts IAG to 'neutral' (overweight) - price target 2.25 eur
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Credit Suisse raises Intertek to 'outperform' (neutral) - price target 5850 (5550) pence
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Citigroup raises Rentokil Initial to 'buy' (neutral) - price target 650 pence
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COMPANIES - FTSE 100
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Sports betting and gaming operator Entain said net gaming revenue rose by 7% in 2021, or by 8% at constant currency, from the year before. In the fourth quarter alone, NGR was up 4%, or 6% at constant exchange rates. For 2021, earning before interest, tax, depreciation and amortisation is expected to be GBP875 million to GBP885 million, ahead of previous expectations. In the US, Entain said BetMGM expects net revenue from operations to be more than USD1.3 billion in 2022 and expects to be Ebitda positive in 2023. "2021 has been a successful and eventful period for Entain, and our market-leading platform has driven another year of strong, sustainable and diversified growth," said Chief Executive Officer Jette Nygaard-Andersen. "All of our major markets have performed well. BetMGM, our hugely exciting business in the US, has been a particular highlight with FY21 net gaming revenue ahead of expectations and an upgraded outlook for 2022."
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DS Smith said its financial performance has remained in line with its expectations since its interim results early in December, "delivering a significant improvement in profitability during the second half of this year and towards our medium-term targets". The paper-based packaging company made the comment as it set out an accelerated commitment on carbon emissions reduction ahead of a seminar for analysts and investors on Thursday afternoon.
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COMPANIES - FTSE 250
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Premier Foods said it now expects annual trading profit of at least GBP145 million after a better-than-expected financial third quarter. Sales in the 13 weeks to January 1 were up down 1.8% on a year ago but up 7.0% on a two-year basis. The firm said it significant outperformed the market and its Mr Kipling cake brand had its "biggest ever" Christmas. "The strong momentum from the first half of the year continued into the key Q3 trading period, with our brands growing by 11.3% compared to two years ago. This was well ahead of the market across all our categories and resulted in very encouraging share gains," said Chief Executive Alex Whitehouse. After "three strong quarters of trading", Premier Foods lifted its full-year profit expectations. It expects trading profit of at least GBP145 million and adjusted pretax profit of at least GBP125 million. It noted that current consensus for trading profit is GBP140.7 million and for adjusted pretax profit GBP119.3 million.
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ContourGlobal said it has agreed to sell its hydro-electric generation business in Brazil to Patria Investments for BRL1.73 billion, about USD313 million. The price tag includes the assumption of debt, so the net proceeds to ContourGlobal will be USD110 million. The company said it will decide whether to return the cash to shareholders or reinvest it once the deal closes, which is expected in the second quarter. ContourGlobal also granted Patria an exclusive right to buy its wind assets, with these expected to be sold in the first half of the year. "This sale is consistent with our drive to unlock value from undervalued assets in our portfolio and deliver further attractive risk adjusted returns for our shareholders, and demonstrates that value differential for our assets in the public and private markets," said CEO Joseph Brandt. The hydro assets consist of nine run-of-river hydro-electric generating businesses operating under long-term contracts with 168 megawatts of gross capacity. They had a gross asset value of USD105.4 million as of September 30.
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Retail investment platform AJ Bell reported a 27% annual rise in total customer numbers in the final quarter of calendar 2021 to 398,066. Total assets under administration on December 31 were GBP75.6 billion, up 21% on a year before. "We have had a solid start to our new financial year with customer numbers, gross inflows and assets under administration all growing steadily," said CEO Andy Bell. "We continue to see strong demand for our easy to use, low-cost platform across both the advised and direct-to-consumer markets."
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COMPANIES - MAIN MARKET AND AIM
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Food delivery platform Deliveroo said it finished 2021 on a strong note, with fourth quarter orders up 42%. Gross transaction value in the final three months of 2021 stood at GBP1.73 billion, up 33% on a year before. A 42% rise in orders to 80.8 million helped to offset a 7% dip in gross transaction value per order to GBP21.4. In the UK, gross transaction value rose 35% to GBP945 million, with orders up 41% at 40.4 million but gross transaction value per order down 4% at GBP23.4. For 2021 as a whole, gross transaction value rose 67% to GBP6.62 billion on a reported basis. At constant currencies, gross transaction value rose 70%, at the top end of guidance for 60% to 70% growth. "I am proud of what we achieved in 2021; despite a challenging backdrop, we continued to strengthen our customer proposition, widen our customer base and execute against our strategy. We are excited about the opportunity ahead and look forward to making further progress in 2022," said Founder & Chief Executive Will Shu.
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Thursday's shareholder meetings
BHP Group PLC - GM re corporate unification
Countryside Properties PLC - AGM
Henderson Far East Income Ltd - AGM
Ixico PLC - AGM
Smiths News PLC - AGM
Vivo Energy PLC - GM re takeover by Vitol
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By Tom Waite; thomaslwaite@alliancenews.com
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