Primark profits sweeten Associated British Food’s outlook

But its sugar operation continues to struggle.

Article updated: 10 September 2018 11:00am Author: Ian Forrest

  • AB Foods backs guidance for the full year, bolstered by retailer Primark
  • Market unimpressed as shares drop 3.3% in early trading due to the poor outlook for the sugar business
  • We maintain a 'hold' recommendation for medium risk investors seeking growth.

Conglomerate Associated British Foods today said that it expects to make progress with its full-year operating profits as strong performances from its retail, grocery, agriculture and ingredients businesses are offset by weakness at its sugar operation.

In a trading update just ahead of the end of its financial year, the company reported that its value clothing chain Primark had seen a 5.5% rise in sales on a constant currency basis, but a 2% decline on a like-for-like basis. The second half in the UK was in line with last year but poor weather hampered sales in northern Europe. Profit margins declined in the first half to 9.8% but improved to 11% in the second half of the year. Primark expanded with 15 net new store openings and plans a further 14 in the next financial year.

The market was clearly not overly impressed with these results and the shares dropped 3.3% in early trading, mostly due to the poor outlook for the sugar business where production is expected to drop along with prices. With such a wide variety of businesses under its umbrella, ABF is quite hard to compare with other companies and to value. While the deteriorating prospects for the sugar business are a concern the other parts of the group are mostly performing well and prospects for Primark in particular are good. We maintain our 'hold' recommendation for medium risk investors seeking growth.


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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.