Associated British Foods

Ticker ABF

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As of 10:44 18 Sep 2019
Market cap. Pound sterling
18,138.52 million
As of 10:44 18 Sep 2019

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Primark can't avoid Brexit

Sun glasses at Primark store  in Birmingham
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Back to Primark, owned by Associated British Foods which issued a trading update earlier. ABF's shares are down 1.8%.

Sophie Lund-Yates, equity enalyst at Hargreaves Lansdown, says: “Primark is managing to dodge many of the issues troubling the high street, in a climate where tough conditions are forcing many competitors to close stores, Primark’s sales growth is actually being driven by new shop openings.

"That’s not to say the retailer is home and dry though, like-for-like sales are actually in decline. Added to that, Brexit related headwinds means costs are expected to increase next year, and margins are expected to dip.

"The group also needs to strike a fine balance between keeping sales moving and opening too many new stores - over the next financial year, one million square feet of new space is to be added to the store estate.

"Opening new shops is certainly a tactic that has worked for ABF, and continues to offset the decline in like-for-like performance. However, the thing to remember is it can’t follow this method forever.”

Primark-owner on Brexit

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More from Associated British Foods, mentioned earlier.

It says two thirds of its operating profits are earned outside the UK and the weakening of sterling against our trading currencies, particularly towards the end of the financial year, will result in a translation gain this year of£10m.

With regards to Primark it says: "The strengthening of the US dollar during this year and the recent weakening of sterling will increase the cost of goods for next year."

But, it adds that it businesses "have completed all practical preparations should the UK no longer be a member of the EU and contingency plans are in place should some of our businesses experience disruption at the time of exit."

London open

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In early trading, the FTSE 100 is up 29 points at 7,311.

Associated British Foods - owner of Primark - is the biggest faller, down 2%.

Lloyds Banking Group is down 1.8% after warning it could take a £1.8bn hit for payment protection insurance.

The biggest riser is Centrica, up 2%.

The FTSE 250 is up 61 points at 19,770, led by property centre owner Intu which is up 17% after reports it could receive a takeover offer.

Primark sales fall 2%

shoppers with primark bags

There's a trading update from Associated British Foods.

It says sales at its retail arm Primark for the full year are expected to be 4% ahead of last year ( at constant currency and actual exchange rates), with increased selling space partially offset by a 2% decline in like-for-like sales.

"Our full year outlook for the group is unchanged, with adjusted earnings per share expected to be in line with last year. Strong profit performances this year from Primark and grocery are expected to be offset by the anticipated decline in AB Sugar."

Primark sales 'decline'

Primark bags

Associated British Foods has issued a trading update saying group revenue from continuing businesses for the 40 weeks ended 22 June 2019 was 3% up on the same period last year.

It expects "good profit growth" in its retailing arm Primark year and says its outlook for the group;s results is unchanged.

At Primark it sales in the year-to-date were 4% ahead of last year as increased selling space "partially offset by a decline in like-for-like sales".

It said Primark recorded a "further significant increase" in market share but that like-for-like sales - which strip out store closures - were "held back by unseasonable weather in May which compared to a favourable market environment in the corresponding period last year".

"We have seen an improvement in sales in June," it added.

'Sound' Primark

Primark bags

More on Associated British Food which reported results this morning.

Its shares are down 1.3%.

Graham Spooner, investment research analyst at The Share Centre, this is because sales at its clothing arm, Primark, have fallen 2%.

“The full year outlook remains unchanged with adjusted operating profit in line with last year. We therefore continue to maintain our 'hold' recommendation as the longer term growth prospects for Primark remain sound and there is increasing global demand for food, although the sugar business remains a concern,” he said.

Primark sales up

primark store front with people walking past
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Association British Foods has published a trading update for the first half of its financial year.

It said: "For the half year, other than the expected reduction in sugar revenue, sales growth will be delivered by all of our businesses. We expect adjusted earnings per share to be broadly in line with the same period last year, with lower net financial expenses offsetting a small reduction in adjusted operating profit."

At Primark, its clothing arm, sales are expected to be 4% ahead of last year in the first half and like-for-like sales down 2%.

"With a much higher margin, profit is expected to be well ahead of the same period last year. Early trading of the new spring/summer range has been encouraging," the company said.

No deal 'would be reckless', says Associated British Foods

Leaving the European Union without a deal would be reckless, according to John Bason, finance director at Associated British Foods, which owns Primark.

He tells Reuters: "If anybody believes that you can just go ahead without some sort of an agreement here, I think that that is reckless.

"The UK's food supply generally is dependent on the free flowing border."

Sage Group leads FTSE risers

Shares in Sage Group, the UK software firm, leapt to the top of the FTSE 100 risers after it said its organic service revenue grew by 7.6% in the first quarter to £465m.

Sage's share price rose 7.3% to 638.7p, closely followed by Primark-owner Associated British Foods whose stock added 5.7% to £23.00 after reporting its results.

Whitbread is one of the morning's biggest fallers, down 4.4% to £45.64, after the pubs and hotel operator gave a cautious outlook for its financial year.

The FTSE 100 is now down 0.47% at 6,830.56.