AB Foods' shares rise 9.6%, leading the FTSE 100 index, after the British conglomerate said it expects a significant growth in profit for the full year and raised its dividend payout. The group's retail arm Primark reported an adjusted operating profit jump of 46% to GBP508 million, and expects its operating margin to improve in the second half compared with 11.3% in the first. The following is a selection of analyst comments.
AB Foods Serves Up Dividend, Profit Surprises After Strong Performance
0722 GMT - AB Foods delivered a better-than-expected first-half performance, with Primark, grocery and ingredients operating margins ahead of expectations, RBC Capital Markets analysts Richard Chamberlain and Manjari Dhar write in a note. The conglomerate's 1H sales were in line with RBC's estimate, while adjusted operating profit of GBP951 million beat RBC's expectations of GBP823 million. Adjusted pretax profit was also ahead of views at GBP911 million compared withGBP818 million, and the dividend surprised at 20.7 pence versus RBC's forecast of 15.0 pence. The analysts expect further healthy sales trends at fashion retailer Primark in the short term and continuing recovery for store-based retailing, with a strong margin improvement ahead. Shares are up 7.2%, and 31% on a 12-month basis. (michael.susin@wsj.com)
AB Foods' Primark Margins Likely to Boost Shareholder Returns
0802 GMT - AB Foods' 1H performance was significantly ahead of market expectations driven by a jump in profit margins at its retail arm Primark, ensuring the potential for further shareholder returns, Liberum analysts Anubhav Malhotra and Wayne Brown say in a note. "Primark's store expansion program, further margin potential, and return on investments into capacity expansion in food should combine to deliver double-digit shareholder returns, including 5%-6% via dividends and buybacks over the medium term," they say. Primark's guidance for full year was upgraded as 2H margins are expected to be slightly above the 11.3% in 1H, the analysts add. Shares are up 8.9%, leading the FTSE 100 index. (michael.susin@wsj.com)
AB Foods' Primark Is Taking Market Share With Improved Offering
1038 GMT - AB Foods' first half was impressive, with strength across all areas and Primark particularly delivering a stunning performance, suggesting its value offering is resonating with cost-conscious consumers, AJ Bell investment director Russ Mould writes in a note. AB Foods' retail arm could have found the middle ground between its "Primarni" past--designer-inspired clothes at cheap prices--and providing better quality apparel at still affordable prices, therefore taking market share from rivals, Mould notes. "The company's strong balance sheet and diversified model...put the [it] in an enviable position to both reward shareholders and invest in further expansion in the business," Mould says. Shares are up 9.4%, leading the FTSE 100 risers. (michael.susin@wsj.com)
AB Foods Earnings Reflect Postpandemic Normalization Trends
1428 GMT - AB Foods reported a robust 1H with broad-based improvement across its portfolio despite Primark's volume remaining challenged, Barclays analysts Warren Ackerman and Patrick Folan say. The British conglomerate's standout figures were the 39% increase in adjusted operating profit and 46% rise in adjusted EPS, the analysts highlight. Despite the focus on Primark's margin beat, the strength of grocery, ingredients and sugar businesses was equally impressive, they say in a note. "Overall the results show a clear normalization of trends after the Covid years, supply chain challenges and inflation headwinds and the bounce back in profitability is a testament to the resilience of AB Foods' business model which some had questioned," they add. Barclays lifts the price target on the stock to GBP27 from GBP24. Shares are up 9.6%, and up 34% on a 12-month basis. (michael.susin@wsj.com)
(END) Dow Jones Newswires
April 23, 2024 10:45 ET (14:45 GMT)
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