Associated British Foods Share Discussion Threads

[bruce meinhoff] 19/1/2006 16:05

Just bought a few...

[spaceparallax] 15/1/2006 14:30

To be honest, I was rather surprised when the share price rose significantly in the wake of the moderate results. Whilst it's disappointing to see the retracement, I feel that it's almost inevitable and would expect to see us settle at just sub 800s. In the event that that does happen, we might be able to maintain a steady share price for a while and then hope for improvements on the back of positive announcements.

[mangal] 09/1/2006 23:27

About time these started motoring again !

[madaboutmoney] 09/1/2006 20:18

Break-Out?

[gateside] 09/12/2005 12:06

First of all, the trading results were good. Adjusted operating profit rose by
18% and adjusted earnings per share by 14%. Dividends for the year will show an
increase of 10%, the fourth successive year of double digit increase in
dividends. All of this has been against a background of very competitive
markets for most of our businesses.



The annual report includes extensive comments on the trading results of
individual businesses and there is no need for me to repeat that. However, I
won't let this opportunity pass of remarking on the really excellent trading by
Primark. Sales growth has been strong where that of many competitors has been
weak or negative. Profits grew by 30%. This was achieved in a trading
environment which was tough, even by the standards of UK clothing retailing.



I am sure you all know about the shocking fire at Primark's main UK warehouse on
the evening of 1st November. The premises, which were owned by a third party,
and our stock were a complete 'write off'. Our insurance covers the stock and
also the effect of business interruption. More importantly, Primark's
management took immediate action to deal with this crisis; another warehouse was
made available and incoming stock flowed to all stores with little interruption.
Sourcing of alternative goods for those destroyed has proceeded as quickly as
practicable, helped by the use for a period of a large cargo plane to speed
goods from Asia. Primark has continued to trade well.



The good growth in the group's trading results was accompanied by a major level
of investment. £1.5bn was spent on renewing plant and machinery, expanding
capacity and buying new businesses. Normal renewal investment in productive
assets absorbed £182m. We invested £628m in acquiring new space for Primark and
fitting it out. £733m was spent on acquiring new businesses, of which the major
part was on the yeast and bakery ingredients business now trading as AB Mauri.
There were also several other smaller businesses which add to the range and
capacity of our food manufacturing operations.



This heavy investment reflects our long-term strategy, discussed when we met a
year ago, of devoting much of our resources to expanding our non-sugar interests
by developing current businesses and adding new ones which complement our
existing operations and skills. The investment I have referred to has been both
in the UK, some £700m, much of it to expand Primark, and abroad another £850m
with AB Mauri accounting for the major part.



You will recognise from what I have been saying that your Board retains its
long-term commitment to grow our businesses. At the risk of repetition, I will
emphasise that when we invest in existing operations and add new ones it is in
the expectation that we will be there, in a leading position, in the long term.



A very good example of this long-term commitment is Twinings which most of you
will know celebrates its 300th anniversary next year. ABF acquired the business
in 1964. The founder, Thomas Twining, would not recognise the commercial world
of today nor the far flung operations which make up Twinings nine generations
later. However, he would I guess recognise much of the product, the range to
suit different tastes and above all the commitment to quality.



Twinings, together with Ovaltine, forms the core of ABF's hot beverages business
which now is sold in more than 90 countries. Ovaltine, or as it is known in
many of its markets, 'Ovomaltine', by coincidence has just celebrated its
centenary. It was originally developed in Switzerland as a tonic for
malnourished children but has spawned many other products in its various
markets.



There are other brands in our hot beverages business with strong regional
presence. Less than 25% of this business is now in the UK. Very much the
largest part is spread across the world with Asia a particular area of growth.



I am glad to say that our hot beverages business has been trading very well and
growing both the main brands and the various sub brands and extensions that have
been developed. Just one example which you may recognise, if only from the
advertising involving Stephen Fry, is the recently launched 'Twinings Everyday
Tea'. It is pleasing that it has been performing well up to expectations.



There is one other thing which Thomas Twining would recognise in a much changed
world. That is the famous shop at 216 Strand in London, not far from here. It
is the site of his original tea shop and is the oldest commercial premises in
continuous trading in the city. Those of you who head south from here should
take a very slight detour to visit it.



ABF is now widely spread around the world, operating in a variety of businesses.
There will always be challenges for our people to face. As I speak to you
today, the first is the proposed reform of the EU sugar regime. On 24th
November agreement was reached in Brussels by The Council of Ministers for the
reform of the regime. This agreement follows revisions to the proposals
published by the European Commission in June 2005. The agreement has yet to be
ratified by the European Parliament. The ABF businesses affected by these
proposals are the sugar operations of British Sugar in the UK and Poland.



The thrust of the proposals will be to reduce productive capacity in the EU,
eliminate subsidised exports and reduce support prices. The nature of these
proposals is welcomed by British Sugar as one of the most efficient producers in
the EU. We envisage a continuing successful role for British Sugar which will
be supported with investment, where appropriate, as it adapts to the new
environment.



Our best estimate of the longer term operating impact on our sugar operations,
which results from the agreement, is based on the assumptions made by the
European Commission. The outcome is expected to be slightly better at the end
of the period of transition than the £40m reduction in profit which we estimated
in June 2005 in response to the Commission's first proposals.



The recent rise in gas prices is an important issue for ABF as it is for much of
British industry. The market for gas has simply failed to operate in the way
intended. For example, last week, despite sharply higher prices, the main gas
pipeline from Europe operated at substantially below capacity and stocks
consequently reduced further. If supplies to industry failed this would have
serious consequences for industry and customers alike.



Another major development will be the roll out of new stores by Primark over the
next 15 months. Recent new store openings have been successful and 46 further
stores will be opened mainly those acquired when we bought Littlewoods.
Together with store extensions 1.5 million square feet of trading space will be
added to give 4 million square feet against 2.3 million just over a year ago.
The plans for this programme are well developed. I have every confidence that
they will be successfully implemented and that Primark will be trading strongly
from a much expanded base.



Plans for these two major businesses will not affect our commitment to building
our other businesses further. Following the major investment of the past year,
ABF is still cash positive and has the financial strength to support further
growth in our operations.



Let me comment now on the immediate outlook.



I said earlier that Primark has continued to trade well even after the fire.
There was swift and effective action by Primark's management which helped
mitigate the disruptive effect of an event of this magnitude.



Trading in the current year for British Sugar UK and Poland has been difficult
and we expect volatility to continue during the transition to the new EU regime.
We continue to work on cost reductions in both the UK and Poland and the
exploitation of new revenue opportunities including the manufacture of
bioethanol in the UK.



I would remind shareholders of my comments in the annual report about the impact
on profits of the roll out of new Primark stores converted from Littlewoods.
This will occur progressively from Spring 2006 until early 2007 and returns will
build gradually. The reduction in net investment income will result in
relatively modest growth in earnings for the current year and the benefit of the
investment will begin to be realised from the second half of the year and
beyond.



Overall, trading in the early part of the current year has been a little ahead
of the previous year which saw a good opening. Competition in all our markets
is strong and the current trend in energy prices is a particular concern. We
expect to deliver further progress as the year develops.

[gateside] 15/11/2005 09:03

For those interested in investing in food/drinks companies. Might be worth looking at the IPO for Britvic (No EPIC as yet) which will take place next month. I will be interested to see what sort of dividend that they intend paying, and also reading the finanicial details when they are published. One to keep an eye on.

They were tipped in the Independent yeaterday.




Something quite juicy is about to be offered to investors. It is the drinks company Britvic, which is not just about those little bottles of orange to go with your vodka, but is also the distributor for Pepsi in the UK and owner of the growing J2O and Fruit Shoot brands.

The company announced its long-awaited flotation plans yesterday, and will now start touring the City to gauge interest. Private punters will not be given the chance to get in at this stage, but should take a serious look at the company when shares start trading early next month.

One of Britvic's key attractions is its proven ability to innovate. This is evidenced by the 20 per cent per year growth of J2O, which it invented in 1998, and of Fruit Shoot, the number one kids' drink after just five years. New water and flavoured water brands planned for next year have very strong potential in an increasingly health-conscious market.

Britvic also has a 14-year licence to sell Pepsi ranges, including Tango and Gatorade, in the UK, which accounts for 40 per cent of its turnover. New flavours and "no added sugar" product launches by both Pepsi and Coca-Cola have been boosting the market for fizzy drinks in recent years.

Plans for £12m cost savings over the first three years of Britvic's life as a floated company should also go down well. And longer term, there is the hope of an international push for brands such as Robinsons, J2O and Fruit Shoot.

There has been only limited financial information given so far, but Britvic has enjoyed five years of 5 per cent turnover growth and about 7 per cent earnings growth, and current trends are likely to persist.

The total value being put on the company is about £800m, but that will include about £300m of debt, the interest on which will have to be subtracted from the earnings before interest, tax and exceptionals number that was publicised yesterday. That was £78.7m for the financial year just finished, implying post-everything earnings in the new year of £40m-£45m. The equity, then, of £500m, or perhaps £550m would be valued on a price-earnings multiple of between 11 and 14. Unless it breaks the top of that range, the shares will look an attractive investment for the long term.

[crontab] 10/11/2005 11:53

I think ABF is going to take a trip south.

[crontab] 09/11/2005 11:52

What chance a takeover/merger between ABF and Tate? 6.4bn and 2.4bn market cap. respectively. Would allow them to take some of the oversupply out.
Just a "blue-skies" thought - wouldn't get through on competition grounds, I guess.

[gateside] 08/11/2005 18:26

Primark makes strides as AB Foods gobbles up 12% rise

ASSOCIATED British Foods, the company behind the Silver Spoon sugar and Primark discount clothing brands, today reported a 12 per cent hike in annual profits and said it sees further overall progress in the coming year.

The group, whose product portfolio also includes Twinings and Ovaltine, banked an adjusted profit before tax of £590 million in the year to September 17, in line with market forecasts of between £584m and £593m.

The star performer during the year was the 122-strong Primark chain, with operating profits 30 per cent ahead on the back of a 17 per cent surge in sales.

It confirmed second-half like-for-like sales growth at around 12 per cent, bringing full-year same-store growth to nine per cent.

Primark has grown rapidly to account for nearly a quarter of group profits, but some analysts are concerned that a major fire at its main UK warehouse last week and a weak retail background may tarnish the retailer in the run-up to Christmas.

AB Foods proposed a full-year dividend of 18 pence a share, up ten per cent from 16.4p the previous year.

The company also posted an 18 per cent rise in annual operating profits.

It said in September that it expected second-half operating profit growth to be almost as strong as the first half's 18 per cent.

Meanwhile, full-year earnings per share were up 14 per cent to 53p.

Group chief executive George Weston said: "To deliver a 14 per cent growth in earnings in such a competitive environment is very encouraging and reflects the contribution from our acquisitions and further progress in a number of our key growth platforms, such as international hot beverages, US branded grocery and Primark, which had an outstanding performance.

Mr Weston added: "We have also laid firm foundations for long-term growth with over £1.5 billion invested in acquisitions and capital expenditure."

He added that the roll-out of new Primark stores converted from Littlewoods would occur progressively from spring 2006 until early 2007.

Shares in AB Foods, which is 55 per cent owned by the family of Mr Weston, have climbed by around 3.5 per cent this year but the stock has underperformed the wider FTSE 100 index by nearly ten per cent.

[gateside] 08/11/2005 18:25

AB Foods' (ABF.LN) FY results are broadly in line, says Oriel Securities' Richard Workman. The "big uncertainty" is still the EU's proposed sugar regime changes, expected by end-November, he says. "British Sugar will look for a reduction in the level of support prices, but there's a lot of opportunity as well for it to process raw cane sugar and industrial products," he says. Maintains add.

[gateside] 08/11/2005 18:23

AB Foods (ABF.LN) "in line with market expectations," says trader. However, says the Littlewoods acquisition will limit growth this year. Thinks shares look cheap, but "as with Tate & Lyle the best entry point may be post the EU Sugar announcement 24/25 November."

[gateside] 08/11/2005 18:21

CSFB reiterates AB Foods' (ABF.LN) outperform rating, 830p target after full year headline numbers come in as indicated in its trading update. Says Primark results are "comfortably better than we had expected" but Primary was "a touch lower" than it had anticipated. Notes the fire at the main distribution center at Lutterworth has caused only "limited disruption."

[jelfsie] 08/11/2005 16:46

Agree, its still a growth story and should do well during these "frugal" times. Plenty of competitors going bust / pulling out. Retail valuations are not good at present. Hive off at the top of the next retail up turn IMHO.

[crontab] 08/11/2005 16:31

Why? I don't think so.

[cambium] 08/11/2005 09:33

they should hive off primark

[cambium] 05/11/2005 16:12

Associated British Foods (ABF.LN) is expected Tuesday to report a 12% increase in FY pretax profit before items at GBP587M from GBP525M a year earlier, according to a consensus of 15 analysts provided by the company. Goldman Sachs says higher yeast prices are expected to have benefited Burns Phelp which "came under some pressure in 1H2005 in a competitive market." Says "it is likely that above-market momentum has continued" at Primark. Says ABF needs to display "signs of a recovery at its UK bread operations while the major new plant in Australia - expected to come on stream early next year - should encourage a better performance in that region. Shares -0.4% at 811p. (SCO)

[cambium] 04/11/2005 15:35

ABF will report full-year results on Tuesday

[gateside] 03/11/2005 17:00

Tipped as a HOLD in The Times

ABF still in fashion despite Primark's warehouse blaze
By Peter Klinger




IT IS 70 years since Associated British Foods was incorporated as a British company that owned seven bakeries. Since then, and under the guidance of the Weston family since 1948, ABF has expanded to become a global food and ingredients group and a member of the FTSE 100. These days, investor focus is less on Kingsmill bread or Twinings tea than on Primark, ABF's stunningly successful discount fashion chain. Primark still accounts for only just under 20 per cent of ABF group sales and just over 20 per cent of operating profit, but the fashion chain's ability to outperform its rivals has prompted investors to rate ABF more highly than straightforward food groups.
Nonetheless, it was surprising the ease with which investors yesterday brushed aside news that a fire at a key Primark warehouse had destroyed an estimated £50 million-worth of garments, or three weeks' supply. ABF's shares gained 16½p to 804½p, adding £130 million to its market capitalisation.



The market response typifies Primark's difference. While Marks & Spencer and Bhs are struggling to win over customers, Primark's like-for-like sales growth this year is about 9 per cent, above the 6 per cent analyst consensus tip. Over the past five years, Primark's share of the UK clothing market has more than doubled to about 2.7 per cent, still a long way behind M&S's 9.8 per cent but gaining ground with its strategy of offering customers the latest fashion at low cost.

The overnight fire at Primark's Lutterworth warehouse in Leicestershire is unlikely to disrupt the sales momentum. Perhaps the fire was a stroke of good fortune; whereas many fashion outlets are struggling to give away their clothes, Primark has just effectively offloaded £50 million of items such as sequin shrugs, white wool coats and boots. Courtesy of its extensive insurance policy, it will be covered not only for the garments' loss, but also for any fire-related drop in sales should it be unable fully to stack the shelves of its 120-plus stores.

ABF will report full-year results on Tuesday and analysts are more likely to worry about the conversion of recently acquired Littlewood stores and the pending European Union sugar regime than the fire. The consensus forecast is for adjusted profits per share of 52.7p. ABF's shares are trading on a forecast earnings multiple of 15.3 times. Not cheap, but then ABF is no ordinary company. Keep holding.

[m.t.glass] 02/11/2005 11:14

Clothing stocks lost in today's huge warehouse fire are described as fully insured - as is the consequential cost of disruption - but there will still be big disruption, with trade across the chain temporarily dented by difficulties in refilling shelves with equivalent stuff. No lasting effect I guess, but some diversion of management time all over the country. Primark is lucky in having such an ad hoc range that it never needs to find items that match previous items; it can bring in something else.

PS: Did anyone spot any spreadbetters lurking in Lutterworth at night with a box of matches?

[qwerty1234] 01/11/2005 13:41

Well paulo2, I hold a few of these bought at about 830p.
The share price had a good run up to 860p a few months ago and was bound to retrace by about 10% or so.
Technically the share price has dropped back to the 200 day moving average and touched support at about 770p. There seems to be a support zone developed between 730p and 780p.

You are right about Primark. I buy my cheap socks in the local store as well as cheap trousers and other cheap things. Socks work out at 40p a pair and trousers for £6. Similar stuff in M&S costs about £32! You just can't argue with those price differences. Why, you don't even need a washing machine. If you change your socks once a week and throw the dirty ones in the bin, £20 would see you in socks for the year. :-)

I once saw a queue outside the local store at 9am on a Sunday morning! The store is always full and always queues at the checkout. I stopped going to M&S once I got over my snobbery at buying in a cheap store!

Results are due soon. If they are good, I'll hang on. If not I'll sell.

All IMHO, DYOR.

[paulo2] 01/11/2005 11:03

I live in Liverpool, but work in Manchester. I get the train every day and on the return journeys for the past week, half-term, and during the summer holidays, all I could see were wall to wall Primark bags.

Why is this share dropping with the results due so soon?

[gateside] 31/10/2005 19:38

Hi Cambium

Well if you bought in this morning you timed it well.