ABF brands

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Food and retail giant Associated British Foods has issued a trading update for the second half of its financial year to warn over lower Primark sales and reduced sugar profits.

The Primark, Twinings and Kingsmill owner’s CEO George Weston said ABF “continued to perform well in the second half, delivering good topline growth, a significant improvement in profitability and excellent cash generation”.

But while Primark sales are expected to grow “around 4%” in H2 due to continued store expansion, like-for-like sales are expected to decrease by 0.5% in H2, with growth of 0.2% in Q3 and a projected decline of 0.9% in Q4. 

ABF blamed “unfavourable weather” in the UK and Ireland, which resulted in lower volumes of seasonal lines in womenswear and footwear. 

In contrast, the standout performer was ABF’s grocery division , with the business expecting sales growth of 3% in H2 – “reflecting good demand for our leading international and regionally‐focused brands” - while it also expects grocery profitability to be slightly ahead of previous expectations and now in line with H2 in its 2023 financial year. Ingredients also performed well, particularly in yeast and bakery, ABF said.

However, ABF’s sugar business performance was described as “mixed”. 

Sugar will deliver an adjusted operating profit of approximately £200m for the period, which, while still “strongly ahead of last year” was lower than previously anticipated – due to a reduction in European sugar pricing caused by “strong” production volumes, both on the continent and across the UK’s sugar beet sector.

Looking ahead, ABF said it was “well positioned for further strategic progress” in 2025, supported by good momentum in retail and most of its food business.

Given the “expected strong cash generation this year”, ABF intends to extend a £500m share buyback programme launched last month by an additional £100m.

Its share price this morning rose by 4.3% on the back of the announcement to 2,393p.

The group’s full year results for the 52 weeks to 14 September will be published on 5 November.

Morning update

Greenpeace is reported to be “blockading” the Unilever London HQ this morning as part of a plastic pollution protest.

Meanwhile, Bakkavor reported unaudited H1 results for the 26 weeks to 29 June show strong profit gains – driven by its British business.

Like-for-like revenue rose by 3.8% to just over £1.1 billion, driven by “operational efficiency supported margin improvement” in the UK and overseas. Adjusted operating profit rose by 26.7% to £55m, with margin growing from 4% to 4.9% year on year.

Bakkavor said profitability continued to strengthen in the US – despite lower sales, while its China business was “simplified”, with losses reduced.

It has upgraded guidance for its full-year outlook, with operating profit anticipated to be between £108m and £112m, “ahead of market expectations”.

“This has been a strong first half for the group, with momentum from our 2023 restructuring activity continuing to support our performance in 2024,” said CEO Mike Edwards.

The sandwich and ready meal specialist has announced an interim dividend of 10% “reflecting strong performance and upgraded outlook”.

Bakkavor’s share price rose 1.3% in the wake of the announcement to 156p.

Other news 

Elsewhere, a quarterly forecast by the British Chambers of Commerce warns that while the UK economy will perform better this year, it’s “unlikely to be heading into the fast lane any time soon”.

The BCC expects the UK economy to grow by 1.1% for 2024, with the projection for 2025 remaining at 1.0%. The economy is expected to grow by 1.1% in 2026, a minor upward revision.

It described the overall landscape for growth as “relatively weak”, with UK consumer price inflation expected to rise slightly higher than forecast to 2.6% by the end of the year “due to global trade uncertainties, pay growth, and rising energy costs”.

It is then expected to slow, closer to the Bank of England 2% target, reaching 2.2% in Q4 2025 and 2.1% in Q4 2026, the BCC said.

In other news, the challenges faced by the fruit and veg sector drove further losses for Florette owner Agrial Fresh Produce last year.

The bagged salad grower cited lower demand “due to increasing price pressures” in its accounts for the year to 31 December 2023, posted with Companies House.

Sales fell by 7.1% to £107.6m as Agrial posted operating losses of £5.6m, though this figure was an improvement on the £7.7m it lost in the previous accounting period.

It pointed to a loss of business in retail after it moved to recover price hikes from customers as a key driver of its performance. However, Agrial recovered some of those volumes from new business in the foodservice sector.

And in the past 24 hours The Compleat Food Group acquired speciality food producer and distributor Harvey & Brockless for an undisclosed figure.

Share price review

Today’s biggest early food and drink riser on the FTSE was brewer Marstons, which had climbed by 4.2% in early trading to 39.1p a share at 8am. Greggs was the second highest riser at 0.9% to 3,198p, with Premier Foods up 0.6% to 180p and Ocado Group up 0.5% to 352.4p.

Yesterday in the city

The FTSE continued its slump yesterday, ending the day down 0.4% to 8,269.6pts.

Agricultural group Wynnstay was among the day’s winners, climbing 1.5% to 350.3p. Naked Wines, meanwhile, rose 1.9% to 55p.

It was a bad day for AIM listed Chapel Down, which fell 15.1% to 59p after it reported a slump in sales and profits in its half-year results.

Hilton Food Group fell by 2.4% to 950p, despite a strong set of half-year results. Chairman Robert Watson has stepped down from the publicly-listed Meat, seafood and plant-based packer and supplier after more than 20 years.

Also falling was Glanbia, which slid 9.6% to €15, after the Irish global nutrition group announced the next phase of its share buy-back program. Dairy co-operative Tirlán Co-op announced plans to spin out Glanbia shares worth €239m to its members on Tuesday.