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Ian Pollard: ABF – Primark Faces 2% Like For Like Decline

Associated British Foods ABF expects a small reduction in adjusted operating profit as it enters the close period for its interim results for the 24 weeks to 2 March 2019. Despite this, sales growth is expected from all the businesses with the exception of Sugar but this is obviously not the ABF of old. For the full year results are expected to be in line with last year, That would have been unheard of and completely unacceptable even in the comparatively recent past. To add to the woes AB Sugar revenue from continuing operations is expected to be lower than last year with the result that the division will now make a marginal loss for the first half. Primark faces a 2% decline in like-for-like sales although sales are expected to be 4% ahead of last year and profit is expected to be well ahead of the same period last year but only because of a higher margin. The Eurozone has helped to save the day with sales expected to be 5% ahead of last year.

Bunzl plc BNZL has acquired a further safety business in the US. Californian based Liberty Glove & Safety, is engaged in the sale of a full range of personal protection equipment. No it’s not what you thought and its not knuckledusters either, it’s gloves, with revenue in 2018 of US$93 million.

Finsbury Food Group FIF Revenue for the 26 weeks to the 29th December rose by 0.5% on a like for like basis  Total group revenue however fell by 3.5% reflecting the closure of businesses partially offset by acquisitions. Better news is that last years first half loss of £1.2m was turned into a Profit before tax of £7.5m and the interim dividend is being  increased by 5.5% to 1.16p per share.The CEO describes the results as robust, delivered in a challenging period. A warning note  is that wider market pressures will continue in the period ahead.

Dechra Pharma DPH Trading in the six months to the end of December was strong with group revenue rising by 19.1% and the interim dividend up by 29.6%. EBITDA increased by 27.7%, operating profit by 35.8% and diluted earnings per share by 47.4%

Dialight DIA found 2018 to be a challenging year but one in which the foundations were laid to drive growth and restore market share. The prospects of further progress in 2019 remain unchanged, but with a second half weighting. Three major products are to be launched which will significantly expand the Group’s market.and the company has two new facilities in Mexico and Malaysia, to provide sufficient capacity to meet growth aspirations.

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Ian Pollard – Costa Sale Brings Large Share Buy Back For Whitbread Shareholders.

Whitbread plc WTB Completed the sale of  Costa to The Coca-Cola Company for £3.9bn  on 3 Jan 2019, ahead of schedule.   Over 2,000 new rooms were  added with  occupancy high at over 80%. UK  like for like sales growth fell by 0.6% over the quarter and 0.7% over the year. Despite the high occupancy rates accommodation was the main culprit for the decline with falls of 1.5% and 2.2% respectively. International sales growth was much stronger and helped to save the day with rises of 3.5% over the quarter  and 4.1% over the year. The company claims that it has experienced a momentous year with the sale of Costa for 3.9 billion but this current year is going to be much more momentous for the shareholders, as the sale has enabled the company to commence the distribution of largess with an initial share buyback program of up to £500 million.

Associated British Foods plc ABF has issued a trading update for the 16 weeks to the 5th January. Group revenue from continuing operations was 2% ahead of the same period last year at constant currency. Sales at Primark were 4% ahead of last year, at both constant currency and actual exchange rates.  Sales at Primark were 4% ahead of last year, at both constant currency and actual exchange rates, and with a higher operating profit margin, profit was well ahead. Primarks share of the total clothing market increased significantly and sales were 1% ahead of last year.

Workspace Group WKP experienced strong demand in the third quarter. The Chief Executive claims  they have continued to see a great deal of activity across the whole of the business. Demand for  newly refurbished space in London has been particularly pleasing

SSP Group plc SSP has had a good start to the new financial year. First quarter total group revenue increased by 7.6% on a constant currency basis Full year  expectations are that like for like sales growth for the Group remains unchanged at between 2% and 3%.

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Ian Pollard – Singles Day at Primark

Alibaba invented Singles Day as a shopping celebration for the unattached as opposed to the romanticism of Valentines Day. It is now the world’s biggest online sales event, exceeding the combined totals of Black Friday and Cyber Monday. Yesterday saw sales hit a record $1bn in 85 seconds and the total spend for the day came in at $30.8bn, a 27% rise on last year. UK High streets were probably closed for the day unable to think of anything to celebrate and Primark no doubt steadfastly maintaining that online sales damaged its business.

PS; I remember when Archie Norman became boss of ASDA, he introduced a singles night, so that the unattached could exchange erotic glances with each over  the frozen peas. It was in the nineties on a Thursday night and was very well attended. Oh for the sound of trolleys gently bumping into each other.

Diageo DGE  has agreed to sell nineteen brands to Sazerac for $550 million. The net proceeds of approximately £340 million, after tax and transaction costs, will be returned to shareholders through a share repurchase. Completion is expected early in 2019.

Babcock International Group BAB confirms that it strongly refutes the contents of a report issued by Boatman Capital which so far has ensured that it remain anonymous and untraceable. The report included many false and malicious statements and the Group is continuing to seek to discover the identities of those behind Boatman Capital. Babcock is currently delivering 128 contracts for the UK Government. Underlying earnings are in line with expectations and the outlook is confirmed for the financial year ending 31 March 2019.

Amur Minerals AMC admits that the completion of the Pre Feasibility Study has taken longer than initially expected and that the  delay has caused concern. The release of the PFS is now scheduled for Q1 2019. AMC believes that the additional time taken to address points which are of interest to a number of potential partners has greatly enhanced the quality of the content of the Pre Feasibility Study and allowed for the creation a document that more readily meets their expectations. 

Sirius Minerals SXX announces a significant milestone for it in the completion of its major construction procurement programme to support its stage 2 senior debt financing process. Final lender commitment letters are expected to be received in December and January  and  the Company is targeting quarter 1 2019 for the financial close of stage 2 financing.

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Ian Pollard – Housebuilders In Cloud Cuckoo Land

Bovis Homes BVG delivered a total of 1,580 completions in the half year to the 3oth June, slightly ahead of  expectations and an increase of 4% on the previous year. Average selling prices for private houses only managed by a whisker to avoid falling into negative territory at £335,000 compared to last years £334,700. The total average selling price represented nothing less than a disaster, collapsing from £277,400 last year to this years £261,000 Bovis  claim that  the fundamentals of the housing market remain robust. Rumors that their latest new site will be in cloud cuckoo land are not to be believed.

Persimmon PSN It is not all that long ago when a set of results like these from one of the country’s major house builders would have been regarded as a national disaster. Gone, however, are the days of double digit increases in this that and the other and Persimmon regards itself as being in a robust position merely because it has managed to scrape into positive territory. It provides an update that in the six months to the 30th June revenue increased by 5% and completions of new houses, rose by 3.6%. Most telling of all however is the fact that Persimmon was only able to increase its the average selling price by a mere 1.2%. In other words new house price inflation is virtually dead, despite the fact that consumer confidence is resilient and business is claimed to be robust.

Associated British Foods ABF updates that the revenue momentum of the first half continued into the second half with like for like group revenue in the forty weeks to the 23rd June being 3% ahead of last year at constant currency rates and 2% ahead at actual exchange rates. Lower EU sugar prices impacted the performance of the Sugar division without which the increases become even more respectable at 6% and 5% respectively. Good profit growth for the full year is expected from Grocery and Agriculture. The continuing decline in wold sugar prices means that sales and profit at AB Sugar, both for this financial year and the next will be lower than previously expected.

Primark is benefiting from higher margins and sales in the year to date were 6% ahead of last year at constant currency rates and 7% ahead at actual exchange rates. This was mainly due to an increase in selling space but like-for-like sales improved on those for the first half of the year. Margins in the second half are expected to be well ahead of the first half.

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Ian Pollard – Primark Like For Like Sales Drop

Associated British Foods ABF warns that for the first half so far like for like sales at Primark have gone into decline with a 1% fall. This is despite a strong performance in the UK with produced a 4% rise in like for like sales and an 8% overall sales rise which was helped by an increase in selling space. Nonetheless one can not go on for ever increasing selling space and producing lower like for like sales. For Primark it is not all that long ago that these figures would have been seen as a disaster and it looks like the glory days may have gone at least for the time being. All other businesses except sugar will show sales growth, which again is the opposite of what one used to expect  during the years when Primark was in its heyday

Hammerson plc HMSO 2017 saw Hammerson achieve the highest level of lettings in its 75 year history and group occupancy rose to a 17 year high at 98.3%. Over the past 5 years  earnings per share have grown at an annual rate of 8.3% and all this despite the retail disasters which have hit high streets and  shopping malls, as shopping habits have changed. The final dividend is to be increased by 6.5%

Bunzl plc BNZL is to increase its final dividend by 10% maintaining a 25 year track record of unbroken dividend growth. Revenue for the year to 31st December grew by 16% and led to 13% rises in earnings per share and profit before tax. Organic revenue growth was the highest for 11 years at 4.3% on top of which was the beneficial impact of newly acquired businesses. The future is seen as being positive and the policy of consolidating the fragmented  market in which it operates, will be continued.

One Media iP Group OMIP claims to have weathered the worst of the storm, got back on track and seen the first green shoots of recovery, as the Chairmans forecast that streaming would replace downloading, turned into reality. The result is that in the year to the 12th October, revenue rose by 14%, EBITDA by 121% and operating profit by 927% as the industry saw the birth of a whole new market for audio visual entertainment. No dividend is to be paid  but that is a decision which will in future be reviewed each half year.

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Is Primark Ex Growth ?

Image result for associated british foodsAssociated British Foods ABF freely admits that it has been a major beneficiary of sterling weakness over the 40 weeks to the 24th June. Group revenue during the period  grew at constant currency rates by 10% but on an actual exchange rate basis it was double that at 20%. Third quarter underlying operating performance was ahead of forecast after a stronger performance from Primark where revenue was 13% ahead, based on like for like growth and an increase in average selling space.

The problem for ABF is that the growth in average retail selling space at Primark was also 13%, exactly the same as revenue growth  without any exchange rate benefits – – so where, one may ask, is the like for like revenue growth. The only growth at Primark on these figures came from currency benefits which lifted revenue growth up to 21% and from increased selling space.

Without any greater detail, the figures appear to assert that Primark did not enjoy any like for like growth and went ex growth during those 40 week,. despite the claim that it has increased its market share. The only saving grace is that there was a spurt during the last 16 weeks when sales rose by 15% at constant currency rates and 21% at actual rates. Third quarter trading prior to Easter was particularly strong.

Image result for easyjet logoeasyJet EZJ June passenger statistics showed year on year growth of 11.3% and load factor rose again to 94.1%. Checking on some fares,appears to indicate that all pretence of being a budget airline appears to have been abandoned. Despite that the load factor indicates that it must still have something going for it. Perhaps it is the punctuality.

Image result for bovis homes logoBovis Homes BVS Trading for the 6 months to the 30th June has been in line with expectations but the group C.E.O. is confident a successful turn round can be delivered. He has visited all regions and 85 sites as part of the process but completions for the full year are still expected to be 10-15% down on 2016.

Image result for churchill china logoChurchill China CHH has enjoyed strong growth in its export markets  for the half year to 30th June as it continued to benefit from the weakness of sterling.

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Weak Sterling Continues to Hit Primark

Associated British Foods ABF expects excellent progress in adjusted operating profit and earnings per share for the half year to the 4th March. Primark sales are expected to be11% ahead at constant currency rates and 21% ahead at actual exchange rates but on a like for like basis UK Primark sales will show growth of only 2%, positively pedestrian compared with past performances. Most of the groups extra profit will come in the current half and there are warnings that sterling’s weakness last year will produce greater margin decline in Primark in the second half of this year..

In grocery, revenue and operating profit are expected to be ahead of last year and sugar is expected to be well ahead.

Bunzl BNZL is increasing its dividend for the year by 11% after producing a set of strong results for the year to the end of December and continuing 24 years of unbroken dividend growth. Statutory operating profit and profit before tax each rose by 12% and basic earnings per share by 14%.

Hiscox HSX admits that its strong results for the year to the end of December have been flattered by foreign exchange movements, as well as by a strong investment returns. Profit before tax, with an increase of 64% grew to record levels and the final dividend is being increased by 15% to 27.5p. Gross written premiums for the year grew by 23.6%

Persimmon PSN continued to outperform in 2016 and is to repay shareholders a further 25p per share on the 31st March as a first interim dividend for 2016. That is in addition to the already agreed second interim dividend of 110p. per share which will be paid on the 3rd July. Underlying profit before tax for 2016 rose by 23% on revenue for the year which was up by 8%. Underlying basic earnings per share rose by 19%. The average selling price during the year was increased by what for housebuilders is the very modest amount of 3.8%. Forward sales at the year end showed an increase of 9%

Rotork plc ROR despite a “currency tailwind” of 10%, 2016 profit before tax still slumped by 20% and earnings per share by 19.9%. The trading environment did stabilise in the second half but any near term growth in the nergy market is expected to be modest, reflecting those sombre thoughts, the full year dividend is raised by 1%.

Dechra Pharm plc DPH All products produced sales growth in the half year to 31st December and growth in recently acquired businesses, exceeded expectations. Total group revenue was up by 34.7% at constant exchange rates or 55.9% and actual exchange rates. Underlying operating profit rose by 28.6% and EBITDA by 27.7%

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Primark Sales Fall as UK Weather Bites

Associated British Foods ABF Whoever would have thought that ABF would be reduced to the state where it has to blame poor sales at Primark on unseasonable UK weather. First Christmas was too hot and then March and April were too cold, it bleats. It has also joined that raft of companies which has now started to benefit substantially from the weakness of sterling, which was supposed to help the UK’s manufacturing industries export more not save the management of companies like ABF from embarassing results. At constant currency Primark sales are expected to have been  9% ahead for the 53 weeks to 17th September but the unavoidable truth is that like for like sales fell 2%.

Overall ABF expects the second half operating performance will have been ahead of expectations plus added benefits coming from sterling weakness. Full year earnings per share are expected to be marginally ahead of last year, as are grocery revenues.

Anglo Asian Mining AAZ Stronger metal prices have helped Anglo Asian return to profitability for the half year to 30th June, last years loss of $4.1m being turned into a profit of $3.5m. Strong first half production figures saw record copper and silver production with gold slightly down but gold bullion sales fell sharply. The figures were also helped by a fall of 26% in cash operating costs.

Restore plc RST is increasing its interim dividend by 33% after like for like adjusted profit before tax rose by 26% for the half year to 30th June. Revenue for the half year rose by 26% on a like for like basis and EBITDA by 37%

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Has Primark Gone ex Growth ?

Associated British Foods, ABF, owners of Primark have been reduced to claiming that Primark has been impacted by currency rates.  Amazing how when things start to go wrong currency rates is the directors first choice as to where to lay the blame. The fact that in the previous years of heady growth, currency rates never got a mention as being in any way responsible for the success – allegedly superb management alone was responsible then.

Now management has also had to admit that its decisions to open new stores in Germany and the Netherlands impacted its existing outlets and caused a fall in sales in those outlets.

Like for like sales in the past 16 weeks have only been in line with those of last year and continue to be held back by the effect of those new stores in the Netherlands and Germany. The UK it claims delivered a positive like for like performance but the details as to how positive, are not mentioned. Primark usually trumpets its growth figures in every announcement. Why has UK growth now become a closely guarded secret ?

As for currency problems, Primark sources most of its products in dollars and the strength of the dollar has impacted margins. It claims that it is now taking action to remedy this.

Over the first 40 weeks to date, total sales rose by 13% on a constant currency basis or by 9% on an actual currency basis due to the weakness of the Euro. Selling space in that period however, increased by 8%.

No doubt all will be revealed at the year end but flat like for like sales over a 4 month period, may not bode well. Let us hope that management does not have to delve even deeper into the excuses drawer.

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