ABF Shares Soar On Strong FY Update, Buyback And Special Dividend News

Associated British Foods rose on Tuesday following the release of solid full-year numbers and the announcement of a new share buyback programme and special dividend.

At £22.38 per share, the ABF share price was up 6.3% and leading the FTSE 100 higher.

Revenues at the Primark owner soared 16% during the 12 months to 16 September, to £19.8 billion. Sales grew across the business although its value clothing unit was once again the standout performer. Primark’s turnover increased 17% from the previous year to £9 billion.

ABF said that Primark enjoyed “a sales increase in all our markets driven by a number of factors, including carefully selected price increases taken to partially offset high and volatile input cost inflation, well-received product ranges and the resulting appeal of our offer to new and existing customers.”

It added that “strongly performing new stores and the rollout of our enhanced customer website also contributed to the strong sales performance.”

Price increases at its Grocery division pulled revenues 12% higher to £4.2 billion, while pricing actions and increased production meant sales at Sugar rose 26% to £2.55 billion.

Revenues at Ingredients and Agriculture improved 18% and 7% respectively, to £2.16 billion and £1.84 billion.

ABF’s adjusted pre-tax profit rose 9% year on year, to £1.47 billion.

Share Repurchases, Special Dividend

Net debt at the company leapt to £2.27 billion last year, chiefly a result of significant investment in its retail operations. Primark opened 27 new stores last year and spent heavily to improve its digital operations.

But ABF said that its financial leverage stood at just below 1 times, leading it to announce plans to repurchase another £500 million of its shares and to pay a special dividend of 12.7p per share.

This supplementary reward meant total dividends for the year rose to 60p per share from 43.7p a year earlier.

“Performed Extremely Well”

Chief executive George Weston commented that “at the outset of this financial year the Group was facing very significant economic challenges caused in part by major geo-political events. Looking back on the year, it is clear to me that the group performed extremely well and is as a result now well positioned for the year ahead.”

He described trading at Primark as “excellent under the circumstances,” noting that selective price increases “[had] delivered as intended, with customers continuing to shop with us enthusiastically.”

“Well Positioned”

Looking to the new year, Associated British Foods said that “whilst the environment is still challenging for the consumer, inflationary pressures have eased and there is less volatility than there was 12 months ago.”

It added that “the group is well positioned as a result.”

Discussing last year’s results, analyst Mark Crouch of eToro said that “this is a very strong update from Associated British Foods, which has navigated the inflationary environment and shaky customer demand well over the past year.”

Describing Primark as “the one everyone always wants to know about,” Crouch noted that “carefully selected price increases allowed the budget clothing retailer to significantly boost revenues without putting off customers.”

He added that “successful collaborations with the likes of Stacey Soloman and Rita Ora have [also] gone down well with shoppers.”

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