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Henry Croft, Research Analyst at Accendo Markets, commented this morning (12/9/16):
Associated British Foods (ABF) shares are the worst performer on the UK Index this morning (-5%), despite what on the surface looks like a positive trading update. Investors will like the sound of 2016 operating profit and EPS expected up on last year as well as a silver lining from Brexit in the form of weaker pound sterling delivering a helpful translational gain. The latter, however, is a double-edged sword; on the one hand its P&L has benefited, on the other the balance sheet now suffers from a £200m hole (previously a surplus) on its pensions scheme as well as a likely higher debt by year end. Even worse, perhaps, is the forecast for sales at its flagship Primark brand to be down 2% like-for-like due to bad weather and FX moves. This puts the less exciting part of the business back in focus and income seekers considering the company’s shares as a bond proxy of sorts may now have to rely upon food rather than clothing. A mid-September heatwave could even make things worse for Primark delaying the start of the all-important Autumn/Winter season and those big ticket purchases. Is the food/ingredients side of the business enough keep the shares in fashion?
Associated British Foods (ABF) currently trading at 3156p / -5.1%; Accendo Markets does not have a rating or target price on Associated British Foods (ABF)
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