UK grocery sector ‘star’ of ABF’s stable

By Anne Bruce

- Last updated on GMT

Related tags Allied bakeries Associated british foods Uk

Ryvita is enjoying strong growth
Ryvita is enjoying strong growth
UK businesses were the “star of the show”, as Associated British Foods (ABF) reported its interim results today, said analysts.

Shares in ABF fell 7% after the Primark to sugar beet group reported setbacks including high cotton prices having hit its high street fashion retail chain.

But ABF said it was making “substantial”​ investment in its UK grocery business, upgrading some of its production lines and improving supply chain efficiency.

New plant bread lines are being built at the Allied Bakeries Glasgow and Stevenage bakeries and a new rolls plant has been commissioned at its West Bromwich bakery.

ABF is also transferring production from Ryvita's factory in Stockport to its expanded site at Poole – a project on plan for completion in the summer.

ABF group revenues increased by 9% to £5,207m for the 24 weeks ended March 5 2011. Adjusted operating profit was 5% ahead of last year at £390m.

Grocery revenue increased by 8% to £1,726m and profit rose by 17% to £111m, benefiting from a much reduced level of provisioning for the cost of manufacturing reorganisation.

Analyst Clive Black of Shore Capital said Allied Bakeries was reported to be gaining volume and market share gains while a good performance was recorded across the other UK brands.

‘Pat on the back’ for UK management

Black remarked:UK grocery has been the star of the show for ABF this half. The management should get a pat on the back.

“In comparison worldwide the ingredients business went backwards; sugar performance was mixed, and the Australian and Mexican operations were challenging​.”

Another analyst commented: The issues for AFB are less UK grocery and more other areas of the business. ABF’s UK bread business has seen to perform better than Premier’s for the last 18 months or so. It has new management which have started to get its act together​.”

Investec said in a note: “ABF have posted a strong H1, well ahead of consensus, but are guiding to a much more difficult H2 which we think will lead to modest consensus downgrades for FY11.”

Kingsmill grows market share

Chief executive George Weston said: “Allied Bakeries' Kingsmill brand achieved volume and market share increases across the UK with its Great Everyday medium sliced white loaf being the fastest selling product in the category.

“Kingsmill launched a new seeded range in the period and Burgen and Allinson maintained their respective category leadership positions.”

However, he said that margins came under pressure from the continued rise of wheat costs, and were only partially recovered through price increases, and a high level of promotional activity.

Twinings Ovaltine and the UK businesses performed well, he added.

Jordans and Ryvita enjoyed strong revenue growth supported by television advertising and the launch of two new Crispbread variants. Silver Spoon also had a good first half, with speciality sugars and baking ingredients continuing to show strong growth, Weston said.

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