Business Performance Review of Two LSE Players: Associated British Foods Plc & Crest Nicholson Holdings Plc

Summary

  • Associated British Foods Plc revenue contracted by 12% year-on-year in FY20.
  • The Company has estimated the complete loss of £375 million during the closure period (5 November to 2 December 2020).
  • Crest Nicholson Holdings Plc expects adjusted profit before tax (PBT) to be above the consensus for FY20.
  • The performance was supported by the stamp duty holiday

Associated British Foods Plc (LON: ABF) and Crest Nicholson Holdings Plc (LON: CRST) are LSE listed stocks in the consumer industry and the construction industry, respectively. Shares of ABF and shares of CRST were down by 0.97% and 3.91%, respectively, from their last closing price (as on 5 November 2020, before the market close at 1:20 PM GMT).

Is Associated British Foods Plc prepared well-enough for lockdown closures?

Associated British Foods Plc is the FTSE 100 listed international food, ingredients, and retail company. The Company operates through five business segments such as grocery, sugar, agriculture, ingredients, and retail. 

 

Recent Updates

On 2 November 2020, the Company provided an update regarding restrictions of movement of people due to Covid -19 pandemic to contain the spread of the virus. All Primark stores have been temporarily closed in several countries like the Republic of Ireland, France, Belgium, Wales, Catalonia in Spain, and Slovenia representing, 19% of the total retail space. The UK Government has made an announcement earlier that all non-essential shops are going to remain closed from 5 November 2020 to 2 December 2020. Almost 57% of the total retail space will temporarily close down, and the Company has estimated the complete loss of £375 million during the announced period of closure. Trading hours in other markets are also going to get affected.

The Company has £1,088 million of revolving credit facilities, which is yet to be drawn, and the Company has total liquidity headroom of £3,118 million. Associated British Foods had net cash before lease liabilities of £1,558 million and, gross cash before lease liabilities of £2,030 million as on 12 September 2020.

FY20 results (ended 12 September 2020) as reported on 3 November 2020

(Source: Company presentation)

The Company's revenue has plunged by 12% year-on-year to £13,937 million during FY20 due to Covid-19 pandemic. The adjusted profit before tax (PBT) during FY20 declined by 35% to £914 million. The adjusted earnings per share in FY20 were 81.1 pence, which were down by 40% year on year. Associated British Foods had net debt (including lease liabilities) of £2,081 million as of 12 September 2020. The Primark business lost £2.00 billion of sales and £0.65 billion of profit during FY20 due to Covid-19 pandemic.

Segmental Analysis

(Source: Company presentation)

Share Price Performance Analysis of Associated British Foods Plc

(Source: Refinitiv, chart created by Kalkine group)

Shares of Associated British Foods Plc were trading at GBX 1,690.50 and were down by close to 0.97% against the previous closing price (as on 5 November 2020, before the market close at 1:20 PM GMT). ABF's 52-week High and Low were GBX 2,730.00 and GBX 1,554.00, respectively. Associated British Foods Plc had a market capitalization of around £13.63 billion.

Business Outlook

The Company has recently updated regarding the significant adverse impact it had on its business prospects due to Covid-19 pandemic. The Company expects Primark full-year sales and profit to remain higher next year. However, sales will decline in the first half of FY21, but it will get offset by the improved sales in the second half of the year. The Company will continue to expand its retail selling space. Sugar division is expected to yield higher profits next year driven by the performance of Illovo.

Will Crest Nicholson Holdings Plc recover in the second half of the year?

Crest Nicholson Holdings Plc is the FTSE 250 listed Company providing designs and deliver sustainable homes. The Company operates through five regional house-building divisions: South West, Midlands, South, Chiltern, and Eastern.

 

FY20 trading update as reported on 3 November 2020

On 3 November 2020, the Company provided an update for the performance during FY20 ended on 31 October 2020. The Company expects the adjusted profit before tax (PBT) to be at the upper end of the range £35 million and £45 million, and ahead of consensus of £37.9 million. A positive trading environment drove the performance since the spring lockdown.

 

Several factors like stamp duty holiday and pent up demand have enhanced the confidence levels in the housing market. The SPOW (sales per outlet week) rate during the three months from July to September has improved to 0.54 from 0.37 during H1 FY20. Forward sales at the end of FY20 stood at 2,289 units worth £480.50 million slightly ahead from the levels of 2,013 units worth £378 million at the end of FY19.

 

The Company has strengthened its balance sheet having net cash of over £135 million as on 31 October 2020, while it was £37.20 million at 31 October 2019. The Company will reinstate the dividend with its next interim results and, it would resume its dividend on 2.5 times cover basis. Coronavirus credit facility from the UK government for £300 million is still undrawn.

 

H1 FY20 results (ended 30 April 2020) as reported on 24 June 2020

The Company's revenue got affected due to Covid-19 pandemic and declined by 52.2% to £240 million during H1 FY20 ended on 30 April 2020. The operating profit plunged by 84.3% from £70.8 million in H1 FY19 to £11.1 million in H1 FY20. Net debt increased by 36.6% to £70.8 million as of 30 April 2020.

 

Average outlets increased from 58 in H1 FY19 to 64 in H1 FY20 and sales per outlet week (SPOW) dropped by 20% from 0.46 in H1 FY19 to 0.37 in H1 FY20.

(Source: Company presentation)

Share Price Performance Analysis of Crest Nicholson Holdings Plc

(Source: Refinitiv, chart created by Kalkine group)

Shares of Crest Nicholson Holdings Plc were trading at GBX 255.60 and were down by around 3.91% against the previous closing price (as on 5 November 2020, before the market close at 1:20 PM GMT). CRST's 52-week High and Low were GBX 524.00 and GBX 159.85, respectively. Crest Nicholson Holdings Plc had a market capitalization of around £559.06 million.

Business Outlook

The Company has shown confidence in its prospects and expects full-year profits to remain ahead of its forecast range. The Company will focus on improving its balance sheet in case trading gets disrupted due to Covid-19 pandemic by maintaining operational efficiencies. However, the Company is well prepared for the fresh challenges caused due to the announcement of another lockdown.

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