Saturday 8 November 2014

ABF annual report 2014

ABF, annual, report, 2014, front page

The day of the announcement of the report the share price dropped a little bur the very next day it jumped up by almost 10%! 10%! have people gone mad I wonder?

Yes, they have is the quick answer to that one!

If you want to read the report in full from where I have taken all the info then please go here. If you want to look at my summary from last year then please see Associated British Foods (ABF) annual report 2013.

The highlights as presented by the management is at a first glance looking pretty good. That the earnings per share is 30% up is excellent for instance and that they have managed to reduce their debt is also great. However the group revenue was down by -3% and that is bad news. I bought ABF as a growth company and would then also like to see that happening with increased revenue which I did not this year.

ABF, 2014, financial highlights

If we then look at the financial statement we see that the revenue is indeed down but happily also the operating costs are down and they are down by more than the drop in revenue is which gives us a nice amount of earnings dropping out in the end.

ABF, 2014, financial statement

I did however buy ABF due to Primark so to me at the moment the most important thing is how are the segments doing and here we see some really bad news. All the segments besides from retail ahve decreased revenue and last year was carried to a large part on the shoulders of Primark that continued to make excellent business with increased revenue and earnings. The biggest concern of all is the Sugar part that did not only have a massive drop in revenue but also in earnings and they even say that 2015 will become worse with lower margins. Due to restructuring most of the other segments could still deliver increased earnings even though their revenue dropped so this was at least good.

ABF, 2014, segments performance

Conclusion: The earnings drop in sugar is having a dramatic influence on the entire group and as a shareholder I should be happy that retail is there to cover things for the time being. I hope that in 2016 or 2017 the Sugar part will once again start doing good business and then it will be a great moment to be a shareholder. I did however buy it due to Primark and they keep delivering what I want to see so I remain as a shareholder even though ABF is highly overvalued at the moment...

If you want to find out more about ABF then please see analysis of Associated British Foods (ABF) 2013.

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