ASSOCIATED British Foods is expected to paint a picture of sharply contrasting fortunes from different part of its business this week as it gives a trading update – with food price increases and the performance of its budget clothing chain, Primark, under the spotlight.
Food manufacturers have not been slow to pass on their increased costs to the consumer, with a recent survey claiming shoppers are paying 8.3 per cent more for their food now than they were in January.
However, sales of Britain's supermarkets' ow
n-brand lines have soared in recent months, potentially cutting margins for producers.
In July AB Foods said that with the exception of its sugar business, the company predicted profits would "show progress in the second half".
Against this backdrop the company will update the City on trading this morning.
Meanwhile clothing chain Primark has been the jewel in the crown of AB Foods in recent years.
Alarm bells were ringing in the City when the company said in its July update that like-for-like sales at Primark were down in April, despite the company claiming it was happy with the performance of the business – blaming a dip in sales on poor weather and the benefit of Easter trading in the 2007 period.
But if the performance of Primark is expected to have benefited from the credit crunch, the likely impact of the slowdown on French Connection has had investors panicking.
The fashion retailer's shares have fallen by two-thirds over the past year as the credit crunch has taken its toll on consumer spending.
Sales in the UK and Europe retail division were flat, both in total and on a like-for-like basis, in the first 15 weeks of the firm's financial year, which started in February.
Bryan Johnston of Edinburgh-based broker Bell Lawrie predicted the company would report flat sales in its results for the six months to 31 July. "The group has already warned that both UK and Europe have recorded weak margins as compared to last year. The company believes that flat like for like sales was 'good performance' given the difficult trading environment," Johnston said.
The housing sector is also expected to deliver more bad news as Redrow and Barratt Developments report results this week.
Redrow is expected to reveal that sales in the year to 30 June fell by at much as £140m to about £520m when it reports full year results tomorrow.
The group published a trading update on 9 July that underlined the crisis facing the housing market as it reported crumbling sales and the loss of hundreds of jobs.
Like its peers, the group has been hit by a lack of mortgage availability in the wake of the credit crunch and collapse of confidence among buyers. Redrow is expected to scrap its final dividend, with analysts predicting profits at the group will have halved to about £60m even before write-downs of its land bank are taken into account.
Barratt Developments is likely to be questioned over the extent of its writedowns when it reports full-year results on Wednesday, in the wake of its sales falling by about 50 per cent this year.
The company warned earlier this year that its land was likely to be written down by about £85m this year, but this is well below the magnitude of its rivals' writedowns, meaning analysts are likely to probe the company's valuations. Barratt has been under intense scrutiny over its debt pile of about £1.7 billion, which some analysts predicted could result in the company collapsing.
Dollar lift for Craneware?CRANEWARE, the hospital billing software company, will reveal details of its first year on the stock exchange tomorrow, and could reveal details of a boost from a resurgent dollar.
The Livingston-based company, which floated on the Alternative Investment Market a year ago, reports results for the year to 30 June.
Despite a slowdown in the US economy and the weakness of the dollar – the currency in which Craneware makes all of its sales – a string of substantial contracts has seen shares in the company rise 63 per cent since its London debut, giving it a current market capitalisation of more than £52 million.
With hospitals in the US under increased pressure from the insurance industry to provide accurate billing for patients, the company expects its Chargemaster software to continue to grow – and with the dollar storming back on the pound's recent weakness its revenue for the current year is likely to be given a boost.
The full article contains 767 words and appears in The Scotsman newspaper.
