Valuation - Associated British Foods PLC

A Valuation of Associated British Foods PLC (LON: ABF) on 9 November 2020

The Company

Associated British Foods PLC (LON: ABF) is a multinational food processing, and clothes retailing conglomerate based in the UK. The food processing business boasts a range of high-profile brands including Ovaltine, Ryvita, Jordans and Twinings, while the clothes business is Primark, the fast-fashion retailer with 384 stores across the UK and continental Europe. The business was valued in GBP.

The Story

Before the pandemic, ABF had been growing at a steady clip and was improving profitability. In addition to improving margins in the food processing business, Primark had been performing well. The firm’s strategy of continually improving cost-efficiencies and growth-by-acquisition was working for the food business. While increasing store count (384) and selling space (16.25M sq-feet) was working for Primark. ABF was generating returns on incremental reinvested capital (21.25%) that had historically been well above their cost of capital (5.95% avg).

Once lockdowns started being r…