DAVY VIEW

The recent closure of Primark’s global store estate has led us to materially lower EBIT estimates. Our Primark assumptions are anchored by conservatism — we model a six-month period of full lockdown. Key unknowns include the timing and scale of the post-COVID-19 recovery — we model a gradual rebuild of sales densities from H2 2021. While recognising the impact of COVID-19, ultimately Associated British Foods (ABF) remains a quality operator with strong franchise value in Primark. It is operationally diversified. On our highly conservative estimates, it trades at 16.6x FY2 and a free cash flow yield of 7%. We expect the absolute dividend to be maintained. We believe investors should look through this period of flux. We recommend the shares.