Associated British Foods profits slide despite 'excellent' growth at Primark
Source - SMW
Associated British Foods reported a fall in first-half pre-tax profits as 'excellent' profit growth at Primark was offset by an ongoing slump in sugar revenues.
For the half year, statutory pretax profits fell 15% to £515m and revenue climbed 1% to £7.53bn.
The fall in statutory profits was blamed on an exceptional charge of £79m, the bulk of which was attributed to the loss of a private label manufacturing contract that led to a non-cash impairment of £65m in the company's grocery business.
Adjusted pre-tax profit for the half year was flat at £627m compared with a year earlier and adjusted earnings per share was also flat at 61.1p.
AB sugar saw revenues fall 13% to £769m with lower EU contracted sugar prices impacting our UK and Spanish businesses, the company said.
Sales at Primark were 4.4% ahead of last year, driven by increased retail selling space partially offset by a 1.5% decline in like-for-like sales. That was slightly above the sales guidance given in February for 4% growth.
Primark profit was 25% ahead of last year, supported by a higher margin, the company said. Early customer reaction to the new spring/summer range had been 'encouraging,' it added.
The board declared an interim dividend of 12.05p per share, an increase of 3% on last year.
'This is a robust set of results. Profit at AB Sugar was substantially reduced but, from this period, we expect our sugar profitability to improve. The strong underlying growth in Grocery profits demonstrates good momentum. Primark delivered excellent profit growth, driven by further development of our customer experience and selling space expansion,' said George Weston, Chief Executive of Associated British Foods.
'In the second half we expect the underlying growth in grocery to continue. Our full year outlook for Primark profit is unchanged and will reflect the expected margin reduction in the second half due to the effect of a stronger US dollar on purchases,' the company said.
'Our full year outlook for the group is unchanged, with adjusted earnings per share expected to be in line with last year.'