Primark boosts AB Foods results

Associated British Foods reported a 13 per cent rise in full-year profit this morning as its Primark discount fashion chain expanded rapidly.

AB Foods reported adjusted pretax profit of £1.096 billion (€1.29 billion) for the financial year to September 14, on revenues up 9 per cent to £13.3 billion, beating average analyst expectations. Adjusted earnings per share (EPS) rose 13 per cent to 98.9 pence.

Primark, which has more than 250 stores in Britain and Europe and generates almost a third of group sales, has performed strongly through the economic downturn thanks to its low prices and quick adoption of fashion trends.

Its adjusted operating profit rose 44 per cent to £514 million on revenue up 22 per cent to £4.2 billion as it added 10 per cent store space.

AB Foods said it expected Primark’s continued growth as well as expansion in its grocery business to boost profits in those divisions next year, although it forecast a further fall in profit from its AB Sugar business as European sugar prices drop.

Overall, the group confirmed it expects adjusted EPS for the coming year to be similar to 2013.

Sugar prices have been under pressure due to expectations of a fourth year of oversupply in the 2013/14 season, with benchmark sugar falling to three-year lows in July.

"Looking ahead to the next few years we see excellent prospects for Primark and further margin recovery in grocery," chief executive George Weston said in a statement.

British retail sales grew slightly more strongly in October compared to the previous month, but lower clothing sales due to mild weather limited overall gains, the British Retail Consortium said this morning.

Shares in the group, 55 per cent owned by the family of Mr Weston, have risen 38 per cent over the last year to trade at 22 times expected earnings, compared to 23 times for H&M and 26 times for Inditex.

For its grocery business, which includes Silver Spoon sugar, Twinings tea and Ryvita biscuits and accounts for a third of sales, it reported a 24 per cent increase in adjusted operating profit to £232 million.

Reuters