Primark hits the right note for thrifty shoppers

Associated British Foods, which owns Primark, yesterday predicted that its half year profits would increase, despite the uncertain economic conditions.

It also expects growth to continue throughout the year.

New stores are planned in the next financial year in Harrogate and Scunthorpe after the group bought 10 Bhs properties.

There will also be new stores in Folkestone, Guildford, Winchester, Bournemouth, Perth, Worcester, Ilford and King's Lynn.

Finance director John Bason said: "Primark's momentum is improving, it's an amazing performance especially since January and February were hit by terrible weather in the UK and the current retail environment."

AB Foods said its results for the first six months of its financial year would show strong sales and profits growth across its business, with brands such as Silver Spoon and Twinings Ovaltine leading the way.

Primark also produced strong trading, with Christmas sales beating the firm's expectations.

The discount clothing brand is set for further UK expansion in the coming months, with stores planned for Chester, Bury and Blackburn.

Primark, which has 196 stores and 6.1m sq ft of selling space, has also been expanding in its other European centres and the firm plans to open three stores in Spain in the second half.

AB Foods said its grocery division had benefited from good results across its UK brands and a restructuring during last year.

Rising demand for home bakery ingredients helped Silver Spoon, which also saw better profits after a rationalisation of its packaging plant.

Twinings Ovaltine also experienced strong sales in the half year, driving profit growth.

AB Foods said there were signs that the ethnic wholesale sector was stabilising and its Westmill Foods business – which supplies flour, rice, spices, sauces, edible oils and noodles – saw profits improve in the period although these have not recovered to levels seen two years ago.

Indian food brand Patak's was aided by advertising campaigns and is expected to show year-on-year profits growth.

AB Foods said profits from its sugar division would be substantially ahead of last year, helped by strong European performance and a recovery in China, where prices have now risen to record levels.

The group's agriculture division has been affected by the volatility in commodity prices, but all UK feeds except sugar beet are expected to show revenue growth.

The group, which is 55 per cent owned by the family of its chief executive George Weston, has been investing heavily in many of its operations such as Primark and sugar, and analysts said this spending is starting to boost returns.

Mr Bason said the chain continued to gain from its value for money clothing range.

Its performance had also been boosted by the fashion trend towards nautical designs and more lace.

Mr Bason said the grocery division was benefiting from an improved economic environment, while sugar saw better UK yields, and good performances in China and Africa.

The group was giving a trading update ahead of its half-year end on February 27.

The half-year results are due to be published on April 20.

'An attractive combination'

Analyst Graham Jones at house broker Panmure Gordon expects a 13.8 per cent rise in Associated British Foods' half-year earnings to 28.7 pence per share and full year earnings to increase 10 per cent to 63.5p.

"We believe ABF offers an attractive combination of defensive earnings and strong profits growth," he said.

Mr Jones had forecast that Primark's like-for-like sales would grow by 7 per cent in its first quarter, so the estimated 8 per cent rise for the half year to February 27 suggests a further acceleration.

Primark, which has 11 stores in Yorkshire, accounts for nearly a third of group profits and has branched out from Britain to open in Ireland, Spain, Portugal, Germany and the Netherlands.