Profits rise as Primark leads way for owner ABF

The food and clothing group said it expects growth to continue this year, boosted by high sugar prices, falling cotton prices and ongoing “robust” trading at Primark.

The conglomerate, which holds brands including Twinings tea, Silver Spoon sugar and Kingsmill bread, will hike its interim dividend by eight per cent to 8.5p per share.

ABF said adjusted pre-tax profits in the 24 weeks to March 3 increased to £363m from £353m a year earlier. Revenues surged 11 per cent to £5.77bn.

“It has been a good start to the year with a lot more to come in the second half,” said chief executive George Weston, whose family owns 55 per cent of the company.

“The UK retail scene is tough but we are more than holding our own and we are confident the year will be good.”

The 233-store Primark chain, which has 12 sites in Yorkshire, grew total revenues by 15 per cent. But with like-for-like growth at two per cent, this was mainly driven by new space, after the retailer added 1m sq ft of new selling space over the past year.

It opened 10 new stores during the first half, and plans to open six more in the second half.

Primark’s operating profits increased to £154m from £151m. The group said sales over Christmas were “particularly strong and have continued to be good since the New Year, especially considering the economic climate”.

ABF added while it absorbed high cotton costs in the first half – which dented Primark’s margins by 1.2 points to 9.5 per cent – cotton prices have since fallen and it is now beginning to see the benefit of lower input costs.

Sugar profits rose 59 per cent helped by strong prices in Britain, Spain and Africa. But grocery profits fell 31 per cent due to charges to cover the closure of two small bakeries in Newcastle and Glasgow, and cost savings, including jobs, at its Australian food operations.

“We expect substantial growth in both adjusted operating profit and adjusted earnings per share for the group for the full year,” said Mr Weston.

ABF insisted its exposure to the eurozone is limited to 20 per cent. It expects growth rates in these areas to remain under pressure, but said its diversity, geographic spread and low reliance on bank debt should “afford some protection”.

Charles Stanley analyst James Dawson said the “solid” set of results should support market forecasts of 15 per cent full-year operating profit growth.

“The strength within the UK sugar business and the potential for improving profitability at Primark are more than offsetting the drag in performance deriving from grocery and ingredients,” he said.