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Associated British Foods boosts profits but currencies weigh

Published: 08:00 19 Apr 2016 BST

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The rate of Primark's selling space expansion will increase

Primark owner Associated British Foods PLC (LON:ABF) reported higher first-half profits but said foreign exchange volatility weighed.

ABF said adjusted pre-tax profit in the 24 weeks to February 27 rose 4% to £466mln on a 2% increase in constant currency revenue to £6.1bn.

But adjusted operating profit on an actual basis rose 3% to £486mln – rather than 5% at constant currencies - and actual revenue declined 2%.

Chairman Charles Sinclair said: “As expected, the movement in exchange rates held our group profits back, both in the translation of overseas revenues and profits and, significantly, in the transaction effect on the margin at Primark and British Sugar.”

ABF also cautioned on the potential impact of the UK government’s planned levy on sugar in soft drinks.

It pointed out that sugar may not the only cause of rising levels of obesity, which the tax is designed to reduce.

Sinclair said: “There is uncertainty as to how these proposals may be implemented.

“Obesity has been, and continues to be, a complex issue driven by many different factors.

“We remain committed to informing and educating consumers about the role that sugar can play in the diet and lifestyle.”

The clothing retail market in the period was challenging, especially in the UK, ABF said.

But the rate of Primark's selling space expansion will increase and the line-up of new shop openings was strong, both for the second half of this year and next year.

ABF said it was encouraged by the early trading in the US and excited by the prospect of Primark's recent entry into Italy.

The group’s British Sugar business turned in a “better” result driven by cost and efficiency improvements.

The company increased its interim dividend per share by 3% to 10.3p and reduced net debt to £421mln.

Operating profit rose 35% to £477mln, pre-tax profit lifted 115% to £457mln and basic earnings per share increased 150% to 45.2p.

Adjusted EPS, however, were similar to last year's due to currency effects. 

ABF also said sterling’s weakness as a result of uncertainty about the UK’s EU referendum meant currency volatility may not materially affect its full-year results.

Shares rose 1.3% to 3392p in early London trading.

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