As expected, foreign exchange movements and a slumping Sugar division put a dent in the profits of Primark owner Associated British Foods (LON:ABF).
Adjusted profit before tax of £1.03bn in the 52 weeks to 12 September was down 6% on the year before, while reported profit before tax slumped to £717mln from £1.02bn in the previous year.
The median forecasts of analysts covering the stock had been for adjusted profit before tax of £1.08bn.
Adjusted earnings per share dipped 2% to 102.0p, a shade below the consensus forecast of 102.53p.
Sales of £12.8bn were down 1% year-on-year but up 2% on a constant currency basis.
"We delivered a strong operational performance despite the challenges of food commodity deflation and big movements in exchange rates. The group continues to generate strong cash flows and to reduce net debt. While marginally down, our earnings per share result underlines the group's strength," said George Weston, chief executive of Associated British Foods.
Net debt at the end of the reporting period was down £352mln from a year earlier at £194mln, leaving the company plenty of head room to invest in expansion opportunities, particularly for its highly successful clothing retail chain Primark.
Primark saw adjusted operating profit rise 2%, or 5% on a constant currency basis, to £673mn from £662mln a year earlier.
The retailer's sales were up 13% on a constant currency basis at £5.35bn.
The contribution from new space appears to be circa 12% (constant currency), according to Shore Capital's (SC) calculations.
“With total space growth at 9% (with retail selling space increasing by 0.929m sq-ft to 11.155 - SC forecast 11.15m sq-ft) once again the sales densities of the new space additions have outperformed the core estate, an encouraging trend,” the broker said.
Sugar profit was, as flagged, substantially lower than the year before, with the adjusted operating profit collapsing to £43mln from £189mln the year before as a result of much weaker euro-denominated EU sugar prices, but group chairman Charles Sinclair said the business made great strides in reducing operating costs.
“After three years of large profit declines for AB Sugar, we expect greater stability in profit next year ahead of EU quota removal in 2017; however, the substantial moves in exchange rates last year, notably the weakening of the euro and emerging market currencies, will have a significant influence on the results for the coming year,” Sinclair warned.
“At current rates the translation impact would be at a similar level to last year but the transactional impact would be greater and will be seen primarily in Primark and British Sugar,” he predicted.
The dividend for the full year was upped by 3% to 25p.
Shares were off 1.1% at 3,395p in the first hour of trading.