Primark owner Associated British Food PLC (LON:ABF) reported a 5% rise in group revenue, to £13.4bn, with the high street clothes retail business driving the performance.
For the 53 week period, ending September 17, the group has reported a £1.07bn profit, a 5% on 2015,
The high street clothes retailer grew sales by 9% compared to the year before. Primark’s revenue for 2016 was up 11% at US$5.84bn, versus £5.34mln in 2015, although the retailers profit margin reduced to 11.6% from 12.6% the in the prior year.
Primark’s strong performance was partially thanks to expansion, with new stores adding some 1.2mln square feet of retail space in the year.
Like-for-like sales were down 2%, impacted by unseasonable weather and cautious consumer sentiment, according to Primark.
Elsewhere ABF’s grocery brands generated some £3.2mln of revenue for the year, up from £3.17mln in 2015, the sugar business saw a 1% drop in revenues to £1.79bn (though on a constant currency basis it would’ve been up 5%) and the ingredients business grew revenue by 4% to £1.29bn.
ABF’s agriculture unit reported just over £1bn of revenue, down about 10% from the year before.
Group chief executive George Weston said: “This has been a year of progress for all of our businesses with a substantial expansion in Primark's selling space, increased margins in all of the food businesses and fundamental structural changes at AB Sugar.
“The recent decline in the value of sterling presents both benefits and challenges to the group. The diversity of our operations and our broad geographical footprint, combined with a strong balance sheet, equip us well to take advantage of these opportunities as they arise."
Robert Waldschmidt, consumer sector analyst for Liberum Capital, in a note this morning, said: “Despite short-term concerns, ABF’s long-term fundamentals appear robust and we retain our conviction that Primark and Sugar will power mid-term profit growth.
“ABF offers investors compelling exposure to secular growth trends in retail over the next 10yrs.”
Liberum rates ABF as a ‘buy’, and its £35 per share price target suggests nearly 40% upside to the current share price of £26.11.