Interim profits from Primark owner and foods group Associated British Foods came in bang in line with market expectations, with the sugar businesses sweetening the performance considerably.
Adjusted operating profit of £412m in the 24 weeks ended March 3rd was up 6% on the corresponding period a year earlier, and consistent with market expectations.
Adjusted profit before tax was up 3% to £363m on the back of 11% revenue growth to £5,766m. Adjusted earnings per share rose 5% to 34.4p.
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Net debt of £1.59bn at the end of the reporting period after net capital investment of £326m over the six month period was lower than the £1.65bn expected by the market.
Like-for-like sales growth at its clothing retail unit Primark was 2%, in line with company guidance given at the end of February. Total revenue rose to £1,615m from £1,406m the year before, while the Retail unit's operating profit edged up to £154m from £151m.
The Sugar business saw revenue rise to £1,203m from £1,024m at the interim stage last year, while operating profit shot up to £172m from £108m the year before. This was driven by a strong increase in the UK, further improvement in Spain and a better performance from Illovo.
The Agriculture unit's revenue rose to £597m from £507m the year before, but operating profit eased to £16m from £18m. Profits in the UK and China were ahead of last year but lower grain prices and reduced volatility led to a fall in Frontier's profit from last year's very strong level.
In Grocery, revenue climbed to £1,813m from £1,743m the year before but, again, operating profit was lower, falling to £75m from £109m last year. The decline in operating profit was primarily driven by restructuring costs at George Weston Foods in Australia and Allied Bakeries in the UK, margin declines at Allied Bakeries and higher than expected costs of operating the Castlemaine meat factory in Australia.
The Ingredients business saw operating profit slide to £18m from £31m last year on revenue that improved to £538m from £527m the year before, as the challenges experienced by the yeast and bakery ingredients business, seen particularly in the second half of last year, continued.
For the group as a while, George Weston, Chief Executive of Associated British Foods, said, "we expect substantial growth in both adjusted operating profit and adjusted earnings per share for the group for the full year."
"AB Sugar's investment over recent years, its focus on maximising capacity utilisation and operational efficiency and the strength of regional sugar prices, are expected to drive the full year profit for Sugar well ahead of last year. This, together with strong profit growth from Primark in the second half, should more than offset the lower profit in Grocery and Ingredients," revealed Chairman Charles Sinclair.
The interim dividend has been hiked by 8% to 8.5p.
The shares rose 23p to 1,238p in the first two hours of trading after the release of the results.
JH
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