Primark owner Associated British Foods has forecast 'significant growth' in full-year profit as it reported a 39% jump in the first half, partly driven by margin recovery at its clothing chain.
The UK-based group, which also owns major sugar, grocery, agriculture, and ingredients businesses, said adjusted operating profit, its key profit measure, was £951 million (€1.10 billion) in the six months to March 2, on revenue up 2% to £9.73 billion (€11.29 billion).
"The group has delivered a strong first-half performance and is on track to deliver significant growth in both profitability and cash generation ahead of expectations at the start of this financial year," it said.
It was previously forecasting 'meaningful progress' in full-year profit.
Performance By Division
Primark's first-half revenue rose 7.5% to £4.5 billion (€5.22 billion), with like-for-like sales up 2.1% and margin recovery to 11.3%, up from 8.3%.
In its Grocery division, the business reported a 'significant profitability improvement', led by the performance of its US-focused brands, while Sugar also saw a 'strong profitability improvement'.
Profit in its Ingredients business was driven by a 'continued strong performance in AB Mauri', it added, while higher profitability in Agriculture resulted from 'lower input costs'.
'The Group continues to prioritise investment in its businesses and we continue to expect to increase spend in each of the next few years to slightly above last year's level,' it said.
Analyst Comment
Commenting on its performance, analyst Russ Mould of AJ Bell said, “After a strong trading update in January, Primark-owner Associated British Foods has built on this momentum with its first-half results.
“It delivered an impressive set of numbers with strength across all areas of the business, including the less-heralded food and ingredients arm. The performance of Primark was particularly stunning, suggesting its value offering in clothing is resonating with cost-conscious consumers.
“The company seems to have found a middle ground between its disposable ‘Primarni’ past to providing better quality apparel, still at affordable prices, including in categories like children’s clothes where parents need to regularly update items as their offspring grow. The company’s outperformance of a flatlining UK retail sector suggests it is taking market share from less robust rivals.
“The company’s strong balance sheet and diversified model which the Weston family, with its controlling stake in the business, are committed to, put the company in an enviable position to both reward shareholders and invest in further expansion in the business.”
Additional reporting by ESM
