Primark womenswear sales propel ABF profits to almost £2bn

Associated British Foods profits have soared this year thanks to a boost from bumper sales at Primark stores.

The FTSE 100 firm, whose food brands include Dorset Cereals and Twinings Tea, revealed pre-tax profits jumped by 43 per cent to £1.9billion in the year to 14 September.

Operating profits at its retail division soared by over half to £1.1billion due to price hikes, lower material and freight costs, and growth in key markets like the UK, France and Spain.

Primark’s revenue in the British Isles, where it derives nearly 50 per cent of all trade, expanded by 2 per cent despite wet summer weather, partly because of the popularity of its autumn/winter ranges. 

Primark further benefited from higher women’s clothing sales, supported by greater demand for nightwear and knitwear and large orders for collaboration ranges from the likes of popstar Rita Ora.

This helped its revenue swell by £440million to around £9.4billion and lifted ABF’s overall turnover by 4 per cent at constant currency rates to £20billion.

AB Sugar’s operating profits also climbed by over half to £181million owing to rising sugar prices at its UK and Spanish businesses.

George Weston, chief executive of ABF, said: ‘This was a year of very strong financial and operational progress across the group.

‘We delivered a substantial improvement in profitability, excellent cash generation and strong returns as a result of consistent, multi-year investment and a return to some normality in our markets and supply chains.’

ABF has declared a special dividend of 27p per share and a final dividend of 42.3p per share, meaning its total dividend was up by half on the prior year.

However, it warned that lower European sugar prices, caused by elevated market supply, would ‘significantly’ affect the sugar segment’s earnings this financial year.

Alongside this, the London-based firm is targeting mid-single-digit revenue growth at its Primark outlets.

Russ Mould, investment director at AJ Bell, said: ‘Associated British Foods is a company that really knows what it is doing.

‘It understands its audience – particularly for its Primark chain – and it makes sensible long-term decisions to help drive long-term growth.’

Associated British Foods shares were 0.9 per cent up at £23.10 just before midday on Tuesday, although they have fallen slightly since the year started.

Fellow food processing firm Hilton Food Group declared that current trading was in line with bosses’ forecasts.

The FTSE 250 business, which supplies supermarkets such as Tesco and Waitrose, said its core meat ranges and convenience meals were selling well in Europe, while its seafood arm had boosted revenue and core meat volumes.

While Hilton’s turnover is rising healthily, the British Retail Consortium noted food and grocery demand across the UK only experienced ‘a modest step up’ last month.

Total retail sales increased by just 0.6 per cent, which the BRC blamed on half-term falling a week later than the previous year, uncertainty preceding the budget, and milder weather hitting winter clothes orders.

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