It might be setting foot on more overseas territories, but discount clothing retailer Primark has reported a small dip in operating profits. The company, which is the largest division of conglomerate Associated British Foods (ABF), saw turnover rise 7 per cent to more than £2.6bn on a constant currency basis, as it continued to open stores in Madrid and the US. But like-for-like sales dropped nearly 1 per cent as unseasonably warm weather in northern Europe made for a weaker Christmas. Foreign exchange headwinds contributed to a 3 per cent dip in operating profits here, as the retailer purchases goods in dollars, but sells them in the weaker sterling and euro.
Importantly, the sugar division, the group's third largest by revenue, swung to a £6m operating profit compared to a £3m loss for the same period in 2015. Tightened stock levels in the European Union and China helped push up prices, and the division's cost reduction drive helped, too. The company also bought the 48.7 per cent stake in South African-listed sugar producer Illovo that it did not already own for 5.6bn rand (£262m), which management said should be immediately earnings-accretive.
The grocery division managed to push profits up in spite of a minor dip in sales, thanks to margins rising from 8.1 per cent to 8.6 per cent. Twinings Ovaltine performed well in the tea market, but management warned margins in the UK bakery market - in which its Kingsmill brand competes - "remain under pressure".
Elsewhere, the absence of lossmaking Yi'an and BoCheng beet sugar factories in China, which were sold in the previous financial year, helps explain the large jump in reported profits this term.
Analysts at Credit Suisse expect adjusted pre-tax profits of £1.05bn in the 2016 financial year, leading to EPS of 101.2p and compared to £1.03bn and 102p in FY2015.
| ASSOCIATED BRITISH FOODS (ABF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,412p | MARKET VALUE | £27bn | |
| TOUCH | 3,410-3,413p | 12-MONTH HIGH | 3,606p | LOW: 2,708p |
| DIVIDEND YIELD | 1.0% | PE RATIO | 36 | |
| NET ASSET VALUE | 859p* | NET DEBT | 6% | |
| Half-yearto 27 Feb | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 6.25 | 213 | 18.1 | 10.0 |
| 2016 | 6.12 | 457 | 45.2 | 10.3 |
| % change | -2 | +115 | +150 | +3 |
Ex-div: 2 Jun Payment: 1 Jul *Includes intangible assets of £1.4bn, or 180p a share | ||||
