Primark drives growth at AB Foods

Primark's underlying operating profit grew 55 per cent to £238m, while sales at the unit rose 24 per cent to £2bn and like-for-like sales rose 7 per cent. Moreover, Primark's operating margin increased from 9.5 per cent to 11.9 per cent - helped by lower cotton prices, better exchange rates and lower markdowns. However, management expects no further margin improvement in the second half and a much slower pace of store expansion. In the half-year alone, Primark opened 15 stores across Europe and expanded retail space by 13 per cent. However, expansion should pick up again in the next financial year and will include the first French Primark store.

By contrast, profits at the sugar business fell from £172m to £163m as a robust African performance was more than offset by lower beet yields in Europe and a deterioration in China, where sugar prices are stubbornly low. In China, a £22m charge was taken for the writedown of two mothballed beet factories and management expects operations there to be lossmaking for the full year.

But the agriculture division boosted sales by 7 per cent and operating profit there rose 25 per cent to £20m - helped by a better cost performance. Grocery sales rose just 1 per cent but, reflecting restructuring costs in 2012's first half at George Weston Foods in Australia and at Allied Bakeries, profit grew 29 per cent to £97m. The ingredients business, meanwhile, saw profits slump 89 per cent to £2m, largely reflecting a £15m provision for restructuring the group's European dry yeast capacity following the launch of a new Mexican yeast plant.

Broker Panmure Gordon has upped its full-year EPS forecast by 1p to 96p (from 87.2p in 2012).