Profits and revenue fall at Primark’s parent company Associated British Foods – but will still pay a dividend
Primark parent company Associated British Foods (ABF) has said it will still pay a dividend, despite falls in both profit and revenue for the year to 12 September.
The figures
Adjusted operating profit was down six per cent in real terms, or four per cent on a constant currency basis, to £1.09bn, while group revenue fell one per cent to £12.8bn.
Adjusted pre-tax profits were also down six per cent to £1.03bn, while adjusted earnings per share fell two per cent to 102p.
However dividends per share increased three per cent to 35p and net debt was cut to £194m.
Why it's interesting
ABF is a tale of two divisions: on the one hand Primark continues to perform strongly, with 20 new store openings, including its first store in the US, and further expansion opportunities beckoning for next year.
Although retail trading was not as "exceptional" as last year, Primark was still in growth, with revenues up eight per cent to £5.3bn (or 13 per cent on a constant currency basis) while adjusted operating profit climbed two per cent to £673m.
On the other hand, ABF's sugar division continues to be a bitter pill. The Weston Family-run group had to swallow a £100m non-cash loss on the sale of two uneconomic factories in Heilongjiang, China, and world sugar prices have meant "significant profit decline" in the division for the third year in a row. ABF said it expected "greater stability in profit next year, ahead of EU quota removal in 2017."
On top of food price deflation, there has also been pressure from currency movements.
What they said
Chairman Charles Sinclair said: "Against this background a two per cent decline in adjusted earnings per share is all the more creditable and the group continued to generate strong cash flows and reduce net debt significantly as a result… With the group's cash generating ability, the lower net debt and the committed borrowing facilities available, we have the capacity to meet our growth ambitions."
Chief executive George Weston added: "We delivered a strong operational performance despite the challenges of food commodity deflation and big movements in exchange rates. The group continues to generate strong cash flows and to reduce net debt. While marginally down, our earnings per share result underlines the group's strength."
In short
ABF is not slowing its expansion plans for Primark, and despite having three tough years in sugar, it hopes to be nearing the end of the pain. However currency pressures continue and are expected to lead to a "modest decline" in profits and earnings for the next year.