AB Foods lifts FY outlook as interim profits jump
By Michele Maatouk
Date: Tuesday 23 Apr 2024
(Sharecast News) - Primark owner Associated British Foods posted a jump in interim profit and revenue on Tuesday as it lifted its full-year profit outlook.
In the 24 weeks to 2 March, adjusted pre-tax profit rose 37% to £911m, on revenue of £9.7bn, up 2% at actual rates and 5% at constant currency. The company said revenue growth was driven by continued good momentum in retail and food businesses.
Adjusted operating profit was up 39% at £951m.
Revenue from the retail segment - Primark - pushed up 7.5% to £4.5bn, while adjusted operating profit was 46% higher at £508m. Primark sales growth was driven by newly-opened stores and by last year's "carefully selected" price increases to offset inflation.
The company said sales of womenswear and menswear both grew "well", as did sales of its health and beauty ranges.
Meanwhile, the grocery arm saw revenue grow 5% to £2.1bn and adjusted operating profit 39% to £230m.
Looking ahead, AB Foods said it was on track to deliver "significant" growth in both profitability and cash generation ahead of expectations at the start of this financial year.
Chief executive George Weston said: "This is a very strong set of financial results, as we are now benefitting from the restoration of some normality in our markets and in our supply chains. Improvements to the group's operational performance, driven by the investments and strong execution over the last few years, are now becoming visible. Group profit margins are recovering accordingly to more normal levels.
"Looking ahead, we continue to invest with discipline to build further sustainable growth. Geopolitical risks remain, of course, and the consumer has yet to fully emerge from cost of living pressures. But the Group is well positioned to deliver good returns to shareholders."
At 1155 BST, the shares were up 9.3% at 2,737.89p.
Russ Mould, investment director at 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.
"Primark's lack of a full transactional online presence may have held it back during the pandemic but compare its own fortunes now with the likes of Boohoo and ASOS and its decision to limit itself to click and collect sales looks prudent. Selling clothes online and dealing with returns brings extra layers of cost and complexity."
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