6th Nov 2018 08:19
LONDON (Alliance News) - Associated British Foods PLC on Tuesday hiked its dividend by 10% despite reporting a drop in annual profit due to one-off items and poor results from sugar.
Shares were trading up 2.4% at 2,446.0 pence each, the third best performing stock of the FTSE 100 index on Tuesday morning.
For the financial year that ended September 15, AB Food's pretax profit fell 18% to GBP1.28 billion from GBP1.58 billion a year ago, as the company incurred a GBP34 million loss on sale and closure of businesses compared to a GBP293 million profit on such items the year before.
"Last year included the benefit of a one-time profit on the sale of businesses, namely the group's US herbs and spices business and south China cane sugar operations," the company explained.
On an adjusted basis, pretax profit increased 5% to GBP1.37 billion.
Meanwhile, the company's revenue also increased 1.4% to GBP15.57 billion from GBP15.36 billion a year ago.
AB Foods adjusted earning per share came in at 134.9 pence, up 6% on the previous year, beating company-compiled analysts consensus which forecast an increase by 4.6% to 132.9p.
By division, the AB Foods Retail unit, made up of low-cost fashion chain Primark, "delivered its most significant profit growth in recent years", with adjusted operating profit up 15% to GBP843 million from GBP735 million and revenue up 6.1% to GBP7.48 billion from GBP7.05 billion.
Back in September, AB Foods said Primark sales were expected to show 5.5% growth on the year before, boosted by increased selling space and despite the well-documented struggles of the UK high street.
Meanwhile, the company said that in the medium term it plans to add further Primark stores in the US and to enter a number of markets in central and eastern Europe.
AB Foods Sugar unit recorded a 51% drop in adjusted profit to GBP123 million from GBP249 million. Revenue fell 15% to GBP1.73 billion from GBP2.03 billion.
"The end of the EU sugar regime has been expected for some years now and the decline in operating profit for AB Sugar this year was primarily a consequence of the transition to a deregulated EU sugar market, which is now much more competitive," the company explained.
However, in addition to Primark's results, a good performance from AB Foods Grocery, Ingredients and Agriculture businesses helped offset the drop in Sugar.
Grocery saw adjusted profit up 11% to GBP335 million, Ingredients jumped 13% to GBP143 million while Agriculture's was up 18% to GBP59 million.
Chief Executive Officer George Weston said: "This was another year of progress for the group. Strong profit performances were delivered by each of Primark, Grocery, Agriculture and Ingredients.
"These more than offset the decline in Sugar profit which was caused primarily by low prices in the first year after the structural change in the EU sugar regime. Looking ahead, management have clear plans for further investment and for pursuing opportunities for business improvement."
The company lifted its full-year dividend by 10% to 45 pence per share after proposing a 33.3p final payout for the year.
Looking ahead, the company said it continues to invest in opportunities to expand Primark, Twinings Ovaltine, and Ingredients.
The company expects Retail profit to continue to increase as Primark selling space expansion will go on.
However, AB Foods continued to guide for a significant drop in its Sugar unit profit as prices continue to be cut.
With regards to Brexit negotiations, AB Foods said it is concerned about the risk of "abrupt changes to the UK's customs procedures" in the event of a no-deal Brexit, and therefore, supports the intention of having a transition period in place beyond March 2019.
"While we continue to regard the possibility of the UK leaving the EU in March 2019 without any form of transition period as highly unlikely, those businesses that might expect to see some disruption in these circumstances are making the preparations necessary to ensure this disruption is minimised. We do not expect these preparations to materially impact the financial performance of the group," the company added.
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