21st Apr 2020 09:06
(Alliance News) - Primark parent Associated British Foods PLC on Tuesday reported a sharp first-half profit fall and skipped paying an interim dividend, but said it has "ample" cash as it fights with the financial burden of the Covid-19 pandemic.
In the six months to February 29, revenue climbed 1.5% year-on-year to GBP7.65 billion from GBP7.53 billion.
Pretax profit plunged 42% to GBP298 million from GBP515 million in the year prior. Exceptional costs multiplied to GBP309 million from GBP79 million.
AB Foods said it recognised a GBP248 million inventory charge, a GBP36 million provision for a onerous contract, and a GBP25 million exceptional cost following fire damage at a baked goods factory in Wakefield, West Yorkshire.
An inventory value assessment has been conducted in response to Primark store closures due to the Covid-19 pandemic, AB Foods explained. Among items included in this were garments of clothing which have already been received by the Primark retail arm but will otherwise be unsaleable when stores re-open following the Covid-19 lockdown.
Other items, specific to the Spring/Summer season, including Father's Day goods and Euro 2020 merchandise, were also included in the review. These goods are "unlikely to retain any value". The Euro 2020 football competition was postponed to 2021 due to the health crisis.
AB Foods has decided not to declare an interim dividend, saying it was prudent given the focus on managing cash outflow in the second half of the financial year. In the same period last year, it made a 12.05 pence interim payout.
Associated British Foods said it delivered an "encouraging" trading performance in the first half of its financial year, prior to the worst of the coronavirus outbreak in Europe and the US.
Revenue at the company's retail segment rose 2.2% to GBP3.71 billion. Primark's like-for-like sales were 0.5% lower year-on-year, though total sales climbed 3.9% at constant currency.
Back in January, AB Foods reported a 3.0% sales rise for Primark in the 16-weeks to January 4, a period which included the crucial Christmas stretch.
In the Grocery unit, which contains Kingsmill bread, the bakery products chain and the Silver Spoon sugar brand, interim revenue edged 1.1% lower annually to GBP1.69 billion. Revenue jumped 12% at constant currency, however.
Elsewhere, AB Sugar revenue climbed 4.4% to GBP803 million, amid higher sugar prices in the EU. Agriculture revenue was 4.1% higher year-on-year at GBP692 million. At the Ingredients unit, revenue was 0.3% lower at GBP742 million.
"Our expectation for the aggregate operating result for our Sugar, Grocery, Ingredients and Agriculture businesses in the second half is unchanged. We have good visibility that we will be able to mitigate half of the operating costs of the Primark business while the stores remain closed," Chair Michael McLintock said.
"The timing of the reopening of the stores, however, remains uncertain; moreover, the process of reopening, once it begins, is likely to be complex. As a result, it is too early to provide earnings guidance for the remainder of the current financial year."
Shares in AB Foods were 4.6% lower at 1,894.50p each in London early on Tuesday.
By Eric Cunha; [email protected]
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