9th Nov 2021 08:43
(Alliance News) - Associated British Foods PLC said Tuesday it delivered a resilient annual performance, with its Primark fast-fashion store chain holding up well against pressures from the Covid-19 pandemic, and in the mood to expand.
"Our financial performance this year more than ever demonstrates the resilience of the group. This comes from the strength of our brands, the diversity of our products and markets, our geographic spread, conservative financing and an organisation design that permits fast and flexible decision-taking," Chief Executive George Weston said.
Shares in the the FTSE 100-listed food processing and retailing company were up 6.9% to 1,986.50 pence in London on Tuesday morning, making it the top performer in the blue-chip index.
For the 53 weeks that ended on September 18, revenue was GBP13.88 billion, down slightly from GBP13.94 billion in financial 2020, but pretax profit rose by 5.7% to GBP725 million from GBP686 million.
AB Foods posted adjusted operating profit of GBP1.01 billion, down 1% from GBP1.02 billion last year. Operating profit of GBP808 million was in line with GBP810 million the year before.
Its Retail unit, which houses the Primark fashion chain, delivered adjusted operating profit of GBP415 million, up 15% from GBP362 million in financial 2020. It said Primark's profit margin was 10.6% in the second half.
However, AB Foods said sales at Primark, including a 53rd week this financial year, were GBP5.59 billion, 5% below last year at both actual and constant currency exchange rates and down 12% on pre-pandemic level due to Covid-19 restrictions. AB Foods said Primark's performance was "good", and it expects improved margins and profit next year.
"This year has been characterised by greater than expected restrictions on the ability of Primark to trade. For this financial year we estimate the loss of sales, while stores were closed, to be some GBP2 billion. When stores were open, full year like-for-like sales were 12% below two years ago and were 7% lower excluding destination city centre stores," AB Foods said.
AB Foods said it will press ahead with its Primark expansion in growth markets. In the US it will open a store on Jamaica Avenue, Queens, and it has signed four further leases to expand its reach in the greater New York area, as well as a lease for a store in Tyson's Corner, near Washington DC.
Primark ended the period with 398 stores across the globe, up from 384 the year before.
Elsewhere in the group, Grocery division revenue was GBP3.59 billion in the recent financial year, up 2% from GBP3.53 billion and up 3% at constant currency. AB Foods said strong growth in Twinings Ovaltine more than offset an expected decline in sales at Allied Bakeries.
In Sugar, revenue totalled GBP1.65 billion, up 4% from GBP1.59 billion, and up 8% at constant currency. AB Foods credited higher domestic and regional volumes for Illovo in Africa, particularly in Zambia and Malawi, as well as higher sugar prices in Europe and Africa.
Agriculture division revenue rose by 10% or 11% at constant currency, while Ingredients revenue was flat from financial 2020, though up 4% at constant currency.
AB Foods declared a 20.5 pence final dividend, alongside a 13.8p special dividend, bringing total dividends for the year to 40.5p.
"Given the strength of our balance sheet and our confidence in the future we are setting out today a new capital cash allocation policy that provides the group with the capital it needs both for investment and financial stability while allowing for enhanced returns to shareholders when appropriate. We are announcing a special dividend for shareholders today as a result," Weston said.
He added: "Although the possibility of further trading restrictions cannot be ruled out, we expect Primark to deliver a much improved margin and profit next year. We are now intent on expanding our new store pipeline and investing in technology and digital capabilities to continue improving the performance of the business."
By Paul McGowan; [email protected]
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