Primark owner Associated British Foods (LON:ABF) have surpassed profit expectations in their first-half results, driven in part by a rise in sugar prices and strong retail sales.
The food and fashion conglomerate saw pre-tax profits rise 35 percent to £624 million in the 24 weeks to 4 March, with revenues up by 19 percent to £7.3 billion. In addition, the dividend was raised 10 percent to 11.35 pence.
The company attributed the successful performance to burgeoning sales in both its retail clothing operations and grocery businesses. Its food brands include Twinings, Silver Spoon, Kingsmill bread, Jordans, Dorset Cereals, Patak’s and Blue Dragon.
Chairman Charles Sinclair said: “The growth in earnings achieved in the first half has been excellent. We expect the underlying revenue momentum in all of our businesses to continue in the second half.
Nevertheless, Sinclair remained cautious of the negative impact of currency fluctuations, with the slide of the pound tempering profits. Sinclair added:
“However, profit growth in the second half will, at current exchange rates, be tempered primarily by a smaller translation benefit and the full effect of the devaluation of sterling against the US dollar on Primark’s margin.”
In addition, whilst the company had begun to note some recovery with regards to its sugar businesses, its Silver Spoon brand continued to feel the strain of an increasingly “competitive” market.
During the reported period, ABF sold two of its businesses, US herbs and spices and its cane sugar operations in South East China. With these additions taken into account, unadjusted pre-tax profits rose by 92 percent to £867 millon.
Meanwhile, its Primark stores continued to perform well in light of the opening of 16 new stores in 8 new countries, with trading continuing to be above expectations.
Sinclair commented overall on the performance of ABF brands:
“Primark delivered a substantial increase in selling space which, together with its strong consumer offering, contributed to a further increase in our share of the total clothing market. Furthermore, we achieved a more acceptable rate of return in sugar and further good progress was made by our ingredients and grocery businesses.”
Shares in Associated British Foods are currently up 1.91 percent as of 10.27AM (GMT).