ABF profits rise by 10%
Nov 7 2007 by Iain Laing, The Journal
ASSOCIATED British Foods today said profits rose 10% after the retail-to-grocery business benefited from further strong growth at Primark.
The value fashion chain achieved annual operating profits of £200m – an increase of 20% on a year earlier – after it opened 32 new stores and maintained like-for-like sales growth in a testing trading environment.
The improvement offset a poor UK showing from the company’s Kingsmill bread business, as AB Foods posted group profits of £613m for the year to September 15.
Profits were also lifted by a “significant year” for the company’s sugar business, with a better-than-expected first contribution from Africa-based acquisition Illovo and an increase in profits from China. The company is the second largest sugar producer in the world, while its British Sugar operation is the sole processor of the UK sugar beet crop.
Hot beverage brands, Twinings and Ovaltine, continued to deliver strong growth, but their impact on profits at the company’s grocery division was offset by the losses at Allied Bakeries and margin pressure at Silver Spoon.
AB Foods chairman Martin Adamson said he expected the company to make further progress this year, despite the reform of the EU sugar regime set to have a further negative impact on profits. He added: “High commodity costs will continue to put pressure on margins but we are seeing some success in recovery through prices.”
AB Foods employs 85,000 people in 43 countries, with its operations generating sales of £6.8 billion in the last financial year.
Primark is now the second largest clothing retailer in the UK after the acquisition of former Littlewoods stores bolstered the estate to 170 sites.The business generated revenues of £1.6bn, with like-for-like sales ahead 1%. AB Foods said those stores unaffected by new openings were likely to have seen growth of around 7% in the period.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said the results highlighted near-term concerns.
“While overall progress has been made, there is still room for concern going forward. EU reform of the sugar market is expected to prove negative near term, while dollar weakness and rising food commodity prices also remain unhelpful.
“That said, management have transformed the group over recent years and their reputation for stringent cost management and shrewd acquisitions remains intact.”
