Primark owner Associated British Foods sees profits jump

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A line of Primark shopping bagsImage source, PA

Food-to-fashion group Associated British Foods (ABF) has reported a leap in first-half profits, driven by a recovery at its sugar businesses and continued growth at its Primark chain.

Pre-tax profits jumped by 35% to £624m in the 24 weeks to 4 March, with revenues up by 19% to £7.3bn.

ABF said profit growth in the second half would be "tempered" by the weaker pound pushing up the cost of imports.

However, it added the outlook for full-year profits had improved.

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.

"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."

AB Sugar had benefited from a rise in sugar prices and "significant savings" achieved as a result of performance improvements, the company said in a statement, leading to a "more acceptable return on investment".

Mr Sinclair also pointed to the "major contribution" to profits growth made by "substantial increases" in its grocery and ingredients businesses, whose brands include Twinings, Ovaltine, Kingsmill bread, Jordans, Dorset Cereals, Patak's and Blue Dragon.

It also owns Silver Spoon sugar, whose profit margins declined because of the "competitive" retail sugar market. However, it said the rate of decline in Ryvita crispbread volumes slowed, following the launch of new pack sizes and flavours.

Over the six months, ABF sold two businesses, US herbs and spices and its south China cane sugar operations. When the proceeds of these disposals are taken into account, unadjusted pre-tax profits rose by 92% to £867m.

It opened 16 new Primark stores in eight countries. It said Primark "performed well in the highly competitive UK market" and saw a "strong" increase in market share.

"The impact of the US dollar's strength on Primark's input costs have been well flagged and our commitment to price leadership in clothing retail has seen, as forecast, a decline in its operating margin," added Mr Sinclair.

ABF's share price rose by 3.6% following the release of the results.