Primark boosts AB Foods as annual profits soar

Associated British Foods reported a jump in full-year sales and profits on Tuesday, despite surging input cost inflation, after a bumper performance at its budget fashion brand Primark.

Group revenues for the year to 17 September rose 22% on both a constant and actual currency basis, to £17bn, while adjusted operating profits rose 42% to £1.44bn.

Pre-tax profits came in at £1.08bn, compared to £725m a year previously.

Revenues in its grocery business - which includes Ovaltine, Allied Bakeries and Twinings - rose 3% on a constant currency basis, to £3.74bn, as prices rose, although a weaker margin contributed to a 3% dip in adjusted operating profits to £399m. Sugar revenues jumped 18% to £2.02bn.

The biggest driver of growth, however, was in retail, where revenues rose 40% on a constant currency basis to £7.7bn and adjusted operating profits soared 135% to £756m. The company attributed the strong performance to an increase in footfall following the end of Covid-19 related restrictions as well as "more normal" customer behaviour post pandemic.

Michael McLintock, chair, said: "Just as we began to experience a more normal operating environment, we encountered the most changing economic conditions for many years, with sharply rising and broadly based inflation, as well as highly volatile input costs and exchange rates.

"We estimate that inflation increased costs across the group by some £1bn in this year alone."

Looking ahead, he added: "The group continues to face considerable headwinds from high inflation, particularly in energy costs, volatile exchange rates and pressure on consumer discretionary spending.

"However, I remain confident that the group has the business model necessary to delivering a year of further growth in sales. We look forward to Primark’s accelerated rollout of stores, especially in the US, and to further digital development including the launch of a new click and collect trial in stores in the north of England and Wales."

Unlike most of its rivals, Primark still does not have an online operation.

George Weston, chief executive, said: "Substantial and volatile input cost inflation will be the most significant challenge in the new financial year."

Prices would be left unchanged at Primark, he said, despite "significant" input cost inflation and "sharply moving" currency exchange rates.

"As a result, in the current financial year, we expect significant growth in group sales from pricing in food, as well as from some pricing and from space expansion at Primark. Our outlook remains unchanged. We continue to expect group adjusted operating profit and adjusted earnings per share to be lower than the financial year just closed."