ABF expects Primark to smarten up

Primark, the value fashion chain, is expecting strong profits growth over the next six months after a flat first half, its owner Associated British Foods said yesterday.

Soaring cotton prices, which Primark tried not to pass on to customers, saw operating profits rise just £3m to £154m on sales up 15 per cent at £1.6bn in the 24 weeks to 3 March. But cotton prices are now less than half their peak last year and the chief executive, George Weston, said that should mean better margins on still-growing sales in the second half.

He said: "People are being squeezed but we have a great deal of confidence in our stores. Interestingly, in Germany, where the economy is strongly placed, Primark is doing really well and in Spain and Portugal, where the economies are challenged, Primark is doing really well."

On the groceries side, the owner of Twinings, Ovaltine and Kingsmill bread saw operating profits drop from £109m to £75m.

The real boost to ABF came from sugar, where profits jumped 59 per cent. ABF's total pre-tax profit rose3 per cent to £363m and the dividend goes up 8 per cent to 8.5p.