Primark avoids retail gloom as profits rise

Discount store’s success helps offset decline in parent company’s sugar business, which has been hit by EU changes to sales quotas

Primark owner Associated British Foods grew revenue and profit in the past financial year, bucking the downward trend that has plunged many British high street retailers into difficulties in recent months.

ABF posted a 1 per cent rise in group revenue to £15.6bn, while pre-tax profit went up 5 per cent to £1.4m.

The group reported that Primark “delivered its most significant profit growth in recent years” in the 12 months to 15 September, with retail revenue up 6 per cent at £7bn and operating profit up 15 per cent to £843m.

ABF said the discount store performed particularly well in the UK, with like-for-like sales up 1.2 per cent.

Success in its retail arm helped to offset continued decline in ABF’s sugar business, which has long been struggling due to falling sugar prices as a result of the EU removing sugar sales quotas.

George Weston, chief executive of Associated British Foods, said: "This was another year of progress for the group. We continued to pursue the opportunities to grow our businesses with a gross investment of £1.2bn.

“Strong profit performances were delivered by each of Primark, grocery, agriculture and ingredients. These more than offset the decline in sugar profit which was caused primarily by low prices in the first year after the structural change in the EU sugar regime. Looking ahead, management have clear plans for further investment and for pursuing opportunities for business improvement."

The company said it plans to focus investment in Primark, Twinings Ovaltine and its ingredients business, and expects profits to improve in retail and grocery, while sugar profits will be “significantly lower”.

Meanwhile, the group said it will pay a dividend of 45p for the year, marking a 10 per cent increase on the amount paid to shareholders in the previous 12 months.

Emma-Lou Montgomery, associate director at Fidelity Personal Investing’s share dealing service, said: “Associated British Foods has hit the sweet spot for investors again. Not with its sugar business but with fast-fashion brand Primark, whose performance has more than compensated for the fall in profits in its sugar business as a result of the deregulation of the EU sugar market.”

“Primark has delivered its most significant profit growth in recent years and that’s especially sweet in a retail sector that has soured for so many other retailers. For many that 10 per cent rise in the annual dividend for shareholders will just be the icing on the cake.”

Shares in ABF were up more than 2 per cent in early trading.