AB Foods growth driven by Primark

Associated British Foods forecast "good progress" in full year earnings per share after a strong finish to the year from its Primark discount fashion chain.

The retail and food group also said adjusted operating profit for the second half of its year to September 14 would be ahead of expectations thanks to Primark’s performance.

Recent data and surveys have shown a gradually improving outlook for UK consumer spending, which generates about two-thirds of gross domestic product.

Primark has been the standout performer in the clothing sector with its low prices pulling in cost-conscious customers.

AB Foods said full year sales at Primark, which has more than 250 stores in Britain and Europe and generates about a third of the group’s profit, were expected to be 22 per cent ahead of the prior year at actual exchange rates, driven by new store openings and sales growth at stores open over a year of close to 5 per cent.

The firm said Primark’s second-half operating profit margin would be in line with the first half, beating internal expectations.

Joint house broker Panmure Gordon increased its 2012-13 EPS forecast by 1.2 per cent to 97.2 pence, equating to 11.4 per cent growth year-on-year.

However, it cut its 2013-14 EPS forecast from 104.3 pence to 101 pence on concerns EU sugar prices are looking weaker than expected next year.

AB Foods said full-year revenue and adjusted operating profit for its AB Sugar business would be in line with management expectations, while its agriculture business would deliver revenue and profit substantially ahead of last year.

For its grocery business, which includes Silver Spoon sugar, Twinings tea and Ryvita biscuits it forecast a substantial improvement in full-year adjusted operating profit after second half revenues improved.

AB Foods added that year end net debt is expected to be about £0.9 billion (€1.06 billion) compared with £1.1 billion last year.

Shares in the group, which are 55 per cent owned by the family of chief executive George Weston, have risen 39 per cent over the last year.

They closed Friday at 1,851 pence, valuing the business at £14.7 billion.

Reuters