Primark drives earnings at AB Foods

Associated British Foods beat forecasts with a 20 per cent rise in first half profit, driven by a stellar performance from its Primark clothing chain and a recovery in its grocery division.

Primark trades as Penneys in Ireland.

The firm said today it had made underlying operating profit of £496 million in the six months to March 2nd.

That compared to analysts' average forecast of £485 million and was up from £412 million in the 2011-12 half year.

Revenue increased 10 per cent to £6.33 billion.

Many British retailers have been finding the going tough as consumers fret over job security and a squeeze on incomes.

Primark, with its focus on low prices, has been one of the few to buck the gloom. Its sales rose 24 per cent, helped by 15 new store openings.

Sales at stores open over a year increased 7 per cent. AB Foods' underlying earnings per share rose 22 per cent to 41.9 pence and the firm is paying an interim dividend of 9.35 pence, up 10 per cent.

It said it expected to make "good progress" in its full year. The group forecast strong profit growth from Primark, although not at the same level of the first half which had the benefit of lower cotton prices, and an improvement in grocery.

The group said these factors would more than offset a reduction in profit from sugar as a result of lower EU production and lower prices in China.

Shares in AB Foods, 55 percent of which are owned by the family of chief executive George Weston, have risen 51 percent over the last year.

They closed yesterday at 1,847 pence, valuing the business at £14.6 billion.