Associated British Foods hails 'magnificent' Primark

4th Nov 2014 07:06

Full-year earnings and dividends from Associated British Foods were up 6% on the prior year as the company predicted a slight increase in earnings in the new financial year due to dwindling sugar profits.Revenues in the 52 weeks to 13 September fell 3% to £12.9bn in actual terms but rose 1% at constant currencies as a strong performance from its grocery, agriculture, ingredients and Primark businesses boosted adjusted pre-tax profits 2% to £1.12bn despite pressure from lower sugar prices in the EU and generally challenging food market conditions.Adjusted earnings per share rose 6% to 104.1p enabling the board to declare a 6% hike in the annual dividend to 34p per share.Operating profits at AB Sugar fell 56% and with the continuing fall in EU sugar prices and volatility in the world sugar price management expect a "further large reduction in profit" in the new financial year, though it added that "this will put much of the effect of the structural changes in EU prices behind us".But the Primark clothing retail chain had a "magnificent" year, according to chief executive George Weston, increasing operating profit by 30% at constant currency and adding a net 1.2m square feet of selling space to over 10m sq ft by the financial year end.Grocery's progress in profit and margin came in well ahead of last year thanks in part to Twinings Ovaltine's excellent year, with profits up 20% despite lower revenues.After net capital investment of £691m cash flow increased by roughly 10%, enabling net debt to be trimmed by £358m to £446m.In the year ahead, Primark's continuing expansion and grocery, ingredients and agriculture all expected to make further progress, a "marginal decline" is forecast in adjusted operating profit, with impact on earnings mitigated by much lower tax and interest charges."We therefore see limited opportunity to grow adjusted earnings per share in the new financial year," chairman Charles Sinclair said."With the strength of the group's balance sheet and strong cash generation, we have every reason to be confident of further progress for the group thereafter."Broker Shore Capital said the results were "a little ahead" of forecasts but highlighted management's "cautious outlook" for 2015.