Primark Profits Jump 44% Despite Criticism Over Rana Plaza Disaster

Ultra-discount retailer Primark has boosted its parent company's results after posting a 44% surge in profits.

Primark owner, Associated British Foods, reported higher than expected annual profits following a surge in activity at the discount clothing chain, whose annual operating profit topped half a billion pounds this year.

AB Foods said its adjusted pretax profit rose 13% to £1.096bn ($1.75bn, €1.3bn) in the financial year ended 14 September 2013, beating expectations.

Group revenues rose 9%, compared to the same period last year, owing in part to a 22% increase in Primark earnings, the company said in a statement.

Adjusted earnings per share rose 13% to 98.9 pence.

AB Foods said that Primark's continued expansion and the expected growth in the group's grocery business should boost profits in those units in 2014.

However, it forecast a further reduction in profit from its AB Sugar division, the second-largest contributor to group earnings, as European sugar prices drop.

The company will dole out a final dividend of 22.65p on 10 January 2014, taking the total payout for the year to 32.0p, a 12% increase, the statement said.

The company's stock was trading 3.02% lower at 08:27 hrs in London.

Rana Plaza Disaster and Primark

After the collapse of the eight-storey Rana Plaza building in Bangladesh on 24 April, which killed more than 1,100 people, over 70 retailers agreed to sign a pact to improve protection for Bangladeshi workers.

Last month, Primark offered to compensate injured workers and relatives of those who died in the Rana Plaza factory disaster in Bangladesh.

Some 550 workers at the supplier New Wave Bottoms, which had been making clothes for Primark, will be given the equivalent of three months' wages, until the long-term compensation is finalised.

Primark, which operates 257 stores in Britain and Europe, generates more than a quarter of the group's sales. The chain opened 16 new stores in total during the financial year and now manages nine million square feet of selling space.

Primark's revenue was 22% ahead of last year at actual exchange rates, which benefited from the recent strengthening of the Euro, and was 21% ahead at constant currency. This result was driven by an increase in retail selling space, like-for-like sales growth of 5% for the full year, and superior sales densities in the larger new stores.

"Adjusted operating profit was 44% higher than in 2012 at £514m, reflecting the strong revenue growth," according to the statement.

"I am delighted to report that the group has again delivered a great set of results. Grocery was much improved, agriculture achieved record profits, sugar was in line with our expectations and it was a remarkable year for Primark," AB Foods Chief Executive George Weston said in the statement.

AB Foods, which also makes Twinings Tea, is majority owned by Weston.