Primark owner Associated British Foods lifts interim dividend as first half profit climbs

Associated British Foods lifted its interim dividend on the back of a solid six months, during which an increase in operating profit offset a slight decline in revenue.

In the six months to 27 February, the owner of Primark posted a 2% year-on-year drop in revenue to £6.11bn (€7.72bn, $8.75bn). However, revenue climbed 2% when stripping out currency fluctuations, while adjusted operating profit rose 3% - 5% on a constant currency basis - to £486m.

The producer of Twinings tea, which lifted its interim dividend 3% year-on-year to 10.3p, attributed good performance across the board, in particular at Primark, where buying and selling expansion continued.

The upcoming referendum on Britain's membership of the European Union has created uncertainty in the business community and financial markets but Associated British Foods, which has expanded aggressively in Europe, sounded mildly optimistic over its ability to deal with the outcome of the vote.

The company indicated that it undertakes relatively little cross-border trading between the UK and the rest of the EU and its business model was focused, wherever possible, on aligning production with the end markets for its products.

Meanwhile, addressing George Osborne's decision to introduce a levy on producers of sugary drinks in a bid to solve Britain's growing obesity problem, Associated British Foods said uncertainty surrounded the way the tax will be introduced.

"There is uncertainty as to how these proposals may be implemented," said group chairman Charles Sinclair. "Obesity has been, and continues to be, a complex issue driven by many different factors. We remain committed to informing and educating consumers about the role that sugar can play in the diet and lifestyle."

Associated British Foods added the outlook for the second half of the year remained unchanged, despite the ongoing weakness in the pound against major currencies.

"If current rates were to prevail, this would give rise to a currency translation benefit in the second half and we would no longer expect currency translation to have a material impact on our results for the full year," Sinclair added.