Weak sterling helps Primark owner post increase in full-year revenue

Shares in Associated British Foods (ABF) surged almost 8% higher on Tuesday (8 November), after the owner of Primark posted an increase in full-year revenue, partly thanks to the weakening pound.

In the 12 months to 17 September, the FTSE 100-listed group reported a 5% year-on-year increase in revenue to £13.4bn ($16.6bn), while revenue on like-for-like basis was 4% higher than in the previous year, despite like-for-like sales falling 2%.

As a result, adjusted operating profit rose 3% year-on-year to £1.11bn, while adjusted pre-tax profit were 5% higher than 2015 to £1.07bn and adjusted earnings per share also rose 5% to 106.2p

The group also added it has lifted its total dividend by 5% year-on-year to 36.75p.

ABF attributed the increase in revenue to ongoing development of its discount clothing retailer Primark, which added 1.2 million square feet of selling space during the year, with new store openings planned for the 2016/17 financial year.

The pound's sharp decline in the three months following Britain's European Union referendum has boosted profits in the company's branches outside the UK. However, ABF warned sterling's ongoing weakness could have a negative on Primark's margins, given the retailer purchases most of its items in dollars and sells in pounds.

"The recent decline in the value of sterling presents both benefits and challenges to the group," said group chief executive George Weston.

"The diversity of our operations and our broad geographical footprint, combined with a strong balance sheet, equip us well to take advantage of these opportunities as they arise."

Meanwhile, the company said its AB Sugar business will benefit from an increase in sugar prices and from reductions in its cost base, while the grocery, ingredients and agriculture businesses are expected to make further progress.

ABF, which invested £1bn over the last 12 months in both Primark and its food businesses, added the sale of ACH's herbs and spices business in North America is expected to be completed shortly.