Adjusted profit before tax at Associated British Foods (ABF), the parent company of Irish-founded budget fashion retailer Penneys, more than doubled during the first half of its financial year as sales returned to pre-Covid levels.
Pre-tax profits jumped 109% to £666m on the back of group revenues of £7.9bn, which rose 25% year-on-year and 28% on a constant currency basis, with adjusted earnings per share up 154% to 63.8 pence and a improved divided of 13.8 pence per share (+123%).
Penneys, which trades as Primark internationally, accounted for 45% of ABF revenues for the 24-week period ending on 5 March, with total sales rising 59% year-on-year to £3.5bn and an adjusted operating profit margin of 11.7%.
Sales were strong in the UK and Ireland due to increased holiday travel and socialising following the lifting of restrictions, but in a trading update ABF characterised footfall in continental Europe as "weak" and said its US stores were "trading well". The retailer also launched a new website during the period.
"This half year sales and operating profit for the group returned to pre-COVID levels. Our people have responded well to the many challenges we faced," said George Weston, CEO of ABF.
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"Primark delivered a significant increase in sales and profit, with stores now open and trading largely free of restrictions."
Sales in ABF's food division were up 6% to £4.3bn, with sales and profits in its sugar business well ahead, but food profits fell 9% to £330m, which the company blamed on input cost inflation.
The impact of cost cutting measures and price increases to counter rising costs has yet to show up on the balance sheet, partially due to logistic challenges and Covid-related labour absences, and Penneys will increases costs later this year to try and offset the damage.
"Looking further ahead, inflationary pressures are such that we are unable to offset them all with cost savings, and so Primark will implement selective price increases across some of the autumn/winter stock," Weston added.
"However, we are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty. Notwithstanding the inflationary pressures we are experiencing, our outlook for the year is for significant progress in adjusted operating profit and adjusted earnings per share for the group.”
The trading update shows that ABF had net debt, including lease liabilities, of £1.7bn and made gross investment of £450m during the period. There was also a £25m exceptional charge in the prior half year.
Photo: Laura Johnston from Ringsend with her shopping bags outside Penneys store on Mary Street Dublin on the first day of shops reopening last May. (Pic: Leah Farrell/RollingNews.ie)
