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Associated British Foods scrapped its interim dividend in a bid to conserve cash as profit fell sharply in the first half of the year, even as profit at Primark was ahead of expectations amid smaller-than-expected decline in margins.
For 24 weeks ended 29 February, pre-tax profit fell 41% to £298m on-year and revenue was up 2% to £7.6bn.
Grocery achieved 'excellent' profit and margin growth, sugar was on track to deliver a 'material' improvement in profit for the full year and Primark profit was ahead of our expectations, the company said.
AB Sugar revenue was 8% ahead of last year in the first half due to higher EU sugar prices and increased export sales at Illovo more than offsetting a decline in sales volumes in Spain, the company said.
Sales at Primark were 3.9% ahead of last year at constant currency and 2.2% ahead at actual exchange rates, driven by increased retail selling space partially offset by a 0.5% decline in like-for-like sales. With the smaller than expected decline in margin, operating profit was only 'marginally down on last year on an IFRS 16 pro forma basis at constant currency,' it added.
Looking ahead, the company said its expectation for the aggregate operating result for its sugar, grocery, ingredients and agriculture businesses in the second half was unchanged.
'We have good visibility that we will be able to mitigate half of the operating costs of the Primark business while the stores remain closed,' AB Foods said. 'The timing of the reopening of the stores however remains uncertain; moreover, the process of reopening, once it begins, is likely to be complex. As a result, it is too early to provide earnings guidance for the remainder of the current financial year.'