Associated British Foods, owner of Primark, has announced its half year results with revenue fell 2% at actual exchange rates and was flat at constant currency.
Adjusted operating profit fell by 10% at constant exchange rates, due to a poor performance in Sugar, which made a loss of ยฃ16 million.
Outlook for this financial year is weighed down by Sugar, which is now expected to make a loss of ยฃ40 million versus previous expectations of a ยฃ50-70 million profit.
Charlie Huggins, manager of the โQuality Shares Portfolioโ at Wealth Club, said,ย “There is not much to celebrate in these results fromย AB Foods.
“The outlook in the Sugar business has worsened, primarily due to lower European sugar prices and an operating loss in Vivergo, the UK bioethanol business. Actions are being taken to turn these businesses around. However, the group warns that a return to profitability is likely to take longer than expected.
“Primark’s sales performance in the UK and Ireland also continues to disappoint. Like-for-like sales fell by 6%, worse than competitors, meaning Primark lost market share in the period. The recent resignation of Primark’s CEO Paul Marchant due to inappropriate behaviour casts further uncertainty and raises question marks around Primark’s culture.
“There are bright spots in the results. Primark is growing well overseas, with plenty more white space to expand into. And margins in the retail business have grown impressively, demonstrating the power of Primark’s operating model. This will be vital in offsetting cost pressures from the Autumn Budget.
“Overall, there is no doubt that AB Foods faces a challenging environment. But investors will feel it could and should be doing better. The performance of the sugar business leaves a bitter taste and with cost pressures building, improving Primark’s UK sales must be an urgent priority.”
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