Currency swings to hit Primark owner ABF as US debut looms
Published 22/04/2015 | 02:30
Shares in Primark owner Associated British Foods (ABF) slumped more than 5pc yesterday after it warned that a weak euro would result in a bigger hit than expected to its bottom line.
The company would feel the impact during its next financial year as existing currency contracts expired, it said.
ABF noted that exchange rates between some of its major trading currencies had "changed markedly" in recent months.
"The impact on adjusted operating profit in the first half from the translation of overseas results into sterling was a loss of £11m (€15.2m) and, if current rates persist, the translation impact on full-year profits when compared with last year would be in the order of £25m (€34.7m)," it predicted.
The company also insisted that the big currency swings wouldn't affect its Primark operations and value for customers.
Chief executive George Weston said Primark's performance in the first half of the financial year had been driven by a significant expansion in selling space and "superior trading".
The currency difficulties came as ABF released first-half results that were in line with market expectations.
Group revenue rose 1pc to £6.25bn (€8.7bn), and was 3pc higher on a constant currency basis.
Adjusted operating profit was down 5pc at £474m (€659m), while pre-tax profit was 51pc lower at £213m (€296m).
Primark, which is headquartered in Dublin and trades as Penneys in Ireland, again proved to be the star performer for ABF.
Primark's revenue in the 24 weeks to February 28 rose 12pc to £2.5bn (€3.5bn), while operating profit at the unit was 8pc higher at £322m (€447.7m).
Penneys outlets in Ireland performed "very strongly", according to ABF.
The company said that several of its stores opened during the last 12 months now feature regularly in the top 20 Primark outlets based on annualised sales.
Those high-performing outlets include its store in Berlin-Alexanderplatz, Cardiff, Stuttgart and Cologne, as well as shops in Marseilles and Paris.
The group said that like-for-like sales in the period were hampered by unseasonable warm weather across northern Europe last autumn, and the impact that opening new stores in the Netherlands and Germany had on existing outlets in the region.
ABF is on track to open its first outlet in the United States later this year, having signed deals that will enable it to open a number of outlets in the north-east of the country. Its flagship store will be in Boston.
ABF has interests across a number of sectors, including groceries, sugar production and agriculture. It owns well-known brands such as Twinings, Kingsmill and Ryvita.