Profits rise at Penneys owner AB Foods as it beats forecasts
Associated British Foods, owner of the Primark/Penneys clothing chain, beat forecasts with a 3pc rise in first-half profits and said currency pressures that had held back its performance were starting to ease.
The group, which also has major sugar, grocery, agriculture and ingredients businesses, said on Tuesday it made an underlying operating profit of 486 million pounds in the six months to Feb. 27.
That compared with analysts' average forecast of 480 million pounds, according to Thomson Reuters data.
Group revenue fell 2 percent to 6.12 billion pounds.
AB Foods said the results reflected progress for all of its businesses despite unfavourable foreign exchange movements.
The company said the movement in exchange rates held back profit, both in the translation of overseas revenues and profits and, significantly, in the transaction effect on the margin at Primark and British Sugar.
But it said sterling had weakened recently against its major trading currencies and, if current rates were to prevail, this would give rise to a currency translation benefit in the second half.
The group highlighted further selling space expansion at Primark, which accounts for more than half of group profit.
It also pointed to cost reduction and performance improvements contributing to a better result at sugar, profits well ahead at ingredients, and improved profit margins at grocery and agriculture.
Net debt was reduced to 421 million pounds and the dividend was raised 3 percent to 10.3 pence.
Shares in AB Foods, majority owned by the family of Chief Executive George Weston, have increased by 12 percent over the last three months on a rebound in world sugar prices.
They closed at 3,347 pence on Monday, valuing the business at 26.4 billion pounds.
AB Foods said the underlying trading outlook for the group for the full 2015-16 year was unchanged. It maintained its forecast of a marginal decline in adjusted earnings per share from the 102 pence made in 2014-15