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Strong Primark sales help AB Foods to maintain earnings outlook

Published 23/02/2015, 07:54
© Reuters. A shopper carries Primark bags in Blackpool

LONDON (Reuters) - Associated British Foods (L:ABF) reiterated its annual earnings expectations on Monday, helped by strong demand and increased store space at its Primark discount fashion chain where half-year sales are set to rise by 16 percent.

ABF said the growth at Primark and progress at its grocery, ingredients and agriculture businesses would help to offset continued weakness in its sugar operation.

The firm said on Monday it still expected a marginal decline in adjusted earnings per share (EPS) for its 2014-15 year from the 104.1 pence made in 2013-14.

Ahead of the publication of first half to Feb. 28 results on April 21 it said underlying trading remained in line with expectations.

As previously indicated, it said adjusted operating profit for the first half was expected to be lower than last year's 497 million pounds ($764.4 million).

It said adjusted first half EPS are, however, expected to be in line with last year, largely benefiting from a lower tax rate.

The expected 16 percent sales growth at Primark on a constant currency basis was driven by an 11 percent increase in retail selling space and very high sales densities in stores opened during the last year.

It said Primark's cumulative like-for-like sales had improved since its January trading update and were now level with last year, while its operating profit margin in the period was in line with expectations, though lower than last year as a result of a higher level of mark-down.

AB Foods forecast its grocery division would deliver a first half operating profit in line with last year, while ingredients and agriculture would both show progress.

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However, as previously indicated, profitability at AB Sugar will be substantially lower, hurt by the fall in EU sugar prices and weakness in the world sugar price.

Shares in AB Foods, 55 percent owned by the Weston family and up 8 percent over the last six months, closed Friday at 3,036 pence, valuing the business at about 24 billion pounds.

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