AB Foods earnings fall 40% on Primark’s COVID-19 hit

Associated British Foods on Tuesday reported a 40 per cent fall in full year earnings, with a COVID-19 related hit to profit at its Primark clothing business outweighing increases at its sugar, grocery, agriculture and ingredients divisions.

The group said it made adjusted earnings per share of 81.1 pence in the year to 12 September, down from 137.5 pence reported for the 2018-19 year. The group is not paying a final dividend.

Group revenue stood at £13.9 billion, down 12 per cent from the previous year. Statutory operating profit for the year reduced to £810 million from £1.2 billion last year, driven by the reduction in adjusted operating profit and an increase in the net exceptional charges to £156 million this year from £79 million last year.

Profit at AB Foods’ grocery division, whose brands include Kingsmill bread, Twinings tea, the Ovaltine drink and Jordans cereal, rose 15 per cent to £437 million.

Primark, which does not sell online, has predicted it will lose £375 million from the latest lockdown in England due to begin on Thursday.

AB Foods, however, said it has no plans to build an online business for the fashion retailer despite it recording a 63 per cent slump in full-year profit.

Over the last decade Primark has been the fastest-growing arm of the group. But the pandemic has hit Primark hard, with the clothes retailer’s adjusted operating profit falling to £362 million from £969 million in 2018-19, reflecting the closure of its stores across Europe in a first wave of lockdowns.

Primark does not sell online because it does not consider that to be economically viable given the selling price of its products.

AB Foods chief executive George Weston said that thinking had not changed.

He said Primark had traded well since stores reopened, with £2 billion pounds to 12 September, adding that new stores were still being well received in new markets.

“I think that COVID has more demonstrated the strength of Primark than the weakness,” he told Reuters. “What we’ve seen with Primark is when people are able to shop they prefer to shop with us than do so online,” he said.

Primark still expects full year 2020-21 sales and profit to be higher than 2019-20.

(With Agencies)