FDBusiness.com

Associated British Foods (ABF) has reported a 3% rise in group revenue to £7.6 billion at constant currency for the 24 weeks ended 29th February 2020, compared to the first half of last year. Adjusted operating profit at £682 million was 3% ahead on an IFRS 16 pro forma basis at constant currency.

However, the statutory operating profit for the first half to 29th February 2020 reduced by 35% to £349 million as a result of exceptional items of £309 million charged compared to £79 million in the corresponding period last year. Following the closure of its stores in March 2020 the level of inventory at Primark increased significantly as sales ceased immediately and the inbound supply chain continued for several weeks with goods in transit. An assessment of the carrying value of this inventory has resulted in an exceptional charge of £284 million.

ABF’s Speedibake Wakefield factory was destroyed by fire on 1 February. Following an evaluation of replacement options, ABF has announced that this factory will be closed and this has led to an exceptional charge of £25 million. As a consequence group statutory profit before tax decreased by 42% to £298 million and basic earnings per share decreased by 44% to 27.5 pence.

ABF’s Grocery business achieved strong profit and margin growth during the first half, its Sugar operation is on track to deliver a material improvement in profit for the full year and Primark profit was ahead of expectations.

In Grocery, ACH in the US performed strongly. Twinings Ovaltine launched a wide range of new products in many of its markets and benefited from last year’s investment in supply chain simplification. Further significant cost reductions were implemented at Allied Bakeries following its loss of own label volume.

Primark performed well in the first half, achieving further market share growth, measured by value, in the UK, with a good contribution from the selling space added over the last year.

George Weston (pictured), chief executive of Associated British Foods, comments: “The group delivered an encouraging trading performance in the first half. The rapid spread of COVID-19 has impacted all of our lives and the human tragedy that continues to unfold has shocked and saddened us all. We are a strong, diversified and resilient group. Our people are working hard to maintain supply from our food businesses. Primark is managing through an extraordinarily challenging period after all of its stores closed in March and our management response to mitigate the cash outflows was swift and proportionate. Although uncertainty remains, we have the people and the cash resources to meet the challenges ahead.”