(Alliance News) - Associated British Foods PLC on Tuesday raised its full-year outlook after a strong first half driven by good performances at fast-fashion retailer Primark and its food businesses.
Shares in AB Foods leapt 8.8% to 2,726.00 pence each in London on Tuesday morning.
"The group has delivered a strong first half performance and is on track to deliver significant growth in both profitability and cash generation ahead of expectations at the start of this financial year," AB Foods said in a statement.
In the 24 weeks to March 2, AB Foods reported pretax profit of GBP881 million, up 37% from GBP644 million the year prior. Basic and diluted earnings per share were 87.4p, up 30% from 67.0p.
Revenue edged up 2.3% to GBP9.73 billion from GBP9.56 billion a year before.
In response, AB Foods hiked its interim dividend by a substantial 46% to 20.7p from 14.2p.
Primark sales increased by 7.5% on a constant currency basis to GBP4.50 billion from GBP4.23 billion, AB Foods said.
Operating profit in the division jumped 46% to GBP508 million from GBP351 million. This reflected an improved profit margin of 11.3%, up from 8.3%.
Analysts at Barclays noted that margin was 60 basis points ahead of expectations.
AB Foods said retail sales were driven by good performances across most markets, due to price increases and well-received product ranges.
The company also highlighted a significant profitability improvement in its Grocery business, led by US-focused brands and a reduction of losses in Allied Bakeries.
There also was a strong profitability improvement in the Sugar division, driven by better Vivergo performance and good profit growth in Ingredients, driven by continued strong performance in AB Mauri.
As well, AB Foods reported higher profitability in Agriculture due to lower input costs.
Chief Executive George Weston called it "a very strong set of financial results", which benefited from the "restoration of some normality in our markets and in our supply chains".
"Improvements to the group's operational performance, driven by the investments and strong execution over the last few years, are now becoming visible. Group profit margins are recovering accordingly to more normal levels," he noted.
Looking ahead, AB Foods said it expects Grocery to continue to perform well, and predicted a "substantial improvement" in profitability at Sugar, benefitting from a more typical beet crop and production level at British Sugar and the reduced losses in Vivergo.
Primark is expected to continue to perform well in the second half driven by the store expansion programme and the modest levels of like-for-like growth.
"We expect a moderate improvement in adjusted operating margin in Primark in the second half compared to the first half, albeit with a step-up in investment to support medium-term growth," the firm remarked.
By Jeremy Cutler, Alliance News reporter
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