By Michael Susin
Primark owner Associated British Foods reported better-than-expected profit for the year on lower costs and lifted its dividend payout.
The stock is among the top risers on the U.K. blue chip index FTSE 100, with shares up 2.9%.
The British conglomerate on Tuesday said that adjusted pretax profit--which strips out exceptional and other one-off items--for the year ended Sept. 14 increased to 1.96 billion pounds ($2.54 billion) from 1.47 billion pounds a year ago. The figure was ahead of market expectations of 1.91 billion pounds according to estimates provided by LSEG Refinitiv.
"We delivered a substantial improvement in profitability, excellent cash generation and strong returns as a result of consistent, multi-year investment and a return to some normality in our markets and supply chains," Chief Executive George Weston said.
The group previously said it is benefiting from a margin recovery due to lower material and freight costs, which had risen in recent years due to the pandemic, the war in Ukraine and the logistic disruption in the Red Sea.
Adjusted operating profit--the company's preferred metric--rose 32% to 2.00 billion pounds, beating market expectations of 1.955 billion pounds and reflecting a robust margin recovery, it added.
Total group revenue increased to 20.07 billion pounds from 19.75 billion pounds, driven by both Primark and food businesses.
Primark business--which accounts for the lion's share of the company's earnings--reported a sharp increase in adjusted operating profit to 1.11 billion pounds from 735 million pounds, and a margin improvement to 11.7% from 8.2%. The fashion retailer's revenue grew 6% to 9.45 billion pounds.
The board declared a final dividend of 42.3 pence a share and a special dividend of 27.0 pence, bringing the total dividend to 90.0 pence a share, from 60.0 pence a year ago.
Added to that, the company launched a share buyback program of 500 million pounds, expected to be completed before the end of fiscal 2025.
Looking ahead, Primark is expected to reach mid-single digit sales growth in fiscal 2025 as it continues its store rollout program, which is aimed to contribute around 4% to 5% per year to Primark's total sales growth for the foreseeable future.
Performance for the sugar division is expected to be hit by lower sugar prices in Europe in the fourth quarter, with adjusted operating profit for the overall segment expected to be in the range of 50 million pounds to 75 million pounds. The outlook is in line with the profit warning issued in September.
Profitability is expected to recover in fiscal 2026 to be more in line with fiscal 2024, it added.
"The group is well positioned for the medium term, supported by strong cash generation and good momentum in our retail and food businesses," it added.
Write to Michael Susin at michael.susin@wsj.com
(END) Dow Jones Newswires
November 05, 2024 04:44 ET (09:44 GMT)
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