Profits leap for Primark owner after sterling fall

The Belfast branch of Primark where national sales rose by 12%
The Belfast branch of Primark where national sales rose by 12%

Primark owner Associated British Foods (ABF) has reported a strong rise in half-year profits, boosted in part by the Brexit-hit pound.

The company saw adjusted operating profits rise 36% to £652 million in the 24 weeks to March 4, while total revenue rose 19% to £7.3 billion.

Taking into account the sale of its US herbs and spices and Chinese sugar operations, pre-tax profits rocketed 92% to £867m.

ABF, which also generates revenue in Asia, Europe and the Americas, said it benefited to the tune of £51m from sterling’s collapse following last year’s referendum vote.

At Primark, total sales increased 12% at constant currency, driven by more retail space, and 22% ahead at actual exchange rates.

In the UK, the retail chain’s sales rose 7% and 2% on a like-for-like basis.

ABF also confirmed Primark’s profit margins are taking a hit from the collapse in the value of the pound, which has driven up costs for British businesses.

“The operating profit margin in the first half declined, as forecast, reflecting the strength of the US dollar on input costs.

“The full effect of sterling weakness against the US dollar on Primark’s purchases will result in a greater margin decline in the second half because our currency hedges were at more advantageous exchange rates in the first half,” ABF said.

However, it added Primark “remains committed to price leadership in clothing retail”.

Chief executive George Weston said: “The underlying growth of the group at constant currency was strong in the first half.