Weak euro to dent Primark growth

Dublin-headquartered discount clothing retailer Primark grew revenues by 13% in the 12 months to September 12, driving growth for parent group Associated British Foods (ABF) in its latest financial year.

On a group basis, ABF yesterday reported revenues of £12.8bn (€18bn) for the year, up by 2% on a constant currency basis.

While adjusted pre-tax profits were down by 6%, at just under £1.1bn, the group managed to continue generating strong cash flows and reduce debts.

In terms of sales, ingredients (up 3%) and retail (up 13%) were the only divisions to show growth. Retail is wholly represented by Primark, which trades here as Penneys.

That division also grew operating profit by 5% in the year, to £673m.

More than half of the £613m capital expenditure for the year was spent on Primark, with more spend due in the current year.

Much went on the company’s US expansion, and its first store there will be added to by seven on the East Coast before the end of the year.

“We intend to maintain investment in expansion opportunities, most notably for Primark,” ABF chairman Charles Sinclair said.

However, he warned that “substantial moves in exchange rates”, notably the weakening of the euro and of emerging market currencies, will have a “significant influence on the results in the coming year”, particularly for the Primark/Penneys and British Sugar divisions of the group.

“At this early stage, we expect the currency pressures to lead to a modest decline in adjusted operating profit and adjusted earnings for the group for the coming year,” said Mr Sinclair.