ABF sees £171M half-year profits boost

ABF posts sales and profit growth in its interim results

Associated British Foods (ABF) saw a £171M boost to its operating profits in its interim results posted today, boosted by its ingredients and grocery businesses.

Operating profit for the company grew 36% to £652M in the six months to March 4 this year, while its adjusted profit before tax rose 35% to £624M.

Chief executive George Weston said underlying growth of the company had been strong in the first half of the year.

He added: “We achieved a more acceptable rate of return in sugar and further good progress was made by our ingredients and grocery businesses.”

ABF achieved sales of £7.3bn for the first half of the year, 19% ahead of last year and a 7% increase at constant currency.

The first half of the year also saw ABF dispose of two business, its US herbs and spices and China cane sugar operations.

‘Generated a profit of £255M’

According to chairman Charles Sinclair: “The disposals generated a profit of £255M, with an associated tax charge of £82M, both of which are included in the group’s statutory performance measures. As a result, profit before tax was 92% higher than last year and earnings per share were 79% ahead.”

ABF’s grocery sales saw a 15% increase to £1.6bn and operating profit grew 20% to £151M. This was boosted by strong overseas sales by Twinings Ovaltine, claimed ABF.

The company also saw sales growth from Allied Bakeries – driven by new pack design for the Kingsmill brand – and Jordans achieved good growth driven by muesli and Country Crisp, and Dorset Cereals.

The company’s ingredients business saw a 53% rise in operating profit to £61M for the first half of the year. Ingredients sales also grew by 22% to £730M.

ABF said most of its ingredients activities were outside the UK and its results therefore benefitted from their translation into sterling.

Sinclair said that the UK’s decision to leave the EU was unlikely to impact the business, since it operated on a global scale.

‘Seize the opportunities and mitigate any risks’

However, he added: “We have had a dedicated team working for many months to determine the consequences of Brexit for us, and our businesses are now working to seize the opportunities and mitigate any risks.

“We are actively engaging with a number of government departments to ensure that these opportunities and risks are recognised.”

Sinclair’s outlook for the rest of the year was positive and he said that sales would continue to grow into the second half of the year.

“The growth in earnings achieved in the first half has been excellent. We expect the underlying revenue momentum in all of our businesses to continue in the second half,” he said.

“However, profit growth in the second half will, at current exchange rates, be tempered primarily by a smaller translation benefit and the full effect of the devaluation of sterling against the US dollar.”

 

ABF interim results for the 24 weeks to March 4 2017 – at a glance
  • Group revenue: £7.2bn +19%
  • Adjusted operating profit: £652M +36%
  • Adjusted profit before tax: £624M +35%
  • Adjusted earnings per share: 59.7p +30%
  • Dividend per share: 11.35p +10%
  • Gross capital investment: £416M
  • Net cash: £190M

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