Key points:
- Associated British Foods reported its final results
- The company said inflation will be the most significant challenge going forward
- ABF shares jumped over 5%
Associated British Foods (LON: ABF) shares jumped Tuesday morning on the back of its final results in which it said substantial and volatile input cost inflation will be the most significant challenge in the new financial year.
The company, which owns Primark, reported a pre-tax profit of £1.08 billion, increasing from £725 million the previous year, with the company stating that its clothing store benefitted from more normal customer behaviour following the pandemic. Group revenue for the year ended September 17 came in at £17 billion, above consensus expectations, while adjusted operating profit was £1.43 billion.
ABF shares are currently up 4.91%.
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Focusing on Primark, its total sales came in at £7.7 billion, 43% above the previous year, with the company stating that there was a significant increase in customer footfall and sales densities as markets emerged from the pandemic. Meanwhile, ABF said that Primark's UK like-for-like sales are now broadly in line with pre-pandemic levels. Adjusted operating profit margin came in at 9.8%.
The company also raised its final dividend to 29.9p per share, bringing the total dividend to 43.7p per share compared to a total dividend of 40.5p last year. In addition, ABF announced a £500 million share buyback programme.
“Looking ahead, substantial and volatile input cost inflation will be the most significant challenge in the new financial year, and our businesses will continue to seek to recover these higher costs in the most appropriate way,” commented ABF Chief Executive George Weston.
“Primark has faced significant input cost inflation and sharply moving currency exchange rates. We have decided to hold prices for the new financial year at the levels already implemented and planned and to stand by our customers, rather than set pricing against these highly volatile input costs and exchange rates.”
As a result, in the current year, the company expects significant growth in sales from pricing in food and some pricing and from space expansion at Primark. However, ABF's outlook remains unchanged, and they continue to expect adjusted operating profit and adjusted earnings per share to be below the previous financial year.