Sales are proving to be sweet at Associated British Foods

By RUPERT STEINER FOR THE DAILY MAIL
Updated:

Associated British Foods weighed in with better than expected full-year sales as discount clothing chain Primark and the company's giant sugar business starred.

But the group warned the outlook for the economy remained grim and that shoppers have traded down from its premium Kingsmill loaves and Twinings brands.

Kingsmill has also come under attack from bitter rival Hovis, which has spent millions on a new advertising campaign, in the battle to dominate Britain's bread market.

abf

The white stuff: Silver Spoon has proved to be one of the company's success stories this year

Shares in the group, which also owns Silver Spoon, Ovaltine and Ryvita, fell 121/2p to 8201/2p after chief executive George Weston was guarded on the outlook for the company.

'The likely scale and speed of economic recovery remains uncertain,' he said.

'And we are cautious about the outlook for the UK consumer over the next year.'

But the powerhouse of the business, Primark, seems to have positively thrived during the recession.

There has been strong demand for its super-cheap clothing with the chain of 191 stores once again defying the rules of the retail jungle.

Underlying sales grew 7 per cent while expansion into Spain, Holland, Germany and Portugal boosted total sales, up to £2.3billion from £1.9billion.

Weston said 'better weather' and 'on trend' clothing ranges had helped Primark deliver 'exceptional' operating profit which rose from £233million to £252million.

'The business offers good quality fashion at low prices because it purchases very large volumes and has low mark-ups, minimal advertising and low overheads,' said Weston.

But the extra cost of a new distribution centre in Northamptonshirecaused profit margins to fall from 12.1 per cent to 10.9 per cent.

The retailer's results mark the end of Arthur Ryan's tenure at the helm.

Ryan stepped down as chief executive two months ago after setting the business up for ABF in 1969. He has been replaced by former chief operating officer Paul Marchant.

Figures for the group beat forecasts with a 5 per cent rise in full year earnings helped by a strong performance in its sugar business where operating profit rose from £153million to £189million.

Total revenues for the group rose 12pc to £9.3billion but pretax profits fell from £527million to £495million.

Weston said this was due to the closure of two factories in America and a hike in the cost of borrowing.

Net debt dropped from £1.15billion at the half year to £999million. The firm increased the total dividend by 4 per cent to 21p a share.

Read more on ABF by visiting thisismoney.co.uk

Most watched Money videos