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Primark Lifts ABF's Full Year Guidance

11 September 2017

The post-EU referendum fall in sterling will result in an £85m windfall for the group this year as around two-thirds of its operating profit is earned outside the UK.

The lower markdowns and margin mitigation mean that the business now expects the full year margin to be improved on the first half performance of 10%, which had been adversely affected by sterling's relative weakness to the United States dollar.

Associated British Foods plc (LON:ABF) (ABF.L) has released a pre close period trading update today. At actual exchange rates, sales are expected to be 20 per cent ahead.

Primark owner Associated British Foods has raised its forecast for full-year results, particularly citing a strong performance at the low-priced fashion chain and a major boost from a slump in the pound.

In the final quarter of the year Primark benefited from favourable weather, resulting in fewer markdowns and AW17 had got off to a good start, it said.

The Group said, in the next financial year, it is planning over 1.2 million sq ft of additional selling space.

A total of 30 new Primark stores have opened across nine countries during the financial year so far and AB Foods said that it expects to open 19 more over the next financial year, with most of the expansion happening in France, Germany and the UK.

Big new stores will be in Stuttgart and Munich in Germany; Toulouse and Bordeaux in France; and Antwerp in Belgium.

In a pre-close trading update, the FTSE 100-listed firm said its grocery revenues from continuing businesses are expected to be level with a year ago while adjusted operating profit is expected to be lower. Overall, it does not expect to see a material currency translation benefit next year at current rates. Likewise, Sugar's revenue and adjusted EBIT are expected to be better than last year's figure.

Capital expenditure will be higher than a year ago driven by a higher level of investment by Primark across all its countries of operation.

Some of this cash will be absorbed by the purchase of Acetum, the Italian producer of Balsamic Vinegar of Modena, whose brands include Mazzetti, Acetum and Fini, that was also announced on Monday. In the year ended December 31, 2016 the business generated net sales of EUR103 million.

The group said: "We have ambitious plans to grow these brands and the acquisition will broaden our global presence in speciality foods".

Primark Lifts ABF's Full Year Guidance