The economic impact of governments’ actions to contain the pandemic can be seen in the financial results, the company said.
Primark owner, Associated British Foods (ABF.L), said it will return the money it borrowed from governments to take its employees on vacation as it continues to view its prospects positively with the removal of lockdown restrictions .
Nevertheless, the latest figures show that profits and sales plummeted in the first half of the financial year.
“The economic impact of government efforts to contain the pandemic was reflected in our last fiscal year financial results and this half-year results,” said Chairman Michael McLintock.
The company’s shares fell around 3% on Tuesday morning, extending losses to 4.2% in the afternoon.
ABF shares collapsed Tuesday morning. Graphic: Yahoo Finance UK
Group sales decreased 17% to £ 6.3 billion (US $ 8.8 billion) and operating profit decreased 8% to £ 320 million.
Adjusted Operating Income was 46% lower at £ 369 million as the majority of Primark stores worldwide were closed for much of the period.
CEO George Weston said, “With most Primark stores closed more than half the time, the management team showed operational agility in response to government actions to combat the pandemic.”
“Looking ahead, as stores reopen and Primark starts making money again, our confidence is reflected in our decisions to repay our job retention program funds for this fiscal year and declare an interim dividend,” he added.
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The queues in England and Wales to get to the discount store when the stores opened on April 12 were reportedly long.
“Human pythons are again snaking around the huge stores as loyal customers have queued for styles on social media for the past few weeks,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.
“It is a replay of the release of pent-up demand seen after restrictions were eased during Lockdowns 1 and 2, and why Primark was so optimistic despite the revenue gap created by the closings,” she added.
The story goes on
ABF’s food, sugar, agriculture and ingredients sales were higher on a currency-neutral basis than in the first half of last year.
Adjusted operating income for each of these food companies was well above expectations and last year, and was 30% higher overall year-over-year.
The Group’s net present value before lease liabilities was £ 705 million compared to £ 801 million a year ago.
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“The cash outflow resulting from the periods when Primark stores were closed last year was significantly offset by increased cash generation from our grocery store, targeted cost control initiatives and the non-payment of dividends for our last fiscal year.” “it said.
ABF will repay the £ 121 million it borrowed from governments, including £ 72 million from the UK government, for its vacation program and has no plans to make any further claims.
“Although uncertainty persists, a large proportion of the UK adult population has now been vaccinated. Last week we successfully reopened Primark’s UK and Welsh stores, which comprise around 40% of our total retail space. Assuming our UK and Welsh stores remain open, Primark will return to cash generation, “the company said.
But Street said, “social distancing requirements in stores and the continued closings of stores in some markets are still likely to weigh on sales. The continued cessation of international travel and office work is likely to hurt revenue in large downtown stores, depending on spending from tourists and workers’ lunch break. “
Meanwhile, ABF’s board of directors has decided to pay an interim dividend of 6.2p per share of £ 49 million. This will be paid out to the shareholders on July 9th.
Going forward, the company expects Primark’s profit to be slightly lower than last year as the repayment of cash from the job retention system is treated as an expense on adjusted operating income throughout the year.
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