* Finance director says no chance of Primark spin off
* Sees H1 EPS ahead of last yr, FY EPS similar to last yr
* Sees 5 pct currency headwind in H2
* Primark H1 sales seen up 13 pct, sugar revenue well down
* Shares down 2.7 pct; up 63 pct over last yr
By James Davey
LONDON, Feb 24 Associated British Foods
has no plans to separate its high-flying Primark discount
fashion chain from its grocery and struggling sugar businesses,
despite their divergent performances and lack of overlap, the
firm said on Monday.
With double-digit percentage sales growth at Primark
contrasting with big falls in revenue from sugar, perennial
speculation of a possible break up has resurfaced among traders
and the media.
But long-serving finance chief John Bason ruled it out. "It
will not happen on my watch," he told Reuters on Monday.
"What I don't get from anybody is that Primark is any less
of a retailer because of ownership by ABF. I think if anything
Primark is the differentiated retailer because of ABF, long may
that continue," said Bason, finance director since 1999.
He said Primark had thrived being part of ABF. "There's so
much more to do, you'd be mad to change that wouldn't you?"
Bason was speaking after Associated British Foods (ABF),
whose grocery brands include Silver Spoon sugar and Twinings
tea, published a trading update for its fiscal first half ending
March 1, and kept its earnings guidance for the 2013-14 year.
Shares in the firm, which are 55 percent owned by the family
of Chief Executive George Weston, have risen 63 percent over the
last year, hitting a record high of 3,001 pence on Friday.
That has largely been thanks to Primark, the standout
performer in Britain's clothing sector in recent years with its
low prices and quick adoption of fashion trends pulling in
But ABF shares fell 2.7 percent to 2,912 pence on Monday,
giving a market capitalisation of 23.2 billion pounds ($39
billion), after the firm highlighted headwinds due to the
strength of sterling and repeated a weak outlook for sugar.
ABF said adjusted earnings per share for the first half
would be "firmly ahead" of last year's 41.9 pence, while
adjusted EPS for the full year would be similar to the 98.9
pence made in 2012-13.
The group cautioned that sterling was continuing to
strengthen against its major trading currencies and this would
have a more significant negative effect on the translation of
overseas results into sterling in the second half.
"The translation effect of the strength of sterling is quite
a headwind, about 5 percent, and even with that we're keeping
our numbers (guidance) the same," said Bason.
ABF said Primark's first-half sales were expected to be 13
percent ahead of last year on a constant currency basis, driven
by an 8 percent increase in space and a 4 percent rise in sales
at stores open over a year.
Primark's operating profit margin was forecast to be higher
than in the same period last year, benefiting from warehouse and
distribution efficiencies as well as lower freight rates.
Bason did not think shoppers would move away from Primark as
Europe emerges from a prolonged period of economic weakness.
"Primark welcomes an improving economy, we think we'll do well
in it," he said.
ABF reiterated that lower sugar prices, as the market
adjusts ahead of EU regime reform in 2017, would result in a
substantial reduction in first half and full year revenue and
profit from its sugar businesses.
ABF has also previously stated that it expects Primark's
profit will be well ahead of the previous year.
First-half revenue at ABF's grocery business, which also
makes Ryvita biscuits, is forecast to be ahead of last year at
constant currency, with improved margins.