AB Foods ups shareholder returns as profits jump 25%

(Sharecast News) - Food, ingredients and retail conglomerate Associated British Foods is returning another half a billion pounds to shareholders as it reported double-digit growth on both the top and bottom lines in the last financial year. The Primark owner also proposed a final dividend of 33.1p per share and a special dividend of 12.7p, taking the full-year payout to 60p - up 37% year-on-year.

After already executing a £500m share buyback in the past financial year, AB Foods is launching another £500m return due to the strength of the balance sheet and the underlying cash generation of the business.

Group revenues were up 16% at £19.75bn in the 12 months to 16 September, driven "in large part by pricing actions". Primark sales were up 17% at £9bn, helped by the company's decision to pass on only part of input cost increases on to customers.

As such, the adjusted operating margin in retail did drop to 8.2% from 9.8% the year before, but it expects that to return to above 10% - helped by lower material and lower freight costs going forward.

Meanwhile, group pre-tax profit rose 25% to £1.34bn, while basic earnings per share surged 51% to 134.2p.

Looking ahead, AB Foods said that inflationary pressures have eased and there is "less volatility than there was 12 months ago".

"Strong cash generation will be driven by higher profitability, lower working capital, lower levels of cash tax payable and pension contributions, partially offset by higher capital investment. We look forward to a year of meaningful progress," the company said.