Associated British Foods (ABF), the parent company of Primark and Penneys, is predicting a substantial increase in full-year earnings, following a 39% increase in the first half of its financial durations. This growth has been partially attributed to a margin recovery at its clothing chain. Moreover, on Tuesday, the UK-based retail behemoth projected that the impending hike in Ireland’s corporate tax will only amplify its effective tax rate by less than 1%.
ABF, which also runs substantial sugar, grocery, agriculture, and ingredient businesses, stated that its adjusted operating profit, its principal profitability metric, amounted to £951 million (€1.1 billion) in the six months leading up to March 2nd. This was achieved with revenue of £9.73 billion, marking a 2% increase.
ABF expressed satisfaction with the company’s robust performance in the first half and anticipates delivering substantial growth in terms of profitability and cash generation, exceeding initial expectations for the financial year. Earlier, it had projected notable progress in annual earnings.
Primark’s revenue for the first half witnessed an increase of 7.5% reaching £4.5 billion, with comparable sales of 2.1% and a margin recovery of 11.3%, up from 8.3%. The firm defines its trading in the Republic during the period as “only satisfactory” due to a slow revival in consumer sentiments there.
ABF drew attention to the impact of an increase in the Republic’s corporate tax from 12.5% to 15% this year for large companies, as allowed by the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two agreement, in a note accompanying the update.
On evaluating the group’s prospective exposure to Pillar Two income taxes, ABF, the owner of Penneys, identified several tax jurisdictions where the transitional relief measure, designed to lighten the administrative load on multinational corporations during the initial years of the agreement’s implementation, is not applicable. It further noted that the most significant among these jurisdictions is Ireland, where ABF will be held accountable to pay taxes at the revised rate of 15%.
According to a recent report, the anticipated effect of Pillar 2 on ABF’s adjusted effective tax rate in 2023, as predicted by a high-level evaluation, would have been less than 1%. ABF has noted that these new regulations will come into effect during its fiscal year in 2025. The information showed that Primark Ltd, the Dublin-based firm that manages the Penneys stores in Ireland for ABF, disclosed pre-tax earnings that went beyond €394.2 million for the 12 months ending in September 2022. The firm amassed more than €3.1 billion in revenues during its latest annual account cycle. The reported tax contribution for that duration was over €52.4 million. Extra report was provided by Reuters. This information is protected by the copyright laws of Thomson Reuters 2024.