ABF hit by £284m Covid-19 inventory charge

Associated British Foods said it expected profit to be lower even after its shuttered stores reopen as the owner of Primark reported a £284m charge for goods it cannot sell in the first half.

Pretax profit for the six months to the end of February fell 41% to £298m as revenue increased 2% to £7.64bn. Exceptional costs were £309m compared with £79m a year ago as ABF wrote off £284m for goods delivered after Primark was forced to close all its stores in March.

ABF said reopening Primark's stores would be "complex" and that it was therefore unable to provide financial guidance for the current financial year.

George Weston, ABF's chief executive, said: "When we are allowed to reopen we must make our Primark stores safe for our staff and our customers, even if that means ensuring there are fewer people shopping at any one time and so accepting lower sales at least until the remaining risk is minimal."

The UK government is debating when and how it will start to lift the lockdown that shut all but essential shops in March. Deaths from Covid-19 appear to be levelling off but many analysts expect the reopening to be gradual and tricky as consumers remain wary and authorities seek to prevent a second wave of the disease.

Weston said ABF had 68,000 employees receiving furlough payments from governments across Europe. Without this government support ABF would have been forced to make most of these workers redundant, he said.

ABF has been criticised for cancelling orders from countries such as Bangladesh where factory workers rely on ABF to feed their families. Weston said ABF had taken delivery of lots of stock it cannot sell for the moment and would pay for work on Primark garments in vulnerable countries, whether completed or not.

Weston said: "We are supporting suppliers with commitments to buy garments that are as yet unfinished. But not until shops reopen and we can place new orders, will the economic hardship that Covid-19 has caused to all those in our supply chain begin to reduce."

ABF said £801m of net cash and £1.1bn of credit facilities at the end of March. It now has £1.5bn of cash on hand. The company has also been accepted for the Bank of England's commercial paper purchase programme.

"Even though this is a time of unprecedented uncertainty, the group has ample cash liquidity to deal with the likely challenges in the year ahead," the company said.