Associated British Foods has decided to spin off Primark to separate the discount fashion retailer from the rest of its food empire following an in-depth review of the group.
The demerger is expected to be finished by the end of the 2027 calendar year and will result in ABF shareholders owning stock in Primark and food as two separate listed entities, which are both expected to trade as part of the FTSE 100.
ABF announced in November it was exploring the move as its grocery and food business – which owns the likes of Twinings, Kingsmill, Jordans, Ryvita, Blue Dragon and Silver Spoon – was historically less well understood by financial markets than Primark.
Today, ABF said its board was confident in the long-term prospects of both the retail and food businesses.
Primark operated almost 500 stores across 19 global markets and generated annual revenues of £9.5bn, while the food division sells in 52 countries, has yearly sales of £9.8bn and employs more than 55,000 staff.
ABF estimated dis-synergies of less than £45m following the separation and one-off costs of about £75m.
Following the demerger, the food business will retain the Associated British Food plc name and will be run by George Weston as CEO, while Eoin Tonge will oversee Primark.
“This is an important step in the evolution of ABF,” Weston said. “For our food business, the separation will enable greater understanding of the breadth and strength of our differentiated portfolio and its long-term growth opportunities as the only FTSE 100 pureplay food producer.
“For Primark, it enables the creation of appropriate governance to maximise the future potential offered by Primark’s powerful brand, strong customer proposition and opportunities in existing and new markets.”
ABF chairman Michael McLintock added the separation better reflected Primark’s scale and the need for a better understanding of the food business.
“The opportunities ahead for both Primark and FoodCo are considerable and the board firmly believes that each will thrive as an independent entity,” he said.
Challenging first half
The announcement follows a challenging first-half financial performance for ABF as revenues fell 2% to £9.5bn in the six months to 28 February and adjusted operating profits slipped 18% year on year to £691m.
Primark was weighed down in the half by a 5.6% decline in like-for-like sales in Europe, compared with 1.3% growth in the UK. It left the retail chain with sales up just 2% for the half, mostly thanks to new store openings.
Adjusted operating profits slumped 20% in the grocery division because of challenges in the US cooking oils business, which has been hit by weak consumer demand in the country.
Adjusted operating profits declined 7% for the ingredients division on the back of soft market demand in the bakery sector in the US, while sugar made an adjusted operating loss of £27m, mainly as a result of lower average selling prices in Europe.
ABF left its full-year outlook unchanged, apart from sugar, which is now expected to make a loss.
“We knew the first half of this financial year was going to be challenging and that’s borne out in our financial results,” Weston said. “However, we still expect improved group performance in the second half.”
He added: “We are managing the impacts of the Middle East conflict. Given what we know today, we expect the cost consequences in 2026 to be manageable. However, there is a risk to Primark sales if the conflict persists and consumer spending deteriorates. Our strong balance sheet underpins the group’s resilience.”
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