Associated British Foods is pressing ahead with plans to separate Primark from its food-and-drinks operations.
The decision follows a review ABF the company first announced in November.
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Chair Michael McLintock said a demerger was the “best way to maximise long-term returns for shareholders”, adding the opportunities for both the clothing retailer and the food business were “considerable”.
ABF, home to food and drinks brands including Jordans granola and Twinings tea, said the split is intended to create “a clearer investment proposition” for each part of the company.
Shareholders in ABF, which is majority owned by the Weston family vehicle Wittington Investments, will own stock in the separately listed Primark and in the food business, which will retain the Associated British Foods name.
Wittington Investments will be the majority shareholder in both companies, ABF said.
FoodCo, which spans ABF’s grocery, ingredients, agriculture and sugar businesses, generates around £9.8bn ($13.23bn) in annual revenue and employs more than 55,000 people.
Primark has 486 stores in 19 markets, generating annual revenue of about £9.5bn and more than 83,000 employees.
George Weston, ABF’s chief executive, 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 FTSE100 pure play 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 expects the demerger to be completed before the end of the 2027 calendar year.
The group said recurring dis-synergies are expected to total less than £45m, while it forecasts one-off separation and transaction costs at around £75m.
The announcement came alongside ABF’s interim results for the 24 weeks to 28 February, which showed broadly flat group revenue of £9.47bn, a result that amounted to a 2% decline in constant-currency terms.
Adjusted operating profit fell 17% to £691m, while adjusted profit before tax declined 19% to £663m. Adjusted earnings per share were down 15% to 70.7p.
Revenue from ABF’s grocery business was flat at £2.07bn. Adjusted operating profit from the division, which also houses brands including Patak’s sauces and malt-drinks brand Ovaltine, dropped 21% to £179m.
ABF said it expects its grocery division to report annual adjusted operating profit “moderately below” last year when it brought in £478m, a result down 6% on 2024.
The company has forecast “a strong sequential improvement” in the division’s adjusted operating profit in the second half of its financial year compared to the opening six months.
ABF said this is “primarily driven by the timing of innovation and marketing in our international brands, a reduced impact from high cocoa costs and US tariffs, as well as normal seasonality in grocery and other phasing impacts”.
