LONDON, April 21 (Bernama-PA Media/dpa) — Associated British Foods (ABF) is to spin off its Primark retail business, breaking up one of the UK’s largest consumer businesses, reported PA Media/dpa.
It came as Primark highlighted weaker trading in April as pressure from Middle East conflict weighed on consumer sentiment.
The company, which runs large food, sugar and agriculture operations, said on Tuesday it expects to separate Primark by the end of 2027.
The move comes after a significant review into the company structure in a bid to improve returns for shareholders.
Both companies are set to be listed on the FTSE 100 following the split.
Wittington Investments, the vehicle of Associated British Foods’ founding Weston family, is to keep majority stakes in both businesses.
Primark runs 486 shops across 19 markets and employs more than 83,000 workers.
The high street retail business reported annual revenues of around £9.5 billion ($12.8 billion).
ABF’s food business has around 55,000 workers and produces grocery brands including Twinings, Ryvita and Patak’s.
The food operation will keep the Associated British Foods name following the separation.
George Weston will be chief executive of the food business while Eoin Tonge will be chief executive of Primark.
Bosses said the break-up will result in around £75 million of one-off separation and transaction costs.
It added that it expects to lose out on “below £45 million” of synergies following the deal.
Weston, chief executive of ABF, said: “This is an important step in the evolution of ABF.
“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 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.”
It came as ABF reported that revenues and profits fell over a “challenging” first half of its financial year.
The group reported that adjusted pre-tax profits slid by 19 per cent to £663 million for the 24 weeks to February 28.
It said grocery adjusted profits fell by 20 per cent over the period, largely due to an impact from its US oils business.
ABF said it expects grocery profitability to improve in the current half-year due to a reduced impact from high cocoa prices and US tariffs.
Meanwhile, the group said the Primark retail business saw revenues rise 2 per cent over the past half-year, driven by store openings.
In the UK, like-for-like sales grew 1.3 per cent as Primark gained market share despite “a difficult retail environment.”
Bosses said they expect “manageable” cost impacts from the West Asia conflict on the chain due to hedging arrangements and cost mitigation.
However, the company added that “we remain alert to potential further deterioration in consumer spending and to the longer-term impacts on costs, such as energy, freight and fabric, all of which will depend on the duration of the disruption.”
–BERNAMA-PA MEDIA/dpa