AB Foods will spin off Primark into a separately listed company and retain a standalone food group to sharpen focus and improve investor clarity
The group behind Primark and a wide range of grocery brands has confirmed a major corporate restructuring: Associated British Foods will separate its value clothing chain from its food operations. Management says the move follows an in-depth review and is intended to deliver clearer strategic focus and improved returns for investors.
The split is intended to result in two independently listed companies on the FTSE 100, with the demerger targeted for completion by the end of 2027.
The two businesses involved are substantially different in model and scale. Primark operates an international retail network while the remaining group — to be known informally as FoodCo — will continue to house grocery brands.
Ownership will remain concentrated: Wittington Investments, the Weston family vehicle, intends to keep majority stakes in both companies. The group says the separation will be executed via a dividend demerger and expects shareholders to receive holdings in each listed entity.
What the demerger will change
Executives argue the split creates two businesses that can pursue tailored strategies without the constraints of a combined structure. For the food side, management believes being a stand-alone producer will enhance visibility of its brand portfolio and long-term growth opportunities. For the retail side, separate governance and capital allocation should allow Primark to accelerate investments in product, marketing and technology that support its low-price, high-volume model. The company has flagged one-off separation costs of around £75 million and expects to forgo less than £45 million of former group synergies once the split is complete.
Financial performance and recent trading trends
The update included a trading snapshot for the reporting period: adjusted pre-tax profits fell 19% to £663 million for the 24 weeks to February 28, reflecting a challenging first half. Grocery adjusted profits declined by 20%, in part because of weakness in the US oils business. By contrast, Primark delivered modest sales growth, with total revenue of about £9.5 billion cited for the retail arm and the store-opening programme adding roughly 4% to sales in the period.
Primark trading details
Primark runs 486 shops across 19 markets and employs more than 83,000 people. During the half, group revenues for the chain rose around 2%, with like-for-like sales in the UK up 1.3% as the retailer gained market share through renewed investment in its customer proposition. Performance in continental Europe was weaker: like-for-like sales declined 5.6% as consumer confidence lagged and initiatives to improve trading were still being rolled out. Management reported an encouraging spring start followed by softer trading in April, citing the impact of the Middle East conflict on consumer sentiment.
Food business snapshot
The food division comprises grocery names such as Twinings, Ryvita, Patak’s and others, with reported sales cited at roughly £9.8 billion in some filings. The business employs around 55,000 people and produces a broad range of branded food products. Management said grocery profitability should improve in the current half-year as pressures from high cocoa prices and US tariffs subside, but they remain attentive to cost risks including energy, freight and fabric that could be affected by ongoing global tensions.
Leadership, ownership and the path to separation
Governance arrangements for the split have been signalled: Michael McLintock will remain as chair until the demerger completes. Post-separation leadership is expected to include George Weston as chief executive of the food group and Eoin Tonge staying on as chief executive of Primark. Wittington Investments will retain majority stakes in both businesses, underlining continuity of control even as public minority shareholders receive shares in each newly listed company.
Execution and investor implications
Management and the board believe the separation will maximise long-term returns by enabling each company to tell a clearer operational and financial story to the market. The demerger is expected to be effected by way of a dividend demerger, subject to approvals, and both entities are anticipated to qualify for inclusion in the FTSE 100. Investors should expect a period of transition as costs of separation are incurred and previously shared functions are unbundled, but the group argues the long-term benefit is a pair of businesses better aligned to their respective markets.
