ABF considers Primark separation

Associated British Foods (ABF) is reviewing its group structure in a move that could result in the separation of its Primark and food operations.

The company said no decision had yet been taken, but the review is aimed at “maximising long-term value” across the business.

The process is being conducted in consultation with ABF’s largest shareholder, Wittington Investments, which said it remained committed to keeping majority ownership of both the retail and food divisions.

Investment bank Rothschild and Co is advising the board on the review.

Elsewhere, ABF reported a 13% decline in adjusted operating profit to £1.7bn for the year to 13 September, as mixed trading at Primark weighed on results.

In the UK and Ireland, Primark’s total sales fell by 1%, with like-for-like sales down 3.1%. ABF said weaker sales in the first half were partly offset by stronger performance later in the year, helped by an improved womenswear range and greater digital engagement.

Across Europe, sales edged up 2% despite a 1.5% fall on a like-for-like basis. In the United States, sales climbed 20% as new store openings boosted growth.

Primark’s adjusted operating profit rose 2% to £1.1bn, reflecting cost discipline and higher margins in selected markets.

George Weston, CEO of ABF, said: “Primark’s improved UK trading in the second half was encouraging and reflects renewed focus on our value proposition, a stronger product offer and enhanced digital capabilities. We have more to do in some of Primark’s European markets and there are plans in place. Significant white space remains as Primark continues its store expansion in existing and new markets and through franchise opportunities. 

“I fully support the board’s review of the group structure and will be closely involved in the process and any outcome.”

Michael McLintock, chairman of ABF, said: “ABF has delivered good long-term returns for shareholders in its current structure and has been a supportive home for both Primark and our Food businesses. 

“Given the scale that Primark has now attained and the need for better understanding of our Food businesses, the board has been undertaking an in-depth review of the future shape of ABF to assess whether a separation of the Primark and Food businesses would be a better structure in the years ahead.” 

He added: “This review is in consultation with Wittington as ABF’s largest shareholder, and we look forward to discussing the review further with all of our stakeholders. I am leading the review and will update the market further when we are able to provide more detail.”

ABF said the board would “provide an update on the review as soon as practicable”.