Primark owner could split itself in two as profits plunge

Primark owner AB Foods could split itself into two separate businesses after a sharp fall in profits over the last year.

The group thinks the value of its food business has been overlooked by financial markets for some time, while bargain fashion retailer Primark is so big it could operate as a standalone business. 

FTSE 100-listed AB Foods told shareholders on Tuesday it would conduct a review of its group structure, which could see the separation of Primark from the food business. 

The Mail on Sunday revealed in April that the resignation of former Primark boss Paul Marchant could ultimately lead to a spin-off of the retailer.

His exit came after allegations of inappropriate behaviour towards a woman in a social environment late last year that sparked an internal investigation by ABF carried out by lawyers at Herbert Smith Freehills.

AB Foods saw profits slump 13 per cent last year, as weak consumer confidence across the UK and Europe was compounded by low sugar prices.

AB Foods thinks its food business ‘has historically been less well understood by the financial markets than Primark’

The firm posted an adjusted operating profit of around £1.7billion for the year to 13 September, reflecting a 3 per cent fall in revenues to just shy of £20.5billion. 

The clothing part of the business managed to achive growth, with adjusted operating profits up 2 per cent at Primar. But there was a slide on the grocery side of 6 per cent, with sugar sales declining 10 per cent, to deliver an adjusted operating loss of £2million.

UK like-for-like sales improved in the second half with AB Foods citing its ‘renewed… focus on Primark’s value proposition and product offer’.

But AB Foods, which owns Silver Spoon, Ovaltine and Kingsmill among its stable of food brands, warned it expects consumer confidence to remain ‘subdued’.

Boss George Weston said the most recent financial year was one of intense strategic and operational activity’ that saw ‘most’ of its operations deliver ‘robust financial results, while navigating a challenging external backdrop’.

He added; ‘Looking ahead, we are confident in the Group outlook for 2026 although much depends on the consumer environment, which is particularly unpredictable at the moment.

‘Our strong balance sheet underpins disciplined investment as we continue building brands and businesses that will deliver growth over the long term.’

AB Foods weighs split

AB Foods said its board of has been conducting a review of the group structure ‘with a view to maximising long-term value’.

The review is being conducted in consultation with ABF’s largest shareholder, Wittington Investments, which AB Foods said ‘remains committed to maintaining majority ownership of both businesses’. Rothschild & Co has also been assisting the Board with the review.

Weston said: ‘Within ABF we have two great businesses but one strong culture of long-term value creation driven by the dedication and excellence of our people.

‘Our unique and exceptional Food business has historically been less well understood by the financial markets than Primark, yet it has a highly attractive portfolio, deep global expertise and much potential.

‘Primark has an incredibly strong international brand, a powerful customer proposition, and substantial growth opportunities.’

Chairman Michael McLintock added: ‘ABF has delivered good long-term returns for shareholders in its current structure and 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.’

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