Associated British Foods is reviewing the make-up of the UK group, a move that could see the company separate its Primark retail arm from its food operations.
The Tip Top bread and Jordans granola maker said today (4 November) it had been carrying out a review of its structure “with a view to maximising long-term value”.
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“Although no decision has been taken, the outcome of this review may lead to the board deciding to undertake a separation of the Primark and Food businesses,” ABF said. “This review is being conducted in consultation with ABF’s largest shareholder, Wittington Investments, which remains committed to maintaining majority ownership of both businesses.”
ABF’s food businesses include its grocery, ingredients, agriculture and sugar business units. The company’s grocery business also houses food brands such as Blue Dragon cooking sauces, Mazola cooking oil and Twinings tea.
Chief executive George 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.
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By GlobalData“Primark has an incredibly strong international brand, a powerful customer proposition, and substantial growth opportunities.”
The review was announced alongside the publication of ABF’s financial results for the year to 13 September. Revenue was down 3% at £19.46bn ($25.43bn) and 1% lower on a constant-currency basis as growth in retail was offset by falling sales from the group’s sugar business. ABF’s retail sales were up 1% at £9.5bn.
Within the company’s grocery division, ABF’s global brands saw “good sales growth”, though this was offset by the group’s Allied Bakeries arm in the UK and its US oils businesses.
In August, ABF announced a deal to acquire the Hovis bread business from UK headquartered private-equity firm Endless.
Total operating profit fell 23% to £1.5bn. Adjusted operating profit dropped 13% in actual currency and 12% in constant-currency terms to £1.7bn, attributed to lower earnings from sugar.
ABF chairman Michael McLintock added: “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.”
For the company’s 2025/2026 financial year, ABF said it expected the international brands in grocery to see “good growth in sales and profit”, helped by investment in marketing and product innovation. The company added it expected the growth to be offset by lower volumes and profit from US oils, meaning profit next year would likely stay “around the same level as 2025”.
On the outlook for ABF, Weston 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.”
In a note to clients today (4 November), Barclays analysts described ABF’s possible business split as “a positive surprise”, adding it shows the business wants to bring its foods and ingredients division “out of the shadows”.
They stressed ABF does have some bright spots in its foods business, such as in grocery, “where we have long argued that its Ovaltine/Twinings is a jewel which benchmarks well against the very best food assets around”.
The group’s UK bread, Spanish sugar and Australia grocery business “seem to have tarred the entire non-Primark businesses”, the analysts said.
Debating how management may change if the split goes ahead, the Barclays analysts said they thought CEO George Weston could be picked as the new chief for the food business, leaving space for a new chief executive to be appointed to lead Primark.
