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Associated British Foods PLC on Tuesday said it plans to demerge its fast-fashion retail business, Primark, as the group reported lower-than-expected half-year profit and soft trading at its Sugar business. The decision follows a strategic review, announced by the London-based food processing and clothing retailing business last November. Along with discount retailer Primark, AB Foods owns an array of food manufacturing brands including Twinings tea, Kingsmill bakery, Jordans cereals and Mazola cooking oils. The demerger decision has the backing of AB Foods’ largest shareholder, Wittington Investments Ltd, the company said. Primark has annual sales of around £9.5 billion and the food business around £9.8 billion. It is intended that both Primark and ’FoodCo’ will be listed on the London Stock Exchange and, given their scale, both are expected to be constituents of the FTSE 100 index. Following the demerger, FoodCo will retain the Associated British Foods PLC name. AB Foods estimates dis-synergies - meaning the extra running costs of the two businesses operating as separate companies - at below £45 million per year. It expects one-off separation and transaction costs in the region of £75 million from the demerger. The separation of Primark from AB Foods is expected by way of a dividend demerger and to be completed before the end of calendar 2027. It is intended that George Weston will be chief executive of FoodCo and Eoin Tonge will be chief executive of Primark. Weston is currently CEO of AB Foods, while Tonge was promoted to CEO of Primark in March, after serving as interim head of the retail business since March 2025. AB Foods Chair Michael McLintock said: ‘The opportunities ahead for both Primark and FoodCo are considerable and the board firmly believes that each will thrive as an independent entity.’ Alongside the strategic update, AB Foods said pretax profit fell 8.7% to £632 million in the 24 weeks that ended February 27 from £692 million a year prior, missing £710 million consensus cited by RBC Capital Markets. Shares in AB Foods were down 4.8% at 1,794.50 pence each in London on Tuesday, the worst performing stock in the FTSE 100, which was up 0.1%. Operating profit declined 19% to £691 million from £835 million on-year, or by 19% to £663 million from £818 million on an adjusted basis. Revenue edged down to £9.47 billion from £9.51 billion, and fell 2% at constant currency. Basic earnings per share fell 12% to 62.7 pence from 71.0p, or by 15% to 70.7p from 83.6p on an adjusted basis. The interim dividend was left unchanged at 20.7p per share. Chief Executive George Weston said: ‘We knew the first half of this financial year was going to be challenging and that’s borne out in our financial results. However, we still expect improved group performance in the second half.’ AB Foods said retail sales grew 2%, with UK like-for-like sales up 1.3%, but down 5.6% in Europe. Grocery adjusted operating profit declined 20%, primarily due to its US oils businesses, as expected. Ingredients adjusted operating profit declined 7%, due to soft market demand in bakery ingredients in the US, while Sugar posted an adjusted operating loss of £27 million, mainly as a result of lower average selling prices in Europe. Agriculture reported an adjusted operating profit of £6 million. AB Foods said its full-year outlook is unchanged, with the exception of Sugar where it now expects an adjusted operating loss in 2026 compared to projections of a small adjusted operating profit previously. The firm continues to expect group adjusted operating profit and adjusted EPS in financial 2026 to be below last year. In the 52 weeks to September 13, 2025, AB Foods reported adjusted operating profit of £1.73 billion and adjusted EPS of 174.9p. Copyright 2026 Alliance News Ltd. All Rights Reserved.
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