Associated British Foods PLC (LSE:ABF) will split its business in two, confirming plans to demerge its Primark retail arm from its food operations.
Shares in the FTSE 100 group fell 4.8% to 1,795p as it reported interim results showing adjusted operating profit falling 18% to £691 million as sugar and grocery weighed on performance, with full-year earnings per share expected to be lower.
Following a strategic review launched in November, the company is aiming to complete a demerger by the end of next year, with shareholders to receive stakes in both separately listed companies.
Primark and the remaining food business, known as FoodCo, are both expected to be big enough to remain in London's blue-chip index. The split is subject to shareholder approval and will be carried out via a dividend distribution to shareholders.
The results of the review are backed by the group's largest shareholder, the founding Weston family's investment vehicle, Wittington Investments, which will retain majority ownership in both entities.
Chair Michael McLintock said the demerger would "maximise long-term returns for shareholders".
For the food business, chief executive George Weston said it would allow "greater understanding of the breadth and strength of our differentiated portfolio and its long-term growth opportunities".
For the fast fashion chain, he said it enables "the creation of appropriate governance to maximise the future potential offered by Primark's powerful brand, strong customer proposition and opportunities in existing and new markets".
Primark operates 486 stores across 19 markets and generates around £9.5 billion in annual revenue.
The food division, which owns brands ranging from Kingsmill to Jordans and Mazola and Ovaltine, operates across 521 countries and generates roughly £9.8 billion of sales.
Separation costs are expected to be about £75 million, with ongoing dis-synergies below £45 million.
Interim results
Results for the 24 weeks to 28 February showed broadly flat sales at £9.47 billion, lower than expectations, as Primark's like-for-like sales remained down 2.7% in the second quarter, with softer trading into April.
The group maintained full-year guidance, expecting a second-half recovery in Primark and grocery, but warned its sugar division will post a loss in the 2026 financial year.
Adjusted earnings per share fell 15% to 70.7p, with the interim dividend held flat at 20.7p.
Sugar's outlook was particularly cautious, with management noting "limited visibility" for the 2026/27 beet crop and "no evidence yet of a recovery".
Broker Shore Capital said it would lower its EPS forecast to circa 156p after ABF said still-weak sugar markets would weigh on earnings.
On the split, he said: "Whilst there is water to flow under the bridge, the separation is due to be complete before the end of 2027, we foresee valuation creation potential in due course."
"There is a lot to like in the prevailing and emerging ABF investment theses, with the combined group equity trading on undemanding multiples and the confirmed demerger, FY26 guidance and favourable valuation metrics leading us to retain our Hold stance on the group's equity."
** UPDATE: Adds share price, details on interim results, and broker comment **