Primark/Penneys Spinout: AB Foods Considering Sale
“`html
Associated British Foods Considers Primark Separation Amidst Profit Dip
Table of Contents
November 4, 2023 – Associated British foods (ABF) is evaluating a potential separation of its Primark fashion business from its food divisions, following a reported 13% decline in full-year profit.The downturn was primarily attributed to challenges within its sugar unit.
Financial Performance Overview
ABF reported an adjusted operating profit of £1.734 billion for the year ending September 13, 2023, a 13% decrease from the previous year. Group revenue also fell by 3% to £19.46 billion. While Primark experienced a 2% increase in adjusted operating profit, the grocery division saw a 6% decline, and the sugar business reached only breakeven due to low European prices.
Shares in ABF were down 2.6% at 2,210 pence this morning, though year-to-date gains still stand at 8.6% as of November 4, 2023.
| Metric | 2023 (Reported) | Change |
|---|---|---|
| Adjusted Operating Profit | £1.734 billion | -13% |
| Group Revenue | £19.46 billion | -3% |
| Primark Operating Profit | Increase of 2% | N/A |
| Grocery Operating Profit | Decrease of 6% | N/A |
| Sugar Operating Profit | Breakeven | N/A |
Potential Primark Separation
Analysts at one firm suggested that Primark has reached a size where a separation from ABF’s food businesses would be logical, noting that the food division appears undervalued. ABF operates Primark across 475 stores in 18 countries, alongside grocery brands and its sugar operations.
Future Outlook
AB Foods expressed confidence in its medium and long-term growth prospects, anticipating growth in adjusted operating profit and adjusted earnings per share (EPS) in 2026. However,the company cautioned that the consumer environment is expected to remain subdued.