Associated British Foods (LSE:ABF) Q4 2026 Earnings Call

0:00 Good morning, thank you all for joining us either here in person particularly thank you or online. We're here to review the ABF standing results for the 52 weeks ending the 12th of September 2026 and I'm of course delighted to be joined by Joana Edwards our finance director here Chief Financial Officer, and Eoin Tonge, the Chief Executive, Primark. I am aware that this session in rehearsal went on for quite a long time, so settle down. We've got a fair amount to say, and I ask for your patience. Some of the content is, well, all the content is important, and I think interesting. Let me start by saying that this was a year of good strategic and operational progress across the group. I really mean that.

0:48 The operating environment, though, was difficult. Weak consumer sentiment and a number of sometimes significant headwinds for our businesses. Those impacts were evident in the financial results that we've published today. Our adjusted operating profit was down 14%. Primarily due to low profit in Primark but profit was also low in our food businesses due to a couple of specific reasons and I'll come on to those. Adjusted earnings per share down 11% reflecting the benefit from share buybacks. We've maintained our full year dividend in line with last year. We completed £250 million of share buybacks 2026. This is a statement, the maintenance of the dividend of two things.

1:35 Firstly, our confidence in the underlying strength of the group in the medium and the long term, both Primark and AB Foods, and also that even with maintaining the share, the dividend with lower earnings, the dividend remains well covered. This year our businesses responded well to difficult operating environment. We focused on things that were within our control and we made good progress with a number of important strategic projects across the group and there were a lot of them. There really were a lot of them. In Primark I am very pleased with the progress to re-energize our core proposition while opening up new avenues of growth, new important avenues for growth.

2:20 This time last year we set out our key strategic priorities for Primark and we're delivering against these. We've taken significant steps to lower prices, to improve price perception, to strengthen our product offer particularly in women's wear and to increase customer engagement. In two areas where we said we would unapologetically focus first, we've delivered like for like sales growth. So both in the UK, which went from minus three to positive, and then in women's wear, our largest category where we delivered like for like growth everywhere. We're now building on this as we increase our focus on Europe and in other categories. Primark still has significant white space.

3:09 And most notably in the year, our new franchise model, which has got off to a very strong start in the Middle East, even in the circumstances of that part of the world. The franchise model will open up markets beyond the Middle East and next within the Middle East. Saudi Arabia but then Mexico. Our decision to offer home delivery in Great Britain is also an attractive opportunity for future profitable growth. In foods we focused on what we can control. We had two very specific headwinds in US oils and sugar which masked good growth in a number of other areas in both grocery and ingredients. We stayed well invested in marketing and product innovation and I'll show you some of that as we go through. We made significant progress in key areas of self-help we identified in 2025 and in doing so we really have strengthened our business in a lot of different areas. We completed the acquisition of Hovis, major project both to acquire it and now the major integration exercise is well underway.

4:16 We expect to deliver significant synergies to create a profitable UK bakeries business. There are no surprises. Thank you very much. and in agriculture we're exiting our UK compound feed business which will allow us to focus more intently on higher margin growth areas. This will both improve profitability within agri but also free up capital that has been quite miserable in the returns that's generated for us. Across the group we invested another 1.2 billion in capital projects.

5:04 Majority of this will drive growth, new stores, depots, technology in Primark and new capacity, capabilities and technology in AB Foods. The large number of new products this completed either this year just gone or completing now will contribute meaningfully to future growth and deliver attractive returns and not in the distant future but quite close in now. We've made those investments while continuing to deliver strong capital returns to shareholders through both dividends and buybacks and this is underpinned by our still robust balance sheet with 1.1 times leverage. One of the most important, maybe the most important strategic decision this year was the one to de-merge Primark. We'll create two focused businesses, each with the capability, the investment capacity and the strategic flexibility to accelerate its own growth agenda. We're on track to complete that process in December 2027 and we've made good progress already to build the systems and processes to operate the business as a standalone business.

6:13 We'll also use the time leading up to the demerger to provide a greater understanding of our businesses. We'll hold two separate capital markets days in autumn of 2027. We know that AB Foods, which is how we'll refer to the food business going forward, is currently less well understood and over the next 12 months we'll tell you much more about our portfolio of businesses and brands and how the food group operates. This will include a series of four shortish investor education events during 2027 and lovely to see as many of you as like to come at those. We'll start with a deep dive on AB Foods and how we operate, followed by events from each of the three business segments that we'll have within AB Foods, so grocery, ingredients and sugar and agribusiness.

7:04 The main difference from the segments we have today is that we'll bring together sugar and agriculture. It won't change how these businesses are being managed internally, however for reporting purposes I think it makes sense to group together the commodity elements of AB Foods.

7:26 Good morning everyone. Let me take you through this year's results in more detail then. In 2026, group revenue was 19.6 billion, up 1% at actual rates, with a net benefit from foreign exchange translation of 284 million pounds. At constant currency, group revenue was 1% below last year. Primark sales grew 2% and sales in AB Foods declined 4% including disposed and closed businesses. Excluding disposed and closed businesses, AB Foods sales were down 1% as you can see from the slide. Group adjusted operating profit was 1.5 billion, a decrease of 14% at constant currency.

8:18 While this was primarily due to lower profit in Primark, profit also declined in our food businesses. There was a small impact from foreign exchange translation, a net benefit of 20 million, and the group profit was in line of our expectations. Within the results there are a number of moving parts though, so let me go through the detailed performance by segment. Starting with Primark and looking here at sales, these grew 2% to 9.8 billion. New stores contributed 5% to sales growth and Primark like for like sales declined 2.6% in a challenging consumer environment across most of our markets.

9:03 In the UK, we had a much improved performance. Like for like sales grew 0.5% compared with a 3% decline last year and we gained market share. This was despite the clothing retail market declining in the year. It is a consequence of the actions we've taken to re-energise Primark's proposition. In continental Europe, we are at an earlier stage in our commercial recovery and in the development of our capabilities in brand, marketing and digital. Sales were down 1% and like-for-like sales declined 4.7%. In the US, sales grew 13%. We made good progress with new space expansion with 14 store openings in the year. However, it was a difficult trading environment.

9:51 This was mainly due to the effect of US tariffs on consumer sentiment and footfall. FY2026 was a strong year of openings with a total 37 new stores. This includes 33 of our own stores across Europe and the US and our first four franchise stores in the Middle East. Primark's adjusted operating profit margin was 10.2%. This was below last year for two main reasons. The first was our decision to significantly increase investment across price, product, marketing and digital initiatives to drive like-for-like sales growth. And in the areas where we prioritise investment this year, the UK and women's wear, our like-for-like sales grew. We also had continued investment in technology to build capacity and scale.

10:46 The second was lower like-for-like sales of course and the associated increase in markdowns. There was a margin benefit from foreign exchange and the cost efficiency delivered across our supply chain, store operations and central costs enabled us to offset inflation. In grocery, in grocery sales grew 2% which primarily reflected the consolidation of Hovis. Excluding Hovis, our underlying sales were broadly flat. We had sales growth across a number of our international and regionally focused brands underpinned by continued investment in marketing and new product innovation. We had sales growth. Twining sales grew in the year.

11:31 However, strong growth across most of the year was then held back by the extended summer heat waves in the UK and France, which lowered hot tea consumption. Grossly adjusted operating profit was down 11%. This was primarily due to lower sales and profit in our US oils business, as George just mentioned, both our retail brand Mazzola and our joint venture Stratus, reflecting ongoing pressure on consumer spending. Ovaltine profit was impacted by higher cocoa costs and the phasing of sales in Thailand as we changed to a new distribution model. The implementation of new ERP systems drove higher depreciation costs. At the half year, I noted that US tariffs had affected profit.

12:18 A large proportion of these costs was refunded in the second half. Ingredients had an adjusted operating profit of £238 million, down 8%, in line with our expectations. In our yeast and bakery ingredients business, AB Maori, profit declined. This was mainly due to weaker consumer spending in the US, which reduced demand for our products. There was also subdued demand for our specialty yeast products for use in alcohol beverages. Most of AB Maori's other markets and categories performed well. In specialty ingredients, ABFI, the portfolio performed well overall. This included good growth across a number of our pharmaceutical products as well as in yeast extracts and enzymes for food and beverage markets.

13:09 We continue to invest in R&D, commercial capabilities and strategic capital projects to drive growth. Sugar had an adjusted operating loss of £47 million. As we guided in April, we did not offset the first half loss in the second half. In the UK, sales and profit declined significantly. This was primarily due to lower average selling prices compared to 2025, which was only partially offset by lower beet prices. Profitability was also impacted by the recognition of onerous contracts provisions. This arose from low European sugar prices, higher gas costs and lower yield expectations for the beet crop that is currently being harvested due to the hot, dry summer.

13:59 Lower yields reduced absorption on fixed costs as you probably would know. Our Spanish business as a Carrera had a reduced operating loss in 2026 as a result of our restructuring actions last year. In Africa, which is our growth market, overall profit was lower. This was primarily due to lower sales in South Africa and Eswatini and lower production in Tanzania. One thing to note is that the anticipated devaluation of the Malawian currency did not take place in 2026. We have factored currency devaluation into our 2027 figures. Agriculture adjusted operating profit was £19 million, broadly in line with last year. Our specialty business delivered good growth across specialty feed, feed additives and nutritional supplements.

14:54 Lower profit from our joint venture frontier was due to lower commodity prices, smaller crop sizes and reduced demand for crop protection products following dry spring weather. We have taken the strategic decision to exit our low margin compound feed business in the UK to focus on higher margin growth opportunities. The results of this business are now included in disposed and closed operations and not within the agriculture segment. Moving to adjusted earnings and adjusted earnings per share. Adjusted EPS was 1.56 pence, down 10.8% reflecting lower profit, but benefiting from a lower tax rate and the share buybacks.

15:39 Regarding the adjusted effective tax rate, which reduced slightly to 23.9%, These benefited from the reassessment of certain tax positions, which more than offset the negative impact from a change in the geographic profit mix. We do expect some upward pressure on the Group's effective tax rate in 2027 as we will be lapping the non-recurring benefit. Free cash flow of 652 million was in line with last year. While operating profit was lower, there was a cash flow benefit from having lower net working capital at year end. Mostly as a consequence of a reduction in inventories in Primark due to both phasing effect and specific actions to take the reduced inventory levels.

16:33 Capital expenditure of 1.2 billion was broadly in line with last year and we also completed a number of acquisitions totaling 0.2 billion. I'll share more on these investments shortly. Our balance sheet remains strong and continues to support both investment and shareholder returns. As I just noted, our overall working capital position was lower than last year, primarily due to lower inventory levels in Primark. Seasonal inventories were also well managed. Our net cash position was slightly lower, reflecting the shareholder returns made in the year, both dividends and buybacks. The value of our pension surplus continued to grow and was 1.7 billion at the year end, whilst we continue to provide a cash benefit through the abatement of employer contributions.

17:24 Turning now to cash and liquidity. Our year-end net debt position including lease liabilities was 2.8 billion compared to 2.6 billion in 2025. This reflects the net cash reduction I just explained and additional lease liabilities from properties acquired as part of the OVIS acquisition. Our leverage ratio was 1.1 times which is an increase on last year but well within our capital allocation policy. Total liquidity was 2.4 billion which includes undrawn committed facilities of 1.8 billion. This robust position underpins our continued investment in growth while maintaining resilience and flexibility. Our total investment in 2026 was 1.4 billion as I just said across the group split between 1.2 billion of capex and 0.2 billion of acquisitions.

18:18 Around 40% of our investment was in Primark, across new stores, new depots including Sheffield, increased automation, digital capabilities and new technology. The remaining 60% was in AB Foods and a large amount of this spend was to complete multi-year projects. These investments will drive growth in new markets and add capacity where we've been constrained and also add new capabilities. We also completed acquisitions including Hovis in the UK, Abe's Bagels in Australia and New Zealand and Elementis Pharma in Germany. Across ABF we've invested more than 100 million this year in technology projects including automation to drive efficiency in our supply chains and new ERP systems to strengthen efficiency and decision making in our businesses.

19:08 We expect group capex to remain at a similar level in 2027 as we make the final cash payments for projects that have now been completed in our food businesses. We expect capex in AB Foods to start to reduce in 2028. Our capital allocation approach is to return excess capital to shareholders, both through dividends and share buybacks. Our 2026 proposed total dividend is 63 pence, which is in line with last year. This reflects our confidence in the medium term and long term outlook for the group. Our dividend remains well covered. We completed our most recent share buyback programme of 250 million in August. Over the last four years, we have returned 1.9 billion to shareholders through share buybacks.

19:58 and 1.6 billion through dividends. These shareholder returns alongside our continued investment in our business demonstrates our commitment to delivering long-term value for shareholders. I'll finish on our outlook for the Group. In a challenging year ahead, the Group will continue to make significant strategic and operational progress that will serve us well when the operating environment starts to improve. However, we remain cautious on consumer sentiment and the impact of inflation and higher energy costs on our businesses. We expect group adjusted operating profit and adjusted EPS to be below 2026 mainly due to sugar as previously guided. I won't go through the full detail of the guidance by segment on this slide. I would like to point out that in grocery dough we now expect adjusted operating profit to be broadly in line with 2026.

20:53 While we expect sales growth in most brands and businesses, we expect this to be offset by higher input costs. Our grocery outlook includes a one-off impact from consolidating Hovey's losses in the first year of ownership as well. And we expect to deliver significant synergies and profit accretion in subsequent years. For the rest of our business segments, there is no change to the guidance we provided in our trading update in September. And with that, let me hand over to you, Eoin.

21:29 Thank you Joana and good morning everyone. So obviously Joana has actually just taken us through the performance of Primark in the year already. Just a quick recap to set the context. Overall growth of 2% driven by good expansion including the start of our franchise business in the Middle East. But like for like, a decline of 2.6%. However, with growth in the UK and a decline in Europe, tough overall context, it has to be said, across pretty much all of our markets, including the UK. And in that context, we're very pleased with the UK performance, which continues to consistently outperform the market. Clearly, performance in Europe was difficult. So we have more to do to win there. And I'm going to talk a good bit about that today.

22:15 So 12 months ago when I was standing here I said we're going to challenge ourselves and have to take a really hard look at our operating environment and our business and be very precise about what we're going after. And I think the key point I want to leave here today is that we're very clear on our strategy and the direction. It's about building a better Primark. Driving like for like sales growth through clear levers of value, category focus, increased brand and marketing activation and in time more localization and improved customer availability. It's about leveraging our scale to drive an omnichannel model, which obviously I'm going to talk more about today, which is new, and also to drive expansion through our store estate and our new franchise arrangements where we believe we can accelerate.

23:07 And it's all underpinned by cost discipline to enable us to invest in the proposition and to protect margin. I also ended the year with a new leadership team in place, some real world-class talent to help build a better Primark. We're on with this strategy, so let me set out what we've done in the year, what we're learning, where we are getting some wins already and how we are applying some of those wins. If I can wrap it up in a single sentence, we're going to create a stronger, simpler, more scalable business and you're going to see some of those themes as I talk through the review of last year So again, last year we talked a lot about refocusing and resetting our value proposition in the year. This is about getting Primark back to being who we are, the original and the best value disruptor in the market.

24:02 It's about getting back to our fashion roots, investing in quality that our scale enables. But most importantly, and the biggest element of this has and will always be price. And that's where we've really focused this year. We started the year with Major Finds, which was a really successful promotional vehicle for our customers, showcasing our amazing value with just killer prices for the products that we offered. And it's been a great football driver. We started in the UK and we rolled that out to our markets in Europe through the year. but then we ended the year with iconic value and this really is the major initiative to reset our value proposition and indeed our price proposition we set this out in July as we brought in autumn winter product this is about a major price investment in iconic hero lines focusing where we believe it matters most we've seen a really good response across all markets and this has been in all markets Critically it has reinforced our category leadership in core categories such as leisure and nightwear and it's also come with an overall strengthening we believe and simplifying of the range including consolidating our price points.

25:14 All of this reset now covers over a quarter of our range and it will continue through autumn winter of this year and spring summer into next year. The price leadership underpins a new investment in style and quality, including investments in fabric. Which leads me on to the work that we're doing on sharpening our product focus. Starting with women's wear, our most important and our largest category. I talked a lot about what we were doing in this category last year and it really has been a standout performer in the year. Not just strong like for like growth in the UK but beyond. For example, H2 women's clothing was up strongly in France and Spain. So what is the playbook?

26:01 Well better product starts with better insights and we do have our most comprehensive and clearest ever women's wear customer insight across our markets. We understand who our core customers are and we have much stronger certainty about where we believe the growth lies. Primark is a fashion brand at heart and so we have reset our women's wear offer to attract more fashion and style-led customers. If you've been in store, make sure you do go into store, you'll see how different this looks and feels. We've strengthened our core women's wear fashion offer bringing more elevated contemporary style to the mat. all designed to challenge the perceptions of what affordable fashion can look and feel like. We launched The Scene, which is a new collection aimed at the growing youth market. We continued a strong fashion lens into our collaborations.

26:56 We had the continued strength of our collaboration with Paola Echevarria, but we also had a new collaboration with Colleen Rumi by Colleen, which has been very strong in all markets, not just the UK and Ireland. Performancewear is another example of investment in value, quality, fabric and style. This is a deliberate category focus where we knew innovation and fabric and our scale could disrupt the category. It's been a really strong success story for us. We are now the largest seller of performancewear and athleisurewear in the UK in a relatively new category for us. To support these new strengths and lines, we have also introduced better in-store merchandising, displaying the complete looks for inspiration.

27:41 Coordinated ranges have significantly increased year on year in store. And I mention this because we see good uplifts when we showcase the full outfits together for our customers. So critically we are also applying the same focus in women's wear to our other categories where we are in truth a little further behind and we had less strong performance in the financial year just gone. Kids wear has been a big focus for us in the year. We have a huge opportunity we believe in this category. and there is a lot of change underway. We've already improved the mix and quality, invested in price, simplified the range, improved style and in some cases tackled the over-reliance on licence. We have a higher kids wear mix in our European markets so strengthening in this category is critically important for those markets.

28:33 We launched a lot of these changes just in autumn winter just now so more to report on this. And finally in menswear we're also rebuilding our style credentials in that category in a similar way to what we're doing in womenswear. Plans are at an earlier stage albeit you will see some of the changes in our autumn winter collections already. Underpinning our improved category focus is a continued step on in marketing and digital engagement across all our markets. We said this time last year we were at the foothills in this, but we have made very good headway in the year. We started and indeed invested most of our energy and money in the UK at the beginning of the year. It was there that we had our very first integrated marketing campaign.

29:20 which has delivered strong commercial results so we started off with in denim we can in last September which had strong performance which we measured with a good uplift in the Primark market share in women's denim and then we had shockingly chic in spring which was actually the launch of that elevated fashion in the core fashion offering that I spoke about and then the getaway in summer Pleasingly and quite importantly brand metrics have improved in step with these campaigns. Of course the obvious question is what are we doing outside of the UK in relation to our marketing and activation and our focus is to increase our activation in European markets.

30:07 I talked about major finds they started in the UK in the year and then we moved them all the way through to European markets in the year but in H2 we really started to step up our broader activation in Europe So we had our first funnel marketing campaign in Spain with the summer campaign that I mentioned, The Getaway. We've since continued in Spain with our Primark Form performance wear marketing campaign just at the start of this financial year which has been very positive. We launched also our first multi-channel marketing campaigns in France and Italy at the beginning of this year which were focused on autumn winter fashion. We've also started more meaningful local activation with what we call our spotlights, where we choose a partner influencer to help us curate a Primark edit to highlight and spotlight in stores and online. We started this in the UK with a fashion focused spotlight.

31:05 We've since extended these to Spain with a kids wear focused spotlight and then in recent weeks a more again a fashion focused spotlight in Italy. All of these have been successful. I think there's lots of real potential for them. Very local, very focused in the market that we are operating in. So we've a lot of focus, more to do in activation in Europe, and we'll continue to step that up this year. Which, if I think of stand back and think about Europe, I think this step up in activation, along with our investment, our iconic value investment, our category focus, in particular kids wear, gives us confidence and recovery in the European markets. And in time, these markets should benefit from more from localised ranging.

31:54 So there's a lot going on in Omnichannel to get excited about. Across our markets we continue to invest in digital engagement. Our CRM database that we are actively marketing to was up 38% year-on-year, growing both in the UK and Europe. We've continued to see very strong website traffic, particularly in the UK, which is up significantly in the year, obviously helped by Click and Collect. Our app is now live in the UK, Ireland, Italy and Iberia and overall stock tracker usage across web and app is still high across markets and we've seen higher stock checker usage on the app than the website when available. There's more opportunity here but we have seen some really good delivery and we had a full year of click and collect in the UK which has gone really well with continued strong metrics.

32:46 The last step is to go fully omnichannel. As George mentioned, we announced our Sheffield site acquisition in September to support home delivery in the UK. This is obviously a big deal and one we're very excited about. I guess there are a number of key questions that are being asked on this. Why? Why now? Can it be profitable? And of course, when? And we've done a huge amount of work on this in the last number of years. Critically, it starts with confidence around the target consumer. It is targeted on customers who shop with us, but more occasionally, generally more style led and do a lot more of their total spend online with other brands. So the first point I want to make here is that this is set up to really focus on incrementality.

33:36 And Click and Collect has given us some real confidence here. Sales through Click and Collect have been highly incremental to date and have supported the market share gains that we've had in the UK. Click and Collect through our work reaches roughly a 10km store catchment area, so home delivery clearly unlocks more. Aligned to this focus on incrementality is how we believe we can protect the basket size, obviously critical for delivering our value proposition profitably. With this type of customer, we feel we can have a minimum order sizes to protect the basket size. And basket sizes and click and collect have been good to date and also give us confidence here. And we're going to protect the economics further by passing on charges in line with the rest of the market.

34:26 Importantly, having full home delivery strengthens the effectiveness of our digital engagement and the cost of customer acquisition both for this channel and for our stores. So after years of review, we feel very confident that it's time to now target a profitable growth in this channel. Our plan is to launch in the UK by the end of the calendar year next year. Store expansion continues to be a core growth engine. We delivered 33 new owned stores in last year across Europe, the US and UK. In total, new space delivered 5% growth. Overall, we still see a lot of runway for space growth in Europe. Our market penetration in some markets is still very low and with a better and more focused proposition that I've spoken about, we feel we have plenty to go after.

35:17 In the US we substantially increased our store estate in the year with 14 new stores taking us to about 50 now. That included our Herald Square store in Manhattan which performed strongly and around which we drove a large brand awareness campaign which has really helped. As Joana mentioned, the year had a more challenging backdrop with tariff volatility and a nervous consumer. I was there a couple of weeks ago, it felt a bit more reassuring if felt conditions appeared to be settling. We are now trialling a lot of new things in the US. For example, we are testing more bespoke ranging for our stores there at the moment. Still loads of growth potential in the market.

36:03 Also see an omnichannel opportunity in the US in time. But off the back of our recent rapid expansion, we plan now to focus on the performance of our current enlarged estate. This includes the testing the new customer proposition that I've mentioned before, including the more bespoke ranging and overall drive profitability and cost optimization. And then we'll look to restart our expansion from a stronger base. Our brand has so much untapped potential globally and franchising is a capital efficient and expedient route to market and to attractive new markets. In a year we have already built a meaningful business in the Middle East now with six stores across four countries and there's so much potential still in that region.

36:50 I was in Dubai last week and the stores were performing remarkably well despite the near-term uncertainty. Next year we open our first store in Saudi Arabia that George mentioned with Al Shaya at the end of March and that opens with a lot of growth potential. We also worked hard on our second franchise arrangement during the year signing with a new partner Liverpool for Mexican market entry just before the end of the year. Mexico as a market has huge potential for us we believe and we're moving fast in this franchise space and taking together this acceleration plus to continue store expansion gives us a lot of confidence on the current four to five percent medium term expansion target. Building a better Primark is also about a stronger operating model, supporting our new growth routes, but also operating a simpler model.

37:43 We've already taken a substantial amount of costs out last year with self-checkouts and labour cost savings in stores, as well as other broader supply chain efficiencies. However, I am signaling a step up in this programme. really addressing the complexities of our operating model that our operating model faces today to get us back to be more the most efficient and simple we can be we simply can't be a value leader without being a cost leader and we see significant cost efficiency opportunity across all areas more to come in this space of course technology automation and data investment will be needed to simplify and fund growth An illustration of this are the investments we're putting into driving customer availability.

38:28 This includes a new investment in RFID technology for our ranges which will be rolling out in phases over the coming months. We see both considerable like for like and cost opportunity across all markets with that investment. This is about getting us back to being the most efficient model, simple and scalable. So thank you, all in all very clear on the direction of the business and a lot of exciting times at hand and I look forward to your questions later.

39:02 Thank you, Eoin. Before I talk through this year's performance, let me start with some wider context. As I said in my opening, ahead of next year's demerger in capital markets day, we will also offer a series of four short education sessions on AB Foods, but I look forward to explaining in more detail what's in our portfolio and how we operate. And this morning, let me give you just some edited highlights. We are a deliberately different kind of food group and I'll pick up on some of these differences. The first is the diversification of the portfolio. Food is a sector that never stands still and where consumer needs and preferences will always evolve and never faster than now. Our diversity provides both resilience and optionality for growth and our devolved operating model gives us strong local leaders close to our market and customers empowered to be agile in response to changing trends.

40:00 But there are structural trends as well, and I think we're well positioned for these. Trends such as growth in food service over decades, premiumization, health and wellness. This year alone, there are numerous examples of our product innovation driving participation in areas of structurally growing consumer demand. We are positioned where we have leading market positions and a competitive advantage. We like to be in small categories in large markets and we like to be in large categories in small markets. Industry structure is really important to us. Businesses in our portfolio play different roles. Some provide us with long duration growth, others provide us with strong cash generation, and there are some earlier stage businesses.

40:52 Again, this breadth gives us resilience and multiple routes to growth. We invest patiently behind growth opportunities where there are attractive returns and we take a long-term view. In the last two years we've invested 1.6 billion in capital projects in AB Foods and the majority of those were growth projects. We also accelerate category reach through targeted acquisitions and there were some examples of that this year as well. where necessary we should reshape businesses to improve their competitiveness, financial performance and long-term returns and I'll also talk about some of those examples this morning. We've talked in the last couple of years about a wave of investment in our food businesses, that 1.6 billion. This slide shows the key projects that have either now completed or are in the process of being commissioned this year.

41:43 I'll talk about them in more detail as I review the business segments, but what these investments have in common is they extend our capacity and capabilities in attractive markets, strengthening our competitive advantage and providing a strong platform for future growth. So having set out the broad elements of our strategy in AB Foods, let me go into performance by segment this year and starting with grocery. As Joana set out, grocery profit was down in 2026, and the main reason was the performance of our US oils business. Mazzola, which is our retail brand, faced a decline in the edible oils category in a difficult consumer environment. And it was particularly Mazzola's core Hispanic consumers that reduced their category spending, who are under pressure for reasons we understand. We've looked hard at the data, and we don't think that this is a consequence of GLP-1.

42:38 The market is smaller than it used to be but Mazzola held its position as the number one brand. We focused on affordability through promotions in smaller formats and our marketing investment maintained our share of voice in basic edible oils at around 80%. Our joint venture in oils, then, Stratus, mainly serves the food service market, and consumers reduce their spending on outer home dining. We think the slowdown in food service will reverse over time, although, again, GLP-1s may be causing part of the market shrinkage. There were also some smaller headwinds to grocery profit this year, but I would characterize these as bumps in the road. So in Ovaltine, we face significantly higher cocoa costs, which has since come down somewhat.

43:26 And then we've had a one-off impact from commissioning our new factory in Nigeria, and then a phasing impact as we tradition to a new distribution model in Thailand. as we expected performance was stronger in the second half and then in Twinings that long hot summer led to lower tea consumption in the UK and France. But there were a number of places where we had very encouraging growth in the year and I'll share a few highlights. Overall, twining sales were up this year despite the hot weather impacts in Europe. Growth was volume-led, supported by growing consumer demand for wellness products and really good innovation. Our sales of fruit and herbal teas grew double digits.

44:11 Our sparkling tea ready to drink in the UK have strong momentum growing 70% in 2026 and this year we launched them in Australia alongside a new range of cold infusion tea bags. Initial sales there in Australia have been strong and demonstrate how we build our resilience to summer heat waves. We'll continue to grow distribution and expand in new channels, in particular online. In the US, which is our largest market, twinings with the number one tea brand on Amazon for the first time, driven by sales growth of 37% in that channel. Ovaltine had continued innovation in its ready-to-eat portfolio in Brazil, which is a fast-growing market for Ovaltine. We expanded our presence in food service through a new and really important partnership with McDonald's.

45:01 McDonald's has launched the Ovaltine McFlurry, which also drives, of course, brand awareness for our retail products. Ovaltine themed milkshakes in Brazil are the biggest selling ones in that big market. Our world foods businesses delivered record profits and again innovation was very strong. Blue Dragon sales grew double digits in the UK and grew 30% in the US which is a target market for us. We also had good growth in Jordan's with innovation targeted consumers looking for more nutritious and protein based cereals and our sports nutrition business sales grew 20% this year in the fast growing hydration space. In July we completed the acquisition of Hovis and the integration with our UK bakery business began then and is now well underway. There are three significant elements to this integration.

45:58 We will deliver significant production and distribution synergies. The benefits will start to come through from the second half of 2027 and will be accretive to earnings in 2028. The second element is innovation. We're developing products for the growth sectors in bakery driven by changing consumer tastes, including shifts to healthier option and cleaner labels. Last year, Hovis launched its first sourdough loaves, which were developed using a specialist expertise from our company, AB Maori. And Hovis will shortly be launching a new Just Three loaf in Tesco's, which is bread made from three simple ingredients. And then third, we are reinvigorating the Hovis brand. It's a national treasure that's not received the investment it deserves and we have the opportunity to restore it. Our recent consumer marketing campaign is the first major brand investment since 2008.

46:56 Let me show you the recent TV ad. If these walls could talk, they'd say there's strength in all of us. Excuse me. Alright, I'll meet you there. Ovis, strength baked in.

47:33 We've seen an immediate sales uplift following the airing of that ad. Hovis is a brand that's rooted in heritage, it's rooted in health, it's rooted in community and we really do love it. Within grocery then, several multi-year capital projects have either been completed this year or are very close to completion. So investments in twinings both in Poland and in the UK have increased capacity and also give us some optionality and resilience we can pack for different markets in both factories. Ovaltine's new production site in Nigeria is up and running. It supports our growth ambitions in both the domestic, very large Nigerian market and the export markets in West Africa.

48:26 It enables us to operate much more cost effectively and four times quicker than before. The chocolate beverage category in Nigeria has 95% household penetration. So our products are a consumer staple in a country with 220 million people and where 7 million babies are born every year. Ovaltine is really really well placed to supply this growing market. New capacity for Blue Dragon supports international expansion. The new bakery, and that's in Poland, the new bakery line for Tip Top in Western Australia adds capacity and also efficiency in a market where we are really the only scale baker. Then onto ingredients. As a reminder, Maori is a business with large-scale yeast production and a portfolio of specialised bakery ingredients.

49:18 It combines its strong innovation capabilities, and they're very good, with its established routes to market, and both those are combined to drive growth. This year we continue to expand production in attractive markets with structural growth. Our new fresh yeast plant in India will meet fast-growing demand for bakery products. The market is growing at about 6% a year as diets shift from rice to wheat-based foods. That's another one of these global trends. With strong population growth and bread consumption per capita still low, there's significant headroom for future growth. We've finally got the capacity we need to play significantly in that market. In Australia, we completed our new flour mill outside Melbourne. This cements our position in the southeast of Australia where demand for flour continues to grow with population. It also allows us to close two existing sites, greatly reducing our fixed overhead costs and driving efficiency.

50:18 But as Joana set out, it was a tougher year for our bakery ingredients business in the US, where there was weaker demand. We do believe that some of this is the impact of GLP-1s. And on top of that, in specialty yeast, there was subdued demand in the alcohol beverage sector, resulting in lower production and destocking. I may have said it in the past, but we provide a majority of the We expect both of these markets to stabilize, possibly at lower levels than at peak. Our portfolio of specialty ingredients business then, the other part of our ingredients portfolio, ABFI, performed well this year with both volume and profit growth.

51:09 We focus on three growth markets, food and beverage, health and nutrition, and pharmaceuticals, which are both actives and also excipients. In this year, in all our target markets, we focused on increasing sales coverage, adding technical capability to strengthen our technology platforms and accelerating innovation. We also enhanced a number of capabilities within the business to support the next phase of growth. For example, the new customer fulfillment center in our enzyme factory in Finland. Acquisitions are another key element of our growth strategy, hence the acquisition of Elementis Pharma this year. That strengthens our position in the growing digestive health market, particularly antacids, milk and magnesia.

52:03 Demand is growing strongly. for those people from those people who have tummy aches as a consequence of their GLP-1 habit I do believe there's a lot more to come from our specialty ingredients businesses in the future On to sugar then. And this first slide is a reminder that we have two very distinct sugar businesses. Africa is a long-term growth opportunity. We continue to grow sales of our leading retail brands. The businesses are supported by favorable demographics and opportunities for continuous improvement in our commercial, our operational, and our agricultural performances. And in all those three areas, we did well this year.

52:48 And the opportunity in Africa is not just sugar, although we have to be disciplined. It's also in co-products such as ethanol and electricity. Across in Europe, we own our UK and Spanish sugar businesses for their cash generation on average. in the UK where the market leader with a structural cost advantage our assets are well invested so that capex is really only spent on high returning projects particularly those to reduce energy costs and there's a big project that's commissioning now at Wissington to reduce gas use. Last year we restructured our Spanish operations to focus on back-to-back refining contracts, so where we've only got one factory left in Spain which is processing beet, the rest of the operation is a refining business.

53:41 This year we're underway with the restructuring of our UK footprint to go from four factories down to three. This will take out significant cost and increase the utilization of the other three remaining factories. Both of these actions will ensure we're well placed when the market turns. But for now, the environment in Europe does continue to be challenging. As Joana explained, losses in European sugar this year were because of lower average sugar prices and because we recognized large onerous contract provisions at year end. Looking ahead in Europe, there are early signs of recovery in European sugar prices and there are reasons that these signs should continue to be evident. European sugar production for the current campaign is estimated to be down significantly, more than 20%, and higher world sugar prices make it less likely that imports will fill the gap in domestic supply cheaply.

54:40 In 2027, our results won't really benefit from the high European sugar prices because this year's customer contracting is nearly complete, at least in the UK. In Spain, there may be more of an opportunity because there's a bigger spot market in the Spanish market. and in 27 of course we have ongoing exposure in the UK in particular to really high gas prices. We should see higher sugar prices in future years, we really believe we're going to see those and gas prices will eventually come down. In Africa, there were short-term disruptions to performance this year. In South Africa, where we had a strike and some problems with import tariffs. And then in Tanzania, again, that was rain-related at the beginning of the season. Joana highlighted that too.

55:34 But we made good progress in Tanzania, and this is really the important bit, with the commissioning of the new sugar mill. It's a very large, very complex project. It doubles our existing capacity and allows us to meet fast-growing demand in a market where everything we sell is branded and premium. As I said earlier, co-products are another growth opportunity and we have invested in some important projects. Again in Tanzania we've built a new distillery to take all the molasses from the new sugar factory and turn it into potable alcohol and that is now complete and beginning to sell potable alcohol. Then in Iswatini we have an ongoing project which will allow us to sell significant quantities of electricity generated from bagasse into the national grid and that's on the basis of a long term contract.

56:30 Agriculture then. Our focus within agriculture is on higher value specialty businesses like Premier Nutrition, which is pictured here, which grew very nicely last year. It's got a very good recent track record. We took the decision in the year to exit UK compound feed business. This will improve profitability and free up, as I mentioned before, low returning capital. We've already sold two of the mills. We'll finalise the future of the remainder in, I think, the first half of 2027. and going forward this leaves us with an attractive portfolio of value-added products and services particularly the enzyme business, the phytase enzyme business which is a nice global value-added business.

57:18 We see good growth potential in our specialty animal nutrition businesses more generally. We've also begun building a presence in pet care in this country and in dairy we continue to develop our full service offering for dairy farmers, Astera, that's going well. Thank you for your patience so far, just a summary. Looking ahead, I said at the outset we remain focused on what we can control. Across the group, there are some headwinds which, quite frankly, we can't control. We'll continue to deliver operational improvements and strategic projects that will deliver growth. Primark will continue to strengthen its value proposition and execute on new avenues for growth. AB Foods will continue to drive growth from strongly managed brands and businesses. There'll be tailwinds from the integration of UK bakeries.

58:12 There'll be improved profitability from European sugar and a focus on higher value added areas in agriculture. Our capital projects including stores and depots in Primark and capacity and capabilities in AB Foods will contribute meaningfully to growth over many years. and delivering the demerger in December 2027 will support long-term value creation as well. So taken together we have good reason to be confident in the medium long-term outlook for Primark and AB Foods and with that let me hand over to you for your interrogation. Thank you.

59:07 Thank you, it's John Stevenson at Peel Hunt. New to Primark, so I've got a couple of questions on Primark if that's okay. I know you get probably too many questions on Primark. Interesting on the iconic value launch into autumn winter, is the implication here stronger Q4 and a good build into the new year? and then the second question just on the the economics of home delivery and how it stacks up again sort of new to the business so interested in how you think about typical basket size number of items and product discovery in store and how do you replicate that online what do where do you need to set that online delivery and what are you planning for returns rates

59:46 I think this is a good question to pass over to my friend on my left.

59:52 Yeah look I think yeah we've got good momentum with the iconic value investments and as I said before it is across all our markets it's not just a UK specific trend I think so yeah we do have Good cautious confidence around what that will mean for momentum. We shouldn't underestimate that the world is still a little bit of a complicated place out there but I think that investment really should stand us in very good stead into this Q4 and beyond. On the home delivery Omni profitability, well I think look some of it's what I said earlier you know I think we've seen in the click and collect that the basket sizes are you know well ahead of store basket sizes on average right so obviously we get a broader church into our stores so you know so but we have we've seen that and with who we believe we're going after here we believe we can target higher than even the click and collect basket sizes so we're looking for higher than the basket sizes that we've had in click and collect and the rest of the economics stack up the way I described.

1:01:09 We aim to get good basket sizes, aim to get incrementality, aim to get good efficiencies through marketing and customer acquisition that will also help the stores and then pass on charges. If I take a summary of that, maybe what you're asking here is, I don't see a reason why this should not be materially dilutive to group operating margin once we get to a steady state. So that's the way we're setting this up and that's important.

1:01:46 Fantastic. Is there a number yet in terms of that sort of minimum basket size?

1:01:50 No, no, no. And, you know, to be honest with you, I think we've given quite a lot away in terms of what the proposition is. I don't think we want to be given more away at this point in time. You know, we think it's going to be great. A lot of people asking for it, a lot of people excited about it. And, you know, I think it's I think it's going to I think it's going to go well. But, you know, we also want to leave a little bit behind for the customer when we when we launch it.

1:02:19 Warwick O'Kines, BNP Paribas. I've got two on Primark as well actually please Eoin. I think earlier a few months ago you said that you were buying for like for like growth in 27 but with the pretty warm start to autumn winter how confident are you that you've got tight enough inventories to win back the markdown that you lost last year? and secondly just following on from John's question on iconic value what decline in ASPs you're expecting in 27 from your price investments?

1:02:55 You are right that our financial year didn't start off great. The back end of September was fantastic for everything except selling clothes with the unseasonable warmth in the UK and all other markets. So we've got a bit of recovery to do on that, but I think we've got good momentum. Not particularly anxious about inventories, as you will have seen in Joana's presentation, our inventory level going into this year. The year is good, it's strong and it's tight. We feel pretty good. So feel pretty good about markdown levels and so on. A bit to recover from the gap of the last couple of years but as I said to the previous question, decent momentum.

1:03:50 So we'll have to see how the next few, obviously quite important weeks develop but at the moment it feels alright. The decline in ASP in the year I'm just trying to think what the decline in ASP is the year across the whole thing is a couple of percent or so roughly across the whole group

1:04:19 Richard Chamberlain Richard Chamberlain Richard Chamberlain Richard Chamberlain Paul Andrew Lister, Lynne Walker How do you see that evolving over the medium term? I guess it's a bit hard to say, but should we think that now as more sort of mid to upper range of where it's likely to be in your mind? And then George, on the US cooking oils, it sounds like you see that as a sort of cyclical development at the moment. Is that right? And it's just taking time for pressure on customers to ease?

1:05:16 I think you mentioned the other Softer parts of grocery were more sort of temporary in nature, but cooking oils might, the duration of that downturn might last a little bit longer, is that right?

1:05:28 I think, sorry, I think Mazzola is more cyclical, if that's the right word, as our consumer products finds a way to more income and maybe with some of the quite frankly just fear of the current administration works through, I think that business will come back. What you're seeing at the moment is people still buying into Missoula but they're using it more often and they're also not entertaining with their friends which are opportunities, which are occasions when quite a lot of cooking oil gets used. It feels like those two things will go away.

1:06:13 We don't see that community as buying into GLP-1s in any significant way. So no reason to think that we won't see a rebound there. I think in food service, I think there may be a little bit more of a structural shift. So I think there are two different things. There is declining disposable income. reducing food service volume particularly at the fast food end and that will come back and then i think there's a glp-1 effect call it five ten percent i don't think that will come back

1:06:47 I'll cover the hedge and operating margin. So in terms of hedging AFX for the year as you know we're right into the year so the hedging for this year is pretty much covered. I know you've expressed some concerns around the euro dollar and there will be some turbulence in the coming months but we're pretty much hedged for the year. on the margin and the guidance has stayed at around the 10% 10.2% for FY26 that feels right but as we said it before it's about like-for-like growth so we're not going to be medium long-term what's the right margin there's a lot of growth opportunities all the investment that is going through should be driving that like-for-like and with like-for-like we'll see the leverage coming through as well so not guiding medium long term but feel confident with the margins as they are.

1:07:43 Yeah I mean exactly that's what I would say we're not giving a number for medium to longer term but you know everything that we talked about here driving growth taking costs out but at the same time continue to invest in the proposition you know like obviously that's looking to try and improve the business. I'm not sure this is working actually, we can hear you www.youtube.com

1:09:13 It's not really to do with the demerger but we do want to go into separation with two well-financed businesses both with strong balance sheets so maybe there's a little bit of something there. It's much more to do with just you know we have a policy that when we have surplus capital by our definition will return us and we're not really in that place.

1:09:35 One and a half is the upper end. We say if we're between one and one and a half, then we don't necessarily consider we have surplus cash. And we've returned a lot. We've returned 1.9 billion already. And I think it's hard when you return year on year. The expectation is you'll continue. But we're very clear this is not about every year we return. It's if we feel we have surplus cash, as you say.

1:09:58 Midterms, it's harder to see the transmission mechanism that gets from Democrats taking at least one house maybe two in in Congress through to increase confidence in the Hispanic population and increased disposable income. I think the most likely one is resolution of The Gulf, the Straits of Hormuz blockage leading to gas prices coming down and diesel prices coming down. That will feed through to a population who, like everyone else in the States, spends a fair chunk of money on transport.

1:10:48 Maybe I'll describe the Sheffield, maybe I'll hand over to Joana on what that means for guidance but it is a highly automated facility and it's active at the moment actually so when we take it over there's not a huge amount to do for us to There's a bit of work for us to do, to put our systems in and so on, but it's not like it's a significant piece of work. So there will be some dual running costs and obviously we need to scale the facility up. So we'd expect to be taking control of the facility sometime in the middle of next year, basically.

1:11:37 and there will be some one-off costs that we will have they are included in the guidance you probably would have noticed that the majority of the actual cash related to Sheffield was taken in FY26 we took it just before the year end about 75 million so it's included in the guidance and it's not very material and the majority of the cash is best money in FY26 Monique okay yeah Matt Matt

1:12:08 Hi, Matt Clemens from Barclays. Maybe one for George to start off with. Capital investment cycle, we've heard a lot today about capacity additions and then we just heard that the timing of the DC spend was in this year, but then CapEx guidance for next year is to be flat. How do we think about kind of multi-year capital investment cycles? Do we expect CapEx to moderate year after next?

1:12:26 Yeah, so CapEx is... is flat in 27, the year we're in, really more to do with the final payments for projects which are now essentially complete than payments for work that is just starting. There will still be some projects to complete in following years, but it'll be lower. There's more to do in Australia. the Eswatini project will run over into 28 and Zambia payments will run into 28 but the actual facility will be finished in 27 so yeah it'll come down okay thank you and then two questions on Primark if that's okay first one on the decision to kind of pause expansion in the US just kind of why now is the right time kind of what's changed in your year of

1:13:28 The second question on any near-term assumptions or impact you've seen around social unrest in some of your key European markets.

1:13:42 I think two main things about how we're thinking about the US. One is we actually just have gone through a significant growth phase and So I think, you know, kind of consolidating when you go through those phases of there's always a bit of it makes sense. I think the second thing, which is probably the more important thing, is we've done an awful lot of work. I talked about this last year, but we've done an awful lot of work in terms of how we think we can win in the US. and I think we've got to give that a go properly with the new enlarged store estate so we have a much better sense of who the target consumer is we as I said in the presentation we've done a good bit of rearranging in our stores aligned to that target consumer Price is at the moment, although I did say things have calmed down, the US has gone through almost turmoil, I would say, on tariffs, right?

1:14:34 It's massive disruption across the marketplace in terms of what tariffs have done to prices and sort of that calming down. So I think we really have to give our proposition a good go with a meaningful store estate that we have now, 50 stores. But as I said before, I think sort of the medium term, The vision for the US is still strong. I do think it would help with an omnichannel support along the lines of what I described for the UK. It's the same principles in that it helps with your cost of customer acquisition. Social unrest in Europe is concerning.

1:15:19 We've had a few incidents with our stores. Thankfully too bad but no one's immune unfortunately to a riot. So obviously the usual thing you would expect me to say is we're focusing on protecting our people and so on when those situations happen. A little bit unfortunately where it's all a little bit too common in some of the countries that we find ourselves defending. We have had some disruption. I can't get away from that. So we'll just have to see how the next few weeks develop over the next period of time.

1:16:09 Thank you Sridhar, I'm Kali from UBS. Just a couple of follow-ups to Matt's questions please and then a separate one. On CapEx, a helpful commentary on AB Foods into 28, can you just give us an idea how we should think about Primark into 28 and perhaps beyond? Eoin, I think you're still reiterating 45% space growth despite a bit of a pause in the US. So which markets are going to pick up the slack? If that was there, if you could talk through. and then on food, Allied Bakeries and Harvest I understand how you're excited about the Harvest business but if you could talk through a little bit about milestones your ambition was to become a profitable bakery business combined The kind of milestones and time taken to get there.

1:17:02 Thank you.

1:17:06 So I think it's a good question on the CapEx for 2028. I don't want to be too descriptive, but just going to give some themes, I would say, and it kind of relates a little bit to the second question, actually, which is if we see a little bit more of a shift to franchise Thank you for joining us. but I'll come back to your second question specifically and we've also we're probably coming through we've had a fair bow wave I would say of investment in depots so and there's still some this year you know obviously we've talked about Sheffield although some of that was last year as I say we've still got to do some this year to get it up and running we're completing our depot in Italy this year as well but we've have kind of come towards the end of some of the automation spend so I think you know if I kind of take those two big themes I think we're you know it's more it's more sort of tipped to to less capex in in the kind of FY28 FY29 I do think we'll have a step up in technology spend now technology spend tends to be in but more in opex than it is in capex so but I do think we'll have a step up there On the countries, yeah look outside of franchise I think is probably where your question is because I think

1:18:39 the franchise sort of expansion is a bit more clearer I think maybe I think we still got good opportunities in our southern European markets so you know we're still opening good stores in Spain and Portugal and in Italy and in France we've got quite a lot of white space in Central and Eastern Europe we've had particularly good expansion in Poland and Saudi Arabia in the year just gone so we still see quite sorry did I say Saudi Arabia? Poland and Romania so I think that's the general shape of where I still think there's quite a lot of areas to grow Hello

1:19:31 there's a big date sometime around Easter where we turn two water systems into one two routes into one and we end up with a bakery network to supply those which is a single bakery network that's the date we're aiming towards so it'll be the second half at that point we start to to make savings. But yeah, it's another four or five months worth of work.

1:20:11 Jeff, then Clive.

1:20:13 Jeff, then Clive. Sorry. Thank you. Slightly big picture question. Sorry, Jeff Lowry, Rothschild & Co. Redburn. Slightly big question big picture question on the theme of capital deployment and the 1.6 billion in sort of really big projects trying to think through what that means for future revenue capacity and particularly operational gearing as you start to fill it up just very aware of the gap between sort of time gap between capital in the ground and return on that capital and then second on on the Primark side Can you just help us understand where you're having those successes? What is it? Is it an extra unit in the basket? Is it better conversion of footfall? Is it more footfall and a slightly naughty one when you're physically investing in price?

1:21:01 What's happening to the absolute gross profit? I appreciate it's just a subset of your business at the moment, but keen to really understand the elasticities. Thank you.

1:21:13 OK, we will start to see revenue and profit benefits from the investments back half of this year and into next year. And I think we've probably given ourselves capacity for about, in most cases, three years worth of growth or more. In some places, we've simply put down a starting point. So will we add more band dryers in Nigeria as we grow our business there? Yeah, almost certainly. The sugar factory in Tanzania will be full straight away. The ethanol plant will be full over a couple of years. Western Australia is built with lots of capacity to come.

1:22:01 So it's reasonably quick. India I think will fill up within about three years, but again this is just the first capacity on a site that's built for expansion. so it's a combination of returns to these projects which I think are two and three years out and when we sign these off we do we sign them on a kind of three-year return basis but in a number of places they are kind of points of entry with with more to come behind yeah and then

1:22:40 yeah I mean I think we've had more successes with visits and transactions than we have with conversion I think there's still more to do in conversion so a lot if you think of a lot of the activities we've had improving our style credentials in women's wear or indeed marketing it sort of has drawn more people into the store so that's that's possibly you know the more obvious I think we've got probably you know as I say I think we've still got a little bit more to do on conversion and you know some of the merchandising we're doing in stores at the moment I think we'll go to we'll speak to that but I think most of the wins have been in transactions rather than conversion, sorry then items and basket.

1:23:27 I think on your second question gross profit like look you know obviously we don't we've got to be quite We're very careful in terms of how we invest. We do target a certain level of volume uplift which goes to cover the price investment. We've seen pretty good elasticity in those regards actually on the iconic value.

1:23:56 Just on the what we've seen with lower prices, we're fighting an environment where basket sizes are down I suspect everywhere so quite where the return is coming from we know that the volume uplifts on the discounted products are really good but we've seen footfall fine basket sizes down that's just the environment we're in I think so until we get through this consumer squeeze I think it'll be harder to answer your question properly Clive, sorry.

1:24:32 Yeah, thank you. One for you George and then one for Eoin maybe. Firstly, you mentioned diet suppressant drugs several times through your presentation today. and in addition to oils and sugar you've got a bakery and bakery ingredients business so to what extent is that a headwind for your returns going forward in terms of the sunk investment you've made and to what extent does it influence your ongoing M&A because medium-term Rona and returns are You both talked about consumer headwinds.

1:25:18 You talked about consumer insights. What are going to be the big themes in apparel to the end of this decade? Is it just continual bumps in the roads or do you actually have some proper walls to run through? And then just lastly, we've had a quarter of a century of returns data in online apparel. How do you feel about that? Because that tends to make a bit of a difference. Yeah.

1:25:48 I think GLP ones are as much as an opportunity as they are a threat I think both in ingredients but also in the better bits of grocery we're always looking for change you know commoditization is our enemy and we've got big chunk of population now looking to eat different things in different ways and it's really down to us and our branded businesses in particular to find solutions to new need states. We're doing a very good job in tea. Interesting communication challenge about whether you tell people in different markets what the herbal mixture is actually about or whether you just assume that they know it.

1:26:34 In the UK, for example, people don't like being told that they're on a GLP-1 diet. In the States, they're absolutely fine. They boast about it. So we've got the opportunity for innovation. It's true in ingredients, too, where health and wellness again requires kind of changes in fashion changes in theory about how we how we're going to live forever and in particular we're looking for things to make our glp-1 journey easier We're looking for more protein and more fiber. But we are selling a ton more milk of magnesia because it works really well in settling down tummies which aren't feeling great because GLP-1.

1:27:23 I think it's an opportunity in a market where we don't have population growth in many places we don't have income growth in lots of places we need these changes so you either sit there and go it's a bit of a bugger if you're selling sugar into soft drinks or you can say hey Our job is to delight the consumer. Let's go do that instead. But there are parts of ABF, farm milling in Australia will be down a bit, but there's population growth, so that's fine. I think UK sugar is more affected at the moment by people exporting food manufacturing to Europe, probably on the back of high energy costs than it is any dietary shift.

1:28:18 oils in food service in the states I've talked about but you know yeah there are some places where life has got harder but there are some where just a wall of opportunities been opened up

1:28:32 Well, I'll have a go at some sort of visionary answer to your first question. I mean, look, as you know, sort of fashion trends sort of move pretty fast. I mean, there's some trends that I think are kind of, you know, are going to stay. I mean, the less formal, you know, more informal dressing is, I think, is becoming more. I mean, this is the most formal setting I've been in for a long time. and I think you know people are much more comfortable dressing in different ways in different settings and I don't think that's going to sort of change and I think sort of the youth dynamics of that is it will only just kind of keep driving that so I think that said you know athleisure is another kind of trend that I think is only going to get bigger and bigger you know and it kind of sort of merges a little bit into I think the years of what people used to call fast fashion are sort of over to a certain extent and I think you know you're I think consumers demand more.

1:30:00 True value operators like ourselves are just not fast fashion. I think that continues. I think omnichannel truly is omnichannel. People are looking for both an online and store experience and I think that will continue. So they would be the the things that I think about that. Clearly the whole AI world is going to disrupt marketing and customer engagement so you know a lot of people do their searching through through the more traditional search engines. So that obviously changes the whole way we're going to be starting to engage with customers and that's only going to keep on developing.

1:30:47 We all know that as well. which is good for us to a certain extent because in some ways we've kind of come late to the party so we can some ways you know hopefully kind of bypass a little bit of the more traditional routes to market. The returns, look returns is a fact of life you know By the way, I think the other theme is going to be of circularity. I do believe circularity is going to become more and more important than just what people purely call sustainability, but that's my very personal view. and just on returns you know I think look it's a fact of life in terms of when you do when you do home delivery I think the world is becoming a little bit more sensible in that space right in terms of you know trying to discourage people from Overbuying and then over returning and so I think you'll see you've seen that with a lot of retailers in the space But obviously we have to factor it into the whole operation everything I spoke about earlier

1:32:02 Hi, it's Anubhav Malhotra from Panmure Librem. I have a couple if you don't mind. Firstly on the sugar business, the nature of the business, I mean, you book your selling prices early and the costs come later and you fix them later. And that's probably part of the reason why you have had to book on risk provisions in there. is there any way that can be fixed and your approach to two year contracts, have you changed that approach given the world is a lot more volatile place in terms of the outlook for cost going forward and then secondly on Primark on the buying margins is part of the reduction in average prices being funded by buying margin and how much of it is being funded by buying margin if you can give us an example there and what are you seeing going forward in terms of cost inflation coming through in factory gate prices?

1:32:51 Thank you.

1:32:53 You ask a very good question about the timing differences between particularly when we contract for sugar beet and when we sell that sugar beet. We take all the risk of price movement through that period. Now Two-year contracts, multi-year contracts, we do more of them than we did in an attempt to even out some of the risk profile we've got. Quite frankly, I wish we could do more of that than we can at the moment. I also wish in the UK Thank you very much. some more optionality than what we largely have at the moment is we have a fixed cost of beat and we have a fairly fixed selling price for most of what we sell but a year on that's that's the dislocated bit gas there are different ways of covering gas gas never used to move around so much but we now We will now cover gas as an element in a contract when we sign the contract.

1:34:17 So that takes some of the risk out of it. But yeah, we take, in British Sugar in particular, I think we take more of the commercial risk than either the farmer, supplier or the customer. yeah trying to build more contracts in which are linked maybe to world sugar prices more contracts which cover more years and maybe some upside and downside more upside downside sharing with the farmers so low sugar beat price but with added benefit if the prices move We do some of it in all those areas.

1:35:07 It would be nice to be able to do more.

1:35:11 But there has been quite a bit of progress.

1:35:12 Yeah. I mean, we really haven't been sitting there. I talked about self-help in the area where we could help ourselves in sugar. That has been one example. So the new sugar contract has a lot more risk-carrying in it than the old ones.

1:35:37 I think some of it was funded by margin. I think there's always opportunity for more of it to be funded by margin but we would have worked specifically on certain lines in that regard. So that's probably the best way to describe that answer. I think factory grade prices obviously did increase, you know, with in this sort of, you know, really since the beginning of the war, there's been pressure on underlying fabric costs, etc. and so on. So we've had to kind of navigate through that as well.

1:36:17 I think it's well worth emphasizing, though, that we believe that there is a lot of cost to be released from the Primark supply chain both the bits that we control and also the effectiveness of our buying so we don't have to make a decision is it margin or is it sales volume what we're trying to do is to drive price through cost release there's also a lot of waste in the system Thank you for watching. and it's also waste in having to take summer product off the shelves across the whole of Spain on a single date rather than keeping the Mediterranean stores with summer ranges for another three or four weeks.

1:37:29 There's so much opportunity, as Eoin said, to simplify the business, to reduce the cost of the business and to use that to drive like for like through price. We have a question from the phone lines. Please stand by. Your question comes from Cedric Norvath from Morgan Stanley. Please go ahead.

1:37:53 Hi, good morning everyone. Thank you very much for taking my questions. I have two if that's okay. The first one would be on primary sourcing. There has been recent news flow around protests creating supply chain disruption in Bangladesh. So could you just comment on whether Primark has experienced any disruption so far which is ahead of the key holiday season and perhaps provide some indications on the scale of your sourcing exposure in the country? and then on agent e-commerce if I may agents such as you know Metamuse should probably improve price discovery and make Primark value proposition even more visible to consumer but on the other hand could further increase price transparency and therefore somehow intensify competition so do you see this Primarily as an opportunity to improve your visibility and to acquire new consumers or do you see a risk that it creates a race to the bottom with price becoming even more important in consumers' purchasing decisions? Thank you.

1:39:08 Two very good questions. More recent disruption of Bangladesh is literally very recent in relation to wage protests. They do happen on a periodic basis but at this point in time we don't think it's going to have an impact on It's too late anyway for disruption for peak trade. We did actually have more significant disruption in Bangladesh a few months back actually around gas shortages and that was more material I would say which we've had to navigate through. um and then on the uh i think i got most of your question on on on the um sort of agentic um uh search and agentic marketing um i i think look yeah i think we're gonna have to work hard at it like everyone's gonna have to work hard to kind of improve your visibility i think um um my i guess the optimist to me thinks that it's not going to be i think if you if you if you've got good product and you've got good um and you've got good ways of um We've been frustrated for years and years and years by the nature of the wage renegotiations in Bangladesh. We think that they are

1:40:47 more confrontational than really they need to be. We've worked hard and led the retail industry in trying to ensure that wages in Bangladesh are fair and working conditions are safe So we look at these periods of violence as real failure of the garment industry and its leadership in Bangladesh. It shouldn't get to this. Thank you.

1:41:38 We will take our next question. and the question comes from Georgina Johanan from JP Morgan.

1:41:46 Please go ahead. Hi, thanks for taking my questions on the phone. I had two please, both related to the online proposition home delivery when you open up the new site i just wanted to understand if you and maybe you could talk a little bit about how flexible that home delivery stock pool is going to be and how integrated or not that's going to be with the stores please i.e if you end up overstocked for online could you ship the product back to stores and and vice versa um And then the second question was just around your sort of confidence on the incrementality of that offer and sort of talking about the larger basket sizes from Click and Collect and so on. Is what you're saying that it's actually a different and new customer that's coming in to shop for Click and Collect?

1:42:42 and the fact that it's larger basket sizes is that kind of indicative of a higher income demographic like effectively is that what you're targeting with home delivery or would that be the wrong way to think about it please? Thank you.

1:42:55 Well, if I take the last question first, I think it's sort of the right way to think about it. I wouldn't necessarily just call it a higher income, but what we're seeing in Click and Collect is definitely a different type of customer. A customer that does shop in Primark already, but and so on. Thank you very much. The stock pool isn't the first rodeo for a retailer to run home delivery.

1:44:17 Paul Andrew Lister, Lynne Walker, Katharine Stewart, Lynne Walker, Katharine Stewart Thank you so much. There are no further questions from the phone lines.

1:45:02 I will hand back to the room.

1:45:05 Thank you. One last chance for any further questions. We have taken a lot of your time, so perhaps everyone would prefer another cup of tea. And if not, thank you very much indeed. And we will be seeing more of each other, I think, over the next 12 months than any other time in our history. And maybe you'll send some of your colleagues along. But thank you.

1:45:30 Thank you all