Associated British Foods Stock

Welcome to the Associated British Foods Trading Update Conference Call hosted by George Weston, Group Chief Executive Officer; and Joana Edwards, Group Chief Financial Officer.

[Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to George Weston. Please go ahead.

Good morning, everyone, and thank you for joining this call. This morning, we published a trading update for the fourth quarter of ABF's 2026 financial year. If I were to characterize it, it was a quarter where trading was okay, but one which we also took some important strategic steps in both Primark and in our food businesses.

And as a result, there's a lot to cover in this morning's update, and I'll take a few minutes now, if I may, to give you some color. While the financial year hasn't quite finished, we now have a good sense of how the results will land. And starting with Primark, sales in the fourth quarter are expected to be up 2% and up 2% for the full year in 2026. In a consumer environment that remains challenging in most of our markets, Primark's like-for-like sales are expected to be down 3% in quarter 4 and down 2.6% for the full year.

The trends in quarter 4 were very similar to the previous 3 quarters this year. So we remain encouraged by good results in both the U.K. market and the womenswear category across all markets. This, as we've said in the past, is where we -- is the area we've unapologetically prioritized both our focus and our investment. We've sharpened prices. We've improved our product offer. We've increased investments in marketing, strengthened our digital capabilities. We are seeing the benefits, and there's more to come.

I'm particularly pleased with the recent launch of our iconic value campaign. This is a strategic investment. It is an important investment to introduce new lower prices across hundreds of items. It's across all markets and categories. Primark is redefining value and not just through price, but also in our continuous improvements in quality style and the store experience. It's early days, but the initial volume reaction has been encouraging.

Our good execution of new stores contributed around 5 percentage points to sales growth in quarter 4 and is expected to contribute around 4% for the full year. We're very pleased with the initial success of our franchise stores in the Middle East. Our first stores in Bahrain and Qatar are due to open shortly. And we're now expecting -- we've now expanded our franchise agreement to include Saudi Arabia. We've also signed a franchise agreement with a new partner to enter the large and important Mexican market in due course.

In terms of profit, we continue to expect Primark to deliver an adjusted operating profit of approximately 10% for the 2026 financial year. Looking ahead, we're excited to announce that Primark will offer U.K. home delivery in the future. Importantly, this will be a profitable channel for growth that complements -- doesn't replace it complements our store model.

Let me say a bit more about why we want to move into home delivery and why now, particularly given our strong resistance to doing so in the past. We've always known that there's an incremental customer segment that Primark could reach by offering home delivery. Historically, though, there just wasn't a way for us to make money from providing that service. We've monitored what we watch the online channel closely.

And over time, we've seen the economics of home delivery market evolve, including the introduction of returns policies and increased fees. As a result, there is now an opportunity to drive profitable incremental growth through this channel. The other thing that's changed over time is that we've built strong digital capabilities in Primark, which maybe 2 or 3 years ago really didn't exist, including digital marketing and Click & Collect. This means we're well positioned to maximize the potential of home delivery and to use it to accelerate our digital flywheel, which complements our store model. That's why now is the right time to take this step.

And having made that decision, we've acquired and you would have seen the announcement this morning, a highly automated depot in Sheffield. It gives us the capability to offer U.K. home delivery, and it gives us the capacity to continue to grow Click & Collect. It's a good deal for us. We're not setting a timetable for home delivery today, and we're not providing any financial data at this stage. But this really is an attractive growth opportunity.

Moving to our food businesses. Grocery sales grew in the quarter. Overall trading in timings, though was below our expectations. The extended hot weather in the U.K. and Europe impacted hot tea consumption, particularly black tea. In Ovaltine, there was a phased impact from the change to a new distribution model in Thailand, which will save us money from next year, but gives us an impact this year.

As a result of all these short-term impacts, we now expect grocery adjusted operating profit to be slightly below our previous expectation for the full year in 2026. We are very pleased that we've completed the Hovis acquisition and that we're well underway with the integration. We expect this transaction to deliver significant synergies in both production and distribution.

This gives us -- this will give us the ability to create a sustainably profitable bakeries business, supported by investment in marketing and innovation. And you will see Hovis is already back on air. In 2027, we expect grocery adjusted operating profit to be slightly ahead of 2026. While Hovis is significantly dilutive to grocery profit next year, it's expected to be accretive to profit in subsequent years.

And so to Ingredients, both our yeast and bakery ingredients businesses and our Specialty Ingredients portfolio delivered good growth in quarter 4. Our full year expectation for 2026 are therefore unchanged. And for 2027, overall Ingredients profit is expected to be broadly in line with this year due to start-up costs in our new yeast facility in India.

In Agriculture, adjusted operating profit this year is expected to be in line with our previous expectations. We've taken a decision to focus on our higher growth segments and higher-margin segments and to exist -- and to exit, I beg your pardon, our U.K. compound feed business. We've already divested 2 of our 10 mills during 2026, and we expect to finalize the future of the remaining mills by the end of 2027. These are now within our disclosed and closed operations. We expect agricultural profits to grow next year.

In Sugar, the adjusted operating profit loss in 2026 is expected to be towards the higher end of our previous guidance range of minus GBP 25 million to minus GBP 60 million. Since July, we've increased the level of onerous contract provisions taken this year for 2 main reasons. One, we now expect a small U.K. crop, and this has a negative impact on overhead recoveries next year. And then secondly, natural gas costs, as you all know, have risen significantly, and this increases production costs.

We remain cautious on the outlook for Sugar for 2027. We expect the operating loss to be below this year or to be worse than this year and to be in the range of minus GBP 70 million to minus GBP 170. But there are a number of factors that could materially influence the outcome within this range, either positively or negatively, in particular, significantly higher gas costs lasting for longer, production levels in Africa, which may well be affected by El Niño weather impacts and then currency movements, notably in the Malawian kwacha.

But looking ahead, we've seen a recent turn in European sugar prices, and there are 2 reasons why this trend should continue. First, European sugar production, which is starting now, is estimated to be significantly lower this year than for the previous few years. Back in June, as I said last time we were together, the European Commission estimated the European sugar consumption would drop nearly 15% in this year's harvest, partly due to lower planted acreage.

And since then, the very hot and dry summer that's affected us has affected many other European sugar producers. And Northern Europe, in particular, has significantly reduced yield estimates. It's too early to put a hard number on that because the harvest is only just starting. But I think the German number was to be down 24%. A more significant deficit in European production this year after all that affects our overhead recoveries will allow the industry to work through the surplus inventories in the system much more quickly than we previously feared.

And then secondly -- so in summary, supply and demand has altered significantly in the European market and the stock overhang will be worked through the system quicker. Secondly, and also supportive world sugar prices have risen sharply in the last only 6 weeks. And if they remain at these levels, it's less likely that cheap imports will fill the gap in the domestic supply.

In 2027, though, we won't see the benefit of these high European prices in our results, especially not in the U.K. because we've already -- we are already a long way through this year's customer contracting round. However, higher prices should benefit future years.

We've continued to look very seriously at our cost base, both in Spain and also in the U.K. And in the U.K., this includes the announced closure of Cantley, which is 1 of our 4 production sites in the U.K. This will enable us to meet existing customer demand more efficiently and will support sustainable profitability over the longer term.

And then finally -- I'm sorry, I've gone on for quite a long time that there's been a lot to say. Finally, an update on the demerger of Primark from ABS Food businesses. We are making good progress towards being demerger ready, and we expect the demerger to take place in December 2027. This gives us time to build the systems and processes necessary to operate both businesses on a stand-alone business.

And this is important. It also gives us time to explain more about the businesses -- about our businesses, particularly in food to the market. We're not going to rush that. As well as separate Capital Market Days, we will run a series of smaller investor education events for the different components of our food businesses, many of which I believe are less well understood.

So thank you for your patience. And with that, let me hand over to you to questions.

[Operator Instructions] And your first question today comes from the line of Clive Black from Shore Capital Markets.

Just 2 for me, if I may. First of all, can you just give a little bit of color how the balance sheet may have looked at the year-end? And then secondly, a little bit of a left field question, but just in terms of Ingredients, which is quite a profitable business, what is the magnitude of the investment in India? And in that respect, how is that influencing the FY '27 outlook?

Okay. Let me hand over to ask Joana to answer the first question, and then I'll come back on the cost of the yeast factory in India.

Thank you for the question. I always like those questions on balance sheet. We haven't yet closed the books. We've still got a little bit of trading to do in Primark. But as you've seen, we've done quite a lot of investment in the last few months, including the investments that we've made today on the Sheffield warehouse.

What I can say at this point in time is that we will be around the leverage levels that just above the 1x. So priority from a capital allocation has always been investment, and that's what we've been doing this last quarter.

Can I just come back on that, Joana. Just George mentioned restructuring in Agriculture. And also, clearly, the Cantley closure in the U.K. Should in that respect, we be anticipating elevated impairment or exceptional items or restructuring costs in the balance sheet in November?

Yes, there will be some the same way as there will be below the line, you'll see also the start of the transaction costs. We have not got all of those into FY '26, bearing in mind that some of the announcements on restructurings have just taken place. But yes, we will be seeing some of those reflected in the balance sheet. There's also, as we mentioned, the mills, ADM restructuring. So there is -- there will be a few puts and takes in the below the line.

Clive, but just -- just as a reminder, looking forward into '27, there will be a fairly significant working capital unwind as we sell the feed mills. So that will help next year's balance sheet even if some of the restructuring charges hit this year. On to Ingredients, well, yeast and bakery ingredients investments in India, about GBP 100 million between 2 different plants.

The bigger number is the yeast plant in Pilibhit in the north of India and then also the BI factory, which is now up and running. The yeast factory is commissioning. There are commissioning costs to these plants. I think we're getting on with it in the yeast factory in particular. And -- but the -- as we build volumes for the yeast plant, we will have some stranded overhead until we've built that new plant up. It's quite a big facility.

Underlying, George, are you anticipating that the Ingredients business, excluding India, will make good profit progress then?

Yes, yes. It's early days. And the Specialty Ingredients businesses are feeling particularly well placed at the moment. Yeast is quite a big energy user. So we worry about some of the input costs in that part of the business.

Our next question today comes from the line of Richard Chamberlain from RBC.

Three for me, please, if that's all right. I just wondered if you could, in the light of this acquisition then of the Sheffield DC from Boohoo, give an idea of sort of Primark CapEx expectations for the coming year and whether you still need additional Click & Collect warehouse capability in addition to what has been provided on the home delivery side.

And then again, on Primark, what sort of reaction are you seeing to marketing investments? Should we expect more of that impact to come through in the coming year in terms of sort of brand halo and so on? And then finally, just on the Sugar side, I wonder if you can just give an update on what -- on energy costs, what you're assuming you're going to be paying for gas and so on compared to what you have been paying in the last quarter or second half of this year?

Yes. So the Sheffield DC will remove the need to do anything on Click & Collect warehouse investment. Part of the business case is to give Click & Collect all the growth space capability that it needs. We expect that Click & Collect will move into that Sheffield site first. And then we followed on with home delivery thereafter.

Marketing investment returns. Well, in the U.K., in particular, we think we've got the marketing mix about right. We are driving incremental sales. Now there's a lot more beyond simply above-the-line advertising going on. But the brand metrics in particular, have benefited from the advertising and anything that we specifically advertised is selling well.

We've seen a good reaction in Spain to the first full marketing -- integrated marketing campaign that gives us confidence. And in France, too, where we've started the marketing journey, again, a good reaction to that. Sugar energy costs, we are forecasting somewhere over GBP 1 a therm into next year. Now we do have, though, some uncovered energy needs. We won't know exactly how much until we know how much crop we've got to process. But when I last looked, which was yesterday, spot gas prices were about GBP 1.90. So there is exposure there. And we'll see where -- we'll just have to see where that goes.

And we're taking some of that exposure into the onerous contracts this year as we flagged as well. So...

I mean we had the 2 big gas saving projects. So firstly, Cantley, the closure of Cantley will save us on gas usage. And then we have, I think, it's the U.K.'s largest onshore renewable -- sorry, energy reduction program, carbon reduction program, which is steam drying at Wissington, which will turn on with the new campaign. So we are taking 2 big steps to reduce energy use, but we will remain large energy users despite that gas bridge users despite those 2 steps.

The benefit of Cantley will be in FY '28 rather than this campaign very likely. We'll see on the size of the...

Your next question today comes from the line of Jon Cox from Kepler Cheuvreux.

A couple of questions from my side. Just in terms of Primark and you're looking ahead for FY 2027, you talked about aiming for like-for-like growth. Just any initial thoughts. I think today's figures in Europe look a bit worse than people are anticipating, maybe hoping for some improvement there. Just wondering how long do you think Europe will take? You've said, obviously, clearly, the focus is on the U.K. but I thought some of the practices in the U.K. were already being rolled into Europe. And clearly, Q4 was worse than it was in Q3.

Second question, just on the home delivery. You talked about profitable growth. But just bear in mind what you said historically about the cost of delivery and your average ticket size, do you think the profitability of that business will be below your high street business?

And then the last question, just on Sugar. You seem to indicate in the last statement, all options are open with regards to that Sugar business. The losses seem pretty dramatic now in the next financial year. Is that really because you decided, look, the shape of the Sugar business, you want to maintain and it's really getting to grips with the various issues.

And really just on the size of that loss you're talking about for FY '27, you seem to allude it's the U.K. crop, which is the issue, like the bad weather, the hot weather means that your production is low. And as a result, that's the main drainer you think in FY '27? Or is it part of that Europe -- sorry, part of the African business, you mentioned El Niño and Malawi and currency movements. If you could talk a little bit more about that because the headline size of that loss looks pretty dramatic.

Yes. No, thank you. Why don't I handle Sugar first and then you do Primark like-for-likes. So yes, the increase in onerous contracts into this year is a U.K. issue, and it is a combination of our current best assessment of the likely size of the U.K. crop and therefore, the likely overhead recoveries. And then it also has some fairly realistic/miserable assumptions about the cost of processing that sugar.

We -- looking into next year, we have taken -- within that range, we have taken some account of possible volume impacts from El Niño, but we just don't know. You learn about El Niño really after the event, but I think it would be irresponsible of us not to include the likelihood of some weather effects. In the past, El Niño has often led to early and heavy rainfall in Tanzania and then -- but dry weather in South Africa.

The hot weather -- sorry, Spanish beat is irrigated. So there isn't a crop risk in Spain. Obviously, I mentioned the U.K. one. The -- I think the issues in European sugar really are limited to 2, energy prices, gas prices in the U.K. and then sugar prices across all Europe. I think there is -- I think this end, we're feeling more optimistic about the direction of sugar prices than we have for 2 or 3 years.

If the -- Europe, we think will be -- well, we're fairly sure there will be a significant deficit of sugar production in Europe. And significantly -- because it will be significant, I think Europe will get through the stock overhang quickly, as I said before. So looking forward into 2027, I think there are reasons for optimism both in pricing and then you wonder how long we can all sustain wellnight GBP 2 a therm gas prices. So I think at some point that those will come down.

Africa, lots of reasons for optimism looking through weather events. So in Tanzania, the factory is -- the new factory is well on the way to commissioning. Malawi, good. Zambia, good. There's been a problem on pricing too much imported sugar coming into South Africa, which has affected pricing in South Africa and Eswatini. Those though remain well-placed businesses. So Africa, yes, weather threat and Europe, I think, looking rather better in the medium term.

Like-for-like. So for Primark, we have been saying that the focus is driving that top line growth. But as we noted in the statement and you picked up the 4.3% down on Continental Europe for the like-for-likes for the quarter. We do note that the consumer confidence remains weak.

So thinking that we go from that phase into positive like-for-like is quite a loop. And we are very wary as well that we need to manage stock and inventory. So yes, we are continuing to focus on gaining market share, but we are aware that the consumer sentiment is still not quite turned. And certainly, that's impacting us in quite a few of our markets. You had asked about home delivery profitability as well and whether that was -- do you want to take that one?

Yes. I mean the -- what we think we can do is, firstly, offset some of the cost of home delivery. The market really has come towards us in terms of pricing for delivery to people's homes. The depot gives us -- will give us a good pack and dispatch base -- cost base. And then the trick is to make sure that the bulk of the home delivery sales are incremental, not substitutional. And we think that we've got the tools to help us along to achieving that.

Okay. If I could just come back to the like-for-likes for FY '27 in Primark. So we shouldn't expect necessarily to go positive in Europe in the current year, but maybe the U.K. will be slightly better. So we'd get somewhere close to flat like-for-likes. Is that the plan?

Yes. I think that we will hopefully see the like-for-like starting to improve, but we need to put that in the context of the consumer. It would be unwise to do so, as I said, particularly in terms of stock management.

But just in terms of all the initiatives you're doing and you're talking about the new range and the volumes look good and just something for us to hold on to in terms of an improvement at Primark.

Yes. And we should continue to see the improvement. And George talked about the iconic value campaign, which started very well and which we've rolled out in all the markets. So we should be seeing an improvement. But it's going to take time. And as I say, we do have to take a view on what the markets will do and market performance overall.

Your next question today comes from the line of Frederick Wild from Jefferies.

So my first is on just about the -- they're both really about the external environment, I'm afraid. The first is on whether you are seeing any extra cost pressures emerge within Primark from the macro environment, whether they be from freight or COGS and whether there are any offsets to that from, say, sourcing of availability in Asia and how that's impacted your FY '27 margin guidance for Primark?

And the second question is there have obviously been a lot of changes in the last few months in terms of de minimis exemptions ending in Europe. I just want to see whether you've seen any change in the competitive landscape emerging from that.

Primark costs, lots of puts and takes really. So dollar helps us Freight is sort of okay. We've had some material cost, so fabric cost increases, but we don't really see those until the second half. So taken all together, there is some cost inflation in the Primark supply chain, but not much.

And the team is continuing to work on driving efficiencies because there is also inflation, salaries, et cetera, but compensated by working through the cost base.

We're still -- I have to say this, it's not answering your question on de minimis, but we're still grinding our teeth rather that everyone else can get steps in place on de minimis to remove the tax advantage apart from the U.K. We are -- I haven't had any conversations with the Primark team where they've suggested that they're seeing change in consumer behavior because of the de minimis exemption. I don't know, Joana, anythting?

No, I think...

It hasn't come up.

I mean it comes out in the media, and I think that there's been quite a lot of talk about it, but it's going to take a bit of time for customers to go like, "Oh, I wanted to use Shein, oh, it's going to cost me a lot of money, so I'm going to go to Primark instead." So it's hopefully something that will filter through.

And could I just -- sorry, ask a quick follow-up. Does -- based on your comments on cost, does that imply maybe some more cost headwinds in FY '28 emerging from this?

Well, I think we just have to see where these energy costs go. It's too early to talk about '28 on fabric costs.

Your next question today comes from the line of Adam Cochrane from Deutsche Bank.

A couple of questions on Primark, if I can. When you're thinking about your flat EBIT margin for FY '27, you sort of mentioned briefly about the limited like-for-like maybe expectations within gross margin, you're doing some investments into pricing, but you've got some benefits from FX, et cetera. What are the moving parts to get to a sort of flat EBIT margin?

If you don't have much in the way of like-for-like, you probably got some cost inflation just naturally coming through. Is it -- you've got a large cost efficiency plan? Can you just explain how you get to a sort of flat EBIT margin? It seems quite a good performance on a flattish like-for-like.

And then secondly...

Yes, sorry, Adam. Keep going. Yes, sorry, you said you had to. Yes.

Yes. So in terms of the volume uplift that we're seeing from the iconic value ranges, are you also seeing a halo effect that customers coming in to buy those products are also buying some of your other products as well? Or if they're primarily just coming in to buy the iconic value ranges, is there a chance that you have to broaden that investment to more of your categories?

And then the final one is really quickly on the online home delivery, I'm assuming the answer is going to be no. But does it have any change in your view of the long-term store expansion potential in Europe given that you can access some of those customers via a different channel, potentially as you roll out into Europe in the future?

Yes, good question. The flat EBIT margin has several parts within it. We talked about the cost base where as I said, there's not -- sorry, the kind of commodity costs and labor costs, there's not much net news in there. Some of the cost-saving initiatives are quite large, and we'll start to see them coming through. The one that we haven't really mentioned is except tangentially, the markdown percentage this year will be higher than last year.

And going into next year, we -- well, we've taken steps to address that. And that's a -- and if we successfully do so, as we think we will, that will contribute to margin maintenance as well. So offsetting, I think, the cost savings there. We've got significant investment in price going on.

And I suspect -- I think that, that leads me to the second point about halo. We know that -- we're doing this because we know that our reputation for unbeatable value was fraying, and we're putting that right at pace. We are a volume retailer and We, therefore, the right thing to do is to invest in price wherever there's an opportunity to do that in order to drive volume.

The volume uplifts in the promoted prices have been good, and we're watching the overall brand reputation around value for money closely. But it's important to repeat what I said in my opening statement that this repositioning or this kind of sharpening of value goes beyond simply price and also goes into range and fabric and fit in a number of categories, starting with womenswear, the quality of what we're selling, the durability, the fashionability, the sizing accuracy has all taken a step forward and we'll continue to do so. So it's more than just price. It's also the other components of value.

Home delivery across Europe, no, we expect -- we intend that the introduction of home delivery in the U.K. will actually drive same-store sales as we attract more people into the brand. And we would expect if and when we get on to home delivery in Europe, the same thing to happen. It -- one of the things that we are interested in Europe is getting the brand better known outside areas where there's a store. So no, I don't think it does affect long-term store expansion plans in Europe.

Your next question today comes from the line of Sreedhar Mahamkali from UBS.

A couple of them, please, most have been already asked. So perhaps on Grocery, George, I think you're talking to an improved performance in F '27, including harvest losses being consolidated. you could tell us how you see what the drivers are of an improved performance in grocery? And also, what should we be thinking in terms of that Harvest Losses total bakeries losses and ability to improve sharply with the synergies? That's the first one.

Secondly, on Primark and home delivery, can you talk a little bit more about how you're preparing for it? What are the milestones? When might we see the launch?

So that -- so home delivery, and I think I'll be allowed to not so much apologize, but to explain why yesterday's conversation was incomplete. We haven't, at the time, actually signed the agreement to buy the Sheffield distribution center, which is quite a big piece of the home delivery story because it allows us to get into home delivery significantly faster than had we had to build a greenfield distribution depot for single pick, but we couldn't tell you.

As I say, Click & Collect will be in that facility in the first half of next year. And we're not saying anything about the date of starting home delivery because that's pretty sensitive commercial information.

We're moving at pace...

Mostly EBIT pace. And then bakery losses will be greater than they have been prior to the Hovis acquisition for a couple of reasons. The first one is that a number of costs, energy-related costs, but also wheat have increased in price, and we need to recover that still from the marketplace.

Secondly, there are reorganization costs to be borne through the year, which will increase the losses as well. We don't get the benefits of the synergies until probably we start to see them in the second half of next year. So the first half is going to look pretty challenging. That is the largest contributor to next year -- well that's largest negative contributor next year's grocery profitability.

We expect to see good growth in Twinings, not least because the -- I think I mentioned this in July, the cocoa price has come down somewhat. And secondly, within Twinings Ovaltine, we're beginning to see some of the benefits of the investment in digital infrastructure and ERP.

Australia should give us decent growth. We're worried about the Australian consumer. The United States I'm afraid there's still more volume to be lost in our oils business. So that's a drag. The rest of U.K. grocery, I think, will be good.

Your next question today comes from the line of Anubhav Malhotra from Panmure Liberum.

I have 2 on sugar really. There have been some recent news in the African press on acquisition interest in Illovo. So just in that context, maybe can you share your views on the strategic value of that business? And if you would be open to any options for the asset if there's an attractive enough offer?

And then secondly, there's also some recent news on sugar import tariff regime in South Africa. They have increased the prices on those imported sugar. Does that have any impact on your view on the profitability of the South African sugar business for next year? I know that has been a drag or not yet.

Yes, 2 good questions. Look, the commentary in the South African press about acquisition interest in Illovo is just gossip. And we're not going to say any more than that because we just don't discuss either gossip or anything to do with the sort of corporate level activity.

The tariff regime, I don't think the changes will help '27 because there's a lot of stock in the country that's come in very cheaply. It remains -- there's a market overhang there. We don't think the tariff regime goes -- the changes go far enough, and we're making that point to the authorities.

The situation with the new suggested prices is less bad, but it's not good. I don't think they've done the job that they need to do in order to support growers and millers in South Africa. Yes, I wouldn't believe everything you read in the South African press.

But can you just clarify if you would be open to strategic options for that asset, not particularly the shopper, but in general...

I'm not going to speculate. -- the other part of the business, I'm not going to do on this one.

And the next question today comes from the line of Georgina Johanan from JPMorgan.

Three questions from me, please. And the first 2 just being clarification, if that's okay. Just first of all, on the freight point, I'm a little confused because, obviously, we've already seen material freight inflation. We've had retailers such as Inditex referencing the pressure on gross margin as a result.

So when you say freight is expected to be okay next year, do you mean you have offsets? Or are you actually not expecting to see any pressure from freight next year and therefore, instead, it could perhaps be a fiscal '28 issue? That's the first one, please.

The second one was just on home delivery. I understand your point around like attracting more people to the brand in Europe and therefore, perhaps increasing store like-for-likes in Europe. But just to be clear, in the U.K., have you factored in a portion of cannibalization? Or are you actually expecting it to drive higher in-store like-for-like sales in the U.K. as well, please?

And then just finally, given some of the moving parts on the balance sheet and the warehouse acquisition and so on, could you just perhaps give some color on how you're thinking about share buybacks into next year, please?

Thanks, Georgina. Freight, we are pretty well hedged out through next year. So on sea freight, and we use very little air freight where I think rates have increased very significantly, but really aren't having an impact on us. So that's freight. So it's not a question of offsets. Home delivery in the medium term, we think will drive same-store like-for-like. So it's not an overall like-for-like figure. It's -- we think it will support stores on top of being incremental volume in its own channel.

If I may just, we haven't decided on how we're going to report if that was the question, if we report it separately or not.

And then share buybacks, well, surplus cash firstly goes back into the business where there's a demand. And Joana, do you want to say anything there?

I think it's a bit what I've already said to Clive, which is our capital allocation, to your point, is about investment. Yes, we've just spent a significant amount of money. I think Defra put it out there, GBP 90 million on the distribution center. We've made some good investments. Leverage will be within what we feel is the right level. So the decision will be made by the Board in October and at that point in time, we'll communicate, but priority on investment in the business.

May I just follow up on the freight point because I understand about the hedging, but my understanding, but perhaps I'm incorrect is that there does tend to be fuel surcharges that come in over and above your hedged levels. Is that not the case for Primark then?

I think we'd probably rather stay away from our arrangements, our commercial arrangements.

So just to be absolutely clear, you'd expect freight costs from a margin perspective to be flat year-on-year into fiscal '27?

We don't see freight as a headwind going into FY '27.

The next question comes from the line of Warwick Okines from BNP Paribas.

Yes, 3 questions actually for me as well, all on Primark, just building on what you've said. Firstly, could you reassure us about how much tighter your Primark inventory is heading into winter, just to reassure us about the markdown margin recovery. So maybe something around cover or inventory per store. Secondly, George, you mentioned the price investment in iconic value.

And I think Owen a few months ago was talking about, for example, in kidswear, reducing 1/3 of new lines on a like-for-like basis. So what sort of overall pricing like-for-like do you see in autumn/winter and maybe heading into next year? And thirdly, on home delivery, could you remind me where you are on RFID and whether you need this for home delivery or if that's a separate consideration?

Yes. There is a lot of work going on in the supply chain, which will taken together improve stock accuracy and reduce cost in reducing stock -- improving stock accuracy, it will also improve availability. So we're -- those are really important projects for us. How much tighter? I think there are a couple of things.

I think we, like many others, are looking at these transition ranges. We got caught, quite frankly, last year with far too many heavyweight garments post Christmas, and we sold them at we sold them at very significant discounts. We won't be doing that again. So there's a sort of tightening up on autumn/winter heavy weight.

And at the same time, a development, again, like many others doing of transition products. We have seen great response to workout gear. That is a very strong transition product for us already, and we'll be doing more of it. So it's just an example that we're rethinking, if you like, August through September, October, and we're rethinking post Christmas in the ranges, both in quantity and also in the offer.

Just from a balance sheet perspective, if that was part of that question, we should be seeing a working capital that is not increasing going. We will have less weeks cover going into the end of this financial year.

And then sorry, kidswear price investment. I think I'm just going to take the fifth on that one.

But I mean, I was really thinking about across all of Primark. I think you said that your like-for-like prices are lower on average. Is that a fair reflection of autumn/winter?

That's a fair reflection of autumn/winter. And kidswear is an important part of that pricing initiative -- pricing strategy.

Yes. And RFID home delivery?

I'm also going to decline to help you out on that one.

Yes. Okay. Fair enough. In which case, I'll ask #4, perhaps you can. I mean I think Georgina already asked this in many ways. But I suppose I don't understand why you would expect home delivery to drive incremental store like-for-likes unless you've seen that happen in Click & Collect. How have you seen that within obviously what would have been negative like-for-likes in the last couple of years?

We've seen the attachment rate in stores be significant, and we have seen footfall improvements in stores, too. And we're seeing a new shopper coming because we have Click & Collect.

The next question today comes from the line of Vandita Sood from Citi.

Just a really quick one on sugar, if I can clarify. And then I have one on Primark CapEx. So on sugar, I think you've previously spoken about a GBP 25 million adjustment from the Malawian currency. And I think previously, this was in this year's guidance. Just wondering, so you're sort of closer to the GBP 60 million losses this year, even though you've not taken into account the GBP 25 million from the currency? And is that also now in your assumption for FY '27? And then just building on a couple of other questions on Primark home delivery.

Just wondering what else we need to think about in terms of CapEx other than the fulfillment center that you acquired? I mean, presumably, you need things like CRM functionality, payment functionality, merchandising. How incremental -- how much more incremental CapEx do you need versus just sort of setting up Click & Collect versus when you set up home delivery?

So the numbers we're talking about for FY '26 sugar, I think, have 2 partially offsetting big elements to them. The first is the increase in the onerous contracts driven by overhead recoveries next year and gas prices next year. That's a significant negative. The positive is that Malawi hasn't devalued.

Now the effects of devaluation on profitability are more complicated because we're into hyperinflation accounting. And -- I mean, we're not through this year yet. So there remains some residual risk that the Malawi decide to devalue. We know the devaluation is coming. we will have to offset the price devaluation with pricing if and when it comes. So yes, it's an assessment of an estimate of it and the timing of it is in the range I've given you, the minus 70 to minus 170 million. And we're quite sure that it will come. It has to come.

Home delivery, other functionality, is sort of slightly caught up in my point about our own digital journey. We have built a lot of capability that is -- that supports home delivery. Now there will be some extra we need. But we do have quite a lot of the infrastructure already that we will need that is currently supporting both the digital communication but also Click & Collect. So the extra CapEx is not huge.

And sorry, just a quick follow-up on the offsetting sugar with the pricing point. What is the earliest you can start to benefit from the sort of higher sugar prices in the market, given where you are in your contracting cycle?

Well, I think Spain has more spot trade than the U.K. The U.K., we -- I think we shouldn't be estimating any pricing improvement in '27. So this time next year, we'll be through the contracting round for '28. -- and we'll be looking into, I think, significant higher prices. But we won't benefit from it in the U.K. until '28. In Spain, there may be some earlier improvement.

That was our final question for today. I will now hand back to George for final remarks.

No, I really just to thank you all for coming on this call. It's been an important one. And I think it's one where I hope you begin to understand our confidence, well, there's a lot of a lot of good work going on, which sets us up well for the future, home delivery, obviously important. The 2 franchises, Saudi and Mexico don't underestimate their importance in the medium term.

The sugar production levels in Europe don't underestimate the importance of them looking into '28. And then that's on top of a lot of other good work that is going on both in the digital space, but also in the -- now we're getting into sort of completion of some of the CapEx projects that have been going on for 2 or 3 years.

So it's actually -- it's a very busy time. It's a very exciting time. I think the numbers don't reflect the optimism that we all have for really both sides of the business. And lots to be done on the demerger still. So thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, and thank you for standing by. Welcome to the Associated British Foods Trading Update Conference Call hosted by George Weston, CEO; and Joana Edwards, CFO. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to George Weston. Please go ahead.

Good morning, everyone. Thank you for joining this call. As you'll probably know, we've put back this reporting date, this trading update having not had it for a couple of years. We've done that primarily because it's -- we can give you more certainty about sugar at this date. We -- just before I get sort of into the meat of what I'm going to be saying, we've picked up that there's a bit of uncertainty about the -- why we've chosen the date for Primark reporting that we've done. I just wanted to head that one off straight away.

The first thing is, if you go back to 2023, this trading update was earlier in June, and we didn't have the June figures at that point for Primark. We do now have the June figures, so we can report on them. And so rather than give you a trading update to a period 6 weeks ago, we thought it would be more helpful to give you something that was bang up to date. We haven't done that because June was a better month, and we're trying to flatter our figures. But because, as I say, our desire to give you up-to-date figures.

If we take June out of the U.K. figures, though we were minus 1.1%, with June in, we're minus 0.5, that's U.K. across the rest of our markets, it makes no difference through that period. I hope that what that kind of covers off that issue. It was a resilient quarter of Primark progress, we think, has been solid as has grocery and ingredients. The businesses -- those businesses all remain on track. There's no change to the guidance, and I'll share some more color on all those sectors in a moment. But I do want to start about sugar. As I say, this is the reason for putting this reporting date back in is to give you a bit more certainty on sugar.

In Europe, we've got visibility of the processing campaign. It finishes In spring. So by now, we know our volumes, the contract and selling prices are known and our production and beet costs are known. 3 months ago, we couldn't have said that. The profitability of next year's sugar campaign, which begins in September when we start processing beet, this is in Europe, can be difficult to assess at this stage. So we have to be just a little bit careful of being too certain about next year in Europe. The contracting round is underway. It typically runs for a few more -- the sales contracting, it runs for a few more months. So we don't have certainty about pricing going into next year. It's difficult to assess production costs for next year, particularly hard at the moment given the volatility in gas prices as a result of the Middle Eastern conflict. And I'll come back with some sensitivities around that.

This time of year in Africa, our annual campaign has only just begun in the southern hemisphere, so things are upside down. It typically runs across until December. It straddles there for our year-end. And you get movement in profitability between the 2 years, depending on issues like when the campaign starts, how well it starts, how well it finishes. And the -- as I say, phasing of production and sales in idea can be affected by weather and by operational issues at the factory. We don't have full visibility of the African number until closer to the financial year-end.

We have in Africa this year, 2 additional uncertainties. This is the year for '26. The first one is the pace of the ramp-up of the new Tanzanian sugar mill. So far, so good, but early days. And then secondly, it's quite an important issue about whether there's going to be a devaluation of the Malawian currency in this financial year or whether it falls into next financial year. And there's quite a big swing in profitability in sugar this year, depending on the timing of that devaluation. We're providing a range of outcomes for the operating loss in sugar because of these uncertainties. It goes from GBP 25 million to GBP 60 million.

GBP 60 million take into account -- well, sorry, let me go through some of the uncertainties. First, gas prices into next year, this year, in Europe, we paid about 75p a therm for gas. It obviously spiked up to 160. It's now selling at around about 100. If it doesn't come down further, then we will be recognizing more onerous contracts in this year's number. If it comes down, we will be recognizing less. To give you an idea then into next year of the effect of gas costs, it's between GBP 600,000 and GBP 700,000 profit either up or down per penny of therm. So we're sitting at GBP 104. If it went to GBP 114, that would be down GBP 6 million or GBP 7 million. If it went down to GBP 94. It would be up GBP 6 million or GBP 7 million. That is -- obviously has an effect on next year's profit. It also has an effect on these onerous contracts into this year's figures.

If there's a devaluation in the Malawian kwacha this year, the negative profit impact will be around GBP 25 million. That is included in that GBP 60 million bottom end number. And then thirdly, if the initial ramp-up of the new build in Tanzania is slower, this could impact profit again by kind of single-digit numbers of millions and you need to be aware of that. Looking ahead into '27, our expectation is there will be a further deterioration in the sugar result from that GBP 60 million potential operating loss this year. And that number assumes gas prices remain at the current year for the entirety of next year.

Average sugar prices in Europe are not yet sufficiently known. Energy fuel fertilizer costs, not really known. Production levels in Africa, not really known in the split between '26 and '27, not really known. There is one other effect that we haven't seen having an impact yet, but we have seen in previous years, which is El Nino weather impacts, which typically reduce sugar production in Tanzania because it gets too wet and Southern Africa, South Africa because it gets too dry. As I say, we're not seeing that yet. But in the past, it's had a reasonably significant impact on sugar production and therefore, profitability.

On to European sugar prices, -- we expect that there will be a significant reduction in European sugar prices -- sugar production, sorry, in the harvest that will start in about September. So the European sugar data, which was published by the commission following its June management committee meeting, estimated a production drop of nearly 15% in this year's harvest. That's a combination of acreage, which will be well known and yield, which is estimated at this stage. They've essentially said, look, last year had great yield, let's just assume that the yield returns to its long-term average, which is 5% down on last year's yield.

Now this hot weather has had some impact on plant health, both in this country and across Northern Europe. So we think that, that yield reduction is possible, but the crop has a long way to run. So big reduction, we think, in sugar production. That's great in a couple of ways. Firstly, in the supply-demand balance, there is a stock overhang that will mitigate against bigger price changes because of that on the back of production reducing or sugar output reducing. But I think in the longer run, it should give all of us confidence that there has been a supply side response and quite a big one to prices going down.

I think there's been some skepticism about whether we'd ever see that, and we have. So that's good. The performance of the Sugar business continues to be one of our big priorities. We continue to look very seriously at how to lower our cost base going forward, particularly, but not just in Europe. Let's look then at the quarter performance in our other businesses. In Primark, total sales were up 3% in the context of challenging consumer environments in most of our markets. That's okay. We've continued to make good progress to strengthen our consumer customer proposition everywhere. As you know, the focus so far has largely been on the U.K. market and on womenswear.

So in the U.K., sales grew 1%. Like-for-likes were broadly flat in the quarter. We continue to gain market share and do so quite strongly. Outbreak of the Iran conflict had a negative impact on consumer sentiment. April and May weather was up against really good trading weather the year before. And -- so not surprisingly, April and May were a bit soft. I've actually given you the number in the U.K. And then trading bounced back very, very well in June. We are seeing the benefit of our sharper focus on price and from the improved product offer, as I say, starting in womenswear. We're seeing the launch of some exciting new ranges. Our increased marketing is working well. We're really starting to see the impact of the digital investment, including Click & Collect, which has had a strong period.

Like-for-like sales in Europe remained weak. We know what the challenges are, and we're beginning to take the required actions. It's still early days. We are seeing some green shoots from certain initiatives. We're investing more in our marketing and digital capabilities. We're more targeted on our core customer base. Other campaigns are still to come in Europe this summer. But we've seen the best of -- the first of an integrated marketing campaign, including a full advertising campaign in Spain. We've seen other good work, too.

So overall, I'm really encouraged by what's already been achieved to improve Primark's customer proposition. I'm excited about what else we have to come over the coming weeks. New store openings contributed 5 percentage points to sales growth in quarter 3. The 10 new stores opened in the quarter included our first store in Manhattan, which has got off to a very, very strong start. And it's -- so the starting couple of weeks were great and it's been strong since. We expect the halo effect to be very positive for the brand in the U.S. generally and in New York State and Greater New York in particular.

The franchise stores in the Middle East have traded exceptionally well despite the circumstances in that part of the world. We're now up to 4 stores in the region. We've got a good pipeline. There's no change to our guidance for the '26 financial year for Primark. It's a consumer -- a challenging consumer environment, and we still expect Primark to deliver an adjusted operating profit margin for the full year of approximately 10%. This expectation includes increased investment in initiatives to drive like-for-like sales and also increased investment in our technology capabilities. Food businesses then. In grocery, sales were up 1% with good growth across a number of our brands and businesses, including Twinings.

U.K. oils remains a drag on growth this year. That is not new news. That's what we've been seeing for a while. We welcome the recent decision by the U.K. Competition and Markets Authority to approve our acquisition of Hovis. The combination of production and distribution activities of all bakeries of Hovis, and we expect to drive significant cost synergies that we can then use to invest in product innovation and the creation of sustainably profitable bakeries business. And we're working on next steps towards the completion of that acquisition.

Ingredients, quarter 3 was broadly as expected, with sales up 3%. Growth came from both our yeast and our bakery ingredients business and from our specialty ingredients portfolio. We continue to support future growth with small acquisitions in the period. Then agriculture, sales were down as we'd expected. Following a customer loss earlier this year in our U.K. compound feed business, which has always been a low-margin business, we're adjusting our cost base. We sold one of our 9 compound feed mills during the period as a part of the process of adjusting that cost base.

So across the group, we continue to take targeted actions and make investments to drive performance. Several long-term -- long-running projects have either recently completed or are nearing completion. The biggest one, of course, is that Tanzanian factory. And these investments underpin our confidence in the long-term growth prospects for the group.

And with that, let me hand over to you for questions.

[Operator Instructions] And your first question today comes from the line of Monique Pollard from Citi.

Two, if I can, please. The first was just on the ingredient sales. They were quite a bit better in the third quarter, as you mentioned, George, versus the first half. So just trying to understand whether the profit could also come in better, just given the profit guidance for the year is unchanged in that segment?

The second question I had was just on -- if I look at Primark, the like-for-likes maybe have come in slightly better than maybe people were expecting. Just wondering if the like-for-likes are coming in better or worse than what you had planned and budgeted. And whether given that and given your reiteration of the 10% EBIT margin target, whether that's an indication that you feel that your price proposition is roughly in the right place, please.

Yes. Thank you. Two good questions. Ingredient sales, they've been more or less in line with where we had expected. There are a lot of different geographies and different sectors across our ingredients, different companies across the ingredients. The profit expectation, we've reiterated with a degree of, I think, relative certainty of where we're going to end up now. So I wouldn't write the profits up this year.

In the longer run, we think we're well placed in the ingredients sectors for future growth. But this year, I think the profit guidance is pretty well placed. Primark like-for-likes, we're certainly pleased with the U.K. We're pleased with womenswear. We're pleased with the beginnings of the repositioning of kind of value -- or the resetting of value expectations. Major finds is important, reflagging price points in stores, that's done well. Some of the new products, particularly performance, really, really good.

Primark at its best I think with startlingly lower prices for good relevant product in a growing sector. That's Primark at its best. I think if I were being honest, I would say that we're a little bit more -- we're more disappointed that Europe hasn't improved faster because we are working at price perception. We have started the full integrated marketing work in some of the markets. We remain convinced it's going to come, but it's maybe just a bit slower than we would have hoped. But U.K. good.

And Europe consumer environment is quite subdued as well. So yes, we are in a context which is difficult, too. Yes.

I think when we last spoke, we were very concerned about the consumer response in the U.K. to the situation to the war in Iran. And we are, I think, now a little bit more relaxed about that. We haven't, for example, seen a collapse in holiday bookings. And beach holidays drive sales in the back half of the financial year in Primark. So we're worried specifically about that. But I think we're okay.

Our next question today comes from the line of Frederick Wild from Jefferies.

So the first one is all about just decomposing what's happening in trading right now. I don't suppose you could give us an update on how you see overall consumer...

Frederick, sorry, we're having a bit of trouble understanding your question, sorry.

Just hearing it. Could you speak up a little.

Is this any better?

Yes, that's overcompensated. Yes, no doubt that we can hear you.

I will talk very softly. Yes. So the first question is just about understanding the current dynamics in the market and your trading. I suppose if you could give us your sense of underlying consumer health outside of things like weather swings and calendar shifts and all that sort of thing. And I guess beyond that, how trading in July has proceeded and whether we should think about maybe a bit -- a few more products going into sale.

And the second question is, I know you talked previously about really expecting to start to see some of the impact of the actions you're taking in Primark coming through in either the Spring/Summer '27 collection or even into autumn/winter '27. Is that still the right way to think about the cadence of improvement in Primark like-for-like?

We've been managing stock levels very tightly and through spring/summer because well, we just have to in this environment. I think we saw in the first half a higher markdown percentage than we would have seen in prior years. And I think you can assume in the second half, we'll have something similar. We think it gives us an opportunity into next year, the high levels of markdowns we would have seen throughout this year.

As to trading, I don't want to get into a week-for-week commentary. We've got you up to date to the end of June, and we'll see how things go from through July, August. I wasn't -- the second question, what are we doing in -- for autumn/winter. If -- come back if I haven't answered the question, but the product improvement will continue and broaden beyond womenswear, which is what I've been saying for a while is where we started. We haven't done -- and similarly, the focus on price perception will broaden beyond womenswear, too. So for example, we haven't done a major find outside womenswear yet. And I think we will begin to see that sort of activity either combined with womenswear or taking its turn with womenswear. So relentless focus on price perception, relentless focus on value. And I think a relentless search for just fantastic product like the performance ranges. Anything you want to add to that, Joana?

No. But as you said, Frederick, the focus into next spring will be improvement and George mentioned it, it's unashamedly being womenswear, it will expand. Kids is massive for us, but we need to get that moving in the same way as we have womenswear. So that's something to be expected going into spring/summer next year and for that matter, autumn/winter 2027, as you said, men's likewise. And the investment behind it, which I don't know if it was where your question was going to, will continue because the focus is on driving that like-for-like growth and continuing that improvement that we are definitely seeing now in the U.K., and we want to get moving into Europe.

Your next question today comes from the line of Richard Chamberlain from RBC.

A couple for me on Primark, please. Just in the statement, you make reference to sharpening the focus on the key target customer base in Europe ex U.K. And I just wonder what you mean by that comment? And then second, in the U.S., I wondered if you can just give a bit more color on trading performance by region and maybe update as well, if that's okay, on number of openings for the rest of this year and next year, please?

Okay. So both in the U.K. and in Europe, we have some tremendously loyal customers, customers that spend the bulk of their clothing purchases with us. And we're refocusing down on them, what they need, what they expect of us. And that, I think, is where some of our U.K. performance is coming from, reengagement with our core customer base of loyalists. Now across Europe, we've got the same characteristics. We've just got fewer of them. And so -- but we think that what will inspire our loyalists in Europe is what will inspire should be, could be loyalists in Europe as well.

So people who share many of the same characteristics with our loyalists who are nonetheless not yet shopping with us to anything like the same extent. They may already be coming into our shops. They're just not buying into the whole portfolio, the whole offer. U.S. trading has been -- has bounced around a bit. It is -- let's say, New York has got off to -- or Manhattan has got off to an absolute flyer, and that's great. Elsewhere in the states where the brand is still much less well known, so we opened a store in Memphis, one in Nashville. They have been, quite frankly, disappointing, but we shouldn't be too surprised by that.

We have a good customer franchise with particularly Hispanic populations in the U.S., starting in New York, but Florida and Texas coming through. Those populations are really struggling. Their consumer expenditure is well down. And even where we are well known to them, there, their shopping -- their purchasing power is just really squeezed. So that, I think, is driving some of the softness in like-for-like sales where we are known. And yes, some of the -- so some of the store openings is good, where we're opening into brand knowledge, where we're not, it's been not so strong. I can't remember, do we have a number for new store openings.

We actually, Herald Square, Manhattan, that you just mentioned, George, of our 43rd store. We're hoping to have 47 by the end of this year. So definitely a year of strong store opening, but benefiting from that halo effect that the marketing in New York should be bringing. I think we're now up to 6 stores around that region, which is very encouraging. We have seen an uplift in trading linked to the tax refunds in March and April. But it is volatile, and it does talk to what George just mentioned, which is our reaches into that population that is still quite impacted by the general economic context. Is that helpful, Richard.

Yes, that's very helpful.

We will now go to the next question, and the question comes from the line of Warwick Okines from BNP Paribas.

Two questions, please. The first is a bit of a multipart one. I just wanted to pick up on your comments about markdown in Primark, George. You said there might be an opportunity for margin recovery in 2027. My question is, could you actually decide to put that into price reality rather than price perception? In other words, sort of swap markdown this year for lower prices next year. What other puts and takes are there like raw material pressure. And should we think of you having an ambition to improve operating margins in Primark next year? And then my second, I think, shorter question, although it's probably a complicated answer, is how are you thinking about the prospects and possibilities for home delivery in your online channel?

Right. Look, this is a trading update rather than a kind of competitive or strategy session. The -- to your first question, as we've been saying for a long, long time, the net margin is something that we arrive at either having traded well or badly throughout the year. We don't target it. We're comfortable with where it is at the moment. It's been significantly higher other than COVID times. It's rarely been much, much lower. There are some following wins next year.

That markdown is an opportunity. Currency is a following wind. Having said that, raw material costs are higher. Freight is under control, but you never quite know where that's going to go next. And on what we're going to do with price, well, I'm not going to flag anything about price other than to say we know what our key customer wants us to be. And we've delivered on those expectations in the first half much better than we have the previous few years. And that's where we -- we've rediscovered who we are.

That is -- and then I don't have any update on home delivery to share. I think we've said that on -- we'd love to have Click and Collect across Continental Europe. It's going to take longer because the -- whereas in the U.K., we could repurpose the customer service desks. We never built them in the first place in Europe, and we need a supply chain solution in Continental Europe as well. As you know, we've been looking for better supply chain solutions for Click & Collect in the U.K. as well.

Your next question today comes from the line of Adam Cochrane from Deutsche Bank.

Thanks for the geography lesson on the Sugar business. In terms of -- I think there's not much I can add to what you've already said. I just wanted to clarify, when you're talking about the EBIT in '26 coming in between 25 and -- minus GBP 25 million and minus GBP 60 million, you said that FY '27 would be worse than the minus GBP 60 million. Is that minus GBP 60 million or worse in '27, irrespective of what you do in '26 within that range, it will be worse than GBP 60 million loss.

Yes. That's our central assumption. The biggest part of it is an assumption that whereas we were paying 75p a therm for gas next year, we'll be paying 105p. Now that's just -- we just picked that number because it's what it is today. I think there's also a possibility -- well, it depends on where the South -- sorry, the African sugar profitability ends up this year. The flip side of this year's under or overperformance will be in next year.

So that we don't know at the moment. We don't know about the impact of El Nino, but we fear it. And although the pricing round in Europe has started with -- and again, I have to be careful that I don't give away commercially sensitive information. We are really encouraged by that reduction in sugar output that we think is going to be a reality into next year and the year after.

If I may, just the last one, which George already mentioned before is the starting point on the GBP 60 million is also because even if the Malawian kwacha doesn't devalue this year, which would bring us, if it does not, then it would be closer to the GBP 25 million. The assumption is it will next year. So you already got GBP 25 million in there. And for that matter, the onerous contracts, which is the other big piece into the GBP 60 million, even if we don't materialize some of that, they will materialize next year that the own onerous contracts is the shift between the 2 years. So the 2 biggest pieces that takes us from the GBP 25 million loss to the GBP 60 million loss are going to happen. It's just more of a timing. I would like to point out that those are not cash items into this year, both of those. Hopefully, that's helpful.

Great. And then on Primark, 2 bits. You talked increasingly about womenswear and the U.K. Would you be able to give an idea of the outperformance of womenswear versus the overall U.K. performance that you've seen. And then secondly, in terms of the -- on geography, across Europe, you called out Spain briefly there. Are you seeing big divergences in the European performance between countries? And where you've taken some of these integrated marketing actions, et cetera, are you seeing a sales uplift on those actions that you're taking?

Yes, good question. I'm not quite sure how much I'm allowed to give away on U.K. Womenswear performance, but it is good. So if we're at minus 0.5 for the -- minus 0.1, it's kind of mid-single-digit positives in the U.K. Yes, there is a divergence in performance across Europe. Iberia is better than France and Italy, which have been 2 difficult markets. East Europe, Eastern Europe remains good. As I say, the Middle East isn't in the like-for-likes, but is really good. And Northern Europe, we've seen this before when consumers get nervous, shopping kind of grinds to a bit of a halt. So Germany, Austria, Netherlands, soft.

Yes, I mean womenswear is definitely very strong in the U.K. Actually, womenswear positive overall for the quarter for Primark. And as George said before, unashamedly so it is our course.

And with regards to when you've done some actions in some of the European markets that you obviously haven't done in all of them, are you seeing a positive reaction to the actions that you're taking?

Yes, we are. Yes, we are. As I said earlier, would I like to have seen it go further? Yes. But no, it's certainly having a positive impact.

Our next question today comes from the line of Georgina Johanan from JPMorgan.

I've got 2, please. The first one was just if you could give any color in terms of the full price sales mix at Primark in the quarter and how that's changed year-on-year or perhaps the full price level of like-for-like growth. I guess where I'm coming at it from is just thinking about, you mentioned the markdown opportunity for recovery into next year, George. But I'm just wondering actually if it's going to be quite difficult to get back into positive like-for-like territory given that there will be kind of a large proportion of markdown sales that you're comping against? And just how we should be thinking about that and how you're thinking about that in your buy-ins, please?

And then my second question was just a very simple one. In terms of the current OpEx base of Primark, is it possible to just give us a kind of high-level rule of thumb, I guess, in terms of kind of what percentage is fixed and what percentage is variable with sales at the moment, please?

So you're making us work hard. We don't track full price sales. So I've got no data set to share with you. The markdowns, yes, 2% greater expenditure on it. I think we can -- look, if your question is, are we only getting good sales performance because of markdown, the answer is no. Most of the womenswear outperformance is not markdown.

And they were -- sorry, they were good to make sure we manage the inventory levels, but they were at much lower price. So yes, higher volumes but lower price. So the impact on the actual like-for-like is more marginal than the actual performance in some of the big categories, which is womenswear. Don't forget, we did a lot of markdown on seasonal items, particularly in January, and those needed to go at the price that is right.

OpEx versus -- shall I take that one. OpEx fixed versus variable. I think this is going to be an interesting part of going into the demerger where we'll -- we will be giving more detail around the P&L. Of course, we have got staff in stores and then we will have all the cost of running stores. But we have not given the breakdown of those 2. The majority of the costs are fixed as it would be in a retail business, hence, the importance of getting that leverage with the like-for-likes. Sorry, I'm not trying to avoid the question, Georgina, but I think we will be coming back to it in the next few months.

No, that's very helpful, and I look forward to that extra detail. And maybe just in terms of thinking about the buy-ins for next year in terms of buy-ins for positive like-for-like next year. Is that -- should that be our assumption?

Yes. I mean I think -- sorry, Georgina, just a little bit of color on that. I think we've got to be more cautious around heavyweight outerwear. The autumn/winter season seems to be starting later and later. And it's a bit of a mug's game to be providing people with coats 70% off in January.

Our next question today comes from the line of Sreedhar Mahamkali from UBS.

A couple of them, please. I think you referred to Iberia and Iberia clearly has been a strong market flow for you for a while. But is it -- do you put that down to market or something Primark is doing now that's different to what you're doing in France and Italy.

Sorry, which...

Iberia, yes. Exactly. And I think then on France, you have in the past flagged some strong competitors in the value segment. Is that still a main driver of your challenge in the market? That's the first question. And secondly, on Primark margin, I mean, George, you referred to markdown opportunity. I think this year, we're down 160, 170 basis points, much of which we are assuming to be markdowns as you've signaled in the past. But you were previously also signaling that headroom was to be used for driving like-for-like growth when you head into next year rather than seeing it as a margin recovery opportunity. Is that not necessarily the same case anymore?

So the -- really, the only differences in the competitor set Spain versus France are that in Spain, we've had lefties to compete with for quite a long time. And in France, we've got more action stores and -- who are just in little bits of the clothing sector and then more Kiabi. And it's Kiabi who I think have upped their game really significantly in the last few years. And I think we understand Kiabi and their capabilities much better than we did previously. But those, I think, are the differences.

I think the Spanish consumer is in a better place than the French consumer. And I suspect that that's the biggest driver of the differential performances across those 2 markets. Markdowns -- look, I don't -- I'm just reluctant to flag too much about how we're going to trade next year. So yes, you've seen a greater emphasis on price perception and demand creation and price investment this year on top of the markdowns. You're going to see a lot more of the same next year.

Sreedhar, on the markdowns, I think that we talked about this a little bit before. Yes, that tailwind going into next year. George mentioned it the same as we've got FX. The principle still remains that we will continue to invest to drive that top line growth. So the different initiatives that we continue to do, which George just mentioned, will continue. We have that as one of the levers that we can use to support that investment as well.

Your next question today comes from the line of Matt Clements from Barclays.

A quick question on the U.S., if that's okay. So brand awareness has been a long-standing issue. How certain are you that new space is the answer? Are you thinking about changes to your location strategy at all? Or are there less capital-intense levers you can use in the U.S. to raise brand awareness, maybe targeted marketing or even if it's new space, maybe franchising?

So I mean, the great thing about the U.S. market is you can -- about marketing in the U.S. is you can target it really to individuals. It's amazing how much detail is available -- targetable detail is available on the bulk of consumers in the U.S. We use that reality across the U.S. grocery business as we use it in Primark too. So advertising or marketing can be very, very efficient in the U.S. We think that the -- we invested heavily in brand awareness around the opening of the Manhattan store.

And we have -- and I think that's been absolutely the right thing to do because we have a strong cluster of stores within range of people who are now walking to Penn Station past our store, they can get to our stores in many of the other suburbs of New York. I think some of the learnings that from store openings in good locations, but locations where we have -- where there's no reason for us to be known, I think we are going to pull back on that to some extent in the future. We're also having a good hard look at the offer. In places, it's really, really attractive for our core customer. In other places, we're very much a kind of me-too player. So I think we can sharpen the offer up too. Franchising in the states, no, thanks.

Your next question today comes from the line of Darren Shirley from Shore Capital.

A couple of questions on the food side, if you don't mind. First of all, on the grocery, you're talking positively about sort of momentum across a number of brands. But U.S. oil, which has been a headwind for some time now around margin and it looks more like sales at the moment. How is that trending that sort of headwind from U.S. oil? How do you anticipate entering 2027? And is this going to be something that's hanging around for a while?

Yes. Okay. The -- we are a bit miserable about retail oil sales in the States. And I think there are 2 or 3 things in play. The first one is that our predominant consumer again is -- and our heavy use consumer is that Hispanic population in the Smile regions who are under financial pressure, who are under pressure from ICE and are feeling a bit miserable. If you are not entertaining with food, then you tend to reuse oil one more time.

So typically, they would have been -- that population will be using oil maybe 3 times before they throw it out. We think it's gone to 4 in many cases. We don't think that, that's going to change into '27. We think also that we've got a very good joint venture in Stratus, which supplies a lot of food service oil. We are undoubtedly seeing the consequences of GLP-1s on food service demand, particularly for fried food. So again, oils, lovely businesses, very strongly branded in Mazola case, but with significant headwinds.

But as you pointed out, Darren, there are some of the other brands in the grocery segment that are doing well. And where we're seeing some of the headwinds from GLP-1, we're also seeing tailwinds within that segment, which is the beauty of having so many different businesses. So Twinings we've highlighted. George, you talked about Fleischmann.

Well, I talked about at the half year. That home baking trend continues. So good volume and value sales increase in home baking. The reality, though, is that the oils business is very big. And so negative like-for-like sales -- volume sales in that sector flow through to the bottom line in quite a big way.

But a sense from what you say, and this isn't sort of an issue that you're going to annualize and then stabilize, it's likely to be a feature for some time, a headwind for some time. Am I reading that correct.

Yes, we haven't seen a slowdown in the market decline in oils yet. It's been running -- in the old days, you would have said oil would -- oil volumes kind of tracked population and population growth. And now we're running at -- we'll be running this year at kind of mid-single-digit volume declines in the category.

Okay. And then on a more positive on the Hovis, getting that through. I've been looking at that potential merger with someone for 25 years. I mean, how do you see the time line of that? I mean I understand you haven't got a hold of it yet, but what do you think the length of the integration process will be? And when do you think you'll get that sort of a very positive inflection point from a profit perspective in 12, 18 months out?

Look, we've done a lot of planning around the integration process. A year, inside a year, now we haven't been inside a Hovis bakery for -- well, we haven't been inside of Hovis bakery. So we're not quite sure what we're getting. So I have to just leave a little bit of uncertainty about that integration program because there may be things that take us more time. There could be some that we can go quicker with. But we have a target date for when we can put -- where we can process one order for all the business and put it on one truck. And that is -- that's in the first half of next year. .

We're hoping to give you some more detail.

Yes. So we didn't really want to divert too much attention today onto a business we haven't bought yet. But there will be -- we will share more if and when we complete.

We will now take our final question for today. And the final question comes from the line of Anubhav Malhotra from Panmure Liberum.

Just 2 from me. The pound has weakened a lot recently. And given the ongoing changes in the U.K. politics, there's risk for further deterioration. Maybe if you could give us where you stand currently on FX hedging for Primark into next year? And at what sort of rates have you hedged compared to this year? And then secondly, on the Click & Collect performance in the U.K., it's been more than a year since you extended the rollout to all U.K. stores. Are you happy with the performance of the stores that you did in the second wave of completing the rollout. And has that performance been tracking in line with what you had been seeing in the testing phase.

Yes. Let me answer the second one and then give Joana the first. So Click & Collect is going well. And we measure it in a number of ways. The sales through that channel, sales, which we believe are new sales or new customers through that channel and then attachment rate, size of basket, which drives economics. Against all those measures, Click-and-Collect is outperforming our business case. And it's still growing just as -- when did the final store get it? .

May.

May. So it's going quickly, and we're really pleased with this. Pound levels.

Well, you are right to talk about our hedging strategy because we are already hedging for next year. And as we sit here, I don't think we tend to give you our average hedging rate, but we still see FX as a favorable effect for next year. Yes, we'll see what happens to the pound with all the uncertainty and turmoil on U.K. politics, but we still see that as we stand here with the level of hedging as a positive.

That was our final question for today. George, would you like to say any final words?

Just very briefly, we do think that momentum is building in Primark with lots left to do, important new leaders are coming into the business over the next few months that will accelerate both the commercial progress that's already started. It will also reinforce the capability to undertake this -- the demerger work, which is a lot of work. I don't think -- the demerger work so far is not distracting us from other -- from the day job at Primark, and that's quite important, but it is a busy period.

What else? Sugar, we've got another -- we think we've got another difficult year coming our way. But there's just a lot of uncertainty around the cost base. I take quite a lot of comfort from these commission production estimates that we've seen recently, they bode well for the future. Anything else that I've left out.

So I think we have started doing this Q3 trading update again. And hopefully, it's not a teaching, but the more in-depth level of granularity around sugar, particularly, but which will extend to the other businesses is something that is beneficial and certainly as we go into the demerger.

I think those of us who continue to cover food after the demerger, this trading update is going to be a really important one for sugar. Okay. Thank you. Thank you all for joining this call, and see you in a few months' time.

Have a good summer.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

Good morning, everybody. Just before we go on to the results, a couple of minutes on the demerger of Primark. We've -- since last November, as a Board and as a group, we have reviewed sort of all angles every which way on this potential transaction. And I think it's fair to say that as a Board, we are -- we have a deeper conviction even than before that the restructuring and the split is the right way to go.

Just to emphasize, this is not an exercise in financial engineering. We feel that each of these businesses, because of their very distinct dynamics, deserve and need separate oversight from separate dedicated boards and accountability to separate groups of shareholders, each of whom have chosen to invest in either food or retail because of a clear choice. So we are absolutely focused now on delivering this transaction.

The timing, we've talked about the end of 2027. That's to give us maximum flexibility. I suppose there's probably a sweet spot between June and October. The costs, I hope very much that we're conservative in the numbers that we put in the release. Obviously, nothing is final until it's final, but we've tried to put a top estimate there for the costs. Wittington are fully supportive, and it's all systems go. So we are excited to be proceeding with the transaction. I suggest if there are any questions, I take them at the end rather than now, and we just move straight on with the results. George?

Michael, Thank you. It's actually quite a big day for those of us who've grown up with Primark. I think it is a moment to celebrate the success of that business over the 57, 58 years, that's been part of ABF during which time it has benefited hugely from the governance that ABF has provided often in fairly idiosyncratic, but always very effective ways.

Secondly, though, congratulate -- I thought I was just going to be talking to empty chairs today, and congratulations and thank you for making in person, but I guess there are a number of you who are enthusiastic cyclists and good luck getting home in that mode of traffic -- of transport.

So I'd just like to take a moment to add to what Michael has said with a few words on why we think Primark and Food are going to be two really good separate businesses. And let me start with Primark, which is -- it's a global disruptive leader in apparel. And I think during Eoin's remarks today, you'll start to feel again some of the excitement around the business and what it is capable of. But we really do offer clear price leadership, great quality and exciting fashion in prime location stores.

And it's the combination of those three that I think together that make this such a unique business. The business has got a really top class product engine. The buying team in Dublin is absolutely amazing. We have sustainability and ethical sourcing in any discount business you need to -- I think, to overindex on your capabilities in the supply chain to convince the skeptical that actually, you are very responsible citizens and that you care about the people, in particular, in the supply chain.

We know we've got multiple levers still for long-term growth. Continued investments in value, better investor availability, increased digital enablement, more locally tailored execution. That's all stuff that we can -- Eoin and the teams can still get there.

The business has really exceptional brand strength, and we've seen that most recently in the Gulf states. It has just reemphasized to those of us who've watched the first 3 store openings, what an amazing brand Primark really is. We have provable, scalable growth model for international expansion, both of our own stores. And inevitably, when you open a franchise and that just goes off like a firecracker, you think, well, I wonder what else we can do with franchise. And again, Eoin is thinking through that.

We have a highly productive store estate. These big stores give us cost efficiencies. We have an efficient supply chain, one that is capable of further improvements, but it's good already. And we have a lean overall cost base behind the store and the supply chain as well. We have an experienced team. We have a very deep team. The capability goes a long way down through the organization, both in store management but also in Ireland. We have a solid balance sheet. We are even more disciplined in our capital allocation. It's inevitable that when you put a finance guy on top of the business that you get to see more finance discipline quite early on.

And we -- I personally just have huge confidence in the sustainable long-term value creation of this business, but what Michael says, I absolutely fundamentally believe it's time to have more specific governance and oversight of the business into the future. It's not about the next year or 2 years. It's 5 years, 10 years, 20 years out, the right governance will help the growth -- help us deliver the growth potential and ambitions for years and years to come. So that is Primark.

And then to Food, we've built a differentiated, really quite different global food group that operates across multiple parts of the food supply chain. It gives us resilience. It positions us well for long-term structural growth trends that we see in food demand. Food demand is always changing. If you're right across the food supply chain, I think you're going to have insights into that change, which are quite privileged. At the heart of the business, our strong brands and ingredients platforms, we've inevitably, because we just do, have a well-invested asset base. These characteristics will allow us effectively to compete and to grow. In turn, it will enable us to deliver attractive, sustainable returns to shareholders.

We have a deliberately devolved operating model, which, again, is quite different from other food companies, and we think it's a key strength. You put decision-making close to customers and markets. You have strong central oversight. We have a strong network of connection across the business. That putting of authority down the organization into lower levels in the organization helps us to move faster, it helps us to stay relevant locally and food is always a local business. And it also allows us to attract and retain high-quality talent.

We have any number of people who've spent very large amounts of their career in the food business, and it's a key strength. And I just refer to one, which is we are on to the third Chief Executive of Twinings, Ovaltine in 60 years. we've just got a wealth of knowledge of hot beverages markets.

And then finally, the balance sheet, cash generation gives us the flexibility to keep on investing for the long term. It allows us to keep building better businesses, stronger brands over time, none of that will change once the businesses have been separated. And finally, and again, sustainability is part of what we operate. I think it's actually knowledge that food is -- wherever you're operating food is part of the supply chain, has given us over the years some of the insights into the Primark supply chain, you are not unique. You have responsibilities up and down the supply chain. And that we will take with us in food.

The businesses, both businesses have very strong fundamentals. Primark will be the largest retail -- international retail clothing business, this is on the FTSE. And I believe that food will be the only pure-play food company on the FTSE 100, so quite distinct and worthy businesses.

Let me now turn with that to the half year results. We're here this morning to review the last 24 weeks ending the 28th of February. And let me just take you briefly through some of the highlights. We knew that the first half was going to be challenging, and that's been borne out in the numbers on this slide with group adjusted operating profit down 18%, adjusted EPS being down 15%. The difference is the benefit from the share buybacks. The half 1 performance was broadly in line with our expectations, and there's currently no change to the full year outlook despite challenges that are clearly emerging and present from the Gulf. And the exception to what I've just said is Sugar, and I'll come back to that in some detail later on.

We've kept our interim dividend in line with last year. We have confidence in the future performance of the group. We have confidence actually in the second half. We completed GBP 187 million of buybacks in the year-to-date. We'll have completed the announced GBP 250 million by the end of this financial year. Joana will go through the financial results in some detail in a moment, but let me just give you some overview.

In Primark, we made good progress. We really did in reengineering the customer proposition. That's across product, across price perception and in our digital engagement with our customers. In the U.K., these initiatives began in the autumn. And as a result, performance in H1 in the U.K. was much better. We really do have the answer, I think, to our lackluster trading of the last few years.

We delivered like-for-like growth. We gained market share in the U.K. all within a challenging consumer backdrop. Trading in Europe was weak. The initiatives and investments to drive the improvement in the U.K. are clear. We know what we have to do, and it resembles what we're currently doing in the U.K. But we've started in the unapologetically as Eoin will take you through in the U.K.

In Food, profit in Grocery & Ingredients business was impacted by the weakness that we had expected in the U.S. consumer in certain categories, particularly cooking oils and bakery ingredients. Mazola is its largest customer. Consumer franchise is Hispanic. And as you all well know, the spending in that community is well down under the -- as a result of the challenges that they face. The rest of these food portfolios in Grocery & Ingredients generally performed well.

In Sugar, the results were below our expectations. The adjusted operating loss was mainly due to prolonged low average selling prices in Europe. The crop last year was sadly better than we'd expected. Acreage was down, but yields were up. The market is still long sugar in Europe. And I'll talk about the dynamics beyond that later on and what I think it means for the outlook, both the second half and also into next year.

The last 6 months have been another period of intense activity, lots of good progress made in all sorts of places. Obviously, the two key leadership appointments when we met in November, Joana and Eoin were both are very ably filling their roles on an interim basis as a consequence of what they showed us in those interim positions, we appointed them to the substantive. We appointed them for the long term. And I'm actually delighted that we're able to do that. We've made good progress with the acquisition of Hovis.

The CMA issued an interim report at the end of March. It provisionally cleared the transaction in Great Britain, which is great. But as noted, the competition concerns in Northern Ireland, and we'll continue to work constructively with the CMA over the next few months. We expect to reach -- them to reach a final decision in the summer.

Across the group, we invested GBP 534 million of capital expenditure in the first half. These are investments very largely in growth opportunities. They have good attractive returns. And it's been exciting to see a number of the multiyear projects reach completion over the last 12 months and others will be finished later this year. And as well as investing in our businesses, we've continued to make strong capital returns to shareholders through dividends and through share buybacks. The balance sheet remains strong with 1.2x leverage.

It's worth just spending a little bit of time on the Middle East conflict and what it means for our business. From a cost perspective, the primary direct impact is energy costs, but there are others, including freight, fabric, packaging and agrichemicals. Given what we know today and given the hedges that we have in place, we expect to be able to manage the cost impacts that we're seeing through the rest of 2026. The longer-term cost impact is not yet clear, and we need to remain agile as things evolve. We're not seeing shortage of raw materials, we're just seeing the likelihood of inflation in them.

We're also focused on the impact on consumer spending, particularly for Primark. We've seen what we think is an impact in just the last couple of weeks in Primark sales really across the whole of Europe. And there must be a risk that if the conflict persists, consumer spending will keep on being subdued.

And with that, Joana?

Thank you, George. Good morning, everyone. So let me take you through the results in more detail. Group revenue was GBP 9.5 billion, which is flat compared to last year at actual rates, with a net benefit from foreign exchange translation of GBP 76 million. At constant currency, the group revenue was 2% below last year, as George just said. Primark sales grew 2%, while overall sales of our food businesses declined by 3%. Group adjusted operating profit was GBP 691 million, a decrease of 18% at constant currency. The majority of this was due to the lower profit in Primark, Grocery and Sugar compared to the first half of 2025. There was a small impact from foreign exchange translation, a net benefit of GBP 4 million. So let me take you through the detailed performance by segment.

Starting with Primark, and looking first at sales, which grew 2% to GBP 4.7 billion. While Primark's like-for-like sales declined overall by 2.7%, the performance by market was very different. In the U.K., Primark had good sales with growth of 3% and like-for-like sales growth of 1.3%. And Primark gained market share in a difficult U.K. clothing market. This was a strong improvement driven by actions to reenergize Primark's customer proposition, and Eoin will take you through those later.

In Continental Europe, sales declined 1% and like-for-like sales declined 5.6%. The consumer environment remained weak, and while similar initiatives to the U.K. are being implemented, they're at an earlier stage. Our store rollout contributed 4% to growth with good execution across our key growth markets in the U.S. and Europe and through our new franchise model in the Middle East. Primark's adjusted operating profit margin was 10.1%, as we expected. Gross margin was lower due to the higher level of markdowns, as we effectively managed inventory levels. This impact was partially offset by favorable foreign exchange and supplier efficiencies.

The margin also reflects a significant step-up in the investment across product, brand, digital and technology, as we focus on like-for-like sales growth and the business growth in scale. We maintained a strong focus on cost optimization and efficiencies, which helped to offset cost inflation. Our full year guidance for Primark is unchanged with adjusted operating margin expected to be approximately 10%, so similar to what we had in the first half. As George said, given what we know today, we expect the cost impact from the Middle East conflict to be manageable in 2026. We remain alert to potential further deterioration in consumer spending and to the longer-term impacts.

Moving to Grocery. Sales of GBP 2.1 billion were in line with H1 2025. Growth in international brands was offset by lower sales of U.S. oils. Adjusted operating profit decreased 20% at constant currency as expected and primarily due to the lower profit in our U.S. oil businesses, both from our retail brand, Mazola and from our joint venture, Stratas. Grocery profit was also impacted by the effects of higher cocoa costs and U.S. tariffs on our international brands. Our grocery guidance for the full year is unchanged with adjusted operating profit expected to be moderately below last year. We are positioned to deliver a strong improvement in grocery profit in H2 compared to H1 and George will set out some of the building blocks that underpin that shortly.

Ingredients performance in the half was as expected. Sales and profit in our yeast and bakery ingredients business, AB Mauri declined primarily due to the lower customer brand for bakery ingredients in the U.S. I had flagged that already as well. There was also subdued demand for our specialty yeast for using alcohol beverages. AB Mauri's other markets and categories were relatively resilient.

In Specialty Ingredients, ABFI, we had good growth overall and across most of our businesses. We accelerated investment in product innovation and commercial capabilities to drive long-term growth. Our ingredients guidance for the full year is unchanged. As with Grocery, we expect cost impact for the Middle East conflict to be manageable in 2026. It does not reflect the indirect consequences or the longer-term impact.

Sugar sales declined 9% with adjusted operating loss of GBP 27 million. In the U.K., sales and profit declined significantly due to the lower average selling prices, reduced export sales and as such, a reduction in the estimated net realizable value of our sugar inventories. This impact was only partially offset by lower negotiated beet prices. Spain was also impacted by lower European prices, although the operating loss was lower than the first half of 2025 due to the restructuring actions that started last year.

Turning to Africa. Overall profit was down due to lower sales in South Africa and Eswatini and lower production in Tanzania. Overall, for sugar, based on our view of the current market dynamics, we do not expect to offset H1 operating loss in the second half. And so we now expect sugar to deliver an adjusted operating loss for the full year in 2026. George will talk through the market dynamics and the outlook in more detail shortly.

Agriculture adjusted operating profit was GBP 6 million compared to GBP 12 million last year. This reflects two main factors: compound feed declined due to the loss of a large customer, and we are adjusting our cost base accordingly. We also had a lower profit contribution from our joint venture, Frontier, where grain trading business was impacted by unfavorable market conditions and a small crop size. Our specialty feed and additives businesses delivered strong growth. Following their H1 performance, we expect agriculture adjusted operating profit in 2026 to be below 2025.

Moving to adjusted earnings and adjusted earnings per share. A couple of points to highlight here. Firstly, tax. The adjusted effective tax rate was 24.5% in the first half which is similar to the tax rate in the first half of 2025 of 24.1%, and we continue to expect the group's effective tax rate in 2026 to remain broadly in line with 2025. Secondly, you can see that the adjusted earnings per share have continued to benefit from the share buybacks.

Free cash flow was GBP 71 million compared to GBP 27 million last year. While operating profit was lower, there was a reduced working capital outflow because of reduced inventory levels in Primark since the 2025 financial year-end. As a reminder, we have a seasonal peak in working capital at the end of the first half, and net cash balances are always at the lowest at this point in the year. You can see as well that capital expenditure at GBP 0.5 billion was broadly in line with last year, and I'll come on to some of the details of that spend shortly. Our balance sheet remains strong and continues to support investment and shareholder returns.

A few points of note. Firstly, you can see that overall working capital was broadly in line with last year. Inventory levels in Primark was slightly higher than last year. However, seasonal inventories were well managed by markdowns in the period. Secondly, the lower net cash position compared to prior year reflects the shareholder returns we made in the year, both in dividends and share buybacks. Finally, the pension surplus continues to grow and is a very significant asset at GBP 1.7 billion.

Turning now to cash and liquidity. Our half year net debt position, including lease liabilities, was GBP 3 billion compared to GBP 2.1 billion (sic) [ GBP 2.772 billion ] in H1 2025. This is due to the cash reduction I just explained. Our leverage ratio was 1.2x and is an increase on last year, but well within our capital allocation policy. Total liquidity was GBP 2.2 billion, which includes total committed credit facilities of GBP 1.8 billion. This robust position underpins our ability to continue investing in growth while maintaining resilience and flexibility.

Our capital allocation policy prioritizes disciplined investment to drive long-term growth. In the first half, we invested GBP 534 million across the group. Around 40% of this was in Primark where we continue to roll out stores, invest in our depot network, including automation, investing digital and new technology. The remaining 60% was in our food businesses. A large amount of the spend was in multiyear projects, a number of which completed in 2026. George will talk more in detail about some of these investments shortly.

Across ABF, we continue to spend around GBP 100 million per annum on technology investments, including automation to drive efficiency in our supply chains and new ERP systems to strengthen efficiency and decision-making in the businesses. We still expect CapEx to be around GBP 1.2 billion for the full year in 2026, similar to last year.

Our capital allocation approach is to return excess capital to shareholders, both through dividends and share buybacks, as I said before. Our interim dividend is 20.7p, which is in line with last year. That's a reduced level of dividend cover, but as George said, reflects our confidence in the outlook for the group.

In terms of share buybacks, we expect to complete GBP 250 million in this financial year. We've completed GBP 187 million of buybacks in the year-to-date with the remaining GBP 63 million left to complete. And these shareholder returns, alongside with our continued investment in capital in the businesses demonstrate our commitment for delivering long-term value for shareholders.

I'll finish on the group's full year outlook for 2026. The phasing of group profit was always expected to be weighted to the second half of 2026. For the group overall this year, we continue to expect adjusted operating profit and adjusted EPS to be below last year. For the segmental guidance, there is currently no change to our previous expectations for 2026 with the exception of sugar. This slide sets out the additional detail that I covered during the presentation.

And with that, let me hand you back over to George.

Okay. Let me just introduce the section on Primark, which Eoin will take over from me after this first slide, and then I'll come back for food after that. And I think it's my job to really to share some color as to what has been going on. I said at the outset, how delighted I am that Eoin is permanently enrolled as Primark's Chief Executive. He's also only the third Chief Executive in Primark nearly 60 years of history so his appointment is a very significant one.

Over the last 12 months, Eoin has taken a hard look at several elements of Primark's strategy. He's taken a hard look at the customer proposition and he's taken a hard look at the company's operational effectiveness. He has really thought about Primark's value proposition and how to refine it starting with price and price perception, which are at the heart of Primark. We now, as well as that, have a deep insight into Primark's customers across Europe, the U.K. and the U.S. We have a clear picture of who or which customers we're going after and then customer strategy because of that, knowledge can be increasingly targeted for each market.

There's been strong progress on the product offering, starting with womenswear and Eoin will tell you more about that. There's been a refocus on digital -- an increased focus on digital and how we continue to build on what is already in place. We remain excited about the white space opportunities in the U.S. and Europe. The introduction of our new franchise partnership model in the Middle East, as I was saying earlier, I think is a real game changer.

Importantly, also, though Eoin has accelerated the work to improve supply chain effectiveness and significantly reduced costs, there are loads of cost opportunities available to us. And of course, we have Filip Ekvall joining later in the year, joining Eoin's team as the Chief Commercial Officer. It will be a great addition given to his experience, plays into a lot of the opportunities that we've been identifying and that I've mentioned.

That's enough of a summary for me of the significant areas of focus in a very energized business. There's a lot to go after, and the business is really moving very fast. So with that, Eoin, over to you.

Well, that's quite an intro. Thank you. Good morning, everyone. Great to see you all, as always. Look, I am conscious as it's my first time seeing you guys since being appointed, and I'm delighted, I'm honored to be officially taking up the reins and being the third CEO for Primark.

I don't think we wasted any time, as George said, during the interim period. It allowed me to really get under the skin of the business, as George said, get out to the markets and really get to grips with our customers in each market. And I'll talk more about that in a moment. It means I am coming into the role very clear about what the job has to be done and how we're going to grow.

So let me remind you of Primark's key strategic priorities and how I feel we're progressing against them. We need to reenergize Primark's customer proposition to drive like-for-like sales. This is firstly around sharpening our price and price perception. Price leadership is and always will be our DNA, and we're doubling down on that. Major Finds has been a good start here. It's really resonated to remind people that Primark is the place for knockout value.

Prices are given, but it's quality and style we deliver at those prices that will set us apart. So we strengthened our product offer, starting with significant developments in womenswear, and I'll come back to that.

We're working on getting better integrated in our customer engagement across channels, supported by a step-up in marketing investment and we're investing in the digital capabilities to enable this, building on the momentum and learnings we have from our Click & Collect rollout in the U.K. Now I recognize the focus of reenergizing the customer proposition has been, as George said, unapologetically in the U.K. and actually unapologetically in the womenswear category also.

There's a reason for that. Look, it's our largest market. It's our largest and most strategic category, womenswear. However, we focus on H1 also on getting deep insights in our customers in some of our core markets in Europe and the U.S. also and how best to bring our offer to each market. And by the way, we did that also in the U.K. The opportunity now is to roll out more activity in more markets and in more categories into spring, summer and into autumn, winter. All of the key product initiatives will be delivered across the store estate, including more in-store activation in Europe.

We also have more Major Finds across the U.K. and in Europe in H2 alongside increasing marketing activity in Europe as well. Look, we recognize it's going to -- it might take more time to implement the same level of digital customer engagement in these markets, but our richer customer and our market understanding of Europe has given us confidence that, as we begin to dial up the local marketing activity, including local influencer partnerships, more targeted digital marketing and greater use of CRM, these initiatives will have an impact.

And that goes for the U.S., too, similar story. We've taken a stand back to work on the target consumer and are now seeking to execute a step-up in more tailored products and customer engagement activity.

Moving on from the customer proposition, I still feel very excited about the significant white space opportunities in both existing and new markets. We've been focusing on how best to unlock this with a clear lens again on the local customer opportunity. This now includes the new franchise model, which I'll speak to in a moment.

Underpinning all of this is really an overall transformation of the Primark business. We've talked about this for a while with our investment in technology, in supply chain, in digital and in cost optimization. There really is a lot of activity going on here. And we spent the last number of months organizing ourselves for success here to deliver on the investment case that George laid out at the beginning.

I think despite the near-term headwinds and uncertain environment, that's the overall medium-term and long-term message, roll out more of the reenergized customer proposition, attack the white space and transform business for the future.

So let me now give you a little bit more color on the progress to date in the U.K. and the customer proposition, including digital engagement in the white space development and in the transformation. We've definitely made progress in reinforcing our value proposition and price leadership in the U.K. and our brand metrics shows that, that is the case. As I said, our focus has been on womenswear and activation of womenswear in the U.K. which, again, our biggest market, our biggest category, and it's actually central, really, to our brand strength.

In the U.K., we now have had Major Finds drops pretty much every month, every few weeks, actually, since September, all in womenswear and they're achieving their objective, which is to remind core customers of what Primark is all about. So firstly, helping to tackle the price perception, but they're also selling out and driving footfall into stores with attachments buys. And finally, they are working very well for us online in terms of sales and in digital engagement.

Moving on to Denim. Denim has been a focused category for us in H1 with a lot of product in store and customer activity. I'll come back to the customer activity in a moment. On the performance, we've invested significantly in the performance wear category. This is Primark value in action and innovative fabrics delivering quality comparable to product costing many more times, unlocking an entire new category for us and democratizing it for our customers.

We maintained a strong focus on unbeatable value in everyday essentials. Primark absolutely dominates nightwear, and we have seen good like-for-like growth across underwear and nightwear. We're becoming more strategic with our curation and coordination in our fashion lines and stores, which is resonating well with customers. It wasn't in the half, but our Shockingly Chic campaign, which is nicely modeled by our CFO today and that some of you may have seen launched. It launched a new design-led womenswear main range that sees us return to our fashion roots, offering incredible style at Primark prices. This curation alongside continued ongoing partnerships, including our newest with Coleen Rooney, which has been very successful, means our womenswear fashion offer is broader and better than ever.

And finally, we've expanded our offer with a new youth label, The Scene, which targets a discerning and different younger customer who is looking for trend-led fashion prices that they can afford. It's early days, but the initial response has been very encouraging.

Our product engine is working well. And I think the trick is -- as I said, is to broaden the focus from womenswear into other categories such as menswear, kidswear and lifestyle and be clear on our focus, including what we don't do.

Okay. So let me move on then to -- where am I? So I should just say, overall, the focus on womenswear and with the focus on the activation in the U.K. as a result in the good like-for-like sales growth and the strong market share gain in the U.K., which it was in the slide before, but anyway, I missed my chance.

Okay. So then moving on to -- on the activation, particularly in the U.K., let me talk about two things. One, better integration of our approach; and two, using our digital flywheel more effectively. Again, it's got a U.K. lens. We significantly stepped up our marketing investment in the U.K. but critically driving more integrated customer engagement and reach. A couple of examples to illustrate this. In September, we launched our fully -- first fully integrated U.K. campaign, In Denim We Can which is followed by the Shockingly Chic campaign, the more recent one. Both are multichannel spanning in-store, TV, paid social, CRM, out-of-home plus Primark's typical strong organic reach.

These are very first full funnel activations for Primark. The denim campaign delivered strong ROI and improved brand health and early results from our latest Shockingly Chic campaign are also encouraging.

We are also really exploring the potential within influencer marketing markets. Our collaboration with Perrie Sian at the end of last year, Perrie's Primark Picks delivered strong sales, particularly online with our first launch delivering our highest ever Click & Collect performance.

On overall digital capabilities, we're continuing to invest in the customer experience and functionally on our website. Our website traffic was up 37% across the business in H1. We are rapidly growing our CRM customer database with a further 1 million customers added during H1 to now reach over 5 million across our markets and 3.5 million in the U.K. alone. We are seeing the benefits of having this data. We know e-mail engagement is contributing to healthy store traffic, particularly again in the U.K.

Of course, our digital flywheel in the U.K. is strengthened by the usage and the sales of Click & Collect, which is nationwide in Great Britain and continues to grow. In the U.K., we've just launched our app which includes the ability to purchase through Click & Collect and the app is now available in Ireland and Italy and will be rolled out in Spain and Portugal in the second half.

So moving on to our expansion. It's a new space contributed 4% to sales in the first half. We opened 11 owned stores in the half, 4 of these were in Europe, including in growth markets such as Italy and Poland. Five stores were in the U.S. where we now have 38 stores in total. I remain very confident about our proposition being differentiated and highly attractive to U.S. customers. As I said earlier, the detailed work to deepen our understanding on our target consumer in the U.S. will allow us to be laser-focused on how we grow, better tailoring our product, our customer activation and indeed our store footprint.

Awareness is still the big opportunity, which is the main reason why we're looking forward to our Manhattan flagship opening in a couple of weeks on May 8th. The prime location puts us on the map for millions of New Yorkers and U.S. stores, and it's going to be a big moment for the U.S. brand.

As George said, our new franchise model is incredibly exciting and a real game changer, as he said. Our first store in Kuwait has traded better than expected. In March and April, we opened our first two stores in Dubai, which, despite the circumstances, have also traded well above expectations. And we've got an exciting pipeline ahead, even again, despite the circumstances including opening in Bahrain and Qatar this calendar year. And fundamentally, we just believe over time that this new franchise model creates opportunities for new market entry.

And then finally, moving on to transformation. George and I have talked a lot about the activity to invest in the business in the future. We've stepped up our overall approach to transformation, which we will update you on over time. I'm going to talk to you just to three elements today: cost optimization, supply chain effectiveness and overall technology investment.

On cost, let me give you three examples of delivery in the first half. Firstly, the rollout of self-checkouts. We now have self-checkout in 250 stores. It's great progress, but it's still only half of our store estate. So plenty more to go after. I remind you, the self-checkouts typically reduce labor in stores by about 10% and improve the customer experience. Secondly, continuous improvement in our store labor model has also delivered ongoing cost reduction. And thirdly, in the period, we've now moved some of our transactional central functions to a third-party business service model, which will deliver efficiencies over time. So all very good progress.

On the second pillar today, supply chain effectiveness, there's a lot of activity going on. We see this as a big unlock for growth and efficiency. In H1, we neared completion of our new depot in Northern Italy and continued with other automation projects. And then there's a lot going on in the third pillar. Again -- I mean if there wasn't a lot going on in technology, you'd be wondering what's going on and again, we made good progress on the overall technology agenda. Some of this is in fundamental core systems to modernize our business as we scale.

Some of this is in more technology and systems to enable us to drive growth and productivity. Again, I will provide more updates on this in the coming months and indeed years. Overall, Primark's transformation agenda, it is a multiyear project which will underpin the acceleration of top line growth and drive cost reduction.

With that, I'll hand you back to George.

Thank you. Let me move on to an update of our food businesses, which will be all I talk about in the years to come. As I said at the outset, the food businesses have made good progress in the half across a number of areas despite the damp financial results. We continue to invest in marketing, innovation technology and capacity, all to drive growth. And this has set us up well, I think, for a strong improvement in profit in the second half. The first half performance was broadly as we expected to be with the exception of Sugar. And with that introduction, let me now go through the different sectors.

Starting with Grocery where profit in H1 was below last year. And the primary reason for that was weakness in U.S. oils, both in our retail brand, Mazola and also in our joint venture, Stratas. Stratas predominantly serves food service customers and the lower-end food service market in America is quite restrained at the moment. And Mazola is clearly navigating a headwind. Its core consumers are the Hispanic population, as I've said. We've continued to see those consumers significantly reduce their spending in a difficult environment.

They're not entertaining each other and they're reusing oil. And their spending is well down. We have responded where we can. We've improved affordability through promotions, and we've focused on smaller formats. It's important that we don't give up on our customers here. So we've retained our advertising share of voice. Something like 80% of the branded marketing spend in this category is ours. These high spend is what has underpinned our steady increase in market share and sales over a number of years now.

We remain the #1 brand. In fact, I think our branded market share is about the same as the next two combined. We really are strongly placed in the category, and we want to remain so.

As we go into H2 in Mazola, we're annualizing the reduction of sales that began in H2 last year. So the year-on-year comparator becomes a bit easier. For Stratas, the reduction in out-of-home eating by those consumers and lower procurement margins led to a reduced profit contribution in the first half, and we expect more normal margin levels to improve profit in the second half, and we've got some of that baked in already.

If those were the two problem children, let me go on to better areas of performance. So the international brands, led by Twinings and Ovaltine, but also with the World Food brands and Chatham and others really did -- really had a good year. Twinings had showed good volume-led growth supported by strong innovation. The innovation pipeline and the pace of innovation in -- across Primark -- sorry, across Twinings has accelerated markedly in the last couple of years. And then the marketing has all been excellent. The advertising campaigns are all best in class. So good growth in the U.S. And that was also driven by an expansion of our e-commerce business there. I think Twinings now is the largest brand on Amazon in the United States.

But there have been other highlights as well. Blue Dragon, part of the World Foods portfolio saw volume-led growth across the U.K. and across international markets. We had some really good exciting new product launches, particularly in Korean, which we supported with strong in-store merchandising. I don't know any of you have seen the World Foods section of Tesco in the U.K., it's really strong. Patak's also had a good year of innovation-led progress. Jordans showed good growth. It was helped also by new products like the protein boost granola. Mazzetti, the balsamic vinegar brand, double-digit sales growth in H1 with good performance across a number of its markets.

Good sales growth in the first half in the international brands didn't translate in the half into profit growth. And there are a couple of reasons for that, and they both relate to Ovaltine. The first one was the effect of higher cocoa prices. They peaked in the first half of 2026. It is our certainty that those prices have come down and some of our positions that we've taken with lower sugar prices -- sorry, lower cocoa prices, which again gives us confidence of that improvement in half 2. It's as close to being baked in as it can be.

And then Secondly, we started up the new factory in -- Ovaltine factory in Nigeria, which is an incredibly exciting long-term prospect for us with 7 million babies born every year in that market. But there have been -- but start-up costs a reality of any commission. Commission has actually gone well. So I'm not flagging disaster and things breaking, but there are just inevitable start-up costs, which are first half related. Second half, they don't repeat.

Now I've gone slightly off-piste. This is a new slide, but I think it's quite an important illustration of some of what we're about in food. In future conversations, we do want to -- particularly over the next 18 months, we do want to shine a light on some of the less known parts of the food portfolio. And I've given you four here, their brands that are small, but very successfully accessing niche categories of food and niches where there are good growth project -- growth prospects. So for example, they don't include Gentleman's Relish.

The sales growth in our Sports Nutrition business was over 30% in the first half, led by hydration brand, High5, explosive growth in that category, and we're in it in the U.K. and in it at scale. Anthony's Goods had another year of sales growth in the high teens. Anthony's, and I think I've mentioned in the past, is a leading U.S. brand of organic ingredients and superfoods. Essentially, if you're California and you make smoothies in the morning, you're going to be using some of Anthony's products. And that trend is growing very quickly and spreading across the states. And again, we've got the #1 position in a number of those ingredients and exciting future.

At the moment, it's just online delivered through Amazon in time, we hope it will become -- getting to bricks and mortar and then the growth becomes several X times -- the potential market becomes several X times what it is at the moment.

And then we had good strong growth, again, within World Foods in two more recently acquired brands, Al'Fez and Capsicana which are used for Middle East and in Latin American cooking. And again, good market characteristics in both those.

If you take all those businesses together, they only have sales of about GBP 100 million, but it's still GBP 100 million. And so they're small. Their combined sales growth in H1 was about 20%. We like these categories and we can manage these sorts of businesses because of how we are organized. And so we can be in the smaller scale, but fast-growing areas of the food market, and we will be.

If I look ahead to the second half in grocery, we will see that strong increase in profit that Joana mentioned. Firstly, we -- this is a typically seasonal business. First half is always weaker -- the sort of profit flow-through is often -- it's always, I think, second half weighted. Part of that actually is the crumpet season in Australia, but that's just a kind of anecdote for you. There are a few reasons why the shape of first half, second half is deeper at this time around. And I've mentioned the cocoa costs are there. the Nigerian facility is up and running.

There will be -- there are some other costs which have come down in the second half. So U.S. tariffs have come off a bit, both in tea and also in [indiscernible]. Interested to see that you now have a route to getting your money back on overpayment of tariffs, and I hope that Eoin is on it. And then there have been some go-live costs for new ERP systems. So ACH in the states has gone live. There were some start-up costs on that. The project has gone very well, but there have been costs that are being borne in the first half. The same, I think, is true of Twinings, Ovaltine, which is nearing the end of its ERP journey.

As I noted earlier, we do expect more normal margins in Stratas. We're already seeing it in the future book and that will increase our profit contribution. In Australia, we'll benefit from the new capacity at Tip Top, so the new bakery or the bakery extension and rebuild in Western Australia. In Australia, and then this is just a comment about the Gulf, we've seen steep increases in fuel costs. We have a really big distribution task in Australian bakery. We have had a fuel surcharge accepted by most of our customers already. It's part of what gives me confidence that the second half profit that we can cope with the Gulf on the cost side.

And finally, in Twinings. We have a bunch of new products hitting in the market, particularly in Australia around cold in the second half, and that will drive stronger profit in the second half. But it's the only one where we, I think, still got a lot of work to do. The rest of these causes of profit increase in the second half, I think, are more or less locked and loaded.

Let me go on to Ingredients and start with Mauri which is our yeast and bakery ingredients business. The key driver in bakery ingredients now is product innovation, I think, particularly in the era of GLP-1s. We develop products that meet very specific consumer needs in each local market. And we've just called out on this slide some of the product innovation for the U.S. market. So lower fat content donuts, egg-free cake mixes and so on and so forth. We've installed the new sourdough capability in the U.K. It's now up and running and is filling up fast. We've commissioned, and we're supporting our customers innovation with sourdoughs.

So it's not just being able to sell them product that's relevant, it's also giving them the technical expertise to turn -- to enter into the sourdough market. And again, that is going well. Bakery ingredients technologies can replace fat, eggs and without compromising on taste and texture. Some of the -- they showed us some of these solutions the other day, and they were really compelling. Donuts with 30% reduced fat which still tasted extraordinarily indulgent. But in the first half, the ingredients profit was -- sorry, in AB Mauri was impacted by a weaker demand in the U.S. market and also by reduced demand for specialty yeast. We have a very good strong position in specialty yeast for an alcohol manufacturer. And we're inevitably at the receiving end of some of the shutdowns to distillation capacity, which have occurred in the States and in Scotland. Some of the distilleries are turning back on again now, so it's picking up. But there's been a marked step down in specialty consumption.

ABFI, which is the Specialty Ingredients portfolio, most of the business in that portfolio delivered good and in some case, really good growth in the first half. In Pharmaceuticals, our excipient, actives and vaccine-related products all grew well. And lipid sales, which again is part of the pharma portfolio, they were lower. They're expected to recover in the second half. In Food & Beverage and in Health & Nutrition, we had good growth, driven by yeast extract growth, enzyme growth, botanicals growth and extruded protein crisps, which also grew. We do continue to invest. We're strengthening our teams and capabilities across R&D, commercial and business development.

And we have a number of ongoing strategic capital projects. In first half, we commissioned new capacity for the yeast extract business in Germany, and there's more -- there's another project there that we'll be completing hopefully in the second half, which, again, will increase unlock capacity and sales.

One of our businesses in March, SPI Pharma, agreed to acquire a German company called Elementis Pharma. That's a business that will strengthen SPI and our position in pharmaceutical actives. These are antacids in particular, and it will expand its offer in digestive health.

Let me turn now to Sugar and starting with Europe. Remember, we have two very different businesses. We have two European sugar businesses for the U.K. and Spain, and then we have a lovely portfolio of sugar businesses in Sub-Saharan Africa. We firmly believe that the European sugar businesses are capable of generating a lot of cash in years to come, even in a market with long-dated trend of volume decline. And they've demonstrated this over years. Sugar consumption in the U.K. and not every kind of health commentator recognize this fact, sugar consumption per head of population in the U.K. peaked in 1965 and has been going down since.

We've also had some step-change reductions in demand, particularly when the sugar tax was introduced to the beverages category.

So we've coped profitably with reductions in demand, industries, which are in decline, can nonetheless generate a lot of cash, and that's what we firmly believe sugar will do.

We have in the U.K. a highly efficient business in British Sugar. We are one of the lowest cost producers in Europe, if not the lowest cost producer. The assets are well invested. The only CapEx that we're investing and have been investing for the last few years has been about reducing our energy costs. They've been good projects with good short-term paybacks. The one that is underway now to put steam drying into Wittington is partly funded by -- with taxpayers' money. These are nice fast payback projects. There is no other significant CapEx requirement for British Sugar into the future.

In the U.K., the market share -- our market share is over 50%. We are really well placed. We have a super industrial brand. We are well known for being a very reliable, high-quality supplier of sugar. The customer relationships are in good shape.

And then lastly, producing in the U.K. gives us the added protection, that it's probably worth GBP 10 a tonne, maybe GBP 15 of the English Channel. And so our U.K. business is just potentially a great business in a market that's declining albeit, but the European sugar industry is more than capable of coping with reducing supply -- reducing demand.

So why are we losing money, again? The answer is that the European prices have been low for a couple of years. The market remains oversupplied. The surprise this year, sorry about it, was that yields from a reduced acreage across Europe were very good. Some of the best sugar yields in Northern Europe prevented the acreage reduction from turning into -- turning Europe into deficit.

The other thing that's worth mentioning is that the surplus is actually quite small. It's just that, that surplus has driven very aggressive pricing. So that aggression will go away once the surplus goes away, but I can't help but feel that we've overdone the price reaction given the level of surplus.

There needs to be a rebalancing of supply and demand. If you look at sowing intentions, they are well down across most of Europe. If those reduced sowings combined with a more normal yield outcome, then I think there's a good chance that the market will be in deficit will be short sugar. There's stock still in the system, which will flow through. So I think the -- we can't expect price reaction to be very early and very strong. And we haven't seen it starting yet. Hence, the warning today about the second half and about next year. We just haven't seen prices reflecting an anticipated shortage of sugar. Maybe we'll get there, maybe we won't. We don't know at this stage. But I think it's right to call out that right now, sugar prices remain subdued.

In Spain -- so that's U.K. But in Spain, there are some of these similar characteristics around market pricing. The restructuring we did last year, though, has changed the business significantly. We were predominantly a beet processor and now we're predominantly a cane processor. As a cane processor, you can back-to-back sales contracts, which you can't do in beet. So we've derisked it. Now that Spanish business will never have the same scale to be at the level -- the cost level of British Sugar, but it's largely a beet business -- sorry, it's largely a cane business now and a trading business.

So we think that -- I mean there's more to do, but the heavy lifting and the cost associated with any restructuring in Spain, in particular, we've taken all that. So we think Spain is in a much better place. There's also new leadership in place to take quite a different business forward.

I think I've gone through most of the characteristics of the second half. Our own sugar production, since those have been -- we're not playing our part in taking sugar full capacity. We produced 8% less sugar in the harvest just completed than what we produced in the year before. And next year's -- the sowing intentions in the U.K. are off another 8%, 9%. British Sugar in the old days, you'd have thought 1.25 million tonnes, maybe 1.3 million was normal. We produced 1 million last year. We'll be under that this year. We're playing our part in coping with industry demand reduction.

We will have another trading update in July. We will give you more information about how the crop has progressed. At that stage, we will also tell you more about the start-up in Africa, which is -- the timing of the start-up determines how much of the profit in their campaign falls into this year and how much will spill into next year.

And so with that, let me move to Africa, which is now over half of the sugar revenues. Now this is half the sugar business and more. The fundamentals are really strong, growing population, very high market shares, very well-branded sugar business with very good routes to market in a place where that is quite difficult to achieve. We're always going to get some weather-related events, but the long-term fundamentals are intact. At this stage of the year, again, the start-up crop risk is still ahead of us. So when we come back in July, we'll be able to say, look, Malawi, Eswatini got away on time. We think Tanzania might be late. We think Malawi is going to be late. As I say, it tips money into next year from this year, and we'll tell you as much as we can about it.

We have increased the -- the last thing to say about Africa is that very big investment in Tanzania, the new factory is complete. We had quite a lot of wrestling to do with it before the rains came and we had to shut it down for the rainy season. We've done a lot of very good work in the off-crop, and we have a fair degree of confidence that when it starts up again, probably in June, it will run much better than it did. It will take a while to ramp up to its full capability. I remind you; we built it because there's a significant shortage of sugar in Tanzania, that's a supportive government and sugar demand is growing every year.

There's also a project there, which is -- will be complete around about the same, around about June, I think, to build a new distillery to produce high-quality potable ethanol. It will be the second distillery we've got from that site. That second site is almost sold out, already. So these are lovely economic opportunities that we face into -- in Africa.

So finally, on to agriculture. The focus is on growing our portfolio of value-added specialty products. We've still got some of the old stuff, but it's reducing in importance. The new premix plant in Vietnam is near complete also in China. The integration of the full-service offer for dairy farmers in the U.K. continues to progress, and we're beginning to look offshore to see where that model is relevant. Our compound feed sales were well down. I noticed in November that we lost our largest customer in the U.K. It's allowing us to adjust our cost base accordingly, and that work is well underway.

And then finally, I do feel for our good folks at Frontier, the JV because they've had a horrible combination to cope with of a very small crop that goes all the way back to the wet autumn in 2024, and then -- which led to small U.K. harvest, they merchant that harvest. And then actually, even despite the volatility in some commodities that the Gulf situation has caused, there's been very low soft commodity volatility, lowest in kind of 10-year period. And you need that -- as a trading business, you need that volatility to trade on. So it will come back. It will come back and -- but just not in the first half.

Let me finish on the group outlook. The financial year, the outlook is unchanged with the exception of sugar, where I think we've told you what's going on. That outlook does take into account the expected cost impact of the Middle East conflict, which we have good reason to think is manageable. It doesn't reflect the risk that if the conflict persists, there's a further -- that's accompanied by a further deterioration in consumer demand. That's a risk that remains out there.

Primark has made very strong progress to reenergize the customer proposition, albeit in a consumer environment that's challenging across all our markets. The food business is positioned for strong improvement in profit in the second half of the year. The businesses are all well invested for long-term growth. There are a number of multiyear projects completing this year. That's a very good thing. And our strong balance sheet supports whatever resilience we have to display. We're confident in the long-term fundamentals and growth projects -- prospects of both the retail and food businesses. Today is the day to reconfirm that.

And with that, let me stop and open up for questions.

William Woods from Bernstein. Three questions, if I may. The first one is just on Primark. Primark is an independent business. Do you think it changes your approach to long-term growth and capital allocation or enables you to do anything differently?

The second question is looking at H1. Obviously, you had some quite significant margin compression year-on-year. Did you buy too much or get the buy wrong? And would you aim to get more stability into your margin going forward?

And then the third and final one is you obviously completed a massive review of the business and its structure. Do you want to conduct more portfolio review in the Foods business?

Do you want to take the first two?

Yes. Yes. Look, I -- well, actually, I mean, George, you might comment on, I don't think it changes much. Look, I mean, the style, obviously, Primark has been part of ABF for, well, forever. And it's been kind of a long-term approach. So I think fundamentally, that's the culture. I don't think it changes the long-term outlook and thinking and so on. But more to the point around governance and focus and all that sort of thing, a slightly different point. And that's my personal view.

If we didn't think that this change in governance -- governance wouldn't accelerate long-term growth in Primark, we wouldn't be doing this. That is essentially what we're trying to do. And it's just an increasing belief that if you get the right expertise in the room, you will take better decisions. And we've reached the stage where with that complexity in the business and the scale, we need that.

I'll do the margin one. I mean, yes, look, I mean, inevitably, we did buy too much. I mean, hindsight is a great thing, of course, isn't it? And the markdown -- the level of -- higher level of markdowns in the first half reflect that. Buying too much is a feature of trading as well, right? So I think, obviously, as we look into the current period, obviously, we've got to be very, very thoughtful about the buy and all that sort of thing, but we wouldn't be expecting the same level of markdowns to repeat themselves.

And then no, this review has been about where Primark governance essentially. But we've been doing a lot of portfolio work in food. Vivergo has gone. Chinese sugar has gone. Mozambique sugar has gone. Spain has changed into refinery business. Bakery, we hope we'll own Hovis and that will address the problem. We've been buying some of these smaller positions. I think we'll see more in ingredients over the next few years. I think Elementis is just the start of a very attractive acquisition. So that food portfolio, if you're going to access as we want to, new markets, new growth opportunities, M&A has got to be part of it.

And then the existing holding, you've got to be sure that it really is a cash cow, otherwise, there's kind of no point to it. We've got a couple of -- we've got Australian meat; we still need to do something with. It's not the biggest thing out there, but it neither ticks the cash cow box nor the growth box. So yes, what are we going to do? But I think most of the other -- what people would fairly harshly describe as bleeders. I think we're well on with doing something with.

And can I just follow up, George, very quick -- Eoin, very quickly on the product, you're confident that you're getting product right. It's just the allocations that were maybe wrong into this year.

Yes.

Well, don't forget that the weather was very benign. So we also had a lot of winter product that we need to shift, and it's better to do so.

We've reequipped a lot of families with coats at 70% off in January.

Which is partly to do with the allocation around of last year...

Yes.

Yes. Yes. Yes. That's right.

It's Richard Chamberlain from RBC Capital Markets. Also three for me, please, if that's okay. So I mean just following up on the margin point on Primark. I wonder if you can give a little bit more color on your expectations or sort of impacts on digital and marketing initiatives on the margin and what you've seen so far and what you're expecting in H2?

On the sugar side, George, can you maybe just walk us through a little bit more on the change in guidance? Is that all sort of EU pricing related? Or is there also a change in expectation for Illovo? Are you also saving still is it GBP 30 million from the Vivergo shutdown from last year?

And then just finally, on the demerger plans, any sort of updated thoughts or initial thoughts on the capital structure for both businesses, where will be -- what sort of balance sheet will you be looking to run for both sides? Just any sort of high-level thoughts on that?

We haven't said anything officially about balance sheet structure. I think you can look through to the Wittington majority control of both and assume that there's a degree of conservatism that's going to characterize the balance sheets of both companies. But let me not say anything more on that.

We did say that it's going to be both of them will have very strong balance sheets...

Yes.

Both businesses as stand-alone.

Yes. Yes, those savings from Vivergo are there. We've still got some people on site making sure that the site doesn't deteriorate too fast while we wait to make a decision about whether there's a buyer or whether we dismantle it or whether the U.K. falls out so spectacularly with the Americans that the trade deal is undone. And then we'll see where we go. I think we sort of moved on from Vivergo.

Illovo, there are a couple of headwinds. So the delay in the Tanzania start-up or the difficulty of the Tanzania start-up has delayed the ramp-up, and that will affect the profitability of the second half in Tanzania. Actually, pricing, which we were worrying about in Tanzania has come back reasonably well.

And then we've had too much sugar coming into the South African market, which -- where there is a -- there should be an automatic tariff adjustment mechanism, which hasn't been working very well. So there's been -- I wouldn't describe it as a flood, but quite a lot of third world sugar, third-party sugar come into Africa and depressed margins in South Africa and in Eswatini. So there are some headwinds, but they would fall into the camp of kind of normal stuff.

Yes. And Africa is second half. So...

Yes.

We'll need to see how the campaign goes because it's just starting in some of our markets.

Do you want me [ to have a ] go? I mean you might comment on it as well on the margin on the digital and marketing and margins. I mean you would obviously expect us to say this, we're quite judicious in how we think about the spend in both and the returns that we're generating from both. So I don't think there's anything to really say for this financial year. I think your question was more medium term, is this, or is it?

Yes, I think you mentioned Europe...

Yes. No, there will be a step up. There will be a step-up in the second half of the year, but we're expecting it to return, but it's not material to the overall group margin.

No, I think when we gave guidance in January, we had assumed those investments, in fact, that they were in place as well in the first half. It is to drive the growth, and that's what we always said. It wasn't about the margin. So the guidance that we're giving is confirming what we said in January is as we are here today with the minus 2.7% like-for-like, the margin would -- the resulting margin would be at around 10%, including the investments which we had already identified for driving top line growth. Adam?

It's Adam Cochrane, Deutsche Bank. Just a couple on Primark, please. Can you just outline the sort of any time line for the improvements and changes that you're going to make in the European business? I'm assuming it's as quickly as you can go. But what -- when can we expect these various bits you've seen in the U.K. to come into Europe?

And secondly, on the price and value perception study or whatever is you've undertaken, can you just give us some color on where you see the consumer, what they're thinking about your brand? And with the improvements that you've seen in the U.K., is that more related to the price investments that you've made, the marketing side of things? What do you think or have you asked what has actually driven that change in price perception in the U.K.? And from that, is price perception the main issue in Europe from your study? Or is it something else?

Good questions, Adam. Why don't I kind of start with that second question first to lead into the first one.

Yes, look, I think the color we're seeing on the consumer improvement in the U.K. isn't just on price. It's price, it's quality, it's style and fit. And in fact, the brand metrics demonstrate that. We already actually do score very highly in price actually in our brand metrics. So it'd be hard to move them higher. But remember, price perception is a very -- it's a kind of a complex thing, right? Like it's not just straight lowest price always. It's kind of are you getting the best value really for that product.

So I think everything that we're doing around sharpening our price, sharpening our product, more engagement, telling people more about it, that's all going to improving that overall picture. So -- and indeed, the metrics we're actually seeing in the U.K., we're not seeing those take-up metrics actually in Europe, right? So we're not seeing them. So that's what gives us kind of confidence to a certain extent.

So the barriers are the same that we have to kind of go through. We have to remind people of the incredible price. And some of that's about shouting about it, some of that's about showing about it. And then we've got to make sure people come back because the quality that they get is stands out. I think that's all very doable in the markets in the European markets that we're operating in. So that's the answer to your second question, I think.

And on the timing, look, we're -- notwithstanding, of course, the world is kind of sort of obviously a bit of a tricky world out there. I think we were seeing really good green shoots actually before kind of conflict, if you will. And I think we're pretty confident that a lot of what we're trying to do is going to impact certainly a little bit in spring/summer, but certainly more into autumn/winter into next year. I would say -- and as I said before, it will take more time. Digital will take more time in Europe because we don't have the infrastructure, but it will take more time. And so that's, I think, the way to think about it.

Warwick Okines from BNP Paribas. Two on Primark, if I may. Firstly, could you give us a sense of the steepness of slowdown that you've experienced in recent weeks?

And secondly, if we've already seen a slowdown in Primark, why aren't you assuming this continues? I mean is it because you don't think there'll be a real inflationary pressure on the consumer? Just seems odd to me.

That's a good question. I mean like the -- the slowdown was marked, but not dramatic, right? I would tell you the best way to describe it since middle of March.

Weeks really.

Yes. Yes. So -- and I guess the consumer probably -- I think, well, like all of us, we hoped it was going to be short and then when we realize it's not going to be short, and you can see the sort of inflation is going to impact, the consumers start to think that's -- we all know what's happened.

I'll let Joana reconcile the guidance point. But the one thing I'd say is that, first of all, it's very early days. And secondly, like we win and lose in this environment, right? So it's very hard for us to kind of say exactly with precision as exactly how it's going to go as to how long and prolongs. We've seen in the past that people do drop out of the market, but we've also seen trading down, right? So we just have to see how this all develops.

Yes. Yes. And it is early days. We know that we're comping against Easter last year. So reading the figures is not as straightforward as sometimes it could be. We're confirming the guidance, which for the second half is based on negative like-for-like. So there is a degree of we thought conservatism when we issued in January. The green shoots we saw in March were good. So we feel that there's something that's working there. How much of a decrease we will see in the consumer, it's still too early days, Warwick.

You may have seen the BRC numbers of 2 weeks ago, which were minus 12. We beat that, but it was still a pretty shocker of a week.

Yes. And that was U.K. I think it is important to say this is not just the U.K., which again links to we've got comps against Easter last year, Mother's Day in March, at different dates, Carnival and some. So we know there is always a little bit of a bumpy read into the figures into the second half. And as I say, the guidance is on the basis of continuation of what we had seen before, the negative minus 2.7%.

The other thing I would add just to it -- just [ to add ] that the activity we just talked about plays very well into the environment that we're going into. So we'll have to see how that all plays out.

Gary Martin here from Davy. Just a couple of quick questions from my side. Just the first one on the demerger, and I appreciate the color given on the balance sheet, but would it be possible to get maybe a bit more granularity just around the free cash flow generation dynamics of both of the businesses post separation? That's my first question.

And then just around the outlook, just on the sugar side, how do you expect just the various moving parts around the Middle East conflict and the, I'll say, the inflation across the energy side, potential inflation across the distribution side, how does that feed into your 2027 outlook on sugar and sugar pricing?

Yes. Again, we'll have a lot more to say about cash flows in both businesses. Again, one of the things that we had a very hard look at actually before we had made the announcement in November was to ensure that both parts could fund their own ambitions. Primark -- under normal circumstances. Primark has always been cash generative. The only time it wasn't was obviously when we were shut down during COVID. And food, food CapEx probably won't fall in '27 because there are payments still to be made, but it will fall in '26...

'28.

'28. And that, combined with the eventual return of sugar cash flows will make that business a good solid cash generator, able to fund its -- as I say, its ambitions and also deliver shareholder returns.

The free cash flow was definitely one of the key areas that we spent a lot of time with the whole team of Rothschild there. Thank you. We supported all those 23 and 11 scenarios of stress that we put through the models. But as you say, George, they both standalone from a free cash flow perspective. And for that matter, in terms of capital allocation, the assumptions going forward at the moment we've taken are similar to [indiscernible]...

And the separation of the balance sheet is actually -- well, none is ever completely straightforward. But the leases obviously go to Primark. The pension surplus mainly applies to plc. And...

Yes.

That's more to say.

Sorry, Gary asked about the Middle East as well.

Okay. Gary, sorry. Thank you, [ Joana ]. There's one potential bit of upside, which is there are some very big sugar refineries blockaded at the moment in and around Dubai and that supply well over 1 million tonnes of white sugar into the area. Well, Europe has got a fair amount of white sugar available if some of these markets want it.

Energy, look, these are energy-intensive businesses, and the growing of the crops is an energy-intensive business. Costs, if they don't come down soon, will have to flow through into pricing. It's not as if there is a high level of profitability in European sugar, which can just absorb these cost increases. So that has to be passed on.

We're not alone in that.

Yes, it's everyone.

Clive.

Clive.

Clive from Shore Capital. Two, if I may. And I know you're going to teach us about the demerged entities down the lines. But George, you used the word specific governance as a benefit. I just wondered if you could just flesh that out a bit more because it sounds like a very important part of your thinking.

And then on the food side, you touched on quite a lot of themes, and I think it was characterized best by you saying food is a very dynamic industry. Why do you think or how do you think AB Foods is well positioned for whatever ahead is in food markets? I mean you touched on GLP and food security just the two, but yes...

Specific governance, I think there are 2 slightly different benefits for the 2 different businesses. In Primark, it's about getting industry expertise around international, around digital, around marketing onto the Primark Board. I think the scrutiny of the business, a lot of you here are already retail analysts, will remain properly intense and valuable for the challenge that you provide. But it's getting that richer wisdom across a business, which has so many more complexities than it would have a few years -- would have had to cope with a few years ago that will bring the better decision-making and thus the growth.

I think in food, I think it's -- the issue is more the market scrutiny and pressure, which we, quite frankly, I haven't really felt for a long time for 2 reasons. Firstly, because you're great at retail, but you don't know the questions you should be asking me sometimes on food. And secondly, because Primark growth has given us such great top cover in food, we just haven't been exposed enough.

And I remind you that the ownership model is about the -- about Wittington providing the long-term focus and wherewithal and the market exposure keeping our feet to the fire. So I think having our feet put to the fire will be a good thing. Maybe it will be more for my successors than for me. But nonetheless, that's what we hope -- that's what we're aiming for.

And then, of course, for individual shareholders presented with these individual investors presented with the biggest international retailer on the FTSE and the only largely pure-play food company on the FTSE, we'll have, I think, really interesting things that they might want to invest in where at the moment, the combination of the two hold some investors back. So that's really the governance story.

Let me answer, sort of get at this kind of food is an interesting place, isn't it, through a couple of anecdotes. The first one is that the fastest growing scale brand in ABF last year was not Twinings. It was Fleischmann's home baker's yeast. We are selling in the States more home baker's yeast than we were to American consumers than we were at the height of COVID, and it's all the increase is to the under 35s, and some of you will be aware -- more aware than me of the return of whichever gen it is to those sorts of activities. There are more knitting circles, crocheting clubs, book clubs, food preparation activities going on than you would have ever expected to see. And we are seeing it rather wonderfully in Fleischmann's yeast, where we have a 70% share of the entire U.S. market.

If you'd ask me 10 years ago, would you get more growth out of Twinings international brand kind of health credentials scalable across all sorts of markets or Fleischmann's yeast, I have thought you were pretty stupid people to be asking the question. But you just never know. Food changes the whole time because the consumer changes the whole time.

And I think that there is, in that ABF willingness to not think that focus is the only good thing, but to think that actually involvement in lots of different places with teams that know those places and an organizational model that can support those teams. I think that makes us unusual and a bit special.

I can look at Anthony's Goods and go, where is all that growth coming from? Well, it's a lovely Managing Director, Brittany England, who lives in California and knows that world, makes movies every morning and is just all over the specialty ingredients, being supported by a really commercial boss, Imad, who's telling her all sorts of things that she wouldn't have found out for herself. And that's -- the combination of the 2 drives, I think, our right to be there and has turned Anthony's into the biggest player in that specialty ingredients market in place.

So we do like the diversity because we can't anticipate the future. We can see certain trends, and we can be as agile as we can possibly be in exploiting those trends. But you've kind of got to be in it to play. Now there are certain things that we believe the population growth, for example, is a really good place to be. This is why we like Africa, why we built a factory in Nigeria and why we like Australia, for instance. And there are certain trends like foodservice, like premiumization, like healthfulness now, which I think are going to persist and where I think we are fairly well exposed already, but with much more to do.

Does that sort of get at some of what you've...

Good stuff.

That's a stuff. There'll be more. I can rant forever on other stuff.

Sreedhar.

Sreedhar.

Sreedhar Mahamkali from UBS. Maybe hopefully, the last 3. One on grocery, a couple on Primark, please. Mazola, you've talked about the challenges, George, but can you talk about market share trends for Mazola? Are you still holding the leadership? And also, what are you doing to attract a different customer? How do you grow it again? First one.

Secondly, I think, Eoin, you talked about price leadership in Primark, sharpening it. Can you expand a bit more, which markets, categories? How broad is this, price sharpening? Or is it very sort of specific products in specific markets? And is it being done with margin investment or kind of slightly different by almost altogether?

And thirdly, also on Primark, you've talked about self-help technology investments driving productivity. Does that give you confidence enough to say Primark can sustain a double-digit margin medium term?

Let me answer the Mazola question and then Eoin can pick up the second one.

Well over half our sales of Mazola are to the Hispanic population. That population consumes 3 or 4x as much oil, vegetable oil, cooking oil as the rest of the population. So when that population starts to reduce oil consumption, you inevitably lose market share. It's not that we're losing relevance to that population. It's just they're buying less and they're such big consumers. We've been working on a heart healthy campaign probably for about 10 years. It's relevant to the Hispanic population, but it's also relevant to the broader population.

And actually, our share gains over the last few years have come from that broader population. But they're more -- that other population -- the Anglo population, if I can call it that, use more different oils. They've gone into olive oil in a bigger way. They use more own label. They're a bit indifferent about whether it's corn oil or whether it's rapeseed oil or whether it's soy-based oil. So it's not such an attractive market. But we have been chipping away at it with a degree of success, but it's a little bit every year and based on that heart healthy positioning of the brand. It won't replace the volume losses in the Hispanic population because we have such a big share of that. They're so loyal to the brand and they consume so much.

Yes. Look, I mean, I think I'm not going to give specifics about where we're going to do -- where -- I mean we have price leadership now, right? Like we check our price leadership every single day in every single market. We have price leadership now. So we're pretty comfortable where we are today. But we've got to keep on making sure we're on it, and we're leading. So I'm not going to talk more about that.

I mean, look, it's too trite to always say you're just doing simple margin investments because you might have a gross margin investment, but obviously, you're looking for volume pickup that ultimately will be overall operating margin neutral. So I think it's just too tight to say that. And obviously, it goes to your second question is sort of how you might kind of fund elements of that market investment, which comes down to how you do self-help, et cetera, and so on.

So I think it's -- we believe in the medium to long-term, to answer your second question, we're pretty clear we can go after what you're going to call double-digit margins, but like healthy margins in the context of driving growth, continuing to invest in the proposition, and that's not just price, but it's also marketing as well and digital. There will be moments in time where digital will be a drag on margin because when you have undercapacity, particularly, you will have points in time with that. But -- and then the self-help to go after that. So there's a lot to go after.

I talked about cost, cost in stores, cost in depots, cost in further across the supply chain and including centrally, there is -- the supply chain effectiveness is not just about cost also, it's about making sure that as we grow, we're getting the product into the right place, which also goes to growth. I've talked about the digital opportunity, areas like data and technology, there's lots to go after there that will both inform cost and growth. So yes, I've kind of give a rambling answer, but I think I got your question. There you go.

It's [indiscernible] from Citi. Just two from me on Primark, if you could. So firstly, according to your typical FX hedging patterns, we think there may be some quite material tailwinds just from the dollar sourcing hedges that you've done coming your way sort of next fiscal year. First of all, is that correct?

And secondly, if that does end up being the case, given you've said you're happy with your price position today, does that get -- help you get towards, let's say, investing in your marketing or anything else? Or do you just simply give it back in price to maintain that?

And secondly, I don't know if you'll answer this, but just as you've done a deep dive at Primark, have you had any discussions about like what a steady-state margin could look like and whether there's any room for potentially a home delivery online channel if the unit economics of that could work?

Do you want to talk about FX?

Yes. [indiscernible] you're right, tailwinds every cloud, there's a silver lining. And certainly, as we continue to see the dollar move, we have got a tailwind on FX. I think what we said before is we're using that to drive top line growth. Now is that going to be through investment? Is that going to be through price investment, technology investment, all the different things, all the levers that Eoin has just gone through as we were talking to Sreedhar's question.

It is not something that we're going to be using to orchestrate the margin or to manage the margin. It is to drive the top line growth. And it's good to have some tailwinds because to your second question about steady-state margin. I think as we sit here, talking about steady state feels quite difficult because of all the uncertainties that we've got. But what we said around the margin is that it is a resultant of what we're doing and the initiatives we are taking to drive top line. Do you want to talk about?

Yes. I mean one thing just to clarify, when I say happy, like we have price leadership. There's always opportunities to continue to invest. I think on -- yes, look, obviously, as we've done lots of thinking about the future, we've done both the kind of thinking of the growth and indeed the cost side of life. And I mean, actually, I would say it's predominantly been focused on the growth side, as you can imagine.

Look, home delivery, it's still a return dilemma for us. Our position hasn't changed there. We've got loads to go after in digital. We're doing, I think, some really exciting stuff there. And -- yes. look, I mean, I think we're pretty clear that we can go back to [indiscernible] first question, I think I'm pretty clear that we can continue to drive good margins, but more importantly, strong cash with the growth opportunities ahead of us.

Thank you all. Again, congratulations on getting here. This has gone on a while. You've got an hour and 13 minutes to get back on the underground. And thank you very much for your continued involvement in our lives. And it really is -- I just sort of go back to -- this is quite a big day for us. It's quite a big day. And we have to remember that. But thank you very much.

Thank you.

Thank you.

Good morning, everyone. Thank you for joining the call. This morning, we published a trading update for the first quarter of ABF's 2026 financial year, that is for the 16 weeks to 3rd of Jan. We have brought forward this update, and this is due to the weaker-than-expected performance in Primark over the period. The period has just closed. We are still finalizing the Q1 numbers for the individual businesses and for the group. However, the release provides our best estimates of where we expect to close the period. George would very much wanted to be on this call. It hasn't been possible given the timing is with our businesses in the U.S. this week and is currently on a flight back. In the light of the information of this release, we are updating the market as soon as possible. And I've asked Eoin Tonge to join today to share some additional color on the performance in Primark. Before we move to Q&A, I'll briefly set out the key elements of today's trading update. I'll start with Primark. Primark's total sales were up approximately 1%. Performance between our different markets was mixed with a continuation of the same trends we had in the second half of 2025 and which we highlighted in November. So in the U.K., total sales grew 3%, like-for-like sales grew 1.7% and Primark gained market share in a difficult retail environment. And as has been well covered in the media, consumer sentiment remained weak and the Christmas trading period was particularly disappointing for clothing retail and mild weather didn't help.

However, as we set out in November, the range of actions we've taken in the U.K. to improve Primark's customer proposition has continued to drive an uplift in sales. We're focused on improving price perception, strengthening our product offer, increasing the use of digital marketing, driving growth in Click & Collect and refurbishing our store estate. We've seen good results from actions to date, particularly in womenswear, and there's much more to come. As I say, Eoin will be able to provide some more color on these.

In Continental Europe, the consumer environment has continued to be tough without any meaningful improvements over Christmas for our consumers. We are focusing on value we offer our customers in those markets, but we haven't yet rolled out those same initiatives that we had in the U.K., although they are now underway. And given the positive reaction we've seen in the U.K., we do expect this to drive improved performance in Europe in the coming months. Again, Eoin will provide more detail.

In the U.S., the retail environment has been volatile, and this impacted consumer sentiment and footfall.

Across markets, our new store rollouts were well executed. We opened 11 new stores in Q1, and as expected, new space contributed around 4 percentage points to Primark's total sales growth. We are particularly pleased to have opened our first franchise store in Kuwait, which has been trading very well.

Overall, Primark sales growth in the period was below our previous expectations, and we now expect Primark sales growth in the first half of 2026 to be in the low single digits. In a difficult trading environment, we significantly increased markdowns to manage inventory levels effectively, which has impacted profitability. We have a broad range of initiatives in place and planned for the coming months, which we expect to drive improved sales and profitability, particularly in Europe. However, if Primark's current sales trends were to continue in the second half, we would expect the adjusted operating profit margin for the full year to be approximately 10%, similar to the first half as we continue to invest in growth. It should be noted that the first half of 2025 had a nonrecurring benefit to profit of EUR 20 million.

Moving now to our Food businesses, where we had a mixed performance in Q1. In the U.S., as we said in November, we had expected ongoing consumer weakness to lead to lower sales. We have seen a worsening in this trend. In our cooking oils and Bakery Ingredients businesses, the impact has been more acute than anticipated, and we are more cautious on the outlook. As a result, we now expect both Grocery and Ingredients segments to deliver adjusted operating profit for the full year that is moderately below last year.

In Grocery, the effective phasing means the impact will be more significant in the first half of the year. In our U.K. Bakeries business, we are focused on achieving regulatory clearance as quickly as possible for our acquisition of Hovis. We are making good progress, and we are pleased to have now moved into Phase 2 of the CMA's review.

For our other food businesses, Sugar and Agriculture, there's no change from the guidance we gave you in November.

For the group, we now expect group adjusted operating profit and adjusted EPS to be below last year.

With that, I'll hand you over to you for questions.

[Operator Instructions] And your first question today comes from the line of Richard Chamberlain from RBC.

A couple of questions, I guess, probably for Eoin, if you're on the line, Eoin. Happy New Year, sorry, tough first half. But the first one would be, given the accelerated sort of channel shift online, we seem to be seeing, particularly in Mainland Europe, is there anything that Primark can do to accelerate its digital strategy in Europe? I'm thinking about Click & Collect plans, use of stock checker, that sort of thing, improving the digital experience. That's the first one.

And then in terms of Primark U.S., is that a market thing, do you think? Are we seeing sort of consumer weakness, particularly in sort of Primark segment there? Is that across the board? Or has that been sort of concentrated in certain areas of the U.S.

Thanks, Richard. I'll start, and then I'll hand over to Eoin, if that's okay. So the channel shift to digital in Europe, well, we are continuing to work on digital initiatives. And certainly, in the U.K., our digital presence, and we do have Click & Collect in all our stores is helping to drive the push on those initiatives. For the U.S. and the reason why I'm answering the question, we -- it is a theme across not just Primark, but there's definitely a lot of volatile consumer behavior, and we do feel the environment is volatile, not just for Primark, but as we pointed out, for other U.S. businesses, particularly U.S. oils and our bakery ingredients. Eoin?

Yes. So yes, so look, on the European piece, look, of course, there's more we can do on the digital side of things. I think it will take a little bit of time to get transactional like Click & Collect into some of the countries, but we can do more before that. I mean, interestingly, I think if I look at sort of performance in Europe and particularly if the -- if I look at some of the categories, particularly that have underperformed, it's not, I would say, online competition where we've really suffered, if you will. It's more bricks-and-mortar competition. But that being said, I think the future of direction of travel is for us to get more digital into Europe. And I think that's somewhat inevitable.

Now on the U.S., yes, nothing more really to add to what Joana already said. I think look, as we said in November, like I mean, I think it's just going to be a very bumpy road. I think with the tariffs and with everything else that's going on, I mean, I think it is just a challenging environment. I think we'll navigate through it. It will probably be another 12 months is my guess, of sort of like uncertainty volatility. But we just have to navigate through it. I don't think it makes much difference to the kind of our sort of long-term point of view in relation to the U.S.

We will now take the next question. And the question comes from the line of Jon Cox from Kepler.

First question, just really on the plan for the -- or the review of the split of the 2 businesses. Just wondering if the profit warning has an impact potentially delaying any sort of decision or if not actually scrapping that plan because maybe it shows that being sort of like a conglomerate is actually not a bad thing to be if parts of the business aren't working. That's the first question.

Second question, just on that, am I understanding you right, Eoin, you are saying that Click & Collect will ultimately be rolled out into Europe? I don't think I've heard you say that before.

Thanks, Jon. Happy new year to you as well. The review of group structure, as we said, it is ongoing. The decision has not been made, and we will update in April, as we said. Just to remind a couple of the things we said at that point in time, the purpose of the review is to assess the long-term benefits of the separation. It's understanding what's best for the shareholders and the businesses in the medium to long term. So today's trading update is not impacting that per se. The core rationale remains the same. Primark is at scale, there's complexity. The food is less well understood, and we think that, that is something that we can benefit by having the 2 businesses separate. So that rationale still holds. And continue to be true. So at this point in time, the trading update does not mean anything else than what we are updating, which is making sure that the guidance is appropriate to the market. It's a separate topic from the review.

The second question on Click & Collect. What -- I think Eoin has mentioned it in the past that we do have plans to roll in Europe. It's the timing and how we have the right infrastructure to do so and to be able to benefit from that digital activation. Eoin?

Yes. Look, look, I don't think the answer for us to improve performance in Europe is just about Click & Collect. I think there's a number of things that we believe we need to do. I mean, initially, it's going to be about just getting -- improving our product proposition, getting more customer engagement. I think they're the kind of -- they are the priorities. I mean we feel pretty good that we can get back on the front foot into Europe on the back of that. I think the -- I think I have said before actually that I would see us going in Click & Collect into Europe in time. And so I think that's going to be part of the journey as well. But I don't -- I think there's plenty more we can do to get back on the front foot in Europe.

I wonder if I just quickly follow up on grocery and the weakness there. I wonder if you could just talk about any particular segments at all, a lot of news flow on GLP-1s. We saw the U.S. new dietary recommendations come out overnight. Any thoughts on that on your grocery portfolio and maybe some of the weakness we're seeing?

Yes. I mean, at the moment, what we're seeing and certainly you have seen in this first quarter is a continuation of what we had seen before, which is linked to the U.S. consumer being quite subdued and particularly in some of our customer base of the Hispanic population following everything that's been happening. from April onwards. So there's definitely a consumer piece. And again, that's impacting our bakery ingredients customers that are seeing those volume declines on the bakery ingredients, and therefore, we are seeing volume declines as well.

GLP-1 is a good question, and we're certainly following it closely and monitoring closely. It feels that it's a bit too early to call that as one of the impacts, but we are looking at what does that mean. At the moment, it feels like the biggest factor is that this consumer that is going out less, the food services is down. So there's quite a lot of factors that just point to our customer base being quite subdued.

Will now take the next question. And the next question comes from the line of Adam Cochrane from Deutsche Bank.

A couple of questions on Primark, if I can. In terms of the European performance, can you give any -- is there any differences by region across Europe? And what I'm really thinking about, is this weakness driven by lower footfall into the stores? Is it lower basket size? And when you're sort of analyzing this, is there any concern over brand awareness, price perception that is completely different between the U.K. and Europe? Or is it really just you think the initiatives that you've taken in the U.K. that's the main difference between there in Europe?

And the second question I've got is you talked about sort of increased markdown. Historically, you've had quite an effective clear-as-you-go mechanism for clearing through inventory. But looking forward now, do you have to think about changing the amount of product that you're buying given this weakness in the European consumer to try and manage the profitability? Or how are you going to balance between sales and profitability?

Thanks, Adam...

Do you want me to?

I will -- yes, sure, Eoin, go with the European performance. I probably will comment on the markdown as well, but go for it.

Yes. Look, I mean, there have been differences across the different markets, I guess, over the last, I would say, 12 months. But that being said, I mean, I would say that if I look in the period, there's been a sort of just general weakness in a lot of our markets across Europe. I think there is quite significant market weakness as well. I don't think a lot of this -- a lot of this is actually market forces. I mean some of it -- some surprises on our end and some of it's kind of always -- there's always kind of when you look back in time, execution things that we could do better. And I'll come back to that when I talk about the markdown point. But if I look at -- France and Italy have been a bit challenging. Germany hasn't been great. Spain has been okay. It didn't have a great Christmas, not that dissimilar to what we saw in the U.K. So I think in France and Italy, it has been a little bit more about kind of footfall and Germany to a certain extent. I think a lot of the things that, yes, we have to work on are the same things that we have been working on in the U.K. I think brand awareness is not a problem in Spain. It's a bit of a problem in France. We're not hugely scaled in France. We are strong in the metropolitan areas, but that's to a certain extent. And a little bit in Italy, but just again, it's a scale point. I think the price perception points are -- were I think have been evident for the last 12 months or so. I think we need to -- as I said in November, I think we need to get back on the front foot in relation to us being, again, being known for the sharpest on prices and with proper blue water. So that's the reason why we're rolling out major fines into Europe into the second half of the year or sorry, from now actually.

So I think a lot of those kind of things are the same. And like awareness, there is definitely more we can do on the customer engagement side. If I look at some of our competitor base, bricks-and-mortar in most cases, they are doing more on the customer engagement side of things.

On the markdown, before I hand back to Joana, the -- look, I mean, obviously, we've been asking ourselves that question an awful lot in the last few weeks as to what you would do differently, et cetera, and so on. We did come into this year with strong expectations. We didn't think they were unrealistic. They look now a little bit unrealistic, obviously, in hindsight. But I think some things have surprised us. I think probably surprised the marketplace, cold weather product, in particular, sort of has not been -- has been soft and as a result of that's been a large part of the markdown. Christmas performance, as we've talked about. And I think to a certain extent, just general distress in the marketplace has impacted as well. So I think, yes, there are clearly learnings. I mean, I think particularly on that cold weather side of things, I think we will have to think a little bit more differently as we go forward. So yes, you always have learnings when you come through an environment like we just had.

And I'm not going to add much into that. Just on the expectations for the full year margin of the 10% if the current performance continues. Of course, as Eoin said, what we are expecting is to get that like-for-like growth moving, particularly in Europe now, and we've seen it in the U.K. But the assumption at the moment is, yes, if we have the same performance, we would have those markdowns. But we are expecting to see some of that traction coming through with all the initiatives that Eoin has started mentioning in his answer.

Does any of this change your outlook for the store sizes that are required in your European rollout? I know that over the time, you've changed store sizes in the U.S. and Germany and other places. is this going to change what your ideal Primark store looks like across Europe for your new stores?

I'm not sure the last period changed it too much. I think, Adam, I think the -- we have been reducing the store sizes anyway actually. I mean if you look at the stores we've opened in France more recently, they've been smaller than historically. So I think we have been reducing that anyway. So I think there's a lot more that goes into sort of how we think about the store sizes like obviously, also thinking about sort of what the future overall sort of channel kind of approach might be, et cetera, and so on. But look, I think we've already been reducing the store sizes. We would only be targeting kind of large store formats in sort of primary metropolitan areas. So look, yes, I'm not sure -- I don't think the last period of time is giving me cause for thought. It's more about how we think about the long term.

Your next question today comes from the line of Sreedhar Mahamkali from UBS.

A couple of questions, both on Primark, please. Firstly, I guess if you could -- I mean, you just referred to the markdown. And clearly, that must be a meaningful part of the margin decline of 160 basis points. Could you just help us deleverage versus that markdown impact so that we can start to get our models in line for next year? And also, while we're there, anything you can help us in terms of how we should think about Primark margins into next year more midterm? That's the first question.

Secondly, you referenced to improving price perception in the U.K. Can you just give us a little bit more context there? When have you started to see these improvements? And when did that actually start to turn into better sales trends? Just give us a bit of a time frame so we can think about what we should be modeling over time in Europe as well?

So on the markdowns, and actually, I think it's a relevant question as we look at the bridge between our expectations and now. The difference between what we said before, which is just slightly below last year's margin and where we are guiding now, which is the 10% is really mostly the markdown. So if you think in terms of moving parts, that is the bulk of it. The deleverage is a factor, but actually, we are taking some mitigations against that. It's still a part, but the big bulk is markdowns, as you mentioned. And into midterm, if you're meaning in terms of margin going forward, well, it's too early to guide anyway. We don't even know what are the tailwinds or headwinds definitely for going into next year. And in any event, I think I'll repeat what we've said before, which is we are putting things in place to drive like-for-like top line growth. So the purpose is not to guide to a target margin. So focusing on top line sales. And the price perception in the U.K., maybe Eoin?

Yes. Price perception, yes. Yes. Look, I think -- I mean, I think you can see from the market share -- I mean, there's a few different ways of looking at price perception, right? I mean, I guess the ultimate one is probably our market share performance, which is where we're kind of getting back to relatively consistent market share growth, which is good. And I guess to a certain extent, that's been happening for the last 5 months or so, and which I think is good. I mean it's probably a number of things. I think we are quite pleased with how the major fines has sort of helped remind people of our price performance. So -- so I think -- and that's been going for the last few months in the U.K. And if we look at our -- if we look at Brand Tracker, certainly that we've seen a good improvement as well on that. And so yes, I mean, it's been a matter of months, I would say, Sreedhar, in terms of where we've been able to sort of kind of get back on -- in sort of getting that perform as well. I mean I think there's still work to be done, right? Like we -- I think major fines is only one element of it. I think there's a number of elements to it. So I think we're pretty committed, as I said in November, to really getting back to properly being a proper value leader. And I think that the major fines is one aspect of the things we're going to do from now and into the future. So I think that's what I'd say. And hopefully, that will kind of see us getting back into growth, both in Europe and continued growth in the U.K.

And the next question comes from the line of Georgina Johanan from JPMorgan.

Three questions from me, please. First of all, just in terms of Eoin, you made some comments sort of seeming to suggest that it wasn't online players who were taking share in Europe, but rather maybe some particular bricks-and-mortar competition had stepped up. Am I understanding that right? And if so, is there a particular player who has improved incrementally? And is that a local player or a kind of a global player? Any color on that would be really helpful, please.

Second question, just in terms of the markdowns, is that spread quite evenly across markets? Did you experience a significant increase in markdown in the U.K. as well. I, of course, ask given that, that market was in positive like-for-like territory.

And then finally, just in terms of pricing in the U.K., I know you're doing a lot of work around price perception. But I just wanted to understand, have you actually lowered like-for-like prices in the U.K.? And if so, by how much, please?

Thanks, Georgina. Happy New Year to you as well. I'll take the markdowns and then hand over to Eoin, if that's okay. As you would see the performance in the U.K. means that we would have more markdowns in Europe. But all that said, the markdowns were not predominantly in Europe. There was a spread across the different geographies, but less so in the U.K. In terms of the other 2 questions, Eoin?

Yes. Yes. No, I mean, I think -- no, I mean, Georgina, when we'll be looking through the sort of relative calculative performance and sort of trying to see where we've won and where we've lost. it's clear to me, it's not a pure-play online story alone. Maybe that's the point that I'm making here. Like so if I was going to say there's parts of accessories that is clear that is a bit more sort of pure-play online. But if I look at kind of places like to a certain extent, kidswear and a bit on home, I'd -- if we look at that, that more local bricks-and-mortar type of competition. So it's obviously different by different category, different need state, et cetera. But I guess my point I was saying here is that it's not just a pure-play online point. And for each of those cases, I think we know what we need to do. Some are a bit trickier than others, but I think we know what we need to do. And some of it is increased competition. Some of it -- I don't think we've executed as well as we could do or at least we know what we need to do to adapt. So hopefully, that helps. Pricing in the U.K., no, no. I mean the primary kind of pricing element that we've done so far in the U.K. is on the major fines, which is much more selective pricing. And yes, so we'll watch this space in terms of what we might do into the future. But for now, that's all we've done.

Yes, so we have not moved like-for-like prices Georgina.

That's really clear. If I just may follow up on that point on the bricks-and-mortar and sort of the competition. So it's not like you're saying there's actually been a step change in the competitive environment from a particular player or a new entrant or something like that?

No. I mean I think if you were to look back a longer time, I mean, it's not -- I think -- I mean, you guys know this better as much as I do is that there has been growth in the sort of the less more kind of pure apparel players. And there's been growth in those types of players. So -- and that's probably happened over time. I don't think it's not the last period of time. So in some categories like, for example, home, that has been -- there has been a step-up in competition, but it's happened over time.

[Operator Instructions] And your next question comes from the line of Anubhav Malhotra from Panmure Liberum.

I just had one more to add and again, back on the margin expectations at Primark. I mean you've given us the full year expectations probably more for a worst-case scenario where the current trends continue for the rest of the year of around 10%. Maybe you could give us more color on what's your base case scenario for Primark margins is if the initiatives that you have put in to improve the performance do actually work?

to do is make sure that we provide the estimates and on -- if we were to continue with the current performance and having the impact of markdowns, bearing in mind the expectations we have on sales. That's the guidance we're giving, but we're also saying that we are very hopeful on all the initiatives that are now being underway in Europe and are being also other initiatives that are coming into the U.K. on product, et cetera. But we haven't set a top scenario. I think what we're saying is that we're absolutely hopeful on all those initiatives as we've seen them translate into positive like-for-like in the U.K., but we acknowledge the challenges.

And the next question comes from the line of Warwick Okines from BNP Paribas.

Firstly, I just wanted to come back on your comments about the sort of balance between the top line growth and the Primark EBIT margin. I know he's not on the call, but I think it's fair to say that George has sort of generally said that he's wanted a guardrail of comfortably double-digit margins at Primark through the cycle. I'm just wondering whether the sort of success of the investment that you've had in the U.K. in terms of driving like-for-like and market share has maybe persuaded you that you can actually get a better overall result by driving top line and accepting a lower EBIT margin.

And then my second question is around the actual mechanics of the markdown and how you handle that through the quarter. Could you just talk a little bit more about what you actually did? We know the impact on the gross margin, but what did you actually do? Was this all red tickets? Or does the markdown comment you make also include some of the value investments that you've been making, maybe adjusting the sort of first initial price?

Thanks, Warwick. I'll take the first one, and then I think Eoin can give some color on the markdown and the execution of the markdown. So the balance between top line growth versus EBIT, what we said is that we will focus on driving that like-for-like and top line growth and the margin will come as a consequence. I know George is not on the call, of course, as you said. What we have said in terms of margin was that we were comfortable between the 11% and 12%, but not to say that, that was the only guardrails that we would put around the margin. And what we definitely tried to put forward is that the margin is not the objective. The objective is driving top line growth. But of course, if you got growth, you will have leverage and therefore, there will be margin consequences. We are continuing to invest. Some of that investment will be phased. Some of it will be translating into medium and longer-term growth as well. And that's why we said that the priority is that investment if the initiatives are resulting into top line growth. And of course, that's what we're monitoring very closely as we are rolling those out. But again, the margin, there isn't -- we are now down to 10% or we now accept the margin at least. That's definitely not the thinking. The thinking is let's drive top line growth and with the top line growth, we will have the consequent margin. Eoin, do you want to talk about how we run through the markdowns through the quarter?

Yes, sure. Yes. And by the way, I'll just echo what you said there in terms of where the focus and priority is, which is on driving like-for-like growth. So we're not going to do anything stupid, but we -- that's where our priority is. The -- look, I don't -- I wouldn't say there's anything -- I mean, I know it's not a great markdown period of time, but I mean, we talked a little bit about the context of that already. But I don't think there's anything sort of particularly sort of different in terms of how we did the markdown through the period. The markdown we're talking about is what I'm going to call the traditional markdown. So it doesn't include any other sort of price activity that we talked about before. So as we said, obviously, cold weather product, in particular, we sort of started to mark down as we went through the period. And then with some Christmas parts of Christmas as well as been softer Christmas, obviously, that would have kind of accelerated as well. So I don't think I would say there was anything particularly sort of unusual or special about sort of our markdown activity through the year. And obviously, the scale of it was not where we wanted to be.

And if I may squeeze in -- sorry, go on Joana.

Sorry, I was just going to say, Warwick. And as Eoin alluded to Christmas, we also know that, that's what we've seen on the high street, not just with us. It just seems to have been with a difficult Christmas period, more of a markdown. So there's definitely been a phasing post Christmas on that markdown activity. Go on, you want to ask something else?

Yes, if I could squeeze another one, just to sort of end on a slightly cherry note. I know it's only one store, but can you talk a bit about the Kuwait opening and in particular, how you're pricing relative to peers in the Middle East?

Yes. Well, maybe I'll have a go at that. I mean, yes, it's going incredibly well. We -- thank you for asking a cherry good question because I mean it does remind you here that there's still quite a lot of growth available to Primark. And we've been more than happy then with the Kuwait opening. Pricing-wise, yes, we're sharp. That's -- we're -- there's different local competitors. We know exactly who they are. That's how we operate. We're all over it. And we're the best price -- we're the price leader in the market. So -- but it's been great so far. And we've got a lot of exciting stuff next week -- next year, sorry, with Dubai and a bit beyond as well. So yes, some very -- that's a very exciting frontier for us.

Dubai is quite soon, isn't it? Dubai is coming out. We've got the store in Dubai.

Dubai, end of March. Yes.

It's definitely good to have a positive note. So thank you, Warwick, for that.

We will now take our final question for today. And your final question comes from the line of Vandita Sood from Citi.

I just had a couple on food, if that's okay. So firstly, on grocery, point taken about worsening trends in the U.S.-focused businesses, but I believe that's about 15% of the mix. So for the rest of the business, especially the international brands, I think you were planning for volume growth driven by innovation. Just a quick update on that would be great.

And on the Ingredients, as I understand, you were planning to reinvest some profits and hold margins flat. Now with weaker trading, are you still going ahead with those investments? Or do some of those need to be pushed back?

And lastly, just a quick one on phasing in the food businesses, if you could add a bit more color on that, 1H versus 2H?

Vandita, so let me take those ones in turn. So grocery, yes, the expectations we had on the U.S. consumer and the fact that they are worse than what we had expected as that translated into the first quarter is really the reason for our decrease. Just in terms of your comment about how much the U.S. business is compared to the rest, the U.S. business from a sales point of view is around the 9%, which I quoted before. The profit is more than that. And just as a reminder, we have a joint venture as well, which is consolidated just on a profit basis. So the impact of that consumer weakness and softness on the U.S. is more marked than just on the sales line. But you are very right to point out that the international brands had quite a lot of initiatives, and we're definitely seeing some of that innovation coming through. Twinings has actually performed very well in the first quarter. And we've seen volume growth, absolutely on the back of those initiatives. We actually got more initiatives in the second half. So to your question around phasing, the first thing that I would note is in grocery, there's more -- there's a shift towards the second half with more initiatives, but also a comparator that is more favorable in the second half.

In Ingredients, the investments are going ahead. Yes, we've got weakness in our U.S. consumer where actually our customers are seeing volume softness, but that doesn't stop us believing in that business. And of course, this is not about the short term, and we're hoping that, that volatile environment in the U.S. will abate at some point. Difficult to say when, but the investment proposition is very much one that we feel confident with and excited about.

Did I miss something on your question? The H1, H2. So I mentioned it for grocery. Actually, it's a very good point for the food businesses because on sugar as well, where we confirm the guidance, there is a potential technical that I call it, and then I talk about hyperinflation. But in Malawi, if we do have a devaluation of the kwacha, which has been expected in the first half of our financial year, that will skew the profitability to the second half because the devaluation will take place. Hyperinflation accounting will be applied for the half year, and we will be recovering that devaluation through the pricing in the second half. So thank you for highlighting that. Yes, the food business is very much skewed towards the second half profit rather than first half. I now summarize it, it's the comparators. It is the technical accounting on Malawi, sugar and then actually the initiatives on the international brands for the second half, which are stronger.

That was our final question for today. I will now hand back to Joana for closing remarks.

Well, thank you all for joining. Bearing in mind it was unexpected, and there's a lot of announcements today. As we say, we feel very confident, well, hopeful on all those initiatives that we talked about for Primark. But we feel that at this point in time, it was right to update the guidance. So again, thank you for joining the call. I wish you all a very happy New Year, and we'll follow up with questions on a one-to-one if there are any further questions. But with that, I wish you a good day.

Okay. Good morning, everyone. Thank you all for coming today. For those of you who don't know me, I'm Michael McLintock, Chairman of ABF. Before we get into the detail of the results, I just wanted to make a few remarks in relation to our announcement today that we are undertaking a review of the group structure. As a Board, we do, as a matter of course, regularly assess the appropriateness of the group structure. However, the current review is more substantive and has been running for a while and has reached the point where there are 2 options, to stay as we are, or to split into the separate businesses of retail and food.

Above of our consideration is whether our retail and food businesses have now reached a point in their development where they would each benefit from greater independence and a clearer line of sight into their respective activities. We believe both businesses have exciting opportunities ahead of them, but separation might lead to better understanding, which is something that should benefit our food businesses, especially.

I emphasize that no decision has yet been made. Splitting the group into 2 freestanding businesses is a complex proposition, and we need more time to confirm feasibility. Nevertheless, the fact that we're saying something today reflects the fact that there is a fair chance of the separation occurring, and making the announcement gives us the opportunity to consult with all our stakeholders without fear of leading potentially sensitive information.

I'm leading the review and has been carried out in consultation with our largest shareholder, Wittington, who have indicated that in the event of the split, they intend to maintain majority ownership of both parts of the group. So no decision has yet been taken. You will appreciate that there is a limit to what more I can say at the moment. But we look forward to discussing with all our stakeholders, and we will, of course, provide an update as soon as it is practicable.

And with that, I'll hand over to George to take you through.

Thank you, Michael. Good morning, and thank you all for joining us. We are here, of course, this morning to review ABF's annual results for the 52 weeks ending the 13th of September 2025. Before I go into the results, I wanted to say and make clear that I fully support the Board's review, and I have been and will continue to be closely involved and working with the Board throughout. I'm delighted to be joined by Joana Edwards ABF's Interim Finance Director. Joana will give a detailed review of our financials shortly.

And I've also invited Eoin Tonge to join us this morning in his role as Interim Chief Executive of Primark. A lot of good work has been happening in Primark over the last few months and lots more to come. And so I've asked Eoin to give you an update on that this morning.

Our financial results for the group this year show sales down 1% and adjusted operating profit down 12%. This was due almost entirely to sugar's profits going from close to GBP 200 million in 2024, down to only breakeven in 2025. That's the result of the sharp drop-off in European sugar prices in the summer of 2024. Prices sadly have remained persistently low since then. The rest of our businesses delivered robust financial results against the challenging external backdrop sanctioned as of the tariffs and all. We've kept though our interim and final dividends in line with last year, and we've announced today a new buyback program of GBP 250 million, which will be completed in 2026. We're really quite confident about the future.

2025 was a year of intense activity in ABF. As you know, we're about building brands and businesses that will deliver growth, cash generation and strong return generations. And to that end, we invested GBP 1.2 billion of capital to hear across Primark and our food businesses. We're now well through about wave of investment in our food businesses. A number of large multiyear projects were either completed recently or will be completed in the next few months. These are exciting growth projects that will still be delivering value, I think, in 50 years' time.

Another thing we've been doing is fixing businesses. I said in April that we had 3 loss main business that we would take action to address and we have. Firstly, and sadly, we closed our Vivergo bioethanol plant in the U.K. The regulations in any other country in the world would have meant this business was profitable, but it was the right thing, therefore, to do, to fight for its survival. However, the U.K. government decided not to make the intervention we needed, and we couldn't tolerate continued losses and so it's gone.

Secondly, we substantially restructured our beet manufacturing footprints in Northern Spain, reducing the number of facilities from 3 down to 1. This follows recent action to exit our sugar businesses in Mozambique and in Northern China, and I'll talk more about sugar later.

Thirdly, we reached an agreement to acquire Hovis Group. Combining their production and distribution with ours will deliver significant cost synergies and will enable innovation. This will create a U.K. bakeries business that's sustainably profitable. The transaction is subject to CMA approval, and we're working closely with them through their review.

Alongside reinvestment in our business, we've delivered strong capital returns to shareholders in 2025. This included just under GBP 600 million through buybacks in the year. And over the last 3 years, we've returned GBP 3.2 billion to shareholders through dividends and share buybacks.

Before Joana goes through the financial results in detail, I'll share some color. In Primark, we've reviewed our focus on a number of initiatives to drive like-for-like sales growth. And the business is in mid-flight on a lot of very good work. This includes improving price perception and improving our product offer. Progress in the U.K. has been really encouraging. The business is back on a stronger footing and there's more to come. We still got work to do in Europe, but we know what's required and there are plans in place. The consumer environment though, was weak, particularly in the U.K. but also in Europe. And Primark's like-for-likes declined in the year. Space growth was well executed and profit delivery was good.

Grocery performance was as we had expected. Our international brands are growing, but that is being masked by declines in U.S. oil and U.K. bread. Ingredients performed well. In both grocery and ingredients, we're benefiting from sustained investment in those businesses. Sugar profit was breakeven this year, excluding the loss in our Vivergo bioethanol plant. We've made progress, but there's still more work to be done, which I'll cover later. Agricultural profit was lower this year due to one-offs and less contribution to our joint venture.

With that, I'll hand over to Joana.

Thank you, George, and good morning, everyone. So let me take you through the results in more detail. Group revenue was GBP 19.5 billion, which at constant currency was 1% below last year. Of note, this year, there was a negative impact of foreign exchange translation of approximately GBP 450 million. Group adjusted operating profit was GBP 1.7 billion, a decrease of 12% at constant currency due to the reduction in sugar profits. At actual rates, the decline was 13% again, an adverse translation impact of around GBP 50 million, mainly from sterling strengthening against the U.S. dollar but also from some of our African currencies.

So let me take you through the performance by segment. Starting with retail, and I've got a couple of slides on Primark. Looking first at sales, which grew 1% to GBP 9.5 billion. Like-for-like sales declined 2.3% and the dynamics in this were very different between the 2 halves of the year and also different in the U.K. and Ireland compared to Continental Europe.

In the U.K. and Ireland, like-for-like sales declined 6% in the first half. The clothing market declined in a weak consumer environment, particularly within elements of our Primark's shopper space. In the second half, Primark's U.K. trading showed a good sequential improvement. Like-for-like sales were broadly flat, and Primark gained market share. This was a result of a number of initiatives to strengthen our value proposition and product offer.

In Europe, the shape was the opposite. A strong first half was followed by weaker trading in the second half. As George said, we have more to do in some of our European markets. Eoin will talk this morning about the actions we've been taking in the U.K. and our plans for similar initiatives in Europe. Our store rollout program contributed 4% to growth with good execution across our key markets in Europe and the U.S.

Primark's adjusted operating profit grew 2% to GBP 1.1 billion, and adjusted operating profit margin was 11.9%. Excluding a nonrecurring benefit in the year of around GBP 20 million, the underlying margin was broadly in line with last year's margin. Gross margin improved in 2025 due to favorable foreign exchange, supplier efficiencies and effective markdown management. And our focus on cost optimization and efficiencies broadly offset wage inflation, and a significant step-up in investment across product, brand and digital initiatives. Part of those efficiency savings come from the investments we've made in technology and automation in recent years.

Moving to grocery. Sales of GBP 4.1 billion were in line with 2024 and adjusted operating profit decreased 4% at constant currency. Our 2 largest international brands, Twinings and Ovaltine, delivered good sales growth, supported by investment in marketing, strong commercial execution and product innovation. These figures also benefit from consolidating our acquisition of the Artisanal Group in Australia. As expected, lower sales and profit in both U.S. oils and Allied Bakeries led to an overall decline of 4% in grocery adjusted operating profit.

Ingredient sales of GBP 2 billion were in line with last year at constant currency. Our yeast and bakery ingredients businesses, AB Mauri, delivered good underlying growth. This was offset by the impact of hyperinflation accounting treatment in Argentina. In specialty ingredients, most of our portfolio performed well. Our enzymes and Health & Nutrition businesses had particularly strong growth, offset by lower sales in one of our pharmaceutical businesses. Prior year acquisition in specialty use and bakery ingredients contributed to growth. Adjusted operating profit for Ingredients grew 16% at constant currency. This was supported by a continued focus on productivity savings across our supply chain and good management of input costs.

As expected, sugar sales declined 10% and the segment had an adjusted operating loss of GBP 2 million. The operating loss in our Vivergo bioethanol plant of GBP 36 million is included here and separately captured within disposed and closed operations. In the U.K. and Spain, low European sugar prices and high beet costs drove significant operating losses. As we said back at the interim results in April, our cost base in Spain is structurally too high. Since then, we have completed restructuring in our northern beet operations to reduce our footprint from 3 facilities to 1. We will continue to reduce costs and improve efficiency in our operations.

In Africa, performance was mixed. We had good growth in Malawi and Eswatini, whereas droughts impacted production costs and profitability in Zambia and South Africa. In Tanzania, there was an impact from sugar imports that were higher than usual. Our new sugar mill began production last week and will significantly increase domestic supply. George will talk in more detail shortly about the building blocks to improve profitability going forward.

Agriculture sales decreased 1%, and adjusted operating profit decreased from GBP 41 million in 2024 to GBP 25 million in 2025. This reflects two things: a reduced profit contribution from our joint venture, Frontier, as a result of exceptional weather conditions; and secondly, one-off costs in the year. Our specialty feed and additives business performed well, and we had good growth in our dairy business. Sales in our compound feed business remained soft.

I showed this slide at the interims in April. In a year where there was a significant focus of the implications of U.S. tariffs, this is a reminder that ABF's exposure to the U.S. is modest at around 9% of group revenue, and at least around half is domestically sourced.

Moving to adjusted earnings and adjusted earnings per share. Two things I want to highlight here. Firstly, on tax. The adjusted effective tax rate was 24.2% this year, similar to the tax rate at the half and up from 23.1% last year. This was mainly due to the introduction of Pillar 2 tax rules, which increased our tax rate in Ireland. We expect the group's effective tax rate in 2026 to remain broadly in line with 2025.

Secondly, you can see that the adjusted earnings per share have benefited from the share buyback. We estimate the accretion to EPS on a cumulative basis since the start of the buyback to be about 7%. Note, basic earnings per share includes exceptional charges of GBP 188 million compared to GBP 35 million in 2024 as well as losses on closure of business of GBP 32 million.

Free cash flow was GBP 648 million compared to GBP 1.4 billion last year. There are 2 reasons for the reduction. On one hand, the lower operating profit, and on the other hand, the year-on-year movement in working capital. In 2024, as I explained at the interims, there was a working capital inflow of GBP 305 million, which was mainly due to Primark's inventories reducing to more normal levels after all the supply chain disruptions the year before. In 2025, there was a working capital outflow of GBP 95 million, mainly due to slightly higher Primark inventories.

You can see capital expenditure at GBP 1.2 billion, which was in line with last year, and I'll come on to the details of that spend shortly. One point to note on cash tax. In 2025, it was lower than last year due to a one-off EU state aid refund of GBP 25 million. Without this benefit, we expect tax cash in 2026 to be moderately higher.

Our balance sheet remains strong and continues to support investment and shareholder returns. A few things to highlight on this slide. Firstly, you can see that working capital was broadly in line with last year. Secondly, the lower cash balance of GBP 0.4 billion reflects the shareholder returns we made in the year, both in dividends and share buyback. Finally, the pension surplus. This continues to grow and is very significant at GBP 1.6 billion, underlining the strength of our financial position.

Turning now to cash and liquidity. Our year-end net debt position, including lease liabilities, was GBP 2.6 billion compared to GBP 2 billion last year. This is due to the cash reduction I just explained. Our leverage ratio was 1x and is an increase on last year, but well within our capital allocation policy. Total liquidity was GBP 2.2 billion, and this robust position underpins our ability to continue investing in growth, while maintaining resilience and flexibility.

Our capital allocation policy prioritized disciplined investment to drive long-term growth. In 2025, we invested GBP 1.2 billion across the group, around 40% in Primark where we continue to roll out stores, invest in our depot network and add new technology. The remaining 60% was in our food businesses. A large amount of the spend was on multiyear projects that have either completed in 2025 or will complete in 2026.

It is worth noting that across ABF, around GBP 100 million of this year's CapEx investment was in technology, including automation to drive efficiency in our supply chain and new ERP systems to strengthen efficiency and decision-making in the businesses. We expect CapEx to remain at a similar level in 2026.

Part of our capital allocation approach is to return excess capital to shareholders, both through dividends and share buybacks. Starting with dividends. We are proposing a total dividend of 63p, which includes an interim dividend and a proposed final dividend in line with 2024. That's a reduced level of dividend cover, but reflects our confidence in the outlook for the group.

In terms of share buybacks, during 2025, we completed GBP 594 million of buybacks. And looking at our total shareholder returns in the last 3 years, we have returned GBP 1.6 billion in paid and proposed dividends and GBP 1.6 billion in share buyback. And today, we have announced an additional share buyback program of GBP 250 million, which we expect to complete in the 2026 financial year. These shareholder returns, alongside our continued capital investment in the business, demonstrates our disciplined approach to capital allocation and our commitment to delivering long-term value for shareholders.

I'll finish on the outlook for 2026. For the group overall this year, we expect to deliver growth in adjusted operating profit and adjusted EPS. I won't read out the segmental guidance in detail as you have it both on the slide and also in the RNS. In Primark, we continue to expect the consumer environment to remain subdued. We are focused on a number of initiatives to strengthen our value proposition with a view to driving like-for-like sales growth. And we expect new space to contribute around 4% to sales. Next year's margin will reflect investments in growth. We expect overall profit in grocery and ingredients will be broadly at this year's level. In sugar, we expect some improvement in profit.

And with that, let me hand you back to George.

So the biggest change in Primark this year has been the leadership. You all want to know who the permanent CEO will be. I can tell you that we're well underway with the selection process, and I'll update you once the decision has been made. I would hope that we can do that early in the new year. But I'm extremely pleased with what Eoin has achieved in the interim role over the past 7 months. He successfully brought together and empowered the leadership team in Primark. He's driven forward a number of critical trading and operational initiatives across product, technology, route-to-market, supply chain and marketing, and these are progressing at pace and will better position Primark for future growth and expansion.

A key priority for Eoin and the team has been how best to unlock the growth potential of Primark's proposition, both in like-for-like sales growth and space expansion. We recognize the competitive challenges in our marketplace and the customers today take a more complex route to purchase in our stores. However, two things are clear. One is the continued differentiation of Primark's value proposition, offering unbeatable prices for great quality clothing; and two, is the strength of our brand.

Two weeks ago, I was in Kuwait with Eoin and others for the opening of our first store in the region. No shopping center in the Middle East has seen a store opening like it. The queue was 300 meters long at its opening and 4 hours later, it was still 200 meters long. The average basket size was 27 items.

Our ambition on new space continues and was well executed this year. However, we're also rebalancing our focus on to driving sustainable like-for-like growth across our markets and putting a renewed emphasis on strengthening our proposition, including on price perception and our product offer. Clearly, the last 12 months of trading have been very challenging. Consumer sentiment in both the U.K. and Europe has been weak and particularly so for core customer base -- for Primark's core customer base. In that environment, though, we need to execute better.

And with that, I'll hand over to Eoin to share his thoughts.

Thank you, George, and good morning, everyone. It's nice to be here with you all. So it's been a busy 7 months on the key areas of focus that George just mentioned, I think there was already a lot of work going on in Primark. I think what we've done is really just challenge ourselves to take a hard look at our operating environment, and then be very precise about what we're going after.

The consumer backdrop is challenging. Our customers have more and, in some cases, newer choices in the value space. We also recognize our world has evolved, as George has said. The customer journey to our stores is more fragmented and more complex than it used to be. We fundamentally believe that our core proposition has never been more relevant to consumers, but we know we have some work to do to enable our customers to rediscover our value disruptor edge. Primark is the original value disruptor, and we remain that today. We need to make sure that it is always front of mind for our customers.

So let me tell you what we're doing in approaching this. Our priority in all markets is like-for-like sales growth. This is about sharpening our value proposition, starting with price and specifically price perception while at the same time, strengthening our product, starting with womenswear, better integrating our customer engagement and, of course, continuing to develop our digital capabilities to enable all of this, all the while thinking hard as to how we attack the significant white space available to us. And driving cost optimization to enable further investment in the proposition.

So let me give you color on all of those items, starting with value and price perception. Look, we still have the lowest prices in all the markets we operate in. As always, we've continued to reduce our prices whenever we've seen our competitor prices below ours to maintain our price leadership in every market. As a reminder, around 85% of our products are priced at GBP 10 or equivalent or less. But in today's environment, we need to keep reminding customers of this unbelievable value, especially as we broadened our product offering.

There is actually more to do here, but we've made some progress in the year. We started off with a campaign in April called Never Basic. It was to remind customers of the extraordinary entry price prices that we have in our essentials. We also refreshed our in-store communication, so our prices are now much more visible to customers, top basic stuff, but retail is all basic stuff. In some markets where the need is greater, we will increase this further.

But we want to do more to get more assertive on communicating our value credentials to customers. We recently launched Major Find, which simply put is wow product at wow prices. Limited edition fashion items at low price points to create a standout must-have deal. We started that in the U.K. and Ireland, and we'll be rolling that out into Europe in the coming month or so. Early days, but we've seen that this type of initiative is resonating with customers hungry for value and will drive both footfall and attachment sales.

This is just the first example and going forward, you'll see us really doubling down on communicating our value proposition to customers and getting a lot more disruptive to remind them what Primark is all about. Low prices are, of course, only one part of our value equation. You need to have a differentiated quality product offering to go with them, which brings me on to what we're doing on product.

Primark continues to offer a great quality essential clothing and fashion, and we've been developing our ranges nicely throughout the year. About half of our range is womenswear, which includes fashion, accessories, underwear, nightwear and footwear. It's the engine of our like-for-like growth, so no surprise that when we started to focus on our product evolving, we focused here in womenswear first.

We've been building and promoting talent in our team, including some leadership changes, and we've developed a much more targeted womenswear strategy overall. I'll give you a flavor of elements of that. Primark has always been about making fashion trends more accessible to every consumer. The best example last year was our investment in performancewear and the very strong results at delivered. Our product is high-quality, stylish with strong innovation and fabric, all at affordable and accessible prices, really Primark at its best.

Another big initiative is coordination. We've seen last year that as we've done a better job of curating ranges for customers, we get a strong like-for-like benefit. Our Paula Echevarría collection is the best example of this, which has continued to grow. And the sales in our last campaign were up 7% on the same launch last year. We'll be doing more of this coordination approach for ranges this year.

Primark is famous for everyday essentials, and I'd call out our success in nightwear in particular, where we're leveraging our strength to respond to newer trends. If anyone has seen the recent viral moments and store sellouts in a number of our pajama prints, it really feels like the old Primark again. Overall, these actions we've taken in womenswear are delivering results. We've seen a strong sequential improvement in womenswear sales in the second half of 2025 compared to H1 particularly in the U.K. where the initiatives were combined with increased marketing support.

Progress hasn't just been in Womenswear. Kidswear also progressed well last year. A key driver there has been newness, both in own label and through the successful expansion of our licensed offer. As an aside, I feel there is much more we can do to leverage the benefit of our strong relationships with key brands in culture, including Disney and Netflix.

I'm not going to talk much about menswear today, but we're making many of the same developments that I've spoken about in womenswear. Growth in performancewear is a great example of that.

Our lifestyle categories, however, such as Health & Beauty and Home, which account for about 10% of our sales, really had a tough year and contributed significantly to our like-for-like challenge last year. We've got more work to do in those categories, but I believe there is still a lot of opportunity as we sharpen our proposition.

On to customer engagement. We're really at the foothills of integrated customer engagement around our compelling value proposition. That said, we made some progress this year, which I think is setting us up well. We've been using paid social marketing for a number of years now, which has driven good conversion with strong ROIs that discontinued last year, particularly in the U.K., and, again, with good uplifts delivered. For example, increased revenue from paid media was up 30%. Increased efficiency of paid media was up 5%.

We've also continued with our brand affinity campaign in Germany and our brand awareness campaign in the U.S. The impact we've seen on our brand metrics has been positive, but more to do to optimize our marketing approach. Towards the end of the year, we had our first truly integrated performance marketing campaign in the U.K., which focused on denim, which has been a tough category for us for a few years now.

The In Denim We Can campaign was a multichannel campaign, including out-of-home, paid social media, TV advertising and visual merchandising. The response has been good, not just because our denim sales have been up 12% in the U.K. following the campaign. It has also had a positive impact on our brand metrics, including consideration and brand reappraisal. There's so much to go after as we continue to integrate and optimize our brand and marketing approach. The initial focus, as George has mentioned, has been in the U.K., but we'll expand this to other markets in the coming year.

What's underpinning our more integrated customer touch points is continued investment in our digital assets. We've continued to invest in the customer experience on our website, including better functionality. We've had 177 million visits to our primark.com website last year, an increase of 24%. Customers are spending more time on our website and are viewing more of our products. Critically, 20% of the website visits this year have -- customers have used the stock checker, which is the best measure of intent to convert.

Plus, our CRM database continues to grow. It's reaching 4 million customers, and our survey data shows that e-mails have been a strong driver of store visits. And finally, we launched our Primark app in the year. It's only in Ireland and Italy so far, but the results have been good, and we're going to roll that out into other markets this year, including the U.K.

Our Click & Collect service now has been available from all British stores since the end of May. It's contributing nicely to growth, and the metrics have remained very strong. The average basket size was around 25% higher than the U.K. average. And we've had at least a 40% attachment rate when people come into stores to pick up their Click & Collect, again, with higher average basket size. Our data shows that 1 in 4 Click & Collect customers have not shopped with Primark for at least 2 years prior to the first Click & Collect purchase.

Importantly, there's plenty more to do to optimize the range and drive customer awareness. Over 1/3 of our U.K. customer base are still not aware we offer the service. Given our comfort level on the customer and the financial metrics of the service in the U.K., we're exploring the potential to offer Click & Collect service in other markets over the coming years as part of more integrated market growth plan.

New space contributed 4% of sales growth in 2025. We opened 23 stores in Europe and the U.S. In the U.S., it included our first stores in Texas and Tennessee. There is, of course, a lot going on in the U.S. at the moment with tariffs and the consumer reaction to increased pricing across the market. But we have an exciting year ahead. The number of store openings will be our largest yet in this current year and includes a flagship in Manhattan, which is obviously significant from a brand awareness perspective.

We also opened the first stores with our new design concept in Europe last year. This enables us to expand our footprint across different store sizes, while still maintaining strong sales entities. It will be a key enabler for smaller store openings outside of key cities. As George talked about, we had a great time opening our first franchise store in Kuwait a couple of weeks ago, which had an amazing initial reaction. And we're getting ready for 3 openings in Dubai early in the calendar year 2026.

Franchising is an important new capability for Primark and has the potential to open up significant new market opportunities in the future. We're confident that our store rollout program, which now includes franchise, will continue to contribute 4% to 5% of sales growth for the foreseeable future.

To continue investing in the customer value proposition, we have to drive continued cost optimization. As with any retailer, cost optimization is focused within stores, in our supply chain and in central operations. There's still a lot of opportunity to go after, and we made decent progress last year. We now have self-checkout in 195 stores. Self-checkouts have the potential to reduce labor hours in a typical store by about 10%. They also help the customer experience if executed well, and they have not driven increased stock loss. LED lighting is now in over 320 stores and, on average, has reduced our energy consumption by 35%.

We are making some progress with a number of ongoing projects in our warehouses to either fully or partially introduce labor-saving automation. And we've also identified opportunities to drive savings in our central costs. For example, we announced this year that we're moving to a global business service arrangement for certain central functions. Of course, cost optimization will, of course, be a multiyear project.

And finally, on sustainability, although it is lost focus in some circles, it hasn't at Primark. You can see from the metrics we are making good progress. Given our scale and volumes, I'd particularly like to call out what Primark is doing to drive circularity and fashion. This is all about keeping products and materials in use for longer, for making them more durable as well as aiming to reduce waste over time. This includes embedding circular design principles into how products are created. We've made really good progress here.

20% of all Jersey and 8% of all denim products are now circular by design as defined by our standard, which, again, considering our scale, really brings to life how we are really making a difference. 74% of our clothes are now made from recycled or more sustainable materials. We are reviewing our approach to sustainability. We believe there is an opportunity to make more progress if we focus on a smaller number of more impactful activities. We'll update more on this review through the year. So that's Primark.

Hopefully, you'll see we have a clear plan of focus, and let me hand you back to George, and I'll come back to your questions.

Thank you, Eoin. Now let me take you through our food businesses and starting with grocery. We're building grocery brands and businesses to drive long-term profitable growth and strong cash generation. We're investing more in marketing to both drive volume growth and underpin strong brand equity, and we're growing our portfolios through product innovation as we respond to global consumer trends like premiumization, convenience and health and wellness. You can see our current footprint on this chart. We focus on geographies with attractive long-term demographics and market fundamentals.

Typically, these are English-speaking and with growing populations, either naturally or from immigration. And we're investing in the capacity and the capability to be able to grow in new and existing market channels as well. Given the breadth of ABF's portfolio, I'll focus today on just 3 of our key brands. And I start with Twinings, which is one of our largest and our fastest-growing brand. Twinings has had consistently good volume-led growth in recent years, something like 3%, 4% compound. This has delivered meaningful growth in market share in three of its largest markets, the U.S., France and Australia. And in the U.K., Twinings has had very meaningful growth in market share in fruit and herbal infusions and in benefit plans.

Twining's growth reflects disciplined and patient execution. It's included a focused program of product innovation supported by clear consumer insights and testing and we've increased the effectiveness and sufficiency of our advertising to deliver strong returns, that somewhat sits behind the volume growth. And as you know, our strategy is to maintain the strong position that Twinings hold in black tea and leverage that to grow in wellness teas. Consumers are looking for great tasting and naturally caffeine-free beverages that are good for you.

In 2025, our growth rate for both green teas and herbal infusions was in the high single digits, and benefits blends grew double digits. Twinings has an exciting and very long runway for continued growth. This includes expansion in our smaller markets as we start to deploy our now proven blueprint for growth. Markets such as Italy, the Nordics and the Middle East, which I saw the other day, all grew well this year.

Ovaltine is the other large-scale growth engine within our international brands. We've made some progress in recent years, but we've also had to navigate some headwinds. In 2025, we had to manage through a steep increase in cocoa raw material costs. Inevitably, the need for price increases led to some tough negotiations with retailers and that impacted volumes. It also led to consumers in less affluent countries walking away from the category. But we're now through that.

Ovaltine is a brand with a unique taste. It has very strong brand awareness and equity in the markets where we sell. This means we can leverage our strong base and market share in powder products to grow through innovation, including expansion into both ready-to-drink and importantly, ready-to-eat products.

Sales growth in our ready-to-eat portfolio was in the high single digits this year. This included strong volume level growth in our Crunchy Cream chocolate spread, think Nutella but better and the launch of successful innovations in Thailand, China and Switzerland, often based on that Crunchy Cream starting point.

Moving then across the United States and to Mazola. We're delighted to have become the #1 branded cooking oil in the U.S. We took that position 3 years ago, and we've held it for the last 3 consecutive years. Our market share now excludes that of #2 and £3 branded players combined. We've remained well invested in advertising and store activation for Mazola, while others have pulled back long-term investment in our brand.

Mazola share of voice in the cooking oils category increased from around 50% last year to around 80% in 2025. It's hardly a surprise that we should be piling on market share as we are. This year, we've launched our new 2-gallon format, which targets consumers looking for value, and we made good operational progress with reliability and efficiency following heavy investment in our packing plant in Argo in Chicago.

There is a headwind, however. Mazola's core consumers are the Hispanic population in the U.S., particularly first-generation immigrants. And we've seen those consumers come under pressure and significantly pull back on expenditure. Expenditure amongst Hispanics is well down in the States. We believe and really hope that this effect will be transitory, but it will impact volumes in 2026.

So I focused on just 3 of our brands this morning. However, this slide is a reminder that we have a large and diverse set of grocery businesses across a breadth of markets and there continues to be a lot of activity across the portfolio in 2025. This shows a small number of examples. We're activating our brands through marketing and in stores. We're growing through different channels, including Amazon, which I think we've really got a grip on now. And we're launching new products to meet consumer needs, including convenience and wellness. And we're adding new capacity to drive growth and efficiency.

Also to note that our grocery portfolio includes our U.K. bread business, Allied Bakeries, and the operating loss this year was a significant drag on overall profitability in the grocery sector. Clearly, the acquisition of Hovis, subject, of course, to CMA approval and the associated cost synergies would be very accretive to the profit of our grocery sector.

Moving then to Ingredients. Our yeast and bakery ingredients business, Mauri, delivered very good underlying growth this year. This reflects the breadth of our global reach with sales in more than 100 countries. We remain well positioned in the Americas and Europe, in particular, while growing our presence in fast-growing markets in Asia. Our new yeast plant in the north of China should be commissioning in this year. We're leveraging our well-established routes to market for yeast as we expand our portfolio of other products and technologies associated with baking.

And we're growing our global network also, food scientists and technology centers to develop products to meet changing consumer trends. This includes demand for healthier, more flavorful bakery options. To share an example of that. In the U.K. this year, we've just about commissioned a new production line to make sourdough ingredients through fermentation to supply into the U.K. bakery market. That's Mauri.

Turning now to our portfolio of specialty ingredients businesses, which overall performed well in 2025, particularly in enzymes and in Health & Nutrition. We know there's more that we need to tell you about all these businesses. They've been growing well. They're now quite sizable part of our total ingredients business. However, to do that, any justice would take a lot more time than we have available this morning. I look forward to doing it on another occasion.

We're increasingly clear on our strategic priorities for specialty ingredients. We know the technologies we want to focus on, the capabilities we want to build on in the markets we want to service. We know we can't go everywhere, and we can't do everything. More to share with you going forward as we grow in these areas and as we continue to invest in some exciting opportunities. I expect growth will continue to be both organic and through acquisitions in our specialty ingredients portfolio.

Sugar. Let me start with Africa, which accounts to close to half of ABF's sugar revenue. As you all know, in our African markets, the fundamentals are extremely attractive in terms of population and GDP growth. Sugar consumption traditionally grows faster than GDP. Our businesses are well positioned for the long-term market growth opportunities. We have really good cane estates and factories, and they're both getting better. And we have strong market positions and leading retail brands, well-established routes to market for those brands as well. The brand metrics we possess for all our major European sugar brands are ones that any leading FMCG company would absolutely die to have.

Tanzania, Zambia and Malawi are our key growth markets. And I'll note here that Zambia, which this year has been our best of our sugar business, is listed on the Lusaka Stock Exchange. The most recent market capitalization for Zambia, Sugar was just over $900 million. We own 75% of that business. In Tanzania, we'll accelerate growth with our new sugar mill. It will double our capacity in that market, which is just as well because the population is forecast to double by 2050.

Tanzania is already a deficit market and it's going to remain so. But we have a strong market position with industrial customers, and we have the leading market -- leading retail brand, Bwana Sukari. Our new factory, ABF Food's largest single investment over the last couple of years, that factory started up last week. And in the medium term, we'll expect the return on that investment to be something around 20%. This is a plant which will still be there in 50 years' time.

In Malawi, our business entered into a partnership with part of the World Bank this year to enable investment in infrastructure for water irrigation. Our businesses in a number of parts of our African sugar businesses are the partner of choice for international and local organizations on development opportunities to drive positive change for local communities and economies where we operate and we benefit from those partnerships significantly. That's Africa.

The other half of our sugar business is in Europe. And in 2025, these businesses were loss making. We need to see a recovery in European sugar prices to get them back into profitability, and I'll talk about those dynamics in a moment. But just first, as a reminder of our market positioning, our businesses are in the U.K. and Spain. They're both deficit markets and, therefore, they should in times of European sugar deficit trade at a premium to other markets.

And the U.K. The U.K. has some additional protection from both the English channel and from Brexit. British Sugar has built its customer relationships on its product quality, its reliability and security of supply. And these factors support a price premium. Our market share is well over 50% of the U.K. sugar market. Beet prices, though, have been -- sorry, British Sugar is also a very low cost and highly efficient producer. It's at the bottom end of the cost curve among European sugar producers.

Beet prices, though, have been too high in the U.K. We negotiated a significantly lower price in this year's campaign that sugar that's coming out of the ground now, and that has given us a cost saving of about GBP 50 million. And we've negotiated already a further reduction in next year's beet price. So that is for crop that will go into the ground in March, April of '26.

In our Spanish business, Azucarera, the deterioration in market conditions demonstrated to us what we already know, which was new, which was that the cost base in our beet factories was too high. So we've significantly reduced our beet manufacturing footprint in Northern Spain. We couldn't address that cost inefficiency.

We've removed about GBP 20 million of cost and will create other efficiencies as well, 3 beet facilities down to 1. It's pivoted, and this is the most important point. Our Spanish business to cane refining rather than beet processing. In fact, refining has increased from 20% of the business to about 80%. The business becomes a much more back-to-back trading business, which will help reduce the risk and the volatility in Azucarera. We'll look at other opportunities to further reduce costs in Spain. We believe they are available to us.

We're still confident that in time, supply and demand will rebalance in Europe. Price tends to fix price. Beet acreage should continue to come down as beet prices come down and sugar prices will then improve. We also think that there will be some removal of manufacturing capacity beyond our reduction of capacity in Spain. The market recovery will be slow pace. It won't happen in '26. Our European operations are well placed for when it does.

So to bring all this together on sugar, the actions we've taken in the last couple of years have fundamentally reshaped ABF sugar businesses. We've restructured our business in Spain. We've exited weak businesses in Mozambique and China. We took the decision to close our Vivergo bioethanol plant. We now have a clear strategic focus within our remaining businesses.

In Africa, the growth potential is extremely exciting. In the U.K., British Sugar can compete toe to toe on cost with any European competitor. Because this wasn't the case in Spain, we've changed the game there and shifted our focus to refining. Recent and future capital investment in sugar is aimed at unlocking the growth opportunities in Africa and also aimed at reducing our energy costs in U.K. We expect these investments in both parts -- in both Africa and Europe to deliver strong returns.

To reinforce the point, this slide shows the pro forma operating profit and return on average capital employed for our remaining sugar businesses over the 5-year period to 2024. This is what we've had through that period. These would have been the returns. It shows that the sugar businesses generate a sensible profit and a sensible return on investment through the period, and we're confident we'll get back to these sorts of levels when the European market recovers.

Briefly then on agriculture, where I have sympathy for the teams within agri. Some of the very good work done in parts of the business were masked by one-off costs and our joint venture, Frontier, performed very poorly, really due to a combination of exceptional weather impacts. For our agricultural business, the focus in recent years has been to grow our portfolio of value-added specialty products and services. And these continue to grow well in 2025, in particular, Premier Nutrition, another extremely good year, and our enzymes business, AB Vista, performed well as well. We also saw good growth in dairy where we're making progress with the integration of our full service offer for U.K. dairy farmers.

In summary then, I come back to what I said at the outset. ABF is focused on building brands and businesses that would deliver profitable growth and cash generation over the long term. For Primark, our focus is on driving sustainable like-for-like growth. Profit is holding up well and the white space opportunities are exciting.

Three things I'd say on food. The first is our international grocery brands have good momentum and are returning to profit growth after a period of elevated reinvestment. Ingredients performance is good, and we believe there's much more to come, especially in specialty, where we have real clarity of focus. And in sugar, the fundamentals are strong in Africa, and we're well placed when sugar prices recover in Europe.

Our balance sheet remains strong. On capital expenditure, we're well through the major capital investment cycle for food. We've been able to make the right investments in long-term growth while also though delivering strong returns to shareholders through dividends and buybacks. So I'm confident in the group outlook for 2026, although much depends on the consumer environment, which is particularly unpredictable or miserable at moment. But looking further ahead, I feel very positive about the group's medium- and long-term prospects for growth.

So thank you for listening so patiently through what has been quite a long presentation. Before we go on to Q&A, I'd just like to make a couple of points about the review that Michael announced earlier. I'd like to make it clear that what we're currently looking at in this review is either the separation of Primark and food businesses by way of a demerger or the maintenance of the status quo.

If we do proceed to demerge, I would hope to continue as CEO of the food businesses. And as you know, we're conducting a selection process for a permanent CEO for Primark. Whatever the outcome, the culture, the long-term values, the stewardship of ABF will remain fundamental to the success of our businesses.

I want to finish with 2 important points. Firstly, that we have a fantastic food business with a highly attractive portfolio huge potential and deep global expertise across our people, all of which I look forward to talking about more in the future as it's less well understood than retail. Secondly, Primark is flourished with the ABS structure, and over 60 years, we've created an incredibly strong international brand with a powerful customer proposition.

What we're reviewing now in more depth is whether there's a better structure available going forward, for these 2 brilliant businesses. You'll appreciate, as Michael mentioned, that we can't give you all that much more detail at this stage other than what we've said today. I hope you will, therefore, please focus your questions on the results. And we look forward to discussing this more in the future when we're in a position to do so.

And with that hope in mind, may I have the first question.

It's Warren here at Barclays. I know you're going to want us to talk about the financials for inevitably by grabber. So can you say a little bit more, if possible, just in terms of the motivation and kind of timing, I guess, on this. Is it a governance issue? Is it a valuation concern? And is there anything at this stage you can say on tax liabilities, legal dissynergies? I know it's early stages, but any kind of like framing on this because I think it's so long as I covered the stock, I never really thought it's on the table, so kind of what's changed in your mind as the first one.

Then I will get on to the actual financial. Look Eoin, are you able to say anything about the kind of investment you're expecting for Primark in 2026 above the line in terms of digital because it seems like your margin guidance is slightly lower? I think it was flat and now it is slightly below flat. Is that because the investment is a bit higher? And if so, where is that investment kind of targeted?

And finally, just on sugar. We've been in a big downgrade cycle in sugar. Do you think we've now troughed on sugar? And beyond '26, is there any kind of reason to think there's any long-term erosion in the sugar profitability?

On the review briefly, it's about governance. It's about long-term governance. And within that governance line, I think there are 2 different issues. The first one is food where I think we couldn't quite frankly, been getting the scrutiny from the investment community that would serve us well because most of the scrutiny has been about retail, and perhaps we want to put that right.

And then on Primark, it's really about oversight of what is now a very big and very complicated business. And just maybe there's a better oversight model available to us than the brilliant model that we've been running with for 60 years. So you go -- well, that was 60 years, that worked absolutely fabulously. And now looking into the future, maybe it's time to do something different. It's a big call.

In terms of timing, I would imagine that we would have come to a conclusion about whether to stay together or pull ourselves apart by the interims and the process of actually getting there will take 18 months or so.

I don't think we've got anything to say about tax because we haven't been able to investigate. This is the purpose of the review is to dig deeply into those sorts of things. So we have a prima facie case to separate, but we don't have all that detail.

Shall I just do the sugar kind of has anything changed? Whenever you get into these downturns, there's always that kind of bare case that said that the world will never go back to where it was. You see the same thing when you get into boom times. And really, in the end, supply and demand seldom sells out. There are a couple of areas of, they're not so much watch-outs, but they are sort of changes going on.

The first one, I think, I think we have to accept that GLP-1s are going to take a couple of percent off sugar -- off food production in Europe and sugar included in that mix. The second one, I used to think that the money that we -- the good returns we made through selling power -- we had 2 big combined heat and power stations attached to the sugar factories, and we've always done very well selling electricity. I thought that with the growth of renewables, that would erode, with the growth of demand for electricity with AI installations, maybe that demand won't go away. But I think GLP-1s, I think you've got to kind of model maybe we'll lose a couple of percent of volume across Europe.

Maybe I'll also let Joana square the circle as to what you've been saying in terms of guidance. But just in terms of how we're thinking about the investment, I mean some of the things I've already spoken about in the presentation. So we're probably -- I'd say we're nudging up our digital marketing spend, not a huge amount year-on-year, I would say.

Most of the kind of, I would say, investment is coming from a combination of investing in price through initiatives like major find and also marketing support around those initiatives and other sort of trade initiatives like, for example, rolling out more performance and so on. So that's where the investment in margin is coming from. Some of that is funded by well -- actually, I'll let you square the circle on guidance. But that's how we're thinking about the step-up on investment.

Just to really square that circle. So margin, 11.9% for FY '25, as we know, anyway, we had there a one-off of GBP 20 million. So what we said is we'll be slightly below. It's not the margin that is the leading point. It is the creation of demand. So it is all those efficiencies we talked about, foreign exchange being a tailwind, particularly in the first half. We've got some efficiencies certainly from the work that we've been doing on supply chain. Eoin mentioned what we're doing on the central costs. But yes, the point is those will be used to fuel the drive of top line growth, which is what we want to focus on, first and foremost. So guidance, slightly below the 11.7%, which would be the underlying margin for FY '25.

Adam Cochrane at Deutsche Bank. A couple of questions on Primark. And just one little one on the separation, if I may. I'll get that one out of the way. Can we just confirm that both the food business and Primark on a cash flow basis are cash flow profitable and can fund their own investments? That's the only one on the separation.

In terms of Primark itself, the marketing spend something we've been waiting for, for a while to reinvigorate the brand. You've done it in a few different markets. Can you just talk a little bit more about what success you've had with the marketing spend? And most importantly, how are you managing the message between fashionability and price?

Because some of your advertising campaigns, I thought they look very trendy fashion led rather than price-led. Is that something that you're going to rebalance going forward. And then the franchise opportunity in the Gulf. Can you just talk a little bit more about what that looks like? Is it a model that can be expanded beyond the Gulf? Or is it something quite specific to the Gulf?

So yes, look, I think I think it's a mixed bag, I would say, on success on marketing spend. I just have to be kind of honest with that. And I think you're probably right to say that there has been a little bit too much on the fashion side of representation of the brands, but maybe not enough on price. I was interested when I was in Germany that we're looking at our brand campaign. It was very hard to see the price, actually.

And fundamentally, we're a value disruptor, and then we've got to remind people of that all the time. So I think there probably is a little bit more balance we have to get there. It's like that's the classic challenge of a value operator, say, how do you kind of project the quality of the products, but at the same time, remind people of the unbelievable price. So I think that's what we've just got to do more and more of.

I think there were elements of we can which showed that a lot of the comfort you got was actually about the unbelievable prices we had. But I agree that the top line advertisement looked a little bit too fashioning. So yes, more to do. I think it's fair to say the brand metrics, as I said in the presentation, that we've seen in the States are encouraging in awareness. I mean it was only -- we only did it in the New York area. So it's only in the New York area where we've had those sort of kind benefits.

So look, we've got a great brand. We've got a great set of products, we've got to sharpen our comps. I think that's the message. I think franchise is a significant opportunity beyond the Gulf actually. I think the Gulf is proving what the model can do. But look, the Gulf is probably the most tried and trusted franchise market in the world. So we just have to be -- I don't want to be naive to know that this is where a lot of people do relatively well. So our brand is definitely resonating, it's very exciting with loads of opportunities in all the Gulf states actually. So I wouldn't -- we started in Kuwait because our partner is based in Kuwait.

But obviously, we've got plenty of other opportunity outside of Kuwait. That's going to be the focus for the next period of time, but it does open up the opportunity. For sure, it does open up the opportunity. It's about getting good partners. But if you can get good partners in different regions, I think there's some real opportunity in the future.

Richard Chamberlain, RBC. Three for me, please. Just one on Primark. What are the plans now for the Click & Collect offer, now it's been fully rolled out to the U.K.? I know you're planning to take that to other markets in due course. Second, on the sugar profit guidance. I think you guys are looking now for a small profit in fiscal '26. How much of that improvement from the loss, I guess, in the last year will come from lower beet costs? I seem to remember you were saying I think GBP 50 million or something before. Is that guidance still valid?

And then I guess on the proposed separation. Any early thoughts, short about sort of amount of financial leverage that the stand-alone food business could support? I mean, presumably, it could theoretically take on some significant on-balance sheet debt in future. Is that going to be the plan or too early to say?

I do collect relatively quickly. I mean I think, look, the U.K., we obviously did a lot of testing U.K., right? But in that time, we obviously developed a capability. And so that's good. And as I said in the presentation, the metrics, financial; metrics and the customer metrics, are very compelling. It's fair to say. So we will be rolling it out into other countries. But the timing might take -- it might take a bit of time.

There is some supply chain fixes we need to have a more kind of sort of sustainable, repeatable click and collect and online model. So a bit more to do on that. But actually, in some ways, I don't think we are any way defensive at the time we've taken to get where we've got to on Click & Collect. We've had to work it through and get the model right and then we'll take our time in other markets as well.

On sugar, the total beet cost this year will be GBP 50 million less than the total cost last year, but the average selling price will be lower and we'll offset all of that just about. We have multiyear deals, a number across a chunk of our volume. And as the this year -- actually, year-on-year, the price has gone up slightly, but more of the high-priced contracts have rolled off. So that's what's going on in U.K. beet.

Look, I'm tempted to say we can't tell you anything about kind of leverage ratios and stuff like this in a business that we haven't decided to create yet. So perhaps I'll stop there. I'd just remind you that the same majority shareholder is going to be in the same position in both. And you can look back and think about how any majority shareholder thinks about leverage.

The first one is also on the separation, but it should be quick. I think it's pretty clear, but is it the case that you are only looking at the 2 options, i.e., a demerger and maintaining the status quo? There's no other strategic review of specific segments or anything like that?

The second question is on Primark margin. I just wanted to clarify, what are the moving parts? Is it mostly going into gross margin? Or is it going into OpEx? And within that, do you think there's room to move on price, whether that's price mix, the hero products that you mentioned with wow, products at wow prices, et cetera? Do you think there's movement around price?

And then the final question is just on the cash return. Obviously, there's some volatility in the buyback over the last few years now. In hindsight, do you think it would have been better to stay at a GBP 450 million run rate and deliver consistent cash return? Or do you think you will follow basically earnings and the cash flow going forward?

So the margin tailwinds, both the gross margin level and operational efficiencies as well, we've talked about the move on some of the central functions into our GS. But we also have got some efficiencies on the supply chain, on stores. Those stores are still driving some of those efficiencies. FX is going into the gross margin. So there are different components, both in terms of the gross margin and the operational margin. But as we said before, it is not about the margin. It is how we use those to drive the top line.

I would basically on room on price. I mean, I think, look, we're not going to invest in prices for the sake of investing in price, right? Like I think you have to be quite targeted to where you're going to invest in price. I think we will over the next 24 months invest in price, so give me 24 months, not to be a guidance point. But it needs to be targeted and needs to be focused.

Sorry, just before the cash returns and the volatility in the share buyback, I think our capital allocation policy is quite clear. If we got enough cash, then we will look at distributing some of that. So having a GBP 450 million doesn't tie in with our capital allocation policy. We had less cash at the end of this year than we had at the prior year, GBP 250 million feels right, even though we were at 1x.

Geoff Lowery, Rothschild & Co Redburn. Can you just step back about Primark for a minute and help us understand what has sort of sat behind the slightly lackluster LFL? Is this items into basket? Is this footfall? Is this particular category? And you've drawn a distinction between price and price perception, which is a really interesting one. Which of those is the bigger issue in terms of what your data says about the business? And I guess that plays into the sort of ultimate question here, which is, your margin has mostly recovered the pre-COVID type levels. The sales densities nominal have been under some pressure. Is that the right shape do you think over time for a discounter and a price-led strategy with your evolving geographic mix?

That's lots in there question. I think it's a bit of at all actually in terms of what have been impacting like-for-like. Baskets have been tough, I think, pretty much across all markets. Where we've seen creeping ASP through price, it's being offset by units per transaction, which means that consumers have sort of capped at their spend level. So we've definitely seen that and some of that's been a bit more extreme in the countries where it's been tougher, right? I think footfall has also been a bit of a challenge in certain places.

And again, it's been a bit -- I think there's lots of factors to that. Some of that is market, some of that is our positioning into the marketplace. And then I think we've had some headwinds on categories. Last year, particularly the lifestyle categories have been tricky. And I think womenswear up until kind of more recently has been tricky as well. So I think it's been a bit of everything. So that would kind of suggest that it's kind of market and us, right?

And I'm trying to focus on what we can control and as I said before, I still believe we've got the right proposition, just how we execute and communicate against it is going to be key. I think that's a really good -- I mean, that's a tough question because the answer I think, is nuanced by market. And this is where I think we've also got to get a little bit better as sort of how we're deploying our approach by market.

I mean, the U.K. is obviously our more mature, most mature markets. So you always have your frame of reference around that. But I think actually, we can be continuously more price-led, I think, in certain other markets. And we've still got quite a lot of operating leverage to go after. So I think it's -- I have to be a bit more kind of nuanced in terms of my answer and be a bit more kind of -- we have to understand exactly how the best win in each of the markets that we operate in. I still think we can.

There are certain markets that are just going to be tough, like Germany. We've talked about Germany before and it's not going to be a big future for near-term future. It might be in the medium to long term, but it's not a big near future. That being said, we're opening up our first store in Germany for the first time in a couple of weeks' time. So I'm going there because we still believe in the future of the market, but it's a tough market. So anyway, it's a long answer to a very interesting question. Hopefully, that helps.

Clive Black from Shore Capital. A couple if I may. Firstly, on food, notwithstanding the separation, is there any parts of the assortment or the portfolio that you still feel need some care and attention after the busy year you just had?

And then around future CapEx. Firstly, you made a fantastic statement about plants returning in 50 years, we'd probably 6-feet under well before that. But in terms of returns on your food investments, what thresholds are you looking for in that respect? And maybe highlight some of the big projects for the current year? The reason I asked that is you said you've gone through quite a hump of food investment, but still the group is looking at GBP 1.2 billion of CapEx or thereabouts.

And then lastly, just on Primark. How do you characterize the U.S.A. in terms of its maturity profile? Some years ago, this was the sex and violence of ABF. Where do you see the States today for the business?

I don't think I'm portraying too many secrets in saying that we sign off CapEx projects at a minimum of 15% year 3. That's certainly the start. We then start to ask whether we believe it. And look, I mean, we know in some of these very big projects to get to settled state output can take a while. But really what we've been looking at in all these projects is long-term competitive position, while I talk about 50 years. It's why -- we wouldn't have done Tanzania if it hadn't been for the brand metrics. We're supporting that. Similarly, Australian developments are on the back of the positions that we've already got.

Where do we head our portfolio? Look, I don't want to just talk about the bad stuff. I want to talk about the good stuff, too. I really do, would love to have a longer session with a group of fellow-minded people about the potential for Primark or our enzyme business or the health and -- the position or what we think we can do with Ovaltine over the years. There's so much there that I think is underappreciated. Yes, look, there are always problems. We've lost a major account, as you all know, in our Animal Feed business, we'll get on and do something about that.

But really, I think the better use of all our time is accelerating the growing bits, the attractive bits and making sure that you kind of prevent bad stuff from happening again. Yes, of course, we've had to take some action on things like Vivergo on Spanish sugar. But really the future of the food group is about growing the lovely bits, much more than it is about fixing the last few kind of headaches.

It will come to fruition. We'll have the capacity expansion in yeast extracts, that's really good. We'll have the yeast plant in Northern India. The market is oversupplied at the moment, so we won't get an immediate return of that. We'll get the flour mill in Victoria complete, that will reduce our cost there and solidify our position in the Victorian market.

We'll be a long way through the capacity expansion at World Foods Polish site. We'll have the sourdough plant up and running quite soon. We'll have the blending plant at enzymes done by January. What have I missed out? Was it the cross food? Ovaltine Nigeria. We have the most fantastic Ovaltine business, obviously, in Switzerland, to be Swiss is to eat Ovaltine in all its manifestations.

The population of Switzerland, I think, is 11 million, which means that the Nigerian population grows by Switzerland every 15 months. And we have really good brand awareness in Nigeria. But we've never had a cost base to really access that market because we've been importing product tariff paid out of China. So that's an exciting one.

I think -- well, as I said, there's a lot going on in the U.S. I mean we are 33 stores. And I think for a maturity level in the U.S., that's pretty immature for a market the size of the U.S. Although we've been there 10 years with COVID slap bang in the middle of that. So I think this year is going to be an important year. We're going to open up more than 10 stores, including Manhattan. We're going to do a little bit more brand marketing as well, particularly in the New York area to support that.

There's obviously a huge amount of noise in the marketplace going on at the moment. So we have to kind of see how that all settles that. I hope it does. But I mean, like we're still -- that's still really early days. You'd like to think in kind of a U.S. growth plan. But we're not going to do anything stupid either. We've been kind of thoughtful. We've made some mistakes. We've learned from the mistakes. We're making money but we've got -- so we've still got to be pretty kind of thoughtful as to how we expand. So it could take another 10 years to get to maturity. But I still think the proposition works well there, if we can kind of get the awareness in the right way.

It's Monique Pollard from Citi. I have 3 questions, if I can, they're all on Primark. The first one, Eoin, given your focus on the price investments being very targeted and specific, I was just interested in sort of how you think about the overall price landscape and whether or not you benchmark to secondhand clothing platforms, like Vintage as well, when you're thinking about that price proposition now, given the rise of those platforms?

The second question was just whether you had any views at all on the potential for the closing of the de minimis loophole in the U.K. budget and what benefit that could potentially bring to the competitive landscape in the U.K. overall?

And then the final question was just on second half U.K. trading. So obviously, a massive improvement there. And you've mentioned a lot of the focus you've put into the customer value proposition driving that. Just wondered if you had any views on whether the competitive landscape, so M&S and the cyber issues that have been well understood, had, had any benefit there or weather benefits, et cetera? Just trying to understand sort of how much you think was external factors versus your own internal?

The overall pricing landscape, I mean, it is interesting, actually, we haven't changed our pricing that much this year to reduce pricing to make sure we're still at the lowest entry price point. So that's demonstrating that it's not a very competitive market from a pricing perspective. We don't benchmark to the secondhand market. Maybe we should, but I think it is quite a different market. I mean, we look at it quite a lot, but we don't benchmark to it. I mean a lot of product on vintage in the U.K. is Primark. So it's going to be hard for us to benchmark to that one.

The pricing has been more competitive, I would say, in Europe. So I think that's where we see more kind of pricing pressure. In H2 in the U.K., I think I'm going to be a bit more bullish and say it's all to do with us rather than to do it -- it's always to do with the external market. But the impact of M&S and it was more a switch between M&S and Next than it was elsewhere. And I think we just executed better.

De minimis, gee, we had hoped to see some actions taken in the budget. The Europeans are well on the way to close the loophole, Americans have done it. And we've been working very hard to provide the treasury with information about the value add of High Street versus the value-add of this method of trading. Also we'd point out that given the closure of parts of the U.S. market, the rest of the world is getting a lot of pressure out of Chinese manufacturers. And we really should be taking steps to preserve our own position. So I hope so. But until we see the budget, it's likely to be one -- sorry, if it came through the one nice thing out of the budget amongst a bunch of things that perhaps weren't cyber to you.

Warwick Okines, BNP Paribas. Just a similar question to Monique's, but looking at Europe. Eoin in particular, I was wondering if you could just reflect on the sharp decline in like-for-likes in the second half in Europe? How much of that do you think was you versus the market? Was there a particular change in cannibalization effects or deliberate cannibalization effects in H2? And what does that mean for European like-for-like looking forward?

Look, I think most markets in Europe are feeling the pinch. I mean if you look at all the metrics about European clothing markets, they're all struggling at a market -- like high-level market level. And they're all competitive, right? It's not like there's a sort of a new competitive kind of theme in European markets, they are all competitive. I think we've had a bit of cannibalization. I think you probably would have quantified the kind of 1/4 of the impact is that like -- I thought you don't want me to say this, but there have been some weather impacts, like particularly Iberia quite struggled in the second half of the year.

And I think places like France, I think have become more competitive actually. So back to my answer, I'm not more competitive. I think are very competitive, and a bit tougher, particularly in this kind of tougher environment. So it's a bit of everything, to be honest work, like I have to be -- it's a bit of everything. And it just goes back to the same thing again. We just got to execute well. The proposition is good, we've got to execute well. But I think European markets are going to just take a little bit longer to recover.

Sreedhar Mahamkali from UBS. Just to build on a couple of questions earlier, maybe on Primark again, sort of 3 questions, I guess. The U.K. is where you spent a lot of time. I think you've talked to a lot of initiatives to reinvigorate the Primark there. Does it give you confidence you can actually now see sustained positive like-for-likes in the U.K. over the coming year, 2 years sort of time period? Otherwise what should we be looking for in the U.K. as a proof of the efforts you're making continuing to deliver? That's the first one.

The second one, I think you've talked about cost optimization, clearly also talking about investment for growth. I guess the question is, at Primark level sustained growth in like-for-like terms means what in terms of operating margin? Is a mid-11 sort of margin consistent with healthily growing like-for-likes in the business, how should we think about it?

And again, third one also on Primark. Is the medium-term CapEx what we've just seen today, GBP 497 million, GBP 500 million, something that we've seen today, is that a good run rate to think about for Primark CapEx?

All good questions. I think U.K. like-for-like, well, I mean I think you should measure us on U.K. like-for-like. Look, I think there's a lot still to go after in the U.K. So I don't -- I'm still kind of optimistic about where we can go in the U.K. We've only just rolled out Click & Collect. All of the initiatives that I talked about here, there's more to come on all the initiatives that we talked about, performancewear, more coordination, et cetera.

So I think we can -- like we shouldn't be trying to aspire to get to more sustainable like-for-likes in the U.K. We still got like -- I mean, our brand is phenomenal in the U.K., the brand awareness, the consideration, all that sort of thing. So there's still a lot to go after. I think margin, I think, we would say around these levels. I don't think it's around these levels feels, we can kind of make the model work for sustainable like-for-likes.

We always have said before, which we still believe is that the margin is the outcome. But the strategy is to drive the like-for-likes. But around these levels feels right. And then CapEx, yes, I think at a similar level. I think similar levels, although there's sort of -- franchise, obviously, is quite a capital-efficient way of expanding.

So there might be a bit of give from that. I think what the take might be more investment in digital. So I think that's similar levels is probably okay for now.

I think the depot spend will be similar, too, for a little while, yes.

And some of that's actually also to support digital as well.

Where we'll see the decrease side is where we hit the bar. This year, still same level and then starting to go down a little.

Is there anyone online? No, there's no one online. Thank you all very much for coming. And we've got some pressies for you all by the way of thanks, little bribe. And if not before, we'll see you next year. And in the meantime, it's a bit early to say, happy Christmas, but we're getting there. Thanks a lot.

Thank you.