Greencore Group Stock

Right. Good morning. So 8:30, we will kick off. And look, a huge thank you for being here this morning with Catherine and I and making your way across a hot London to be with us for our FY '26 H1 results, and we have people online as well. So we thank you for joining us. Look, it's great to be presenting these results for the first time from our Greencore London office, which will be familiar to many of you from previous Bakkavor presentations. These results demonstrate that we're starting to reap the benefits of what we call internally better together, 2 businesses that were each very strong in their own right, but now together can deliver even more following the acquisition, which completed in January.

I'll open with some key messages and an overview of our new Greencore business. Catherine will cover the financials, and I'll close out with an operating review.

So to start with, in my view, Greencore has never been in a better place. Firstly, the enlarged group has delivered strong operating profit growth of 15.3% in the half and revenue growth of 3.2%. These numbers reflect the underlying growth rates for the new enlarged Greencore, and we're encouraged by the positive momentum. Catherine will speak more about the pro forma basis of calculation, but essentially includes 6 months of the old Greencore and 10 weeks of Bakkavor U.K. since acquisition.

Secondly, our customer relationships, the backbone of our business, are in a really good place. Bringing these 2 businesses together enables us to deliver more for our customers and gives us the opportunity to further expand the breadth and depth of these partnerships. Encouragingly, we've already had our first new business wins as a combined group, and we know there will be more to follow.

Thirdly, our integration program is progressing really well. We've completed a full top to bottom organization redesign. The new team is in place, and we're focused on driving the business forward and on delivering our synergy targets. Perhaps the best indicator of success is that we've had literally 0 disruption in our core businesses. We've launched just as many new products as in any other year. We've maintained our best-in-class food audit performance and colleague attrition remains low and service levels are above 99%. So overall, I'm really pleased with today's numbers and with everything our colleagues have achieved over the past months.

On Page 5, I wanted to touch briefly on my first impressions of the Bakkavor business. Getting to learn about the sites, processes and ways of working has been a key priority. I visited 3 sites within 48 hours of day 1 completion and I've been working my way through them since. Overall, I've been hugely impressed. We've always known Bakkavor is a brilliant business. And since taking ownership, we're very pleased with what we found and the only surprises have been positive ones. The sites are in great shape and well invested in line with our own high standards.

Walking around a Bakkavor site, there's very little to differentiate them from our Greencore sites. The people are great, too. We've experienced a strong cultural fit with the individuals across both businesses rolling their sleeves up and working collaboratively together. Customer feedback has also been really positive. And the theme generally is how can we do even more with you. And finally, we found a huge amount of opportunity to leverage the best of both, both where we can learn from each other, but also from where we can build something better together.

Page 6 brings that scale to life. We operate across 13 categories, giving us a diversified and balanced portfolio. The majority of revenue comes from our powerhouse categories of sandwiches, ready meals and salads with a strong presence right across the convenience food market, covering all day parts from breakfast, lunch, dinner and snacking. In the U.K., we have 28,000 colleagues across 32 manufacturing sites and 21 distribution depots. And from a procurement perspective, we're purchasing over GBP 2 billion each year with people on the ground across Europe and China.

Turning to Page 7. And what makes this business really special is the everydayness of it. Our operation never stops, not for a single minute throughout the entire year, and we do this at scale. For example, every single day, we book in over 500 deliveries of raw materials. Every day, we make 4,200 SKU recipes across over 400 production lines. Every day, we conduct over 5,000 individual product quality checks. And every day, we complete nearly 10,000 direct-to-store deliveries covering every postcode in the U.K. In any given month, our products are enjoyed by over 70% of the U.K. population. This is a hugely integrated and complex operation, and we manage it with real grip, delivering over 99% service levels, which is critical to our strong customer relationships.

So in summary, our new Greencore business is in a great place. And with that, let me hand you over to Catherine for the financial review.

Thanks, Dalton. Good morning, everyone, and thank you to everyone who has joined us online and in the room today. As Dalton has already noted, it has been a busy 6 months for the group, and I'm delighted to be here today to take you through our financial results for that period. Planning for and delivering on integration has been a real focus over the past months, and I'm pleased to share that our teams have come together strongly as the new Greencore. The integration of our 2 businesses is progressing very well, and we are firmly on track to deliver the synergy targets we have previously outlined.

As you'll see in our results, we have also maintained a strong focus on delivery in our core business, and I will now take you through some detail on the financial results for the first half of FY '26.

Starting on Slide 9, let me touch first on the basis of reporting that underpins the results that we will take you through today. Firstly, I'll be presenting a pro forma version of our results. This pro forma basis includes 6 months of the Greencore business, Bakkavor U.K. for 10 weeks in both current and prior year and excludes Bristol, a legacy site, which we sold in January 2026. This pro forma basis is, therefore, more reflective of the actual year-on-year performance of the new combined Greencore business. You will also have noted from our RNS statement this morning that the U.S. business has been classified as an asset held for sale. And therefore, what we are presenting here is our combined U.K. operations. I will cover some specific details on the U.S. business later in the presentation.

Moving on then to the numbers. I'm pleased to say that we delivered pro forma revenue of GBP 1.3 billion in the period, reflecting year-on-year growth of 3.2%, the drivers of which I will take you through in a moment. I'm also extremely pleased to say that we have delivered adjusted operating profit of GBP 73.3 million for the period, reflecting year-on-year pro forma growth of 15% (sic) [ 15.3% ] and a strong pro forma adjusted profit margin increase of 60 basis points to 5.6%. This is a real testament to the focus of our teams who delivered this over a very busy period of the acquisition and integration of Bakkavor.

Looking to our statutory or reported financial performance on a continuing operations basis and therefore, reflect the U.K. businesses only, we have delivered 43% reported revenue growth and 62% reported adjusted operating profit growth. When you look at our bottom line, you will see a GBP 13 million (sic) [ GBP 13.4 million ] loss before tax in the period, and that's largely reflecting acquisition-related exceptional costs incurred in line with expectations. Return on invested capital continues to be our North Star metric and is the key lens through which we manage the business. Accounting for the acquisition has resulted in an increase in our invested capital base.

We have completed provisional acquisition accounting, and you can see from the release this morning that this has resulted in acquired goodwill of GBP 734 million and a further GBP 937 million (sic) [ GBP 937.5 million ] increase in intangible assets, reflecting the strength of the acquired Bakkavor customer relationships. To adjust for the impact of the additional goodwill generated, we have provided an adjusted view of ROIC, which excludes this goodwill. On this adjusted basis, ROIC was 10.8% for the period. Consistent with prior treatments, this amortization charge will be an adjustment to certain key metrics, such as our adjusted earnings per share.

And as you can see at the bottom of the table, that adjusted EPS was 8p per share for the period, reflecting an increase of 31%, in line with adjusted operating profit growth. On a continuing operations basis, free cash flow was negative GBP 76 million, driven by a working capital outflow and exceptional charges related to the Bakkavor acquisition. We have, however, ended the period with group net debt of GBP 818 million (sic) [ GBP 817.6 million ] and a leverage ratio of 2.3x, which is lower than the 2.5x net debt-to-EBITDA post-acquisition level that we would have previously guided to, details of which I will cover in a little more detail shortly.

So turning to Slide 10. Let me take you through the drivers of our pro forma revenue performance, which has increased by 3.2% year-on-year. Firstly, we are pleased to have grown volume and mix by 0.8% despite a slightly subdued market and with a particularly wet winter impacting momentum. Within this, there was a strong contribution from new business wins won last year annualizing into this year, especially across salads, sandwiches and our direct-to-store distribution. We have a strong pipeline of new business into H2, and Dalton will give you some more color on that shortly. Inflation recovery and pricing contributed 2.4%, driven by recovery of inflation in labor and ingredients, particularly related to protein.

You will see that we have chosen to disaggregate performance into 2 distinct product category portfolios underneath our single segment of convenience food. Food for now or food you eat on the go, sandwiches, salads, et cetera, and food for later or food you would eat at home, such as ready meals, desserts and pizzas.

When analyzed by portfolio, Food for now revenue increased to GBP 731 million, representing a 5.3% pro forma increase on the previous year, with strong performance in sandwiches, sushi and our direct-to-store business. Our food for Later portfolio grew to GBP 587 million, representing a small increase on the previous year, noting that this includes 10 weeks of Bakkavor sales, so not fully representative of future run rates. And this category is also one that we grew very strongly for the same period last year with our large Ready Meals win.

Moving on to the next slide. Pro forma adjusted operating profit grew 15% (sic) [ 15.3% ] with margin increasing by 60 basis points to 5.6%. Let me take you through the main drivers of that improvement. Volume and mix growth, including the new business wins helped to contribute to adjusted operating profit growth and improved operating leverage across the network. Gross inflation was about GBP 40 million in the half. To give you a sense of the material drivers there, around 60% of that related to labor inflation, with the remainder coming from materials and packaging inflation. We recovered a large part of that inflation through pricing, including through the automatic joint models that we have in place with customers.

On operational excellence, both the legacy Greencore and legacy Bakkavor operational excellence programs performed well, contributing to the offset of inflation and accreting margin by driving continued focus on standardizing labor and minimizing waste across sites.

Finally, we have maintained a strong focus on management of the ongoing cost base, and this continues to contribute to improvements in margin. This will, of course, be supported by synergy delivery.

Moving on to Slide 12 and cash flow for this first half period. While we have a cash outflow for the half, this is largely attributable to the timing of exceptional charges related to the acquisition and working capital outflows. You can see that underlying EBITDA was strong at GBP 111 million, GBP 38 million higher than the prior year. Net working capital is a negative outflow of circa GBP 86 million, driven by the timing of outflows around period end and also work that was ongoing to align how we manage our debtors and creditor balances with respect to terms and use of facilities such as invoice discounting, et cetera.

We expect this outflow to reverse and for us to end FY '26 in a broadly flat working capital position as we focus on fully integrating our management of debtors, creditors and other payables. Cash exceptional charges for the period were circa GBP 59 million, with the majority of this increase related to acquisition and integration costs and making business easier transformation program costs.

Further detail on the composition of exceptional charges can be found in the appendix. Maintenance CapEx of circa GBP 15 million (sic) [ GBP 14.5 million ], was an increase of GBP 2 million versus the prior year, reflecting our enlarged manufacturing network.

Just going quickly through some of the other items here. Interest and tax charges were circa GBP 16 million (sic) [ GBP 15.6 million ], an increase of GBP 14 -- GBP 4 million, apologies, versus prior year, reflecting the increase in the group's financing facilities due to the Bakkavor acquisition. On pensions, as a reminder, our U.K. defined benefit scheme is now fully funded and the decline of GBP 5 million versus the prior year reflects this new reduced contribution obligation.

Finally, lease payments at GBP 11 million were GBP 4 million higher versus prior year, reflecting the additional leases brought on to the portfolio following acquisition and other cash flow movements netted to approximately GBP 0 in the period. Our free cash flow conversion over the last 12 months was 3%, driven by the movements I mentioned. Over the medium term, we expect cash conversion to be in excess of 55%, and this will continue to be a key focus and a priority for us.

Moving on to net debt. We are pleased for our leverage to be at 2.3x, which was below the expected range of 2.5x post transaction. The slightly faster trajectory here is driven by the robust performance and cash flows from both businesses since announcement of the acquisition in May 2025. Just to run through some details. Starting with the cash position at the end of the period, which was GBP 57 million, an increase of GBP 6 million versus the prior year. Our bank borrowings have increased GBP 839 million, an increase of GBP 733 million (sic) [ GBP 732.9 million ] which again is a result of the acquisition financing we previously communicated and asset financing of GBP 21 million (sic) [ GBP 20.5 million ] reflects Bakkavor financing we have added to our portfolio post-acquisition. The private placement of GBP 15 million is in line with the prior year. In short, we remain very confident about deleveraging to at or below 1.5x within 2 years post completion of the deal.

Just moving on to Slide 14 then and synergies. The key takeaway here is we are firmly on track to deliver our synergy targets. We continue to target an annual saving of at least GBP 80 million. And since day 1, we've been able to get -- really get under the hood of the synergy delivery and validate the preliminary plans that we have in place. I'm pleased to say that we are making strong progress across all target synergy areas. We now have detailed performance management and tracking rhythms in place to ensure we meet our targets. We are also unchanged in our view of one-off costs of circa GBP 90 million to achieve the savings, which will be incurred broadly in line with the run rate synergy realization over the next 3 years.

I've spoken about the components of the synergies before, but they fall broadly into 4 categories: organization, operational excellence and distribution, site footprint and direct and indirect procurement. We currently see no change to the run rate cumulative phasing, so 50% run rate to be delivered by January 2027, 85% by January 2028 and 100% by January 2029.

Moving on then to our capital allocation framework. Post acquisition, the group's philosophy continues to be to deploy capital to balance both long-term growth and shareholder returns. Our immediate priority is to rigorously manage our synergy program and deliver on synergy opportunities as well as ensuring we continue to maximize the potential of the core business. The increased cash flow generated from the combined group, in addition to the savings the synergies will deliver will facilitate us to delever below 1.5x within 2 years post completion.

In respect of CapEx investments and driving organic growth, we will continue to ensure funds are available to invest in critical maintenance and strategic CapEx, and we expect to spend circa GBP 80 million on a reported basis in FY '26. While we are very clear that our near-term priority is to delever the business, we are keen to maintain the payments of an annual dividend, having recently reinstated the group's dividend. And subject to the ongoing financial performance of the group, we would intend to pay a progressive dividend post the year-end. We don't anticipate any further acquisitions or shareholder returns in the short term, but we will, of course, provide further clarity on our plans as we delever into the future.

Just moving on then to Slide 16. Before I wrap up, I'm going to touch on the U.S. business briefly. I referenced earlier that the U.S. business has been classed as a held-for-sale asset as we consider the best course of action for the business and for shareholders. Greencore U.S. is a really strong business that's performing well with excellent people, growth prospects and enduring relationships with some of the top U.S. retailers. Prior to the acquisition, there had been some consideration of the best long-term path for the U.S. business, including what ownership structure will best support its future growth.

Following the combination of Greencore and Bakkavor, we have continued to evaluate next steps here. Our main focus is clearly the U.K. integration and synergies, but we want to be clear on what the best outcome for our U.S. business is. As a result, we are exploring a potential sale of our U.S. operations to the right long-term partner for the business. This is at a very early stage and no decisions have been made, but we will, of course, communicate updates to the market in due course.

So before I conclude my section, I think it's important to reference the broader macroeconomic events happening in the world, which are causing inflationary pressures. I would say 2 things on this. The length of the conflict in the Middle East remains uncertain, and we remain cautious about further inflationary pressures later this year and into next and potential impacts to demand. That being said, we remain confident with the level of protection we have in place. We have pass-through mechanisms and protections in place across 75% of our raw ingredients and our gas and electricity costs are fully hedged in FY '26 and the majority into FY '27.

To wrap up then, I hope you will have seen this morning that the group has delivered a very strong financial performance in H1 FY '26, continuing to deliver strong double-digit profit growth whilst completing a very significant integration. It's good to see strong growth in revenue and margin, both of which are key metrics for the group. There is good momentum in H2 FY '26, both in the core business with Q3 trading remaining robust as we lap a strong summer last year. We have rigorously combined and integrated our performance management and financial reporting from the close of the transaction, and I have real confidence around our ability to achieve our synergy targets and deliver on the potential for our combined business.

Looking forward, the group expects to deliver FY '26 adjusted operating profit in line with current market expectations, bearing in mind that the published consensus contains the result of the U.S. business rather than it being an asset held for sale. With that, I will hand you back to Dalton.

Thanks, Catherine. And look, let me turn to the operating review on Page 19. And as you'll have seen, the business is performing strongly. It's a tough market environment, but our volumes have held up well, and we see plenty of opportunities for future growth and market outperformance. Internally, we've continued to strengthen the key capabilities that give us a sustainable competitive advantage and increase our resilience, what we call our moat, which we continue to widen and deepen. And we've made really strong progress on the integration. We're now operating as one business, delivering synergy quick wins, which give us great confidence in our overall synergy target.

Turning to the overall market on Page 20. In line with our pro forma methodology, we're comparing legacy Greencore against the market for the full 6-month period and legacy Bakkavor for the 10 weeks from acquisition in mid-January. So we split those 2 data sets into 2 graphs. Starting with Legacy Greencore. The business reported 0.3% volume growth against a flat grocery market. That flat market reflects reduced consumer confidence, which took a hit in the run-up to the autumn budget and has remained depressed since. Greencore's growth of 0.3% reflects good performance in our core categories and across our largest retail customers, including continued outperformance from M&S.

On the Bakkavor side, the market declined by 0.2% over the period since acquisition, impacted by low consumer confidence and record rainfall affecting high street footfall. Bakkavor volume was also impacted by a small number of business losses from this time last year. We recognize this volume performance isn't where we want it to be, but we have dedicated teams driving volume across the portfolio, and we feel positive about our go-forward trajectory. We've also had a series of new business wins, including our first as a combined business, which will begin onboarding in H2 and will contribute circa 100 basis points of annualized revenue growth.

In the longer term, we continue to benefit from structural tailwinds, as shown on Page 21. Our customers really value these categories. They're front of store, fast stock turn, high margin and rich in opportunities for innovation and premiumization. Three specific trends continue to provide a tailwind. Firstly, convenience. Retail sales in convenience stores are growing at 4.2% with store openings showing no signs of slowing. Asda Express just opened their 500th store having entered convenience less than 5 years ago. With 1/3 of our volume going through convenience formats, this is great for our business.

Secondly, premiumization. Unit growth in the premium tier has outstripped standard tier by 600 basis points over the last 3 years, a trend we continue to capitalize on across our core categories. Thirdly, Eating at Home, consumers are increasingly choosing dine-in options as eating out becomes more expensive, while growing health and calorie consciousness further supports this shift. These are enduring trends that have held up consistently and convenience and value will remain important drivers of eating habits.

A key Greencore-specific tailwind is the opportunity to grow further with existing customers as shown on Page 22. Despite holding the #1 or #2 position across nearly all categories, there's plenty of headroom, illustrated by the depth and breadth of category exposure across our 9 largest customers who represent over 90% of sales. The dark green shading shows our established partnerships, while the light green and white space highlight where we have room to grow either from a small existing presence or from scratch. Selling more of what we already do to existing customers is the most value-accretive growth we can achieve. So as retailers increasingly look to work with a smaller set of larger, more strategic partners, we see real opportunity to deepen these relationships further.

Page 23 shows the moat I referenced earlier, the key elements that make our business unique, resilient and difficult to replicate. Let me talk specifically about our progress in 4 areas of our moat. Page 24 shows some examples of the innovative new products launched in the half. We had a really strong Christmas season, including the award-winning Yorkshire Pudding wrap developed in collaboration with M&S for their cafe range. We also launched a great new range of summer dips and deli products for Sainsbury's and Tesco, which are performing well. We also leaned into growing demand for health-focused products through our nutrient dense range with M&S and a new licensing partnership with Myprotein. In total, we launched 308 new products in the first half.

And for those of you here in the room, you'll get an opportunity to take home and try some of these great products. All of this is made possible by a product development team of over 200 colleagues, including 50 chefs, the majority operating on dedicated customer accounts with strong Chinese walls between them. I don't believe anybody in our sector can get close to this level of product development resource for any individual customer.

Moving to Page 25 and procurement. Prior to the acquisition, we had identified a significant cost-saving opportunity through standardizing indirect procurement. That is everything outside ingredients and packaging from PPE through to broadband through to stationery. We've been implementing this across our legacy Greencore sites, moving contract ownership to our central procurement director, creating clear policies, spend guardrails and group level supplier negotiations rather than site-by-site contracting.

Examples from H1 include optimization of our inbound third-party logistics network or centralization of embedded contractors, so think maintenance contractors, reducing suppler numbers from 91 to 38 with a new rates tracking process or a sole supply model for forklifts across the combined business, or renegotiated PPE contracts, ensuring consistent pricing across all sites. These are just a few of hundreds of examples. And the bigger opportunity ahead comes from rolling this approach out across the enlarged business as part of our procurement synergy work.

On Page 26, across the combined U.K. 32 sites, we had 871 operational excellence projects live in H1, ranging from an energy monitoring project, reducing usage by 12% year-on-year to automated veg prep, reducing labor by 50% to a new pasta depositor delivering GBP 140,000 of annualized savings.

Looking ahead, our road map has 2 strands. Firstly, deploying best practices from each existing program more widely across the enlarged estate. And secondly, redefining our automation road map, capitalizing on best of both methodologies in the near term and evaluating breakthrough technologies and next-gen concepts for the longer term.

On Page 27, on technology, our Making Business Easier program continues to focus on driving improvements in core processes using proven SaaS solutions. Our big 5 areas of focus are in operations, specifically operations performance measures and materials management. Secondly, supply chain planning; thirdly, time and attendance; fourthly, product lifestyle management; and finally, fifthly, net revenue management. And we will start to see these types of solutions going live in the new financial year.

On the back of our site, Project Vision, the rollout of a standardized SAP ERP has successfully gone live in 2 pizza sites with 0 impact to service levels. During the integration period, we've continued to run these 2 programs in parallel and both programs have been delivering strongly. We're now planning to bring them together into a single transformation program to drive further efficiency and improved delivery.

Turning to integration on Page 28. And we've made really good progress since January. Pre-completion, we established our integration management office and completed the key preparation work to hit the ground running on day 1. So from day 1, we focused on organizational redesign following the appointment of the senior leadership teams. We executed our business continuity plans whilst ensuring no impact to our commercial or operational performance, and we maintained 99% service levels. And from mid-April, we began operating as one combined business with a single functional leadership structure and operating model in place. Of course, there's still plenty more to do from day 100 to done, but you can see we're really pleased with the progress.

On synergies, on Page 29, we remain firmly on track to deliver our GBP 80 million target in the time frames indicated. So let me add some further color. On organization, our new design is live and delivering savings with central function colleagues having now left the business. And we were really sorry to say goodbye to some great people who've been instrumental in driving both businesses forward, and it hasn't been an easy process. But we're confident we now have the strongest team in our sector with balanced representation from across Greencore and Bakkavor.

On procurement, supplier engagement as a combined business is progressing well. On operations, whilst these synergies are naturally backloaded, we've developed a clear road map to begin executing from the beginning of FY '27. And on the right-hand side of this page, you can see examples of synergies already delivered. So that includes the org transitions, consolidation of our Central London office footprint, removal of duplication across professional fees and many, many more that together add up to a significant number.

Before we wrap, let me return to the key messages. Our combined business is performing well with strong revenue and profit growth in H1. The new Greencore can now deliver more for customers who are seeking deeper, more strategic partnerships. Integration and synergy delivery are progressing well. And as Catherine said, we expect to deliver FY '26 adjusted operating profit in line with current market expectations. So in summary, we've done a lot. There's a lot more still to do, and I feel really good about where we are today. And with that, Catherine and I will be now delighted to take any questions you might have.

Fintan Ryan here from Goodbody. Two questions from me, please. I guess, firstly, notwithstanding the heat wave that we've had over the last week or so, can you give a sense of what you're seeing in terms of consumer confidence behavior with regards to your categories over -- specifically over Q3 and sort of more broadly around since the outbreak of the war in the Middle East?

And then secondly, I appreciate the very strong margin -- 60 basis points margin delivery in the first half. Can you break that down in terms of its component parts, gross margin versus OpEx savings? And what would you be anticipating to hold on to for the second half of the year before we start to layer on synergies and the M&A integration.

Okay. Thanks, Fintan. So look, I will give you some thoughts on where I see the consumer at this stage. And maybe, Catherine, you'll pick up the margin side. So look, it's a tough market, Fintan. Consumer confidence is low. It's at one of the lowest levels of the year, and you've got a cautious customer out there, not an absent one. There's been no collapse in demand across the sector, but it's a subdued market, and you can see that from sort of flat grocery growth that we showed for the half. Definitely, the consumer is expecting a cost of living squeeze. There's no doubt about that. And they're adopting increasingly defensive behaviors. These are behaviors they're not new to the sector, but they're sort of just coming back again.

So overall spend being pulled back, prioritizing food, obviously. I think the material use of promotion, switching and loyalty mechanics out there. Again, none of these are new, but what happens is the customer sort of just moves more in or moves more out of them and loads of mechanics going on across the high street in terms of meal deals, dine-in options. And I really think this trade -- the continued trading out of out-of-home dining into in-dining, which is obviously helpful for us. And I think our categories are resilient. I think from the retailer point of view, clearly, there's still growth at the premium end and the value-focused retailers are winning and it's sort of a squeezed middle that's suffering further.

I think what's interesting and slightly different from Ukraine, which we obviously experienced is the health-focused agenda continues actually. Interesting enough. I mean, I think we saw that really drop post Ukraine. But I think there's still a focus now on health and retailers are still sticking to that, and I'm sure we'll come back to that with GLPs, et cetera. So look, it's a quiet market.

Having said that, Q3 for us, we talk about it being robust trading. There's a lot to go after in Q3. I mean with the weather like this, like that -- I mean, I was in one of our customers' shops last night. I mean the thing was rammed, you could hardly get through the front door. So it's great for our categories and long may continue this weather. And there is resilience. And of course, then you've got the World Cup coming and we could talk about the World Cup all day long. So there are opportunities for growth, but it is a tough market, 0% growth in grocery, like come on, not great.

Are you comfortable with that?

Yes.

Catherine, do you want to pick up the margin piece?

Yes. Look, certainly. Look, the deck obviously kind of set out what we see are the key levers contributing to that margin growth year-on-year. And I think you'd probably be familiar with those. So they are the levers we have been kind of deploying over the last number of years to improve that number. Maybe if I just kind of walk through them and just give you a little bit of color. I suppose started the most material one, and unfortunately, it is a headwind, and that would be inflation. I think I referenced that, that was GBP 40 million in the half, and that would have been a pretty significant step on from the same period in the prior year, to be honest.

I don't know if you can remember back to '25, we were in a kind of a deflationary cycle. I mean labor has been a pretty constant feature over the last number of years that labor inflation driven predominantly by national living wage, but raw materials and packaging had started to come off. But you might recall towards the end of last year, we started to see a pretty significant step on in a few raw materials, but I think predominantly from our perspective, protein really drove that. So that was the most material number in there.

We did a good job as we have been doing with engaging with our customers and making sure that we were in a position to recover that. So I think, again, you know we have some automatic pass-through models. which give us good protection. And then we have the ability to negotiate and engage with whatever is coming through the pipeline and recover that with customers. And at a high headline level, we would have recovered about 75% of that inflation in that way. So then you're looking to kind of offset the rest of that. And look, I referenced our operational excellence program. Again, a lot of you will be familiar with how we've approached that over the last number of years, and it's great to see Bakkavor have a similar way of thinking about driving constant efficiencies in their manufacturing networks.

We go about it in a slightly different way, but it's been really pleasing to see that they -- how they think about it. So I think there's good opportunity for us to really drive on in that space going forward as well. But operational excellence is continuing to, I suppose, offset the balance of that inflation and contribute to an accretion in that operating margin improvement that you would have seen. I mean we referenced volume and mix contributions as well. They were probably slightly lower. And then you're also into just that ongoing management of the cost base. That's another key lever that we pull to make sure that we're constantly stepping the margin on and then a small contribution from synergies. So look, hopefully, that's a bit of color around kind of the kind of magnitude of those various levers for the period.

Gary, did you -- it's probably easy, do say where you're from just for the transcript, if that's okay.

Gary Martin from Davy. I've got 3 questions. I'll probably take them one at a time, if that's all right. I'll start with the synergy piece.

[indiscernible] go one at a time.

I'll keep you guessing. I'll keep you guessing. I'll start with the synergy piece. I thought you had mentioned that any surprises that you had experienced with regards to the integration process were positive. And Catherine, you had mentioned that the synergy integration time line was broadly on track and kind of within the range of guidance. I'd be curious, are there any -- just in terms of phasing, is there any opportunity there with regards to maybe crystallizing some of those synergies sooner than you had initially anticipated? And if so, what are the moving parts behind that kind of crystallization?

Look, I think we're fairly confident with the original phasing that we put out there, to be honest. I think as I said in my remarks, we were planning before day 1, and we really hit the ground well for day 1. I think the area we've probably made most progress on, as you would expect, is in that organizational area where we had to go 2 into 1, the top layers of the organization. We've made a lot of progress in that regard, right? That was kind of the initial focus area. But we have really robust plans across the other kind of key categories that we called out. So I think I would stick with the message that we're confident with the phasing that we called out, Gary. But inevitably, there will be things that move at slightly different paces to the kind of plans that we had before day 1.

That makes sense. I'll just dovetail off the back of Fintan's question then just around the like-for-like piece and just the kind of volume trajectory into Q3 in particular. And I'll focus on Bakkavor here, if that's all right, just with regards to the weaker volume growth in the Q2 period. Is there an expectation there for a sequential pickup? And if so, what are the moving parts in terms of any degree of contract losses? Are those kind of permanent in nature? Or what's the way to think about it moving forward?

Well, look, Bakkavor was lapping some customer losses, which we talked about. And it was also, Gary, it was a 10-week time frame and a particularly tough period for the high street. But look, it's not where they want to be and it's not where we want to be. We've talked about 100 basis points of new revenue opportunities coming through in H2. That's annualized. We're encouraged by the reaction we're having now with customers in terms of new business wins. We've got some really exciting business wins coming through.

And we are showing up to our customers in a way that they wanted us to show up, which is how can you do more for us? The innovation engine is firing well. We've got the World Cup coming at us and other opportunities. So, look, we're off to -- we've said trading is robust. We're feeling confident. But look, as we talked about, it's a tough market. There's not a lot of growth out there, but there's a lot of opportunity still to convert profitably, 15% profit growth in the first half. Like this is a real opportunity to continue to convert profitably and maximize the growth potential.

Yes, I agree with that. Look, I think Bakkavor is probably a factor of lapping some losses historically, but we're absolutely on with kind of leveraging that combination, and we're already starting to see some green shoots there. So I think we're in a good place.

Just as an aside to that part 2 of that question. Part 2, would you say that some of the new contract wins are -- would say they're eclipsing some of the previous losses that you've experienced that you've seen with Bakkavor?

Yes. And we're encouraged by them, and they're good categories with good customers and customers we know very well.

Okay. Helpful. And then my final question, just around the leverage piece and free cash flow into year-end. But then thereafter as well, I'd just be curious as to how you envision leverage over the next 12 to 18 months just with regards to potential U.S. sale, forward CapEx? Is it going to stay at the level that you expect in FY '26 into FY '27 as well? And just a general flow of free cash flow with regards to that move up towards 55% free cash flow conversion. How do you expect the kind of everything to settle there?

Just a apologies on the drilling. That's not us drilling away here because we could stop that. I think it's the building and we will -- apologies for that.

Look, there's a few things I would say on that, Gary. And if there's anything to follow up, please do. Look, I think the underlying business is performing well. I think it is doing what we expected it to do, generating strong cash flow. So we're obviously focused on making sure we drive that on. I think from a CapEx perspective, I think we had about GBP 50 million on an annual run rate basis that backup were slightly higher at about GBP 70 million. If you added those together, simplistically, you would expect that kind of an envelope.

But as you can imagine, we are really trying to get under the bonnet of understanding what their plans were from a CapEx perspective and our own and where to prioritize, I suppose, our focus over the next 12 to 18 months. So GBP 80 million feels about reasonable, but it could be between, I would say, GBP 80 million and GBP 100 million. GBP 80 million, I think, for this year and into next year, probably GBP 80 million to GBP 100 million, broadly speaking, could be where we're at. And just then, I think -- yes, I think from a net debt perspective in general, I think broadly speaking, we are sticking to that overall message that we will be back down to within our target range of 1 to 1.5x within 2 years of the closeout of the deal.

Karl Burns from Berenberg. Just on that new contract win, I don't know if you could give any more color on sort of the categories it's in, 100 basis points as well, you must be pleased. Any sort of guidance on full year contribution from net new business wins? And then just a second question on the U.S. disposal. Any time frame on that? And have advisers been appointed?

So look, on -- we probably won't give too much Karl if that's okay, in terms of that business win. But it's -- what's really exciting about this specific win is that this is a category that Bakkavor does really well that we don't do, going to a customer that we know really well that Bakkavor doesn't deal with. And it's been us going in. And what we've had to do here is essentially say to the customer we know really well, you're going to get the Greencore proposition in terms of the whole package, Karl, should I say, in terms of how we serve the customer innovation, et cetera, coming from Bakkavor with their expertise in this category.

So it's encouraging because I think what it really said to us is what we thought would happen is happening. Customers are saying they want to do more with us, and this is an example of that. So I won't go more into the category, but it's not one that we do, and it's one that they do, and they do it very well. And look, there'll be more of those. That's the point. And actually, the complementarity of this combination is such that when you look at that football field of white space versus green, I mean, there are customers where we have real white space that we know really well on the Bakkavor category. So encouraged there.

In terms of the U.S., I'm sure Catherine will comment on that. Yes, advisers have been selected. We are super early in this process. And as Catherine said, it's a great business. Should we be the long-term owner to really unlock the potential, I think that's what we're going to see. I mean it supports some of the best retailers in the world, if you think about Amazon and HEB, Kroger, like these are fantastic retailers. So we'll just see where that goes. It's early stages.

Yes. Look, that was exactly the point I was going to make. It is a fantastic business. It's performing very well. So we are just considering what the best thing to do with that part of the business is, but we won't be giving it away. So we will go through the process that we need to go through to kind of come to some conclusion on future course of action there.

Matthew Webb from Investec. First question is on some of the figures on Page 10, which showed a very stark difference between the performance of food for now versus food for later. And given that the business that you've acquired in Bakkavor skews more to food for later. I just wonder whether that's something that you're concerned is going to be a bit of a headwind for you, whether you think that the different performance of those 2 categories will remain as stark as that. And I suppose what you can do, a, as category leader potentially to reinvigorate that whole category, but also what you can do to gain share within it? That's my first question.

Yes. Look, just to pick up on that, you're right. And I think this is directly linked, Matthew, to what we've been discussing there around the Bakkavor volume over that period, right? Because that you're absolutely right, the majority of that is feeding into that food for later category. So the volumes were a little bit behind what we would have liked for the reasons that we would have set out. And you're absolutely right, Bakkavor's categories predominate into that food for later side of the house. There are also some interesting things going on in there from an inflationary perspective.

Absolutely, there's some high inflation going on, but there was some deflation coming through with dairy and other categories that really also impact the Bakkavor portfolio. So net-net, that's kind of contributing to that softness from a top line perspective. But I think all of the points that Dalton raised around how we're driving on with regard to those categories, how we're leveraging those relationships that we have and Bakkavor has to really drive into that white space. I think that's where you will see that showing up hopefully in the future.

And I would add to that, Matthew, that structural tailwind of the move from dining out to dining in very much skews towards the Bakkavor side of the portfolio because typically, I mean, you can see some of the examples there. These are products that are consumed in the home. So, look, I'm confident that we're focused on it in the right way. We're very focused on volume market share growth, like every single week, we have the top 40 people on a call every Thursday, we go through our market share. We, to be quite honest, talk very little about revenue because the revenue flows. We just talk about volume. Volume is actually the metric we use in our organization to drive it. And we do not want to have negative volumes and everything goes into that, it's got to be accretive, but that's where our focus is. I think you had a second question.

Probably so. Yes, second question, just on the ERP systems. You mentioned that there's good progress being made with both. And ultimately, the aim is to bring those 2 programs together. Could you just explain a bit more what that entails? Because I think perhaps a bit earlier in the integration process, there were a few questions about whether ultimately you might transition your systems onto the Bakkavor system as a more upstate one. Is that what we're talking about or we're not there yet?

It is not what we're talking about, to be brutally honest. Look, I've spoken to you before about making business easier and what we're trying to achieve within the Legacy Greencore portfolio with our ERP. So we had 4 or 5 ERPs and our proposition there was to get all of our 16 sites in the world at the time onto 1 ERP. And I think we have an understanding that getting our legacy sites on to System 21 rather than SAP is the right place for us to be at. It would have been -- we felt too much a leap for us to consider moving to SAP at that point in time.

So we're going to standardize across System 21. Bakkavor had decided to go on an SAP journey. I think they had a risk around out of life around their ERP system. So it was something that they were kind of compelled to do, and they're doing an -- I'm sorry, we are doing an excellent job of putting that in place. So I think we are happy. We've considered this in detail, happy to let those 2 programs continue alongside each other. I don't think we're going to be in a place, to be honest, in the medium term where we're going to be deciding to do a big SAP rollout across the entire network. And we have -- we're happy that you can have 2 ERPs running alongside each other and still drive some of those efficiencies that we are really hungry to deliver that we've spoken to you about before.

That's the 3 SaaS implemented processes that sit on top, agnostic of whether it's System 21 or SAP. So when I talk about time and attendance and workforce management or materials management like they have Red zone, for example, which is our operations performance management system, like that's independent on whether it sits on top of System 21 or SAP. So we'll have 2 ERPs. There's no point in putting everybody on SAP at this stage. But when we bring in the supply chain management, that will sit above both, and that will be 1 system, it won't be 2. So you'll have 1 time and attendance sitting on top of the legacy Bakkavor, legacy Greencore ERP.

Sorry, do you mind if I just -- are there any particular supply challenges that have been thrown up by -- or either by the conflict in the Middle East, most obviously or weather conditions, et cetera, that either you've experienced or that you've had to sort of pivot away from by switching from one region to another or anything like that?

No, nothing material. I mean actually, a huge amount of work happened post Ukraine in terms of supplier resilience. So our procurement team have been very much looking at supply resilience and had put a lot of contingencies in place post that. And actually, that's helped us now. But we've seen no supply issues. So we've got nothing on the horizon either. It feels pretty balanced at the moment.

It's Karel Zoete, Kepler Cheuvreux. I have a couple of questions. The first one, can you discuss the operational performance of the North American business? Last year was a bit of a year with 2 halves for Bakkavor and the business saw acceleration. Did you see that continue in terms of top line and that's right margins?

And then a question with regards to the working capital outflow. Bakkavor was more enthusiastic with the factoring of receivables and Greencore more modest. Has that been something you've adjusted that kind of explains this?

And then the third point is with regards to cash out of exceptionals. I think by now, you booked most or the largest part of the exceptional budget. What should we anticipate for the remainder of this year and next year?

So I'll take the U.S. and you might add to it as well. And then working capital and cash, you can pick up. Business is performing really well, actually. Performance is strong. They're right on where they need to be. Customer partnerships are really good. As you know, they've got a big partnership with HEB. Innovation engines, good, technical engines, good, sites converting well. Revenue has been strong. I mean, it's relatively early days for us in terms of getting our arms around it. It's a very stand-alone business.

I mean, Catherine and I obviously are involved, but it is -- it has its own structures over there. But so far, we've been very encouraged by what we've seen. And there's -- I mean, I've -- through my own network, used to work in for a U.S. retailer, like we are getting inbound. As you know, lots of the U.K. -- U.S. retailers come to the U.K. to explore this market. They all want it. Problem is the distribution, as you know, across the U.S. But I'd be encouraged by it. I think there's a real opportunity there.

Yes. No, look, I totally agree on the U.S. business. But look, with regard to the working capital outflows, it has been interesting. You're absolutely right. Bakkavor would have leveraged invoice discounting at a more significant scale than us and in different ways as well, and that's been a lot of what we've had to work through. We have some better terms associated with our platforms and the same is the case on the Bakkavor side of the house. So we're just trying to understand how we should move forward because some of these are specifically with customers. Some of these are kind of facilities that we access via our banks and that would have similar situation.

So we just need -- we're working through that to kind of understand how we optimize that. And then I suppose with regard to exceptionals, we have provided some incremental guidance at the back of the pack, and I think we're indicating GBP 110 million for the total exceptional cost for the year and about GBP 60 million from a cash flow perspective of that is to do with the acquisition and integration. So, yes, that's obviously going to be a significant proportion of that cost incurred, but we will definitely have some of that into next year as well as we continue with the integration element and the costs associated with the delivery of synergies.

Charles Hall from Peel Hunt. Dalton, you talked a lot about volume growth and pushing on that front. Can you talk a little bit about product optimization and plant optimization? And are there any products or customer service levels that you need to address and maybe drop some product lines?

So from a product point of view, we're still at early stages, I would say there as we get to learn the categories and get more familiar and the teams come together. I think there's quite a lot of optimization that can go in, in terms from the ingredient side where we can go back now to customers and say, look, actually, because of our enlarged scale, we can source slightly differently. The opportunities -- I mean, like, for example, I'll give you an example, the Asda pizza launched in U.S. the pizza.

We're obviously big buyers of tomatoes from our grocery business in Selby and across the network, being an Italian. They're obviously a big purchaser of tomatoes because the pizza base is a tomato base. So there'll be an example like that where we've been able to come together and leverage our know-how in terms of procuring in this case, Italian tomatoes.

So I think there's a lot of that, that's starting. In terms of optimization, we talk about a column that uses this word, [ Tetris ]. It's sort of like Tetris moving products around. We're at the early stages of our thinking there about where it's best to produce what product. And I mentioned earlier about our operational synergies, and we're at the early stages, it's more FY '27 and a lot of that thinking is going to come in there in terms of how can we fill the network. The network has got capacity. There's sort of we've got run at about 15% capacity. They run at 20% capacity. So that capacity is there.

The commercial team, our focus on the to them is, okay, how are you going to lean in and sell that capacity profitably? So that's their focus. And the operations team, the focus is, well, how can you convert as profitably as possible so that we can offer the best value for our customers. So I'd say when we meet again later in the year, we'll have a lot more on this, but that's where the thinking is it's still that we came together as a combined structure in mid-April. So early days. There's clearly a huge amount of opportunity to sell more through existing capacity and be more efficient because, quite frankly, we make similar things in similar plants.

And just a second question if I may. On the inflation, what do you see coming through over the next few months? And what sort of quantum of food inflation do you think we might be getting to?

I think we'll be at sort of 5% by the autumn. I think it has to be because it's so lagged if you think about energy and fertilizers. I mean, think about what's happening in packaging, et cetera, there's a decent lag, but I would say 5% is what we will be faced into in the new commercial -- sorry, in the new calendar -- sorry, in the new financial year, so this autumn, as Catherine said, look, in our particular case, we're very hedged. But it's back to Fintan's original question for the consumer only 5% that's [ hyper stomach ]. So it's going to be all around value and how we can drive that value. So meal deals, GBP 375, dine-in meals, GBP 10, et cetera. That's where the opportunities are. Do you want to comment on inflation?

No, no. I think. Yes, no that's...

Clive Black from Shore Capital. I have to say for a start, I do hope you're not hoping on or expecting England to be Croatia to deliver Q3 on the 17th of June or Ghana for that matter. Two questions. In terms of that matrix of opportunity, from a substance perspective, what are the most meaningful categories for you to shade in? And then from a strategic perspective around the manufacturing platforms, how have you found the 2 processing systems? And I'm thinking more 3 to 5 years rather than 1 to 3 years. Is there rewiring? Have Greencore got optimal process engineering that can go into Bakkavor and vice versa?

You mean it from an automation or...

Yes, from a process engineering, manufacturing platform perspective, everything from end-to-end systems, automation, robotics, you name it.

Yes. Well, we'll both come in on that. In terms of the matrix opportunity, look, there are on the value -- there are a number of retailers where we have a very material presence. Aldi has been a terrific customer for us and a great partner. And Bakkavor typically has not served them. So I think the opportunity is on some core customers in the same way that Tesco is an incredible customer, but typically for Greencore, it's sort of been our #5 customer. So I think from a customer point of view, we're very clear where the opportunities are.

And then I think from a category point of view, look, they've got some terrific categories. I think they're doing some fantastic stuff in dips. And I think we see an opportunity to invest further in that business and really propel that whole Med deli areas you can see on the high street, just continues to increase. So we're excited by what they're doing there.

Actually, interesting enough, we get lots of questions around desserts and where does that market fit in a GLP world, et cetera. Actually, pretty encouraged by what I've seen out of the desserts business. It's very capital intensive, but that also means that if you've invested the capital, you've got a real opportunity to do things that maybe others haven't who haven't previously made those investments. So I'll be excited by that.

And I think salads is just a business. We're strong in salads, they're strong in salads. It's nearly 20% of our business now going forward is salads, and that has huge tailwinds behind it. So I think there's sort of that matrix of there's a few customers where we see a real opportunity and there are a few categories which we'd be keen to really drive. Sandwiches is nearly 25% -- just over 25% of our business, probably not so much opportunity there. Ready meals is 20% of our business, real opportunity there. You think what they did, I think M&S, which you follow closely came out, and they specifically talked about the revamp of their collection range that Bakkavor had done and think about that expertise coming into our business.

In terms of process, I think we're both at early stages in terms of process optimization. There are 2 businesses that have been built up through acquisition. They're very well run operationally. Many of you have been through the plants. But I think in terms of automation, and we've talked about NextGen, I think there's a real opportunity. If you think about AI, like this time last year, it was kind of a little bit more conceptual. And today, AI year on is very much in the practical. I think this NextGen, I've talked about it for a while here. I keep feeling it's nearly there. I think it feels to be getting closer.

And I think that opportunity in terms of automation, robotics, dexterity, replication in terms of automatic -- from automated arms, et cetera, could really have a material difference. And then the whole MBE, which I'm sure Catherine will cover, like we're a patchwork of Excel. We're a patchwork, both businesses, like we have hundreds of people in areas where they're literally doing a lot of stuff mechanically. And we'd love to have those people focused on doing more for customer, not sort of redundant work.

Yes. Look, there's 2 things I would call out. Firstly, I think it's important to call out that all of our manufacturing sites exist and can continue to operate with their own individual systems and processes, and they find their own ways to plug into the center. So from a business continuity perspective, we're working fine in that regard. And I suppose back to pick up on Dalton's point, I mean, this was the original issue that we had in Greencore that encouraged us to really just bite the bullet and invest in fixing the underlying processes, driving standardization and leveraging automation because each of our legacy sites would have had different ways of doing things and a lot of them weren't even on spreadsheets. So there's a lot of paper involved. So that was the business case around that investment from our perspective.

So -- and again, as we move through that program, we are looking to deploy automation around operations performance, and we've now started looking at something that Bakkavor had deployed. So that's a fantastic kind of synergy that is really going to drive consistency across the broader group and will drive efficiencies and further improvements into the future. Also another area, demand planning and supply chain, like that is a massive area for a business like ours. We currently do it all sorts of different ways, right?

So again, we're looking to centralize that and drive consistency across 32 sites. It's not going to be easy because you really are going to have to address well embedded ways of working. But once we get that unlocked, again, it's going to drive a massive efficiency, I think, from our perspective. So everything is fine at the moment. It all works, but there's massive potential there for us to kind of just make everything more seamless.

Okay. It's like conscious of the time, and I know that you've all got busy agendas. So if you're good with that, we'll wrap it up. We really appreciate you being with us this morning in person, and we thank you for those that have joined us online. We'll close it there.

Thank you very much. Thanks, everyone.

Good morning, everybody, and thank you for joining Catherine and I for our FY '25 results presentation. It's great to be sharing a very set -- very strong set of results with you this morning. Our core business is in a great place with our commercial and operational excellence programs, combined with our cost efficiency efforts, providing the platform for us to reach a record level of profitability.

I'll start with some key messages, then we'll cover our financials and an operating review, and we'll close out on our acquisition of Bakkavor. So let's start with some key headlines on Page 5. Firstly, we're really proud of what we feel is an exceptional year of delivery. Catherine will share more; however, I do want to highlight the strong performance that we've had against every one of our financial medium-term targets. In particular, we achieved a 15% ROIC, which is an increase of 350 basis points on FY '24.

Secondly, we continue to deliver for our customers on 2 things that are incredibly important to them, service and innovation. And these are 2 of the key elements that give us a competitive advantage in the market. Thirdly, against a subdued backdrop, we've had strong manufactured volume growth of 2.5%, which is well ahead of the overall grocery market. And we continue to take advantage of a number of structural tailwinds, which we expect to continue through FY '26 and beyond. Fourthly, we're driving this positive momentum into FY '26 as we know there is a lot more opportunity to go after in our core business. Trading has started well, and we anticipate another year of profitable growth ahead.

Finally, regarding the acquisition of Bakkavor, things are progressing to plan, both in terms of the external support for the deal with the positive Phase 1 decision from the CMA and our internal progress on planning for integration and synergy delivery. We crossed another key milestone this morning with the agreement to sell our Soup & Sauce business to the Compleat Food Group, a business we have a high amount of respect for and one where our Bristol colleagues will really thrive. This now paves the way for us to complete the Bakkavor transaction in early 2026, in line with our original time line.

Turning to the next page, and I wanted to highlight the 5 areas that we see as key to sustaining our enduring competitive advantage in the market. We've really doubled down on these to create what we call a moat around our business, something that is highly valued by customers and extremely difficult to replicate. Firstly, our innovation engine. We launched 534 new products this year in partnership with our customers. That's over 10 products every single week. What makes us unique here is that our innovation teams are increasingly embedded within our customers, and we've built capabilities to support every stage of the innovation journey far beyond just recipe development.

Secondly, our technical leadership. We believe we have best-in-class capabilities in the technical and food safety space where you can never compromise on quality. These high standards were recognized in our BRCGS audit performance this year. To give another example, we reduced product withdrawals by 60% year-on-year from an already very low base in FY '24. And this level of reliability is incredibly important to our customers. A third part of that moat is around complexity management. Our business is complex, manufacturing over 1,500 SKUs using more than 2,000 unique ingredients produced in 16 factories up and down the country, operating chilled, ambient and frozen supply chains, delivering it all directly to our customers' doors or through our direct-to-store distribution system.

There's a lot of moving parts, and we take great pride in the fact that we do all this without missing a beat with over 99% service levels in FY '25. Fourthly, our infrastructure. This is a really well invested and fully integrated manufacturing network, which we continue to ensure remains world-class, fit for the future of next-gen automation and technology. And the final area in our approach is to efficiency. We really lean in on our cost base at every level of the business, driving a culture focused on delivering the best possible value for our customers. This is in part executed through our Greencore Operational Excellence program, which last year delivered a 4% increase in units per labor hour.

Bringing these 5 elements together creates a business that is highly resilient, extremely hard to replicate and provides a strong platform for future growth, hence, why we call it our moat. As I now hand you over to Catherine, I'm confident in saying that our business is in a good place and with plenty more opportunities to go after.

Thanks, Dalton. Good morning, everyone. I just want to echo Dalton's thanks to you all for joining us in person and on the call today. It has been an exceptional year for the group with strong performance across every financial metric. I'm very proud of our performance and the progress that we've made. And starting on Slide 8, I'm going to give you an overview of some of those key financial metrics for 2025. Starting with revenue, you can see that we delivered a strong revenue number of just under GBP 2 billion for the year, representing growth year-on-year of 7.7%, the components of which I will cover in more detail shortly. Adjusted operating profit is a key KPI for us. We said 2 years ago that we would return to pre-pandemic levels of profitability by 2026, and we're delighted to have exceeded that one year early. We delivered GBP 125.7 million, an increase of 28.9% year-on-year. And again, I'll speak to some of the individual elements of that improvement in a moment.

On adjusted operating margin, we have grown margin by 110 basis points to 6.5%. This is still short of our medium-term target of being at 7% or above, but it's clearly really strong progress in the right direction. And we will look at some of the key drivers of that growth as we move through the deck. You can also see that we delivered strong cash flow for the year, and our leverage closed the year at 0.4x net debt to EBITDA. Most importantly, though, we're delighted to have delivered a return on invested capital of 15% in 2025, representing a 350 basis point increase versus the prior year. This was primarily driven by an increase in net operating profit after tax and also a slightly lower average invested capital base. Return on invested capital is our North Star metric and is the key lens through which we manage the business. If we move over to Slide 9, we have set out in a little bit more detail the breakdown of our revenue performance for the year.

As mentioned, total revenue increased by 7.7%, 2.9% of which was driven by new business wins. Underlying volume and mix growth represented 2.8% and inflation and pricing impacts then drove the remaining 2%. The most significant contributor to the new business win-related growth was the ready meals contract that was onboarded in our Kiveton site in September 2024. There were also several other wins across our other categories in the first half of 2025, and these are being delivered in the network throughout Q3 and Q4. Our underlying volume and mix growth was supported by continuing strong demand for convenience food, continued product innovation and some favorable weather during the summer.

We saw good growth in sandwich and sushi in particular, while performance in parts of the salad portfolio and ambient sauces was a bit more challenging. When analyzed by segment, our food to go category revenue increased to GBP 1.3 billion, representing a 7.5% increase on the previous year, while revenue associated with our other convenience category grew to GBP 609 million, an increase of 8.3% on the previous year. Some further detail on the composition of those categories has been included in the appendix. Just moving on then to Slide 10. You can see our adjusted operating margin increased to 6.5%, and I'll take you through some of the main drivers of that improvement. Volume growth and mix drove a positive impact of 0.4 percentage points, driven by some of the factors I've just taken you through. There was a negative inflationary impact of 2.5 percentage points. That represents about GBP 45 million worth of inflation in the year.

And to give you a sense of the components of that, about 75% of that was related to labor inflation, with the remainder coming from materials and packaging inflation, which really started to increase from Q3, Q4 onwards. Pricing and inflation recovery drove a 1.7 percentage point impact. This was delivered through our pricing pass-through mechanisms and positive discussions with customers around labor pricing, in particular, during the year. Our ongoing operational excellence initiatives drove a positive impact of 1.1 percentage points, which partially offset inflation, as you can see, but also contributed to the operating profit growth. This encompasses our continued focus on driving efficiency across our manufacturing business, including direct labor optimization and waste reduction.

Finally, a focus on managing our overheads and indirect costs drove an incremental saving of 0.4 percentage points. I have been very focused on our overhead cost base since joining, so it's good to see the contribution being driven by this work. In the current year, this was predominantly driven by indirect labor standardization, functional headcount challenges and other overhead savings. Just moving on then to Slide 11 and cash. For this financial year, we recorded a free cash inflow of GBP 120.5 million, a significant improvement on the prior year with a number of factors contributing to this outturn.

There was a net working capital inflow of GBP 27.6 million, which was a significant improvement on the prior year. Again, at our Capital Markets Day, I would have referenced the increased focus we are putting on proactive working capital management across all the components. The impact here is driven by a broad focus on stock management, managing our debtors, creditors and other payables to optimize inflows and outflows. Maintenance CapEx for the period was GBP 29.6 million, which was an increase of GBP 3.4 million when compared with 2024. While not included in the definition of free cash flow, we also meaningfully increased our strategic capital expenditure, which I'll speak to you about in a little bit more detail shortly. Cash exceptional charges for the year were GBP 17.4 million and were comprised of spend on the Making Business Easier transformation program and also on the Bakkavor transaction.

Just going quickly through some of the other items here. Interest and tax charges, GBP 25.7 million, down GBP 600,000 compared to last year as a result of lower interest cost and borrowing, offset by a slight increase in tax paid. I have previously referenced that our U.K. defined benefit scheme would achieve a fully funded position by the end of September 2025, meaning nearly GBP 10 million of annual pension contributions from the group would no longer be required. We do, however, now anticipate an increase in tax-related cash flows in 2026, which is likely to offset this.

Finally, lease payments of GBP 15.5 million were broadly in line with last year and other movements here of GBP 11.2 million related to share-based payments and other noncash-related charges. Our free cash flow conversion was 66.5% for the last 12 months. We are happy to have delivered this in the context of our overall medium-term target of being at 55% and above, and we'll continue to focus on cash conversion going forward. Just moving on then to Slide 12 and touching on our capital allocation framework. I have previously noted that I will update on our capital allocation plans at our half year and full year results announcements. Our priority, as you can see here, continues to be ensuring funds are available to invest in organic growth through maintenance and strategic CapEx, an area, as I said, I'll expand on further in a moment. But just moving on to dividends.

Last year, the group reinstated the payment of a dividend for the first time in 5 years and indicated that going forward, it will be a progressive dividend growing in line with earnings. Given the strong financial performance of the group for the year, the Board is recommending the payment of a dividend of 2.6p per share, an increase of 30% year-on-year. We have closed out the financial year with our leverage in a very strong position with net debt to EBITDA at 0.4x. And as I think about points 3 and 4 here, this puts us in a really strong position as we contemplate closing out on the Bakkavor transaction and focusing on deleveraging post completion. As a result of this transaction, we are not proposing any further return of capital to shareholders at this time. At this point, it will be premature to talk about the capital allocation framework for the combined group with any specificity.

What I will say is the group's philosophy is to deploy capital to balance long-term growth and shareholder returns. We will do this through investing in driving operating profit growth, generating strong free cash flow and following a disciplined investment and capital allocation approach that ultimately drives returns for shareholders. Moving on then to Slide 13. I wanted to just take you through a little bit more detail on how we think about investment into the core business. As you can see here, our adjusted operating profit growth feeds strong cash flow generation, which we then prioritize for investment into the core business. This ultimately then enables delivery of above-target returns.

Year-on-year, we have increased that capital investment by 34% with strategic investments increasing from GBP 6.2 million to GBP 13.8 million. And I just wanted to call out some of the areas that we have invested in. We've invested GBP 4 million to automate certain manual tasks. In this financial year, this included projects like packaging automation, automated sushi rolling and some vegetable slicing. We invested GBP 5 million capacity and capability expansion across the network with many of these projects now operational and some carrying into full year '26.

We also invested GBP 4 million in sustainability investment to help drive our sustainability objectives while also driving benefit to the P&L. As we've indicated in the guidance in the appendix, we'd expect to step this investment up again in 2026, and we are guiding on investing GBP 50 million in that financial year. Alongside this spend, we're continuing to invest in our making business easier program, investing GBP 12 million over the past year through exceptional items and increasing this investment into 2026. Dalton is going to speak about progress in this area shortly.

Just to finish off, you will remember that we set out our 5 medium-term financial targets at our Capital Markets Day. I'm really pleased that we have made strong progress against all of these targets in 2025. We have effectively met our returns on invested capital target, and we've continued to drive the business to further deliver on this metric. On revenue, we obviously outperformed versus this metric in the financial year with a key driver of that being a significant new business win. On margin, again, we made excellent progress versus our target of being at 7% or above, and we are confident that we have a pathway to get to that target.

On cash conversion for the full year, we outperformed our target for the reasons I've highlighted, and our leverage is clearly below the indicated range, but this is a welcome positive as we look to complete on the back of our transaction. So in summary, we have had a very strong year. I will refer you to some further guidance we've set out in the appendix. I just want to thank you all for your attention this morning.

And now I will hand you back to Dalton.

Thank you.

Thanks, Catherine. And let me now turn to the strategic and operating review. And on Page 16, you can see our strategic framework, which we launched at our CMD earlier this year. And there are 2 key pillars here: strengthen the core and grow and expand, underpinned by 5 enablers, which make up our Greencore way of winning. And following some years of stabilization and rebuilding, last year was about progressing both pillars in parallel, realizing opportunities within our core business while simultaneously building the platform for future growth. And you can see on Page 17 that a key element of our strong core is our performance versus the wider market.

It's been a tough year in the U.K. grocery market with subdued volume growing at 0.7% against a backdrop of persistent high inflation and muted consumer confidence; however, our core categories where we typically hold the #1 or #2 position continue to perform well. For example, the market -- the sandwich market grew at 4% year-on-year. For example, us, we grew at 4% year-on-year. In absolute terms, we outperformed the market by 180 basis points, achieving 2.5% manufactured volume growth. And despite that difficult backdrop, there are some key tailwinds to support continued growth. Firstly, consumers' desire for convenience continues to rise with the large multiples opening 175 new convenience stores this year, and the number of convenience stores is forecast to rise by 2% next year.

Secondly, premiumization remains an important growth driver in our key categories. For example, own label premium sandwiches grew 23% year-on-year. Finally, we're seeing a sustained trend of growth in eating in, which was up 1% versus last year against eating out, which was down 3%. As eating out becomes increasingly expensive and dine-in options improve in quality and variety, more and more consumers are seeing better value by staying at home. This is particularly important for us as we look to our combination with Bakkavor who have real depth in the food for later market. Turning to Page 18 and another key factor of our performance has been in our portfolio management. We're committed to driving returns in every part of our business with the goal that each category will, in time, cover its cost of capital.

And we can point to some really good progress here. You know about our 15% ROIC figure, but I thought it worth sharing the building blocks which sit underneath it. Our focus in portfolio management zeroed in initially on our larger categories, so sandwiches, ready meals, ambient sauces and salads, which make up 85% of our revenue. We've made really good progress here, increasing ROIC across these categories by 400 basis points, therefore, keeping returns well above WACC. A good example is in our sandwich business, where we drove returns in 3 areas: Firstly, new business wins in the retail and coffee channels; secondly, margin accretive new product launches; and thirdly, operational excellence initiatives. And we've also driven ROIC in our smaller categories by circa 100 basis points, whilst this is in the right direction, we still have more to do so that every category covers its cost of capital.

A good example here would be our sushi business with improvements again driven by, firstly, new business wins; secondly, diversifying our offering into poke bowls; and thirdly, execution of our automation road map. Moving to Page 19, and let me share the key enablers of our strategic framework, starting with great food. We launched 534 new products in partnership with our customers last year. That's over 100 more than in FY '24. This includes NPD, so entirely new-to-market concepts as well as what we call EPD, so existing product development to improve quality and taste profiles. We're now able to deliver this scale of innovation at speed faster than ever before, reacting quickly to trends and working with our customers to get new products on shelf fast. You can see a great example of exactly that on the top left of this page.

Last week at the CMD, M&S talked about their partnership with us and the work we did together on the strawberry sando, which went viral, quickly becoming M&S' top-selling sandwich and selling over 1.2 million units within weeks of launching. This is a great example of the incremental impact that innovation can have. The other products that we've highlighted here on this page, Greggs, Mac & Cheese, Sainsbury's, Taste the Difference, Chicken and Nduja Wrap and Cox, marry Me Chicken Sandwich are other examples of the many products that had hugely positive consumer feedback. And on the right, you can see some of the benefits that innovation delivers, driving incremental growth, margin accretion through premiumization and improved quality. Moving to Page 20, and we wouldn't be able to deliver any of this without our strong partnerships with customers and suppliers. And here, you can see a few examples of the value that we've delivered through these partnerships.

For example, we supported the launch of a first-to-market food on the move store with co-op. We created a bespoke offering of hot and cold products, testing out new concepts such as serve over counters, super premium ranges and time of day offers. We've also -- we're also servicing these stores via our direct-to-store distribution arm. This is a great opportunity to trial new concepts, which can then be rolled out into their main estate. Secondly, we used our category management and insights capabilities to support a customer with a full store transformation, advising them on space, product locations, flow and range. 30 weeks after the reset, volume in the store was up 22% with the number of shoppers up 18%. Thirdly, through an Innovation Day with one of our customers, we identified an opportunity to expand their premium sauce range into a new cuisine.

The products went live 4 months later, growing the tier by 163% for that customer and allowing them to grow 1 percentage point of share in that sauce cuisine. Fourthly, an incredibly important part of our partnership model is the relationship that we have with our suppliers. We often speak about our customers wanting to do more with fewer strategic partnerships. Well, the same is true for us with our supplier community. We've reduced our total supplier base by 15% since FY '22 and strengthened our relationships with our key suppliers. This is an important driver in helping us manage complexity whilst in parallel ensuring that we have the best quality products in the supply chain with the right cost structure. There are -- these are just 4 of the hundreds of examples where every day, our teams are going above and beyond to build truly lasting partnerships. Moving on to delivery excellence on Page 21, and our Greencore operational excellence model continues to deliver strongly.

We've spoken before about units per labor hour as a measure of productivity in our sites. And this has continued to build, up 4% from FY '24 and up a material 10% since FY '23. This progress has been underpinned by the delivery of over 700 -- or 701 individual operational excellence projects in the year with an average value delivered per project increasing by 37%. An example would be a line balancing exercise we ran in 7 of our sites, reducing bottlenecks and increasing units per labor hour by 10% in those sites. This project delivered GBP 750,000 of in-year savings. And we still have more to go after in the core business. So we've set up 2 new centers of excellence to target the next set of opportunities. Firstly, on next-gen automation, we've continued to progress select concepts.

You can see in the photo an automated packing line, which we installed in our Spalding salad site, and we're now kicking off the first of a 5-year automation road map with 12 prioritized concepts in order to deliver at least 10% direct labor savings over time, a number you might remember we shared with you at the CMD. Our current focus is on recruiting the team with a head of automation now in place in order to move at pace to deliver the first prioritized concepts. Secondly, on group logistics, we've kicked off a project to optimize and standardize the way we do internal logistics across our sites. This includes inbound, outbound and warehousing costs. Like many areas of our operational excellence agenda, we can drive real benefits here from moving to one standardized way of doing things across the group.

On Page 22, a key part of delivery excellence is our Making Business Easier technology transformation, a multiyear program driving consistency and simplicity into the business. The program is now in its second year and is making good progress. We've included some examples on this page of the kind of initiatives that we are driving across 2 dimensions: the quick wins, which are delivering early value and the multiyear transformational projects. To highlight a couple. Firstly, a quick win for us this year was the rollout of an automated invoice processing across all sites. This has reduced time to process, improved payment controls and reduced errors.

In FY '26, we expect to process over 100,000 invoices automatically, which at that scale has significant benefits. We've also made good progress on our larger multiyear initiatives. You can see some examples of the types we're working on, on this page. None of them are rocket science. It's more about standardizing and modernizing some of our basic business processes after years of underinvestment. An example of this would be supply chain planning, where we've now selected a tech platform for a solution to streamline demand forecasting and production planning and scheduling and are rapidly moving into the delivery phase. Whilst we're still early on our journey, we're making good headway. Total program costs are still estimated to be up to GBP 80 million over 5 years, whilst investment in FY '26 will be circa GBP 20 million to GBP 25 million, which is reflective of the upfront phasing of the program spend.

Moving to sustainable choices on Page 23, and we're pleased to hit our Scope 1 and Scope 2 carbon emissions and food waste reduction targets in FY '25, which is a particularly strong result in a year when we increased manufacture volumes by 2.5%. And looking further out, we've also begun development of our 2040 net zero transitional plans for 4 pilot lighthouse sites, which will form the basis for future group level climate transition plans. And whilst we've got good results in some sustainability areas, we did not meet our in-year target on water reduction. This is because of a couple of particularly high water using sites as the other sites have substantially decreased our water usage in year.

However, we know there is more work to be done, and this remains a key focus for us. In the people space, one achievement I wanted to highlight is the reduction in our attrition rate down by 600 basis points from 24% to 19%. We need to keep great people and have them grow their careers with us. So this is a really strong result. We also made progress on our employee engagement score, hitting 84% in our last survey. And we were also proud to donate nearly 1 million meals with our charity partners during the year. Let's now switch gears on Page 24 to the second part of our strategic framework, grow and expand. And let me briefly set out why we're so excited by the combination with Bakkavor. From a strategic perspective, the deal will create a U.K. convenience food champion with strong relevance, reach and resilience. It will also unlock at least GBP 80 million in cost synergies and creates significant optionality on capital allocation.

From a financial perspective, the deal will create material value for shareholders with an attractive returns and earnings profile, which you can see on the right-hand side of this page. Since May, we've made really good progress on the planning for integration and synergy delivery with a cross-functional team and a central integration management office now up and running with colleagues from both businesses. On Page 25, you can see an updated time line for the deal. Let me orientate you on where we are today and what comes next. We announced the recommended acquisition back in May, receiving strong support from both sets of shareholders at our respective AGMs. Following this, the CMA began a Phase I investigation into the deal, which they concluded at the end of last month. And we were really happy that they raised no competition concerns with regards to 99% of the revenues of the combined group, and this is in line with the strategic rationale of bringing together 2 complementary but not overlapping businesses.

Competition concerns were identified in only one area, supply of own label chilled sauces, less than 1% revenue of the combined group. These sources are manufactured exclusively in our Bristol site. And over the past weeks, we have been working with [indiscernible] to come to a quick resolution, and we were delighted to announce this morning that we have a binding agreement to sell our Bristol site to the Compleat Food Group, and that's just 3 weeks after the CMA announced their Phase I decision. In terms of next steps from here, we've already secured agreement in principle for our proposed remedy from the CMA. So the final step is to secure formal CMA approval, which is expected to come before the end of the year. As such, we remain on track to close the deal in early 2026. On a personal note, whilst, of course, we're very sad that we have to sell our chilled sauces business, I know that the Compleat Food Group will be a great home for the Bristol team.

And looking ahead, we're really excited to be welcoming back our colleagues to the combined group and for what we can deliver together for our customers, for our consumers, for our colleagues and of course, for shareholders. I'll wrap now with some closing thoughts on Page 26. And firstly, we're thrilled by the group's exceptional delivery and our progress against our medium-term financial targets. Secondly, we remain encouraged by the potential in our core business. We know there are so many more opportunities to go after that will drive returns. Thirdly, trading has started well, and we look forward to another year of profitable growth. And finally, we remain excited about the potential from our acquisition of Bakkavor and are delighted that the pathway is now cleared to completion in early 2026, which will allow us to get going on synergy delivery. So thank you again, as Catherine said, for coming here this morning. We really appreciate it. And now we'd both be delighted to take any questions or clarifications you might have.

Mike, are you going to do the honours? We will start up front here.

Patrick?

Patrick Higgins from Goodbody.

Two questions, if that's okay. Maybe the first one for you, Dalton. Just in terms of, I guess, the wider kind of consumer backdrop, your slide on Page 17 outlines several key drivers around the food to go or your convenience business that should underpin that category's continued outperformance, whether it's convenience or premiumization. I guess my question is just more around the general U.K. consumer backdrop. Are you seeing any shifts in kind of consumer behavior or any kind of green shoots in terms of an improving or improving underlying or kind of broader consumer demand?

Then my second question is possibly for you, Catherine, just around the cost outlook. What kind of inflation are you guys budgeting for the year ahead? And maybe just talk us through the various buckets with labor, raw materials. And then against that, how should we think about the various levers you guys have at your disposal to kind of offset and continue your kind of margin delivery, whether it's in terms of price pass-through or your kind of ongoing cost savings initiatives?

Okay. Thanks, Patrick. Look, I'll take that first one then. Look, there's definitely a sense of uncertainty out there. Consumer confidence is still pretty negative. You saw the latest GFK -- it hasn't really improved at all. In fact, it's not in a great place. Having said that, if you think about our business, look, volumes have remained really strong. Q3, Q4 were terrific for us and growing very strongly ahead of the market. So look, we enter into this financial year with a real level of confidence. I thought Simon Roberts did a super job last week talking about a trend that we've seen for a number of years, but this is in the same basket, people trading up and down in the same basket. And I think that bodes well for the portfolio and the categories that we operate in. If you think about our categories, we're own brand.

So that by default has huge value credentials. We typically tier our ranges, even think about the meal deal, there's 3 tiers now. There's even an ultra-premium meal deal, and they're offering fantastic value. And I think, look, there's a strong underpinning of tailwinds out there, the move on premiumization, very important for us, the move on convenience stores, very supportive to our underlying business. And then this what I highlighted in there, this dine-in versus dine out and the value that's been offered there. So I think those 3 sort of structural tailwinds and then obviously, you've got the population growth underpin gives us a level of confidence as we go into what is a fragile market. I mean we can't get away from that. So I think we're confident that despite the consumer backdrop, those tailwinds, Patrick will continue to drive the business forward.

Thanks, Patrick. Yes, look, when we think about inflation, I know I referenced it when I was speaking earlier, for 2025, the inflation we experienced is about 2% to 3%, and that was broadly throughout the year caused by labor inflation, as you know, by about 6% in the year. And obviously, we had the national insurance increase on top of that. Q3, Q4, we saw significant price increases in the protein space. So that obviously fed through quite significantly. When we were thinking about 2026 then, I think we were anticipating inflation of about 3% to 4%, to be honest. And again, seeing that protein inflation continuing into this financial year. There's a little bit of uncertainty as to how long that will continue. Obviously, we have expectations around labor inflation, but we await, I suppose, any announcements in next week's budget to see where that lands. But I suppose 3% to 4%, but I suppose a little bit of uncertainty as to how that would play out.

Obviously, it's still pretty early in the financial year. And I suppose I would just reiterate, as we called out in the presentation, we've been pretty good at offsetting that inflation, whether it's through engaging with our customers are deploying our cost initiatives. And I know that was your other question. When we think about managing our margin, we think about it in 3 areas. And I think we've spoken at length about those areas today, I suppose is how we engage with customers. Dalton spoke about that at length, our innovation, premiumization, delivering for customers and really using that to drive volume and accrete margin. Then obviously, there's how we approach the manufacturing network. Again, we give you a fair bit of detail around how our operational excellence initiatives have kind of evolved. So we're really now starting to look at next-gen automation to really tackle that kind of manual element of our business that still is ripe for automation.

So I suppose that's kind of where we see ourselves pivoting in that space. And look, I referenced the focus we have really deployed last year and will do into the future around pretty significant cost base under gross profit and above operating profit. There is lot of indirect labor there and other overheads to just be kind of laser-focused on. Again, they're the kind of key areas that we see ourselves kind of continuing to leverage to drive margin going forward.

Just keep moving down the...

Gary Martin here from Davy. Just a couple of questions from me. Just a follow-on to Patrick's question there just around the cost side of things. Just around conversations with retailers at the minute, I mean, how challenging is that after a year of reasonably high inflation, particularly with NIC charges, national living wage? Is it becoming trickier from your side? Or are there levers to pull from your perspective? And then maybe just a second question just around -- or even just a follow-on to my first question actually, just around the level of, we'll say, low-hanging fruit that are left from a self-help perspective. Is there still a lot that you can do from that side to offset any additional costs and then just a further question just around cash conversion this year, very strong, well above the 55% set the CMD. I'm just wondering how sticky that is. I know that there were some puts and takes with regards to pension coming down and cash tax coming up and all the rest of it, but it would be good to get a long-term view on that.

Yes. Thanks, Gary. Look, maybe I'll start on the first 2, Catherine, and then you can sweep over anything I missed and pick up the cash conversion. Look, the retailers have been fighting hard for their consumers to ensure that they're as competitive as possible, and it's a challenging market out there. I don't think the level of conversations have changed. We're very transparent. I mean, typically, about 75% of our volume goes through some sort of transparent model.

So that's really helped the conversations because it's very transparent to -- as the proteins move up or down, they're getting it in that month or the next month depending on the contract. So the conversations, I think, are at a similar level to before. The real focus is on innovation. It's not really on cost because you've got the transparency there. That's sort of table stakes. It's all around innovation. And there's a huge push on it. Everybody is trying to just get an edge.

And I think we've been very successful with these Chinese walls that we put through our business that allows dedicated teams for specific customers to develop those ranges that I put out. I mean, actually, there's a mince pie wrap that went out yesterday for one of our large customers. We're always trying to do something slightly different. And I think if the innovation is there, Gary, the conversations are much more positive. Typically, where I would have more tense conversations is where there'll be a challenge, well, somebody else launched that, why haven't I got that? That's where the conversations are. It's not really in cost.

That's not to minimize it. It's just to say that if you're not there on cost, you don't have a business. And that leads, I think, into your second point around is the much more low-hanging fruit. We think you've got to continually be driving this. And leaving to aside the Bakkavor opportunities that will come from that, there is still opportunities in OE. So capacity management, line balancing, overhead balancing, like there's a lot of work we've done there. We were doing something the other day in terms of indirect procurement. You would be shocked in the variety of pricing around Wellington boots.

It would blow your mind, there are Wellington boots that have been purchased that are extremely expensive in our network. Now it's not people doing anything wrong, but they're needing to react to a situation. And you go -- when you standardize all of that, and I think when you're talking about Wellington Boots, you're kind of going, yes, there's still a lot of opportunity out there. It's a well-run business, but we are going to keep going after it. And then maybe we'll talk later about next-gen automation, like there is just such an opportunity there.

Like if you think about the dexterity of the hand, what it can do today in assembly, you think about next-gen automation that we think is probably 24 to 36 months away where you're able to mimic the dexterity of the hand and be able to pick up because you can pick up anything with a robot, but to pick up a tomato, a slice tomato without bruising it or a piece of avocado is a whole different kettle of fish. And that sort of dexterity is coming through. You think of that next-gen automation into our food to go operation real opportunity. But Catherine, do you want to pick up on that...

And look, just to pick up on that point as well. I think we're really starting to see this year the benefit of that operational excellence mindset across our manufacturing business. It's a real muscle that's just strengthened over the last period and it's kind of just an ongoing assessment of the manufacturing business just to see where the opportunities lie. So yes, look, just around cash conversion, absolutely, we had a strong performance this year. As I said, it was just really from proactive management across the cash portfolio, I suppose specifically focusing on working capital, obviously, impacted by improved revenues. and increased costs as well give us a little bit more opportunity around the year-end.

Absolutely, you've called out the point around the pension contribution. And I suppose our improved profitability over the last few years means we've been consuming some of those tax losses, and we're now in a position where we potentially are looking at higher cash tax this year. But I suppose broadly speaking, we're still confident with the range we indicated at the Capital Markets Day that we will be ahead of that on a go-forward basis.

Charles Hall from Peel Hunt. First of all, well done, terrific year. Could I just ask about the other convenience sector that you had volume -- underlying volumes were down slightly. Can you just talk about the moving parts of the different businesses within that, how you compare against the market and what you see as the outlook for that segment of the business?

Yes. Look, I think there are some areas where we've just had some deliberate business losses that we've seeded. I mean I can talk about salads, for example, there's been a number of contracts there that we've just said, not for us. In fact, they were more on the commodity side of prep veg that we just didn't want to go into and we wanted to move up the value chain. But overall, I think if you think about other convenience like that ready meals has been absolutely like a train.

We're trying to, Charles, continue with this focus that we was very successful for us 3 years ago, which was resigning volume that wasn't profitable, and it worked very well. You'll remember, we gave up 10% of our volume. You've got to be careful that you don't slip into that, business is good, so we'll take this on the side. So we've tried to keep our shape there. And -- but in general, our share, I mean, I think I would say salads would be -- that would be the one area where it just didn't really quite work to the level we had hoped. The rest, I think we're confident from a share point of view. I don't know if you add on that...

And are you now through that business resignation process? Or is there still more to do?

No, we're absolutely through it. But these contracts are often on 3- to 5-year cycles. So actually, we're now coming up to many of those contracts that 3 years ago, we were -- we took a strong stance those are starting to be recycled into the market. And we're just trying to be firm on this and not get ahead of ourselves. So there's nothing more now. You've seen the portfolio, the ROIC that we've been making huge progress and even sushi, which I know we talked about a couple of years ago, like it's absolutely flying at the moment. I mean there's more to do, obviously. So I think we're in a pretty good place on our portfolio.

And anything to say on new business wins?

Had some good wins over the summer, which will carry through. It's about 100 basis points of volume that will annualize into this year. So I think that's a good underpin and you put that on top of what's going on with those structural tailwinds of premiumization, convenience stores, you wouldn't want to get ahead of yourself, but we're feeling confident. And I think as we look to Bakkavor, when we think about that ability to manage those portfolios, there'll be learnings that we can bring to them, and I'm sure they'll have learnings for us as well.

Andy Wade from Jefferies.

First one, just sort of looking at your 7% operating margin target. So on the one hand, we've got that where you're at 6.5% this year. But just sort of looking through how you're talking about the opportunity still. There's still fundamental stuff like line balancing and overhead balancing and procurement and so on. But then you've got the big projects to come as well, the automation, logistics, the tech side of things, which is going to be another 5 years. I'm just sort of trying to square up where we're nearly at 7% already and you've got so much in the pipeline. Am I overestimating how much is still to go? Or is that 7% looking very conservative? That's my first question.

Look, I'm sure Catherine will have some views on -- Well, actually, do you want to go on that?

Look, we have plenty, plenty to go after, plenty levers to pull, right? They're not all going to magically appear next year. We're obviously planning to deliver these initiatives over the next number of years, right? I think what we would say is 7% over the medium term, 7% or above is a target that we're happy. We are happy to stand behind at this point in time. Obviously, that's Greencore on a stand-alone basis. We're really looking forward to combining with Bakkavor and then seeing what that looks like. And obviously, we'll be back out to talk to you about how we feel from a margin perspective in the context of the enlarged group. But I think, Andy, the point you made is valid. We have -- I suppose we have plenty of things that we're going to go after to drive the margin. But as I said, it's just -- we need to knock it down, deliver them and wait for them to show up in the P&L. So I think we're happy with the 7% and above.

Okay. Second one, sort of touching back on question Charles asked on the contract side of things. Can you just remind us, you had the big ready meal win in September '24, which is annualized through now. You had some wins in the first half, a bit of salad loss in the second half and a couple more that you've just recently won. Is that broadly the shape of it? Or is there any big ones I'm missing there?

No, that's broadly the shape of it. Some -- a number of sandwich contracts that have come our way that were either expansion or new customers, but...

That's the sort of 100 basis point-ish number you were talking about with Charles' question. Great. And then a little bit churlish given how good the results are, but the making business easier, we're talking about GBP 80 million over 5 years. Are we going to be taking all of that as exceptional? And I guess if it's going to be going on for quite a long time, why do we think that -- I mean, obviously, you run it by the accountants and stuff, but how does that qualify as exceptional given it over quite a long period?

Yes. Look, I mean, it's a transformational spend. We've obviously given that a lot of consideration. We're into year 3 of that program now, and we're happy that it qualifies as an exceptional spend.

Yes, Clive Black from Shore Capital. Three relatively general ones. Firstly, what's the plant utilization then in September '25, what spare capacity you've got? Secondly, maybe say a word on your coffee shop opportunity because that's been a mixed blessing for Greencore in the past. And then lastly, what sort of -- how would you classify your relationships with the movers and shakers in process engineering?

In process engineering.

Manufacturing engineering.

So I'll rattle through that and Catherine, please, come in if you want. So plant utilization, we're about 85% at the moment. So we've got that 15%. We had it before. We sold some of that capacity, which is part of the 2.5% volume growth, and we've been squeezing more out. And I think the challenge into the ops team is I will always be at around 15%. Now at some point, the guys will say, you need to put down more bricks and mortar. But I think our challenge back in is we shouldn't need to put more bricks and mortar down. I'm talking as a stand-alone site, forget the Bakkavor opportunity because obviously, one is to get to 3 shifts. Okay?

And at the moment, for example, wrap rolling, we haven't got any technology that can go faster than a human. So we wrap roll ourselves. But we don't think we're far away, I mean, far sort of 18 months away from being able to speed the wrap lineup and bang, you pick up more capacity. So what we say to the team is, let's keep it at 15 and keep eking it out. In terms of the coffee channel, good question given ISG. But I think like if you take something like Costa or Nero, I mean, Nero is a fantastic business as is Costa, very professionally run. In the Nero case, they give us the keys. We deliver at night. We deliver through our DTS operation. We deliver other products for them as well. In some cases, we're quasi-merchandising the shop for them. So I think it's a good channel.

It's professionally run. And I think if we're disciplined in holding our shape, I see the opportunity there. And then the third in terms of process manufacturing, this is a really good question. So we've been typically dealing with the Militex of this world, so European, and we want to go out to China. In fact, the plan is to go out in Q1 to go out to China to start speaking to other OEMs, think with the Bakkavor behind us and we can say, look, we've got 40 plants here. I think we believe there could be a different conversation. But we're trying to pull kind of current leading-edge technology from the Militex, but we want to see as something next gen from other sectors Clive because we're not the only other people out there who are dealing with the hand dexterity issue, and we believe there must be technology out there. And like I can't tell you how many thousands of people we have on our lines that -- and we've talked about 10% of that could be a medium-term target and some might say that's not ambitious enough in terms of taking labor out.

Nothing further for me, to be honest.

[Operator Instructions] The next question comes from Karel Zoete from Kepler.

I have 2 clarification questions. The first one is in relation to the transition costs in 2026 plus the integration cost. What would be a reasonable expectation for both aspects combined in '26? And the other thing is on operating margins. Did I understand correctly you expect them to expand into 2026?

Yes. So look, I suppose if you think about cost of the transaction into next year, we have an estimate of our costs being about GBP 40 million. for the transaction. And obviously, we recognized GBP 11 million in exceptionals in full year '25 in respect of the transaction. I suppose moving on to margin, absolutely, Karel, I suppose our expectation, our plan, our aspiration is that we will improve the operating margin in 2026. I'm not sure if you want me to build on it anymore. I think we've spoken a bit today around how we're planning to approach that, obviously, within the confines of that overall operating margin target of 7% and above that we've set out over the medium term, I suppose we are on the journey to delivering that, yes.

Okay. Well, we'll wrap it there. We really appreciate you coming in today, and thank you for your questions and support.