Premier Foods plc Stock

Hello, and welcome, everyone, to the Premier Foods Quarter 1 Trading Update Analyst Conference Call. My name is Becky, and I will be your operator today. [Operator Instructions]

I will now hand over to your host, Alex Whitehouse, to begin. Please go ahead.

Thank you very much, and good morning, everyone. Thank you for joining this, which is our quarter 1 trading update call, and that covers the 13 weeks to the 27th of June this year. As usual, I'm joined on the call this morning by Duncan Legg, our CFO.

I'll start by giving a few headlines on our trading in the quarter, and then we'll go into a few key areas to provide a bit more detail before, as usual, passing to you for questions. I might want to ask -- and also as a reminder, we're holding our AGM at 11:00 this morning, which, as usual, we're hosting in our offices here in St. Albans. So if any shareholders would like to attend and don't yet have the details, please do contact Richard Gonen in Investor Relations for details of how to attend. So on to the quarter 1 results then.

Firstly, I am pleased to say that once again, we've grown our branded sales ahead of the market. That's up 4% and so further increased our market shares. And this was led by a particularly strong performance by our branded Sweet Treats. And with our biggest brand, Mr Kipling, delivering especially strong growth. Now overall, our group sales increased by 2.7% and our U.K. branded sales increased by 3.8%, and that was led by our strong innovation program. So the strong branded growth is partially offset there by further rightsizing of our less profitable non-branded business.

I'm pleased to say that we're on track at this early stage in the year and with our trading profit expectations for the year unchanged. I'll take you through some of the progress we've made in the first quarter. But before I do that, I just wanted to remind you of the branded growth model, which is the core of what we do and is the reason why we've been able to deliver such consistent strong performance over an extended period of time now.

Now firstly, we're lucky to have a portfolio of really strong brands, which are leaders in their categories and have got very high household penetration. But then we spend a lot of time and effort talking to and listening very carefully to our consumers so that we can create and bring to market insightful new products, which are based on current consumer needs and trends, which includes things like premiumization and better-for-you options.

We then support many of our brands with emotionally engaging advertising and impactful marketing campaigns to maintain that strong awareness of our brands and keep them contemporary and relevant. And then we also use digital channels to enhance our connection with younger audiences.

And finally, but very importantly, we work closely with our key retail partners to deliver category growth and deliver excellent in-store execution for our brands. And it's this branded growth model that underpins our 5-pillar growth strategy, where we continue to make strong progress in all of the pillars, but I'll come back to that shortly.

So if I kick off with Sweet Treats first then, well, we've had another really great quarter here with branded sales up by 6.6%, and that was led by Mr. Kipling, which has grown by another 9% this period. And this trend means that our branded Sweet Treats has now grown on average by 8% for the last 11 quarters, which is clearly a very consistent strong performance. But a significant part of this growth has been driven by the quality of the innovation program, which, as I said, is a major part of our branded growth model and overall strategy.

However, I should also point out that the underlying core product ranges also continue to perform very strongly as well. And we talked back in May about those Sweet Treats new product ranges, which we launched relatively recently. And this quarter, we've introduced further new products, including birthday cake slices, which builds on the already successful birthday cake Tarts. And you might remember these birthday cake Tarts were inspired by a trend that we've seen in the U.S. for birthday the flavor. And these are selling really very well indeed.

And so we've extended the idea into our cake slices, which is, of course, our best-selling cake format. And we've also launched a new range of Mr Kipling Worlds, including some modern flavors like Cooks and Cream, which will appeal to younger consumers. Now these new ranges add to the product innovation we launched last year, particularly Mr Kipling tubs of Cake Bites, which is perfect for sharing or for those wishing to control portion size and also the Mr Kipling breakfast bakes.

Now if we move on to the grocery business then, our Grocery branded sales increased by 3% compared to last year. And similarly to the Sweet Treats business, we launched a series of new products based on current consumer trends. And this includes Ambrosia custard in pouches, which are a convenient option, perfect for lunch boxes that contain just 100 calories a pouch. And we also introduced Lloyd Grossman premium cooking source kits, which is the same format as the Spice to a 3-step kit to bring Italian restaurant quality meals into the home.

And we've also brought to market missing hands and meals in a part, and these are a complete nutrition product range, which are nutrient dense -- they contain over 20 grams of protein per pot and 26 essential vitamins and minerals, and they can be particularly helpful for those using GLP-1s. In addition to those launches I've just outlined, we also delivered very good growth from some ranges that we introduced last year.

And in particular, I call out OXO Bone Groth and Angel Delight Bubble Jelly, which were significant contributors to both sales and growth and share gains for those brands. Moving to the non-branded part of the business. In Sweet Treats non-branded sales increased by 5.3% due to some strong volumes on pies and tarts and a contract win for cake slices. And we expect our non-branded Sweet Treats to now deliver modest growth across the year.

Non-branded grocery sales were GBP 2.5 million lower in the quarter. And I said before, we continue to rightsize this part of the business and so have exited some further contracts, which impacted the shape of the numbers in the quarter. We do actually expect the trend in grocery to improve as we go through the year. Now as I've said before, whilst these nonbranded contracts can be a bit lumpy, our target over the medium term is for these parts of the business to be flat or possibly deliver some modest low single-digit growth.

And timing-wise, I'd expect this to take place in Sweet drinks before grocery, which is what we're now starting to see. Now look more widely at the other strategic pillars, we've continued to make some encouraging progress. The next pillar is investment in our infrastructure, and we haven't provided an update on this today as this is just a trading update.

However, we do remain on track to invest somewhere between GBP 55 million and GBP 60 million in CapEx this year. And by way of a reminder, this part of our strategy enables us to drive improved efficiency and automation through our supply chain, enhancing our gross margins, which means we can reinvest back into brand investments. Now moving into new categories. I'm pleased to say we've continued the momentum here with sales increasing 16% compared to last year.

So further good progress, especially when set against last year's comparative when sales in those new categories grew by 38%. This quarter, I'd call out Cape Herbs and Spice as a particularly strong performer, which as I've mentioned before, has become an established presence in the market. It's great for bringing flavor to live and a wide range of dishes, so poultry, fish, salads and ribs. -- and also across midweek evening meals, but also the barbecue season, which helps us reduce the seasonality and sensitivity of our grocery business.

Growth from new categories also included FUL10K yogurt and granola, which we launched last year and is in the chilled app. And this is a pot of protein enriched yogurt with a lid containing some of our market-leading FUEL10K granola, which you sprinkle on top or which you can mix in. We now move on to international. As I said before, our focus markets are Australasia, North America and EMEA. And within these target markets, we're currently focused on Mr Kipling, Sharwoods and Spice Tailor, but now also FUEL10K. And in the first quarter, overseas sales at constant currency grew by 6% and actually 7% on a reported basis.

So if you take Europe first then, where we increased sales in double digits in the quarter. It's been very pleasing to see the encouraging start to the launch of Fuel 10K, where we're initially in the Netherlands, Germany and France. The Netherlands is where we've achieved the most significant distribution with both granola and C parts ranges listed in Albert He, and we supported the launch with some social media.

And as I say, it's off to an encouraging start. In North America, sales also grew in double digits. Canada saw increased sales of the Spice Tailor. -- while in the U.S., we saw very strong growth compared to last year due to the new distribution for Mr Kipling Slices and Pies, which took place in the second half last year as well as some more recent listings. In Australia, sales of the Spice Tailor grew over 20% as it benefited from a multichannel marketing campaign, which actually included TV advertising in addition to an immersive retail experience in one of Australia's largest shopping centers.

And we do this because we know that once people try the Spice Tailor, they do really like it and they tend to come back and make it a regular purchase. So our focus is on increasing consumer awareness. And then in cake, in Australia, we saw sales stabilize as retailer stock holding levels begin to normalize. And then just as a reminder, our final strategic growth pillar is to look for inorganic opportunities where we can deliver further growth by leveraging the strength of our branded growth model.

And as you know, we're looking at acquiring future-focused brands, which have significant further future potential to scale up and deliver high growth for many years ahead. And following that premise, all 3 of the brands we've acquired since we set out on this strategy, that's the Spice Tailor, Fuel10K and Merchant Gourmet, they've all again grown sales in double digits this quarter, which we're really very pleased with. And Merchant Gourmet enjoyed widespread growth across all its range, especially from some of its new launches, including the new gourmet baked beans. And Fuel10K also continued to progress very strongly as well. We've mentioned before that we have the #1 granola product in the U.K. market with our flagship chocolate granola. We that continues to be the case.

And in fact, we've strengthened that further and taken more market share in the granola category. So another very strong performance from the brand. And then in terms of the Spice Tailor, the core Indian kids range performed particularly strongly and the brand also then growing sales in the teens percentages in quarter 1. As we said before, we'll continue to explore further inorganic opportunities and where we believe we can add value by applying our branded growth model.

And we're looking for high-growth future-focused brands. Of course, we do now have some greater flexibility in terms of the size of opportunities we can consider given the strength of our balance sheet. However, and also, as we've said before, we are quite picky, and we'll update you when we've got anything more we can share on that. So look, in summary, we're on track and our trading profit expectations for the financial year are unchanged. And it's particularly pleasing to see the good progress across the pillars of the growth strategy and in particular, the role that our recently acquired brands are playing in accelerating overall group growth.

As we look forward to the rest of the year, we'll continue to drive performance across all of those 5 pillars of our strategy and to leverage the strength of our branded growth model. And as usual, of course, we'll be continuing to support our brands as well as bringing a number of new products to market in the U.K. and also building our brands overseas. And over the medium term, we expect to continue to build the business by making strong progress against that 5-pillar strategic growth strategy.

So look, thank you very much again for your time today. I'll now pass back to the operator, and we'd be very happy to take any questions.

Our first question comes from Charles Hall from Peel Hunt.

Can I just ask on Ireland? What was the impact in the quarter from that change in -- from a distributor to direct retail? Was it just in that quarter? Presumably, it doesn't affect ongoing sales. And just give a bit more color around that, that would be great, please.

Sure. Thanks, Charles. Yes, so what we've done is we've had a historic relationship with one of the retailers in Ireland, a significant one as well, where we've gone through a distributor, which isn't particularly efficient. So we've now moved that to direct delivery relationship, which obviously is more efficient, saves us some money and gives a bit more control. So there is a one-off impact as we run down the stocks that were in the distributor's warehouse, if you think about it that way because they have -- they own that stock. But you're absolutely right, it is a one-off. It only affects the first quarter of this year. And I think from an impact point of view, think about it as a couple of million or so of sales. And that would be grocery brand to be fair.

Got it. Perfect. And then one other. Can you just give an update on input costs and pricing? I think when you last talked about it a little bit higher, but not looking to change pricing. Has that changed at all?

Similar picture, although obviously, we're very aware of what's happening when we thought we've got that seems to have dissipated on us. So we'll keep very close to that. If we need to take some action, then we'll do so. But at the moment, it doesn't look like we need to.

Our next question comes from Andrew Wade from Jefferies.

A couple of questions from me. First one on innovation and new product development. I just sort of interested as to the cadence of it seems to have stepped up or intensified. I don't know whether that's just a perception thing or you sort of explaining it in more detail, but it really seems like there's been some quite big wins there on the product development and innovation side. Is that putting a bit more into it? Or is that sort of -- it's the way it's always been? And if it step change, can we sort of see that continue at the same level? That's the first one.

Yes, good question actually and quite observant as well because, yes, there is a subtle change here that's something we've been working on for a few years. It takes a little while for these things to filter through. So whilst we might not have more NPD in absolute terms, in fact, it might even be a little bit less. What we've been focusing on is coming up with ideas which have got overall greater scale-up possibility.

So when you think of things like OXO Bonebosth, that's something that we expect to be able to scale and be worth several million pounds of turnover as opposed to doing lots of little things. And similarly, with the innovation that we've talked about on Sweet Treats, like the breakfast bakes, which targets a different time of the day. They're very specifically intended to be entirely incremental to the rest of the Mr Kipling business, which is generally even lunchtime onwards. So there is a subtle change there, and it's really about scale.

Interesting. And then the second one I was going to ask, on the non-branded grocery side of things, that was obviously a bit light of certainly I expected and I think perhaps others as well. Obviously, not too much of a concern given it's sort of not a strategic priority and it is relatively low margin. But I'm sort of interested as to -- you're obviously still very happy with consensus trading profit expectations. Is it just that sort of that revenue is such a low margin, it doesn't have much impact? Or are you sort of slightly out trading elsewhere? Just interested in the dynamics around that.

Yes, sure. I mean it's no change from what we've talked about really because what we've been doing is deliberately unwinding some of these contracts where we're not really making any or very little money. So what you're seeing is relatively hollow revenue that we're getting out of. So therefore, no impact on trading profit. If you look at the journey we've been on that, particularly on grocery, we've now got a smaller non-branded business, but a significantly more profitable one, which is exactly what we're trying to achieve.

Now from that base, that's something that we can now move forward on and start to -- as you've seen on Sweet Treats, actually getting a bit of modest growth out of it because we're kind of happy where we've got to. It's just going to take a little bit longer to sort of finish the journey on grocery. But yes, I'd expect that to start to flatten out and eventually maybe get into a little bit of modest growth as we are on...

Our next question comes from Matthew Webb from Investec.

The first question is just on the impact of the timing of Easter. I don't think you mentioned it in the statement, but casting my mind back to the full year results. I think you said that some sales have been sort of dragged into Q4 '26 out of this quarter due to the early Easter. I just wonder whether I remember that correctly. And if so, whether you'd be able to -- I know it's really to quantify it, but it was that enough to move the needle in the quarter, I suppose is my question. That's question one.

Yes, you're absolutely right. Well remembered. So yes, we're right in quarter 4, we did say that quarter 4 had benefited from that changing in Easter timing. And because deliveries tend to go out a few weeks before Easter, obviously, to make sure they've got to get through warehouses and get on the shelves and get put on the display, it got benefit in Q4, but obviously, that's at the expense of Q1.

So we've not particularly mentioned it in the announcement today, but you're absolutely right. Q1 particularly grocery and would have been stronger if it had been the like-for-like timing of Easter for the quarter. But obviously, we've seen that benefit in Q4.

Got it. And then second question on international. So the part of international that you mentioned are all performing strongly, so Europe, North America and Spice Tailor in Australia. But the overall growth was only 6% up against a relatively weak comp as well, I think. So presumably, the Australia cake was weak. Could you just remind me what's going on there and maybe sort of update on where we are in that part of the business, please?

Yes. So your analysis is spot on. So double-digit growth in Europe and North America, good growth of the Spice Tailor in Australia as well, overall, Australia was pretty flat. And that is that sort of continuation of getting the stock levels right in Australia. This was actually -- the outset here was better than we expected actually because I expected to see more stock come out of the system in Australia than it did because I think we're now getting to the right levels.

So therefore, you end up with 6% growth, even though you've got double-digit growth out of Europe and North America because Australia is so much bigger for us and so much more an established market than either Europe or North America. So there's a relative size impact going on there. But actually feeling pretty good about the stabilization of stock in Australia.

You might remember, we said we put a logistics person from the U.K. into our Australian team on the ground to get very close to the retailers and their logistics teams to work through what's the right amount of stock, what should the right frequency of ordering be. And we made quite a lot of progress on that. So I'm feeling a bit more comfortable with it.

And also just sorry to follow up on that. The -- if you take the sort of stocking issue out of it, what do you think the underlying performance of the Australian cake business has been looking like in the quarter?

That's a really good question. I yesterday I don't have the analysis, unfortunately. I know that as we went through last year, we were seeing really, really strong growth. And I know we've got a nice plan this year for the Australian cake business, including a lot of new products and continued marketing support. So I'm not worried about the health, if you like, of that business, although I think it's fair to say it's becoming a more mature business like in the U.K. But yes, I'm not concerned about that really.

We currently have no further questions on the line. I will hand back over to the management team for any final comments.

Well, thanks for your questions, everybody. Look, I think, obviously, quarter 1 is not our biggest quarter. We know that, that comes later in the year when the weather gets to. But nevertheless, we're off to a good start. I'm really pleased with the branded growth that we've delivered.

I'm also pleased with the performance across the pillars actually, but good to see the international business picking back up again, which is obviously what we expect to see. So overall, we're in a good position, no change to outlook for the year. Thanks very much.

Thank you. This concludes today's call. Thank you, everyone, for joining. You may now disconnect your lines.

Welcome to Premier Foods Full year results. That's for the 52 weeks that ended on the 28th of March this year. As always, I'm here with Duncan, our CFO, and what we'll do is usual double act. I'll take us through some highlights. Duncan can then run us through all the financials, and I'll come back and show you the progress we've made against our 5-pillar growth strategy this year.

At least I was hoping that's what I was going to do. So you might remember that we had a really strong quarter 3 and a really strong Christmas, really important period of time for us, of course, with some really strong second half branded growth. Well, that carried on through quarter 4. And actually, quarter 4 branded growth in the U.K. was up 5.1%, and that brought the second half to 5% overall. There's a bit of phasing there from Easter. We had a really strong Easter as well. Easter falls into our quarter 1, but actually, the shipments go out largely in quarter 4. But remember that an early cold Easter is generally good for us because that means more people are eating roast dinners and less people are getting the barbecue out. So an early cold Easter was good, and that helped us as well, and we took quite a lot of market share there as well. And that led us to more profit delivery than we expected. So we raised our guidance after that strong Christmas at the end of Q3, but that strong Q4 came in better than we thought. And so therefore, profit came in overall better than those raised expectations.

And the other bit of interesting news we've got today, it was given the continued strong performance of the business, our strong cash generation and the strength of the balance sheet, the Board is currently planning to introduce an interim dividend starting with the current financial year. So that will be off the back of our half year results this year when we talk about those next November.

So if we run through the headline numbers, then revenue came in at GBP 1.175 billion, that's up 2.5% versus a year ago. But that second half being stronger, up plus 3.8%. But then, of course, importantly for us, because we focus on building the brand, branded revenue was GBP 1.042 billion, that was up 3.4% with that second half coming in more strongly at 4.7% growth. That included taking more market share. So we increased our market share both in Grocery and in Sweet Treats during the year. And not just in the U.K., actually, we also did that in Australia, which is our biggest market outside of the U.K. And actually, it's the only other market that we've got reliable data for. So in the 2 markets where we've got good data, we increased market share, both Grocery and Sweet Treats.

That got us to that trading profit, which crossed GBP 200 million, up 6.7% versus a year ago, and as I say, ahead of the previously raised guidance. Adjusted EPS 15.8p was 8.7% ahead of a year ago, and that runs faster, if you like, in terms of growth and trading profit because obviously, we've got lower interest costs year-on-year. Free cash flow, GBP 153 million was up 9.1% and that helped bring net debt to EBITDA down to 0.4x, that was a GBP 48 million reduction. And bear in mind, of course, that's after investing that capital back into our manufacturing infrastructure, which is obviously a core pillar of our strategy. But it's also after the acquisition of Merchant Gourmet, which we completed during the year.

So dividend for the last financial year then is a 20% increase on prior year, so well ahead of earnings. And as I say, the Board is currently also planning to introduce that interim dividend from this year onwards. So a nice set of financial numbers overall that we're really pleased with. But at the same time, we also made good progress against our branded growth strategy. So we've seen the left-hand side numbers. Remember, that's growing the core U.K. So brands in the U.K. grew by 3.7%, 5% in half 2. Infrastructure investment, we invested GBP 52 million. That was up 25% versus the prior year as we continue to invest into more projects in our manufacturing sites, which at the end of the day makes us more efficient and helps fund the brand expansion.

And the third pillar of expanding into new categories. Growth there was 37% as we continue to expand the business outside its traditional core categories into new areas. I'll come back to these in more detail later. And the international business, made some really strong in-market performances and some really good progress, but it was offset by that reduction in stock of cake that's held in Australia, which I mentioned at the half year, and I'll come back and talk about that in a bit more detail. And then inorganic opportunities like the brands we bought. We bought 3 brands now in recent years, all performed fantastically well. Actually, they all grew by double digit and Merchant Gourmet is already running ahead of the acquisition model on which we based our acquisition.

So really, really good, I think, progress against the 5 pillars. We thought it might be interesting to look at the numbers in a bit of context actually and look at this over a 5-year run because what you see is you see this consistent strong performance year after year after year. So it doesn't really matter which KPI we look at. If you look at branded revenue at the top left, it's just consistent strong growth, 7.7% on average. Trading profit in the middle top here, that's running actually ahead of the growth rate of revenue and actually moving from 2021, GBP 141 million to the GBP 200 million that we've announced today. Similar position for EPS up to that 15.8p. And indeed, free cash flow down at the bottom left there, moving from GBP 65 million in '21, '22 up to the GBP 153 million today, so more than doubling over that period of time.

And that obviously helps drive net debt to EBITDA down from the 1.7x to the 0.4x today. And then finally, on dividend per share, we introduced that actually in the previous period in FY 2021 at GBP 0.01 a share, and we've moved that up ahead of earnings every year with that big step-up last year. Remember, that was the repurposing of the dividend match to the pensions. And then obviously, we've built on that by 20% this year. So when I stand back and look at that, it's a good strong consistent performance over multiple years. And I think that just points to the robustness of the strategy and also the brand building model that sits behind it.

And so with that, I'll hand over to Duncan, and he can walk us through the numbers.

Thanks, Alex, and good morning, everyone. So I'll start off with a few sort of financial headlines. Firstly, trading profit we've just heard is ahead of the expectations we raised back in January. So that's up 6.7% versus prior year. Alex has mentioned free cash flow, but generating cash has always been one of Premier Foods strengths. It's actually previously, it's obviously gone to servicing the pension scheme and our debt. The good news is now we can invest it back behind the business. And obviously, that's helped reduce leverage down to 0.4x. And as Alex has just mentioned, really pleased to announce we're currently planning to introduce the interim dividend from this financial year. So that will be over and above the final dividend that will come on top. And obviously, we'll share more details of that following the half year results in November.

So moving on to financials. I think good progress across our key financial metrics. So looking at branded revenue, that's up 3.4%. I'll talk about it in a minute, but really good Sweet Treats performance, again, some great innovation. Alex will give some examples of that later and a stronger second half for the grocery business. From a non-branded perspective, we've seen that as we rightsize that business, we have seen that declining year-on-year, particularly in grocery, which I'll come to. So that leaves total revenue up 2.5%, up at GBP 1,175 million.

Trading profit, I've touched on. Adjusted PBT is growing further ahead of earnings and trading profit. So that's up 8.5% to GBP 184 million. And again, as we've been building cash throughout the year, that's been earning a return. So our interest cost has been reducing. So back to free cash flow, over GBP 150 million. So that's over 9% up year-on-year and more than double where it was 5 years ago, and that's even after our pretty significant step-up in capital investment. And obviously, that then allows net debt to be below GBP 100 million, I think, for the first time, and that is GBP 48 million lower despite having bought Merchant Gourmet. And as you said, really delighted to be announcing a decent step-up in dividend. We've always said, haven't we? We want to grow ahead of earnings and very much been the case so far, so proposing a 20% increase to the final dividend, and that will be more than triple where it was when we started.

So looking at the performance per business unit. So Grocery, so as a reminder, that includes our international business. So we have branded revenue up 2.3%. We've got good growth across many of our brands, I think particularly call out our acquired brands and all 3 of those are growing in strong double digits. Alex will talk a bit more about Merchant Gourmet later, but that is performing ahead of plan already. And obviously, FUEL10K and TST are continuing their strong trajectory. A much stronger second half with the branded business up 4.3%. Non-branded, as I mentioned, so that does continue to go down. We are rightsizing our non-branded business. And actually, if you look at it over the last 5 years, it's about 25% smaller from a revenue perspective, but it's twice as profitable. So that probably gives you a bit of a feel for what we've been trying to do. This is the tail end of it. We haven't quite rightsized the grocery bit. Some of that will fall into -- continue into FY '27, but much closer for Sweet Treats.

So where does that leave total revenue? So that's up 1.4% to GBP 860 million. And you can see divisional contribution growing ahead of revenue. So that's all about the benefits from the branded mix, from the capital investment and the efficiencies we're doing across the sites as well as some good strong control of our overhead cost base. Sweet Treats has had another fantastic year. So branded revenue is up more than 7%. That's for the second year in a row. And again, really good innovation. We'll talk about some examples. It's not just a record year for Mr Kipling, but Cadbury has had a great performance within this as well.

And then non-branded, we said this would rightsize, I guess, a bit sooner than the grocery business, and that's very much as it's played out. So non-branded is down 1% for the full year. And actually, it was in growth for both Q3 and Q4. That leaves total revenue up 5.5% to GBP 315 million. And again, a great combination. This is the sort of P&L that clearly I love. A combination of the branded mix coming through, a load of volume going through the factories, increased factory recovery and efficiencies, you can see divisional contribution growing 18% to GBP 42 million and importantly, the divisional contribution margin eking up to 13%.

So components of cash. So picking out the key ones. So CapEx, GBP 52 million is pretty much where we guided. Looking forward, we're looking at probably GBP 55 million to GBP 60 million for the coming year, and that's very much a continuation of the big investments that we've announced in our Worksop, Carlton and Lifton site as well as a continuation of our cost-out and efficiency projects. Interest down at GBP 16 million, as I said, that is all around getting a return on the cash we've been holding on our balance sheet. You might have seen that post year-end, we've announced an amendment and upsizing of our revolving credit facility. So that's now GBP 367.5 million, and we've extended the maturity from 2029 to 2031 as well.

We have got a bond that matures in October this year. I think it makes sense. We'll update interest guidance once we've refinanced the bond. Tax is GBP 14 million. So we continue to benefit from the brought forward corporation tax losses, and we're guiding to a similar amount of cash tax for the coming year. And then acquisitions, you can see the GBP 46 million net of cash for Merchant Gourmet coming out. Looking forward into this year, we do have the payment of the deferred consideration on both the FUEL10K and the Spice Tailor acquisitions. So that will be paid, and that's very much as we expected and according to plan for the coming year. And then all that takes us to net debt of GBP 95 million, so below GBP 100 million, which is great to see.

And then looking forward, I suppose, another couple of bits about FY '27. So first of all, it's a 53-week year. So there's a few quirks in terms of timing of working capital payments. So we're guiding to a working capital outflow there. And obviously, with everything going on in the world at the moment, as you'd expect, we are monitoring political economic events really closely, as you'd expect and as we've talked about before, we do have cover and hedging in place, which buys us time. So that gives us an opportunity just to see how things are playing out. And of course, we'll then take a view and we'll act accordingly.

Pensions. So a couple of new bits of news for pensions today. But first of all, a bit of a recap as to where we've got to. So we set in place the segregated merger about 6 years ago, which was the structure that we thought would benefit the pension situation. Thereafter, it's actually performed better than we expected, and we've got bigger benefits sooner. So the main one of that was switching off deficit contribution payments 2 years ago. So that would have been GBP 38 million we would have paid this year had we not done that. And then as a reminder, last year, the 3 sort of sections within the trust were still separate. We legally crushed them together. So now we have one scheme that's all net, and that enabled us to remove the dividend match and that was reinvested back to the dividend, as Alex has just said.

And then we've now finalized the triennial valuation. And we've agreed with the trustees that the company no longer needs to fund the administration cost of running the scheme. So that's GBP 5 million in cash that we paid last year that we will not be paying this year or going forward. So if you combine all of those, that's the best part of GBP 50 million annually that we would be paying into the schemes that we are no longer. And then the other bit of new news with the valuation is we're seeing a small surplus on a buy-in basis. So that is a bit better and a bit sooner than we expected, which is great positive news. Clearly, it's early days, but there's a good chance at the end of all this, there will be some sort of surplus to share between the company and the trustee.

So our capital allocation principles remain unchanged. I think it's a great example of how we -- how these have played out and how we've deployed the principles this year. So a decent step-up in CapEx, and Alex will talk about some of the projects that we've been investing behind shortly. So that's up 25% to GBP 52 million. M&A, obviously, Merchant Gourmet, I think that epitomizes the sort of brand we're after. It's future-facing, fast growing and performing really well, and it's actually doing a bit better than expectations so far this year, albeit early days, so very encouraged and pleased with how that's performing as well as the other 2 as well, which we've talked a lot about.

And then dividends, we've always said that we were going to start small. We acknowledge that, but it was important for us to progress the dividend faster than earnings. I think we've done that consistently over many years, and that culminates with another 20% step-up in the final dividend this year plus the introduction of the interim dividend. And I guess you can think of the interim dividend being part funded by the administration fee saving on the pension scheme. In terms of leverage, I mean, we talked a long time, didn't we, for the 1.5x target when we were way above that. Clearly, that's a bit in the rearview mirror. So I think the reality is we'll probably be operating between a leverage of 1x to 2x over the medium term. Obviously, timing of M&A will dictate where we are within that range going forward.

So where does that leave us? Look, I think we're well positioned for growth. We are a pretty profitable business, and I think we're proud of that. And we compare, I guess, our branded growth model that we use is very comparable to the multinationals, and we see ourselves as a mini version of those. And our trading profit margins would be commensurate with those as well. So we very much see ourselves nettled albeit a much smaller version of that peer set. And then going back to free cash flow, I think it's a real strength, isn't it that over GBP 150 million of free cash after having stepped up our capital expenditure so much. And the good news is that with cash these days, as I mentioned earlier, we can deploy it in line with capital allocation principles. And hopefully, what I've just been through and how we've done that this year is a great example of the model working through and generating value.

So that's it for me, and I'll pass back to Alex.

Thanks, Duncan. So as well as I said that strong financial performance that Duncan has just shared, we're really pleased with the progress we've made against the 5-pillar growth strategy. So I just want to walk us through that progress pillar by pillar. But before I do, just a bit of a reminder of what the 5-pillar growth strategies and what sits behind it. So what sits behind this is the concept that we believe that our core skill set is about building brands and growing brands in a profitable way over the long term. And so what we originally sat down and said to ourselves is, well, that's great. We can do that with our existing brands and their existing categories in the U.K., but only gets us so far. So what else can we do with that skill set to actually generate more value and ultimately build a bigger Premier Foods over time. And this is where this comes from.

So actually, we do start here over on the left-hand side, focusing on building a strong growth out of our core U.K. brands because at the moment, that's where the center of gravity is. So it's really important we continue to do that clearly. The second pillar is investing into our supply chain. So as Duncan talked about, this is investing into our operational infrastructure, either to create the ability to manufacture some of the new products that we bring to market or in order to make ourselves more efficient, more efficient means lower cost production, it means enhanced margins, and we use that P&L space to invest back in the brands to drive growth. So in many ways, we see Pillar 2 as a facilitation pillar, a facilitation of growth.

Pillar 3 is expanding within the U.K. into different parts of the store. So a great example of that would be when we took Ambrosia, which we all know as being a desserts brand, like rice pudding and custard. And we took that into breakfast with Ambrosia Porridge. So it's taking the creaminess from Devon concept through into a creamy porridge from Devon, which has proved to be very popular, but it's all incremental revenue clearly because it's a totally different time of day to any revenue that we're generating in desserts. So the purpose of this pillar is incremental revenue generation through participating in categories that historically we've not played in.

The fourth pillar is about overseas expansion. So that's building businesses with what we call critical mass, so building them to scale in our focus markets overseas, which are Australia, New Zealand, North America and Europe. And then the fifth pillar is buying brands, which we can then apply our growth principles to generate significantly more growth than they've exhibited so far and that we will get from our core as well. And obviously, the new acquisition this year was Merchant Gourmet. So those are the 5 pillars. And what sits behind them is what we call our branded growth model. So if we think that our core skill is building and growing brands in a profitable way, this is how we do it.

So at the top left, we are really fortunate that in the U.K., we've got really brilliantly well-known brands with leadership positions in their categories, very high household penetration. If we were to randomly knock on some doors this afternoon and ask to see what was in people's cupboards, we would find that most households would have several Premier Foods products in the cupboards statistically speaking. The other thing we've learned about the brand portfolio over the last few years is that despite the relative vagaries of the external environment, the portfolio is really resilient. And that's because at the end of the day, we're selling relatively low-cost products. The cheapest way to feed yourself is to actually cook for yourself at home. And if you do that, then you're tending to use some of our products. So we've proven to be pretty resilient in the ups and downs of the global environment.

But obviously, great brands, but on their own, they don't grow unless you do something with them. So the 3 kind of key levers we've got for growth our new product development. This is a really important part of our model. So we constantly have a stream of new products that we bring to market that are based on our in-depth understanding of consumers. So we spend a lot of time and a lot of energy talking to consumers, understanding how they're shopping, how they're cooking, how they're eating and how that's changing over time because change gives us the opportunity to bring new products to the consumers that fit into those changing habits. And then we continue to invest behind the brands as well. So it's great that we've got really well-known and well-loved brands, but they won't stay like that if we don't keep investing behind them. So we invest in marketing and advertising to build the brands, maintain the awareness, keep them contemporary and relevant and more and more in digital channels to target younger audiences.

And then finally, but really importantly, bottom right are our partnerships with our key retailers. So we work on the principle that if we can work in partnership and strategic relationships with our key retailers, then we disproportionately benefit because we've got leading positions in those categories. So we're essentially working together to create category expansion, and we're getting most of the benefit from that because we've got the leading brands. So that's the branded growth model.

So the next question obviously is, well, how have we done in implementing that over the year in the U.K. And you can see on the left-hand side how the growth built during the year. Remember, at the beginning of the year, our grocery business was held back a little bit by the really hot spring, but then we grew quite strongly as we went through into the second half with that really strong Christmas and then a strong quarter 4 as well. And we continue to take market share, as I said at the beginning. And if you look at the graph on the right there, what that shows is actually how our market share has built over the last 4 years. So the market share we've increased this year is based on an increase the year before is based on an increase the year before. So I think what this is telling us is that our brand building model, when we execute it well, really works and is able to deliver consistently strong performance that's ahead of market.

And we also introduced a series of new products, of course, during the year. And as I said earlier in the year, we had a particularly strong lineup of new products this year, and we've been really, really pleased with their performance. And I've just put a snapshot of them on here. I won't go through them all in the interest of time, but there's 1 or 2 things I'll pick out. So bone broth is a really good example. OXO bone broth, we spotted bone broth as a trend a few years ago in the United States, and we thought this is going to work really well under OXO. So we brought that to market earlier this year and so has proven to be the case. And this is a really great example for me because we've got a really well-known mature brand in OXO. And we've now got a really on-trend new product format, which is completely transforming the growth rate of the OXO brand.

The other things I'd point out is really these 3 new product ranges for Mr Kipling. As Duncan said, we had a really strong branded performance from our cake business this year, 7.3% branded growth. And it's really been strongly driven by the innovations, 3 of which are on here. So you've got Mr Kipling breakfast Bakes, which we introduced about a year ago and have continued to grow really strongly. And that was an intentional effort to get Mr. Kipling into the morning because we realized that most of our consumption was taking place from lunchtime onwards. There was a whole part of the day where the brand really wasn't present.

And then you also might remember, we talked a year ago about birthday cake Tarts. So Mr. Kipling birthday cake Tarts, this is taking again from the states, a trend we've seen for birthday cake as a flavor rather than necessarily a birthday cake. And those have performed really well. We've actually expanded several flavors into that range now. It's actually lapping itself, but still delivering really great growth. And then the new thing this year was a range of these tubs of small bites of cake. And this taps into a trend for people still wanting an indulgent treat but actually only wanting something small and often wanting to share that with other people. So it's really those 3 have been the backbone of that really strong branded growth from our cake business.

And then I must just mention Bubble Jelly. So again, this is another example of a brand, Angel Delight, that's been around for a long time, very well known, a very mature brand, which is now demonstrating lots of growth because we've got a very on-trend product with Bubble Jelly. If you're not familiar with Bubble Jelly, it's based on Bubble Tea. And if you're not familiar with Bubble Tea it's because you don't have kids of the right age. That's probably what I'd say there. And of course, we're always basing, as I say, on consumer trends. There are 4 key trends that we talk about a lot, health and nutrition, which is a key driver for us and has been for many years, convenience and on the go, premium and indulgence, which actually premiumization has proven to be a really big thing and packaging sustainability. That's not an exhaustive list, but those are probably the big 4 that we focus on.

And I said that we continue to support the brands, and we use a variety of tools for that. We continue to use TV advertising because we're bought by millions of people a day. And so it's important that we're able to talk to millions of people a day and TV is still the only medium that can really do that. But we augment that with other tools like out-of-home, where we're particularly targeting your routes to the store, so it's bus stops and it's poster sites around stores. And we often use that actually to remind people of new products. And then more and more social and digital media, where we're targeting a younger demographic and trying to recruit those younger consumers into the brands from the start of their cooking journey, if you like.

The other interesting thing I find with this as well is that the getting costs for the brands are a lot lower. So it actually allows us to support some of the smaller brands like Angel Delight with social media in a way that obviously it would never make sense to put a TV campaign behind it. So continue to support the brands really strongly and also getting great execution in store, which is obviously related to those strong retail partnerships. On the left there, you've got the increase in distribution points that we achieved this year. Now this is a measure of how many products we've got in how many stores compared to the prior year. And we're able to increase that by 4.7%, which I think is a really, really strong statistic. Grocery was really strong at 3.5%. So that's 3.5% more products in more stores. I think that's a really great number. But even that is dwarfed by quite staggering 12% increase in distribution on our Sweet Treats business. And that is driven by the fact that we've had this great lineup of new products that have performed really well and therefore have deserved the shelf space in store, and it's coming on top of what we've got on the core range.

And then you've got some gratuitous pictures of massive in-store displays. We've relaunched the Batchelors brand in quarter 4, new packaging, new advertising, new products. And we've got some really staggeringly big displays in some of the bigger stores as part of our in-store theater program. And then here, we've got just a really nice picture of some of the displays we got up over Christmas. So that's actually across our different brands. So you've got OXO, you've got Bisto, you've got Paxo and you also got Ambrosia all on the same display on the runup to Christmas. So all the things you need to help make your Christmas dinner from Premier Foods all in the same place. So continued great execution in store.

Now we get asked a lot about what we think the impact of GLP-1 will be on the business. So I thought, okay, well, let's do a slide on it then, and I'll talk you through where our heads are because for us, we are seeing this as a net opportunity rather than a net risk. And the logic behind it is as follows. So when this first started to emerge, we sat down and thought about our portfolio, and we thought, well, if you look at our grocery business, what we're essentially doing is we're making products that people use as part of putting a family meal together. That's bought as part of the family shop and it's part of the family meal creation. So in all probability, that's still going to happen even if one person in the family is not going to eat as much of it. But now there's enough people out there who are on these medications that we can find them and talk to them in our market research.

We've spoken to people and they're telling us that's exactly what they're doing. So that family meal is still getting made. If you're using the jar of Loyd Grossman pasta sauce to make your pasta, that's still happening. It's just one person that's maybe not having as much as they would have had in the past. But the bit we didn't expect is the bit I've got down the bottom left there is talking to these people, and this is now statistical rather than qualitative research, is there a significant decrease in the amount of out-of-home eating that people on GLP-1 do. And if you look here, we've got 50%, 60% decreases in the amount of eating in pubs, restaurants and takeaways. And they're telling us that that's because they've got much more control over the food when they prepare it themselves at home. So if we've got a whole bunch of families, therefore, much more likely to eat at home, I've got to believe that, that is actually going to play into our hands because, obviously, that's what we do.

And then the other thing that's quite interesting is that we know that people on GLP-1 medications are much more likely to be seeking increased levels of fiber and increased levels of protein. And of course, we've bought brands that are absolutely bang on in those areas with FUEL10K, which is a protein-based brand; and Merchant Gourmet, which is fiber and protein. So I think actually, there's a really interesting opportunity for those 2 brands with people who are on GLP-1 meds.

Now the one area we thought this might need thinking about is Sweet Treats because logically, you might think people are going to eat less cake. But if you look across the last 10 quarters, we've got an average growth rate of 8.1% from our Sweet Treats brands. So I have to say at this point, we can't see anything, quite the opposite, actually. But when we look into the usage habit, in reality, it's not actually that surprising. And that's because if you look at how our cakes are consumed and purchased, they're not on-the-go snacking. There are a box of cakes that's bought as part of the weekly shop that's brought home and generally speaking, left out on the countertop and different members of the family will eat them as they go past, make a cup of tea, whatever. So we think what's happening is that purchase is still happening, that box of cakes is getting taken home and put on the kitchen counter and maybe one person is not getting their fair share, which actually is what I feel like at home often. If I'm not pretty quick off the mark, that tends to happen to me as well.

And then the other thing that was also quite interesting is we have got a product that plays into this area with that new range of the Cake Bite tubs because we do know that people on GLP-1 are telling us they do want the occasional treat, but they just want it to be small. And so we think that, that range will basically play into that. So overall, as I say, it's still early days, but we're seeing net opportunity here rather than net risk.

So if I move on to the second pillar then, this is that, as Duncan said, investing back into our manufacturing infrastructure. And on the left-hand side, you can see how we've increased our capital investment over the last 4 years. And if I look on the right-hand side, then I've got some really nice examples of some of the big initiatives that we're currently working on and we're working on last year. So the top one is a new manufacturing line in our Carlton cake factory, and that's going to make Mr Kipling, apple pies and cherry pies and things and fruit pies. And what this is, is a completely brand-new line, much more up-to-date technology than we've had in the past. It runs much, much faster and therefore, makes the cakes at a lower cost.

But what's also interesting about it with that more modern precision technology and the engineering, we can actually control the process of making the pies much more tightly. So we can ultimately get a better quality product as well. And so armed with the knowledge of what this machine can do, what our marketing team have done is they've worked with consumers to try and optimize what the perfect apple pie looks like. So what does that mean in terms of the pastry, its thickness, how well it's baked, how crumbly it is, how big should the apple pieces be inside, how many of them should there be and what should the source be like? And putting all that together to come up with what we think is the best apple pie we can possibly produce because the machinery has got the ability to make it with that level of precision in a consistent way. So the win-win here is consumer gets a much better product, and it costs us less to make it.

Boilers are quite an interesting topic. So we've big steam generation in our Lifton plant and also in Worksop where we use the steam for the cooking processes. And what we've done is we've replaced our old boilers or in the process of replacing, I should say, our old boilers with some much smaller, much more modern, much more efficient boilers. So we use less energy. We create less CO2. But also from a capacity point of view, we, therefore, are now below the threshold, so we don't have to pay the energy levy tax. So it's sort of like a second saving on top of the saving we're getting from using less gas. And then finally, down the bottom, we've just highlighted as part of our solar rollout, the solar farm that we've installed at the Carlton Cake site. So we've got 3,500 solar panels in a field that we own that's next to the site. And this can supply up to 70% of the site's energy requirements when you get a sunny day in Barnsley.

Moving on to new categories. So sales up 37%, still a relatively modest base, but actually, it won't be if it carries on growing double digit like this every year. And Ambrosia porridge, we talked about before, that was the first big success we had in this area, 19% growth last year. It's in all the major retailers. We've got 5 different flavors now. And this is actually becoming quite a decent sized business in its own right now. Cape Herbs & Spice continued to grow, 23% up, achieved more distribution, but also increased its market share. But then the new product this year was FUEL10K going into yogurt. So we've got a protein-enriched yogurt with the leading FUEL10K granola on top. And that's obviously in a completely different part of the store. It's in the chiller with all the rest of the yogurts, of course. And it's a completely different new part of the store for us. So incremental revenue again, because that doesn't cannibalize any of our existing revenue streams. So really good progress there and 3 things that we'll continue to drive quite hard this year.

I'll move on then to the fourth pillar, that's building our businesses overseas. And as I said, we made really good progress across a number of the markets, but this was offset by that reduction in stock holding in Australia. So actually, revenues were 1.8% lower than a year ago. That's clearly not what we planned. If you look beyond that at the rest of the businesses, on aggregate, they were up 10% year-on-year, which broadly is what we would have expected.

If I look at each region in turn, Australia and New Zealand, the actual performance of Mr Kipling in market remains really strong. We had 10% growth on a retail till scan point of view as measured by Circana. We continue to increase our market share, and we actually had record household penetration getting up to 21.3%. So there is no business health issue here. It really is just about the amount of stock held in market, which is held by the retailers. And we also grew double digit in our Indian and Asian sources business in Australia, and we continue to take market share with those as well.

At the same time, we made some really interesting progress, I think, in the U.S., where sales were up 17% and that's as we took the Mr. Kipling apple pie and cherry pies into a region of Kroger, where they performed really very well. And so on the back of that, Kroger is also now taking the slice range, which has gone into store literally last week. I'm afraid it's so new. I don't have any performance data to share with you on that, but we're certainly very pleased with the Apple pies. And hopefully, then the slices are add on top. And what we'll do then is look to roll out into more regions over time. The pack of 8 lemon slices here is a new pack format for us. We normally don't -- so we're normally selling 6 of those in the U.K. This is a larger pack size we've done for Walmart in the States. So we've got a test running in Walmart in the States in 560 stores with the lemon slices and also chocolate slices. And I've seen the data on that, and it's actually off to a pretty good start. So we're quite encouraged by everything that's happening with the cake business in the U.S. at the moment.

And then moving on to Europe. So Europe grew by 9%, and it was particularly strong in the second half of the year as we started to take FUEL10K granola into a couple of European countries. So we started with the Netherlands. We took that into market in Q4, and we went into 1,000 stores of Albert Heijn in the Netherlands and actually also into the Delhaize stores in Belgium as well. And then now we're in about 6 other countries in Europe as well. So that's kind of the next big thing for FUEL10K is expansion overseas. And at the same time during the year, we actually also made some good progress on Sharwood's in France, where we've now gone into a total of 6 retailers, and we've got 5,500 distribution points.

And then finally, the fifth pillar, which, of course, is M&A, and we continue to look for more acquisitions in this area. What we're looking for are future-focused brands, brands which we think will scale up to be big brands of the future through the application of our branded growth model. And I think the Spice Tailor, FUEL10K and Merchant Gourmet are all really great examples of that. And I can't stress enough how fussy we are here and the amount of energy and analysis that we put behind these things before we go forward on them because what we're doing is we're validating that they fit the criteria such that when we apply the growth model, we will get that expansion and that scale up over time. And at the same time, of course, we put strong financial filters over that strong disciplines and particularly on return on invested capital.

And if I look at the acquired brands that we've made so far, so Merchant Gourmet, as Duncan mentioned, did better than we anticipated in the year. On a pro forma basis, it delivered GBP 30 million of turnover. You might recall that when we bought it, we said we thought it was going to do about GBP 28 million, so it's done about 7% better than we planned, which is a great start. And where we see the opportunities here initially are in expanding distribution. So just like with the Spice Tailor and FUEL10K, its performance in market deserves more shelf space and more ranging than it's got. So one of the things what we'll be doing is looking to work with retailers to expand the amount of shelf space we've got. We've also got a strong innovation pipeline coming up, some of which is in existing categories and some of which is expanding into new categories. And as the brand grows, as we've done with FUEL10K and the Spice Tailor, we'll increase the brand investment. So it's following our overall branded growth model.

And then very briefly on both FUEL10K and the Spice Tailor, they both performed double digit in the year, and they both continue to increase market share, and they both benefited from a series of new products that we brought to market as part of our innovation program. I will just call out though, the FUEL10K core granola product. This is the #2 granola in the U.K. The chocolate SKU is the fastest selling and the top SKU in the granola category in the U.K. and this thing just keeps on growing. We actually -- we've actually introduced a large size of the chocolate product given how well it sells. So it's a real star within that brand.

So if we change gear then and just have a look at the plans for this year. As you would expect from us, there's lots happening across the pillars. We've got a lot of new products coming to market, most of which are going to take place later in the year. So commercially, I'm going to keep quiet about those. But the ones that I can talk about are the ones that are a little bit closer in. So on the top left there, you've got Merchant Gourmet going into baked beans with a range of 3 flavors of gourmet beans. We've got Ambrosia on the go custard. So it's a little squeezy pouch, and you've probably seen them in other products of custard and chocolate custard.

And then one that I also think is quite interesting down the bottom there is Mr Kipling birthday cake slices. So again, that's building on the success we've had with the birthday cake tarts, taking into slices, whereas, in fact, slices are our biggest format within Mr Kipling. So that could be really interesting, but it's not quite in market yet. In terms of infrastructure investment, 2 of the biggest projects we've got at the moment are expansion of capacity down in our Lifton sites with a new process plant. And I mentioned that once before. It's really expanding our capacity to be able to make more porridge and also free up space for some of the new products that are coming down the line, which we're going to need the capacity for.

And then in Worksop, we've got a significant expansion of our sources manufacturing capabilities, and that will allow us to manufacture the Lloyd Grossman sauces ourselves that were previously made externally. And as you can imagine, there's quite a significant margin improvement when we make that ourselves rather than paying someone externally to manufacture it. On the new categories, we'll continue to push all 3 of the successes that we've got. Ambrosia Porridge, interestingly, we're going to introduce a 6 pack. And the purpose for this is that actually the usage habit is once people start to enjoy these, they'll tend to buy several a week. And what they tend to do in a lot of cases is put one in their bag on the way to work and they eat it when they get to work. Well, that obviously only works if you've got some spare ones in the cupboard. So if we can sell you a 6-pack, there's much more chance that you've got some spare ones in the cupboard so that you can put one in your bag and take it to work with you.

And then, of course, we'll continue to build on that initial success we've got with the FUEL10K yogurts with the granola on top. And in particular, we'll be looking to build more distribution and get that out into more stores during the year. And then from an overseas perspective, key focus area is obviously going to be the continued rollout in North America of those pies and slices, building on that success we've had in Kroger. And then Europe, a lot of focus on the recent launch of FUEL10K and making sure we've got the right support models behind that as well as building on that Sharwood's distribution increase.

And then one of the new things in Australasia is the rollout of Mr Kipling's Apple Pies because believe it or not, we actually don't have Apple pies yet in Australia. So that's a new thing that will go into market this year. And in parallel to that, of course, we're always looking for what that fourth acquisition brand is going to be. But that's all I can really say on that one at the moment, of course, but lots of activity across all the pillars. So where does that leave us then? Look, I think we've had another really good year, good branded revenue growth, particularly in the second half, strong earnings progression with that trading profit crossing GBP 200 million and ahead of the already raised guidance, strong free cash flow, getting our leverage down to 0.4x. And then, of course, we've got that 20% increase in the dividend that we've announced. And as you've seen, good progress against the 5-pillar strategy as well.

In terms of outlook, look, we'll continue to deliver further profitable branded revenue growth, and that's through leveraging that branded growth model. We've got a strong pipeline of new products and brand support plan for this year, of which I've shown you a little bit at the front end of. And we'll continue to leverage the benefits that exist for Merchant Gourmet since we made the acquisition as well as looking for further acquisitions. And then in terms of outlook, look, I'm always aware of the fact that I'm having this conversation with you halfway through our first quarter. So I know what that looks like and you don't. But what can I say at the moment? I mean we're exactly where we expected to be. So we're on track and our expectations, therefore, for this year remain unchanged at this point.

So thank you very much again for your time, and Duncan and I are very happy to take any questions. Thank you.

Charles, let's start here.

Charles Hall from Peel Hunt. Alex, can you just talk a little bit about the U.K. market, how you see consumer demand, how retailers are responding and also cost inflation and what you might need to do on pricing?

Yes, sure. So -- and this is a very obvious question to ask us. But actually, we've got a very unexciting answer in that I'm not seeing any dramatic change in consumer habits, certainly not that's affecting us. I think part of that might be because of that portfolio resilience we've talked about. So what we've seen in the past is maybe we do lose some consumers to private label down at the bottom end, but then we gain some consumers who eat out less. And so if things get really difficult, that's what we'd expect to happen. But at the moment, I'm not really seeing anything.

And from a cost inflation point of view, at the moment, we've got, as you would expect, longer-term contracts and hedges and things in place, which requires a bit of time. But at the moment, we're just watching and waiting to see what happens with the Iran conflict, and we'll take action if we need to.

And then on the international side, you're building out distribution points across quite a lot of countries now. Are you able to now put more resource into those countries to hopefully get to some tipping point in terms of the rate of growth?

Yes, I don't necessarily think it's a function of resource though at this point. It's a function of perseverance and making sure we're getting the distribution and then putting the support behind that distribution once we've got it. I think in terms of people, we're pretty comfortable with where we are. We've got a team on the ground in Australia. We've got a team on the ground in North America. And then we're gradually putting regional heads into different parts of Europe, and I think that model is working pretty well.

First question, just in reference to the grocery distribution points and the Sweet Treat distribution point data that you provided. Just wondering if you can provide a bit of color with respect to the phasing of how that distribution point expansion has played out through the year? And also, if you can just provide some color as to whether it's primarily those new products, new categories that are filling those additional distribution points or if it's the broader portfolio? I guess what I'm interested in is whether or not the phasing of the expansion in the distribution points has played a role in accelerating growth throughout the year.

Yes, it's a good question. I mean the expansion of the distribution points is largely led by the new products, but that distribution coming on top of the core range rather than necessarily substituting large portions of it. So therefore, whilst I don't have the numbers in my head in terms of exactly when it happened, but it's reasonable to assume that will have happened with the rollout of the NPD, which tends to be a function of when the retailers change their shelf layout, which actually for most of our categories tends to happen around the middle of the calendar year. That might help play into that.

It does help. Next question is just in reference to the trading profit outperformance you've delivered today. You've delivered efficiency projects, which has clearly assisted in that outperformance, but there's also been these rollout of these new products that we've just touched on. Can you provide a bit of color as to how much of that outperformance relates to the projects you're undertaking relative to potentially a better mix effect of the products that you're selling?

I mean, certainly, we know that the new products that we bring to market are key drivers of our growth because they provide a largely incremental revenue stream. So that plays into a lot of the top line delivery as does the higher growth levels from the brands that we've acquired. And then I think particularly if you look into Sweet Treats, the strong performance in our Sweet Treats business has dragged incremental volumes through the factories, which, of course, makes the factories more efficient, and we get the factory recoveries associated with that. So that plays in quite strongly to profit delivery.

I think if you, yeah, and then play over the things you said, Matthew. So benefits the CapEx investment, which has stepped up further this year and the sort of well-established supply chain sort of cost and efficiency program even outside of CapEx. And as you'd expect, we've got a pretty tight control over the overhead cost base. So I think all those things come together gives you the profit delivery you're seeing.

Matthew Webb from Investec. First question, just going back to cost pressures and price increases. You say that you've got a sort of period of grace while your contracts run through. I just wonder how -- roughly how long that is? And to be specific, does it give you the whole of the rest of this calendar year, i.e., taking you through to the next sort of scheduled round of annual price increases? Or might you have to move a bit earlier than that?

I don't -- commercially, I don't want to get into the exact length of different hedges and things we've got. What I can say is that we've got some time in order to watch and see what happens. And then if we do have to increase prices, then reluctantly, we would do. And we've got a reasonably strong track record of being able to do that when we need to. But we'll have to see whether it's necessary or not.

Got it. And then one for Duncan, I guess. Just on the pension, you said you've got a surplus on a buy-in basis. Would you be willing to disclose roughly what that sort of surplus is at the moment?

I mean I think it's pretty early days, so I'd probably not want to speculate in terms of sizing and what might happen. But I think it's directionally positive. The schemes trustees are doing a great job of running the scheme and the scheme a bit ahead of where we expected it to be. So I think all positive news there. The surplus is small, but there is a surplus, I suppose, and all the work that everyone has been going into derisking. I mean 2 things. One is less likely to unwind. But two, the rate of growth will be slower than we've seen previously. So I think those things all equal. But certainly directionally positive, but it is early days. And if there's any more clarity we get further through the year or beyond, we'll obviously share it.

Excellent. And then just on that point again, you said that you would share the benefits of any surplus with the trustees. Would how that is divided up be subject to negotiation? Or is it 50-50 or already set in some?

I think that would be very much wait and see. But you'd expect it to be shared in some way, shape or form.

Clive Black from Shore Capital. Another one for Duncan I'm afraid, it's always boring questions, sorry, mate. How does your pension scheme situation dovetail with regulatory change? I mean respect the fact that you can't speak about numbers, but how does that regulatory change potentially enable the process here?

Good question. I suppose just as a recap. So currently, for any sponsor with any surplus, accessing it is pretty difficult. And technically, the way legislation works at the moment is until the scheme is wound up, so that's post buy-in, post buyout, then you wind it up, you can't get hold of any of that surplus. So again, going back to Matthew's point, is a bit theoretical and the theory at the moment, although albeit positive. We are hoping to start expecting 1 of the 2, the government to clarify rules around sponsors accessing surpluses at some point during this calendar year. So it may well be that under circumstances, and that will be one around level of scheme funding and how much buffer there is.

Second is what the sponsor might use it for. So it will be probably investment related rather than taking it out, but there will be probably some guidelines around what it can be used for. But to the extent that does get clarified, that may mean people like us or others could put the surplus to work before the end of the scheme, but very much wait and see.

And then just 2 other quick ones. Firstly, you've made immense progress on Sweet Treat margin. How should we sort of take that going forward? Is that a new base? Is it a one-off? Can it go further?

I think we indicated a while ago that we expected that we would somewhat be able to close the gap between Sweet Treats and grocery. And a large driver of that would be the automation process, the investment we're making into the manufacturing sites. And so you're seeing some of that benefit. But what we're also seeing is actually just sheer efficiency growth through volume. And I think we just had so much success with the new product ranges that it's actually inherently making us more efficient through volume. So it's a bit of both.

From what you said from, for example, Carlton the automation, that could be a further driver for Sweet Treat margin?

Yes. Definitely. I mean that there's no benefit from the new apple pie line in these numbers, and that will clearly come. Yes.

And then lastly for me, I respect again the fact, Alex, is commercially sensitive. But in terms of marketing advertising, how did last year progress on the previous year? And kind of what's the trend there, maybe not with numbers?

Yes. So I think what we've said before is that we know we're on a journey in terms of the amount of marketing investment we put behind the brands. Aspirationally, we want that to be a lot more. But we've made really some really great progress since we started this sort of 6, 7 years ago now. So we're investing quite a lot more than we were, but there's still some left to go. We don't necessarily do it on a linear basis for the same amount every year. It tends to move in waves. But yes, we're a good way down the journey.

Andy Wade from Jefferies. A couple from me. First one on Australia. Obviously, the destocking process has gone on for a bit longer than we thought. I guess my 2 questions would be on it. One, I mean, just to flesh out a little bit, I mean, how much less stock are they carrying of yours now than they were previously? How confident are we sort of getting towards the bottom? And is there any risk that although they're still selling through the tills at the moment, their intention is to sell a bit less in the future? Just sort of wanting to get as much as we can -- as much color as we can on that.

Yes, that's really helpful question actually because, look, I don't see that there's a risk around them wanting to sell less. It's really just a question of how much stock do they want to sit on in market in order to be able to provide against that. Bearing in mind, they can't just call us up and a pop around with a truck the next day like Tesco can. You're talking about several weeks on the water. So getting the level right is clearly tricky. And it's a bit opaque to us, if I'm honest with you. We can't see their system, so we can't see exactly how much stock they're sitting on.

I suspect they've still got a bit too much. And I suspect there's still a little bit to come out of the system over the forthcoming months. But we have -- we've actually now put a logistics person into our Australian team to partner up with the logistics people at the 2 big customers so that we can get a little bit more transparency and try and work with them and help them because it is -- when you're shipping over those distances, I think there's an inherent lumpiness to it because you're not shipping every day. It tends to go in little waves, but this is probably more volatile than we would like. So we're going to work with them and see if we can kind of smooth it out a bit.

And obviously, important that they don't end up with not enough that you have availability issues can't run with promotions and so on.

Exactly. Because then reaction time is you haven't got the reaction time because you've got a ship that's got to get all the way from the U.K. So yes, keeping the right amount is important. The question is what is the right amount?

Okay. All right. And then second one, just sort of following a bit on from what Clive was asking around the margin side of things. Obviously, more going into capital investment and cost-out projects being a big part of that as well. And you talked about just as one example there, Carlton still to come through and feed into the numbers. But -- so I'm just sort of wondering how we marry that up with what you've always talked about previously is that we're going to run at a broadly flat-ish sort of margin. Is that sort of moving -- is that evolving a little bit such that we can see upside to that? Or is it still the same? It's all going to -- and it ties back into the marketing point you were making earlier. So just how those all play out.

High level investors.

Yes. So I think at a principal level, and then I'll let Duncan comment, we've always said, haven't we, that we'll take gross margin expansion, and we focus really hard on that actually, not just from a factory investment point of view, but across a number of things. And we will deploy that expansion into investment behind the brands and sort of close that gap to our aspiration on marketing investment. But as you've seen over the last few years, actually, some of it ended up dropping through, and we finished up with trading profit growing a bit faster than top line.

No, I think that's right. I think if you're taking probably a high-level look forward view, I'd probably still go down the -- you'd expect pretty strong margins to be -- remain broadly flat, and we'd use the expansion to invest back behind the brand. Clearly, to Clive's point on Sweet Treats, there are pockets of the business where we do think there's further to go. And Sweet Treats, if we do continue with the volume and the NPD and everything else going through, that probably just -- it might help Sweet Treats margin, but we'd probably use that to just reinvest back behind grocery.

I just ask a follow-up to Andy's question then. So then is that -- to interpret that comment then, is that to say that there was a limit to the marketing investment you could deploy this year, and that's why it fell to the bottom line and that you weren't able to take those efficiencies and put them back into the market through marketing? Or to Alex's comment, will the benefit from that outperformance on profitability flow through to marketing in FY '27 and there should be a commensurate benefit to sales growth as a result?

Yes. And I wouldn't say -- I mean there's no real limit in terms of what we've been able to deploy between marketing. I think a lot of it comes down to when the benefits come through, when we have visibility of them as well as we will only deploy marketing or any investment if we're going to -- if it's the right time, we're going to get the best return and we can plan for it. So just it may be that we get some extra money coming through, but doesn't necessarily we spend it because if we're not spending it in the right way of getting the right return, then we wouldn't. So I know there's a bit of timing around. But generally, the game plan is to invest that behind the brand for sure. I guess with anyone, any time when you close the year off, there's always bits, but there's been no hindrance or lack of ability or desire to invest that behind the brand this year for sure.

I think as I said at the beginning, we had a really strong quarter 4, and that's what took us to the position where trading profit ended up being above our already updated guidance. And when you get that strong performance right at the end of the year, it's actually quite difficult to redeploy it into brand investment and do it to Duncan's point, in an efficient and sensible way. That happens at the beginning of the year, we've got a lot more time to plan and make sure it's well invested.

Any more? No? Well, good. look, thanks, everybody, for coming this morning. Good to see everybody. As you can see, it's been another good year for the business. And we're pretty optimistic and looking forward to another good year this year as well. Thank you.

Thanks all.

Good afternoon, everyone. I think we are pretty much at 2:00, so ready to crack on.

Yes, afternoon, everybody. This is the Premier Foods Half Year results Bond Investor Call. We had our main webcast call of the results that Alex Whitehouse and Duncan Leggett posted this morning, which should be available to view as a replay. We're hosting this to answer any questions that anyone may have from a credit perspective. So that's the purpose of the call. Duncan is going to do just a couple of slides from the presentation this morning, and then we'll open to any questions.

Perfect. Thanks, Richard, and good afternoon, everyone. Yes, I thought I'll just do a couple of slides. Some of you may have dialed in this morning. There's a webcast on the website for anyone who wants. So I'm just going to take Slides 3 and 4 of our analyst presentation that's on the website. And in terms of the summary, we're really pleased that after a bit of a softer weather impacted quarter 1 that we've seen quarter 2 sort of snap back into slightly more normal levels. So you can see in the middle here, Q2 U.K. branded growth up at 3%, and that brings H1 up to 2%.

So really good trajectory. And actually, if you look at quarter 2, July was actually pretty warm. So delivering the 3% after pretty much only August and September being more normal, we're really pleased with. Again, that's where we expect it to be, but it's always good when it comes through. Total branded revenue for the half up at 1.9%. And then market share. So we've had a really good run of market share gains. You can see 130 basis points over 3 years. And that's all around deploying the branded growth model and effectively driving growth that in most cases has been some way ahead of the market.

I think we're really pleased that we've been able to hold on to that growth, notwithstanding a bit of a weather impacted first half. So I think we're really pleased we managed to maintain and keep hold of those gains. In terms of profitability, so a slightly unusual one this half because we've got this extended producer responsibility levy, you may have seen from other corporates, but this is -- this is a levy based on producers all around the packaging it uses, the energy intensity, the recyclability. And the way the accounting works is that it's forced us to take a full year's charge in our first half numbers.

Now if you think about how we deal with this, we would offset it and recover it over the full 12 months. So on the left-hand side or bottom left, you can see the reported profit delivery. So we have still growing trading profit and adjusted PBT with this full year charge in. But actually, if you exclude the amount that relates to half 2, effectively, we will recover and offset it over the second 6 months of the year. So if you take half of that out on a basis that will be dealt with in H2, then actually trading profit is up 7% and adjusted PBT up 10%.

So really good underlying profit generation, which we're really pleased with. And then leverage, I mean, it's been coming down for a while, isn't it? We're well in the rearview mirror in terms of the net debt that we inherited. And as long as we have associated with Premier, I think really positive news that we bought Merchant Gourmet in the half year and net debt to EBITDA is still only 1%.

So in terms of strategic progress, so obviously growing the core. And again, we've got good U.K. branded revenue growth, good recovery in grocery and a continued, frankly, pretty stonking performance from Sweet Treats so that grew 9.4% from a branded perspective, really successful consumer insight-driven and BD really, really doing performing well. CapEx, we continue to deploy capital. Everyone will be aware of, this is a key pillar of how we grow our gross margin and that creates the room to reinvest behind our brands, which clearly then drives future growth.

CapEx is a big part of it. We are investing in pretty high returning opportunities still in the sort of 2-, 3-, 4-year payback for many of them. And doing pretty well in terms of laying that capital down this year, so well actually that we think we might spend a bit more than we thought, which for us is really good news because it means we're spending money on the projects that drive return and therefore the quicker we can get at those, the better.

Category expansion. So this is something that's been growing really well for us. It's still a relatively small base, but you can still see really good growth. So you can see a picture of a FUEL10K yogurt. This is our latest expansion, which is a sort of protein-rich yogurt with a bit of a lid that includes what is now the U.K.'s best-selling Granola SKU, which is our Chocolate Granola for FUEL10K. So a really good combo there. Pretty early days, but seems to be performing pretty well. We've also got Ambrosia Porridge and the Cape Herb and Spice really driving growth in there. International, I think it's -- from an in-market performance perspective, we're very pleased. We are gaining listings of things like Spice and FUEL10K in Europe.

We are getting new listings in the U.S. as well, and North America was up -- went into double digits for the second quarter. And in Australia, which is still by far the biggest component of our international business, in market performance, we're growing at 17% for Cake, which is fantastic. That doesn't translate into revenue, which you would have picked up, no doubt because the retailers have decided to reduce their overall stock holdings, if you like. They have been holding a bit of a buffer because of the inconsistent shipping lead times as we've come out of COVID and then the Suez Canal has not been used. And now shipping times and shipping routes are becoming a bit more established and a bit more reliable, they've decided to bring down the in holding stock.

So what does that mean. Clearly, it's not anything we can control, we can just control driving the model in Australia, which is working really well. All that means is they just -- the in-market forms isn't flowing through to our revenue because they are effectively -- we are selling all that -- making all those great sales out of stock that's already in market.

So that's just a bit of a timing adjustment, if you like, but certainly not a reflection on the overall health of the business. And inorganic opportunities, FUEL10K and Spice Tailor are flying. So U.K. and the U.K., they are growing well into double digits. And as you will know, Merchant Gourmet we acquired in September. So really, really pleased with that, early days, but performing well, and we're getting on with the integration of that and looking to, again, use the benefit of our broader scale and our model to help grow distribution, supercharge the NPD pipeline and generate value. So really, really excited about what that's going to bring.

So that's all I was planning to share. I thought it would be a good overview, but I think most important is that we have time and able to answer any questions from yourselves. So happy to pass over, which will facilitate.

Thanks, Duncan. [Operator Instructions] I think the first one is coming from Neill.

Congrats, Duncan, strong set of results. A couple for me. On the acquisition pipeline, you've been pretty consistent on how picky you are and how that fits into the -- how your potential targeting fits into the 5-pillar strategy, et cetera. But just on cadence of acquisition, it's -- I think it's been on average one a year for the last 3 years. I appreciate the gap is wider between FUEL10K and Merchant Gourmet.

But if another opportunity came along in the next sort of 6 to 12 months, is that something you would look at? Or do you worry about distraction risk and integration risk with merchants? And then just on the bridge facility and interest guidance, the interest guidance that you've given seems to indicate to me that you would not be looking to refinance the '26 notes until after the end of this fiscal year. Is that the right way to read it? Or is it just you'll be opportunistic as and when you think the right time to come to market is?

Perfect. Thanks a lot, Neill. So taking your second question first, just before I forget it. I think, yes, clearly, what we've done with the bridge facility is just sensible financial planning really, isn't it, just buys us a bit of time, gets us through audit and sign off and stuff and just make sure that we can do our best as best we can to try and pick the market at the right time. I think your interpretation of interest guidance is pretty spot on. I think we're looking at sort of back end of this year, maybe early next will be what the guidance suggests. But clearly, if we thought the right thing was to go somewhere between now and then and we thought it was the best thing to do for the business, then we would seriously look at it. And the first question...

M&A.

So cadence. I mean, we are always looking. And as you say, roughly one a year, a couple of years almost since FUEL10K one, and we've been looking at a lot of stuff during that time, but we've decided not to get involved or decided that some of the stuff wasn't as attractive to us or -- 2 questions. So if something comes up in the next 3, 6, 12 months, we'll be seriously look at it. Yes, we are looking at stuff now. We always are.

And clearly, when we're assessing whether to do a deal, clearly, financials, our commercial criteria, financial criteria are really important as well as our facility headroom. And to your point, we would make sure we don't buy stuff more than we can chew. I think the Merchant Gourmet, we are in the middle of integration. It's relatively straightforward. It's U.K. We are relatively known. So I think in the next few months, we'll be pretty integrated and then flowing that through the existing business. So that will be dealt with pretty quickly.

And therefore, yes, clearly, if something comes up. And with these things, you can never tell that something is going to come up. You need to be prepared to act if they do -- isn't it? So yes, we could considerably do another deal if we felt it was the right thing to do in the next 6 to 12 months.

[Operator Instructions]

In the meantime, just maybe ask a question that you may have heard from this morning, but I guess just in case anyone's got any questions on working capital. So we do build stock during the first half of the year. That's very much how we operate on the basis that going into our Q3 peak sales period, we are sitting on a lot for obvious reasons because that is when we need it and when it sells through. That's probably shown through a bit more in the cash flow than it would normally do, and that's just around, a, the stock build was a bit bigger during H1 than it was the previous before, and that's just making sure that we've got everything ready for the second half.

And the other bit is we've just phased the stock build a bit more evenly through the half. So therefore, there's a bit less of a natural offset with the creditors. So you might have seen there's no change to our full year view or full year guidance. But just in case it's a bit more of an outflow than people are expecting purely just a timing piece of when we build stock during the half, and we expect that to sell-through and get the cash in by the year-end.

Thanks, Duncan. No hands being raised just yet. Maybe just a minute on CapEx guide.

Yes, sure. So we've -- clearly, we're stepping up CapEx investment over the last few years, haven't we. And we guided to GBP 50 million for this year. And that's all around putting -- deploying capital in the way that we see the best way back into the business and generating pretty attractive returns. We guided to GBP 50 million for this year.

We're just making really good progress in putting that to work and again, putting that to work for the value-creating projects. And we actually think we're making a bit better progress than we thought we would going into this year. So we've just ticked up guidance from GBP 50 million to GBP 55 million. Looking forward, whether it's GBP 50 million or GBP 55 million probably doesn't matter too much, but it's that sort of range going forward, and we have a good pipeline of effectively margin-enhancing projects we can see over the next sort of 3, 4, 5 years, a great visibility of, I guess, the fuel that's going to drive margin growth, which is going to drive investment back into the brands and drive future growth. So feeling pretty good about that.

Great. One more question coming from Neill.

I'll take the opportunity if no one else does. There's a lot of noise in the press around supermarket price wars, real imagined anywhere in between. In terms of what you're seeing and negotiations, I guess, ramping up around this time of year and into first quarter of next year, any change to the sort of competitive tension between suppliers and retailers that you're seeing, anything we should be aware of this time?

Yes. It's a really good question. I think short answer is no. But you're right in terms of the amount of coverage it gets. What are we seeing? I think quite a lot -- not exclusively, but quite a lot of the, call it, price war, quite a lot of it is around fresh and areas that we're not part of. So we're probably not feeling it there. Clearly, negotiations with customers are never easy, and we're not going to -- otherwise, but they're not really changing. So we just manage them in the usual way. And clearly, having market-leading brands and pretty strong relationships, I think we are pretty well placed.

In terms of, I suppose, the other piece is the relative performance of the customers, that's getting probably a bit more polarized with Tesco's winning, Morrisons not having done great, but probably shown some better signs and Asda still in a bit of a trouble. And clearly, therefore, when Asda is declining, we're declining in Asda. But what we're trying to do is grow within Asda even though it might be declining so that we can help Asda help themselves turn around. So we sort of leverage the strong relationships to try and grow the people that are growing, but also help the people that are struggling a bit more to grow their categories through growth of our brands. So that's the other piece that we're just keeping an eye on. But I think summary is no real change to the aggressiveness or otherwise in terms of negotiations.

And given that backdrop, is there any change to your promotional strategy? I know that's the other thing we're hearing is promotional rate is elevated and remains so. I think it was 30% in October, which I think we normally only see in the peak weeks before Christmas.

No, we generally agree the promotional plan with the customers at the beginning of the year and broadly stick to it. So I mean, things like cake are generally on promotion a bit more than the grocery, but that's no change. So I wouldn't think there's anything that was called out.

We did have one question come in on the Q&A unattributed how you're thinking about your short-dated October '26 bonds. I think we've already sort of essentially answered that one.

Yes, I hopefully covered it -- is where we need to refinance. We've just used the bridge facility just to enable us to buy a bit more. So yes, hopefully, that's dealt with.

Great. Okay. Well, we have no further requests for questions or any further questions. So I think we'll probably wrap it up there if there's no more incoming. All the documents are -- that you might want to refer to are on our website and say -- there should be a recording of the webcast from this morning as well, if that's of help to anybody on the results center of the website.

So with that, thank you very much for joining. And we'll have -- next time we'll come to market will be our Q3 trading update, which will be third week in January. Thanks, everybody.

Thanks, everyone. Appreciate you joining.

So good morning, everybody, and welcome to Premier Foods half year results for the 26 weeks that ended on the 27th of September this year. I'm joined by our CFO, Duncan Leggett. And between us, we'll take you through what we've been doing in the first half of the year.

So I'll give a bit of an overview, then Duncan can take us through the numbers. And then I'll come back and give you an update on some of the progress we've been making against our 5-pillar strategy. So to start off then with some headlines. So we're really pleased that actually growth stepped up from our U.K. brands in the second quarter, so up to 3% then in Q2, and that brought half 1 to plus 2%.

And branded revenue then for the first half of the year, GBP 453 million and up just shy of 2% -- now obviously, what's going on there is 2 interesting things, some really strong performance from our Sweet Treat brands, so 9.4% growth in the first half and actually double digit for Mr Kipling, which is, of course, our biggest brand. And then grocery, our grocery portfolio, which was, of course, was suppressed somewhat by that long hot summer that we had. What was really good to see is as the weather started to normalize halfway through quarter 2, we can see that, that grocery business bounced back quite nicely, which is what's driving part of that 3% growth.

So U.K. market shares, and you'll be aware that we've gained quite significant market share over the last 3 years or so, so 130 basis points up. And we're really pleased we managed to hold on to all that in the first half of the year despite that downward pressure on the grocery business caused by the weather. Profit delivery then trading profit was up 0.4% and adjusted PBT up 2.2%. And that's after taking a full year's cost of the new packaging levy, EPR.

Now obviously, that's something which applies to a full year sales, and it's something that will recover over a full year, but accounting principles require us to put all of that cost into period 1 and therefore, into the first half of the year. So for way of comparison, if we were, in fact, just to take the first half cost of the EPR and see what trading profit would look like, then trading profit was actually up 7% and adjusted PBT up plus 10% in the half, which I think is more representative of the performance that the business has delivered. And it's actually with that in mind, which is why we're saying today that we are nicely on track to deliver our full year trading profit expectations and actually adjusted PBT now expected to be slightly ahead.

And then down in the bottom right-hand corner there, net debt to EBITDA remains low at 1x, and that's after the cash out for the very recent purchase of the Merchant Gourmet brand.

Now in terms of performance against the 5-pillar strategy, we made good progress across the board here really. So you've seen that growth on the U.K. core. So half 1 at 2%, but Q2 bouncing up to plus 3%. In terms of infrastructure investment, we've spent GBP 23 million, that's back into our manufacturing sites in particular, and we're on track to invest about GBP 55 million this year in efficiency programs and also ability to manufacture some of the new products.

In terms of category expansion, so this is sales that we're making from categories that historically we've not really been present in, and sales there were up 41% and still a fairly modest size base, but nevertheless, a continued really strong growth rate.

And then internationally, our overseas businesses, in particular, our biggest business in Australia, had a really strong in-market performance. So sales to shoppers in store were actually up 17%. Unfortunately, you don't see that in the revenue because what we've also got is a compression, a reduction in the buffer stock that the retailers are holding in market in Australia. And I'll come back to that in a little bit more detail later.

And then finally, inorganic. So inorganic growth, we've got really strong double-digit growth in the U.K. from both the Spice Tailor and Fuel 10K. So they're both continuing their journey of scaling up. And as I said, in the quarter, we also bought Merchant Gourmet. We'll talk about that again later as well, but we expect that to follow a very similar pattern to Fuel 10K and the Spice Tailor.

And then before I hand over to Duncan to go through the numbers, I just give you a quick update on the pillars of our emitting life plan. And I think what we're finding here more and more is that as we pursue the pillars and the principles of the emitting Life Plan, we're able to make decisions which are good for the planet, good for our products, but also which are good for us commercially as well. So a few interesting examples we've put on here. So in the first half of the year, our sales of non-HFSS products grew by 10% as we continue to reformulate our product ranges with recipes that are lowering fat salt and sugar. And that's good, obviously, for public health, but it's also good commercially because we know our consumers are trying to eat a little bit more healthily. And it also helps future-proof the business.

And then, of course, Merchant Gourmet, the brand we've acquired also supports healthier diets and actually, the ingredients that go into that improve soil health. On the planet pillar, a really good example is that we've just installed and it's just up and running a solar farm, which sits in the field next to our big bakery in Carlton, where we make most of our Mr Kipling cakes. And this will provide up to 70% of the site's electricity requirements. So great in terms of CO2 reduction, but also great in terms of lower electricity bills.

And then similarly in Lifton, but obviously a very different approach, we've installed a heat recovery system. So we obviously use a lot of heat to cook custard and to cook rice pudding. And what this system does is it takes the heat that's left over at the end of the process and recycles it back to the beginning and starts to warm up the next batch ready for cooking. So it's a really good use of heat recycling. Again, reduces CO2 and reduces our fuel costs down at Lifton.

And then finally, on the people pillar, as most people will be aware, we're almost in gender balance on our overall management population. And then the other thing we've put on there is that we're now working with computers for charity. So they're able to take and recycle our older IT kit.

And so with that, I'll hand over to Duncan, and he'll talk us through the financial performance.

Thank you, Alex, and good morning, everyone. So I'm going to dive into the financials. And I thought I'd start with some headlines. As Alex has said, we're really pleased that we've managed to grow trading profit in the first half. As Alex has just pointed out, it is a slightly unusual position in that we've had to absorb the full year's charge of the extended producer responsibility levy. We will be offsetting and recovering this over the full year. So if we do exclude the component relating to the second half of the year, really good strong profit delivery, up 7%.

Looking further down the P&L. So adjusted profit before tax, that is our trading profit less our interest number. We're now expecting that to be ahead of where we thought we would be at the beginning of the year, and that is all around a later refinance of our high-yield bonds. And leverage continues to be in a really good position. We know it's come down significantly over the last few years, and it's still only 1x having bought Merchant Gourmet, which is really fantastic news because it means we're able to deploy further capital for value generation.

So diving into the numbers. We're in good growth for the first half at branded revenue. So that's up 1.9% to GBP 453 million. Really good performance from our Sweet Treats business, which I'll talk about later and really encouraging to see the trend in our grocery business improving as we've gone through the second quarter. Non-branded revenue continues to decline half year-on-half year. We are still rightsizing that business and with it to a level of profitability that's acceptable to us. So that is producing a decline in non-branded, which leaves total revenue up 0.7% to just over GBP 500 million.

Divisional contribution is growing ahead of turnover. So we are seeing some volume benefits from the Sweet Treats factories coming through there as well as our supply chain cost efficiency program, and this obviously includes the benefit of the increased capital expenditure we've been doing. Obviously, this divisional contribution includes the full charge relating to EPR. If again, we remove the amount relating to the second half, growth was significantly higher than this.

I think trading profit, I've covered and adjusted PBT. So our expectations and guidance for the full year is now slightly higher than it was coming into the year. For the half itself, adjusted PBT is up 2.2%. And again, this is all around lower interest cost half year on half year. With our lower leverage, we've gone through the first half of this year with higher overall cash balance, which obviously is earning a return for us. You can see that flowing down to adjusted EPS of 5.4p and then net debt of GBP 207 million. That is still lower than prior year, GBP 14 million down after having spent a net GBP 46 million on Merchant Gourmet.

So going into a bit more detail around our business units. So starting with the Grocery business, and this includes our international business. Branded revenue is down 0.5% to GBP 337 million. I think from a strategic process, Alex will talk about this a bit later, but really strong performance from our acquired brands with Spice Tailor and Fuel 10K in the U.K. growing double digit, strong new categories performance up over 40% and our premium ranges performing really well.

We know that we had a softer Q1 because of the weather impacts in grocery. And obviously, because this does include international as well, we've seen some adjustment to market buffer levels of stock that have impacted the performance. But as Alex has just mentioned, really encouraging to see the momentum back into the business in Grocery with U.K. and Ireland branded revenue up 3% in the second quarter.

Non-branded revenue declined 9% to GBP 32 million. You can see some of the contracts we've exited there. Again, these are deliberate actions to get the business to the right level of size and the right level of profitability for us, which means that total revenue is down 1.3% to GBP 369 million. Divisional contribution margin has ticked up slightly. So a couple of things going on here. We have got the benefits of the -- again, the operational program efficiencies, looking at waste at sites, looking at the benefits of the capital expenditure, they're all flowing through nicely as planned. And also, we have consciously decided to invest a bit less behind our brands in the first half. We didn't think we'd get the return that we expect based on the impact of the weather.

So we've consciously moved that to our third quarter and second half, which is great news, isn't it, because then we've got even more firepower behind our brands at our key Christmas period. Sweet Treats had a fantastic second quarter to follow the first quarter. So for the half, branded revenue is up 9.4% to GBP 116 million. Alex will give some examples of this shortly, but some really good consumer-driven NPD that's performing extremely well for us. Even more pleasing is the performance of Mr Kipling within this. So Mr. Kipling is up over 10%. Non-branded revenue is down 7.5%. Again, we are exiting some contracts. This actually will start to become flatter as we go through the second half. By its nature, non-branded will remain volatile. But for Sweet Treats, it will definitely flatten out during the second half. And that leaves total revenue up 6.8% to GBP 133 million.

Moving down to profit, a really good performance. I think you can see the benefits of the branded performance flowing through to margin as well as the strength of the Mr Kipling brand. And clearly, with the volume growth we've had in the first half, that then creates efficiencies in the factory, all of which have a nice leveraging effect as we go down the P&L. So divisional contribution is up over 20% to GBP 14 million.

Looking at net debt and how that's moved during the half. I think really good that we are still deleveraging even after having bought Merchant Gourmet, strong EBITDA performance, clearly driving cash flow. In terms of working capital, so we always have a stock build at this time of year. You'd understand going into our peak sales period, stock levels at the end of September are significantly higher than they are at the end of March. That is no different. It is slightly higher this September than it would have been last year, but very much just a position of where we are at the point in time, our full year guidance for working capital very much unchanged.

CapEx, clearly, we are stepping it up over time, and we're also making a conscious effort to try and deploy it more evenly through the half. So really pleased we've been able to spend GBP 23 million in the first half, and that's a step-up from where we've been. I think also with the ability of spending it, getting these projects in place, so that we generate the returns as soon as possible, we're also guiding to slightly higher CapEx at GBP 55 million versus the previous guidance of GBP 50 million.

So interest of GBP 7 million. If you go back to the first one of these I did, which was 6 years ago, that number was GBP 18 million for the first half. So you can really see the benefits of the deleveraging and the restructuring of the balance sheet that we've done. Dividends, GBP 24 million paid in the first half. As a reminder, we stepped that up significantly by 62% at the year-end. So that's been paid.

And then the GBP 46 million for Merchant Gourmet is the enterprise value less a bit of cash in hand of Merchant Gourmet at the time of acquisition. So it wouldn't feel like a presentation from me without a slide on pensions. Actually, there's not that much new news. We have an ongoing triennial valuation, the results of which we expect to be early next year. But what I thought would be helpful was just a bit of a recap as to what's been delivered since the merger 5 years ago, and that is over GBP 40 million of annualized cash benefit that we're seeing today.

So that started with a GBP 5 million reduction in May 2023 following some good performance from the scheme. The full suspension last year, so that was GBP 33 million we were due to spend last year that we have agreed with the trustees to suspend. And the dividend that removal, that was about GBP 5 million. Obviously, that would have increased as the dividend grew over time, and we managed to recycle that into dividend payment, hence, the big rebase last year.

Valuation data, we will share when we can. And obviously, we're working towards a buy-in transaction at the end of next year. So capital allocation, very much unchanged. And I think this first half is a great example of the capital allocation playing out exactly as we want. So we've got a good -- spent a good slug of CapEx in the first half and wanting to spend more as we get into the year. Again, all around the good returning, high-efficiency projects so we can start getting the benefits of those flowing through. M&A, I mean, Alex will talk about it in a bit more detail, but really, really pleased to have made the purchase in the first half.

Certainly, things got off to a good start, and we're looking to get on with integration. And dividends having rebased it off the back of the full year results, so a big step up by 62%. We still intend to grow it faster than earnings as we move forward. So the final slide for me, I thought it would be worth a recap of some of the things we're looking for when we're thinking about M&A. And again, it starts off with strong brands. So if you think about the Spice Tailor and Fuel10K, the founders did an amazing job getting the brands to the scale that they did, very much true for Merchant Gourmet as well.

And what we're trying to do now is to lift the capability and scale of these brands to the next level. So with Spice Tailor and the Fuel10K, we have successfully increased distribution, increased innovation, strengthened the pipeline, used our customer relationships to get some great feature. We very much expect Merchant Gourmet to follow the same model. I think the only other point to mention is almost a 2-year gap between the Merchant Gourmet and the Fuel acquisition.

This just reinforces that we are picky, as we've always said, we'll only do the right deal -- we only do a deal if we think it's right for the company. Merchant Gourmet very much hit not just our commercial criteria, but our financial criteria, particularly return on invested capital. So really pleased to see the diligence that we're applying to this.

And that's all for me, and I'll hand back to Alex.

Thank you very much, Duncan. So what I'd like to do now is just walk us through progress against the 5 pillars of the growth strategy. So as a reminder, what's sitting behind our growth strategy is this understanding that our core skill set is in building brands and growing brands over the medium term in a sustainable and profitable way. And so the idea is that if we can do that over a broader base using the same skill set, then in principle, we can build a much bigger Premier Foods than the one we've got today. So as a reminder of those 5 pillars, starting on the left-hand side.

So the first pillar is about continuing to grow our U.K. brands because at the end of the day, right now, that's where our critical mass is, that's where the majority of our sales and profits are generated.

The second pillar is investing back into our supply chain and where we've got significant opportunities to keep investing in improving efficiencies, improving productivity and that obviously expands margins, which helps us with the fuel to invest back in branded growth.

The third pillar is expanding our U.K. brands into new categories, so categories which historically we've not really played in, in different parts of the store. And a really good example of that is actually Ambrosia, which, of course, we extended into breakfast with Ambrosia porridge pots.

The fourth pillar is building our international business, so building overseas businesses with critical mass. And of course, that's all entirely incremental to anything that we do in the U.K.

And then the fifth pillar are those inorganic opportunities that Duncan was talking about. So building the brands that we've already purchased, but then looking for more brands we can bring into the portfolio, which we believe will then deliver more value through the application of our skill set in building brands. And of course, what sits behind all this is our branded growth model. And as a reminder, this is how we go about building our brands and delivering sustainable profitable growth over time.

And we're very fortunate on the top left there that we start with really strong leading brands. That's true in the U.K. It's actually more and more true in Australia as well now. Our brands are leaders in their categories. They're very well known by consumers, and we've got very high household penetration. So most households will have at least one, if not several of our brands in the covered. But as I've said many times before, that doesn't give us growth. It gives us a good start point, but it's then what we do next that drives the growth.

And one thing we know is that FMCG brands, which can consistently innovate over time have a tendency to deliver long-term revenue growth. And that's why our second pillar is really about building our NPD plans based on really in-depth understanding of our consumers. So we do spend a lot of time understanding how our consumers are shopping, how they're cooking and how they're eating and how that's changing over time so that we can then develop new products that fit with those habits that fit with those trends and play a genuinely helpful role for those consumers. And within this, which also includes our strategy of premiumization.

And then down the bottom left, yes, it's great that we've got these really strong well-known brands, but they'll only remain so if we continue to invest in them with marketing and advertising campaigns. And that builds the brands, maintains awareness and it keeps them contemporary and relevant for our consumers.

And then finally, but very importantly, it's about how we build our relationship with our retail partners. So we take the view that it's better to work together in strategic partnerships with our retailers focused on driving mutual growth for the category because with our strong brand positions, we will then tend to disproportionately benefit. So it's really then the application of those 4 things together.

And when we do that well, that's how we get consistent growth, consistent market share gain. So if we just talk about how we've been applying that to the first pillar to our core U.K. brands. And as I mentioned before, we had 3% growth from our U.K. brands in quarter 2. But what you can see here is that big step-up from the 1% we had in quarter 1 to 3% in Q2. And yes, we know that Sweet Treats has grown very strongly with our Sweet Treat brands up 9.4%. But one of the big differences between Q1 and Q2 was the impact of that hot weather on quarter 1 and actually on the first half of Q2 as well. What's also sitting behind that is continued strong performance from those premium ranges. So if you group together all our premium ranges, they actually grew by about 13% in the first half.

And as I mentioned earlier, you can see there the step-up in market share over the last 3 years or so. And we're really pleased that we were able to hold on to those strong share gains despite that downward pressure on our grocery brands due to the warm weather. And if we walk through the branded growth model and see what's been happening in the first half. And as I said before, having a strong innovation plan is really important.

We work on a number of key consumer trends, which you can see down the left-hand side there. But this year, we do have a particularly strong pipeline of new products. And here's just a sample of some of those that we've launched in the first half of the year. So we launched Bristow Perry Perry Gravy, which is clearly targeted at a slightly younger consumer. And we've got Bachelor's pasta and Suce. Well, Bachelor's pasta and Sauce, of course, has been around for a long time, but in a dried format that you had to rehydrate. What we've got here is a wet format. It's ready to eat, you microwave it and in 90 seconds, it's ready, which seems such an obvious thing to do.

You might ask why we've not done that before. But actually, technically, it's quite difficult to do well. So our chefs have spent quite a bit of time making sure that the pasta doesn't go soft in the pouch while it's sitting in the source. But given that we've now cracked that and we've launched that into the market, it's actually performing very well indeed. In the middle at the top there, you've got Lloyd Grossman premium pasta sauces, which is a new range we've launched, authentic pasta sauces made in Italy from high-quality locally sourced ingredients. We've then got the Spice Tailor expanding into a new cuisine type with Mexican.

And then we've got from our strategic partners at Nissin, an expansion of the Demae Ramen noodle range. And over on the right-hand side there, you've got 3 examples of how we're expanding FUE 10K beyond its original breakfast heartland into other parts of the store. So therefore, we've got FUEL10K instant noodles, instant soup. And then similar to the microwavable battelors custom sauce, there's a microwavable what we call protein bowls, and that's actually Mexican bean chili. And we've got several examples there from Mr Kipling.

The 2 I'm going to pull out are on the far left with breakfast bakes. And this fits with our strategy of getting more presence in the morning from our overall range, and this takes Mr Kipling into that space. And the example there is a blueberry breakfast bake, which actually also non-HFSS, so not high in fat, salt and sugar. And then right in the middle there, there's a tub, which represents a range of a new product range we've introduced into Tesco, which is tubs of bite-sized pieces of Mr. Kipling Cake, which obviously designed for sharing. Very early days on that one as well. But so far, the sales have been really impressive. So a really strong pipeline that's come to market during the first half of the year.

And I also said it's important that we continue to support and grow our brand equity. So we use a number of techniques for that. So we continue to use TV advertising, and that's because we've got several million products being purchased today by consumers. And so therefore, we need to talk to several million consumers and TV has still got the best reach. I'm including with that digital TV as well. We also got out-of-home, which more and more we use, particularly for communicating new products, and we try to target things like bus stops and locations that are close to supermarkets. And so it reminds you when you're on the way to the store.

And then more and more, we're using digital and social media, and this is really focused on targeting younger consumers that 18 to 35 demographic. So as you're leaving home and you're setting up your own kitchen and you're going to start doing the cooking yourself. Now the other interesting thing about digital and social media, of course, is that the getting cost is a lot lower than TV. So what this allows us to do is to support some of the smaller brands, which previously we wouldn't have been able to do.

And then I also said that in-store support is really important. That's why we have those strong strategic partnerships with our key retailers. And our execution in store in the first half has been really great. And that graph on the left-hand side, I think, is one of the most powerful things I want to show today, which is how our distribution has evolved from where we were a year ago at this point to today. And this is really a measure of how much more distribution we've got. So how many more products in how many more stores.

And overall, we have a 4.7% increase in distribution, which I think is a really positive number. And grocery is very healthy at 3.1%, but the standout number there is Sweet Treats of 14.8%. That's 14.8% more of our Sweet Treats brands products in store than they were this time a year ago. And that's really helped by that very strong NPD pipeline, so the number of new products that we've launched over the last year or so.

In the middle there, we continue to get really impactful in-store execution in terms of displays. That's a really nice gold run that's got a series of our brands and products on it. And then this year, we also started doing some outdoor sampling. So this is taking place in the car parks of large supermarkets, where we were cooking up some summer food using things like Cape, herbs and spice on barbecue and also the Lloyd Grossman pizza range. So if I move on to the second strategic pillar now, which is investing back, particularly into our manufacturing sites.

And as I said, we're on track to deliver about GBP 55 million of investment in the year. So a big step up from where we used to be, if I go back 5 or 6 years. And remember, many of these projects that we're working on have still got really good paybacks in that 3- to 4-year kind of window. And a couple of examples we've pulled out to show you a good example of growth capital. This is putting in place the capital needed for new products that we launch. You remember, we talked before about the success we've had with Mr Kipling Birthday Cake Tarts -- and we also -- it has a sister product as well actually, which is on there, which is strawberry and cream tarts.

And we needed some capital investment into one of the sites in order to be able to automate the manufacturing of those, which is something we've done. And then that image down the bottom there, that big complicated network of pipes is actually a cooling process for our mini rolls and cake bars under the Cadbury brand. And what this does is it actually cools down the warm cake because it's come off the product. So actually, it's more efficient and it actually saves on food waste. Some good examples of how we're driving growth and also reducing our cost base through capital investment.

If I move on to the third pillar then, so new categories. the growth we're getting from categories that historically we've not been present in. And of all the experiments we've done, the 2 real winners are Ambrosia Porridge and Cape Herbs & Spice. So Ambrosia 2 real winners are Ambrosia Porridge and Cape Herbs & Spice. So Ambrosia porridge pots expand distribution and launch new flavors. And the new news there is we've actually made now a Fuel 10K version of this, which is just coming to market. So a protein enriched version of that 3-year CAGR, a very similar trajectory as we gain more market share.

We've increased our distribution, and we've introduced more flavors into the range. And then the new one that's really come on to the map now is fuel there is some of our fuel 10Kranola. And remember, of course, that Fuel10K chocolate granola is the best-selling granola in the U.K. and you mix the granola into the protein yogurt. Very early days, put it in a couple of retailers so far, but we've been really impressed by how well that's selling. And in fact, one of the retailers has already started to increase their store count, their distribution on that. So really good performance and 41% growth from those new categories.

And we'll now move on to international. So the fourth strategic pillar held in our biggest market by the Australian retailers. And to understand that, it's important we understand the supply chain a little bit here. So we manufacture the cake in the U.K. We freeze it and it gets shipped to the port. And then actually, the retailers own it from that point onwards and are responsible for shipping it down to Australia and holding what they consider to be an appropriate level of stock.

And historically, they've sat on a decent amount of stock to cover some of the uncertainty that we've had in shipping times down to Australia, obviously, with the difficulties in the Middle East and lots of boats having to take the long way around. So those retailers have now come to the conclusion they don't need to sit on as much stock, and so they've started to reduce it. And that reduction in stock obviously manifests itself in the fact that they don't need to order as much from us because they're working from the stock they've already got. So that's what causes the impact on revenue. But actually, if you look at performance in market, we're really very, very pleased with it. And I've included some of the numbers here. So we actually -- if I look at the sales we've made to shoppers from stores, so scanned through the EPOS tills and measured by Circana, we actually increased those by 17% in the first half. So a really strong performance and which ultimately will eventually pull through to turnover.

Mr Kipling increased its household penetration. And if you look down at the bottom there, we've got some phenomenal market share gains. And in fact, actually, we've got record market shares in the first half in Australia. So a really strong 190 basis points increase in our cake market share and a 450 basis point increase in our Indian sources, which is pretty staggering. So really pleased with that.

And actually, one thing that's helping that Indian performance and the Indian market share is the TV advertising that we've put behind the Spice Tailor in Australia. So what that's doing is introducing the brand and making more people aware of it that will then go on and try it. And of course, the one thing we know about the Spice Tailor is once you try it and realize how delicious it is, you tend to come back time and time again. So that's working really well for us in Australia. And then quickly moving on to North America on the top right-hand side.

In quarter 2, we saw double-digit revenue growth as we launched our Apple pies into the U.S. So one thing we've learned about the U.S. is obviously, it's a big apple pie market, but most of those apple pies are family sized. And there's really not a lot of sort of standard, what we would consider individual apple pies in the U.K. So we've launched our Mr Kipling Apple pies in the U.S. and have really seen some quite encouraging initial performance, which catapulted into double-digit growth.

At the same time, we've also launched in our new packaging. So remember, we discovered that U.S. consumers see British cake as being a better quality cake. And so we put U.K. cues onto the pack. So therefore, we've got pictures of Big Ben and Union Jacks and things on the pack. And in Canada, we've got continued good momentum for Mr Kipling and for the Spice Tailor.

Then going down the bottom to Europe, and we're continuing to expand distribution of Sharwood's and the Spice Tailor. And you might remember, I said once before that we were putting dedicated sales resource into some of the big cluster markets in Europe. And the idea there is that then we start to own the distribution relationship with the retailer from a selling point of view, even if we're then using a third party to do the logistics and the distribution. And that's already starting to have an effect.

So the first resource that we put in place was in the Netherlands with a head of sales responsible for Benelux -- and that's already starting to land new distribution. So we've just managed to secure Fuel 10K distribution in one of the big retailers in the Netherlands. And also, we've got Spice Tailor into Jumbo, which is one of the other big retailers in the Netherlands. So really that turning into distribution gains already.

And then in Cadbury Flake Cake, we continue to expand in the Middle East, where it's actually very popular down there. And if I move on now to talk about the brands we've purchased. So both the Spice Tailor and Fuel10K growing double digit in the U.K., strong market share gains and really just benefiting from the branded growth model application. So new products coming to market and supporting the brands with digital and social media.

And then in Australia, as I said, we've actually got mainstream TV introducing the brand to more people. So really happy with the performance there. And then obviously, in the quarter, we bought Merchant Gourmet. So a great brand, strong double-digit growth, really great track record, market-leading positions and really in line with consumer trends.

So healthy eating, it's a premium brand and it's a convenient whole food. It's already proven its ability to expand into new categories, and it's got exceptionally high consumer repeat rates, even higher than the Spice Tailor. And so we were really quite impressed with that. And it's completely complementary to our existing brand portfolio, of course. So what we're going to be doing here is pretty much the same as we did with the Spice Tailor and Fuel10K because we see this brand following exactly the same trajectory with really strong growth.

So we see opportunity for further distribution expansion because if you look at how well merchant Gourmet sells and what we call the rate of sale, it deserves more distribution than it's got. So that's something -- what we've seen with Feul10K and the Spice Tailor, and we expect exactly the same to happen here is as you significantly scale these brands up, your costs don't increase anything like as quickly as your top line is increasing.

Really, there's just a bit more brand support. And as a consequence of that, we see quite a significant drop-through of that turnover growth through to improved profitability. So if you look forward into half 2 then, and we've got some really strong plans across the board. If we look at our U.K. brands and the innovation plans, we've got another series of new products that are coming to market.

And as I said before, I think this year, we've got a really strong lineup of new products. So some of the examples we've pulled out there, if we look at the top left, I said before, we've had some good success with the ready-to-use microwavable past and sauce. So this just extends that out further into Roli.

OXO has brought to market 2 flavors of bone broth. So this is following a trend that we picked up in the United States and people enjoying that for the benefit of protein and collagen. And we've got Bisto, which has brought a premium ready-to-use version of gravy. So this is in a little Tetra Pack and just pour it into the pan. Fuel10K there. We talked already about Fuel10K ready-to-eat porridge pots, so essentially replicating what we've done with Ambrosia, but this is Fuel10K now going into rice pudding, so a protein enriched chocolate rice pudding.

And then bottom left there, we've got Angel Delight with bubble jelly. So you'll probably be aware of the trend to bubble tea. And this is a jelly version of that idea. So it's jelly with bubble balls in it. So that's also only been in market for a few weeks, but we've been really very impressed by how well that one is selling. And then we'll be bringing to market for our -- working with our strategic partners at Nissin, a protein version of the very successful Soba noodle pots. If I move on to the second pillar, which is our investment back into infrastructure, there's a couple of really exciting projects I want to highlight here.

The one at the top is the first in what will be a series of what we're calling replatforming projects. And replatforming for us is the replacement of one of our existing production lines with something which is much more up-to-date, much more state-of-the-art. And what we're finding that, that's able to bring for us is much tighter control of the production process, leading to much better quality and consistent product quality. But at the same time, the speed and the efficiency is meaning that we can produce it at a lower cost.

So essentially, we get a better product for the consumer at a lower cost to produce. And then down the bottom there, what you can see that image is a new, more efficient boiler, which we're currently in the process of installing into our workshop site. And we'll be doing something very similar at the Lifton Creamery as well. And so those 2 sites use steam in order to cook some of the products, and we use the boilers to generate the steam. And what we're doing is replacing some of our big older boilers with these new, much more efficient ones, which are also a lot smaller. So this means that we will use significantly less gas. So that's better for the environment, of course, but it also saves us money on our fuel costs.

And actually, the other thing that these do is they actually drop us out of one of the government levies, which is related to boiler size and boiler capacity. And so we'll no longer be part of that, which is a further saving on top of the saving we make in gas utilization. On the new categories pillar, pillar #3, we've talked about the Fuel10K yogurts, which have been very successful so far. So we continue to drive those and be looking to get those into more distribution and early stages, but that's there the Fuel10K ready-to-eat porridge, which essentially replicates what we've done with Ambrosia.

Moving to our overseas business. In Australia, probably worth pointing out, this is a version of the Spice Tailor. So Spice Tailor is generally a pack made for 2 people. But we do know that particularly the best-selling product in Australia, which is butter chicken, which is on there, is a milder flavor and often enjoyed by families. So what we've done is we've created a larger family size pack, so you just have to use pack to make dinner for the family. And then what we also should see in Australia is we should see the tapering off anticipation of that impact from the reduction in buffer stocks on cake.

Moving forward to North America. So in the U.S., we'll be getting further distribution of the Spice Tailor. You might remember once before, I said we were in one customer and seeing how that was going. And we've been pretty pleased with the performance. So we're now extending that out into a second big customer, which will come on stream in the second half of the year. And we'll continue to expand our Mr Kipling Apple Pies because we've been very pleased with how that started in the U.S., including into Canada, where we've just gained distribution in Canada, Walmart for our Apple Pies, which I think is about 280 stores.

And then in Europe, we'll continue to build distribution of the Spice Tailor and Sharwood's and also now Fuel 10K. As I said before, we've just gained distribution of the Spice Tailor in a big customer in the Netherlands. And then Fuel 10K in the second half will be in the Netherlands and will be in Italy and we will be in Portugal as well as we start to roll that brand out now to more countries. So lots happening across the board. And at the same time, we've got written down the bottom there, the M&A team will continue to look for more brands that we can buy and which fit our criteria and where we believe that if we apply our branded growth model, we'll be able to deliver further value.

So to sum up from me then, look, I think we've had good U.K. branded revenue growth despite the warm weather. We were really pleased how it popped up in quarter 2 once the warm weather started to dissipate. We've got particularly strong performance from Sweet Treats, at 9.4% growth from our Sweet Treats brand and over 10% from Mr Kipling. And we're making further capital investment into our manufacturing sites with attractive returns. And the 2 acquired brands, the Spice Tailor and Fuel10K have continued to grow really strongly. And then plus, of course, in quarter 2, we made the Merchant Gourmet acquisition.

In terms of outlook, we expect revenue to step up in half 2, and that we expect to be a combination of volume and price mix. You've seen we've got a really strong innovation pipeline. I think it's the strongest we've had for several years, to be honest. And we'll start to see the benefits of the Merchant Gourmet acquisition as we go through the integration process. So with all that in mind, we're on track, in fact, nicely on track to deliver our trading profit expectations for this year.

And as I said, adjusted PBT now slightly ahead. I'm always conscious that we're always having this conversation as well halfway through what is our most important quarter in Q3. And whilst there's still an awful lot of water to go under the bridge before we get to Christmas Eve, at the point where I'm standing now, I'd say that we're quite happy with that and that we're on track.

So look, thank you very much, and we'd be more than happy now to take your questions.

[Operator Instructions]. First question this morning is coming from Mr. Charles Hall of Peel Hunt.

Well done on good progress through the period. Could you just give a little bit more color on that trend through Q2 and into the early part of Q3 and also a bit of feel on price and volume mix.

Yes, sure. Thanks, Charles. So yes, of course, there was a sort of transition between quarter 1 and quarter 2 on our grocery business because of the weather. Sweet Treats remained very strong all the way through, of course. But really, if you look at what the weather did in quarter 2, actually, July was pretty hot. So the start of the quarter was very similar to quarter 1 and then things improved as we went through August and September. So essentially, exit rate was a lot stronger than where we were on average through the quarter, if that makes sense. And then looking forward into the second half, obviously, we'd expect growth to step up in the second half and then that being a mix of volume and value. Does that answer the question, Charles?

Yes. And so sort of broadly even mix between volume and value?

I mean, historically, that's where we've been. I think we'll have to see how it plays out. There is obviously some inflation in there in the second half. But historically, we've tended to be about 50-50...

Perfect. And then on distribution points, one of the great successes has been you landing new products and then sticking on shelf post the initial launch. Have you got any color on how successful you've been on recent product launches in terms of maintaining them on shelf?

I've not got any up-to-date stats on that. Remember the last time we looked at it, our success rate was about 75%. So that's -- we measure that as being still present on shelf 2 years later. So a really good measure of sticking power. I haven't got a more up-to-date measure of that. What I can say, though, Charles, is that we're really pleased with this year's NPD pipeline. This is a stronger pipeline than we've had for several years. And so there's lots of things in there that have already launched that we're really pleased with and are just coming to market now and the early signs are really good as well. So that's going to be a good sign looking forward.

Next question will be coming from James Edwardes Jones of RBC.

A couple, please. First, well, they're both financial, so probably to you, Duncan. But what would a pension in terms of both, I guess, financial disclosure and the reality of Premier's liabilities towards pensioners?

And second, the increased CapEx guidance, where is that increase going? What should we be thinking about for future years?

Perfect. Thanks a lot, James. Let me take both of those probably in reverse order, if that's okay. Yes, CapEx, I think we've we've been working hard at trying to obviously deploy as much capital as is sensible and we can sensibly do. We know we've got a big pipeline of projects. We know they return really well for us in terms of payback. And as I say, this year, we stepped up guidance to about GBP 50 million from about 40-ish last year. And I think what we've seen during the first half is really good progress is actually putting that capital to work.

Clearly, it's in our interest to get that down projects in and running, getting the returns as quickly as we can. We probably made a bit more progress than we expected during the first half, which means we think we'll spend a bit more for the full year. So ticking up guidance to your point, up to GBP 55 million.

So from our perspective, this is really positive. This is really what we're all about to do, and we know we've got a good track record of generating returns. Probably the other piece is feeling really good about the pipeline of projects, if you like. So the GBP 50-odd million, GBP 55 million, we can see a good home for that capital over many, many years, which gives us the fuel for our margin progression that we've seen so far. So very much 50-55, I would say, is still around what we'd expect to go to spend over the next few years, which again goes to show we've got plenty of good opportunities to deploy capital effectively.

And then just on pensions, I mean, look, I think where -- what a buy-in does, I suppose you know it locks down all the remaining risk in the scheme. The company is still responsible for the pension scheme. It's still on the balance sheet, although there will be some adjustments as and when a buy-in transaction happens. It's probably a bit too detailed to go into now. But the risk is completely locked down and then one would typically move towards a buy-in transaction, which then removes it from the company and from the balance sheet. But I think that is something we're working to.

We've been saying that we expect to get there by the end of next year, round about as best as we can predict these things. But I think I'll probably just reiterate what I said before is sitting here today, I view us pretty well locked down. We've got a really sophisticated hedging strategy. So we're not really exposed to interest rates or inflation. We are continuing to derisk the assets, and we made further progress of that during the first half. So we are taking less risk.

So actually, I always view the pension scheme pretty much fixed in terms of level of risk out there. Clearly, we need to formalize that by doing a buy-in, and then it may well be that we buy out after that. But certainly sitting here today, even though we're working towards the buy-in, feeling really comfortable with where the scheme is and the chassis continue to do a great job running it.

We'll now move to Karine Elias of Barclays.

Congrats on the very strong results. I just wanted to go back to your -- one of the comments on the bridge facility that you've got. I understand the flexibility obviously, but just understanding how you're thinking about the refinancing. Is it just you being opportunistic, waiting for rates to be lower? Or how should we interpret that?

Yes, thanks very much for the question. I think clearly, we need to refinance the bonds. The high-yield bond market has worked pretty well for us in the past. So I think that's certainly where we are today in terms of expectations for the future. The reality is that we're sitting on a 3.5% bonds and any new bond is likely to be more expensive than that. So we are making sure that as best as we can in a sensible way we can, we can approach the bond market in an ordered and sensible way to try and get the best rate possible.

To help us with that, as you pointed out, we put in place a bridge facility, which effectively, obviously, as you know, gives us committed financing and a bit more -- allows us to be a bit more deliberate and take a bit more time to do our best to try and approach the market at the right time. So very much just a pushback on timing. And obviously, that's flown through to our interest guidance and upgraded expectations for profit before tax for the year.

Next question will be coming from Darren Shirley calling from Shore Capital.

First of all, just on EPR. It seems to have been a bit of distorted in the year and obviously, a headwind you didn't want. Is there anything you can do to reduce your exposure to EPR? I mean in a sense it's -- a lot of it's weighted towards sort of glass packaging or heavier packaging, et cetera. Just any way you can do to reduce your exposure to that going forward?

I'm not -- I think the short answer is yes. I think the first thing to clarify is, obviously, the way EPR has been administered, it means we -- or at least the accounting principles around it, I mean we have to take all of the cost in the first period of the year, so it manifests itself in half 1. But we have got it all covered. So it's all being recovered. It's all been recovered over the full year. But obviously, that's happening over a year rather than just over the first half. So that's why it creates that distortion.

Can we reduce our exposure? Yes, we can, and we continue the program we've had for a number of years, which is about reducing the amount of packaging, making the packaging more recyclable, and we can change the mix of the packaging as well. So there's definite work we will -- we can and will do on that. There's more to go after. But what we don't really know is how the scheme is going to evolve either. So I'm not necessarily banking any upside on that looking forward yet until we see how the scheme evolves.

Okay. And then another one in Australia. Can you just -- in terms of when that sort of buffer build, let's say, begin? And when would you expect that to end? And so we start to see sort of the good underlying stuff that you've talked about coming through in terms of sales? And when we do see that coming through in terms of sales, I mean, what should we be looking at there for you to be viewing it as a success, Alex? Is it double digits? Is it high double digits? If you could give us some idea on timing and magnitude, that would be helpful.

Yes. Sure, Darren. So look, I think it started in the back end of Q1, but we saw the bulk of the effect during Q2. Obviously, we don't control it. It's really up to the retailers how much stock they want to have in their warehouse. Has it finished? Probably not quite yet. I think -- but we'll see it taper off, I think, pretty quickly as we go through the second half. I think most of it's happened in Q2, let's put it that way.

And then what sort of performance do we expect to see? I think Australia has clearly had, notwithstanding the stock reduction, the in-market performance, as I mentioned earlier, has been really fantastic. I mean, 17% growth is really excellent performance no matter how we look at it. But I think we also have to accept that Australia is going to be a more mature market for us because in the categories we're in, we're the leader, so cake and Indian sauces. And as we get more mature, then the percentage growth rates are bound to taper off a bit.

Now having said that, the counter to that is we're also extending into other categories in Australia aren't we? So we've -- we're extending into East Asian cuisine with the Spice Tailor. We're extending -- we've put our first feet into gravy. So we've got the Bisto Best product in Australia, although we don't have the trademarks, it's called Paxo Best. And we're looking at other categories and other ways we can expand, particularly with things like Field 10K and potentially merchant gourmet. So we'll have to see how that all plays through, but I'd see a maturation of what we've got in cake and Indian sauces, but then growth coming from the new things we expand into.

That's helpful. And then just a last one on marketing. Speaking to one of your branded food peers, but on the drink side, not too long ago, they were highlighting in their analyst meeting how AI is just basically structurally changing the capability and cost in terms of creating adverts and pace and all of that sort of stuff and was indicating that sort of the old WPP model was basically dead. I mean, where are you now in terms of your own capabilities in that marketing and AI? Is that something you're going to be -- is it a case of will you see more stuff get more bang for your book? Or is there a budget saving there? Anything you can say in terms of sort of that future market is going to be helpful.

Yes. No, I mean, absolutely, yes. And we're seeing -- I mean, obviously, we've got AI helping us in several parts of the business and machine learning as well. But I think actually marketing is one of the areas where you do see more immediately, it's starting to help us. So it starts to help you with research. It starts to help you with concept development. It starts to help you with pack design. There's a number of ways in which AI is already coming in and helping us.

And we're taking an approach there where we're not putting significant upfront investment into that. We're actually working with some of our external partners and using their capabilities. But yes, you're absolutely right.

Next question will be coming from Matthew Webb calling from Investec.

I wonder if I could just start off by asking about that 13% growth figure for your premium ranges. And to what extent that is kind of natural growth as in growth of existing products very much being sort of pulled by the consumer as it were? And to what extent that has been driven by your new product development?

And then the second question is partly related to that. Is -- clearly, the U.K. consumer is not in the best place. You're seeing strong growth at the premium end. Are you also seeing strong growth at the value end? What's happening down there, whether that's just either low-priced products or products that are helping consumers to cook from scratch. That would be really helpful.

So yes, look, I mean, obviously, we're delighted with that 13% growth in the premium ranges. The answer is it's some of both. What we're learning more and more is that there are definitely shoppers out there, consumers out there who are prepared to pay a bit more for a product that is noticeably better. So as long as the product is genuinely better, there are people prepared to pay a bit more. And some of it is growth in our long-standing premium ranges like Bisto Best, for example, which is performing better than Bisto on average.

And then some of it is actually driven by new products we brought to market. So we launched, for example, the Ambrosia premium range, the Deluxe range a few years ago, and that's continued to grow very strongly. And then in this first half, we've put premium version of Lloyd Grossman sauces in there, which I referenced earlier that sort of made in Italy out of premium ingredients.

So I guess some of it is consumer pull and some of it is us bringing more premium ranges to market given that we know that there's consumers there who want to buy them. So that's great. In terms of the overall consumer environment, it's an interesting one. There really isn't it, because you've got to remember that most of our products, they are really relatively low-cost things to buy. We're not selling cars here.

We're selling things that only cost a few pounds to buy. And we all need to cook and the cheapest way to eat is to cook for yourself at home. And so a lot of our products go into those making those meals. So what tends to happen in times of economic volatility or uncertainty is that our sort of product portfolio tends to be relatively resilient.

So we don't really feel the highs and the lows of how the consumer is feeling because people need to cook and eat anyway. What we do see is we see variance, particularly in the number of people eating at home versus eating out or getting takeaway. So when the consumer is under a bit of pressure, we see actually people dropping into our brands who would have otherwise maybe gone out for dinner on Saturday night. So I would say it's a pretty resilient portfolio.

Got it. And then sorry, just one final question. Just hearing again, the process of getting your product into Australia, freezing it, shipping it halfway around the world. It still strikes me as not the most efficient way of doing it. I mean are there any thoughts of switching to local production in Australia, maybe getting a third party to do it for you?

No, there isn't actually. And the reason for that is the kit you need, the production line you need to make the Mr. Kipling cakes are expensive, big and complicated bits of equipment production lines. That doesn't exist in Australia, and it would not be economically sound for us to start to invest capital in Australia to produce those given the absolute potential market size. So we will continue to ship from the U.K. because despite one's initial reactions, that actually is the most efficient way to do it.

[Operator Instructions]. Next question is coming from Damian McNeela of Deutsche Bank.

I think the first one is around your market share development. Now I appreciate you've made pretty good progress over the last 3 years, up 130 basis points. But given the fact that share gains seem to have stalled, can we read into that, that competition in U.K. branded has got a lot harder in recent months? Just any comments on that, please? And then just looking at the sort of costs, so your input costs for 2H and into next year, is there anything that's moving that's worth flagging that may impact on your cost line, please?

So yes, I mean, obviously, we've been delighted to have taken 130 basis points of market share over the last 3 years, and I think that all comes down to the branded growth model and how we drive our brands. I think what we've seen in the first half of this year is we've continued to make really good progress taking market share with the Sweet Treats brands. And obviously, 9.4% growth and actually double-digit growth for Mr. Kipling is obviously above market growth.

What we've seen in grocery is the impact that, that hot weather has structurally compresses your market share. And it's because our share tends to be highest in categories which are most weather affected. So Bisto, for example, we've got a very, very high share of gravy. Gravy stops growing when it's hot. And so consequently, we get a structural market share rebalancing. So I think that's probably the biggest factor in there.

Yes, our categories are always competitive. And we've got categories that are more competitive than others. But actually, I think the biggest thing going on here is the weather impact on market share factor.

In terms of input costs, I mean, look, we buy a huge basket of different things from packaging ingredient from packaging to ingredients. And then obviously, we've got energy and all sorts of things. There's nothing really in there. We're all aware of cocoa, obviously, and although that's come off the peak now, there's nothing in there that's particularly notable. I don't think going forward.

And at the moment, our input cost inflation, as I've said before, is about in line with food price inflation in general, so mid-single digit. And we're hopeful that what will happen as we go forward next year is that, that will start to taper away and the food industry will be back to where it used to be, which is sort of fairly benign low single-digit input cost and then food inflation, but we'll just have to see how it plays out.

Yes. So there are no surprises from [ Rachel ] next week.

[Operator Instructions]. We do not appear to have any further questions. I turn the call back over to the management for any additional or closing remarks. Thank you.

Well, thanks, everyone, for joining this morning. As you can probably see, we're really pleased with that step-up in our U.K. branded performance in Q2, as I say, driven by that strong Sweet Treats performance continuing, but also our grocery business popping back up after the hot weather started to ease. And as you've seen, we continue to make good progress against the 5 strategic pillars, which we will continue to drive. And the aim at the end of the day is to scale up Premier Foods and make it into a much bigger business than the one we've got today. So thank you very much.