Tesco Stock

Good morning, everyone, and thank you for joining Imran and I following the publication of our first quarter trading update earlier today. We've made a good start to the year. I'm particularly pleased with our strong customer satisfaction scores, helping to drive further sales growth on top of the exceptional performance we delivered last year. Alongside ongoing investments in value, quality and service, we are making strong progress against the longer-term growth drivers we set out in April, including personalization, retail media and digital capability. As we build on the unique strengths of our business, we are unlocking sustained long-term growth for all our stakeholders.

I'd like to say a big thank you to all our colleagues for their continued hard work and commitment. Their focus on delivering consistently great service has once again been key to our performance. Before opening the call to your questions, I would like to take a few moments to run through some of the highlights of the quarter.

Like-for-like sales in the U.K. grew by 1.8%, against a particularly strong comparative period last year, which benefited from record-breaking weather and disruption at some of our competitors. This was also reflected in market share, where we broadly held our own across the quarter and saw a small decline in the latest 4-week read as we started to lap the strong comparative. Fresh food led the performance with like-for-like sales growth of 3.6%. Finest also remained strong with sales up 9%. Online continues to grow strongly, with sales up 8.9%, including another strong contribution from Whoosh, where sales grew by over 30%.

Alongside a further expansion of Whooshes to more households, we also rolled out a book for later option, giving customers more choice and flexibility for same-day delivery. Food innovation remains an important driver of our success. And during the period, we launched over 500 new and improved products, including more than 200 in Finest. Our progress on quality was also recognized externally, including 2 good housekeeping Retailer of the Year awards. With the conflict in the Middle East contributing to uncertainty for many households, we have continued to invest in the parts of the shopping trip that matter most to our customers.

During the quarter, that included extending Aldi Price Match to more than 2,000 Express stores. Alongside thousands of Clubcard deals, our extended Everyday Low Price program and our ongoing investments into great quality and service, we're committed to giving customers the very best value for money, however and wherever they shop with us. We are also committed to supporting the communities we serve. During the quarter, we announced plans to double the size of our free Fruit & Veg for Schools program, reaching more than 1,000 schools every week from September.

In Ireland, we have again delivered strong volume-led growth across all channels. Like-for-like sales increased by 3.3%, with particularly strong online performance. New store openings are also making an important contribution to growth in Ireland with a total sales growth of over 5.6%. Booker's performance across retail and catering reflects both a strong prior year comparative, which benefited from favorable weather and the impact of exiting a lower-margin retail contract in the second half of the year. Underlying growth across retail and catering remains solid on a 2-year basis with customer satisfaction scores making further progress. During the period, we also added a further 146 retail partners.

In Central Europe, we delivered modest growth, supported by volume gains and an improved mix in food. Online performed especially well during the period. and we are pleased to see a significant improvement in consumer confidence in Hungary. Alongside good short-term progress, we are also making strong progress against our longer-term strategic ambitions. For instance, our new Adobe-powered personalized communications platform has now gone live, step-changing our capability to give customers more relevant inspiration, offers and reminders. And we were really excited to give all of our colleagues exclusive access to our AI meal planning assistant as we fine-tune it ahead of a broader rollout to customers later this year.

As we start a summer of major sporting events, including the Football World Cup, we are seeing strong engagement from our suppliers as they look to connect with customers. That includes product exclusives from brands such as Budweiser, Walkers and Pepsi. Alongside innovative retail media activity, the World Cup is a clear example of how we are creating engagement moments for brands and customers. We're already seeing customers get into the World Cup spirit. On Saturday, sales of Irn-Bru were up 50% ahead of the Scotland game, and cocktail cans were up 185%. Last night, we also extended our Whoosh operating hours until 11:00 p.m., so that England fans could get drinks and snacks straight to the door without missing a minute of the game, and Whoosh sales yesterday were up around 40%.

In summary, I'm pleased with the start we've made to the year. As customers remain mindful of their spending against the backdrop of continued uncertainty, we are committed to doing whatever we can to deliver the very best combination of price, quality and service. For the full year, we continue to expect group adjusted operating profit of between GBP 3 billion and GBP 3.3 billion and free cash flow within our medium-term guidance range of GBP 1.5 million to GBP 2 billion.

Thank you for listening. I'll now hand back to the operator, and Imran and I would be delighted to take your questions.

[Operator Instructions] Our first question is from Sreedhar Mahamkali from UBS.

And I have 3, please, if you don't mind, right at the top of the queue. Hopefully, that's okay. First one is, is there anything you can help us in terms of shape of trading, particularly towards the end of Q1 and as you entered Q2? I know it's only a few weeks into Q3, so that will be very helpful.

Secondly, I think in the outlook statement, you referred to a good start to the year, as you reiterated operating profit and free cash flow outlook suggested there, Ken. Does that good start mean profit growth in Q1? Is that how we should see it? And last one, you referred to a couple of interesting areas in the release, 15% growth in insurance policies and strong growth in retail media. Again, how should we think about contribution of these to growth of group operating profit this year? I know it's a trading statement, but it will be helpful for us to understand how we should think about those sorts of numbers you referred to.

Thanks very much, Sreedhar. I will take the shape of trade and retail media and insurance question. I'll pass the profit question on to Imran. I think it's fair to say that we are where we expect it to be, Sreedhar. We are lapping exceptional weather last year. And of course, we had disruption amongst our competitor set, which really influenced the base that we're lapping. So I would just say, from a shape of trade point of view, we are where we are, and where we expect it to be.

I would say that we have invested very heavily in value, and our price indices as strong as they've ever been. As you can see from the release, we've also invested in product quality and innovation with over 500 products released. We've extended the Aldi Price Match into our convenience stores, which we think was a really positively received move. And all of that has culminated in a record customer satisfaction score with an NPS of 31. And then as you say, what that's done is that the halo from that has meant that we're starting to see increasing traction with that ecosystem model of trading more people into our financial services products, increasing penetration of our Tesco mobile offering, and winning with suppliers in terms of our retail media proposition, and we won another retail media award during the quarter.

So all in all, we feel like the strategy we laid out for you in April is starting to show real signs of traction. I think it would help us if we could get some sunshine. It's fair to say. So weather-related sales, things like clothing, fresh food, beer, wine and spirits have definitely been impacted by the weather. But other than that, I think the shape of trade is reasonably solid and consistent. I'll pass it over to Imran.

Yes. Maybe if I give just one more comment on the shape of trade. I mean, in April, we did very clearly mention there's going to be a first half, second half play in the sense that we knew we would lap a very strong sort of weather tailwind that we had. You remember the 22 weeks of continuous sunshine was a thing and clearly some disruption at our competitors also benefiting us. Clearly, that straddled Q1, Q2. And I wouldn't want to get into a month-by-month play here. But clearly, it's something that we factored into the shape of our planning.

And also maybe worth to say here as well, we are also very, very clear that, as you know, Sreedhar, we are quite disciplined, and we never go and buy sort of any empty share just because of the difficult lap. So I think we continue to be very happy with how we're trading and the way that Ken described is how we continue to operate.

Then in terms of outlook, I mean, on profit, look, I feel really good about where we are at the end of quarter 1, pretty much played out exactly as we anticipated. You look at the online, you look at Finest, you look at Whoosh, you look at the strategic initiatives, all contributing as we anticipated. The sales of shape -- the shape of the sales growth, exactly where we expected it to be. And frankly, that's also true for profit and cash. Now obviously, there's 9 months to go, so still to play out. But at this stage, really happy with where we landed.

Then this last question that you had, the contribution of profit drivers from media income, from IMS, from mobile. Of course, they're all very helpful. It's part of the strategy. They bring in new customers, but they also bring in new profit, and those are very helpful. As you have seen us perform over the last 5 years, they have been contributing and they continue to do so in a nice way.

Got it. And then just really a very, very quick follow-up. The level of the growth we've seen in Q1, potentially Q2 as you point into H1, H2 there. Is it enough to drive profit growth?

Look, every year, we set out to drive profit growth. And we have -- we said the same as we started into this year, right? As you remember, the range we set out was clearly to give us the space should consumer behaviors change driven by the uncertainty in the Iran conflict. We haven't seen that yet. So I would say 1 quarter in, I feel good about how we are trading and how profit is shaping up. But there's 9 months to go. And to your specific question, can you grow profits with the current shape of trade? Yes.

We'll now take our next question from Clive Black from Shore Capital Markets.

Actually, well done on growing sales against what you were facing into. I just have one question. Last week, the U.K. medical authorities approved a tablet form of disuppressant drug. I just wonder if this is starting to lap on your shores in terms of demand and volume. But also whether you see this development as a positive feature and prospect for Tesco going forward?

Thank you, Clive. Good to talk to you as always. We actually see it as a positive thing. Anything that improves the health of the nation, we think, is a good thing. And as you can see from the last 3 years, the tip of the spear for us has been our fresh food sales growth. We've been really pleased with the consistent quality improvement in our base fresh fruit, vegetables, meat, fish, poultry and the innovation that we brought to that area. So that's been a real positive for us.

I think also, we are one of the few grocers that have retained our pharmacy network, and we're the largest pharmacy chain. And therefore, we're doubling down on helping customers with their health care needs, with their broader health care needs, of which a weight loss service is part of that. And then finally, I would say it's really informed our food innovation program. So we've released a number of high protein, high-fiber product ranges, which actually play to a much broader interest customers have in health care. That goes well beyond GLP-1.

So even before GLP-1 became a thing, I think largely through COVID, we saw a big trend of customers wanting to live better lives, healthier lives, eat better. And that trend has continued and grown. And I think GLP-1 is a subset of that. So we're adapting our business model to take advantage of it.

And so Ken, just by way of follow-up, would you expect volume to reflect these trends, but mix to mean, you won them up?

Yes, I think so. I think that's probably the right way to look at it. Absolutely.

Well, I hope your good lady takes down those Harry Kane posters in your house quite soon and enjoy the World Cup.

Clive, I promise you, in the long list of good-looking sports stars that she has on her wall, Harry Kane didn't quite make the cut.

Our next question is from Izabel Dobreva from Morgan Stanley.

I've got a couple of questions. The first one is on market share dynamics which you saw during the quarter. I suppose the temporary impact from lapping the competitive disruption from last year would has been in your budget and quite well known in advance. So could you maybe comment on your market share, excluding those temporary impacts and what momentum you are seeing in your business outside of that?

And then as a subquestion on market share, could you also comment on the trend you're seeing in the Finest sales? Just because the sort of slowed down a little bit versus the mid-teens number we're used to seeing. So I'm wondering, is that something that is market-wide and you're still getting share in Finest? Or has there been any change there?

And then my final question is just the shape of the buy. As we think towards the 2Q, I guess, there may be a little bit more disinflation to come and some continued months or so on the competitive disruption based on Kantar, so is it likely 2Q will be the lowest point of the year? Or do you think the volume boost from weather and maybe the World Cup will be enough to offset that?

Yes. So let me talk on our planning assumptions. So when we planned the year, you're absolutely right. We took into account the fact that we have not just the weather tailwind, but also the disruption tailwind. And as I mentioned, that straddled Q1, Q2. So absolutely, when you think about the market share reads, we saw the beginning of what I would call a period of exceptional gains. And the last month, you saw that weakening in the 4-week read. That was exactly that. That still continues, in my view, a little bit that big hill to climb. But it's part of the plan. It's part of how we forecast it, which is why when I look at our overall financial metrics, but also the KPIs around all the metrics that we are looking at, whether that's how online, Whoosh, fresh food, nonfood all grew is pretty much in line with expectations. So I think we're in a good place there.

When I look at the rest of the business in terms of excluding those impacts, look, it's playing out exactly as we anticipated, right? I mean the good news is inflation is a little bit lower. As you've seen, I feel we -- the market is calling what was the market around 3.5%. We're meaningfully below that. So actually, when I look at our volume performance, Izabel in both fresh, especially, it's actually quite strong. And between fresh and packaged equally, we're in a good place as it -- broadly slightly ahead, in fact, which is a good thing. We have been impacted, which is maybe worthy of your question to note down is last year, in Q1, we had clothing growth of around 10.5%, 11%. So clearly, as you lap Q1, Q2 because of that weather that's a slight negative, but as anticipated.

So all in all, trading is broadly in line with our expectations, well, fully in line with our expectations. Then Q2, as you would rightly expect, weather will play a big role because you've seen outside, we've had one nice week in May, which was very, very helpful, and we saw it really trade do really well during that period, which is a good sign. But clearly, when you have sunshine, people spend more and enjoy themselves more. And I'm hoping for a longer stay for England and Scotland in the tournament. That is always helpful because I think it also lifts the mood. So when we look at our plans, our propositions, they're resonating well, they're delivering in line with expectations, but we could use a bit of help from the sun.

And Izabel, just to address your second 2 questions. Look, I'm feeling really good about Finest sales because the 9% was building on a particularly strong sales the year before. So I think our 2-year numbers kind of mid-20s in terms of the growth. So that represents an exceptional performance in Finest, and it continues to resonate really well. And of the 500 products that we innovated around in the first quarter, over 200 of them, 220 to be precise, were Finest, including a lot of kind of ready-to-drink cocktails, which saw particularly strong growth in Scotland last Friday.

In terms of the shape of the buy, look, we're very sensitive to weather. The World Cup has been, for sure, factored into our buying and into our thinking around trade plan shape. And with the weather expected to turn really positive next week, we are feeling positive about the shape of trade, and we're well set up for it.

We will now take our next question from Manjari Dhar from RBC.

I just had 2, if I may. First question was on convenience. I just wondered if you could give us some color on the performance of the convenience estate versus the large stores and sort of any more color on the impact of the Aldi Price Match extension to Express? And then my second one, you mentioned the World Cup a few times. I wonder if you could give maybe a little bit more color on historically, how much has -- or how has the World Cup influenced trading, the shape of trading? And is it more sort of the marketing opportunity or a footfall opportunity for people buying a bit more alcohol.

So I can give you a bit of color on the channel sort of split to bring that a bit of life for you. So if you break down the different channels, what you would have is online growing at around 9%, large stores growing around 1.5% and convenience slightly down. That is driven by, obviously, the tobacco industry trends, as you would expect, but also the lap of the hot weather, where you would imagine in convenience, when hot weather comes in, you also have the drinks, the ice creams, the impulse products that clearly have an immediate impact on that. And also the fact that one of our competitors had been quite disrupted within their convenience channels, which obviously have been a tailwind for us last year. So all in all, I look at the market share in all 3 channels, we're in a good place.

And listen, Manjari, in terms of World Cup, yes, we do mention it. I think we mentioned it more from a consumer sentiment point of view necessarily then from a big change in consumer behavior where the weather has a much bigger impact on consumer behavior and buying habits. So I think given that confidence has taken a step back since the war in the Middle East, we think it could, together with a sustained peace deal in the Middle East, give customer -- consumer confidence a bit of a boost, which would be really welcome.

And then if we kind of get some decent weather, which were due to get, I think that will also help a lot. And we're very -- as I said, we've planned for that.

Our next question is from Rob Joyce from BNP Paribas.

So 2 from me. So firstly, I guess, just to clarify, it sounds like Imran, you're saying you're happy with full year EBIT consensus in that sort of upper quartile, should we say, of the guidance range. Just if you can confirm that's the case and also say what kind of volumes we sort of need to see to get there? It looks like maybe minus 1% in the first quarter. How much of a recovery do we need to get there in the latter part of the year?

And then the second one, just -- sorry to get bogged down in the shorter term again, but I do think like-for-like momentum quite important at the minute. I mean, in the second quarter, if we're looking at the sort of softer comps, maybe some staycations and obviously, those Irn-Bru sales coming through. Does it feel like we should have seen an inflection point in the sort of first quarter into the second quarter? Or do you think that could be the third quarter before we start to see the like-for-like improve?

Yes. Look, I mean, I think on the EBIT number, I mean, just to give you the long answer and then the short version as well. The long version being that the range, the GBP 3 billion to GBP 3.3 billion I would say, as I always say, we aim to grow profits every single year. The low end is to give us the flexibility and the space in case a consumer sentiment turns and 9 months to go is a long period. So far, consumer sentiment hasn't turned and has actually been in line with prior year.

And as I said, our first quarter performance on sales, profit and cash is in line with our expectations. So that's a really good place to start off with. Then clearly, if I look at consensus, I feel right now, it's within that range, and therefore, I feel good about where it is. That's also important.

Then in terms of volume, to give you a little bit of color, maybe if that helps, right? So if I take it in the round for quarter 1, volume mix within food is broadly flat, and we had a stronger performance than that even in fresh food. So that's important. Then again, I mean I mentioned it before, but clearly, the volume is impacted as well by the lap within clothing and nonfood, right? So especially within clothing last year, we had an 11%, 10.5% growth or so in quarter 1. So when you lap that, you obviously have a negative impact on that.

Then when I think about this -- the quarters 2, 3 and 4, I think it would be very unhelpful if I did sort of a month-by-month play. But the way we think about it, broadly speaking, is half 1 had fantastic momentum behind it, driven by weather disruption and frankly, our brilliant execution on availability and all the propositions we brought in. I think the availability and all the propositions we're bringing in as strong or even stronger than last year. But as you would expect, there is a lap impact on weather and competitor disruption that was helpful to us. That will straddle Q1, Q2, but I would expect then that -- us to come out of that at some point. But exactly which precise month, I'm not going to get into.

Our next question is from Xavier Le Mene from Bank of America.

So 2, if I may. Just back to Rob's point about the consensus on the guidance range. You've got a good Q1, you said in line with your expectations. So why not potentially narrowing down the range? So what are you concerned potentially not to be a bit more precise going into Q2 and Q3? And the second one is more about the catering and the food out-of-home environment in the U.K. So have you seen any change in the behavior recently? And what are your prospects potentially going forward?

Yes. On speaking on the first question, it's a question of timing, right? I mean we're basically just 3 months in. I mean, you see the same headlines I do, right? I mean we see the same ones as in uncertainty on the macro does exist out there and consumer confidence levels have and continue to be low. The good news is we haven't seen that low consumer confidence translate into different behaviors, and that's good. But look, with 9 months to go, I would say to you, 1 quarter down, happy where we are, 9 months to go, and we'll keep you posted as we come and speak to you again in October.

And then on your second question, which is around catering performance, is that right? And are you talking about wholesale?

Yes, right.

I think, Xavier, if you think about it last year, actually, the catering performance was outstanding, and it was really driven by the exceptional weather we had. And so we've had exactly the opposite this year where we've had very poor weather. So that's had a particular impact on catering performance. But again, from an offer and proposition point of view, nothing has changed. We're as competitive as we've ever been in terms of value. Our reach is unparalleled, and our customer service and satisfaction scores are stronger than ever in Booker. So we don't have any concerns about the fundamentals. But it is a tough market. And clearly, some of the regulation and tax changes have impacted caterers over the last 6 months in particular.

I would also add, Xavier, because I think it's helpful just from a philosophy point of view, the same applies to catering as it does on what we said about the U.K. core business. You don't chase unprofitable sales, right? We don't buy empty volumes just to get a sales number up. I think, A, that impacts the market and its rationality and B, it actually costs you in the end on the bottom line and in cash, and that's just not a healthy thing to do.

We will now move to our next question from William Woods from Bernstein.

The first question is just on the sequential disinflation that you've seen over the last couple of months. Can you just comment on where you're seeing the inflation still come through? And are you seeing any signs of inflation feeding through from the conflict in the Middle East?

And then the second one is on the competitive environment. Obviously, last year was a key focus. How would you describe the competitive environment at the moment relative to last year?

So look, on inflation, we have, as we said, seen inflation step down progressively right through the last 12 months. So quarter 1 this year is even lower than it was in quarter 4 in the last financial year. And that's really been driven by commodity disinflation, some key categories like dairy, coffee, cocoa, et cetera, which has been helpful. We haven't seen material impacts from the war yet as clearly, it's not a large food producing region. And most of the kind of commodities like fertilizer, et cetera, had already been bought for the current season.

Now what we don't know is whether there will be a knock-on effect into the second half of the year from things like fertilizer prices. But either way, we would hope that some of that will be compensated by falling commodity prices. Clearly, commodity price volatility is a thing. And therefore, we couldn't give you any kind of forward prognosis on inflation at this point other than it's materially lower than some people were forecasting. And we're doing everything in our power to minimize the impact on consumers.

Yes. I mean I would also add to that, like clearly, what's good is our Save to Invest program, the GBP 0.5 billion, we're chasing, we're feeling good. That should help us to continue to sort of do that inflate a little bit less, inflate a little bit later than the market. And that comes to your second question, how rational is the market? And I would say to you, last year, as you rightly point out, there was a bit more sort of disruption. And I think we did well through that. We held our own. We reinvested back, and we still grew. This year, I would say, it's highly competitive as ever, but fairly rational across the board, I would say.

We will now take our next question from Monique Pollard from Citi.

Three questions from me, if I can, please. The first was just on nonfood. So Imran, I think you mentioned the tough clothing comp plus 10% in the last period. If you could just give us some sense in the U.K. of what the nonfood growth was like in this quarter, that would be really helpful. The second sort of reading between the lines of what you've been saying on the consumer. Clearly, industry volumes are negative, but they have been for over 12 months. You've seen a bit of disinflation. So is it right to think, given your comments about aiming to the profit growth, et cetera, that you haven't seen any material change one way or another in the consumer environment versus where we were a few months ago aside from things like the weather?

And then the final question I had was just on Retail Media. So you make those points on the number of awards you've been winning and the contribution from that business increasing. I'm just wondering whether the World Cup is quite a good opportunity to leverage that business and what opportunities you see from the tournament.

Okay. Let me then address the first one on your nonfood question. So if it helps just to lay it out for you, in fact. So food grew 2.6% and nonfood grew minus 0.5%. And the minus 0.5% is in the face of that clothing number I talked about of close to 10% or over 10%. So that gives you a sense of how that played out.

On the consumer, Monique, you're absolutely right to say that consumer -- that volumes in the industry have been negative now for over 12 months. And we saw that kind of consumer post the good weather of last summer step-down in the autumn and has stayed largely flat since by way of behavior. So you're right to say that the war in the Middle East and the kind of political uncertainty closer to home have not really impacted consumer behavior.

And your final point in terms of retail media as an opportunity is absolutely an opportunity in terms of World Cup activation. And we have a number of exclusives, as we mentioned, in my introduction with people like Walkers, Pepsi and Budweiser, and we have done a lot of different media activation campaigns to kind of inspire people to enjoy themselves during the World Cup. So you're dead right.

And we'll now take our last question today from Matt Clements from Barclays.

Two quick questions if I can. Firstly, on U.K. consumer again. I think you've been pretty clear on that, but I just wanted to speak in context of the significant increase in fuel prices and your fuel sales being up nearly 20% in the first quarter. Are you seeing any impact of that in terms of people consolidating shops into bigger baskets and fewer trips or perhaps it's supporting online growth with people less willing to go out in the car to do their shopping.

And the second question is just a quick one on market share. With 1Q playing out as you expected in your outlook, is your assumption for the full year that you can still gain market share in the U.K.?

Thanks, Matt. I'll take the second question one first. I think we'd always say every year, we have an ambition to grow share. That's the kind of framework we laid out a number of years ago, and we're very clear about that as an ambition. So the short answer to that is yes. The second point around the U.K. consumer and the impact of fuel, I mean, we have seen a surge in demand for fuel because we're amongst the most competitive in the market. So we have actually gained share during the period. The online trend is actually a continuation of a trend that was well underway long before the fuel prices became an issue and it's just a continuation.

So the growth in grocery home shopping and quick commerce shopping is effectively persisting, and we are taking full advantage of that. It's also fair to say that over the last 3 years, a great source of growth for us has been the consolidation of baskets, and that's something we continue to focus on.

Since there are no other questions, I would like to hand the call back over to Ken for closing remarks. Over to you, sir.

Thank you very much, Sergey. Thank you, everyone, for joining the call this morning. We really appreciate the great questions and your time, and we really look forward to catching up with you again in October for the interim results. Have a great week, and the best of luck to both England and Scotland in the World Cup. Take care.

Good morning, everybody, and thank you for joining Imran and I as we talk through our results for the year. We will also provide an update on our strategic ambitions as we set ourselves up for longer-term delivery in an ever-changing retail landscape. I'm really pleased with our performance across the last year. Against the backdrop of increased competitive intensity, we took decisive action to further strengthen our investments in price, quality and service. These actions resonated strongly with customers, driving further gains in customer satisfaction and continued growth in market share. Our commitment to delivering the best value for customers remains firm and a period of continued pressure on household income and global uncertainty, this matters more than ever. In a year of strong momentum, customer satisfaction stepped down further, and we reached our highest market share for a decade.

This translated into a strong financial performance with both profit and cash flow ahead of our guidance ranges. Alongside strong operational execution, we have been working across the business to unlock long-term growth opportunities, leveraging our unrivaled customer reach, data insights and digital expertise, including the use of AI.

As part of my strategic update a little later, I will cover some of this progress in more detail. Increasing customer satisfaction and market share are priorities for us. And following our progress over the last 4 years, we were pleased to see further momentum this year. Our Net Promoter Score increased ahead of the competition, including an improvement in value perception. In the U.K. our market share reached 28.5%, outperforming on both a volume and a value basis and taking our total share gain across the last 3 years to 120 basis points. In Ireland, we are now in our fourth year of gains with market share increasing 32 basis points over the year to 24.2%. We started last year with a strong price position versus the market. And despite an increase in competitive intensity, we've exited the year in a similarly strong position.

Across the last 12 months, our investments into price, including tripling the number of products in everyday low prices to 3,000, running alongside over 10,000 Clubcard prices and more than 600 Aldi Price match lines. We finished the year with over 10,000 prices lower than at the start of the period. Quality is a crucial part of the value equation. And I'm proud of our work over the year to deliver continuous innovation and improvement across our ranges. Finest is a key part of this story, delivering sales growth of 15% with our popular dine-in deals performing especially well.

We also launched exciting new ranges like Chef collection, which offers restaurant quality center pieces designed by Tesco's in-house development chefs. But it's not just about Finest. Our frozen range refresh in the second half are biggest for many years, so hundreds of new and improved products across tiers from tasting new recipes and prepared meals and pizza to delicious new frozen desserts.

Our colleagues are the driving force behind our performance, and I would like to extend my personal thanks for all their hard work over the past year to deliver these strong results. In recognition of the exceptional service they have given customers, we're really delighted to be announcing a GBP 65 million performance award for our hourly paid colleagues in stores, distribution centers and customer engagement centers. This follows a further GBP 209 million investment in colleague pay for our U.K. store colleagues, bringing our total hourly pay increase to 43% over the past 5 years, which comes alongside a comprehensive range of colleague benefits. One of those benefits is our save as you earn company share scheme. And I was particularly delighted to see that over 22,000 colleagues mainly those working in store and our distribution centers were able to benefit from GBP 134 million payout from the schemes maturing this year. By consistently delivering for customers, we are creating long-term sustainable value for all our stakeholders. Our fruit and [indiscernible] schools program continues to make a significant impact in some of the most disadvantaged communities across the U.K. It has now expanded to 500 schools, offering children improved nutrition and education on healthy eating.

A further 320 schools in Ireland also benefit from our stronger [indiscernible] food program. Strong supplier relationships and collaboration are fundamental to our success, and we were delighted to be ranked first in the independent advantage survey for the tenth year running. We've also made good progress with our planet plan, including a 68% reduction in our Scope 1 and Scope 2 emissions, well ahead of our plan for a 60% reduction by the end of 2025. And for our shareholders, we returned GBP 2.4 billion through dividends and buybacks during the year. I'll return shortly to provide you with an update on our strategic ambitions, but before that, I'll hand over to Imran.

Thank you, Ken, and good morning, everyone. I'm really pleased with the performance across the year. Following several years of good progress and against the backdrop of elevated competition, we saw consistent market share gains and improved customer satisfaction, which is reflected in our strong financial performance across the year. I'll now take you through our financial performance before taking a step back and setting up our longer-term financial priorities. This year, our statutory results cover a 53-week period. For comparability, the headline results are presented on a 52-week basis unless otherwise stated.

Group sales grew by 4.3% at constant exchange rates. This included a 3.5% increase in like-for-like sales, reflecting growth across all our operating segments. Group adjusted operating profit increased by 0.6% at constant rates to GBP 3.15 billion driven by sales growth and progress on our safety Invest program offsetting operating cost inflation and investments in value, quality and service. Our headline earnings per share increased 6% year-on-year to GBP 29p, benefiting from our ongoing share buyback program and growth in profit after tax. Our cash delivery was strong with GBP 1.96 billion of free cash flow, up 12% year-on-year and above the upper end of our guidance range. We have proposed a final dividend of GBP 9.7p per ordinary share resulting in a full year dividend of GBP 14.5p. This represents growth of 5.8% and is in line with our policy of setting our annual dividend at probably 50% of earnings.

Our balance sheet remains strong. Our net debt, including capitalized leases, was GBP 10.56 billion at the end of the period with our net debt-to-EBITDA ratio at 2.1x. The U.K. and Ireland saw total sales growth of 5% and adjusted operating profit growth of 0.7%, with further volume and value market share gains and progress in safe to invest more than offsetting significant investments into the customer offer and operating cost inflation. Booker sales increased by 0.6%, and adjusted operating profits grew by 0.7% year-on-year. Sales growth in our core catering and retail businesses, together with a strong safe to invest contribution more than offset operating cost inflation. In Central Europe, our sales grew by 3.7%, with the adjusted operating profit performance reflecting the net effect of the benefit of sales growth, a further contribution from safe to invest and lower rental income following the sale of some of our mall properties in the prior year.

Now what I'll do is I'll go through each market's performance in more detail, starting with sales before moving on to profit. In the U.K., sales growth of 4.9% included like-for-like sales growth of 4.2%. Our food labor like sales grew at 5.2% with a strong contribution from fresh food, up 6.9%. Finest was once again a standout performer and grew 14.5% over the year, driven by strong volume growth. Our clothing like-for-like sales grew by 5.1%, driven by womenswear with expanded ranges in activewear and our curated FNF edit ranges, both performing very well. Like-for-like sales grew across all channels, including large store like-for-like of 3.9%. We also took share across all channels, including 71 bps of market share gain in convenience and 30 bps in online. U.K. online sales grew by 11.2%, driven by volume growth and included a circa 2 percentage point contribution from Tesco Rush, where we extended national coverage to over 70% of households. Average online orders per week for our Grocery Home Shopping business grew by 6% as we rolled out more slots to customers and made further improvements to our upside.

In Ireland, like-for-like sales grew by 4.6%. Total sales were up 6.6% at constant exchange rates, including the contribution from 9 stores we opened in the year. Food like-for-like sales grew by 5.1%, supported by a fresh food offer and further growth in Tesco Finest. As in the U.K., we grew across all our channels with online delivering 17.4% growth as we reached over 94% national delivery coverage.

Home & Clothing like-for-like sales were down 1.8%, reflecting the impact from the transition to a commission model for toys as in the U.K. Booker like-for-like sales increased by 0.2% despite the ongoing decline in tobacco sales. In core retail, like-for-like sales were up 2.2%, and we continue to expand our symbol brands, adding a further 369 net new partners. Core catering like-for-like sales grew at 3.8% and customer satisfaction scores improved as we continue to deliver great value and availability for our customers.

Growth was further supported by Venus, our specialist wine and spirit merchant as well as the benefit from good weather over the summer. In Central Europe, like-for-like sales grew by 2.2%, with fresh food up 4.1%, supported by our investments in value. Finest performed strongly with over 30% sales growth. All 3 of our channels grew over the period with online reaching 17.5% growth, while growth in large stores was impacted by softer home and clothing sales reflecting lower consumer confidence in the region and poor weather during key trading periods.

Customer satisfaction continued to grow through the year, and we set up our customer rewards as we celebrated 15 years of Clubcard in the region.

Let's now turn to profit. At a group level, we delivered GBP 3.15 billion of adjusted operating profit, up 0.8% at actual exchange rates. Our strong trading performance, together with a GBP 535 million contribution from Safe to invest more than offset the impact of our significant investments in the customer offer and elevated operating cost inflation, including from increased regulatory costs. This slide reconciles adjusted operating profit to statutory profit after tax, which is presented on a 53-week basis. Total adjusting items represent a net charge of GBP 153 million. This includes the ongoing amortization of acquired intangible assets of [ GBP 38 million ], principally relating to the merger with Booker, and a noncash net impairment charge of GBP 53 million. Restructuring costs mainly relate to our Safe to Invest program, including costs associated with our multiyear program to optimize our distribution network in the U.K. We incurred GBP 28 million in separation costs relating to the disposal of our banking operations. We do expect the transition to complete in the current financial year. We delivered strong free cash flow of GBP 1.96 billion versus GBP 1.75 million last year.

Cash generated from operations increased by GBP 522 million, driven by profit growth as well as strong working capital inflow of GBP 385 million. The working capital inflow was mainly driven by our sales performance, strong working capital management and higher non-trade payables. Cash CapEx was GBP 1.5 billion.

Looking back over the last 5 years, our disciplined approach to investing in high-return areas has fueled sustainable growth and cash flow. This, in turn, has allowed us to steadily increase our capital expenditure while significantly improving return on capital employed, which remains well above our weighted average cost of capital. Over the period, we have continued to return cash to shareholders in the form of dividends and share buybacks. Since the commencement of our share buyback program in October 2021, we have bought back GBP 4.3 billion worth of shares at an average price of GBP 3.17 per share.

This slide provides some additional detail on the nature of our capital investments. Our core operations are the foundation from which our opportunities are built. We continue to maintain and refresh our estate, ensuring that customers get the store and online experience they expect from Tesco. We are also investing strongly into productivity and growth initiatives. Our Safety Invest program has allowed us to simplify, become more productive and reduce costs across our business.

This includes the ongoing optimization of our distribution network, which powers our market-leading availability. With a focus on leveraging our existing assets, our future growth opportunities are generally capital-light. The capital that we do spend is focused on high-return areas such as technology, including investments into new digital platforms and AI.

Looking now to the balance sheet, which remains strong. Net debt was GBP 10.6 billion versus GBP 9.5 billion last year. The increase is mainly due to the prior year, including around GBP 700 million of proceeds from the sale of the group's banking operations, which we returned to shareholders during the course of this year. Lease renewals and extensions also drove a GBP 168 million increase in lease liabilities, and there was GBP 144 million net outflow for property transactions, primarily the buyback of 7 stores in the U.K. Our net debt-to-EBITDA ratio is at 2.1x, and our fixed charge cover is 4.1x, in line with the prior year. During the year, and alongside the scheme's trustees, we agreed the triennial funding valuation for our principal defined benefit pension scheme.

On a technical provisions basis, the funding position of the scheme remains in surplus and it was therefore agreed with the trustees that no pension contributions will be required from the group. Our progress across the last year builds on our strong delivery since we first set our multiyear performance framework in 2021. We are proud to have delivered average sales growth of 5.2% across the period, alongside group adjusted operating profit growth of 7.9% and adjusted EPS growth of 12.2% with nearly GBP 8 billion of cumulative free cash flow across the 4 years, we have comfortably exceeded our expectations of cash delivery. Our capital allocation framework has been a crucial foundation for our financial performance.

In a moment, Ken will cover our evolved strategic ambitions and as we position the business for future growth, the framework will remain central to how we execute our strategy and create long-term value. Our first priority is to reinvest into the business and strengthen our customer proposition, prioritizing high-returning areas and supporting sustainable long-term growth. As we reinvest, we will remain committed to maintaining a solid investment-grade balance sheet. We continue to deliver a progressive dividend, targeting a payout ratio of roughly 50% of earnings, consistent with our recent track record. We also remain disciplined and alert to inorganic growth opportunities that complement our longer-term strategy. Finally, any surplus capital after these priorities will be returned to shareholders. For

the year ahead, we expect around GBP 1.6 billion of capital expenditure, and we are announcing today a further GBP 750 million share buyback. We first set out our multiyear performance framework in 2021, and it continues to guide our approach. By focusing on improving customer satisfaction and growing or at least maintaining our U.K. market share we intend to drive top line growth. By leveraging our assets, growing new revenue streams and targeting productivity initiatives to offset inflation, we aim to grow absolute profits and maintain sector-leading margins. Since setting out the framework, our delivery has exceeded our initial expectations and with our confidence in future cash flow increasing, we are upgrading our medium-term free cash flow guidance to between GBP 1.5 billion and GBP 2 billion per year versus the old range of GBP 1.4 billion and GBP 1.8 billion per year.

So in summary, I'm pleased with our strong performance across the year. We have delivered further improvements in customer satisfaction, market share gains and cash flow ahead of guidance. Our performance in capital frameworks continue to guide us and underpin our delivery and we have returned GBP 2.4 billion this year to shareholders through a combination of dividends and share buybacks. For the year ahead, we are providing a wider range of guidance than we were previously planning, reflecting the increased uncertainty caused by the conflict in the Middle East, much will depend on the duration of the contract and the consequential impacts on the U.K. households and the economy more broadly. At this stage, we expect group adjusted operating profits of between GBP 3 billion and GBP 3.3 billion. We expect free cash flow within our upgraded medium-term guidance range of GBP 1.5 billion to GBP 2 billion. I will now hand back to Ken, who will provide an update on our strategic ambitions.

With our highest market share in a decade, meaningful growth in new revenue streams and strong free cash flow. Our delivery against the multiyear performance framework we set out in 2021 has exceeded our expectations. As we look to the future, we have built strong digital capabilities, including in retail media and personalization. Our success has been shared with our broader stakeholders, too, including investing more than GBP 1 billion in store colleague pay over the last 5 years. However, the retail landscape continues to evolve, and so do we. Households have had to adjust to persistent cost of living pressures and competition remains intense with new entrants and technologies, giving customers more choice than ever. Customer expectations are increasing too. In addition to fantastic value, customers also want food that supports their health goals from a brand they can trust to do the right thing.

To continue delivering for all of our stakeholders in this changing landscape, we have evolved our strategic ambitions into 5 mutually reinforcing goals. These ambitions position us to deliver even better value to our customers while driving sustainable long-term growth. Our 5 ambitions form a connected ecosystem, all designed with 1 clear purpose, continuing to deliver for our customers. Over the next few slides, I will take each ambition in turn and explain what they mean to us, what we've achieved so far and offer some insights on how we are building for the future.

Our first goal is winning in food, delicious, affordable and nutritious food matters more than ever to our customers and their families. And we know that they are looking for the best combination of price and quality across our ranges. With 3,000 everyday low prices, over 10,000 Clubcard prices and more than 600 products in Aldi price match, we offer customers an unrivaled value proposition. We're proud of the improvements we have made in our price position in recent years, but this is an area where we can never be complacent. As our digital and personalization capabilities evolve, we are constantly looking for new ways to help customers to save. Of course, value for money is about quality as well as price. And we are continuing to invest in quality at every year.

Finest has been a great success story for us, but there is so much more to go for. through developing new products, expanding ranges and getting Finest in front of more customers, including through AI-powered ranging tools, we aim to grow finance well beyond GBP 3 billion in sales.

At the same time, we're launching new products that reflect changing customer trends and preferences such as expanding our gut sense and high-protein ranges. Through our market-leading presence across stores, online grocery and rapid delivery, combined with the reach of Booker's wholesale business, we are better placed than anyone to serve customers' food missions, wherever, whenever and however they want to be served.

Wush is a great example of this. Launched just 5 years ago, Wush has grown to be a meaningful part of our online offer, generating over GBP 400 million of sales and now covering over 70% of the U.K. households. We see more to go for in this fast-growing part of the market. This year alone, Wush grew by 51% in the U.K. And we have started to roll out the service in Ireland, 2. We've achieved this largely through using existing infrastructure and resources, demonstrating our ability to grow new revenue streams in a capital-light way. The frequency and troughs we have built through food allows us to serve families a much wider range of products and services, and we want to help meet even more of their everyday needs.

Some of these are well established. For example, since its launch in 2001, F&F has been known for providing stylish and affordable clothing at outstanding value available in our stores and now on line too. Tesco Mobile is the U.K.'s largest mobile virtual network operator. With over 5 million customers, it was recently voted the U.K.'s best network for customer service for the fifth year running. Our insurance and money services business is providing coverage to our customers through 2.5 million policies and 4 million customers are accessing a range of banking products through our partnership with Barclays. We see huge potential to enhance and grow our existing products and services, and F&F is a great example of this. F&F Online made an encouraging start following its launch last year, but we know we can go further enhancing the customer offer. So later this year, we will be launching an exciting new F&F website, which includes a fashion forward look and feel, greater style curation and smarter search functionality.

In the past, expanding into new retail categories tended to be expensive and high risk. Our approach is focused on leveraging what we already have and committing capital in a disciplined way. Marketplace is an example of this and has great potential. We are making good progress and already have seen the benefits it can bring to the wider business. Marketplace has now served over 1 million customers and more than half of them have never shopped online with Tesco before. As part of refining the offer, we have recently migrated our platform to [indiscernible] to improve the seller onboarding process and enhance the customer proposition.

Our 355 in-store pharmacies give us a real point of differentiation in the market. Combined with our ability to offer an ever wider range of healthy, nutritious food they give us a great opportunity to be customers' first choice for health and well-being. We already serve 0.5 million customers per week with everything from prescriptions to vaccinations blood pressure checks and expert advice on a range of common conditions. Our pharmacies also play a key role in our long-standing charity partnerships with cancer research the British Heart Foundation and Diabetes U.K. By using our unique data and insights to build new partnerships and revenue opportunities, we can become the most strategic partner for our suppliers for innovation and brand building.

Clubcard is the U.K.'s largest loyalty program, regularly used by more than 24 million households, spanning our offer from food and telecom to banking. It gives us an unrivaled understanding of our customers, enabling us and our supplier partners to serve their needs more effectively. Tesco Media is the largest closed-loop media and insight platform in the U.K., leveraging our expansive store and digital candies, that has seen significant growth in recent years and ran over 12,500 campaigns in the last year alone, with over 90% of advertisers increasing their spend on the platform year-on-year. The Tesco Media team are innovating at pace. For example, our recently launched AI-powered creative studio tool helps advertisers streamline the production of digital content making the platform accessible for all brands regardless of their size or budget. Building strategic brand partnerships is about more than retail media. The scale and breadth of Tesco means we are uniquely placed to help brands grow.

Our platform can offer everything from access to distribution through our grocery and wholesale channels to self-serve tools that provide insights into customer behavior and opportunities to grow further. Our well-established accelerator program helps small and trend-led brands offering mentoring and development experience. including supporting product formulation, marketing and enhancing their supply chains. We are already partnering with hundreds of suppliers to drive development and innovation. And we think there is potential to bring our expertise to many more.

Underpinning all of this is our Don Humbly business, a market leader in data science. Don Humby team of data scientists, engineers and retail consultants further developed Tesco's intelligence layer, connecting customer and brand insights, analytics and global retail expertise. Using Don Humbly's data science and AI to connect the dots across our retail business is helping us to make smarter decisions at pace. For example, with Bon Humby, we're using AI-enabled data science to transform ranging decisions, moving a process that took weeks into minutes. Our next goal is to be connected, personalize and loved by customers. Alongside our stores, our colleagues are central to the customer experience. We are incredibly proud of the service our colleagues give customers day in, day out.

Last year, we invested in over 1 million hours of training for our U.K. store colleagues. We want our colleagues to be our biggest advocates. We have great foundations for this. with the proportion of our colleagues recommending us as a place to work and shop significantly above industry averages. With the largest network of stores in the U.K., we continue to meet local needs better than anyone. From large stores offering our full range of services to express and 1 stop serving their local communities, we continue to invest in our estate with a particular focus on our fresh offer, helping every Tesco become the preferred store in its community. Customers should feel rewarded every time they shop with us. ClubCard has been at the heart of this for over 30 years. And we're always looking for ways to make ClubCard even more rewarding, whether it's new ways to collect points, making Clubcard points go further or small but meaningful gestures that make a customer's day a little better. By harnessing advancements in AI, the power of Clubcard data and our own digital capabilities and partnerships, we see enormous potential to make every interaction more seamless and relevant by anticipating needs, offering timely nudges and making smarter recommendations. Our strategic partnerships with Adobe and WPP are an important part of this. unlocking new opportunities to provide real-time personalized content, whether direct to customers or through third parties. Another opportunity is personalized offers. We have made great strides on this already from personalized coupons through to gamified experiences like Clubcard challenges.

We're pleased to take this a step further with the recent launch of your car prices to 1.5 million customers and a wider rollout coming later this year. Key personalization is showing customers that we understand them, offering interesting and timely communications that inspire and anticipate their needs. Our new brighter and bolder style of customer communication is one of the ways we're achieving this. We're also excited about our new AIR system with large-scale trial launched to around 280,000 of our colleagues ahead of a wider launch later in the year. The AI system is part of the Tesco app and will initially help customers with meal planning, offer inspiration and help build shopping baskets. We are always looking for ways to make our business even more sustainable for the long term.

We have a strong track record of making Tesco simpler, more productive and more cost efficient through our Safe to Invest program. This has helped us to unlock GBP 2.2 billion worth of savings over the last 4 years, providing the few for our investments into the customer offer and higher pay for colleagues. We are also investing to strengthen our resilience, efficiency and sustainability, ready for future growth.

We recently opened a new semi-automated fresh distribution center in [indiscernible] and during the year, we started consumption on our new distribution center at London Gateway. Our work to further optimize the business will continue with a target to unlock a further GBP 500 million of savings in the year ahead. Supply chain resilience is central to managing risk. We're proud of the strength of our supplier relationships with long-term commitments to many of our key partners, they can have the competence to make long-term investments in their businesses.

Technology plays a key role in supply chain resilience, and we have developed new and unique risk mapping capabilities that identify and help us address potential sourcing challenges. As British agriculture's biggest customer, we're committed to deepening partnerships with farmers, including through our 6 Tesco sustainable farming groups covering everything from cheese to land. The farming industry faces a long list of challenges and the sustainable farming groups provide a forum to collectively improve innovation, quality standards and industry collaboration. We see a much wider opportunity for technology and AI to further enhance our business. Over the last 6 years, we have doubled the size of our technology team.

And we are equipping our colleagues with tools that simplify everyday tasks, freeing them to focus on what matters most. AI is evolving at an extraordinary speed. So putting the right frameworks and governance in place is essential both to protect our business and to capture the full value of these innovations. We recently consolidated nearly 250 individual work streams into a single coherent AI strategy focused on 4 domains: customers, colleagues, supplier partners and operational efficiency. Our planet plan is another key element of our wider business sustainability ambitions. We were an early adopter of science-based emission targets, and we're making good progress having now reduced go 1 and 2 emissions by 68% versus our 2015 baseline. We were also pleased to reach our target at year-end of 65% of our sales being classified as healthy. And we've got ambitions to go further.

Achieving our individual ambition can help us deliver even better value for customers. But the real power comes from bringing these 5 goals together, creating a leading food first retail ecosystem. By winning in food, we can build frequency and trust which helps us lead more everyday customer needs. That, in turn, grows household spend with us, generating capital-light revenue streams and a richer, more holistic data set. As we combine that data with our store and digital footprint, we can build stronger and more strategic supplier partnerships, partnerships that further reinforce our ability to win in food. At the center of this ecosystem is the most connected, personalized and loved customer experience, holding everything together. Throughout it all, our purpose remains clear, delivering even better value for customers and in doing so, generating long-term sustainable growth for all of our stakeholders. Thank you all for your time today. Imran and I would now be delighted to open the floor for your questions.

[Operator Instructions]

So we'll now take our first question from Rob Joyce. Rob, please go ahead.

I might try three. But the first one, just backward looking one. In terms of last year, I think this time last year, we were thinking EBIT would come in at GBP 2.85 billion delivered to a 10% ahead of that. Can you just tell us what what went differently to expect it? How did you manage to deliver so far ahead of that would be the first one.

And second one, I guess you mentioned that the range for the era has is a lot wider than it would have been? Just to help us understand the underlying business trajectory on the 26th of February. What do you think that range was going to be? And then the final one, Ken, a lot of focus on areas that we have discussed as much before in the business outside of core food. Can you give us an idea as to the size of their contribution to the business today. And going forward, we think of those as kind funding investment in price? Or are they margin accretive EBIT growing parts of the business?

Let me just maybe take the first 2. In terms of what went differently to what we expected. Like as -- you're right, when we set out in April, we said we would make sure that we continue to protect the price position that we set out over the last 4 years and make sure that we do not see any ground on that. And we spent the money we invested and the difference is between the guidance that we gave versus what we delivered, the investment choices we made basically had better returns. We invested in price. We invested in quality. We invested in range. We invested in hours. And those things work. And I would say the proof point of that was the market share gains that we delivered landed us in volume growth pretty much every single month of the year. And that really combined with the saving problems that we have delivered the profit growth that we saw.

And what I'm pleased to be able to say to you today is I didn't start the year I think we grew profits last year and the fact that we grew profit and EPS of is a nice outcome because it's coming from market share gains. And I would say to you that's the one thing that I really love about the delivery for the year. In terms of the range, look, I mean, I'm not going to go maybe into what is the conflict wasn't there sort of situation. But what I would say to you is to give you some color on the range. Ultimately, we aim to grow our business every year, right? And we want to deliver the best performance that we can every single year as we set out to do. You see that it's safe to invest. We want to continue to gain shares. We want to continue to run our program. But there is the uncertainty driven by the conflict, as you know. And the duration and the impact of that is an unknown.

What I want to make sure that we want to make sure is if that conflict continues or if the impacts duration lasts longer that we can continue to execute the program that we have. So if we're at the bottom end to your question, that really means that we would have the flexibility to continue to do what we want to do at the upper end, it means it's the same program that we want to every year, which is gain share, great volumes and continue to do well. Ken?

Yes. Thanks, Rob. So in terms of contribution of activities outside that core food business, I think if you kind of walk through our evolved strategy. The way we described is actually the strategy starts and ends with core food and building and maintaining exactly what Imran has just described in terms of a reputation for being the best value in the industry, being the most innovative in terms of product quality, being the best for availability and customer service and then being the most convenient for ease of access. So that's really at the heart of it.

Around that, as you've seen, we have, over the last number of years, started to build additional ways of serving customers that are not necessarily core food. And they include things like pharmacy, things like our Cafe business, things like our mobile phone business, our Financial Services business, and of course, our media income and supplier services business through Don Humby. Every one of those have delivered a meaningful improvement in contribution over the last 4 to 5 years and have been meaningful contributors to profit alongside of course, market share growth, which has also been a big engine of our performance over the last 3 to 4 years.

At the end of the day, the plan is to be able to reinvest the earnings from those activities back into the core business to continue to grow and create this virtuous cycle. So that's, if you like, the kind of elevator pitch in terms of how we're evolving our thinking on strategy. There are, of course, a couple of areas and marketplace would be a good example, where we're at the investment stage of that cycle, where we're building the capability where we're creating the proposition that won't be contributing meaningfully yet to profit and may not for a few years.

And man, I guess a quick follow-up, I guess, just to understand the guidance. I guess the trading continues as we see it right now. Are we hitting midpoint? Are we going to the top end of that guidance?

Look, I mean, we -- let me keep in simple terms. So far, we haven't seen any real discernible change in consumer spending behaviors, right? We've had a good -- you see that in our [indiscernible] data, you see that in both the volume and the value share. So I feel good about how we started the year, but it's early days. And I would say to you that we aim to grow profits every single year.

We'll now take our next question from Manjari Dhar at RBC.

If you ask your question I just have two, if I may. That's the first one, I was just wondering on the upgraded free cash flow envelope. Appreciate the upgrade, but it's a little bit wider the range than it used to be. I just wanted to know the rationale for the thinking around that. perhaps connected to it given the working capital performance last year, how should we be thinking about working capital for the current year? And then my second question was just on the rollout of electronic shelf search labels.

I wondered if you could give us some color on how long that will take and how you're thinking about the savings potential that this could bring.

Sure. So let me take the cash flow number one. I feel good about the cash flow delivery for the year, close to GBP 2 billion. That's clearly on the back of the strong profit performance but also really strong working capital management we ended up delivering what is it GBP 385 million of an inflow. Think of that as beer sales performance, tight management on working capital practices. There's also a one-off EPR payment in there as well. The way we normally think about working capital and an ongoing assumption is think of it more as a normalized year being of GBP 100 million or so of inflow. So that's how I think of it. But it's a good performance in the year. It's no one-offs in there that I would call out beyond what I just said.

In terms of the range, look, after 4 years or so, we've delivered around GBP 8 billion of cumulative cash, which is nice. I'd expect us to have working capital swings every year, as I just said this year. So my view is the range is the right range for the delivery of the business. And I feel comfortable with the fact that it gives me the room in terms of working capital swings one way or the other. The fact that we upgraded, I think, is the recognition of the fact that we have confidence in our ability to leverage the strategy we've laid out to translate that into continued cash flow deliveries every year.

And then Manjari, in terms of the rollout of [indiscernible], I think we have taken our time thus far to make sure that we have the best and latest possible technology. And that means that probably over the next 3 to 4 months, we will kind of finalize what that rollout looks like. And then I would expect it to have some in-year impact in terms of better efficiency in store better price compliance and also a number of other features that these latest ECL technologies will give us in terms of better on-shelf ability better picking accuracy for our online shopping pickers, et cetera. But really, the full year effect of those savings will be felt in the following year. We don't obviously in call out the size of the savings. And what I can tell you is that they're pretty meaningful.

We'll now take our next question from Monique Pollard at Citi.

Two, if I can, as well. The first one, just on the competitive landscape. You mentioned in the statement that the competitive background remains intent. Just wondered what you're seeing from peers, conscious that 1 of the major peers that had been maybe a bit more disruptive last year is guiding to EBITDA and cash flow growth this year? And whether you could just talk a bit about how you think your pricing sits versus your main peers now? That would be helpful.

And then the second question, just on the outlook for food inflation conscious that some commodity prices are coming down, but obviously, the concern about food inflation building from the conflict and the impact that might have on things like fertilizer pricing. So any sort of thoughts you could give on the outlook for food inflation would also be helpful.

Fantastic, Monique. Thank you very much. Well, look, in terms of the competitive landscape, we started the year last year in a really competitive place from the price index versus our key competitors. And as you say, despite the best efforts of those competitors, we have finished the year in pretty much the same shape or not slightly better. So we feel really good about where we are in terms of our price position.

That said, those competitors have announced their intention to keep going. Our expectation is this will be another intense year from a competitive perspective, but we feel really well set for it. So my sense is it will be a bit more of the same, but you can count on us to stay competitive. And more importantly, to keep investing for the future as we stay competitive. In terms of the outlook for food inflation, Look, as you see that the industry and kind of things like O&S, CPI, food inflation or nonalcoholic beverage inflation has shown kind of a moderate decline, as you say, over the last 3 months. [indiscernible] is showing just over 4%. But of course, we always are well under the kind of industry headline rate of inflation because of our promotional plan and also our investment in price.

So I think for now, inflation is stable and has been moderating slightly. Clearly, we can't predict what the future is going to look like from the impact of the conflict in the Middle East at the moment. But clearly, those pressures are going to place more waste on the industry require us to be more competitive in terms of our savings programs and our commitment to keeping costs down for consumers.

I wouldn't want us to give you a prediction of what inflation will look like. But as usual, Monique, you can count on us to work very hard to mitigate that for our customers.

We'll now take our next question from Xavier Le Mene at Bank of America.

Two questions, if I may. First one is given you see some typical value product is the fact that you've got quite a lot of advertising, as I can see right now. I just want to understand the kind of [indiscernible] proposition you've got with [indiscernible] value, is it more kind of cyclical response that you've got right now? Or do you see that almost future shift going forward? That's 1 my first question. The second one, you mentioned retail media. So what should we expect from retail media in terms of profit revenues? And can you potentially give us a bit of indication of what you were able to achieve so far?

So on Tesco Value products, I think our insight was at the start of the calendar year that customers we're looking for greater certainty around those key value items that they have in their shopping basket. And as a consequence, we took our everyday low pricing mechanic from 1,000 products to 3,000 products. So a significant increase in what we would describe as branded low everyday pricing that customers can rely on. And we've seen quite a material volume uplift in sales of those products as a consequence.

Our Aldi Price Match, which is our anchor everyday low price mechanic on our fresh food lines and our own branded lines is consistent at around that 600 product level. And that's become really relied upon by customers as a kind of a value guarantee, if you like. And then, of course, we have over 10,000 products on Clubcard prices every week that are giving people deals on those kind of brands that they love. And that's working well for us as a combination. So the logic really was just the inside of more reliable pricing for everyday low prices, but the mechanics and how they work together are largely remaining consistent.

In terms of retail media, we've had a really good year on Retail Media. I think our investments in that retail platform and our desire to be the best brand-building partner for our supplier base is really starting to pay dividends. Over 90% of our suppliers have increased spending with us this year. And I think it's because they really see the value of a much deeper relationship rather than just buying ad space. They recognize the combination of the insights that we provide through Don Humby, our ability to build audiences that are a lot more tailored to them through our Sphere platform in our retail media and the investments we're making with Adobe and Kevil and others to make that whole retail experience a lot more seamless and cost-effective is really working for them.

So we feel really good about our relationship with our suppliers and ability to be a great partner with them through our retail media platform, and we're quite optimistic about growth for the coming year.

We'll now take our next question from Freddie Wild at Jefferies.

First of all, could I just understand a bit more about your leverage targets? Obviously, you've left them unchanged in terms of where you're looking for your target leverage to be and you're still well under that. Can we think about maybe the opportunity if and when markets calm down, you would look to increase leverage back to within that target range? And my second question is about where this extra capital that you're generating is going. Obviously, you get a buyback unchanged, you flagged that there may be more property buybacks coming. Is that your [indiscernible] of property buybacks over raising the share buyback? Or how should we think about maybe some of this free cash flow growth, which is coming through so strongly coming back to shareholders.

Sure. So maybe, look, on the leverage ratio, it all goes back to the credit rating and how we see the merits of a strong balance sheet. As you might imagine, especially during the last 4 years, but even going ahead into this year having a strong, I'd almost call it, a pristine balance sheet, a 2.1 leverage is nice because I would say it's a source of power, right, because it gives us a lot of flexibility in uncertain times. So I'm quite happy at the lower end of the range. Will we inch our way back up to the 2.3, probably yes, over the next few years. But so far, I'm happy with where we are at 2.1. As it comes to shareholder returns, look, it's a really important part of the equity story of Tesco, right?

Over the last -- since we started this program, we have returned GBP 4.3 billion worth of shares at an average share price of around GBP 3.17. So we've taken out 17% of the equity doing that. So you can imagine it's been a great investment for us. And I believe that share buybacks are absolutely the right way to continue to go forward. And therefore, we've announced the GBP 750 million. There's an elegance when I think about the total dividend and the total buyback in terms of using the excess free cash that we have. Then in terms of overall capital allocation and the uses of the cash, first and foremost, it will always go into the business and making sure that we invest for customers into our stores, into our distribution centers into automation to make sure we have the best possible shopping experience and the most possible setup that you would want to imagine we have, very key to continue to invest into AI and technologies and the digital proposition that we have.

And honestly, as there is excess cash and left over after any sort of property buybacks where it makes sense. Then the idea is absolutely to continue to return. I think the combination of property -- sorry, of progressive dividends and a steady buyback that people can rely on is very attractive during these days.

And we'll now take our next question. That will be from Sreedhar Mahamkali from UBS.

I'll go with three. I think firstly, Imran, I think you talked about the multiyear framework and growing profits over that multiyear period. I think in another slide, you've shown 7.9% CAGR in operating profit over the past 5 years. Is that somehow an exceptional level of profit growth that you can't repeat over the next 5 years? Obviously, barring any sort of external shocks such as the one that we probably are seeing now.

Secondly, I think -- you've said you haven't seen any impact from sort of customer point of view from the conflict. Is there anything creeping into cost lines in any meaningful way? If you could talk part, that would be great. And maybe just on free cash flow and capital allocation, very small one really. I think Imran, I think you referred to inorganic growth opportunities. I'm keen to understand what that is?

Yes, sure. So look, you point out to a very strong performance over the last 4 years. And as we just presented, we're pleased to see that. I'd say to you, the way I think about laying out the strategy this morning or the evolved strategy, what -- the way you should take that is, it is renewed confidence that we can continue to deliver what we said we would do. And what we said -- what we said we would do from a performance framework is very clear, right? We'd say we aim to hold or gain share every year. We want to, therefore, grow the profits every year. we want to make sure we have the buybacks as part of that and therefore, deliver a nice EPS growth every year as well. And ultimately, as a proof point, translate that into the upgraded cash of GBP 1.5 billion to GBP 2 billion. Every year is going to be slightly different in the sense that the circumstances as this year is a really good proof point is going to be different. And therefore, we set out guidance as we have.

In terms of cost lines, look, I think the thing that I'd point out to you at the moment, obviously, fuel prices, energy prices have gone up. as they relate to our own operating cost expenses, it's not going to be a big headwind because of our hedging strategy protects us from that. But clearly, we have to wait and see because it's early days and the stresses and the duration and the implications of the conflicts will obviously have an impact at some stage. And hopefully, we can minimize that as much as we can by the safety investment program that we put in place. Then in terms of inorganic opportunities?

Well, look, I think as always, Sreedhar, we have through, as you saw, the evolved strategic kind of 5-Point Plan laid out desire to drive core food performance, but then to meet progressively more everyday needs of customers as we build out that ecosystem as we get more personalized through the power of the Clubcard and as and when we see opportunities to bolt on other kind of everyday needs that could enhance or improve that customer experience or give us more -- give people more reasons to come and shop with us, then we will always keep an eye on that.

And on property buybacks to give you a sense, right? I mean when you have a strong balance sheet, the ability to buy back your strong properties than own them in your portfolio and then avoid future inflation is no bad thing. It's a really good use of cash.

Just to follow up on what you said, Imran. I think it's something Rob touched on earlier already a little bit. The assumptions you're making, especially at the lower end of GBP 3 billion. Is that an assumption of the conflict last through the 6 months of the year?

No, I think -- look, I mean, the way I think about it is it's not just the duration, it's sort of the consequences, the implications. And those are so hard to judge because it's such a moving fees. So I don't really want to speculate. And all we were trying to do was to say, well, I mean, the conflict could have certain implications that changed consumer behaviors shopping behaviors. We haven't seen that yet. It could have an impact on the U.K. economy. We haven't really seen anything yet that has influenced shopping. But look, if it does, we want to have the flexibility to continue to execute the programs we've built in because it is those programs that continue to allow us to win market share and grow this business.

We'll now go to Clive Black at Shore Capital.

Thank you for the presentation and also happy to [indiscernible] on fabulous delivery. A few points, if I may. First of all, be, I think you said that your average buyback price was GBP 317p. I just wondered at GBP 485p whether needs to be thought about it in a slightly different way, maybe more akin to Sam Wilson, your thoughts would be much appreciated on that. And then fascinating to hear Ken, your thoughts on where the business is going, particularly around being connected. Firstly, I just wondered if you could maybe drill down to what you think a patient shareholders. I understand all your stakeholders that you must and are supporting. But what do you think it actually means for shareholders?

And I also just wanted to drill a little bit deeper in the importance of Dun Humby to your business as you raised today, especially is something that's quite proprietary and exclusive. Again, what do you think that delivers for shareholders.

Look, on the buyback price, the way I think about it is any use of cash, Clive, that we have, whether it's CapEx, whether it's the buyback in this example of properties, discipline and making sure it has a good return. And it's a good use of cash is the first question we ask ourselves. So as we look at buybacks, of course, we have -- and we look at year [indiscernible], if you wish. We look at the intrinsic value of the business. We look at the situation. And I'm very confident that the buyback continues to be an excellent use of cash.

So in terms of the kind of evolution of our strategic thinking and what it means for shareholders, and I think it's linked a little bit to how we set our stall out in 2021, where we said if we look after all of our stakeholders, then we will build a strong, sustainable business that will be good for shareholders over the long term. I think that's proven to be the case. And it's absolutely our ambition looking forward for the next 5 to 10 years. I think we, as I said earlier, have an ambition to maintain market share growth in our core crude business. We think that's absolutely critical to the success of the company. So our strategy starts and ends with our core food business. We're going to keep investing in price, keep investing in quality, keep investing in our supply chain, so we can be the best providers of fresh food in the contrary.

But a link to that. And I think these are some lessons we've learned from the past, Clive, is that we are looking in a capital disciplined, capital-light way to leverage those assets, use the infrastructure, both the physical infrastructure, but also our Clubcard proximity to customers to really start to build out other reasons why customers might shop with us, whether it be financial services, marketplace, quick commerce, phone contracts, fuel, whatever it is, such that we can create additional revenue streams that then get reinvested back into driving core food performance, building market share because as we know, food is the most frequent retail purchase, and it drives that glue and that connectivity with customers, which is so essential for building trust and being able to be relevant for other shopping missions that they might have.

The key, though, which Imran is very strong and it has to be done in a capital-disciplined way. And within our financial framework that we also settled onside our strategy. So I think what shareholders will see and can expect is a very ambitious strategy that will maintain top line growth, a very disciplined approach to capital expenditure that will mean we'll be sensible and look for high returns. And therefore, we will maintain strong cash, very healthy balance sheet and keep returning to shareholders, but only after we've made sure customers are happy, colleagues are happy, and we have strong supplier relationships with our suppliers.

And so just Dun Humby, Ken, just a word.

So Don Humby, for me is a bit of the intelligent engine of the business, right? It is designed to harness the latest technology, whether that be AI or our own data science capabilities internally in Dun Humby to understand how do we optimize how we think about all of our category management decisions how do we optimize our customers' decisions in terms of personalization and getting closer to them? How do we become the best brand-building partner for our branded suppliers through our end-to-end retail media platform, but also all of the additional kind of components we're building on to that in terms of helping them with their innovation pipeline, the go-to-market strategies, et cetera. and then helping with things like personalized ranging.

So we're looking to use the data science to get a lot more specific about our ranging in our individual stores to be more relevant to that local demographic. So just some of the examples of [indiscernible] Dun Humby is really helping the strategy.

We'll now go to William Woods from Bernstein.

The first question is on market share. You've obviously gained a lot of market share over the last few years. what you like the next 3 to 5 years, where do you think you take share from either formats, categories, channels, regions, et cetera? And then the second one is, if you look at the back of the history, one of the test goes down for over the last 15 years was getting distracted by other things, banks, garden centers, coffee shops, et cetera. And now I suppose we've seen a reasonable shift in your tone from focusing on food to things like retail media and clothing and marketplace.

How do you ensure the problems of the past don't reoccur. I'm not necessarily been thinking about CapEx, but more about the culture of how you're running the business in terms of people focusing on food.

Look, I think the first thing to say is that the market share gains we achieved over the last number of years have been quite broad-based. They haven't come from one source. And I think they've been underpinned by the fact that we've made massive investments in value, quality and availability over the last 5 years and we're keeping building our infrastructure, building out capabilities like quick commerce, et cetera.

That means we're more relevant for more shopping missions more often with customers. And that's working really well for us well. So I think the first thing I'd say is that, that momentum will continue. As Imran just said, we have a very strong balance sheet. We have a very strong efficiency program and our commitment is we will keep investing in the core. So the one thing I wouldn't want you to think somehow is that we're all is distracted running after shining new things. Our core safe to invest program of over GBP 0.5 billion a year is almost entirely invested back into the core business. And we're using some of the gains from market share gains and some of our new income streams to reinvest back in those activities that I just mentioned that are strategically important.

But as I said just a moment ago, it starts and ends with our core food business. The whole objective of the strategy is that through our success in core food, we're able to, in quite a capital-light way in a connected way. And so if I give you a very classic example of, say, marketplace or other things, Historically, Tesco Direct was set up in an entirely separate platform with a separate [indiscernible] systems with a separate website, it had to generate all of its own customer acquisition and traction because -- but in the case of marketplace, it's completely integrated into the Tesco app. It is seamless for customers to access it when they're doing their regular shopping as is, by the way, Wush. So if you want to go and do a weekly shop, but you need it in half an hour, that capability is available for you on the same app.

So we're using all of our core assets and our traffic to drive people into the enhanced set of propositions that we're building. And I think that's the key difference of lessons from the past. And we've been quite disciplined about it will. I promise you we obsess as much about the price of carrots and whether we've got availability of raws and movers on the shelf as we do with how is F&F and marketplace doing. I can promise you that.

If I could add maybe 1 or 2 just nuggets as well from my side, Will. It's clear that when you look at the return on capital employed over the last few years, over the last 4, 5 years, of this business, right? We've nudged up CapEx because we've been reinvesting into the business and expanding the business. But at the same time, the return on capital employed has also improved steadily year-on-year. And I think that's a nice proof point that where we spend the money makes us a better business. The other angle I'd like you to think about is it's clear that when you have a market share in online of around 36%, 37% depending on when you measure you have a massive asset and you have to continue to look about where do customers spend their time and where do they shop?

And the fact that personally, I love the fact that we're being able to leverage the strength online that is unparallel to anyone else in the industry, to provide F&F online to provide marketplace to provide a wish to provide media income opportunities for our suppliers.

So it is all in gift of making sure that what we've got is actually maximized as well and that's why it is capital light.

We'll now take our next question from Ben Zoega at Deutsche Bank.

I just had one follow-up on the profit guidance and perhaps 1 on cost savings. So firstly on the profit guidance, is it fair to assume that this range is really about uncertainty around demand and the response that households and to shift their behavior rather than uncertainty around cost pressures. Then secondly, on cost savings. Just within that GBP 500 million target, could you talk a bit about the main buckets and opportunities you see within that [indiscernible].

Yes, sure. So on the cost savings, to take that 1 first. Look, it's an always on program, right? So when I think about it, the way I look at it, it's simplifying how we work. It's taking out inefficiencies, so waste management, transportation, automation in warehousing and distribution, better buying of services, you know, leveraging our shared services more, simplifying in-store logistics, leveraging AI to optimize forecasting to optimize promotions. So I feel like it's all in, it's what we've been doing, and it's working well for us. And as Ken said, we use that to reinvest back into the business and manage our own OpEx in a nice way.

Then when it comes to the guidance, look, it's very clear that when you think about, I assume when you say cost, you mean energy costs, our energy costs are sort of -- given the hedging we've taken, we're in a good place on avoiding any ups that are unnecessary for us.

So I think we're in a good place there. It really is about putting -- trying to put sort of a wider range of because of the uncertainty as to the implications on what happens to consumer behaviors, what happens to the wider economy at large. It's hard to call and this is really just making sure that at the lower end, we've got the flexibility in case we need it to continue to do what we've been doing, which is win.

We'll now take our next question from Matt Clements at Barclays.

Two quick questions if I can. One on IMS, which was a strong contributor to profit and seems to be outperforming your initial expectations. How should we think about IMS profits going forward? And the second question, just kind of extending your comments around strategic ambitions to maybe touch more on Booker and Central Europe within those comments? Where do they sit? And what should we be expecting in the medium term for those businesses?

So I think the IMS. Look, on IMS, you're right, it's done a fabulous job, and I'll be honest, better than I was thinking. So when we laid out the what we were thinking we said it would be around what, GBP 80 million to GBP 100 million a year was the profit number we gave. And I think now the way I think about it is this is at GBP 167 million. So that GBP 160 million, GBP 170 number is a good number. That's sort of where my head's at on that front, which is nice, given we got rid of the riskier credit book, but actually retained the business that we wanted to retain and frankly, now make as much money as we did before. So that's good.

Thanks, Imran. So on the strategic ambitions, I think that I would say a couple of things. First of all, starting with Central Europe. Central Europe is clearly a Tesco retail business. all of the innovation and investment that we do in Tesco U.K., around technology, AI, grocery home shopping capability, quick commerce capability, just simply transitions into our other businesses. So Ireland, for example, get the benefit of all of that technology, and it's been a real driver for them of market share growth in Ireland, where it is by a country mile, the leading online shopping experience, and we've just launched Wush there in the last 12 months, and it's growing very strongly. So it's a similar story for Central Europe. It's a business that obviously is operating in challenging countries from an economic and geopolitical perspective, but benefits from the the kind of the innovation that's happening centrally.

So that's how I would describe our Central Europe and Ireland fit into the context of the strategy. In terms of Booker, book is really interesting. I mean, Booker growth on the top line may not look that spectacular, but actually, it's underlying growth in terms of its catering business and its independent retail business pretty strong. and particularly against the market is growing quite well.

And that is predicated on being the leading value wholesaler in the country, being an innovator around food development. So very similar to the core strategy in TESCO and increasingly looking to benefit from our thinking around that broader ecosystem thinking. So this year, Booker are going to be investing more heavily in the digital experience, particularly for its catering customers, looking to be ever more relevant and helpful in terms of how caterers can run their businesses and deliver a great experience for customers, but also make some money.

And as we think about the long term, of course, Booker gives us access into hundreds of thousands of outlets, food outlets around the U.K. that mean we can be relevant for every food and food-related experience in the country, which is kind of an overarching ambition, if you like, of the strategy. So we see Booker quite core to the overall strategy. But clearly, it needs to continue to win in its core wholesale market, which it is doing at the moment, and I believe we'll continue to do for the future.

And maybe one bullet to add on that as well is 1 of the features that both of them have in common is they have really got really strong cash generation properties. So they are really, really helpful from that side as well. So it's not a bad formula to have to generate the cash and reinvest.

We'll now take our next question from Francois Digard at Kepler Chevreux.

A few points, if I may. The first on volume price balance in '25, '26 of its evolution during the year. Could you share with us how it has evolved and how you see the balance in the coming year in the current year side? Second point on the fresh product growth, it grows faster than the rest of the food. Does that benefit from the Tesco Finest restaurants or is it a different scope what can you tell about the margin of fresh products? And finally, do you expect any impact of fuel price increase on your working cap during the year?

So if I take the volume price balance. So in terms of the way you should think about it is the world panel number of inflation throughout the year has been between, what, 4%, 4.5%. We've been below that every single quarter, every single month, and we've been in volume growth every single month of the year as well. clearly, what we did benefit from in the first half, you would have seen Francois, it was a very, very hot summer, and it was brilliant because people were out about enjoying themselves. I look out the window, and I wish there was a bit more sun. It would be good to see. So we'll have to wait and see how it plays out. And as you know, inflation given the uncertainty be wrong of me to give you a full sense of precision at this early stage, and I don't want to speculate on that. We'll see where that lands. What I would say is we'll continue to make sure that [indiscernible] safe to invest, we continue to protect our price position.

In terms of fresh product growth, Francois, I would say that the balance of it is a mix. I think absolutely, Finest has played a role. It's been a fantastic added value proposition for us. We've doubled the size of the brand over the last 3 to 4 years to make it now a GBP 3 billion plus brand, and we've got ambitions to grow it even more in the coming years. That said, our fresh core product has performed incredibly well. And this has been a combination of really close working relationship with our growers and suppliers on fresh produce and some great innovation in some of our meat, fish and poultry categories. So an example would be our Steakhouse range, which has been a phenomenal success with customers and shown us really growth and added value growth.

So to your point around margins, we have seen a modest improvement in margin mix over the last 12 months in fresh, driven by a combination of a lot of work on efficiency, but also some great success in our added value ranges such as Finest and Steakhouse range. Imran, do you want to pick up the working capital point on fuel?

Yes. Look, obviously, the way I think about working capital at the moment in terms of fuel is it's so unpredictable. Clearly, when it moves up, it's favorable. When it goes down, it's unfavorable. So when I looked at the year we just closed, there was actually a bit of a negative because it had gone down. What will matter is where it is before half year and before year-end, but we'll keep you posted. But clearly, given the working capital cycle on fuel, it can be a benefit.

We'll now go to the telephone lines for our next question, which is going to come from Karine Elias from Barclays.

A lot of them have already been answered. But just going back a little bit, if I may, to the competitive environment. Obviously, despite some of your competitors embarking on investments last year, albeit they did have some issues specific to IT for some. Would you still maybe describe the environment as being rational to a certain degree? Or do you feel that anything has changed? And then my second question was really more on the convenience. Some again have talked about how convenience was struggling on the back of weaker tobacco sales. Yours have done much better. Maybe if you can expand a little bit on that would be helpful.

Thanks, Karine. Look, I'd start by saying that the market is and always has been intensely competitive. And at any given moment, you have a number of competitors making moves and attempting to take share and win with customers. It's what makes this business such a fantastic business. It's never a dull moment. And I think we can expect that to continue. That said, I think such are the cost pressures the industry has been facing over the last number of years between energy issues, commodity issues, regulatory and tax issues that has forced a certain amount of rationality in the market. So what I would expect the coming year to be is largely the same, is a very intense competition for the shopper basket, but there's certain rationality driven by the need to combat cost and maintain control over those cost pressures.

So that's how I would kind of describe the last few years. That's how I see the next 12 months as well. On convenience, I think that you're right, we have outperformed the market on convenience. I think a lot of that is down to the fact that on the top 100 essential lines, our convenience stores are the same price as our large stores. So we are a strong value proposition in convenience in relative terms. I think the second thing to say is that we are -- have a greater fresh penetration in our convenience stores, and that's worked well for us as well.

And the third thing to say is that, of course, our quick -- we're the only major retailer that have real critical mass in our quick commerce proposition through Tesco Wush, which will be a GBP 400 million business this year. And that has also helped a lot in terms of driving our convenience business. So I think those factors will continue to help us as we go into the coming year.

We'll take our last question for this morning from Rob Joyce of BNP.

Very quick one. Just in terms of the shape of the EBIT you're expecting for the year ahead, anything you'd flag in terms of differences versus FY '26?

The one thing I would flag is maybe the fact that lapping the hot summer, that's clearly going to be a thing. But we'll wait and see how it all plays out because that uncertainty thing is still something we need to work through as you can appreciate. But look, last year, we were close to 5% growth top line, driven by the strong volume growth and the hot summer. Let's see how it plays out.

As an Irish man, you never thought you'd hear me say this, but we're really hoping England and Scotland do well in the World Cup.

I've got on video now.

Okay, Ken. So that wraps up the questions for this morning. So just back to you for your closing remarks.

Listen, I would just like to thank everybody who's joined us this morning for taking the time to listen to our presentation and for all the excellent questions we had. As you can see, we are consistent in our messaging. what you saw this morning was an evolution of our strategic intent and our commitment to keep focus on our core business, delivering great value great quality and consistent high standards in our stores and in our online proposition despite whatever the environment might throw at us over the coming months. So thank you again, and we look forward to seeing you all early in the summer.

Good morning, everyone, and a very happy New Year. Thank you for joining us today for our quarter 3 and Christmas trading update. As usual, I'm here in Welwyn with Imran, and I'll start with a brief overview of our performance before opening the line for your questions.

We are delighted with the way the customers have responded to our continued investments in value, quality and service. Group like-for-like sales grew by 2.9% over the 19 weeks, including 3.7% growth in the U.K. Customer satisfaction improved, and our U.K. market share is at its highest level in more than a decade, following 32 consecutive periods of gains.

We set ourselves a challenging plan for Christmas, and we delivered in line with that plan. With over 2 billion products going through our tills and more than GBP 6 billion of sales in the 4 weeks to Christmas Eve, our teams right across the group worked hard to deliver the outstanding service that customers have come to expect from Tesco. I would like to start the call today by saying a huge thank you to them for delivering a Christmas we can all be proud of.

Our performance builds on last year's successful results and reflects the strength of our core food offer. In a highly competitive market and with customers looking to make their money go further, we saw particularly strong growth in fresh food with like-for-like sales up 6.6% in the U.K. Running alongside familiar festive favorites, we launched 340 new and improved own brand Christmas products, including 180 in Finest.

We recognize that for many families, the cost of Christmas can be a stretch. We did everything possible to make sure our customers got the best value from us. Starting with our fresh Christmas dinner for a family of 6 for under GBP 10, and just GBP 1.59 per person, it was even better value than last year. More broadly, our rate of inflation eased through the Christmas period and continues to be materially behind the market.

We also invested in making the Christmas shop even easier for customers, including hiring over 28,000 additional colleagues. And with support from AI-powered scheduling tools, we offered more than 100,000 extra online delivery slots in the week before Christmas. Through better forecasting and planning, AI also helped us to deliver best-in-class availability and to optimize deliveries across our network.

Customers continue to embrace Finest with sales growth of 13% in the U.K., including a 22% increase in our Finest party food range. Highlights included Christmas center pieces such as our Finest Turkey Crowns and Chef's Collection Beef Wellington as well as our curated Finest gifting range and a long list of award-winning products. We sold around 21 million Finest pigs in blankets, along with 2.5 million bottles of Finest Prosecco. We also saw strong demand for low alcohol options, including selling almost 0.25 million bottles of Nozeco. While Turkey retained its popularity, some customers opted for other meats this Christmas with sales of beef joints up 29%, making it the most popular alternative.

Online remains our fastest-growing channel with growth of 11% across the 19 weeks. It was our biggest online Christmas, including our 2 busiest days ever. In the week leading up to Christmas, we delivered on average 2 orders every second. Whoosh also performed strongly with sales up 47% and more than 0.25 million customers trying it for the first time. Both in-store and online, customers benefited from additional value through Clubcard. Alongside thousands of Clubcard prices per week across a broad range of family favorites, we offered customers more personalized rewards, including gamified experiences with Clubcard challenges. Our retail media offering continues to engage customers and brands, including the return of sponsored Christmas Gratis now in their third year. The Tesco Media team continued to make great progress, and we were delighted to be named Media Brand of the Year at the Media Week Awards.

In Ireland, we built on last year's strong performance and are now in our fourth year of market share gains with fresh food continuing to lead the way. With 5 openings in the period, including 2 large stores, we now have 190 stores in Ireland. We continue to roll out Whoosh, which is now available in Dublin, Galway and Cork. Booker performed well despite challenging market conditions, with increased customer satisfaction scores in both core catering and retail. Our wine and spirits specialist, Venus, continued to win new business. And in our symbol brands, Premier opened its 5,000th store.

In Central Europe, our targeted price investments contributed to growth in both food and nonfood across the period despite a backdrop of subdued consumer confidence and increased competition. Value continues to be a key priority as customers seek to make their money go further, and we're determined to do everything we can to help. Earlier this week, we launched a new commitment to Everyday Low Prices on over 3,000 branded products, alongside our existing Aldi Price Match on more than 650 lines and thousands of Clubcard prices.

Our strong performance this Christmas gives us the confidence that group adjusted operating profit will now be at the upper end of the GBP 2.9 billion to GBP 3.1 billion guidance range that we issued in October. We continue to expect free cash flow within our medium-term guidance range of GBP 1.4 billion to GBP 1.8 billion. So as we move to your questions, I just want to say another big thank you to all our colleagues for everything they did to help our customers to have a brilliant Christmas.

Thank you all for listening, and I'll now hand back to Sergei.

[Operator Instructions] Our first question is from Rob Joyce from BNP Paribas.

So the first one, Ken, you referenced the easing food inflation over Christmas. Was that the entire driver of the slowdown versus 3Q? Are we seeing any sort of broader volume slowdown in the market? And do you think the overall market stepped down over Christmas? That would be the first one.

And then the second one is probably a bigger question, but clearly guiding to a broadly flat EBIT this year after strong top line performance. What do you think needs to change for you or the market for you to be able to return to profit growth?

Thanks, Rob. Happy New Year. Two great questions. Look, I think definitely, the very strong trading plan we put together contributed to the drop in the kind of overall market growth. And therefore, the easing of inflation was a material factor. There was also a step down in volume, even though we outperformed the market in terms of our volume growth, and we're really pleased with that consequentially. So I would say that our performance was pitched exactly right. It was an aggressive trading plan, but it was complemented with a fantastic product innovation pipeline and really consistent execution, both online and in stores. So for us, it's been a really pleasing performance.

In terms of -- you're right, the guidance is broadly flat year-on-year. I think that's an exceptional performance if you think about where we started this year and some of the competitive activity that we responded to. What I'm really pleased about is how decisively we acted and how we got on the front foot and delivered very strong market share performance consistently across the year. And what's particularly pleasing, Rob, is that we didn't stop investing in the future. So we've been making substantial investments in our store estate, substantial investments in automation to keep our savings programs going, and even more importantly, making substantial innovation, investments in technology for the future. And so we've got a very clear strategy. We believe in the long-term possibilities for this business, and we're quite confident for the future.

And maybe if I could just add maybe 2 bullets from my end as well, Rob. Two things on the ability to upgrade the outcome for this year and continue to invest to continue the momentum and continue to protect the position of strength that we have, I think, is not a bad place to be.

The second thing to your sort of longer-term question, it's important to go back to the performance framework that we did set out almost 5 years, and we really stick to, which is we are very clear that we want to continue to drive up customer perception, to drive up market share, which in turn drives up profit and drives up cash. And I think you've seen us do that year in, year out. I think this year was an exceptional year with an exceptional reaction to a competitor, but I think we stuck to our guns. We invested into the proposition. We invested into price and truthfully, being able to upgrade is a nice feeling, because it demonstrated that everything we've done really worked out well.

And just a quick follow-up on that inflation point. Do you think -- is the inflation then more -- the slowdown more driven by your own investment in price relative to your sort of input costs? Or are you seeing input costs falling more broadly? And does the kind of -- I'm just looking at next year and thinking people have got -- markets got Estimates U.K. growing above 3%. Does that look a bit ambitious given the Christmas exit rate?

Look, let me take first the Christmas specific question. Look, Kantar calls around an inflation of around 4% or so, slightly north of 4% over the Christmas period. As Ken just said, we made conscious choices to invest. There's no other time when you've got so many customers in your stores and you build momentum. And if you look at our market share gains, our volume market share gains were even stronger than our value market share gains over 12-year records. And I think you get -- that pays back as you then go into Jan, Feb, March and April into the next year. So I'd say to you, it was a conscious decision to invest into value, which we saw pay off in the market share.

Then in terms of next year's outlook, you know as well as I do that inflation is a driver of commodities as much as it is of stickier costs on payroll. All of those things are still to be worked out, and we'll see where we land when we talk to you in April.

Our next question comes from Xavier Le Mené from Bank of America.

A quick one actually on the market share. As you said, you've got the strongest market share ever for the last 10 years. But where potentially do you see your peers? Do you still think that you've got opportunity to grow your market share? Or are you more in a position to defend what you've got right now?

So Xavier, we are always thinking offensively rather than defensively. That's our mindset. And we see it less about the market share per se and more about are we doing the right things for all our stakeholders and particularly our customers. So are we getting our value right? Are we getting the quality of the proposition right from a product point of view? Are we getting our execution right? And are we innovating and thinking about the future in ways that customers' trends and needs are adapting. And that's really where we focus all our energy. And then we look to market share as a measure of how successfully are we executing against that strategy. So we don't see any limits in terms of where we can take market share, but it is not a given. It's something that we have to work very hard to achieve.

Right. And just one follow-up on actually Rob's question. Sequentially, you said you've seen a bit of a slowdown. It sounds like it's also market driven, but do you expect the slowdown to continue heading to '26, or do you think that potentially it's more a question of consumer confidence and hopefully, U.K. consumers getting a bit better going forward?

Look, I mean, I think when I look at consumer confidence this year, I would say it's mixed. But it's been mixed throughout the entire year, right? What you saw was people that are -- there's a cohort of groups that are, frankly, in a good place and feeling comfortable with their savings and their spending, and there's a group of people looking for value. I feel we saw that reflected. When you look at Finest's performance, in a way it's a reflection of the fact that people looking for value and quality at the same time were able to hit that. So I think our Everyday Low Price campaign that we're launching, again, hits the bull's eye on that.

I think addressing all of those opportunities for those customers looking for value is the right way to go forward. Fair to say that as you -- the question behind the question is, was the market overall a bit softer over Christmas? I'd say yes, on a volume basis. The reality, though, also is because we really outperformed every single month over the last 19 weeks on a volume share basis, we were not really affected by that. And I think one proof point for me is the way we exited the year was very clean on stock. Then how it plays out next year, we'll obviously talk to you again in April. But look, one of the things that we do feel good about in this business is, and I think we've demonstrated that over the last 5 years is, we are very good at adapting ourselves to whatever the environment throws at us. And it's one of the reasons why we've put value at front and center of everything we're doing.

We'll now take our next question from Manjari Dhar from RBC.

Just 2 questions from me, please. My first question is on supplier-funded promotions. We've seen them picking up over recent months. Just wondering how much higher could this go? And if it does continue to drift higher, does that change your approach for the Tesco business, maybe for your private label business?

And then my second question is on the digital data opportunity. I guess how much further is there to go with Clubcard personalization and AI? And what sort of things should we be expecting this year?

Thanks, Manjari. So I would start off by saying that kind of supplier-funded promotional penetration or participation is actually only returning to what it was pre-COVID. So it's not like it's wildly out of kilter with historical norms. That's the first thing to say. The second thing is that actually, as you saw from our announcement this week, we have reinvested a lot of promotional funding back into everyday low pricing through the extension of our low-price campaign from 1,000 to 3,000 lines. And that really is based on an insight from customers that say they need reliable low pricing during these months where money is tight and they're watching every penny. And so that is the first signal, by the way, that we are kind of -- we are responding to customers' needs in the moment. So I'm kind of relaxed about that, if you like. I think it's a normal...

And maybe to give you a number on that, just to give you a sense to underpin Ken's point, last year's promo percentage was around 33%, and this year was 34% over that 19-week period, which gives you a sense. There was a slight creep up, but not massive.

Yes. It was artificially depressed during COVID, Manjari. So it was very hard to compare apples with apples. If I go to your second question, which is a very exciting question. It's a question we're really excited about. We don't see any limits to the opportunity around data and particularly the opportunity to serve customers better through data, getting to understand their needs better, responding much more dynamically, using AI to help us be there for customers whenever they need us. And we're investing behind that, and we'll continue to do so. And I think it will be something that you'll see continuous improvement from us over the next number of years. I think there's infinite possibilities.

Great. Maybe just a quick follow-up. Should we be expecting investment levels behind that overall group CapEx to slightly step up now as a result?

Well, we've always been quite clear about our kind of breakdown of CapEx being kind of a 3-part logic, which is part 1 is where we're investing in our core estate renewal and the shopping experience. Part 2 is where we're investing in automation to support our Save to Invest programs, and Phase 3, which is all about innovation, technology investment for optimizing our proposition. And probably the greatest -- we've seen step-up investments across the board actually in all 3 areas. And that's been what's been behind our progressive increase in capital. And actually, as we've gone, we've kept a very close eye on return on capital employed, and that has also been improving over time. So we're very disciplined in how we spend our money.

Yes. And also what's really nice is, in the base, we've also reflected already increases year-on-year into our tech organization, because we know that this is an area of opportunity for both on the growth side, but also on the efficiency and savings side.

We'll now move to our next question from Sreedhar Mahamkali from UBS.

Maybe 3 for me, if you don't mind. First one, in terms of improving price position versus the market statement and the comment in the statement, can you talk to us if it's been the case versus all operators as you see it, especially given one of your big competitors reset and continuing investment? That's the first one.

Secondly, just trying to understand the new or renewed push on everyday low prices. A couple of questions there. Is this reallocating the promotional funding more to be fully behind Everyday Low Prices versus Clubcard Prices? How do you see the offer to the consumer changing in the round as a result of what you've been executing really well on Clubcard Prices already?

And second one, sticking with Everyday Low Prices, is this first signal to us that 2026 is likely to be as big a year of investment as it was in 2025? Is that how we should read this?

Okay. Thank you very much, Sreedhar. I think I'd start off by saying that our price position has strengthened over the year versus the market generally. And that I think more importantly, the sophistication of our pricing investment has improved through the technology investments we've made such that we focus on the lines that matter most to customers. So we're investing in value, but we're investing wisely and quite judiciously. And I think that is what has helped us to outperform the market.

On your point around Everyday Low Pricing, I think that was a response to customer insight, which said they wanted more reliable pricing on everyday essentials in these key periods in January, February. And so we made a long-term commitment to, as you say, invest principally promotional funding back into Everyday Low Pricing. And you shouldn't read it as any more than us responding to a customer insight to give customers the best possible value in these early months of the year. And I don't think it's a signal of anything other than our intent to stay on the front foot from a value for money point of view in 2026.

Yes. I think one aspect, Sreedhar, that's important is we already have Everyday Low Prices on 1,000 SKUs. And what we're doing is because it worked so well, we're giving it more visibility, more color, and it's been expanded to 3,000 of people's favorite brands in the country. So from that level, it's also a confirmation of something working really well that we want to double down on -- or triple down on, I should say.

And in the round, I guess what I'm trying to understand is Clubcard Prices have been incredibly successful for you. Is this a recognition, to Ken's point, I guess, some of that needs to be more upfront shelf prices rather than Clubcard Prices. Is that how I should see it?

I mean, I think it's a continuous conversation depending on what customers are looking for, but I'd be very comfortable to say to you that as opposed to having only exclusive deals on Clubcard prices, we want to have more, as Ken said, more longer-term price fixes as we've been doing on Low Everyday Prices now rebranded.

We'll now move to our next question from Clive Black from Shore Capital Markets.

Also, very happy New Year. Very well done, by the way. Not an easy thing to deliver. The question I have is really around volume. First of all, why do you think volume in the Christmas period was a bit slower than you and maybe the industry expected? And in particular, do you think there are features around alcohol consumption and maybe diet suppressant drugs that are starting to kick in more noticeably in that respect? And then in terms of that volume, is that a key factor why you expect working capital -- or sorry, your free cash generation to come in with the existing guidance, which might mean that working capital is a bit of a flatter benefit year-on-year? Would that make sense?

Clive, Happy New Year to you too, and thank you for your comments. I'll speak to the volume comment, and then I'll pass over to Imran maybe to talk about working capital. So I'd start off by saying that what was particularly pleasing about our performance is we outperformed the market on volume. I think it's fair to say that the market overall was a little bit softer on volume, but our outperformance was particularly important. And within that, I was particularly pleased with our fresh food performance.

So speaking to your point about is there a little bit less alcohol consumption, is there an impact? I think there's a general impact from people wanting to eat and live more healthily. And for sure, within that, GLP-1 will be having an impact. But our fresh food sales at plus 0.6% were particularly strong. So my feeling is that whatever way this trend evolves, we're really well set up to take advantage of it. And we've been investing very heavily in our fresh food proposition over the last couple of years, and it has been the principal driver of our business, which we feel really pleased about.

There's no doubt, as you saw from some of the stats that I shared on the call earlier that you are seeing a significant rise in low and no alcohol sales, but we respond to that as well. We have the products and the range to address it. And within our food range, we have a high number of high-protein products that are really well-suited to anybody looking to pursue that kind of diet. So we feel really well set for whatever trends are coming our way. But for sure, trends are emerging and we are keeping a very close eye on them.

Sorry Ken. Just in that respect, Ken, are you therefore seeing -- sorry, are you seeing notable step back, therefore, in areas that are more exposed to change in ambient carbohydrates and the like?

No, not really. I mean, we shifted an extraordinary amount of chocolate tubs over the Christmas period. So I think -- and I was a material contributor to that personally. So no -- the short answer is no, it's been really strong.

Sorry, Imran?

Yes. No, absolutely. Just on your second question, I mean, just to reiterate what Ken just said, I mean, we -- and how it impacts cash, I mean, obviously, we were less affected by the market slowdown because if I look at Q3 and the Christmas period, we were growing volume every single month and outperforming on market share every single month. So that gives you a sense of it not being a real driver on working capital, because ultimately, volumes are positive. And more pleasingly, I could say that we're exiting very, very cleanly. Actually, I was very happy about that. I mean, we set up a very ambitious Christmas, and we delivered in line with that. And when you exit cleanly, it just helps you get momentum also into January, which is nice.

In terms of cash flow, look, we had a very, very strong first half, over GBP 1.6 billion. As you know, typically, our cash flow is skewed towards the first half. And in the second half, you've got the payments out the door from all the supply you bring in for Christmas. So that phasing will play itself out as per normal. And as you know, our guidance on cash is that consistent range we've been giving, GBP 1.4 billion to GBP 1.8 billion. I know we've delivered always to the upside on that one. And so it's never stopped us from doing a good job, and the plan is to continue to do so. But as you also know, the working capital balances at Tesco are enormous. So just to give us a bit of flex in terms of any last-minute payments or receivables or anything like that, it gives us a bit of space to do that. But obviously, cash is important, and the plan is absolutely to continue to deliver within that range.

Our next question is from Monique Pollard from Citi.

Two from me, if I can. The first one, obviously, good market share gain, U.K. market share gains of 31 bps over Christmas. And from what I understand from the commentary from Imran, the volume market share gains over that period are even stronger than that. What I'd like to understand from customer feedback, the surveys you do, et cetera, are you able to give us some sense of how much of that you think is due to strong price positioning? And you mentioned your price position has strengthened versus the market this year, and you were aggressive in terms of inflation over the Christmas period. So how much of that is price positioning? And how much is things like investment in availability over Christmas, which is probably particularly strong versus particularly some competitors over the period and things like the store estate, staff in stores, et cetera, over that period?

And then the second question is just me trying to understand that level of price investment that you've put in, whether some of that was seasonally specific to the Christmas period. As you mentioned, you never get that volume of customers in store and therefore, important to be on the front foot on price, or whether that is sort of something we should expect to be a bit ongoing?

Right. Monique, so I think the short answer to your first question is that delivering the kind of market share performance we've delivered, not only over Christmas but right across the year, is actually a composite of great value, great quality, great execution. I think you'll have seen amongst some of our competitors that even if you drive a very strong value message, if you don't have the quality and the supply chain precision and the in-store execution to go with it, it's very hard to deliver the performance. So I would say that our market share performance has been a composite performance of everybody in Tesco across all the functions and departments doing their job really well and executing against the plan. So I think that would be the answer to the first question.

The second question around price investment is that clearly, Christmas is the FA Cup final for retailers. So we all lean in very heavily to a very strong trade plan over Christmas. And it's also a chance for customers to reappraise your proposition, shop [ B2B ] for the first time and really like and appreciate what they see. So we work very hard from everything from product innovation through to hiring of nearly 30,000 extra people through to the very strong trade plan that we delivered. And that is quite a specific event.

It doesn't necessarily mean anything for the rest of the year per se other than the fact that we will continue to invest appropriately. And I think as you saw from our announcement earlier this week, we acted against a specific customer insight for January, February, which said we needed to provide more reliable Everyday Low Pricing on a wider range of products. And so we've traveled our Everyday Low Pricing range to 3,000. And so what you can expect from us is that we will adapt constantly to insights from customers and react, so that we're giving them the best value and that's appropriate for the moment.

Another angle, Monique, as well to keep in mind is the perspective on channels. So when you look at where the market share gain came from over the Christmas period, we got it in large stores, which is great, because that's the key estate. But at the same time, that 11% growth we saw in online also led us to continue to gain market share in our online business, which was also great to see. And given the fact that we are over 36% market share in online, that gave us an extra benefit on market share as well.

We'll now take our next question from Matt Clements from Barclays.

First question was, you often give a very useful insight into the health of the U.K. consumer at your update. I was wondering if you could just talk us through how sentiment and spending evolved through the period, particularly around maybe November with the budget? And how do you think we're set up on consumer health into '26, government policy, et cetera?

And then the second question was around Finest, which is compounding exceptional growth now. Any views on Finest into next year? I mean, particularly around the dining-out to dining-in trend? Do you expect that to continue? What's the innovation pipeline like? Anything on that would be helpful.

Great. Thanks, Matt. So I think the first thing to say on consumer sentiment is that we've definitely seen that consumer sentiment is mixed. I think we have a section of the community that is in pretty good shape from a household budget perspective. And then we have a section of the community that is really struggling to make ends meet. And I think that is playing out overall in terms of how customers are shopping. They're very value conscious.

At the same time, though, there is a significant proportion of households that are in decent shape financially, and they are looking for good value for money. And that, I think, is a big factor in what's driving our Finest sales. I think there is that trend towards eating in more and eating well, and that's driving our fresh food sales. And I think the consumer has shown great resilience in a lot of uncertainty. I think the budget is just one factor in a number of factors that's driving uncertainty. But we have seen a pretty resilient consumer in terms of their spending pattern and habits. And we continue to monitor it very closely. But we, to a certain extent, as long as employment remains strong, expect that resilience to continue.

And Finest really is a subset of that. I think Finest, for us, is delivering on 2 fronts. It's responding to that trend of wanting to eat restaurant quality food in your home, but it's also responding to the fact that historically, Tesco would have undertraded in that particular meal occasion or mission. And I think what you've seen for us in terms of the amount of product innovation, the bravery to go deeper into distribution, to go into more and more different categories and cuisines has given us the confidence to really fight for fair share in that meal occasion. And so we still believe there's a lot of room for growth in Finest in the coming years.

We'll now take our next question from William Woods from Bernstein.

Happy New Year. When you look at your success over the last 5 years, you've had great success with things like Aldi Price Match, Clubcard Prices, Finest, et cetera, and your peers have played catch-up. What do you think are the next levers that you can pull over the next 5 years to continue to innovate, continue to lead the market and gain market share?

Thanks very much, Will. I think first and foremost, we would say that our strategy of focusing on the core basics and executing them brilliantly and consistently remains a fundamental pillar and foundation stone of our strategy going forward. The second thing I would say is that the building out of our proximity to customers in terms of their food needs is equally important. So what we've done in terms of extending our grocery home shopping, slot availability, the work we've done to build Whoosh into a really market-leading from a value point of view quick commerce model. The launch of F&F online are all contributing factors to getting closer to customers and making life more convenient.

And then on top of that, we're working very hard to get really close from a data point of view to our customer base. And that is really starting to deliver results for us. And that, I think, is where the greatest opportunity lies is using data and insight to really get closer and closer to customers and anticipate and serve their needs, both digitally and physically. And we see clearly Clubcard at the very heart of that. And we also see dunnhumby as a clear source of competitive advantage to help us deliver that as well.

And probably I should finish by saying something that's not necessarily the sexiest thing, but is absolutely critical, which is that we have an incredibly strong Save to Invest program. Imran has led this since he's joined the business. The step-up in our savings has been extraordinary from GBP 300 million a year to nearly over GBP 0.5 billion a year. And that shouldn't be underestimated in what it has allowed us to do in terms of stepping up capital investment, stepping up our investment in value without ever compromising on the customer journey. So they'd be the key pillars of what underpin our future growth opportunity.

Our next question comes from Ben Zoega from Deutsche Bank.

Just a couple of questions, follow-ups from my side. Firstly, on inflation, and secondly, on supply funding. So firstly, you say you've improved your price position against the market. I just wanted to ask, is this broad-based across competitors, or were there particular competitors that you'd call out as closing that gap against? And are there any particular product areas where you focused your price investments such as fresh foods?

Secondly, on supplier funding, is it fair to say that the elevated levels of supplier funding in H1 has continued into Q3 and Christmas, particularly as the market turned more promotional? And are you able to comment on the levels of brand support behind the expansion of Everyday Low Prices?

Look, I mean, in terms of inflation and strengthening price position, I mean, we take a view, and we obviously have our own pricing strategy, and we have stuck to that since over the last 5 years. And look, we take a broad view that we want to continue to strengthen versus everyone. I mean, ultimately, the ultimate judge of how strong your price really is, is the customer. And the combination of Aldi Price Match, Clubcard Prices and now Low Everyday Prices, in our view, is the right combination, and it's made us stronger and stronger, and it's working well for us. And I would say to you, it's a broad-based strengthening across most of our competitors, which is good to see.

Then in terms of promo intensity and supplier funding, look, the truth is, promo funding has gone up a bit. You saw that from the brands wanting to regain volume growth, which is good for us, because it comes under the banner of Tesco and Clubcard Prices. So we like to see that. That's a good thing. You will have noticed that the Low Everyday Prices is -- or Everyday Low Prices is brand oriented, which is good. Brands like to grow, and they can see that they have grown with Tesco online and in-store, and they want to continue to grow, and we have a great partnership with them. As ever, any campaign or events we run, there are always some investments from our side, some investments from the brand side, but you wouldn't expect me to give you some commercial details on the call here in terms of how we execute these. But suffice it to say, they are customer-centric and data-led. And clearly, the idea behind them is to continue to grow and gain share.

And we'll now take our last question today from Karine Elias from Barclays.

Most of them have been answered, but just one final one. In the release, you mentioned, obviously, the competitive environment being as competitive as ever. Just broadly speaking, I think historically, you've called it more rational. Do you feel that that's still the case? Or perhaps there was some intensity going into Christmas?

So the definition of rational is always a broad one when you're dealing with 10 to 12 different competitors who are all looking to win the basket from you. But I would say that the market intensity in terms of competition, pricing, et cetera, has remained strong since February last year. It didn't really change over Christmas. But I think what, and hopefully, you will have observed is that our response has been really decisive and really quick, and we have maintained that intensity throughout the year. And that's what really helped us underpin the very strong market share performance that you saw over Christmas.

Thank you. That was the last question today. With this, I'd like to hand the call back over to Ken Murphy for closing remarks. Over to you, sir.

Thank you so much, everyone, who's joined the call, took the time out. I know it's an incredibly busy day with a lot of announcements from various different companies. So we really appreciate you taking the time to join us. Thank you all for the excellent questions. I wish everybody a really happy New Year and a prosperous 2026, and I'm looking forward to seeing you all in April. Thank you. Goodbye.

Good morning, everyone, and welcome. I'm in Welling with Imran to share an update on our performance over the first half of the year as well as the progress we are making to unlock our longer-term growth opportunities.

I'm pleased with the progress we've made across the half. Our strong momentum is once again down to the brilliant work our colleagues do day in, day out to put our customers first. I'd like to start today by saying a huge thank you to all of them. In the face of increased competitive intensity and additional taxes, we took decisive action to further invest in delivering the best possible value, quality and service. Our actions have resonated with customers. Satisfaction has increased. And consequentially, we have continued to grow market share, in fact, even more share than we anticipated.

Alongside strengthening our competitive position, we have continued to invest in both our core business and long-term growth opportunities, enabled by our Save to Invest program. The strong response from customers to the improvements in our offer is reflected in our financial performance, which Imran will take us through in more detail shortly. To summarize, our group sales grew 5.1% with growth in all operating segments and our adjusted operating profit increased by 1.6%.

Though we are pleased with our performance so far, we remain focused on delivering the best possible value for our customers as they start to get ready for Christmas. Building customer trust and satisfaction is at the very heart of everything we do. Our overall brand perception score has increased year-on-year and remains well ahead of the competitor average. We outperformed peers across the board with continued gains in satisfaction, value and quality. Our Net Promoter Score has also moved forward during the half and is now at its highest level in 6 years.

Our ongoing investment in value, quality and service continues to resonate with customers. In the U.K., we have grown volume and have consistently seen market share gains for over 2 years. with our share now over 28%. Meanwhile, in Ireland, we have consolidated 3 years of strong gains. Household budgets remain tight, and we understand how important value remains to customers. We've continued to invest in price, improving our position relative to the rest of the market with a particular focus on the products that matter most to customers.

Through a combination of Aldi Price Match, low everyday prices and Clubcard prices, our value proposition remains unrivaled, and we have seen switching gains from the majority of our key competitors. Ensuring customers get the best possible value by shopping at Tesco isn't just about price, and we are passionate about raising the bar in quality and product innovation across our ranges. This half, we launched more than 470 new products in the U.K. with 200 of those being in Finest. Highlights include an improved Finest BBQ range and delicious new launches like iced coffee concentrate and Finest Gelato. As the price of dining out continues to rise faster than the price of dining in, customers are increasingly turning to our Finest ranges to treat themselves.

Now in their third year of double-digit growth, Finest sales have grown over 16% year-on-year. While Finest has again been a standout performer, we continue to broaden and deepen our quality offering across all tiers, including relaunching our meal deals sushi range and improving welfare standards on our core fresh chicken ranges. Our commitment to providing great quality for all customers is being recognized externally too. And in June, we were awarded Retailer of the Year at the Free From Food Awards.

Clubcard allows us to understand our customers even better and the insights it provides help power our business. Clubcard engagement is growing with penetration around 85% across the group. As we continue to celebrate 30 years of Clubcard, we have been sharing new and exciting rewards with customers, including cinema tickets for GBP 2.50 in Clubcard vouchers with Cineworld and GBP 10 off with a range of Days Out partners. Customers can now earn Clubcard points when they charge their cars too. Our new partnership with Pod awards points for charging at more than 2,500 EV points across our estate.

Our colleagues are central to everything we do and the service they provide shapes the experience customers have. In March, we announced an above-inflation pay increase of 5.2% for our colleagues in stores. This latest investment, the equivalent of GBP 180 million builds on significant investment in pay and benefits we've made in recent years. I'm proud to say that more than 64,000 colleagues, mainly those working in stores and distribution centers are currently participating in our Save As You Earn share schemes.

Colleague safety and well-being is our top priority. And all our U.K. colleagues have now free access to a personal safety app that can track their journeys and help them raise the alarm if they don't feel safe. This is part of a much broader offer, which includes a virtual GP service, accessed by many of our colleagues and their families. It's important that everyone feels welcome and can thrive at Tesco. And I'm proud that we have been listed as one of the Times top 50 employers for gender equality for the fifth consecutive year.

We're committed to delivering for all of our stakeholders. And throughout the half, we've taken further steps to support our communities, the environment and our suppliers. Our Fruit & Veg for Schools initiative has already provided more than 10.8 million portions of fruit and veg. And this year, we've extended the scheme to even more schools. We introduced fruit and veg planters made from recycled soft plastics too, so that people can try their hand at growing their own projects.

We also launched our new campaign to help the nation get more of its 5 a day. Across stores and online, we've incentivized healthy choices through Clubcard challenges on fruit and veg with recipe Inspiration too. We're working hard to make the food system more sustainable and making good progress on our Planet Plan. Supporting our commitment to procure more electricity through our power purchase agreements, we've agreed a new deal with EDF for Hare Craig wind farm in Scotland, which will start generating renewable electricity in 2028.

Strong partnerships with our suppliers are fundamental to our supply chain and so our ability to serve customers and communities. To help farmers achieve our shared goals, we have rolled out an additional sustainability-linked incentive for more than 400 farmers in our sustainable farming groups. As the biggest customer of British agriculture, we believe we can play a key role in supporting the long-term economic and environmental sustainability of U.K. farming.

We started the year facing even greater uncertainty than normal, but we were confident that by putting customers first, we could deliver for all of our stakeholders. We're pleased with the customer response to our decisive action. And this, combined with strong cost control and the benefit of good weather has allowed us to upgrade our guidance for the year.

Imran will now cover this as part of his financial review before I return to update you on our strategic progress. Over to you, Imran.

Thank you, Ken, and good morning, everyone. I'm pleased with our performance across the half. As Ken highlighted, we saw a better-than-expected response to the investments we made to our customer offer. This translated into strong sales growth, operating profit growth and continued cash generation.

Group sales grew by 5.1% at constant exchange rates. This included a 4.3% increase in like-for-like sales with continued volume growth. Group adjusted operating profit increased by 1.6% with growth in sales volumes alongside progress on our Save to Invest program, offsetting operating cost inflation and investments across value, quality and service. Our cash delivery was strong with GBP 1.3 billion of free cash flow in the half. Net debt was GBP 9.88 billion at the end of the half, an increase of GBP 430 million versus year-end. As a reminder, the year-end figure included around GBP 700 million of proceeds from the sale of our banking operations, which we started to return during this period.

Around half of these proceeds have now been returned as part of our total GBP 1.45 billion buyback program this year. Headline earnings per share increased 6.8% year-on-year to 15.43p. We have proposed an interim dividend of 4.8p per ordinary share. This is in line with our policy of setting the interim dividend at 35% of the prior year total dividend. As you will have seen in our release this morning, following changes to our Group Executive Committee during this period, Booker is now reported as a separate operating segment. Following its disposal last year, our banking business continues to be presented as a discontinued operation.

My review this morning is on a continuing basis. Group sales for the half were GBP 33.1 billion. Our U.K. and Ireland segment delivered total sales growth of 5.6%, continuing its strong momentum. Booker total sales increased by 2.4%, with strong performances in core retail and catering offsetting the continued decline in the tobacco market. In Central Europe, sales grew by 5% with growth across all our countries amid regulatory and competitive pressures.

Group adjusted operating profit increased 1.6%, driven primarily by strong trading performances in the U.K. and Ireland. Over the next few slides, I will cover the performance of each market in more detail, starting with sales before moving on to profit. In the U.K., we delivered total sales growth of 5.6%, including like-for-like sales growth of 4.9% with continued market share gains. Food like-for-like sales grew by 5.7% with volume growth supported by ongoing investments in our customer offer as well as the benefit of good weather.

We saw strong growth across many categories, but Finest was once again a standout with sales up 16%. Our clothing sales were also particularly strong, up 7.8%, driven by the performance of our new ranges, which really resonated with customers as they enjoyed a great summer. We grew sales and outperformed the market in all U.K. channels. Our large store like-for-like sales grew by 4.5%, supported by continuing investments in price and service as well as our market-leading availability.

Convenience like-for-like sales, which include both Tesco Express and One Stop grew 1.4%. Within this, the performance of our Express stores has been particularly good with over 70 basis points of market share gains. Our U.K. online sales grew by 11.4%, mainly driven by volume growth. We saw market share gains of 112 basis points with share now at 36.9%. We increased our online capacity, adding over 70,000 weekly delivery slots. The number of Delivery Saver subscriptions also increased, growing to 788,000.

We extended the rollout of Whoosh, our rapid delivery service with U.K. household coverage now at over 70%. With increases in both active customers and basket size, Whoosh delivered a 2 percentage point contribution to total online growth. Leveraging our existing asset base, Whoosh has now become an important part of our mission to serve customers wherever, whenever and however they want to be served.

In Ireland, like-for-like sales grew by 4.8%, with volume growth supported by the continued rollout of our store renewal program. Total sales were up 6.5% with a 1.3 percentage point contribution from new stores. Food sales grew by 5.1% as we continue to invest in product quality and innovation. Fresh sales were up 6.3% and sales of our Finest ranges grew by 13%. Nonfood sales were down 1.8%, which includes a 3.8 percentage point impact from the transition to a commission model for toys with The Entertainer. Excluding this impact of toys, nonfood sales were up 2%.

Booker like-for-like sales increased by 1.7% with strong growth in core retail and catering offsetting continued tobacco decline. Our core retail like-for-like sales grew by 4.1% with particularly strong growth in our Premier symbol brand. In total, Booker added 275 net new retail partners in the half.

Core catering saw like-for-like sales growth of 5.7% with volume growth supported by a weather benefit. We continue to invest in price competitiveness and saw a further increase in customer satisfaction.

Best Foods Logistics like-for-like sales grew 1.3% despite ongoing weakness in parts of the fast food market it serves. In Central Europe, like-for-like sales grew by 3.4% with growth in all countries despite competitive and economic pressures. Food like-for-like sales grew by 4%, with fresh food up 7%. Our ongoing targeted price investments enabled us to remain competitive and contributed to an increase in our Net Promoter Score.

Nonfood like-for-like was down 0.8% with volumes challenged by subdued consumer confidence. We saw growth in all channels in the region with particularly good performance in our convenience and online channels.

I'll now move to our profit performance. Group adjusted operating profit was GBP 1.67 billion, which represents a 1.6% increase on last year at constant rates. Our group adjusted operating margin was 4.6%, slightly lower than last year. Within this, U.K. and Ireland adjusted operating profits grew by 2.1% to GBP 1.47 billion. We delivered a strong trading performance, which combined with continued delivery of our Save to Invest program, more than offset investments in our customer offer and the ongoing cost inflation, which includes the increased national insurance contributions and the new EPR levy recognized in the half.

The U.K. and Ireland segment also includes operating profit from our insurance and money services business, which increased by GBP 6 million to GBP 100 million. Booker reported adjusted operating profit of GBP 162 million, growing 0.6% year-on-year. A good weather tailwind and cost efficiencies from our Save to Invest program helped mitigate significant industry-wide operating cost pressures, including the EPR levy. I am pleased with the contribution Booker makes to the group and see further opportunity for growth in the years to come. Central Europe adjusted operating profit was GBP 44 million, down GBP 5 million. This reflects targeted price investments to counter competitive pressures together with lower rental income following the sale of some of our shopping malls last year.

This slide details the 2 main reasons for the GBP 72 million reduction in statutory profit. First, we have higher adjusting items of GBP 71 million versus GBP 37 million last year. This includes GBP 20 million restructuring and property costs and GBP 13 million of bank separation costs in addition to the ongoing amortization of acquired intangibles, mainly related to the Booker merger.

Second, net finance costs are higher. This is mainly due to the movement in fair value remeasurements of financial instruments as a result of the decrease in long-term inflation expectations.

Moving now to our cash flow, which remains strong. We delivered GBP 1.3 billion of free cash flow with cash generated from operations increasing GBP 283 million year-on-year. While we normally see a working capital inflow in the first half at GBP 408 million, we saw a higher inflow than last year, reflecting the strong trading performance in the half. Our cash CapEx was GBP 0.7 billion in the half versus GBP 0.6 billion in the prior year, reflecting a more even shape to this year's investments. Tax paid was GBP 50 million higher, reflecting the end of historical tax deductions and phasing of tax payments.

Dividends received increased GBP 50 million versus the prior year, reflecting income received from IMS. Let's now turn to the balance sheet, which also remains strong. Net debt was 9.88 billion, an increase of GBP 430 million from the year-end. The year-end balance included GBP 700 million of disposal proceeds related to the sale of our banking operations, and we have since returned around half of this. Together with the payment of our full year dividend and ongoing capital return, this additional buyback more than offset the benefit of our very strong free cash flow. Our net debt-EBITDA ratio was unchanged from the year-end at 2x, partially benefiting from the disposal proceeds we will have returned by year-end. Our fixed charge cover was 4.3x at the end of the half compared to 4.2x at year-end.

During the half and alongside the scheme's trustees, we agreed the triennial funding valuation for our principal defined benefit pension scheme. On a technical provisions basis, the funding position of the scheme remains in surplus, and it was therefore agreed with the trustees that no pension contributions would be required from the group. We continue to invest in our business with capital expenditure of GBP 667 million in the first half. We are prioritizing investment in high-returning areas such as automation and the development of our digital platforms.

In the summer, we opened the semi-automated fresh food distribution center in Aylesford, and we have continued to deliver wider automation initiatives across the group. This represents ongoing investment to ensure we are fighting fit for the future. We're also investing in our core estate, which in the half included 112 store refreshes. We expect total CapEx this year of around GBP 1.5 billion.

In April, we provided guidance, which allowed us to take decisive action and invest in every aspect of our shopping trip, following an increase in the competitive intensity in the U.K. Competitive intensity remains elevated, and we are committed to doing everything we can to deliver great value, great quality and great service for our customers. However, a better-than-expected customer response to our actions, strong cost control and the benefit of good weather have helped mitigate the impact of our investments in the first half. We now expect full year '25/'26 group adjusted operating profit of between GBP 2.9 billion and GBP 3.1 billion, an increase from the previous range of between GBP 2.7 billion and GBP 3 billion. We continue to expect free cash flow within our medium-term range of $1.4 billion to $1.8 billion.

Before handing back to Ken to talk us through the strategic progress, I wanted to take a moment to reflect on our longer-term momentum. We set our multiyear framework in 2021, and it continues to guide our approach to creating sustainable long-term value for every Tesco stakeholder. Delivery against our framework has been strong, and I'm pleased with our progress over the past 4.5 years.

Our customer-focused and disciplined approach has delivered free cash flow ahead of our expectations. We have continued to invest in our business and make strong progress on our long-term opportunities. We ended the second half with strong momentum, which is built on our long-term commitment to investing in our customer offer. This has been reflected in our consistent delivery against our multiyear performance framework and strong consistent earnings growth and cash generation. I will now hand back to Ken to talk us through our strategic progress.

Thank you, Imran. Our strategic priorities continue to guide our approach to differentiating ourselves in a very competitive landscape. Each week, customers benefit from exceptional value through Aldi Price Match, Low Everyday Prices and of course, Clubcard prices. This winning proposition has supported an improvement in our price position against the market.

At the same time, we're driving innovation and enhancing our product ranges. These improvements are being recognized by customers with our quality perception making significant gains over the last 5 years. The strength of our Save to Invest program on track to deliver GBP 500 million of savings this year underpins our ability to invest, innovate and mitigate the effects of inflation. We have continued to improve and expand our store estate, opening 38 new stores and refreshing 112. As demand and our store estate grows, we're committed to ensuring our distribution network remains fit for the future.

In the first half, we opened a new semi-automated fresh food distribution center in Aylesford. And in July, we also announced a major investment into a new site at DP World London Gateway, which we expect to open in 2029. Online performance remains strong, and we have seen further growth in market share and customer satisfaction. We've increased our capacity, adding vans and more delivery slots for customers to choose from.

Tesco Whoosh, our rapid delivery service, continues to grow at a double-digit rate. Orders are up nearly 50% year-on-year with an increased number of active customers. Whoosh is now in over 1,600 stores across the U.K., and we've also launched in Ireland during the half. The recent launch of F&F online means more customers can access a much fuller range of clothing. Early performance has been encouraging with over 3 million sites visits per month so far.

We are introducing the platform in planned stages, learning and adapting as we go to ensure we offer the best possible online experience. Meanwhile, with over 600,000 products now available, Tesco Marketplace further enhances our online product offer. Every one of our customers is different, and we're investing in our digital capabilities to engage with them in a more relevant way. We have partnered with Adobe to build our capability and help power our one-to-one interactions with customers.

In the early stages, this includes close to real-time personalized e-mails with offers and recipe inspiration based on their preferences and shopping habits. As we build our capability, customers can hope to see a lot more. We have also sent tailored digital coupons to over 10 million customers and further enhanced our Clubcard challenges, which are now in their 10th round.

In addition to increasingly personalizing our core offer, we are looking to meet even more customer needs wherever, whenever and however they want to be served. In partnership with Aviva, we launched Tesco Life Insurance, offering customers cover at Clubcard prices with great rewards included. Customers can also access complementary health and well-being services with the Aviva Digicare+ app.

Tesco Mobile is one of the U.K.'s most trusted mobile networks and was voted Uswitch Best Mobile Network for Customer Service for the fourth year running. Our mobile customers benefit from exclusive Clubcard offers and no robbing fees for our 48 home-from-home destinations. In addition, F&F Home launched last year and continues to go from strength to strength. Designed by our in-house team, our expanded home range offers timeless designs at great prices.

Retail Media is an exciting growth opportunity for us, and we've extended our reach across channels and suppliers in the first half. We were delighted to win Retail Media Network of the Year at the Retail MediaX Awards in May and to have been shortlisted for 8 of the upcoming MediaWeek awards. We've enhanced our Tesco Media & Insights offer, adding new features so suppliers and agencies can better manage their campaigns through our Sphere platform.

Our mix of suppliers has expanded too. And by building tailored products to suit brands of all sizes, we have seen significant growth in small brand advertising. Over 550 new media screens were rolled out across our Express convenience stores, and we've expanded our product offering, including launching video advertising on the Tesco app.

Across our stores, distribution centers and offices, Tesco has been using machine learning for well over a decade. As technology improves, we are evolving how we use data and artificial intelligence. By leveraging these tools, we are generating deeper customer insights and driving innovation and operational efficiencies. This is enabling us to unlock future growth opportunities while optimizing our operations. For instance, we are utilizing data analytics within our retail media campaigns. Our Tesco Media team has developed [ smart stock, ] which can anticipate when customers are running low on household products. This allows us to send timely personalized reminders, helping both customers and suppliers and setting a new benchmark for precision-led retail media.

In addition, we can understand our customers better using our AI-powered range curation tool. The tool enables us to better tailor store offerings based on the shopping habits of local customers, ensuring more customers can find what they want when they want it.

Moving to operational efficiencies. Our fleet is one of the largest in the country, transporting everyday essentials to stores and homes every minute. Routing software isn't new, but new AI-powered tools developed in-house are allowing us to optimize the combination of products, baskets and routes for every Tesco lorry and delivery van. In a business as large as ours, small changes can have a big effect. And these new tools have allowed us to remove around 100,000 miles per week.

To recap, we've started the year well, customers are responding to our investments and market share gains have been strong, which has been reflected in our financial performance. We remain determined to offer customers the best possible value while continuing to innovate. I'm pleased with the progress we've made on our longer-term growth opportunities to set ourselves up for future success. As we head into the second half, competition remains intense, and we are as focused as ever on delivering for all of our stakeholders. Thank you for your time. Imran and I would now be very happy to take your questions.

We'll now take our first question from Freddie Wild at Jefferies.

Three, if I may. So firstly, could you help us understand the current competitive environment out there, both how it's sort of currently changing and how you see it for -- continuing for the rest of the year?

And second, Ken, I would love to get your thoughts as ever on consumer health and how you see the consumer spending environment at the moment.

And then I suppose the combination of those 2 questions is, can you help us understand what goes into both the top and the bottom end of your guidance and what we would need to see to reach both that top and bottom end?

Thanks a million Freddie. I'll take the first 2, and then I'll hand to Imran to cover the third. I think I would start by saying that the competitive environment in the U.K. retail sector is probably the most intense in the world, particularly in grocery. And I think that at the start of this financial year, we saw that step up a notch. In both directions, actually, we saw an increase in pricing intensity, and we also saw an increase in cost pressures coming through the P&L of the industry, and that created a lot of pressure in the system.

What I'm delighted about is the response that the Tesco team put in place really decisively and really quickly to address that. I mean, first of all, we invested very heavily in price. And secondly, we accelerated our Save to Invest program. The third thing we did, of course, is we didn't take our eye off the other aspects of the offer. So we have invested equally heavily in our quality, our new product innovation as evidenced by the 470 new products we launched during the half and in availability, making sure we were best-in-class in terms of product availability and expanding our digital footprint through our online shopping channels, both GHS and quick commerce Whoosh. I think it was a combination of all those factors, Freddie, that's allowed us to win in the half.

So I would say to you that the market has definitely stepped up in terms of intensity. We see that continuing into the second half. So we don't see any relaxation, if you like, or moderation in the competitive environment. Clearly, the forthcoming budget will tell a lot in terms of whether the cost pressures will ramp up yet another notch, but time will tell. But what I'm really pleased about is our ability to respond to the environment and win with customers. Moving on to that, the customer sentiment and how they're feeling. I think the best way to describe it is mixed. I think that the shopping habits they've built in over the last 3 or 4 years following the initial cost of living crisis have stuck. And in some ways, some of them have been accentuated. So you are seeing a increase in fresh food purchases, which I think is a good thing for the health of the nation, but also indication of a trend of more scratch cooking and more cooking for first principles.

We're also seeing, though, a trend of more dining in, in weekend and evening occasions as evidenced by the strong growth in finance of over 16%, which is now lapping 3 years of consecutive strong double-digit growth. As I look forward, I think the consumer is concerned. I think it's concerned about job market. It's concerned about inflation. It's concerned about the upcoming budget. But we've prepared really well from a Christmas perspective, both in terms of our price investment, our product quality and innovation around the Christmas period and in terms of our operational standards. I'll hand over to Imran now to talk guidance.

Freddie. So look, when we set out the guidance at the beginning of the year, right, we were very clear that we wanted to have what we call flexibility and firepower to react so that we can continue to invest not just in price, but in quality and service to keep winning. The truth is we made those investments. And the truth also is those investments really worked. And honestly, they work better than we thought they would. And that's kind of why we are able to upgrade today to the GBP 2.9 billion and GBP 3.1 billion range, which feels good. But as Ken just mentioned, right, we're going into a second half, which we're not going to have the weather tailwind, I think, fair to say.

And we'll have to make sure we continue to invest to keep winning. With the new budget and the uncertainty that's out there, we want to make sure that we have that flex and firepower. And there's a lot to play for, especially as Christmas comes. I feel good going into the second half with the momentum we have, and we'll play -- we'll keep you posted in terms of how it all played out. But from a position of strength, I would say.

We'll now take our next question, and that will come from Monique Pollard at Citi.

The first one was just on food inflation. So the latest Kantar read for the 4 weeks to the start of September was at 4.9%. Just wondering if you can give a view on where you think you stand versus that industry food inflation number.

The second question was just on that cash flow benefit from the dividend from IMS in relation to the prior year. So that GBP 50 million that you got in the first half. Just wondering if we should expect another inflow from there in the second half or whether that's the GBP 50 million for the year and done?

And then the final question I had was just around your online business. So as you said, you've made sort of quite a few investments and started a few things up since the start of the year, the launch of F&F online, there's been a ramp-up in the number of products on the marketplace. And then you're seeing this very strong online market share growth.

Just wondering whether you can give us any stats on whether there's been more time generally on site, higher conversion. Anything you can give us to help us with how some of these investments are driving that online engagement.

Thanks a million, Monique. First things first, and then I'll hand over to Imran to talk on dividends. On food inflation, we can't give you a specific number. What we can tell you, we've been inflating meaningfully behind the market. And I think that is a consequence of the price investments we've made, and over the 6 months, we've actually increased the gap between us and the market in terms of price competitiveness. And the second thing, of course, is the strength of our Save to Invest program and the fact that we've dialed that up even more, and that's helped to manage and fund that investment. So we've been able to deliver a strong bottom line at the half year. Imran, on the dividend growth.

Yes, sure. I mean also just maybe one thing on the growth profile on the inflation, given the fact that our inflation was significantly below the market, it also gives you an indication that we had strong volume and mix benefits in the half, which is a great testament to the returns we're seeing.

On the cash flow, yes, you're right. IMS had a fantastic half. And clearly, we will continue wanting to expect to see an annual dividend from them. This is a catch-up from last year. I would expect that to be once a year. So at this stage, I would bank in just the GBP 50 million that we received and then annually, whenever we finish the next year, get the next one the year after.

On the online business, I'll give you a few points and then maybe also Imran will jump in with a few of his thoughts on the online business. I think I'd start off by saying is that we do see it as a system rather than as any one specific offering. We are trying to develop a world where we are able to offer customers what they want, when they want, whenever they want it. And therefore, there is a logic that is broader than just a single proposition of GHS, Whoosh, F&F online marketplace. They're all part in our view of a broader plan, to be able to cater to customer needs as they evolve and develop, be able to fulfill those needs in a really efficient, convenient and good value way and then to reward customers through the Clubcard for shopping more with us.

And that's kind of been a part of our strategy now for some years. And what you're seeing is evidence of us progressively building that out. And different parts of the proposition are evolving at different speeds. So Whoosh, we launched 3, 4 years ago for a handful of millions, initially very modest growth. Post-COVID, we thought there was a massive, if you like, exodus out of the quick commerce market. But in the last 6 months, we've seen 60% growth in Whoosh. And it's now a really meaningful business, and it is a business that is profitable and contributing. And we see great growth potential in that.

Similarly, we know that for F&F online, 80% of clothing missions start with an online search, even if they end up physically in store, shopping. So when you look at the F&F business, you need to look at it holistically. And we've had a very strong performance over the 6 months on both clothing and home for F&F. And we think the online presence has been a contributor to that, even though it's still in the early stages of ramping up. I think that -- and similarly, marketplace, yes, we've added a lot of vendors. It's a slower burn marketplace, but it is something that we believe in for the future. Imran, any?

Yes, yes. Just a few thoughts. Just to build on Ken's comments there. I mean, if you think about the market share that we have in online, it's close to 37%, 36.9% and we gained in the last read 112 basis points. I mean that's pretty -- that's good. I mean that's -- I'm happy about that, I have to say. And then when you think about Whoosh, 60% growth. And then when you look at clothing, just within total clothing in the half growing close to 8%, those are really strong set of numbers. And I think the platform it gives us and the experimentations we're doing and the drive on top of that, leveraging the personalization capabilities we have, it's a real well-performing asset, I have to say. And profitability is really good, as Ken said, because of the way we're leveraging it.

We'll now take our next question from Clive Black at Shore Capital.

Congratulations on the results. I'm just going to ask one question for a change, which I think would be a good trend, to be honest. Your -- could you give us an indication of your capital allocation plans with the share rerating? At what point does a share buyback to you feel destructive to value? And what would you think about if a share buyback wasn't on the cards if you were still generating such cash? And very well done, not easy to do what you've done.

Thanks, Clive.

Thanks, Clive. So look, I mean, just as a principle, Clive, as you know well, we always evaluate returns on any cash out the door, whether that's CapEx or whether it's dividends or whether it's buybacks, right? And in general, we see the buyback mechanism as a very efficient means to return the surplus cash. If you look over the last, what is it now, since October '21, we returned around GBP 3.7 billion.

We reduced the number of shares outstanding by 15%. And over that period, profits have risen in a nice way as well. So you can imagine the value that's been created has been fantastic. Having said all of that, we always continue to make sure we evaluate the returns on those metrics and make that on an annual basis together with our Board. But so far, I feel very good about the value that's been created.

Are we getting close to the point that you have to think about something different?

It's -- when we get close to it, it will be a quality problem to have. I feel we're at the very beginning of our journey. We have seen some nice recognition. But look, ultimately, our job is to continue to make sure we invest in the right way, continue to drive the profitable growth. If you remember the performance framework that we laid out, right, we said we want to run this business to continue to gain or hold market share, protect the margins and continue to drive profits. It won't be linear, but we do want to see continuous growth. And that's what we've done. And I believe in that model. I believe in the opportunity to continue to create value, and I feel we're on that journey as we speak.

We'll now take our next question, and that will come from Rob Joyce at BNP Paribas.

So just to make Clive happy, I'm going to ask 2. So in terms of that brand perception, it seems to be a key metric. So the brand perception from that chart you showed, showed a real leg up, looks like about a year ago. Can you help us understand what drove that leg up and what you've got left to really push that brand perception on from here?

And then just looking at the broader market, we just stopped talking about them, but are you seeing additional space coming down from the discounters? Are you seeing any change in the way they're sort of competing in the market?

And I guess within that, are you seeing any signs of trade down yet from your own customers?

Thanks, Rob. I think I would start by saying that our brand perception drivers are actually quite broad-based. So when we look across how people judge us, value clearly plays a very important point, or part. But the product quality, the shopping trip experience, the helpfulness of the colleagues, the role we play in the community, reputation are all factors in driving brand perception. And we've seen gains across the board. And I think the lesson we've learned as a management team is if you over-index on any one factor, the risk is that you become a bit of a one-trick pony and that you forget about the value for money equation, which is the total package and the complete experience.

And the second thing I would say is that having applied that logic of we need to win in price, we need to win in quality, we need to win in the shopping trip, the consistency of the execution across that -- across the estate, both the physical estate and the digital estate is absolutely critical. because you could be the best store in the world in Sandhurst, but if you're cr** in Bromley, customers in Bromley will think you're cr**. So we have really worked very hard on that consistency and maintaining standards right across the board. And we've worked very hard, particularly online, and we've seen meaningful improvements in online metrics across the board over the last 18 months in particular. And that's given us a real boost.

And if you take a micro example like Whoosh, for example, which has seen 60% growth this year, it's a really meaningful business for us now. We are meaningfully cheaper than all the other quick commerce players. We're quicker in general in terms of our service, and we offer way less substitutions or missings because our system uniquely is integrated fully back into our stockpiles. So we think we have sources of really meaningful competitive advantage that help drive that brand perception.

In terms of the discounter behavior, I don't think we've seen a massive change. Clearly, there has been one change, which is both of them have made -- starting to make meaningful money now in the U.K. And so that's clearly driving them to think about the market a bit more holistically than they would have been when they were just purely looking for a land grab. We haven't seen any reduction in their demand for new space, so they continue to open space. And in fact, they're dropping bigger boxes. So Lidl in particular, are building bigger shops when they do go for new space, and they're expanding, particularly in the area of fresh food, which is also our greatest source of growth. So they are very formidable competitors. Clearly, they're global businesses. And it means that the market is as intense, if not more intense than ever from a competitive point of view.

If I could add, Rob, one of the things that was very important to us going into the year was the price competitiveness that we have versus all players. We're all 11 in the market. And the one thing that is important to us and has actually worked, and that's when we say the investments really deliver on what we wanted them to do was the price position that we have today versus where we were in April when we spoke to you is even a bit stronger. And that to me is no bad thing.

Very clear. And just a thought on the trading down. Have you seen any trading down within the basket in recent sort of months or weeks?

The trade down really happened 3, 4 years ago when the first cost of living crisis kicked in. We saw a significant trade down during that period. And that behavior is largely stuck, Rob. I think the 2 trends that we've observed in the last 6 months is an uptick in fresh food, which means more scratch cooking, more batch cooking, which is helping manage budgets. And the second is more dining in, and you're seeing that being part of the reason for the strong growth in Finest. So we call out those 2 trends as customer responses to the cost of living pressure. But actually, they're relatively positive trends for us because it's a source of big investment for us, both in our Fresh offering and in Finest.

Yes. And I think as you look as well, just to build on that, what's very clear to us going into the second half, the promotions that we run, the Aldi Price Match, the Low Everyday Prices, the Clubcard prices, their importance only continues to rise going into the second half as people continue to chase value. But overall, behaviorally, that hasn't changed. People still look for the best value. And clearly, they found it with us.

We'll move on to James Anstead at Barclays.

Ken, Imran, 2 questions from me, if that's okay. Firstly, you've really emphasized this point you've got a great customer response from the investments you've made. Now one explanation for that could be that perhaps others didn't invest, but it sounds like you're saying that competition did increase in the way you expected. So I'm just interested to know kind of how you explain to yourself why this customer reaction has been as positive as it has been? And does that change how you weigh up future investment in the offer?

And the second one, perhaps for Imran, in particular, even the high end of your new profit guidance range at GBP 3.1 billion implies, I think, a 3% or 4% decline in EBIT in the second half year-on-year compared with the 1% or 2% growth in the first half. Obviously, there's a lot of moving parts within that. So that's an oversimplistic equation. But would you highlight any particular points that we should bear in mind when thinking about 2H versus 1H?

Okay. So in terms of the impact of our investment decisions and why we think we're winning. I think I would call out the fact that a lot of competitors have invested heavily in price, but we don't necessarily see the same broad-based investment across product quality, the shopping trip availability, innovation and personalization that give customers that kind of holistic package.

We're also seeing certain trends, as I called out before, in terms of dining in, in terms of more demand for online fulfillment, whether that be GHS or Whoosh. And we've invested very heavily behind those as well. And we don't necessarily see the same level of investment from direct competitors. So what I think you're seeing, James, is that uniquely, I think we've invested in price, and we've invested in all other aspects of the business as well. And if you remember, when we gave the product profit guidance in April, the reason we gave the range we gave was because we wanted the flexibility to invest in price without compromising on all the other aspects of the shopping trip because we understood that customers value the total package, not just one element.

And we think that the sustainable formula for winning is to continue to invest across the board. Not only that, but if you're going to win in this environment over the long term, you have to balance the needs of all your stakeholders. So you have to keep investing in your colleagues. You have to keep investing in supplier relationships. And that done well then gives the returns you need for investors. And of course, we've also been leading the charge in the industry in terms of our investment in our estate, whether that be in our store renewal program, convenience rollouts, online platform, our distribution network or, in fact, our AI and technology capabilities, you're seeing that Tesco is leading the way in terms of its investment profile. And this, we think, is what it takes to deliver sustainable performance.

Yes. On your second question, James, look, I mean, as we entered the year, if you told me that we would gain 80 bps of market share every month, I'd say to you, I'll certainly take that. I mean I wasn't planning on -- we weren't planning on seeing that much of a gain month by month, but we did. Now as we go into the second half, we're going to lap a stronger last year half where we already started to gain very, very significant market share. So we have to lap that. I'm certainly not going to be counting on hot weather as a beneficiary in the second half. And inherently, the second half is a more competitive one. If you think about Christmas, the golden period for retail where everyone tries to show up in their best.

We will certainly plan to do the same. We are planning to do the same. And -- but I would say to you, the only thing that we can't ever become is overconfident or complacent. So we're entering the second half with the same attitude as we entered the first half, which is it's more competitive than before. We need to keep winning, and we shouldn't take market share gains for granted. And we need to keep going after those and make sure we build a Tesco that is more resilient than where we found it, and that's the plan. So we'll wait and see how it plays out. We're absolutely trying to make sure we will have everything in place to keep winning, but we'll report back to you when we're done.

So we will now take our next question from Manjari Dhar at RBC.

I also just had 2, if I may. My first question is on the investments you've made online in logistics and slots and availability and the overall platform. I guess, as you look at what you've done so far versus sort of the overall ambition, how much more do you think there is to go in terms of those investments?

And then my second question is on convenience store -- the convenience store market. And I just wondered if you could give some color on what you've seen there and whether you've done anything specific to drive the market share gains you've seen in the Express stores?

Thanks very much, Manjari. So look, in terms of online, we are investing heavily because we think it's where customers want us to. It's where we see the greatest rates of growth and the greatest demand. We think we're actually in a relatively different stages of investment depending on the proposition. But the first thing I'd say to you is you should see it more holistically as a platform powered by Clubcard that we are looking to address customer needs in whatever way they want to be served. So that's the first thing I'd say is you shouldn't look at them as discrete items.

If I then say "well what stage is each at?" I would say that grocery home shopping is a relatively mature business model. but it's in very strong growth, and we are constantly innovating and finding ways to add capacity. And as soon as we add capacity, that capacity is filled up by customer demand. So we see ongoing investments in that model.

On Whoosh, we think we're about, I'd say, 25% in to the opportunity for Whoosh. It's now a really meaningful business. It's now growing at a really rapid rate. It has, as I said earlier, we believe, some real competitive advantage that we want to exploit. So you can see further investment in that. And I think there's quite a long way to go before we would say that model is mature. I think the third stages, which is F&F online and marketplace is at the most immature stage of the 3. It's got the greatest capacity for growth and the greatest long-term opportunities. We just -- there's a lot of work to be done to build that model out.

So I think each of the 3 propositions are at different stages of growth. And then clearly, behind that sits all the work we're doing to invest in greater personalization capability through our partnership with Adobe, exploiting retail media opportunities across all of the platforms as well as in store, through our supplier strategy. So it's -- these are all components of a cohesive kind of single strategy, if you like, Manjari, that has, we think, plenty of legs and a lot of life left in it yet. And then on convenience, do you want to give 2 minutes on convenience, Imran?

Sure. Look, convenience, we had a really good outturn there because we -- as you, I think, indicated, we gained 70 basis points of market share. which is nice to see. You will also have seen, though, that it was the slower growing channel of the 3. If I look at online, they're growing double digit, large at 4%, 5% and then convenience at close to 2%. What's nice for us is that the value, the range that we're doing, the more sort of by area is actually resonating well with our customer base.

And I think it's one of the reasons why we are doing as well as we have been having put in more own label brands in the last year, I think we're starting to see the benefits of that as well in our ranges. And actually, when I go across to Booker, where we are clearly a big wholesaler to the convenience channel as well, we saw a real strong growth at over 4%, close to 5%. So I feel overall, when I look at the convenience channel for us as such, we're doing quite well, and we'll continue to innovate as and when needed.

We'll now take our next question from Sreedhar Mahamkali at UBS.

So I've got 3, please. I guess, firstly, Ken, you talked about improving the price gap versus market with lower inflation in the first half. And I think, Imran, you also mentioned even better price position than in April.

I have specifically, can you say if you've improved your price position versus all other 3 sort of large full-line grocer competitors since April? If you wanted to be even more specific than that, we'd take it, but just across the market, particularly the 3 of your largest competitors will be helpful.

Secondly, if I can pick up on Clive's question slightly differently on capital allocation. What are your thoughts on where we are in the journey in terms of leverage ratio? Are you okay for a period for it to be below your sort of lower end? Or if it is sustainably stuck at the lower end, do you think you want to revisit the target or use the additional headroom in the balance sheet? I know it's not a question for half year, but more on a full year, but very interested in your thoughts and how you're thinking.

Thirdly, I think Booker acquisition a number of years ago, the way I think it was articulated was it was going to give Tesco access to faster-growing out-of-home market. A number of things you've talked about today seem to suggest maybe it isn't a faster-growing market going forward. At home probably is going to structurally be a faster-growing market than out-of-home. What should we be looking for in terms of Booker in the medium term? What is the role Booker is playing in the group as you see it today?

Great, Sreedhar. Thank you. So look, I'll speak to price gap and Booker maybe and then I'll hand over to Imran to talk capital allocation.

So on the price gap, we actually improved the price gap to the total market, not just the full-line grocers. Clearly, you wouldn't expect us to give you the specifics. But you can rest assured that it -- as you would expect in our market in a price-sensitive market, customers are very, very sensitive to price movements and particularly on the products that matter most to them. And I think the investments we've made in improvements to our pricing algorithms and the AI-driven decision-making to really hone in on those things that really matter to customers has really, really helped us alongside a very substantial actual financial investment in pricing.

So it's -- I think it's improving the price gap, but it's an intelligent pricing investment that really has been a big factor in our performance on pricing. If I talk to Booker for a second, I think that if you look at the average growth rate in the catering market since the acquisition, you would argue that it is a higher growth market. And it will go through peaks and troughs like every market, but it is performing very well. The second thing I would say is that Booker within that out-of-home market is performing particularly well.

So even last year, which was a very tough year for the industry, Booker continued to take share and perform very well because of its strategy of focusing in on the most important customers who are the highest growth caterers in the market as well, of course, the fact that it has a balanced model of catering and out-of-home and convenience retail customers, which means it optimizes its cost base and makes it very, very efficient from a pricing and value for money point of view.

If you look at the half year performance and you strip away tobacco, which is in a bit of a terminal decline, as you'd expect, we would all hope, you will see that actually the underlying growth rates for the out-of-home market and for retail are pretty robust in the half. and Booker has performed ahead of our expectations. So we feel very good about Booker, and we think it's performing very well in its market, and we think it's a market with plenty of opportunity.

Look, when we set up the leverage ratio and we gave a range of 2.3x to 2.8x, fair to say we've done better on -- well, we've done better on free cash flow most of the years. And to your point, the ratio has come down. And -- but also fair to say and very transparently, at the end of last year, we received the proceeds from the bank sale, which were fully in net debt and hadn't been returned at all yet, right? And we've started that return via the buyback. And I would say we're halfway done. So my expectation is by the time we're done, that ratio inches up again in terms of where we want to land.

Look, am I comfortable with where we are in terms of lower end of the ratio at that 2.3x level? Yes, I feel that's the right place to be. Look, all the uncertainties that are out there, I think it's probably a good place to have a very strong balance sheet, which we do have. But as we've demonstrated, where we see opportunities to invest, where we see returns, we will absolutely do so in line with the capital framework that we've set out.

[Operator Instructions] We'll now move on to our next question from Benjamin Zoega from Deutsche.

Just wanted to follow up with a slight clarification on Marketplace. Given the strong online sales and Delivery Saver subscriber growth, just wondering what kind of contribution or attachment rate you had with Marketplace within online, if you're able to give any color on that. I do appreciate it's early stage, but just interested to hear your thoughts on what kind of things will be needed to unlock the capacity for growth in marketplace that you mentioned earlier?

I don't have any specific data for you on attachment rates per se. Clearly, we've seen a big surge in sellers, and we now have over 1 million SKUs on the platform. I think that the steps for us around marketplace, I think, first of all, is to complete the kind of platforming we've done and making it super easy for sellers to onboard. We've recently launched a [ Buy Box, ] which has really helped us in terms of driving price competitiveness on the site. But where we've chosen to place our marketing dollars in these last 6 months has been more heavily weighted towards our grocery home shopping and Whoosh platforms because they're in such strong growth.

I think the next step for us, once we're comfortable is to think about driving the marketing behind the platform, and that's probably one big factor. So I would say to you right now that, as I said earlier, in terms of the 3 stages of driving our overall online proposition, we feel really good about the pace of growth in the more mature parts of it like GHS, the emerging businesses like Whoosh and the very early-stage business like Marketplace.

We will now take our next question from François Digard at Kepler Cheuvreux.

Two, the one is simple. You flagged progress towards the GBP 500 million Save to Invest targets. How much of that savings have been realized so far? And how confident are you that it can fully offset the structural cost pressure like national insurance on the new packaging levy?

And the second question is on Retail Media. Even if I understand that it is a growth accelerator more than a direct profit driver, could you help us put some figures on its size, at least in terms of revenues? How significant is it or at least some growth space or the market share you have in that field? So any colors you could add to the phenomenon?

So I'll do the first bit on Save to Invest in the -- to your question, I mean, clearly, this year, we have an exceptional year of cost increases, whether that's NIC of GBP 235 million, if it's the EPR levy of, what is it, GBP 90 million. And clearly, you have got our store payroll, just stores alone going up GBP 180 million, and that's just before head office and all the other increases and investments we're making. What that, therefore, means is the Save to Invest program is fundamental to the strategy, as in, we need to do the savings to offset our own operating costs that we are incurring so that we can be at the most competitive vis-a-vis our customers, and that is what we're doing.

The phasing to your very specific question is, I would say, evenly phased first half, second half. That's how it's played out because a big chunk of it has started already last year. So we get the benefit and then you start the second half activities because as you might imagine, we're already now starting to think about what are the saving activities that we need to go for to make sure next year is again protected from any operating cost inflation as well.

Then in terms of confidence to hit the number, I feel very confident. This is a core skill, I would say, in the business. Tesco is very, very good at making sure it stays efficient and lean. And so far, so good.

François, as you know, we've been pretty consistent in not breaking out media income separately as we see it as part of the broader supplier strategy and winning with suppliers in terms of helping them build their brands. But I can give you some facts to give you some sort of sense of the momentum behind retail media. We called out in the release, obviously, that we've been able to grow media income by 25% this year so far in the half, which is really, really strong. That has been on the back of a couple of drivers. One is a much broader base of clients, and we're winning with some big household names in particular. The second is that we've been expanding our physical store estate where we've been putting screens into our convenience estate. The third is we've launched video on our web platform, which has also helped driving media.

And we have been increasingly trying to become more sophisticated about offering suppliers an integrated trade and marketing package that's both physical, digital and obviously is aligned to product display plans, promotions, et cetera. So it's all working really well and actually has been recognized in the industry where we've won a number of retail media awards over the last couple of months, including Retail Media Supermarket Platform of the Year. So great momentum. We do see it, though, as a part of the bigger ambition to be the best place for brands to grow in the world from a supermarket point of view. And we're continuing to build out the assets and capabilities that will help brands to grow in our business.

We've now got a follow-up question from Rob Joyce at BNP Paribas.

Sorry to jump on again. Amazon, so, we've seen Amazon's fairly high profile move. They've closed all their U.K. stores, launched in 1,000 cities in the U.S., same-day delivery, just launched a big -- relaunched the private label range. Just wondering your thoughts so far on how you've competed with Amazon in the U.K. and whether you're seeing any changes there or anything you sort of braced for?

Well, I'd start -- I'll pass over to Imran because he'll have some views on this as well. I think that the signal that Amazon is closing its physical stores is a thing. I think it's a recognition that this is hard. I think equally, though, we'd be naive to think that somehow they have gone away as a competitor in grocery. And I think they will instead look to focus on their areas of strength, which is their online platform, ambient grocery and partnerships with other retailers.

So what I would say to you is that on the one hand, we feel good about the fact that we're a hard competitor to beat in our home market. but we would be far from complacent about Amazon as a competitor for the present and the future. We think that there -- we have to work very hard to make sure that we're a viable alternative to customers in grocery.

I couldn't have said it better. So nothing to add.

That concludes the Q&A for these results. So I'd just like to hand it back to Ken Murphy for his closing remarks.

Thank you very much. Listen, we appreciate it, as always, that you take the time to join us. Thank you for your great questions. Both Imran and I feel very proud of the team here at Tesco. I think they've delivered a fantastic all-round performance that has meant that more and more customers continue to shop with us.

We have every intention of continuing on that vein in the second half. We think it's going to be a challenging market, but we're set up really well, and we feel really good about our performance.

So thank you, and we look forward to catching up with you after Christmas.