Associated British Foods plc

Just before we get on to the results, a couple of minutes on the demerger of Primark. Since last November, as a board and as a group, we have reviewed sort of fall angles every which way on this potential transaction. And I think it's fair to say that as a board, we have a deeper conviction even than before that the restructuring and the split is the right way to go. Just to emphasize, this is not an exercise in financial engineering. We feel that each of these businesses, because of their very distinct dynamics, deserve and need separate oversight from separate dedicated boards and accountability to separate groups of shareholders, each of whom have chosen to invest in either food or retail because of a clear choice. We are absolutely focused now on delivering this transaction. The timing, we've talked about the end of 2027. That's to give us maximum flexibility. I suppose there's probably a sweet spot between June and October. The costs, I hope very much that we're conservative in the numbers that we've put in the release. Obviously, nothing's final till it's final, but we've tried to put a top estimate there for the costs Whittington are fully supportive and it's all systems go so we are excited to be proceeding with the transaction I suggest if there are any questions I take them at the end rather than now and we just move straight on with the results George

Michael, thank you. It's actually quite a big day for those of us who've grown up with Primark. I think it is a moment to celebrate the success of that business over the 57, 58 years that it's been part of ABF, during which time it has benefited hugely from the governance that ABF has provided, often in fairly idiosyncratic but always very effective ways. Secondly, though, I thought I was just going to be talking to empty chairs today, and congratulations and thank you for making it in person. I guess there are a number of you who are enthusiastic cyclists. and good luck getting home in that mode of transport. So I'd just like to take a moment to add to what Michael has said with a few words on why we think Primark and food are going to be two really good separate businesses. And let me start with Primark, which is, It's a global disruptive leader and apparel. And I think during Owen's remarks today, you'll start to feel again some of the excitement around the business and what it is capable of. But we really do offer clear price leadership, great quality and exciting fashion in prime location stores. And it's the combination of those three that I think together that make this such a unique place. business. The business has got a really top-class product engine. The buying team in Dublin is absolutely amazing. We have sustainability and ethical sourcing in any discount business you need to, I think, to over-index on your capabilities in the supply chain to convince the skeptical that actually you are very responsible citizens and that you care about the people in particular in the supply chain. We know we've got multiple levers still for long-term growth, continued investments in value, better availability, increased digital enablement, more locally tailored execution. That's all stuff that we can, Owen and the teams can still get there. The business has really exceptional brand strength. And we've seen that most recently in the Gulf states. It has just re-emphasized to those of us who've watched the first three store openings what an amazing brand Primark really is. We have proven more scalable growth model for international expansion. Both are in stores. And inevitably, when you open a franchise and it just goes off like a firecracker, you think, well, I wonder what else we can do with franchise. And again, Owen is thinking through that. We have a highly productive store estate. These big stores give us cost efficiencies. We have an efficient supply chain, one that is capable of further improvements, but it's good already. And we have a lean overall cost base behind the store and the supply chain as well. We have an experienced team. We're a very deep team. The capability goes a long way down through the organization, both in store management, but also in Ireland. We have a solid balance sheet. We are even more are disciplined in our capital allocation. It's inevitable that when you put a finance guy on top of the business that you get to see more finance discipline quite early on. And I personally just have huge confidence in the sustainable long-term value creation of this business. But what Michael says, I absolutely fundamentally believe it's time to have more specific governance and oversight of the business into the future. It's not about the next year or two years. It's five years, 10 years, 20 years out. The right governance will help us deliver the growth potential and ambitions for years and years to come. So that is Primark. And then to food, we've built a differentiated, really quite different global food group that operates across multiple parts of the food supply chain. It gives us resilience. It positions us well for long-term structural growth trends that we see in food demand. Food demand is always changing. If you're right across the food supply chain, I think you have insights into that change, which are quite privileged. At the heart of the business are strong brands and ingredients platforms. we've inevitably, because we just do, have a well-invested asset base. These characteristics will allow us effectively to compete and to grow. In turn, it'll enable us to deliver attractive, sustainable returns to shareholders. We have a deliberately devolved operating model, which again is quite different from other food companies, and we think it's a key strength. You put decision-making close to customers and markets. You have strong central oversight. We have a strong network of connection across the business. That putting of authority down the organization into lower levels of the organization helps us to move faster. It helps us to stay relevant locally, and food is always a local business. And it also allows us to attract and retain customers. high-quality talent. We have any number of people who've spent very large amounts of their career in the food business, and it's a key strength. And I just refer to one, which is we are on to the third chief executive of Twining's Oval Team in 60 years. We've just got a wealth of knowledge of hot beverages markets. And then finally... The balance sheet, cash generation, gives us the flexibility to keep on investing for the long term. It allows us to keep building better businesses, stronger brands over time. None of that will change once the businesses have been separated. And finally, and again, sustainability is part of what we operate. I think it's actually knowledge that food is, wherever you're operating food, it's part of the supply chain, has given us over the years some of the insights into the Primark supply chain. You are not unique. you have responsibilities up and down the supply chain. And that we will take with us in food. The businesses, both businesses have very strong fundamentals. Primark will be the largest retail, international retail clothing business listed on the FTSE. And I believe that food will be the only pure play food company on the FTSE 100. So quite distinct. and worthy businesses. Let me now turn with that to the half year results. We're here this morning to review the last 24 weeks ending the 28th of February and let me just take you briefly through some of the highlights. We knew that the first half was going to be challenging and that's been borne out in the numbers on this slide with group adjusted operating profit down 18%, adjusted EPS being down 15%. The difference is the benefit from the share buybacks. The half one performance was broadly in line with our expectations and there's currently no change to the full year outlook despite challenges that are clearly emerging and present. from the Gulf. And the exception to what I've just said is sugar, and I'll come back to that in some detail later on. We've kept our interim dividend in line with last year. We have confidence in the future performance of the group. We have confidence, actually, in the second half. We completed £187 million of buybacks in the year to date. We'll have completed the announced £250 million by the end of this year. financial year. Joanna will go through the financial results in some detail in a moment, but let me just give you some overview. In Primark, we made good progress, we really did, in re-engineering the customer proposition. That's across product, across price perception, and in our digital engagement with our customers. In the UK, these initiatives began in the autumn, As a result, performance in H1 in the UK was much better. We really do have the answer, I think, to our lackluster trading of the last few years. We delivered like-for-like growth. We gained market share in the UK, all within a challenging consumer backdrop. Trading in Europe was weak. The initiatives and investments to drive the improvement in the UK are clear. We know what we have to do and it resembles what we're currently doing in the UK. But we've started unapologetically as Owen will take you through in the UK. In food, profit in grocery and ingredients business was impacted by the weakness that we had expected in the US consumer in certain categories, particularly cooking oils and baker ingredients. Mazzola is its largest consumer franchise is Hispanic. And as you all well know, the spending in that community is well down as a result of the challenges that they face. The rest of these food portfolios in grocery ingredients generally performed well. In sugar, the results were below our expectations. The adjusted operating loss was mainly due to prolonged low average selling prices in Europe. The crop last year was sadly better than we'd expected. Acreage was down, but yields were up. The market is still long sugar in Europe. And I'll talk about the dynamics beyond that later on. And what I think it means for the outlook, both the second half and also into next year. The last six months have been another period of intense activity. Lots of good progress made in all sorts of places. Obviously, the two key leadership appointments. When we met in November, Joanna and Owen were both very ably filling their roles on an interim basis as a consequence of what they showed us in those interim meetings. positions, we appointed them for the long term, and I'm actually delighted that we're able to do that. We've made good progress with the acquisition of Hovis. The CMA issued an interim report at the end of March. It provisionally cleared the transaction in Great Britain, which is great, but it noted competition concerns in Northern Ireland, and we'll continue to work constructively with the CMA over the next few months. We expect them to reach a final decision in the summer. Across the group, we invested $534 million of capital expenditure in the first half. These are investments very largely in growth opportunities. They have good, attractive returns. And it's been exciting to see a number of the multi-year projects reach completion over the last 12 months, and others will be finished later this year. And as well as investing in our businesses, we've continued to make strong capital returns to shareholders through dividends and through share buybacks. The balance sheet remains strong with 1.2 times leverage. It's worth just spending a little bit of time on the Middle East conflict and what it means for our business. From a cost perspective, the primary direct impact is energy costs, but there are others including freight, fabric, packaging, and agrochemicals. Given what we know today and given the hedges that we have in place, we expect to be able to manage the cost impacts that we're seeing through the rest of 2026. The longer-term cost impact is not yet clear, and we need to remain agile as things evolve. We're not seeing shortage of raw materials. We're just seeing the likelihood of inflation in them. We're also focused on the impact on consumer spending, particularly for Primark. We've seen what we think is an impact in just the last couple of weeks in Primark sales really across the whole of Europe. And there must be a risk that if the conflict persists, consumer spending will keep on being subdued. And with that,

Thank you, George.

And good morning, everyone. So let me take you through the results in more detail. Group revenue was 9.5 billion, which is flat compared to last year at actual rates, with a net benefit from foreign exchange translation of 76 million pounds. At constant currency, the group revenue was 2% below last year, as George just said. Primark sales grew 2%, while overall sales of our food businesses declined by 3%. Group adjusted operating profit was £691 million, a decrease of 18% at constant currency. The majority of this was due to the lower profit in Primark, grocery and sugar, compared to the first half of 2025. There was a small impact from foreign exchange translation, a net benefit of 4 million pounds. So let me take you through the detailed performance by segment, starting with Primark, and looking first at sales, which grew 2% to 4.7 billion. While Primark's like-for-like sales declined overall by 2.7%, the performance by market was very different. In the UK, Primark had good sales with growth of 3% and like sales growth of 1.3%. And Primark gained market share in a difficult UK clothing market. This was a strong improvement driven by actions to re-energize Primark's customer proposition and Owen will take you through those later. In continental Europe, sales declined 1% and like for like sales declined 5.6%. The consumer environment remained weak and while similar initiatives to the UK are being implemented, they're at an earlier stage. Our store rollouts contributed 4% to growth with good execution across our key growth markets in the US and Europe and through our new franchise model in the Middle East. Primark suggested operating profit margin was 10.1% as we expected. Gross margin was lower due to the higher level of markdowns as we effectively managed inventory levels. This impact was partially offset by favorable foreign exchange and supplier efficiencies. The margin also reflects a significant step up in the investment across product, brand, digital, and technology as we focus on like-for-like sales growth and the business growth in scale. We maintained a strong focus on cost optimization and efficiencies, which helped to offset cost inflation. Our full year guidance for Primark is unchanged, with adjusted operating margin expected to be approximately 10%, so similar to what we had in the first half. As George said, given what we know today, we expect the cost impact from the Middle East conflict to be manageable in 2026. We remain alert to potential further deterioration in consumer spending and to the longer-term impact. Moving to grocery. Sales of 2.1 billion were in line with H1 2025. Growth in international brands was offset by lower sales of U.S. oils. Adjusted operating profit decreased 20% at constant currency, as expected, and primarily due to the lower profit in our U.S. oil businesses, both from our retail brand, Mazola, and from our joint venture, Stratus. Grocery profit was also impacted by the effects of higher COCA costs and US tariffs on our international brands. Our grocery guidance for the full year is unchanged, with adjusted operating profit expected to be moderately below last year. We are positioned to deliver a strong improvement in grocery profit in H2 compared to H1. And George will set out some of the building blocks that underpin that shortly. Ingredients performance in the house was as expected. Sales and profit in our yeast and bakery ingredients business, AB Maori, declined, primarily due to the lower customer brand for bakery ingredients in the US. I had flagged that already as well. There was also subdued demand for our specialty yeast for using alcohol beverages. AB Maori's other markets and categories were relatively resilient. In specialty ingredients, ABFI, We had good growth overall and across most of our businesses. We accelerated investment in product innovation and commercial capabilities to drive long-term growth. Our ingredients guidance for the full year is unchanged. As with grocery, we expect cost impacts for the Middle East conflict to be manageable in 2026. It does not reflect the indirect consequences or the longer-term impacts. Sugar sales declined 9% when adjusted operating loss of 27 million. In the UK, sales and profit declined significantly due to the lower average selling prices, reduced export sales, and as such, a reduction in the estimated net realizable value of our sugar inventories. This impact was only partially offset by lower negotiated beet prices. Spain was also impacted by lower European prices, although the operating loss was lower than the first half of 2025 due to the restructuring actions that started last year. Turning to Africa, overall profit was down due to lower sales in South Africa and Eswatini and lower production in Tanzania. Overall for sugar, based on our view of the current market dynamics, we do not expect to offset H1 operating loss in the second half. and so we now expect sugar to deliver an adjusted operating loss for the full year in 2026. George will talk through the market dynamics and the outlook in more detail shortly. Agriculture adjusted operating profit was 6 million compared to 12 million last year. This reflects two main factors. Compound feed decline due to the loss of a large customer, and we are adjusting our cost base accordingly. We also had a lower profit contribution from our joint venture frontier where grain trading business was impacted by unfavorable market conditions and a small crop size. Our specialty feed and additive businesses delivered strong growth following the H1 performance. We expect agriculture adjusted operating profit in 2026 to be below 2025. Moving to adjusted earnings and adjusted earnings per share, a couple of points to highlight here. Firstly, tax, the adjusted effective tax rate was 24.5% in the first half, which is similar to the tax rate in the first half of 2025 of 24.1%. And we continue to expect the group's effective tax rate in 2026 to remain broadly in line with 2025. Secondly, you can see that the adjusted earnings per share have continued to benefit from the share buybacks. Free cash flow was 71 million compared to 27 million last year. While operating profit was lower, there was a reduced working capital outflow because of reduced inventory levels in Primark since the 2025 financial year end. As a reminder, we have a seasonal peak in working capital at the end of the first half, and net cash balances are always at their lowest at this point in the year. You can see as well that capital expenditure at 0.5 billion was broadly in line with last year, and I'll come on to some of the details of that spend shortly. Our balance sheet remains strong and continues to support investment and shareholder returns. A few points of note. Firstly, you can see that overall working capital was broadly in line with last year. Inventory levels in Primark were slightly higher than last year, However, seasonal inventories were well managed by markdowns in the period. Secondly, the lower net cash position compared to prior year reflects the shareholder returns we made in the year, both in dividends and share buybacks. Finally, the pension surplus continues to grow and is a very significant asset at 1.7 billion. Turning now to cash and liquidity. Our half-year net debt position, including lease liabilities, was 3 billion, compared to 2.1 billion in H1 2025. This is due to the cash reduction I just explained. Our leverage ratio was 1.2 times and is an increase on last year, but well within our capital allocation policy. Total liquidity was 2.2 billion, which includes total committed credit facilities of 1.8 billion. This robust position underpins our ability to continue investing in growth while maintaining resilience and flexibility. Our capital allocation policy prioritizes disciplined investment to drive long-term growth. In the first half, we invested $534 million across the group. Around 40% of this was in Primark, where we continued to roll out stores, invest in our depot network, including automation, invest in digital, and new technology. The remaining 60% was in our food businesses. A large amount of the spend was in multi-year projects, a number of which completed in 2026. George will talk more in detail about some of these investments shortly. Across ADF, we continue to spend around 100 million per annum on technology investments, including automation to drive efficiency in our supply chains and new ERP systems to strengthen efficiency and decision-making in the businesses. We still expect CapEx to be around 1.2 billion for the full year in 2026, similar to last year. Our capital allocation approach is to return excess capital to shareholders, both through dividends and share buybacks, as I said before. Our interim dividend is 20.7 pence, which is in line with last year. That's a reduced level of dividend cover, but as George said, reflects our confidence in the outlook for the group. In terms of share buybacks, we expect to complete 250 million in this financial year. We've completed 187 million of buybacks in the year to date, with remaining 63 million left to complete. And these shareholder returns, alongside with our continued investment in capital in the businesses, demonstrate our commitment to delivering long-term value for shareholders. I'll finish on the group's full year outlook for 2026. The phasing of group profit was always expected to be weighed to the second half of 2026. For the group overall this year, we continue to expect adjusted operating profit and adjusted EPS to be below last year. For the segmental guidance, there is currently no change to our previous expectations for 2026, with the exception of sugar. This slide sets out the additional detail that I covered during the presentation. And with that, let me hand you back over to George.

Okay.

Let me just introduce the section on Primark, which Owen will take over from me after this first slide, and then I'll come back for food after that. I think it's my job really to share some color as to what has been going on. I said at the outset how delighted I am that Owen is permanently enrolled as Primark's chief executive. He's also only the third chief executive in Primark's nearly 60 years of history, so his appointment is a very significant one. Over the last 12 months, Owen has taken a hard look at several elements of Primark's strategy. He's taken a hard look at the customer proposition, and he's taken a hard look at the company's operational effectiveness. He's really thought about Primark's value proposition and how to refine it, starting with price and price perception, which are at the heart of Primark. We now, as well as that, have a deep insight into Primark's customers across Europe, the UK, and the US. We have a clear picture of which customers we're going after, and then customer strategy, because of that knowledge, can be increasingly targeted for each market. There's been strong progress on the product offerings, starting with women's wear, and Owen will tell you more about that. There's been a refocus on digital, or increased focus on digital, and how we continue to build on what is already in place. We remain excited about the white space opportunities in the US and Europe. The introduction of our new franchise partnership model in the Middle East, as I was saying earlier, I think is a real game changer. Importantly, also, though, Owen has accelerated the work to improve supply chain effectiveness and significantly reduce costs. There are loads of cost opportunities available to us. And, of course, we have Philip Eckvall joining later in the year, joining Owen's team as the chief commercial officer, it will be a great addition given to his experience, plays into a lot of the opportunities that we've been identifying and that I've mentioned. That's enough of a summary for me of the significant areas of focus in a very energized business. There's a lot to go after, and the business is really moving very fast. So with that, Owen, over to you.

Well, that's quite an intro. Thank you. Good morning, everyone. Great to see you all, as always. Look, I am conscious it's my first time seeing you guys since being appointed, and I'm delighted, I'm honoured to be officially taking up the reins and being the third CEO for Primark. I don't think we wasted any time, as George said, during the interim period. It allowed me to really get on the skin of the business, as George said, get out to the markets, and really get to grips with our customers in each market. And I'll talk more about that in a moment. It means I am coming into the role very clear about what the job is to be done and how we're going to grow. So let me remind you of Primar's key strategic priorities and how I feel we're progressing against them. We need to re-energize Primar's customer proposition to drive like-for-like sales. This is firstly around sharpening our price and price perception. Price leadership is and always will be our DNA, and we're doubling down on that. Major finds has been a good start here. It's really resonated and reminds people that Primark is the place for knockout value. Prices are given, but it's quality and style we deliver at those prices that will set us apart. So we strengthened our product offer, starting with significant developments in women's wear, and I'll come back to that. We're working on getting better integrated in our customer engagement across channels, supported by a step-up in marketing investment. And we're investing in the digital capabilities to enable this, building on the momentum and learnings we have from our click-and-click rollout in the UK. Now, I recognize the focus of re-energizing the customer proposition as being, as George says, unapologetically in the UK, and actually unapologetically in the women's wear category also. There's a reason for that. It's our largest market. It's our largest and most strategic category, women's wear. However, we focused in H1 also on getting deep insights in our customers in some of our core markets in Europe and the US also, and how best to bring our offer to each market. And by the way, we did that also in the UK. The opportunity now is to roll out more activity in more markets and in more categories into spring, summer, and into autumn, winter. all of the key product initiatives will be delivered across the store estate including more in-store activation in europe we also have more major finds across the uk and in europe in h2 alongside increasing marketing activity in europe as well look we recognize it's going to it might take more time to implement the same level of digital customer engagement in these markets but our richer customer and market understanding of europe has given us confidence that as we begin to dial up the local marketing activity, including local influencer partnerships, more targeted digital marketing, and greater use of CRM. These initiatives will have an impact. And that goes for the U.S. too. Similar story, we've taken a stand back to work on the target consumer and are now seeking to execute a step up in more tailored product and customer engagement activity. Moving on from the customer proposition, I still feel very excited about the significant white space. opportunities in both existing and new markets. We've been focusing on how best to unlock this with a clear lens, again, on the local customer opportunity. This now includes the new franchise model, which I'll speak to in a moment. Underpinning all of this is really an overall transformation of the Primark business. We've talked about this for a while with our investment in technology, in supply chain, in digital, and in cost optimization. There really is a lot of activity going on here and We spent the last number of months organizing ourselves for success here to deliver on the investment case that George laid out at the beginning. I think despite the near-term headwinds and uncertain environment, that's the overall medium-term and long-term message. Roll out more of the re-energized customer proposition, attack the white space, and transform the business for the future. So let me now give you a little bit more color on the progress to date in the UK and the customer proposition, including digital engagement. in the white space development and in the transformation. We've definitely made progress in reinforcing our value proposition and price leadership in the UK, and our brand metrics show us that that is the case. As I've said, our focus has been on women's wear and activation of women's wear in the UK, which, again, our biggest market, our biggest category, and it's actually central, really, to our brand strength. In the UK, we now have had major fine drops pretty much every month, every few weeks, actually, since September, all in women's wear. And they're achieving their objective, which is to remind core customers of what Primark is all about. So firstly, helping to tackle the price perception, but they're also selling out and driving football into stores with attachment buys. And finally, they're working very well for us online in terms of sales and in digital engagement. Moving on to denim. Denim has been a focus category for us in H1 with a lot of product in store and customer activity. I'll come back to the customer activity in a moment. On to performance. We've invested significantly in the performance wear category. This is Primark value in action. Innovative fabrics delivering quality comparable to product costing many more times, unlocking an entire new category for us, and democratizing it for our customers. We maintain a strong focus on unbeatable value in everyday essentials. Primark absolutely dominates nightwear, and we have seen good like-for-like growth across underwear and nightwear. We're becoming more strategic with our curation and coordination in our fashion lines and stores, which is resonating well with customers. It wasn't in the half, but our Shock Me She campaign, which is nicely modeled by our CFO today, that some of you may have seen, it launched a new design-led women's wear main range that sees us return to our fashion roots, offering incredible style at Primark prices. This curation alongside continued ongoing partnerships, including our newest with Colleen Rooney, which has been very successful, means our women's wear fashion offer is broader and better than ever. And finally, we've expanded our offer with a new youth label, The Scene, which targets a discerning and different younger customer who is looking for trend-led fashion prices that they can afford. It's early days, but the initial response has been very encouraging. Our product engine is working well, and I think that the trick is, as I said, it's to broaden the focus from women's wear into other categories such as menswear, kidswear, and lifestyle, and be clear on our focus, including what we don't do. Just give me one second, my technology error. Okay, so let me move on then to, where am I? I should just say, overall, the focus on women's wear and with the focus on the activation in the UK has resulted in the good, like-for-life sales growth and the strong market share gain in the UK, which it wasn't like before. But anyway, I missed my chance. Okay, so moving on to on the activation, particularly in the UK, let me talk about two things. One, better integration of our approach. And two, using our digital flywheel more effectively. Again, it's got a UK lens. We significantly stepped up our marketing investment in the UK, but critically driving more integrated customer engagement and reach. A couple of examples to illustrate this. In September, we launched our first fully integrated UK campaign in Denim We Can, which is followed by the Shock Me She campaign, the more recent one. Both are multi-channel campaigns. spanning in-store, TV, paid social, CRM, out of home, plus Primark's typical strong organic reach. These are very first full funnel activations for Primark. The Denim campaign delivered strong ROI and improved brand health, and early results from our latest shockingly chic campaign are also encouraging. We are also really exploring the potential within influencer marketing markets. Our collaboration with Perry Shan at the end of last year, Perry's Primark PIX delivered strong sales, particularly online, with our first launch delivering our highest ever click and collect performance. On overall digital capabilities, we're continuing to invest in the customer experience and functionally on our website. And website traffic was up 37% across the business in H1. We are rapidly growing our CRM customer database with a further 1 million customers added during H1 to now reach over 5 million across our markets and 3.5 million in the UK alone. We have seen the benefits of having this data. We know email engagement is contributing to healthy SOAR traffic, particularly again in the UK. Of course, our digital flywheel in the UK is strengthened by the usage and the sales of Click and Collect. which is nationwide in Great Britain and continues to grow. In the UK, we've just launched our app, which includes the ability to purchase through Click and Collect, and the app is now available in Ireland and Italy and will be rolled out in Spain and Portugal in the second half. So moving on to our expansion. So NewSpace contributed 4% to sales in the first half. We opened 11 owned stores in the half. Four of these were in Europe, including in growth markets such as Italy and Poland. Five stores were in the U.S., where we now have 38 stores in total. I remain very confident about our proposition being differentiated and highly attractive to U.S. customers. As I said earlier, the detailed work to deepen our understanding on a target consumer in the U.S. will allow us to be laser-focused on how we grow, better tailoring our product, our customer activation, and indeed our store footprint. Awareness is still a big opportunity, which is the main reason why we're looking forward to our Manhattan flagship opening in a couple of weeks on May 8th. This prime location puts us on the map for millions of New Yorkers and U.S. tourists, and it's going to be a big moment for the U.S. brand. As George said, our new franchise model is incredibly exciting and a real game changer, as he said. Our first store in Kuwait has traded better than expected. In March and April, we opened our first two stores in Dubai, which, despite the circumstances, have also traded well above expectations. We've got an exciting pipeline ahead, again, despite the circumstances, including opening in Bahrain and Qatar this calendar year. Fundamentally, we just believe over time that this new franchise model creates opportunities for new market entry. And then finally... Moving on to transformation, George and I have talked a lot about the activity to invest in the business in the future. We've stepped up our overall approach to transformation, which we will update you on over time. I'm going to talk just to three elements today, cost optimization, supply chain effectiveness, and overall technology investment. On cost, let me give you three examples of delivery in the first half. Firstly, the rollout of self-checkouts. We now have self-checkouts in 250 stores. It's great progress, but it's still only half our store estate, so plenty more to go after. I remind you, self-checkouts typically reduce labor in stores by about 10% and improve the customer experience. Secondly, continuous improvement in our store labor model has also delivered ongoing cost reduction. And thirdly, in the period, we've now moved some of our transactional essential functions to a third-party business service model, which will deliver efficiencies over time. So all very good progress. On the second pillar today, supply chain effectiveness. There's a lot of activity going on. We see this as a big unlock for growth and efficiency. In H1, we neared completion of our new depot in Northern Italy and continued with other automation projects. And then there's a lot going on in the third pillar. Again, I mean, if there wasn't a lot going on in technology, you'd be wondering what's going on. And again, we've made good progress on the overall technology agenda. Some of this is in fundamental core systems to modernize our business as we scale. Some of this is in more technology and systems to enable us to drive growth and productivity. Again, I will provide more updates on this in the coming months and indeed years. Overall, Primark's transformation agenda, it is a multi-year project which will underpin the acceleration of top-line growth and drive cost reduction. With that, I'll hand you back to George.

Thank you, Owen. Let me move on to an update of our food businesses, which will be all I talk about in years to come. As I said at the outset, the food businesses have made good progress in the half across a number of areas, despite the damp financial results. We continue to invest in marketing, innovation, technology, and capacity, all to drive growth. And this has set us up well, I think, for strong improvements in profit in the second half. The first half performance was broadly as we'd expect it to be, with the exception of sugar. And with that introduction, let me now go through the different sectors, starting with grocery, where profit in H1 was below last year. And the primary reason for that was weakness in U.S. oil's. both in our retail brand, Mozilla, and also in our joint venture, Stratus. Stratus predominantly serves food service customers, and the lower-end food service market in America is quite restrained at the moment. And Mozilla is clearly navigating a headwind. Its core consumers are the Hispanic population, as I've said, We've continued to see those consumers significantly reduce their spending in a difficult environment. They're not entertaining each other and they're reusing oil and their spending is well down. We have responded where we can. We've improved affordability through promotions and we've focused on smaller formats. It's important that we don't give up on on our customers here, so we've retained our advertising share of voice. Something like 80% of the branded marketing spend in this category is ours. These high spenders, what is underpinned, are steady increase in market share and sales over time. a number of years now. We remain the number one brand. In fact, I think our branded market share is about the same as the next two combined. We really are strongly placed in the category and we want to remain so. As we go into H2 in Mizzou, we're analyzing the reduction of sales that began in H2 last year. So the year-on-year comparator becomes a bit easier. For Stratus, the reduction in out-of-home eating by those consumers and lower procurement margins led to a reduced profit contribution in the first half, and we expect more normal margin levels to improve profit in the second half, and we've got some of that baked in already. If those were the two problem children, let me go on to better areas of performance. So the international brands, led by Twining's Noble team, but also with the World Food Brands and Chatham and others, really did, really had a good year. Twinings had showed good volume-led growth, supported by strong innovation. The innovation pipeline and pace of innovation across Primark, sorry, across Twinings, has accelerated markedly in the last couple of years. And then the marketing has all been excellent. The advertising campaigns are all best in class. So good growth in the U.S., and that was also driven by an expansion of our e-commerce business there. I think Twinings now is the largest brand on Amazon in the United States. But there have been other highlights as well. Blue Dragon, part of the World Foods portfolio, saw volume-led growth across the U.K. and across international markets. We had some really good, exciting new product launches, particularly in Korean markets. which we supported with strong in-store merchandising. I don't know any of you have seen the World Foods section of Tesco's in the UK. It's really strong. Patax also had a good year of innovation-led progress. Jordan showed good growth. It was helped also by new products like the Protein Boost granola. Mazzetti The balsamic vinegar brands had double-digit sales growth in H1, with good performance across a number of its markets. Good sales growth in the first half in the international brands didn't translate in the half into profit growth, and there are a couple of reasons for that, and they both relate to Ovaltine. The first one was the effect of higher cocoa prices. They peaked in the first half of 2026. It is our certainty that those prices have come down and some of our positions that we've taken with lower cocoa prices, which again gives us confidence of that improvement in half two. It's as close to being baked in as it can be. And then secondly, we started up the new Ovaltine factory in Nigeria. which is an incredibly exciting long-term prospect for us with 7 million babies born every year in that market. But startup costs are reality of any commission. The commission has actually gone well, so I'm not flagging disaster and things breaking, but there are just inevitable startup costs, which are first half related, second half they don't repeat. Now I've gone... Slightly off-piste, this is a new slide, but I think it's quite an important illustration of some of what we're about in food. In future conversations, we do want to, particularly over the next 18 months, we do want to shine a light on some of the less known parts of the food portfolio. And I've given you four here. They're brands that are small but very successfully accessing niche categories of food and niches where there are good growth prospects. So, for example, they don't include Gentleman's Relish. Sales growth in our sports nutrition business was over 30% in the first half, led by hydration brand High Five. Explosive growth in that category, and we're in it in the UK and in it at scale. Anthony's Goods, had another year of sales growth in the high teens. Anthony's, and I think I've mentioned in the past, is a leading U.S. brand of organic ingredients and superfoods. Essentially, if you're Californian and you make smoothies in the morning, you're going to be using some of Anthony's products. And that trend is growing very quickly and spreading across the states. And again, we've got the number one position in a number of those ingredients and superfoods. exciting future. At the moment, it's just online, delivered through Amazon. In time, we hope it will become, get into bricks and mortar, and then the growth becomes several X times, the potential market becomes several X times what it is at the moment. And then we had good, strong growth, again, within world foods in two more recently acquired brands, Alfez and Capsicana, which are used for Middle Eastern and Latin American cooking. And again, good market characteristics in both those. If you take all those businesses together, they only have sales of about 100 million, but it's still 100 million. And so they're small. Their combined sales growth in H1 was about 20%. We like these categories and we can manage these sorts of businesses because of how we are organized. And so we can be in the smaller scale, but fast-growing areas of the food market, and we will be. If I look ahead to the second half in grocery, we will see that strong increase in profit that Joanna mentioned. Firstly, this is a typically seasonal business. The first half is always weaker. The profit flow-through is always, I think, second-half weighted. Part of that actually is the crumpet season in Australia, but that's just an anecdote for you. There are a few reasons why the shape of first half, second half is steeper this time around. And I've mentioned the COCO costs are there. The Nigerian facility is up and running. There are some other costs which have come down in the second half. So U.S. tariffs have come off a bit, both in tea and also in a Chatham. Interested to see that you now have a route to getting your money back on. overpayment of tariffs, and I hope that Owen is honest. And then there have been some go-live costs for newer ERP systems. So ACH in the States has gone live. There were some startup costs of that. The project has gone very well, but there have been costs that have been borne in the first half. The same, I think, is true of Twining's Oval Team, which is nearing the end of its ERP journey. As I noted earlier, we do expect more normal margins in Strauss. We're already seeing it in the future book, and that will increase our profit contribution. In Australia, we'll benefit from the new capacity at Tip Top, so the new bakery or the bakery extension and rebuild in Western Australia. In Australia, and then this is just a comment about the Gulf, we've seen steep increases in fuel costs. We have a really big distribution task in Australian bakery. had a fuel surcharge accepted by most of our customers already. It's part of what gives me confidence that the second half profit that we can cope with the Gulf on the cost side. And finally, in Twinings, we have a bunch of new products hitting the market, particularly in Australia, around cold in the second half, and that will drive a stronger profit. in the second half. But it's the only one where we've, I think, still got a lot of work to do. The rest of these causes of profit increase in the second half, I think, are more or less locked and loaded. Let me go on to ingredients and start with Maori, which is our yeast and bakery ingredients business. The key driver in bakery ingredients now is product innovation. I think particularly in the era of GLP-1s, We develop products that meet very specific consumer needs in each local market. And we've just called out on this slide some of the product innovation for the US market. So lower fat content, doughnuts, egg-free cake mixes, and so on and so forth. We've installed the new sourdough capability in the UK. It's now up and running. and is filling up fast. We've commissioned and we're supporting our customers' innovation with sourdough, so it's not just being able to sell them product that's relevant, it's also giving them technical expertise to enter the sourdough market, and again, that is going well. Baker Ingredients Technologies can replace fat, eggs, and without compromising on taste, and texture. They showed us some of these solutions the other day, and they were really compelling. Donuts with 30% reduced fat, which still tasted extraordinarily indulgent. But in the first half, the ingredients profit was impacted by weaker demand in the U.S. market, and also by reduced demand for specialty yeast. We have a very good, strong position in specialty use for alcohol manufacture and we're inevitably at the receiving end of some of the shutdowns to distillation capacity which have occurred in the States and in Scotland. Some of the distilleries are turning back on again now so it's picking up but there's been a marked step down in specialty use consumption. ABFI, which is the specialty ingredients portfolio, most of the business in that portfolio delivered good, in some case really good, growth in the first half. In pharmaceuticals, our excipient, active, and vaccine-related products all grew well. And lipid sales, which again is part of the... farmer portfolio, they were lower. They're expected to recover in the second half. In food and beverage and in health and nutrition, we had good growth driven by yeast extract growth, enzyme growth, botanicals growth, and extruded protein crisps, which also grew. We do continue to invest. We're strengthening our teams and capabilities across R&D, commercial and business development. We have a number of ongoing strategic projects. capital projects. In the first half, we commissioned new capacity for the yeast extract business in Germany, and there's another project there that we're completing, hopefully, in the second half, which, again, will increase unlock capacity and sales. One of our businesses in March, SBI Pharma, agreed to acquire a German company called Elementus Pharma. That's a business that will strengthen SPI in our position in pharmaceutical actives. These are antacids in particular. And it will expand its offer in digestive health. Let me turn now to sugar and starting with Europe. Remember, we have two very different businesses. We have two European sugar businesses, the UK and Spain, and then we have a lovely portfolio of sugar businesses in Europe. Sub-Saharan Africa. We firmly believe that the European sugar businesses are capable of generating a lot of cash in years to come, even in a market with long-dated trend of volume decline. And they demonstrated this over years. Sugar consumption in the UK, and not every kind of health commentator recognizes this fact, sugar consumption per head of population in the UK peaked in 1965. and has been going down since. We've also had some step change reductions in demand, particularly when the sugar tax was introduced to the beverages category. So we've coped profitably with reductions in demand. Industries which are in decline can nonetheless generate a lot of cash, and that's what we firmly believe sugar will do. We have in the UK A highly efficient business in British sugar. We are one of the lowest cost producers in Europe, if not the lowest cost producer. The assets are well invested. The only capex that we're investing and have been investing for the last few years has been about reducing our energy costs. They've been good projects with good short-term paybacks. The one that is underway now to put steam drying into Wissington is partly funded with taxpayers' money. These are nice, fast payback projects. There is no other significant capex requirement for British sugar into the future. In the UK, our market share is over 50%. We are really well placed. We have a super industrial brand. We are well known for being a very reliable, high-quality supplier of sugar. The customer relationships are in good shape. And then lastly, producing in the UK gives us the added protection, and it's probably worth £10 a ton, maybe £15, of the English Channel. And so UK business is just potentially great business in a market that's declining, albeit that the European sugar industry is more than capable of coping with reducing supply, reducing demand. So why are we losing money again? The answer is that the European prices have been low for a couple of years. The market remains oversupplied. The surprise this year sorry about it, was that yields from a reduced acreage across Europe were very good. Some of the best sugar yields in Northern Europe prevented the acreage reduction from turning into, turning Europe into deficit. The other thing that's worth mentioning is that the surplus is actually quite small. It's just that that surplus has driven very aggressive pricing. So that aggression will go away once the surplus goes away, but I can't help but feel that we've overdone the price reaction given the level of surplus. There needs to be a rebalancing of supply and demand. If you look at selling intentions, they are well down across most of Europe. If those... reduced sowings combined with a more normal yield outcome, then I think there's a good chance that the market will be in deficit, will be short sugar. There's stock still in the system which will flow through. So I think we can't expect price reaction to be very early and very strong. And we haven't seen it starting yet, hence the warning today about the second half and about next year. We just haven't seen prices reflecting an anticipated shortage of sugar. Maybe we'll get there. Maybe we won't. We don't know at this stage. But I think it's right to call out that right now, sugar prices remain subdued. In Spain, so that's UK, but in Spain, In Spain there are some of these similar characteristics around market pricing. The restructuring we did last year though has changed the business significantly. We were predominantly a beat processor and now we're predominantly a cane processor. As a cane processor you can back to back sales contracts which you can't do in beat. So we've de-risked it. Now that Spanish business will never have the same scale to be at the level, the cost level of British sugar, but it's largely a beet business. Sorry, it's largely a cane business now and a trading business. So we think that, I mean, there's more to do, but the heavy lifting and the cost associated with any restructuring in Spain in particular, we've taken all that So we think Spain is in much better place. There's also new leadership in place to take quite a different business forward. I think I've gone through most of the characteristics of the second half. Our own sugar production, not playing our part in taking sugar, but Cabastia, we produced 8% less sugar. in the harvest just completed than what we produced in the year before. And next year's, the sowing intentions in the UK are off another 8%, 9%. British sugar in the old days, you'd have thought 1.25 million tons, maybe 1.3 was normal. We produced a million last year. We'll be under that this year. We're playing our part in coping with industry demand reductions. We will have another trading update in July. We will give you more information about how the crop has progressed at that stage. We will also tell you more about the startup in Africa, which is the timing of the startup determines how much of the profit in their campaign falls into this year and how much will spill into next year. And so with that, let me move to Africa, which is now over half of the sugar revenues. This is half the sugar business and more. The fundamentals are really strong growing population Very high market shares, very well branded sugar business with very good routes to market in a place where that is quite difficult to achieve. You were always going to get some weather related events, but the long term fundamentals are intact. At this stage of the year, again, the startup growth risk is still ahead of us. So when we come back in July, we'll be able to say, look, Malawi, actually, Eswatini got away on time. We think Tanzania might be late. We think Malawi is going to be late. As I say, it tips money into next year from this year, and we'll tell you as much as we can about it. The last thing to say about Africa is that very big investment in Tanzania, the new factory, is complete. We had quite a lot of wrestling to do with it before the rains came and we had to shut it down for the rainy season. We've done a lot of very good work in the off-crop and we have a fair degree of confidence that when it starts up again, probably in June, it will run much better than it did. It'll take a while to ramp up to its full capability. I remind you, we built it because there's a significant shortage of sugar in Tanzania. There's a supportive government, and sugar demand is growing every year. There's also a project there which will be complete around about June, I think, to build a new distillery to produce high-quality potable ethanol. It'll be the second distillery distillery we've got on that site. That second site is almost sold out already. So these are lovely economic opportunities that we face into in Africa. So finally on to agriculture, the focus is on growing our portfolio of value-added specialty products. We've still got some of the old stuff, but it's reducing in importance. The new premix plant in Vietnam is near complete, also in China. The integration of the full service offer for dairy farmers in the UK continues to progress and we're beginning to look offshore to see where that model is relevant. Compound feed sales were well down. I noticed in November that we'd lost our largest customer in the UK. It's allowing us to adjust our cost base accordingly and that work is well underway. And then finally, I do feel for our good folk at Frontier, the JV, because They've had a horrible combination to cope with of a very small crop that goes all the way back to the wet autumn in 2024, which led to small UK harvests. They merchant that harvest. And then, actually, even despite the volatility of in some commodities that the Gulf situation has caused, there's been very low soft commodity volatility, lowest in kind of 10-year period. And you need that as a trading business. You need that volatility to trade on. So it'll come back. It'll come back, but just not in the first half. Let me finish on the group outlook. The financial year, the outlook is unchanged with the exception of sugar, where I think we've told you what's going on. That outlook does take into account the expected cost impact of the Middle East conflict, which we have good reason to think is manageable. It doesn't reflect the risk that if the conflict persists, that's accompanied by a further deterioration in consumer demand. That's a risk that remains out there. Primark has made very strong progress to re-energize the customer proposition framework albeit in a consumer environment that's challenging across all our markets. The food business is positioned for strong improvement in profit in the second half of the year. The businesses are all well invested for long-term growth. There are a number of multi-year projects completing this year. That's a very good thing. And our strong balance sheet supports whatever resilience we have to display. We're confident in long-term fundamentals and growth prospects of both the retail and food businesses. Today is the day to reconfirm that.

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

Hi, good morning. William Woods from Bernstein. Three questions for me. The first one's just on Primark. Primark is an independent business. Do you think it changes your approach to long-term growth and capital allocation or enables you to do anything differently? The second question is looking at H1. Obviously, you had some quite significant margin compression year on year. Did you buy too much or get the buy wrong? And would you aim to get more stability into your margin going forward? And then the third and final one is you obviously completed a massive review of the business and its structure. Do you want to conduct more portfolio review in the foods business? Thanks.

Do you want to take the first two? Yeah. Yeah, look, I – well, actually, I mean, George, you might comment on – I don't think it changes much. Like, I mean, the style, obviously, Pramuk's been part of ABF for, you know – Well, forever. And it's been a kind of a long-term approach, so I think fundamentally that's the culture. I don't think it changes the long-term outlook and thinking and so on, but more to the point around governance and focus and all that sort of thing, a slightly different point.

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

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

And then... No, this review has been about where Primark, about Primark governance essentially. But we've been doing a lot of portfolio work in food. You know, the Virgo's gone, Chinese sugar's gone, Mozambique sugar's gone, Spain has changed into refinery business, bakery, we hope we'll own Hovis and that'll address the problem. We've been buying some of these smaller positions. I think we'll see more in ingredients over the next few years. I think Elementus is just the starting point, very attractive acquisition. So that food portfolio, if you're going to access, as we want to, new markets, new growth opportunities, M&A has got to be part of it. And then the existing holding, you've got to be sure that it really is a cash cow. Otherwise, there's kind of no point to it. We've got a couple of, we've got Australia meat we still need to do something with. It's not the biggest thing out there, but it neither ticks the cash cow box nor the growth box. So, yeah, what are we going to do? But I think most of the other, what people would fairly harshly described as bleeders. I think we're well on with doing something with.

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

Yeah.

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

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

Which is partly to do with the allegations of fairness. Yeah, yeah, yeah.

Yeah, sorry. Morning, thank you. It's Richard Chamber from RBC Capital Markets. Also three for me, please, if that's okay. So just following up on the margin point on Primark, I wonder if you can give a little bit more color on your expectations or sort of impacts from digital and marketing initiatives on the margin and what you've seen so far and what you're expecting in H2. On the sugar side, George, can you maybe just walk us through a little bit more on the change in guidance? Is that all sort of EU pricing related or is there also a change in expectation for Elovo? Are you also saving still, is it 30 million from the Virgo shutdown from last year? And then just finally, on the demerger plans, any sort of updated thoughts or initial thoughts on the capital structure for both businesses? What sort of balance sheet will you be looking to run for both sides? Just any sort of high-level thoughts on that? Thank you.

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

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

Yes, those savings from Virgo are there. We've still got... some people on site making sure that the site doesn't deteriorate too fast while we wait to make a decision about whether there's a buyer or whether we dismantle it or whether the UK falls out so spectacularly with the Americans that the trade deal is undone and then we'll see where we go. I think we sort of moved on from Vivergo though. Elovo, there are a couple of headwinds. So the delay in the Tanzania startup, or the difficulty of the Tanzania startup, has delayed the ramp up, and that will affect the profitability of the second half in Tanzania. Actually, pricing, which we were worrying about in Tanzania, has come back reasonably quickly. reasonably well. And then we've had too much sugar coming into the South African market, where there should be an automatic tariff adjustment mechanism, which hasn't been working very well. So there's been, I wouldn't describe it as a flood, but quite a lot of third-world sugar, third-party sugar, come into Africa and depress margins in South Africa and in East Martini. So there are some headwinds, but they would fall into the camp of kind of normal stuff.

And Africa is second half, so we will need to see how the campaign goes because it's just starting in some of our markets.

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

Yes, I think you mentioned Europe.

Yes, there will be a step up in the second half of the year, but we're expecting it to return, but it's not material to the overall group, Martin.

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

It's Adam Cochrane at Deutsche Bank. Just a couple on Primark, please. Can you outline any timeline for the improvements and changes that you're going to make in the European business? I'm assuming it's as quickly as you can go, but when can we expect these various bits that you've seen in the UK to come into Europe? And secondly, on the price and value perception question, study or whatever it is you've undertaken, can you just give us some color on where you see the consumer, what they're thinking about your brand? And with the improvements that you've seen in the UK, is that more related to the price investments that you've made, the marketing side of things? What do you think or have you asked what has actually driven that change in price perception in the UK? And from that, is price perception the main issue in Europe from your study, or is it something else? Thank you.

Good question there, Adam. Why don't I kind of start with that second question first to lead into the first one. Yeah, look, I think the color we're seeing on the consumer improvement in the U.K., isn't just on price. It's price, it's quality, it's style, it's fit. And in fact, the brand metrics demonstrate that. We already actually do score very highly in price actually in our brand metrics. So it'd be hard to move them higher. But remember, price perception is a very, it's a kind of a complex thing, right? Like, you know, it's not just straight lowest price always, it's kind of are you getting the best value really for that product. So I think everything that we're doing around sharpening our price, sharpening our product, more engagement, telling people more about it, that's all going to improve in that overall picture. Indeed, the metrics we're actually seeing in the UK, we're not seeing those take-up metrics actually in Europe. We're not seeing them. That's what gives us confidence to a certain extent. The barriers are the same that we have to go through. We have to remind people of the incredible price. Some of that's about shouting about it. Some of that's about showing a bit about it. Then we've got to make sure people come back because the quality that they get stands out. You know, I think that's all very doable in the markets, in the European markets that we're operating. So that's the answer to your second question, I think. On the timing, look, we're... Notwithstanding, of course, the world is obviously a bit of a tricky world out there. I think we were seeing really good green shoots, actually, before conflict, if you will. And I think we're pretty confident that a lot of what we're trying to do is going to impact society. certainly a little bit into spring, summer, but certainly more into autumn, winter, into next year, I would say. And as I said before, it'll take more time, digital. Digital will take more time in Europe because we don't have the infrastructure, but it'll take more time. So that's, I think, the way to think about it.

Sorry.

Warwick.

Warwick, sorry.

Thank you. Good morning. Warwick O'Kines from BNP Paribas. Two on Primark, if I may. Firstly, could you give us a sense of the steepness of slowdown that you've experienced in recent weeks? And secondly, if we've already seen a slowdown in Primark, why aren't you assuming this continues? I mean, is it because you don't think there'll be a real inflationary pressure on the consumer? Just seems odd to me. Thank you.

That's a good question. The slowdown was marked, but not dramatic. I would say it's the best way to describe it since the middle of March. A couple of weeks, really. I guess the consumer probably, like all of us, we hoped it was going to be short, and then when we realized it's not going to be short, and you can see the inflation is going to impact, the consumer starts to think. We all know what's happened. I'll let Joanna reconcile the guidance point. But the one thing I'd say is that, first of all, it's very early days. And secondly, like, you know, we win and lose in this environment, right? So it's very hard for us to kind of say exactly with precision, this is really how it's going to go as to how long it prolongs. You know, we've seen in the past that people do drop out of the market, but we've also seen trading down, right? So we should just, you know, we just have to see how this... how this all develops.

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

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

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

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

Gary Martin here from Davies. Just a couple of quick questions from my side. Just the first one on the merger, and I appreciate the color given on the balance sheet, but would it be possible to get maybe a bit more granularity just around the free cash flow generation dynamics of both of the businesses post-separation? That's my first question. And then just around the outlook, just on the sugar side, how do you expect just the various moving parts around the Middle East conflict and the, we'll say the inflation across the energy side, potential inflation across the distribution side, how does that feed into your 2027 outlook on sugar and sugar pricing? Thanks.

Yeah. Again, we'll have a lot more to say about cash flows in both businesses. Again, one of the things that we had a very hard look at actually before we made the announcement in November was to ensure that both parts could fund their own ambitions. Primark, under normal circumstances, Primark has always been cash generative. The only time it wasn't was obviously when we were shut down during COVID. And food... The food capex probably won't fall in 27 because there are payments still to be made, but it will fall in 26. 28.

28, sorry.

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

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

And the separation of the balance sheets is actually, well, nothing's ever completely straightforward. But the leases obviously go to Primark. The pension surplus mainly applies to PLC. And that's more to say. Sorry, Clive.

Sorry, Gary asked about the Middle East as well.

Oh, Gary, sorry, beg your pardon. There's one potential bit of upside, which is there are some very big sugar refineries blockaded at the moment in and around Dubai that supply well over a million tons of white sugar into the area. Well, Europe's got a fair amount of white sugar available if some of these markets want it. Energy... Look, these are energy-intensive businesses, and the growing of the crops is an energy-intensive business. Costs, if they don't come down soon, will have to flow through into pricing. It's not as if there is a high level of profitability in European sugar, which can just absorb these cost increases. So they'll have to be passed on.

We're not alone in that.

Yeah, it's everyone. It's really helpful. Thanks.

Clive?

Clive, sorry. Yeah, thank you, Clive, from Shore Capital. Two, if I may, and I know you're going to teach us about the demerge entities down the lines, but George, you used the word specific governance as a benefit. I just wondered if you could just flesh that out a bit more, because it sounds like a very important part of your thinking. And then on the food side, you touched on quite a lot of themes, but I think it was characterized best by you saying food is very dynamic, industry. Why do you think or how do you think AB Foods is well positioned for whatever ahead is in food markets? I mean, you touched on GLP and food security just for two, but yeah, thank you.

Specific governance. I think there are two slightly different benefits for the two different businesses. In Primark, it's about getting industry expertise and around international, around digital, around marketing, onto the Primark board. I think the scrutiny of the business, a lot of you here are already retail analysts, will remain properly intense and valuable for the challenge that you provide. But it's getting that richer wisdom across the business which has so many more complexities than it would have had to cope with a few years ago that will bring the better decision-making and thus the growth. I think in food, I think the issue is more the market scrutiny and pressure, which we, quite frankly, I haven't really felt for a long time for two reasons. Firstly, because you're great at retail, but you don't know the questions you should be asking me sometimes on food. And secondly, because Primark growth has given us such great top cover in food, we just haven't been exposed enough. And I remind you that the ownership model is about Whittington providing the long-term focus and wherewithal and the market exposure keeping our feet to the fire. So I think having our feet put to the fire will be a good thing. Maybe it'll be more for my successes than for me, but nonetheless, that's what we're aiming for. And then, of course, for individual shareholders presented with these, individual investors presented with the biggest international retailer on the FTSE and the only largely pure play food company on the FTSE, will have, I think, really interesting things that they might want to invest in where at the moment, the combination of the two, hold some investors back. So that's, that's really the governance, the governance story. Let me answer, sort of get at this kind of food is an interesting place, isn't it? Through a couple of anecdotes. The first one is that the The fastest growing scale brand in ABF last year was not Twinings. It was Fleischmann's home baker's yeast. We are selling in the States more home baker's yeast than we were to American consumers than we were at the height of COVID. And all the increase is to the under 35s. And some of you will be more aware than me of the return of whichever gen it is to those sorts of activities. There are more knitting circles, crocheting clubs, book clubs, food preparation activities going on than you would have ever expected to see. And we are seeing it rather wonderfully. in Fleischmann's yeast where we have a 70% share of the entire US market. If you'd asked me 10 years ago, will you get more growth out of Twinings international brand kind of health credentials scalable across all sorts of markets or Fleischmann's yeast, I would have thought you were pretty stupid people to be asking the question. But you just never know. Food changes the whole time because the consumer changes the whole time. And I think that there is in that ABF willingness to not think that focus is the only good thing, but to think that actually involvement in lots of different places with teams that know those places and an organizational model that can support those teams. I think that makes us unusual and a bit special. You know, I can look at Anthony's goods and go, where is all that growth coming from? Well, it's, A lovely managing director, Brittany England, who lives in California, knows that world, makes smoothies every morning and is just all over the specialty ingredients, being supported by a really commercial boss, Imad, who's telling her all sorts of things that she wouldn't have found out for herself. And that's the combination of the two drives, I think, our right to be there. and has turned Anthony's into the biggest player in that specialty ingredients market. So we do like the diversity because we can't anticipate the future. We can see certain trends and we can be as agile as we can possibly be in exploiting those trends. But you kind of got to be in it to play. Now, there are certain things that we believe the population growth, for example, is a really good place to be. This is why we like Africa, why we built the factory in Nigeria, and why we like Australia, for instance. And there are certain trends like food service, like premiumization, like healthfulness now, which I think are going to persist, and where I think we are fairly well exposed already, but with much more to do. Does that sort of get at some of what you've... That's a good start. There'll be more. I can rant forever on that stuff. Sridhar? Sridhar.

Morning. Sridhar Mamkali from UBS. Thanks for taking my questions, maybe, hopefully the last three. One on grocery, a couple on Primark, please. Mozilla, you've talked about the challenges, George, but can you talk about market share trends for Mozilla? Are you still holding the leadership? And also, what are you doing to attract a different customer? How do you grow it again? first one. Secondly, I think Owen, you talked about price leadership in Primark, sharpening it. Can you expand a bit more which markets, categories, how broad is this price sharpening or is it very sort of specific products in specific markets? And is it being done with margin investment or kind of slightly different buy almost altogether? And thirdly, also on Primark, you've talked about self-help technology investments driving productivity. Does that give you confidence enough to say Primark can sustain a double-digit margin medium-term?

Thanks. Let me answer the Mazzola question and then Owen can pick up the second one. Well over half our sales of mazola are to the Hispanic population. That population consumes three or four times as much oil, vegetable oil, cooking oil, as the rest of the population. So when that population starts to reduce oil consumption, you inevitably lose market share. It's not that we're losing relevance to that population. It's just they're buying less and they're such big consumers. We've been working on a heart-healthy campaign probably for about 10 years. It's relevant to the Hispanic population, but it's also relevant relevant to the broader conversation, the broader population. And actually, our share gains over the last few years have come from that broader conversation, that broader population, but they're more, they're more that other population that the Anglo population, if I can call it that, use more different oils, they've gone into olive oil in a bigger way, they use more own label, They're a bit indifferent about whether it's corn oil or whether it's rapeseed oil or whether it's soy-based oil. So it's not such an attractive market. But we have been chipping away at it with a degree of success. But it's a little bit every year. And based on that heart-healthy positioning of the brand, it won't replace the volume losses in the Hispanic population because we have such a big share of that. They're so loyal to the brand and they consume so much.

Yeah. Look, I mean, I think I'm not going to give specifics about where we're going to do, where, I mean, we have price leadership now, right? You know, like we check our price leadership every single day in every single market. We have price leadership now. So we're pretty comfortable where we are today. But we've, you know, we've got to keep on making sure we're, we're, we're on it and we're leading. So I'm not going to talk more about that. I mean, look, you know, it's too trite to always say you're just doing simple margin investments because, you know, you might have a gross margin investment, but obviously you're looking for volume pickup that ultimately will, you know, be overall operating margin neutral. So, you know, I think it's just too trite to say that. And obviously it goes to your second question is sort of how you – my kind of fund elements of that market investment, which comes down to how you do self-help, et cetera, and so on. So I think it's, you know, we believe in the medium to long term, to answer your second question, we're pretty clear we can go after what you're going to call double-digit margins, but like healthy margins in the context of driving growth continue to uh invest in the proposition and that's not just price but it's also um marketing as well and digital there will be moments in time when digital will be a drag on margin because when you have uh under capacity particularly you will have points in time with that but um and then and the self-help to go after so there's a lot to go after you know i've talked about cost cost in stores cost in depots, costs, further across the supply chain, and including centrally. The supply chain effectiveness is not just about cost also. It's about making sure that, you know, as we grow, we're getting the product into the right place, which also goes to growth. You know, I've talked about the digital opportunity, you know, areas like data and technology. There's lots to go after there that will both inform cost and growth. So, yeah, I've kind of given a rambling answer, but I think I got to your question. There you go.

Hi, it's Sandita Sood from Citi. Just two from me on Primark, if you could. So firstly, according to your typical FX hedging patterns, we think there are maybe some quite material tailwinds just from the dollar sourcing hedges that you've done coming your way sort of next fiscal year. First of all, is that Correct. And secondly, if that does end up being the case, given you've said you're happy with your price position today, does that help you get towards, let's say, investing in your marketing or anything else? Or do you just simply give it back in price to maintain that? And secondly, I don't know if you'll answer this, but just as you've done a deep dive at Primark, have you had any discussions about what a steady state margin could look like and whether there's any room for potentially a home delivery online channel if the unit economics of that could work? Thank you.

Yes. You're right. Tailwinds, every cloud, there's a silver lining and certainly as we continue to see the dollar move, we have... got a tailwind on FX. I think what we said before is we're using that to drive top line growth. Now, is that going to be through investment? Is that going to be through price investment, technology investment, all the different things, all the levers that Owen has just gone through as we were talking to Shredda's question. It is not something that we're going to be using to orchestrate the margin or to manage the margin. It is to drive the top line growth. And it's good to have some tailwinds because to your second question about steady state margin, I think as we sit here talking about steady state feels quite difficult because of all the uncertainties that we've got. But what we said around the margin is that it is a resultant of what we're doing and the initiatives we're taking to drive top line. Do you want to talk about?

Yeah, I mean, one thing just to clarify, I want to say, we have price leadership. There's always opportunities to continue to invest. I think on, yeah, look, obviously, you know, as we've done lots of thinking about the future, we've done both the kind of thinking of the growth and indeed the cost side of life. I mean, actually, I would say it's predominantly focused on the growth side, as you can imagine. Look, home delivery, it's still a return dilemma for us. Our position hasn't changed there. We've got loads to go after in digital. We're doing, I think, some really exciting stuff there. And... Yeah, look, I mean, I think we're pretty clear that we can, go back to Sridhar's first question, I think we're pretty clear that we can continue to drive good margins, but more importantly, strong cash with the growth opportunities ahead of us.

Thank you all. Again, congratulations on getting here.

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

Thank you.