Greencore Group plc

A huge thank you for being here this morning with Catherine and I and making your way across a hot London to be with us for our FY26 H1 results. And we have people online as well. So we thank you for them joining us. Look, it's great to be presenting these results for the first time from our Green Corps London office, which will be familiar to many of you from previous back of war presentations. These results demonstrate that we're starting to reap the benefits of what we call internally better together. Two businesses that were each very strong in their own right, but now together can deliver even more following the acquisition, which completed in January. I'll open with some key messages and an overview of our new green core business. Catherine will cover the financials, and I'll close out with an operating review. So to start with, in my view, Greencore has never been in a better place. Firstly, the enlarged group has delivered strong operating profit growth of 15.3% in the half and revenue growth of 3.2%. These numbers reflect the underlying growth rates for the new enlarged green core, and we're encouraged by the positive momentum. Catherine will speak more about the pro forma basis of calculation, but essentially includes six months of the old green core and 10 weeks of back of all UK since acquisition. Secondly, our customer relationships, the backbone of our business, are in a really good place. Bringing these two businesses together enables us to deliver more for our customers and gives us the opportunity to further expand the breadth and depth of these partnerships. Encouragingly, we've already had our first new business wins as a combined group and we know there will be more to follow. Thirdly, our integration program is progressing really well. We've completed a full top to bottom organization redesign. The new team is in place and we're focused on driving the business forward and on delivering our Synergy targets. Perhaps the best indicator of success is that we've had literally zero disruption in our core businesses. We've launched just as many new products as in any other year. We've maintained our best-in-class food audit performance. And colleague attrition remains low, and service levels are above 99%. So overall, I'm really pleased with today's numbers and with everything our colleagues have achieved over the past months. On page five, I wanted to touch briefly on my first impressions of the back of all business. Getting to learn about the sites, processes, and ways of working has been a key priority. I visited three sites within 48 hours of day one completion, and I've been working my way through them since. Overall, I've been hugely impressed. We've always known back of all is a brilliant business. And since taking ownership, we're very pleased with what we found. And the only surprises have been positive ones. The sites are in great shape and well-invested, in line with our own high standards. Walking around a back of our site, there's very little to differentiate them from our green core sites. The people are great too. We've experienced a strong cultural fit with individuals across both businesses rolling their sleeves up and working collaboratively together. Customer feedback has also been really positive. And the theme generally is, how can we do even more with you? And finally, we found a huge amount of opportunity to leverage the best of both, both where we can learn from each other, but also from where we can build something better together. Page six brings that scale to life. We operate across 13 categories, giving us a diversified and balanced portfolio. The majority of revenue comes from our powerhouse categories of sandwiches, ready meals and salads, with a strong presence right across the convenience food market, covering all day parts from breakfast, lunch, dinner and snacking. In the UK, we have 28,000 colleagues across 32 manufacturing sites and 21 distribution depots. And from a procurement perspective, we're purchasing over £2 billion each year with people on the ground across Europe and China. Turning to page seven, and what makes this business really special is the everydayness of it. Our operation never stops, not for a single minute throughout the entire year, and we do this at scale. For example, every single day, we book in over 500 deliveries of raw materials. Every day, we make 4,200 SKU recipes across over 400 production lines. Every day, we conduct over 5,000 individual product quality checks. And every day, we complete nearly 10,000 direct-to-store deliveries covering every postcode in the UK. In any given month, our products are enjoyed by over 70% of the UK population. This is a hugely integrated and complex operation, and we manage it with real grit, delivering over 99% service levels, which is critical to our strong customer relationships. So in summary, our new green core business is in a great place. And with that, let me hand you over to Catherine for the financial review.

Thanks, Dalton. Good morning, everyone, and thank you to everyone who has joined us online and in the room today. As Dalton has already noted, it has been a busy six months for the group, and I'm delighted to be here today to take you through our financial results for that period. Planning for and delivering on integration has been a real focus over the past months, and I'm pleased to share that our teams have come together strongly as the new Green Corps. The integration of our two businesses is progressing very well, and we are firmly on track to deliver the synergy target we had previously outlined. As you'll see in our results, we have also maintained a strong focus on delivery in our core business and I will now take you through some detail on the financial results for the first half of FY26. Starting on slide nine, let me touch first on the basis of reporting that underpins the results that we will take you through today. Firstly, I'll be presenting a pro forma version of our results. This pro forma basis includes six months of the Green Corps business, back of our UK for 10 weeks in both current and prior year. and excludes Bristol, a legacy site which we sold in January 2026. This performer basis is therefore more reflective of the actual year-on-year performance of the new combined green core business. You will also have noted from our R&S statement this morning that the US business has been classified as an asset held for sale. And therefore, what we are presenting here is our combined UK operations. I will cover some specific details on the US business later in the presentation. Moving on then to the numbers. I'm pleased to say that we delivered pro forma revenue of £1.3 billion in the period, reflecting year-on-year growth of 3.2%, the drivers of which I will take you through in a moment. I'm also extremely pleased to say that we have delivered adjusted operating profit of £73.3 million for the period, reflecting year-on-year pro forma growth of 15%, and a strong Performa adjusted profit margin increase of 60 basis points to 5.6%. This is a real testament to the folks of our teams who delivered this over a very busy period of the acquisition and integration of Bacavor. Looking to our statutory or reported financial performance on a continuing operations basis, and therefore reflective of the UK businesses only, we have delivered 43% reported revenue growth and 62% reported adjusted operating profit growth. When you look at our bottom line, you will see a £13 million loss before tax in the period, and that's largely reflecting acquisition-related exceptional costs incurred in line with expectations. Return on invested capital continues to be our North Star metric and is the key lens through which we manage the business. Accounting for the acquisition has resulted in an increase in our invested capital base. We have completed provisional acquisition accounting and you can see from the release this morning that this has resulted in acquired goodwill of 734 million and a further 937 million increase in intangible assets, reflecting the strength of the acquired back of our customer relationships. To adjust for the impact of the additional goodwill generated, we have provided an adjusted view of ROIC, which excludes this goodwill. On this adjusted basis, ROIC was 10.8% for the period. Consistent with prior treatment, this amortisation charge will be an adjustment to certain key metrics, such as our adjusted earnings per share. And as you can see at the bottom of the table, that adjusted EPS was eight pence per share for the period, reflecting an increase of 31% in line with adjusted operating profit growth. On a continuing operations basis, free cash flow is negative 76 million, driven by a working capital outflow and exceptional charges related to the back of our acquisition. We have, however, ended the period with group net debt of 818 million and a leverage ratio of 2.3 times, which is lower than the 2.5 times net debt to EBITDA post-acquisition level that we would have previously guided to, details of which I will cover in a little more detail shortly. So turning to slide 10, let me take you through the drivers of our pro forma revenue performance, which has increased by 3.2% year on year. Firstly, we are pleased to have grown volume and mix by 0.8% despite a slightly subdued market and with a particularly wet winter impacting momentum. Within this, there was a strong contribution from new business wins won last year annualising into this year, especially across salads, sandwiches and our direct-to-store distribution. We have a strong pipeline of new business into H2 and Dalton will give you some more colour on that shortly. Inflation recovery and pricing contributed 2.4%, driven by recovery of inflation in labour and ingredients, particularly related to protein. You will see that we have chosen to disaggregate performance into two distinct product category portfolios underneath our single segment of convenience food. Food for now, or food you eat on the go, sandwiches, salads, etc. And food for later, or food you would eat at home, such as ready meals, desserts and pizzas. When analysed by portfolio, Food for Now revenue increased to £731 million, representing a 5.3% pro forma increase on the previous year, with strong performance in sandwiches, sushi and our direct-to-store business. Our food for later portfolio grew to 587 million, representing a small increase on the previous year, noting that this includes 10 weeks of back of our sales, so not fully representative of future run rates. And this category is also one that we grew very strongly for the same period last year with our large ready meals win. Moving on to the next slide, Performa adjusted operating profit grew 15% with margin increasing by 60 basis points to 5.6%. So let me take you through the main drivers of that improvement. Volume and mixed growth, including the new business wins, helped to contribute to adjusted operating profit growth and improved operating leverage across the network. Gross inflation was about £40 million and a half, to give you a sense of the material drivers there, around 60% of that related to labour inflation, with the remainder coming from materials and packaging inflation. We recovered a large part of that inflation through pricing, including through the automatic joint models that we have in place with customers. On operational excellence, both the legacy green core and legacy back of our operational excellence programs performed well, contributing to the offset of inflation and accreting margin by driving continued focus on standardizing labor and minimizing waste across sites. Finally, we have maintained a strong focus on management of the ongoing cost base, and this continues to contribute to improvements in margin. This will, of course, be supported by synergy delivery. Moving on to slide 12 and cash flow for this first half period. While we have a cash outflow for the half, this is largely attributable to the timing of exceptional charges related to the acquisition and working capital outflows. You can see that underlying EBITDA was strong at 111 million, 38 million higher than the prior year. Networking capital is a negative outflow of circa 86 million driven by the timing of outflows around period end and also work that was ongoing to align how we manage our debtors and creditor balances with respect to terms and use of facilities such as invoice discounting, etc. We expect this outflow to reverse and for us to end FY26 in a broadly flat working capital position as we focus on fully integrating our management of debtors, creditors and other payables. Cash exceptional charges for the period were circa 59 million pounds, with the majority of this increase related to acquisition and integration costs and making business easier transformation program costs. Further detail on the composition of exceptional charges can be found in the appendix. Maintenance capex of circa 15 million was an increase of 2 million versus the prior year, reflecting our enlarged manufacturing network. Just going quickly through some of the other items here, interest and tax charges were circa 16 million, an increase of 4 million, apologies, versus prior year, reflecting the increase in the group's financing facilities due to the back of our acquisition. On pensions, as a reminder, our UK defined benefit scheme is now fully funded and the decline of 5 million versus the prior year reflects this new reduced contribution obligation. Finally, lease payments at £11 million were £4 million higher versus prior year, reflecting the additional leases brought onto the portfolio following acquisition and other cash flow movements netted to approximately zero in the period. Our free cash flow conversion over the last 12 months was 3%, driven by the movements I mentioned. Over the medium term, we expect cash conversion to be in excess of 55%, and this will continue to be a key focus and a priority for us. Moving on to net debt, we are pleased for our leverage to be at 2.3 times, which was below the expected range of 2.5 times post-transaction. The slightly faster trajectory here is driven by the robust performance and cash flows from both businesses since announcement of the acquisition in May 2025. Just to run through some details, starting with the cash position at the end of the period, which was 57 million, an increase of 6 million versus the prior year. Our bank borrowings have increased 839 million, an increase of 733 million, which again is as a result of the acquisition financing we previously communicated. And asset financing of 21 million reflects back of our financing we have added to our portfolio post-acquisition. The private placement of 15 million is in line with the prior year. In short, we remain very confident about deleveraging to at or below 1.5 times within two years post-completion of the deal. Just moving on to slide 14 then and synergies. The key takeaway here is we are firmly on track to deliver our synergy targets. We continue to target an annual saving of at least £80 million, and since day one, we've been able to really get under the hood of the synergy delivery and validate the preliminary plans that we had in place. I'm pleased to say that we are making strong progress across all target synergy areas. We now have detailed performance management and tracking rhythms in place to ensure we meet our targets. We are also unchanged in our view of one-off costs of circa £90 million to achieve the savings which will be incurred broadly in line with the run rate synergy realisation over the next three years. I've spoken about the components of the synergies before, but they fall broadly into four categories. Organisation, operational excellence and distribution, site footprint and direct and indirect procurement. We currently see no change to the run rate cumulative phasing, so 50% run rate to be delivered by January 2027, 85% by January 2028 and 100% by January 2029. Moving on then to our capital allocation framework. Post acquisition, the group's philosophy continues to be to deploy capital to balance both long-term growth and shareholder returns. Our immediate priority is to rigorously manage our synergy program and deliver on synergy opportunities, as well as ensuring we continue to maximize the potential of the core business. The increased cash flow generated from the combined group, in addition to the savings the synergies will deliver, will facilitate us to delever below 1.5 times within two years post-completion. In respect of CAPEX investment and driving organic growth, we will continue to ensure funds are available to invest in critical maintenance and strategic CAPEX. And we expect to spend circa £80 million on a reported basis in FY26. While we are very clear that our near-term priority is to delever the business, we are keen to maintain the payment of an annual dividend, having recently reinstated the group's dividend, and subject to the ongoing financial performance of the group, we would intend to pay a progressive dividend post the year-end. We don't anticipate any further acquisitions or shareholder returns in the short term, but we will of course provide further clarity on our plans as we delever into the future just moving on then to slide 16 before i wrap up i'm going to touch on the u.s business briefly i referenced earlier that the u.s business has been classed as a held for sale asset as we consider the best course of action for the business and for shareholders green core us is a really strong business that's performing well with excellent people growth prospects and enduring relationships with some of the top u.s retailers Prior to the acquisition, there had been some consideration of the best long-term path for the US business, including what ownership structure will best support its future growth. Following the combination of Greencore and Bacavor, we have continued to evaluate next steps here. Our main focus is clearly the UK integration and synergies, but we want to be clear on what the best outcome for our US business is. As a result, we are exploring a potential sale of our U.S. operations to the right long-term partner for the business. This is at a very early stage and no decisions have been made, but we will, of course, communicate updates to the market in due course. So before I conclude my section, I think it's important to reference the broader macroeconomic events happening in the world which are causing inflationary pressures. I would say two things on this. The length of the conflict in the Middle East remains uncertain and we remain cautious about further inflationary pressures later this year and into next and potential impacts to demand. That being said, we remain confident with the level of protection we have in place and We have pass-through mechanisms and protections in place across 75% of our raw ingredients, and our gas and electricity costs are fully hedged in FY26 and the majority into FY27. To wrap up then, I hope you will have seen this morning that the group has delivered a very strong financial performance in H1 FY26, continuing to deliver strong double-digit profit growth whilst completing a very significant integration. It's good to see strong growth in revenue and margin, both of which are key metrics for the group. There is good momentum in H2, FY26, both in the core business, with Q3 trading remaining robust as we lap a strong summer last year. We have rigorously combined and integrated our performance management and financial reporting from the close of the transaction, and I have real confidence around our ability to achieve our synergy targets and deliver on the potential for our combined business. Looking forward, the group expects to deliver FY26 adjusted operating profit in line with current market expectations, bearing in mind that the published consensus contains the result of the US business rather than it being an asset held for sale. With that, I will hand you back to Dalton.

Thanks, Catherine. And look, let me turn to the operating review on page 19. And as you'll have seen, the business is performing strongly. It's a tough market environment, but our volumes have held up well and we see plenty of opportunities for future growth and market outperformance. Internally, we've continued to strengthen the key capabilities that give us a sustainable, competitive advantage and increase our resilience, what we call our moat, which we continue to widen and deepen. And we've made really strong progress on the integration. We're now operating as one business, delivering synergy quick wins, which give us great confidence in our overall synergy target. Turning to the overall market on page 20, in line with our pro forma methodology, we're comparing legacy green core against the market for the full six-month period and legacy back of all for the 10 weeks from acquisition in mid-January. So we split those two data sets into two graphs, starting with legacy green core. The business reported 0.3% volume growth against a flat grocery market. That flat market reflects reduced consumer confidence, which took a hit in the run-up to the autumn budget and has remained depressed since. Greencore's growth of 0.3% reflects good performance in our core categories and across our largest retail customers, including continued outperformance from M&S. On the back of all side, the market declined by 0.2% over the period since acquisition, impacted by low consumer confidence and record rainfall affecting high street footfall. Back of all volume was also impacted by a small number of business losses from this time last year. We recognise this volume performance isn't where we want it to be, but we have dedicated teams driving volume across the portfolio and we feel positive about our go-forward trajectory. We've also had a series of new business wins, including our first as a combined business, which will begin onboarding in H2 and will contribute circa 100 basis points of annualised revenue growth. In the longer term, we continue to benefit from structural tailwinds as shown on page 21. Our customers really value these categories. They're front of store, fast stock turn, high margin, and rich in opportunities for innovation and premiumization. Three specific trends continue to provide a tailwind. Firstly, convenience. Retail sales in convenience stores are growing at 4.2%, with store openings showing no signs of slowing. Asda Express just opened their 500th store, having entered convenience less than five years ago. With a third of our volume going through convenience formats, this is great for our business. Secondly, premiumization. Unit growth in the premium tier has outstripped standard tier by 600 basis points over the last three years, a trend we continue to capitalize on across our core categories. Thirdly, eating at home. Consumers are increasingly choosing dining options as eating out becomes more expensive, while growing health and calorie consciousness further supports this shift. These are enduring trends that have held up consistently and convenience and value will remain important drivers of eating habits. A key green course specific tailwind is the opportunity to grow further with existing customers as shown on page 22. Despite holding the number one or two position across nearly all categories, there's plenty of headroom, illustrated by the depth and breadth of category exposure across our nine largest customers who represent over 90% of sales. The dark green shading shows our established partnerships, while the light green and white space highlight where we have room to grow, either from a small existing presence or from scratch. Selling more of what we already do to existing customers is the most value accretive growth we can achieve. So as retailers increasingly look to work with a smaller set of larger, more strategic partners, we see real opportunity to deepen these relationships further. Page 23 shows the moat I referenced earlier, the key elements that make our business unique, resilient, and difficult to replicate. Let me talk specifically about our progress in four areas of our moat. Page 24 shows some examples of the innovative new products launched in the half. We had a really strong Christmas season, including the award-winning Yorkshire Pudding Wrap, developed in collaboration with M&S for their cafe range. We also launched a great new range of summer dips and deli products for Sainsbury's and Tesco, which are performing well. We also leaned into growing demand for health-focused products through our nutrient-dense range with M&S and a new licensing partnership with MyProtein. In total, we launched 308 new products in the first half. And for those of you here in the room, you'll get an opportunity to take home and try some of these great products. All of this is made possible by a product development team of over 200 colleagues, including 50 chefs, the majority operating on dedicated customer accounts with strong Chinese walls between them. I don't believe anybody in our sector can get close to this level of product development resource for any individual customer. Moving to page 25 in procurement. Prior to the acquisition, we had identified a significant cost-saving opportunity through standardizing indirect procurement. That is everything outside ingredients and packaging from PPE through to broadband through to stationery. We've been implementing this across our legacy GreenCore sites, moving contract ownership to our central procurement director, creating clear policies, spend guardrails, and group-level supplier negotiations rather than site-by-site contracting. Examples from H1 include optimization of our inbound third-party logistics network, Or centralization of embedded contractors, so think maintenance contractors, reducing supply numbers from 91 to 38 with a new rates tracking process. Or a sole supply model for forklifts across the combined business. Or renegotiated PPE contracts, ensuring consistent pricing across all sites. These are just a few of hundreds of examples. And the bigger opportunity head comes from rolling this approach out across the enlarged business as part of our procurement synergy work. On page 26, across the combined UK 32 sites, we had 871 operational excellence projects live in H1, ranging from an energy monitoring project, reducing usage by 12% year on year, to automated veg prep, reducing labor by 50%, to a new pasta depositor delivering 140,000 pounds of annualized savings. Looking ahead, our roadmap has two strands. Firstly, deploying best practices from each existing program more widely across the enlarged estate. And secondly, redefining our automation roadmap, capitalizing on best of both methodologies in the near term and evaluating breakthrough technologies and next-gen concepts for the longer term. On page 27, on technology, our Making Business Easier program continues to focus on driving improvements in core processes using proven SaaS solutions. Our big five areas of focus are in operations, specifically operations performance measures and materials management. Secondly, supply chain planning. Thirdly, time and attendance. Fourthly, product lifestyle management. And finally, fifthly, net revenue management. And we will start to see these types of solutions going live in the new financial year. On the back of our site, Project Vision, the rollout of a standardized SAP ERP has successfully gone live in two pizza sites with zero impact to service levels. During the integration period, we've continued to run these two programs in parallel, and both programs have been delivering strongly. We're now planning to bring them together into a single transformation program to drive further efficiency and improved delivery. Turning to integration on page 28. And we've made really good progress since January. Pre-completion, we established our integration management office and completed the key preparation work to hit the ground running on day one. So from day one, we focused on organizational redesign following the appointment of the senior leadership teams. We executed our business continuity plans whilst ensuring no impact to our commercial or operational performance. and we maintained 99% service levels. And from mid-April, we began operating as one combined business with a single functional leadership structure and operating model in place. Of course, there's still plenty more to do from day 100 to done, but you can see we're really pleased with progress. On synergies on page 29, we remain firmly on track to deliver our 80 million pound target in the timeframes indicated. So let me add some further color. On organization, our new design is live and delivering savings with central function colleagues having now left the business. And we were really sorry to say goodbye to some great people who've been instrumental in driving both businesses forward, and it hasn't been an easy process. but we're confident we now have the strongest team in our sector with balanced representation from across Greencore and back of all. On procurement, supplier engagement as a combined business is progressing well. On operations, whilst these synergies are naturally back-loaded, we've developed a clear roadmap to begin executing from the beginning of FY27. And on the right-hand side of this page, you can see examples of synergies already delivered. So that includes the org, transitions, consolidation of our central London office footprint, removal of duplication across professional fees, and many, many more that together add up to a significant number. Before we wrap, let me return to the key messages. Our combined business is performing well with strong revenue and profit growth in H1. the new green core can now deliver more for customers who are seeking deeper, more strategic partnerships. Integration and synergy delivery are progressing well. And as Catherine said, we expect to deliver FY26 adjusted operating profit in line with current market expectations. So in summary, we've done a lot. There's a lot more still to do. And I feel really good about where we are today. And with that, Catherine and I would be now delighted to take any questions you might have.