Premier Foods plc

Hello, everyone, and thank you for joining the Premier Foods Q3 Trading Update. My name is Lucy, and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. It is now my pleasure to hand over to CEO Alex Whitehouse to begin. Please go ahead.

Thank you very much, and good morning, everyone. Thanks for joining this, which is our Q3 Trading Update call. And that covers the 13 weeks up to the 27th of December last year. I'm also joined on the call this morning by Duncan Leggett, who's our Chief Finance Officer. I'll give a quick overview of our Q3 trading, and then we'll open the call for questions. So as always, the third quarter of our financial year is our biggest and therefore our most important quarter of the year. And I'm very pleased to say that we've had a really strong Christmas as the momentum from our brands accelerated into the third quarter, so building quickly. on the numbers we delivered in quarter two. In fact, our branded revenue grew by 5.2% in the quarter compared to last year, and we also made further good progress against all five of our strategic pillars. So given that strong performance in our key quarter, today we're raising our profit expectations for this financial year. If we now look at a few of the other headlines, total group sales increased by 4.1%, which as I mentioned just now represents and acceleration on the sales reported in quarter one and quarter two. Also very pleasing is that we have a grain-grown market share, both in grocery and sweet treats in the UK, where overall share went up by 22 basis points, and where we also gained share in Australia as well. And this demonstrates that we continue to drive branded growth ahead of our markets, and this builds on the strong track record that we've delivered over a number of years now. And of course, that strong brand performance continues to be underpinned by what we call our branded growth model, leveraging our great market-leading brands and driving growth by bringing highly relevant new product innovation to market based on our in-depth understanding of consumer needs and trends. We also support our brands with engaging and meaningful advertising and marketing campaigns that keep the brands relevant, and top of mind for consumers. And that's something that we're actively evolving right now, targeting younger consumers as they start to cook for themselves. And then we deliver excellent in-store execution for our strong retail partnerships. And whilst this is always important, it's especially so in quarter three, which as we know is our key quarter in terms of sales. And if you were out in stores on the run up to Christmas, I've no doubt you would have seen several of those impactful product displays that we had out in store across our customers. And as I've said before, our brand building model is actually very similar to many of the large-cap multinational branded food or FMCG businesses. In fact, we see ourselves as just a much smaller version of those multinationals. The main difference, of course, is that whilst we've got significant scale here in the UK, we're still in the early stages of our international expansion. And I'd also argue that our spies and culture make us more agile and so quicker to respond to consumer needs. at the heart of this model is our strong portfolio of brands which offer our consumers both quality and value for money one thing we know is that when consumers are feeling financial pressure many of them turn to our brands to make tasty affordable family meals and if you think about it this makes perfect sense as obviously we all need to eat and the most cost effective way to do that is to cook for yourself at home rather than eating out or getting a takeaway so which arguably means that we're insulated from the fluctuations of the economic cycle. As we've said many times before, brand investment is very important to our branded growth model. We said back in November at the interims that we were planning to spend more on brand investment in the second half of this year than we did last year, and that's certainly been the case in quarter three, and we've got plans in place to do the same for the fourth quarter as well. For example, in quarter three, in addition to our usual strong support for the larger brands like Bisto and Mr. Kipling, this year Paxo benefited from some advertising, and actually it was the first time in around 20 years supporting the brand, and it's the most important time of year in the run-up to Christmas. And this financial year, we've had a particularly strong product innovation program, and that's across all our categories, and quarter three really benefited from the addition of these new ranges delivering significant incremental sales growth. And as always, as I've said before, these are all based on our in-depth consumer understanding. And I'll come back to some specific examples shortly. But overall, this is really one of the most comprehensive programs we've put together in recent years, and the benefits will continue into this quarter and, in fact, beyond. Now, one of the increasingly consistent trends we've seen over the last year or so is consumers trading up into our premium ranges. So the premium indulgence consumer trend is the one that we've been working on for some time with ranges such as Ambrosia Deluxe, the Spice Taylor brand, and Mr. Kipling's signature mince pies. And all of these ranges outperformed their respective categories in the quarter. And actually, when it comes to those signature mince pies, I think I've probably got to confess that I contributed to a fair amount of the growth personally. So let's take a look at how our grocery business did in the quarter. Grocery branded sales increased by 5.8% and with total sales of 4.6%. Now, I've already mentioned that we had a wide range of really good products which we've launched into market over the last quarter or so. And so, for example, OXO enjoyed a particularly good period of training as it benefited from new product launches including Bone Broth, which has proven to be very successful. And also a ready-to-use stock, which as the name suggests, comes ready to use in a liquid form so you don't have to make it up. And additionally, Bisto sales also grew, helped by a new premium ready-to-use gravy product. And while from Paxo, we launched stuffing kits, which were shaped like a Christmas wreath. Our desserts range has also enjoyed a strong quarter. Ambrosia fails increased partially due to continued growth of its premium deluxe range. And Angel Delight benefited from recently launched pots of bubble jelly, which are based on the bubble tea idea. Sales of the Nissin brand, the grain grew in double digits, and that was led by Demo Ramen noodles. And we also launched a new Soba protein pots in the quarter. So these are pots of instant high protein noodles aligned to the trend for consumers seeking increased protein in their diets. And Bassel has also increased sales, helped by the addition of a range of pasta and sauce in convenient microwavable pouches. In grocery non-branded sales, were down 7.5%, and that's as we made conscious decisions to exit a couple of contracts on stuffing and custard. So turning to sweet treats then, branded sales increased by 3.1% in the quarter, and with the strong performance that it's delivered so far this year, sales to date are up 6.9%, which we're obviously very pleased with. And within this, both Mr Kipling and Cadbury Cake have reported sales growth, And like the first half of the year, we again grew faster than the market. So taking further market share as we continue to drive our branded growth model. And Mr. Kipling had a very good Christmas. We sold 19% more of those premium Mr. Kipling signature mince pies as we further increased retailer distribution. And we also introduced a two-pack version. And as I mentioned earlier, we've definitely seen consumers trading up and spending just a little bit extra to treat themselves. Also driving the Mr. Kipling growth is its extensive innovation program and very much a continuation from half one. So the breakfast breaks range continued to contribute to the sales growth. However, the star performer here is now the cake bites pubs range, which I mentioned back in November. So this is a range of bite-sized pieces of cake that come in tubs, which are handy for sharing with family and friends. Capri Cake also had a very good period of growth. and was supported by a good performance from its core Mini Rolls range, boosted by new Cadbury Caramel Mini Rolls, which we launched in the first half of the year. And then just a brief word on the non-branded side of the business. So non-branded sweet treats increased sales by 2% compared to last year, following contract wins on parts and also some seasonal lines. And so now moving on to our strategic pillar of extending our brands into new categories. So we've had some really notable successes here since we embarked on this strategy. And this quarter was no exception as we increased sales by another 29%. And you might recall this is on top of an increase of 38% last year. So some really strong compounding progress taking place here. And the growth was led by the emerging success of Fuel 10K yogurt and granola range, which, as you may recall, is our first real foray into the chilled part of the store. And the range comes in three flavor variants. And we're looking now to build further retailer distribution during 2026. Also driving new category performance was Cape Herbs and Spice, which has gained further distribution this year and continues to go from strength to strength with wide distribution now across all the major retailers. Now, moving to the brands we've acquired over the last couple of years, and we continue to be really pleased with the progress that these have all made. With all three brands, the Spice Tailor, Fuel 10K, and our most recent acquisition, Merchant Gourmet, all growing sales in double digits in the quarter. So this year, the Spice Tailor has launched another set of new product ranges as we continue to leverage the strength of the brand. And this year, that's included a larger size pack that's suitable for families and an expansion of the Thai range with Pad Thai noodles and sauce. Moving over to Fuel 10K, the momentum of the core granola range continued through the quarter and was a strong contributor to the overall growth. And we also recently launched a convenient ready-to-eat porridge pot. And this is essentially the same format as our successful Ambrosia porridge pots. But, of course, the Fuel 10K version is high in protein. And both are made at our Lyft and Ambrosia cream room. And, of course, as I just mentioned, there's the new Fuel 10K yogurt and granola, which is also proving very popular with consumers, having been in market for a couple of quarters now. Merchant Gourmet's had a really strong start in its first full quarter of our ownership. The brand delivered very strong results. It benefited from increased in-store displays for its chestnut range in the run-up to Christmas, leveraging the strength, actually, of the Premier Foods merchandising team. And additionally, the new product range is launched this year, such as the Meals in Minutes range, which includes things like super grain bowls and bean and lentil chilli, performed very strongly. And then finally, looking at our international business, We resumed double-digit sales growth in the quarter, with revenue up 10% compared to the same period last year. And as a reminder, the main brands that are our strategic focus for us overseas are Mr Kipling, Sharwoods, the Spice Tailor, and increasingly, actually, Fuel 10K. And in time, this may well also include Merchant Gourmet. That's something that we're currently looking at. In Australia, our cake business yet again reported very good in-market performance, building on the performance in half one. So in the quarter, this delivered strong turnover growth now that the level of stock in market is stable. Mr Kipling was again a key driver of growth, and that was due to the strength of our core cake slicers range. And yet again, we delivered further market share gains. And as we look forward into the fourth quarter, we also have some new listings landing in New Zealand across both the core Mr Kipling and Cadbury cake ranges. Remaining in Australasia, the Spice Tailor benefited from the introduction of that large size pack. And as in the UK, this is in addition to the standard size pack, it's aimed at families looking to create that restaurant quality meal at home. And of course, Sharwood's product range also grew sales in the quarter. Moving briefly on to North America. In the U.S., it's early days, but the launch of Mr. Kipling apple pies has been going very well in Kroger, which is obviously encouraging, and while the core slicers range also made some further distribution gains. You might also recall that we've recently accentuated the Britishness of Mr. Kipling cakes on the packs for the U.S. market, which seems to be resonating well with the U.S. consumer. So with all that, Mr. Kipling was up quite strongly in the quarter. In Canada, Mr. Kipling slicers continued to perform well, And that's in Walmart and now with a confirmed listing of apple pies as well. And then finally on to EMEA. We've just landed some significant new distribution of Fuel 10K in Europe. And by the end of quarter four, our best selling granolas will be also available in Germany, the Netherlands, Portugal and Italy. So that's a run through of some of the key highlights in quarter three. As we look ahead to quarter four, and as you would expect, we've got strong plans in place, including further new product launches, increased advertising support for our brands year on year, and continued impactful execution lined up for in-store. So to wrap up then, look, we've had a really good Christmas with strong growth for both our grocery and treats businesses, driven by that lineup of new products and some great execution of our brands in-store. We've taken further market share in both our grocery and sweet treats businesses in the UK and also in Australia. Premium ranges have continued to go well and are growing ahead of our core ranges as consumers trade up and treat themselves. And importantly, we've continued to deliver against all the pillars in our five pillar growth strategy, with sales from new categories up 29% on international business resuming double digit growth, and the spice dealer, Fuel 10K, and our most recent acquired brand, The Merchant Gourmet, all increasing sales in double digits with actually much more to come. Now, one point that I'd like to leave you with today, and it's a really fundamental one. So we've got a broad portfolio of market-leading brands with high household penetration, and these brands offer great options for consumers to prepare and eat affordable, delicious meals at home, which means that we're pretty insulated from fluctuations through the economic cycle. Because in good times, consumers trade up from label into our brands, while in tougher times, consumers might trade down from eating out or eating takeaways to cooking at home. So with this great portfolio of brands and our strong track record, we're therefore very confident of delivering on our medium term aspirations. And so as I mentioned right at the start, given that strong brand of performance in our key quarter, we're now guiding trading profits for this financial year to the upper end of expectations. So I'd say we're in good shape for the rest of this financial year and, in fact, beyond. And with that, I'd like to thank everyone for your time. I'll stop there and pass back to the operator, and Duncan and I will be very happy to take the questions. Thank you.

Thank you. To ask a question, please press Start followed by 1 on your telephone keypad now. If you change your mind, please press star followed by T. When preparing to ask your question, please ensure your device is unmuted locally. The first question today comes from a Charles Hall of Peel Hunt. Your line is now open. Please go ahead.

Morning, Alex. Morning, Duncan. Well done on an excellent quarter. Thank you, Charles. Morning, Charles. Morning. Just a couple of questions. Firstly, could you just comment about the level of cost inflation that you're seeing in the business and also about price initiatives? I think you do the pricing in this quarter, don't you?

Yeah, sure. So, look, I think, you know, we've said we've been seeing Low to mid single-digit inflation. And I think that will carry on for a little bit longer, Charles. And as always, we try and absorb as much of it as we can, but then having strong brands helps us actually be able to pass that on. If you look at what we've delivered in the quarter, though, just to be clear, there's both volume and value growth in the growth that we delivered in Q3. And some of that value growth is actually the premiumization, of course, because as we've got faster growth from the more premium ranges, that obviously has a price mix effect.

Thanks. That makes sense. And then a question on CapEx. You've obviously already guided that you're going to be materially increasing CapEx. Can you just give an update on how projects are going and the level of returns you're expecting from that?

Yeah, I think very much on track, Charles. As you say, we increased the guidance a bit at half year and very much on track with that. And again, we're prioritising the cost out projects and some of this re-platforming that we've talked about before. So we're starting to deliver plan and deliver bigger projects which would be full production line replacements where it makes sense and we've started one of those and that all to get to something that works more efficiently, increases product quality, increases throughput at a lower cost per unit so again all this stuff very much makes sense and again we've got We've got a really strong pipeline over many years to come that give us the confidence about carrying on spending what we're spending and getting the good growth margin progression that we've been achieving.

Perfect. Thanks very much.

Thank you. The next question comes from Clive Black of Shaw Capital Markets. Your line is now open. Please go ahead. The next question comes from Clive Black from Shaw Capital Markets. Your line is now open. Please go ahead. Moving on, the next question is from Matthew Webb of Investec. Your line is now open. Please go ahead.

Thank you. Morning, everyone. Two questions from me, please. The international growth, I thought, was particularly strong at 10% given that, if I'm right, I think that the comp was plus 29 and that had been boosted by some positive shipment timing. So presumably your underlying growth was significantly stronger than that 10%. And you set out some of the reasons for that. And it sounds to me like a lot of those are quite sustainable, you know, distribution gains, a lot of new product development going in there. I mean, is there, without seeking explicit guidance on it, I mean, is there any reason why we shouldn't expect a strong double digit rate of growth, you know, at least over time? the next 12 months or so as the four-year effect of all that comes through. That's my first question. And then my second question, you obviously talked about the importance of stepping up marketing spend in the second half to your success. And I just wondered whether we should expect you to continue pushing that level of investment up into next year. Is there anything... that you've learned in this quarter and been positively surprised by in this quarter that might make you a little bit more aggressive maybe on the marketing spend? Those are my two questions. Thank you.

Morning, Matthew. Yeah, thanks for those. So, yeah, obviously very pleased with international growth. I think it was against really strong comps. And as we've said before, we do see over the medium term a big opportunity to expand the business overseas. I think, you know, we've not given specific guidance on individual years, but, you know, I would expect that it will slip between high single and loadable digit growth because the thing is because the scale of the business isn't huge at the moment, depending on when containers leave and arrive, actually it can make it quite lumpy, which is what we saw last year. But yeah, we see quite a significant opportunity here and we're working really hard to build further distribution and working out which brands and which product formats have got the, I guess, the most traction for us overseas. And that's why we're quite excited about the first steps to roll out Filtengai granola in Europe, actually, which will start in this quarter. So, yeah, all very positive from our point of view. Marketing spend, so we're on a journey. I've talked about this before, that we know that the model we follow, the way we run our brands and run our business is very similar, as I mentioned earlier, to the way in which the big multinational FMCG brands, brand of companies operate. And in order to fully emulate that model, we know that we need to increase our brand investment. And so we've been on a journey over a number of years now to keep steadily increasing that investment level. And we fund that through the work we do internally on cost savings and gross margin management to have a very robust gross margin management program, which helps unlock the fuel, if you like, that we invest in behind the brands. And that's worked really well for us. But we've still got a bit of a way to go. So there's more work to do on this. And we'll continue to increase and ratchet up that brand investment where we can. And that's now allowing us, particularly as we've started to use, I guess, even more so a wider range of tools, particularly how we use social media and influencers. It's allowing us to support some of the smaller brands, like I've mentioned Paxo this Christmas had first support it's had in 20 years. And that's as a result of us having a little bit more investment pot to put behind the brands and also a different set of tools.

Very helpful. Thanks very much indeed.

Thanks. Thank you. The next question comes from Matthew Abraham of Berenberg. Your line is now open. Please go ahead.

Morning all. Thanks for taking my questions. First one just relates to the revised outlook that you provided this morning. Just wondering if you can break out the key drivers of your improved expectations for trading profit for the full year. Just wondering specifically how much of the improvement reflects outperformance in Q3 relative to what you expect to play out in Q4. And then also just looking secondly for a bit more colour on the new distribution agreements that you mentioned throughout this morning. Just wondering if you can give us a sense of timing and scale of those agreements and what that may mean for volume growth in the next financial year.

Want to take the first one, Duncan?

Yeah, sure. Thank you. Thanks, Matthew. And good morning. Yeah, I think, you know, in terms of profit, really pleased to be able to guide the upper end of expectations. As you know, Q3 is a really big quarter for us. So having got through it and delivered the performance we have and got a bit of extra visibility towards the year end, that is always helpful. Probably a couple of bits to call out in terms of that, I think. The performance from Q3 was good. We're also accessing some of the synergies from merchant Gourmet acquisition a bit sooner than we'd forecast. So that's helping. And of course, as you'd expect, you know, big focus on costs, supply chain efficiency programs and the benefits of some of the increased CapEx. They're all flowing through as well.

And if I pick up on the distribution, I mean, there's two bits to it, really. I mean, we've got continued increase in distribution in the UK. And that's as a function of two things, really. Strong performance on our core brands. which therefore facilitates more distribution, but also as we launch some of these new products that I've mentioned, so things like the Oxo Bone Broth, that justifies clearly some space on the shelf. So we've got an ongoing increase in our distribution levels in the UK, and this year is no exception. If I was to compare total distribution points this year compared to last year, I can tell you that that's noticeably up again. But I think what you might be referring to might be more the international distribution that we're building. And, you know, we're on a constant program of gaining distribution overseas. So particularly in Europe and North America, Australia obviously is much more established. But it's a constant effort in terms of getting some of those target brands and those target products into new customers and new stores across those geographies and then obviously nurturing them and seeing how well they go and when things work really well like i think we're seeing with the apple pies in in kroger in the us um then that's and to be clear that thing one region of kroger because it's a regionalized business then obviously we take that success story and and take it around the other retailers and go look how well it's doing in in in one of your other regions or one of your competitors, and use that as a way to try and leverage more distribution. So that's exactly what our international team are programmed to do. And that's one of the reasons why, as I mentioned earlier, we expect that this offers us a big growth lever over the next few years. We intend to remind people we've doubled the size of our overseas business over the last five years, and the plan is to now go and do that again. and this is exactly how we go about doing it.

Understood. That's helpful. I'll pass it on. Thank you. Thanks.

Thank you. The next question comes from Damian McNeill of Deutsche Bank. The line is now open. Please go ahead.

Yeah, morning everybody. Thanks for taking the questions. Two for me, please. The first one just on Merchant Gourmet, obviously you highlighted that it was 18% growth and it was the first full quarter you've had of running that brand. Just wondering if you could sort of expand a little bit more about your sort of expectations for the brand going forwards and how much distribution helped that 18% growth is the first question. And then the second question is kind of building on Matthew's questions around marketing spend. Obviously, we've talked about the journey that you're on there. How many more brands are there in the portfolio that haven't really had much attention historically or for the last several years? And should we expect the pace of marketing investment to increase? I know you don't give us the exact numbers, but I'm just sort of wondering whether you could give us a little bit more colour on that, please.

Yes, good morning, David. So Merchant Gourmet, obviously, we're super happy with the 18% growth. That was ahead of the Merchant Gourmet team's plan for the year, and it was also ahead of our acquisition model, which is always nice to be in that position. How much of it was distribution? I think some of it would have been certainly distribution because a big driver of that is the new products that the guys had launched. So there's a series of new products there and what they call meals in minutes, which have performed very well. So that will be partially therefore distribution based. um another chunk of it was as i mentioned in the call earlier actually where premier foods can start to help which is we've got a merchandising team which um is out in stores every day um making sure that all the right displays are up that products aren't out of stock and all that sort of thing um and that that effort is particularly intense over the christmas period um and so As usual, over Christmas, they'll be making sure that all the key Christmas sellers like Bisto and Paxo and Oxo and Ambraser are all brilliantly displayed. But what they were able to add to the list this year is we said, well, we'll do the same for Merchant Gourmet chestnuts as well, please. So actually, Merchant Gourmet chestnuts had a whole load of displays in store that they would otherwise not have had. And this is where the scale in our skill set can kind of, even in the initial phase, can come and help. Now, obviously, where we go next Is exactly what we've done on the spice Taylor and fuel 10k and this will be closing down distribution gaps But obviously that will come as range reviews happen in the different customers. It will be the MPD pipeline It will be increasing marketing investment And then as I mentioned will also be then looking to see where we can take this overseas as well So there's been a bit of help from the Premier Foods side of things over the last quarter, but actually the big things are still very much still to come. And on that marketing investment, we have made a lot of progress on this journey over the last five years, but you're right, there are still some of the smaller brands in the portfolio, which I think will benefit from more marketing support. Paxo being a perfect example over this Christmas, where we will look to dial that support in over the coming years but also to do more on the bigger brands as well. Do I expect that to be a change in the pace of investment increase? Probably not, but probably more a continuation of the journey that we've been on over the last five years or so. Does that answer that question, David?

Yeah, very good. Yeah, that's great. Thanks, Alex.

Thank you.

Thank you. The next question comes from Clive Black of Shore Capital Markets. Your line is now open. Please go ahead.

Morning, everyone. Sorry for being cut off, but we've managed to divert the thought police. And congratulations on a really good performance, to be fair. A couple from me, if I may. First of all, around innovation, a little bit like the theme of the lads on marketing, Where is that today from where it was, say, two or three years ago? And are you again on a journey to elevate innovation within the business? And Alex, perhaps just two points around that, the extent to which innovation is kicking into international. And I think you also mentioned young, a focus on younger cooks. Maybe some examples as to embellish that story. And then if this has been asked, do shut me down, but... A lot of talk, understandably, through the festive period, given negative volumes in UK grocery around the impact of diet suppressant drugs. I just wondered how you feel Premier Foods is positioned on that quite big and growing subject. Thank you.

Morning, Clive. Thanks for that. So, yeah, so innovation. Where are we today versus two or three years ago? I think actually in a stronger place. I mean, this has always been core to what we do, you know, over the last month, longer than the last five years, actually. And it has been at the heart of how we've driven growth because we believe it's super important that you are with the consumer as their trends and habits change. and help facilitate that. Ultimately, we see any change in consumer habits as an opportunity, which I'll talk about on the second part of your question as well, actually. But obviously, as you do more and more of that, you learn and evolve as you go, and I would say that we've learned a lot over the last few years, and we've evolved how we go about innovating and how we work with consumers to develop You know, what the next recipes and the next ideas are going to be. And one of the bigger focus areas for us has been finding ideas which are what we would describe as bigger platforms. So ultimately ideas that have got broader consumer appeal and therefore have got the ability to scale up. So actually, if you were to, if you like, scratch below the surface a little bit of our innovation program, what you actually see happening over the last five years is this evolution of less new products coming to market, but the ones we bring to market are bigger and have got greater potential. And so therefore, we can leverage them much more and gain greater overall growth. So it is a journey, but one where I would say we're in a lot stronger position than we were a few years ago. Innovation in international. At the moment, we've not been necessarily innovating specifically for any individual markets. We've tended to use the innovation we're developing for the UK. But more and more, as the organization expands overseas, we're thinking more holistically about developing products which will work in multiple markets. And you see that actually the large size of SpiceTaylor products for families actually came out of the Australian team. So the Australian team was saying, look, we've got a whole load of families buying the Spice Tailor because especially with the milder flavours, we're finding families are cooking it as a family meal and giving it to the kids as well. So how about a family-sized pack? So that was really developed initially for the Australian business, worked really well and was reversed into the UK. That's just us starting to become a more global organisation, if you see what I mean. And then finally, your point on focusing on younger consumers. That's very true. It's predominantly in our media approach and how we're communicating with consumers. So we're changing our balance of media tools to target more younger consumers as they start to cook for themselves. But we are seeing it in some product formats. So we did a version of Bisto, which is a peri-peri flavor Bisto, which was deliberately targeted at Nando generation and was supported by influences on social media. So, you know, very specifically joined up in terms of the product and the product flavor profile and the media and communications around it. And then we've got brands like, you know, Fuel 10K is clearly targeted at younger people in the first place. So that whole brand is focused at that end of the age spectrum. So clearly lots happening and we continue to learn and evolve as we go. In terms of weight loss drugs, this is really interesting, actually. So you might remember, I've always said we didn't expect to see a very big difference. We've thought long and hard about this, and we actually can't see an impact from it either. And the reason why we think this is is because the kinds of products we make are not bought – as individual on-the-go type eating products they're they're bought as part of the weekly shop by families and used to prepare family meals so if you're for example you know buying a pasta sauce as part of the weekly shop because you're going to make pasta for the family even if you've got one member of the family on a weight loss drug you're still making the pasta for everybody else and i think the same is true for example oxo cubes you know if you're and they're making a casserole or something. So as we look across most of our grocery portfolio, we see that they're family meal occasions and therefore not significantly impacted or likely to be significantly impacted. We did think for a while that our sweet treats business might have more of an impact because obviously their treats and their cakes But again, we're having an absolutely cracking performance from the sweet treats business this year, up over 6% branded cake sales year to date. And then when we've looked into the consumer habits of how, you know, Mr. Kipling cakes are consumed, again, It's a pack of six cakes. You buy it as part of the weekly shop. We know the most common thing that happens with that is that people take it home and they sit it on the countertop in the kitchen. usually near the kettle. And so what we think happens there is even if one person in the family is on an appetite suppressant drug, then those cakes just get eaten by the rest of the family. So we're not seeing and not really expecting to see much of a downside impact. Now, what is becoming more interesting is we're starting to see potential for some upside here so actually when I look at the whole thing on balance we see there's more opportunity in weight loss drugs than there is risk for us and that's because of things like fuel 10k so one of the things we know is that if you're on one of these drugs there is a risk that you don't get necessarily all the right nutrition and you don't get particularly enough protein and we know that fuel 10k as a brand is targeted it's positioned on protein and so is potentially really helpful to people who are on those drugs and as you'll also be aware we've done an awful lot of work over the last you know, five, ten years, making our products and making our portfolio healthier. And then also with some of our acquisitions, so like Merchant Gourmet, for example, is necessarily a healthy brand. It's, you know, focused on a lot of high-fiber pulses and grains, and therefore it's potentially really helpful to diet as well. So, as I say, on balance, we're now in a position where we're seeing more opportunity than risk in this.

That's... That's really fascinating. And I have to say, on balance, slightly and pleasantly surprising, the second answer on GLP. So thank you for that. Really insightful. And it sounds like you've got a bit of a cold, so I hope you keep better as well. Thank you.

Thanks, Les. Thank you. The next question is from Andrew Wade of Jefferies. The line is now open. Please go ahead.

Morning, chaps.

First one from me, just looking at the international progress, obviously encouraging there, and even more so the fuel 10K progress into Europe. So just on that subject, just sort of interested if you're still of the view that an international bridgehead could and would accelerate things into Europe and or other territories. So that's the first one. And then on the second one... The Lloyd Grossman renegotiation or announcement in November was obviously a positive and you signalled then a pretty significant investment in Worksop there. Just interested in any colour you can add around the Worksop in-housing there. Thanks.

Yes, good morning, Andrew. So international progress, obviously, yeah, we're really happy and it was on top of pretty strong comps as well. So I'm really pleased with that. And fuel sanctuaries in Europe is really exciting. I mean, the granola business in the UK is a phenomenal growth driver for us. We've got a really strong market position now and continually taking market share. The chocolate granola is the best-selling granola product in the UK, and we've managed to carve out a really strong market position. So the interesting question we've got on the table is, can we now do the same in other countries overseas? Because if you were then to join that up, you could, in theory, make quite a big granola business across Europe. So that's the interesting challenge for us, and I think we'll see more of that as we go through this quarter and it starts to get into some of those countries. kind of exciting times. Could a bridgehead acquisition help? Yeah, maybe. I think we've been really clear that we're open to acquisitions that are in the UK and overseas. And we continue to look, but that's probably about as far as I can go right now. But when we've got something to tell you, we'll let you know. But we continue to look for more brands we can buy that we can bring into the portfolio and be successful like the ones we've built so far. The Lloyd Grossman announcement, yeah, so this is really encouraging. And the big shift here really is it's an investment in margin improvement, isn't it? So we will move from having the Lloyd Grossman sources core range made by a third party into making them in workshop along with our Sharwood sources and the Home Pride sources. So they'll all be made in sort of what we're calling a sources centre of excellence. with a new modern kit, and that will have a very positive feed-through into margins and then therefore delivers a really nice return on investment. That's the logic behind that one.

Lovely. Thanks very much, guys.

Thanks. The next question comes from Ria Mehta of Equatus Investments. Your line is now open. Please go ahead.

Thank you for giving me the opportunity and congratulations on good set of numbers. My first question is in terms of you just mentioned that people are moving more towards premium food and premiumization and the high end of the goods are getting more traction. So with the increasing ASP from the premium goods, are we seeing any margin expansion going forward?

Morning. Yes. So, look, I mean, yes, the premium, the really interesting thing here is that it's certainly been proven out that UK consumers are prepared to pay a bit more for products which are noticeably better. So the trick is the product has to be significantly better. Otherwise, you know, you're trying to, you know. you're not going to convince people and they're not going to stick with it. But if we manage to develop products which are definitely noticeably superior, then people are prepared to pay a little bit more for it, which is great. And I think we've got a whole number of examples of those. We don't talk specifically about the margins on the individual products, but what I can say is that we do have a pretty robust margin improvement program across the business. And as I mentioned earlier, that's something that we use to fuel the investment back into the brands. And that's how we've managed to increase our brand marketing investment significantly over the last four or five years.

Got it. Any newer acquisitions which we are looking at or there is in pipeline?

Well, obviously, we're looking for acquisitions all the time. We've got a team that are focused on this. And we've clearly been really successful with the three brands we've bought so far. So we're definitely looking to acquire more. But obviously, I can't disclose the things we're looking at until the point where we buy something.

What level of debt are we comfortable with? In case we are doing acquisition or like our Capex plans have also increased and our distribution plans have also increased. So what is the cap ceiling of the debt that we would be looking at?

Yeah, thanks. Why don't I take that one? I think clearly debt and leverage significantly improved versus where it has been, which is fantastic. You might remember we had a one and a half times target of leverage when we were sort of on the way down. I think the reality is that depending on timing of M&A and size to an extent, we'll probably be operating in the one to two times net debt three bit R range. Will we go slightly higher for the right acquisition or the right acquisitions? Possibly, but I think that remains to be seen and it would only be if there was a very clear route back down from a cash flow perspective.

Got it. Also in our half-yearly update, we had mentioned that the dividend will staggeringly increase So are we looking at increasing the payout? Is there any policy laid out for the same?

Sorry, would you mind repeating the question?

So in our half-yearly update, we have mentioned that the dividend will increase going forward. Are we going to increase the payout percentage? And is there any policy on the same?

Okay. Well, I mean, I think that's something that we'll think about and talk a bit more about at the year end, I think, as part of the capital allocation policy that we've laid out. M&A and CapEx, i.e. investing back into the business, remains a key priority for us, but we do see dividends pay out and we've said we'll progress it faster than earnings but we see that as a key part of the overall returns package and as we do at any year end we will decide as a board what we think the right direction of travel is but dividend remains an important part of overall returns going forward for sure Thank you The next question comes from Corinne Elias of Barclays Your line is now open, please go ahead

Hi, congratulations on the results and thank you for taking my questions. I just had a quick follow-up on the bonds. Obviously, I think on the last call we discussed the fact that you had put in place a bridge facility that gave you additional flexibility, especially given where interest rates are. Any further thoughts there? Thank you.

I mean, continue to look at the market, Corinne, thanks for the question. I think, no, I think, you know, where we are, clearly we are benefiting from the current bonds, which is fantastic. We know it won't go on forever. I think that the next logical time to look at it will be following the year-end results. So we'll see how the market is and how we feel then.

That's great. Thank you very much. And this is Luca.

Thank you. The next question comes from Oliver Blackman of BlackRock. Your line is now open. Please go ahead.

My question has been answered now. Thank you.

Thank you. We have no further questions at this time, so I'd like to hand back to Alex for closing remarks.

Well, thanks, everyone, again, for joining the call this morning. As you can see, we've had a really strong Christmas, a really strong quarter three, really good growth from our brands. And as you know, we're all about growing brands in this business. And I think, encouragingly, really strong performance across all five pillars of the of our growth strategy. So we're in good shape and consequently why we've been able to raise our trading profit target today. So thanks again. We'll talk to you next time.

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