PZ Cussons Plc

Good morning all and thank you for joining us on today's PZ Cousins full year results. My name is Drew and I'll be the operator on the call today. During the call, we will have an audio Q&A session following the prepared remarks. If you would like to ask a question, please press star followed by one on your telephone keypad and to withdraw your question, it's star followed by two. With that, it's my pleasure to hand over to Jonathan Myers to begin. Please go ahead when you're ready.

Thank you very much, Drew, and good morning, everyone, and thank you for dialing into our results presentation for the year ended 31st of May, 2025. For those of you who can see the slides we're presenting this morning, it's worth calling out a successful example of our brand-building activities in the last year on the slide in front of you. Original source advertising on a London bus as part of our Nature Hits Different campaign. I'll have some more detail on this later, but suffice to say for now that the activity helped deliver another year of growth for the brand in F125. Turning to the agenda then for this morning, I will start with a brief introduction before handing over to Sarah to take us through a review of the financial. I'll then provide a broader update on strategic progress and performance before moving to a summary and a chance for you to ask any questions. Note on this slide, too, an example of how we've been building brands over the past year. This one, driving trial and customs baby, specifically the Telon Oil, launched last year, as shoppers browse a specialist baby storage carton. Our Telon Oil has now reached 10% household penetration in urban Indonesia and is growing market share. So, moving to our main messages for this morning, we are making progress against our strategy. Our four priority markets delivered a strong performance. We have good momentum in the core of our business. The UK delivered a strong improvement in profitability, fueled by revenue growth and gross margin expansion. Indonesia ended the year with its fifth consecutive quarter of revenue growth, with a healthy mix of high single-digit revenue and volume growth for the year. We continued to gain market share in Australia on each of our top three brands and grew operating profit overall. But we were still battling against the softer consumer backdrop holding back our revenue. Finally, our Nigerian business demonstrated its resilience, continuing to perform well in a high-inflation environment. Meanwhile, we have also made progress pushing change through the business, strengthening our brand-building capabilities, driving better integration of our marketing and R&D teams, and extending our planning horizons to enable greater focus on sufficiency and quality of our multi-year innovation plans. Since the close of our financial year, we announced the sale by joint venture partner, Walmart International, in line with the objectives of the strategic review we announced in April 2024 to streamline and simplify our portfolio. It was also after careful consideration of alternative value creation options that we announced the decision to retain CentroPay, setting a new strategic direction with a new partner in the U.S. and a dedicated operating model within PBED to deal with. While I appreciate you will naturally have questions on our wider African business, all I'm able to say today is that we are continuing to progress our strategic review and will, of course, provide an update when we do have something to say. Finally, we are working hard on reducing costs and unlocking value in the business, whether that's through reducing discretionary spend, tackling our structural cost base, or the sale of surplus non-operating assets. I'll cover more on this later. So overall, we know there is more work to be done and that we have not yet delivered all that we set out to achieve. But there has been good progress to date, particularly the underlying momentum in the core of the business. Now, we are focused on delivering our strategic actions and operational improvements to evolve Peter Cousins into a business with a more focused portfolio and stronger brands, delivering sustainable, profitable growth. And with that, I'll hand over to Sarah to take us through the funding process.

Thanks, Jonathan, and good morning, everyone. I'm going to share a summary of our FY25 full-year results, walk you through the key movements at a group level, then by segment, and finish with current trading and guidance for the year ahead. As Jonathan mentioned, we've seen momentum across most of our portfolio, with a particularly strong performance in the UK and Indonesia. Group revenue declined by 14 million pounds to $514 million, with a $47 million reduction attributable to the Naira, which, while more stable in FY25, was nearly 40% weaker on average versus sterling than in FY24. Life-to-life revenue growth, calculated on a constant currency basis, was 8%, driven by pricing in Nigeria. Excluding Africa, life-to-life revenue growth was flat. Adjusted operating profit was 55 million pounds, down 6%, with adjusted operating profit margin lower by 30 basis points at 10.7%. However, as you can see from the bottom of the slide, excluding from each year's figures the contribution of BZ Wilmar, the sale of which we announced in June, group adjusted operating profit margin would have increased by 30 basis points. On a statutory basis, operating profit was £21 million, compared to a loss of £84 million in FY24, which was primarily attributable to forex translation and US dollar denominated liability losses in our Nigerian subsidiaries following the currency devaluation of June 2023. And we have since significantly reduced our exposure to any future NIMA shock, as we have made good progress in extinguishing historical liabilities and repatriating service cash. We maintain a flat net interest charge in the year. With a higher adjusted effective tax rate, more indicative of a higher rate going forward, adjusted FY25 earnings per share declined ahead of operating profits, down 8.5%. The board is proposing a final dividend of 2.1 pence per share, taking the total for the year to 3.6 pence, the same level as the prior year. Pre-cash flow was 42 million pounds, up slightly due to an improvement in working capital, partially offset by the reduction in operating profits. Net debt increased slightly to 112 million pounds, with a net debt to EBITDA ratio of 1.7 times. However, taking into account the proceeds from the sale of our Wilmar joint venture, which is expected to complete in the final quarter of calendar 2025, our pro forma ratio would have been 1.1 times. Turning now to the financial performance details, and firstly, revenue. To aid comparability, the first bar showed the impact of adjusting the FX translation, presenting NY24 revenues at FY25 exchange rates. The breakdown of the adverse £55 million impact is, as usual, provided in the appendix. On this like-for-like currency basis, revenue increased 8% in the UK and Indonesia. and Jonathan will come on to the brown drivers of that revenue growth later. We again took pricing in Africa, with multiple increases throughout the year to offset double-digit inflation in Nigeria. Jonathan will also outline the steps we're taking to turn around Central Haven. Now to operating profits. As I mentioned, our overall adjusted operating profit margin decreased by 30 basis points, to 10.7%. We've shown this chart excluding Wilmar, given this represents the more accurate basis for future profitability. Lower in absolute sterling terms, but more cash-like and sustainable in nature, versus an equity-accounted share in a non-core, lower-margin joint venture. On a constant currency basis, Group gross profit margin was lower in the year, reflecting the adverse mixed impact of strong revenue growth in Nigeria, where gross margins are structurally lower. This was more than offset by a 220 basis point reduction in FEMBA HEMS. Around half of this represents structural cash savings relevant to our going forward business. Also included within this number is a reduction in amortization, to reflect the business decision to extend the useful economic life of our SAP software now that the manufacturer's support period will run for longer, allowing us to extract a higher return from that IT asset. Marketing investment was broadly unchanged as a percentage of revenue, while the impact of forex translation had an overall adverse 70 basis point impact on margins. So let me now provide some more detail on the performance of each of our regional reporting segments. Looking first at Europe and America, where we saw growth in both like-for-like revenue and operating volume. Revenue grew 0.6% driven by price mixed growth and with a very small overall volume decline. Growth in our main UK brands was offset by a challenging Santa Fe performance, without which Europe and America's revenue growth would have been 2.4%. Adjusted operating profit was up £4 million, with a margin increase of 230 basis points. Driven by tight cost control and the full-year impact of the integration of the UK personal care and beauty businesses, as well as ongoing revenue growth management, and the Product Margin Improvement Initiative. This more than offset the £3 million impact from the introduction in the UK of extended producer responsibility plans, a new cost which we will seek to mitigate over time through, among other things, a review of our entire packaging portfolio. Turning now to Asia-Pac, where like-to-like revenue was flat. Continued momentum in Indonesia was offset by a decline in ANZ. All our core customs baby segments drove volume-led growth in Indonesia, and ANZ saw market share gains in all three major brands, despite the softer macro environment there. Both markets improved their profitability with higher gross margins and lower ONAs. This, though, was offset by a reduction in profitability in some small Asian markets and lower profits in our business manufacturing non-grounded soap noodles. Overall, adjusted operating profit reduced by 3 million pounds with a margin decline of 150 basis points. Revenue in Africa declined by 7% due to the depreciation of the nylon. The 35% like-for-like revenue growth reflects 20 rounds of price increases, and inflation in Nigeria remained elevated at over 30% for much of the year. Whilst volumes declined 12% as a result of those price increases. This was mitigated somewhat by further route to market improvements that Jonathan will describe. We've seen our Nigerian business return to volume as well as price-led revenue growth. so far this FY26 financial year. Electricals revenue was £47 million, up over 30% on a like-for-like basis. Adjusted active operating profit margin improved by 250 basis points, or excluding people at Wilmar, it increased by 450 basis points. The operating profit numbers shown here are excluding a £9 million benefit that the Africa region reported in FY24 related to intra-group debt forgiveness, the cost of which was shown in last year's central cost line and which had a net nil impact to overall group operating profits. And I note it to explain that the Africa segmental results presented here are both comparable year-on-year and representative of underlying operations. So finally then, our central cost line, which equated to 30.5 million pounds in FY25, and which was, on a reported basis, down slightly versus FY24. However, we have also made the corresponding Nigerian debt forgiveness adjustment here to ensure comparability. And as such, central costs increased 6.8 million pounds in FY25. This was split between underlying cost increases and investments in group-wide capabilities attributable to the performance of business units, but best housed at the corporate center for maximum return, and so reported them. For example, the shifting of some marketing and some R&D roles to sit central. As we'll come on to, we see this number falling considerably over the next 12 months, given the cost savings we're announcing today. So moving now to cash flow and net debt. Total pre-cash flow was £42.3 million compared to £41.6 million in the prior year, reflecting an improvement in working capital offset by lower profits. Net debt was £112 million compared to £115.3 million last year, representing a net debt to EBITDA ratio of 1.7 times, which, as mentioned earlier, will then see a significant reduction following the completion of the Wilmar sale. The group also continues to have no surplus cash held in Nigeria following our successful repatriation efforts. As we said in the statement this morning, trading year to date has been in line with our expectations. Group like-for-like revenue to the end of September is expected to be up around 10%. Strong revenue growth in Asia-Pac is made up of Indonesia hosting its sixth consecutive quarter of growth, plus ANZ also being one. Africa is showing encouraging volume momentum. Europe and Americas is down 2% or up 2%. excluding Santa Fe. And we expect Europe and America to continue to strengthen across October and November, which would see us back to overall revenue growth there in half month. In terms of profit guidance, we expect group adjusted operating profits to be between 48 and 53 million pounds. And this figure strips out any contribution from normal which is now treated as an asset sold for sale in accounting terms, and so its profit contribution in FY26 will be reported as part of the disposal calculations. Captured within the guidance are cost savings of between 5 and 10 million pounds, some of which will be reinvested in the business, subject to clear return criteria. Net debt will fall significantly in FY26 to less than one times EBITDA. We expect cash proceeds of between £15 and £20 million from the ongoing programme to sell surplus non-operating assets, of which we have received £8 million so far this current financial year. We're expecting to receive proceeds of approximately £47 million before the end of the calendar year, from the sale of our worldwide joint venture. Jonathan will talk a little more about the cost savings and the ongoing asset sales proceeds in a little detail. And so with that, I'll now hand back to him.

Thanks, Sarah. So let me give a broader update on progress and performance, framed around the highlights and messages I covered at the beginning of the presentation. And let's start with the UK and what was behind the strong operating profit that I mentioned earlier. Beyond the cost savings Sarah talked about, key driver of the revenue performance have been better commercial and brand building tactics. Taking original sources as an example, we delivered a bold marketing campaign from February through to May, firmly targeting younger consumers with an optimized mix of social media, out of home and TV, leveraging our partnership, social media influencer and personality, Jamie Lang. This is a good example of how we are enabling more competitive brand activation. with the £2 million media campaign reaching more than 15 million people. Pick-up in brand awareness meant Original Sports not only achieved its highest household penetration in almost five years, but, thanks to considered price and promotional optimisation as well, the brand also grew grossly. Based on the success of the first wave of the Nature Hits Different campaign, look out for the next a good example of us prioritizing brand support against activities with proven return on investment. Another way of driving revenue on our brands is to work in partnership with the owners of other brands to engage common target consumers and drive in-store activation. Six months ago, we highlighted the success of CareX and its Grappler partnership, which we have since expanded to Zog and Room on the Room. notably carrots grew revenue and gross margin in FY25, consolidating its number one position in the hand wash market. We've also extended this type of brand partnership to Charles Fund to include a tie-up with Bluey and BBC Studios. Now, if you don't have young kids or don't know Bluey, it's one of the most popular TV shows in the world for children, and it's amazing enough to secure disproportionate levels of support across retail outlets. Just take a look at this tie-up with Bluey and Kellogg's that Sainsbury's has evidenced. So, we've seen encouraging F125 performance in the UK, and we look forward to more to come. Not least our plans for Christmas gifting, which is starting to hit the shelves this very month. Turning to Indonesia and customs babies. You may remember the Child's Farm slumber time product range rule. addressing the importance of reassuring parents that their washing and bathing products are giving their babies the best possible chance of a good night's sleep for the well-being of both the baby and their parents. The Cuddle Calm range takes the consumer insights and product formulation learnings from child's farming and applies them to customers' babies, albeit in a very different context. It's a good example of us leveraging shared baby insights across geographies and brands we have sought to create a more integrated marketing and R&D organization. Elsewhere in our intermediate business, we continue to see phenomenal growth in e-commerce, whether that's through established platforms such as Shopee or the ongoing success of our own live streaming capabilities. Turning to our business in Australia and New Zealand, where we continue to see softness in category values through the year, so reassuringly we've seen the first signs of amelioration in the latest quarter. Against that backdrop, we continue to make market share gains on our top three brands thanks to renewed efforts to drive better in-store presence, competitive pricing and promotion, and broad distribution across retail channels. The Morning Fresh post on the right-hand side is an example of those efforts. We're already the clear market leader in washing up liquid, and we are leveraging this strong position and our brand equity for winning performance and great value to help grow market share in the auto dish category. We've been using net hangers on bottles of morning fresh liquid to drive awareness, and then offering hundreds of thousands of samples of Auto Dish tablets to drive trial. While Auto Dish is a highly competitive category, our position of strength in the washing up liquid market gives us a clear competitive advantage to leverage as we seek to build trial, distribution, and market share. Turning to Nigeria, perhaps the best example of brand activation was the recent relaunch of Kera. Carrots have been available in Nigeria for some time, but has always been sub-scale as the product positioning has largely been taken from the UK. Thanks to good work with Nigerian consumers, our campaign, Win the War Against Germs, means the brand now looks and feels new and relevant, with clear antibacterial positioning, distinct brand assets, always disruptive messaging, and benefiting from professional endorsement. Just like the original sources I gave earlier, the execution was a multi-faceted campaign. Digital, TV, out-of-home advertising, and a series of in-person launch events. In fact, we estimate the campaign reached 125 million people. It's early days, but signs so far are promising. CareX will absolutely be one of the drivers of Nigeria's performance in FY26. Beyond the excellent work on CareX, we have continued to strengthen our go-to-market presence. A key part of this, as we've mentioned before, has been the number of stores served directly by us, as opposed to by our wholesalers. Simply put, covering the stores directly leads to better retailer relationships and in-store presence, as we can directly influence which products turn up in which types of outfits. From covering just under 70,000 stores directly three years ago, We exceeded our target of reaching 200,000 in FY25, and we're now striving for even more stores in direct coverage in FY26. A driving force in how we are seeking to serve consumers better in our core categories is the strengthened brand building operating model we have adopted over the past year as the next phase in the journey to raise the bar on how effectively and consistently we build from the ground. Many of you will remember where we started. Strong brands with good tactical plans, but more of a trading mindset and limited cohesion across the portfolio. We've moved on from that in recent years, creating better alignment across the group and strengthening in-year plans. But we know there's more to do. So we now have put in place a brand-building setup which balances staying close to consumers in our priority markets, whilst leveraging more effective integration and collaboration across both markets. meaning improved visibility of multi-year innovation and revenue growth plans in our priority market. Ultimately, we are building on our strength of in-year activation to add excellent multi-year innovation. Not only is this good for our consumers, it's also good for our marketing teams. We've seen a 7 percentage point improvement in engagement scores for the marketing function across the group. Ultimately though, success will be measured in sustained progress on market share, revenue, profitability. Moving to portfolio transformation, in June we announced the sale of our 50% stake in PZ Wilmar, our Nigerian cooking oil business, to Wilmar International, our joint venture partner, for cash consideration of $70 million. This will simplify our portfolio and, as Sarah said, significantly strengthen our ownership. It sees us exit a non-core category and reduce group reliance on Nigeria as part of our overall efforts to rebalance the portfolio and concentrate on our core categories of hygiene, using, and baby. The sale also benefits a number of our wider sustainability metrics, as Peter Wilmar represents around 10% of our scope three inventory. Turning now to San Tropez. As we explained back in June, although our intention was to sell the brand, After running a comprehensive process to do so, our firm belief is that the better course of action for our shareholders is to retain it and maximize value in the coming years. There are three reasons which give us the confidence. First, it's important to remember that once it's had a challenging performance recently, Saint-Tropez is regarded as an iconic brand. It established the self-tan category and has for many years been the driving force behind the market. It still has great brand equity and awareness, with more than 30% share of the prestige south town beauty market in the U.S., and envied positions on the shelves of key U.S. beauty retailers such as Ulta and Sephora. Second, a key tenet of a new direction is the partnership we have formed with the Emerson Group, a leading U.S.-based partner to many brand owners, including some of the world's largest personal care and beauty businesses. They will provide customer management, logistics services, and brand activation in the U.S. Tantra Pay will be integrated into Amazon's dedicated selling teams to key U.S. retailers, with initial meetings having already taken place. Not only does this partnership give us access to a strong go-to-market operator in the U.S. with significant scale and expertise, it also dramatically simplifies our own operating model. We no longer have a need for our own team on the ground, nor the expense of dedicated offers in our company. Next for the U.S., Our Sandra Paid model is better, simpler, and more cost-effective. Finally, we have also appointed a new executive with significant experience of the beauty category, not least from many years spent at L'Oréal, to lead the Sandra Paid business with a single-minded focus on value creation and a dedicated team coming together beneath him. Looking ahead, therefore, we're busy with the innovation plans for the 2026 season And working on celebrating the 30th anniversary of the launch of Saint-Tropez next year. So lots more to come on Saint-Tropez. Moving now to the final slide before summing up. As Sarah touched on earlier, we have made progress driving cost efficiencies and identifying opportunities to unlock further pockets of value. All of it which will help to fund future growth programs. To that end, we have announced this morning that we expect to generate 5 to 10 million pounds of cost savings in FY26. It's a big number at the top end of the range, but we're hard at work to deliver it. We've already developed a track record and a playbook to do this with a 3 million pound savings in the UK business ceremony, removing duplicating structures and operating expense. But more importantly, the organization is increasingly building a mindset of ongoing cost optimization. but also through the relentless and rigorous pursuit of grinding out the inefficiencies that consumers do not value and should not be expected to pay for, whether that's saving on the re-tendering of label production in the UK, the shifting of surfactant supplies for our Nigerian business, or sourcing a different enzyme for our Arabian laundry brand in Australia. We're also unlocking value from non-corp or non-operating assets, mostly in Asia and Africa. These range from high-end residential property in Ghana and undeveloped land in Indonesia to empty warehouses in Nigeria that are no longer required by the business, and pretty much everything in between. The market value of these assets is significant, and we estimate that after fees and taxes, we should generate net cash proceeds of around £30 million from their disposal, the majority of which will complete during this financial year. Common across all the activities shown on this slide is a single-minded pursuit of simplification, whether of processes, operations, or portfolio, and as a result, unlocking value. In summary, while there's a lot going on at PZ and still much more to do to deliver, I want to be really clear that our day-to-day focus is on continuing to drive the underlying business across our priority markets. We're building stronger brands in our core categories, and we're driving more competitive go to market execution in our largest markets. The combination of which means we can get more PZ products into the homes and hands of more consumers. So, with that, enough of us and a chance for you to let us know your questions.

Thank you. We'll now start today's Q and A session. If you would like to ask a question, please press star followed by one on your telephone keypad. And to withdraw your question, it's star followed by two. Our first question today comes from Sahil Shan from Singer Capital Markets. Your line is now open. Please go ahead.

Morning. Can you hear me? No. Good morning. Hello. Well done for an excellent presentation there. Forgive me, I'm fairly new to Story, but I've got a couple of questions if I sir care. Firstly, just on the Accenture Pay brand, you've retained it. and outlined a new U.S. circus strategy with Emerson. I suppose my question is, what internal KPIs or milestones are you using to evaluate success, and how quickly should investors expect signs of recovery in the brand's P&L contribution? So that's my first question. The second one's around capital allocation. I think with the Walmart proceeds and asset disposals, it looks like expected to significantly reduce the net debt this year. Are you thinking about capital deployment priorities going forward around reinvestment, M&A, or maybe returning capital back to shareholders? Thank you.

Well, I take the first of those questions on capital allocation. So, you're absolutely right, after a very considered process, we took the call to retain doing so than in selling it. We're very clear as we did that what are the strengths and what are the challenges that we need to address. And the most broken, if I can use that phrase, part of the business was in North America where we had seen double digit declines. And it's for that reason we have taken the most dramatic action of any part of the business model in North America effectively to adopt a new route to market partner and one who's very, very qualified because they're already operating with the likes of Altair and Sephora as well as more mainstream retailers in driving both personal care but also high-end beauty care. So that's a final confidence for us that we are putting our business in the hands of a proven partner, one who we've known previously, by the way, through work together on Transfarm. So as we look to the future, ultimately the most important measure will be value creation. And that is indeed how we have structured our thinking and also our incentivization as we look at the team that will be leading that business. But obviously what really matters will be driving growth in market share, growth in store distribution, because ultimately it is a brand that wins in store and online, but with sufficient social media activation and influence. And as that goes through perhaps one or two seasons, so coming to your question a very seasonal business. The summer is all important, or late spring into summer is all important. So we are working hard for summer of 26, but we're also trying to make sure we get ahead of the game for the summer of 27. So I would be expecting to report to you improved momentum as we exit next season, but more importantly the season after, once we have a longer lead time to Thanks Jonathan.

Let me touch on the capital allocation point. So you're absolutely right to say, you know, we were very clear that the first use of any cash proceeds from the portfolio transformation would be to reduce our level of debt. It takes us for FY25 to a pro forma leverage ratio of one times, and then with further surplus asset disposals and ongoing cash generation in FY26 south of one time. And that we see very much within our target range and the level of leverage we feel comfortable with. Then in terms of our broader use of capital, it's first and foremost to drive the organic growth of the business. And of course, as a brand-building organization, that is behind R&D investment, behind marketing campaigns to drive our brands, and also to give us more capacity to grow volume, also automation to make sure our product margins remain very competitive. So first and foremost, we see the highest return on our capital being in driving the organic growth of the business. We also are retaining sufficient capital to support a sustainable level of dividends. We don't have a stated policy, but internally we think a little bit around a, you know, a targeted cover of two times and that growing in line with the earnings going forward. And then if you set the capital, I think you can see us putting towards bolt on M&A if we see opportunities that both fit very neatly within our core markets and our four categories or indeed the opportunity to acquire some additional capabilities, be that digital. And Child's Farm was our last such example in March 2022. And we should think about Child's Farm as being an example of something we might do again when the time is right. And I think we would say all of those things we consider to take precedence over surplus returns because we believe we can deliver more returns by deploying the capital in turn.

Super. Thank you very much. That's really helpful. Just one final one from me. It would be really appreciated. Post these results, it would be good to catch up. Could you get the relevant IR person on your side to reach out to me? And we can take it from there. Thank you.

Thank you.

Our next question comes from Matthew Webb from Investec. Your line is now open. Please go ahead.

Good morning, everyone. I appreciate you've touched on this already, but I wonder if you could just provide a bit more detail on where the 5 to 10 million of targeted savings are coming from. Jonathan, I think you mentioned that 10 million is quite a big number at the top end, and I would agree with that. So anything that could bring that to life would be very helpful. And then maybe also where... your priorities are in terms of reinvesting a portion of those savings. That's the first question. Second question on the EPR. I infer from the way that you've talked about that, that you've really absorbed that 3 million. I just wondered whether whether there were any discussions with your customers about passing that on, at least in part. And then also, I know you mentioned that this had prompted a review of your approach to packaging. And without prejudging that review, I just wonder whether you could give any examples of some of the things you might consider there. But then the third question is just on Indonesia. Well, Steve, I appreciate your trading has been very strong, so probably the answer is no, but I just wondered whether you'd seen any impact from the recent political unrest in that country. Thank you.

Right. So, three good questions, Matthew. And I'll come in with the EPR and the Indonesia response for you.

So, Matthew, let me try and unpack that 5 to 10 million a little bit. And as Jonathan mentioned, you know, we're establishing, you know, a better understanding of where, you know, if you like, there might be opportunity in our overhead cost base as well as the muscle that we think we've very definitely built in terms of optimizing product costs, having an FY25 integrated our latest UK personal care and beauty businesses. So I think in terms of, you know, where we sit today on top of that historical overhead work is recognizing that we inherited a business that needed to, you know, unashamedly invest behind capabilities. And they were both commercial to drive the business, but they were also, you know, if I use the word corporate, to meet the PLC to make sure we are doing things in the right way. And we have shown both good hard and soft benefits from those investments over the last three to four years. And we recognize we're in a position now where we can afford to maybe, you know, unpick some of those capabilities. So we have quite a strong corporate cost base. And in some of the enabling functions, most notably, you know, very close to home and finance, perhaps in HR and IT. We've now reached the level of capability that we think is sufficient, so we have been looking at some of the capabilities we can take away there. That 5 or 10 million, we've got a good line of sight to provide. We're working on the additional five. It's probably split, you know, two-thirds people from increasing standard control, from internal promotions rather than external hires, and yes, the net reduction in overall and then a one-third is more, if you like, a little bit more tactical, be it the use of consultants, managing travel and expenses, and, you know, just good continuous improvement and being very cross-conscious. So some central capabilities on which we think we now no longer generate a level of return, two-thirds people, one-third non-people.

So if I pick up on the EPR question, then I'll come on to Indonesia, Matthew. So first of all, on EPR, I would say we, along with other manufacturers, have been getting our heads around the implications of this tax, and we're one of the first to report, just as the nature of our financial year ends, and we'll be all keenly looking to see what other people are saying as they report in the coming months as well. But I would say, back as you identified, really there are two levers that we can pull as we try to deal with what is effectively a new cost in our cost structure. The first is absolutely, as part of a broader revenue growth management effort, always looking at our ongoing optimization of pricing and promotion. And sometimes that is tweaking our promotional activity where you nudge up the price per liter or the price per pack. And other times that can be literally straightforward price increases that we are communicating to retailers and working with them as they choose how much or little of those increases they want to reflect on shelves. So that has clearly been one lever that we have been pulling, and we will continue to look at that over time. But also over time, particularly as we learn more about the exact drivers of the EPR tax and how it is applied, is how we can optimize our packaging across our portfolio, be that primary packaging or secondary packaging, to literally reduce the weight or volume that we are using. And so, for example, over time, light weighting of bottles for light weighting of caps and also looking at our secondary packaging can be very important and very helpful as we learn how to more effectively optimize the EPR impact but also continue to provide packaging that consumers find useful and usable. But obviously then what it's also doing is helping us on our journey of sustainability capability as well. So, you know, we're embracing the challenge but obviously we're also learning exactly how the tax works among those manufacturers. As for Indonesia, just in case anyone else on the line didn't pick it up, there was some social unrest in Indonesia at the very tail end of August and the beginning of September. It was related to housing allowances for MPs, and it rather snowballed from there. We obviously triggered our business continuity plan, put it into action. There was minimal disruption to our business. We did actually have our people working from home, so we closed our offices for the period The interesting insight is rather as we have seen with previous events in Indonesia, what it leads to is the shopper actually going to their local open market, a wet market rather than a modern supermarket. And so we see a channel switch. And the good news is our distributors are very well placed to be able to support that switch. Our distributors will carry around seven and a half weeks of inventory. So even if we were unable to get some deliveries through, they still have sufficient products in their warehouses delivering their locality. So there's minimal disruption, nothing in Q1, a little bit maybe in our P4 numbers, but all of it will come back in Q2.

Great. That's all very helpful. Thank you both very much.

Thanks, Becky.

Our next question comes from Damian MacMiller from Deutsche Numis. Your line is now open. Please go ahead.

Thank you. Morning, Jonathan. Morning, Sarah. Two from me, please, this morning. Firstly, UK washing and bathing seems to be growing at around about 2%. Can you provide a little bit of insight into both the consumer experience of the category and also the competitive dynamics that you're managing at the minute, please? The last question is around marketing spend and I think it was held broadly flat this year. What are your sort of expectations for the current year and also to what extent is AI being used to try and optimise your marketing spend as well, please?

So I'll pick up a little bit on the Washington Bay thing, Capri Dynamics. Sarah can talk a little bit about M&C spend expectations and I'll then come back with AI and how that can help us optimise and drive higher return. First of all, I think probably in keeping with other consumer categories in the U.K. retail environment, we are seeing an increasingly competitive category of washing and bathing. There's growth to be had. There's still some growth in the market. So it's still an exciting and interesting segment of the market to be playing in absolutely particularly if you've got strong brands and strong relationships with the retail market capabilities. But there is no doubt. And that's where it collides a little bit with where you're asking about competitive dynamics. Because we're also seeing some of our competitors, and you will be able to work out from their own comments which ones I'm talking about, who are trying to rebalance for themselves a focus on value versus volume. And perhaps they've been chasing value too much rather than volume. So how's that manifesting itself? There's no doubt there's still an awful lot of people that are interested in shower gels that sell at a pound or less, so we need to make sure that we have pack sizes and promotional price points that absolutely deliver for that. But what we're also seeing is an increasing intensity in the competitive environment on larger pack sizes, so in particular 500 and 600 milliliter bottles. So whereas in the past those may have been relatively unpromoted versus the smaller circa one pound price point bottles, You're now beginning increasingly to see quite a lot of price promotion on 500 mil and up. So we are absolutely sharpening our pencil. We're absolutely trying to respond. It's always a little bit of a lag, as you know, in promotions based on the retailer's promotional calendars. But as we move through this year, we will be trying to make sure that we are responding to not just competitive pressures, but also how shoppers are evolving too. So as I say, very interesting subcategories playing. but very competitive too.

Thank you. Sorry, Damien, you come up.

No, no, I was just saying thank you, Sarah. So, yes, brilliant.

No, thank you, Damien. Let me talk to M and C. So you're right in terms of the FY25 margin breach that we shared this morning. Effectively, what we're saying is that there was no positive contribution to our margin performance in FY25 from Evancy. Or the other way of putting that is we grew our marketing spend in line with our revenue growth, which is actually a good thing. So we probably shouldn't in reality colour code it red. What we've not done and what we won't do is either set internally or guide externally to a set of prescriptive marketing spend targets, either in absolute terms or with reference to our overall revenue, because our brand portfolio is so diverse. So, you know, Cousins Damien, as Jonathan referenced, being sold in wet markets through distributors in Indonesia has a very, very different support model in terms of the relevance of profitable growth than with a Saint-Tropez being sold in the U.S. So what we do do on a case-by-case basis is work out a level of sufficiency for each of our brands and then with increasing scrutiny and data capability, and maybe Jonathan will touch on that as part of the AI topic, really understanding whether that agency delivered incremental return or not, and if it doesn't move it or optimizing it. But I think what you should be very certain of is the overall direction of travel to underpin our brand-building ambition will be a net increase in marketing investments, And if I think about the 5 to 10 million of overhead cost savings that we're committing to in FY26, where we talk about reinvesting a portion, marketing investment will absolutely be the number one candidate on that list for reinvestment. So hopefully that answers the question.

Yeah, thanks. I'll pick up on I think I'm on the AI part. My flippant response to you, Damien, having known you for a few years, I can say to you, lemons. What I mean by lemons is if you look at that Nature Hits Different campaign on the side of the bus I talked about earlier, those very first graphics were actually AI-generated. So we are trying to embrace artificial intelligence and how it can help us. I'll come on to some other ways in which it can help us, but actually how it can help us in the core elements of brand building and as fundamental as generating the graphics, which in that particular campaign We're able to test and modify and test and modify and then ultimately bring to market whether that was on boring old traditional TV or much more interesting and exciting social media. So that's a good example of where we have been developing campaigns using artificial intelligence. But somewhat more fundamentally as a company, we are also spearheading the use of data analytics and artificial intelligence in how we can improve revenues but also offer cost involved with that. So as part of forming a partnership with Microsoft on the Microsoft fabric platform, we have been exploring, for example, how we can more effectively use our market share data to drive market consumer insights to help us unlock opportunities for the future. We'll have more to say on that in the future. I don't want to say we're just scratching the surface. It's not that we're doing nothing, but we do see that AI has an opportunity and a part to play for us in the future.

Okay, very clear. Thanks very much, Jonathan, Sarah.

Thank you. With that, that concludes the Q&A portion of today's call, and I'll hand back over to Jonathan Myers for some closing remarks.

Thank you, Drew. And thank you to everyone who's called in today and those who asked questions. Hopefully you've got a sense of, you know, we are hard at work. There's plenty done, but we are firmly on the ground. We have plenty more to do, and we have a lot to get on with. So that's what we are going to go and do. And I would ask all of you in the UK, as you go shopping in the next few weeks and you see our Christmas gift sets on the shelves, make sure you pick one up and put it in a stocking for someone in your family. And we'll thank you next time we talk. Bye-bye.

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