Hilton Food Group Plc

Good morning, everyone. Thank you for joining us. We're pleased to present our 2025 full-year results today. Joining me this morning are Matt Osborne, CFO, Mel Chambers, COO for the East Region, Sami Zehu, COO for the West Region, and Martin Epsley, Investor Relations Director. You all know Matt and are getting to know Martin, but I also think it's important that you get to meet more of the wider leadership team, and I'll ask Mel and Sami to say a few words about themselves when they present later. I should mention Hannah Surtees is also with us today. Hannah's handed over the investor relations button to Martin. Going forward, she's going to head up our communications team and work closely with me on our strategy. I'd like to thank Hannah for the sterling job she's done in recent years and say how much I'm enjoying working with her. Over the next 35 minutes, we'll take you through the key highlights of the year, including our financial performance and our refresh strategy. Then there'll be time for questions. Let's start with our 2025 full year. Overall, we delivered solid financial performance in what has been a challenging operating environment. Adjusted profit before tax was 73.2 million, which is down around 3% year on year. This reduction reflects the impact of the disposal of Fairfax Meadow, together with the challenges in our seafood businesses and Dalco. Importantly, performance in our core meat operations in this challenging environment was stable. This demonstrates the resilience of our core business. We made good commercial progress during the year. We secured contract extensions in both the Netherlands and Denmark. This reinforces the strength of our long-standing customer relationships and the value we continue to deliver to our retail partners. In terms of our growth investments, our projects in Canada and Saudi Arabia remain on track. These are important platforms for future expansion. and we continue to expect them to contribute from 2027 onwards. Alongside this, we're planning to invest up to 30 million to expand capacity in Poland. This will enable us to benefit from attractive growth opportunities in fresh prepared foods. It will also strengthen our position in Central Europe. Looking ahead, our 2026 outlook remains unchanged since the January trading update. We expect adjusted profit before tax to be in the range 60 to 65 million. This year-on-year reduction largely reflects continued challenges in our seafood, vegetarian and vegan businesses. Remain cautious on the impact of red meat inflation. Finally, we've refreshed our strategy. Going forward, we'll focus on growth plans and investment on our corn, meat and fresh prepared food activities. We will also implement plans in CTL, FOPEN and DALCO to improve performance and increase strategic optionality. As part of our strategic refresh, we've also updated our financial framework. We have a clear focus on delivering sustainable profit growth, disciplined investment and compelling returns for shareholders. So while 2025 has had its challenges, we've made important changes in several areas and continue to position the business for long-term growth and value creation. I'll now hand you over to Mark to take you through our full year 2025 performance.

Thanks, Mark, and good morning to those of you in the room and those of you listening in. I'll now walk you through our 2025 financial results, highlighting the main drivers of volume, revenue, profit, net debt and cash flow. I'll also touch upon the outlook for 2026 before handing back to Mark. As we saw in the first half of the year, our full year performance was underpinned by continued resilience within our core meat and fresh prepared food businesses, which now account for around 90% of our revenue. This is a testament to the strength of our core business model and the expertise and commitment of our teams. As we've previously highlighted, our seafood, vegetarian and vegan businesses are facing challenges and our strategic review, which Mark will introduce shortly, seeks to address them. Before then though, let's take a closer look at the numbers. First, the headlines. Volumes from our continuing operations, so excluding Fairfax Meadow, which we sold in September last year, were up 0.2% against a highly inflationary environment, which drove revenue up 11.9% on a constant currency basis. Constant currency operating profit fell by 4.4%, reflecting in particular the challenges in the UK seafood business, and I'll cover profit in a little more detail shortly. The resulting operating profit margin was 2.3%, down from 2.6% last year. In line with the guidance we provided last November, profit before tax was £73.2 million, down 2.8%, and from continuing operations, so again, excluding Fairfax Meadow, profit before tax was £69 million, down 1%. Adjusted earnings per share of 56 pence was 7.4% lower, reflecting a slightly higher tax rate of 30% due to the impact of truing up some historic tax allowances. Our strong financial position and confidence in the medium term outlook means we are maintaining our commitment to a progressive dividend policy. With the final dividend flat, the full year dividend per share is up 1.4% to 35 pence. Net debt improved slightly year on year. with significant cash inflows in the second half from divestment proceeds and a partial unwind of working capital. This was despite the planned increase in growth capital, with 2025 being the main year of spend on our Canada project. Moving to revenue. With volumes of mix broadly stable, an 11.9% increase in constant currency revenue was almost entirely down to increases in raw material input costs. On MIGS, we continue to see a shift in the UK, in particular with lower cost products forming a higher proportion of our overall volume. However, multi-buy and promotional activity were a positive for us in Australia. The relative strength of sterling versus the Australian dollar remained a headwind, albeit partially mitigated by strengthening of the euro in the year. Now moving to show volume and revenue by region. I've shown a version of this chart before, but I've split out our seafood, vegetarian and vegan businesses to demonstrate the performance of our core meat businesses. These numbers also exclude Fairfax Meadow. In the UK and Ireland, core meat volumes remained resilient and were only down slightly despite significant inflation in beef of more than 30%. The impact of this inflation can be seen in revenue increases of 23.5%. European volumes were stable overall, including double-digit growth in fresh prepared foods in Central Europe and the benefit of new customer volumes in Denmark. Revenue growth was less material than in the UK, reflecting a more diversified mix of meat products. And APAC again delivered volume growth, despite the re-emergence of raw material inflation. Seafood, vegetarian and vegan volumes were down 2.6%, with price inflation weighing heavily on whitefish volumes in the UK. FOPM volumes were relatively stable as we continued to meet customer demand despite the regulatory restrictions on our facility in Greece. And DALCO volumes were up, albeit from a low base. Revenue was down by more than volume despite the whitefish inflation, with market salmon prices 17% lower in 2025 than in 2024, reducing FOPM revenues. Moving now to profits. Operating profit from our core meat and fresh prepared food businesses was slightly up year on year, with the volume growth in APAC being the main driver, given the cents per kilo fee structure there. Seafood, vegetarian and vegan operating profit was materially down, however, with sea chill moving into a loss-making position, reflecting the pressure that lower volumes puts on gross profit. Floppen's underlying profit was stable, albeit there were material non-underlying costs that I'll cover shortly. We delivered an improved result at Dalco, although the business remains loss-making. Central costs were lower, as were interest costs, reflecting lower market rates. Before the negative impact of FX due to the weaker Australian dollar in particular, Group PVT on a constant currency basis was down 2.8%. After excluding the contribution from Fairfax Meadow, which we sold in September, it was down 1%. Non-underlying and exceptional items excluded from the underlying results represent a net profit of £29.3 million in the period, albeit there were a number of moving parts. The biggest cost related to FOPEN. We incurred cash costs totaling £9.2 million relating to the relocation of production from Greece to the Netherlands to ensure continuity of supply to our customers in the US, while also using air rather than sea freight to ensure an appropriate level of inventory. We expect regulatory restrictions to be in place for at least the first half of 2026 and expect some further FOPRAM-related exceptional costs this year. In addition, we write off inventory that could not be delivered to the US or resold elsewhere, resulting in an £18.4 million charge. We incurred reorganisation and restructuring costs of £9.6 million compared to £4.2 million in 2024. This reflects the ramp up of our transformation activity and group reorganisation in order to support long term efficiency and growth. We expect these costs to continue in the range £5 to £10 million a year over the next few years, and this spend will help underpin our medium-term growth objectives and will provide some more detail on our transformation programme in the strategic update section shortly. Last, but certainly not least, we recognise profits on disposal of £66.5 million relating to the sales of Fairfax Meadow and Foose Connected. Both of these transactions are steps towards simplifying our portfolio whilst also realising significant value for the group. Now moving to net debt and cash flow. Net bank debt improved slightly in the year, despite a free cash outflow. This includes the impact of material cash inflows from the disposals of Fairfax Mellow and Foods Connected, as we realised value through portfolio simplification. Exceptional cash flows relating to FOPN and wider group transformation and restructuring totaled £18.9 million, and we returned £31.5 million to shareholders in 2025, consistent with our progressive dividend policy. Net bank debt of £126.7 million results in net debt to EBITDA of 0.9 times, remaining at very comfortable levels. And in February of this year, we successfully refinanced our bank facility, which now provides an increased £450 million of revolving credit facilities for at least the next five years, providing flexibility to deliver future growth opportunities. In addition, these bank facilities are enhanced by the ongoing benefits of our lease and customer supply chain financing, with margins typically 0.5 to 1.5 percentage points lower than our bank facility. Let me touch on our free cash outflow. The group remains intrinsically cash generative and retains a strong balance sheet. This strength provides flexibility to allocate capital to benefit the group over the longer term. In 2025, this included the investment in inventory to ensure we'd be able to deliver excellent service levels to our customers during peak trading periods in the second half of 2025 and into 2026. It is important we continue with disciplined investment in our existing facilities, ensuring they run efficiently and continue to support growth. Core net capital expenditure of £46.5 million was lower than last year and included spend on capacity increases at Hilton Foods Ireland. It also included further investment in Sweden, where we've installed frozen burger production lines, a new category in our partnership with IKA. 2025 was also the main year of investment in our expansion into Canada. We've now spent £55 million in total on the project, with the remaining project costs being incurred in 2026. The project remains on track for full launch in 2027. Before I hand back to Mark, let me cover the outlook. We've traded in line with our expectations in the year to date and continue to expect 2026 adjusted PBT in the range 60 to 65 million pounds, unchanged from the time of our trading update in January. As we said at the time, the expected production in profit is predominantly due to continuing challenges in Seachill, Foppen and Dalco. Our core meat business continues to prove resilient and volumes over the first part of this year were solid. However, given the economic backdrop, it is right we remain cautious on the impacts there may be on meat demand due to inflation. We are also mindful of any potential direct or indirect impacts of the current situation in the Middle East. We would expect net debt to increase in 2026. Core capex will be 50 to 55 million pounds within our expected range. However, total capex will remain elevated as we complete our project in Canada and expect to commence spend on our planned capacity expansion in Poland. Both of these projects will create value for shareholders and are expected to contribute to earnings in 2027. One of the reasons we remain positive about the medium term and long term outlook for the group. I'll be back later to summarise our refreshed capital allocation framework and medium term financial targets. But for now, let me hand back to Mark.

Thanks, Matt. Mel, Sammy, Matt and I will now take you through a summary of our strategy. This is based on the review we've recently completed. We aim to be the international red meat partner of choice. Aligned with that and certain appropriate geographies, we have a developing fresh prepared food business that we'll invest in whether returns are attractive. What gives us confidence in this ambition is the structural strength of our core meat businesses. We operate long-standing partnerships with leading retailers. We benefit from high barriers to entry in our markets. We have a proven operating model that is delivered consistently over time. However, this strategy is not only about defending what we already have. We also see significant further growth potential, which we will unlock through a combination of portfolio optimization, targeted investment, and evolution of our operating model. Simply put, this is a strategy that builds from a position of strength and our core capabilities. Importantly, we will be very deliberate about where we invest to drive future growth and attractive returns. Before we provide a bit more detail on our growth potential, let me put it in context against our recent track record. As you can see from the chart on the left, operating profit from the group's core activities, excluding Fairfax Meadow, Seachill, Foppen and Dalco, has grown by 4% on average since 2022. This demonstrates the strength and stability of our core meat and fresh prepared food operations. On the right, you'll see the building blocks that underpin future growth. The expected reduction in profit in 2026 compared to 2025 is largely down to the challenges faced by Seachill, Foppen and Dalco. We expect profits from our existing core business to be relatively stable and remain so moving forwards. This will be supplemented from 2027 by our projects in Saudi Arabia and Canada. We expect to realise the full benefits from these in 2029. We also expect to deliver growth from our focus on our fresh prepared food product offering and multi-customer models in certain markets. We'll provide some colour on this shortly. All this results in mid-single-digit average operating profit growth per year, with potential for adding additional growth beyond from value-adding investments. Here are the three levers that will drive this growth over the medium term. The first is maximising the core. Here, our focus is on reinforcing our leadership in retail meat by maintaining the structural advantages we've built over many years. At the same time, we're driving continuous efficiency improvements to maintain margin resilience. This ensures that the core business continues to generate stable and predictable cash flows. The second lever is enhancing the mix. We are actively increasing our exposure to higher margin segments where we have an opportunity to win. This is particularly the case in value-added meat and fresh prepared foods. These categories offer faster growth and attractive returns. They allow us to better serve evolving customer and consumer needs. Mel will talk about expansion plans in our Poland business shortly. The third lever is geographic expansion. We will continue to replicate our partnership model in under-penetrated and high-growth markets. We will work alongside anchor retail partners to leverage our expertise and scale. Taken together, these three levers create a balanced growth profile. They support stable cash flows, high margins and faster overall growth, while reducing our reliance on volume alone. While the framework itself is simple, the value creation potential from executing it well is significant. A key part of enhancing our mix is optimising our portfolio, particularly in seafood and meat alternatives, where performance has been volatile and unsatisfactory. These businesses have limited synergy with our core meat capabilities. We are taking a very focused and disciplined approach and will limit future investment across the three businesses, SeaChill in the UK, Foppen and Dalco. Across these businesses, the overarching objective for the group is consistent, to reduce earnings volatility, improve returns and create greater flexibility and optionality for future value realisation. In Seachill, our priorities are operational recovery, cost reduction and product focus. This should allow us to rebuild margins. In Foppen, we are operating an increasingly consolidating smoke summer market. Our focus here is on driving volume through best-in-class quality, customer service, competitive pricing and continued innovation. We will also address the challenges of the continuing into 2026. We have resumed sea freight shipments to the US and are actively rebuilding the stock pipeline. We continue to engage with US regulators to lift the restrictions on our Greek facility. Encouragingly, underlying retailer demand remains strong. In Valco, the priorities are to improve operational performance and win new business. we're aiming to put the business in a stronger position operationally and financially, giving us greater flexibility in how we create value from it. I will now hand over to Mel, who will then hand over to Sammy to help bring our growth strategy to life with specific examples from our East and West regions.

Thank you, Mark, and good morning, everyone. Having recently stepped into the role of Chief Operating Officer for the East, I'm extremely excited about the opportunities that lie ahead in my region and the refreshed group strategy. More broadly, I bring with me more than 25 years experience from across the food industry with a strong focus on operating globally. When I joined Hilton Foods in 2022 as the CEO for the APAC region, I spent considerable time strengthening the customer relationship, building deeper alignment and developing a regional leadership team for future success. As we move on to competitive positioning, there are three key areas of focus that will underpin how we maximise our core meat capabilities. First is manufacturing excellence. We are driving continuous efficiency and improvement across all our operations, and this is supported by a clear automation roadmap. At the same time, we are maintaining a very disciplined approach to cost control, particularly within central functions, and this ensures that we avoid any unnecessary or duplicated overhead. Second, innovation and category leadership. We continue to enhance our capabilities in value-added products, working with our partners to develop new target product ranges that align closely with consumer demand. We are also expanding into adjacent categories, such as slow-cook products, where we see attractive growth opportunities. And third is our security of supply. We will continue to develop our global red meat sourcing centre of excellence, which allows us to leverage our scale more effectively, while also using our local sourcing capabilities to ensure resilience and availability in each of our markets. Together, these initiatives will ensure that we improve our competitive advantage, continue to support our retail partners effectively, and position the core business for sustained market outperformance. This slide now provides a clear example of our strategy to enhance our mix through our planned investment in Poland. We see a compelling opportunity in fresh prepared foods in Central Europe, driven by strong underlying demand and forecast market growth of around 8% per year. At the same time, our retail partners are increasingly looking for value-added solution, which plays directly to our strengths. Our planned investment of up to £30 million over 2026 and 2027 will expand capacity, increase automation and enhance our processing capabilities. Importantly, this will allow us to differentiate our offering through improved shelf life and product innovation. And from a financial perspective, this is a highly attractive investment. It is expected to generate returns well above our cost of capital, with return on capital employed above 20% over the life of the project. It will also be accreted to the group's margin mix. And this is a good example of how we can deploy capital in a disciplined way to drive both growth and returns while strengthening our competitive position. I'll now hand over to Sammy.

Thanks, Marilyn. After 30 years at Procter & Gamble, my most recent role was as CFO and Deputy CEO for six years at Nomad Foods. I'm really pleased to have the opportunity to step into this role from my non-executive position. After having been exposed to Hilton Food products, facilities and people over the past several months as a board member, I felt that there was a huge opportunity to contribute if we got the strategy right and properly executed to reignite value growth for the years to come. Our investment in Canada comes under my remit and represents a step-change growth opportunity for the group. As you probably know, we are developing a new facility to support a long-term, 10-year partnership with Walmart with a site scheduled to launch fully in early 2027. Progress on the project remains on schedule. Product development has been completed and tailored to customer requirements, and we will begin production testing of equipment and systems in the second half of the year. From a financial standpoint, this is an attractive opportunity. We expect return above our cost of capital, with return on capital employed over the life of the contract consistent with our refreshed capital allocation framework. The project will begin contributing to profit from 2027 with a full contribution from 2029 and beyond. Importantly, this is not just about the initial contract. We also see further opportunities in adjacent value-added categories within Canada. More broadly, we see broader potential through all our retail partners' international footprints. So, Canada is both a significant standalone investment and is a good example of international expansion. To support the delivery of our strategy, the newly appointed executive team is behind our plans to evolve our operating model through what we call one Hilton strategy. This is about embedding a consistent value creation mindset across the organization, ensuring that all parts of the business are aligned around delivering returns. It also involves building a more integrated and scalable global platform, allowing us to leverage our international scale more effectively while continuing to execute strongly at a local level. At the same time, we are preserving and strengthening what differentiates us, particularly our deep partnership with leading retailers and our unique collaborative business model. Overall, this transformation ensures that we can scale efficiently as we grow without losing the strength that underpins our success. Let me now hand over to Matt.

Thanks, Sami. Now, let me spend a few minutes taking you through our refreshed capital allocation framework and medium-term targets. Everything is underpinned by our desire to maintain a strong balance sheet, ensuring we have appropriate headroom to withstand any market shocks and provide flexibility for future investment. I'm comfortable with net bank debt excluding leases in the range one to two times EBITDA through the cycle. This is significantly below a bank facility's financial covenant of three times. We will continue to invest in our facilities to maintain and enhance our operations, underpinning core organic growth through improved automation and productivity and the development of new product categories. this investment will be in the region of 45 to 55 million pounds per annum and will fluctuate depending on when and where investment makes economic sense our strong balance sheet and cash generative model then provides flexibility for further incremental value adding and strategically aligned investment This could be in material new capacity expansion, such as the project we're planning in Poland, or in geographical expansion, similar to our entry into Canada and Australia and New Zealand before that. Our benchmark for these investments is high. Returns need to be materially ahead of whack, and any investment must support a group rocky target of greater than 20%. At the same time, we also recognise the importance of cash returns to shareholders. we are maintaining our progressive dividend policy with the intention to move back to around two times earnings cover over time through adjusted earnings growth that our strategy is expected to deliver. Our dividend policy means we retain flexibility to seek further value-adding investment opportunities in line with our strategy. However, in the future, should no attractive opportunities exist, we would consider returning any surplus cash to our shareholders In addition, we would continue with our progressive dividend policy. Let me now cover what the strategy means in terms of medium term targets. First, as Mark has already said, we are targeting mid single digit operating profit growth on average each year. Recognising though that the nature of our investment means it won't be a linear progression. This growth will be underpinned by our ongoing investment to improve and automate our facilities and the contribution we expect from the new facilities in Saudi Arabia and Canada from 2027. It excludes any benefit from material incremental investment in new geographies or in large scale capacity expansion. It also excludes any contribution from the improvement plans we have in place at Seachill, Poppen and Dalco. We expect these businesses, which we anticipate to be marginally loss-making as a whole in 2026, not to become a sustained drag on earnings. Second, through continued good working capital management and a focus on cash flow, we expect cash flow conversion, so free cash flow as a proportion of net income, to be around 100% on average over the years. Third, we continue to target a group ROCI of at least 20%. This figure was 20.1% in 2025, and we expect it to drop below 20% in 2026, given the level of pre-productive capital related to the Canada project. Any further material incremental projects may also have a shorter-term impact on reported returns, but over the medium term, we believe this is an appropriate target to benchmark the group against. Let me now hand back to Mark.

Thanks, Matt. To summarise, we believe we are well positioned for the future. We have a resilient and cash-generative core business. This is supported by structural advantages and a strong track record of execution. We have a clear strategy to drive growth. This is built around maximising the core, enhancing the mix and expanding geographically. We will apply a disciplined approach to capital allocation, ensuring that we invest only in opportunities that generate attractive returns. Aligned to this, we have a highly engaged, skilled and talented workforce. Taken together, this positions us to deliver sustainable profit growth, strong cash generation and reduced volatility. We believe this will deliver compelling value for shareholders over the long term, as we focus on being the international red meat partner of choice. That concludes the presentation. Thank you all for listening. I'll now chair the Q&A. Can you please ask questions via me and I'll allocate to the appropriate person. Can I also ask that when you ask a question, you introduce yourself and give us the institution that you work for? Thanks very much.

Hi there. I'm Matthew Abraham from Barenbo. First question, just in reference to the FY26 guidance. Just wondering if you can outline what your expectations are for that raw material price inflation that's crept up in the second half of the year, please. Matt, do you want to answer that?

Yeah, I think we recognise that there are inflationary pressures, but the basis for the guidance we issued in January hasn't really changed, and we're confident in that 60 to 65 million PBT guidance.

Okay, so does that then infer that there's the expectation for a deterioration in elasticity as there has been from the first half of the year to the second half of the year because there will be that sustained high price backdrop? Is that the expectation given that this inflation backdrop is likely to persist?

So we recognise the resilience of the core product we produce. We recognise that there could well be some inflation pressures, but I'll come back to the guidance we issued in January took into account our views on inflation.

If you go back to the presentation, I think in one of my sections I talk about we're mindful of the ongoing position on red meters as an example. That mindfulness is built into our numbers and forecasts that we put into the market for this year. So we feel comfortable where the guidance is and we feel comfortable that we've taken into account where we think the inflationary nature of our products are going to go and the impact on consumers' purchasing habits.

Okay, that's helpful. It was obviously impossible to account for it in January, but one thing that's obviously changed is the freight dynamic. Can you just talk about your exposure there and what you're doing to mitigate those pressures, given that that's a new factor post-January?

I think that's a really difficult question to answer. If I went around the room and asked everybody to answer that question, I think we'd probably get a lot of different answers. Suffice to say that in our business, we're in the very lucky place that a lot of our contracts are cost plus, so they go automatically to our customers. And where necessary, we're looking at holding the mirror up to ourselves, looking at our internal costs and taking costs out where we can. um i don't think anybody can predict what's going to happen as a result of the middle east we're very as we said in the presentation we're very mindful of the situation and we will react accordingly i think the most important thing is outside of that we are very comfortable with that where our numbers are for this year okay that's so far i'll pass it on

Morning. Charles Wall from Peel Hunt. A couple of questions, if I may. Firstly, can you just talk a little bit about the red meat market, what your customers are doing to respond to the higher price points and what you're doing in terms of product positioning?

Okay. I think that depends on geography. And maybe in a second, I'll ask Mel to talk a little bit about what's happening in Australasia. I think that's important. In the UK, which is a fairly substantial part of our business, actually no different than Australia, but Australia. What's typically happening is people are trading down, and Matt talked about that. I think one of the benefits that we have, we're probably the lowest cost producer of the product in the UK. That supports our customers' ability to be consumer aware. And if you look at the shelves in Tesco, they're doing a range of things to give real value to consumers. So what we're typically seeing is people trading down, moving down the portfolio towards mints, etc. But there's still a top-tier purchasing habit that people are buying into premium cuts, maybe eating out less than they were and consuming it at home. We see that trend continuing. We saw evidence of it last year. We expect it to continue for this year. Now, do you want to just quickly talk about Australia?

Yeah, absolutely. I think you nailed it overall. But, I mean, we've seen 3% growth in Australia. We haven't seen it slowing down. But they are definitely changing the mix. So lots of $3 for $25, $3 for $20 offerings, promotions in store. And we're working strongly with the customer on co-creations of that middle tier and how do we build the value in that middle tier.

Great. And Matt, last year, the inventory increased fairly significantly, building up ahead of Christmas and Easter, I think. And partly, obviously, that's pricing, but also availability. How do you see that panning out this year?

Yeah. So as we would have talked about before, we built inventory to ensure we had availability. sufficient available to us to hit both Christmas and now Easter peak. So that's largely unwound. We'll have seen, as you rightly say, an increase in the stock value just because of inflation as well. So comfortable where that sits. And so see that unwind now. Now, clearly, we will work with our customers to ensure that we can meet their demand and meet peak trading periods. And how that looks really depends on availability in the market and some of the challenges we may face into. But comfortable with where we sit, comfortable with us delivering for our customers and the service levels.

Let me come in just to add something to that. There was a lot of noise around those purchases last year because they were surprised. And one or two people since I've been involved have said, could that happen again? What is absolutely clear is if, particularly in the environment that we touched on at the moment where there's lots of uncertainty, if opportunities arise for us to buy meat ahead of any inflationary pressures, that's exactly what we'll do. We'll explain it to you guys. We'll explain it to shareholders. But if it's the right thing for the business, that's exactly what we'll do.

And lastly, Mark, the SVV, as I think we'll now call it, is how much do you think you can improve the profits and how long will it take to get change in those segments?

There's a – so we didn't really discuss it in the presentation, but I've got a dedicated team working in that area. It's got its own effective – effectively its leader. We're already seeing evidence of improving trends in those businesses. We've won new business in Balco in recent days, as an example. We've got a cost-out program in the Seachill that's starting to pay dividends. Foppen is actually a different set of problems. But as you heard in Matt's presentation, we're already using sea freight as opposed to air freight. That starts to normalize it. We are working very hard with the U.S. FDA to get our protocols reassessed. That's happening. We put it in two weeks ago. We're waiting for the results. But we're also challenging some of the things that are perfectly acceptable in the U.S., for example, dipping fish in salt water that on the face of it are not acceptable in Europe and the UK. But we think we found an opportunity to make them acceptable in the UK and we're going to be working on that. So we've got a range of activities in each of the businesses that we're already on with. um that will start to deliver improvements now will they get to the stage where at the end of the year i think in matt's presentation he said he said that they will be collectively loss making still by the end of the year will we get to the stage where they're profitable by the end of the year question mark but we're working very hard to make sure that that's where we get to um we you know we we want to give ourselves choices in these businesses and that's what the all the work we're doing it's about giving ourselves choices

Yeah. Sorry, Darren Shirley from Shaw Capital. Just a question. On one of the areas where you talk about enhancing the mix within the business, you talk about scaling value-added meat. Can you just outline exactly what that means? Is that an opportunity you haven't been taking advantage of previously, or is that a new opportunity?

I guess a bit of both, Darren, to be fair. Just as an example, we do sous vide in that area where we've been very successful with it, but there is greater opportunity to do it in more places around the world. Some of the work that we're doing in Poland will enhance our capability to deliver against that as a product line. There's opportunities, further opportunities in the UK. And the interesting thing is you don't have to manufacture it everywhere. You can manufacture it in one place and export it to the neighbouring countries. So, as an example, and Mel can probably give you more detail than me on this, We will upgrade our facilities in Poland, but that gives us an opportunity to sell into the neighboring countries from the Poland facility, which is a low-cost, will-be automated solution.

Okay, thank you. And then Poland, 30 million, what exactly are you expanding there? Is it the meat side? Is it just the fresh prepared side? Is it? new capabilities, just a bit of colour, what you're getting for 30.

I feel a bit sorry for Sammy because I'm passing all these questions to Mel, but I promise I'll give one to you in a second, Sammy. Mel, do you want to just talk about what we're doing in Poland?

Absolutely. So it is an expansion of our fresh prepared foods business that we currently have there, which is next to the fresh meat factory. So it's expanding the footprint of that, which allows us to be able to have more capacity so that we can keep up with the customer demand. And as Mark touched on, it can act as a hub that can then serve other markets from there. And so what we're looking at doing is advancing the technology within that facility and also the automation at either end.

In terms of the products, Mel?

Yeah, so the products, we're looking at sous vide. We're looking at the ready meals. We do sandwiches, pizzas currently through there. So a lot of the fresh prepared foods.

Thank you. And just one last one, if you don't mind, is you talked about there being additional exceptional costs associated with fopping this year. Could you give us a sort of a ballpark number in terms of what we're thinking?

Yeah. So current run rate is around £800. thousand to a million euros a period now that will have included um air freight costs as opposed to um sea freight costs and as mark touched on we're moving away from air freight at the moment so we've seen that that reducing over time um as you know we're operating out of the facility in the netherlands which has increased operating costs as well and that's where we where we where we see it

Clive Black also from Shore Capital, Darren's younger brother. A few, if I may. Firstly, to follow on from Charles's question about working capital, are you looking at a similar positive outflow this year or is it an improvement year on year? Maybe start with that. Do you want to start one?

Yeah, so based on where we sit today, we'd expect there to be a modest improvement over the year. Now, as Mark said, though, we will reserve the right to make purchasing decisions if we see it's the right thing to do to ensure we're avoiding inflation or ensuring supply for our customers.

Then, not to keep something out of it, I think you talked about long-term opportunities. from international retailers. Just flesh that out, what that actually means for investors.

Sure, absolutely. I think we declared in our third pillar that there was effectively an opportunity to expand geographically and I think you've seen that in the move that we are making now today in Saudi and Canada and the idea there is to leverage what we are doing that as a benchmark if you want for future opportunities either to excel in into new geography or expanding effectively into new category within those geographies as well okay so that that could mean further product categories and further plants in those markets is that where you're living i mean all options are being considered and will be effective investigating the opportunity on the basis of they say the best opportunity from a value creation standpoint absolutely

Just to be clear, those opportunities will be in fresh meat, our core capabilities, or fresh prepared foods, the list that Mel articulated. We're not going to go into sort of wide categories. We'll focus on the things that we know and understand, and that's where we'll invest. You know, just to maybe put a bit more flesh on that, um one or two people have asked in recent times will we spend more in canada the answer to that question is we might and the reason we might is because we might win incremental business there so um that is it's not a definite but there is a chance that we win incremental business there uh that business so if the costs the capital costs go up they're going up because they deliver improved returns

The probability will be with existing customers rather than new customers.

I think in the main with existing customers, but I think it's fair to say that we've got a team with suitcases traveling around looking for opportunities in appropriate geographies. These are long pipelines, though. You don't have an idea today that gets delivered tomorrow. As you've heard in the case of Canada, that's probably been in the making for decades. three years before we actually started the development. So we're working on long-term projects.

And again, in your presentation, you talked about a global red meat sourcing capability. What does that actually mean for shareholders?

So the one thing that shareholders should draw from that is we actually have a very well-run, efficient sourcing team based in Huntingdon that source red meat from South America, from Australasia, and around the world. I would say that we are at the top end of capabilities in that area. Look, as I said, The supply of meat declines in the West in particular, you know, that I think will come more and more into its own and it gives our shareholders and us as a business a degree of comfort going forward. Does that sourcing capability need to be replicated in fish? I think to a degree it is already there in fish. I think the fish challenges are much more here and now operational customer product, so that we're looking at the business on a relatively short-term basis to solve some of the challenges that we have. ongoing sourcing capabilities are a thing that we'll look at, but they're not in the immediate to-do list.

Okay, and then just the last one. Again, you talk about your production platform around the world. How consistent is that to the extent, you know, we've been to Huntington and more to others have been to other plants around the world, but across the globe, how consistent is your production capability?

I think if you traveled around the factories, you'd see similarities in all the factories. One of the things that, you know, I think Sammy talked about one Hilton. One of the things that we're addressing full on at the moment is our ability to make sure we're getting synergies from the skills we have in the various locations. You might argue Hilton hasn't historically done that. You know, each of the businesses has done their own good work, but it hasn't been translated across the group. we're already seeing benefits of getting it group-wide rather than business-wide. And I think we'll continue to do that. I think the fundamental factories, if you walk into our factories, you'll see similarities everywhere. And you'll see the same focus to efficiency, yield, giveaway, all the things you would expect to see in any factory. And the fact, you know, the reality of it is, if you take Walmart as an example, They didn't just sign a contract and say, we'll go and work with Hilton. They went and visited lots of these facilities, saw it themselves, saw something that is different than what our competitors offer, and then signed on the bottom line. So that isn't me saying it. That's a very big, highly competent retailer saying, we want to put our eggs in the Hilton basket. Thank you.

Matthew Webb from Investec. Can I ask about any operational implications of the strategic review and the very clear distinction you've made between core and non-core? I mean, are these businesses already run very separately? If not, are they going to be separated out more clearly to give you that optionality of selling the non-core product? when profitability improves. And then related to that, I think you mentioned that the investment priority would now obviously be on the core side of the business. Clearly, when it comes to expansion, that's what we would expect. But if there was a big automation project that would improve the profitability of the non-core side, would you go ahead with that or would you be wary of doing that if the ultimate plan is to sell?

thank you well I think the last start of the last point first we haven't said that the plan is to sell so let's let's be clear about that what we have said is we need to work very hard on these three businesses to deliver optionality they're already now it was one of the first things I did when I put Mel and Sammy into their roles took out these three businesses and managed them separately and they have a management team looking after them that are focused entirely on improving those businesses during this year. So, if you wanted a view on the capital question, if the capital pays back in less than a year, then the chances are we'll probably say yes. If it's a long-term capital investment, um then the chances are unless we've done the short-term stuff i.e got the businesses to a sustainable position we're not going to be investing long-term capital in these businesses and that's the i think the team would probably agree i've been very clear with the team we will invest but short sort the businesses out in the first place and that's where we've got to get to um you know and i've said a few times this is all about giving us option optionality improving the current situation through a range of measures, and then that gives us choices going forward, choices to keep the business but also to do other things as well. But be clear, there has been no decision to sell any of these businesses. Understood. Thank you.

Just a thought for me, if I may. So you mentioned the desire to improve the businesses and there's been improving initiatives implemented in these businesses over a number of years. What's different in the approach that's being outlined today? Yeah, I guess that is the first follow-up.

In some respects, I'm probably the wrong person to ask that. they're not here but if you ask the team i am sure they would say there's a very different approach in the rigor and challenge that goes on in their businesses to to that that has been historically done so it's a it's a it's a rigor it's a focus it's a Accountability is an empowerment that maybe didn't exist before as we look to improve them. Now, as I've said already, there's a range of things that we're working on from cost out at one end to volume in at the other, and they're all different depending on the business that we're talking about.

Okay, and then maybe just one more follow-up by May. So there's a greater concentration of investment going into what appears to be a high-returning business in the core, but the Roki target's unchanged. Why would there not be a better Roki profile if more investment's going into a better-returning component of the business?

Maybe I should pass that to Matt, but I'm not going to. I'm going to answer it. Because we believe that that level is a satisfactory, acceptable return for us that work in the business and for shareholders as well.

Okay. Thank you. Thanks. It's Darren Shirley again. Two areas of the business which haven't been mentioned. Obviously, you crystallise value with Food Connector daily this year. But within that sort of bucket of sort of other investments, you've got Agito in there and Sellag. I mean, where do they sit in sort of the new the new Hilton?

Well, I think it's very clear from what we've said that they're not core in terms of investment. They are important, though, because not necessarily as a shareholding point of view, they're important to the running of the business. Agito is intrinsically linked to our developments around the world, and it forms a big part of what we're doing in Australia. CELAG is a startup, and it's a business that's very interesting from a personal point of view, but it's not necessarily that interesting for the view of a public company. And being absolutely blunt, we would like other partners to join us in the CELAG investment.

Cheers. And then just a point of clarification, because you mentioned called red meat on a number of occasions. In APAC and in Canada, fish, am I right in thinking seafood will continue to be part of the broader offering you're bringing to Woolworths in Canada at the moment?

Seafood is going to be a continuing part of the offering in Australia. May not be in Canada.

Does that represent sort of a downsizing of the thinking in Canada?

No. I'm not, at this stage, I'm not going to say any more than that. You shouldn't worry about what I've just said from Canada. It is integral to the offering that we have in Australia. In Australia, it works really, really well. I think the difference between Australia, it is a very simple, straightforward cost plus model. What we operate in the UK is different to that.

Because there were ambitions to expand the seafood offer in APAC. Would those ambitions still be there?

Do you want to talk about that, Mel? No.

Yes, the seafood works well in New Zealand as a food park. So we have the red meat, the poultry and the seafood. And due to it being a smaller location, less stores, it serves being able to serve the whole country out of that one facility. In Australia, due to the diversity of travel time and transit time, the seafood model wouldn't work long term because it's fresh, it's not frozen. So when you're looking at trucking for 12 hours from there to there, your shelf life is obviously shrinking significantly. So it works well in New Zealand, but it's not something that we're progressing currently in Australia.

Helpful. Thank you.

Any more questions? We're going to be around for a little while if there's any individual questions you want to ask. I'm conscious one or two of you have got to get off to another presentation. Good business that is as well, by the way. Thank you for your time. Thank you for your questions. And feel free to come back to us on any points over the next few days. Thank you.