Associated British Foods plc (ABF) Earnings Call Transcript & Summary

Good morning. Thank you all for joining us either here in person, particularly thank you or online. We're here to review the ABF's annual results for the 52 weeks ending the 12th of September 2026. And I'm, of course, delighted to be joined by Joana Edwards, our Finance Director here, Chief Financial Officer; and Eoin Tonge, the Chief Executive, Primark. I am aware that this session in rehearsal went on for quite a long time. So settle down. We've got a fair amount to say, and I ask for your patience. Some of the contents, well, all the content is important and I think, interesting. But let me start by saying that this was a year of good strategic and operational progress across the group. I really mean that. The operating environment though, was difficult, weak consumer sentiment and a number of sometimes significant headwinds for our businesses. Those impacts are evident in the financial results that we've published today. Our adjusted operating profit was down 14% primarily due to lower profit in Primark, but profit was also lower in our food businesses due to a couple of specific reasons, and I'll come on to those. Adjusted earnings per share down 11%, reflecting the benefit from share buybacks. We've maintained our full year dividend in line with last year completion GBP 250 million of share buybacks 2026. This is a statement, the maintenance of the dividend of 2 things. Firstly, our confidence in the underlying strength of the group in the medium and the long term, actually both Primark and AB Foods, and also that even with maintaining the share -- the dividend with lower earnings, the dividend remains well covered. This year, our business has responded well to a difficult operating environment. We focused on things that were within our control, and we made good progress with a number of important strategic projects across the group. And there were a lot of them. There really were a lot of them. In Primark, I am very pleased with the progress to reenergize our core proposition while opening up new avenues of growth, important avenues for growth. This year -- this time last year, we set out our key strategic priorities for Primark. We're delivering against these. We've taken significant steps to lower prices to improve price perception to strengthen our product offer, particularly in womenswear and to increase customer engagement. In 2 areas where we said we would unapologetically focus first. We've delivered like-for-like sales growth. So both in the U.K., which went from minus 3 to positive and then in womenswear, our largest category, where we delivered like-for-like growth everywhere. We're now building on this as we increase our focus on Europe and in our other categories. Primark still has significant white space. And most notably in the year, our new franchise model, which has got off to a very strong start in the Middle East, even in the circumstances of that part of the world. The franchise model will open up markets beyond the Middle East. And next within the Middle East, Saudi Arabia, but then Mexico. Our decision to offer home delivery in Great Britain is also an attractive opportunity for future profitable growth. In Foods, we focused on what we can control. We had 2 very specific headwinds in U.S. oils and sugar, which masked good growth in a number of other areas in both grocery and ingredients. We stayed well invested in marketing and product innovation, and I'll show you some of that as we go through. We made significant progress in key areas of self-help we identified in 2025. And in doing so, we really have strengthened our business in a lot of different areas. We completed the acquisition of Hovis, major projects both to acquirers and now the major integration exercise is well underway. We expect to deliver significant synergies to create a profitable U.K. bakeries business. There are no surprises that we've -- no significant surprises at least that we've uncovered as we've got to know that business. In European sugar, we're reducing our U.K. footprint to meet customer more effectively as prices recover. So 4 factories down to 3 with the closure of Cantley. And in agriculture, we're exiting our U.K. compound feed business, which will allow us to focus more intently on higher margin growth areas. This improved profitability within agri, but also free up capital that has been quite miserable in the returns that's generated for us. Across the group, we invested another GBP 1.2 billion in capital projects. Majority of this will drive growth, new stores, depots, technology and Primark and new capacity capabilities and technology in AB Foods. The large number of new products this completed either this year just gone or completing now will contribute meaningfully to future growth and deliver attractive returns and not in the distant future, but quite close [indiscernible]. We've made those investments while continuing to deliver strong capital returns to shareholders through both dividends and buybacks. And this is underpinned by our still robust balance sheet with 1.1x leverage. One of the most important -- maybe the most important strategic decision this year was the one to demerge Primark. We'll create 2 focused businesses each with the capability, the investment capacity and the strategic flexibility to accelerate its own growth agenda. We're on track to complete that process in December 2027. And we've made good progress already to build the systems and processes to operate the business as a standalone business. We'll also use the time leading up to the demerger to provide a greater understanding of our businesses. We'll hold 2 separate Capital Markets Day in autumn of 2027. We know that AB Foods, which is how we'll refer to the food business going forward is currently less well understood and over the next 12 months, we'll tell you much more about our portfolio of businesses and brands and how the Food Group operates. This will include a series of 4 shortage investor education events during 2027 and lovely to see as many of you like to come at those. We'll start with a deep dive on AB Foods, following by event on AB Foods and how we operate. For [indiscernible] each of the 3 business segments that we'll have within AB Foods, Grocery, Ingredients and Sugar and agribusiness. The main difference from the segments we have today is that we'll bring together Sugar [indiscernible] and agriculture. It won't change how these businesses are being managed internally. However, for reporting purposes, I think it makes sense to group together the commodity elements of these 2 businesses. And with that, Joana, over to you.

And good morning, everyone. Let me take you through this year's results in more detail then. In 2026, group revenue was GBP 19.6 billion, up 1% at actual rates, with a net benefit from foreign exchange translation of GBP 284 million. At constant currency, group revenue was 1% below last year. Primark sales grew 2%, and sales in AB Foods declined 4%, including disposed and closed businesses excluding disposed business and closed businesses, AB Food sales were down 1%, as you can see from the slide. Group adjusted operating profit was GBP 1.5 billion, a decrease of 14% at constant currency. While this was primarily due to lower profit in Primark, also declined in our food businesses. There was a small impact for foreign exchange translation, a benefit of GBP 20 million. And the group profit was in line of our expectations. Within the results, there are a number of moving parts, though. So let me go through the detailed performance by segment. Starting with Primark. And looking here at sales. These grew 2% to GBP 9.8 billion. New stores contributed 5% to sales growth and like-for-like sales declined 2.6% in a challenging consumer environment across most of our markets. In the U.K., we had a much improved performance. Like-for-like sales grew 0.5% compared with a 3% decline last year, and we gained market share. This was despite the clothing retail market declining in the year. It is a consequence of the actions we've taken to reenergize Primark's proposition. In Continental Europe, we are at an earlier stage in our commercial recovery and in the development of our capabilities in brand, marketing and digital, sales were down 1%, and like-for-like sales declined 4.7%. In the U.S. sales grew 13%. We made good progress with new space expansion with 14 store openings in the year. However, it was a difficult trading environment. This was mainly due to the effect of U.S. tariffs on consumer sentiment and footfall. FY 2026 was a strong year of openings with a total of 37 new stores. This includes 33 of our own stores across Europe and the U.S. and our first 4 franchise stores in the Middle East. Primark's adjusted operating profit margin was 10.2%. This was below last year for 2 main reasons. The first was our decision to significantly increase investment across price product, marketing and digital initiatives to drive like-for-like sales growth. And in the areas where we prioritize investment this year, the U.K. and womenswear, our like-for-like sales grew. We also had continued investment in technology to build capacity and scale. The second was lower like-for-like sales, of course, and the associated increase in markdowns. There was a margin benefit from foreign exchange and the cost efficiency delivered across our supply chain, store operations and central costs enabled us to offset inflation. In grocery. In grocery sales grew 2%, which primarily reflected the consolidation of Hovis. Excluding Hovis, our underlying sales were broadly flat. We had sales growth across a number of our international and regionally focused brands, underpinned by continued investment in marketing and new product innovation. We had sales growth [indiscernible] sales grew in the year. However, strong growth across most of the year was then held back by the extended summer heat waves in the U.K. and France, which lowered hot tea consumption. Gross adjusted operating profit was down 11%. This was primarily due to lower sales and profit in our U.S. oils business, as George just mentioned, both our retail brand Mazola and our joint venture, Stratus, reflecting ongoing pressure on consumer spending. Ovaltine profit was impacted by higher cocoa costs and the phasing of sales in Thailand as we change to a new distribution model. The implementation of new ERP systems drove higher depreciation costs. At the half year, I noted that U.S. tariffs had affected profit. A large proportion of these costs was refunded in the second half. Ingredients had an adjusted operating profit of GBP 238 million, down 8%, in line with our expectations. In our Houston bakery ingredients business, AB Mauri profit declined. This was mainly due to weaker consumer spending in the U.S., which reduced demand for our products. There was also subdued demand for our specialty use products for use in alcohol beverages. Most of AB Mauri's other markets and categories performed well. In Specialty Ingredients, ABFI, the portfolio performed well overall. This included good growth across a number of our pharmaceutical products as well as in used extracts and enzymes for food and beverage markets. We continue to invest in R&D, commercial capabilities and strategic capital projects to drive growth. Sugar had an adjusted operating loss of GBP 47 million. As we guided in April, we did not offset the first half loss in the second half. In the U.K., sales and profit declined significantly. This was primarily due to lower average selling prices compared to 2025, which was only partially offset by lower beet prices. Profitability was also impacted by the recognition of onerous contract provisions. These arose from low European sugar prices, higher gas costs and lower yield expectations for the bit crop that is currently being harvested to the hot dry summer. Lower yields reduced absorption on fixed cost, as you probably would know. Our Chinese business as [indiscernible] had a reduced operating loss in 2026 as a result of our restructuring actions last year. In Africa, which is our growth market, overall profit was lower. This was primarily due to lower sales in South Africa and Eswatini, and lower production in Tanzania. One thing to note is that the anticipated devaluation of the Malawian currency did not take place in 2026. We have factored currently devaluation into our 2027 figures. Agriculture adjusted operating profit was GBP 19 million, broadly in line with last year. Our Specialty business delivered good growth across specialty feed, feed additives and nutritional supplements. Lower profit from our joint venture frontier was due to lower commodity prices smaller crop sizes and reduced demand for crop protection products following dry spring weather. We have taken the strategic decision to exit our low-margin compound feed business in the U.K. to focus on higher-margin growth opportunities. The result of this business are now included in disposed and closed operations and not within the Agriculture segment. Moving to adjusted earnings and adjusted earnings per share. Adjusted EPS was 156p, down 10.8%, reflecting lower profit, but benefiting from a lower tax rate and the share buyback. Regarding the adjusted effective tax rate, which reduced slightly to 23.9%, down from 24.2% last year. This benefited from the reassessment of certain tax positions, which more than offset the negative impact from a change in the geographic profit mix. We do expect some upward pressure on the group's effective tax rate in 2027 as we will be lapping the nonrecurring benefit. Free cash flow of EUR 652 million was in line with last year. While operating profit was lower, there was a cash flow benefit from having lower net working capital at year-end, mostly as a consequence of a reduction in inventories in Primark due to both phasing effect and specific actions to take the reduced inventory levels. Capital expenditure of EUR 1.2 billion was broadly in line with last year, and we also completed a number of acquisitions totaling EUR 0.2 billion. I'll share more on these investments shortly. Our balance sheet remains strong and continues to support both investment and shareholder returns. As I just noted, our overall working capital position was lower than last year, primarily due to lower inventory levels in Primark. Seasonal inventories were also well managed. Our net cash addition was slightly lower, reflecting the shareholder returns made in the year, both dividends and buybacks. The value of our pension surplus continued to grow and was EUR 1.7 billion at the year-end whilst we continue to provide a cash benefit through the abatement of employer contributions. Turning now to cash and liquidity. Our year-end net debt position, including lease liabilities, was GBP 2.8 billion compared to GBP 2.6 billion in 2025. This reflects the net cash reduction I just explained and additional lease liabilities from properties acquired as part of the Hovis acquisition. Our leverage ratio was 1.1x, which is an increase on last year, but well within our capital allocation policy. Total liquidity was GBP 2.4 billion, which includes undrawn committed facilities of GBP 1.8 billion. This robust position underpins our continued investment in growth while maintaining resilience and flexibility. Our total investment in 2026 was GBP 1.4 billion, as I just said, across the group, split between GBP 1.2 billion of CapEx and GBP 0.2 billion of acquisitions. Around 40% of our investment was in Primark across new stores, new depots, including Sheffield, increased automation, digital capabilities and new technology. The remaining 60% was in AB Foods, and a large amount of this spend was to complete multiyear projects. These investments will drive growth in new markets and add capacity where we've been constrained and also add new capabilities. We also completed acquisitions, including Hovis in the U.K., Abe's Bagels in Australia and New Zealand and Elementis Pharma in Germany. Across ABF, we've invested more than GBP 100 million this year in technology projects, including automation to drive efficiency in our supply chains and new ERP systems to strengthen efficiency and decision-making in our businesses. We expect group CapEx to remain at a similar level in 2027 as we make the final cash payments for projects that have now been completed in our food businesses. We expect CapEx in AB Foods to start to reduce in 2028. Our capital allocation approach is to return excess capital to shareholders, both through dividends and share buybacks. Our 2026 proposed total dividend is 63p, which is in line with last year. This reflects our confidence in the medium-term and long-term outlook for the group. Our dividend remains well covered. We completed our most recent share buyback program of GBP 250 million in August. Over the last 4 years, we have returned GBP 1.9 billion to shareholders through share buybacks and GBP 1.6 billion through dividends. These shareholder returns alongside our continued investment in our business, demonstrates our commitment to delivering long-term value for shareholders. I'll finish on our outlook for the group. In challenging year ahead, the group will continue to make significant strategic and operational progress that will serve us well when the operating environment starts to improve. However, we remain cautious on consumer sentiment and the impact of inflation and higher energy costs on our businesses. We expect group adjusted operating profit and adjusted EPS to be below 2026 mainly due to sugar as previously guided. I won't go through the full detail of the guidance by segment on this slide. I would like to point out that in grocery though, we now expect adjusted operating profit to be broadly in line with 2026. While we expect sales growth in most brands and businesses, we expect this to be off by higher input costs. Our grocery outlook includes a one-off impact from consolidating Hovis losses in the first year of ownership as well. And we expect to deliver significant synergies and profit accretion in subsequent years. For the rest of our business segment, there is no change to the guidance we provided in our trading update in September. And with that, let me hand over to you, Eoin.

Right. Thank you, Joana, and good morning, everyone. So obviously, Joana has actually just taken us through the performance of Primark in the year already. Just a quick recap to set the context. Overall growth of 2%, driven by good expansion, including the start of our franchise business in the Middle East, but like-for-like a decline of 2.6%. However, with growth in the U.K. and a decline in Europe. Tough overall context that as we said, across pretty much all of our markets, including the U.K. And in that context, we're very pleased with the U.K. performance which continues to consist early performance in Europe was difficult. So we have to move -- we have more to do to win there, and I'm going to talk a bit about that today. So 12 months ago, when I was standing here, I said we're going to challenge ourselves and have to take a really hard look at our operating environment and our business and be very precise about what we're going after. And I think the key point I want to leave here today is that we're very clear on our strategy and the direction. It's about building a better Primark, driving like-for-like sales growth through clear levers of value, category focus, increased brand and marketing activation and in time, more localization and improved customer availability. It's about leveraging our scale to drive an omnichannel model, which obviously is -- I'm going to talk more about today, which is new and also to drive expansion through our store estate and our new franchise arrangements where we believe we can accelerate. And it's all underpinned by cost discipline to enable us to invest in the proposition and to protect margin. I also ended the year with a new leadership team in place. It's a real world-class talent to help build a better Primark. We're on with this strategy. So let me set out what we've done in the year, what we're learning, where we are getting some wins already and how we're applying some of those wins. If I can wrap it up in a single sentence, we're going to create a stronger, simpler, more scalable business. And you're going to see some of those themes as I talk through the review of last year. So again, last year, we talked a lot about refocusing and resetting our value proposition in the year. This is about getting Primark back to being who we are, the original and the best value disruptor in the market. It's about getting back to our fashion routes, investing in quality that our scale enables. But most importantly and the biggest element of this has and will always be price. And that's where we've really focused this year. We started the year with major fines, which was a really successful promotional vehicle for our customers, showcasing our amazing value with just killer prices for the products that we offered. And it's been a great footfall driver. We started in the U.K., and we rolled that out to our markets in Europe through the year. But then we ended the year with iconic value. And this really is the major initiative to reset our value proposition and indeed, our price proposition. We set this out in July as we brought in autumn, winter products. This is about a major price investment in iconic care lines, focusing where we believe it matters most. We've seen a really good response across all markets, and this has been in all markets. Critically, it has reinforced our category leadership in core categories such as leisure and nightwear. And it's also [indiscernible] overall strengthening, we believe, and simplifying of the range, including consolidating our price points. All of this reset now covers over 1/4 of our range, and it will continue through autumn and winter of this year and spring, summer into next year. The price leadership underpins new investment in style and quality, including investments in fabric, which leads me on to the work that we're doing on sharpening our product focus. Starting with womenswear are most important in our largest category. I talked a lot about what we were doing in this category last year and it really has been a standard performer in the year. not just strong like-for-like growth in the U.K. but beyond -- and for example, H2 women's clothing was up strongly in France and Spain. So what is the playbook Well, better product starts with better insights, and we do have our most comprehensive and clearest ever womenswear customer insight across our markets. We understand who our core customers are and we have much stronger certainty about where we believe the growth lies. And Primark is a fashion brand at heart. And so we have reset our women's wear offer to attract more fashion and style led customers. If you've been in store, make sure you do go into store. You're going to see how different this looks and feels. We strengthened our womenswear, our core womenswear fashion offer, bringing more elevated contemporary style to the mat. All designed to challenge the perceptions of what affordable fashion can look and feel like. We launched the scene, which is a new collection aimed at the growing youth market. We continued the strong fashion lens in our collaborations. We had the continued strength of our collaboration with [ Paulo Echeverria ], which we also had a new collaboration with [indiscernible] which has been very strong in all markets, not just the U.K. and Ireland. Performance where is another example of investment in value, quality, fabric and style. This is a deliberate category focus, where we knew innovation and fabric and our scale could disrupt the category. It's been a really strong success story for us. We are now the largest seller of performance wear and athleisure wear in the U.K. in a relatively new category for us. To support these new strengthened lines, we have also introduced better in-store merchandising, displaying the complete look for inspiration. Coordinate ranges are -- have significantly increased year-on-year in store and I mentioned this because we see good uplifts when we showcase the full outfits together for our customers. So critically, we are also applying the same focus in womenswear to our other categories. where we are in truth, a little further behind, and we had less strong performance in the financial year just gone. Kidswear has been a big focus for us in the year. We have a huge opportunity, we believe, in this category and there is a lot of change on the way. We've already improved the mix and quality, invest in price, simplify the range, improve style and in some cases, tackle the overreliance on license. We have a higher kidswear mix in our European markets. So strengthening in this category is critically important for those markets. We launched a lot of these changes just in autumn/winter just now. So more to report on this. And finally, in menswear, we're also rebuilding our style credentials in that category in a similar way to what we're doing in womenswear. Plans are at an earlier stage, albeit you will see some of the changes in our autumn/winter collections already. Underpinning our improved category focus is a continued step on in marketing and digital engagement across all our markets. We said this time last year, we were at the foothills in this but we have made very good headway in the year. We started and indeed invested most of our energy and money in the U.K. at the beginning of the year. It was there that we had our very first integrated marketing campaign which has delivered strong commercial results. So we started off with in denim, we can in last September, which had a strong performance, which we measured with a good uplift in the Primark market share in women's denim. And then we had Shockingly Chic in the spring, which was actually the launch of that elevated fashion in the core fashion offering that I spoke about and then to get away in summer. Pleasingly and quite importantly, brand metrics have moved improved in step with these campaigns. Of course, the obvious question is what are we doing outside of the U.K. in relation to our marketing and activation and our focus is to increase our activation in European markets. I talked about major fines. They started in the U.K. in the year, and then we moved them all the way through the European markets in the year. But in H2, we really started to step up our broader activation in Europe. So we had our first funnel marketing campaign in Spain with the summer campaign I mentioned to get away. We've since continued in Spain with our Primark performance wear marketing campaign just at the start of this financial year, which has been very positive. We launched also our first multichannel marketing campaigns in France and Italy at the beginning of this year, which were focused on auto winter fashion. We've also started more meaningful local activation, what we call our spotlights where we choose a partner influencer to help us curate a Primark edit to highlight on spotlight in stores and online. We started this in the U.K. with a fashion-focused spotlight. And we've since extended these to Spain with a focused Spotlight and then in recent weeks, a more, again, fashion-focused spotlight in Italy. All of these have been successful. I think there's lots of real potential for them, very local, very focused in the market that we are operating in. So we have a lot focus more to do in activation in Europe, and we'll continue to step that up this year, which if I think of stamp back and think about Europe, I think this step-up in activation, along with our investment, our iconic value investment, our category focus, in particular, Kidswear, gives us confidence in recovery in the European markets. And in time, these markets benefit from more from localized ranging. So there's a lot going on in omnichannel to get excited about. Across our markets, we continue to invest in digital engagement. Our CRM database that we are actively marketing to was up 38% year-on-year, both growing both in the U.K. and Europe. We've continued to see very strong website traffic, particularly in the U.K. which is up significantly in the year, obviously helped by Click & Collect. Our app is now live in the U.K., Ireland, Italy and Iberia, and overall stock tracker usage across web and app is still high across markets. And we've seen higher stock checker usage on the app than the website when available. There's more opportunity here, but we have seen some really good delivery. And we had a full year of Click & Collect in the U.K., which has gone really well with continued strong metrics. The last step is to go fully omnichannel. As George mentioned, we announced our Sheffield site acquisition in September, Port home delivery in the U.K. This is obviously a big deal and one we're very excited about. I guess there are a number of key questions that are being asked on this. Why? Why now? Can it be profitable and, of course, when. And we've done a huge amount of work on this in the last number of years. Critically, it starts with confidence around the target consumer. It is targeted on customers who shop with us but more occasionally, generally more style led and do a lot more of their total spend online with other brands. So the first point I want to make here is that this is set up to really focus on incrementality. And Click & Collect has given us some real confidence here. Sales through Click & Collect have been highly incremental to date and a support of the market share gains that we've had in the U.K. Click & Collect through our work reaches roughly a 10-kilometer store catchment area. So home delivery clearly Aligned to this focus on incrementality is how we believe we can protect the basket size, obviously, critical for delivering our value proposition profitably. With this type of customer, we feel we can have a minimum order sizes to protect the basket size and basket sizes in Click & Collect have been good to date and also give us confidence here. And we're going to protect the economics further by passing on charges in line with the rest of the market. Importantly, having full home delivery strengthens the effectiveness of our digital engagement and the cost of customer acquisition, both for this channel and for our stores. So after years of review, we feel very confident that it's time to now target profitable growth in this channel. Our plan is to launch in the U.K. by the end of the calendar year next year. Store expansion continues to be a core growth end. We delivered 33 new owned stores in last year across Europe, the U.S. and U.K. In total, new space delivered 5% growth. Overall, we still see a lot of runway for space growth in Europe. Our market penetration in some markets are still very low and with a better and more focused proposition that I've spoken about, we feel we have plenty to go after. In the U.S., we substantially increased our store estate in the year with 14 new stores taking us to about 50 now. That included our Square store in Manhattan, which performed strongly and around which we drove a large brand awareness campaign, which has really helped. As Joana mentioned, the year had a more challenging backdrop with tariff volatility and a nervous consumer. I was there a couple of weeks ago. It felt a bit more reassuring. I felt conditions appear to be settling despite everything else is going on. We are now trialing a lot of new things in the U.S. For example, we are testing more bespoke ranging for our stores there at the moment. Still loads to growth potential in the market, also see an omnichannel opportunity in the U.S. in time. But off the back of our recent rapid expansion, we plan now to focus on the performance of our current and large estate. This includes the testing the new customer proposition that I've mentioned before, including the more bespoke ranging and overall drive profitability and cost optimization. And then we'll look to restart our expansion from a stronger base. Our brand is so much untapped potential globally. And franchising is a capital-efficient and experienced route to market and to attractive new markets. In the year, we have already built a meaningful business in the Middle East, now with 6 stores across 4 countries. And there's so much potential still in that region. I was in the [indiscernible] last week and the stores were performing remarkably well despite the near-term uncertainty. Next year, we will open our first store in Saudi Arabia that George mentioned with Alshaya at the end of March. And that opens with a lot of growth potential. We also worked hard on our second franchise arrangement during the year, signing with a new partner, Liverpool, for Mexican market entry just before the end of the year. Mexico is a market has huge potential for us, we believe. And we're moving fast in this franchise space. And taken together, this acceleration plus to continued store expansion gives us a lot of confidence on the current 4% to 5% medium-term expansion target. Building a better Primark is also about a stronger operating model, supporting our new growth routes, but also operating a simpler model. We've already taken a substantial amount of cost out last year with self-checkouts and labor cost savings in stores as well as other broader supply chain efficiencies. However, I am signaling a step up in this program, really addressing the complexities of our operating model that our operating model faces today to get us back to be the most efficient and simple we can be. We simply can't be a value leader without being a cost leader, and we see significant cost efficiency opportunity across all areas. More to come in this space. Of course, technology, automation and data investment will be needed to simplify and fund growth. An illustration of this is the -- are the investments we're putting in to driving customer availability. This includes a new investment in RFID technology for our ranges, which we'll be rolling out in phases over the coming months. We see both considerable like-for-like and cost opportunity across all markets with that investment. This is about getting us back to being the most efficient model simple and scalable. So thank you. All in all, very clear on the direction of the business and a lot of exciting times at hand. And I look forward to your questions later.

Thank you, Eoin. Before I talk through this year's performance, let me start with some wider context. As I said in my opening, ahead of next year's demerger and Capital Markets Day, we will also offer a series of short education sessions on AB Foods, and I look forward to explaining in more detail what's in our portfolio and how we operate. And this morning, let me give you just some edited highlights. We are a deliberately different kind of food group, and I'll pick up on some of these differences. The first is the diversification of the portfolio. Food is a sector that never stands still and where consumer needs and preferences will always evolve and never faster than now. Our diversity provides both resilience and optionality for growth and our devolved operating model gives us strong local leads close to our market and customers empowered to be agile in response to changing trends. But there are structural trends as well, and I think we're well positioned for these trends such as growth in foodservice over decades, premiumization, health and wellness. This year alone, there are numerous examples of our product innovation, driving participation in areas of a structurally growing consumer demand. We are positioned where we have leading market -- sorry, we are positioned where we have leading market positions and a competitive advantage. We'd like to be in small categories in large markets, and we like to be in large categories in small markets. Industry structure is really important to us. In businesses, the businesses in our portfolio play different roles. Some providers with long-duration growth, others provide us with strong cash generation, and there are some earlier-stage businesses. Again, this breadth gives us resilience and multiple routes to growth. We invest patiently behind growth opportunities where there are attractive returns, and we take a long-term view. In the last 2 years, we've invested GBP 1.6 billion in capital projects in AB Foods, and the majority of those were growth projects. We also accelerate category reach through targeted acquisitions, and there were some examples of that this year as well. Where necessary, we should reshape businesses to improve their [indiscernible] financial performance and long-term returns, and I'll also talk about some of those examples this morning. We've talked in the last couple of years about a better wave of investment in our food businesses, that GBP 1.6 billion. This slide shows the key projects that have either now completed or in the process of being commissioned this year. I'll talk about them in more detail as I review of the business segments. But what these investments have in common is they extend our capacity and capabilities in attractive markets, strengthening our competitive advantage of providing a strong platform for future growth. So having set out the broad elements of our strategy in AB Foods, let me go into performance by segment this year and starting with grocery. As Joana said out, grocery profit was down in 2026, and the main reason was the performance of our U.S. oils business. Mazola which is our retail brand faced a decline in the edible oils category in a difficult consumer environment. And it was particularly Mazola core Hispanic consumers that reduce their category spending who are under pressure for reasons we understand. We've looked hard at the data and we don't think that this is a consequence of GLP-1. The market is smaller than it used to be, but Mazola held its position as the #1 brand. We focused on affordability through promotions and smaller formats, and our marketing investment maintained our share of voice in basic edible oils is around 80%. Our joint venture in oils, then Stratas mainly serves the food service market and consumers reduced their spending on [indiscernible] home dining. We think the slowdown in foodservice will reverse over time, although, again, BLP1s may be causing part of the market shrinkage. There were also some smaller headwinds to grocery profit this year, but I would characterize these as bumps in the road. So in Ovaltine, we faced significantly higher cocoa costs, which has [indiscernible] down somewhat. And then we've had a one-off impact from commissioning our new factory in Nigeria and then a failing impact as we tradition to a new distribution model in Thailand. As we expected, performance was stronger in the second half. And then in Twinings, that long hot summer led to lower tea consumption in the U.K. and France. But there were a number of places where we had very encouraging growth in the year, and I'll share a few highlights. Overall, training sales were up this year despite the hot weather impacts in Europe. Growth was volume-led, supported by growing consumer demand for wellness products and really good innovation. Our sales of fruit and herbal teas grew double digits. Our sparkling tea ready-to-drink in the U.K. [indiscernible] ready-to-drinks in the U.K. have strong momentum, growing 70% in 2026. And this year, we launched them in Australia alongside a new range of old infusion teabags. Initial sales there in Australia have been strong and demonstrate how we build our resilience to summer heat waves. We'll continue to grow distribution and expand in new channels, in particular, online. In the U.S., which is our largest market, [indiscernible] the #1 tea brand on Amazon for the first time, driven by sales growth of 30% -- 37% in that channel. Ovaltine had continued innovation in its ready-to-eat portfolio in Brazil, which is a fast-growing market for Ovaltine. We expanded our presence in food service through a new and really important partnership with McDonald's. McDonald's has launched the Ovaltine McFlurry, which also days, of course, brand awareness for our retail product. Ovaltine themed milkshakes in Brazil are the biggest selling ones in that big market. Our World Foods businesses delivered record profits. And again, innovation was very strong. Blue Dragon sales grew double digits in the U.K. and grew 30% in the U.K. -- in the U.S., which is a target market for us. We also had good growth in Jordan with innovation targeted consumers looking for more nutritious and protein-based cereals and our sports nutrition business, sales grew 20% this year in the fast-growing hydration space. In July, we completed the acquisition of Hovis and the integration with our U.K. bakery business began then and is now well underway. There are 3 significant elements to this integration. We will deliver significant production and distribution synergies. The benefits will start to come through from the second half of 2027 and will be accretive to earnings in 2028. The second element is innovation. We are developing products for the growth sectors in bakery, driven by changing consumer tastes, including shifts to healthier option and cleaner labels. Last year, Hovis launched its first [indiscernible] which were developed using a specialist expertise from our company, AB Mauri. And Hovis will shortly be launching a new just 3 loaf [indiscernible], which is bread made from 3 simple ingredients. And then third, we are reinvigorating the Hovis brand. It's a national treasure that's not received the investment at deserves, and we have the opportunity to restore it. Our recent consumer marketing campaign is the first major brand investment since 2008. Let me show you the recent TV ad. [Presentation]

We've seen an immediate sales uplift following the airing of that ad. Hovis is a brand is rooted in heritage. It's rooted at health in health, it's rooted in community, and we really do love it. Within grocery then, several multiyear capital projects have either been completed this year or are very close to completion. So investments in Twinings both in Poland and in the U.K. have increased capacity and also give us some optionality and resilience. We can pack for different markets in both factories. Ovaltine's new production site in Nigeria is up and running. It supports our growth ambitions in both the domestic, very large Nigerian market. And the export markets in West Africa, enables us to operate much more cost effectively and 4x quicker than before. The chocolate beverage category in Nigeria has 95% household penetration. So our products are a consumer staple at a country with 220 million people and with 7 million babies are born every year. Ovaltine is really, really well placed to supply this growing market. New capacity for Blue Dragon supports international expansion, the new bakery and that's in Poland, the new bakery line for Tip Top in Western Australia adds capacity and also efficiency in a market where we are really the only scaled baker. Then on to Ingredients. As a reminder, Mary is a business with large-scale use production and a portfolio of specialized bakery ingredients. It combines its strong innovation capabilities, and they're very good with its established routes to market and both those combined to drive growth. This year, we continue to expand production in attractive markets with structural growth. Our new fresh East plant in India will meet fast-growing demand for bakery products. The market is growing at about 6% a year as diet shift from rice to wheat based food. That's another one of these global trends. With strong population growth and bread consumption per capita is still low, there's significant headroom for future growth. And we finally got the capacity we need to play significantly in that market. In Australia, we completed our new flower mill upside. Melbourne, this cements our position in the Southeast Australia where demand for flower continues to grow with population. It also allows us to close 2 existing sites, greatly reducing our fixed overhead costs and driving efficiency. But as Joana set out, it was a tougher year for our bakery ingredients business in the U.S. where there was weaker demand. We do believe that some of this is the impact of GLP-1s. And on top of that, in Specialty East, there was subdued demand in the alcohol beverage sector resulting in low production and destocking, I may have said in the past, but we provide a majority of the special yeast to the scotch whiskey market in this country. We expect both of these markets to stabilize, possibly at lower levels than at peak. Our portfolio Specialty Ingredients business then, the other part of our Ingredients portfolio, ABFI, performed well this year with both volume and profit growth. We focus on 3 growth markets, food and beverage, Health & Nutrition and pharmaceuticals, which are both actives and also excipients. In this year, in all our target markets, we focus on increased sales. We focused on increasing sales coverage, adding technical capability to strengthen our technology platform and accelerating innovation. We also enhanced a number of capabilities within the business to support the next phase of growth. For example, the new customer fulfillment center in enzyme factory in Finland. Acquisitions are another key element of our growth strategy. Hence, the acquisition of Elementis Pharma this year, that strengthens our position in the growing digestive health markets, particularly antacids, [indiscernible] magnesia. Demand is growing strongly for those people who have tummy aches as a consequence of their GLP-1 habits. I do believe there's a lot more to come from our specialty ingredients businesses in the future. On to sugar then, and this first slide is a reminder that we had 2 very distinct sugar businesses. Africa is a long-term growth opportunity. We continue to grow sales of our leading retail brands. The businesses are supported by favorable demographics and opportunities for continuous improvement in our commercial, our operational and our agricultural performances. And in all those 3 areas, we did well this year. And the opportunity in Africa is not just sugar, although we have to be disciplined. It's also in coproducts such as ethanol and electricity. Across in Europe, we own our U.K. and sugar -- Spanish sugar businesses for their cash generation on average. In the U.K., we're the market leader with a structural cost advantage. Our assets are well invested, so the CapEx is really only spent on high-returning projects, particularly those to reduce energy costs and there's a big project that's commissioning now at Wissington to reduce gas use. Last year, we restructured our Spanish operations to focus on back-to-back refining contracts. So we're -- we've only got one factory left in Spain, which is processing beat the rest of the operation is a refining business. This year, we're underway with the restructuring of our U.K. footprint to go from 4 factories down to 3. This will take out significant cost and increase the utilization of the other 3 remaining factories. Both of these actions will ensure we're well placed when the market turns. But for now, the environment in Europe does continue to be challenging. As Joana explained, losses in European sugar this year were because of lower average sugar prices and because we recognized large onerous contract provisions at year-end. Looking ahead in Europe, there are early signs of recovery in European sugar prices, and there are reasons that these signs should continue to be evident. European sugar production for the current campaign is estimated to be down significantly more than 20%. And higher world sugar prices make it less likely that imports will fill the gap in domestic supply cheaply. In 2027, our results won't really benefit from the high European sugar prices because this year's customer contracting is nearly complete, at least in the U.K. In Spain, there may be more of an opportunity because there's a bigger spot market in the Spanish market. And in '27 , of course, we have ongoing exposure in the U.K., in particular, to really high gas prices. We should see higher sugar prices in future years. We really believe we're going to see those and gas prices will eventually come down. In Africa, there were short-term disruptions to performance this year in South Africa, where we had a strike and some problems with import tariffs. And then in Tanzania, again, that was related at the beginning of the season. Joana highlighted that, too. But we made good progress in Tanzania, and this is really the important bit with the commissioning of the new sugar mill. It's a very large, very complex project. It doubles our existing capacity and allows us to meet fast-growing demand in a market where everything we sell is branded and premium. As I said earlier, co-products are another growth opportunity, and we have invested in some important projects. Again, in Tanzania, we've built a new distillery to take all the glasses for the new sugar factory and turn it into potable alcohol. And that is now complete and beginning to sell potable alcohol. Then in Eswatini, we have an ongoing project, which will allow us to sell significant quantities of electricity generated from the gas into the national grid, and that's on the basis of a long-term contract. Agriculture, then. Our focus within agriculture is on higher-value specialty businesses like Premier Nutrition, which is pictured here, which grew very nicely last year. It's got a very good recent track record. We took the decision in the year to exit U.K. compound feed business. This will improve profitability and free up, as I mentioned before, low returning capital. We've already sold 2 of the mills. We'll finalize the future of the remainder in, I think, the first half of 2027. And going forward, this leaves us with an attractive portfolio of value-added products and services, particularly the enzyme business, the [indiscernible] enzyme business, which is a nice global value-added business. We see good growth potential in our specialty Animal Nutrition businesses more generally. We've also begun building a presence in pet care in this country. And in dairy, we continue to develop our full service offering for dairy farmers [indiscernible] that's going well. Thank you for your patience so far, just a summary. Looking ahead, I said at the outset, we remain focused on what we can control. Across the group, there are some headwinds, which quite frankly, we can't control. We'll continue to deliver operational improvements in strategic projects that will deliver growth. Primark will continue to strengthen its value proposition and execute on new avenues for growth. AB Foods will continue to drive growth from strongly managed brands and businesses there will be tailwinds from the integration of U.K. bakeries. There'll be improved profitability from European sugar and a focus on higher value-added areas in agriculture. Our capital projects, including stores and depots in Primark in capacity, and capabilities in AB Foods will contribute meaningfully to growth over many years. And delivering the demerger in December 2027 will support long-term value creation as well. So taken together, we have good reason to be confident in the medium and long-term outlook for Primark and AB Foods. And with that, let me hand over to you for your interrogation. Thank you.

[indiscernible] of Peel Hunt. New to Primark. So I've got a couple of questions on Primark, if that's okay. I know you get probably too many questions on Primark. Interested on the iconic value launch, obviously, into autumn/winter. Is the implication here stronger Q4 and a good build into new year? And then the second question, just on the economics of home delivery and how it stacks up? Again, sort of new to the business. So interested in how you think about a basket size, number of items and product discovery in store? And how do you replicate that online? What -- where do you need to set that online delivery? And what are you planning for returns rates?

I think this is good question. I'll pass over to my friend on my left.

Yes, look, I think, yes, we've got good momentum with the iconic value investment. And as I said before, it is across all our markets. It's not just a U.K. specific trend, I think. So yes, we do have good cautious confidence around what that will mean for momentum. We shouldn't underestimate that the world is still a little bit sort of a complicated place out there. But I think that investment really should stand at some very good stead into this Q4 and beyond. On the home delivery, omni profitability, well, I think, look, some of it is what I said earlier. I think we -- we've seen in the Click & Collect that the basket sizes are well ahead of store basket sizes on average, right? So obviously, we get a broader church into our stores. But we have -- we've seen that with who we believe we're going after here, we believe we can target higher than even the Click & Collect basket sizes. So we're looking for higher than the basket sizes that we've had in Click & Collect. And sort of the rest of the economic stack up the way I described, we've aimed to get good basket size is aimed to get incrementality, aim to get good efficiencies through marketing and customer acquisition that will help also help the stores and then pass on charges. So that's sort of how -- now if I take a summary of that, just maybe what you're asking here is I don't see reasons why this should not be materially dilutive to group operating margin once we get to a steady state. So that's the way we're setting this up, and that's important.

Is there a number yet in terms of that sort of mid basket size?

No, no. And to me [indiscernible] such, I think we've given quite a lot of way in terms of what the proposition is. I don't think we want to be given more way at this point in time. We think it's going to be great. A lot of people are asking for it, a lot of people are excited about it. And I think it's going to go well. But we also want to leave a little bit behind for the customer when we launch it.

Warwick Okines, BNP Paribas. I've got 2 on Primark as well, actually, please, Eoin. I think earlier a few months ago, you said that you're buying for like-for-like growth in '27. But with the pretty warm start to autumn/winter, how confident are you that you've got tight enough inventories to win back the markdown that you lost last year? And secondly, just following on from John's question on iconic value, what decline in ASPs you're expecting in '27 from your price investments?

Keep going, yes. So I mean, you are right that the year -- our financial year didn't start off great, right? The back end of September was fantastic for everything except selling close with the heat, I mean, unseasonable worth in the U.K. and all other markets. So we've got a bit of recovery to do on that. But I think we've got good momentum, not particularly anxious about inventories. As you will have seen in the -- in Joana's presentation, our inventory level going into year is good. It's strong. And it's tight. We feel pretty good. So we feel pretty good about markdown levels and so on, a bit to recover the gap of the last couple of years. But as I said to the previous question, we sort of decent momentum. So we'll have to see how the next few, obviously, quite important weeks develop. But at the moment, it feels all right. The decline in ASP in the year, it's -- I'm just trying to think what the decline in ASP is the year across the holding is a couple of percent or so. So roughly across the whole group.

It's Richard Chamberlain from RBC. A couple of quick ones on Primark. That's the one on the grocery side. So I wonder if you can just talk about how you're hedged on FX for the coming year? Is that sort of pretty much fully hedge now on the cost side, obviously, in light of the recent euro weakness against the dollar. And then I guess the operating margin now 10% is more sort of towards the lower range where it's been. How do you see that evolving over the medium term? I guess it's a bit hard to say. But should we think that now is more sort of mid- to upper range where it's likely to be in your mind? And then George, on the U.S. cooking oils, it sounds like you see that as a sort of cyclical development at the moment. Is it right and it's just taking time for pressure on customers to ease? I think you mentioned the other softer parts of grocery were more sort of temporary in nature, but cooking oils might. The duration of that downturn might last a little bit longer. Is that right?

I think Mazola is more cyclical, if that's the right word, as our consumer finds a way to more income and maybe with some of that, quite frankly, just fair of the current administration works through. I think that business will come back. What you're seeing at the moment is people still buying into Mazola, but they're using it more often, and they're also not entertaining with their friends which are opportunities, which are occasions when quite a lot of cooking oil gets used. It feels like those 2 things will go away. We don't see that community as buying into GLP-1s in any significant way. So no reason to think that we won't see a rebound there. I think in food service, I think there may be a little bit more of a structural shift. Now I think there are 2 different things. There is declining disposable income reducing foodservice volume, particularly in the fast food end, and that will come back. And then I think there's a GLP-1 effect, call it, 5%, 10%, I don't think that will come back. Eoin, over to you.

I'll cover the hedge and the operating margin. So in terms of hedging FX for the year, as you know, we're riding to the year. So the hedging for the [indiscernible] is pretty much covered. I know you've expressed some concerns around the euro dollar, and there will be some turbo loans in the coming months, but we are pretty much hedged for the year. On the margin and the guidance as stated at around the 10%, 10.2% for FY '26, that feels right. But as we said before, it's about like-for-like growth. So we're not going to be medium, long term, what's the right margin. There's a lot of growth opportunities, all the investment that is going through should be driving that like-for-like and with like-for-like, we'll see the leverage coming through as well. So not guiding medium, long term, but feel confident with the margins as they are.

Yes. I mean, exactly. That's what I would say. We're not giving a number for medium to longer term. But everything that we talked about here, driving growth, taking costs out, but at the same time, continue to invest in the proposition like, obviously, that's looking to try and improve the business.

[indiscernible] from Citi. I have one question on Primark. And then a couple of the rest of the business. So the first question on Primark, the highly automated warehouse in [indiscernible]. I was just interested in when that will be operational and whether there'll be any period of some [indiscernible] running costs Q3 to consider this year as a result of that? The second question on the U.S. oil business. [indiscernible] that U.S. forward business in the near term? And then the final question was just on the share buyback. Obviously, you come in this year, net debt to EBITDA below your [indiscernible] just trying to understand the decision not to do the buyback, whether it's just to do with the demerger?

Yes. It's not really to do with the demerger but we do want to go into separation with 2 well-financed businesses, both with strong balance sheet. So maybe there's a little bit of something there. It's much more to do with just -- we have a policy that when we have surplus capital by our definition will return us and we're not really in that place.

Yes. 1.5% is the upper end. We say feel between 1% and 1.5% then that we don't necessarily consider we have [indiscernible] and we've returned a lot. We've returned GBP 1.9 billion already. And I think it's hard when you return year-on-year. The expectation is you'll continue, but we're very clear. This is not about every year we will return is if we feel we have surplus cash.

Midterm, it's harder to see the transmission mechanism that gets from [indiscernible] taking at least one house, maybe 2 in Congress through to increased confidence in the Hispanic population and increased disposable income. I think the most likely one is resolution of the Gulf, the Strait of Hormuz blockage leading to gas prices coming down and diesel prices coming down. That will feed through to a population who, like everyone else in the States, spends a fair chunk of money on transport [indiscernible]

Well, maybe I'll describe this to [indiscernible], maybe I'll hand over to [indiscernible] on sort of kind of what that means for the guidance, but it is a highly automated facility and it's active at the moment, actually. So when we take it over, it's kind of -- there's not a huge amount to do to -- for us to put it into work. There's a bit of work for us to do to put our systems in and so on. But it's not like it's a significant piece of work. But -- so there will be some dual running costs. And obviously, we need to scale the facility up. So we'd expect to be kind of taking kind of control of the facility sometime in the middle of next year, basically.

Yes. And there will be some one-off costs that we will have. They are included in the guidance. You probably would have noticed that the majority of the actual cash related to Sheffield was taken in FY '26. We took it just before the year-end about GBP 75 million. So it's included in the guidance and it's not very material. And the majority of the cash is [indiscernible] in FY '26, Monique.

Matt Clements from Barclays. Maybe one for George to start off with. The capital investment cycle, we've heard a lot of [indiscernible] about capacity additions and then we just heard that the timing of the DC spends in this year, but the CapEx guidance for next year is to be flat. How do we think about kind of multiyear capital investment cycles? Do we expect CapEx to moderate year after next?

Yes. So CapEx is flat in '27. We're in really more to do with the final payments for projects which are now essentially complete than payments for work that is just starting. There will still be some projects to complete in following years, but a little lower. There's more to do in Australia. The Eswatini project will run over into '28. And Zambia payments will run into 28, but the actual facility will be finished in '27. So yes, it will come down.

Okay. And then 2 questions on Primark, if that's okay. First one on the decision to kind pause expansion in the U.S. Just kind of why now is the right time? Kind of what's changed in your year of kind of in your position, what you've seen has led to that decision? And the second question on any near-term assumptions or impact you've seen around social unrest in some of your key European markets.

Yes. I'll go [indiscernible]. The -- I think 2 main things about sort of how we're kind of thinking about the U.S. Sort of one is we actually just have gone through a kind of significant growth phase. And so I think kind of consolidating when you go through those phases, sort of there's always a bit of -- it makes sense. I think the second thing, which is probably the more important thing is we've done an awful lot of work I talked about this last year, but we don't know of a lot of work in terms of how we think we can win in the U.S. I think we've got to give that a go properly with the new and large store estate. So we have a much better sense of who the target consumer is, we -- as I said in the presentation, we've done a bit of rearranging in our stores aligned to that target consumer. Price is at the moment, although I did say things will calm down, the U.S. has come through almost turmoil, I would say, on tariffs, right? Like it's massive disruption across the marketplace in terms of what tariffs have done to prices and sort of that coming down. So I think we really have to give our proposition a good goal with a meaningful store estate that we have now 50 stores. But as I said before, I think sort of the medium-term is a vision for the U.S. is still strong. I do think it would help with an omnichannel support along the lines of why I described for the U.K., it's the same principles, right, in that it helps with your cost of customer acquisition. So yes, so -- but that starts behind that. Look, social unrest in Europe is concerning. We've had a few incidents with our stores. Nothing thankfully too bad, but our -- everyone has -- no one's immune unfortunately, to [indiscernible] and so obviously, look, the usual thing you would expect me to say is we're focusing on the protection of our people and so on when those situations happen. Little bit unfortunately, we're -- it's all a little bit too common in some of the countries that we find ourselves defending. We have had some disruption. I can't get away from that. So we just have to see how the next few weeks develop over the next period of time.