Good day, and thank you for standing by. Welcome to the Associated British Foods pre-close trading update conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, George Weston, CEO. Please go ahead. Good morning, everyone. Thank you for joining Eoin and me this morning. The main purpose of the call, of course, is for you to ask Eoin and me questions about the statement we put, we've just put out. But before we begin, I wanted just to make a couple of brief observations. Firstly, I hope you found this to be a reassuring update. Compared with where we were a year ago, we see what we've done this year as something of a triumph. In food, the trading performance was similar to that of the third quarter, so there's continuing momentum in grocery and ingredients. Sugar actually traded slightly better towards the back end of the year, and beat last year, and so now we expect food overall to be strongly ahead of last year. Primark continues to trade well, although the fourth quarter was fairly tricky at times. Terrible weather right across Europe. Northern Europe, it was too cold, and then it became too hot, and Southern Europe was too hot. And despite that, and despite the pleasure of being able to talk about weather for the first time in three years, we think despite bad weather, we'll have 15% sales growth, like-for-likes of 8%, and market share continuing to grow. Primark margin is now expected to be around 8%. That's down a bit, due to increased stock loss that's been well reported by others, and also some one-off charges in Germany. Combining the Primark performance with food for this financial year, we're ahead of expectation on adjusted operating profit margin. Next year, we expect to see substantial improvement in sugar, the non-repeat of the terrible crop that we've had to cope with this year in the U.K., and then the start-up losses of the Vivergo, again, not repeating. And then Primark gross margin, we anticipate recovering strongly. Costs have fallen further and faster than perhaps we'd anticipated. So that's the shape of this year and some upgrades next year, and now over to you. Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A roster. We will now go to your first question. One moment, please. Your first question comes from the line of Warren Ackerman from Barclays. Good morning, everybody. It's Warren Ackerman here at Barclays. Two questions, please. The first one is just on the stock loss and the one-off charges in Germany. Can you maybe outline what those charges are in Germany? And on the stock loss, if you're able to quantify that, what's happening, maybe, maybe give us some numbers and whether that continues into next year. And then you talk about a big improvement in margins for Primark next year. Are you able to kind of give us some of the moving parts to think about, you know, where the margin might land and the key sensitivities around that? That would be super helpful. And then on sugar, obviously you're saying a substantial increase next year. Can you maybe kind of update us on what you think kind of British Sugar can do in terms of you know profit contribution and where we are with the Vivergo losses into next year? Thank you. Okay. You want to start off? Yeah. You jump in. Yeah, yeah. Okay. Well, I mean, I think, I mean, obviously we originally had suggested that and hoped that our margin in the second half of the year would be similar to the first half of the year. And the miss is down to, first down to stock loss and then a small amount to the Germany restructure costs. The Germany restructure costs are just the usual restructure costs, people costs, in relation to both closing stores and actually resizing some of the stores. It's a modest amount of charges. The bigger impact there, which brought the margin down below eight is the stock loss. As we've gone through the year, that sort of has kind of, you know, it's been ticking up as we've gone along, particularly as we sort of trued up the year. And that accounts for the sort of, you know, the sort of 50 basis points or so miss, or so, the bulk of that is stock loss. And we do expect it to keep high into next year, to you know, we're. There's it. We can talk more about some of the specifics, but, you know, it's not just a U.K. phenomenon. We see it in other markets. A nd we do expect it to maintain. So, probably at the levels we've seen this year or thereabout. In terms of margin, moving parts, so, obviously, as we've gone through this year, the moving parts being that, we saw, you know, significant inflation in the first half of the year, on supplier costs, including freight as well. The FX dollar wasn't as much of an impact in the first half of the year, and pricing was. We had some pricing come through the first half of the year. As we've gone through the second half of the year, we've moved to a little bit more higher pricing impact. FX, the FX impact has been tougher because of a lot of the hedging we did, kind of really around this time last year when sterling was particularly weak. And supplier costs have started to come down, including freight, because remember, we talked about freight, starting to get the benefit of freight into our fourth quarter. And then as we go into next year, we'll continue to get the supplier cost benefit really across the year, actually. A little bit second half weighted. Freight will obviously have for the full year. Pricing will have a benefit in the first half of the year, which is a carry forward of some of the pricing into autumn, winter. And the FX, because of more kind of recent strength in sterling and euro, we'll start to see the benefit of that into the second half of the year. So they are the kind of moving parts, Warren, hopefully that helps answer the question. British Sugar Sure. I mean, firstly, let me tackle the Vivergo, where we had really quite significant start-up losses through this year, which we don't expect to see again at all. Vivergo is actually trading profitably at the moment, so we have every expectation that we won't see any losses next year at all there. And then sugar really has been the biggest moving part is our expectation of a much more normal crop. We ended up producing in the U.K. only about 720,000-730,000 tons of sugar last year. And this year, there's still risk to the crop in the lifting of it, but we would expect to be closer to 1 million tons. You get, better, obviously better factory recoveries, and you have more sugar to sell. I think we would expect sugar profitability to be returning to the levels that we would have seen before the sugar regime shocks of 2017, or even a bit better than that. So, good, good recovery in U.K. sugar. Africa, we expect to stay high. The profit increase this year in Africa has been very strong, and we expect another good year. Okay. Thank you both. Okay. Thank you. We'll now go to your next question. One moment, please. Your next question comes from the line of Grace Smalley from Morgan Stanley. Please go ahead. Hi, good morning. Thank you very much. Just following up on the question on Primark margins for next year, thank you for the detail on the moving parts. Could you maybe just help us with overall where you'd expect those moving parts to net out and the magnitude of margin expansion you, you expect for Primark margins next year? And any further detail you can give us on the time you would expect to recover to double-digit or 10% margins at Primark, that would be very helpful. And then my second question, as you think about Primark margins next year, and the margin bridge, could you just go into a bit more detail on what you're assuming on, pricing? You mentioned maybe some more price increases still coming through in the front half, but just anything you're building into the margin bridge of potentially pricing, rolling over or price decreases next year. Thank you very much. Okay. So I think that, we would expect, based on what we can see at the moment, and we've got quite a lot of these lower costs are in the goods which we're now selling. So we would expect margins to be safely north of 10%, next year. How far north, we don't know, but full recovery of margin through the year. It's the only cost that's the significant cost that's not obviously gonna come down again is labor, where we had significant labor cost increases last year, and I think we'll see fairly significant, although I suspect lower, labor costs again in the year to come. But these reductions, freight is a very big one. We were paying anything up to $8,000 a container. You can see what the spot rate's now, they're in the twos. Cotton has halved. Other fabrics, polyester is well down. About 60% of the fabric we use is cotton, if that helps somewhat. And we, what other big bits? Energy is well down, as well. Eoin, would you add anything? Yeah, I mean, I think you're right. I think that the reason our confidence- the reason why our confidence level is high is, as George said, that most of the inputs we're sort of locked in, or most of them are locking in at the moment. So that's all helpful. So obviously, the big driver becomes, you know, where the volume pitch is. And, you know, we're not giving guidance on that today. That's where the sensitivity will be around our percentage margin. Then on pricing, we've announced that we're bringing down kids wear fairly significantly. Everything else, well, there'll be some carryover pricing from price rises taken this year. Beyond that, we will react normally on pricing. We'll remain the lowest price seller of our clothes. So, yeah, we'll trade as we always do. Yeah. Yeah. Great. That's very helpful. Thank you very much. Okay. Thanks, Grace. Thank you. We will now go to your next question. And your next question comes from the line of Clive Black from Shore Capital Markets. Please go ahead. Yeah, good morning, gentlemen. Thanks for the call and the time. Two hopefully relatively quick ones from me. Can you make a comment on finance income, given that interest rates have materially risen year on year? I know it's a trading statement, but it'll be interesting to know whether that's a feature to look forward to in November. And secondly, also maybe just give a little bit more about the quantum of the swing in the Vivergo year on year. George, that would be-- that would be helpful in understanding its mix within the wider sugar business. Thank you. So, Eoin, why don't you do the quantum, do the break? Yeah. Finance income, firstly. Yeah, no new news on finance income, Clive. I mean, we're effectively I mean, I think you can pretty much double the first half, I think, of the year for the full year performance. I'll just double-check that. But on the Vivergo, I mean, I think what we've talked about before is tens of millions of loss. I mean, I think if you go back a year, obviously it was a sort of a perfect storm, really, in terms of Vivergo. All of the inputs were going against us, high raw cost, high energy, low ethanol pricing. So the margins were very, very tough. And then we also had some kind of startup issues as well. So, at the moment, operationally, we're going okay, and the margins have recovered to somewhat approaching more normal levels. So, you know, we're not expecting huge outperformance necessarily, but we're not expecting a repeat of those significant losses. Okay. So several tens of millions GBP swing year-on-year- Yeah. -with the prospect of the remaining profit long ago. Yeah. Can you give a... Another way of asking my first question then, Eoin, sorry. Can you give an indication of non-lease cash balances at the year-end, roughly? Yeah. Well, I mean, we haven't given an update on this, Clive. Sorry, might have given you the right answer to the first question, but 'cause we're still just working through that as we speak. Sure. I'll give a fuller update on that at the year-end. But I mean, I think, you know, in terms of the moving parts- Sure. Obviously, we would have had to step up in CapEx out. Working capital, it's probably a little bit more sluggish than we'd like. I think the trajectory is in the right direction in terms of people reducing stock levels, but I think we'll get more of that benefit into next year than necessarily at the end of the, at the end of this financial year. So we're just working through that. So, you know, I think people have roughly just a little bit north of GBP 1 billion in terms of cash balances. I'd expect maybe a little bit lower than that, tiny bit lower than that. Okay. But for FY 2024, finance income should be a little bit of a tailwind for you? Sorry, sorry. Yes. Yeah, finance income should be a tailwind. Exactly, it should be. Yeah, because obviously we'll have, we'll have cash balances at higher interest rates as well. Perfect. No, that's really very helpful. Thank you, guys. Thank you. Bye, Clive. Thank you. We'll now take your next question. Your next question comes from the line of Gary Martin from Davy. Please go ahead. Morning, all. Just a couple of quick questions from my side. Just firstly, on Primark volume in Q4, I know you said explicitly that you wouldn't forecast into FY 2024, but just on Q4, did you still see a positive overall volume across the Primark estate? I mean, and is that a healthy run rate into FY 2024? That's my first question. And then just secondly, just on the U.S. rollout, obviously, four new stores rolled out during the period, what kind of trends were you seeing just in that market, and what kind of densities were you seeing in those stores? Thanks. ... Yeah, I mean, on the first one, Gary, the I mean, it's all price. Actually, volume's back a little bit, actually, in Q4. I mean, I think the like what we saw actually is that our units for transaction were actually a little bit better than previous quarters, which is a good positive sign. But transaction levels were quite volatile, and that was largely driven by weather. I mean, I know a lot of people kind of it's easy to judge to blame the weather, but the correlation of poor weather in different markets was very evident on the transaction levels. So in some ways, I think it gives us sort of a little bit of confidence in that the units per transaction are sort of holding up. And hopefully that trajectory goes in and the transaction levels normalize a little bit as we go into a kind of, hopefully, a more sort of normalized weather pattern and into autumn, winter. So, we'll see how that goes. Obviously, like, currently, current trading is tricky, right? Particularly in the U.K. You know, because it's far too hot. Last week was not good and it's far too hot. You know, we need to transition because most of the clothes now are heavier weights. So, so that, that's how we're seeing it. But there's nothing I... Like, we feel pretty, you know, we feel in good shape going into next year. And our products we feel are set up well for autumn, winter, and then into spring, summer. And the new stores, it's been one of the sources of real satisfaction this year has been that the sales outperformance compared to the average of the new stores. So like-for-like, sorry, sales densities in the new stores have been nicely ahead of company average. Excellent. Good color. Thanks so much. Thank you. We'll now go to your next question. One moment, please. And your next question comes from the line of Anne Critchlow from Société Générale. Please go ahead. Good morning, everyone. Thanks for taking my questions. I've got two, please. So first of all, in ingredients, I just wondered whether you're seeing entirely structural growth this year, or is there a cyclical element that we need to take into account, perhaps losing some of that recovery next year? And then secondly, on Primark, about the Click & Collect trial, I understand it's just 1,000 lines in womenswear to start with. I wonder if that was just the start because it's a trial, or whether you're going to take a different approach in womenswear compared to childrenswear, where I think you put the entire range online. Thank you. Sorry, just on the Click & Collect kids where we didn't put the entire range online. We put some entirely new products and some which previously were only ranged in the largest stores. So we've never put everything on Click & Collect in kidswear. So in that regard, what we've done in womenswear is very similar, where we don't have clothes ranged in smaller stores. We put them online and... but on top of that, there is also some items which are available only on Click & Collect. Ingredients, we don't think in yeast that it is cyclical. We think that there's been some recovery in low inflationary costs that have gone on for many years. And I think the industry has had the opportunity of recovering years of small rates of inflation. We're not seeing any significant reduction in pricing at this stage. You know, but I could be proven wrong, but I think it's been a structural... Well, it's been a shift in expectation of margin in yeast. Great. Thank you. Thank you. We will now go to the next question. One moment, please. And your next question comes from the line of Richard Chamberlain from RBC. Please go ahead. Thank you. Morning, guys. A couple from me, please. On Primark, I wondered if you could just comment on the net space outlook for next year, and whether you see any more restructuring coming through on that. And then, I guess also on Primark, how are you thinking about sort of operating leverage for next year? Obviously, you indicated a 10% margin target, at least for next year, but how should we think about operating leverage within that? I mean, my sense is that Primark's been running its stores with slightly less staff since the pandemic. Do you see a need to, you know, to have to now sort of return or put more staff costs into stores? Thank you. So the net space outlook, I think next year we'll open about as much new space as we have this year. There will be some continuation, I would expect, of space reduction in Germany, but that is, I remind you, that's within consultation with the works councils. So I'm not gonna forecast or anticipate any of that, but- But the net number should be similar? The net number, as Eoin said, should be similar. Yes. Operating leverage, look, there are a number of places where we see it. There's leveraging through purchasing volumes still. In the States, the increase in store numbers is now feeding through to leverage on the depot cost. And there is some operating leverage elsewhere. There are still some areas where we're investing in central costs, so there's more cost to go into digital and other IT. So I think net-net, not a significant increase in operating leverage- Yeah. next year. Yeah. I mean, yeah, exactly. I think we get the... We continue to get the benefit of the fact that we've got new store, so new space openings. But on the flip side, we've got inflation, and we've also got investment. Yeah. Continued investment. Lower store operating 18. Yeah, so, so lower manning levels in stores is driven really by two things. Firstly, it's the increasing importance of self-checkouts, and secondly, it's sort of in-store operating disciplines improving. Okay, thanks, George. I mean, I guess I was wondering whether- Yeah. The increase in sort of stock loss shrink that you've seen, is that partly related to self-checkout, and you might need more, you know, policing of that going forward? No, it. Look, we have enough self-checkout trials, or examples of self-checkout, to be fairly clear of the consequences of self-checkout on stock loss. It's not what's driving stock loss. Right. I say that with a great deal of certainty. We will be putting more security hours, security people, security hours into the stores where we have a particular issue. We will be investing further in CCTV coverage, remote monitoring as potential for us, and then body cams and such like. So, actually, probably more capital cost to tackle stock loss than operating, but some operating as well. Okay, that's helpful. Thank you. Sure. Thank you. We will now go to your next question. Your next question comes from the line of Simon Irwin from Credit Suisse. Please go ahead. Hi, just a quick one from me on Primark. Given the better performance of the, particularly the like-for-likes over the last couple of years, what do you think's changed? I mean, obviously, you know, you could argue that the positioning, price positioning through an economic downturn might have helped, but do you think that there has been kind of genuine improvement in the offer, giving you increased market share in key markets through, you know, better collections in the performance of the digital? Or, you know, what do you think have been the kind of key elements to the better performance that you've seen? I think probably the biggest one, I say without any kind of huge certainty, has been the website. That has, we're at 1%-2% like-for-like improvement as a consequence of the website, which is now rolled out across all our markets. So that's a big one. Destruction of competition through COVID has helped. I think, in certain categories in particular, we can see what we've picked up from Debenhams. I think the disappearance of Topshop has given us more of an opportunity to get into more expensive, more so higher price point womenswear in The Edit, that that's been performing extremely well, as have the Kem ranges, so higher price point menswear. I think both connected, more to loss of competition than anything else. Supply chain working much better. You know, a year ago, we had problems with stock levels in Spain because the depots weren't working properly, the shipping wasn't working properly, the ports weren't working properly. That's been of benefit. And, I think, sure, pricing. I think people in many of our markets, when they go looking for value, come into our stores, and either for the first time or to buy a bigger proportion of their repertoire with us. But it's not just that. It's not just that. It's a bunch of other things as well, led with. Led, I think, by the digital investments. Great. Thank you very much. Okay. Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone keypad. That is star one and one to ask a question. We will now go to your next question. And your next question comes from the line of Georgina Johanan from JP Morgan. Please go ahead. Thank you. Good morning. I've got two questions, please. The first one, just following on from your previous comments around all the initiatives and external factors that have been supporting recent like-for-like performance. Is this something that you're expecting to actually continue to drive positive performance into full year 2024? Or do you see a lot of those factors, say, the kind of the disruption of competition, for example, now being fully in the base, and perhaps we should have more, you know, more moderate expectations into next year? I'm mindful that, like, ahead of the pandemic, on average, your like-for-like was trending sort of flat to slightly negative. That was my first one, please. My second question was just around the margin outlook for Primark on more of a midterm basis, because I think previously you talked about how it might take, you know, a couple of years to fully recapture and get back to that margin that you were in before. But of course, now, as you said, like, a lot of those input cost pressures have now fully reversed, and whilst there is some wage inflation in the OpEx base, of course, your pricing is higher, and you're not talking to any deflation. So should we be seeing this as now, like, a one-year recovery rather than a multi-year recovery in the Primark margin, please? Thank you. Yeah, okay. Look, so some of the performance improvement this year has been a kind of one-off. Well, sorry, a step up, which we'll maintain, but you won't see a second step. The website has only been across most of our markets in the last few months, so I think there will be benefits from that into next year. I think our successful entry into these new categories, new higher levels of fashionability, and so forth. I think we'll continue to get growth out of them from now. We're now known as somewhere that you can go for higher price point, but still great value, womenswear and kidswear. That's rolling out some of those ranges to more stores. More of those stores, so significant rollout of The Edits through new stores. And we would have high expectations or some expectations that we'll be using Click & Collect for those sorts of products in womenswear into next year's trial. Margin outlook, I think we've recovered to... Well, how do I answer this one? I don't think it's a one-off improvement that'll go away again, because I don't think the competitive dynamics have changed significantly. There hasn't been a shift in supplier power. If anything, the competition has got easier for us. And so to the extent that the kind of strategic realities have reasserted themselves, in a way that resembles pre-pandemic, I think these new improved margins should—we should be capable of maintaining them. Yeah, and indeed, I would say there are still some levers for us to pull. We've still got some efficiencies to go after in supply chain. We've still got operating leverage. You know, we're currently heavily investing at the moment in digital, in a lot of our expansion. So, you know, eventually we will get leverage on that as well. So I think we, you know, we're not going to give a medium-term. Well, we've talked about we want them to be over 10%. We're not giving a medium-term target at the moment, but we feel that the model supports over 10% margin. Obviously, it'll get impacted over time, at times by currency, as currencies move, but it, it... We should be able to maintain it. Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Anubhav Malhotra from Liberum. Please go ahead. Hi, team. Most of my questions have been answered, but I'll still ask on the decision to go into womenswear in Click & Collect, and maybe just explain the reasoning for that. Is it just an experimentation like with kids wear, or are you seeing positive results from kids wear that you think can now apply to womenswear also? Thank you. Okay. I mean, it's our biggest category, so it's one we have to explore with the Click & Collect trial. We used the northwest for our early learnings, and also to iron out any bugs there might have been in the operation of Click & Collect. We've now expanded to London. I think that gives us more data points for analysis of the margin consequences of Click & Collect. We were always gonna try womenswear at some point, and that some point has arrived. We, you know, we have to learn, we have to learn all sorts of things that return rates, cannibalization rates, et cetera, and we need to know them for our biggest category, not just kidswear. It remains a trial, but, you know, it. Put it this way, if kidswear had been a really nasty experience, we wouldn't have expanded to London, and we wouldn't have expanded into womenswear. Thank you. Thank you. We will now go to our next question. One moment, please. We will now take our last question for today from the line of Sreedhar Mahamkali from UBS. Please go ahead. Hi, good morning. Thank you for taking my questions and squeezing me in. Really a couple of quick ones, please. First one, I guess, can you give us a sense of how you're thinking about growth in Primark and perhaps how your, the volume of buys for the year ahead compares to, the year we're just finishing? And second, a bit connected, I guess, is like your view on industry level inventories in the U.K. and Europe, and how you see the promotional to the markdown to the environment over the next year. Those two will be very helpful. Thank you. Okay. So we're expecting to buy more units next year than the year just gone. We'll open another kind of 3% of space, another 1 million sq ft of space, in the next year, and we expect to see some like-for-like growth as well, particularly in some of these new categories. The new ranges, like The Edit, and so forth. Industry-level inventories- Markdowns. Markdowns, really hard to get visibility of it. Yeah. I don't think... There's no indication that the States has got the same level of stock levels that it had a year ago. If it's an indicator, I was in Bangladesh just recently, where suppliers' order books are okay, unlike a year ago, where the Americans in particular had sort of switched off orders. So it feels more normal. Yeah. I think that's right. I think it's more normal, yeah. I mean, certainly, I mean, we're focused on our own kind of our inventory. I think markdown levels are fine, and have been fine this year. Our inventory level is probably a little bit higher. That's more kind of a, we're just carrying a little bit higher inventory than we'd like, but that is coming down, and will hopefully continue to come down into next year. But it's not a markdown risk. It's more of a financing point than anything else. For the really obsessive about this, about amongst us, and that includes me, the speed of the ships has gone to, gone back to normal. Some of the extra stock was being caused by a slowdown in shipping speeds and then an acceleration of shipping speeds. That bump, which fed through inventory, is in the past. Thank you. Thank you. I will now hand the call back for closing remarks. No, thank you for doing that, but I think we're largely done. I don't want to waste your time by repeating what I've already said. So thank you all very much, and see you at the full year. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.