Good day, and thank you for standing by. Welcome to Associated British Foods January trading update conference call. At this time, all participants are in the listen-only mode. After the speaker's brief introduction, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. It is now my pleasure to hand you over to the finance director, Mr. Eoin Tonge. Please go ahead. Thank you, and good morning to everyone. I'll just say a few words, actually, 'cause obviously it's a relatively short trading statement, before we kick into questions. Overall, we're happy with the first 16 weeks for our financial year. In our food businesses in particular, we've been trading well, and a theme really of continuation of good, strong trading performance, particularly in our U.S.-focused brands in grocery and AB Mauri in ingredients. Sugar has had a bit of a mixed performance across its different markets. However, the key point around sugar production in and sugar crop in British Sugar, the indications are positive and strong. And in Primark, we felt trading was very good. We have delivered nearly 8% growth, which obviously is very strong. Like-for-like growth of 2.1%, with it being strong in the UK at 3.8%, a little bit more mixed in Europe at 1.3%. And the US continued to drive very strong growth from store opening. As you'll see, obviously, we give, well, not just a reinforcement, but an upgrade in our expectations around Primark margin, and particularly driven around gross margin. So that's really the overall summary. I mean, obviously, we can kind of capture some of the questions, particularly if there's questions around the Red Sea as well, as we go through the Q&A. So with that, I'll hand you over to the Q&A. Thank you, sir. We will now begin the question and answer session. As a reminder, to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Once again, that's star one one for question. Our first question comes from the line of Warren Ackerman from Barclays. Please go ahead, sir. Yeah, good morning, Eoin. Warren here at Barclays. So, couple from me. That 2.1% like-for-like, could you help us by splitting it between volume and pricing? And maybe talk around some of the moving parts. Looks like Europe's a bit weaker than the UK, but I guess the key thing is around the volume outlook for the second half for Primark. If volumes are down in the first half, why would we be, or why would you be confident? What are the kind of more positive moving parts around volumes for the back half? 'Cause I guess that's gonna be the key delta for where margins exactly land. So if you can give us an idea of what you're budgeting for volumes in the back half, and what would be good and what would be bad, that would help us. And then secondly, obviously, the inevitable question on the Red Sea. I know it's maybe hard to quantify, but can you maybe share with us any color that you do have, and what you might think is a worst case scenario and where we are in terms of kind of sort of inventory coming from the Far East? And you know, have you seen any surcharges yet? I imagine it's only a matter of time. Thanks. Thanks, Warren. Good, too comprehensive, good questions. Right. Why don't I start off with the like-for-like? I think, I mean, what we guided at the back end of last year, that we were targeting modest like-for-like growth, and we've delivered modest like-for-like growth. We also, I mean, what we said was that we expected the first half to be driven more from pricing, and the second half of the year, more from volume. And the comparators will be stronger, tougher in the first half and comparatively weaker, or easier, in the second half. So that's sort of the mix, right? So it's quite an important framework and, just to remind everyone, and I think I don't think I feel any differently in terms of that guidance today than I did in November. In terms of the actual shape in the 16 weeks, it was. We had modest volume decline. All of it came from pricing and a little bit more than more than that. In the UK, I mean, and the pricing impacts across all the countries were similar. So, you know, it's not like there was. I mean, there's a little bit of mix change, a mix change, but I wouldn't. I think it's almost easier as a proxy just to assume that the price impact is similar across different countries. I mean, Europe, I mean, there is an interesting point in Europe in that a couple of our countries get impacted by I mean, the like-for-like measure when you're in significant growth mode gets impacted by new store openings. So that was very much the case, and as kind of new stores come into the like-for-like metric from being non like-for-like, you have a kind of a sort of a natural decline because of the halo effect of the opening. And that happens in two countries, Italy and Poland. And I think, you know, that, that does have a bit of a, a bit of an impact. If I kind of go through the, sort of the major countries, I think Spain, you know, had a good performance. And, you know, although it was probably most impacted by weather, all the way through the period of time, and it sort of ended strong, it ended stronger. But I mean, you know, it ended stronger. France actually had a pretty consistently strong performance through the period of time. Italy, as I say, was impacted by that halo effect in particular. And Ireland's probably soft, I would say. I mean, the two countries that we would probably pick out as softish, with more to do with comparatives, and economic conditions would be Ireland and Portugal. And so. But overall, you know, we do pretty good with it. So for the second half of the year, you know, we've obviously budgeted for volume increase on a like-for-like basis. As I say, you know, we have slightly easier comparators, but we've also, you know, we also feel we're in pretty good shape from a product perspective. And indeed, you know, what we would get, there's quite a bit of excitement in that regard coming, as you normally would expect it to be, into the second half of the year. And so that's where we are. And so nothing's really changed in our outlook, you know, in that regard. I'm sure there's more questions than that, but I tried my best to cover all your bases there, Warren. On the Red Sea, you know, look, I mean, somebody asked me earlier, "You seem, you guys seem quite relaxed about this." Like, I don't think we're relaxed about it. I think we've worked hard with, you know, our supplier, or, you know, our shipper and so on, to adjust the supply routes. And I think in some ways, you know, we all have a bit more of a muscle in this regard because of more recent disruptions to supply chain. So, you know, we are going around the Cape of Good Hope. It's adding two weeks to the timings of supply of stock. We're not particularly anxious about, I mean, we're anxious, but I don't think we're o n a gross basis, we're anxious, but on a net basis, we're not anxious about stock availability, in that we will just adjust our timings. It probably will depend. I mean, this all depends on how long it goes on for as well, so we have to just remind ourselves about that. But if it goes on for longer, it'll add to our stock levels. We will obviously have to have more stock on the water, and so, it will keep stock levels a bit higher. But I think it's all manageable. From a cost perspective, I would expect some surcharges. You know, we're covered and, you know, in some parts, obviously in large part. But I think for the remainder of the financial year, there is an exposure in relation to some surcharges, but I don't think it's material. You know, I think a worst case, it's type of scenario is probably circa GBP 20 million or something like that, of additional cost. But, you know, we'll work through it. So that's kind of. You know, I don't think we're relaxed, but I think we are net relaxed, net relaxed, if you know what I mean. Like, but we have to work to get there. Thanks, Warren. Thanks, Warren. Thank you, Warren. Our next question comes from the line of Sridhar Mahamkali from UBS. Please ask your question, Sriram. Morning, Sriram. Hello. Morning, Warren. Maybe just to actually build on that question, and then another one on current trading. So just to build on where Warren was going with it, I guess in that scenario, is it, I know it's probably too early, but on the freight, could this be much more of a challenge for margins next year? I think, you know, you sort of talked about a midterm margin trajectory at Primark at the full year results in November. Does this put that in a bit of a jeopardy as in next year's margins? Any very early thoughts, I know it's super early, and that'll be helpful if there are but insights we should be thinking about for 2025, 2025 margins. Secondly, I think in the statement, you talked about much improved recent trading with cold weather. I think in your answer to an earlier question, you also talked about Spain ending stronger. So at the overall European level, is the exit rate much more in line or even better than group like-for-like that you reported for 16 weeks? Any color you can give on that, that'll be super helpful. Thank you. Yeah, sure, Sriram. Look, I mean, I guess personally, I would be, I'd be, I think, I think it's more worrying if this, if the, if this situation was going into next year, but that's more a personal point than a Primark point, right? So we don't know. There's a lot of, obviously, unknowns in that regard. I mean, yeah, it would create negative pressure if it translated into next year. You know, I mean, it is a different stress scenario than COVID, right? I think, you know, in some ways it's a lot easier to adjust from the going to the Red Sea versus going around the Cape of Good Hope than, you know, the chaos where everything was getting stopped in different places at different times, and so on, and creating all the logjams, which were much more harder to manage. So in some ways, it's a bit of an easier adjustment. However, I would expect there to be upward pressure on margins. I don't think, you know, like, I mean, you know, freight is sort of in and around, you know, a couple of percentage of sales, you know? It's not, it's not—I don't, I think it's, you know, it will, it will definitely be. It would definitely impact next year if it kept on going. But I think, you know, the direction of travel on overall, on kind of margins is good. You know, we've had a bit more normalization of cost of goods. I mean, FX, I'm not gonna be one to call FX, but at the moment it's been trending in the right way. God knows what an election's going to do to that. But anyway, but I think in general, we're trending in the right direction from a margin perspective. So in puts and takes, even with that risk of freight, I suspect it's a positive trajectory rather than a negative trajectory. Sorry. That was my first On current trade. That was your first question. Yeah. Second question, sorry. I got lost in the Red Sea there. Yeah, I think, yeah, I mean, it's almost you need to do a little bit by country, but the exit rates are always kind of a little bit sort of, I'm not quite sure they're that meaningful because, you know, the conditions for cold weather clothing hasn't been great. You know, it's been good in terms of clearing that cold weather stock. So, it has been good. But I would say, you know, in general, I think most of the markets have kind of ended up stronger than. Well, I mean, certainly, the first period was a washout, I think it's probably fair to say. I mean, or whatever the opposite of a washout, when the weather is good. Mm-hmm. You know, because everyone and obviously the market experienced that. So that, there's nothing kind of unusual. And particularly in Europe, where it was really hot, you know? It wasn't that it was warm, it was hot. So I think, you know, we've got. Yeah, it's been a bit stronger towards the end of the period and into January. The one sort of, you know, caution on it is, I mean, you know, the consumer is still. We think is still fragile enough, you know, consumer sentiments are still fragile enough. We see that in terms of our units per transaction, which, well, I mean, we budgeted for negative units per transaction, so it wasn't like we weren't expecting it, and it came through that way. So, we shouldn't underestimate that there's still some softness in the consumer, and that's carried through the whole period. Thank you very much. Thank you, Sridhar. Our next question comes from the line of Warwick Okines from BNP Paribas Exane. Couple questions Please go ahead, Warwick. Thanks. Morning, everyone. A couple of questions from me, please. The first is that, in your opening remarks, you described the statement as a Primark margin upgrade, and you've talked about some of the, well, the direction of travel being good on margins, but could you just give us a bit more detail in terms of what's changed from your original assessment in November? And I know that you just flagged sort of potentially 20 basis points of pressure from surcharges, GBP 20 million. And then the second question is just whether you could give us a bit more detail on the mixed trading performance in Illovo, what exactly has been happening there? Thank you. Sure. Yeah, no, no worries. And congrats for being the person that asked the first question on non-Primark. Sorry, I'm joking. Okay, so margin upgrade. I mean, look, we I think we've been sort of, you know, naturally progressively positive on Primark margin, predominantly to do with gross margins. I mean, all of my sort of, kind of upgrading has come from gross margin, right? And, and that's been, you know. That's always true, the kind of passage of time as you, particularly when you get your first quarter under the belt, but also as you lock in more and more, you're buying for the remainder of the year, at certain pricing, you get more and more confident of your gross margin delivery. So I think we're. You know, that's really what's driving it. The shape of margin delivery hasn't changed, in the sense that the first half is driven a little bit more by pricing and some cost of goods reductions, but albeit impacted negatively by FX and OpEx inflation. Whereas the second half of the year is there's no pricing, and there's more accentuated cost of goods deflation. You've got OpEx inflation offsetting that. So that's the shape hasn't changed, just the magnitude of the cost of goods deflation has been higher as you've gone through the year. FX has got slightly better into the second half of the year, but I wouldn't say that's been a big driver of that. So that is the shape. So, you know, we, the other sort of moving parts, stock loss, I mean, I think, I mean, I've said at the end of last year, I'm not expecting much improvement in stock loss. I'm not kind of seeing we're not seeing that yet. Although we're trying our best, it seems to be a tough, still a tough problem for society. So, they are the moving parts, and as I say, we've just got more comfortable with product margins as we've gone through the year. So then if I flip, if I switch next to Illovo, well, maybe I'll talk sugar in totality. I mean, obviously the two big moving parts in sugar, in the sugar division were British Sugar getting back to a more normal level of production, and Vivergo not having the losses of last year, particularly in the first half of the year. And then on both of those things, maybe slightly to a lesser extent, but still positive, we're pretty, we're pretty happy about. So, we're happy with the trajectory where we are in terms of the crop on British Sugar, and Vivergo has had losses in that first 16 weeks, but nowhere near the losses that it experienced in the same period last year. Illovo has been, you know, the demand and the commercial side of things has been very, very good. All the markets are trading very well. It's been all to do with production and predominantly to do with well, and currency. Let me come back to currency a second, and predominantly production, weather-related production. If I take Malawi as an example, it's had two years of cyclones that have impacted the crop, and in the end, worse than we had hoped for, and that has impacted production. That should come back, you know, that should come back, but it's not gonna come back this year. And that's probably one of the biggest, that's probably the most dominating impact. Currencies have been a little bit challenging because there have been devaluations in both Malawi and Zambia, but we've recovered them through pricing. So it's been tricky, but we've been able to cover those through pricing. So that's what's happening in Illovo, and that's what's happening in sugar in total - in totality. That's great. Thanks, Eoin. Bye, bye. Thank you, Warwick. Our next question comes from the line of Clive Black from Shore Capital. Please ask your question, Clive. Thank you, thank you, Eoin. Can I ask about grocery, please? You talk about some challenges in Asia with Ovaltine, but perhaps just more broadly, give us a feel, excluding, you know, U.S. Ovaltine and Twinings, how you see grocery, particularly post inflation cost recovery and maybe more normalized trading conditions. Thank you. Yeah, I mean, it's been pretty good, I would say. I mean, obviously, our grocery business is quite, they've got kind of a lot of different characteristics across the globe. I mean, if I start with international brands, I mean, we've sort of called them out in the statement. But Twinings is trading well, obviously it's investing quite a bit, and it's in the brand, but that investment in general is going well. We think, you know, particularly in the US, also in the UK, the Ovaltine, as we called out, I mean, China is a bit of a challenge for us, which is impacting the overall numbers. It's not gonna have a massive impact on profits, but it is impacting the overall numbers. We're looking at, we've got to just rethink our kind of go-to market strategy in China post-COVID. And Thailand's been a bit more of a continuation of the kind of shift between powder and ready to drink. But, you know, our brand is so strong there, I think, you know, it's gonna, it might take a little bit more time to readjust, but I think we're in good shape there. We've just got to readjust to a little bit of that mix shift in the marketplace. The rest of our global brands have traded pretty well. I would say our international brands have traded pretty well. Jordans, Mazzetti, Patak's, Blue Dragon. And then in the U.K., actually, it's been, you know, I mean, look, Bakery continues the sort of the improvement that we saw in the second half of last year. And we've had, you know, I think good commercial performances across the space in the U.K.-focused brands. The U.S. has been a standout. Mazola, that our brand positioning, actually, in the U.S. is very strong. Mazola, Fleischmann's, and that is, and we're benefiting from that brand positioning being very strong. Australia is, they've been a bit more of a mixed bag, I think it's fair to say. Been a little bit tougher, a bit more of a tougher marketplace. But all in all, I mean, you know, it's trading better than we would've hoped for, which is great. You are expecting, well, you are experiencing more normalized conditions, though, post the inflationary spike. Is that a fair assertion? Yeah. I mean, it is a fair assertion. Yeah, it is. I mean, I think it's probably fair to say people are getting back to focusing on growth rather than on just on price and margin recovery and all that sort of thing. So I think it's, it feels a bit more normalized. It's not – I wouldn't, I won't pretend that it's everywhere, but in most places it feels a bit more normal. Okay. No, thanks. Thanks very much, Eoin. Thank you. No worries. Bye bye. Thank you, Clive. Our next question comes from the line of Adam Cochrane from Deutsche Bank. Please ask your question, Adam. Hi, Eoin. A couple of questions, please. In terms of talking about the Red Sea quickly, the freight agreements that you have, can you just run through what the mechanical impact is in terms of if current freight rates are up 100% or so, when that might have an impact in terms of timing? And then secondly, on your commentary about confidence over Primark margin, can you elaborate a little bit on what exactly you mean by this? So we went from towards 10%, to comfortably above 10%, to now confident of being even more comfortably above 10%. Just a bit of a chat on what you're talking about with regard to that margin number, 'cause it feels a little bit opaque right now. The third point is, in terms of looking at your increases in gross margin and maybe the volume weakness in the market, how much, with some of these benefits coming through, have you thought about trying to trade some gross margin for volume across the business? Thanks. Yeah, yeah, let's, let's, yeah, I can take all those. I mean, look, it's not commercially savvy for me to talk through the ins and outs exactly of our contracts, and our contracts with, with, particularly when we're having discussions about them. But we're in. We have got covered in relation to our freight, and that extends through a good part of this year. I think, you know, there is a difference between the spot rate and the contracted rate, as you know. And the contracted rate, you know, as I say, I'm expecting some surcharge on the contracted rate, 'cause I think, you know, you wouldn't. And I think it doesn't, sometimes it doesn't matter what your contract is, but I think in some ways you're in a sort of, we're in a slightly different world here, so you kind of expect some surcharges almost regardless, regardless of how you're contracted. So I think, you know, as I say, we'd expect some, we expect some upward pressure on it this year. You know, 20 basis points, as Warwick said, is probably as good an indication as ever, as I have. I don't think it'll be that much, but that's probably the exposure. So that's where we are. You know, it just keeps on going for longer, will there be a structural shift in contracted rates for freight? Yeah, I think there probably will be. But I mean, but there's lots of ifs and buts there, right? You know, so it's hard to know if this will be structural, really. It's hard to know. And genuinely, if anyone on this call knows if it's gonna be structural, I'm all ears. So that's what I'd say on Red Sea. I mean, on the margin percentage, yeah, look, I think it's progression of time. I think we've always been sort of, as I say, positively, you know, we've been always positive to the upside, but cautious, you know, as time has gone by. You know, when George grabbed the mic in the September call, and he talked about would we be comfortable above 10%, certainly what he was saying was, we hope to be more than 10%, but we didn't know, and now we do know. So that's really what it is, Adam, you know? We've always been confident or comfortable that the business, you know, is gonna bounce back to sort of, you know, pre-COVID type percentage margins. We've always been confident, and we've stayed with that from, well, as long as I've been here, we've stayed with that. The pace of getting there is faster, which is good. So, I think that's, I'm trying my best not to be opaque, but I think that's the best, I think the best way I'd describe it. And as I say, I think the trajectory is positive. You know, like, you know, obviously the second half of the year, we're getting more benefit on product, COGS. So, I think it's positive and reinforcing that we should be able to get to those types of pre-COVID levels and maintain. The gross, yeah, I mean, that's, look, you know, we probably spend every day of our lives in Primark worrying about whether we've got the right price points. You know, we think we'd have, we look at it, as I say, we look at it on a daily basis, not just on a monthly basis. But I think we, you know, we feel we've got the right price points, and, you know, the balance is okay, I would say, in terms of, you know, price versus volume. You know, yeah, it's a fragile consumer. Maybe there's an argument to say that the consumer is gonna get stronger as the year goes on, as kind of wage, real wage inflation kicks in. So we'll have to see how that goes, and that'll feature into everyone's decision on pricing. But I suspect pricing will probably be as I've said before, and I'd still, I still maintain, I think pricing will be benign for a little bit longer, yeah, a little longer still. That's great. Thanks. Thank you, Adam. Our next question comes from the line, Gary Martin from Davy. Please ask your question, Gary. Morning, Gary. Hi, how's it going? Just a couple of quick ones from me. I think a lot of it's been clarified already, but just maybe just to dial into US growth on Primark, up 45%. Obviously, the majority of that would be new store rollout. Would it just be interesting just to get a bit of color on what you're seeing on the ground out there in terms of store densities and just general sales, particularly just in any of the newly established stores. It'd just be quite interesting just to get a bit of color there. And then just second, just on ingredient. It sounds like you're a bit more constructive on AB Mauri. It seems to have persisted a little longer than expected in terms of positive performance. I suppose if you see a bit of a contraction in destocking, I think the current forecast is for modest decline in profitability and ingredients this year. But I suppose, are you in a better position now to maybe say that could be closer to plus? What's, what's, what's your, what's your thoughts on that? Yeah, sure, Gary. Okay, well, look, yeah, look, I think the US, I mean, look, you take a step back, and you kind of go, okay, you're growing at 45%. That's the, that's the-- and that's the mode, you know, we're in as a business at the moment. It is a, it is an expansionary mode, and that's good. In general, I would say new stores are working well, and the densities are good. Not completely uniformly, so we've got some stores that aren't trading as well as we would have liked, and there's all reasons for that, but, you know, in general, the new stores and new store densities are good. There's a little bit of cannibalization in the Northeast that is kind of rolling through, but kind of coming to an end. I like, I think the market backdrop, I mean, it is hard to call the market backdrop, and in some ways, our numbers aren't very indicative of the market backdrop because we've got such new store openings, so some big new store openings, that our like-for-like measure is a bit of a sort of a nonsense. So it's a hard one for us to really. Our numbers don't really tell the story of the market backdrop, so it's more anecdotal, we guess, in terms of market backdrop than anything else. It just feels a bit mixed, actually, in truth. You know, certainly not positive. I would. You know, it feels relatively subdued, the apparel market in the U.S. So yeah, look, I mean, things are going all in the right direction. I think we do have a bit of a momentum on our store-opening format at the moment, you know, in terms of slightly smaller stores and kind of more mall-type locations. I think we've got a model that's working, which is good. So, I think they're the key themes at the moment, and, you know, we've still got work to do in terms of brand awareness, et cetera, and so forth. I mean, that'll be a multi-year project, but, you know, I think we've still got work to do in that regard. On ingredients, yeah, look, Mauri, I mean, the story of last year was very much Mauri just continuing to beat our forecasts, and, it's keeping on doing that. We're, and, in some, in some. I think we're believing now that there's a bit more of a structural change that has happened in both yeast and bakery ingredients, which means the margins and should be better for longer. So I think that's, you know, I think some of that performance that we're gonna see this year should go into next year as well. The destocking we're seeing is more on the specialty ingredients side of things. This is a theme we saw all the way through the last six months of last year, first in enzymes, more recently in the pharmaceutical part of our specialty ingredients businesses. It's not gonna have a massive impact on profitability for our overall ingredients division. So that would be more dominated by AB Mauri. So although we were expecting there, well, we thought there might be a pullback in the Mauri performance. Because that's not happening, we're not expecting a pullback in ingredients performance in totality. Excellent. That's really, really helpful. Thanks a lot. Cheers. Bye, Gary. Thank you, Gary. Our next question comes from the line of Grace Smalley from Morgan Stanley. Please ask your question, Grace. Hi, thank you. Just coming back to the Primark margin upgrade, should we expect Primark margins to be closer to 11% this year? And if so, what level of like-for-like for the year would you need to reach 11% Primark EBITDA margins this year? And then, appreciate the comments on the different drivers in the first half versus the second half. Taking it all together, is it fair to think, therefore, that margins should actually be a similar level in both the first half and second half? Thank you. Yeah. Yeah, I think, I mean, there is, it is definitely possible for margins to get to, get to 11%, probably a little bit more than, you know, you kind of more the, the sort of the, the higher end of modest like-for-like to get to there, and very limited impact from Red Sea. So it is definitely possible to do that. I think, you know, but I mean, look, you know, it's, I mean, I'm naturally cautious, so I'm probably a little bit not wanting everyone to go there yet, if you know what I mean. But it is definitely possible. Actually, the first half is probably gonna be a little bit stronger than second half in terms of margin, but only marginally. So, you know, we have, obviously have the pricing benefit. So, you know, you're, you're, we're, we're, we, we know where we are today on, on, on, on most of the first half margins. So, so it, it, it's, it's probably a little bit stronger in the first half than the second half as we, as we, as we stand today, but, but it's, but it's not like it's not massive swings between the two, although albeit the route to get there is, is quite different. Got it. Very helpful. Thank you. No worries. Thank you, Grace. Our next question comes from the line of Anne Critchlow from Société Générale. Please ask your question, Anne. Thank you. Good morning. I've got two questions, please. First on British Sugar. So just, wondering how the sugar beet harvest managed to avoid all the flood damage in the east of England, whether that was, you know, down, down to timing of harvest, or, or perhaps is beet just a more resilient crop than we thought it was? And then secondly, on, Primark, Germany. I mean, the market does seem to be quite weak there and possibly weakening. Just wondering if that's putting back your hopes, you know, on profitability this year in Germany. Yeah. Yeah, I mean, beet, I guess, is a bit more resilient. I'm not, wouldn't say I'm an expert in it. It is definitely gonna cost us a little bit more to harvest the beet. It's not material in the grand scheme of things, but it is costing us a bit more. The beet that's coming out of the ground is bigger. The sugar content isn't as strong as we would like, but it's bigger, so it's gonna cost a little bit more to process. But again, it's not material in the grand scheme of things. So, yeah, it has been hard work, heavy work to get beet out of the ground in large parts of the country because of the wet weather. But we've been able to do it. So it's, you know, it has been a worry for us, but you know, the indications. Most of it's out of the ground now. But the indications are very good. So that's that. Germany, actually, let me. Look, Germany has been tough, from a, as I say, market backdrop perspective. But we've sort of traded quite well. In the grand scheme of things, we've traded quite well. You know, Germany will turn an okay profit this year. We're not. I don't think it's pushing us back too much, really. I mean, the work we have to do in Germany is pretty clear to us. I don't think the market backdrop changes our approach that much. As I said at the back end November, all the physical work we've largely done in terms of, you know, closing stores or rightsizing stores. You know, and we're kind of sort of, I don't know, kind of almost kind of getting back to normal, in a kind of way, in one ways. But we've also recognize we've got some brand work to do, and we'll be doing some of that this year. So, I don't think it's really the market backdrop's not. It's a little bit like the US. The market backdrop being a little bit negative doesn't really alter and change our plans. You know, we're here for the long run. Great. Thank you. Very helpful. No worries. Thank you, Anne. Our next question comes from the line of Georgina Johanan from J.P. Morgan. Please ask your question, Georgina. Hi, thank you. 2 from me, please. Just the first one, in terms of the Primark margin longer term, and I think you said that the pace of getting back to that as well has quite clearly accelerated. But when we think about that longer term margin, I mean, just to sort of clarify, assuming you're referencing in excess of 12%. And I guess from here, what are the drivers that take you there? Is it purely leverage, and is that leverage from a like-for-like perspective, or actually is it adding space and just leveraging that fixed cost base in the business? That's my first one, please. Then my second one is, could we just get an update on the Click-and-collect trial and how that's going from a sort of cannibalization perspective or, or not, as the case may be, and, and any profitability metrics that you could, could share, please? Thanks so much. Yeah, no, absolutely, Georgina. So I mean. Well, I don't know where you got 12%. I don't, I didn't say it. Look, what I said is kind of getting back to sort of pre-COVID margins, and there's no, there's no reason to believe we couldn't get into that. And I think 11.5% was sort of the actual pre-COVID margin. But, I mean, we aren't, I mean, I mean, Adam is right, we are a little bit opaque on product margin, and maybe that's something we need to think about as to whether we give more of a kind of a target. And but, but, the, I, I'll say what we've said a good few times before. I mean, this is a double-digit margin business, and there's plenty of levers to get comfortable on that. I mean, obviously, gross margins have been all over the place in the last five years. FX being one kind of, sort of, big component, actually, particularly if you look back on the pre-COVID to today, in terms of dollar strengthening versus where it used to be. But, a nd then obviously we have now price in the system, which we didn't have pre-COVID, which is very, very helpful, and fabric is gonna come back to somewhat pre-COVID levels. So, like, you know, that's a sort of a net, a net kind of win on gross margins, in terms of where we are. We obviously had quite. Stock loss is higher period to period. Hard to know if that's structural for the remainder of time. It's highly unlikely it's structural for the remainder of time. And then obviously we have quite a bit of OpEx inflation that we either try and offset through cost efficiency or through leverage, as you rightly say. And it's both like-for-like and non-like-for-like. Non-like-for-like, I mean, the most kind of, you know, stunning example of that is the U.S., we carry quite a lot of fixed costs there. As we grow that marketplace, and the more stores we have, the more we leverage those, that overhead. But it's also, you know, you also have to maintain your store densities on a like-for-like basis to keep your margin healthy. So, I don't think, like, our position on product margin hasn't changed. You know, like, we're still confident that the trajectory of getting back to those types of margins is good, and the levers to keep it there, sustain it, and continue to invest in price are there. But I'm not giving a target, and I haven't given a target, so just so we're clear. The click-and-collect. Yeah, look, I mean, I don't know if I've got much news on click-and-collect. I mean, it's too small to kind of say there's cannibalization. I mean, if there's cannibalization, that's a bit of a problem, 'cause the whole point we're trying to demonstrate is incrementality, actually. And it's incrementality which will help us make our decision around whether we roll this out more broadly and how we roll it out more broadly. So I think it's going well. It's still going fine. The metrics are still pretty good, the expansion of the categories and the expansion of the stores has given us the data now that is allowing us to kind of think about where we go next, which we will be kind of thinking about over the coming months. It's just not a big impact on overall sales at the moment because it's still a trial. Great. Thank you so much. No worries, Georgina. Thank you, Georgina. Our next question comes from the line of Richard Chamberlain from RBC. Please ask your question, Richard. Yeah, thanks. Morning, Eoin. Hey, Richard. Heyya. Just a couple of follow-ups, please, on Primark. I think in your sort of opening remarks, you referred to this sort of halo effect in markets like Italy and Poland. Is that a sort of new development you're seeing in those markets? And are sort of sales of existing stores being impacted by new openings there? And then also, I wondered if you're still seeing a sort of digital boost across the board for Primark due to a, you know, broader range online, access to the stock checker, and so on, and what you're seeing in terms of that impact? Thanks. Yeah. Yeah, no. Hey, look, I don't think it's a new feature. I think that what's happening here, of course, is that the rate of pace at which we're opening stores has increased again, right? So it's a feature that used to exist that's come back to us. There's two effects that happen, actually. One is you have a halo effect when the stores open, 'cause there's an excitement feature, et cetera, and so forth. When they kind of go into like for like, the initial comparison isn't as, you know. It's hard to kind of have like for like growth on that halo effect. That's one thing. The second one is cannibalization, where you when you open a new store, and if it is in the same region or city, it will have an impact on like-for-like, because it impacts the other stores. Again, that's. There's nothing new there. And in fact, actually, every store we open, we project the level of cannibalization. We tend to get that pretty right, pretty right. It's not quite a data-driven kind of exercise. So, there's always to a certain extent, those effects that you have to kind of, you just have to put a bit of cautionary around like-for-like, as a measure, when you're in a growth mode. So just so you know. So, but in the case of Italy and Poland, what we really are talking about there is the halo effect, rather than the cannibalization. On digital, I mean, sorry, like, you know, Italy in the period just gone had particularly strong non-like-for-like growth, as did Poland and as did the U.S., right? So. On digital, yeah, look, we're very. I'm very positive on, I think the impact digital is having on the overall customer engagement. You know, like, I mean, I know I've said this before, but I mean, I know we're kind of playing a little bit of catch-up here, but it has caught on very strongly. We get, you know, in terms of kind of, in terms of the hit rate to our, to the site, and then in terms of use of the stock checker, which is always a good indicator of conversion, it's been very strong. You know, the international sites have caught up with the UK. You know, we did have record user levels over Christmas, which demonstrates that, you know, it is a, you know, research online, buy in stores is, you know, as a model, is working. So, I think we're very positive. There's a lot more we can still do in terms of harnessing our digital footprint, particularly with social media. But at the moment, it's in a good trajectory. Great. Thanks. Thank you, Richard. Our next question comes from the line of James Grzinic from Jefferies. Please ask your question, James. Thank you. Yes, good morning, all. I presume I can still say Happy New Year. I just had two or three follow-ups. The first one is just to clarify: So you're saying 11% operating margin at Primark is doable this year, and it should be more front-end loaded to the semesters, and thereafter, we can get to 11.5%? So my first question was just to clarify that. I did say all that. Yes. Okay. I did say all that. I mean, but I don't wanna kind of remind all the kind of caveats and all that sort of thing that we have to have here. You know, we've you know, we've still gotta deliver volume growth into the second half of the year, you know, but the trajectory is good. The trajectory is good. Okay. And when I think about the moving parts, how important is the mix of product to gross margin? How, 'Cause quite clearly, if I think back, that there's a lot more linen this past summer that I've been used to see in a Primark store. I'm just wondering how much that mix development has been important. And secondly, can you help me understand the mix of markets? 'Cause you are going to a much more of a leased model by definition, there's less and less of the spaces in Ireland, and the U.K. So I'm trying to understand how comparable the 11.5 is relative to history, given that a lot of the space that you're opening is leased space. I guess the last question, I guess over the past two or three years, you had a very helpful dynamic in terms of efficiencies from the new system rollout. I think probably very important in terms of really sharpening labor scheduling. Has that how much more is there to go in terms of that tailwind, please? Sorry, on the last one, what was the, s orry, just make sure I got the first part of it. Yeah, yeah. In terms of systems, I think it was rolled out Oh, systems. three years ago, and I think one of the historic areas of potential in the business had been labor scheduling and the ability to do that much more effectively, and that the systems were gonna help you do that. I presume that's been a meaningful drive over the past couple of years, and I wonder Okay. How much is there to go from that? Yeah. Okay. I mean, mix. Yeah, so mix. Well, I mean, I think it is helpful, but look, I think, you know, I think it's helpful. I think it's, it'll be helpful on like to like as well. I think expanding out the edit, collaborations and licensing in general is positive to mix. And, you know, I think we're thinking a bit more around sort of like, I mean, a bit more classic, what I'm gonna call price architecture. Albeit, you know, we're still gonna be the lowest cost, right? Like, the lowest price. You know, that's still our kind of, t hat's still our mantra. So I think, I do think their mix is, it's a good question, and I think it is a theme of how we, you know, how we think about our margins. It's definitely moderately helpful. I think it's moderately helpful, then massively helpful, James, right? Like, do you know what I mean? So I think that's the way I would think of it. I mean, the lease question. I mean, I'm not sure our lease position has changed that much. I'm just trying to. Yeah, like we've always been leasing, so I'm not quite, I'm looking around. I mean, we've got maybe a little bit more shorter leases. So that's probably one theme. So arguably that means, you know, that the lease costs on an absolute basis should be higher, but also the market generally, the markets have come back a bit. I'm not sure it's massive impact on the overall percentage margin. I'm looking around the room, but I don't think it's the predominant number. Well, just to clarify, I mean, 'cause historically, I mean, the Irish and UK businesses are 60%-70% freehold structures compared to 10%-20%, I think, internationally. Just simply the mathematics of the mix of openings being virtually all internationally, that's what I meant. Yeah. But I think that shift—I mean, when we say historically, I mean, I think that shift's been happening for quite a long time now. So I think it. There is a shift, you're right, that has impacted percentage margin. I might have to come back to you as to whether it is a mathematical set, what that is mathematically in terms of impacts, but it's not something that's sort of like a, it's that I'm spending a lot of time in analyzing on. So as a result, I'm probably being weak on the answer. Systems. Yeah, look, systems is a big part of the Primark growth plan. We have done quite a lot of work in systems over the last five years or so, but we've still got a lot more to do. So we've got the like the, So I mean, basic infrastructure is pretty good, but as you continue to grow and you grow into new markets, the demands on your systems infrastructure become greater and greater. So it's, for example, it's an area that I spend a lot of time on with the Primark gang. And we have quite a step-up of investments actually in systems in this financial year, embedded in that margin narrative that we spoke about before. So I think, you know, it's still quite a bit of work to do there. I think there's still quite a lot of opportunity in terms of P&L around stock flow management. You know, we don't have a lot of sophistication in terms of products optimization by country, by store, et cetera, and so on. So I think there's over the next 10 years, I think there's still opportunities in relation to improvements that can come from systems. Great. Thank you. No worries. Thank you, James. Our next question comes from the line of Anubhav Malhotra from Liberum. Please ask your question, Anubhav. Yeah. Hi, Eoin. My question is around the National Living Wage increases. Since you last reported, the government has announced, UK government has announced around 10% increase. If you could just tell us, was it above what you had budgeted in your numbers? And if you could in some way quantify what sort of an impact it had on your margin expectations for this year. And my second question is around the sugar business. Where are you with contracting on the sugar business, and what sort of prices are you expecting, especially given the recent decline in the spot market prices for sugar? Thank you. Sure. Yeah, sure. I mean, it was a little bit above what we were budgeting for. But the net impact's not that material. In that, I mean, obviously there's a huge amount of labor inflation already in the system. We had already sort of we were projecting quite a lot of labor, so a lot of inflation on rate. Obviously with the impact of the National Living Wage, you have to look at your differentials a bit more, and that does put a bit more pressure on the overall labor bill and the labor OpEx inflation. But it's not gonna have a big impact on. I mean, we will on guidance, if we thought it was a big impact on guidance, i.e., what we budgeted for, it's not, it's not, it's not a material, it's not a material impact. Well, I mean, there's a couple of things to say on sugar. I mean, firstly, the world price is one indicator, but it's only an indicator. The world, the European price is more interesting to British Sugar, and even then, it's got its own dynamics because we're somewhat isolated, more isolated in the island of Great Britain, in over recent years. So it doesn't, It's an indicator, but it's only an indicator. In terms of contracting, et cetera, and so forth, we're pretty well contracted, so it's even if it did have an impact, it wouldn't have an impact, certainly not for this financial year. And even the dip that's happened in world prices, most people's read about it is that it's quite technical. i.e., it's temporary. It's gonna come back again. So not particularly anxious about pricing at the moment. Thank you. Thank you, Anubhav. Our next question comes from the line of William Woods from Bernstein. Please ask your question, William. Hi, and thanks for taking the question. Just quick one on, Primark. Are you, what are you seeing in terms of the situation in Bangladesh at the moment? And then the second one is, you seem much more positive on the gross margin. Are you able to give me what is moving within gross margin that has made you more confident? Is it cost, is it production? Are you value engineering the products more? What exactly is driving that gross margin increase? Thanks. Yeah, sure. Yeah, I mean, it appears things have settled down in Bangladesh. You know, there is an election this year, which means that there might be some disruption in and around that, but it appears it has settled down. Obviously, we've a lot of people on the ground and a lot of people worrying about all of our countries on a regular basis. So it's something we keep an eye on closely, but it would appear things have settled down at the moment. Gross margin, yeah. I mean, it's a bit, it's a little bit of everything, actually, William. It's not value engineering. Sorry, so when I say it's a bit of everything, it's not, it's not value engineering, or at least not that I'm aware of. It's not, 'cause there's nothing, there's no, we've got no particular new sort of fandangled thing that we're doing in terms of product. Or, it's a combination of cost reduction and fabric costs itself. So it's really those two things that are driving both the reduction. Thank you. Thank you. No worries. Thank you, William. Our next question comes from the line of Nick Coulter from Citi. Please ask your question, Nick. Hi, good morning. Thank you. Two quick ones, please. Firstly, could you comment on the price volume mix you're seeing in grocery, particularly in the U.S., and if promotions are coming into play? And then secondly, I know it's a trading statement, but with regard to consensus EBIT, where do you see that presently? And if you could talk to the considerations or puts and takes from this morning's update, particularly in the food businesses or non-Primark, as you call them. Thank you. Sure. Yeah, sure. The price volume. Yeah, I mean, it's been pretty, I think, actually pretty equal actually, price volume impacts actually across our grocery business. Which is, you know, which is very good. So, you know, we've seen a little bit more promotional activity, yeah, actually pretty much across all the markets, including the US, but- Are you volume positive in grocery? Sorry, Eoin. We're volume positive in grocery, yeah. Okay. The only sort of, I would say, one where we're not is own brand, which is what we call Life. Yeah. So yeah, it's a pretty healthy picture in terms of volumes. I mean, obviously the US is, in particular, as it has been, good. I mean, we called it out, so it's been good, actually, and it hasn't just been good in the US ABF brands, it's been very good in Twinings as well. So you know, which is, it's not a, it's our international brand, so it's. So yes, the US has been good. There, so, you know, we, you know, that's been more about gaining market share, it is, than category volume growth, which is good. So yeah, we're, t he volume contribution has been very pleasing in grocery. Right. and I would say particularly probably in the U.S. Your next question on EBIT consensus. Yeah, as you say, it's a trading update, but I will factually tell you that the EBIT was for group was GBP 1,840. Look, you know, we've. I'll just go back to what we've called out. We think the Ingredients, Grocery and Primark will be a bit better for the reasons that we said before. So but I suspect those numbers will creep up a bit. Okay. So and I There's no watch-outs? There's nothing in there that we should think about in the other direction, just positives from Primark and grocery? Well, none that we've called out, no. That's super. Thank you. No worries. I think that might be the final question, actually, so. Great. Thank you, Nick. We have now reached the end of the question and answer session. I'll now turn the conference back to Eoin for closing comments. I've got nothing else to say. No, look, thanks for all the calls this morning. They were all very good engagement. And, look, we'll be speaking to you again at the half year. And thank you again. Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.