Hello, and welcome to the Bunzl Q1 Trading Update Call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question once the presentation has finished, please press star, followed by one on your telephone keypad. I'll now hand it over to your host, Frank van Zanten, CEO of Bunzl plc. Please go ahead. Good morning, and thank you for joining us today. I'm sure you have all read our announcement bringing forward our Q1 Trading Update. I have with me Richard Howes, our CFO. I will first provide an update on our trading performance before handing over to Richard, who will discuss guidance and capital allocation. We will then move to Q&A. Since announcing our full-year results at the beginning of March, we have seen performance fall short of expectations. This has been driven by North America, particularly our largest business, which serves grocery and food service customers, where operational challenges have resulted in a significant decline in adjusted operating profit, compounded by the uncertain trading environment. Given the disappointing start to the year, we are revising our expectations for 2025. Now, let me go into some detail about what's happening in North America. In a more uncertain environment, we have seen some revenue softness across the region. This has pressured the operating margin in the business area and, in particular, has amplified previously discussed operational challenges specific to our largest business, which primarily serves food service and grocery customers. As we have talked about before, we have been developing the strategy in our business over the past few years to enhance its own brand offering to customers, complementing its strong third-party supplier relationships and to drive organic growth. We were progressing well with this strategy and have successfully increased own brand penetration in this business from around 5% a few years ago to 14% in 2024. However, the strategy required substantial investment and changes to the sales and operating model of the business, and it is here that we have encountered some execution challenges. In particular, our local teams lost some commercial agility and were less able to respond quickly in a competitive market, and we have been less operationally efficient overall. In the first quarter, we saw continued deflation, which has compounded these challenges. As a result, we saw slower-than-anticipated volume improvement and own brand growth, the loss of a higher-margin customer category, which together, alongside higher operating costs, has driven a significant decline in adjusted operating profit. Whilst execution challenges were not new over the quarter, they have previously been offset by strong own brand momentum and some larger business wins. We had expected this progress to continue whilst we further improved the operating model, but the trading environment has made it more challenging to deliver these offsetting elements. In response, we have taken a series of decisive actions to improve the performance of this business, including changing its leadership. Jim McCool, who you know as our CEO of North America, is now directly running this business. Jim is a strong leader and has been CEO of our North America business area since 2019. We have an action plan in place to drive organic growth through empowering the local management teams, ensuring that the sales teams have greater commercial agility to better compete. Additionally, to deliver margin benefits, we will be launching more own brand categories, accelerating cost-saving initiatives, and refocusing on operational excellence. We expect some of these changes to deliver benefits in the near term, although a number of these improvements will extend well into 2026. Overall, I remain confident in the strategy for this business and believe that with the new team in place, we can achieve a stronger platform for growth in North America in the medium term. Turning to our other business areas, in Continental Europe, operating margin decline was driven by dynamics seen in the second half of 2024, with a decline broadly in line with our expectations. Our cost initiatives are underway, and we expect to see benefits from these and other margin management initiatives towards the end of the second half. Furthermore, we have started to see some limited price inflation in certain businesses, which will be supported. U.K. and Ireland have seen lower underlying growth than expected, driven by deflation, with an operating margin decline reflective of the mixed effect of Nisbets in the quarter. We expect operating margin to benefit in the second half from margin management initiatives and synergies. The Rest of the World continues to see strong underlying growth, particularly in Latin America, with the business area maintaining a good operating margin. Before I hand over to Richard, I want to reiterate my confidence in the Group's compounding growth strategy and resilient business model. Bunzl has a long track record of delivery, and the actions we are taking should continue to support this. Furthermore, in the context of higher uncertainty, Bunzl remains a resilient business supported by the essential nature of products we supply, the breadth and depth of our customer and supplier relationships, and the diverse range of end markets and geographies we operate in. Our people are our key asset, and I know they will continue to work tirelessly and respond to any changing environments to support their customers. Over to you, Richard. Thank you, Frank, and good morning, everyone. Starting with the changes to our outlook, we revised our guidance to reflect the operational challenges faced by our largest business in North America and the implications on the remainder of the year from a more challenging start for the Group. We provide this update despite significant uncertainties relating to tariffs and their impacts on inflation and economic growth. Although inflation is typically a benefit to Bunzl, this situation remains dynamic, and any potential benefit from tariffs, together with a potential adverse impact on economic growth, is excluded from our guidance. We now expect moderate revenue growth in 2025 at constant exchange rates, driven by announced acquisitions and broadly flat underlying revenue. Group operating margin for the year is expected to be moderately below 8% compared to 8.3% in 2024. The year-on-year decline is driven by margin contraction in North America, although we also expect to see some margin decline in the U.K. and Ireland. Operating margin in the first half of the year is expected to be around 7%. The Group's second half operating margin is seasonally higher and expected to benefit from actions taken. Furthermore, the operating margin year-on-year will be supported by the annualization of the margin decline in Continental Europe. In addition, on current spot rates, we expect a further adverse impact from currency translation compared to the point at which we gave our guidance previously. Turning to capital allocation, given the significant economic and geopolitical uncertainty and our current performance, we feel it is prudent for the Group's leverage to be around the lower ends of our target range of 2x-2.5x adjusted net debt to EBITDA. We are currently aiming for leverage to be towards the lower end of our target range by the end of 2025 after potential acquisitions. In light of this, and having purchased around GBP 115 million of shares year-to-date, we are pausing our 2025 share buyback program. Our highly cash-generative business model allows us to continue investing in value-accretive acquisitions whilst maintaining this more prudent leverage. Despite the relatively slow start to the year, our pipeline remains active. Leverage within the target range remains appropriate for Bunzl in the medium term, and we will keep our capital allocation options under regular review. Before we get open for Q&A, I would like to echo Frank's confidence that despite the specific challenges in the first quarter, which we have acted decisively to address, the fundamental strengths of the Bunzl model are unchanged. With that, we'll be happy to take any questions. Thank you. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. Our first question for today comes from Suhasini Varanasi from Goldman Sachs. Your line is now open. Please go ahead. Hi, good morning. Thank you for taking my questions. Just two from me, please. Can you provide more color on what happened in North America, please? Because it feels like, on the one hand, you have the challenges linked to own brand offering, where volume seemed to be a lot softer than expected. The second, you also seem to have a customer category loss. Is there any way you can provide more color on what happened here? Was it a loss that was due to pricing, for example? Secondly, in the own brand offering, what exactly went wrong, please? Okay. Let me take the first question, and maybe, Richard, you can talk about the second. Firstly, I'd like to take you through what happened during the last few years in our largest distribution business in the United States. This business predominantly serves large and local grocery and food service redistribution accounts to our network of branches in the U.S. We basically did two things. We implemented a strategy of building own brands complementary to our strong branded local manufacturing relationships. Like the retailers and grocery companies do for many years, own brands can be very enhancing for margins and stickiness in the relationships. This strategy has been very successful, building own brands from about 5%- 14% of sales last year. The second thing we've done is we've changed our organizational model from a branch-based structure over time to a sales and operations model, which included hiring professional sales management and shifting responsibilities. Two-thirds of our business is being managed centrally with large national accounts, where the model has been effective, but 1/3 is more local. During this process, some of the processes have been too far centralized, and to achieve more local agility and speed of decision-making on prices and products, we have now taken decisive actions to empower our local teams to make fast decisions and become more competitive with local customers. There have been some execution challenges with developing the business in order to support the strategy, and since our last update in a more uncertain environment, this and a confluence of factors has combined to drive a significant decline in the first quarter. These challenges have resulted in continued deflation, slower-than-anticipated volume improvement, and own brand growth. We had an isolated customer category loss that Richard will touch on, and we have dealt with higher operating costs partly from the new model, which have resulted in a significant decline in adjusted operating profit. Over to Richard for the second question. Suhasini, look, I don't think we should get into the specifics around individual customer actions. What I would say, and to reiterate Frank's point, that this is an isolated incident as we see it, and certainly not related to any service-level issues or anything like that. I think that's probably as far as we can go. Thank you. Just a quick follow-up, please. Is it possible to mention which vertical the customer loss was in? The detail on national accounts or managed centrally versus local operations was very helpful. Just to be clear, the weakness that you saw in North America was on the local side within own brand? Yes. The weakness has been on the local side. Yeah, that's correct. I'd say the central managed accounts, they behave very well in the current structure. Where we face some issues is with the local agility, with the local sales teams dealing with local customers who often really want to have a fast response. This is where we really already have taken action and where we do see some, expect some improvements already in the second half and more in 2026. Understand. Thank you. The vertical where the customer loss was in? It was in grocery. Grocery. Thank you very much. Thank you. Our next question comes from Sylvia Barker of JPMorgan. Your line is now open. Please go ahead. Thank you. Hi, morning, everyone. Just coming back on North America, could you talk about kind of just remember, so we do not know what you were expecting for H1 before, but could you give us some idea of the costs going into that business versus the shortfall in revenue you expect just to get a better sense of that kind of profit shortfall that we are seeing in the first half? Second question on Nisbets. It seems like most of the issues that you had last year are now behind us, and this is more of a mixed impact. Can we just check where is the profit of Nisbets now relative to where you have budgeted for it when you bought it, and how quickly can we get back up to budget if we are below? Finally, on Continental Europe, it seems like that's broadly tracking in line with expectations, but we do, I guess your guidance assumes a relatively quick recovery in the margin, and indeed, margins going up in the second half. Could you give a little bit more color around what you're budgeting for on that Continental European margin in the second half, and what are the key risks and opportunities there? Thank you. Okay. Let me deal with the second question with Nisbets. What we shared before is this, let's say, the first year of Nisbets in 2024, the business operated in a more softer market environment. What also was important is that they had these one-off supply chain issues where basically their automated warehouse was impacted by a flood, and they had to really quickly work on recovering. That had some knock-on effect during the year. Really, near the end of the year, the performance improved. The first year was below expectations, but there were some very specific reasons for it. The business ended the year with a good run rate. The first quarter revenue was in line with expectations also, following the slower or the lower base on the first quarter. The business is performing in line with expectations for this year. Obviously, it's below where we hoped it would be in the second year when we bought the business, and that's simply because the basis was changed given the difficult start. What is important to say is this: we are very pleased with Nisbets. It's a very strong business, strong market share, strong management team. Businesses are very active now in terms of going after the synergies. The synergies look good. All over, pleased with the acquisition of Nisbets. We are on North America. We have been investing in this business to expedite this strategy. Over the last couple of years, we have made quite significant investments to support the strategy. Obviously, there has also been a level of operational OpEx increases over that period. If we look at what our guidance implies, North America, in the first half, which will capture your point generally on Q1, is going to be the decline year-on-year will be similar to what we are guiding to at the Group level. That should give you a sense for where the profit element of this comes from. Certainly, there is an increase in cost. As Frank said earlier, this is a confluence of various issues. It is deflation. It's slower than it's an expected volume growth, slower than expected own brand growth, as well as the isolated loss that we've talked about. In regard to Continental Europe, we came into the year expecting a similar picture. Profits and margins to be down year-on-year. I think the team are doing a very good job in going after various opportunities, certainly cost focus in the region, and that is well underway. As Frank mentioned, there's also been some price increases in the region, and I think that has helped. When we look at Q1, we've actually seen Continental Europe go into slightly positive territory in inflation. They have turned a deflationary situation into a slightly positively inflationary period, which I think is useful and important for the recovery in profits. When we think about that going into the second half, yes, we do see an improvement in profits from the first half. That will be supported by the cost savings. It will be supported by the price increases. There is growing confidence around volumes and new business wins, as well as the business looking to continue to buy better from its suppliers. Okay. Thank you both. Could I just go back, Richard, just on the North American kind of shortfall? I appreciate there's quite a few things in terms of the moving parts. How do you think about kind of the revenue shortfall versus the profit shortfall? I guess some of it will be operating leverage as well. Could you give us an idea of relative to where you expected, I guess, for the first half? How much is it down to the revenue, and how much is it down to kind of the other impacts? Yes. Look, I think you mentioned the right point. I think we are seeing operational deleveraging. It is a mixture of lower revenue for the reasons we've given, some margin impact because the isolated customer loss was actually quite good margins. At the same time, we're seeing OpEx increases through inflation, but also specifically the additional investment we put into the business. Obviously, that investment was very much there to, in part, drive revenue growth. As we've called out, we're not seeing volume improvement or indeed own brand growth that we expected. Perfect. Thank you for that. Thank you. Our next question comes from Annelies Vermeulen of Morgan Stanley. Your line is now open. Please go ahead. Hi. Good morning, Frank. Good morning, Richard. I have three questions, please. I just wanted to delve into the volume piece specifically in North America. If you put to one side own brands and deflation and other things that you've mentioned, I'd assume it's too early for that business to have seen any real impact from tariffs and so on. What is it that has driven that volume shortfall specifically? Did that get materially worse as you moved through to Q1? What are you hearing from your customers in that regard? Secondly, just on capital allocation, given you've paused the buyback, you want to be at the low end of your leverage range. Can we assume that you won't spend your full GBP 700 million this year on deals, or is that still on the table? Lastly, can I just double-check the customer loss in grocery? Can I assume that that's not your largest US grocery customer that you've lost? Thank you. For you, Richard. Morning, Annelies. In terms of volume in North America, look, we've called out the fact there has been obviously a slow start in terms of the volume improvements and the own brands. That's the main impact. We have seen volumes in Q1 down on what we saw in Q4, albeit I think it's just worth reminding that, and we called this out at the full year results, that actually what was quite a good Q4 in terms of volumes was supported by actually a very good seasonal period. The lead-up to Thanksgiving and into Christmas for the business was a very positive period for North America. I think we have to think of that as somewhat temporary in its nature. It's difficult to take a run rate from that necessarily into the first half. The volume softness we're seeing in North America in the first half, we should very much think about being more to do with what we called out in the statement. Having said that, I think it is, of all of our regions, even though it is difficult to pick apart what is normal trading versus what is affected by the wider economic uncertainty, I think the one area that that is more likely to be seen is in North America. I think we've seen that more laterally in the quarter. On your second question on capital allocation, yes, I think you should assume we will not spend GBP 700 million on deals in 2025. We are, in giving the sense that we'll be towards the lower end of the range of our target range, that does include a certain amount of acquisitions that we are expecting to do, but it won't be $700 million. In terms of the customer loss in grocery, I think we've covered it. We're not going to give which customer it's with, but we will just reiterate the fact that we do see this as an isolated incident, and it's not in any way related to service levels. Understood. Thank you. Thank you. Our next question comes from Rory McKenzie of UBS. Your line is now open. Please go ahead. Good morning, Rory. I have two questions, please. Firstly, just on the timing of these impacts. Given we last spoke to you about six weeks ago, could we conclude that most of this volume shortfall happened through March, or is this a trend kind of through Q1 that you've only really identified now as you look back? I guess I'm just asking whether we should think about there being a weakening volume growth exit rate, and Q2 underlying revenue could be weaker than the Q1 number, or do you think Q1's the trough? Secondly, within your guidance, it sounds like the H2 Group margins could be close to flat year-over-year. What is the range of outcomes to think about for North America? You've clearly put actions in place quite quickly, but you mentioned that they would still be going well into next year to kind of take full effect. Should we be expecting margins to be falling through this fiscal year and also into the start of FY 2026 as well? Thank you. Richard, for you. Yes. When we think back to what we've seen in the first quarter, Rory, I think the thing to say is that, and you know as well, the first couple of months of this year is always a very low period. These are the lower periods for the Group. As a consequence, whilst we can see some indications around trends, particularly from, say, January numbers, it's difficult to extrapolate too much from the first month or two in this group. I think it is reasonable to assume that there has been weakness throughout the quarter, sorry, but that actually March is a more meaningful month. I think when you see the March results, it counts more in the view of the quarter. As a consequence, that's much of what we've seen in coming to our guidance today. In terms of how this looks Q2 over Q1 and how this progresses through the year, I do think we should assume that Q2 will be better than Q1 in total for underlying revenue growth. We have called out the fact that we are seeing some inflation in Europe, and that means that overall, the deflationary trends that we have seen are easing. The corollary of that is that I think we should assume that there is some ongoing volume weakness across the year. Of course, we will hit harder comps in the second half, but that is effectively offset by a more positive outlook when we look to the deflation moving into inflation picture. In terms of group margins, look, we are seeing and expecting, and our guidance assumes that we will see an improvement in group margins as we go into the second half of the year. We've talked about North America. I think that the speed and the decisive nature of the actions we've taken, plus the fact that we were doing some of this earlier, particularly on the cost actions, I think means that we have confidence that those actions taken will moderate the decline in margins that we've seen in the first half in the second. I think we can be clear on that. I've given a response on Continental Europe, which also obviously has our second biggest region, will also have a positive effect on the second half margin picture. I think overall, given the actions we've taken and the speed with which we're operating, we can support a second half that is improved. Look, we've also called out this does not include anything from tariffs or indeed the second and third order effects of that around economic impact. We will see how this plays out, but I think from what we've done today and from where we stand today, we do see improvement in the second half. Okay. Thank you, Richard. Thank you. Our next question comes from Karl Green of RBC. Your line is now open. Please go ahead. Yeah. Thanks very much. Good morning. A couple of questions. Just going back to North America, and apologies for pressing the point here, but I'm still a little bit confused about some of the phrases that you used, Frank, in terms of things like lost commercial agility. What exactly do you mean by that? What is your sense about what's going on competitively? I mean, clearly, this customer loss has gone to someone. What is happening in terms of competitor dynamics in your view? Volumes, again, linked to some of the comments you've made before. I know via the Re-D channel it's sometimes difficult to see the exact underlying trends, but what is your sense as to what the underlying drivers of the volume softness are? Is it lower footfall in restaurants? Is it changing behavior in grocery? Just a bit more color there in society. You're getting feedback from the sales team. The second question, just very simplistically, I know you don't want to name the grocery customer, but can we at least get an approximate annualized revenue impact of that customer loss? Thank you. Let me talk about the agility bit and then Richard take the other things. I'd say when you're dealing with local smaller customers, for instance, a redistribution food service company, think about the U.S. food service or a Sysco, but then a very small one in a local market. These people are buying products from Bunzl, and their product range includes more than 90% of what they sell are food items, and the rest is non-food items. Because their warehouse has limited storage space, they are buying from people like Bunzl a wider range than they can basically stock. They would be buying some of their products directly from the manufacturer, but because they cannot afford to buy minimums like truckloads or at least 15 pallets, and they still need to be able to fulfill a much broader range, they need to buy from people like Bunzl, where we are effectively the warehouse of the customer, of the food redistribution smaller business. These businesses are often, especially when they are small, having very much of a trading mentality. Like with Bunzl, buying at a good price is important to be able to make a good margin. The tendency there is that people, when they have orders for certain products, buy from Bunzl, but they buy from other people as well, and they are trying to get a good price for specific things they need for a certain customer or for a certain category. They're always in a hurry. To be able for them to trade effectively, they need to have price information or product information very, very quickly. We knew that, so it has always been a priority when making these changes that we wanted to make sure that the agility, so the local people having the power to make pricing decisions, the local people getting exceptional prices from branded suppliers or getting price-supported prices on own-brand products is very important. Now, in this transformation process or change process in the distribution business, it has appeared that some of these processes have been centralized too much, more towards the center of giving approvals for, for instance, special prices or stocking new items and stuff like that. That works perfectly well when you're dealing with very large food service broadliners because they have time, they're often very well planned. It takes some time to make decisions on new category, on growth items, on new items, sustainability items. When you're dealing with local, very small people, when they ask a question, they need an answer by yesterday, basically. It needs to be very quick. Our business has moved things too much into the centralised model, and that has been restricting our salespeople and commercial people in the field dealing with the local customer, which represents about 1/3 in all the categories. We have local grocery, we have local redistribution, has sort of, in a way, handicapped them a little bit to get that necessary price, product information to be able to help the customer quickly. One of the things we're doing now as part of the decisive actions we spoke about is basically putting, like it used to be before we made this change process in the organization, a lot more empowerment into the local management. The salespeople will all have now one person in market, in the individual market, where they can talk to, where they can request a special price, where they can request a special product. They talk to a person they know. That person knows our business very well. That person knows the local competition very well. We are giving them all the tools in terms of the true prices. We are sheltering some of the margins through own brands. We give them full visibility in terms of doing the right thing so they can go back to the customer within 24 hours and start to win business. That is really what we mean in terms of giving them the agility back, empower the local people who have been often with 25, 30 years with Bunzl. They can make that decision. They could not make that decision anymore recently, and we are now moving or have moved part of it already back deep down in the organization for people to make fast decisions. That's helpful. Basically, that's implying that this is market share loss. I mean, these downstream customers have gone elsewhere in the short term. Would you be confident that you can get that share back with these changes quite quickly, or do you think that they've gone elsewhere and that those new relationships are going to be sticky? Yeah. That's a very good question. I'd say most of the business that we lost over time has been with local food redistribution businesses. The good thing for us is we haven't lost the customers because it's quite opportunistic kind of trading often. We're still dealing with the broadliners in a number of categories, and sometimes you lose certain products or certain categories because they were able to buy it somewhere else at a cheaper price or get an exception or whatever. The relationship with the buyer is still there with our salespeople. If we give them the toolkit, it's expected that over time they can win back some of that volume, but also win new volume. Now, hopefully, some of that is going to happen sooner than later, but that's very hard to estimate because you've seen our guidance exclude any impact of tariffs and potential economic developments. We are now entering this period of quite hectic business dealings because of tariffs, because of alternative sources and stuff like that. It's very difficult to estimate if they're going to give us a faster opportunity because everybody has to deal with a lot of price increases because of tariffs or not. Remains to be seen. The fact that I'm very confident about, based on my 30 years with Bunzl and the industry, is if you give people the tools to be effective with, everybody wants to win. That should certainly be helping from where we are today. Thank you. Carl, on your point about the business that we've lost in North America, look, in terms of scale, you can take it that it's clearly meaningful enough at the revenue level for us to want to call it out, but also emphasize the fact that because this is a higher margin business, that's also part of the reason why we're mentioning it. Think of those two things together. Okay. Thank you. Our next question comes from James Rose of Barclays. Your line is now open. Please go ahead. Hi there. Thanks. I've just got one left. It's more just to confirm that the lower volumes you've experienced, it seems like you're saying it's entirely down to you. It's your own operational challenges and structure which has caused that. Not trying to flag any specific end market trend or changing customer behavior or impact from tariffs or customers trying to move away from imported own brands or any of the above to explain it. It's an operational problem of yourselves. Is that fair? Richard? James, look, I think we're certainly looking at this as being predominantly down to our own issues in the quarter. I think you can see, I think, in external data, you probably would see some slowdown in customer footfall in food service in North America, but it's not always easy to draw a line from that directly to our products because we are selling products they need to effectively run their restaurants, and it may not be directly related to a slowdown in the short period. I think we'd be saying it's predominantly down to our own issues. As Frank said also, and we've called out that over and above that, there is a general level of uncertainty, which is not easy to discern the overall impact. I think it is fair to say if there is an impact, it's probably come more in March than it's come in January and February. I think you're right to assume this is predominantly down to our own issues. Okay. Thank you. Thank you. Our next question comes from Tom Burlton of BNP Paribas. Your line is now open. Please go ahead. Thanks. Yeah. Morning, Frank. Morning, Richard. Thanks for the color so far. One question regarding tariffs. I understand that you're excluding that from the guidance today, which seems very prudent. I wondered if you could just give us a kind of framework for how you're thinking about some of the sensitivities and maybe a reminder of some of your sourcing from kind of tariff-affected countries, remind us kind of how much of the North American business is sort of sourced locally or domestically, and how we should think about a framework for kind of your ability to pass through kind of some of the tariffs that we've got in place today. I know this is a kind of moving piece, and policy is changing, but some sort of framework for how we should think about maybe some of the sensitivities or your exposure to kind of policy as it stands today would be helpful, please. Yeah. Just to reiterate, we are not assuming anything in terms of our guidance from tariffs, either positive or negative. Just to put some context, about 10% of our U.S. purchases are coming from China. In the last couple of years, we have been working on a China-plus strategy. We have moved certain things out of China. There are certain product categories or products that are really centered around the capacity of China or the capability. You would not be easily able to move that out. What we could move out, we have moved out of China. What remains is really where China is the place to be from a quality and sourcing competitive point. I would say the tariffs that have been announced are obviously huge, like 145%, which is massive. The problem everybody faces right now is that it is a very unpredictable world. Let's say there's a U.S. president who changes his view by the day, by the tweet, and that makes it very hard to predict. Let's say we have the advantage being Bunzl that we have 50 people in Shanghai, in Asia, in our sourcing office that has done a great job in COVID, but also after that, who is in contact with all these suppliers also outside of China. They are helping the businesses to look at alternatives for sources in China. I'd say historically, when we implemented tariffs, we saw a favorable impact from tariffs. The big uncertainty is how quickly can we move things out of China and, let's say, prices. The mechanism is effectively we'll put prices up. Let's say things like disposable gloves are categories that everybody is buying from China. That's where it's centered around. That's expected to drive product price inflation. Product price inflation is, in general, good for distribution for Bunzl as well. The big unknown, obviously, is what is tariffs going to do with the whole economic outlook of the United States, but also the world. 10% U.S. purchases. We are well connected with other areas. There's a lot going on. It's difficult to predict how long this is going to take. Is it going to stay at this level? Is it going to reverse? We are very careful trying to keep all the balls in the air and balancing off. I think we are in a better place than local competitors who don't have their Chinese organization locally who can sort of pick up things quickly as well. Thank you. Our next question comes from Suhasini Varanasi of Goldman Sachs. Your line is now open. Please go ahead. Hi. Thank you. I just have a couple of follow-ups, please. The customer loss in the U.S., sorry to come back to that. The reason for the loss, was it down to price? If it's down to price, are customers basically shopping around a bit more given the macro uncertainty? Do you have more contracts that are coming up for renewal this year? The second one is on margins. When you say margins are going to be moderately below 8%, can you help us quantify how much below? Is it 20, 30 basis points, 40 basis points? Thank you. Richard, for you again. Suhasini, I think you could assume that inevitably, in a discussion with customers around business, price is a factor. As I said earlier, there's certainly nothing to do with service levels. I think, yes, you should assume that price was a factor in this discussion with customers and ultimate loss. As to is there heightened levels of competition? Look, I think there is. I think it's fair to say that we asked, and part of the reason that we've lost some business in food service, for example, would certainly be part of that. It doesn't mean today that we expect further losses of this nature. That's not something that we expect at this time. As to your second question, how much below what does moderately mean, essentially? I think we've given you a decent steer. We'll leave it to you to decide effectively what that means. I think it is somewhere it is clearly below where we'd normally expect to be. I think I've given you enough to better get there. Thank you. Thank you. As a reminder, if you'd like to ask a question, that's star five five one on your telephone keypad. Our next question comes from Sylvia Barker of JPMorgan. Your line is now open. Please go ahead. Hi. I'm sorry. Just a very quick follow-up. Just in terms of inventory levels, for the 10% of products that we source from China, you said you saw a little bit of poor holding Q4 from clients within safety. Did you actually kind of stock up on cheaper products ahead of tariffs yourself? Or what are the inventory levels, I guess, within those businesses in the U.S. today? Thank you. Richard. As we talked about at the full year, I think we have seen inventory levels a bit higher than we would have naturally seen towards the end of last year. I think at that stage, it was not anything to do with tariffs. It was more to do with making sure we had the right mix of products on own brands ahead of the launches we are expecting. I actually see our inventory levels in our biggest business, our largest single business, actually coming down through the quarter. I do not think there are any obvious signs that we are—I do not think we are pulling forward to buy inventory ahead of tariffs. Look, it is something that is a bit higher than we have expected at this stage of the year. I think we will change that as we go through the year. I think generally that we will deal with those inventory levels. Certainly nothing that's overtly driven by tariffs on our part. Thank you. Thank you. At this time, we currently have no further questions. I will hand back to Frank van Zanten for any further remarks. Thank you all for your questions. I would like to end this call by reiterating that Bunzl has a long track record of delivery, and we are taking decisive actions to improve our current performance. I remain confident in the Group's compounding growth strategy and resilience, both of which will continue to support the business in the long term. Thank you for joining us on the call.