J Sainsbury (LSE:SBRY) Q2 2027 Earnings Call

0:00 Good morning everyone. Welcome to our interim results presentation. Thank you for joining us today. I'll begin with the key highlights of the first half, specifically how we're delivering for customers and how that's translated through to the strength of the performance we've achieved. Blathnaid will then take you through the financial performance and outlook before I come back to talk with a bit more detail on the progress we're making across next level Sainsburys. But before that, I want to start by saying a big thank you to every one of our colleagues and to all our farmers and suppliers for everything they've done to deliver for our customers through the first half. We all know just how challenging conditions have been across the food supply chain through the course of this summer with five record heat waves, particularly for our farmers and growers. And that's extended to the pressures that the extreme weather placed on all our logistics and store colleagues.

0:53 So many of our team working right across Sainsbury's went the extra mile to really deliver. A huge thank you to them. Now we've delivered another strong first half with continued grocery volume growth, market share gains and profit growth. And what sits behind that is something you've heard me talk about many times. Our relentless focus on the things that matter most to customers. Great value, outstanding quality, excellent availability and leading service. On value, we're in a really strong position, improving against most key competitors in the half. Operationally, we've delivered outstanding availability at the most challenged times in the summer heatwaves, with fresh food availability two percentage points higher than the other full-choice grocers.

1:40 We continue to pull ahead of the rest of the market on quality, with the strength of our innovation across Taste the Difference and Discovery. And we're building momentum and differentiated capability using the strength of our balance sheet to invest in accelerating customer loyalty through personalized value, technology which improves the customer journey, and infrastructure and systems that deliver efficiency and resilience. Now the cost of living remains top of mind for customers and we've continued to make very focused investment to ensure that we're razor sharp on price across all the items in the basket that customers buy most often. With the biggest Aldi price match in the market, Nectar prices on almost 11,000 products and personalized value through your Nectar prices where customers have saved 250 million pounds since launch in 2021.

2:35 This is delivering a consistency in our value position that has really stood out over the last six months. And while we've strengthened value, we've kept investing in what has always set us apart, our trusted reputation and the association Sainsbury's as a brand has with customers for our food quality, range and innovation. This year, we expect to launch more than 2,000 new and improved products, our biggest innovation program ever. This includes more than 700 taste the difference and discovery products really stretching our lead versus the market. And innovation isn't just about premium food. We're building on our leading position to make healthier choices easier by introducing new products, reformulating current ranges and improving the visibility of nutritional benefits on packaging.

3:26 We're seeing real momentum as we bring more of our food offer to more customers with fresh food sales up over 4% in the first half. We opened 14 convenience stores and two supermarkets, both of which were former home-based stores, and we're really pleased with their performance. We've also invested in around 170 stores in the first half, focusing on those with the greatest potential. That investment is delivering, with these stores seeing stronger volume growth and customer satisfaction scores higher than the rest of the estate. and to create greater fresh food capacity, we've been rationalizing general merchandise range and space, making the space work much harder with volume for general merchandise stocking point up 10%.

4:11 And across all our supermarkets, we completed our biggest ever fresh food range reset, changing range and space allocations to reflect evolving shopping habits and improve availability and stocking efficiency. Sainsbury's has long had a reputation for strong relationships with farmers and suppliers, and we're building on that at a time when it matters more than ever. By the end of 2026, 60% of products in fresh produce, dairy, meat, fish and poultry will be in long-term agreements. This goes way beyond the agreements that you will hear other retailers talk about. This is about our cost of production models which give producers predictable profit margins, greater certainty and the confidence to invest for the future.

4:57 That strengthens the resilience of our supply chain and helps our suppliers deliver the consistent quality and availability of food our customers rely on. So why do the inputs across what we're doing on value, innovation, quality and our relationships with suppliers matter so much? It's because they're delivering a winning formula that customers really trust. On Value for Money, I've talked before about how long it took for customer perceptions to catch up with the real change we've made in our value position following the investment we started with Food First back in 2021. That has now shifted. Customers consistently recognize the value they get at Sainsbury's, rating us ahead of our competitors. That reflects what we've delivered over time and the trust we've built.

5:45 And importantly, we've strengthened our value position whilst maintaining the quality advantage that has always set Sainsbury's apart. You can see that really clearly here. Our quality scores remain significantly ahead of the other full choice grocers, maintaining an advantage we've built over many years. And it's the strength of that proposition that gives us the confidence to put more of it in front of more customers. In the stores where we've made the most significant investment, we've added an average of 1500 new products per store. And as part of our fresh food reset, we've given more space to key categories such as meat, fish and poultry. At the same time, we're getting more from the space we retain in general merchandise with higher trading intensity, lower working capital and simplified operations.

6:36 Toys is a good example. It was one of the first categories to go through the full range reset and with fewer better products, sales grew 13% in the first half. So, we're creating more space for our stronger food offer while at the same time driving better productivity from the rest of the store. This is where it all comes together. We are right there with our customers, day in, day out, ensuring we deliver on the things that matter most to them. And at a time when the market has been a bit more volatile, we have maintained our lead and consistency on overall customer satisfaction, with more customers continuing to choose Sainsbury's for their big basket shop. This shows how our consistency has translated into performance, with strong volume growth relative to the market over a number of years.

7:23 We knew we would be lapping some particularly tough comps through this period. So while we continue to grow volumes, we dipped a little below the market in the second quarter. The comp will remain tough through quarter three and we're expecting it to be another very competitive period. But we are really well set up for the second half. Our feed proposition remains consistently strong across value, quality and service and we expect to deliver another winning peak. So let me bring all of that together. We are really encouraged by our first half. We're continuing to invest in the things that matter most to customers and we can see those choices delivering strong customer satisfaction and continued growth of big basket main shop customers. We're heading into peak with a strong value position, outstanding quality and our best ever Christmas ranges, including 60 new Taste the Difference Discovery products.

8:18 And we're going to continue to make the right balance choices that will deliver sustainable sales and profit growth. And our guidance today reflects that, with our central case implying continued profit growth in the second half. With that, let me hand over to Blathnaid to take you through the financial performance and outlook.

8:37 Good morning and thank you Simon. I will now cover the financial highlights for the 28 weeks to the 12th of September 2026. Starting with a reminder of our financial framework. This lays out the factors that underpin our commitments to deliver profit leverage from sales growth, strong cash flows, higher return on capital employed and enhanced shareholder returns. As we near the end of our three-year next-level strategy, we are pleased with our progress. We delivered continued food volume growth, higher profits and strong cash flow generation. We are well on track with our plans to deliver £1.6 billion of free cash flow over the three years to 2027. Together with the bank exit proceeds, we will have returned nearly £2 billion to shareholders through dividends and buybacks.

9:29 We are now going to look at the performance of our continuing operations, excluding Argus. As a reminder, we have entered into an agreement to sell Argus to Swift Partners. As a result, the performance and cash flow directly attributable to Argus has been represented as a discontinued operation. Underlying performance in this financial review refers to the Group's continuing operations, unless otherwise stated. Starting first with our sales performance. Grocery sales grew by 2.9%, reflecting continued volume growth and a lower level of inflation versus last year. Grocery growth was partially offset by a 3.4% decline in general merchandise and clothing. General merchandise sales were down 5% year on year, in line with our expectations, reflecting our strategy of allocating more space to food and simplifying the range. Clothing sales were down by around 2% in a subdued and promotional market and against tough comparatives. Despite this, volumes performed ahead of the market, reflecting the strength of our offer and improved availability.

10:37 In total, Sainsbury's sales grew by 2.6% in the half. Fuel sales were up substantially year on year, reflecting higher average wholesale prices and a modest volume decline. Together, this delivered total continuing operations sales growth of 4.5%. Looking at the shape of that by quarter, grocery growth was lower in Q2 than Q1, entirely as a result of lower inflation. Volume growth was broadly similar across both quarters despite tough comparatives. Turning now to the sale of Argus. As announced in July, we have agreed the sale of Argus to Swift Partners, enabling us to fully focus on our core food business. This transaction is expected to complete in February 2027, with full separation expected by February 2029. Additionally, in July, we handed back our banking licence. The final bank colleagues exited and we exited the last of the owner's contracts. Together these have created significant complexity in the accounting for the half with the exit charges relating to the bank and moving Argus to discontinued operations.

11:46 While the bank is now clear, the Argus exit costs will continue to move. The largest element will be the working capital true up that we will need to complete at year end. The numbers you are looking at today reflect the half year position. They will be adjusted for both trading performance and the working capital true up as we finalise the sale and exit in February. While we have treated Argus as discontinued, given the fact that it is heavily integrated into Sainsbury's, this has driven a review of the Sainsbury's assets and resulted in some impairments in continuing operations. I will cover those in the next few slides. This table shows the breakdown of Argus discontinued operations numbers. Before I talk about some of the bigger numbers, you can see that Argus made a loss of 8 million in the first half, slightly higher year on year.

12:37 This was in line with our expectations and we continue to expect Argus full year operating profit to be in line or ahead of last year. We have recognised a non-cash impairment loss We have also booked a provision of £102 million in relation to separation costs, largely tech driven. There will be further separation costs to be recognised as we finalise the exit. Separately, we recognise £37 million of restructuring and impairment costs in line with our Save and Invest programme. Turning now to profits from continuing operations. Last year we reported total underlying operation profit of £506 million. Excluding the Argus discontinued operating loss and taking into account perimeter adjustments, this creates a continuing underlying operation profit base of £507 million.

13:34 Versus this £507 million base, underlying operation profit increased by 3.6% to £525 million, reflecting volume growth, balanced investment in the customer offer and continued cost-saving delivery. Underlying finance costs were flat year-on-year and as a result underlying profit increased by 5.2%. We expect continuing operations underlying net finance costs to be around 300 to 310 million in 26-27 versus our previous guidance of around 320 million pounds. Underlying earnings per share increased by 10.4%, reflecting a lower underlying tax rate year-on-year and a reduced share count as a result of the cumulative effect of share buybacks.

14:26 This slide sets out items excluded from underlying results on a continuing operations basis. We incurred £60 million of non-underlying costs during the half. The largest item was £87 million of divestment costs. This primarily relates to non-cash impairment of non-trading sites and Sainsbury's stores following the announced disposal of Argus operations, as well as fees associated with the disposal. It also includes £8 million of final bank exit costs. Retail restructuring programme credits in the period primarily reflect gains from lease exits and the renegotiation of dilapidation provisions recognised in prior periods, partly offset by the redundancy and property strip-out costs associated with bakery closures.

15:16 Now turning to our cash flow metrics. Free cash flow increased by £57 million year on year. There are three elements to this. Firstly, the working capital of £67 million is largely driven by payment timings. We continue to deliver on our working capital programme. Secondly, capital expenditure was 71 million lower year-on-year in the first half, primarily driven by timing of spend. And finally, profits are higher year-on-year. Net debt will be covered on the following slide. This table shows the key elements of our cash flow and movements in net debt this year and last. Following the change in the financial services business model, net debt and associated cash flows from financial services are now included in the core net debt measure. Opening retail net debt has been adjusted accordingly as shown on the table. Comparatives have not been restated, given the prospective nature of the change in the financial services operations.

16:19 Before the impact of this change, net debt, including lease liabilities, increased by £221 million, primarily reflecting shareholder returns, comprising of £213 million of dividends and £200 million of the £300 million share buyback programme Returning bank disposal proceeds received in the prior year. Free cash flow of £333 million was partly offset by divestment cash costs including the wind down of previously provided bank exit costs not directly attributable to portfolio sales and advisor fees associated with the disposal of Argus operations. Current year discontinued operation cash flow represent trading cash inflows of Argus operations and cash outflows to settle owner's contracts previously provided for by the bank portfolio sales.

17:14 We continue to expect to generate free cash flow of more than £500 million in 26-27, consistent with our commitment to generate at least £1.6 billion over the three years to 2027. Continuing cash capital expenditure is expected to be between £750 million and £800 million in 26-27 versus our previous guidance of £800 million to £850 million, with the reduction reflecting the movement of Argus to discontinued operations. Here we lay out our balance sheet metrics. Net debt to EBITDA is broadly unchanged year-on-year at 2.6 times and within our target range of 2.4 to 3 times.

18:02 Return on capital employed improved by 20 basis points year-on-year to 9.2%. Turning to shareholder returns. As previously announced, we intend to complete a £300 million share buyback programme this year, comprising a core of £200 million and an additional £100 million returning bank disposal proceeds. The £200 million core share buyback was completed in the first half, with the remaining £100 million expected to complete in the second half. We are proposing an interim dividend of 4.1 pence per share, representing 30% of last year's full-year dividend, consistent with our standard policy. In total, we expect to return more than £600 million of cash to shareholders this year. In summary, we are pleased with our performance in the half.

18:55 We delivered profit growth against continued tough comparatives in a competitive market, generated strong free cash flow and are delivering strong cash returns to shareholders. We also announced the sale of Argus, which will allow us to focus our resources on our core food business. Looking ahead to the full year and the guidance we have issued to the market this morning, I thought it would be useful to clarify what exactly this represents and how it compares to our previous guidance. Our previous guidance was underlying operation profit of £975 million to £1075 million including Argus. Last year, Argus contributed £9 million of operating profit and we said that we expected profits to be broadly unchanged year on year.

19:43 So on a continuing operations basis, if we exclude that £9 million from the previous guidance and round down by £1 million, that will be the equivalent to £965 million to £1065 million. Versus that range, we now expect to underline operation profit from continuing operations of between 1025 million and 1065 million pounds. I know plenty of you will ask about the financial services contribution. Financial services contributed around 3 million pounds to operation profit growth in the first half. For the full year, we expect a contribution to continuing operations profit growth of around £10 million versus the previously guided £20 million.

20:28 This reflects the financial services contribution that now sits with Argus in discontinued operations. For next year we talked about £40 million of incremental income and we still expect to deliver at least half of that upside on a Sainsbury's only basis. So roughly another £10 million of incremental income from financial services next year. We won't separately disclose financial services income and we will only make a comment when it has made a significant impact on growth in any period. And, as a reminder for future years, when we announced the divestment of Argus we guided that the impact on underlying operating profit was broadly neutral, with loss to Argus operating profit and its synergies offset by Argus store-in-store rental income and Nectar income. This included the change to our financial services contribution expectation, so no further adjustment is required.

21:24 We remain focused on maintaining our strong competitive position, delivering strong cash generation of more than £500 million and creating consistent value for shareholders. Thank you for your time. I will now hand back to Simon.

21:40 Thank you, Blathnaid. Let me now take you through the progress we're making across our Next Level Sainsbury's strategy. When we launched Next Level Sainsbury's in February 2024, we set a clear purpose and four strategic outcomes. We're now in the final year of the plan and we continue to make sustained progress. As we announced in July, the planned sale of Argos is an important evolution. It will create a simpler, more focused Sainsbury's while enabling Argos to continue its transformation under dedicated ownership. I'll come back to Argos shortly, but let me start with first choice of food. Now our ambition here has been consistent right back to when we launched Food First in 2021. We want many more people to choose Sainsbury's as the place they come to for good food.

22:28 On value, what's distinctive is how the different elements work together. We have the biggest Aldi price match in the market and Nectar prices on almost 11,000 products. And increasingly, we're combining that broad-based value with personalized offers through your Nectar prices. Together that's delivering really meaningful value for customers, saving £16 on average on a big trolley shop and consistent trusted prices on the items customers buy most often. And while customers have the reassurance of trusting us on value, they know they don't need to compromise on quality. As ever, it's the quality of our food that really sets us apart. Taste the Difference sales have increased nearly 50% over the last four years.

23:13 And on that strong base, we're still seeing growth ahead of the market again this year. With continued investment in fantastic innovation and quality, we see huge further opportunity here. And our biggest programme of Taste the Difference innovation is coming for this Christmas. Taste the Difference Discovery, our range of restaurant quality meal solutions and premium speciality products is building on that strength and opening up new territory for customers seeking the most exciting innovation in food. We've doubled the range this year and it's now contributing around a quarter of Taste the Difference growth. Our product development teams working alongside our suppliers are doing a brilliant job expanding discovery into new categories including BBQ, Italian meals and premium meat, fish and poultry choices like Norfolk Black Chicken.

24:02 And we expect the range to exceed 200 products by the end of the year. We want our customers to be able to access the best of our food offer however they choose to shop with us. and we're encouraged by the growth we've continued to have across all channels, not just through supermarkets, but also convenience and groceries online. Online performed particularly strongly with sales up 9%, reflecting improved overall customer satisfaction, including the friendliness of our drivers, quality, range and availability. As you know, we were early into the rapid delivery grocery market, both with our own on-demand proposition, Chop Chop, and then we moved into partnership with Deliveroo, Uber Eats and Just Eat through 2025. We've largely completed our role out of on-demand, now in more than 1,400 of our supermarkets and convenience stores.

24:54 Alongside expanding our digital offer, we're making shopping at Sainsbury's easier and more seamless, creating a more joined-up experience both online and in-store. and we've bought Smart Shop on demand and Groceries Online together in our enhanced Sainsbury's app. We're also adding new features to take the effort out of shopping. Search Your Store helps customers quickly find products, while AI-powered Smart Lists turn a photo or even a meal idea into a shopping list, helping customers plan, find what they need and keep track of their budget. Now in two, the work we've been doing to strengthen the customer offer is continuing to deliver. We've been focused on developing our ranges and style credentials alongside driving better availability through a step up in operational performance.

25:42 We're seeing the benefit of that focus. Customer perceptions of style are up, availability is stronger, and too has outperformed the wider clothing market. We also delivered our best ever back to school performance with sales up 8%. This is being supported by the rollout of RFID across clothing, giving us better stock accuracy and helping drive availability and operational efficiency. So while the overall clothing market remains subdued, we're making good progress on the things that will strengthen the to offer for the longer term. Turning next to loyalty everyone loves, Nectar continues to be a really important part of how we deliver value for customers and deepen their relationship and connection with Sainsbury's.

26:27 We're continuing to make Nectar more personalised and more rewarding, while giving customers more ways to earn and benefit through our growing coalition of partners. At the same time, we're investing in the data and retail media capabilities that continue to strengthen the long-term growth opportunity for Nectar 360. And what's really powerful is how those two sides increasingly work together. For customers, it's about delivering great value through Nectar prices, points and increasingly personalised rewards, alongside more ways to earn and redeem points through our coalition partners. And for suppliers, Nectar 360 brings together our customer insight, targeting and retail media capabilities to help brands connect with customers in more relevant, measurable and higher returning ways.

27:14 And that's driving deeper digital engagement. Nectar participation continues to grow with digital nectar users up 9%. And 17% more customers are accessing personalized offers on their favorite products each week through your nectar prices. We know that this engagement drives a real difference in loyalty. And increasingly, personalization can help customers discover different parts of our range, whether that's making healthier choices or introducing more customers to taste the difference. Nectar 360 continues to be at the forefront of retail media in the UK, fueled by innovation and the strength of customer engagement with Nectar. Pollen is the most advanced retail media platform in the UK.

27:59 We launched this proprietary platform at the end of last year and we're now rolling out across a wider client base. It's revolutionizing the way that brands and agencies work with Nectar to run omnichannel retail media campaigns at scale. Pollan has now delivered more than 600 campaigns for around 100 clients. Nectar360 has also become the first UK retail media business to be accredited and independently audited against the IAB Europe Retail Media Measurement Standards. This provides a unique guarantee of credibility on the way that Nectar360 delivers and measures return on investment. And alongside Pollen, we're continuing to expand our in-store media network with more than 3,500 digital screens today and close to 5,000 expected by the end of the year.

28:50 Now this slide brings to life what that capability can deliver for brands. Brands are able to connect with customers across in-store, on-site and off-site channels and measure the impact. This Diet Coke and the Devil Wears Prada campaign is a great example, reaching 8 million customers and delivering a 3.7 times incremental return on advertising spend. Let me now turn to Argos. As we announced in July, we've agreed the sale of Argos to Swift Partners, completing February 2027. This is the right next step for both businesses, creating a simpler, more focused Sainsbury's, while giving Argos greater flexibility to accelerate its transformation under dedicated ownership.

29:35 The team continues to make good progress in delivering the transformation plan with investment in people, stores and technology and encouraging marketplace launch and strong new customer take up of the new credit proposition. And perhaps most importantly, it's business as usual at Argos and we expect four year trading profits to be in line with or ahead of last year. So our focus is on continuing that progress and securing a stronger future for Argos as we move towards completion of the transaction. Save and Invest to Win is about investing in technology and infrastructure to deliver sustainable structural efficiency gains. We're creating a simpler, more automated and more productive business, while continuing to invest in the capabilities that will make Sainsbury's stronger for the future.

30:22 We're on track to deliver our £1bn cost saving target, taking total savings to £2.3bn over the past six years. Our focus has moved away from individual one-off saving initiatives towards end-to-end improvements in processes and ways of working that change the game in terms of costs. These will deliver savings well beyond the current year. Investment in technology is improving productivity and delivering benefits for customers. Our stores are becoming more connected from the shelf edge through to customer scanning. and AI is making a very real difference to in-store productivity and safety and loss prevention whilst improving customer satisfaction and availability. We've made good progress rolling out facial recognition technology following a successful trial which saw logged incidents fall by 46% and more than 90% of identified offenders not returning to our stores.

31:18 Self checkout video analytics are now in nearly 600 stores, with continued rollout across supermarkets and introduction into our convenience stores, driving significant reductions in miss scanned items. Smart shop is now in all supermarkets with 20% more handsets year on year, supporting operational capacity and bigger basket shops ahead of peak. and we've rolled out our optimized reduction algorithm to all stores, reducing waste and improving colic efficiency. This has already delivered a double digit million pound saving. Before I close, let me come back to the commitments we made when we launched Next Level Sainsbury's. We're now in the final year of the plan and we continue to make good progress against those commitments. We've built on really strong foundations to sustain a very strong competitive position, consistently investing in our customer offer.

32:11 We've grown food volume ahead of the market and we expect to have grown profit faster than sales and improve roki supported by our cost saving program. We've generated strong free cash flow whilst investing in our stores and in the long-term strength and resilience of the business. And we expect to hit our target of more than 1.6 billion of free cash flow over the three years of the plan. And we couldn't do any of this sustainably without keeping a strong focus on outcomes for customers and colleagues and our key plan for better outcomes. We'll give a full update on performance against all the metrics at the end of the year. And that brings us back to our key message today. We're delivering for all our stakeholders, building a stronger, simpler, more focused Sainsbury's with the capabilities that matter for today and tomorrow.

33:01 Our winning combination of value, quality and service is consistently delivering for our customers. We have a strong and trusted value position and leading quality and innovation building on the core strengths of the Sainsbury's brand. We're deepening loyalty through Nectar and growing retail media income whilst investing in technology, productivity and efficiency. And this is generating strong, sustainable returns for our shareholders. Thank you for listening and thank you for joining us this morning. Ronald and I will now take your questions. Hello and welcome to the Sainsbury's 2026-2027 Interim Results Announcement Analyst Q&A call. On the call this morning is Simon Roberts, Chief Executive and Blathnaid Bergin, Chief Financial Officer.

33:53 If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raise hand function. Thank you and a moment for the first question please. Our first question comes from Manjari Dar with RBC Capital Markets. Please unmute your line and ask your question.

34:19 Morning Manjari. Morning.

34:21 Morning Simon, morning Blathnaid, thank you for taking my questions. I just had three if I may. My first question is on how you view the consumer outlook as we sit now versus when you originally set your guidance, the original guidance. And then my second question was just on how you view the competitive backdrop evolving in some of those faster growing segments that you mentioned online, on demand. The Premium Market. And then finally, also on online and on demand, I guess, how do you look at the capacity that you have for growth now and the ongoing opportunity there? Thank you.

35:06 Thanks, Manjari. OK, well, let me let me take each of those in turn. So, look, I think on on the consumer outlook on where customers are at, you know, you can see in our results today we've been super focused on the value, quality and service proposition at absolutely the heart of the Sainsbury's Thank you very much. Thank you very much. But I think we look forward to the third quarter with the focus on cost of living being front and centre, providing great value. But then obviously as we get towards Christmas, there's signs already customers are starting to look to Christmas food orderings up, interesting grocery online slots that went live last week.

36:20 We've got more of those. Big focus on innovation and new products in the food office. So I think customers looking for reasons to be assured on both value and quality that they can get what they want every week. In terms of how we think about the competitive backdrop, I think you can see in the recent market reads that there's not a lot of volume in the market at the moment. It's being really clearly competed hard for. and you know everyone's working hard for the volume that they can get and i think you know that reflects you know our first half of the year there's been quite a lot of noise in the in the sort of comparatives obviously some extreme weather impacts this year the impact of the prolonged cyber on last year's comps uh changes in how customers have shot particularly the warmer weather meant that you know customers shot more frequently but often with smaller baskets and that's got to play through into a lower level of volume in the market and I think you know obviously that means that everyone is working hard to secure volume and within that you can see what we're doing you know we've continued to really deliver that combination of value quality and service and then specific to your point on the channel chefs I think really clearly online growth at 9% in the half. We're really encouraged by that.

37:41 We've been working hard over a period of time to build our capacity and also our service proposition and actually our customer satisfaction. We didn't show it in the slides there, but our customer sat moved back in front in the period as well as we continue to really make sure we're delivering for customers online. in terms of what's happening in there you talked about some of the segments so obviously on demand the fastest growing segment we obviously you know went into that market last year and so we've largely completed our rollout getting into you know pretty much all of our supermarkets and convenience stores in the way we've rolled that through and so I think as we look at that going forward, we delivered in the first half of this year 27% growth in on-demand. And actually, interestingly, what we saw is that our total volume of grocery performance was a little bit up in quarter two.

38:33 Thank you very much. um look i think it's absolutely at the cornerstone of our food focused plan which is customers want great value but they also want great quality and they want exciting new food ideas and you know the innovation team uh working with our suppliers on a fantastic job at the premium level 2000 new products this year big focus on taste the difference our biggest innovation program ever for this christmas so a lot happening across how customers are shopping the kind of products they want and I think what we can see in that is our our formula our winning formula continues to make sure we can take a better share we can win big trolley shoppers and customers get assurance in the Sainsbury's offer.

39:38 It's very close, thank you.

39:40 Thanks Manjari. Thank you. Our next question comes from Matthew Clements with Barclays. Please unmute your line and ask your question.

39:50 Matthew good morning.

39:51 Morning Matthew. Matthew, your line is unmuted. Matthew, please unmute your line and ask your question. We will circle back to Matthew in a moment. Matthew, can you hear us?

40:13 Matthew, we'll come right back to you. Okay. Yes, Matthew. We will move on to Rob Joyce with BNP Paribas. Please unmute your line and ask your question.

40:36 Rob, morning. Hey, hopefully. Morning. Hey, Rob, loud and clear.

40:39 Good morning.

40:41 Excellent. So I'll go with three as well. So first one, I guess, sort of stands out as the relative slowdown in performance versus the market. I guess the other thing that stood out was the closing the gap of your sort of overall customer satisfaction versus the other three grocers. They all seem to have caught up quite a lot in the recent quarter. And given that wasn't value or quality, can you tell us what sort of driven them to catch up there? And do we think this sort of relative gap is going to sort of stay closed versus competitors for the foreseeable? And second one, on this quite a lot of process, Post Press reports about your discussions with Morrison's that seem to have been quite extended.

41:33 Should we consider that as potentially suggesting that the kind of food first strategy is coming to an end? The upside from that, you've maybe taken and harvested most of that. And then the final one would just be on the overall competitive dynamic of the market. I mean, interesting to see Aldi there improving for the first time in quite a while. Are you seeing a step up in particular from that element of the discounted space? Thank you.

42:01 All right, Rob, super clear. Thank you. Three questions. So let me start, first of all, on your question on the quarter. Look, I think we're actually really encouraged about our performance in the first half of this year and the fact that we've continued to win share, particularly of large trolley shoppers. That's really fundamental in terms of the strength of our proposition. You know, I would just point out that we've just lapped some of the biggest comps we've seen in any of our plans so far. So this time last year, Sainsbury Plc and I think what we can see in the market is there's a bit more promotion out there, there's a bit more incentive out there and actually what we've continued to do is to deliver our plan and make sure we're giving customers that combination of quality, value and service that they really come to expect from us.

43:06 and so you know as we come into the third quarter you can see in the market reads you know volume volume is is subdued in the market at the moment um and in that context you know we're making sure that we're absolutely delivering for customers what they expect from us we've had continued very strong and we continue to make sure that the proposition is very strong you know and you can see that coming through in the fact we're growing in all channels and in the key parts of the grocery shop our value is as strong as it's ever been in terms of your point on value I'll just come to that next before your middle question look I think as you can see we've got some of the strongest value we've ever seen and obviously through the summer you know as customers shop differently Thank you very much. and you know specifically on the discounters that you that you reference how much our value position has really stepped up compared to where we were before so net nets what would I what would I draw out of that you know volume is more challenged in the market you can see that I can see that everyone's working very hard to get what they can there's a bit more incentive promotion vouchering out there at the moment um you know we continue to deliver our plan and we've taken a better share in the In the half and actually as

44:36 I said, volume gains were a bit better in Q2 than they were in Q1. On your middle question, look, I'm not going to, and you wouldn't expect me to comment at all on the speculation in the media. What I'm just going to absolutely reinforce is the point I started with on the call, which is as a team, we're completely focused on our plan to continue to put food right at the heart of Sainsbury's. And you've seen in our food first strategy we launched in 2020, you can see in next level with you know a few months of this plan to go how much year on year on year improvement in our performance we've been able to deliver you know we've you know pretty much six years now have sustained our performance you know we've continued to win more customers and everything we're about you know not least given the announcement we made with Argos in the summer is continuing to double down on the opportunity the very significant opportunity we see to continue to strengthen our food business and that's that's everything that the team and I are about.

45:38 Thank you, Simon. I guess just to round out, do you still think you can grow profits in this kind of challenged volume of environment?

45:45 You've seen in our report this morning, in our update this morning, we've obviously lifted the lower end of our guidance range. We have obviously delivered an improvement in our profitability in the first half. The central point of our guidance points to increasing profit in the second half. We continue to deliver all of the benefits for customers we committed to, but continue to grow our profits as we do that. So We've got a very clear plan for the second half. We are very focused on delivering it. Our guidance today, I think, gives you a clear message that at the central point of our range, we expect to grow profits 2% in the second half. The range 1025 to 1065. Let's see how Christmas plays out. But we're definitely coming into this period with a very clear plan. And I would just make the point as well, our cost savings program, a billion over three years, Thank you. Thanks Rob.

46:57 Thank you. Our next question comes from Matthew Clements with Barclays. Please unmute your line and ask your question.

47:05 Sorry that muting and unmuting is out of our control on the side, obviously a mess too much for the system. I'll keep it to one because I've wasted everyone's time already. Nectar participations continue to grow, but you don't explicitly call out nectar as a profit growth driver in the first half. If we assume that cost saving broadly offsets cost inflation, is Nectar one of the key explanations for the delta between profit and sales growth? And then perhaps how important was Nix, be it to full price or finest in grocery? Thank you.

47:43 Matthew, thanks. Well, I think just to just to pull up on a couple of the key The numbers we've talked about in the half on Nectar are really important. We talk about Nectar as a big acquisition engine to bring more customers into Sainsbury's and to give them the confidence to get great value. And as you saw, we've had a 9% increase in the number of customers digitally using Nectar. That's significant in the first half of the year given the high bar we started the year with. and 17% more customers now using your Nectar prices. So I think that really shows how fundamental Nectar now is in really driving the total value proposition but also giving more customers reasons to shop with us. And our participation levels now across our supermarkets and grocery online channel are moving into the highest level of performance that we could have expected, well towards 90% overall.

48:35 and I think the way we think about this as you know is that we want to give customers reasons to shop in Sainsbury's and that's why acquisition of customers into Nectar is such a key part of our next level strategy and then obviously as we do that two things happen first of all customers get the value at Sainsbury's they also get to benefit from all the coalition partners that we work with and then that clearly turns into our ability to drive Nectar 360. so you'll be familiar that we committed over the over the course of this three-year plan to deliver 100 million incremental Thank you very much. Thank you very much.

49:44 that's helping drive our ability to drive trade up you saw in the in the video back there you know one of the things more and more as we learn about customers we can personalize how we talk with them and help give them suggestions and ideas and recommendations for example you know to help eat more healthily or our taste the difference ranges and so more and more it's helping in the mix in terms of what customers choose and then we're converting that as I say through net to 360 so um we're really encouraged with the progress right across loyalty everyone loves and obviously as we look ahead, you know, Nectar and our retail leadership, our retail media leadership in the UK is one of the things that's really underpinning our confidence as we look ahead. Okay, thank you. Thanks for your patience. Thanks, Matthew.

50:32 Thank you. Our next question comes from Benjamin Yokyong-Zoega with Deutsche Bank. Please unmute your line and ask your question.

50:39 Benjamin, good morning. Good morning. Just two, if possible. Firstly, on the markets, growth has softened. We're seeing promotions run ahead of full price sales. Have you seen any meaningful shifts in customer behavior, maybe in Q2 compared to Q1? And how are you thinking about balancing volume growth and share gains against potential margin dilution from further price investments as we move through the year? and then secondly I guess to go back to those higher margin profit streams it's great to see profits robust despite the softer sales but can you comment in a bit more detail on the contribution from on demand and retail media in the half I assume these are key profit drivers

51:30 Ben, okay, shall I take the first question, maybe Blathnaid on the second one in terms of how we think about the other streams. So, look, I think, not to repeat, Ben, but just to kind of recap, I guess, in terms of customer behaviour, look, I think, what do we see in quarter two, we saw a lot going on for the customer, not least driven by some of the weather impacts we saw through the summer. you know so I think you know five heat waves and people out a bit less and they shopped more frequently with smaller baskets as I said we had the we had the annualization of some of the cyber impacts last year and then obviously we've had you know we've just had a real focus in customers on the cost of living I think all of those things together have contributed to not a lot of volume in the market at the moment as I said earlier and that volume being competed hard for which has seen promotions running a bit up and more general incentives and coupon activity in the market.

52:27 The way we think about this is, as I said earlier, we've got a very clear and strong proposition which customers continue to respond well to. We're obviously pleased to be raising the lower end of our guidance today and pointing at the midpoint of our new guidance to our profit commitment for the second half of the year. Obviously in setting that range, that tighter range, We continue to make balanced choices to make sure that as we enter this second half of the year, we can do exactly what we need to do, both in delivering for customers and to make sure that we get the right balanced choices across the business. Look, obviously, you wouldn't expect us to do any activity that won't deliver the right level of performance. And so we're very focused on getting things right for customers, making the right balance choices and making sure that we've got the right plan as we come into the second half of the year and what is a more subdued volume set of conditions there to deliver the best outcome that we can.

53:27 Great. Look, we see nectar and food on demand and on demand very much just as part of our business, as business as usual for us. Simon talked about the incremental 100 million from Nectar. That's well on track to deliver this year. There's always a balanced choice on how much we drop through to the bottom line versus how much we invest to drive our proposition. We make those choices as we travel through the year. Food on demand, we got out of the blocks early on that last year. We're really pleased with its performance last year. Of course, others are coming into the market now, so we're seeing a little bit of a slowdown. But I have to say it grew by 27% in H1, so we're pleased with the food on demand performance as well.

54:07 Thank you very much. Thank you. Our next question comes from Isabel Dobreza with Morgan Stanley. Please unmute your line and ask your question.

54:18 Isabel, good morning. Good morning.

54:21 Thank you for taking my questions. My first one is around the phasing of your price investments across the year. We have seen a big improvement in your value credentials over the first half, but I'm wondering to what extent did your expectation for the food inflation evolution over the course of the year impact the phasing? And was there a case of fraud loading as perhaps you expected higher input cost headwinds? in the second half. Then my second question just following up on the rapid grocery market. What in your view is the best action plan to defend market share from here given the entry of some competitors in the space who have their own market share ambitions or is your expectation that their entry may actually enlarge the market meaning that you can still sustain a high level of growth?

55:20 and then my final question on Nectar 360, could you talk us through how you are adapting the proposition for agentic commerce?

55:31 Excellent, okay let's take each of those in turn. So in terms of your first question, we've delivered our plan in the first half, Isabel, exactly as we planned. So when we look at our relative price position, obviously that's a function both of what we've done but also what others have done. and so when we think about the environment overall you know we come to the end of the first half of the year in a very strong value position we've constantly obviously made sure we look week to week to make sure our compassiveness is where it needs to be but just to be really clear we've not we've not made any different choices to we planned To your point, what is different is that inflation is at a lower level than I think most of the forecasters imagined at the beginning of the year. We never made a specific view on where inflation would get to, but obviously inflation is running lower than most forecasters thought.

56:25 For us, around 2%. And I think as we come into this period, we're not seeing a lot of move at the moment, as you'll know. I think when we look at the feed categories, I think a couple of things going on there. I think it's clear, obviously, in some of the branded categories where it's more dominant suppliers, they're very focused on maintaining volume, whereas in fresh categories, I think the pressure is building for obvious reasons. and when we think about fertilizer and energy and the other inputs into fresh food. So I think in fresh food a bit of pressure is building now which I think will feed through in time and obviously what we'll continue to do is balance the right value position for our customers and getting inflation through to the shelf where we need to.

57:11 I think it's hard to be timing of that what exactly play out as I say so far in the quarter that there's not been I think the pressure on fresh food categories will build. In terms of the rapid grocery market, just to recap there, obviously we were really pleased to take advantage of the move we made last Thank you very much. you know improve the operational performance think about how the efficiency of the operation works and I think once you've taken a big scale capacity on that shouldn't be underestimated in terms of how we improve operationally and from a profitability point of view how we continue to drive that and I think look you know on demand is clearly going to be a very important part of the way consumers shop and that's why you know businesses like ours are really thinking about and starting to put in place all of the Thank you very much.

58:39 as we think about on demand you know it's three percent of our total grocery sales today and so it's given a lot of growth but by far and away you know the the biggest channel is still physical shopping and i think you know as we look ahead we'll see growth in in on demand and obviously everyone will cycle through their first year of building capacity we continue to be really confident in our overall proposition as i say we grew we grew volume a bit in our core supermarkets in the second quarter even though we were lapping Thank you very much. Thank you very much.

59:46 So one of the things we're quite focused on at the moment is how do we improve our discoverability? How do we improve our customer experience? So we're really watching the trends, what's emerging and how do we stay aligned with those and move at the pace that the market's moving at and our customers are moving at on that.

1:00:05 Thank you. I hope we've answered all your questions there. Thank you. Thank you. Our next question comes from Xavier Lemene with Bank of America Merrill Lynch. Please unmute your line and ask your question.

1:00:19 Xavier, good morning.

1:00:20 Good morning.

1:00:24 We can't hear Xavier. Xavier, please unmute your line and ask your question. Let's just try to see whether we can make this work. Oh, yes, sorry. Working now. We can hear you. Great.

1:00:39 okay good okay uh it's not like it was anyway um so uh thank you for taking my question so uh first one if you look at the underlying uh operating profits which grew by 3.6 percent and your top line grows extruding fuel slower than that can you help us to think about the operating leverage that you have in h1 and what we should expect in h2 um especially can you help us to understand the cost bridge from here uh labor cost energy cost and How are you adding the cost, you know, going forward because potentially that's where some inflation should start to rise forward. So that is the first question. Second one, just on the operating profit to the H1, so the 525 million, what would you need, what would need actually to go wrong in order to land at the bottom of your guidance?

1:01:32 Just to understand a bit of that. The last point is more on Transferring non-food space into food. Can you help us to understand the kind of capital you've got there, what it means in terms of cell density, but also in terms of margin?

1:01:52 Thank you. Brunette, do you want to take the first two?

1:01:54 I'm going to start with the first two. We, if you look at the middle of our guidance range and you look at where we plan to land for the year end, we will deliver profit leverage over the life of the plan. So we're pretty pleased with that outcome and subject to everything going our way, which is a great second question on that. And so what would need to have be true to land at the bottom of the range of volume and what happens in the budget next week and consumer sentiment. But we are, you know, Fully locked and loaded for Christmas. We're going to serve up a great Christmas to our customers. So we are ready to go on that. What is coming through? So if we look, if we stand back and look at the costs in particular, if we look at the hedging, we hedge about 12 to 18 months out in advance. We're pretty locked and loaded for this year and sort of the first half of next year. Let's see where energy prices move in the market.

1:02:41 But we may see some of those costs coming through into the cogs from our suppliers as well, as Simon talked about earlier.

1:02:46 and earlier on that do you want to take yeah no thanks so on and then on the space questions I'm just maybe just a half step back in terms of what we've been what we've been implementing through next level Sainsbury's so you'll remember sort of two key streams of strategic drive here one was to make sure that we repurposed to your question more of the space in our supermarkets to feed and so specifically we've been continuing to drive that program forward we actually made investments in the first half of this year overall at about 170 stores supermarkets and convenience stores in supermarkets we've been increasingly reducing the space to general merchandise and correspondingly increasing it to food and particularly fresh food and we added you know significant space to food in the half and importantly the general merchandise change just to give you a couple of points to emphasize that so we've been able to improve the sales per stocking point up six percent in general merchandise and we've been able to make you know substantial labor reduction costs and also improve our working capital through reducing the stock holding in GM and so improved in trading intensity in GM, improved assortment and operating cost benefits in food as we continue to drive that program in terms of our supermarket space and then separate to that as you know we continue to selectively open new stores and we continue to open new space you know in areas of the UK where we're very confident we can get a good return actually some of the stores that we've opened now on a which

1:04:16 are now coming through their second year of getting good double digit progress in performance. And we're seeing in the stores, we've added more space to food, both improvements in volume compared to the overall business and also in customer satisfaction as well. So in summary, the space to move in more for more is really delivering as we expected. Thank you, Zoe. Thank you. Our next question comes from Elizabeth Rosemore with Citi. Please unmute your line and ask your question.

1:04:46 Hello Elizabeth.

1:04:47 Hello Elizabeth. Morning Simon, morning Blathnaid. I just had one question, please. It was on demand as well. And yeah, given the kind of shift in competitive context there, obviously, you've still got your first party platform in Chop Shop, which I assume is very small. I kind of think of it as maybe less than 5% of your total on demand business. I was just wondering how you're thinking about that now, given the step up in competition on the third party platforms, and whether you might look to re-emphasize your first party platform. Thank you.

1:05:21 I'm not going to talk about our next phase plans today because we're here obviously talking about the first half of this financial year, but maybe a couple of stats if it's helpful. Look, Chop Chop sales in the first half of this year grew actually a bit ahead of our marketplace on demand platform. We were 34% up in Chop Chop. It's a much smaller part, as you say. Overall in the marketplace in the aggregators, we were up 27% in the half. And as I said, Actually, as we lapped the comp, what we found was we have 35% up in the first quarter, 17% up in the second quarter. Whereas what we can see is a slightly higher performance in shop shops. So look, obviously, shop shops are a really important part of our proposition. You heard on the presentation how what we've done on our app now is join together all of our propositions so it's easier and much less friction for customers to shop.

1:06:11 We're very focused on making sure we've got the capabilities today and tomorrow in the online space. Sales up 9% in online overall. Customer satisfaction improving. We've done a lot of work to make sure that the customer experience in online is the one that we want to deliver for our customers. So it's a real focus for us. And obviously, as we look ahead to how customers can continue to evolve the way they shop in grocery, we're giving a lot of thought to make sure we continue to do and the job that we need to do for them and build the capabilities accordingly so we're really encouraged with how we've delivered on demand you know chop chop a key part of our proposition making sure that we create a seamless experience and as I say you know part of doing that of course is to make sure that the physical store has great availability because we're picking in our stores right and so one of the things we should never miss here is our availability performance is absolutely an underpin Thank you very much.

1:07:28 I'll use that moment to say a big shout out actually to all of our teams across supply chain logistics and in our stores this summer because it was a really demanding summer and actually you know with temperatures up 38 degrees you know put fresh food supply chains across the UK under real pressure and our team did an amazing job to make sure that we could deliver that outperformance and availability to keep operations strong, even despite the weather. And I think that just shows, you know, the sort of combination of both the human determination and commitment, but also the capabilities that we have in our business now. Thank you. Thank you. Our next question comes from Sridhar Mahankali with UBS. Please unmute your line and ask a question.

1:08:10 Sridhar, hello. Hi, good morning.

1:08:12 Can you hear me? Yeah, I can hear you, Sridhar.

1:08:14 I'm clear.

1:08:15 Okay, very good. Thank you. Thank you. Listen, thanks for taking my questions. I think most of them are sort of done already. Just a couple of ones. One is a clarification, Simon. I think what you're saying, I understand what you're saying, but just wanted to double check. That is, I think in the context of this period of in some time versus industry for you, what does making balanced choices mean? Is that a change in trade plan to drive more volume? or really trying to focus on profitable volume. I thought I heard the latter, but I just wanted to understand that a little bit more. Secondly, I think you've hinted at sort of efficiencies to come. You've built the bulk of the volume there in on-demand and I guess really online as well. Have you started to see profitability improve already in the first half in on-demand and maybe take a very big step back, talk about the online market?

1:09:11 As a whole, how are you seeing profitability trend there, either in the first half or maybe a route? If you could just talk through your thoughts there.

1:09:21 Thank you. All right, well, shall I try and maybe pick up the first question then, Blathnaid, and maybe more broadly on online? Yeah, I mean, let's just recap because it's super important, Sridhar, to make sure we're all clear together. So, look, I think we're all clear on the reality of volume in the market at the moment. We're all clear that, you know, it's become more subdued through quarter two for all the reasons we've talked about and just how much, you know, in what is already a very competitive market, everyone's competing hard for the volume that's there. you know as I said a few minutes ago you know we consistently see the strength of our proposition really connecting with customers and therefore our focus is on delivering and executing our plan to make sure that that you know that trusted value week in week out and the ops that go with it, you know, we're really in a good place.

1:10:06 But obviously you wouldn't expect us, you know, to add activity in that isn't sustainable or isn't profitable. And so when we think about where our plan is, we're going to obviously deliver for our customers the very best proposition in the second half of this year. We're going to focus on the things that we know our customers really respond to. You know, in our range, we've obviously tightened up our range a lot today. We've brought the lower level up to now, you know the 1025 1065 and we've done that to make sure that within that framework we'll make the balanced choices we need to so you know we're not going to we're not going to do things that aren't profitable we're going to really focus on delivering the best offer this Christmas for customers and you know we feel very confident about our food business and you know after multi years of volume out performance multi years of new customers joining Sainsbury's you know year on year on year now we've demonstrated the strength of our offer and we'll continue to Make sure we deliver that in the second half of this year and grow profit as we do it.

1:11:07 Let me take the online operations. Look, we are really proud of what we do in online. We've been at this for decades. We're pretty good at it. So if I talk about the goal, let me start there and then I'll move on to FOD. If I look at the goal, our items picked per hour is really top end, top quartile. But if we look at some of the technologies that's coming, some of the AI, somehow that can drive efficiency. We see further opportunity to get even better of what we do today. Now, if I look at the FOD then on the other side, but that has emerged and developed really, really quickly. There's a lot of learnings from Gal that we can bring into that operation to drive efficiency. So for us this year, it's really about standing back and saying, how do we make a better, more efficient operation? How do we improve the customer experience as well in the food on demand? So more to come on that in the new year as we talk about our strategy.

1:11:55 Thank you, Shredda. Thank you. Thank you. Our last question comes from Clive Black with Shaw Capital. Please unmute your line and ask your question.

1:12:05 Clive, good morning. Glad to see you've changed the name of my company, which is which is novel. Thank you for your presentation and time for my questions. Three if I may, quick ones. Sam, you talked about change in the game with respect to your productivity programme. And I know in the new year you'll set out the next medium term outlook. But what do you mean by that? What is it that's changing the game? And in that respect, are you indicating that you're confident of more productivity benefits to come? And then you set out on the Nectar programme that you were looking for 100 million of incremental gain to 2027, which is on track. I just wonder to what extent pollen has changed?

1:13:00 that metric gives you more confidence or even again could lead to an elevated contribution in time you know 100 million three percent of say the amount of questions on quick commerce the three percent of sales versus these other moving parts kind of staggers me And then just lastly, diet suppressant drugs. You talked about fresh food sales being up 4% plus. I just wonder whether you're starting to see corresponding changes in demand around the impact of ultra-processed food and diet suppressant drugs that may be starting to influence the layout of your stores and where you take things going forward. Thank you.

1:13:49 Thank you. And we will definitely, it's corrected now on screen. Very good. So all good. Let's take this in turn. Look, I think on the first question that you know well, throughout our plan since we started in 2020, we've been really clear that we have to save in order to create the investment capacity in order to win. That's been the core foundation of how we thought about our plan now over six years. and you know as we said in the in the upfront presentation you know we're on track to deliver a billion of cost saving over three years that will be 2.3 billion of cost saving over the six years of food first and next level Sainsbury's and you know we've got a fantastic team in our business working day in day out looking at where you know where we can become more efficient it's not about cost saving it's about efficiency and productivity so that we can deliver better for customers and we can also find new ways of working and I think you can see today even in the first half of this year and if you take a you know a fundamental in grocery retailing you know how do you how do you handle reducing product in the most optimized way so you reduced waste you go back to the products as few as few occasions as necessary and you make sure you get that freshness back in the supply chain and that would be a you know a really good example we're using AI technology we've put a new capability in place it's making double digit www.sainsbury.com These are examples of technology-driven capabilities.

1:15:32 We're thinking a lot about how we connect the whole operating system in the store together. We think about all of the store operational tasks that happen hundreds, thousands of times every day in a store. There's a huge opportunity actually to think about how we do that in a really connected way with technology helping that. We'll be talking more about that with you as we look forward. Productivity you know is absolutely the heart of the way we've delivered our plan today and of course will be and many more. It's one of the things you remember in 2024 when I said to you we said to the market we were taking the opportunity to invest in new technology, to invest in new capabilities at a time when other competitors didn't have the balance sheet strength to do that and you can see in the next level plan how that's really played through.

1:16:22 Look I think on your second point we're really excited about Nectar and Nectar 360. and as I said earlier Mark and Amy and the team have done a fantastic job really building a platform in pollen which means that now you know 600 campaigns in the first half 100 plus clients you know building unique capabilities that no one else in the retail media space are able to do today and you know you saw as a result of that you know that investment and that capability Thank you very much. in terms of capital and it's been a huge focus in Next Level and we'll continue to drive it forward.

1:17:29 We're on tracks to deliver the 100 million we committed. and almost more importantly leading capability in this you know absolutely the heart of this that we made strategic investments choices that are giving us that competitive advantage and look I agree with you when we think about the topics we've covered on the call you know retail media and loyalty that customers love is fundamental to creating value in this industry and we've taken as you know a real leadership position in doing that and then on your last question look I think sort of maybe just half a step back on this Sainsbury's over decades has always been at the heart of the nation's food conversation however customers want to shop whatever choices they want to make and I think as we enter this period where making healthier choices It's very front of mind for customers. Customers want good value food, but they don't want to compromise at all on the quality or on the nutrition of the food that they buy.

1:18:20 And as you say, there are new trends happening, not least with GLP-1. And so we look at all of these shifts happening in the market. We're making a big shift on added shift in health. We've made a lot of moves in the first half of the year, for example, in fibre, really putting fibre choices at the front of our customers' thing. Actually using Necta, we're helping to you know nudge and point customers towards personalized choices about the different products we have the different you know health choices they might want to make and then specifically to your question that no surprise the categories that are growing fastest as a result of GLP-1 are protein, dairy, you know produce and so you know we've just done the biggest space reset in our company for six years in fresh food which means we're using our space to make sure we're responding to how customers want to shop. Our job is to give customers the best choice in assortment and one of the things that we've done it you know through Food First and Next Level Thanks, Clive. Bye.

1:19:49 That was our final question. Let me just wrap up the call then to say, first of all, thank you for some very good questions this morning. I hope we've been able to give you all the colour on the results on our latest this morning. It's been very good to speak together with you this morning. So a big thank you from Blathnaid and I, and obviously look forward to seeing you soon. And thanks a lot for joining the call.