Good afternoon, ladies and gentlemen, and welcome to Spinneys' Q2 2026 earnings call. My name is Jean Jacque van Zyl , Investor Relations Officer for Spinneys. Joining me today are our CEO, Sunil Kumar, and our CFO, Mukesh Agarwal. Thank you for being with us this afternoon, and our thanks to Closir for hosting today's call. Before we begin, I would like to draw your attention to the disclaimer on slide two, which contains important information regarding today's presentation and discussion, particularly in relation to forward-looking statements. Today's call will follow a familiar structure to our previous calls. Sunil will open with our financial and operational highlights, followed by an update on regional challenges. Mukesh will then walk you through our financial results in detail. Sunil will close with our outlook and strategic focus, after which we will open the floor to questions. I will now hand you over to our CEO, Sunil Kumar.
Over to you, Sunil.
Good afternoon, everyone, and great to be here to present our H1 result. As you have seen the numbers, we grew 5.1% revenue, almost AED 1.9 billion, and like-for-like stores grew by almost 2% and EBITDA margin is at 19.4%. E-commerce was one of the big contributors. It moved to 23.6% growth with a participation of 19%. Therefore, the profit after tax, AED 175 million, and it is up by 2.5% and interim dividend declared by the board is AED 122 million, which is equivalent to 3.40 fils per share. The contributors for the growth, despite the challenges and disruptions we faced in the second quarter, still the transactions growth is good compared to the last year. We have got almost a 6% growth.
Our key pillars of the business, which are the two fresh food business as well as private label, both have done extremely well at the current circumstances. We have got a slight decrease in the basket because of the uncertainty and customers' behavior had shifted a bit. They, I should say, trade down, considering that the situation, as well as they started coming to the stores, whether it is e-commerce or in the physical stores, quite often instead of buying a bigger basket. Our store, from 83 stores, we moved into 93, and e-commerce participation is now almost 19%, as I mentioned earlier. Now we have a continuation of our rollout plan, and we have opened 12 stores this year. 11 stores we opened new, and one store we closed. So total stores is 93.
And one thing I wanted to highlight here, it is a milestone for this business. We have now reached 1 million square feet area of trade. As all of us know, the challenge which all of us have faced in this region, the disruptions, and as far as the retail is concerned, particularly a retailer who is focused on the fresh food, our key value proposition is fresh food based. And we face the challenges like any other businesses. And despite all these challenges and disruptions, our H1 result was still grew 5.1%. The sales had an impact on the month of April, and May it had continued, but it was better than the month of April. But April, May, June, we saw a positive result when the schools and Eid al-Fitr, actually the vacation is over and customers started coming back.
If I wanted to dissect our store format, we have four types of store format. One is purely based on malls. One is office-based stores. Predominantly, it is a meal solution stores. Then we have a grocery store, which is a meal solution plus a smaller format. Then we have a neighborhood stores. The most affected stores on this crisis time was the tourism as well as office-based stores. But from June onwards, when the school reopened, we have seen the sales coming back in the month of June. That is the reasons why we managed to get 5.1%, despite there is a big drop in the month of April. And the second challenge what we faced was the availability. As I mentioned on the first quarter, we faced a tremendous cost pressure from sea container to air freight containers.
But one of the key objectives for Spinneys was to ensure that we will have a stock on shelf, and to achieve stock on shelf, we had taken many routes, including a road corridor to get the stock on time. And we should say we were almost on the normal pre-conflict time. The stock availability and service level were on almost 92%. Now we are running in between 83% to 88%, which we are very happy that we have managed to get it. So if you are a customer, if you go to Spinneys or Waitrose or any of meal solution stores, you will see the availability as it used to be in the past. The freight and ports, which we had a challenge. We couldn't get anything on Dubai Port or Abu Dhabi Port.
We have to use Fujairah, Khor Fakkan, Salalah, Jeddah, those ports, and therefore the freight cost was almost double. An example, $3,000 per container pre-crisis time. That in the crisis time from the month of April and May, it moved into almost $17,000, if it is from U.K. or from Europe. Now it is almost is a sustainable manner, I should say. It is almost on $17,000, which is still higher, but we are managing and we are looking as to best cost options and optimizing the containers into the productive assortments into the country. We also look at what are the other areas of improvement we can bring it to navigate and mitigate this disruption. We saw one of the corridor which was available was road transport. So we started bringing things, stock from U.K. and Europe because it required only 17 days.
Earlier days, it was 19- 20 days, but now we got into almost in 15- 17 days, the product from U.K. or Europe on our warehouse. We are very happy. We have taken 27 containers on road corridor. Though it is an expensive, if you are looking at the lead time of the product, for example, eggs, chips, whatever the short shelf by products, we were able to bring it by road corridor because it has a reduced lead time, and therefore, you have a better shelf life to sell in within the stores. That was an avenue which we have got it through this crisis, and we will be using in the future regardless of what the cost is going to be. The margins still, we have managed to get it.
I know you may have many questions on the second quarter, H2 quarter margins, why it became better than 41%- 42%. We can give you details on the questions going forward. Next slide. While we were all going through April and May, we realized that we always wanted to help the community, and we believe that is inspire our communities to live better lives is our motto. From the lessons we learned from incubator program, we identified the individual chefs who were struggling on the crisis time to operate their own restaurants. We invited those chefs to operate our counters with their key products, and it is also it is not a restaurant, it is not a dining restaurant, but understandably, it is a supermarket. Customers have an expectation on the price point as well as the quality.
We managed to get 10 chefs to work with us, and we got a high traction and customer appreciation. We got almost 20,000 transaction from the chef counters. We also did another drive. Understandably, we were looking for a local recruits. Why it is a local recruits? Because we realized that there are a lot of opportunities within Spinneys, and we wanted to give, extend our hands to the community and the local market, and we have got a very good traction and good appreciation from customers as well as the people who are looking for a job in need. Now, the next is a financial insights and highlight. Mukesh will take you through. Any questions you may have it, please ask the questions, and we are ready to answer those questions. Thank you. Mukesh.
Thank you, Sunil. Good afternoon, dear investors. Pleased to meet you from last quarter, and we had multiple round of investor engagement since then. We are able to update you regarding how we are navigating through the current crisis, and, I presume most of you would be aware how Spinneys as a company, as management, we have dealt with the situation. You can see the numbers, how our management or how this entire process has resulted in some good dividends for us. If you can see the number for the current period, our revenue, despite all the current challenges, in the second quarter, especially even the month of March, you can see we have grew by 5.1%. Last year, it was AED 1.8 billion in revenue. Our GP has AED 87 million, AED 84 million, which is a growth of 4.1% from last year.
Our cash profit, which you call adjusted EBITDA, is AED 369 million from last year to AED 365 million, grown by 1.2%. Similarly, our profit before tax, which is a key indicator for our performance, has remained stable. Last year, it was AED 202 million. This year, it is AED 203 million, a growth of 0.5% year-on-year. Our profit after tax, after considering the corporate tax as well as the Pillar Two tax requirements, has grown from AED 170 million last year to AED 175 million, a growth of 2.5% year-on-year. Our free cash flow conversion is still AED 81.94 million. That gives us a very strong position to meet all the capital requirements for the remaining six months as well as our future expansion plans, together with our priority as making sure that we pay stable dividend to our shareholders as we have promised in our dividend policy during the IPO.
Our net debt is AED 225 million. That includes the lease liabilities of AED 1.06 billion. From that, if you remove the cash balance of AED 843 million, our net debt is only AED 225 million. The dividend that was proposed and approved by the board of directors is 3.4 fils per share, which is equivalent to AED 122.6 million. That gives an annualized dividend yield of more than 5% on the current share price. If you have to dissect the retail revenue further, you can see that last year we were AED 1.79 billion. Almost 2% was contributed by the existing stores, which is like-for-like growth of 1.9%, and the new stores contribute around 3.5%, which is AED 63 million, and AED 2 million we lost because of the fact that we closed one store.
On overall basis, we opened 11 stores, and we closed one store, and our online sales penetration is also helping us increase our overall sales number, and you can see that the penetration has increased to 19.1%. Also driven by the fact that the fresh sales and the private label penetration is up by 20 basis and 260 basis points respectively. Our retail revenue, if you look at the two quarters, there is a blip of 5.4% negative LFL in this quarter, mainly driven by the UAE numbers, especially considering the fact that April, as Sunil Kumar mentioned, was significantly down. But the degrowth that we saw in the month of May was lesser because schools reopened from end of April, and then people started coming to offices by the end of April as well. May was better, and June was still better than last year.
On an overall basis, you can see we had an LFL of -4%, but it really helped us in getting us an overall positive growth of 5.3% for the entire six-month period. If you have to split the GP, dissect the GP further, it looks a bit different to what really you would assume. Our GP has gone down by 0.5% from half year, from 41.5% to 41%. That itself is a very, very robust margin. In terms of growth, we have grown from AED 753 million to AED 784 million. If you look at overall, GP has gone down by 0.5%, mainly because of the fact that during the second quarter, we have the higher freight cost and the inflationary pressure, which is also due to the fact that there are a lot of container delays, which resulted in lower shelf-life products coming at the time of receipt.
We had to pass on higher wastages and higher provisions on the income statement, as well as the fact that in terms of the cost that we are able to pass on to the customers, were not on a 100% basis. Because as we discussed in our previous engagements, in the month of March, we as a company, as a management, we consciously decided not to pass on the price increase in the month of March. In the first few weeks of April, even for around 500+ lines, we did not pass the price increase. Then post-April onwards and May and June onwards, we have been trying to see how much we can pass on the price increase on a strategic level. As a result, you can see there is an impact of 0.5% on a half-year basis.
But if you look at the quarter itself, you can see there is an increase of 0.6%. I just want to clear the air that this is not because of the fact that we have increased the GP margin. It is because of the fact that we had made a provision in the first quarter regarding, since we were expecting some significant container delays due to the straight situation. So we had made a provision for all the goods in transit. Some of that we were able to recoup. As a result, we had to reverse those provisions in the second quarter, which helped us increase the margin. As a result, I would request that you look at the GP margin on half year to half year basis rather than just having a look at the second quarter GP margin.
The net GP that we have made is 41% for the second half. If you look at EBITDA, mainly flowing from the GP, because the GP is down by 0.5%, but you can look at the adjusted EBITDA, which is down by 70 basis points, because the fixed costs tend to remain the same. Still at EBITDA level, we are at 19.4%, with increase of 1.2% from last year. On the quarter basis, our registered EBITDA is 60 basis point up, which again, as I said, is flowing from the GP, since we reversed some of the under-traced provisions from the first quarter, and we have made an EBITDA of 20.7%.
Our profit before tax is up by 40 basis point in the quarter on quarter, but again, down by 40 basis points in the half year because and we made 10.7% on sales, which is again, a significant achievement considering the current situation. Because as management, we also took a lot of cost rationalization measures in the second quarter. We did our staff realignment in the stores. We looked at each of the discretionary spending that we are doing, making sure that the cost which are really necessary to make the product available on shelf as well as keep our stores in motion, that was the cost we were incurring. Any cost which were discretionary in nature, we are trying to see if it is really required.
As a result, you can say that despite the fact that our GP went down by 70 basis points, our profit before tax has gone down by 40 basis points. That is a 30 basis point saving in the overall cost structure of the company. The profit for the period similarly has gone down by 30 basis points, and we have achieved 9.1% on sales as an overall profit after tax, resulting in a net profitability from AED 170 million- AED 175 million in the first half. This is a standard slide we present every year. Very important from the shareholders' perspective that we are generating cash, and the cash that we have generated is 77.5%, almost AED 194 million, which after paying for the previous quarter CapEx and the free cash flow is available.
AED 194 million we can use to pay off the dividend that we have committed, as well as all the future expansion plans and dividend in the future. Net debt is negative if we exclude the lease liabilities. We have significant cash balances on the balance sheet, giving us a very strong edge to prepare for expansion. I will pass it on to Sunil to discuss about the strategy for the remaining months.
Thank you very much, Mukesh. Strategic focus, if I look at the operation side, is of course, as we know, the cost of goods is still inflated. Air freight cost is still three times more than what it would have been in the normal pre-conflict time. The supply chain efficiencies we are focusing on, where we can bring the ingredients in the best quality but an affordable price, which regions we might have to pick, whether it is an American continent or Asian continent or European continent, we are working on that to get the efficiency. Our focus is on store opening, which we have committed, and we wanted to get the dates on calendar and on time. We have, as we mentioned in the first quarter, we are going to Kuwait and Philippines.
In Kuwait, we will be in a position to, let's say, 100% when should be in a position to open it, which will be in somewhere in December, we wanted to open, but it will be moving to, if the things are what today, we will be in a position to tell by October whether it will be in December or in January. Philippines, we are looking at the dates, whether it is in December or in January, but we wanted to open end of this year as possible. Of course, one of the key decisions which we declared into the DFM, that we are taking an additional 20 percentage of the share from our partner in Saudi Arabia. The reasons why we are increasing, because we believe in Saudi Arabia. We understand that to turn around that stores, we require economies of scale.
We are already on the site and almost getting finished those two sites. One is in Jawharat Mall, one is in Diriyah. We will be in a position to open in December or in January, but there are two more stores which we have committed and which are the ideal situation for Spinneys customer base. One is in ROSHN development, and one is in KAFD3. They call it KAFD3. We have seen a turnaround of Saudi stores, particularly the first store we opened, and second and third store. In some of the months, we have seen cash positive, and we have to look at what we can bring into the business, whether it is in how will we increase the sales revenue as well as the efficiencies, then we can turn around these three stores.
We have successfully acquired 20% share from our local shareholders, and we will be in a better position, which shows the confidence in the market and what we wanted to achieve from Saudi market. We haven't changed any guidance for 2026. It will be bit of an irresponsibility from our side to change for the future, not understanding exactly how the crisis and challenges are going to be for the next six months. But we are still confident that the guidance which we have given in the beginning of 2026, and we stick to that guidance, and we don't want to change at the given time. I hope you understand the current situation. Anything changes in the future, the next quarter, we will be in a position to explain.
Thank you, Sunil. We will now hand over to Closir to moderate the Q&A section for us.
Thank you. Thank you very much for the presentation. Just before we open the floor for the questions and answer session, we will be displaying a short survey on your screens. Your feedback will be greatly appreciated. Without further ado, if you are connected via the phone and you would like to ask a voice question, please press star two on your phone keypad and wait for your name to be prompted. If you are connected via the web, you can also request to ask a voice question or send us your question as a text. We'll just give a moment or so for the questions to come in.
I wanted to give you an answer. Actually, I started with Saudi in the last slide, so I wanted to continue with Saudi. The question is whether it was the other party, our joint venture party, wanted to sell it. The answer is no. We approached them, and we wanted to sell their 20%. We were looking for, in fact, major share, but they are not willing to pay because they also see the future in Saudi Arabia. It was from our side, we approached to get that 20% of the share. And strategically, we wanted to have a majority of the shareholding. But when we started in Saudi, one of the objectives, one of the strategic approach we had, we wanted to have a local partner all the time in the countries where we don't have our own know-how.
It was an inevitable proposition that we wanted to maintain. That's why we have a minority shareholding. And the second question is, we are taking the measures. It is a day-to-day business, and it's a very dynamic and complex business. Every day we had to consider what are the actions we are going to take, whether it is in the factory, sourcing offices, in commercial side, as well as in the operations. It is not a specific one bullet thing. It is a combination of day-to-day efficiency, which we wanted to bring in. So I can't specify which areas where we are looking at it. Of course, you have seen the freight is one of the components which pays much more cost, and therefore the inflation. So we are looking at what are the options that we could bring in.
And if the first question, if you are asking, as I mentioned, April was the month, which is a double digit minus figures. In May, we saw it is in single digit, and in June, there was a growth compared to April, May, and June. So we are very happy to see that June has grown as single digit. In July, we can see a double digit growth. In August, I don't want to give you what is it then, otherwise you will make the same query, but I am giving an advanced guidance of what is going to happen in July, August. So sorry that I will not be in a position to say what is the growth of in July and August in specific. Now, the last question, has the situation deteriorated further following the recent geopolitical escalation? And it is not.
I am very happy that, as I mentioned, our service level has moved from, in April month, it was more or less 75% to 80%, but it moved into now some days it is touching on 90% availability. Look, one of the things which we have managed very well because of the private label we got from where it was five years back and where it is today, we have a 47%+ market revenue generated from private label. So two things is visible here. One, we have 100% end-to-end control, not dependent on the suppliers, not dependent on the local vendors, not dependent on the national brands, but we are depending on ourselves and our efficiency as well as the supply chain cost effectiveness. So we are happy to see that the private label is growing, which shows the customer's confident on the private label.
And at the same time, you have to look at the margin we have maintained. One of my personal view why it is by June and July it started coming back as it was in the past because of the customer's confidence, the shelf availability of the product in the store. If you go to a physical store today, and you can't figure it out whether there was any challenges we faced. Thanks for our team who is working day and night to ensure that where we can bring the best source of quality product and how will we get those products by freight effectively into the store. Thank you.
Thank you. Thank you very much. Our next question comes from Liam Brown, Panmure Liberum. Liam, please go ahead. Your line is now open.
Hi. Yes. It's Wayne Brown at Panmure Liberum. Just two quick questions from me, please. If you can just walk me through price and volumes in H1. Secondly, you refer to strict control over discretionary capital and OpEx in the half. Can you just run me through what costs were reduced or deferred, and how much did that support your Q2 EBITDA? Thank you.
Yeah. Okay. The first question regarding the transition growth, our transition growth has grown by 6% in this period, and our average basket size has gone down by 0.7%. If you look at the transition growth, as Sunil also mentioned, the second quarter reduction regarding the volume, it was mainly coming from the mall stores in the month of April. Post the conflict when the flights were not working, were not flying, the airports were not working. We had a significant impact when the repetitive flights restarted, then we had a significant impact on the tourism. A lot of tourist-based stores had a more than a double-digit impact, even on the higher side. When the schools reopened in the month of April, when the schools reopened and when the students came back and when the offices started coming back, the volume started increasing.
The meal solution-based stores were still impacted because of the fact that working from home was still continuing. Some stores, for example, the Terminal 1 store in the airport was still facing issues because of the fact that the flights are not 100% operations. But the de-growth that we saw in the mall stores in the month of April, the de-growth as you see today and even in the May and June, the de-growth has come down significantly. The meal solutions as a store are improving now, but still not to the same level that we would expect. The neighborhood stores were quite resilient, though, even during the situation and even post that, they have been quite persistent. On an overall basis, we see the growth, which we saw in the month of April, is coming down consistently.
In June, it was better than last year, and things are looking better and better since then. Regarding the cost measures, Sunil said we are looking at each and every line in the P&L to see what savings we can achieve. We are challenging every cost, and we are talking to the relevant contractors, relevant suppliers to see where we can save costs. Some costs that we save could have a long-term advantage, long-term savings for us. Some costs could be just one-off in terms of making sure that, for example, some of the business travel, which were really necessary, were only allowed. But something which was not necessary was postponed or which was not allowed. Every line item was looked at, and that's the reason you can see there's an impact of 0.3% on the overall SGA.
That is a reduction because of the fact that we were able to successfully navigate the cost rationalization. Thank you.
Yeah. No, that is very helpful. Thank you. Can I follow on with two more, or should I wait?
Please wait. I can see other questions. I realize
Yeah
moderator, I was answering one of the first questions Ahmed asked. Unfortunately, those people who were hearing, listening, did not understand what was the question. Sorry for that. Back to you, moderator.
No worries. Thank you. Thank you very much. Wayne, we will move to the next question, but we will take yours later on. Thank you very much. Just a quick reminder, if you are connected via the phone and you want to ask a voice question, please press star two on your phone keypad and wait for your name to be prompted. If you are connected via the web, you can also request to ask a voice question or send your question as a text. Our next question is a text question from Aqsa Shaikh from Decimal Point Analytics. What is the expected for year 2026 CapEx, and how does it split between new store build-out and refurbishment of the existing base?
Aqsa, thank you for the question. We have budgeted the new store as well as the refurbishment. If you look at our income statement and cash flow, which does not have much variations, we are still going ahead with whatever we have planned and budgeted because we do not see that it will have an impact on our cash flow nor on the balance sheet. We see a great opportunity for going forward because many of the stores which we have signed, as a retailer who is confident about the region, we are actually looking and building those stores. For example, on the crisis time, we opened two stores. in May, we opened one store in JBR, Jumeirah Beach Residence. It was a tourism-based store, but still we believe that the residents who are around will come to our stores, and we are happy with the result.
One store we opened in Abu Dhabi. So we are happy that we will still be going with the plan as we have budgeted with the CapEx, and we do not see any problems going forward in terms of cash availability or cash flow or balance sheet. Thank you.
Thank you. Thank you very much. Perhaps we can go back to Wayne for his follow-up questions now. Wayne, your line is now open again. Please go ahead.
Thank you. So three from me, please. The new stores, can you just talk us through how they have been performing relative to your expectations? Clearly, there were trading differences this year, but just the returns that those new stores are generating. On the cash conversion, if you could just walk us through why the cash conversion weakened. Lastly from me, in the Philippines and Kuwait, can you walk us through the costs relating to the launch in those new markets and how you are managing the management bandwidth to obviously be operating in two new geographies again? Thank you very much.
I will answer the first question. When we sign with the properties and availability of the properties, as I mentioned earlier, we have four formats. One is meal solution-based store format, which we call it The Kitchen by Spinneys, and one is a grocery model, one is purely on the malls, and one is neighborhood stores. The neighborhood stores will normally, it takes time, one to two years, because if we are not there, we lost an opportunity, and it is our job as a community to ensure that we are going along with them. All the developers here prefer us to be with them because they know we will be accelerating, and we will not be compromising on the quality of the operation, regardless there are residents or not.
If you ask me what is the return on investment within six months to one year or two years, we haven't seen any problems. Now, also, please bear in mind, we closed a store this year because it was not working for us. We don't carry forward a store if it is not working, and we don't see there's a future within that store. It doesn't matter whether we have signed it, but we will take a categorical decision-making saying that if it is not a future store for us, rather than you are bleeding and allowing that to dampen, we will take an immediate decision to close the store. We are so active to take the decisions if it is not working.
All the 11 stores, apart from the one store we closed, we are happy with the performance, and I think that these stores will give us a future revenue and bottom line. Second question, the cash flow, please, Mukesh?
Yes. On the cash flow conversion, if you look at the number 77.5%, this is more to do with the timing difference because, for example, if on the month end or in the period end, in our company, the payment cycle runs twice in a month. So it's on 15th and on 31st. 13th and 31st. If for some reason the payment cycle falls on 30th, 31st, which is a holiday, then the payments happen on the coming Monday. So effectively what happens, the real cash out, the checks are cleared only one day after the month end. If you go back to December, it looks very high because of the fact that most of the payments are made in post-year-end. As a result, there's a gap between the payable balance as of the period end and 30th of June.
You will see the huge difference due to this timing difference. As a result, you will see almost a number which is 77.5%. There is a difference of working capital movement, which is driving this calculation.
Okay. I think there is one more question on Kuwait and Philippines.
Yeah.
Philippines is an investment, which is a 40% investment which we do. We do not consolidate that account. Ayala, which is the biggest property developer in Metro Manila, they wanted to have retailers, and existing retailers, they were not happy because they were not keeping up the premiumness of the malls, if you know Metro Manila well. We thought that that is a great opportunity for us. At the same time, we do not want to manage it because we do not know that region well. We have not moved out from GCC, and we do not want to experiment in the market where we do not want to manage, and we do not want to spend time and efforts of the management in that region. We took a strategic decision. We will be managing that store on behalf of, not managing, what the word you want to-
Operational.
Operational. We will operate that store for two years, and we will be charging the time spent as well as the brand and the private label opportunities, et cetera. We are looking at the financial model it will work with us. But it is our responsibility to hand over a store which will carry the brand value in Philippines and in Manila. At the same time, it is a test market whether we can go to the outside GCC and how the customers are going to accept, and it is a better model in Philippines. We have already assigned the commercial team. They are working on already in Manila while we speak. We also have a construction taking place of two stores. We will be opening 3,500 stores, which the construction is taking place, and there is another neighborhood store.
Our plan is to get 10 stores within a two years time within the Ayala properties, because the Ayala properties having enough customers in flow as far as mall is concerned. In Kuwait, we have a 50% shareholding between Alshaya and Spinneys 1961, and we manage the business. Why Alshaya? Because Alshaya is a very prominent business entity in Kuwait, and they understand the Kuwait market very well. They help us to navigate around the issues we may face, which we don't know. We are confident that Kuwait is a market where the premiumness and our proposition will be well accepted. While we speak, already the construction is taking place in Avenue Mall. That is the first store. Second and third store are in pipeline.
Hopefully, I do not want to say hopefully, we will not be opening this year, but we will be in a position to open in January. Second store will be in second half H1 next year, and thereafter, a couple of more stores. Thank you for the question.
Thank you.
Okay. Thank you. Thank you very much. Just another quick reminder, if you are connected via the phone and want to ask a voice question, please press star two on your phone keypad and wait for your name to be prompted. Our web participants can also request to ask a voice question or send their question as a text. Our next question is a text question from Rahul Shah from Kepler Cheuvreux. Can you provide more information on the quarter-on-quarter gross margin improvement? Is it due to mix, more private label? To what extent have you been able to pass on higher input costs?
Thank you for the question. It is a very insightful question, in fact, because if you look at the quarter two result, you have seen a 42.2% margin we have generated. Of course, I am expected that question. There are a couple of things, realistically. What happened in the month of April, as I said, the service level of the local vendors were very low. And of course, Spinneys as a brand always give a paradox of choice, particular categories for each and every category. So we give more assortments because we consider the ethnicity, and they may have their own choices, and it is our job and responsibility to give the product which each and every customers are looking from Spinneys.
When the local vendors were struggling to give us the stock, we had a lot of tail stock in the sense, we call it in the retail term, it is a tail. And the tail, normally, Mukesh is very prudent and he will be considering as in a stock aging provision. And we had a certain stock aging which was sitting because of the tail was not working well, and we had to take an action. That is one factor. And second factor is when in the March, when the crisis started, we had nearly 198 containers were on the sea. We do not know where it was. Some of the containers were diverted to Africa, India, Sri Lanka, Singapore, et cetera. So we had to provide those containers because there was an uncertainty on the containers. That is why you may see the first quarter, the margin was only on 41.1%.
Once we got those containers back into shelf and Mukesh was in a position to release some of the stock aging provisions. And second, because of the tail and the stock which was not moving as we expect, we are not expecting some of the stock may not be moving faster, but it is a requirement for the business to keep the commitment for the customers and ethnicities. But those stocks started moving. And the third thing is the private label. You have seen the growth of private label and customers got more. And of course, the commercial team had introduced more SKUs on private label. So it is a combination of three things together. That is what made us a 42.2%. And still we see the continuation of that growth in the month of June and July. Thank you. It is a long question.
Thank you. Thank you very much. Our next question is a text question from Emad Elrokhy from Barstow & Company. "Congratulations on keeping first half revenue and profit growing despite the freight disruption. First question is, you showed total availability at 83, 88% in second quarter, and shipping delays came down from a peak of 38 days in March to nine days in June. As you revisit full year guidance in Q3, what would you need to see in availability and like-for-like sales before you feel the business is back to a normal trending run rate?" And there is a second question on Saudi. "Now that you have moved from 50% to 70%, does that change how you think about growing the business there, or is it mainly an ownership step?
Thank you for the question. As a business leader, I wanted to see almost a 95% service level. What we mentioned by 38 days of the delay, we got it now to nine days delay, but still, that's a delay. Nine days is still delay. We wanted to ensure, as a business and everybody's looking and working towards how can we reduce the lead time. We are working on the lead time. Our objective is not to get into 83 or 85 or 88. Our objective is to get, regardless the crisis there or not, but I wanted to bring into a 90 plus service level, which will make us in a position to cater enough quantity on the shelf. Another thing I wanted to just remind that our business model is 65, 64 plus percentages of fresh food.
It is a high turnover business in terms of we have to bring today, and we have to sell within two days. The chilled products is only, that's what give us a one week or maybe a 10 days shelf life, but it is a high turnover business. That's what making us so successful. The second question is, of course, we bought Saudi business considering that we can turn it around, and we wanted to have a control stake in our. We had the control stake, 50%+ management belongs to Spinneys 1961, as well as the voting right was with Spinneys 1961. But we wanted to ensure the speed which we take in terms of the capital deployment is in a position. We don't want to ask our local partners to inject money while they see that it is not making profit.
Because sometimes the local partners may have their own expectations. That's why we approached them saying that we wanted to get the investment, 20% additional. I was actually asking 30%, and they gave only 20%, but we are in a position to speed it up. Always remember, retail is an economies of scale, and since we have signed four more stores and committed four more stores, that will be making us in a position to turn around that Saudi business. I am very confident that we will be in a position to turn around the Saudi business. Thank you.
Thank you. Thank you very much. Looks like we have no further questions from the audience, so I will now pass the line back to the company for their closing remarks.
Thank you very much for. I know all of us have gone through a bit of a challenging time, the second quarter, and the management have done everything possible to protect the business, protect the customers, protect the shareholders, as well as the stakeholders. We are looking forward for the next six months, and we are confident that we will be achieving whatever the guidelines we have set on the beginning of 2026. I don't want to revise guidelines, not because of we don't want to. Because of we are confident that this will continue as we have seen couple of months. Thank you very much. Thank you very much.
Yeah. Thank you. Thank you, everyone.
Thank you very much.
Thank you. This concludes the call for today. We are now closing all the lines. Thank you and goodbye.