Good morning, everybody. Welcome to Hilton Foods' full year results 2023. I'm Steve Murrells, the Group's Chief Executive, and I'm presenting today with our Chief Financial Officer, Matt Osborne. We'll share our full year performance this morning, review the progress that we're making in the business versus our strategic priorities, and lay out the strength of the platform that we have in place to go after future growth. This has been a good financial performance for the year, achieved against a backdrop that has remained volatile. As a group, we've seen a pleasing uptick in group revenues and volumes. In addition, and particularly encouraging, has been the growth in profits, which is largely down to delivering our seafood turnaround ahead of our plan.
We've also made progress in further strengthening our balance sheet, with notable improvements in our free cash flow, which positions the business well to support future growth opportunities. I'm also pleased to announce the final dividend of GBP 0.32, an increase of 7.7% on the prior year, and in line with our progressive dividend policy. Our financial outturn has been driven by the strong operational performance across all the businesses. Our core meat category has performed well in both retail and food service. In APAC, we've seen another strong year of revenue and volume growth, while in the U.K. and Europe, we've shown good resilience given the economic backdrop. Particular credit must go to everyone within our Seafood business who have delivered the turnaround ahead of plan and returned the business to full year operating profit. This has created a sustainable business foundation to support future growth.
We've responded to market trends in vegan and vegetarian and taken decisive action in the second half of the year to right-size our operational facilities. Meanwhile, Easier Meals continue to perform strongly, delivering our customers' needs for convenient, pre-prepared products. We've continued to focus on our core and grow our multi-category offer with existing customers, whilst targeting new retail relationships, a particular highlight last year being our new long-term partnership deal with Walmart in Canada. Meanwhile, sustainability remains at the heart of the business and our commercial offer, and only last week we had our more ambitious science-based targets approved. Now, this is the slide that I first showed at the half year, and I wanted to take this opportunity to once again reiterate why I believe Hilton Foods has a clear and competitive advantage.
These three pillars illustrate that we're a multi-category provider of proteins, an international player of scale, and a business with a market-leading technology offer through Greenc hain Solutions. When combined, this brings us competitive advantage in optimizing cost, quality, service, and innovation. Hilton is a business built on a passion for food. As we stand here today, we're continually looking to food skills and innovation, allowing us to enhance our offer by leveraging our world-class insight across all products and all categories. From an international point of view, we've grown from operating in one country with one retail relationship to a business that has strong customer partnerships now around the world. Over the last four years, we have more than doubled group revenues from under GBP 2 billion to GBP 4 billion, driven by our international and our category expansion. Today, 75% of revenues are now outside the U.K.
To our industry-leading technology, a clear differentiator, we provide the most efficient supply chain to our partners through scalable robotics and cloud-based infrastructure, allowing retailers to manage their full end-to-end supply chain from specification to product quality and cost of production mapping. We know there are significant opportunities for us to go after. The key for us is to grow incrementally with the partners that we have today, gaining a greater share of their business. But more than this, there is, of course, potential for a further step change in growth by agreeing more partnerships in new geographies into the future. The key priorities behind me have guided the business to success throughout 2023. Personally speaking, I'd like to thank all of our teams across all our markets for their continued hard work, their contribution, and commitment to delivering progress in all these areas.
These strategic priorities will continue to be our focus throughout 2024. I'm now going to hand you over to Matt for a deeper dive into the numbers. Matt.
Thanks, Steve, and good morning, everyone. As Steve highlighted, we've reported volume growth of 0.7%, with revenue growing by 3.7% to just under GBP 4 billion for the year. Operating profit increased by 33.5% to GBP 95 million, an overall increase of GBP 24 million, with the turnaround of our Seafood business driving a significant amount of this, though across all of our regions, we've seen operating profit growth. Reflecting these improvements, our operating profit margin increased from 1.8% in 2022 to 2.4% in 2023, and our conversion margin, which is adjusted to exclude the value of raw materials from revenue, increased from 10.6% to 12.7% in 2023.
Profit before tax, after allowing for the impact of increasing interest costs, was GBP 66 million, up 19% on the previous year, with adjusted EPS of GBP 0.52 per share, up 17%, and, as Steve said, our proposed full year dividend of GBP 0.32 is 7.7% up on last year, with dividend cover of 1.7 x. Looking at our balance sheet, our overall CapEx spend was GBP 56.8 million, marginally up on 2022, while our robust trading performance and delivery of working capital improvements resulted in strong operating cash flows and therefore a significant reduction in our overall net debt position, which ended the year at GBP 140 million, with leverage at 1x net debt to EBITDA. Revenue grew by 3.7% to GBP 3.99 billion, with constant currency revenue growth of 5.7%.
The overall strengthening of sterling continues to present a headwind, both in terms of revenue and profitability, and we've included the average FX rates for 2023 and current rates for 2024 within a guidance slide in the appendix for your reference. As I said earlier, total volume increased by 0.7%, with increasing prices accounting for a further 4.4% of our revenue growth, while changes in mix, largely from the benefits of a full year of ownership of the Foppen business, contributed 0.7%. On a like-for-like basis, so excluding the benefits of acquisitions and the impacts of changes in FX rates, our volume grew by 0.5%, with revenue growth of 4.8%. Looking in more detail at our regional performance, the volume performance in both Europe and the U.K. and Ireland has remained robust in the face of continuing inflationary pressures in the market.
Volume in the U.K. and Ireland fell by 3%, with revenue up 3.5% on a constant currency basis. In Europe, volumes were down 2%, with revenue up 6.8%, with Europe benefiting from the full year of trading from Foppen compared to nine months in 2022. During the year, we responded quickly to the structural changes in the vegan and vegetarian market and have consolidated our Dalco business into a single site. However, we did see reduced volume and revenue in the segment, albeit this accounts for a relatively small part of the business overall. Volumes in our APAC business continued to be strong, a 7.2% increase, a reflection of more benign food inflation, with more moderate growth expected in 2024, with revenue in APAC up 1.4% at actual FX rates, but up 6.7% on a constant currency basis.
Overall, group operating margins have increased from 1.8% in 2022 to 2.4% in 2023. The key building block for this increase was the positive impact of the successful turnaround of our U.K. Seafood business. This has resulted in the business returning to operating profitability in the year, carrying positive momentum into 2024 to continue the recovery further. As I mentioned earlier, we've also had a full year of trading from Foppen, whose added value, specialty, smoked salmon products are accretive to the overall margin mix in Europe. And in APAC, where we earn an overall cents per kilo fee, the recovery of increased interest costs positively benefited our overall margin, with our more normalized central costs resulting in a partial offset.
As we've discussed previously, our de-risked cost pass-through model generates low single-digit operating margins, but we also look at our margins through the lens of the value we add through the conversion costs that we directly control. On that basis, excluding raw material costs pass-through and revenue, our enhanced conversion margin increased from 10.6% in 2022 to 12.7% in 2023. The U.K. and Ireland have seen the strongest year-on-year profit progression, but across all of our regions, we have seen profit growth. Within the U.K. and Ireland, alongside the seafood recovery, the core red meat business and our Fairfax Meadow Foodservice business continued to perform well. In Europe, operating profits were up 13% overall, with a full year of trading following the acquisition of Foppen, combined with strong performances in our core meat businesses in Benelux, Scandinavia, and Central Europe.
This, though, is partially offset by the impact on our Dalco business of the wider challenges facing the vegan and vegetarian markets. Volume growth in our APAC region has driven strong profit growth, albeit tempered by the ongoing impact of strengthening sterling, with operating profit up 13% and constant currency growth of 19%. After allowing for increased central costs and the impact of interest rate rises, PBT for the year on a constant currency basis was up 20.3% and up 19% at actual exchange rates to GBP 66 million. Our business continues to generate strong cash flows with an operating cash conversion ratio of 3.2 x for the full year. Operating cash flows have increased by GBP 95 million compared to 2022 to GBP 154.5 million, benefiting from strong EBITDA and working capital cash inflows.
In the year, we've seen strong working capital cash inflows, with the levels of inventory held in the business being optimized in all regions, with strong December trading also resulting in working capital improvements. Underlying free cash flow after consistent levels of maintenance capital spend was GBP 134 million, and overall free cash flow after expansionary CapEx was GBP 96 million. We introduced our medium-term financial ambitions in November, and these included a sustainable cash conversion level of 1.5 x and an overall leverage target of less than 2x . Our strong cash flows leave us with overall debt of GBP 140 million, a GBP 72 million reduction compared to the end of 2022, with net debt to EBITDA reducing from 1.8x to 1x .
Our strong balance sheet, combined with undrawn bank facilities in excess of GBP 100 million and a supportive bank group, provides us with the opportunity to invest in achieving sustainable growth in both our existing core business and through wider geographic expansion. Looking at CapEx in more detail, and we've invested GBP 58.6 million in total this year, with GBP 38.5 million of expansionary spend to support growth in our business and with GBP 20 million of maintenance capital, which keeps the facilities we operate at the high standards our customers rightly expect. The majority of our investments in the year have continued to focus on our businesses in the U.K. and Ireland and in Europe. In the U.K., investments in automation are delivering efficiency benefits in our sites in Huntingdon and in Grimsby, and have played a key role in supporting the recovery of our Seafood business.
In Europe, we've invested GBP 10 million in our food park in Sweden, which commenced production in Q3 and delivers incremental growth with our partner ICA. Our medium-term ambitions are to invest less than GBP 50 million per year in our core business, though looking forward to 2024, we anticipate spending ahead of this at around GBP 60 million, as we have a strong pipeline of expansionary investments in our core business that exceed our returns hurdles. The group's ROCE improved by 3.5 percentage points to 18.3% for 2023. We've spoken before about the investments we've made and about how the investments we've made in APAC are now additive to the overall group ROCE as the capital we've invested in those businesses matures. In 2023, we've also seen the positive impact of the turnaround of the U.K. Seafood business, which has driven just under 2/3 of the ROCE improvement.
Looking ahead, in the shorter term, we'll see our investment in Hilton Foods Canada dilute ROCE marginally, but as we ramp up and the facility matures, we expect to see longer-term sustained ROCE benefits during the initial term of the agreement and beyond, with our overall ROCE moving towards the 20% ambition we've set ourselves. The group is in a strong financial position with a strong balance sheet and conservative leverage that gives us both the confidence and ability to support future growth. Our approach to capital allocation gives us a framework to ensure that our investments are targeted to protect our core business and unlock sustainable growth opportunities, driving attractive shareholder returns through expansion in the core business, geographic expansion supercharges, and selective complementary M&A.
Finally, we set out our medium-term financial ambitions in November, and as we've seen this morning, we've made significant progress towards each of them in the year. We remain committed to these ambitions as the guardrails for the business and firmly believe that focusing on their delivery will ensure long-term success and attractive, sustainable returns. I'll now hand you back to Steve to take you through a business update. Thank you.
Thanks, Matt. I wanted to take this opportunity to outline the prevailing market trends that we've been seeing and how we, as a group, have a relevant offer supporting our customers in responding to consumer needs. What sets us apart is our ability to respond to fast-moving trends, deliver via our catalogue of products, and then roll out at scale and pace. Through our insight and food innovation teams across the business, we work in close partnership with our customers, setting them up to win, whether that be through an increased focus on everyday affordability or greater indulgence at special occasions. Similarly, we've bolstered our customer offer in the face of consumer demands for healthier, more convenient meals, while also prioritizing more sustainabl`e choices, of which packaging has been a key focus. It is our highly relevant product offer which is supporting our organic growth amongst current customers.
As well as there being plenty of white space for us to go after across geographies and categories, there is also considerable opportunity to achieve incremental growth in existing markets. Demonstrated by the light blue outlines on this chart, this is what we've done over the past year. To bring a few examples of the progress to life, as Matt said, we've launched our fresh food park in partnership with our long-term standing retail partner, ICA, in Sweden, which launched in Q3 last year and has also recently commenced supplying a similar product portfolio to our Danish business. We've launched a new range of U.K. ready-to-cook products in partnership with Tesco and capitalized on our bacon processing expertise in Ireland, launching with a complementary new leading retailer, Dunnes.
We've also started to engage new customer relationships in Central Europe, U.K. seafood, and our U.K. Foodservice business, Fairfax Meadow, securing a pipeline for growth for the future. And most recently, we've expanded the portfolio of fish products that we supply to Countdown stores in New Zealand, starting with shellfish. In addition, we've expanded our presence in North America and Asia through our Foppen acquisition and recent Walmart announcement. These incremental wins and gains, albeit in their early stages, give us a presence and a foothold into new categories for future development. As you can see from the pictures on this slide, we have outstanding products right away across all of our categories, driven by our passion for food and combined with our supply chain model, which puts the needs of the customer at the heart of the decision-making of our local teams.
They've worked tirelessly in partnership with their customers to drive success. I'm now going to take you through each of our core product categories, the progress that we've made, and how they're underpinned by our strengthening supply chain. Meat is our heritage and where it all started. It is our core category and underpins everything that we do. We've maintained a robust performance across the geographies that we operate in. Key to this has been ensuring we have the right products available at the right price. Growth in our APAC region has remained strong throughout the year, and we've continued to make progress in reducing the weight of the packaging we use and the recyclability, which has underpinned the success of the rollout of our flow wrap packaging format for minced products. We're exploring trials in the burger category to roll this out further without behind.
Fairfax Meadow is our entirely complementary U.K. Foodservice business, which will be celebrating its 50th anniversary later this year. They are established and recognized leaders as catering butchers in the Food service sector. Their expertise, their service, and the strength of their long-term partnerships were recognized recently as Mitchells & Butlers Food Supplier of the Year, in addition to winning the Catering Butcher of the Year at the Meat Management Awards. Their excellence and expertise best place Fairfax in their sector, adding Shepherd Neame, The Alchemist, and The Restaurant Group as new customers in 2023. In our ambitions to be the protein partner of choice, we have further grown our poultry offer across Europe and APAC, including extending our own brand, Baxter, in Scandinavia to include chicken products.
We've also extended our sortation service provision in Denmark to support our partner Co-op through their peak festive trading period and extended our responsibility for the management of Albert Heijn's protein supply chain. During the year, we were pleased to return our Seafood business to full-year operating profit ahead of plan. We're confident that the measures that we've put in place now provide a strong platform and leave us well placed to go after future growth. The business has simplified its operations, including a reduction in our ranges, while driving the core through more popular products, including profitable special buys. We've successfully recovered the cost inflation whilst also winning new business in the year. And where it makes sense, bringing together the best of our fish operations in Europe with those in the U.K.
Our joint venture with Agito, part of Greenc hain Solutions, has underpinned the cost out plan, delivering the GBP 21 million investment program in automation. This has helped the business create a sustainable, lower cost base by reducing reliance on labor and improving the efficiency of the key processes through end-of-line automation. Through a lower sustainable cost base, including driving operational efficiency, yield optimization, waste reduction, and better buying, the business carries positive momentum into this year, following a strong finish to 2023. Looking forward, we've fixed the problems of 2022, and we continue to focus on the improvement plans. We have a strong platform for sustainable growth, and we're pushing on to the next phase. Vegan and vegetarian is a small proportion of our mix. That said, we took timely action to right-size the footprint of our facilities, consolidating two sites into one. This was completed earlier this year.
The team at our Dalco site have completed a full product portfolio review and is working to unlock new co-manufacturing partnerships and opportunities that remain within our private label relationships. This business represents an additional lever to pull in the case of any upturn in consumer sentiment, and we are well placed within a market that we anticipate will naturally have fewer players over time. Moving to our final food category, Easier Meals. This category includes food for now, ready meals, pre-prepared meal centers, and highly localized convenient products. It showcases our love of food, our local insight, and our manufacturing expertise, and demonstrates our prowess in innovation, creating new solutions that better meet our customers' needs by launching new product ranges.
Some of the highlights within this category include relaunching the Tesco sandwich and wrap offer in Central Europe, resulting in sales growth of 25%, driven through improving the quality of the products that we offer. We also launched healthier ready meals, enabling shoppers to meet their aspirations of healthier food in more convenient formats, which are also performing ahead of expectations. Growth in our ready-to-cook ranges has also flourished with new wins in Europe, U.K., and Australia. In September, we announced our long-term partnership with Walmart in Canada. Back at our investor day in November, we shared a theoretical returns profile of a supercharger-style deal. Deals like this do take a long time, but they generate attractive returns over the initial agreement term and beyond.
I believe that Walmart's decision to partner with Hilton in building the most highly automated, multi-category, state-of-the-art facilities is a testament to the strength of our unique offer and our expertise. This is a partnership that serves to underline the strength of our international capability. While we remain in the early stages of onboarding, design, and execution, we're confident of the future opportunities that lie ahead with this iconic retailer. We're continuing to develop our partnership with Walmart and design the product ranges for beef, pork, lamb, and seafood, and explore further areas of opportunities. Full production is expected during the first half of 2027. Greenc hain Solutions is a key ingredient to our competitive advantage, supporting our facilities to be highly automated and ultimately market-leading, as previously illustrated in our seafood operational improvement plan.
Complementing our product offer, Greenc hain Solutions brings a benefit to our customers in ways others simply cannot reach. Through our assets of Agito and Foods Connected, we're creating efficiencies and prioritizing traceability, two of the most important aspects for the modern retailer. As shared at our investor day, we are at the early stages of commercializing Greenc hain Solutions. But in the year just gone, the team have already landed new business wins, extending their reach into new geographies outside of the Hilton Foods customer base. The sustainable protein plan underpins everything that we do. Not least, our sustainability commitments and progress are crucial to our commercial offer for both our customer and their customers. We continue to invest in developing our people and their expertise. We've maintained our CDP climate rating, making improvements in both soy and forest disclosures.
Since 2020, we've reduced our Scope 1 and 2 emissions by 14% and made significant progress in improving our packaging, both reducing absolute weight by almost 2,000 tons. 70% of our packaging is now recyclable. We've raised the bar in each of our facilities, reducing food waste and also investing in renewable energy sources, and adopting best practices in our energy management system, recognized by our multi-site ISO 50001 accreditation across 10 of our facilities last year. We recently submitted more ambitious science-based targets in line with 1.5 °C , which were validated last week. As you can see behind me, our revised, more ambitious science-based targets have been validated by SBTi as part of the business's commitment to reach net zero by 2048, two years ahead of schedule.
This includes accelerated targets to reduce Scope 1, 2, and 3 emissions across areas including greenhouse gas emissions, energy, industrial sources, forestry, land, and agriculture. It builds on Hilton Foods' continued efforts to progress its sustainable protein plan that was first set out in 2022. Turning to the outlook, it continues to be a challenging and unpredictable market. However, we are well placed for the year ahead and continue to trade in line with expectations for the start of 2024. The business has a strong financial position, and we're focused on making progress towards our medium-term financial ambitions to support the business's drive for future growth. I remain confident that we're well placed, and there are many opportunities for further growth through existing partnerships, highly complementary M&A, or wider geographic expansion.
In summary, this is a robust set of results delivered through strong operational progress across all aspects of the business. Our core categories have performed well, and our Seafood business is back on track and fit for future growth. The Hilton Foods business model and competitive advantage deliver a real USP, optimizing cost, quality, service, and innovation. This sets us apart from the competition within our existing long-term customer partnerships and best places us for continued future success. Looking to the year ahead, I'd like to share my focus with you. But simply, that's on executing the plan, ensuring our partner relationships remain strong, continuing to strengthen the balance sheet, and drive sustainable growth. Thank you very much. We'll now take questions from the floor. Could I ask, when you do ask your question, that you just share your name and the institute that you represent?
Thank you. Charles Hall from Peel Hunt.
Hello, Charles.
Hello Steve, morning, and morning Matt. Firstly, could we just talk a little bit about the volume and inflation trends? Obviously, inflation has been a big headwind over the last couple of years. How do you see inflation playing out through this year and also the volume trends in the key markets?
Well, we're setting the business up, I think, this year for volume. Generally, we expect inflation to come down. But it will vary, Charles, depending on what sector you're in. We can clearly see utilities lighter than they were. We equally will see certain commodity areas may rise in price. Currently, lamb pricing's going in a northerly direction. But generally, we see it coming back, and therefore we'd expect our volumes to increase.
Specifically on the seafood side, given that was the area that caused the most problems, what are you seeing overall in seafood prices this year? And are we going to get back to actually starting to see some of that lost volume be recovered? Or is it going to take a bit of time for promotional activity to really work?
I see fish inflation normalizing. The Norwegian tax that was really causing some of the issues last year has settled at 25%. I'm confident that with the business wins that the team's winning, we'll start to see volume recover in that part of the business.
And then, Matt, a lot of expansionary CapEx this year in the existing business. Can you just give us some highlights about what that's being spent on?
In 2023 or 2024?
2024.
2024, yeah. So I think, as we said, we have a number of opportunities that really deliver on the hurdles we set ourselves. If we look in the U.K. and Ireland, we have opportunity to expand capacity in our facility. In Ireland, we have further automation investment we can undertake in the sites in the U.K. Then if we look into Europe, where primarily the investments, the majority of the investments are U.K. and Ireland and Europe, we see opportunities to invest in automation in a number of the facilities we have, which drive really strong returns and certainly hit the, at least hit the hurdle thresholds we've set ourselves.
Then working capital, you had a big inflow last year. Does any of that reverse? Can you just remind us sort of what you see as the sustainable, medium-term working capital movement p.a.?
Yeah. So we benefited at the end of 2023 from a huge amount of work that the teams have done on optimizing inventory holding levels. We'd have talked in 2022 about higher, certainly, salmon stocks to combat some of the challenges of the salmon tax that we were facing into. So a huge amount of work to really kind of focus on what is a sustainable inventory level. We also benefited from strong trading towards the end of the year. Our working capital cycle is such that we have, with strong trading, that gives us a huge benefit. I think, will we expect to see such large positive inflows in future years? No, I don't think so. That's not what we're expecting. I would expect us to be broadly flat working capital year on year on a sustained basis.
Perfect. Thanks.
Thanks, Charles.
Hi, thank you. Damian McNeela from Numis. Just on Walmart Canada, obviously, you've indicated that full production is likely to sort of now be first half of 2027. I was just wondering if you could elaborate on the discussions that you've been having with Walmart and the progress that you've been making that has sort of led to the sort of that sort of slight sort of delay, if we want a better word.
Yeah. Look, I think it's slipped by a couple of months, but you'd expect that on a deal of this size. You'll remember that we signed the contract back in September last year. We speak regularly. We've had multiple meetings in Canada, in the U.K., hosting Walmart on a number of occasions. And those conversations have been very good, very progressive, looking at opportunities beyond the start point of this deal. And I think it's important that we explore all of that, Damien. And if that means that there's a slight slippage in two or three months, I think that's prudent for us to do. But it's very positive. The Walmart team are super enthusiastic, both in Canada and in Bentonville. And we're really looking forward to getting started.
Okay. Thank you. Clear. And then in terms of seafood, I'm just wondering, sort of can you sort of I think this year we're expecting a modest improvement in profitability in U.K. seafood. Are we still expecting full recovery in 2025? What gives you the conviction that that's still the case? Could you exceed historic levels of profitability in U.K. seafood?
Look, I think most definitely we're confident that we'll be back to pre, if you want to call it, crisis levels by the end of 2025. I think with the changes that have gone in, of course, we expect to go beyond that in the outer years. The competitiveness on pricing through the automation, a far smarter inventory of lines, winning new business, and the innovation that's flowing through that part of the business. We're confident that we'll get back to the normalized levels by the end of 2025, and we'll be able to spring on from there into 2026 and beyond.
Clear. Thank you.
Thank you.
Yeah. Clive Black from Shore Capital. Two from me. Do you think you've got scope to materially move your conversion margin in the medium term? And what would be the drivers of that? And secondly, am I right in saying that you're a little bit more on the front foot in terms of strategic growth potential in your concluding remarks, Steve? And is that consistent with CapEx nudging back below GBP 50 million in the medium term? Particularly if you think about the cost of CapEx these days. Inflation in RMI and all the rest of it has been very strong in recent times. Thank you.
Clive, I'll take your second question first and then invite Matt to come back on the margin. I think it's complementary M&A for us. We said, or I said at the investor day, that complementary M&A was on the table. It would be prudent that we continue to have it on the table whilst at the same time making sure that we grow the core in the way that we started to set out this year. What's important is that if we are going to do anything, that it's a natural bolt-on and that it has a good return. At 1 x, we've got the luxury to invest in the right things, which is part of the reason why we've just ticked up this year's investment, albeit in the expansionary level of capital, because we can see we can do stuff that gives us good returns.
But I think we're well placed, and we should keep a watchful eye on things that are really complementary.
Yeah. So conversion margin. So this year we're at 12.7%, good increase from where we were last year, driven, as you said, by largely the seafood turnaround. If we look historically, we'll have been sustainably between 12% and 15%. So I see no reason why we don't get back towards that levels. And what are the drivers? So we've talked about the continued growth driver through seafood. Steve touched on the opportunities that green chain has for driving new services and incremental margin. But also, we've touched on the investments we're making in automation and efficiency. And that's driving the efficiency of our operations, which ultimately drives that conversion margin through.
Thank you.
I think it was here first, and then Sean afterwards.
Thanks. It's Andrew Ford from Peel Hunt. Can I just ask about green chain? You sort of mentioned there's a few projects there on the commercialization front. I wondered if you could give us the geographies or the partners and maybe where you see that break-even point coming in for that sort of business element and if that's been accelerated?
Yeah. Look, green chain has two functions. Its primary function is to drive the core capability and equip our factories to be lowest-cost operator. The additive part to green chain, then, is how we monetize that operation outside of driving the core and start to revenue-generate, acquiring new partners as we go along the way. And that's very much being led by the connected team. I can't give you expressly the details of those contracts because we've just got to just let the ink settle. But when we're able to announce in a few weeks' time, I think it will show you the strength of green chain and how those partnerships, how those new partnerships bring lots of opportunity for them to add incremental value to the overall group.
Thank you. And just on the slowdown in sort of vegan and vegetarian that you've seen, I think you said it went to 3% CAGR. Is that dropped 3%, or that's now the expected kind of growth rate for that category? That was just sort of a minor question. And building from that, sort of what are you now seeing as being some of the main drivers from your customers for the next I know it was sort of a bit of a fad, but is there other sort of big themes coming through that you think are important?
Look, I think what's important to say is we remain a fan of the sector. That's because our customers continue to want to develop this market. We generally think that we will benefit from this market change. The reasons that have caused the drop are clear: flavor, value for money and price, and some of the health connotations that go with the product range. In price and taste, the teams are working very hard to enable our own branded retail partners to push hard in their own backyard. You'll see, I think, a change from more branded dominance to own-label dominance. Andrew, if I could predict CAGR in this sector, I wouldn't be sitting here. I don't think it's yet settled, but I think we're not far off from the base.
When that happens, I think through the work we're doing in Holland, we'll be well placed to see an upturn in that sector.
Thanks, Steve. Thanks.
Morning, everyone. Sean Kealy from Panmure Gordon. If I can just follow up on Damian's question about Walmart Canada. So contract delayed by a couple of months. The FY24 CapEx guide was a little bit below where I am at the moment. And a few comments from you, Steve, on further opportunities there. An optimist might interpret that all as a bit of a redesign of the CapEx plans, potentially to make the contract a bit larger. Is that fair? Or is there anything you can share on that sort of thing?
Do you want to say that? Look, the enthusiasm of the Walmart team as they've got to know our capabilities is palpable. We came together because of our core meat capability and our seafood capability. But as they've had a good look around the operation across Europe and the U.K., they can see there's much more that we can provide for them. We're going through all those opportunities with them. Because if we're going to do anything larger, it's better to do it at the beginning rather than come back to it. I think we'll be much clearer in the next few months to know whether or not we stick with the startup or whether or not there will be some areas for us to bolt on.
Perfect. Thank you very much.
Sean, do you want to give the mic to Darren? Sorry.
Thanks. You mentioned that in Ireland that you've recently got a new contract with Dunnes Stores. Does that subtly or not too subtly suggest that you're moving away from a one-customer, one-country model? Is this open opportunities in some of your European markets?
The interesting thing about Ireland, Darren, was that Tesco could see the opportunity of bringing Dunnes in and the efficiency that that would bring overall. So they were encouraging of us to go and attract them into Drogheda, the facility that we have in the south. Equally, Dunnes were highly complementary of what we were producing for Tesco. So it's been a win-win. It's a business that we've not traded with in the past. We like the family. We like their stores. They are trading very well in the south. As I say, it complements the capability that we've got. And it works for both retail partners.
What does Ireland look like post the Dunnes volumes? Is it 25/75, 50/50? What sort of incremental?
Between the two partners.
Between the two partners, yeah.
Look, the majority will remain Tesco-focused, clearly. But I think Dunnes is additive. It will be a relatively small proportion of the whole. But it's a meaningful proportion of the whole and creates a great opportunity for us. As I touched on, one of the investments we're looking at for this year really is to build that capacity to support the volume for those two customers.
What's exciting is both Tesco and Dunnes are growing. As Matt says, that's where we're going to lay some investment down this year to capitalize on the growth. Of course, growing the facility in the south allows us to serve both the south and the north.
Just on New Zealand and the shellfish and prawns business, could you give the scale of that relative to the existing New Zealand business? Is it a material step up on what you're producing?
It's early days. The first containers landed three weeks ago. It's on the shelf. But we've now taken the Countdown team through the entire portfolio of what Grimsby does. So goes beyond shellfish, goes into fish cakes, battered, breaded, ready-to-cook products that they just haven't had in New Zealand. Those things are coming. And I think that will be quite a step change. But at the moment, the first thing that's just landed is shellfish.
Thank you.
Back to Charles.
Steve, is there any update on progress in Singapore?
So you remember that we updated on our relationship with Country Foods some 6-8 months ago. And that was all about using our relationship with them to access new partners in the region. That continues to happen. But we want to go faster. And so with their support, we've now set up our own international sourcing team in the Asian region so that we can make greater and faster connections to those retailers in China, Singapore, and go much faster. So again, very early days. But for us, that's a great example about where we can take our current catalogue and expand it at pace into a new region.
Thanks, Charles. Thinking about the annualizing impact of Foppen, some of the recovery in U.K. seafood, could you touch briefly on what we should expect the H1, H2 split to look like this year?
Seafood-specific?
At a group level.
So I think we'd have seen, if we look in 2023, the split very much H2-focused because we were working through the recovery of the Seafood business in the first half. And that clearly delivered in the second half. So a bit more weighting. I think we would see the first half weighting stronger than we would have seen for 2023. The other thing to flag is that our half-year will be a 26-week half-year in 2024 versus a 28-week in 2023. So that will also skew it a little bit as well but the other way. So yeah, we'd certainly see a greater weighting to the first half, more similar to what we've probably seen historically, where it was kind of fairly flat, half on half.
Yeah. Perfect. Thank you.
It's Andrew from Peel Hunt again. I noticed in the presentation you mentioned the further rollout of the flow wrap product. Can I just ask sort of what the consumer acceptance is currently on those? I know there's a lot of sort of noise about it when it came to market and made a lot of headlines for squashing meat, etc. And building from that, when customers have that demand of a product that might impact on volumes, how do you manage that? Because obviously, they want the kind of the change and maybe the customer doesn't. But is that part of the conversation? And how do you manage those conflicts?
Yeah. Look, the way retailers manage it is they have shops. They will take a number of stores and effectively live-test what customers do. And on the basis of that, they'll then go slower, go faster, or take a greater period of time to implement. This is an interesting sector. I think I framed it as minced steak, didn't I? In Central Europe, certainly in the Benelux and now becoming in the Nordics, we're seeing a very fast take-up. In Albert Heijn, 100% rollout is in this packaging format. We're now going to burgers, as I mentioned. And we're also seeing that flow wrap incentive taking place in Sweden and, as I say, our other units across Europe. In Ireland, the Tesco Ireland team fully have endorsed it. And that full rollout is starting to take place now. And the U.K. Tesco team are into their second tranche of stores.
I continue to be of the opinion that it is a much, much better product than the slab of mush that I see on other shelves. And I think customers will vote with their feet. And this will be something that happens over time. Tesco and Waitrose are driving it in the U.K.
Just on the sort of variability of deployment based on customer sort of feedback from your customers, how difficult is that for you to adapt? Is that very easy to ramp up and ramp down from the two products out there?
Yeah. Look, as I think I said, we're agile. We can dial up. We can dial down. In this particular sector, retailers, because it's important for their customers, are absolutely focused on reduction in plastic. The conversion from an MAP, traditional form of packaging, to the flow wrap sees a significant reduction in plastic. Retailers very much are encouraging of us to do those types of things. But it does take different times. Therefore, we'll go at the pace according to what that retailer needs.
Thanks.
Okay. If there's no further questions in the audience, we will go to questions online. We have one question online similar to one asked earlier. What was the contribution to op profits of the U.K. Seafood business? And what are the opportunities to further improve the profitability of this business in the future?
Yeah. So the U.K. Seafood business has recorded a low single-digit operating profit this year from the position it was in in 2022. So it's really driven the majority, though not all, of the improvement in the operating profit in the U.K. and Irish business. I think, as Steve touched on, in terms of where the opportunities sit and when we get back to that more normalized profitability level, we would anticipate by the end of 2025 getting back to that more normalized historic profitability. That takes us into 2024. We have opportunity for growth as that business continues to I say continues its turnaround. I think the turnaround is largely complete. It's continuing to build on the turnaround rather than continuing the turnaround. Yeah.
Thank you. There is currently no further questions online. So I'll hand back to you, Steve.
Thanks, Amelia. Okay. Thanks very much, everybody. Enjoy the rest of the day. Thank you.
Thanks all.