Morning everybody, and welcome to the Treatt 2024 half-year results announcements. I'm Ryan Govender, the Interim CEO, and with me today you've got Alison Sleight, who's the Interim CFO. Alison's been with us at Treatt for the last five years, and most recently, before moving into the Interim CFO role, was the Group Finance and IT Director at Treatt. When looking at the 2024 summary of the half, we delivered sales of GBP 72 million in that first half, in line with the expectations. I think I always expected a slow start to the year, and I would have communicated that with most of you. In Q1 especially, which is typically our quietest quarter in Treatt, we saw continued destocking, much of that is industry-focused. However, sales accelerated in Q2, and I'm quite pleased by that.
So we grew by 7.7% at constant currency in that second quarter of the year. What we started to see in Q2, though, is order patterns normalized. We started to see more innovation driven by customers, more collaboration from our teams to try and innovate quickly in Q2. And because of that, we saw some exciting new business wins, both in the premium pillar but also in China. Sales in March were at record levels, and I think that's quite impressive. We proved that we had the internal capabilities to deliver. It's a really important point for us at Treatt: to be able to deliver this Vision 2027 of ours, we need to have many more months like March.
For example, over 3 days in March, we shipped GBP 10 million of sales, which, again, for the size of business we are, as we mature, it's going to be critical that we have those internal capabilities to deliver. I think the team's done a fantastic job. We have also bolstered our sales teams. We've brought in 80 years of industry experience. It was a very targeted approach to investing in the sales team. We added resources in North America, which is our largest region. A new Director of Sales came in, and we've got regional account managers to cover different parts of North America. And importantly, we've hired salespeople within Europe. In France now, we have an account manager. And the point here is that we hire people within our sales team that are closer to customers so that we create the customer centricity that we talk about.
In half one, we also increased our marketing spend. We've attended more trade shows. We focused on our niche products and our deep technical knowledge. That's where we value add as Treatt. So importantly, when you think of our customers, it's the flavorists at our customers that make those buying decisions. They are ultimately the people that decide whether we're going to use Treatt products or not. And what we wanted to do in Treatt is to enhance that technical capability, so put our sales teams with innovation experts, with product specialists, in front of flavorists more often than we've done before. And I think we're starting to become successful there. I am also pleased with the growth in profit. This year, we're starting to see the benefits of all of that cost discipline that I spoke to you about a year ago. That's starting to come through.
What you can see is, despite a slight decline in revenue, the operating margins in the business are starting to improve. Last November, I launched to you Vision 2027, and we've started to make really good progress in this space. For me, I'm focusing on delivering the tangible results out of that Vision 27, and I'll talk to you more about that later. When I look at it, I look at our second-half pipeline. Our pipeline is healthy. Our order book is healthy. We've exited Q2 strongly. And most importantly, the order intake since the 1st of April to today is ahead of last year. This gives me a lot of confidence in the full-year delivery. The results of everything that I've just spoken to you are shown on this slide.
I think for us, we're particularly proud of the delivery of profit and the operating margin improvement, despite the slight decline in revenue. Finally, the board has approved an interim dividend of GBP 0.026 per share, which represents growth of 2%. I want to just remind everybody about our Vision 2027. I spoke to you about this in detail in November, and I don't plan to do that today. What I do want to remind you, though, is about what this plan is all about. This is an organic growth plan. It's a strategy focused on growing our sales, driving innovation, and ultimately utilizing all of that spare capacity that we have available globally. Over the last six months, we've embedded the strategy in the business, and we've focused our resources against executing the plan.
When I look at the three pillars that we have: protecting our heritage, accelerating premium, and growing in new markets. Heritage is what we're known for. That's where we have a lot of experience, over a century of experience there. That's a mature category, and I expect that to grow at single-digit growth. In premium, we've seen good growth over the last 10 years, and I expect that to continue at the high single digits. And then finally, new markets, which is all coming off a low base, we should have at least double-digit growth there. Our how-to win is focused on the 7Cs. I will now take you through a few deeper dives on each of these strategic pillars. Heritage for us is the largest pillar in Treatt. It represents about two-thirds of the business today. We've got more than 100 years of technical experience here.
We have a very strong brand reputation in the market, especially within the citrus and herbs, spices, and floral space. Our focus on heritage has not changed. We provide complex and value-added customer solutions. However, in citrus, over the last 2 years, we have seen sustained high raw material prices. These are high oil prices that we've seen in the market. What that means as a consequence is customers will prefer to keep low inventory levels, will prefer even to destock, and more importantly, gives customers the incentive to reformulate. Some have already elected to switch into more cost-effective natural substitutes. For example, in Treatt, we use our citrus technical expertise to create a new type of natural ingredient using different oils other than in citrus, but we match the citrus profile.
What we do by doing that is reduce the cost in use for the customers and create a more cost-effective solution for them. I'm proud over the last 6 months we've launched a range of orange and lime natural substitutes to help our customers. But the key for us is to maintain our cash contribution whilst we do that. In half one, as an example, almost 15% of citrus sales were from these natural substitutes. The customer drive to these less expensive products and the Q1 destocking, predominantly in synthetic aromas, led to the sales decline that you can see on the slide of 7.7%. However, I will stress that Q2 grew by 5%. So most of this was a Q1 phenomenon. The standout to me in terms of the Q2 recovery was in synthetic aromas. Synthetic aroma grew by 31% in Q2.
To showcase an example of how destocking affected us in synthetic aroma, and ultimately we sell predominantly in synthetic aromas to the flavor houses. In one particular customer, as an example, a normalized order pattern would be about 100 orders a month. During 2023 and within this fiscal Q1, that dropped to about 60 orders a month, and that's recovered now to 90 orders a month in Q2, and that continues into Q3. So what you can see from that example is how severe some of this destocking is and how quickly it's rebounded in the restocking. That gives me a lot of confidence. The good news is we're not back to normalized levels yet, so there's a little bit more to go.
For the remainder of this year, the focus very much is to enhance our brand awareness and technical excellence, to continue doing the deep-dive technical exercises that we do with our customers that wow them. We continue to focus on our world-class procurement and sourcing. That's ultimately what Treatt is really known for: buying from different areas in the world, buying the best quality products, and adding value to that, and ultimately improving our operational utilization to use the spare capacity that we have in heritage. Moving over to premium. Premium for us includes the higher margin categories. So these are the exciting spaces that we were 10 years ago: tea, fruit and veg, health and wellness. Over the last decade, this has been a category that has grown by at least double digits every single year in that space of time.
It now represents 25% of the business for us. Here's an illustration. In 2014, sales in premium was GBP 5 million a year. Last year, it was GBP 34 million. This is an important sector for us, not because of the higher margins, but also what we bring into this pillar. Here, our scientists take natural raw materials. We use clever technology to capture aromas and essences to enhance that taste profile for our customers' beverages. It's important that we create natural, better-for-you and authentic ingredients. That's what our customers want from us. That's what the consumers want from our customers. For example, these may be the passion fruit in a sparkling water. Passion fruit is my personal favorite product within Treatt. This could be a black or white tea in an iced RTD drink or sugar reduction in a cola.
In premium, I think despite all the macro environment that we've seen, the premium market for us continues to be resilient. In the US, taste is still the highest priority for more than 80% of consumers, and that's really important for us. That's what drives some of our innovation and spend in this area. Our sales in premium have grown by 7% in the half. What's really impressive is that we've been able to innovate at pace. We've got multiple new business wins with some of our largest FMCG customers. When I say we grow a share of wallet, it's a great example of how we sell more of our products to longstanding customers. I think this was also an example of Treatt at its very best. We were able to collaborate with these customers, innovate these new tea solutions.
In this example in particular, it took us 3 months from ideation to winning that new business, which in our world is a fantastic rate of turnaround. That's why the agility, that's why the speed, that's why the pace of Treatt is so important. Moving on to new markets. New markets include TreattZest, China, and coffee. Over the medium term, I expect to see excellent growth rates in new markets. And as I've said before, it's all coming off a very low base. In China, our focus remains leading with our rich citrus heritage. We've already enhanced our local manufacturing partnerships on the ground, and we are able to, with third parties, produce higher-value, more specialized citrus products. These could be clear citrus products. These could be emulsion products. But it's giving us more within our toolkit locally on the ground.
During my last visit to China in December, I also had the privilege of meeting some of the largest local beverage and food service brands in the country. The good news is, since then, we've been successful with 4 business wins. These are not big wins, and I'll stress that. But it's significant in that we're entering a relationship with those large customers, where we sell some of our blood orange or perfume lemon formulas into bottled water companies, iced coffee companies, as well as iced tea companies. In coffee, we have been able to manufacture coffee more efficiently. We've seen more volume come through our plant. We've been able to arrange our kits in a way that creates better margins and better operating efficiency. However, in coffee, our sales volume has declined in the half. That's predominantly because of a loss of a contract in North America.
Coffee is still a very new category for us. It's important in coffee that we diversify our customer base. I think I said it before, and I'll say it again. I would rather have a couple of handfuls of diversified customers across coffee houses, flavor houses, as well as direct to FMCG, than be leveraging on 1 or 2 very, very large customers. That's what our sales team are doing today. We're focusing on executing a sales pipeline on coffee that's around winning more customers, predominantly in North America. We have a very tangible pipeline, and I suspect that some of that pipeline will start to win in the second half of this year. Whold brew coffee continues to be in growth. It's really important, especially in North America. So for us, it's still a very important category. We have learned from those first few customers.
We've taken all of those learnings now, and I suspect it will set us up for growth in what is a very important market for us. We have just launched our new TreattZest range. Under what you could see here, it's called the Signature Citrus range. And here you can see our new advert. TreattZest is a higher-margin, value-added citrus product. I think the beauty of this product is that we take an oil-based raw material, and our clever innovation specialists have been able to create a clear, and what I call a true-to-fruit tasting offering. The good news is, internally, we've already scaled our production at least five-fold in three out of the four products. TreattZest offers our customers' flavorists the opportunity to add these highly soluble solutions into beverages. And ultimately, what we're doing is creating this zesty signature note.
Our customers will use these products as that signature note, ultimately enhancing the formulation of this differentiating profile. We've also created new signature experience kits, and we've launched this with some exciting marketing behind it. Very soon, my team will be sending this to our top targets. I think, as you can see, we are quite excited by this opportunity to grow. I will say TreattZest is coming off a very low base. But if we get this right and if we market this right, it can add huge value to our customer base. I will now hand you over to Ali, who will take you through the financial review.
Thank you, Ryan. Good morning, everyone. I'll start with the income statement. So for the half year ended March 31, 2024, we saw the single-digit revenue decline of 5.1%, which was 2.7% behind in constant currency, as expected. Our performance in the period was very much tailored to distinct quarters. Q1 sales declined year-on-year as the continued impact of destocking led to subdued demand in what is typically our softest quarter, and we lapped in the normalized first quarter of the previous year. However, in Q2, we saw sales volumes rebuild, as anticipated, and secured the sizable new wins in our tea category, which led to overall growth in the second quarter of 5.1%. We expect sales to be H2-weighted, which is in line with our usual revenue profile.
We're encouraged by the momentum as we move through the second half and remain focused on volume growth and conversion of our healthy sales pipeline. Gross margin declined 40 basis points in the period to 27.8%. This was due to mix. We saw growth in our lower-margin synthetic aroma category, and some customers switched to the lower-cost natural alternatives that Ryan's mentioned as the citrus prices currently remain high. In the second half, we expect gross margin to increase as sales mix weights more towards our premium categories. FX impacts were minimal in the period as currency exposures continue to be well managed. Although gross margin declined, we are pleased that our adjusted net operating margin improved to 11.3%, pressing us towards the 12%-13% range we expect for 2024. We continue to manage our cost base effectively, and our headcount remains consistent with September 2023.
Total admin expenses in the period were 13.3% lower year-over-year. Despite the revenue decline, adjusted EBITDA improved by 7.1% against the comparable period, and profit before tax and exceptional items grew 4.5% year-over-year. There's actually an 8.6% growth in constant currency terms as our cost-saving measures annualize. Profit before tax grew 7.9% in the period to GBP 7.1 million. We do not expect any material exceptional items this financial year. Moving on to the cash flow. So we've generated GBP 7.4 million cash over the last 12 months and significantly reduced our net debt position from its peak of GBP 30 million in July 2022 to GBP 10.3 million at the end of March, which is consistent with the year-end. We continue to manage our working capital well despite the high raw material prices, particularly in our largest category, citrus, which represents around 70% of our inventory value.
Our strong half-year sales performance at the end of the period increased our receivables by GBP 4.9 million. We remain confident of reducing the debt position further by the year-end. Our capital expenditure has now returned to normalized levels with continued investment in fast-returning and high-payback projects that expand our innovative capability and ensure our operational capacity remains scaled for our future growth. Turning to guidance, we expect 2024 to return to the more traditional H2 sales weighting. Growth in the second half will be volume-driven. We focus on gaining wallet share with existing customers and on building our sales pipeline and converting the opportunities, particularly in our premium categories and new markets. We remain committed to delivering top-line growth and anticipate overall sales growth for 2024 to be within the range of 3%-5%.
With growth in our higher-margin categories anticipated in the second half, as we double down on our sales and marketing activity, we expect our product margin to strengthen, consistent with previous years. We continue to seek margin opportunity from operational efficiencies, be that reducing costs or increasing our yields. We build resilience through the competitive sourcing that we have with our longstanding supply chain relationships. We remain confident in delivering a gross margin between 28% and 30%. Our net operating margin was favorably impacted by the cost disciplines that we strengthened in the second half of 2023 and which have continued in place. While a cost-conscious mindset is embedded, we will continue to invest for growth, demonstrated most recently by the investment in strengthening our global commercial team.
With gross margin improvement anticipated in the second half, we expect to further increase our net operating margin to within our current-year target of 12%-13% and feel confident in advancing this longer term to 15%. Raw material prices, particularly in our largest category, citrus, have remained high. However, the return of our capital investment now to normalized levels and the effective management of our cost base will offset this. We remain confident of good cash generation in the second half and therefore of achieving net debt in line with our expectations and returning to a cash-positive position in 2025. I'm proud that we have good financial disciplines in place, robust forecasting, and with cost and control, I believe that this will allow the top-line growth to flow through to bottom-line profit, all of which underpins our confidence in achieving the current-year consensus.
I'll now pass back to Ryan to conclude on our view on the outlook.
Thank you, Alison. So as I look into the second half of this financial year, there's many things I feel encouraged by. The beverage market continues to be resilient. This is evidenced by some of those new customer wins that I've explained earlier. I'm starting to see the normalization of order patterns in Q2 and going into Q3. We have a healthy order book, and we've got a good sales pipeline. Converting that pipeline is going to be key in the second half of the year. And most importantly, our H1 comps for 2023 gives us the opportunity to try and beat that number. Last year, I look at it, and we had destocking in the second half of last year, which I don't expect to have in any significant degree in the second half of this year.
We've also made very good strategic progress in those tangible items that I've explained before, and those strategic priorities remain as relevant as ever. Our customer collaboration is key in innovation. It's yielding some positive wins in the first half, and I expect that to continue into H2. Therefore, we expect trading to be in line with expectation for the full year. Lastly, I would like to say thank you to Vijay for his partnership and support over the last 6 months. I would like to warmly welcome David Shannon to the business, who joins us in only a couple of weeks. I met David many times over the last few months. David comes to Treatt with over 20 years of industry experience from Croda, and I think he'll be a great addition to the Treatt team.
I look forward to working with David over the next few years to drive this business forward. That brings to a close our presentation today. Thank you very much for attending, and we'll now hand over to Q&A.
Charles Hall from Peel Hunt. Ryan, could you talk a little bit more about the order book and pipeline in terms of which products you're seeing coming through stronger in the second half, which regions are improving, and a bit of a feel for how you convert that pipeline and the timing of it?
It's a great question, Charles. So in the second half of the year, the order book is weighted like we've seen it in the past, albeit the big categories in half-two are in premium, especially in North America. So if you think about regions and category, I'd say premium growth we expect to see in half-two in the order book. North America, which is usually half-two weighted, we expect that to continue to be the same. I think it's really important that we execute that. I think it's important that we convert the pipeline, not just talk of it, but really start to execute the conversion of it. And we've seen tangible evidence of that in half-one. Charles, ultimately for us as Treatt, it's important that we work at pace.
If there was any differentiating factor other than the value-added materials we have, we have the agility in a small business to work at that pace, to partner with our customers. Therefore, that gives me a lot of confidence as to how quickly we can convert the pipeline.
Can you just talk a little bit about the brand activities? Last couple of years, the brands have been coping with a lot of price inflation, and margin retention has been the key aspect of their business. Are you now seeing more focus on innovation?
I think industry-wide over the last two years, we've seen a slowdown in innovation. Certainly from a customer perspective, yeah, other than maybe in California, the rest of the world has certainly slowed down. That's changed. Over the last six months, the pace of which customers are reacting to innovation is fantastic. We've got a team set up for that. We've got the infrastructure set up for that, both in the U.K. with our new labs, but also in the U.S. And I expect that to continue. The real judge is how long it takes some of this innovation to convert. And given the recent activity I've seen with tea in North America, for example, Charles, it gives me a lot of confidence that that'll continue.
Just lastly, you talked a little bit about investing in sales team. Have you started to see the benefits of that come through, or is that all to come in future periods?
Yeah, I think most of the sales team have just got into the business over the last 2-3 months. We're opening new doors, and that's what experience brings you. You have the opportunity to speak to customers that you either don't work with today or you've got a very different relationship with them, a more intimate relationship with that customer. So that's what the sales teams are bringing along today. And I would say you'll see most of that benefit come through in H2 and beyond.
Morning, everybody. It's Damian from Deutsche here. Okay, a couple from me. Firstly, on coffee, Ryan, sales halved in the first half, and you sort of mentioned that you lost a key customer. How do we think about the progression of that coffee business for the rest of this year and then for the next couple of years? Because you've said it's sort of a major opportunity, but I think before you put some numbers around levels of revenue growth you'd expected.
Yeah, I think we have to face into the fact that we have lost a particular customer, Damian. I also think that we can't be afraid of that. We, as a business, this is a new category for us. So ultimately, what we're trying to do is get more of those types of customers rather than be reliant on a handful. The key for us is we've got a tangible target in the pipeline of about 7 or 8 coffee customers that we are actively in conversations with. Converting some of those 7 or 8 customers is going to be key for the second half, but not just half-to. It's going to be key for the next 4-5 years. Will we get to last year's levels in coffee? I seriously doubt that, but I don't think we'll be that far off.
I think new as a pillar will grow year on year, but I think coffee could be slightly adverse to where it was last year. I think the one thing I did say, though, Damian, last year is coffee grew probably beyond our expectation in 2023. And if anything, I saw a gradual buildup towards GBP 10 million of sales in coffee over the medium term. How we get there may look a bit different to what we thought 12 months ago. But if we could get more customers within that category, I think you'll see a very quick move on it. We have the internal capabilities to deliver coffee quickly. So it's the new customer wins that's key.
What are the things that you need to do to achieve those customer wins?
Yeah, I think proving our capabilities to manufacture very good quality coffee is one of the biggest things. Stability of coffee and stability of production is important, and we've proved that. We've proved that within the business. We've proved that to our customer base. We've just launched about 4 months ago, we launched our new coffee range. We've honed that back into what we believe is what consumers want to see and taste. And now it's working with those customers to ensure that we could give them that differentiating profile.
On China, I think sales growth overall was relatively low, but sales from within China were pretty decent. Does that reflect that your current Chinese customers are quite price-sensitive? And is there a sort of a margin impact from the or could there be a margin impact on growth from China if that trend continues?
No, I think the price sensitivity of Chinese customers is no different from anywhere else in the world, Damian. I think we're selling value-added products to them rather than commoditized citrus. I think that's really important. The types of Blood Orange or Perfume Lemon that I spoke about in my presentation is a great example of not just selling a commoditized raw material. That's why it's so important for us to have different sort of manufacturing third parties within the ground that could do that. I think ultimately for us and I think you touch on a great point. The local business for us in China grew by almost 30% in the half, and I expect that to continue.
That's where we're investing the time and the resources in, within our technical capabilities, our innovation capabilities in country, as well as our sales team focusing on food service and brands. So I expect the local growth to continue. I think we need to refocus again on some of the international customers that are within China, but some of that phenomenon is about destocking in Q1 that hasn't fully come back yet.
Just on your sort of the heritage citrus business, can you give us a level of indication of what cost savings a customer can get by switching from a normal citrus oil to a natural variant or different product?
I think the switch from a traditional citrus product to a natural substitute is not an easy switch. Actually, when oil prices are fairly low or normalize, I think most customers will just switch back towards the traditional product. It's only because the oil prices are so high that customers are incentivized to do that switch. Some of these customers, it's quite hard to reformulate very quickly and then put in a new natural substitute. So the trick for us is to keep that profile exactly the same as what it was on the traditional versus a substitute. But to answer your question directly, we could see something from a 25%-30% reduction in price to a customer, which is significant in their terms if you're trying to drive a cost of use.
The key, though, Damian, and I think it's really important, is my team focuses on cash contribution. So whilst we are driving a lower cost in use, it's important for us as a business to maintain that cash contribution as much as we can.
Morning, Matthew Webb from Investec. First question, I just wonder if you could talk a bit more broadly about how you are managing the challenges of what's happening in the orange juice market and, obviously, by extension, the orange oil inflation environment. Obviously, you're helping some of your customers to switch, but where customers are not switching, how the conversations are around inflation recovery, to what extent is that automatic, to what extent is that through negotiation. And also, it looks like things are not getting any easier in that market with the report last week from Brazil. I just wonder whether, more broadly in terms of how you procure, how you buy, how you're coping with that. Because I imagine it's a pretty tough situation at the moment. That's my first question.
At Treatt, our supply chain experts have been with us for a very long time. Our citrus experts in particular focus on sourcing from various parts of the world, Matthew. So whether that's Europe or Africa or South America, we try and diversify our supply based on that raw material. The reality is orange oil prices in particular is what you're talking about. Orange oil prices have maintained a very high level for the last couple of years. Our suspicion 12 months ago is that that price would drop. I think more recent evidence suggests that it will stay high for longer. The ultimate thing for Treatt is that we need security of supply. So we need to ensure that nobody's out of cans on the shelf, and we maintain a level of raw material inventory that can service our customer base.
We also have pricing mechanisms in the business, and it's very common in the industry where you have pass-through pricing in this particular case. So our job is to ensure that we do pass through those higher prices, partnering with customers where we can to help them, but maintaining our cash contribution. We think based on the most recent news coming out of Brazil, we think that the prices will remain high, and we need to get used to this world of where those citrus prices are. I come back to my team. My team is they've got huge amounts of experience within the citrus space. We are very close to customers as to what happens in the space. And we share that deep knowledge with them. So taking them on the journey is as important as making sure that we just pass on price.
And then the second question, and I know this isn't sort of a new sort of theme and that you've been controlling costs very sort of rigorously for some time, but that 13% fall in operating costs in the first half nonetheless was quite a standout figure. I just wonder whether you could talk a little bit more about how that's been achieved and then also in terms of how we should think about that going forward. I think you've guided that this is now sort of new normal level, and you're only expecting sort of around inflation from here on. But I note that you've been investing more in sales force, for example. Is that something that you intend to build on further? And if so, could there be a bit of sort of upside risk to that guidance?
We controlled our costs well last year. We've taken that through. It's embedded. We have benefited from the optimization. A lot of that cost saving last year, we took a number of heads out of the business, and those headcount numbers have come down. So if you think at the end of September 2022, we had 425 heads in the business. We're now down about 360. And yes, we will invest where we need to to deliver growth. So investing in the right people to bring us forward innovatively as well as in sales, we accept the headcount will go up a bit. Don't expect it to get up to the 400s at all, but it will creep up slightly. But we obviously see some benefit of those headcount reductions coming through in the cost base. I think some of the other things as well is sort of operationally.
We've worked a lot around the efficiencies of our processes and where we can make savings in how we operate our clean-in-place solutions, some of our waste disposal, how we manage things like that. And it's also just getting people to think about we have a lot of contracts, just general basic disciplines about bringing down how we renegotiate and what we do, and taking some of the fat out of the business, excess spend that we don't need to have when you look at it with a different lens. So I don't think we're doing anything that damages sort of the cost infrastructure that we need to run the business. I think it's really just taking out some of the excess that we didn't need in the first place and keeping it that way.
My final question just on the dividend. I completely understand why you've only increased that by a couple of % in the half given the earnings growth was only a bit ahead of that and you're looking to rebuild the cover. But you're now not far off that sort of cover target. I think you also mentioned you expect to be net cash by the end of next year. I just wonder when those two things have been achieved, whether we can look forward to a more generous dividend policy.
It's a progressive policy that we have to do. Ultimately, we want to see delivery. We want to grow our top line and grow our profit. I think once that happens, we could think about being more generous on the dividend policy. We have been more generous, I would say, over the last five years. Despite years of profit downgrades, for instance, Matthew, we've increased dividends. I think we want to take a view now that says we would like to build towards that three-times cover. We'd probably prefer to be more conservative whilst we're building our profit growth again within the business. Once we see the tangible delivery of that, I'm sure myself, Vijay, and the board will consider a different approach. But I think we're quite comfortable with that approach today. It's not far off the consensus that we talked about.
If I look at the consensus for this year, it's sort of bang on track of where we want to be. And EPS growth is only a few% ahead of that. So I don't envisage it to be that much more ahead of where you see it today.
We'll go to Matthew Abraham at Berenberg.
So first question's just on gross margin. So is there the expectation then that in the second half of the year, some of these raw material prices, which have been quite high, will revert? And as they revert, customers will switch back to your product in a way from those lower cost, lower-priced alternatives? And part of that change and that phenomenon will drive the margin expansion that's implied in the guidance. And then the second question is around the guidance itself. So am I right in saying that there has been a downgrade from what was previously put forward, expecting 5%-7% year-on-year growth? Have I missed something, perhaps? And this morning, it just appeared to me that the expectations flagged were to be in line with expectations, which I thought was 5%-7%.
Just to confirm, there is a lower expectation now of 3%-5% for the full year?
Gross margin for us is always weighted towards the second half of the year. We've got a skewing in that. That's where the North American beverage market is strong. That's where the premium pillars for us are really strong. And that in itself gives us a good tailwind into a gross margin for half two. We've seen that happen now in Treatt for many, many years where you have a better half two gross margin compared to half one. Could customers switch quickly back into the more traditional citrus product? Absolutely. I have no doubt they will. Once there's more stability on the traditional product, I think that will happen. I'm certainly not banking on that to drive my gross margin in half two. For us, half two margins are going to be driven by the mixed effect of the premium pillar. So that's the sort of gross margin.
Our drive as a business is ultimately to deliver the profit before tax and exceptionals for the full year. So our expectations is that we'll be in line with consensus for that profit number. Sales has softened a bit around the 5-7 versus the 3-5, but I think we're calling that out now. Most of that is because of the Q1 comms that we've seen come through.
We'll go to Gary Martin at Davy.
Just starting off, just dovetailing off of an earlier question, just on the kind of cadence of revenue growth into H2. Will there be more kind of innovation/new business wins driven, or will there be a bit of kind of repeat business in there as well? I know you mentioned cross-selling of business to existing customers and premium, but I think it'd be good to get a more kind of detailed breakdown there.
I think in terms of the order book. So we have visibility of the order book into half two and beyond. A lot of our contracts are annualized contracts, so that's sort of calendar end for most of our customers. So we can see the various pillars within the order book. We can also see what's driving it. So I think compared to last year, most of the order book is proportionate to what we're seeing, albeit on most of those categories, we're up against last year. And it's important that. It's important that we are already seeing tangible signs of that. Order intake since the 1st of April to today is something like 15%-20% ahead of last year. And so that's more shorter-term focused, but it's an important confidence marker for us within the business.
I think in terms of driving the growth, I expect various parts within the premium space to play. So health and wellness is a great example of that. The driving more sugar alternative health and wellness business is what we expect in the second half of the year. Tea is going to play a major portion on that. Tea is within a few customers in North America who've either launched or have launches. We expect the volumes to really come through in the second half rather than anything significant in half one. That's probably the weighting that I see it. Local business in China is going to be interesting in that we should be winning more local business in China, but it's still coming off a low base.
I wouldn't put too much a weighting into how much China will deliver tangibly against the sort of GBP 80 million target in half two.
And then just maybe a follow-on just on the tea business in North America. I mean, it's obviously the new business wins into H1 where we're quite kind of dynamic. I mean, what's the best way to think about that market? I mean, is it structurally growing? Should we expect a kind of similar cadence of growth over the next 6 months to 18 months? And what is the best way to think about that?
The key takeaway for me is our innovation team working with what customers want to go for today. That we believe in Treatt is more important towards whether it's tea or passion fruit or watermelon, etc. If you remember a few years ago, when we downgraded, part of that downgrade was because we had a sort of blip in our tea volumes. And we're very cautious to let that happen again. So ultimately, what we're trying to do is smoothen out our forecasting rather than rely on these big launches. So all of the order book is as important as particularly what will happen in tea. To focus on tea in particular, though, I think North American tea is doing well at the moment. I think there's a big drive towards tea drinking.
There is also a big drive towards moving away from sort of non-alcoholic drinks that's just mocktails into something that's more botanical, to something that's got more tea in it. That gives people that want to switch from alcoholic drinks to non-alcoholic drinks a better alternative.
That's the end of questions remotely.
Thank you, everybody. Appreciate your time. I think I'll just reiterate what I said at the end. The key focus for us in the second half of this year is deliver against a healthy pipeline, convert some of that sales opportunities that we have in there, and continue to drive the innovation strongly. If we do that against the soft comps of last year, we've got all the ability to get towards that full-year consensus view that we have in the market. Thank you.