3i Group plc (III) Earnings Call Transcript & Summary

Good day. And thank you for standing by. [Operator Instructions] Welcome to the 3i Group plc Action capital markets seminar. [Operator Instructions] Please be advised that today's conference is being recorded. I will now hand over to the CEO of 3i Group plc, Simon Borrows, to open the presentation. Please go ahead.

Good morning and welcome to 3i's capital markets seminar for Action's 2024 results. My name is Simon Borrows. I'm the CEO of 3i and Chairman of Action. Also on the call is James Hatchley, CFO of 3i; as well as Hajir Hajji, CEO of Action; and Joost Sliepenbeek, CFO of Action. We plan to take you through a presentation of Action's results and strategy which has been put on our website this morning. Action's excellent track record has continued into 2024 with a very good growth in stores, sales and profits; as well as another strong year of operating cash flow. Action has again delivered very significant transaction growth based on its very low prices and flexible format. This performance was in contrast to much of the European consumer and retail sector which has, in the main, been struggling with transaction volume-driven like-for-likes in particular. Action's performance over the last 5 years sets it apart from its peers and is a testament to the strength of the format and the hard work and dedication of the Action team. The relative performance last year was particularly strong when set against the difficult economic environment and is illustrated well on this slide by the lower charts showing Action's increasing divergence from its peer group. On Slide 5, we update our compounding slide for Action to the 31st of December 2024. Action has made stellar progress since the acquisition in 2011. We and Action's management have prioritized Action's low price customer proposition; and its long-term growth potential based on its rare combination of significant international store growth, high and increasing sales densities and excellent returns on capital as well as strong cash flow. Okay, I will now hand over to the Action team. Hajir, over to you.

Good morning, everyone. And thank you for your introduction, Simon. In this section, I will first share an update on our 2024 performance, followed by an update on our strategy. And before we continue, I would like to give you an impression of an Action store with a short video which also highlights key achievements for 2024. [Presentation]

As you just have seen, customers enjoy shopping at Action, where they are welcomed by our employees. Our store layout is simple by design with broad aisles and a uniform blueprint across all stores. Also the video shows our commitment to improving product quality and sustainability. In 2024, on average, 18.7 million customers, an increase of 3.4 million, visit our stores on a weekly basis to buy their daily necessities at the lowest price while discovering 150 new surprising products every week across 14 categories. 2024 was a strong year for Action with good performance, and investments were made to support our longer-term growth ambitions. More customers shopped at Action than ever before. And we added a record number of store openings, driving strong like-for-like sales growth. As a result, we achieved our financial targets while staying focused on keeping our operations simple, consistent and offering good-quality products at the lowest price. In 2024, we ended a record of 352 stores, with significant expansion in the southern -- in Southern Europe. Our entry into Portugal and other regions within our existing markets was met with a warm welcome by many new customers. This reflected the strength and relevance of our formula. At year-end 2024, we had 2,918 stores across 12 countries. In terms of sales, we delivered GBP 13.8 billion, up by 22% compared to last year. Our like-for-like sales growth was 10.3%, driven by volume. And we delivered over the GBP 2 billion operating EBITDA, up by 29% compared to last year. Reflecting on 2024. There were a number of highlights which contributed to our strong performance. First of all, we remained competitive on price with some 2,000 price reductions in 2024. For Action, offering the lowest price to our customers is a core part of our formula. We will continue to share cost benefits through lower prices while we also invest in our product quality and sustainability. Secondly, we continue to expand our range of daily necessities, which attract a lot of customers. And this helped to drive the volume of transactions, confirming Action as a first choice for customers for their daily nonfood shopping needs. And while the weather held back seasonal sales in early summer, we saw strong seasonal sales in P11 and P12. Seasonal sales like-for-likes were under the 2% in the first half but over the 17% in the second half as a result of our decision to buy more for the Christmas holidays. Thirdly, we again opened more stores in this year than before, expanding in an increasing range of countries which contribute to our store growth. France, Germany, Poland and Italy all opened around 60 stores; and Spain wasn't far behind with 40 stores. While it sounds a lot to achieve, we can do this because of our increasing volume and highly efficient operating model. And finally, our success is possible because of the hard work and dedication of our colleagues. I want to thank all the colleagues for their incredible efforts. Their teamwork and commitment to putting our customers first make a huge difference. 2024 also had challenges, but that is part of international retail. We learned, adapt and grew along the way. The economic environment was challenging with declining economies across Europe, weak consumer confidence and supply chain issues as a result of different political and economic events. The weather also played a role with a colder summer and a warmer winter impacting our seasonal sales. With uncertain times, many consumers watch their spending. Even with these challenges, we once again met our customer needs, showing that a formula of great products at low price continue to resonate with our customers. Over the past 5 years, customer visits have increased. Sales for the average Action store grew by more than 50% over that period. This growth has brought some challenges in handling volumes in our supply chain and maintaining store shelves stocked. This is mainly reflected in the busy city stores, new stores with high customer numbers and during the peak period. For example, in week 49 alone, our supply chain handled 386 million in sales, while around 26 million customers shopped in our stores. We also continued investing in our systems. We successfully implemented our new ERP system, replacing the old one, to prepare ourselves for future growth. We plan this major migration at year-end with care, knowing it would impact the stores and DCs by having limited store deliveries. This was expected, but it caused availability challenges which took longer than planned to resolve. I would now like to take you back to one of the key drivers contributing to our success: our pricing. One of the key strengths of our formula and a reason customers choose to shop at Action is our ability to offer good-quality products at the lowest prices. Every week, we measure and analyze competitive price levels across all our markets. And this structured approach ensures that we're able to maintain the lowest price for our customers. We always respond when we see competitors reacting to our price adjustments. If we do not have the lowest price, our buying team takes action by either lowering our prices, renegotiating the buying price, changing the product for a different one or delisting the product. In our measurements, we compare between the 1,500 to 2,000 products in each individual country. And the graph shows the average price distance to the lowest-price competitor across all our product categories, of products measured over the fourth quarter of 2023 and 2024. Our pricing analysis is a dynamic process that can vary from week to week, as our assortment and that of our competitors keep changing. The measurements contain our entire product range, including comparison of A brands and private labels. I should add that, while we do monitor promotional pricing and act on it, it is however not included in the price comparison shown on this slide. As you can see from the graph, we maintain the strong price advantage over our competitors. Our performance is further reflected in the growth we have seen in most product categories. As mentioned in last year's presentation, one notable consumer trend has been the continued focus on daily necessities, which led us to adjust our store blueprint in 6 categories, building on the changes made the previous year. After making adjustments by increasing or decreasing shelf space, we compared the results to previous performance and observed positive outcomes. First, we saw good performance in one of our top-performing category for which we increased the shelf space, laundry and cleaning. On the other hand, clothing showed the good performance but lower than other categories. When normalizing the like-for-like sales for the reduced shelf meters, this category actually has an above-average growth. We consistently assess the relevance of our 14 categories and store layout to adapt to shifting customer demands and will continue to do so. Next to the flexibility of the formula, we have a simple, efficient and scalable operating model that has enabled us to add a record number of 352 stores, effectively, 1 store a day, which was achieved without any compromise on our store location criteria, selection process or economics. We have added 2 new DCs across Europe to provide closer delivery to our stores. During the year, we continued to expand in Central and Eastern Europe, reaching many new customers. Most store openings were in Poland, where we added 65 stores. In addition, customers warmly welcomed new Action stores in Czechia, where we added 20 stores; and in Slovakia, where we added 13 stores. In our largest markets, France, we opened our third store in Central Paris. And next, we surpassed the milestone of 800 stores, ending the year with 859 stores. In Germany, we increased our opening pace and added 59 stores. Our new store in Munich achieved the highest opening sales of any new opened store across Europe in our history. Next to the growth in our existing markets, we expand to our 12th market, Portugal, in February 2024. We opened our first store in Vila Nova de Gaia in the Porto district and added another 9 stores throughout the year. It is remarkable how customers immediately know where to find us in great numbers from day 1. In addition, we have increased the expansion base in our newest markets Italy and Spain. We are proud of the -- of our success in attracting dedicated local teams, which has enabled us to ensure smooth and efficient store openings through our training programs. This further supports our expansion in these markets. In Italy, where we started in 2021, we added 65 stores in 2024. We celebrated our 100th store in September in Nola, near Naples, and ended the year with 132 stores from North to South Italy. Action in Italy is performing very strongly, making it an important growth engine. We opened our first DC in Italy in May, located in Altedo, near Bologna. In 2025 and 2026, we plan to open more DCs in the North and South of Italy to support our store growth, which I will elaborate on later in the presentation. In Spain, where we started in 2022, we more than doubled our stone -- store number in 1 year, ending 2024 with 66 stores. With success, we opened our first DC, Illescas, near Madrid, to facilitate our growth in both Spain and Portugal. To further support our growth in existing and new countries, we need to keep investing in our systems and organization. With our focus on low prices and daily necessities, we have seen increased customer demand over the years. On the basis of that demand, we have been able to grow in employees, stores and distribution centers across Europe over the last 5 years; from 7 to 12 countries, and almost doubling in stores and DCs. Each year, we're welcoming more and more customers, and to sustain this growth, ongoing investments in the organization and our systems are essential. As I've mentioned before, at the end of 2024, we successfully implemented a new ERP system, replacing our 2006 ERP system, to drive our future growth ambitions. In addition, we started a company-wide program to empower colleagues to shape the future organization. This initiative help us to further define clear roles and responsibilities, strengthen our capabilities and have process efficiencies in place for the future. These investments will enable us to meet increasing demand in our network while remaining scalable, simple and efficient. Next to our investment in systems and our organization, we also made progress in our sustainability program. We continue to believe that sustainability and discount retailer -- retail can go hand in hand. Our Action Sustainability Programme is embedded into our company, and over the past year, we have made good progress. And let me share some of our 2024 achievements. Firstly, people. Our colleagues are at the heart of everything we do. We continue to invest in our colleagues, promoted more than 3,000 -- 3,500 internal employees and created over the 10,000 jobs. We made good progress in planet. Since 2021, we have reduced scope 1 and 2 greenhouse gas emissions by 51%. And we have built our first gas-free DC with high sustainability standards. We achieved 100% gas-free stores and LED lightning (sic) [ lighting ], and 90% of our electricity is sourced from renewables. In addition, last month, the Science Based Targets initiative validated our near-term emission reduction targets, supporting the Paris climate agreement. For our product pillar, we continue to invest in the quality and sustainability of our products. In addition to our cotton, cocoa and timber in our private and white label products are now responsibly sourced. This also applies for palm oil in our candles and food and drink category. Finally, we believe it's important to act as a responsible partner in society, and let me highlight the achievements of 2 of our partnerships. We continued our support for SOS children villages to help children grow up in a safe and healthy environment. In 2024, we supported more than 12,750 children. Next to that, we extended our collaboration with the Johan Cruyff Foundation by 3 years to encourage children to be active for better physical and mental well-being. I cannot emphasize enough how essential our employees' dedication and hard work are to Action's success. Close to 80,000 employees worked at Action stores, DCs and offices at the end of 2024. With 151 different nationalities, they reflect the diverse communities in which we operate. Next to our colleagues, we also use a flexible layer of temporary workers when we require extra capacity or specialized expertise. We provide job opportunities through a wide range of individuals, including those who might face challenges to enter the labor market. Through training, development and internal promotions, we prioritize opportunities for personal growth, creating a more engaged workforce, and maintain our unique Action DNA. In addition, we launched our first 18-month traineeship program to support early-career employees in developing skills for roles in areas such as the supply chain, store operations and real estate. And this bring me to the end of the business performance update, and I will move on to an update on our strategy. I start the strategy section with a slide that you may recognize from the past years. Action's strategy is simple and consistent, with customer focus as its core. We provide quality at low prices, and there is no need for adjustment. We do not only have a consistent strategy but also operational consistency across countries. Our flexible formula has proven to work under one brand providing a consistent experience and a uniform operating model across all countries. This approach ensures customers to receive the same service and products in all stores. Sometimes we adapt our assortment to local needs. For example, A brands may vary by country. And product sizes may differ, such as for bed linen. As a discounter, cost discipline is one of our core values; and we consistently assess our costs. This slide shows how our ongoing reinvestment in our formula, offering the lowest-prices quality products and a surprising assortment, drives our business growth. This growth, in turn, benefits our suppliers, employees, partners and customers to grow with us. This creates a cycle that strengthens Action's competitive advantage and ensures we continue offering the best value to our customers. Our strategy provide us direction, while our flexible and simple formula allows us to rapidly scale at low cost. As mentioned earlier, we can offer the lowest prices due to our ability to buy products on a large scale and the flexibility of our assortment and our store location choices. Each of our trucks deliver high volume to only a few stores, resulting in relatively low transport costs. And finally, we maintain a simple business model with no high street locations. And we maintain low overhead and marketing spend. Moving on to our assortment. We offer 6,000 products across 14 product categories and introduce 150 new products every week, seeking to surprise our customers on an ongoing basis and remain relevant. 1/3 of our assortment is fixed, including articles such as Super Finn dishwashing liquid, while 2/3 of our assortment changes over time. A recent example of our nonfixed assortment is vegetable seeds, which is a popular seasonal product. With our formula, we focus on the lowest prices, with more than 2/3 of our products selling for less than EUR 2. This is a proportion that has increased from 60% over the last 5 years. To ensure our low price points, we monitor our prices in comparison to our competitors and take action when needed. Next to offering products at the lowest price, we continue to invest in the quality and sustainability of our products, which is recognized and valued by our customers. We have a total of 73 private labels across 14 product categories, with private label sales increasing in line with the overall growth of our company. For various products, we won the best product of the year award; and let me highlight some examples. Our Spectrum products 2-in-1 wood paint and spray paint was chosen as the best product of the year in Belgium and in the Netherlands, demonstrating the strength and positive reception of the brand. Over the last [ 2 ] years, I highlighted how Zenova sun milk serves as just one example of our commitments to sustainability in our product range. It contains both a sustainable formula and packaging. Zenova also often ranked among the top quality choices by testing organizations. Next to our product awards, Action has also won a number of prizes listed at the end of the presentation. The Action formula appeals to everyone. We attract customers across all demographics and backgrounds. It demonstrates that Action is a store for everyone across all countries. This also gives us the confidence in our potential for growth in new markets. Over the years, we have seen an increase of the share of high-income customers, which underlines our focus on product quality and relevant customer trends. The growing awareness of our brand shows its strong appeal, while there remains opportunity to increase brand awareness in both mature and new markets. People know Action through word of mouth, digital channels and from other countries where we operate. Especially in our newer markets like Spain, Italy and Portugal, we have seen an uplift in awareness of our brand. We inspire our customers through different digital touch points to come to our stores. And for an example, we have now 3 million followers on both Instagram and Facebook. And our customers app is available in all countries we're operating in. Our product range is supported by the diverse suppliers we work with shaping our unique sourcing mix. This diverse sourcing mix allow us to offer a surprising, good-quality and low-price assortment to our customers; and gives operational flexibility. We have increased our collaboration with A brands over time, as these product can be easily compared and they drive price and quality perception. Importers and wholesalers play a key role in our sourcing ecosystem. Their deep product knowledge and commercial expertise enable us to assess a wide range of trendy and surprising products. And they often serve as an extension of the buying team. Next to this, we are active in expanding our share of direct sourcing activities, which is around 20%. And we aim to diversify the locations from which we source. We are already sourcing close to 50% of our products from Europe and we want to further expand this. This not only allows us to secure products at competitive prices but also aligns with our sustainability goals. Moreover, the insights gained from direct sourcing enhance our interaction with our suppliers. And lastly, we work with stock lot traders, which further diversifies our sourcing options. This fourth product source is relatively small and offers our customers a range of surprising product choices. The combination of our 4 sourcing types is our strength. It offers different supplier options per product, and this delivers unique offering and a healthy competition. We continue to invest in long-term relationships with our suppliers and further diversifying our supplier base and origin of sourcing. The Action Sustainability Programme is important for Action and our strategy. It is embedded in a way -- in our day-to-day operations, as we believe we can offer good-quality products at the lowest price while keeping in mind our impact on the environment. Our scale enhances the impact of our actions, allowing us to make a significant difference moving forward. In 2025 and beyond, we will remain committed to our 4 pillars, people, planet, product and partnership, inspired by the UN sustainability -- Sustainable Development Goals. Let me guide you through our 2025 ambition for each pillar. Let me start with our people. As mentioned earlier, close to 80,000 colleagues work in our stores, DCs and offices. People are at the heart of Action in everything what we do. In 2025, we will continue to invest in the development and well-being of our colleagues. In addition, we will assess employee engagement through our employee survey across all countries, a key tool for developing a stable, engaged workplace; and preserving our company DNA as we expand. Also this year, we will celebrate our 3,000th store opening with all Action stakeholders, meaning celebrating this milestone with our colleagues and suppliers but also rewarding our customers with special promotions in our stores. Moving on to partnership. Action is a responsible partner to society and communities. We actively contribute by supporting children through various partnerships and programs. We continue our SOS children villages partnership, which means that for every new store opening and for every new DC in country, we support SOS children. Next to this, we have decided to extend our partnership with the Johan Cruyff Foundation. We will open sports courts for children in selected communities where our stores are located. Our first court opened in Paris in February, and we will also open new courts in the Netherlands and Germany this year. Starting in 2025, we are excited to launch a new partnership to support local child cancer organizations. We continue to stay committed to providing relief goods and financial emergency aid when disasters impact the communities that affect us. One of our key achievements for 2025 was to get out our science-based emissions reduction targets approved by the science-based target initiative. Our targets commit us to reduce our scope 1 and 2 emissions. They also commit us to reduce our scope 3 product-related emissions, which we will do by engaging with our suppliers to set their own emission reduction targets. For planet, based on our progress, we raised our emission reduction target for scope 1 and 2 from 60% to 75% by 2030. We also aim for 80% of our suppliers to set science-based targets by 2029, with 12% already onboard. In addition, we will expand our electric transport pilot for store delivery to 4 more DCs. For the construction of our future DCs, we aim to achieve the highest sustainability standards. Lastly, for product. We continue our focus on offering products that are compliant, safe and responsibly sourced while offering good-quality products at the lowest price. Our target is to have 100% transparency for all final producers of Action, excluding A brands, by 2025. In 2024, we reached 99% transparency for our private label products; and we will work to 100% this year. For our white label products, we are also on track to meet our target in 2025. In addition, we will launch the SBTi engagement program to encourage suppliers to set emission reduction targets, which will help us to achieve our scope 3 reduction target. Finally, we aim for packaging reduction of 25%, versus 2019, of our fixed assortment, and make the packaging 100% recyclable. At the same time, we will deliver new products from our own waste as part of our circularity program. Our sustainability efforts become more impactful through our growing store footprint. This slide shows the store density per million people and provides direction on the significant expansion potential in the different markets. Since 2019, we have entered 5 countries and added a total of 1,366 stores. Our acceleration in new markets, Italy, Spain and Portugal, clearly demonstrates that customers have welcomed us from day 1. We are preparing to open our first store in Switzerland, with plans to enter on April 5 this year; and Romania later in the year. Our new markets, along with the untapped potential in our existing markets, present opportunities for further expansion for Action. On top of this, our mature markets still deliver solid like-for-like sales growth. Before expanding into a new market, we conduct extensive research in phases. Based on clear criteria, we work closely with local experts to gather insights that help us identify potential challenges and opportunities. This way, we ensure deep understanding of a country's unique dynamics. At a central level, we plan the sequence of our market entries, during which we may also decide not to proceed with a country. Once there is green light, it typically takes about 2 to 3 years to establish a presence on the ground. During this time, we hire and train local teams, as they best understand the local dynamics and culture, in collaboration with our headquarters' departments. In this way, we ensure we are well prepared for a successful entry. This careful preparation has led us to successful expansion in 12 different countries maintaining the same approach, format and offering. We understand that the success of the store also relies on the location. We have clear store criteria and a cautious cannibalization assessment to ensure that every new store is positioned for success from the start. Each location is decided by the real estate committee, which include Joost and myself, following a structured process. And in new countries, we trial different type of locations in order to understand local dynamics better. Due to this process, we don't have any loss-making stores. We prioritize hiring and training local colleagues who will work in our stores. We ensure they are well prepared with training provided by our international store opening teams. And by adapting a uniform way of working across all countries, we maintain the company's DNA and create a consistent experience for our customers. We make sure to build and maintain our stores in a proper way. And we have clear criteria in place for mature stores to ensure timely investments in relocations, refurbishments and optimizing the sales floor area through store enlargements. We also enhance the appearance with new signage and a fresh coat of paint. We strive for a fresh and modern store offering a great shopping experience for our customers and a nice working environment for our colleagues. This slide showcases the uniformity of our stores across different countries. It highlights that our stores share the same types of locations and formats, ensuring a consistent shopping experience for our customers. Our stores typically serve a catchment area of at least 40,000 people and have a store size around 900 square meters and are in locations with low rents. Let me continue to explain about our future growth. Our projected additional white space store potential is 4,850 in existing and currently in-scope countries. Although we added 352 stores last year, the total white space potential increased from 4,700 last year to 4,850, meaning we added around 500 stores to our white space estimate. This can be explained by the addition of further potential locations in the in-scope countries within Europe. As we expand into new countries each year and plan for long-term growth, our understanding of these countries increases, and does our view of their potential. We see clear potential in expanding our urban city store footprint. As we grow, securing the right locations becomes more challenging due to the market saturation and rising competition for retail space. Despite this, our disciplined store location approach and good relationship with landlords position us well to navigate these challenges. Looking forward, we plan to open around 370 stores in 2025. As mentioned earlier in the presentation, we are in full preparation to expand into 2 new countries in a single year for the first time, Switzerland and Romania. And as I said earlier, we still see a lot of growth potential in Europe, especially in the Southern and Eastern Europe where we experienced that customers receive us with great enthusiasm. I'm also happy to announce that, like this year, we are preparing to expand to 2 new countries in 2026, Croatia and Slovenia. Finally, I would like to give a brief update on the market studies we mentioned last year. We have made good progress. The studies relating to Asia and the U.K. will not be continued for the time being. And for the U.S., we have decided to continue our research and are entering the next research phase with a dedicated team. As customer demand for daily necessities continue to grow over the next few years, we will continue, expand our network. With new stores, we will also add new distribution centers to ensure we run a cost-efficient operations with sufficient capacity, high service levels; and within a short distance to our stores. We will open 3 new distribution centers in 2025: in Wallersdorf in Germany, Novara in Italy and Dunikowo in Poland. This will be the first time we opened this many distribution centers in a single year. This significant increase demands careful preparation and resources to support our store expansions. In addition, we will open a hub in Tilburg, the Netherlands. And I also can already share that we will open 2 DCs in 2026, in Ferentino in Italy and in Onnaing in France, reaching 20 DCs in total. As mentioned earlier in the presentation, all our new DCs, starting from the opening of DC Illescas, are built gas free and with the ambition to achieve the outstanding BREEAM certification. Since DC Novara was already under construction before this time, it remains the only new DC with the old standard of BREEAM excellent. In 2025, our commitments remain strong to invest in a future-proof distribution network and the organization to enable the expansion of our footprint. I would like to conclude by [ underline ] that I'm proud of what we have achieved in 2024, with a record number of store openings and continued very strong like-for-like sales growth. We achieved this success through our customer focus, the flexibility of our formula and our continued investment in the organization and systems. None of this would have been possible without the hard work of all our colleagues across Europe. Now I will hand over to Joost Sliepenbeek, the CFO of Action, who will provide you with more background on our financial results and elaborate on our 2025 performance to date.

Thank you, Hajir. Good morning, everybody. In this section, I'm going to present and explain our financial performance in 2024. After that, I would like to provide you with a brief update on our 2025 trading up to and including week 11, along with how we today look at the rest of the year. This slide, I've used in all my presentations since I joined Action as CFO in 2018. That is not because I do not want to invest time to make new improved slides. It is simply because the fundamentals of our financial model have remained unchanged until today. In the rest of my presentation, you will see that our performance in 2024 continues to provide proof for every element of the financial model. Let me already mention some examples. First, the value drivers. In 2024, we added a record number, 352 stores. And at the same time, annualized first-year sales of these new stores increased versus 2023. Also in 2024, we had a 10.5% growth in transactions that led to 10.3% like-for-like sales growth. Combined, the operating leverage that we got from this growth from expansion and like-for-like led to an increase in EBITDA margin of 80 basis points. Second, store economics and the economic model. I will also present evidence of the predictability and consistency of our performance, predictable, visible in the performance, for instance, of our newest market, Portugal; consistent for various aspects, for instance, gross margin across categories and store contribution across sizes and countries. Finally, our cash generation, where I will share details of our store payback period of less than 1 year. Our continuous expansion plays a crucial role in driving long-term value. In 2024, we increased the number of store openings, adding 352 stores versus 303 in 2023. Let me talk you through the reasons why our economics are highly attractive. First, everywhere where we operate, we follow one operating model and all stores are uniform. Second, our newest country, Portugal, underlines how our format travels across borders. In total, we opened 10 stores in Portugal in 2024. And in that first year, they already had an average store contribution margin in excess of the Action average of 24.7%. Third, in our existing markets, the stores that we open perform in line with existing stores in terms of productivity and contribution margin from day 1. This is possible because we have a streamlined and optimized way of working for all the steps in the store opening process as explained by Hajir. Lastly, in our current and new markets across Europe, we recognize significant white space opportunities. Before I continue presenting and commenting further on our financials, I need to explain that in this presentation we're using certain so-called alternative performance measures, for instance, like-for-like sales growth, gross margin and operating EBITDA which excludes the impact of IFRS 16. In the back of the presentation, we've added an appendix with information on the alternative performance measures that we use. And in this appendix, we also present the P&L numbers including IFRS 16. In 2024, we realized a 21.7% increase in net sales and 28.6% increase in operating EBITDA. Both are in line with the average growth over the past 5 years. The higher growth of our operating EBITDA versus net sales growth has expanded our EBITDA margin by 80 basis points to 15.1%. This performance was clearly ahead of the guidance that I gave in 3i's capital markets seminar last year. I will explain the reasons for that later in this presentation. The overall sales growth of 21.7% was driven by like-for-like sales growth of 10.3% and store expansion. The like-for-like can be broken down into growth of number of transactions and ticket amount. With 10.5% growth in transactions, which accounted for 102% of the like-for-like increase over the year, we clearly benefited from new customers as well as higher frequency from existing customers. The ticket amount contributed the balance at minus 0.2%. To place this in perspective, let me remind you that our standing guidance for the coming years is that we should be able to generate mid-single-digit like-for-like sales growth in a low inflation environment and high single digit in a higher inflation environment. When I presented at this capital markets seminar last year, I described the 16.7% like-for-like of 2023 as exceptional. Today, I see the 10.3% of last year as very strong. I also want to emphasize that like-for-like sales growth is a compounding measure. In other words, if I take a store that was in the like-for-like base both years, so that means a store opened before the 1st of January of 2022, that store had a like-for-like sales growth for the 2-year period of 26.9% and also, for that period, almost completely coming from growth in transactions. On this slide, I provide more color on the like-for-like sales growth performance by showing the development over the quarters for the last 3 years, but before I comment on the quarters, a quick reminder of the developments over these 3 years: First, in 2022, we still had distortions from COVID-related closures and restrictions. Therefore, we used a normalized like-for-like in 2022 to ensure a more meaningful analysis, which we've also included on this slide. Second, in 2022 and first half of 2023, we still had relatively high inflation, whereas 2024 growth was exclusively from transactions. Quarter 1 started well with a like-for-like of 9.8%. In line with 2023, we passed on lower prices to our customers. This resulted in, amongst other things, significant further growth in the fast-moving consumer goods categories. In quarter 2, strong like-for-like performance resulted from significant growth in the number of transactions. In this quarter, growth in summer seasonal was somewhat held back by the weather. In quarter 3, we had some recovery in the performance of the summer seasonal assortment, while nonseasonal continued in line with the year-to-date trend. Finally, in quarter 4, like-for-like sales growth was mainly driven by growth in transactions and a particular strong growth in seasonal Christmas assortment. During the second half of the year, we also had the benefit of the changes in the blueprint that we implemented in the first quarter, especially in the categories where we increased meters. When I reflect on the guidance that I gave last year for like-for-like sales growth, which was mid- to high single digit, our outperformance was across all quarters but more pronounced in the second half of the year. Given that the fourth quarter is our biggest quarter, representing approximately 30% of 2024 net sales, and the fact that our store openings are more loaded towards the second half of the year, we've had to manage increased volumes in our buying, which is often months in advance, but we also had to deal with the increased volumes in our supply chain and in our stores. And to give you one data point in this respect. In quarter 4, we handled an average of 21.9 million customer transactions per week for Action in total, a growth of 23% versus 2023 and 49% versus 2022. This is clearly an area where we've had the benefit from a flexible and responsive operating model but also an area where we continue to work on our ability to handle even larger volumes going forward both in certain stores as well as in our distribution centers. On this slide, we present the absolute sales growth in the years 2023 and 2024 and, in all cases, compared to 2022 and only for stores that were opened before 2022, so in other words, a comparable group of stores. The graph only includes the weeks that the stores were both open and selling the full assortment. Spain and Portugal are not included in this analysis, as the first stores in these countries were opened after 2022. As you can see, Action delivered strong performance across all countries, without exception. The markets are presented, from left to right, in order of entrance. If we zoom in on the individual countries, the following can be noted. In our most mature market, the Netherlands, where Action started 32 years ago and where we on average added 7 stores in each of the last 3 years, we still realized strong like-for-like sales growth, 21.8%, compared to 2022. Sales growth in Belgium was mainly driven by an 18.3% growth in the number of transactions. We performed strongly and above Action's average in Germany with 30.3% growth compared to 2022. The performance in our largest market, France, was in line with Action's average in the past 2 years. Significant growth was visible in fast-moving consumer groups -- goods, with more than 40% growth versus 2022. The strongest performance was, like in previous years, observed in Poland with an impressive 60% growth realized compared to 2022. Sales growth was positively impacted by favorable exchange rate. However, like-for-like sales growth in local currency is still 47% versus 2022. Also, in our newer markets Italy and Czechia, the performance was strong and ahead of expectations, having the second and third highest performance with 43.9% and 42% growth, respectively, compared to 2022. This again shows that we are met by new customers with a warm welcome. We had a record of 354 store openings in 2024, achieving our ambition to open significantly more stores compared to the 308 in 2023. In part, this was realized by accelerating the expansion in new countries, Spain and especially Italy. We also had to close 2 stores. This was not because of performance. All our stores contribute positively at the level of store contribution margin, and in our whole history, we've never had to close a store because of performance. The stores we closed in 2024, 1 in Poland and 1 in the Netherlands, were both as a result of the properties being redeveloped to housing by the landlords. Consequently, we added 352 stores, bringing our total number of stores at year-end to 2,918. Last year, we also opened our first store in Portugal, our 12th market, where we today have 11 stores. As shared by Hajir earlier, our target for 2025 is to add circa 370 stores. The main growth countries will be Italy, Germany, Poland, France and Spain. We will also enter 2 new markets in 2025, Switzerland and Romania, but I also want to be very clear about our discipline. Although our focus is on increasing the expansion pace, the quality of our new stores and their profit contribution will always come first when considering new locations. And we've actually seen improved store economics across the store estate. Every new store is discussed and decided in our real estate committee, in which Hajir and I participate. Gross margin is an important driver of our performance. The flexibility of our formula is a very valuable asset, as we deliberately offer a changing range of products across our 14 categories. Besides providing a surprising assortment to our customers, this allows us to buy only products that provide an attractive margin that is consistent across categories. Gross margin in 2024 was 40.4% versus 40.2% in 2023. The variance versus 2023 is mostly explained by a higher sales share of direct import. In 2024, we, of course, remained loyal to our principle to pass lower buying prices through to our customers. And we continued to lower prices, especially in the first half of the year. The impact of the sea freight costs increased in the second half, although we were able to keep the impact relatively limited. On this slide, you see the contribution margin of our stores, first, indicated on the left y-axis by the contribution margin per store in euros, in the blue bars; and second, indicated on the right y-axis by the contribution margin as a percentage of net sales, indicated by the orange dots. The graph includes all stores opened before the 1st of January of 2023. As shown, all these stores are profitable and store contribution margins are very consistent across the store portfolio. In other words, we do not have any loss-making stores. All our stores contribute positively. Actually, none of these stores have a contribution margin below 12%. This underlines that, while expanding our store base, we've always focused on the good quality of our new stores. Finally, I can say that the statement that all these stores are profitable is also true if we add supply chain costs to the calculation. Here you see the same contribution margin per store as on previous slides but now aggregated by country. 9 countries are shown, as Belgium and Luxembourg are combined. And only stores that opened before 2023 are included, which means that Slovakia and Portugal are not on the slide. As can be seen, the average store contribution margin is 24.7% and is consistent and well above 20% across all countries. This again underlines the consistency of our strong economic model. On this slide, you see the short payback period that we have for new stores. Last year, I had the same slide but then for the period 2020 until 2022, so I've added 1 year to the arithmetic. The numbers represent the average CapEx, net sales and store contribution for all stores opened in this period. Although we added 2023 to the analysis, we're getting a very similar number for the payback. If you look at the development over these years, there is an increase in the upfront investment caused by inflation, country mix and slightly more square meters, but this is compensated by a higher store contribution from higher first-year sales and a higher store contribution margin. Historically, our average payback period was around 1 year. As you can see on the slide, for the period of 2020 until 2023, this is significantly less than 1 year. Capital intensity per store is low. We rent all stores. And we pay relatively low rents because we don't need to be in the high-traffic and A-one locations. The CapEx spend of circa EUR 0.5 million per store is low. In the calculation of the average payback, we add to the CapEx the preopening expenses for new stores that include mainly training costs for new employees and preopening rent. In 2024, the average net sales per Action store was EUR 4.7 million. New stores ramp up quickly in terms of sales in the first year and typically grow to the average like-for-like sales growth after 3 years. The investment on this slide does not include working capital. However, because we operate with negative working capital, the payback period for new stores would be even shorter if we factored in working capital. After the increase in EBITDA margin of 70 basis points in 2023, we again realized a very significant increase in 2024 of 80 basis points. I will talk you through the most important drivers behind our EBITDA margin development in 2024. I've already explained the increase in gross margin which is largely driven by an increased share of direct import. Operating leverage is the result of our 21.7% sales growth and in particular the 10.3% like-for-like growth. OpEx had a total impact on EBITDA margin of minus 30 basis points, where the positive impact of 40 basis points in housing costs is offset by 30 basis points due to wage increases and another 30 basis points by inflation in various other OpEx lines. Overall, we can conclude that our operating model, margin management and tight cost control resulted in the strong expansion of our EBITDA margin. Another element of our financial model is high sales density. Compared to other nonfood retail formats, Action historically has high sales per square meter. This has grown over the years mostly because of our like-for-like sales growth. Over the 2019 to 2023 period, this has grown with a compound annual growth rate of 7.8%. Driven by the like-for-like sales growth in 2024, last year, the increase was 7.4%. The operating leverage of our financial model means that operating EBITDA per square meter grows even faster. Here the historical growth rate was 16%, and last year, the increase was 13%. In 2024, our CapEx increased by EUR 110 million or 42% to EUR 369 million. CapEx as a percentage of sales was 2.7%, up from 2.3% in 2023. A big part of the explanation of that increase is in 2 specific items. On the one hand, the low 2.3% in 2023 was very much explained by the sale and leaseback of our distribution center in Verrières, France, whereas on the other hand, 2024 includes almost EUR 20 million higher CapEx for technology related to the migration of our ERP system. This was the biggest technology project in our history. The actual migration was successfully implemented at the end of 2024 and start of '25 and will support our next phase of growth. Having said that, the 2.7% CapEx as percentage of sales in 2024 is nevertheless below the average of 3% of the past 5 years, demonstrating our scale economies. Our store expansion CapEx increased to EUR 216 million in 2024, which is explained by 46 more store openings and higher average CapEx per new store. The average CapEx was 610,000 per store in 2024 compared to 545,000 in 2023. The impact of inflation and scarcity of materials led to an upward pressure. In addition, CapEx in some of our newer markets is also higher, so there's also a mix effect included in this increase. Finally, the stores in 2024 had slightly more square meters. In addition to building new stores, Hajir mentioned we also maintain our existing store portfolio. In 2024, we invested 30 million in store maintenance; and relocations, enlargements and refurbishments or RERs. This is a decrease of 12 million compared to 42 million in 2023. This difference can be mainly explained as there were fewer opportunities for relocations and enlargements in 2024. One of the elements of our financial model is excellent cash generation. This translates into a high cash conversion. As I explained last year, the 104% for 2023 was exceptionally high due to very strong sales in the last quarter resulting in a low year-end inventory level. With 81% for 2024, this has returned to the more normal levels of 2021 and 2022. We remain highly cash generative, as is also reflected in the 12.2% operating cash flow as a percentage of net sales increasing over the years from 7.3% in 2019. Same as last year's, the calculation of cash flow includes CapEx for new DCs in all years presented. Not included in operating cash flow are the financing transactions in July and November, taxes paid and the dividends that we paid in March and December of last year. Including the December dividend, we ended the year with cash and cash equivalents of EUR 814 million. In October 2023, we completed a debut U.S. dollar term loan issuance in the U.S. leveraged loan market, raising $1.5 billion. In June 2024, we returned to the markets with a cross-border EUR 2.1 billion total incremental term debt raise. This EUR 2.1 billion was split between a $1.5 billion tranche and a EUR 700 million tranche. We again hedged the U.S. dollar exposure fully back to the euro. In addition, we had 70% of the interest rate risk on this U.S. dollar tranche, resulting in an all-in euro fixed rate of circa 5.6%. Whilst our leverage increased, as a consequence of this transaction, to 3.5x, we have quickly de-geared since then. As part of these transactions, our 2 rating agencies have reconfirmed the corporate and instrument ratings of BB and Ba2, with Moody's also improving its outlook from stable to positive. The proceeds of this transaction, together with surplus cash from our balance sheet, were used to fund a share redemption that was completed early July. Then in November 2024, we completed a leverage-neutral amend, extend and repricing transaction, pushing out the maturity of EUR 2.545 billion of our senior term debt to 20031 -- 2031 and repricing a total of EUR 3.125 billion of our debt, generating annual recurring interest savings of EUR 14 million. The total amount of our senior term debt remained unchanged at EUR 6.6 billion. We have de-geared since the July transaction, reducing our net leverage from 3.5x to 2.6x by the end of 2024, driven by our continued strong EBITDA growth and cash flow generation. This slide summarizes our operating performance over the last 3 years. The performance proves the power of our financial model shown by the 21.7% increase in net sales, 28.6% in operating EBITDA, giving positive operating leverage; and a record number of 352 added stores. Finally, I want to give you an update on trading in 2025, so far, and our outlook for the rest of the year. Today, we are on week 12. As you probably know, Action operates a 52-week and 12-period reporting calendar, with quarters of each 3 periods with 4, 4 and 5 weeks. That means that we are today in week 4 of our period 3, with still 1 week to go until the end of the first quarter. The information on this slide covers year-to-date until last week being week 11. As you can see, our overall sales growth for these 11 weeks was strong at 17.2%. Like-for-like growth was 6.1%. The like-for-like sales growth year-to-date was driven by a 6.5% growth in transactions. Last year, we ended with 2,918 stores. Our store openings in 2025 are on track to realize our target to add circa 370 stores. Up to and including week 11, we opened 38 stores including 13 stores in Italy, 7 in Czechia, 6 in Poland and 3 in Germany. So far this week, we've opened an additional 2 new stores, 1 in Luxembourg and 1 in Italy. Our total number of stores today is 2,958. Last Sunday, our cash and cash equivalents stood at EUR 927 million. Same as last year, we plan to pay a dividend in March. This will be paid next week. After this dividend, our cash level remains solid, especially given that, considering our normal seasonality, we are strongly cash positive from April, onwards. In addition to the repricing in November 2024, at the beginning of this month, we completed another leverage-neutral repricing transaction, generating annual recurring interest savings of approximately EUR 19 million. In terms of outlook for the year, the guidance that we gave 2 years ago for the like-for-like sales growth for the 4-year period 2023 until 2026 of mid- to high single-digits, depending on the inflation in a given year, still stands. Year-to-date, we're at 6.1%, with transactions at 6.5%. This was impacted by 2 factors; first, lower availability for certain products and stores. This was triggered by the fact that an unavoidable part of the migration of our ERP system was that we could not use our regular store and DC ordering systems for a number of days. Although this was foreseen, this off-line period had a negative effect on availability in the following period. And it took longer than anticipate to fully address this issue, but this has now been dealt with. Second, the timing of Easter, which is this year 3 weeks later versus 2023. Taking these factors into consideration, we expect like-for-like for the full year above where we are year-to-date and within our long-standing guidance range. If I look at the number of stores, we've said that -- we've said in the last 2 years that we expect to open 1,300 to 1,400 stores in the 2023-until-2026 period. At the end of 2022, we had 2,263 stores; end of last year, 2,918, so already 655 added. For 2025, our ambition is to add circa 370 stores. That means that I can safely say that we will end up at the high end of the 1,300 to 1,400 range, possibly slightly above. Finally, our EBITDA margin. Based on year-to-date sales and like-for-like performance, we expect a good first quarter for both sales and EBITDA growth. Last year, I was too cautious on our EBITDA margin. I've set 10 to 20 basis points improvement for 2024 and 15% as target to be reached in 2026. We ended the year at 15.1%, so 80 basis points improvement. If I look at the current year, with further operating leverage from our growth, both like-for-like and expansion, our continued investment in our lowest prices; as well as some inflation in our OpEx lines, especially wages, reflecting labor markets, I expect 10 to 20 basis points improvement. And with that, I hand back to our Chairman, Simon Borrows.

Thank you, Joost. Action has been on an incredible expansion journey since we invested in the business in late 2011, and yet today, it still feels like we are very early in that journey. Action's well-invested organizations are now capable of facilitating a further significant step-up in store numbers and new countries. We will see another increase in store openings this year as we enter Switzerland and Romania and boost store numbers in the South of Europe in particular. And it's good to see our white space opportunity continue to grow as we learn more about our more recent countries and reach more informed views of their store number potential. Action's low-price format will continue to win over new customers in all the countries it operates in. And this will underpin further scale benefits, which in turn will give it further opportunities to reduce prices. And the big challenge for the group as we move forward will be to manage the increasing volumes of sales through the supply chain and through our busiest stores in particular. Now let me close with one of my favorite charts, which neatly illustrates the compounding growth of Action and how its sales growth is developing relative to some giants of the retail sector. And having passed 100x in money multiple terms in the summer of 2023, Action is now well placed to reach 200x during 2026, taking just 3 years for that step. I will now hand back to the moderator before commencing the Q&A session.

[Operator Instructions] And now we'll go and take our first question, and it comes from the line of Manjari Dhar from RBC.

I'd just have 3, if I may. First, I wondered if you could quantify or give any additional color on the level of drag you saw in the like-for-like from the system upgrade and the calendar shift in Easter and the lack of leap year. Any color you could give on sort of exit rate would be very helpful. And then secondly, I was just wondering how you guys expect CapEx per new store to trend into 2025. Should we continue to expect some more inflation there? And then finally, I was just interested on any color you can give on the reasons you chose not to proceed with the U.K. and the Asia studies versus why you are proceeding with the U.S.

Why don't, doesn't Joost take the first 2 questions, the one on like-for-like and the CapEx development? And then if you take the U.K., Hajir, okay?

So if I kind of understand the first question, it is what has been, let's say, the total availability impact of the various items that we have mentioned. And to be honest: We haven't done an accurate calculation, but we think it is slightly more than 1% -- or year-to-date like-for-like, but it is hard to be precise. And this has been mostly an issue for high-volume items, so we've seen that impact more marked in, let's say, the bigger stores and the bigger DCs. Nevertheless, today, we are at a point that I can confidently say that this, yes -- so the drag on availability caused by, amongst other things, the ERP implementation is behind us. And then on the CapEx for new stores in 2025. Without being exact, I would expect what I described as a trend in 2024 to continue. So there will be an upward pressure from inflation. There's also going to be some increase because of mix. And this is because, especially in the Southern countries, Spain, Portugal, Italy, costs to build a store are higher. I'm not going to comment on Switzerland today, but that's not going to have a big impact yet in 2025. But as I also explained, if you look at store payback, we have an opposite impact of average first-year sales increase and higher store contribution margin; and both of which, I expect also to continue. So I would say that, in the balance, impact on average payback will be neutral.

Okay. U.K...

Yes. So I can comment on the U.K. So let me first start with saying that our focus is still, on Europe, the existing markets and then the new markets I have announced. Talking about studies which we're doing: Clearly we need to invest more time in that, so we have chosen for a study -- or more extensive study in the U.S. And that is just also a matter of priorities. And that means that, for the time being, we will not spend time on the other countries.

It doesn't mean never, though. It just means no.

For the time being, yes.

Yes. Okay...

Now we'll go and take our next question, and the question comes from the line of Hubert Lam from Bank of America.

I've got 3 of them as well. So firstly, you're also looking at possibility if -- of expanding to the U.S. If that is -- ends up being a situation that you're going to pursue or -- like, when is the earliest do you think you can decide to expand there? And also, how should we think about the additional cost outlays of expanding to another continent? And also, in terms of the tariff situation today, does that change the attractiveness of that market? That's the first question. Second question is on EBITDA margin. It's you said you expanded a lot last year and still expect further -- expect it to grow further this year. Are there any limits, do you think, to the EBITDA margin? You're already best in class. I'm just wondering how much more you can kind of squeeze out of it. And lastly, on like-for-like sales. A lot of it still -- today is still driven by volume growth. Do you expect that to be still the case going forward? And also, any flexibility you may have around pricing which you can maybe use to help boost the like-for-like sales as well?

Do you want to take the U.S.?

Yes. So there were a couple of questions around the U.S...

The first one was on likely timing if you were to...

Yes. So I already explained in my update that it take us 2 to 3 years to do a full study and then come to a conclusion. In the U.S., we started last year, so we have 1 year behind us, but we -- it's clearly that we need to have more resources in place and more time to investigate that. In terms of tariff and additional costs, I think it's just too early to say anything about that because we're all going to take that into account in the full study which we're doing.

Okay. What about the EBITDA margin limits, Joost?

So I said, for the year, so 2025, my expectation at least is a further expansion 10 to 20 basis points. I would say, longer term, the general observation is that, while we keep growing, we will have the benefit of operational leverage. And we are very much focused on that overall growth and realizing a comparable 10 to 20 basis points per year.

Okay. And do you want to say something about like-for-likes, whether it's mainly going to be volume-driven this year or whether there's any...

I strongly believe that it's going to be volume-driven. That's also what we're now seeing. I think that we are -- the awareness of Action and especially in the new countries is very high. And I think that's going to remain like that, so attracting more customers and in a more frequent way to our stores is definitely in the outlook for this year.

And will there be opportunities for price reductions?

Well, I think that is part of our whole business model, right? So I think the way we act is that, if we see that there are lower buying prices, we will pass that to the customer. And that's definitely also going to give a volume uplift.

Yes. Okay, all right, thanks, Hubert.

And the question comes from the line of Nick Johnson from Deutsche Numis.

I've got a couple of questions. Firstly, just coming back to the EBITDA margin point and looking at it from a different direction maybe, I just wondered if you could say what your OpEx growth run rate is and how we should think about that going forward. I mean, is it sensible to assume OpEx growth will be in line with number of stores plus inflation? So just some pointers around how we should think about OpEx growth, please. And secondly, on white space. So in your white space estimates, are your assumptions around stores per million of population similar for new markets as they are for more mature markets? Or is there some inbuilt sort of conservatism in your new market assumptions? So some color around that would be very helpful.

Okay, Joost, do you want to take the EBITDA margin question? And Hajir, you can take...

So I understand the question. And I think it's probably related to how to model it, but in all honesty -- and I think that is also what I was trying to show in the waterfall chart that I had on the EBITDA margin development of last year. It depends a little bit. So as you've seen, last year, for instance, we had this 40 basis points lower housing costs which obviously had to do with energy being exceptionally high in 2023. So there will always be some of these incidentals included in that. I think the main message I wanted to convey with that slide is that, this operating leverage, that is an element and an important explanation of the expansion. And that, we will have both in existing stores, because of like-for-like and then related to the cost base of those stores; as well as for the overall company if we increase sales also by expansion. And that is because our fixed costs at that level do not increase proportionally because of the fact that we have this operating model that allows us to keep the complexity low and not to have an overhead increase relative to the sales growth.

Okay, all right.

So I answer...

[indiscernible] white space.

Yes, the white space...

Yes. On the white space, we work with different densities per country. And what we also do is, once we're getting more experience in a country and more mature, we also optimize the catchment areas and the learnings which we're then having. So for an example, if you take the larger countries where we also have to deal with urban stores, once we have opened the stores, we also are adjusting the density areas based on the learnings. So that gives more white space as we're going to continue.

Thanks, Hajir. Okay...

[Operator Instructions] And now we'll go and take our next question, and it comes from the line of Andrew Lowe from Citi.

I just wanted to follow up on the white space and that nice chart that you have on Page 36. So if I look at last year's presentation, you had 64 million population in other in scope. And then you've obviously taken out of that 19 million from Romania, 9 million for Switzerland, so I get 36 million. And then today's presentation, you've got 49 million, so you've seen a 13 million increase in that figure. You've mentioned 2 countries, Croatia. That's 4 million. Slovenia is 2 million, so it seems like there's a missing 7 million. Can you just clarify, please? Are there any other additional countries that you've included? And if not, what drives the difference there? And then the follow-up is you've increased your white space opportunity by 500, so I'm just curious. How much of that is driven by the new countries? And how much of that is driven by higher density in your existing countries?

So if we just look to the in-scope countries. Then we have added 2 countries to the in-scope part. If you look to the total of 500 stores: Then 50% is driven by new countries. And 50% of the stores which we have added is driven by the learnings which we are applying across countries, and that is what I was explaining earlier. As we grow in a country, we see and learn about store densities and where we can potentially open more stores. So it's 50%, 50%.

Can I just ask one follow-up as well on this slide? So you've grouped together Germany and Austria. I think your slide last year seemed to imply that you could get up to 1,600 stores in Germany alone if you used your total potential, so would you be willing to clarify what that figure is in Germany under the new assumptions?

Well, I will not comment on the total number in a country. And the main reason why I would not do that is, well, we all know that Germany is a large country, 85 million people. We see a lot of potential in that country still. So there are a lot of areas where we do not have stores. And as I said, one of the learnings which we are applying as we continue to move forward is that we see much more potential as we have today in, so I'm not commenting on a number.

And the question comes from the line of Gregory Simpson from BNP Paribas.

3 again on my end. Firstly, to go maybe back on to Germany. It does like it's -- looks like it's had a bit of an acceleration last year, based on Slide 44, in terms of like-for-likes. Just wondering if there's anything that's driven this in particular. And if -- longer term, do you see a case for Germany to kind of catch up to France, in a sense, given there is a big sales per store difference between these 2 large end markets? Second question is I think you said there has been a bit of a shift towards higher-income customers in Action stores. Have you seen any noticeable shifts in average basket sizes or other behavior from this? And then thirdly, on the tariff point. There's going to be quite a lot of noise between the U.S. and the rest of the world. I was wondering if you -- what you're hearing from your suppliers. And do you think it eventually puts Action in a stronger position in terms of buying power?

Hajir, that -- probably all for you, I think.

Yes. So I think, for me, Germany, it took us a little bit longer, as we also explained in earlier years, to get to the level where we are today, but we see strong awareness in Germany. And we also see that being reflected in the numbers, so personally, I expect that, that is going to continue. It's also very clear that I also took out one of the stores which we have opened in the urban stores, so the Munich store, which was the -- had the highest sales across Action in Europe. So that again shows the potential we still have in Germany as a country. If we just look to the higher income, then I think that you really see that -- the discount shift which is being made over the years, that more and more customers are visiting Action. Nobody is ashamed anymore of discount. And that, we also see that back in everyone is shopping at discount. And that has also to do with lots of daily necessities which are there all the time. If I take the last question, on the U.S. Yes, we already see for a while that there is a lot of capacity in the Far East and that we also see better prices because of a lack of the U.S. orders. And this is something which we already have seen for a couple of month.

Hajir, fair to say on the higher-income basket point that we're not seeing a dramatic change in basket sizes.

No.

Yes.

I think it's much more a reflection of discounts which is being accepted and the daily necessities which we're selling.

Yes. Thanks, Greg.

And the question comes from the line of Haley Tam from UBS.

I think it's probably for Joost. And I apologize if it's a bit numbers-based, but the EBITDA margin guidance you've given of a 10 to 20 basis points expansion: I think, first of all, in the past, you've given us a number for supply chain costs as a percentage of net sales. And I don't think I saw that this time, but I think it was 5% in 2023. I suppose, just simplistically, if I'm looking at your 24.7% store contribution margin for your profitable stores, even if I adjust that for a 0 contribution from all the new stores you opened last year and the ones you're planning this year and then apply a 5% supply chain cost, I would still get to 15.4%, so I just wonder whether I'm missing something in terms of how to think about EBITDA margin. Am I looking at the [ volume puts ], I suppose, is really the question.

Let me think a little bit how I'm going to answer that because again I'm -- I get the feeling that I'm asked for help to fill a model, but let me at least be clear. So your 5% is correct. So I mentioned that number probably last year. And we're about 5% supply chain in 2024 as well. And when I formulated my guidance, I did indeed mention operating leverage which works through also to some extent in supply chain, but I've also mentioned that we expect some increases in certain OpEx lines. And the guidance that I gave is the outcome of that. And I think, for today, I want to stick to that now.

Okay, thanks, Joost. Thanks, Haley.

[Operator Instructions] And now we'll go and take our next question, and the question comes from the line of Daniel Sykes from Redburn Atlantic.

Just one question from me, please. I believe you've previously mentioned targeting around about 20% of your assortment directly over the next few years. Can you just provide us a data point in terms of where you are currently and whether that expectation has changed?

Yes. So on direct sourcing, we are currently on 20%.

No. The target is 20%.

Sorry. What's the...

So we are -- currently versus the target.

Yes. We -- currently we are around 14% versus the 20%, what we're aiming for.

It's moving up this year, though, isn't it?

Yes.

Thanks, Daniel.

I'm showing no further questions, so I will now hand over to Silvia Santoro, 3i's Group Investor Relations Director, to address the written questions submitted via the webcast page.

There's a question on the location of the new hub which is not near a port. And I guess the question is on how do you think about the location of hubs. And what function do they fulfill? What do they provide to the DCs?

Well, the function of the hub is, at the end, to get our direct sourcing products over there; and to make sure that -- once the sales of seasonal items is going up, that it's easy going out to the DCs. And that is the main reason why we have chosen this location.

Okay. Then we have a question on gross margins which have grown. And do -- are you looking to invest some of this into even lower prices? And aware that Action is already very competitive compared to local competition.

So for us, in the whole way we buy our products, we select our assortment. We always want to make sure that we can offer the lowest price. And if we see any opportunity to further pass it back to the customer or in price or in quality, we will definitely do that.

Isn't it fair to say that you had to constrain some price reductions when we had the container problems last year?

Yes.

And that was one of the results of this.

And then we have a question on sourcing. "With 50% of your goods sourced from Europe and the expectation that it will increase, what do you think the percentage -- what do you think that could get to? And are there certain product groups that cannot be sourced from Europe? And is there a pricing constraint in that?"

Well, I think in our whole model we try to diversify as much as possible, so we're looking to Europe, but we are also looking to the Far East; countries outside of China, if you look to Pakistan, if you look to India. I don't have a percentage in mind where we would like to end, but we're really aiming for diversifying without any impact on the price levels because for us that is, of course, part of how we buy product.

Then we have a question on the ERP migration and sort of the longevity of that in reality. "So what does it mean? When do you expect then you will need a further upgrade?"

20 years?

No. Well, probably not 20 but certainly very long period. So this is the newest technology of our vendor and this is a base that we can use for future growth.

Then we have a question on shoplifting. Has it been a problem for Action? And have you seen a change in trend?

No. So in general in the markets where we are active in, of course, we also deal with stores who have more shoplifting, but we don't see a similar trend like the U.K. or the U.S., for an example. That is not the case in the markets where we are active in.

So we have some questions on comparisons to Dollarama. And the question is that it generates 32% EBITDA margins given local economies of [ scales ]. What are Action's EBITDA margins in countries with similar local scale? And is there a potential to achieve similar 30%-plus EBITDA margins on a blended company basis over time?

I think you start from a very different gross margin at Dollarama. That's a very big difference, where they're working off more like a 60% gross margin than our 40%. And that accounts for a great deal of the difference. Any more?

So there's a question on worker retention rates and how it compares to the average in countries that you operate in.

Do you want to say something about that?

Yes. So I think in general we offer our employees competitive wages...

Any countries where it's harder to recruit or hold onto people?

No. So I think the whole recruitment and turnover in general is, in retail, quite a challenge. So we also see some of those challenges in certain countries, in certain areas in Germany, in certain areas in the Netherlands, but we have always been able to open our stores. And so it has never led to situations where we're not able to open our stores.

Yes.

And a question on who are Action's main competitors.

Well, I don't think that we have one main competitor. So we are active in 12 countries. In every single country, we have different competitors. And that is also because we are offering 14 different categories. So for each category, you can [ defined ] a couple of competitors in the country, which we're also doing, but there is not one main competitor.

And then we have a question on 3i, just for Simon, I guess. Your view on reinvestment opportunities of increasing Action-related cash flows into the business -- into other businesses. And how has the landscape of potential targets and pricing evolved? And would you ever consider buying back your own stock in the face of lack of significant opportunities?

As 3i, we would still have an appetite to buy further Action equity. We have a great deal of confidence in the business and in the management team. The environment at the moment is, I will say, characterized as much more of a buyer's market. And we're finding that we -- the 3 transactions or investments we made this year, we -- they were all done through bilateral processes. And we're in another bilateral process as we speak. And when we're in those processes, it's a much better outcome in terms of pricing and other terms of the transaction. And that's a reflection of the lack of competition for a lot of assets at the moment.

When and where will Action list on a public market?

We don't want to list Action. We believe running it in the way we do in a private format is part of the magic dust here. And we don't want management distracted too much by quarterly earnings and share price moves and things like that.

And then we have a question on whether Action has a formal dividend policy.

It does have a dividend policy. And that's to pay dividends in December and March each year, but it's not more detailed than that at the moment.

I have no more questions through the webcast. I'm handing back to the operator for any additional questions on the line.

There are no further questions on audio lines.

Great. Well, I'd just like to say thank you, everyone; particularly to Hajir and Joost, for their input today. This concludes the Action capital markets seminar. Thank you all for your attention. Goodbye.