Currys plc (CURY) Earnings Call Transcript & Summary

Good morning, and thank you for joining the Currys Half Year Results Call. I'll now hand you over to Alex Baldock, CEO.

Thanks, Molly. Good morning, everyone. I want to leave maximum time for your questions, so I'll be brief upfront. These are strong first half results, with strong trading behind them. We're pleased with the market share gains, the stable gross margins, in fact, better than stable gross margins and the strong profits and free cash flow that we've thrown off. And we're pleased that the signs of sustainability of these results, by which I mean, happier colleagues and happier customers, are also continuing to head in the right direction, with the latest colleague engagement showing a further rise from what we shared at the Capital Markets Day, now to 78% and customer NPS rising 5% as well, year -- on two years. So strong results, and we've done that by making more and more of our strengths. And we're a much stronger business now, technology is playing a more important part in millions of lives, and we're making more and more of that. I think, particularly, on the stronger business front, I won't repeat everything you heard at the CMD. One thing I will draw out though, on the sustainability of our progress, we talked about ESG being an opportunity for the business here. And we're really pleased to have got the A rating on climate by CDP, which puts us in the top 1.5% of the world's largest 13,000 companies. And I think that shows the yards that we've made there. But it's not just that. We've got the strategic clarity, a simpler, more focused business with the hardest yards of the transformation behind us. This is a sustainable progress, financially, in much better shape all as before. Technology is a bigger market. It's 20% larger year-on-year in the first half for all the reasons that we spoke about. And we are making more and more of that, as the growing number one, with the winning omnichannel business model, and it continues to show them that it is the winning model, and we can talk about our progress on all the legs of that. We've also flagged this morning that the market has softened in recent weeks. So, let me say a few words about that, and it has. In the run-up to Christmas, we've seen some bumpy customer demand in the market, and we've seen some supply chain disruption. I think the good news is, I mean, we've talked about us being a stronger business, and we'd evidence that as being much better able to ride out these short-term ups and downs. So, the bumpy market has been mitigated by our growth in market share. We've shown 70 basis points of growth in market share in the U.K. in the first half, and the supply chain disruption has been mitigated and the evidence of that is in our market-leading product availability. We are #1 with our suppliers, as well as with our customers. And the evidence of that is in the 15% higher stock levels that we've got this peak versus last year, which, as I said, show that we've been able to, in large part, mitigate these bumps. When you add that to the still stable gross margins, the good cost discipline, all of that gives us the confidence to stick to the expectations we set out at the CMD of circa GBP 160 million of profit, and that assumes, by the way, that the market doesn't get any better. And we're also standing by our medium-term commitments of GBP 250 million of sustainable free cash flow by FY '24. We absolutely believe that we are nowhere near the full potential of this business. Happy to answer any questions on our progress on building customers for life here, and there is progress, right the way, across credit and other services, and building more customers for life. And as I say, we stand by the medium-term commitments for the GBP 250 million of free cash flow, just as we stand by our in-year promises. So with that, I'll pause, and Bruce and I will take any of your questions.

[Operator Instructions] We'll take our first question from Ben Hunt of Investec.

70 bps of market share, I mean, is that really a satisfactory result, given some of your peers are struggling? You've increased the range and done all the good things that you talked about at the Capital Markets Day. I'm just trying to sort of gauge if there could have been more upside there, really, and if you could sort of break down where it was strong and where it wasn't across the channels. And then, maybe, if you could give us some reassurances in the second half, how you're going to meet the full year expectations if the market does remain soft, which is unknown, I guess. But really, what you have up your sleeve to underpin those -- your meeting the full year consensus -- sorry, the full year expectation of GBP 160 million.

Okay. So, let me kick off on that, and Bruce may have some build. So you ask about -- I mean, are we satisfied with our market share? Clearly, never. I mean, we've set out the ambition to continue building it. And we aim to keep building our lead right the way through the life of this plan. So, it's heading in the right direction, but it's nowhere near full potential, is how I would answer that question. I mean, clearly, in a business that historically has been geared towards stores, the events of the past 18 months have the potential to see our market share take a dip rather than continue rising. And in one sense, year on two years, our market shares have to face into the headwinds of channel mix changes. So, for example, year on two years, our market share has dipped 30 basis points, and that's despite 300 basis points plus of improvement in market share in each of the channels. So in one sense, the market channel mix is a headwind that we've shown that we can navigate with our winning omnichannel model. And we've shown that we can continue to grow market share as we've done and extend our lead. The second point, you asked about how we can have confidence in our full year expectations. I mean, clearly, in the current uncertainty with -- sorry, somebody has got a little bit of an echo on the other end of the line. I wonder if I could ask people to be on mute while we're on, that would be helpful. You asked about how we can have confidence in the full year expectations. I mean, clearly, we're with some caution sticking to the GBP 160 million of full year profit that we flagged, only recently. And I think that reflects the uncertainty of the current environment. Bumpy customer demand, continuing supply chain disruption and the -- as yet, unknown full impact of Omicron and associated government restrictions. So, when you put all of that together, what gives us the confidence? Well, we continue to gain market share. It's not just in the first half, but in the period, since, we've seen continuing market share gains. We've continued to have market-leading product availability. So, the relationships with our suppliers that we talked about at the CMD have come good to the extent that we are the last to run out of almost all key lines and that we've got more stock in the business. And the stability of our gross margins, at least the stability of the gross margins. And as you've seen, in the first half as a group, we improved gross margins by 50 basis points, as well as the continuing cost discipline, as we make progress towards that GBP 300 million of sustainable cost reduction that we flagged at the CMD. All of that leaves us confident that with the strength of this business, we can weather these ups and downs in our environment and continue on the path that we set out.

I guess I'll reiterate what Alex said. But the first thing I'd say is, how strong our first performance has been, both from a profit and a cash perspective. Now, I guess, as we think about the full year, where we're being consistent with GBP 160 million worth of PBT that we previously guided to. And we believe -- I guess, our key concern is that the market got carried away and extrapolated that forward. And as Alex has said, what we're trying to do is reflect a level of caution in the second half, but we have plans that get us to that position.

Okay. Great. And then maybe just a bit, if you could give us a flavor over the peak period that we've just seen recently. I mean, has it been sort of colored by sort of lower footfall? Is it a conversion? And also, on the website, have there been drops in footfall or traffic across the websites? Or is it conversion? So, any color on that would be useful.

Well, Ben, we'll get into some of that at the trading update in January. So I mean, for now, I think we'll leave it at the fact that in a bumpy environment of some bumpiness in demand, that we've been able to post the market share gains that we have, and we've been able to do that with a strong reopening of stores, which have accounted for over 50% of the sales in the period, while continuing to show strong growth online, which, online sales have been up over 50% year on two years. So, it's been a broad-based story from -- because that's our model. We're a broad-based model. We've got -- we're an omnichannel business, and both parts of the business have played their part in seeing us weather these ups and downs.

[Operator Instructions] We will take our next question from Simon Bowler of Numis.

I was wondering if we could just kind of touch on the Nordic market, actually, a little bit, if that would be okay. Just in terms of the kind of gross margins have fallen a reasonable amount year-on-year, but channel shift doesn't look to have actually kind of stepped up sequentially much year-on-year. So, I was just wondering, can you talk a little bit around what you're seeing in terms of whether it's kind of competitive or other dynamics that are impacting gross margin and how we should think about that, going forward? And then, similarly, on that market, kind of market share shape looks to kind of drop back at a reasonable amount kind of year-on-year. What are you seeing there in terms of kind of competitive action?

Let me give you a big picture answer to that, Simon, and then Bruce can dig into it a bit more. So, I mean, the big picture on Nordics is that this is a big, growing, profitable part of the group. And then, the relatively rare example of a U.K. retailer with such a large and successful part of the group. And last year, the Nordics posted exceptional market share gains in an unusual competitive environment. And to a certain extent, that has normalized and we've held on to those 2-year gains, while seeing it drop back a bit year-on-year. So, that's the big picture on the market point. Bruce, you might want to build on that.

Yes. So I mean, in terms of your question on Nordic margin dilution, I guess, it's exactly what we reflected at the Capital Markets Day, where, based on the shift of channels to more online, we are expecting some dilution in margin. The other key factor is that we do have some extra supply chain costs in terms of getting ahead of stock availability, and that is having an impact on our margin.

Okay. And those kind of supply chain costs in the Nordics are more pronounced than they are in the U.K.? Because obviously the U.K. hasn't kind of seen that same shape of gross margin.

No, there is a similar level of impact in both markets. If anything, I would say, slightly higher in the U.K., as we faced into some of the warehouse and driver issues. But within the U.K., those margin dilutions have been offset by the positive channel shifts that we've seen back towards stores. And so, that's why it isn't quite as obvious.

Okay. Okay. And then, if I can just quickly touch on the mobile part of the business. I may have got this wrong, it looks like kind of sales were down kind of 20%, 25% year-on-year, which is actually kind of a bit ahead of where I thought we were going to land, this year at least. Are you kind of still on track for kind of divisional losses? You maybe don't report it that way, of somewhere either side of kind of GBP 50 million and then break even into next year? Is that still the way that you're thinking about that part of the business?

Yes. I mean, Simon, I think we reiterate, going forward, we're not going to separately talk about the mobile business. Our vision of a smaller, but moving towards a profitable part of the business is exactly where we're aiming. And our goal, our expectation is still to get the business to profitability by the end of this financial year.

I guess, Simon, I mean, just to build on that a second. Obviously, it makes less and less sense to break this out as a separate category, the more that we integrate it as part of one business, which is the path that we're on, and we're nicely on track to do that. And as Bruce pointed out, that is, seeing us on track to achieve what we said we'd do, which is to get it to profitability during the course of this financial year, obviously, not for the full financial year.

We will take our next question from Adam Tomlinson of Liberum.

Three questions, if I can. Just in terms of current trading, can you maybe just talk a little bit more about the relative performance of stores? And linked to that, just where you're -- in terms of delivery times for those ordering online, where those sit at the moment versus where you'd like to be? And if those are extended, I guess you've got the benefit of customers can come in and click-and-collect from your 300 or so stores. So, just around that relative performance there would be helpful. Second question, just on stock levels. You mentioned being 15% higher year-on-year. Maybe just a bit of color around the profile of that stock. So, I appreciate there's some availability issues with some of the more in-demand categories, so just how you're holding up there and that stock profile. And then thirdly, around the customers for life. You mentioned some stats and more color you can give around that post the focus you gave on at the Capital Markets Day. So, that would be helpful as well, please.

Gosh, quite a lot there, Adam. So, let me crack into it. So, on the current trading, when stores have reopened well since the pandemic restrictions, obviously, you've seen the over 50% of sales that they accounted for in the first half of the financial year. And we're going to -- we'll say a little bit more about peak trading at our update in January. But it's been a broad-based success story when it comes to gaining market share over the period of the first half and the gaining of market share that we've seen since, that's in large part mitigated this softened market that we've alerted to. I mean, our delivery times, we keep a very close eye on the competitiveness of our delivery proposition, and we're at least matching the best in the market when it comes to the options, and our performance against those options, which explains why customer satisfaction with our delivery is substantially improved year on two years. You asked about stock levels. And I suppose the short way of explaining this is it's good stock. So, we're pleased to have 15% more stock in the business than this time last year, but it's one of the enablers of those market share gains that we're flagging. And we're not flagging the need for any kind of fire sale in January. We'll have a normal sale period in January, because we've bought well and we still got good stock in the business in the crucial remaining trading weeks before Christmas. Finally, your question on customers for life. Thank you for asking that, because I always enjoy talking about it. I think, the picture is, as we said at the Capital Markets Day, just with a few updated numbers. So, we have many customers who we can talk to more, in more valuable ways to gain share of wallet and to make them stickier as well as more valuable. And on the -- many customers who we can talk to more in more valuable ways. I mean, the Nordics Customer Club, for example, is now up to 6.3 million members, up 47% year-on-year. And yesterday, since you asked, the Currys Perks, our equivalent club in the U.K. passed 10 million members, which isn't bad going for something that launched only in October. So, we're quite pleased with how that's developing. When it comes to the other foundations of more loyal customers, customers who are likelier to return, you'll remember that credit was one thing that we spoke about being important there. A credit customer is 71% likelier to come back and shop with us in the next 12 months than a noncredit customer. So, our progress there is important, and we have made progress. So, our credit sales are 35% up year on two years, and our adoption rates got to 12.4% now, which is 90 basis points up year-on-year. So we're quite pleased with how that's progressing, and there's more to come. Because, obviously, we land 2 important new platforms during calendar '22, which we're on track to land, both of which will help further growth of credit new customers, as well as the greater utilization of unutilized facilities amongst existing customers, which is a substantial opportunity of over GBP 4 billion, as you'll remember. Finally, on other services, you'll remember that our services you can bucket into helping customers not just choose and walk out with a box, but helping them afford them, which is the credit part, but also get started with their tech, give their tech longer life and get the most out of it. And the longer life part, in particular, is something you're going to hear a lot more about during the remainder of this financial year. We see this as really fertile ground for us. We intend to become every bit as famous for helping give customers existing technology longer life as we are famous for helping them choose lots of shiny new kit. And with our strength in trade-in, in warranty, insurance, repair and recycling, this area is as important for us commercially as it is important for us to be seen as a good citizen on sustainability grounds. And for us, purpose and profit go hand in hand as we believe they have to. And we think this is going to be another reason for customers to prefer Currys to continue the market share gains that we've seen, to continue the NPS climbing that we've seen, and continue our forward march on that 30% share of wallet, that's the big upside opportunity for us with existing customers.

We will take our next question from Andrew Porteous of HSBC.

Hi, Andrew. Don't know if you're still on mute. Molly, we seem to have lost Andrew.

Sorry, I'm back. Sorry, I was on mute. Yes, sorry about that. Just a couple from me. When you're talking about softer trading at the moment, can you perhaps just give us a bit more color about what you're seeing, what sort of you've seen in sort of customer behavior that's driven that comment? And whether you think any of it has to do with you guys going a little bit earlier on Black Friday this year. I felt like you were, perhaps, one of the more aggressive players out there in the market. That was the main one for me, guys.

Well, let me start with that, Andrew. So when I -- and just to reiterate, when I -- you used the phrase softer trading. What we flagged is that the market has softened, and we've gained share in that market. And that's been something that we've seen in recent weeks in the run-up to Christmas since the end of the first half. Now, 2 things there. We flagged the market share gains of 70 basis points in the first half, and we're now saying that those market share gains have continued. And of course, a big enabler of that has been the market-leading product availability that we've talked about. As to what's behind that, I think, actually, rather, the reverse. I mean, the fact that we -- our relationships with suppliers allowed us to go out with a very compelling deal set for customers right the way through this important period, and do so in a way that allowed us to keep gross margin stable and allowed us to keep our discipline on promotion so that we can stand behind the commitment of GBP 160 million of full year profit, even with the bumps in demand and supply. I think, it's been helpful for us to have had such a compelling deal set to put in front of customers during the Black Friday period. As to the fundamental drivers of whatever market softness we end up seeing for the period, we'll come back and talk a bit more about in January. Clearly, the current uncertainty around Omicron and the associated government restrictions and the mood music that goes with that isn't helpful. for consumer confidence, but, you know, how much impact that has in the scheme of things, as I say, we'll say a bit more about it in January.

And then, just when you're talking about confidence over that GBP 160 million, I mean with H1 out the way, with Black Friday out the way now, just -- I guess, how confident are you around GBP 160 million? It doesn't feel like there are that many bumps left in the road to year-end to sort of cope with.

Well, Andrew, we wouldn't be talking about it if we weren't confident as you might imagine. So, I mean, we've worked hard to build a stronger business here, a business that can ride out these inevitable ups and downs in the short term. Everything that we've been doing over the past years, never mind this year, with a greater strategic clarity, a simpler, more focused business to get 75% of the transformation behind us to make sure the colleagues and customers are satisfied and increasingly happy, which gives us confidence in long-term progress; the financially much better shape that we've got the business in, both in terms of growth and gross margin stability and cost discipline; and free cash flow generation as well as on top of a much stronger balance sheet; and with the growing #1 omnichannel specialist business model that we enjoy and that we've substantially built on during the course of the year. All of these things have built this stronger business that we've got and allow us to maintain the stable gross margins, the cost discipline and strong cash flow generation that -- to go along with the market share gains that we're flagging. So it's not -- it's -- a long answer to how we're confident, because it's everything. It's everything that we've been working on over the past few years and it's everything that we're seeing right now in stable gross margins and cost discipline, that allow us to build on the market share gains to stay on track for the GBP 160 million. And just one thing to -- I think I mentioned -- Andrew, I think I mentioned this before, but just to make sure no one misses it. Staying on track for the GBP 160 million does not assume any improvement in the current market. So, if you want to assume a degree of prudence in that, you can.

We will take our next question from Warwick Okines of BNP Paribas.

A couple of questions on costs, please, if I may. The first is, how do marketing costs in the U.K. over peak compare with the costs 2 years ago? Have you been able to reduce marketing costs as you moved to one brand and build customer relationships? That's the first one. And then the second one is, are you still on track for the GBP 25 million of goods not for resale savings this year? Or does your profit guidance assume that you do more in this area?

So I'll let Bruce give a quantitative answer as far as we're going to, to those questions, Bruce -- Warwick, sorry. But let me give you sort of a qualitative one, first of all, on the marketing side. I think, there's a couple of things that we've talked about today that are relevant to that. And the first is the big picture that -- I'll refer you back to what we said at the CMD. That to an unusual extent, we can achieve our ambition through existing customers. So the fact that we've got 80% of U.K. households who are regular customers and that our prize is share of wallet gain amongst those customers rather than the uncertainty and the expense of new customer recruitment. And the fact that we understand the drivers of loyalty of repeat spend amongst those new -- those existing customers better than ever. We talked about the likelihood to return measure that we're increasingly managing the business to. And the fact that things like our omnichannel model, cross-category shopping, more frequent shopping from the range expansion and particularly credit and other services, all serve to increase the likelihood to return, the stickiness, and the repeat shopping of those existing customers. And all of those things bear down on marketing costs, everything else being equal. That's the first point. More specifically, I think, we flagged in the statement that to an unusual degree, and to an increasing degree, our digital marketing costs are not paid for and there's some detail in the statement that you'll find out. Bruce, do you want to build on that?

Yes. So, I suppose a couple of points on the marketing component. First of all, we have increased our marketing spend during the first half, focused on the relaunch or the relaunch of the brand, the launch of the Currys brand. So that is a step forward, certainly year-on-year and year on two years that we wouldn't anticipate continuing. In terms of the movement to one brand, will that give us savings? Well, certainly, that's not our proposal. What we want to do is to use having a single brand to make our advertising and our marketing more effective. And I think that's the key point. In terms of the savings on goods and services not for resale, absolutely. We're on target to achieve the GBP 25 million that we set out at the Capital Markets Day.

We will take our next question from Simon Bowler of Numis.

A couple of follow-ups. The first one is, maybe, thinking on sort of [indiscernible] through January 1, just in terms of that kind of softening demand. Is that just a U.K. phenomenon? Or are you kind of talking across each of your markets? And is there any color that you can offer in terms of category trends within that?

Simon, I think, to be frank, we're going to come back in January and talk about peak trading more generally. When we've been talking about the softness, we have been talking specifically about the U.K., but please let me come back and we'll do the same on product categories in January.

Okay. Great. And then 2 other kind of slightly more modeling based ones. One, the network debt, there wasn't too much kind of further inflow from that in the first half of this year. Should we be expecting that to step up in the second half and beyond? Or do you expect it kind of stabilize around current levels, given your ongoing mobile business?

No, you're right. The network debt had fell by a small amount between year-end and the half year, but we're not expecting a significant movement in the second half.

And is that then true thereafter? Is it kind of a run rate level of that network, if that's the case?

So, there's going to be a gradual reduction, I would say, over the next 2 to 3 years, but considering the major drop offs that you've seen over the course of the last couple of years, I think your modeling should assume that it's relatively stable.

Okay. Understood. And then final one, sorry, which is, of the GBP 300 million cost savings that you had set out, which were off, I believe, the fiscal 2021 base, how much of that falls into this fiscal year? Obviously, GBP 25 million from the goods not for resale, but in terms of the other elements of that, how much of that in this year's base, of that gross GBP 300 million?

So, without giving you specific numbers, I would say that the majority is FY '23 and FY '24. There clearly have been substantial cost savings, as we've simplified and reduced our mobile business. Work has been going on consistently to deliver savings across our IT infrastructure. There's been big step changes that I described at the Capital Markets Day in relation to supply chain. And again, those are delivering. But when we were talking about that GBP 300 million specifically, there are some savings this year, but that was more of a forward-looking statement.

We will take our next question from John Guy of Jefferies.

Alex, you mentioned you've got 15% more stock. Could you maybe elaborate or break out where you have more stock? Is it in videogaming, TVs, white goods? Could you just be a little bit more specific in terms of where the stock is highest? And if you've seen any change in consumer replacement cycles, say, from this year compared to 2019? That's my first question. And I've got a follow-up, please.

I mean, the short answer on stock is that -- I answered before that it's goods stock. So, we're not anticipating the need for a big clearance because we've been reasonably successful at getting in the stuff that customers want to buy, and that's pretty broad-based. I mean we've seen in appliances, for example, range cookers, and American fridge -- American style fridge freezers do pretty well, and we've been well stocked with those as people have got themselves ready for a family Christmas. We've had good stock of coffee, which has been good in the small appliances space, both pod machines and bean to cup have been selling well. And we've had good stock in floor care, brands like Dyson and Shark, we've got good access to those. In mobile, the stock that we've secured has been important. And in Google Pixel 6, in Samsung A12, and Apple iPhone 13, we've had good stock of the new launches. And then in computing, gaming, obviously, as I've mentioned before, has been a standout category that saw us grow 49% year on two years in the first half. We've had -- we always want more. We've had good stock of things like Nintendo Switch consoles that have enabled that growth, as we continue to tap into that trend that keeps on giving. We've had good stock in VR tech, virtual reality technology is arguably the breakout of niche story of this peak trading period. That's increasingly heading into the mainstream. And so again, with the stock that we've had of Oculus Quest has been important there. Within TVs, the super sizing trends carried on. So, 75-inch-plus and high-quality TVs like OLEDs have been -- we've had a decent supply of those. Headphones; Apple supply has been a bit tighter right the way across the market, but we've got more than our fair share of AirPods. And within wearables, Apple Watch has done well. Smart fitness, health and beauty, I mean, I could go on. So I mean, I suppose the point is, John, that we've got a good broad-based range of stock in that 15% up year-on-year that's enabled the market share gains that we talked about.

Great. And you haven't seen any change in the way the consumers are looking to replace product that -- that replacement cycle time frame really hasn't changed much over the course of the last 2 years?

No. I might say a bit more about this in January, but I mean, the big picture of a market that's in the first half, was up to 20% larger year-on-year. One of the drivers of that has been a faster replacement cycle, which goes along with more usage and a greater appreciation of what new tech can do. So no, we're not flagging a change in that.

Great. And if I could have one follow-up, actually, please. Just on how much, now, of your sales are being driven by credit. Has there been any big change compared to 2019? Maybe that's one for Bruce. And also, can you disclose what percentage of warranties are now as a percentage of sales in the first half of this year compared to 2019?

I mean, we don't share the percentages of either credit penetration or service adoption rates. But what we have seen is a step forward, in terms of the quality of sales that we've been making. And that's particularly been true online. I think we talked about that during the Capital Markets Day, as we look to level up our channels, but that's probably as far as I want to go.

We will take our next question from Edward Blair of Liberum.

The question has already been asked, actually; it was about the skewing of products, whether there had been any material skewing of products. But as you said, it will be something you'll address in January. So, the question has already been asked. Thank you.

We will take our next question from Nick Coulter of Citi.

Just a quick one on the buyback, please. Could you remind us when that starts, and if we should necessarily expect it to be evenly applied through next year or if you have any discretion?

So, as we described at the Capital Markets Day, our intention is to start the buyback as soon as we come out of the closed period in January, and that is still our plan. In terms of how that's going to be phased, we're going to balance it, if you remember, so that the payments we make in the buyback is matching to the pension contribution of GBP 78 million a year. So, our expectation based on our dividend will be that the buyback, over the course of the next 12 months, will be more back-end loaded to the late 6 months.

Okay. Great. So, it has to be in line with the timing of the pension payments?

Well, no. In essence, what we are focused on is creating a consistent flow to all of our stakeholders. And therefore, we're looking to balance the cash flows to the pension scheme and to shareholders at a consistent level. And the math basically means that there's a slightly larger amount in the second 6 months than in the first 6 months.

Okay. So it's a cash management -- okay, fine. Thank you.

[Operator Instructions] We will take our next question from Kartik Kumar of Artemis.

I was just wondering if you could comment on the Nordic profitability a bit further. The part I don't quite understand is, to what extent is -- are the investments in the systems, et cetera, bringing down profitability? And overall, was that performance in line with your internal expectations?

I'm sorry, Kartik, I didn't get the beginning of your question. Did you -- were you talking specifically about Nordic?

Yes, just about the Nordics. I'm just saying, in the Nordics, it looks like there were some external factors hitting gross margin. And then internal, effectively, investments that hit OpEx. And so, I was just wondering if you could comment on that and how overall it compared to your own expectations.

Yes. No, absolutely. So, the Nordic business in terms of its overall EBIT returns is pretty much bang on where we expected it to be. We -- I talked, just briefly, a moment ago in terms of gross margins. Some of that has been shift in channel and some of it has been higher levels of supply chain costs that have resulted in the 40 basis points dilution in gross margin. In terms of cost ratios, there are a few points within that. So, you're right, going live with our new system, our next-generation retail website and systems have got a period of double running during the first half that won't continue on a full year basis. There's also some one-offs within our costs. So, for example, a relatively small amount of government funding that we received within the Nordics during the first half last year that hasn't been repeated this year. But broadly, our costs are in line with where we expected them to be.

At this time, we have not received any further telephone questions. I would like to hand the conference back to Alex Baldock for any additional or closing remarks.

Thanks. But by the way, one -- John, coming back to one of your previous questions, one preview of a fuller answer, we do actually break out the credit adoption rates. We don't talk about other services as yet. But the credit sales are up 35% year on two years; the adoption rate has got to 12.4%, which is up 90 basis points year-on-year and sees us nicely on track to meet the commitment that we've made of 16% penetration by FY '24. And we might even do better than that. So, just to give you a fuller answer to your question earlier. Thank you all for your time this morning. As I say, we're pleased with the results. We're pleased that they underline the progress that we're making longer term. Yes, there are some short-term bumps in demand and supply, but we're navigating those pretty well and remain on track, both for our in-year performance commitments, but also for the longer term. And we look forward to getting back to work on that right away. The one thing I would leave you with, while I'm talking to an audience of high net worth individuals shortly before Christmas. I did mention that we've got lots of good stock left, as we do, and there are some cracking deals left on currys.co.uk or in your local store. And I would encourage you to gratify your nearest and dearest with some of the amazing tech that we have to offer. And as I say, some really good deals going. So, I would encourage you to fill your boots. Many thanks for your time. Bye-bye.

This will conclude today's conference call. Thank you all for your participation. You may now disconnect.