Currys plc (CURY) Earnings Call Transcript & Summary

Good morning, everybody. I guess this audience probably sees quite a few worthy corporate videos of that kind in your line of work. And I hope by the time we finish this morning, you might see that this one at least is a little different in -- yes, giving longer life to technology is very good for the planet and very good for customers' pockets, but it also makes us money. And we have a firm intention for it to make us more. I'm going to lead off and then Bruce is going to take you through the numbers. So how would I summarize what happened last year? In short, mixed, a very mixed performance. So on the one hand, we came in at the top end of the guided range on profit and on cash. And the U.K. is very strong and strengthening performance is very encouraging, not least because we can see the strategy working that lies behind it and we started this year in line. On the other hand, the Nordics performance last year was deeply disappointing, and we remain cautious about the consumer outlook and you put those 2 things together, it's caused us to be pretty prudent in our planning to make sure that we are staying absolutely watertight even in any reasonable worst-case scenario on balance sheet and on liquidity and also being cautious in the forecasts for the market going forward. We expect another year of declining markets. So that's the prudence in our planning, if you like. But if the market is better, if we turn out to have been excessively prudent, okay, we'd rather be surprised on the upside and the -- and we will do better than -- we'll be ready to do better in the event that the market is better. And longer term, we're confident that we're building something here that's not just resilient through the short term, but in the longer term, is going to prosper. So enough for me, I'm going to hand over to Bruce to talk you through the numbers from last year.

Thank you, Alex. Good morning, everybody. So as Alex has said, it was a mixed performance from a group perspective with a very strong U.K. performance and perhaps a disappointing Nordic performance. What I'm going to do, I'm going to step you through a very single slide on a group overview, and then I'm going to go through division by division. So at a group level, we finished last year with revenue at GBP 9.5 billion, which was down 6% or roughly down GBP 600 million. Our adjusted profit before tax was GBP 119 million, down 38% year-on-year. Our free cash flow was an outflow of GBP 74 million. Our total indebtedness was down roughly GBP 100 million to GBP 1.6 billion. Our adjusted EPS 8.3p, down 33%. And finally, we returned GBP 35 million to shareholders by way of dividend. At a group level, stepping through each of our divisions, starting with the U.K., our revenue was GBP 5.1 billion. On a like-for-like basis, that was down 7% year-on-year. But despite our sales being down, we successfully grew our bottom line, up by 44% to GBP 170 million of EBIT. From an international perspective, our Nordic business was less positive. Revenue of GBP 3.8 billion, like-for-like minus 10%. But perhaps the most marked number that we'll talk about today is the adjusted EBIT number for our Nordic business was GBP 26 million. That was down 81%. And finally, Greece, quite a different situation in Greece where we had sales growth up 12% on a like-for-like basis. And some of that was driven by the strong macroeconomic environment within Greece. Some of it was through a program or a number of programs of government subsidies that are in place which are helping our categories. Overall, profitability was down 3% at GBP 18 million, and that means that at a group level, our group EBIT was GBP 214 million, down 24%. Drilling down into the U.K., as I've said, like-for-like sales were down 7%. I think it's interesting that our online share of business was absolutely flat year-on-year. Our adjusted EBIT, as I've said, a good step forward, up from GBP 117 million up to GBP 170 million, an increase of 44%. That means that our adjusted EBIT margin improved by 130 basis points to 3.4%. Our operating cash flow also stepped forward to GBP 181 million, very much driven by that improvement in operating cash. However, our segmental free cash flow stepped back to GBP 16 million. There are 3 key factors here. By far, the most important is working capital. Again, because our business is getting smaller, that means because of the structure of our working capital, lower purchases, lower sales means we've had slower stock turns. And although we've successfully reduced the amount of stock across all of our business, unfortunately, our trade payables have reduced by further, and that's why we've got -- more of our stock has been paid for, and we've got a cash outflow. And that is one factor. Another factor is we have seen increases within our exceptionals -- cash exceptionals, offset by lower CapEx. In terms of a profit bridge for the U.K., as I said, our profitability increased by 130 basis points at an EBIT level. And as you can see, a second year in succession, of gross margin progression, up by 160 basis points, offset by 30 basis points decline within our OpEx ratios. Why did our gross margin step forward by 160 basis points? Well, there's 5 factors. The first factor relates to mobile revaluations. I spoke about this a bit in May, the year-on-year progression that has come from our mobile revaluation is worth roughly GBP 10 million. But the other factors, I guess, are part of our core strategy in terms of growing our gross margin. It works well so far and will continue to be our strategy going forward. The first is to continue to increase adoption rates of credits and services, which are so important for our customers. Secondly, it's about monetizing the improvements that we've generated in terms of customer service and the best manifestation of that is the fact that we are now charging for delivery and for installation. The third is making better choices to drive profitability using data. So that could be the products that we choose to sell, the promotions that we propose to run or the advertising money that we put behind certain activities. That's really helping drive the bottom line. And the final component is reduced supply chain and service operation costs. So great success, growing gross margin off the back of another growth the year before. In terms of operating expenses, as I say, operating expense to sales ratios declined by 30 basis points. You could put all of that decline down to 1 factor. And that's the fact that we lost the business rates relief in FY '22. So therefore, year-on-year, we lost roughly GBP 15 million worth of benefits. With the exception of that, our cost-saving activity more than offset our inflationary headwinds. And the only reason the ratio didn't improve was that our cost reduction broadly fell in line with our drop-off in sales. It's worth drilling into costs in a little bit more detail. Our cost inflation was significant. The headwinds continued through the year. As you can see, the biggest cost inflation came through in wages as we continue to invest in our colleagues. You can see on the graph there at the top right-hand side that if you look over the last 5 years, we've invested a 37% increase in colleague wages up to GBP 10.80, the in-year effect of that was GBP 21 million. We've also seen substantial increase in energy costs. Our energy costs increased year-on-year by GBP 15 million. That's an increase of 65% year-on-year. And actually, if you look over 2 years, our energy costs have increased by GBP 23 million, so a substantial headwind on our profitability. We have had some good news. You'll remember in FY '22, we were suffering from very heavy shipping costs. That pressure has unwound somewhat. And that's improved our inflation number by roughly GBP 7 million. And then elsewhere in the business, we've got another GBP 8 million of inflation, which adds up to a total of GBP 37 million. However, offsetting that are fabulous work that's taken place right across the organization to take cost out of the business. And over the last 12 months, we've reduced our cost base by GBP 120 million and you can see there how that splits between gross margin and operating costs. If I was to go through each of these in turn, supply chain, an awful lot of focus on brilliant basics, getting the basics right, getting things right first time within our supply chain and our service operation. And that, combined with the outsourced relationships we've got with GXO and Webhelp have allowed us to dramatically reduce our cost base. Within our stores, we've changed our operating model. Within our stores, we've talked about this before, multi-skilling our colleagues, so they're better able to help customers, improve availability of colleagues within the store and at the same time, reduce our costs by GBP 36 million. We continue to work on goods not for resale, looking to work with our suppliers to lower our cost. From an IT perspective, we continue to take out some of our legacy systems to simplify our estate and also the suppliers we work with. From a marketing perspective, we're showing GBP 13 million worth of cost savings. This isn't simply cutting marketing and therefore have lower sales. This is where we've used data to identify marketing activity that simply isn't adding value. Most of this is digital advertising, PPC advertising, where we've taken out activity that simply wasn't generating profit. And the final component is central costs. And I just wanted to spend a moment talking about a new relationship. It's now been in place for roughly a year, but we're now ready to talk about it. We're partnering with a large organization called Infosys. Infosys are helping us set up a global business services function. And as you can see from the list, this is not just traditional finance and HR outsourcing. We're looking at getting support for the entire organization. That gives us the opportunity to unlock wage arbitrage saving as well as significant efficiencies using Infosys expertise. We've already transferred 800 heads from Currys and Elkjøp in the Nordic into Infosys, and that's allowed us to save roughly GBP 5 million this year, and that saving will continue going forward. Moving on to our Nordic business. Again, revenue GBP 3.8 billion, down 10% like-for-like. Our adjusted EBIT, as I've said, dropped from GBP 142 million down to GBP 26 million, our adjusted EBIT margin falling by 280 basis points down to 0.7%. That fall in profitability has had an impact on our operating cash flow down to GBP 63 million. And in turn, we've seen a negative flow within our segmental free cash flow, an outflow of GBP 42 million. Again, as I described for the U.K., the business is shrinking. That means we've got slower stock turns, and it means that our working capital is an outflow. In terms of the profit bridge for the Nordic business, I described 280 basis points drop year-on-year. Again, I think we've talked about this quite a lot over the last 12 months. By far, the lion's share of that drop profitability year-on-year is in gross margin, a fall of 200 basis points year-on-year. Why does that happen? Again, much talked about we've seen significant COGS inflation within our Nordic business. A chunk of that caused by FX impacts with the weakness of the NOK and the other Nordic currencies. At the same time, we've been unable to pass those COGS increases on to consumer during the course of the last 12 months. Why? Because demand has been soft, because there's been excess stock in the market at certain points, but there's also been intense competition. And I'm sure you've seen and you will hear more about the drop in the profit pool across the whole Nordic market. In terms of OpEx, our costs actually in the Nordics fell in absolute terms. And you will have seen in the narrative, some of the conversation about the cuts that we're making across the Nordic business, particularly in the final quarter as the business looks to slim down its cost base so that we can improve the bottom line as we go ahead. So our costs are down in absolute terms. We are facing in, however, to significant inflationary headwinds, exactly the same as in the U.K. around payroll, energy, et cetera but the cost saving activities are helping us to more than offset that. And the program of change that I described in the U.K. mirrors the activity we're doing in the Nordics. Finally, from a divisional perspective, just talk about Greece briefly, as I say, different to U.K. and Nordics in a growth situation, strong GDP growth and supported by government subsidies. Our adjusted EBIT did fall by GBP 3 million, although I'd remind you, if you remember our first half results, our Greek business dropped back year-on-year by GBP 10 million. So you can see the substantial growth that the Greek business enjoyed during the second half. Our adjusted EBIT margins fell by 100 basis points. Our operating cash flow stepped back broadly in line with our profitability. Segmental free cash flow, however, stepped up significantly. This is the mirror of the U.K. and Nordic business in growth within our markets will unlock free cash flow gains as stock turns more quickly. And quickly, just in terms of our Greek EBIT bridge, as I said, gross margin is down 80 basis points. All of that was in the first half -- more than all of that was in the first half as that margin recovered. The reason is very similar as we were experiencing then to the Nordics. From an operating expense perspective, our cost base has grown within our Greek business as we've invested behind growth and also we've suffered similarly from an inflation perspective in terms of payroll and energy. Moving on to cash flow. So cash flow for the year was an outflow at free cash flow level at minus GBP 74 million compared to plus GBP 72 million last year. Of course, by far, the biggest component of that was a drop off in our operating cash flow, a fall by GBP 107 million and again, driven by the underperformance within our Nordic profitability. If I step down at the other components, our adjusting items increased to GBP 40 million from a cash perspective. The biggest single element of that is property exceptional cash flow to do with our closed stores, dilapidations, et cetera. But the other component, the majority of it relates to restructuring costs as we've taken cost out of the organization. The reason the number is so materially different year-on-year, you may remember, we have 2 big cash inflows, cash settlements last year, which were not anniversary. From a cash tax perspective, cash tax has increased by GBP 20 million year-on-year, GBP 17 million of that I called out in this room 12 months ago, we knew that there was Nordic cash tax of GBP 17 million that related to FY '22. But because of some changes in structure, it dropped into the reported year. That won't be anniversary going forward. And finally, cash interest. Cash interest increased by GBP 9 million to GBP 26 million, partly because of higher average net debt and, of course, partly because of higher interest rates. And in terms of working capital, I think I've said this as I went through, overall, a working capital outflow of GBP 127 million. Roughly 2/3 of that was in the U.K., 1/3 of that was within the Nordics, offset by some improvements within Greece. In terms of uses of free cash flow, we returned GBP 35 million of cash to shareholders. We made our pension contribution, our annual pension contribution of GBP 78 million in the year. And you can see there, there's a big chunk of other that relates -- it's GBP 50 million. It's to do with unrealized FX adjustments as we've managed all of the FX movements across our opening balance in the year and closing balance. I'm not happy to pick that up in Q&A or take that outside, but it's simply FX math, which takes us to a movement in net cash outflow of GBP 141 million. And hence, we've moved from having a positive cash balance of GBP 44 million to a net debt of GBP 97 million. Moving on to look at total indebtedness. So total indebtedness within Currys, we're thinking about the pension deficit. We're talking -- thinking about lease liabilities as well as net debt and you can see that for the first time in 5 years, we actually saw a worsening within our total indebtedness, and that indebtedness increased by GBP 100 million to GBP 1.6 billion. However, if you compare that position to where we were 3 years ago, you can see that our indebtedness is significantly better than that base. In terms of why, well, first of all, let me just quickly touch on stock. I've talked about working capital. Our stock across the business is down 10% year-on-year. That's despite the fact that we've seen high single-digit COGS inflation within the business. So we have significantly reduced our stock and the health of that stock is very strong. But again, going back to the year on 3 years, our average net debt for this year was GBP 96 million. If you look at that number 3 years ago, it was GBP 355 million. So our net debt is much stronger. Our pension deficit on an IAS19 basis has more than halved from GBP 550 million to GBP 249 million. And our net lease liabilities have also reduced as we've closed unprofitable stores and reduced our average lease cost. From a liquidity perspective, the liquidity numbers here are our external liquidity. So the arrangements we have with our banks. Again, I talked about this quite a lot in May. There was concern over the headroom on our fixed charge cover. We worked with our banking lending partners who were hugely supportive to us and allowed us to relax that fixed charge cover down to 1.5x. We finished the year at 1.78x. We've got a headroom of roughly GBP 75 million of cash profit. So we've got good headroom. And as you can see there, our net debt leverage is no challenge. However, the external bank covenant liquidity measures are not the only ones we use. We've also got a 2 internal liquidity measures that we monitor to monitor whether we're happy with the shape of our balance sheet. We actually shared these numbers and the methodology with you at our Capital Markets Day, if you were there back in November '21. We talked about a total indebtedness fixed charge cover. So again, we're there, we're talking about the pension deficits and lease liabilities as well as our net debt would have to be more than 1.5x and our total indebtedness leverage would be less than 2.5x. Unfortunately, based on the trading that we've had over the last 12 months, we have slipped behind both of those internal metrics. Our fixed charge cover has dropped to 1.42x, and our leverage has increased to 2.9x. And in that situation, I see a core part of my job to recover the liquidity to protect the balance sheet and to protect the company. So what are we doing about that? Well, I guess the way I think about it is through our capital allocation policy and our priorities. Again, we shared something like this at the Capital Markets Day, and we explained that our first priority was to pay the required pension contribution. Our next job was to maintain a prudent balance sheet in line with those internal as well as external metrics. And only if they were in place, would we invest to grow the business, pay and grow our ordinary dividend and any surplus cash we would circulate to stakeholders. So picking up the first one of those in terms of our pension deficit. We've just completed the actuarial valuation for our 2022 pension review. It is now being signed and agreed with our pension trustees. And as you can see, it's good news from an actuarial deficit perspective. Our deficit has fallen from GBP 645 million in 2019 down to GBP 400 million in 2022. And if you use those same assumptions and extrapolate them forward through to this year-end, it would be down at GBP 300 million. Now at the same time as doing this, we've worked with the pension trustees and very grateful for their support. We've agreed a revised contribution schedule. This largely reflects the fact that the work we've been doing to reduce our deficit is ahead of where we planned it to be. And that has allowed us to reduce our pension contribution this year from GBP 78 million down to GBP 36 million and for FY '25, next year, from GBP 78 million down to GBP 50 million. So that gives the business GBP 70 million more cash flow to play with during the course of that 24-month period. Now there are some matching criteria associated with that. It's in our statement. I'm happy to pick it up in Q&A or outside. So that deals with lower pension contribution, but we need to continue to look to all aspects of our balance sheet and our P&L to get our liquidity back where we want to, particularly in an environment where there's huge uncertainty going forward in terms of the state of the economy. So we're taking internal decisions. We are continuing and accelerating our cost-cutting activity, both in the U.K. and in our Nordic business. We're also taking significant reductions within our CapEx spend. And finally, we've made the tough decision that we're not going to be declaring a final dividend for the year that's just finished. Putting some numbers behind that, capital expenditure, we expect to be GBP 80 million. That's the basis of the budgets that we've set for this financial year. And as you can see, that's a significant drop year-on-year, but much, much lower than it's been historically. We had a few questions on it from analysts first thing this morning. So if I just spend a second to say that we're not putting the business at risk with this level of CapEx. We're being choiceful in terms of what we're investing and we're not -- what we're not investing behind. Of course, we're being very focused on returns. There are a few projects that we're stopping that ideally, we probably will bring back at a future date so we've put them on the shelf for now. But when the market recovers, we will go back after those. And another key thing for you to have in your mind when you think about this. Within our P&L, we are absorbing quite a lot of OpEx that historically would have been CapEx. So for example, as we switch to software as a service, that has meant that there's quite a lot of costs in our P&L that had to be absorbed that historically would have been in this number and hence, another reason it's dropped down. We continue on cost reduction, cost reduction of GBP 300 million in the U.K. over a cumulative 3-year basis. You saw the progress we've made so far. We think we're on track to deliver that and additional cost savings within our Nordic business. We've talked about the reduction in pension contribution. And as I've said, we're going to stop the dividend. So moving on in terms of current year outlook, where we've started the year in line with Board's expectations. Our capital expenditure, as I've said, is going to be around GBP 80 million. We're calling out that we expect our net cash exceptionals to increase in the current financial year from GBP 40 million to GBP 50 million. Some of that is because of higher property costs, more dilapidations are expected but also the restructuring that sits around the cost out that I've described. And a big chunk of that, that wasn't previously thought about is the work that we're doing in the Nordics. I've talked about the annual pension contribution being lower. The sum total of all this activity is that we expect our net debt position rather than get worse, which we saw last year to improve this year. We provided you some numbers in the slides for your models in more detail in terms of cash flow guidance. I don't propose to go through these, but I'm happy to answer any questions you have. So if I was to summarize, I would say the principal thing that we're thinking about is the uncertainty in the market. We've clearly had a really tough year in the Nordics, good year in the U.K., but the outlook remains uncertain. Our priorities that Alex will talk about is continuing our trajectory in the U.K. and getting the Nordics back on track. But from my perspective, it's all around protecting the balance sheet and protecting the company from the downside risk. Reducing capital expenditure, continuing to take cost out of the business, the reduced pension contribution and stopping the dividend. Final thing I would say is, clearly, we're making these tough choices through all stakeholders, including the support of our banking partners today based on where we are. At the point that the market isn't quite as bad as we are planning for or the economy starts to recover, of course, we will revisit all of these components with all of our stakeholders. Thank you.

Thanks, Bruce. So let's get behind some of those numbers and talk about what we're doing to improve them. And let me start with the Nordics first. So as you've heard, a long and successful track record of growth in sales and profits in the Nordics was brought to a very abrupt halt last year. And it's worth saying at the outset that irrespective of what we've done in response, what happened in the market in the Nordics last year would have meant in any event a sharp reduction in Elkjøp profits. So let's have a look at what happened in the market. I mean the first is softening demand. So the market went backwards by 4% year-on-year in the Nordics last year, fueled by multi-decade lows in each of these markets in consumer confidence. It has picked up a bit in recent times, but these are still very low consumer confidence numbers by historical standards. And at the same time, as that demand softened, so as you've heard, costs increase, both the cost of goods sold and our operating costs were subject to -- again, for the Nordics, unprecedented levels of inflation. And at the same time, the nature of competition in the Nordics made it very hard for us to pass on that COGS inflation in higher prices. In the Nordics, there are competitors such as Komplett, NetOnNet, Verkkokauppa, Power, [ Elon ], ProShop, Bilka for slightly different reasons, all at different times during the course of last year, explicitly prioritized growth over profitability. And in doing so, they bought stock in some cases quite heavily to fuel that growth at the same time as demand was falling, which caused a double hit, a discounting and a clearance, double hit to market pricing during the year. And as you see some examples on the right-hand side, that's taken the market profit pool in the Nordics to near 0 in the past year. So that combination of softening demand, cost inflation and vicious competition would have, as I say, in any event, have resulted in a very sharply declined year of performance in the Nordics last year. That said, our response could and should have been sharper. We could have spotted the market trends a little sooner. We could have taken action, particularly on costs faster and with the benefit of hindsight, the balance of our trading solving between sales, top line and margin rate could have been a bit better. So that's what was. Now I'm confident that we're doing the right things. And we're doing it, first of all, because of a refreshed leadership team. We have new local leadership in the Nordics, not just the guys on this slide, but also we've got 2 new country heads as well who are bringing new clarity on the situation, grip on the actions to improve it and energy in getting the work done. And they -- we are bringing a much better balance for one thing to solving for top line scale with profitability. It's always a tricky balance to strike, but I'm confident for this year, we will be able to stay roughly twice as large or better than the next largest competitor in terms of protecting our #1 market share slot, but we will and are improving gross margins. Let me build on some of the things you heard from Bruce to share a bit more detail about the actions that we're already underway within the Nordics to improve profit. Starting with that better services adoption. In the online -- in the Nordics, as in the U.K., we have a new platform, GNFR and GNFRC in the Nordics, which enables better services adoption rates. And that's one of the things that we're driving as well as better services in store. Services aren't the only margin accretive thing that we're driving. On the right-hand side, you see accessories as well. Very positive for margin and some of the changes we're making online and in the [ TIL ] area in the stores are seeing better adoption of those margin accretive accessories as well. Credit is another service where we're improving our adoption rate, driven by better deal that we have now with Santander, but also insurance, amongst other services, we've got a much more flexible subscription model now, which is launched first on tablet and on mobile with promising early results. So margin-accretive services and accessories, both of those, we will and are improving adoption. Just as in the U.K., we're not chasing less profitable sales. That means more pricing discipline, particularly on discounting, it means lower promotional intensity. And then finally, just -- again, just as in the U.K., we are reducing our costs in the supply chain and service operations in the Nordics in a way that benefits gross margin. So all of this action is underway. And we will see and are seeing improved gross margins in the Nordics in FY '24. It's also cost action that we're taking. And this is also underway. We've taken about 15% of central head count out of the Nordics over the past year and we're also doing much more than we have previously to exploit group synergies. First of all, in the Infosys relationship that you heard Bruce talk about, that's a global relationship for us, and we're making more use of offshoring and outsourcing in the Nordics. Second, we've moved to a single group IT function with procurement benefits and cost synergies across that now unified group team. And third, on GNFR, goods not for resale, we're renegotiating as a group with the principal suppliers there and harnessing some group benefits, as I said. In stores, we've closed some less profitable stores. We're renegotiating leases on renewal and we've imported from the U.K. a successful program on multiskilling of colleagues, which enables without loss of customer-facing time, significant colleague efficiencies. And then finally, there's the same work that we're doing in the U.K. to improve our marketing efficiency is taking effect in the Nordics. So margin and on cost which gives us confidence that even without any help from the market in the Nordics this year, and we're not counting on it, without any help from the market, we've hit bottom last year on profits, and we'll see a substantial improvement year-on-year in the Nordics next year. One thing I should mention, by the way, you see on the right-hand side of this cost slide, that a bunch of these initiatives are permanent, and there's going to be at least GBP 25 million of recurring annual benefits from those cost savings. I mentioned that we're not anticipating any help from the market, and we're not. We expect the market to continue to be tough in the Nordics and in the U.K. and both went backwards last year, are both to continue to go backwards in the next 12 months. And in the U.K., let's turn to that because that's a very contrasting performance and therefore, a slightly different set of actions that we're taking. In the U.K., our market share did slip last year. I think I said at the half year that -- and so we saw -- as we rebalanced our trading approach, we saw an improving trend in the second half, but we kept our #1 market share. And despite a 7% decline year-on-year in sales, as you see, we are able to affect substantial improvements in gross margin, 160 basis points up year-on-year in the U.K., building on the 110 basis points a year before, a substantial driver of the profit improvements that you've heard about. Let me go into 1 level more depth on what we're doing and what we are going to continue to do to improve those gross margins. The first thing is higher services adoption and 2 big services we've called out here, Credit, which is now near 18% of our sales in the U.K., up from very little a few years ago to, as I say, nearly 18% now. And Care & Repair back into growth, that core service is up year-on-year. Importantly, both of these Credit and Care & Repair have seen significant gains year-on-year in online. And that historically was the weakness of -- that we suffered from historical channel shift towards online. We were less good at selling those margin-accretive services, where we got better at it, and we intend to get better still. You've heard about monetizing the customer experience. I'm going to say a little bit more about that in a minute, but simply put, as you improve the experience you give to customers, so you can charge more for it. And the customer will bear that because they're still getting good value for money. We're not chasing less profitable sales. And now we've got better tools and better analytics, we don't have to. We understand better than we did previously, end-to-end, where we truly make money in this business. It's allowed us, as you've heard, to take substantial cost out of our PPC and other digital marketing means as well as be more selective on our promotions. Another big contributor to improving gross margins as is the reduction in supply chain and service operations costs, which is nicely on track. All of this rests on more capable and committed colleagues. And if this might sound a little fluffy for some in the audience, we don't make any apology for this. All of these improvements in the profits in the U.K. would not have been possible without the fundamentals of retail of more engaged colleagues leading to more satisfied customers. It's very hard in our business for the experience of the customer to exceed that of the colleague, which is why these numbers on the left are so important, a 13-point improvement in the independently measured by Glint levels of colleague engagement over the past few years. They are more engaged. But that's not the only retail fundamental that we've been improving. We've got market-leading now availability. And we've invested quite painfully in the early years of the transformation in price so that we won't be beaten and trained the competition, but there's not much point in taking us on. All of this investment is now bearing fruit. And this is an important point that without these fundamentals, it would be very hard, if possible -- if not impossible, for us to affect the improvement of it. They are the foundations on which we can now solve for improved profits as well as keeping the colleague and the customer experience high. And our customers are happier. I mean, again, we get this measured independently, and NPS had another year, up another 90 basis points and accelerating as the year went on. And the reason for that is because we are improving the customer experience at every stage. And I'm going to give a bit more color on this because it matters, because it's not just nice for customers. The first thing to say about the customer experience that we give at Currys is, it is of an unusual scale and complexity. There aren't too many, in fact, there are no competitors who get anywhere products a year. The repairs number down the bottom, that 600,000 big box repairs that we do every year, we get on for nearly 3 million repairs every year. This is a big and complex beast of a customer experience that we give and therefore, the prize of getting it right is accordingly large. The financial price, improving the customer experience has been pretty simple. And you see it in the middle here. We spot pain points in the customer [indiscernible] in place to prevent them from recurring. And you see some of the results of this on the right-hand side. So the store purchase, customer satisfaction score is up another 200 basis points year-on-year as we've done a really good job of leveling up the performance of underperforming stores. We've put a new assisted sales journey in place, with better tools and training for colleagues. And multiskilling has been really important. This has been big and painful, but really worthwhile. The customer still gets the expert advice, but means we've got much greater flexibility to serve the customers coming in with much more flexible in our capacity utilization. And what that resulted in is [ decline ] in store colleague costs while moving forward to the percentage of customer-facing time from 45% to 60%, so a 15 percentage point improvement in customer-facing time. More time in -- that's the price of the store NPS improving. A big box delivery and installation at a record high. That's gone up 400 basis points year-on-year as we've done things like better communications, better tracking, reduction of damages and fewer technical failures. Collection. Well, we don't get everything right. And we had a dodgy start to the year on customer satisfaction on collection and disruptions, which is well-trailed problems on the small box supply chain out in the market, took us a bit of time to recover from that, but we did. And you see in Q4, back up 320 basis points year-on-year as we got better at using the stores and put more consistent processes. Repairs, the in-home repairs these are, already at high scores are now at record highs as we've got pairing things rather than replacing them as well as matching parts to the right goods. So a bit of color to explain what we're actually doing to improve the customer experience, and this is worth money and [indiscernible] installation that you saw on the previous slide. The actions that I talked to on the left-hand side and then the benefits on the right. So what are these benefits? Well, first of all, if you're installing a washing machine in a customer's home and you get it [indiscernible] visits and that's worth money, about GBP 9 million of annualized cost benefit from improving right first time. Your cost of acquiring customers are also lowered because more satisfied customers tend to come back, in turn facilitates the lower advertising spend that you've heard about. Third, a better service encourages more customers to adopt to it. And you've seen a 490 basis point year installation adoption rates as the services got better and then finally, if it's better, you can charge more for it. And we charge for all big box deliveries and installations now and some fact packet math is when we're doing about 3 million delivery and installation and recycling orders would serve GBP 10 per order on an annualized basis, and we haven't seen the full annual benefits of this yet. But on an annualized basis, that's GBP 30 million [indiscernible] services revenue more. So when we talk about why we're pleased about the rising NPS. It's not just because we're lovely people. It's because that's worth money. So those are the retail basics that we're doing [indiscernible] differentiates us, as you know, in this business, things that make us different from the competitors together, omnichannel and the other is services. And online, in stores together, well, it's still the winning model. Still 2/3 of customers prefer to shop this way. And as you heard from Bruce, actually, the proportion of sales in store ticked up last year as the channel mix stabilized, but we're learning to make money out of this as well. Omnichannel has always been the winning model in technology retail, but the challenge has been in line. Can you make as much profit doing it? Well, I think we're showing with the 45% increase year-on-year in profits in the U.K. that we are. But then there are the services, the second of our big differentiators. And I'm going to call out a couple of these. First, this helps customers afford their technology. And credit is important, and so it's good that we had a good year. It's important not just because it makes customers happier, and our credit customers' NPS is significantly higher. It's important because they spend more, 20% more on other services, credit customers spend and 10% higher average transaction value to customers. And they are significantly likely to come back, not just 70% likely at a return and shop with us in the next 12 months, but we see over basket rate from credit customers. So they're valuable. So it's good that we're growing them. As you see on the right-hand side that we are a 12% growth in credit customers last year to GBP 1.94 million. We're up to now -- credit sales grew by nearly 1/4 and we're now seeing a very healthy adoption rate of nearly [indiscernible] . You can see that because they're happier, and it's good for the business because the -- in this book of credit customers of more valuable customers who return with the recurring revenue that comes along with that. That is -- that's building and is a good store of value. There's more to come on credit. We don't think we're anywhere near full potential on this yet, even though it's worth flagging, there are some headwinds in the current financial year, one of the causes of our caution. With higher interest rates, we've had to put our APR up. That will, everything else being equal, will serve to dampen demand. So we're being pretty cautious about promising another big leap forward of credit penetration this year. But we are doing some things differently to counteract those headwinds. We are, for example, introducing new personalized credit propositions this year backed by better CRM, backed by better data and will allow us to get after, you may recall that GBP 4.9 billion of approved credit limits that customers haven't yet made use of, the open to buy, if you like, and we're much better able to tap into that after some slightly frustrating delays, but we're there now on the data and on the CRM. So much for credit, important for us and going in the right direction. The second is back to that worthy video that you saw at the start on helping to give customers technology longer life, in particular through our Care & Repair. And this is not just good for customers, but it's good for us as well. Services sales are significantly more profitable than just selling products on their own. So it's good that we're growing them, and this is the flagship service. We've got across the group, 14 million Care & Repair customers now, 9 million in the U.K. And as you can see, we're growing adoption. Notably in stores, where that leveling up that we've been doing between store performance and the better assisted sales journeys have really kicked in to improve and already pretty strong performance, but some signs on the right-hand side that we're starting to get our act together on selling this stuff online as well. Just to start, 90 basis points year-on-year improvement isn't enough to break out the bunting for, but it's an important start. And we have the platform now, and we've learned some things on how to do this, and we see substantial potential for further growth there. Third and final of the sources of value that we're building here after credit and after care, in particular, on mobile subscriptions, our own mobile virtual network operator, iD, which is ours. It's not a joint venture. And it's principally a subscription rather than a SIM-only business and as part of the mobile market that had a much healthy [indiscernible] for us that had a healthier year last year. You'll recall the historical problems that we've had with our Carphone Warehouse business. That's all in the past. This is now smaller, but integrated, profitable and growing category alongside all the others. And within our mobile category, iD, our own mobile virtual network operator, it's growing, as you see on the right-hand side, growing quite healthily, 13% subscriber growth up to 1.3 million subscribers. And this early start to this financial year has been very healthy as well continuing that trend. Customers are happier. And we've got a competitive advantage here with the new deal that we signed with 3, which allows us in effect to offer the average customer GBP 200 off the mobile network operators per year. [indiscernible] advantage to build on, and we're doing so. Now I think Bruce touched on that this is a -- this presents an in-year headwind on profit and noncash as you grow the book faster, but we're certainly not holding this back because this is something valuable for the long-term health of the business that we are keen to grow. And those of you who follow the telecoms market, will now between GBP 200 to GBP 300-plus per subscriber in the market. So what we are building here is certainly something of value. So as well as the retail fundamentals that are heading in the right direction, these 3 big stores of future value build what we call customers for life, Credit, Care & Repair and Subscriptions that are in good shape. So looking forward, well, what do we look forward with? Well, first of all, we look forward with prudence. You've heard it from Bruce, you'll hear it from me. Our first responsibility is to protect the shareholders. We've had a big hole in our performance last year from the Nordics. I mean in the business that makes GBP 200-odd million of EBIT, when 1 part of it makes GBP 116 million less year-on-year, that's going to leave a hole and it did. Now the strong and strengthening U.K. performance is very encouraging and we know what's behind it, and we're going to keep going with it. But there's no getting away from that Nordics challenge last year, and the outlook remains uncertain. We're certainly not calling a sustainable -- sustained consumer recovery just yet. There are some positive signs maybe, but we'd rather be prudent. And if we're wrong on the upside, great, we'll be ready, and we'll be ready to make the most of it. [indiscernible] we believe what we're building here is a business that's not just resilient in the short term on ample liquidity and a very strong balance sheet that we've got and able to deal with quite comfortably, but something also that's fit for the future and fit to prosper, whether it's the more engaged colleagues, the more satisfied customers, the proven winning model in the market and building some quite value in customers for life as well. And all of this is enabling the U.K. business to show some quite healthy increases in profit. So as you've heard, it's -- yes, we make no apology for taking the tough decisions that all stakeholders, whether it's banks or shareholders or the business or the pension [indiscernible] really water tight against downside risk, but on the upside, we fully intend to keep going on the trajectory of the U.K. business. It's super important that we do. We're on it. We know what's behind it. We're going to keep doing those things. While we get the Nordics back on track with this new leadership team that we have, we are certainly not waiting for the markets to improve those health help actions on margin and on cost. We're confident we'll get us to where we need. Thank you for your attention, and we're happy to go to your questions, which I think Dan is going to compare.

Thank you all. [Operator Instructions] Ben?

Ben Hunt from Investec. Just a couple of questions. Firstly, on your cash flow guidance, the one area of missing, I think, is on working capital. And what should we expect that to be or some sort of picture if the Nordics continues to see sales slowing. The second question is on your second half gross margins in the U.K. And it looks like the exit rate sort of even softened a bit. Your peers yesterday reporting actually a stronger performance in the second half. Is it -- was it a bit of an underwhelming performance there? What's held you back given everything that you've been doing in terms of the self-help with credit adoption and charging for delivery. Could we perhaps see more of a tailwind going forward? And I'll hold back there for now.

Bruce, do you want to kick off?

Yes, absolutely. So working capital, you're right, we're not guiding to a movement in working capital. As I think I've described 2 or 3 times during the presentation, the implications of a slowing business, and we are assuming that both our U.K. and our Nordic business level of sales will drop year-on-year would naturally mean a negative impact on working capital cash effect. Now we will obviously resist that. We will work hard to look at the efficiency of our stock to the underlying base of stock, debtors as well as managing our creditors to try to offset that. So we're not guiding, but I think trying to get towards flat would be our ambition. In terms of margin in the second half of the year that's just finished, we presented, showed excellent progress. You're right. The margin progression in the second half was the same as the progression in the first half, roughly 160 basis points, but I would call that a success. In terms of the margin as we look ahead going forward, clearly, there's going to be a full year effect of the initiatives that we've described to you. So there'd be some upside. But unfortunately, there are also some headwinds. So I think in May, I described to you the fact that the network debtor upside, roughly GBP 35 million of that will be nonrepeatable next year, partly as we lose some of the RPI upside that we enjoyed this year, but also as our subscriber base starts to run off from the Carphone days. [ Shind ] iD, we are growing iD business, but that's an investment actually because we own the customers and from an accounting perspective, but also from a cash perspective, it means that upfront, we're, in essence, giving consumers a mobile fan handset. We're taking the cost of that, the commission downstream. And the final headwind that we're facing into is credit. Again, Alex described it, we're obviously seeing increases in interest rates. That will have a knock-on implication in terms of our cost of credit, our cost of funds within our consumer finance. We're offsetting it to a large degree by increasing our API not quite enough. So continued progression on margin based on the initiatives, but quite a few headwinds as well.

The only thing I'd add to that, Ben, would be, I mean, clearly, you have a choice where you strike the balance. I mean we -- our top line went backwards by 7% in a market that went backwards by 6%, some other competitors who might be moving gross margins forward are quite happy to [indiscernible] year-on-year. We don't like that because we like the benefits of being #1, and we enjoy the benefits, not least with our suppliers that our scale gives us [indiscernible] half year, we're a bit uncomfortable by how much market share we were losing. And so that's why we saw the exit rate improve on that. Now you might call 160 basis points of year-on-year market -- gross margin gains underwhelming. I mean I'll agree with you the things that we've been talking about today, whether it's continuing to build on what we've demonstrated we can do, which is sell more margin-accretive services online as well as in stores, whether it's refusing to chase unprofitable sales because we don't have to because we've got better tools to do it. It's continuing the supply chain and service operation operating cost reductions, which we will do. So none of the things that we talked about we plan on let up on -- we plan to let up on nor do we think we're close to full potential. I said at the outset, we're getting back towards -- we're on the long haul back to an acceptable absolute level of profits in the U.K. We're certainly not done yet, but 45% year-on-year growth is pretty encouraging.

Okay. Great. And if I may, just one more question on sort of more raising it. Some of your friends across the pond are getting quite excited about the replacement cycle going towards the end of this year and into next year. How are you feeling about that? And particularly in context of not chasing these unprofitable customers of those sales. Does it impact that replacement cycle? Just any thoughts on that?

It certainly doesn't impact the replacement cycle because when we talk about not chasing unprofitable sales, it means not giving away delivery free so you lose money on the transaction. It means not spending so much on PPC, that it's impossible to make any money, even if the customer buys something online. It means not giving more than you need to a way in promotions or discounting or markdowns. And those are the things that we mean by not chasing an unprofitable sale and account for a big chunk of the 7% year-on-year sales decline. So that's 1 thing. I mean you're right. I mean Best Buy, Corie Barry and her team have been talking quite excitedly about the product because we've been cautious. And I'd much rather be coming back to you later in the year to explain why we're doing better rather than the other way around. But there are some encouraging signs. In appliances, there's some really good new energy-efficient appliances coming on stream, some of the big TV manufacturers, the Koreans in particular, are bringing out some pretty exciting new models that build on the existing OLED technology and get pictures even at extremely large screen sizes. There's new VR potential in gaming. Gaming is already big and growing fast for us and could go a lot further. And then a VR could well be. The good thing about us, though, is that we don't have to predict these. By virtue of our scale, we're going to be first in the queue whenever suppliers bring something on stream anyway. So if there's some uptick from the replacement cycle and from new product introduction [indiscernible].

Adam Tomlinson from Liberum. First question, please, just one on data. So you mentioned using that to help drive profits and how that can be a big help. So can you just maybe give a little bit more details of data that you're building up across the different parts of the business, perhaps linking those to give a fuller customer proposition. And maybe with reference as well to how that impacts your acquisition costs, customer acquisition costs and any trends you're seeing there? Within the Nordics as well, it sounds like confident of achieving that profit growth year-on-year this year. Perhaps just a little bit more color on the drivers of that. And into your minds, if there is a big risk around that, what are the key risks as to how that -- if that isn't achieved, what are the risks there? And finally, just on iD Mobile. So some good growth there, just the drivers of that growth. And then you did touch on it, but just again, your thoughts in terms of how strategically important that the mobile part is to the overall group now?

Right, 3 quite meaty questions there. So let me start with Nordics. Clearly, it will be helpful if the macroeconomic not counting on it. I mean so I mentioned the Nordics market, GFK measured went backwards by 4% year-on-year last year. We're assuming something similar for the year to come. And so we're not assuming things get any better in the macro. What we're focused on is this getting better. So all of those initiatives that we talk to on margin and on cost, whether it's the margin-accretive accessories and services sales, whether it's not chasing less profitable sales, but it's taking the supply chain and service operations costs down in the Nordics. None of that depends on anyone other than us, [indiscernible] anything or even more certain because it's in our control to make more of group synergies in areas like IT and GNFR and outsourcing, which is what we're doing. I mean the headcount reductions are absolutely in our control, and we've done it. And we're taking the 15% out of overhead, and we'll get the full year benefit of that this year. Can we stand here confident? We're going to do better this year than last on profits in the Nordics? Absolutely, but that's not -- unfortunately, it's not a particularly high bar. So we aim for a substantial improvement year-on-year in Nordics profits. And if the market does come back and you've seen some signs that we shared the data of improving consumer confidence, particularly in Denmark and in Finland, but some signs of life on that front in Norway as well, then we'll do better. But we're trying to keep our under promising and over delivering theme this year and keep to that theme this year. So that's what's in our control. Likewise, on data, we haven't talked very much about it, simply because we'd rather tell you when we've done things rather than what we're planning on doing. But you're right, we do have some very rich sources of customer data in this business, whether it's from the credit accounts, the mobile subscriptions, the services accounts like the Care & Repair, all the loyalty schemes. We've got 11 million perks members in the U.K. and an astounding proportion of Nordics adults signed up to the customer club in the Nordics. And all of this comes with rich access to data. We spent money and worked hard with Microsoft in particular, to bring that data into a usable format. And the one thing that we are talking about today is our confidence that we can use that to better stimulate utilization of the unutilized back book in credit, that GBP 4.9 billion of unutilized credit. That's where -- that's what we're talking about now. There are obviously many other applications of that data that you can be assured we're working on, but we'll tell you about that when we've done something with it. iD, I think, was your third question. So I mean, as you see, the growth has perked up nicely over the past year. And I say, we had a strong start to this new financial year as well on iD, which might cause us some short-term headaches on profit and noncash, all right, we'll swallow that and explain it because it's undoubtedly a valuable asset that we're building here. And what that's been driven by, first of all, it would be impossible had we not negotiated the improved deal with 3 that allows us to effectively sell plan sort of GBP 200 discount to the principal competition. So that's the first thing. We've got a price advantage versus the competition. The second is we're doing the hard yards on improving the customer experience here as elsewhere. In your pack, you'll see, I think, a 6-point improvement in iD NPS during the course of the year. And it's part of a mobile category that's back into profitable growth for us as a business as well. And we've got many of the attributes of a successful mobile business here, as you know, whether it's the relationships with the handset manufacturers, the scale of customers that we have coming into our channels and the capability that we still have in the business. So we're quietly quite confident that we're going to continue this trajectory on iD.

Mike Benedict here from Berenberg. A couple from me, please. So firstly, it looks like the medium-term 3% margin target has been pushed back to the longer term. I wondered what's changed in your thinking there? And then the second one, obviously recently announced a strategic review in Greece, any recent thoughts on that would be great.

Yes. I mean, on the first point, it's the only thing that's changed is a more prudent assumption about the consumer. That's all. Nothing that's in our control has changed at all. And if the consumer recovers faster, then we'll do better sooner. But given the continuing weakness and uncertainty surrounding the consumer in our 2 core markets in the U.K. and the Nordics, we just don't think it's prudent to put -- to make promises that we're not confident that we can keep that aren't entirely in our control. That's the only thing. We've made a more prudent assumption about the market and everything flows from that. That's all. If it's better, we'll do better. On Greece, no, we don't have anything to update you on except to say that some of the things we spoke about, about the Nordics don't really apply to Greece. I mean we're in a position of strength in Greece, and this is a healthy business and a healthy economy with new found political stability as well. And this is an excellent business. It was a great asset, but it's -- in truth, it's got limited synergies with the rest of the group. So it looks like a good time to explore our options there. But as I say, we're doing this from a position of having done everything that we need to do to strengthen the balance sheet and liquidity elsewhere. So we're not a forced seller here. If we don't get a good price for it, we won't sell it. We'll be perfectly happy to keep it. But it seemed like a good time to explore options. There's nothing more to update on the process than that.

Warwick Okines from BNP Paribas Exane. Two questions, please. The first is you talked about credit headwinds in the year ahead like higher APR, for example. Are you actually seeing any change in customer behavior right now? Or is this just an anticipation?

We're being prudent. We're not seeing it just yet. In fact, we've started the year quite healthily on credit adoption levels, but we would expect that everything else being equal, higher APR sort of a -- and a 500 basis point higher APR to dampen demand. And that's what we're prudently anticipating here. And the second factor, even though, as you know, we don't take any credit or fraud risk ourselves, all of that sits with our partner bank, BNPP. Nonetheless, in an environment where an increasing cost of credit that Bruce referenced, and potentially some pressure and stress in the book, we haven't seen it yet, but there's a potential for higher bad debt rates that may cause the bank to reduce its lending appetite. Hasn't happened yet, but we're being prudent and assuming that it will.

And just on your store portfolio, could you maybe talk about some of the opportunities in the U.K. around rent reduction. I'm assuming you haven't changed your view of the number of stores there, but also the Nordics, where you see the store count over time evolving to?

Yes. The honest answer is we don't know because for the long term, we can't predict what the online share of business is going to be and the knock-on impact that has on the shape of our omnichannel model. So what we're doing is we're preserving flexibility. So we're still at 5 years or less average remaining lease length on the stores. We still keep a very close eye on store profitability. Individual store profitability has to get over a certain hurdle, right? And it has to make sense as part of a network and where it doesn't, we close stores. We close a few sort of handful every year. We've closed a few more in the Nordics this year for reasons of unprofitability or near unprofitability, and we could get out of it profitably in a way that shows up the performance of the Nordics. But overall, I wouldn't be guiding you to a significantly lower number of stores in the medium term because at the moment, actually, the channel shift has stabilized, as you've heard it probably on the upside of people's expectations, how strongly stores have come back from the pandemic and stayed strong, in fact, ticked up in terms of share of business over the past 12 months. So we like and if you ask what I hope, I hope this continues because we like the advantages that having both stores and online together can bring and in the U.K., back to that 45% year-on-year profit increase, we're showing we can make something profitable as well as preferred by customers out of this model. Bruce, do you have anything to add on stores?

So certainly in the U.K., we continue to make good progress renegotiating lease terms, roughly 30 stores a year. We have been renegotiating and we've been getting circa 25% to 30% reductions within terms. So that's been helpful. Just one thing for your models. When you look at our financials, it appears on the face of it, the rental costs within the U.K. from a cash perspective has gone up. That isn't the case. There's a timing challenge where in FY '22, there was only 11 lease payments made and in FY '23, we've got 13. So actually, if you take those 2 out, our costs have gone down.

Nick Coulter from Citi. Just a follow-up on Warwick's question, please, on the Nordics. Perhaps one for Bruce, first. In terms of the scale of the medium-term savings opportunity that you see in that region. Clearly, you've delivered and are delivering quite a transformation in the U.K. Does that sort of end-to-end opportunity exists in the Nordics in short? Is there more to go for in the Nordics?

Yes. We're not calling out an absolute level of saving. As some of Alex's slide showed, we have made good progress already in the final quarter of last year. We put changes in place that on a full year equivalent basis will generate circa GBP 25 million worth of unlock. There's more to go after. But I think the Nordics is starting from quite a different place from the U.K. So when we called out GBP 300 million of cost savings over 3 years in the U.K., there were clear opportunities across multiple areas to unlock that saving. I would say that generally, the Nordic businesses run as a tighter ship, and therefore, the scale of those opportunities are smaller. But nevertheless, there's a long shopping list all the areas Alex talked about, goods not for resale, IT costs, marketing, stores, central. All of those, we are absolutely looking at. But I would say the overall quantum is not to the scale it was in the U.K.

Just one build on that. One thing to bear in mind is that, candidly, we've done very little historically to realize group cost synergies between the U.K. and the Nordics. And we talked today on the offshoring and the outsourcing, the IT and the GNFR in particular, as going after some previously untapped opportunities, and they're potentially quite substantial.

Maybe if I could just probe further. Is the cost to serve in the Nordics broadly equivalent to the U.K.? Or are there structural differences that kind of inhibit that comparison?

I mean, from an overhead perspective, I mean we've never shared this kind of thing before. But I guess if you were looking at things like average salaries within the Nordics, they are higher. So there are some aspects like that, that probably filter through most aspects of the business, whether it's outsourced provisions, supply chain service or in stores.

Looked at the full rundown, the P&L, though, I mean the consumer, everything else being equal, is more affluent in the Nordics than they are anywhere else in Europe, including in the U.K. and certainly not in FY '23, as we've seen. But in FY '22, the Nordics was making 3.5% EBIT margins. So even if some people costs and the like are higher, that certainly hasn't inhibited the Nordics profitability historically.

Great. Then one follow-up on Nordics, if I may. Just on the marketplace. How has that performed and what has been a period of turbulence and how does that shape your thinking going forward?

Our marketplace extended stock, I mean.

Yes, your extended range in the Nordics?

Yes. I mean it's made a contribution. We haven't broken out exactly what. And the short answer is there's been no material change year-on-year and its proportional contribution.

Richard Chamberlain, RBC. So yes, another one on the Nordics, please. Have you -- under the new sort of management team, have you made or are you planning to make any sort of significant range changes or SKU reductions in response to the demand environment there? And then, Bruce, in terms of the sort of leverage metrics, you were sort of hinting -- I can't remember your comments about the pension trustees. Have they -- are they asking for you -- for a sort of accelerated timetable in order to bring the leverage metrics back to target in response to the lower cash contributions? And what sort of CapEx projects are you guys deferring? Is that -- are there any particular areas there? Is that also eating into maintenance CapEx? Or is it also longer-term projects that you're deferring?

On your range question, Richard, and Bruce might want to say something on the stock and the working capital angle. But the short answer is no. We're not -- we haven't made significant reductions to the range. But Bruce can talk to the stock. I mean when it comes to the CapEx, again, Bruce can build, but the short answer is, we've taken a very payback oriented view. The things that pay back in short order are the things that have made the cut and the things that are strategically essential have made the cut. So as you would expect, given what we've just been talking about, the Credit, Care & Repair services and iD have all been substantially protected from any CapEx reductions.

So I guess Ben talked earlier on about what our ambition was for working capital. As I reflected, you would expect an adverse movement within our cash impact from working capital as if the business continues to get smaller. Our expectation is to work harder on that. And part of that is to work with our merchandise planning teams, with our commercial teams to constantly challenge them in terms of stock lead times, depth of stock within stores, et cetera. So that is a constant challenge in both the U.K. and the Nordic business to manage that stock down. Shall I carry on with the -- so in terms of the pension trustees that -- Eric, the Chair of the Pension Trustees is in the room today. I have to say that I think we've got an extremely strong working relationship with the trustees. We spent a lot of time stepping through the situation of the U.K. business today as the group where it is today in terms of the overall liquidity of the business, the state of the repayment of the deficits and where we are with that. And I think both parties have reached a stage where we're now happy with the profile. We've reduced cash contributions roughly by GBP 80 million over the course of the remaining 7 years or 6 years, of which it's front-loaded, GBP 70 million of that is coming this year and next year. There are no specific requirements in terms of our liquidity linked to that. However, as I hinted, when I was talking, there is a pension, a dividend matching component. So for example, in the current financial year, we've declared no dividend if we did make a dividend payment that would result in a further contribution to the scheme. That is also true next year as well with the reduced contribution. So there is an assumption in terms of what the underlying level of dividend will be and are matching.

So we've received a few questions online from Simon Bowler at Numis. I'll ask these in turn. So first of all, what sort of profit or cash headwind is expected in iD Mobile?

Well, we're certainly not going to call that out in terms of a quantum. But certainly, as we work through the implications of investment, clearly, it depends on how fast we grow the business. But I would say that there is high single-digit impacts from a P&L perspective and a bigger impact than that from a cash perspective. But it obviously depends on the shape of the iD and how long the growth continues.

The next couple are then. First of all, can you exchange -- can you explain the changes that we made to the adjusting items policy? And can you further explain the GBP 50 million item in the cash flow and especially, can you tell us how much debt is held in the Nordic entities related to that GBP 50 million?

Goodness. Right. I'm sorry, would you give them one at a time?

Yes. So first of all, can you explain the changes to the adjusted items policy?

Yes. So what we've done within our adjusting items policy is we've been far stricter in terms of what hurdle you need to jump for an item to become adjusting. So broadly, we've agreed with our Audit Committee and with our Board that to be an adjusting item, an item or a collection of items that are similar need to be greater than GBP 10 million. So that has meant that items that perhaps would have been adjusting in the past have gone through underlying.

Okay. And then the next one then was on the GBP 50 million other in the cash flow. Can you just give a bit more explanation about what it relates to and then related to that, how much debt is held in the Nordic entities?

Yes. Okay. So from a -- I guess I'll describe the math. So clearly, there's been significant movements in particularly the NOK, the SEK, Danish Krona, Euro compared to the Sterling. So what we have to do in order to true up our cash flow and our balance sheet is to look -- to translate opening balances, then at opening rates. We've then got transactions during the year at average rates and closing cash balance at closing rate and by doing the math, you end up with a difference, and that's what the GBP 50 million equates to. And I confess, I don't know the number off the top of my head in terms of what the Nordic debt is. But we do -- our revolving credit facility is split. So a component of it is U.K. based and a component of it is NOK based. Do you know what the number is?

It's roughly half and half at any one point in time.

Okay. So it isn't quite half and half, but I think that's a good proxy.

And then the final one from Simon is, how long do you think the business can maintain in CapEx at the GBP 80 million level?

My personal view is that it's probably too low a level. Historically, we've talked about our level of CapEx being around 1.5% of turnover. So when our turnover was GBP 10 billion, roughly GBP 150 million. So clearly, down at GBP 80 million. It's significantly less than that. My personal view is that we should be trying to manage the business with a lower level of CapEx than 1.5%, maybe a sensible proxy that we haven't talked about internally would be to look at cash exceptionals and CapEx together, it would be that kind of scale. But it's that kind of shape that we're going for. Probably GBP 80 million is too low in the long term. But does it need to go all the way back up to GBP 150 million, I would question that.

So let me build on that in a couple of ways. Firstly, I think I was answering Richard's question earlier, we're not taking any risk with the business through spending GBP 80 million a year or perfectly adequate maintenance, for example, is included in that -- all the [ KLO ] staff and InfoSec is amply catered for in that. So that's the first point to make. Happily, Bruce's and my personal views coincide on this one, but the answer is probably somewhere between GBP 80 million and GBP 150 million. And what we've done this year is we haven't taken any risks on the downside of the CapEx, but we have foregone upside. And we've done so knowingly to protect the balance sheet and liquidity against the downside risks as we've been talking about. I mean 1 example of that, in the Nordics, we have a very healthy and thriving SME-facing business, a B2B business because a business like ours has many of the attributes to serve SMEs very well. And we have a much smaller operation in the U.K. At some point, we're going to want to take the learnings from the Nordics and apply it to get after the large, growing, profitable and fragmented U.K. B2B market that's accessible and build on our small operation there. We haven't invested behind that currently, even though ideally, we would have liked to have done. So we've foregone some upside, as you would expect, but we haven't taken downside risk.

That's the end of the online questions. Is there any more questions in the room?

Well, in that case, I thank you all for your time. And just repeat the core message that I think you've heard more than once, is that we make no apology for protecting against possible downside risk in an environment where we've had the hit in the Nordics and where the outlook and the consumer is still in such an uncertain place. If our assumptions turn out to be too prudent, then great. Then, we'll be ready to benefit on the upside. And we'll be ready not just to keep the Nordics back on -- get the Nordics back on track, but keep this very encouraging trajectory in the U.K. going. Thank you all.