NEXT plc (NXT) Earnings Call Transcript & Summary

Well, good morning, and welcome to the NEXT annual report, annual presentation. Just a few comments before I turn it over to Simon, with respect to the Board, we've had several departures, and we're going to have several arrivals on the board. I just wanted to comment on those. First, after many years in the group, Amanda is stepping down. Amanda joined the company back in 1995, joined the Board in 2012 as Finance Director and after 12 years on the Board, will be departing in July. Amanda has made a huge contribution not only to the Board, but to the company over all these years and she will be sadly missed. Second, Dianne Thompson, the Non-Executive Director after 9 years on the Board will be stepping down. I want to thank Dianne for her great service during her time on the Board. In terms of new board members, we have 2 NEDs that will be standing for election in May. First, Venetia Butterfield. Venetia is the Managing Director at Cornerstone, which is a publishing company; and second, Amy Stirling, who is the CFO at Hargreaves Lansdown. Both of those NEDs will be standing for election in May. And finally, as an Executive Director, Jonathan Blanchard will be joining the Board in July when Amanda steps down and he'll be put for election next year in May. Jonathan has been the Chief Operational Officer and CFO at Reiss and we know him well, and we feel he will be a great, great addition to NEXT. So those are the changes. The Board work will be seamless. We'll continue to support the direction of the group. And we look forward to adjust a new Board with some new additions, but we'll continue to function very, very well. So Simon, over to you.

All right. Good morning, everybody. Welcome. I think the first thing to say, and this is -- is that it's been at least 7, if not more years since we've started a year looking at forecasting a profit growth as big as the one that we're forecasting today. And that leaves us with an enormous problem I discovered sort of almost -- you could almost call it a mistaken that not being pessimistic is being misinterpreted as optimistic, and I would hate for anyone in this room to think that we had suddenly become wild optimists. We're not. But this is a bit of a watershed, we think, for us because for the first time, really, the weight of the structural change in our industry, pandemic, cost of living looks like it won't affect us in the year ahead. None of those will have a material impact on the year ahead, particularly cost -- the most recent problem cost of living, that really does look like it's easing. And in fact, if anything, might get a slight benefit from wages running ahead of inflation for the next sort of 6 or so months. So we leave behind much better than expected year and we're looking at growth, albeit not spectacular, we're looking at growth in the year ahead, driven by a number of factors. I'm going to spend some time talking through the things that we think will drive the business forward in the years ahead. So starting with last year, sales up 3.3% in the NEXT group. This excludes any contribution from subsidiaries. Full price trade up 4%. And that consisted of online, up 6%, retail at 0.2%. We weren't expecting retail to be up. We're expecting it to be down. We still think there's a little bit of catch-up from COVID coming through last year. And in fact, the number is slightly better than it looks because on a like-for-like basis, stores were up 1.8%. We closed about -- we closed stores representing around 1.6% of trade. So in terms of the addition that acquisitions have made GBP 370 million of sales from subsidiaries. I need to spend just a brief moment explaining how we're reporting profit and subsidiary and sales from our subsidiary businesses. We think the best way to represent the value that the subsidiaries represent to NEXT is by reporting our percentage of their profit. So if we own 70% of the business, we'll report 70% of their profit in our headline number. In order to make our margins consistent with our profits, we will be reporting our percentage of their sales in the same way. So if we own 70% of Reiss, we will report 70% of their sales in our top line. We think that keeps our profits and sales honest and commensurate with each other. Total group sales up 5.9%. Operating profit up 5.5%, accounting for lease interest. If we account for financial interest, financial interest was up more than sales. This is about the rising interest rates affecting the floating rate notes that we issue. We don't -- our bonds are fixed but we swapped out around GBP 250 million of the debt into floating notes. Profit before tax, up 5%. Just to remind everybody that, again, in order to make the profits we report the most accurate reflection of the value the company is creating, we're not going to show in this line, the amortization of brands. For clarity, it will include the amortization of software and other depreciation. Any asset that actually we expect to devalue, we will depreciate or amortize. We've not gone into [indiscernible], but we don't think it's right that we depreciate brands that we bought in the expectation that they'll actually become more valuable, not less. And again, anyone who looked at their numbers this morning, the 918 and thought, oh, they smashed it again. We haven't, we are much more accurate than we said we would be then have expected -- sorry, just GBP 3 million ahead of the GBP 905 million on a pre-amortization basis, sort of post-amortization basis. And just for clarity, last year, we had around GBP 5 million of amortization in the last years, profit number. Tax charge, not quite the 25% that the rate has gone up to mainly because we only had 10 of the 12 months under the new regime in the last financial year. And that increase in taxation has been compensated for by some buybacks to earnings per share post tax at 0.3%. Final dividend, 141p just a nod to the increase in earnings -- underlying earnings per share. We have got an exceptional gain. This year, it's GBP 109 million. It's not a real profit. There's no cash involved. So I shouldn't say that because the audit is in and of course, it's a real profit, but it is just the -- it's just the revaluation of Reiss really as a result of us buying it. So on 2 counts, you could argue that it's manufactured, but it's not cash. We -- just to warn you, we will have a similar noncash item next year of around GBP 20 million, which I'll cover a little bit later. Depreciation, up GBP 18 million. Around half of the increase in depreciation is about the amortization of the software that we have been investing in over the last few years beginning to hit the P&L. The -- on average, we depreciate software of about 4.6 million -- yes, I think that's right. Yes. So that will begin to hit the P&L as we go forward. Moving on to CapEx. CapEx down nearly GBP 40 million on last year as expected. Just to put that in perspective, drop in warehouse, stable on systems. The other areas, some of that is about the CapEx that we're now bringing on to our balance sheet in subsidiaries, about GBP 7 million of that GBP 10 million of subsidiary and head offices is recent other subsidiaries, new photo studio and a big upgrade to lighting in our stores where the investment in light and we'll pay back on that investment in around 2.5 years in terms of saving energy. Warehousing is where we've seen the big drop. This is all about the investment in E3 our new boxed online warehouse beginning to come to an end as that comes on stream. That's cost us around GBP 200 million over the last 4 years. And we expect that to drop to around sort of GBP 1 million in the year ahead. That project is now pretty much finished in terms of CapEx. There are other bits and bobs of warehousing that we will need to invest in over the year ahead. And we would expect warehouse CapEx to be in the order of GBP 60 million going forward. Just in terms of software, you see this has stabilized at around GBP 50 million of CapEx in software. We do expect that number to come down as we begin to complete the modernization programs we've been implementing over the last few years. So if we look at our CapEx going forward, and this assumes no big change, this will change if we suddenly get a huge total platform client. Obviously, there'll be a lot more CapEx. But assuming no big addition on the total platform front normal growth, we would expect CapEx to sort of come back to between GBP 130 million and GBP 150 million during the years ahead. In terms of working capital, a big swing here, it's just worth going through some of the lines. First of all, online receivables. Online receivables, sucking up much cash -- less cash than last year. This is not about the present year. This is really all about last year, where GBP 92 million of cash went back into our debtor books as consumers build back their balances to more normal levels. So what you can see is that our debtor days, the number of days on average, it takes consumers to pay down their debt. So it's 196, 195 days and that number is commensurate, if not a little bit lower than what we would have experienced pre-pandemic. Staff incentives, that's all about the timing of payments [indiscernible]. The ESOT last year, there was a big outflow because the share price was low. Very few people exercise their options. This year, we had the reverse effect. Surplus cash, GBP 684 million. It's good to see our surplus cash coming back to the sort of GBP 500 million to GBP 650 million level that we would have expected as a percentage of profit sort of pre-pandemic. And what you can see is over the last few years, we've invested a lot of money in warehousing and software. And as that begins to come to an end, the cash generation of the business begins to come back to around 2/3 of the profit of the business, which is where we think it ought to be. In terms of how we've spend or return to that. You can see more investments, less buybacks, similar amounts of dividend. And going forward, the -- if we find good investments to make, we will make them. If that's not enough to use up all of our surplus cash, we will return the rest to shareholders via buybacks. Moving on to the balance sheet. And kind of before I go into this long and arduous balance sheet description, which will be super simplified because the vast majority of the changes are all about the effect of bringing Reiss and FatFace onto our balance sheet. It's going from a situation where we had only the money we paid for it on our balance sheet before consolidating none of their balance sheet to now only 70%, for example, of Reiss and having to consolidate all of it. And you can see that's affected brand acquisition number. Stock is up GBP 105 million, of which GBP 84 million comes from recent FatFace. The underlying stock -- next stock, including label up 3%, so in line with our sales projection for the year ahead. Customer receivables. Customer receivables are up 1% with credit sales including interest income, flat on the previous year. So customer receivables rising broadly in line with credit sales, as you'd expect. And I should say that our credit business for a number of years has been a very good, healthy but ultimately, legacy business, we're not planning for any significant growth or any significant decline in our credit business going forward. Other creditors. These are the people that we owe money to, again, lion share of the increase there is about the money that recent FatFace over their suppliers, mainly for their stock, staff incentives and capital accruals over that timing. Pension surplus, there's a big drop. Now the main reason for this is because we are derisking our pension fund, both in -- both for the defined benefit -- beneficiaries and also for the company through a process of buying in and buying out our pension fund. This is an extraordinarily interesting process, which if you want more detail on Amanda can give you chapter and verse after. So please don't hesitate to ask many questions as you'd like. But the -- we've bought the insurance policy. So we've done the buy and bet. That reduces our pension surplus on the balance sheet by a certain amount. And as we undertake the process of the buyout process over the next 2 years, we would expect that pension surplus number to drop to close to 0. And that process in the year ahead, the buyout process will generate a noncash exceptional charge of around GBP 20 million. Net debt, down GBP 97 million. And that drop in debt was deliberate. We have consciously reduced the levels of debt in the business. In the year ahead, we expect to do so again in by around GBP 75 million. We'll generate GBP 780 million, spend GBP 165 million roughly, that's what we expect, and then pay it by way of dividends, share buybacks or investments up to a level of GBP 625 million. So keep GBP 75 million and after cash that we generate. The logic of that is, if you look at our balance sheet as it stands today, we are -- and you could argue that the balance sheet was a little bit lazy. Our peak borrowing requirements in August -- sorry, October this year is going to be GBP 800 million. So that gives us more than enough headroom. The aim is to give us enough headroom that in October next year, when our bond has expired or the August '25 bond has expired, the aim is that we don't have to refinance it. Now that's not to say that we won't refinance it, we probably will, but we think market rates are high at the moment and we don't want to be a hostage to the market. So if the market -- if we think we can get rates that are right for the company, then we will refinance the bond. And if we do that, it will be -- that money will be spent either on investments or buying back shares, and we'll get our gearing back to a level that's still very comfortably investment grade but a little bit more aggressive than where it is today or where it will be when the bond falls away. So net assets up GBP 474 million, the vast majority of which is about FatFace and Reiss. Moving on to retail. Retail had a better-than-expected year, sales flat. Like-for-like is up 1.8%. Interestingly, the growth that we experienced in our portfolio between city center, regional shopping centers and retail parks has returned. There's very little difference. In fact, the differences that we're seeing -- I don't think a big enough that you could say there was any sort of positive trends there. It's more about individual stores performing well and bargain those types of locations. What's even more interesting is that when you look at our the percentage of our trade that we take in different types of store. The left-hand graph shows 2019, the right-hand graph 2023. You can see that actually as a result of all of the upheaval and the various -- the growth in retail parks during the pandemic, the return of the City centers were pretty much back to square one. City center is taking a little bit less retail parks and huge shopping centers, taking a little bit more. And that, by the way, is not City centers across the board. It's that some City centers have been hit very hard and others are pretty much back to where they were. Operating profit up 3%. And I never thought I would hear myself saying this, but margins in retail, up 0.3%. And just in terms of how we got there. Don't get used to that, by the way, Mark how we got there? 0.4% of that was from bought in gross margin. The lion's share of that increase was the fact that freight prices came down during the year, much faster than we were expecting and lower than our costing rates. So there was, in effect, a positive slippage on margin as a result of us paying our freight cost. Freight rates than we costed into our garments. Markdown an improvement here much less surplus stock in retail stores and improved clearance rates. We're expecting some of that to reverse in the year ahead, which will erode margin in the year ahead if it happens. Warehouse and distribution and no score draw. Here, basically efficient operating efficiencies, in part paid by the increased mix of higher-priced product, meaning the ASP went up, not on like-for-like goods, but the average sold price went up, which pushed up efficiencies in the warehouse. That was offset by wage inflation and payroll in the branches, again, 2 things going on here. Good improvement in productivity of 0.4%, but more than offset by the wage inflation of 0.9%. And again, we're expecting with National Living Wage up 10% in the year ahead. That will happen again in the year. In terms of store occupancy costs, lots of different things going on here to result in a no-score draw, benefit on rates and rent, a little bit of rent and a loss of rates as a result of the revaluation, fully depreciation assets. And that is representing a sort of a real fundamental that our stores are sucking up less CapEx than they have done in the past. Offset -- those were offset by higher electricity bills and previous year credit. Looking at the lease renewals that we undertook during the year. We undertook around 56 -- we not -- we renewed 56 leases during the year. That resulted in an average occupancy savings of 31%. Annualized cash savings of GBP 6.7 million and weighted average term of around 3.9 years. Just one sort of -- when we look forward to the year ahead, we're expecting the equivalent saving -- percentage savings to be nearer 16%. And what we see is there are 2 very different types of stores. There's a pre-2019 stores where the lease was agreed before the pandemic. Those stores, we have seen last year and expect to see going forward a significant reduction in rent. And there are those that we renewed since the pandemic and there are quite a few of those coming up because a lot of the ones we signed in the pandemic, we only signed on 2-year leases. So -- and those stores, we're expecting little or no drop in rent. So it's not that the average -- the average will drop to 16%, but that's not representative of what's happening underneath the bonnet, we don't think. In terms of next year, we're forecasting for minus 2% sales and operating margins to move back to around 10.5%. In terms of the online business, online had a good year, up 5%, 6% full price. In terms of how that broke down the U.K. and overseas, U.K. up 3%, with the next brand growing more strongly than our label business. This is the at the first time that's happened for a long while. And that's partly because -- and we think we've got a lot of our own ranges right in the last year and partly because with label, we went through every item and every brand that we sold on label to check that was profitable and a lot of the higher -- sorry, lower selling price, higher returning items on closer inspection. And after adjusting for all the additional costs that then it put into distribution, we're not profitable. So we took them out and that definitely served to depress our label sales a little bit. Moving on to overseas. A good performance on nextdirect.com, up 8%, but an outstanding performance through aggregators. And I should say that's not through -- that growth is not about adding new aggregators. It's mainly about like-for-like aggregators selling more of our stock. Some of that growth, we think, is explained by us providing much better stock availability to our partners. But it's not enough to explain that number. So it's either very good news or very bad news. It's either a flash in the pan that could reverse out as fast as it came or it's indicative that our brand is really beginning to gain traction in some of the overseas markets where it was and very much peripheral. Take your pick. Let's hope it's the optimistic version. The one thing that does give us some encouragement is that the areas that are growing fastest -- the product categories that are growing fastest are the ones that traditionally we haven't sold overseas. So traditionally, our biggest product area by far, overseas is children's wear and the strongest growth again at the moment is on women's and men's. In terms of customer numbers, overall customer numbers up 4%. Again, just when you're trying to reconcile these numbers with the sales numbers, remember that aggregator customers are not included here. This is only the direct customers and the U.K. customers. Credit customers broadly edged up slightly. Cash customers a healthy increase. Overseas customers flat. So what's driving growth overseas and on our own site is the sales per customer rather than increasing numbers of customers. In the U.K., credit sales are down 2% -- sorry, spend per customer is down 2%. Overall credit sales down around 1%. Now the sharp ones amongst you will instantly object to that because I just told you another slide that credit sales were flat. The credit sales I was talking about before included interest income, where we put the interest rates up, these are just product sales. The main reason for that drop in spend per customer and we can see this, we can quantify this is because of the much reduced amount of sales stock that we had going into the end of season sale and a lot of our biggest credit customers are also very big sale customers. Operating margins nudging forward to 0.8% -- by 0.8% to 16%, just running through that. Same benefit online, as we got in retail broadly of 0.3%, 0.4% from freight. The balance being driven by growth in overseas margin, I'm going to talk about that a little bit -- in a little bit more detail in a moment. Much less sales stock, driving margin forward. Warehouse and distribution. All of this benefit comes from operating efficiencies in respect of our overseas business. In the U.K., we did achieve a large number of operating efficiencies, but they're all offset by the increased rent and rates and depreciation from Elmsall 3 and rising underlying wage rates. So overseas that really drove that. Just one number to pick out here is marketing. I anticipate that marketing will become a bigger percentage of our costs moving forward, both in the U.K. and overseas. I think to some extent, this is a measure of the improved effectiveness with which we're doing marketing, particularly overseas, but it's also a reflection of the fact that a lot of the major search engines now are demoting the natural search further and further away from what the customer first sees. So the business that we used to get for free through natural search is no longer free. We're now having to pay for it, which I suppose in the scheme of things is fair enough. In terms of margin, you can see broadly flat margins for NEXT U.K. and label. A lot of the profitability work that we did in label was offset by the rising wages in our warehouse and a drop in Lipsy's margin in one of our wholly owned brands. Overseas, a big increase. And this is what we said we would do. So this shouldn't come as a surprise. In terms of the positives, big improvement in warehousing and distribution. That is partly about parcel rates coming down to near pre-pandemic levels. So first of all, the pandemic, then the fuel prices pushed up the cost of distribution overseas, airfreight in particular. Those surcharges are beginning to come down meaningfully. The other important thing there is that the exercise we did on profitability, removing the low value, high returning lines from our overseas website meant that our distribution costs came down because those low value, high returning items have a disproportionately high percentage of their cost has to be spent shipping them backwards and forwards. Bought-in gross margin increase here, we've consciously gone back to the markets where we felt that we were underpriced and rather than achieve the best possible value, we have pushed prices up a little bit. We've invested that money in marketing but that has given us an increase. In a lot of cases, the customers won't have seen a price increase. It will just have been about the underlying exchange rate where we would normally have reduced prices in local currency, we haven't if their currency is appreciated. And that's offset by staff incentives and bigger -- I nearly said bigger investment in marketing, but it is spending and marketing. I'm not going to fall into that EBITDA like trap either. Next year, we're expecting full price sales up 5%. Operating margins to head back to where they were last year. The biggest item there will be the return of markdown levels being more normal. Moving on to total platform and our investment business. In terms of client sales, on total platform websites, they were up 35%. This is mainly the result of new clients rather than underlying growth in existing clients. Our commission income was up by more than set our client sales were up. And this is because [indiscernible] has a very low commission rate because it has a very high selling price. So as we've brought on customers like JoJo. Those have much lower average selling prices so the commission -- the commission is higher as a percentage of sales. Cost plus income went up a lot. Cost-plus income, just to remind you, is where we offer retail services and our total enterprise platform. This is where we're doing Joules payroll and product systems we charge for those services on a cost-plus basis. They've gone up a lot, mainly as a result of Joules. And then recharges at cost, and this is where we've got joint ventures, mainly Victoria's Secret, we recharge some of our retail costs at cost to the joint venture, and those are up 15%. So total income up at 44%. Profit up 94%, and we're getting now to the levels of profit that we aimed at when we first set the business up. So when we first set total platform up, we said that we wanted to achieve margins of somewhere between 6% and 7% of our clients' turnover and we're there at the moment. You can look at that and say it's a very low-margin business or you can look at how ultimately it's reported is actually accounts and look at the profit as a percentage of the commission and say it's a very high-margin business. We leave you -- you can pick and choose as you like. Either way, we think those margins are commensurate with the levels of risk and investment that we're making in the business. In terms of the profit we're making on equity, that's moved forward by 53%. That is all about the acquisitions that we've made. The underlying profit of Reiss for information was up 11%. Forecast profit next year for total platform services and equity profit between them GBP 77 million. And I should stress that although many of the future deals we do will involve businesses that we buy our stake in maybe even as we FatFace 97% of the business. We will still continue to run the total platform as a separate business. As its own profit center and our client businesses, we will continue to run as independent businesses and that is to overcome -- that does 2 things. First of all, it keeps us honest about the capital and profit margins we're making on our infrastructure. It puts us on a level playing field with other third parties. So ensures that we keep up to date and feel ourselves as hungry competitors, not potentially complacent central overheads. And it also assures the autonomy of our independent businesses so that they keep the unique selling point of their brands, their personality points of view and don't get sucked into the corporate blob. Talking of the corporate blob, in terms of return on capital, which is very important to the corporate blob, return on capital broken down between the TP services and equity. And in terms of total platform, the way we calculate this relatively very simple on the total Platform Services. Total CapEx spent on getting -- onboarding the client. On the bottom line, the profit with depreciation added back before tax, profit after tax and depreciation added back on the top line. That's a 55%. You could argue that was too high. It wouldn't be an unfair argument. The only thing I think you have to bear in mind is that a lot of the capital that has been invested in all of the systems that support total platform have been -- we're paid for 20, 15, 10 years ago as part of developing NEXT. So it's not a reflection of the underlying value of the assets that we're deploying. In terms of the equity profit, we're calculating this by taking the total investment in equity shares, plus any debt that NEXT lends the subsidiary, plus any start-up costs were having to write off things in year 1 in order to get them on to total platform, minus any recovered profit, recovered cash, and we're using profit after tax as a proxy for cash, which at the moment looks like a good proxy. Then on the top line, cash BBT, plus any interest received on the debt that we've lend. That comes in at around 21%. Total return on capital if you put it together around 25%. So we don't know how strong growth we'll be able to achieve [indiscernible]. And we really -- it will depend on whether we find the right businesses at the right price, whether we find clients who want our services. What we can say with some certainty now is that the business we've got is both profitable and makes a healthy return on the capital we invested. And so we'll do as much of it as we can within the rules that we've set ourselves for responsible investment. So looking to the year ahead, start the year with a total NEXT, excluding subsidiaries, sales growth of 2.5%, word of warning here. We are expecting the first quarter to be much stronger than the second quarter. We're getting our excuses in early and we think this is very important because it's very hard to call the Q1, Q2 numbers. I'm much more confident on the 2.5% for the first half year than I am on how it will pan out between the first and second quarter because last year, just to remind you, we saw a swing of over 7.5% between the performance for the first quarter and the second quarter. A lot of that was driven by perfect retail weather. Basically, it went to more than 20 degrees mid-April and stayed there right to the end of June with rain only occurring at night. Now that is the retailer's dream, but it's very unlikely that it will happen again in the U.K. and there was another effect which was pay rises. And we don't know the balance between those 2 effects because they happened at the same time pretty much. So we're not expecting as big as swing between the first and second quarter, but we are expecting a swing. And if we beat or miss that Q1 number, please expect us to put the difference into the second quarter. We expect retail to be down to online at 5%. Total sales are expected to be up 2.5%. Just to stress, we are expecting markdown stock levels to go back to their normal level, but we've been quite conservative about the impact on our P&L. So we've assumed that, that doesn't increase our top line sales, i.e., it erodes margin. So that's GBP 140 million worth of full price sales from NEXT. Add to that GBP 250 million of sales from investments, total increase of 6% in sales with profits up 4.6%. That is where we -- where our current forecast is. Walking forward from the GBP 918 million, the full price sales delivered GBP 36 million of profit. The equity partners deliver GBP 30 million of additional profit, mainly as a result of acquisitions. And TP Services, we think we'll add for. Just to highlight this number is different from the 6 that we said in January. That's because we have more fairly and more accurately allocated costs and profits between TP services and equity profit than the forecast we gave in January. In total, it is the same. Embarrassing budgetary. Costs, a big increase in costs, the lion's share of these cost increases coming from wage inflation, GBP 60 million. Of that GBP 25 million is the result of the National Living Wage. So if we just awarded everyone in the company, the 4% that we've awarded at head office and this general pay increase, that would have cost us GBP 25 million less than the GBP 60 million here. So we can't quantify the effect of the national living wage. The National Living Wage growth over and above general wage inflation. Technology is still coming through as a bigger cost, partly as a result of increased spend, but mainly as a result of the depreciation of the past few years beginning to hit the P&L more aggressively. In terms of cost savings, staff incentives were not expecting to be as big next year as they were this year. This year, we beat our target. Next year, we wouldn't expect we're budgeting to hit target. And bought-in gross margin, we've nudged that forward by GBP 17 million to help pay for some of the national living wage increase. So we can't carry on pushing out wages for free at some point, the consumer is going to have to pay for that. So it is beginning to come into price. That's the bad news. Good news for the consumers. It doesn't mean prices on like-for-like goods are going to rise. We think prices in the first half are going to be about -- on like-for-like goods will be down 2%. And in the second half, as we begin to cost in the increased freight rates from the series crisis, in particular, we expect rates to be down around -- sorry, like-for-like prices to be down around 0.5%. There is an argument that we should have been more aggressive on margin and brought more of that profit erosion back into the balance sheet. We could have done that. We took the view that given the outlook for the group, we were better to -- and I use this loosely invest in better value and maintain our competitiveness, the risk our competitiveness and make a little bit more profit. So that is the view that we've taken right or wrong. In terms of other cost savings, electricity is the biggest single item there, electricity bill. We know -- we've locked into rates now that gives us a GBP 12 million benefits year-on-year in the year ahead. And that gets you to the profit of GBP 960 million, 4.6% increase in underlying profits after accounting for the -- for any buybacks that we've done or plan to do increase of 6.3%. [indiscernible] then takes away the balance with the -- those painful 2 months of increased tax rates and doing all the good work of our buybacks. But it means that we end up with earnings per share post tax. We're aiming for somewhere around 5%, which, as I said at the very beginning of this presentation is a much better outlook than we have given you for the last 7 years, if not a little longer. So moving on to the big picture. I think it's worth saying. It does feel as though next is that something I've watershed. When you look back, things are very, very simple and how simple they were from 1997 to 2017. And because in hindsight, that looked like plain sailing, were opened lots of new profitable space every year. We grow our directory -- within our directory, not online customer base. And we extended the breadth of our product after moving into new areas like home and within clothing, extending our reach into -- not to accessory areas and other areas that we haven't sold. That generated a compound annual growth in underlying profits of the business by 8.4%. If you add the effect of buying back shares and reinvesting dividends, that gives a compound annual growth of around 17.5%. It's one of the great mysteries to me that cash generation and return of cash is so overlooked. I completely understand it because ultimately, it's incredibly boring. There's not a lot to write about. But -- when you look at it and you say actually, more than half of the compound annual growth of the business came as a result of returning cash to shareholders, you're coming actually now there's something -- there's definitely something in that. Anyway, so those were the glory years. And that was followed by -- not wanting to be too biblical about it, but 7 lean years, underlying profit up 2.2%. The -- we can look at that 2.2% and go actually, that was in the circumstances, pretty good. And path ourselves into that. But nonetheless, a very different experience from the one that we had in the previous 20. I think the one thing I would say is that, that number is so much better than the number we were expecting when we did those scary 15-year forecast for you. But once again, the value of cash and returning it to shareholders took a very ordinary growth in underlying profit of the group to very respectable returns for equity. And when you look at the qualities or the capabilities of the group over the last 27 years, the thing that has got us has driven us in the good times and got us through the tougher times come down to 3 things. First of all, the cash and then 2 capabilities, our ability to produce wonderful products and the creation of as good in class, I would almost say best-in-class infrastructure to sell it. The nature of the brand and the product we're producing has changed beyond recognition from 1997 as has the infrastructure that we use to sell it. But in essence, retail comes down to 3 very simple things. Produce great products, sale it on effectively and make sure that you are generating cash and not burning it. And if you can do those 3 things, you can keep the business moving forward. And where we are at the moment because it does look like we will be able to move the business forward. And I'd like to just focus on our approach to some of these sort of key capabilities as we move forward, most importantly, products. I am keenly aware that when a chief executive who doesn't know a lot about product, talks about product, it can sound like a [indiscernible] nonsense. So -- but what I'm going to give you as a flavor of what we're doing to move the brand forward. And the one piece of assurance that I want to give you is that it's not me. People start to say, "Oh, I see you're trying to move your price points up or us and you're trying to go into this market." It's not me. That is not the way we manage our product ranges at NEXT. Men's, women's, children's, home and women's accessories are all managed as separate independent, say independent directors. I don't tell them to book to put in the range. The Board doesn't review the ranges. It's down to their initiative. And actually, not those directors initiative, it's down to the individual initiative of the individual teams producing the different product categories, the buyers, merchandisers, quality assurers and designers that create those ranges. And I said at the beginning, I was -- we were very happy with the ranges that we produced last year. There are always mistakes, always areas that could have done better. But generally, as a portfolio, I can't remember being much happier with the quality of selection that I've seen over the last year. But that doesn't mean we can't move it forward. And the lesson that we've learned from the people who have done this best, from the individual teams that have done this best is they've all done 3 things. The first is they've backed newness with conviction without having evidence from last year that it will be a bestseller. The teams that are able to spot and predict. This is a -- ultimately comes down to talent, not science. And before you all panic, I know what you're thinking. Since then was newness and fashion, you all think this is you summon up images like this "Oh no, they've all gone super high fast fashion." I'm not talking about high fashion and I'm not talking about fast fashion. I'm talking about the trends that we're seeing coming through the all wearable, accessible normal trends, but very different from the bestsellers of last year. And on that front, what we've found is that in most areas, almost without exception, last year's bestseller is never this year's bestseller. So the people who produce the best ranges are the ones who start with the new trends and the ranges that they want to build. And then vitally go back and check it against last year's sales to make sure they're not throwing away any of the golden goose from last year's best seller. But the starting point is this year's, the range you want for this year looking ahead, not what you had last year with a bit of newness added on the top. So newness with conviction of trends that are wearable and accessible to our customers. Secondly, breadth because you come back to the best sellers with conviction and still miss a lot and I think there's definitely a risk. When you're on to [indiscernible] winner, let's say, and this is -- these are not, by the way, the trends of this season, but I'm using this as an example. So please don't run away and go, next thing sequence are going to be built next year. They probably kind of had it actually. I don't know. Richard, you're here. Not -- yes, no -- but let's say your big trends, think of prints, sequins, boxy -- and boxy fit plains. It's easy just to fill your range up with more and more versions of the same thing and miss the fact that there are whole lot of looks out there for different customers that may not be this year's best trend, but they're definitely there and customers definitely want them. And trends are moving faster. And they're moving faster for one very simple reason. And that is that whereas 20, 30 years ago, people go off to the shops rarely to do their big shopping at a location that was a long way to Oxford Street. In buses, I can remember when I started out in the shops. Now you can do your shopping 24 hours a day and get a level of choice and newness that puts Oxford Street or any shopping high street, any shopping center in the world to change. And that means that if customers want a new trend, they want it last year, the chance to they bought it. They'll buy some of it next year, but not nearly as much as this year. So we need to make sure that we're covering as many of the new trends that we love and believe in. And what that -- the aim of that and it's something I think our kids wear range does very well, actually, is target -- it also opens us up to different types of customers. The arty girl, the princess girl, the traditional, the sporty urban girl with different looks, different customer bases, different children, different parents. All want NEXT quality and NEXT prices, but they want different looks. And if we tackle lots of different look, we have lots of different looks in our ranges. We will, by definition, serve lots of different customers. And it's not just about breadth of offer. It's also about breadth of price. I've got to be careful here because people think [indiscernible] what yes, I see you're moving NEXT up market. We're not. But what we are doing and what we found is we've got a lot of success at our mid and upper price points, and we think we can push the boundaries further at the top end of our price architecture. It's not going to be the thing that makes the difference in success and failure, but it will slowly serve to improve the reach of the brand and I think also push our own aspirations for what we do with the rest of the range. And whilst we are very proud of our quality and I think our customers say, in terms of our fit, our wash and wear, NEXT quality is good. The one area I think we can move forward is particularly the mid and upper price points is by investing in better quality fabrics. And by investing, what I mean is really time and expertise and beginning to develop our core fabrics and yarns long before we start the process selection, which is not -- something we do a little bit at the moment, but we could do an awful lot more of that. And to that extent, we'll be investing in both the people and the time and effort and the relationships to try and move the quality of our yarns and fabrics forward to exceed our customers' expectations of the brand. That will be all the more important as the size of our market share in NEXT begins to become a constraint on our growth. And this is just a mathematical reality that going from 1% to 2% of market share is so much easier than going from 7% to 14% and we need to accept that actually, as we grow in size in the U.K., our opportunities for growth, whilst we think they are still there, I mean you saw we grew online, we grew our brand last year and only tell us well nudged it forward. Also, whilst we grew the brand in the U.K. ultimately, as exciting as the product might be, the math are maybe not so exciting. The good news is that the brand is now beginning to get traction overseas. If you look at the last 4 years, we've grown our overseas business by 71%. That is a -- I won't say a game of 2 halves, but that will be not quite right. A tale of 2 territories, 91% growth in Europe and the Middle East. And this is driven by improved awareness of the NEXT brand in markets that are close to home and our ability to serve those markets relatively quickly and cost effectively, either from our warehouses in the U.K. or from our local distribution warehouses in Germany and Ireland. To that end, we have just opened a distribution hub in the Middle East, where up until now, our offer has been competitive because there haven't been a lot of local aggregators. We don't want to get to the point where the local aggregators begin to overtake us in terms of service. So we've opened a hub in Dubai, a fully stocked warehouse. And this just gives you a flavor of the improvement in delivery speeds we can achieve. What this is, is the weighted average time by sales. Consumers are having to wait for their parcels at the moment of last year. And you can see the vast majority of customers are having to wait 3 to 5 days. The new hub is now open, the performance we're getting out of that for goods that are stocked in the warehouse is that 75% of customers are going to get their goods within 3 days of orders, no one was getting their order next day. Nearly over 1/4, we can deliver to our current customers, we can deliver to the next day in the Middle East. We can't put on our website next day delivery because in any one country, different areas, different -- different locations will be served on different time scales. But if you're in the big cities, in our biggest trade locations, then you'll be on next day. The other thing that is driving our local markets is marketing. And what we've done here is we've increased the amount we spent on marketing. We're getting much more -- we're getting a good traction, a very good return on the money that we're spending on marketing in terms of year 1 profit. And we funded that in some territories, as I alluded to earlier, by raising prices. And the aim here is very simple. I think we made a mistake. When we priced our product overseas, we didn't look at the market as a whole. We just said what is the best price we can offer to make our target margin, and that was the price. And in doing that, we've created an enormous audience for NEXT product, the value created enormous audience that could not see us and have never heard of us. And what we think is better to do is to narrow the audience a little bit by pushing prices up and reinvest that money in allowing the customers and helping the customers find our products. Where we're doing that, we think we're getting traction. It's still at the stage of experimentation at the moment, but the outlook is looking positive and we will be investing much more in overseas marketing as we go into the following year in these local markets. In the further field markets, not such a happy picture, sales down 12%. Same brand is pretty much the same offer, but worse economics than U.K., poor service, less well known. And the reason the numbers are down, we think, is because in those territories, Australia, America, Asia, there's been huge growth in local aggregators who can offer local quality service at local prices and local speeds. So in order to tackle these markets, we're going to do this through partnerships. These will be wholesale, franchise license type arrangements. They give us access to our partners' local retail infrastructure, including their stores. It gives us local service levels to compete head-on-head with any other aggregators in those territories. And it opens up the customer base that the partners have already got through their own retail operations. It's very much what we hope to do for overseas retailers in the U.K. through label and total platform, we're doing with others. The other thing we're doing with these partners. Obviously, we're shipping the stock directly to them from territory. We've -- we're at very early stages here. So I don't want anyone to get too excited about this. The trial we've done, one trial with Nordstrom, it's been very encouraging. We've got another deal with a big U.S. retailer that we've signed, but not yet announced. And we signed a deal with an Indian partner to -- through a franchise type arrangement to develop both online and retail business in India, which we'll be announcing shortly. So lots of seeds being planted but I think it will take 5 years for these businesses to become meaningful. And whilst -- this is a short cut to success, and it's very low risk. The vast majority of the stock risk is taken by our partners and a wholesale franchise arrangement. Even where we're doing commission, there's normally some guaranteed by price for the leftover stock. So it's low risk, but it's low margin. We've got to share the margin with the local retailer, and we think that's fine. We would much rather have a small percentage of a big pie than a very healthy margin on the nonexistent business. So that's sort of product taking the constraints of the brand within the U.K. and busting them through growing overseas. We think our sort of constraints in the U.K. as far as the infrastructure is concerned, we can answer that challenge by using our infrastructure to serve other people. We've already talked a lot about Total Platform. I'm not going to talk any more about it other than to say that in the year ahead, we expect it to contribute around 8% of our total profits. There's one further opportunity that both of these capabilities drive, and that is the ability to seed new brands and licenses either through new wholly owned brands like Love & Roses, that's taking -- it's reaching into a different place that the next -- slightly more fashionable customer than the NEXT core customer bolt-in licenses like Cath Kidston that we acquired and collaborations with third-party licenses to combine their design talent with our specialist sourcing skill in areas like childrenswear, swimwear, underwear and nightwear. So you kind of put all of these together and the interesting thing about them or the sort of traditional capabilities and the new business opportunities is that they are all mutually reinforcing. In that, working with total platform clients, as galling as it is, they come up with lots of ideas how we -- the cheek of it. They come up with lots of ideas how we could improve our infrastructure, which we duly do because they are important clients. And of course, the improvements they suggest does benefit NEXT as well. The work we're doing overseas to forge new partnerships and the traction of our own website is getting our relationship with aggregators both near and far, can be used to leverage these new brands overseas and also help total platform clients leverage their brands in markets that we have access to that they don't. And the cash, of course, can be used that all these activities are generating can be used to fund the improvements in infrastructure necessary to drive the whole machine forward. And I could now spend an hour or so. I mean I know this is what you would want, but I'm not going to do it despite popular demand for it. We can spend an hour talking about all the things we're doing to improve infrastructure. I'm going to focus on one which is technology because there is not one new business activity that we're undertaking that doesn't in some way involve some piece of coding being written. And also, it has become a very big cost for us. It's pretty much doubled in the last 5 years, an increase of GBP 100 million. We now employ more people in our technology and support teams than we do in product. So this is a big ticket item for the group. And I want to talk about some of the things we're doing. First of all, that GBP 100 million. You'll go actually how on earth can they spend another GBP 112 million. Believe me, it's a question they ask pretty much every week to our technology teams. A big part of it -- to be fair to them, is about modernizing our software and moving from old static, constrained network to the cloud. So if you look at the sort of increase, around 50% of it is about modernization and cloud technology. Just focusing on the modernization, just quickly to remind you, we have talked about this before. This is about taking all the legacy code we've got that had, frankly, some of it is unsupported, a lot of it is undevelopable. It's so complex that it's become undevelopable. So we are going through the process of rewriting all of our legacy code. That process across all of our various business areas is pretty -- is now half complete. So we're really getting traction at this. And what I would say is that the team -- we are getting better at it as well. We're learning short -- we are learning how to do the modernization process. And the ones we've completed with the exception of payroll, which you all heard about, has been completed without any operational glitch at all. So we're learning to modernize software, relaunch it without having any accidents along the way. We're half of the way through in terms of work and departments. But in terms of cash spend, we're only about 44% of the way through. That is because our finance system, which is the last system that will tackle in earnest, is going to be the most expensive, GBP 40 million there. And I take some pleasure in the irony that finance who have been complaining to me for the last 5 years about how much we're spending on technology. When it comes to their projects, GBP 40 million. I thought I'd just quickly made that point. We are expecting this number to come down in terms of cash expenditure. There will be some tailwind from depreciation in terms of P&L effect. We are expecting this number to come down for 3 reasons. First of all, the modernization already means that we can develop our legacy code faster. So the development work, the business as usual, new functionality we're developing should be faster and cheaper to develop and we've proven that we can do that. More experience. We've taken on so many people that over the last 4 -- 3 years, we've had a huge amount of people who've had to learn both about the business and the systems that they're trying to rewrite. One stage nearly 1/3 of our system professionals were -- had less than a year's experience in the business. That produced a big drag on productivity. And what you can see is that number is falling dramatically, partly because we are not expanding numbers anymore and partly because the market for technology professionals has become a lot softer than it was. And finally, what we have called Yin-Yang development. Now I realize that it's a bit cheesy, but sometimes, in order to get a message across, and this is the presentation that has been done to our technology teams and will be done to our staff. So it has a purpose. The way you design and build systems and the way people collaborate can make an enormous difference to the cost and speed with which you deliver software. And the best way of explaining that is through a project that we did. So we had a problem. And the problem was that we have always as a business that our online and retail customers have, 28 days to return their goods, after which they can't get a refund for cash. We do give them a gift voucher. Online, we've never really enforced that in-store, which has meant that we're giving a lot of cash out where we would be giving stock and it's obviously a lot cheaper to give stock out or out of stock that is to give cash out. So it's a big cost. More importantly, and this is the reason that we focused on it, it means that if people are sitting on stock that ultimately they don't want you can't sell it and getting those returns back into the business quickly is a big driver of growth. So that was the problem. The project that was presented by our brilliant technology and user teams was going to save us GBP 3 million a year or drive -- both through increased revenues and set cost savings. The last time of 6 months, cost of GBP 1.1 million and development time of 4.8 years. That's a developer person years. And that looks time, isn't it like it's a 4-month payback. But when the director responsible stood back and said, "What do you mean you're going to spend GBP 1.1 million just doing what we already do in retail." Relatively simple change. It forced the technology teams and the users who specified the system to get together and work through every single line of the specification to work out where the cost was coming. And what they discovered was interesting is that there is a loophole. And the loophole is this that online customer return my goods in store and I get my gift voucher. I can't use that gift voucher to pay down my account because that sustains getting a cash refund. But what I can do is I could buy something else, then you return that to something else, get another gift voucher and that it gift voucher could be used to pay down my account. Now frankly, if someone does that, good luck to them. But in order to stop that happening, every single gift voucher transaction that we did, every sale that we made, every return that came through, we had to look at what type of gift voucher has been used to buy that item. Storing all that data, calling it back from the mainframe, writing all the algorithms to work out what is someone does a split. They buy it partly with one gift voucher, partly with another gift voucher. The complication of doing that added, combined with a couple of other wrinkles added 50% of the cost of the development. Strip that out, and development still save GBP 3 million. That edge case is not costing us a lot of money. We halved the time it was going to take to deliver the project, halved the cost and development time of doing it. And I think what it comes down to is collaborating because there is a risk that systems technology teams think of -- begin to think of themselves as almost like internal consultants and you user giving you specifications, you got to write it all down really uniquely and exactly what you want. And if you miss something out, it's your fault not ours, and then they write it, throw it back over the wall and it does what it does what they ask for, but it's very expensive. And actually, there could have been a better way. Now I'm not saying that's how we did it, I'm saying that's an extreme example. And our aim is to mimic the best practice at NEXT, which is to kind of break down that wall and to do this sort of Yin-Yang development where the business side of the -- our sales force, our retail team, our product teams, invest in taking people out of the business, whose job it is, just to sit down and work with systems -- the systems professionals on new developments to explain to the technology teams exactly not just what the requirement is, but why the requirement is there, what is it that they're trying to achieve, the value of the application and the value of each element of that functionality. And then the technology people, their job is not just to do it but to inform the business side of the business of how what we're asking for could be done in a much better way. What new technologies that are out there? The specification actually is -- whilst it achieves the aim, it could be much specified in a much better way on new technology using new ideas, AI, whatever it is to deliver better technology. And this collaboration can deliver much cheaper, much better software. And that is -- I think it's the way that we've always worked in a way, but making it clear with so many new people in the department, nearly double the people in department, we need to have another push on this to really make sure that we're developing the right software at the right cost. And so that's it, 3 traditional retail. They've always been there. Produce nice stuff, generate lots of cash, invest in the best possible infrastructure. But those 3 activities done in a way that is unrecognizable from how we operated 20 years ago. And with 3 exciting opportunities of growth driving the NEXT brand overseas, developing our infrastructure for other people in the U.K. and developing new brands to operate within this environment. It's a very exciting plan. It all makes complete sense to me when I read it, whether or not it's successful will not depend on the quality of the plan. It will depend on the quality of that individual people execute on the plan. And I kind of -- I'm not really doing this to you, but I'm going to -- I'm repeating what I will be saying to our teams tomorrow and what I've been saying to them at every presentation for the last 5, 10 years. And that is that ultimately, our success is going to be delivered by their initiative. I can't tell you how big these opportunities on the right-hand side will be. Partly because they are controlled by factors beyond our control, but mainly because I can't predict how innovative, clever and talented, the people will be here executing them. So a big part of what we have to do is to develop brilliant teams. And I thought I'd just like to end on that note. And obviously, also, we have to harness all the intelligence that we can, including brilliant observations and questions of the retail analyst and investment community. And on that note, no pressure. We're going to hand over to you for questions. We do have a mic if you need one, but you might not. On a high-pressure note, who's going to go first? Mic at the front here, sorry. We have one person at the front one at the back and then we'll all settle. Not like UBS, you've all got your own mics. We'll be back there next time, I think. Yes, we booked the room for next time.

Richard Chamberlain in RBC. I just -- can I just kick off with a question on the -- I was intrigued by your comments on the overseas business, Simon. And obviously, you've said that the more further field territories haven't been doing so well. And I just wondered if you can talk a bit more about the extent to which you intend to sort of share the stock risk with partners and whether there's a sort of risk there that those partners aren't currently or may not now sort of buy more into the sort of fashion forward rates? Because I guess the risk is that they get very conservative with having to take all the or the stock risk. So I just wondered how you're sort of thinking about that really.

Look, I mean, our view there is we've got to have the right partners. And again, we can't make them buy stock, they don't want to. It is their risk. So the trick is to work with people who really understand their local markets. And it will be different from what -- from the things that we are most enthusiastic about. So we can't say, I know you've got to take this, denim skirts [indiscernible]. Because they may not be in wherever it is. So I don't think there is a way of managing that risk. Other than making it very clear upfront as we have done that this is part of what we want to do. We want to build an exciting brand. I think also the partners are working with understand that. They have got -- if they want to sell plain chinos or v-neck jumpers they can do that and they've already got those. They're really looking to our brand to add to their portfolio rather than replicate it.

Okay. And sorry, and just to clarify, did you say that the overseas business at the moment is disproportionately weighted to kids wear? So it's men's and women's that are actually out before sort of catching up. Is that correct?

They're growing the fastest. Now, it's still -- kids is still our biggest PN overseas.

Georgina Johanan from JPMorgan. Two questions, please, both on pricing. Just first of all, on the point around like-for-like prices being down 2% in the first half. I think you had initially said last year that your best outlook for price flattish. So just to understand really what's driven the change in your decision there, please, especially given that you're only talking about 0.5% increase in the second half? And I know you've talked about not liking that volatility in prices? And then the second, I guess, just more broadly, like where you've seen a bit of consumers kind of appreciating quality more and maybe those higher price points? Just really your view of why that's happening, please.

Yes. Okay. So I think the answer to the like-for-like price is coming out, I think that is -- we have been more aggressive in terms of moving our sourcing. We've done -- I think the key actually has been we've done much more travel. I think, during the pandemic, we all convinced ourselves that we can work from home, we select products online and -- but I think getting back out into factories and into new factories and giving our existing supply base a little bit more competition. Plus the fact that there are some territories where we are seeing significant local deflation, and that has been better or from depending whose perspective looking at that has been best or worse than we expected. But it hasn't been -- it's not something I can sum up in what the companies have done. Our individual teams have traveled more and got better prices and be more aggressive about pushing product into new suppliers. And the second question was about, oh, the shift in consumer preferences, I don't know. You get these sort of super cycles. And I feel if you look back over the last really from sort of 2015, '14 onwards, you saw a diminishing interest in clothing in general, faster fashion, the rise of more interest in value. But basically, fashion moving down the packing order, certainly, people weren't watching America's Next Top Model or How to Look Great Naked or whatever it was, they were watching MasterChef and travel programs. So I think people's interest in clothing, waxes and wanes, and we appear to be at a stage where their interest is returning.

May I just quickly follow up on that?

At the very end.

Geoff Lowery at Redburn. Just one question. Can you help us understand your U.K. customer count online a little bit more? In particular, what you're seeing in terms of gross recruitment versus churn and whether the profile that you gave us a few years ago of sort of year 1, customer does GBP 100, year 4, customer does 300 or whatever the numbers were. Does the funnel still look at the same once you've recruited them?

Yes. There's been no material change. I will check this actually. There has been no material change in the performance of cash and credit customers in terms of their ongoing performance. Other than that, generally, their spend per customer has gone up. I think the big difference is the mix rather than the behavior. So we have been taking more and more cash customers who are -- where the attrition is higher and the average spend is lower. But those cash customers themselves, we're seeing no material change.

Warwick Okines from BNP Paribas Exane. Just wondering if you could give us a bit more detail perhaps on your Nordstrom trial. What's been working well, what's the scope of it? And how much opportunity is there for some of your total platform clients to piggyback on the success that you have internationally?

Look, I mean, I'm not going to discuss the Nordstrom trial because that is between us and them ultimately. It's a very small trial. I think -- and all I can say is it's not proved unsuccessful. It's proved as successful as we could have hoped for, I think, but it's a very small amount of stock, and it's focused on kids wear. So it doesn't tell us anything about how are other brands or other -- or volume would perform even on kids. We will be trying it more going forward. The people that we are talking to about NEXT but also talking with them about product from our other wholly owned brands. There's definitely interest, but there's not enough orders for me to really give you any super encouragement on that. I think it's going to take 2 or 3 years really for that overseas third-party business to form in terms of the shape of it, which products from NEXT work, which brands that we've got work. I think the one thing I can say is that Cath Kidston seems -- has instantly gained traction overseas in a way that many of our other brands haven't. I think that's probably the only piece of real information I can give you. I could make some other stuff up, but it wouldn't be worth.

It's Adam Cochrane from Deutsche Bank. I've got 2 questions, please. Firstly, on the profit from equity investments, can you just run through I can understand you've got a very good forecasting process sitting within NEXT. With those companies, can you just run through how you come up with that number? Do you review the budgets very tightly, very prudently. But what's the risk to that number, both upside and potentially downside? And then secondly, when you're looking at those aggregators and the growth, how do you make sure that the next brand equity is being presented constantly and how you'd like it to be done across those different platforms? Is there a risk that you get excessive discounting, for example, or the way that you wouldn't be perceived in the U.K. that may be trading on Zalando or something else that they treat your brand differently to the way you do yourself?

Yes, good question. So I think the risk of that number -- we've derisked it. We might not derisk it enough, but we have to -- we don't just take the number they give us and prop it in our results. We take the number they give us and take a little bit of a shine of it. And actually, so far, we haven't been -- our estimates have been better than the partners taken as a basket. So I think that's reasonable. It's a really interesting thing in that the way that companies that work in private equity work in terms of their budget is very different to the way NEXT works. So we will work by saying, well, what's the budget -- we're as sure as we can be that we're going to hit it. Private equity kind of works other way around. It's like where could we get to them? And then the owners, I think the impression I get as the owners will set the surely you can do a bit more than this. You can put a bit more on that top line as if somehow forcing the top line and the forecast, it will actually make any difference to reality. And we have been very careful with the companies that we deal with to make it clear that what we want from them is an accurate forecast of what they think will really happen rather than something to keep us happy and -- or to keep a perspective buyer happy. And I think the trick there is what we've done with their incentives is their incentives on absolute profit growth over the long term. So they will have a percentage of the management in all these business have a percentage of the business they own. We have -- they have an option to sell that to us on a multiple of profits in 5 years' time. So it really doesn't do them any good to be over optimistic this year. And another thing is that their annual bonuses are set against the targets that we agree with them. So any optimism in the their budgets will cost them. What was the second half of the question? Excessive discounting. One, actually, interesting, when we bought this business, they've all got [indiscernible] obviously, we have to stop discounting now. And they've also -- like a Ouija board, no one quite knows who's moving the cup. They kind of just started doing things because they think that's what we want. Actually, we want them to maintain their own brand. And for some brands actually regular promotions are part of what they do, and we have to let them build up their own pricing and promotions strategy. As far as the customers turned customer doesn't know the NEXT [indiscernible], Reiss or FatFace or Joules. As Board members, we are keen for them to preserve and maintain and develop the value of the brand that we bought. So we, as Board members and shareholders will be upset if we saw excessive discounting. But we haven't tried to say, look, you've got to do it like NEXT does it because that wouldn't be right.

Discount product on third-party aggregator.

I apologize. I mean obviously, legally, we can't do that. I think if we felt the brand was being significantly evaluable, we come off the aggregator, we keep a very close eye on it. And -- but most of the promotions that we see on our partner sites tend to be promotions about the order rather than the content of the order. So it's 10% off your first order rather than 10% off next.

It's William Woods from Bernstein. The first question is just on the different categories that are non-clothing. I think last year, you showed some kind of weakness in, I think, home, beauty and sportswear relative to clothing. How is that going? And how do you think about that going forward? And then the second question is on the corporate blob. You were quite cautious about that last year. How do you think the progress internally has gone and culturally within the business?

Yes. So in terms of the culture, I think it's going really well. I mean actually, I'm not the best person to ask because I would say that, wouldn't I. I'm the last to find out if things aren't going right. So I think the best we'll talk to the people are running those individual businesses, but I hope what they would say is that actually, having NEXT as a shareholder -- having NEXT as a shareholder that understands retail but doesn't need to see too much as a good thing. That's our ambition. I have seen nothing that suggests that, that is not the culture that people are adopting because I think ultimately, it's easy to get people to adopt a culture that they want in the first place. No one really wants to be told what to do. We can be -- there are demanding about some things. It's demanding about their financial reporting being right and being honest with us, all those sorts of good things. But in terms of the way they run the business, they've got to run it the way they see fit. In terms of home, beauty, sports versus clothing. The only thing I can say meaningful on that is that we have seen the home business now stabilize. So I think for the last 18 months, if you're seeing home moving backwards and so if it's taken a long time to recover from the bubble, the COVID bubble. That does seem to be normalizing now. So I'm more hopeful on home looking forward. I think the other thing about home, just while we're on it, I think it's an area where partly because they have -- it's been such a tough time for them. They have been much more adventurous about the breadth of offer that they're offering customers. I think if you go and have a look, browsed through some of the products that we're selling, I think you might be pleasantly surprised, maybe not.

Sreedhar Mahamkali from UBS. Just a follow-up on what Georgina's question was around pricing, please. You say in the release, the like-for-like pricing is only referring to about 30% of sales and you referred to strengthening mid and upper end price points. I know you don't necessarily talk about ASPs, but just curious how that evolves this year, next year. That's the first one.

Yes. No, good. I'll just answer it and then let you ask yourself. The ASP and the board ASP going forward. Do you have...

Home [indiscernible] about GBP 25 or something like that.

No, the growth. Yes.

The growth. 3% or 4%.

Yes. We're looking at mix and that includes mix between men's and women's and all the effect of mix on price is to take the minus 2% and push it to plus 3%, plus 4%. And so that is really evidence of that shift in consumer preference.

But that's everything. Sales mix, everything.

And then maybe a slightly longer-term picture, picking up on your point about the watershed moment, which you referred to more than once.

Sorry about that.

Yes, interesting one. But look, I think you've also talked about executing the plan. That's what kind of determines the success and things like that. But if you assume strong execution on a 3- to 5-year view, should we be expecting a material kind of step change in the earnings trajectory relative to what you've talked about last 6, 7 years, accept a legal performance kind of thing. How should we think about?

Look, I'm not going to tell you how to think. It's a really big mistake. But -- and I think there are 2 serious points. I think the first is I'll be very disappointed for our compound annual growth over the next 7 years, assuming there are no sort of train crashes on it. But very disappointed if it wasn't higher than the 2.2% underlying profit growth that we experienced over the last 7 years. That would be -- I'd be disappointed by that. In terms of aspirations for growth, I'm acutely aware that there are businesses that give long-term projections. You will have seen from our own ability to project even 1 year ahead, but we often get it wrong. And I think it's very dangerous for us to make grand aspirations for the group as to what top line could be. I think it's very important that, that is done by our investors and they're much clever asset than we are. But I think for us to do it as a mistake because [ to be honest ] if I set a growth target or a number of TP clients, I'll definitely deliver it. Target for overseas growth, no question, we'll delivered. It might not be delivered profitably, but we can definitely deliver top line growth. TP deals can definitely do that and it might even be profitable TP deals. But the risk inherent in those deals might be much bigger than is immediately apparent. So the very active setting, public-facing long-term targets could actually underline the effectiveness of the business. What I can assure you is that each one of these opportunities, we will be growing as fast as we profitably can. But we're not going to set. I'm not going to give you a sense of where that might be in 5 years' time. A, because we don't know, b, because the act of predicting it would potentially manage the business. And on that, one more.

Anubhav Malhotra from Liberum. I just wanted to ask on the outlook for the store portfolio. Now last 5 years, you're probably close, close to 80 mainline stores. And most of the biggest reason given for that has been that you have not been able to achieve appropriate profitability under any conditions for those? And you have renegotiated a lot of those leases, probably costs are coming down. Do you think you're through the worst of that, through the closure parts and now looking to develop portfolio -- sort of portfolio going forward? That's one. And then second, on the credit business. I know you mentioned you don't plan to increase or decline in major proportions. But what do you think about taking the credit business to the total platform brands?

Yes. Very good question. So in terms of total platform, I think our clients are -- our biggest client Reiss is reluctant for us to put NEXT credit on their website. They think that -- so we are developing and trialing a white label credit that will be like fashion pay. Whether that works or not, we don't know, but we will be trialing that. But it is a trial, don't get exciting about it. And then in terms of retail stores, we are -- there are some areas where we're actively looking at new sites. There are some stores that we think were unlikely to reach agreement with landlords on rent. If I look at the sum total of what we expect in the year ahead and opening closures in square footage terms, we're expecting no change. And on that informative, but more prosaic note, I think we'll finish. Thank you very much, everyone.