NEXT plc (NXT) Earnings Call Transcript & Summary

Good morning to everybody, and welcome to the half year results presentation for NEXT. In this brief introduction, I would like to recognize the very good work of our soon-to-be retired CFO, Amanda James. As I previously mentioned in the March results presentation, she made an outstanding contribution to the group. And as expected, in the handover to our current CFO, Jonathan Blanchard, she did a great job. Jonathan is now up and running and already making a great contribution to the group. When I reflect back on my 7 years at NEXT, I do remember the early days when our LABEL business and our overseas business were still very, very small. It was growing but very small. And today, you'll see in the presentation by Simon that these 2 business segments now are quite significant and making a big contribution to the group. And I think one of the real strong points of NEXT management is the fact that they're able to identify winners early on, put capital and management focus behind those winners and over time, these small little pearls become big contributors. Anyway, that's how it works in most cases. So with no further ado, over to Simon.

Thank you, Chairman. Good morning, everybody. Welcome. Right, first of all, group sales were up 8%. Quick spoiler alert for the whole presentation, if you want the sound bite, the beat in the first half was all down to overperformance in the overseas business. The U.K. business performed pretty much as we expected. Lots of things going on with costs and profits and rest of it. But basically, that's the key thing there. And then in terms of the upgrade we've issued today, that is all about the strength of the sales we've had in September. And I think what that does is it's not so much that we're looking at those numbers, think they're going to go on forever. They're not obviously. It's that all through June and July, we were thinking, well, is this weather or is it something else. And then September came along and answered that question very clearly, and we'll look at some graphs later on to explain that. So total trading sales up 3.7%. And when we say trading sales, we're excluding subsidiaries, so we're excluding non-trade items here. Full price sales up 4.4%. In terms of how that panned out between online and retail, online up 8.4%, retail down 2.6%. Like for like is down 2.2%, a few closures beginning to erode sales in the first half. We expect that effect to lessen as we go into next year. Indeed, next year, we may see small growth in space. Operating profit after lease expense up 7.1%. Profit before tax before -- after interest, the same. Interest now, a relatively low number for the group. This is as we're beginning to wind down our debt levels in preparation for the refinancing of a GBP 250 million bond in August next year. And profit after tax with a tax increase coming in at 5.2%, that is the tail end of the move from 21% to 25%. That effect will have worked its way through the system by the time we get to the end of this year. Earnings per share enhanced by buybacks at the back end of last June and some this year. Interim dividend, up 13.6%. This isn't because we're planning to distribute more cash from the business. It's because, at this point last year, we didn't anticipate any growth in our profits. So we held the interim dividend. This year because we grew profits last year and grow -- are planning to grow profits this year, you've got sort of 2 years growth in the interim dividend. You won't see the same thing in the final dividend. In terms of our ordinary dividend, we will still maintain that at around 35% of profit. In terms of cash flow, one thing I should say on cash flow and balance sheet, in order not to have to untangle lots of tangled numbers, these will both be shown on a consolidated basis. All of the other figures we talk about in this presentation, when we're talking about sales, we will include our percentage of our subsidiaries' sales. If we own 30%, we'll show 30% of their sales and the same with their profits. Here, in terms of assets, liabilities, if we own more than 51% and have control of the company, we will consolidate the whole company. Depreciation, small increase here, GBP 10 million. Of that, half is as a result of consolidation, subsidiaries depreciation. The other GBP 5 million is about software. And that's, as we've ramped up expenditure on CapEx on software over the last few years, that's beginning to hit the P&L now. Our capital expenditure down GBP 10 million as we -- pretty much as we expected. In terms of how that's made up between stores, technology and warehousing, you can see pretty much an even split. And just to reemphasize that we've now come off the peak in CapEx that we experienced 3, 4, 5 years ago in order to get our new Elmsall Way automated warehouse up and running. In terms of how the CapEx bill is looking this year versus our expectations at the beginning of the year, it is down by GBP 4 million, but there are a number of different things going on. First of all, we're investing more in stores. And that's because we've begun to look at some quite big relocation projects, which we'll begin to pay for this year. And then the software CapEx has come down significantly. At the beginning of the year, I mentioned that one of the costs that we felt we needed to get control of is our technology costs. We've done a huge amount of work on that, and that's reflected both in the P&L charge and the CapEx bill. In terms of working capital, a big increase here, stock at GBP 113 million. Staff incentives, this is all about last year's bonus that is paid this year. The head office bonus is paid in the current year but is in respect of last year. Last year, we had -- the previous year, we had a much smaller bonus, so that's just a swing in cash there. We're going to talk a lot more about stock later. So surplus cash, mainly as a result of that swing in working capital down GBP 151 million. Full year surplus cash, we're expecting the stock effects to work their way through the system. So we're not -- we're expecting a much smaller drain from working capital on surplus cash in the full year. So net cash flow, down GBP 18 million in the half. Moving on to the balance sheet. Big increase in investments. This is all down to the investment that we made in Reiss and FatFace. And just to remind you, last year, even though we owned a big slug of Reiss, we wouldn't have consolidated because we didn't have control. This year, we do. So we go from nothing on our balance sheet to everything. It's not just the percentage that we bought. In terms of stock, big increase here, GBP 100 million of that is down to the stock that we brought on to our balance sheet. The rest is in the brand. And I think that needs a lot more explanation. The key thing here is the issue about Suez. So we've got about 2.5 weeks cover more in the business today than we did in July, than we did the previous year. That's because when ships started to be diverted from Suez around the cape, it takes around 2 weeks longer for the ships to get here. So we ordered stock 2 weeks earlier. The stock goes on to our balance sheet at the point of embarkation. We don't necessarily pay for that point. We pay for it in arrears, but it goes on to our balance sheet then. And so that's what's causing the majority of the increase in our stock. And if we just look at the difference between the in-transit stock up 32% and the warehouse stock, which is up just 10%, that gives you a sense of where the stock increase has come from. I think the 10% still looks a little bit aggressive given our sales target, so 2.5%, 3% and I think that we definitely did 2 things. The first is we overestimated the additional time it would take stock to get around the cape. So we built in a buffer and that's contributed to some of that. And we got a little bit -- some of our merchandise teams got a little bit overexuberant about their ability to meet their targets sort of at the front end of the year when things were -- before the sort of effect of the summer and really came home on to roost. As it happens, that, what could be termed a mistake, turned out to be actually quite a good fortune because since that time, obviously, we had disruption, political disruption and floods in Bangladesh which has interrupted our stock supply. So actually quite grateful for that mistake at the moment, and we think that we're going to be okay for stock in the second half. In terms of where we expect to end the year, the in-transit increases begin to diminish as the effect of Suez annualizes. And so we expect to end the year with around 5% more stock in the warehouse than we did at the beginning, more in line with sales growth. In terms of receivables, the thing that's worth pointing out here is that there is a slight mismatch. You would expect our customer receivables to pretty much move in line with the growth in credit sales. They haven't. The biggest element there is the release of a GBP 10 million provision which goes on to the receivables, so boosts that up. In terms of other debtors, some balance sheet effects from Reiss and FatFace. And the other important thing to point here -- out here is the GBP 27 million increase in the amount that is owed to us by our aggregation partners overseas. Two things going on here. Obviously, most of that business is on commission. So they sell the stock. And then a few weeks later, they pay us the proceeds of sale less their commission. That gap between sale being taken and the payment of the money to us is a debt, and that has gone up as a result of the growth in our aggregator business, a, and b, because with one of our aggregators, they moved us from a special new start of favorable terms on to their standard terms. But the majority of the increase comes from the growth in business. Again, some FatFace and Reiss effects on the creditors and, of course, an increase in stock there as well. Pension surplus down a lot. This is all about the fact that we are taking the pension liability by defined benefit scheme off our balance sheet and transferring it to an insurance company. The technicalities of that are fascinating and I would love to go into all the details. And for those who are interested, sadly don't have time. I don't really understand; but for those who do have time afterwards, Jonathan will be very happy to give you chapter and verse on exactly the machinations of that. In essence, the way it appears to me is we kind of spent our surplus derisking the pension fund. And that GBP 38 million surplus, we will expect to come off the balance sheet by the time the process is complete in 1 or 2 years. Net debt up GBP 12 million. Just in terms of what we expect for the net debt for the full year, we started at GBP 700 million, currently forecasting GBP 812 million operational cash inflow, GBP 161 million of CapEx, ordinary dividends, maintaining them at 35% of our expected profit, comes down at GBP 259 million, and then investments and buybacks, returns to shareholders of GBP 317 million. In terms of where we are at with that, we've spent GBP 11 million on investments. The lion's share of that actually has acquired a little bit more of Reiss in the first half of this year. Buybacks to date are GBP 151 million. And that gives us a question over why only GBP 11 million because surely, having done big growth in profits this year as a result of TP, we're going to deliver those every year like as clockwork is what is expected by our investors that we just do the same number of deals every year. That's not going to happen. We're going to be very disciplined about this. And so I think we -- I don't want our investors to expect a smooth flow of total platform deals. The deal flow is going to be lumpy. It's going to be lumpy because we're not going to buy businesses that don't match our criteria. And just to remind you of those, the businesses have to be what we consider to be a great brand. They have to have great management in place or we have to have in mind the management we will put in. And in general, that won't be people from NEXT because if we didn't need them at NEXT, they wouldn't be there. So it's not a straightforward criteria. We've got to be able to add value through Total Platform. There's no point in us just being another private equity purchaser of retail assets. We've got to be able to feel that we can add something to the business and it's got to be the right price. And so far this year, we haven't had any deals that have matched that criteria. And I thought I'd just give you a quick sort of flavor of the sort of the reasons why. These are the biggest 10 deals that we've looked at. Three of them ticked all the boxes, but ultimately, either we couldn't agree a price or somebody else paid more. Three -- 2 failed on both adding value and price. I suppose if you can't add the value, the price is always going to be wrong. So it's a bit of a tautology. And then 5 just failed because on closer inspection, there were multiple things that we didn't like about the business. I think -- what I think the important thing to stress here is just because we don't have any deals -- big deals planned for this year doesn't mean that we don't intend to grow that business. We absolutely do. But we're not going to do so in a way that would ultimately increase risk and damage the profitability of the business. In terms of the remaining cash, so unlikely that, that will be spent on investments. It is not impossible. We've got a committed buyback, a program with our brokers. And the balance is GBP 47 million. The share price at the moment is hovering around the limits of what we're prepared to pay in -- for buybacks. I just wanted to reemphasize that if we don't spend the money on buybacks, we will return the money to shareholders via special dividends. That gets us to GBP 625 million of debt at the year-end. So we could have distributed -- just to keep the debt the same, let alone the leverage the same, we could have distributed another GBP 75 million. We're not going to because we have this GBP 250 million bond to finance next year. Our headroom at the moment at peak is GBP 400 million, which is more than enough. If we look forward to next year, if we don't refinance the bond, we'll still have a GBP 200 million headroom. And that's really only for 2, 3 weeks. So we still got very good headroom. And the reason we're doing this isn't because we don't want to finance -- refinance the bond. At some point, we definitely will. It's we don't want to be in a position where we have to while the price of corporate bonds is still volatile. So net assets up GBP 376 million, which is pretty much the increase as a result of taking Reiss and various others onto our balance sheet. So moving on to the Retail business. Total sales down 2.1%, 2.6% full price and like for like is down 2.2%. At this point last year, rather foolishly I think, I said, oh, positive like for likes, you don't say that very often and here we are again. Just to give you some reassurance on this, in the first quarter, retail sales were flat. And all of the loss came with the weather. And the weather definitely affected -- the change in the weather -- or the benefit of the weather 2 years ago was definitely greater in the stores than it was online. And then that effect reversed out in the second quarter. As it stands at the moment, our expectations for retail in the second half is to be flat. Operating profit down 3.2%. So some erosion of margin, 0.1% erosion of margin. And actually, that 0.1% is flattering and you'll see why in a moment. So bought-in gross margin was up 0.1%, a slight improvement in bought-in gross margin. Markdown, a big adverse movement here. There are 2 things going on. We did have more stock in the business for sale this year than last year in the summer, and that is the result of the previous year being so good. So it wasn't that this year's number was exceptionally high. It was the previous year's was exceptionally low. And at the beginning -- sorry, in the run-up to the sale, we rebalanced the stock between online and retail. This year, we put more stock into retail. So its share of the markdown, stock went up by 20%. The online business increase was only around 9%. And we had lower clearance rates. So achieved gross margin down 0.9%. Warehouse and distribution flat. I think that's worth calling out because there are 2 things. Going on, inflationary increases in wages have been paid for, in essence, by the beginnings of automation beginning to pay for itself, payroll down 0.9%. Over the last 6 or 7 years, we have managed in many years to mitigate the effects of rising wages, particularly national living wage. We've managed to mitigate that through efficiency measures. We think that, that pot has pretty much run dry now and that we -- that if the national living wage continues to rise faster than sales, we will continue to see margin erosion in retail. Store occupancy cost is swinging the other way. But 2 big items here, which are sort of one-off in nature: rates refunds and lower energy costs. We haven't forecast for the rates refund in the second half. So we're expecting greater erosion of margin in the second half than in the first. Central costs, this is all about the staff incentives, so overall margin down 0.1%. But what you can see, because of the sort of one-off effects of the central costs and store occupancy, the underlying erosion in margin in retail is slightly worse than it looks here. In terms of the -- worth looking at the full year picture. If full price sales for the full year are down 1.2%, and I mentioned earlier, that would involve us being flat for the rest of the year, then we're expecting margins to be around -- down around 0.5% in the full year, but still more than -- still net margins of more than 10% in retail. In terms of what's happening to rents. For the last few years, we've announced rent reviews. So rent on renewals coming down by around 16% when we've renewed leases at the term of lease. Either we've renewed it at a lower rent or would not or we've closed the shop. That figure has been running at sort of 25% to 35% for the last 4, 5 years. That number is beginning to come down. And what's happening here is we're beginning to lap the early lease renewals sort of front end of COVID. So if we divide those lease renewals into 2 different types, those stores where we have the -- where the lease had not been renewed since 2018, those ones were down 29%, in line with our recent history. The ones that have been renewed since then, we're seeing very modest reduction. And in some cases -- in fact, in lots of cases, and particularly some of the cheaper retail parks, we're seeing rents holding steady. So I think as time goes on, we will work our way through this sort of step change in retail rents and the effect of that will become less and less beneficial as time moves on. In terms of -- moving on to the Online business, happier picture here. Sales up 7%. Full price sales up 8.4%. In terms of how that breaks down between the U.K. and overseas, 3.3% in the U.K., 22.8% overseas, which was much more than we were expecting. In terms of the U.K. business, 2.2% of that growth came from NEXT-branded stock, 4.8% from LABEL, which is basically all the other brands we sell, whether we own them or not. Overseas, very good growth in our direct business, much more than we expected at 15%, but really astonishing growth from aggregators. The exciting thing for us about that is that virtually without exception, in all the countries where we're growing strongly with aggregators, we're also growing our own online direct business. So a lot of that business appears to be incremental. In terms of customer base, 8% increase in the overall customer base. Overseas up 18%. That figure is a little bit misleading because, obviously, it doesn't include the aggregator customers. That's just the direct customers. In terms of sales per customer, as you'd expect, where we're getting very strong growth, 18%, 9%, you would expect some erosion in the sales per customer. The new customers spend less than the base. So if you're taking on many more new, then you're losing. You're going to get some erosion in average spend. We cannot use that excuse for credit. We think that's partly as a -- the biggest single factor there, we think, is furniture. So operating profit up 7.6%, gives us a slight increase in margin. In terms of how that breaks down, bought-in gross margin up 0.4%; the underlying margin, same as retail. The big difference is that overseas, we put our prices up in some of the territories where we felt our product was much more competitive than it is in the U.K. relative to its competitors. And we did that for 2 reasons. One is we thought it was the right thing to do. But secondly, because it funded an increase in marketing. So there's a gain here, but you'll see that there's a cost that appears down -- further down the P&L that sort of uses that gain. In terms of markdown, not nearly as big an effect here, as I mentioned earlier, a 9% increase in sales, so 9% increase in sales stock, but underlying like for like -- underlying full price sales are up 8%, so not much erosion from margin. The number is slightly flattered by the fact -- by timing of dispatches of the sales stock because the sale comes around the end of the half. If we don't dispatch the stock, it doesn't count as sales. So some of the low-margin sales will fall into this half rather than first half, and that is flattered margin by about 0.2%. Warehouse and distribution, lots going on here. So overall, a slight erosion margin, 0.4% as a result of wage inflation; Middle East hub, 0.1% erosion. And in case you're wondering, well, if the Middle East hub is eroding margin, why'd have you done it, the big benefits of the hub are all about service and speed to market rather than cost. Delivery and returns charging up 0.3%. There was a glitch in our system, which meant we weren't charging some of customers who we should have been charging for returns from home. We weren't. So that was the main benefit there. And we've got some productivity gains from the new warehouse. In terms of marketing, a big increase in cost here. Most of that is coming from overseas. In terms of the cost, it's GBP 22 million more in the first half. We think to stress here is that we are very, very strict about making sure that our marketing pays for itself and our criteria are that if we spend GBP 1 on any 1 campaign, we expect that campaign on average to have paid for itself 1.5x within 18 months. So we expect a profit of GBP 1.50 for every pound we spend, a 50% return. You might think, oh, that sounds way too high. Why don't you -- here, the 50% is way too high. There is an argument to that. Our nervousness is that the measuring of this -- of the returns and which sales are and aren't incremental and which ones come from advertising and which don't, isn't quite an exact science. We want to give ourselves a lot of room for leeway here because they come -- a lot of the information we get comes from the marketing agencies that sell us the advertising space. In terms of the breakdown of that GBP 22 million, GBP 10 million from the U.K., GBP 12 million from overseas. A fair question would be, well, hold on a second, GBP 10 million more expenditure in the U.K., if it's really delivering the GBP 1.50 you say, then you can look at the sales and go, well, that means much of all that sales growth is coming from marketing. That can't be right. And that will be -- that is true. And I think there's one very important point we need to stress here, and that is the world is changing in terms of online retail. What these numbers show is the volume of sales, so the net sales we get from natural search, these are the people who type in, "I want a nice pair of black boots," and then go to scroll through all the adverts and click on the one that has a link that isn't paid for. That number -- as the number of adverts increase and amount of Google shopping and all the other search engines increase the amount of -- that the customers see of paid ads, that's diminishing, and we expect that to continue. And we think that is just a fact of life. And then going forward, marketing will necessarily increase as a percentage of cost for us and indeed most online retailers. It is mainly a negative, but the flip side of that is it definitely plays to the aggregators versus mono-brand sites in that if you have -- the more stock you have on your site, the higher average basket value. And if you got a bigger average basket size, then you're more likely to be able to pay for the advert that someone selling one brand is competing for. Technology, flat. Again, drawing attention to this because it is flat. I think that's the first time we've said that in the last 5 years. So that cost center now under control. And we have broken the back of the modernization program now, software modernization program. We've kind of -- we haven't finished it. We still got finance to do it. It's a very big job, but we've done more than we've got yet -- there's more in the past than there is in the future, and we're beginning to get the benefits of modernized software flowing through into our development as time moves on. So we wouldn't expect this cost to go up as a percentage of sales going forward, although you never know with technology. Central costs, again, that's about staff incentives, so overall margin movement of 0.1%. Looking forward to the margin for the full year, expected margin for the full year, if our full price sales for the full year, up 7.2% full price, we would expect margins to move forward by around 0.5%. In terms of how that breaks down between the different strands of our business. In terms of NEXT brand, we're expecting pretty much the same profitability from the NEXT brand in the U.K. this year and last year. In terms of LABEL, and this is where we're selling third-party brands, 2 things going on here. First of all, last year, we did a lot of work to eliminate unprofitable brands and unprofitable items. And that basically comes down to low ticket price, high returning items whose distribution costs are disproportionately high relative to the sales. The second thing is on some of our wholly owned brands about which I'm going to talk later, we have been a little bit more aggressive with their margins to make sure that they're achieving the sort of -- closer to the sort of margins that NEXT achieve and that's pushed -- that's the lion's share of that increase. Overseas, we've seen an increase in margin, and this is basically the fact that -- although we have spent more on marketing, that effect has been more than swallowed by the growth in the leverage over our overheads. Sorry, actually one thing on that. The other big thing, of course, is price because we put our prices up. We're paying for a lot of that marketing. Different cuts of the numbers. We were concerned that the way we break the business down was kind of hiding how the NEXT brand was doing in the U.K. And we think that, that is an important barometer for us and our shareholders to look at. So we've broken the business down, lumping the NEXT -- all of the business that we do in the U.K. together, retail and online. And what that shows is that as expected, the U.K. is up about 1%. Overseas up 22.8%. If you break down that 1%, NEXT brand in the U.K. was down 0.9% across both channels. And you could look at that and think that, that is a worry. And it is a worry. It's not as big a worry as it looks. So my objective here is to worry you unnecessarily and then tell you everything is okay. But I also want you to know that within those numbers, whilst it is okay, there are things we still -- there are still parts of the brand we think can be improved, and I'll be talking a little bit about that later. What this shows is the cumulative sales for NEXT brand only in the U.K. So you can see in May, NEXT brand was up, looked fine. And it was the NEXT brand particular retail business that was hit hardest by the change in weather. So you look at that, and obviously, despondency and gloom that extend that number forever and say that NEXT brand is dead or you could look at around month-by-month basis and look at the last 6 weeks and go, no, no, the NEXT brand is alive and kicking. It's going to be growing at these sorts of rates forever. The truth is obviously somewhere in between. We -- in our minds, we think there is the opportunity for modest growth for the NEXT brand in the U.K. We think it's a well-established business with 9% market share. Obviously, opportunities for big percentage growth are limited. But we don't think it is [ ex ] growth in the U.K. And we don't think that what we have experienced in the second quarter is indicative of the future of the NEXT brand, and we're expecting it to be up in the second half in the U.K. across retail and online. I should just say, if you're wondering about that 5.9% figure and think, hold on a second, that's not the number in their report, they said 6.9%, that includes overseas and brands. And what you can see is the volatility that we're not adding anything like to our total growth to the last 6 weeks, what we have done in the first 6 weeks. And it shows how the volatility of the U.K. business is being dampened by the resilience that our overseas and LABEL business gives us. So that 0.9% in the U.K. If you add LABEL in and all the other brands we're selling goes to 1%; and if you add the Overseas business in, it goes to 4.4%. And even in June, where our U.K. sales were down significantly on our own brand, total business didn't experience negative growth as a result of Overseas and LABEL. Cutting the numbers a slightly different way. When you look at the -- this is what we call our established business, highly cash generative, love it, modest growth but not going to give us dramatic growth. That accounts about 58% of the business. If you break down the rest of the sort of growth in [ e-commerce ] businesses, overseas, 15%. This is of our total sales, expected sales for the full year, 15% overseas, 17% from LABEL. In terms of LABEL, that breaks down into 2 categories: the brands we don't own or where we don't own the stock, we're selling other people's stock or third-party brands, wholesale and commission; and what we've called WOB here. Please you're going to have to get used to this acronym. We have become accustomed to it. WOB is wholly owned brands and licenses, wholly owned brands. And we were going to call it WOBL, but then we just thought that actually is too silly. So WOB and licenses. We think those are the growth opportunities. And obviously, on top of that, we've got Total Platform as well. So the group sort of -- more than half of the business is established, but quite a bigger-than-expected part of the business is potentially growth. In terms of the business, you know I think actually where the lion's share of NEXT business is its online platform, so NEXT and other brands. And we've been doing a lot of thinking about what it is that makes a great online fashion platform. And I think the important thing that we keep reminding ourselves of is that this is uncharted territory. 20 years ago, there really weren't any online fashion platforms. And this is a new industry. And we think we have a lot to learn from our own experience and experience of our competitors that we're trading with overseas, but also from other industries, and in particular, the industry that we have sort of fallen back on as an analogy and an inspiration for more and more is the streaming -- entertainment streaming, partly because of the endless conversations that we waste discussing which are the better of the streaming services and which ones we're going to call after the summer holidays where magically our subscriptions seem to increase without us actually having pressed the button. I suspect, in my case, it was something through my kids. We've been asking -- if you ask the question, what is it that makes a great streaming platform, what is it that makes you go there, stay there, it really comes down to 4 things: content, the games they show, the films they have; recommendations; is it easy to use; and reliability. And of those 4, we think, by far, the most important is content. And for us, our content is the product we sell. And of that product, by far the most important, as with streaming services, the only reason you go and get -- I'm not sure I'm allowed to mention an individual, but the one that shows slow horses. The only reason I got that subscription was because my friends kept telling me it was the best television that had been shown for 10 years. And I believe them and they were right, just in case you haven't seen it. But that's where you go. You go there for that stuff that you can't get elsewhere. And for us, the vast majority of our original content is our brand. Now I spoke at length about the NEXT brand last time, and I wouldn't want you to think that because I'm not speaking at length about it today that somehow it's diminished in importance. It remains the heart and soul of the business. And everything that we can do to move it forward will make a big difference. But what I would reemphasize is that the points we drew out, which I know are indelibly imprinted on your mind, the points we draw at 6 months ago about the key things that we were looking for in our ranges that made the difference between success and failure are newness, choice, the numbers of different types of customers that we're serving and quality. And the parts of our business that have fulfilled all 3 of those criteria, that have delivered genuinely new ranges, have taken risks on new fashion, new trends, offer genuine breadth of choice and have improved their quality, not just at the sort of top end of the price architecture, although that is where we have been focusing a lot of our time, but also entry level. The ones that have fulfilled that function have done brilliantly and those that haven't, haven't done so well. And the interesting thing for us now is as an owner of other businesses is that we can see exactly the same things in the business we're in, exactly the same things that are important. But there are some customers that the NEXT brand doesn't speak to or some functions and events that NEXT customers actually wouldn't turn to next fall. And to fill this gap, we've started to develop wholly owned brands and licenses. And I think whilst this is a small business, we think that this is quite exciting. And we are beginning to see the business as being a content creation business. The product side of our business is all about creating content. And we think we can use the skills that we have as a content creation business to create different types of content through different brands and licenses. Just to sort of emphasize, the growth of that business has more than quadrupled in the last 5 years. And GBP 250 million, GBP 235 million, let's say, now a meaningful -- it's making a meaningful contribution to our profits. It's about applying our design, our sourcing skills and our buying skills, merchandising skills to other brands. The wholly owned brands, our non-licensed business account for around 75%, 80% of that. There 2 categories here, the brands that we started, Love & Roses, The Set; and brands that we bought, like MADE and Cath Kidston. And again, just to stress, the way we manage those businesses is as independent brands. They have their own profit and loss. They have their own P&L accounts, own management team, different designers, different sourcing base, different quality standards. They are not another label bought by the NEXT dress buyer or the NEXT jumper. We think that's very important. Over and above that, we then have the brands that we don't own but where we use our sourcing and buying skills. And this is where we've got special skill, things like swimwear, children's wear, in particular, where the investment that brands would need to make in order to have those types of ranges would be enormous. We couldn't marry our quality assurance, fabric sourcing base with their design skills to give something that neither of us could deliver on our own. And that business is growing very rapidly as well. Incidentally, Rockett St George, which is here is a -- as a third-party license, we have just bought a stake in, I think, yesterday evening, just in time for me to be able to say that it's right, isn't it, [indiscernible]. Finally, third-party brands. These are -- I think these are the sort of brands that you've got to have, and to sort of fall back on the streaming analogy, this is the sort of thing that, yes, it's not original content, but when you go on to your streaming service, you just expect them to have the original Karate Kid 1. And if they haven't got it, it's deeply disappointing. It's a random example. To that, we're very happy with the brands, the selection we've got now. We still think we can increase brands. Last year, we -- the sales reduced, and this was all about the work we did to improve profitability. This year, the business has returned to growth. So weeding out of that unprofitable business, whilst it improved profit, obviously, diminished sales. We're now focusing our time on 2 things. First of all, we are focusing on getting the best selection of and properly stocking the brands that do really well for us. So it's a return to sort of focus on our -- the power brands. The second thing we're looking at doing is pushing the number of brands we stock, particularly with a particular emphasis on premium brands. Again, this is going to start as a small business, so don't get all excited about this, and we're not about to build matches or something. This is not -- this is -- what this is doing is it's leveraging our experience that we had with Reiss. Both the people at NEXT and the people at Reiss have been surprised, is probably too weak a word, by the amount of their product we've sold on our website. And what we've realized is because we sell so many different products, children's wear, for example, where customers aren't necessarily buying our outwear, we haven't realized how many customers we've got within our customer base that are interested in more premium product than we currently sell on our website. What we're looking to do is leverage that. Within the next 2 months, we'll launch a subsite called SEASONS. And this will carry the sort of brands that you can see and read here on the screen and the fashion aware amongst you will both instantly be excited by the brands that you see there. The -- we think this is an important step for NEXT, albeit we're expecting very small money to start with. As with all of our big new ideas, they start as very small ideas, may be successful, may not. I think the thing to stress here is that -- and the brands are very anxious about this, is that it will be a subsite. You won't see those brands listed alongside NEXT brand when you do a search. Just do a search for jeans. You won't see this brand. You have to either search for them or go into the SEASONS part of the website. So it will feel like a different environment for these brands. So what you -- when you stand back from it all, you realize that NEXT is pushing, both within its own brands and the other brands that it owns and the licenses and third-party brands, the breadth of choice we offer our customer. And that is a good thing. Our general experience is more choice equals more sales, but obviously, it poses the challenge of how do we marry the right product with the right customer. And I think the same thing I'd like I stress here is that we haven't got the answers. We have done a number of trials. We have done personalization trials and they have been, to a limited extent, successful, particularly in things like if you see this item, you are likely to buy that item. We'll be launching a new search algorithm in October which we think represents an advance. We will be personalizing more of our search listings, which means that different customers will see different results in search listing. Not every customer will see a different one because then the site would fall over. So you've got divide them into quite big buckets, but -- and we're personalizing our search listing. And we're doing personalized product placements. And these will work and do work at the moment like ads. They won't look like ads and our client brands won't pay for them, but these, in effect, are using ad technology to target a picture on the website, the part of the website you're looking at, maybe it's the exit page, maybe it's the checkout basket, with a picture of an item that we think you will like, so sort of on-site advertising, but not paid for. Now no business presentation -- whether you're in the ball-bearing industry, shipping, no business presentation over last year would be complete without the mention of AI. So there we are. I've mentioned it. Obviously, AI is playing a big part in the development of this. But the way it feels to me is that we've produced a lot of very exciting results in trial format. And if it was a drug, we'd say, look, it's passed all of its trials. It definitely does the job, but we've yet to mass produce it. We've really yet to use personalization on industrial scale across the whole site. We don't yet know whether we can or not, but that is a key objective for the business over the next year. And then the final thing, just to stretch the analogy way too far with streaming is obviously, if the thing starts buffering just before you get to the denouement of slow horses, for example, it's very, very frustrating. For us, this is all about off-line service, physical delivery and to that extent, our new automated warehouse represents a big step forward. Some exciting news here for your diaries that we will be doing a highly select tour of our warehouse in February year ahead. So February is known to be a very dull month. That's now something to look forward to in February, investor and analyst call in terms of how we're doing. The aim is for 50% of our production on boxed to go through the automation. In terms of where we've got to on that, picking, we aim -- we're past that objection now. So in terms of the actual picking of the stock, more than half of it is now being done from the automation in that site. In terms of packing, the packing is still being done using our old sortation system. The packing will begin to go live as we move through October, and then we aim to ramp that up and our secret target is to hit 50% by the end of the year, but we didn't dare put that in a public presentation. So we hope to be close to our target by the end of the financial year in terms of packing. In terms of where that leaves us, so as it stands today, Elmsall Way has solved our capacity problems. And we don't have capacity constraints on the growth of our online business at the moment. It's already started to reduce costs. But in terms of accuracy and reliability, although the accuracy and reliability that we're getting today is much, much better than it was 2.5, 3 years ago, it will only be once we get the full packing service up and running that we really get the benefits of more accurate, faster and reliable deliveries to our customers. So that really is for next year. In terms of cost, this was the estimate we gave you of the net effect, the sort of increase in occupancy costs versus productivity savings, both in Elmsall 3 and the other productivity saving ideas we've got across the group. That's what we said in March. We're doing slightly better than that. We're probably going to get GBP 6 million more savings from the mechanization this year than we were expecting. Most of that comes out of next year or doesn't appear in next year. But we think overall, there's probably at least GBP 1.5 million more savings in it than we originally expected. Moving on to overseas, which is the -- and obviously, I want to talk about overseas at this point so that you'd listen first, as this is a bit, I think, people are more excited about because it's the biggest number at the moment, our biggest growth number. And it is quite exciting. Our compound annual growth over the last 4, 5 years is 12%, and we're seeing a big inflection this year. And that is all the more surprising because we're also, over the last 2 years, we've had a sharp recovery in margin and normally, you'd expect recovery margins to go hand in hand with a flat or declining sales rather than growing sales. I think they're down to 3 -- we think -- people say why now. And we haven't -- again, we don't really know. We didn't predict this, but there are 3 things we think are making a difference and we can see making a difference. The first is more speculative. And that is convergence. We think that tastes -- international clothing tastes are beginning to converge more rapidly than they have done in the past. It's going at different speeds in different parts of the world. So Northern Europe, we think is converging much more rapidly with the U.K. fashion than Southern Europe or areas further afield. But we definitely sense that, that -- 20 years ago, I think there was a real sense that people in different countries have very different styles. And we all had our various stereotypes of how people dressed in different countries. And sort of people were summing up images of what people in other countries wore. And we think those stereotypes are becoming less and less true, partly because of the ubiquity and globalization of entertainment. But if you're all watching the same films, if you're all watching Modern Family, then suddenly, Cam's shirts with the rolled-up sleeves look that much more acceptable than they would if you weren't seeing them every other day. In terms of marketing, we have spent -- we are spending a lot more on marketing. This is what we spent in the last 4 years, both in terms of amount of money and numbers of countries, countries that we're advertising in. This year, we'll be almost double in number. And that is because we -- having pushed prices a little bit higher, we're able to afford the marketing that previously wasn't in our margin. And secondly, we are getting better at doing the advertising, we are getting better returns, better technology at targeting people overseas. And that -- the vast majority of that increase comes in the 22 countries that we're advertising in last year. But having seen the success we're getting in those countries, we're now going back to countries where we haven't been successful in marketing before and started to readvertise and that is, again, giving good -- we're getting good returns from that at the moment. And finally, aggregators. Aggregators this year will take -- we think will take around 32%, nearly 1/3 of our overseas business. People like Zalando, Otto, much smaller numbers from people like Myntra and ZALORA in the Far East. And in terms of our growth, if you look at the growth we're getting, around -- just over half the growth we're getting in our Overseas business is coming from aggregators rather than our own site. In terms of territories, 90% of our business is still short haul. And this is the issue that we discussed 6 months ago about the fact that we really weren't getting any traction in the areas that were further afield. And there, we felt actually going direct wasn't going to give us anything like the returns we can get in Europe and the Middle East, where we can get the stock from the U.K. to the customer much faster or we've got our own operations. We've now got our own operations in the Middle East and in Germany. In terms of the growth by area, that is slightly more encouraging than it was 6 months ago. So we are now -- the numbers are tiny, but we are at least getting growth in these long-haul countries. And you see the 67% in America, which is a very big percentage of a very small number, but that's all being driven by our partnership with Nordstrom and we plan to launch with another major American retail within the next 2 months. I think the exciting thing here is the potential. And one of the questions that I get in virtually every investor meeting that I do is how big do you think the online business can be. And the answer is we have no idea at all. And so -- and our view is we will be depriving you of the most important part of your job if we guessed on your behalf. But I think what we can say is that in none of the markets that we're doing well, whether we're big or small, other than Ireland, is our market share a constraint on growth. See, in Ireland, we're about 4.1%, and that does include those stores. But you can see elsewhere, we're nowhere near that. Even in the Middle East, where we have a very strong business, only 0.7%. So whether or not we're successful will depend on our execution, on how quickly international fashion markets converge, we can't say. But what we can say is that it doesn't appear to be a natural barrier to us growing overseas. And here, a warning. I think last 20 years, there have been many times where we've delivered great numbers and people gone, woo-hoo, 23% this year, 23% next year, 30% the year after, sort of drawn a straight line between 2 dots. And I think we're going to be very careful about these numbers. Yes, they could be symptomatic of something great, but when those numbers annualize, we may see sales fall back, and that's certainly what we're planning that -- the levels of growth we're seeing at the moment, particularly aggregators, is not sustainable. That was likely to moderate. So just please don't get carried away with this, I think, is the message yet. Wait until we've done it. Standing back from all of that, we now have sort of a very clear picture of the group and what we've got to do. And really, you can sort of think of the group as advancing on 2 fronts. In the United Kingdom, in the sort of management consultant style graphic for which I apologize, but in the United Kingdom, not a lot of opportunity to grow the brand, but big opportunities, we think, in licensed third party and for Total Platform. Overseas, it's all about potential of the NEXT brand. And if the NEXT brand can achieve a fraction of the traction that it has in the U.K. overseas, then we've got a very exciting business. I think the only other thing to mention is that where we have had success overseas and particularly where we're forging relationships with third-party aggregators or department stores, we are also seeing some success on the wholly owned brands that we have. We're leveraging those relationships to push our other products as well. And in the areas where we have our own operations, and really here we talking the Middle East and Germany, there are some brands where we're subject to their being happy with it. Where at third-party brands, we don't own, where we're also beginning to get some traction on third-party brands. So kind of that is the sort of the grand big picture in management consultant style graphic. Back to Earth now and more prosaic stuff, full year guidance for this year. And we're expecting sales to be up 4%, 3.7% in the second half. Before you look and then go, oh, they've undercooked it. Look, they're just -- if you look at that against 2 years ago, so evening out the weather, where there was no weather effect, we are actually expecting stronger growth in the second half than we are in the first. So on 1-year numbers, the numbers look conservative. On the 2-year numbers, they look aggressive. In terms of quarters, we think this quarter -- our experience so far of this quarter is that it will be very good. This time last year, it was boiling hot. After the presentation last year, everyone went out for sunbathe. This year, actually, it's still -- this weekend, you're going to need your umbrella. That wasn't the case this time last year. So we expect quarter 3 to be better than quarter 4. In terms of what that means for profit, our guidance in August 3.4%, says 0.6% improvement since then. Our guidance at the beginning of the year was to grow sales by 2.5%. This was the profit guidance that we gave you at that time. I'm not going to run through each line. I'm just going to run through the differences between the profit guidance we're giving now and the one that we gave in March. So this will include the upgrade from August. In terms of profit from additional sales, GBP 27 million profit from the sale -- the increase in the sales forecast, GBP 12 million from margin. I mean that's where our buyers have overachieved their margin targets through better sourcing and negotiation. And what I should say there is I think when you look at both the likely increase in payroll costs in retail and the likely increase in marketing costs online, I'm not sure we'll be able to give that margin back next year. I think we might have to sort of -- I think we might have to set the level at the level we've achieved this year, our target for next year at the level we've achieved this year rather than what we normally do is give the beat back and start again. In terms of cost base, big increase there is marketing, GBP 15 million more than we expected to spend at the beginning of the year. And I think that's important because you can see how aggressive we've been in chasing the money that we think we're getting from marketing. Few other, staff costs have increased by GBP 4 million. And then in terms of cost savings, from warehousing and logistics and in particular, overseas logistics, we've got about GBP 15 million more savings than we were expecting at the beginning of the year. And that will give us -- if we're able to achieve that will give us profit of GBP 995 million, 8.4% growth on last year. Just so you don't think we're hiding it. Two funnies in there, 2 one-offs, but they balance each other out. We've got a provision -- provisions -- additional provisions that we're taking in subsidiaries. Turns out -- this is fascinating. Turns out that private equity companies aren't as aggressive on their provisioning of things like stock as big public companies might be. But there we go. So we're taking some more provisions in subsidiaries and -- but that has been offset by the release of some of our bad debt provisions. So will give pretax EPS growth of 9.7% once the effect of buybacks are taken into account. And post-tax of the tailwind to the tax increase is -- it's probably -- we're looking at about 8.1% growth in earnings per share this year. And if you look at sort of dividend, if you look at sort of total shareholder return, dividend is around 2.5% of our market cap. So north of -- just north of 10% in terms of total shareholder returns after tax growth. And there we are. That's it. I don't know how long I took. I was hoping to get under an hour, but I don't think I managed. Very nearly, so that was a quick one. We charge extra for that. But the questions are free. Please use your microphones in front of you, unless you're sitting in the front row, which case they are at your side. Richard?

Richard Chamberlain, RBC. Maybe I can just start with a couple on costs if that's all right.

[ When can you start ] with a couple on costs? Just remember, you're going to start asking a couple of questions.

I'll start the session rather than start my streak. Yes. So Simon, maybe this -- you can just give an update on your thinking on sort of ongoing staff costs, if that's all right, store and warehouse in the light of the recent court case and I guess the thinking behind maybe not creating a provision for that outcome. And then the second one is on freight. Should we expect that now to be a tailwind from the second half despite the sort of longer transit times and so on? Will that be now becoming a tailwind for the second half of this year and next year?

Okay. So both of your questions, so first of all, on staff costs, putting aside the equal pay claim that's been made against the company, I think it looks to us likely that the national living wage will continue to rise ahead of inflation. And as I said in the presentation, we don't think -- we think we've kind of got to the bottom of the barrel in terms of productivity improvements. So I think now if -- the faster it rises, the more that will erode retail profitability. Obviously, if the equal pay claim is successful, that will also erode retail profitability. We have written a very detailed one page statement in the statement, and I was told not to wing it and to refer everybody to that because it's a legal case. But if you read that, we're very clear that, one, this is going to be a long process. Two, we believe the tribunal [ ordinary ] law, we will be appealing it. And our legal counsel is very confident of our grounds for appeal. I would encourage you just to read that page or I can read it out to you. The other thing was freight. Just very quickly, tailwind ahead. I think it's too early to say. The freight market is very volatile. And I think if some miracle happened and the Suez Canal opened, then, yes, we'd have a tailwind relatively quickly. We've brought forward most of our freight. So you shouldn't expect any benefit this year one way or the other from freight.

William Woods from Bernstein. The first one is just on Home. Home obviously outperformed in the first half. What's going on there? And then the second one is you're saying that you're not getting the third parties to pay for space on the website. Do you see an opportunity in what is called retail media and getting people to advertise on the platform?

Really good question. So first of all, Home, Home has had a torrid 3 years since COVID when we had this huge boom in homeware and it's still recovering from that plus the sluggish housing market. And we did see a recovery in the first half. And we expect -- we are more positive about Home for the second half than we have been for some time. But just as fashion dis-benefited from the cooler weather, Home really benefited. So actually, we have a very hot summer with the exception of a bit of garden furniture, which is a small percentage. Actually, it's really bad for the Home business. So if -- we nearly showed you this actually. We decided it was going into too much detail. But if you looked at the cumulative sales for Home and cumulative sales of fashion, the first half -- first quarter, fashion was ahead and then they literally just crossed over in the second quarter. And so we think there's a weather benefit. So I think the message there is don't get too excited about Home until you see the housing market moving. On paid for advertising, look, our view at the moment is that it's not the right thing to do. The advertising that we do on site, it's our own product, other people's product, whatever we think the customer most wants. And our view is that the brand, if you like, pays for that through the -- within the commission they pay for us. I think once you -- I'm worried that once we start allowing people to pay for space, our customers will begin to not see what they most want to see, but what most -- the richer store, the brand with the biggest pockets wants them to see. I'm not sure if that's right. So we're not going to do that at the moment.

It's Adam Cochrane from Deutsche. A couple on overseas if I can. In terms of your product design, the sort of the -- increasingly, the fashion being the same across markets, does that mean you don't and don't intend to design product specifically for overseas markets? Is the U.K. product being sold overseas? And then secondly, on the growth in aggregators, would you be able to hazard a guess of whether it's a growth in the number of aggregators that you are selling on, those aggregators taking more of your product or those aggregators putting more of your product into more of their markets?

Yes. So on the aggregator question, which I'll answer first, it's all 3, but I'm not going to give you the proportion. But what I can say is we are getting very good growth on like-for-like product on like-for-like aggregators. But we are also expanding territories with aggregators increasing our product offer with them. But we are -- underlying, we are also seeing like-for-like growth in most aggregation -- in most aggregators in most territories. In terms of design, we don't -- we haven't and aren't designing products specifically for territories. That doesn't mean that it isn't influencing the sort of things that we buy because ultimately, the things that we buy -- our buyers buy are most influenced by the sales that we're taking and the influences that they're getting. So if we start to see certain products selling really well because there's an overseas event, Eid, Diwali or whatever, then our buyers will begin to buy for that just because they're seeing it in their sales number, not because they're thinking I wonder what somebody wants in one part of the territory. So in a way, it's not saying we're doing in any meaningful way at the moment. What is interesting is that where we have done it, the product, if it's successful, has done as well in the U.K. as it's done overseas. The best example of that was where our -- when we had a Russian business, we produced a whole lot of very, very warm children's wear in a, minus 25 coats, and we actually ended up selling them really well, but more than half of them are sold in the U.K.

Warwick Okines from BNP Paribas Exane. Two on the overseas as well, please. The first is could you just talk about the relative performance of kids' versus men's and women's. I think originally, kids' had the most momentum but perhaps more momentum in women's and men's more recently, but just talk about that. And then secondly, the risk is the answer is just a blunt no, but does Total...

You know it's going to be a no.

Yes. Does Total Platform and what those brands are doing and your third-party brands sort of play into the international strategy at all? Are there opportunities to sell third-party brands on the NEXT website? Are you learning from Total Platform companies and what they do internationally?

Yes. It's -- in terms of the product mix, I'm not going to go into product mix performance overseas because I think it's quite commercially sensitive, so it's not something I really want to push into. Broadly children's wear is still our biggest category, but we are getting -- we're now getting traction across the board and most of our -- all of our major product categories, we are getting good growth. In terms of Total Platform, I think where Total Platform has been disruptive is in some of the third-party relationships that our eyes have been opened to and in some cases, forged by having that relationship. I think it was easier to talk to Nordstrom once we owned Reiss. They had an excellent relationship with them than before. All of those brands are already on our own website, and we do sell them overseas. So if you remember the sort of -- that sort of grand chart with the 2 fronts growth, we do expect to grow our wholly owned business overseas and some third-party brands overseas as well. But there, again, I think the trick is there's no point in trying to sell a well-known international brand that has its own business in India, shipping it via -- all the way. So the places where we're most successful selling the brands that we don't own are the territories in which we have our own operations.

It's Georgina Johanan from JPMorgan. Two, please. First of all, just in terms of the retail business, obviously, where you've talked about sort of the ability to hold the margin being a bit less going forward. Is there any thinking on maybe investing in the stores a bit more, sort of refreshes and so on, just how you're thinking about that on a midterm basis, please? And then second one, just a quick one on the current trading. I think just because of what you shared on the U.K. core, it implies that, obviously, the contribution from overseas and LABEL has deteriorated. Perhaps I missed something, but is that just a comp issue? Or is there something else going on weather-wise or whatever?

No, it's just that the U.K. number is by far the biggest in that period, so it's to do with the relative size. I don't think we've seen any easing off of growth overseas. In terms of refreshing stores -- so there are 2 things I'd say. The first is we think maintaining our stores, looking great and being a credit to the brand is really, really important. And whenever we renew leases, we will review the state of the store and go back and invest in it to make sure that it is up to scratch and great representative. So we're a great representative of the brand. And so we are very -- you saw that number spent on stores is increasing. We are acutely conscious that we -- just because our stores are unprofitable, we can't allow them to degrade. That said, if a lease is coming up for review in 2 years' time, we're not going to go and spend GBP 300,000 on it, however much it needs it because it doesn't strengthen your negotiation position. What we won't do and which -- and I think this is a real hiding to nothing is, okay, retail is not doing well. So let's throw a whole load of money at it and refit all the stores in the hope that, that will magically make things better because I'd say that if you look back over the long history of people doing that, it very rarely works.

[ Greg Lawless ]. I am just going to I ask about the consumer outlook. What do you think the consumer will be like this Christmas? And then just in terms of gifting in particular, will there be fewer but higher-quality presents under the Christmas tree?

Yes. So we -- the sort of the first -- that was the first question, I don't know. Our best guess as to the health of the consumer is our sales forecast. And I think I wouldn't want to go beyond that. Other than, if you look at our finance business, there is nothing in the finance business that would suggest the consumer isn't healthy. So our default rates are lower than they've ever been and payment days are lower than last year. People are paying down their debt faster and defaulting less. So we can't see anything to worry about in the consumer base at the moment. In terms of mix, we still think that the exciting parts of our ranges are going to be the mid and upper price points. That's as much to do with fashion and trends as it is to do with consumer expenditure. It doesn't mean customers are going to be spending more money. It just means we think what they do spend on will be fewer, higher-quality things. And that's the trend we've seen for 18 months, and we think will continue.

I just had a couple of questions. The first is just on your credit sales. [indiscernible] based on the growth in the online in U.K. [indiscernible]. And I'm just wondering [indiscernible] in future, and you can consider as an option Overseas. I know in the past, you've talked about having potentially [ a white label ] credit offering that you can make available to the partners in U.K. for instance. And the second question is just on the underlying bought-in margin. So I understand the [ point on the overseas ] bought-in margin, the prices are actually going up to [ that in ] marketing. The underlying bought-in margin went up 10 basis points both in online and retail. I just wondered, is there any specific countries, for instance, offering more competitive pricing in order to gain share? Or is it just more broad based in terms of [ considering ] pricing?

So it's a really good question. So in terms of the second question, are there countries where we think by being more competitive, we could increase sales, and the answer in the vast majority of cases is no. And the reason for that is that if you think about -- pricing isn't a binary thing. It's about marginal pricing. So if you've got 10 million customers who would buy it at GBP 5, if it goes to GBP 6, it's not like it goes to nothing. It goes to sort of GBP 8, GBP 7, would be GBP 5. And the problem we've got in the vast majority of our overseas markets is not the numbers of customers who see the product who can afford it. It's the numbers of customers who see it in the first place because is -- if of those 10 million customers only 0.5 million are seeing it and you pay to double that, it will be better than lowering prices. So that's the view we've taken in almost all countries. There is one country where we've gone the other way, and we've reduced prices by 10%. And in that country, that -- it has worked. But in the vast majority of cases, it's worked the other way around where the -- investing in your customers' ability to see the product in the first place has been more productive than investing and making it great value when they do so. Does that makes sense? And then your credit model of -- look, we can't even do our own models. I'm not going to try and do yours. Very difficult to model it. So I'm not going to help you there. But in terms of credit offers overseas, we -- the reality is credit is one of these businesses that is blessed and cursed by an enormous amount of regulation. So the incumbent is a blessing and the new entrant is a curse. And so there's no way that we're going to go into credit offer -- our own finance credit offer overseas. But that's not to say that we wouldn't and don't offer other payment methods like Klarna and if Klarna have credit, we will offer that in some places. But it will be other people's credit offers rather than our own.

Sreedhar Mahamkali from UBS. A couple of questions then, please. Firstly, I think something you've said, there might even be some space growth in retail next year. How are you thinking about the medium-term view on retail? I think this year, clearly, you're talking to more or less flat. Is this your view now that retail is probably looking like more stable to maybe slight growth in the medium term? Is that how you think about it? That's the first one. Second one, overseas. Clearly, there's lots of margin drivers. You're talking about very deeply underpenetrated markets. On a kind of 3-, 4-year view, it's clearly going to grow faster, but the business gets bigger. As the business gets bigger, should it be more profitable or you kind of look at it and go lots of opportunity we keep going? We keep raising marketing. How should the balance be?

Yes. I mean the answer, we don't know. We're going to feel our way. I think the one thing you can say about our overseas business is that it has very few fixed overheads. And therefore, you shouldn't expect volume to deliver any sort of economies of scale. The only economy of scale might be easy if more people come back of their own accord, and we have to spend less on marketing. I'm not anticipating that for a long time. So I definitely -- and I think where our profitability overseas to move forward of it as a result of volume, we would reinvest that either in more marketing or in better prices. I don't think we need to push the margin. I think the margin that we're making overseas is commensurate with the level of risk in investment we're putting into that business. So I'm not -- I don't -- I'm not looking to push the overall margins of the business at this point in time. And then a medium-term view for retail, we don't -- again, we don't know. And the good thing is that we don't have to guess because we don't have to decide what's going to happen to whole portfolio. We only have to decide on a week-by-week basis what is going to happen in Thurrock or Southend or Aberdeen, where we're looking at a new store. That's the only time we need to take a medium or long-term view. And there, we tend to be taking a 5-year view. And what we normally do when we appraise a new store is that we will assess it on the basis of negative like for likes as a bit of a failsafe. So we'll say, look, will the store make the returns it needs to a 2-year payback, 15% net margin before central costs on a 5-year view, assuming that like-for-like say minus 5. That's how -- that's the only time we really think about what's going to happen in the wider market because the only time that actually makes a difference. And I think on that, [ bom michel ]. We're finished. Great. Thank you very much, everyone.