Pepco Group N.V. (PCO) Earnings Call Transcript & Summary

Good morning again. Welcome to day 2 of our Pepco Capital Markets Day. Hopefully you enjoyed this afternoon and the dinner. Thank you for your attendance. Just first of all, to disclaim, I have no intention of reading that, but I need to do the legal stuff. So I'll assume you've read all that very quickly. You're going to hear from this morning, myself, Neil, our relatively new CFO; Barry, who recently moved from Poundland Pepco, is the MD; Marcin who's our long-standing deals MD; Agnieszka, who is our main Product and Commercial person; and Mark, who's rejoining the company as Transformation Director. As you'll hear from the agenda to the morning. You'll notice there's a coffee break in there somewhere. And so the way the morning will unfold, I'll give an update at a broad level about the things that I feel are important for the company is to address. We then have 3 presentations on the core business, one from Mark on an outside-in view of our competitive positioning. Barry will give you an update on Poundland. Obviously, has moved on from that role so he can [ distribute ] on his successor. And Agnieszka will give us a bit more an update on how our product flow works from product design through the store. And then finally, in terms of the first part of the session, Martin will give an update on deals. Then, there'll be a coffee break. And then the core section of the morning will be Neil giving you an update on modeling how to think about there's lots of data for those of you who data -- and agree that will please you. And then finally, Neil will give us a brief update from the perspective of Ibex in terms of the nonpublic market shareholding and how his future of ownership and sell down. And then we'll have a Q&A at the end. Now look, to be clear, we won't take Q&A at every section of the day because otherwise, we just won't get through stuff. Please respect the fact we will have a very fulsome and open Q&A, but it will come at the end of the morning rather than every section on the way. So look, a few thoughts from me to start the day. Coming back into the business as Executive Chairman, the way I described it, it feels like I've been in the car for quite a long time, they've moved from the passenger seat to the drive seat. And whilst that's only a short movement. The view looks totally different from an exec role than a non-exec role. So I'm relearning a lot about what's going on in the business. And in general, what I'd say is I feel very reassured and confident that this business still has a long runway for growth and profitable growth. There's nothing I'm looking at that says the business is broken or there's anything that you guys should be fundamentally concerned about what's going on in the business. However, I do think that the key theme I would have is, as an executive team, we need to do less to achieve more. We've just tried to do too many things on too many fronts, and it's created a lot of wheel spin, a lot of poor execution. And also, as you know from the numbers, we're not delivering profit growth as well as sales growth. So I think we need to do less to achieve more and re-earn the right to grow because growth is only relevant if in the short, medium and long term, it delivers profitability. And I think, again, if we do less, we will achieve a lot more. Our vision remains very much as it was. I think there's a very great opportunity for us to be Europe's biggest and best discount variety business, serving a [ mere ] amount of budget with her knees across Cloting, FMCG and General Merchandise, no other retailer covers all 3 categories. And I think we have a real opportunity to deliver a leading market position on that. So I am confident, as I said, I don't think there's anything fundamentally broken about the business and the opportunities remain very, very significant. What do I think that we've not in a little bit more detail. I think, first of all, it's really important that we do recognize the macro environment has been tough. Mark will explain this a bit more objectively with work is done with OC&C, but in simple terms, our current customer has just found the last 6, 12 months super hard. And I've said this to a number of you at different occasions, just think of yourself is a mere amount of budget in Eastern Europe, where your household income is for the last 20 to 30 years, is have been broken disposable income growth. No one in our -- [ not knowing ], but in general, people in Eastern Europe did not struggle in the way that people in Western Europe did in the financial crisis. 20, 30 years of unbroken growth, and actually, a Polish household today is wealthier than the average Italian household. That's a remarkable story of growth in East Europe, but that's not been true for the last 6 to 12 months. Using the basic Maslow hierarchy needs, you need to put a roof over your head, heating your home and feeding your family first. And all 3 of those factors have been disproportionately stressed in Eastern Europe versus the Western Europe. Most people have variable rate mortgages. Energy price increases have been significantly higher in Eastern Europe than Western Europe and food inflation has been higher. And so whilst we would say within the categories we sell things, pay our essential items, actually Clothing and Homewares does come later in your needs than putting a roof over your head, heating your home, feeding your family. So again, we'll show this, but our markets have been in contraction over the last 12 months in a way that we've not seen in recent history. Furthermore, certainly in Poland, our competitive set has got better. and has expanded more rapidly than us. So in general, competitive intensity has increased. And finally, no management team likes to talk about this, but it is a reality the weather patterns in Europe, this year have been super unpredictable. A number of us from the management team were here 10 days ago, and it's 29 Celsius. I mean that's just mad for this time of the year. So it's undoubtedly true certainly in the latter part of the spring summer season, weather was really tough. The second point is, I strongly believe, and I hope you agree that any great business is built on a core business model that's continually improving rather than continually diluting. And so if you think about in a retail business, my view of what the metric of the core health of the business is 4-wall EBITDA, what is a core store in your core business deliver in terms of 4-wall cash profitability. And it's fair to say that our business has not yet fully recovered from COVID. And Neil will give us the details on this. But at a headline level, a store in Poland today delivers less cash profit than it did in 2019. That is not a great healthy business, and that's got to be our core focus. We can't grow and grow and grow, whilst our core business is getting slightly weaker every year. So that's got to be our core focus for the next 12 months. Our growth ambitions have just been too great, as I said, and what does that lead to? Look, if you're in a management team, anybody, you'll have your own perspective on your own business. But look, you can't do too much if you try to, you just start falling apart of the edges, and that's really what we've been doing. Nothing's broken, but we've just been executing poorly as we've been trying to do too many things. 800 net new stores, opening a franchise business, trying to build a wholesale business, converting the business in Spain, converting business in Ireland. [ Repair ] all of our stores in East Europe. The list is endless. The business has just tried to do too much and has executed poorly and spent a lot of money. And speed, almost a contradiction to what I just said, but we have a very clear, strong ambition to be a singular business, and that will deliver huge flow-through to the bottom line when we get there. When every store sells the same product offering built on one single platform from a supply chain and IT point of view, a one organization structure. That is a very compelling vision and it will deliver a lot for the company. But moving from where we've been to that platform is just taking us too long, and we're really stuck in the middle, whether it be organizationally supply chain and IT, and we've got to accelerate to that new vision very, very quickly. Lack of data analytics, it's surprised me how frankly, the decisions that have been taken in the business over the last 12, 18 months, whilst generally in the right direction have lacked enough data and analysis of the real underlying performance of the company. And finally, in terms of what's gone wrong, half 2 performance, I just want to unravel this a bit because, certainly, it's in no one's best interest to have delivered 2 [ profitable ] warnings. And I don't feel good about that because what we have to do. And let me explain the circumstances as to why. It really starts with where the business was at the end of half 1. As we look backwards at that point, Pepco operating the company delivered 14% like-for-like growth. We knew we had a huge number of stores to open, and we thought we're going to open them much more quickly than we did. And we thought that they were going to deliver stronger sales than we did. So our inventory purchases in hindsight were significantly ahead of where they should have been. Also, we were manning up our supply chain and our stores to that higher sales expectation. So what then unraveled was a lower like-for-like level, stores that open later, stores that opened and their performance was poorer than we anticipated. And so we ended up with a lot of excess inventory. Furthermore, as the half went on, we will then also start continuing to sell in spring/summer because the weather was so hot. And in the latter months, our autumn/winter stock that was now in stores is in stores at a higher gross margin because we're starting to see margin recovery than our spring/summer. So we were forecasting for August and September that we're going to start selling higher-margin autumn/winter stock and we sold nothing because it was 29 degrees. So you've got a really difficult mix of sales and performance, gross margin underperformance and cost over -- a cost rate above plan because we're manning up to a high sales level. Therefore, as we went through September, our P&L just had a really, really tough time. And we only really got to grips with that through September. So it wasn't ideal. It wasn't at all what we wanted to achieve, but to say that the numbers that we've ended year on are a very robust platform for the future. And as far as I'm aware, there's nothing more for us to do in terms of down to management. It's all out there and we're in good shape. It wasn't the right way of doing things, but it happened. So looking into the future, I mean, the first thing to say is, I feel that the competitive advantages that we've described before remain in place and we'll see as to being a very strong successful retail in the future. And I'll just go through them very quickly. We'll talk about these in the different presentations. But our direct sourcing model for our wholly-owned and integrated team. And it's not a separate business. It's part of our team, PGS, really standards in good stead. It allows us to understand our factories better. It allows us to design products, it allows us to actually have more consistency in high-quality products. And that most importantly, allows us to have privileged gross margins. Secondly, I mean, we are unusual as a discount in that we design, everything we sell in clothing and general merchandise. That allows us to curate product more. It allows the product on the shelf to be more organized, more into collections and look more appealing to consumers. And equally importantly, our FMCG range is now off scale. Not only in the U.K., but increasingly across Continental Europe, we've got scale in FMCG goods, which brands like they want scale and they want growth and we offer them both. So I think our product offering is a point of difference. Thirdly, our stores are both convenient and have -- not only location, but in terms of size. So we can penetrate markets much more deeply than a lot of our competitors because our store size is relatively small. It means we can go into towns and much smaller than many of our competitors. So we can penetrate markets more deeply and offer a greater level of convenience to our customers. Penultimate point, whilst we've still got a bit of work to do to recover our fall, then [indiscernible] and Neil will go through the details of this. Our store model is extraordinarily profitable. And despite all of the hiccups we had last year, it remains an extremely investable model. And finally, our brand equity, particularly in this part of the world is remarkable. If you look at the metrics of our Eastern European business, it's more like a supermarket, the frequency with which people shop and the loyalty of our customer base. And finally, and again, Mark will cover this. There's nothing about our business model and the consumers' views of our business model that say, anything is broken. Whether it be our price position, as customers' views of value, customers' views of competitor set, we remain the leading retailer in our segments in our core markets. So what do I want us to do? I've got a very -- what is, hopefully, a relatively simple mantra in this priority order, this is what we need to do over the next 12, 18, 24 months. First of all, we need to refocus on our core business and start to deliver and not only for our customers, but that 4-wall EBITDA recovery. And secondly, in terms of a second tier of growth, we've got a remarkable amount of headroom in our core markets still. Our business growth will not be dependent wholly on purely entering Western Europe. Eastern Europe has a remarkable amount of headroom in most of the markets that we trade in. And we will -- not to counter that, we will continue to grow in Western Europe and Neil will give us some pretty exciting headlines in terms of what we've achieved so far in Western Europe. So we will progressively move into Western Europe Then the [ hostility ] here is, number one, we don't need to grow purely in Western Europe. There's a lot of headroom in it. And secondly, that growth will be progressive. We won't grow from zero to 100 miles an hour in Western or will be considered in the rate of growth in each of our markets. Finally, back to my point about do less achieve more. We've just got to do less things. There's 101 projects that I'm not going to list here, but there's 101 projects that companies tried to do and we're going to cut them all out because there's just way too much spray and pray in terms of what we've been doing. So a little bit more detail about each of those. I mean, first of all, 4-wall core business health and 4-wall EBITDA. I'm very confident by the end of FY '24, we will have achieved that key milestone that our core business will have a higher EBITDA cash than it did in FY '19. And that really is achieved by progress on each of the key lines, sales, costs and gross margin. But fundamentally, it will be about recovering our gross margin position. Most of us in the room at some point -- I've talked about this in the last year, but we've got to evidence that, that 600 basis points that we lost during the COVID period we can start to recover. And what we're not going to do today is give you detailed ambitions about exactly when we're going to achieve what. But in the medium term, I'm absolutely confident we can recover all of that gross margin. Secondly, from a sales point of view, and this is really important to get the nuance of this, we absolutely can start to recover like-for-like growth and had positive like-for-like growth. Again, I'm not going to say exactly when we'll get to what like-for-like growth. But to say there's nothing broken about our business model as is we can't have sustainable like-for-like growth in our core markets. The thing is we need to do is just get back to the basic great retailing that this business has been about, which is about price leadership and a very strong promotional stance. That won't, in any way, be contradictory to recovering our gross margins. It will mean that we're just going to be somewhat more aggressive both on our price issue and our promotional stance, but I'm very confident with the work we've all done as a leadership team. We can deliver that stronger price and promotional position and still recover our gross margin. That is not contradictory. We can do both. And finally, from a cost point of view, wherever you're in Europe, but particularly in Eastern Europe, there's a lot of cost pressure. Wage increases are going to come through. We're very clear that we have both scale and a discount mentality that means we will be capable of delivering a simple productivity loop where we can reduce our cost base at a rate that allows those cost pressures not to drive up our cost of doing business. I think in the short and medium term, we'll absolutely be able to maintain our cost of doing business as a percentage of sales. On our opportunities in our core markets, as I say, first of all, we do not need to open stores solely in Western Europe. There's a lot of new stores we can open in Eastern Europe, and we've got the detail of that within our own plan. But certainly, with a possible exception of Poland, which is now pretty mature, every one of our Eastern European markets offers great opportunity to open more new shops. Point two, being focused obviously is about deciding what you're not going to do as well as what you are going to do. I'm stopping for the time being the New look refit programme. I think at its heart, it's a good idea to upgrade our store to customers. But actually, it's not delivering a return on invested capital, and it's been way too expensive to implement. So until we get to grips with how we do it in a way, that is less expensive and delivers more in terms of sales. We won't be doing any more of those. And thirdly, in terms of our core markets, and this is probably going to reduce your head space a little bit in terms of what we're going to deliver in terms of the numbers in [indiscernible]. But I think we've all decided that the U.K. business is -- the actually charging the group. And actually, it's fundamentally not. The work that Barry and his team have done over the last recent to improve the business, it's a remarkably successful business now. And actually, it delivers the strongest 4-wall EBITDA cash profit than any one of our business units. And I bet that blows your mind because one would have imagined that. So we will keep and grow our U.K. businesses and speculation about where we, as the management team, stand on that. We will be keeping it and growing it. It is personally a very large European market, arguably second or third biggest. So the scale of the opportunity is large. Our sales per square meter in the Poundland business are remarkably high in the top quartile of any U.K. retail in terms of its sales densities, there's demand out there. The issue we've got to grapple -- we've grappled with, and we'll continue to scrap with it is how to improve the profit conversion. Barry has already done a great job on that, but there's more to come. Why do I feel very confident about this? Look, one of the things you may not understand about the Poundland business is irrespective of what name is above the door, within 12 months, it is effectively a Pepco plus. Every store in the U.K. will be selling Pepco clothing, Pepco GM and the group range of FMCG goods. So it is within 12 months, fundamentally just another region of the Pepco business. And it will -- as a consequence of that, it would deliver incremental gross margin and also in time, significant lower cost base. So it is already our most profitable business and should get even stronger and its scale is large. So it will be our biggest market and arguably our most profitable market. In terms of focused growth, I mean, we will, as you say, our focus on growing into Western Europe. Again, Neil will talk about the details, but I'd segment it into [ 2-0s ]. Spain and Italy, we know enough now we've got enough confidence in the business model to really accelerate the rate of growth there. However, with regard to Germany, there's nothing I am going to say, this is -- we're reversing that, but we were in danger, I have just grown too quickly. We still need to perfect our model there. It's not to say that we've got any lack of confidence. But you don't go from zero to 100 months now overnight, and we've got to actually just get to grips with what the business model should look like there. So really, I'm differentiating between Spain and Italy, where we're now very confident, we'll accelerate growth there. And in Germany, we just need to learn a lot more. Point two, as I said, without going through the detail here, but -- there's a lot of projects that we will just stop doing, whether that be new markets, new channels, there's just too much stuff going on, and we will stock a lot of that. And finally, Dealz, my perspective and position on deals is that could be an amazingly exciting opportunity for the group. But I put it in the probation category, if you want a better. There's a lot that needs to improve about Dealz for us to invest a lot of money. So our focus will be on continuing to grow purely in Poland on proving the business model, which Martin will talk about the details shortly. So I'm not announcing we're closing it but I'm not announcing -- we're going to go for both in terms of its growth rate. Some more specifics on FY '24. The overall point here is this should be a year of reset. We need to rebuild confidence amongst you. We need to rebuild confidence in the public markets. But most importantly, we need to rebuild confidence in the management team that we can deliver profitable growth. The biggest priority and I'm very confident is we will, by the end of this year, have delivered an improvement in our 4-wall EBITDA versus pre-COVID. Secondly, we'll have a more considered approach to growth. This year, we will open somewhere north of 400 stores as a group. That's a group number, not a Pepco number and said by comparison, that was 800 in FY '23. And we will be much, much more disciplined about our CapEx and return on invested capital, as I said earlier. Primarily, that's just about being more disciplined about the numbers. Does this deliver a good sales level, does this deliver a good return on invested capital. We will commit to the U.K. market and explain why. And I think that I want you to either as questions challenge or embrace that because it's a great opportunity for the group. We will continue our growth into Italy and Spain, as I say, but we will be much more thoughtful as we learn more in Germany. We will, therefore, end up generating free cash flow for the first time, property free cash flow for the first time in a long time. What the mantras has been -- historically is to spend everything you earn. Well, we're not going to do that this year. We will be generating free cash flow. Underlying all this, we'll be much more aggressive in speed about moving to a single business model, linking to my point about Poundland. Within 12, 18 months, there won't be 2 businesses. There's just one business now. It's called Pepco. It may have a different name above the door, but every store will sell the same product wherever we are in our business. And that has huge scalability and cost benefits. And we will get out of a lot of things that we've been doing that aren't core. I'm not going to announce the detail of all that today, but there will be a lot of stuff we want to do. And finally, we will be continuing to work on where Dealz fits in. So look, back to where I started, I'm very clear that this is still a super exciting business that can grow dramatically but not only top line but bottom line, I think we've got a very clear positioning in the market that will serve us well. But the key thing is we've got to do less to achieve more and sort of earn, you don't just grow because you want to, you grow because you've earned the right to grow. So we'll be much more disciplined and then doing so, achieve a lot more. And I say I'm super confident about the business, and nothing here where is or is broken. Okay. I will come back at the end and host Q&A. But for now, I will hand over to Mark.

Thanks, Andy. Good morning, everyone. So 2 things I'm going to cover off. Firstly, a bit about the macro context in our core markets of Poland, Romania, Hungary and Czechia, over the last period, just to give a bit of context to where we are. And then building on Andy's concept of a healthy core, having a bit of deeper dive on the Polish market and looking at the sustained customer position or competitive position that Pepco's had from the pre-COVID period today. So to look at how we've been faring from a customer and competitive position. So I mean, a lot of this is not new news. But on the chart here, you see on the left-hand side, just the material impact of inflation across the CEE markets. The pink line is the Pepco average. The gray lines are the 4 core markets that I spoke about. And it peaked to 18%, earlier back end of last year, beginning of this year, they decided to come off. Clearly, that inflation has a material impact on real wage growth, which then if you look at the chart on the right, has a direct not one-for-one correlation, but materially impacts household consumption, which has moved into negative territory as we move through FY '23. If you convert them to into kind of retail markets on the left of the chart, you've got clothing and that has seen a pretty material decline into negative year-on-year volume growth as you move through 2023. And on the right-hand side, you see the same story in homewares, starts with a slightly more negative position, I think, as Andy alluded to in his opening remarks, the discretionary -- the slightly more discretionary nature in the Maslow hierarchy and homewares means that is more material impacted from a volume perspective than clothing. So all of the markets have been in decline, you see Hungary was an outlier on the first slide in terms of inflation. It's also an outlier in terms of consumption. So look, it's been a very, very challenged macro for the last 12 months. There is some tentative signs of positive momentum, particularly in real wage growth. Again, as Andy said, it has been positive, pretty much year-on-year on year-on-year since anyone can remember. Here for the first time, you see it dips negative. So on a real basis, the households that shop in the Pepco business have less money in their wallet and was having an impact. That has slowly started to recover. You can see the top line, I think, is Romania. That's slightly ahead of the curve. Poland is now inching back into positive territory, and you still got a bit of a bit of a lag and the outlier in the Hungary market. And the forecast for the next period is equally positive. So tentative signs of recovery, too early to call, but if real wage growth continues to progress, then our customers will have more money in their pockets, which is good for retail sales. So there's been a lot of short-term kind of short-term kind of turbulence to see. But I think just useful to recap and explain that fundamentally underlying the long-term kind of macro dynamics of our core markets are still strong. As Andy said, there's still space and there's still opportunity to grow in these markets. We'll have positive real GDP growth at a higher level, more mature Western European markets. That converts then into disposable income in the pockets of our customers. And then that, in turn, converts into real retail sales growth of about 5% from our forecast. So very choppy waters as we all know, from a macro perspective in CEE, but I think important to reemphasize that it's still got runway and inherent macro growth ahead of us. So that's the market. Now you've all been in shop yesterday. So you'll have a sense of how Pepco sits from a kind of an assortment perspective versus its competitors. This is your classic kind of a 2x2 matrix. It's illustrative, not definitive. On the vertical axis, you've got relative pricing. So at the top, the higher-priced retailers at the bottom were lower. And then along the horizontal access, you've got clothing on the one side and food at the other. So Pepco kind of sits in a fairly unique position in terms of its assortment. It's an apparel-led discount variety retailers. So as you'll have seen roughly half the shop is clothing, the other half is general merchandising homewares. If you pick some of our key competitors action, as you'll have seen a much broader assortment of homewares and also it's much more commodity hardlines general merchandise. So different to Pepco that we have a good proportion of what you call softer home or more decorative home. KiK -- similar to Pepco but again, you look at the general merchandise execution there, it's a bit more like the Lidl -- Lidl model is a central aisle of general merchandise. And then Sinsay, which is one of our big clothing competitors, you can see is big women's wear big [indiscernible] wear offer and kids were but doesn't have very much general merchandise at all. So Pepco, it has a fairly unique positioning. So just to kind of contextualize some of these slides, competitors, A, B, C and D are anonymized. They're not the same on all the slides before we try and cross-reference them. But as Andy said, if you look at the Poland discount market, it's maturing, I suppose unsurprisingly, competitive growth is high, over the last 5 years. Our main competitors have opened 700 shops, so about 22% growth. We've grown at about 8%. And you can see that the long tail is growing at a much slower rate. So there are many more competitors now operating in the Polish market and where the pink bit at the bottom, just a reference, is Pepco. Now the positive I guess, point that we need to emphasize is that despite that increasing competitive intensity, fairly materially, Pepco has maintained its market share. On the left-hand side in the clothing market and on the right-hand side in homewares. So despite all of that growth, we are maintaining share pre and post-COVID through that period with the big compression in share coming from others. So there's a long tail there of 70% to 75%. That is what's getting compressed as we've moved through those years. So lots more competition, Pepco maintains its share. Now and I mentioned this a few times, the question of price and price leadership is fundamentally important to the Pepco business. just going to this slide, we do every season an independent price survey. We've been doing this, as you can see, since 2019. The Eagle eye, have you will noticed is no 2020 because of COVID, and made it much harder to go into shops and do the price survey. So if you look at the bottom, you've got spring/summer, autumn/winter, so the seasons that we sell. And we benchmark a basket about 100 products. So it's material, and it's large. The gray bars show the difference to Pepco. So on average, competitors are higher than Pepco and the pink line is the average over the last 5 years. So we're still on average, on a minimum price part, sorry, that's the point to make, so the lowest entry products that we sell, we're 30% cheaper than our competition. And if you look at the Pepco ranking at the bottom, what that then also reemphasize is that we are even though we're 30% of the average, we are the #1 cheaper than every single competitor in the market on an entry-price basket. However, just the small but is, you can see that the trend line is lower. That means there's been more competition from competitors on price. So as I think Andy mentioned, we will look to reaffirm our position from a price perspective. The gap is still big, but we can't underestimate the importance of maintaining that. So this is clothing, similar story for homewares. Our price leadership is a bit higher. It's about 50% on average. And again, a big basket of minimum entry product, which will be a frying pan among its that kind of product that is in these baskets. So clear price leadership for Pepco in the Polish market against all competitors in clothing and home. Now importantly, what the customers think about is do they perceive we are the price leader. And this is research that we've done in 2023 with OC&C, so again, independent research with a large statistical sample of people that we've spoken to. So if you ask customers that know all the brands, 53% I think we, Pepco, are the price leaders. So the leaded price leadership showing on the price side flows through into customer perception and materially higher than 2 of our very key competitors. So very good positive reinforcement from our customers on our price leadership. Now the next slide. So this shows the importance of various things to customers in terms of a retailer's home and price range, quality service, that's along the bottom go from left to right, it's a decreasing importance. Particularly in discount retail, as you do these slides, price is always the most important thing, and it's on the far left. So that's how the slide works, and it's out of a scale of 0 to 5. And what we're showing here is that between 2019 and today, if you take the far left of the chart at the top, the low prices, our customers perceive as the highest -- the same score for pricing in 2019 as they do today. So we are still seen as a low price retail. I think it's just important to say that position has not changed. So despite all of the turbulance that we're seeing, some of the like-for-like pressures that we've had in the second half of this year. Customers 2019 versus today still see us from a price position as good as we were. And on pretty much every other metric, we've got better, particularly on quality, which is important for a lot of the work that Agnieszka and the team have done in terms of range extension and some of the new things we brought into the business. The only little outlier there is promotions. And I think as Andy said, again, we'll be looking this year to be doing more to reaffirm our promotional kind of campaigns. So a very positive story in terms of how customers perceive us from a price perception. And then the gold standard metric for any customer-facing business, Net Promoter Score. So we have against all of our key competitors, the best Net Promoter Score in the market. This is one of those slightly kind of a holistic view of what customers think of you. And I think this is a very, again, a very positive story that we lead on price, we lead on perception of price and customers give us a very positive rating from an NPS perspective. So just to try and wrap up a few closing kind of thoughts. The macro has been tough, but there is still solid underlying forecast growth in the CEE markets. Into the concept healthy core, the underlying fundamentals of what we see in the Pepco customer proposition in our biggest principal market remains strong, increased competition, but we maintain market share. We're still the price leader. We've got a 30% to 50% price gap on the lowest-price basket against all of our competitors, against the average. And importantly, we're not marking our own homework, customers tell us the same thing. They perceive us to be the lowest price to have price leadership, and they really like the business. As I mentioned, as Andy mentioned, we'll reaffirm our price leadership over the next 12 months. We will take active steps to make sure we are maintaining that. And then whilst we haven't talked about Western Europe today about Spain and Italy because the focus has been on the core big markets, I think directionally, everything you've seen here in terms of price and customer perception are directionally the same. So just to round off on that point about Western Europe. Thank you.

Good morning, everybody. Thank you, Mark, for that warm introduction. I'm Barry Williams. I'm the Managing Director of the Pepco business here in Europe. This is week 3 in my new role but I want to reassure you that the Pepco business and the Pepco teams are very familiar to me. Why is that? Well, I've been with the group for over 7 years now. And in those 7 years, I've worked with and alongside the Pepco leadership team on the Pepco business. For the vast majority of those 7 years, as you heard and it says on the slide, I was the Managing Director of our business units in the U.K. and Irish segment, namely our Poundland business. We're joined today actually with Austin Cooke who succeeded me as Managing Director of those business units. Austin and I worked together for over 5 years leading those businesses. So really great to see that really important internal succession working very well in that business for us. So look, what I'm going to do is I'm going to build upon some of the messages that Andy shared in terms of the importance of the U.K. The progress that we've made with the business in the U.K. And what we see the future outlook to be in quite an exciting opportunity for us to build upon. I'm going to share with you a couple of very simple slides in terms of the U.K. market dynamics. This will not be new news to you. It will be numbers that you're very familiar with, but I think it's helpful to set a context of why this is such an important market for us and a clear opportunity. Why does the Poundland proposition win in the market? I'll share with you what are the key strengths that we have and what some of those differentiators that create points of competitive advantage for us. I'll come on just to talk about what we see the vision of the future and the overall opportunity and then some initiatives, particularly around that one range and brings together as one business that will further enhance those competitive advantages and the proposition benefits that we've got in the market. So look, briefly, a market of significant scale, #3 in Europe, so a really large market for us and actually forecast to outgrow #1 and #2 Germany and France over the coming years. And within this market, we already have a significant presence within the Poundland business. I'll come on to talk to what those numbers look like shortly. It's an attractive market to us as well from a customer dynamic perspective, discount retail and continues to grow share in the market. This is a continuation of a long-term trend for at least the last 2 decades. Discounters have continued to take share in this market. U.K. customers are attracted to the discount format. And when you look at that growth of discounts, it splits predominantly into 2: food-led discounters and variety discounters. So the food-led discounters would be the Lidl and the little of this world and variety discounters would be ourselves being bargains that I'm sure many of you are familiar with in Home Bargains as well. And we see ourselves with them as the winners in that variety part of the market. So look, it's a market of scale, discounters are taking share. Customers are very familiar and attracted to the discount format, and we have a very significant presence in this marketplace to build from already. So what makes the Poundland proposition win in the marketplace? Well, I'd split it into 2 really. First of all, the unique category focus that we've got and then this convenient format location strategy that we deploy. So that unique category focus, we're the only one of the discounters to combine FMCG, general merchandise and most importantly, clothing and deliver clothing in a very professional way within our overall product mix. We have a full clothing offer in over 400 stores in the U.K. now. And I'll come on to talk about some of the great work with Agnieszka and the Pepco team of how we're building upon that strength already. But add to that general merchandise and then core strengths in FMCG goods and in particular, in FMCG, we're talking about impulse categories, predominantly confectionery, but health and beauty and household. These are all categories where we dramatically overtrade our traditional market share, and they're critically important to that discounter shopper. So building on clear strengths within FMCG business as well. So I talk about category before I do, growth comes from 2 opportunities for us. Core like-for-like and that builds to Andy's previous point of that 4-wall EBITDA, core like-for-like being one of the most critical measures of health within the business. When you see Neil's presentation after the break, he'll point to some proof points of consistent, very nice growth in like-for-like business. So we've proven a track record of developing that business over time, and that's a critical measure for us but growth doesn't just sit with like-for-like, there's also space expansion. Even with 823 stores, there are many markets where we're currently underserviced. So there's opportunity for us to grow our overall space as well. And there's continuing opportunities of market consolidation, and I'll come on to talk about in a little bit of detail. The format strategy, we operate stores from 300 to 1,200 square meters. The sweet spot is around about 1,000 to 1,200 square meters. Why would I say that because that's where we can house the full proposition and that creates the best return for us. And as you see us grow our space, we're growing our space in more of those larger units going forward because the economics are the most attractive for us. I mentioned market consolidation. Many of you, I think, will be aware of the Wilko acquisition or [ Dealz ] that we provided. We made an agreement with the receivers to assign 71 leases to the business. What that allowed us to do was negotiate exclusively with the landlords on those sites. We've concluded 60 successful deals. It's really important, that process for us. We were never going to take these stores based upon the Wilko property deal. We want the opportunity to renegotiate that with about 60 success associations. And most importantly, I think Austin and the team have done an excellent job because to date, we've opened 30 stores. We've got another 10 that are opening this week. And by the space of the next 3 to 4 weeks, all of those units will be open and trade in so we can maximize the opportunity of them in the critical golden quarter trading period as we lead up to Christmas. I don't see this as being the end of consolidation opportunities. It's certainly not the end of the Wilko's opportunity. There's plenty more stores out there that are now vacant, that could be of interest to us. And equally, there's a transfer of trade from the closed stores where we're competing with them into our business as well. After that, there's further weaker players in the market. So I think this is an area that we can continue to benefit from. So what does all that lead to? Well, it kind of leads to what the exciting opportunity for the U.K. and Ireland segment is under the Poundland brand. As I said, even with the 823 stores that we've got and add the Wilko stores to them, now you see the progress we're making on this journey. We're still underrepresented in many of the markets that we operate within. And as we view the market, we see the potential for an estate of up to 1,200 stores. Andy talked about our market lead in sales densities as we open more of those larger 1,000 to 1,200 meter footprint stores that will drive our turnover, and we'll end up with a business with turnover in sterling terms of around about GBP 3 billion. And by any measure for a Western European variety discounter creating very exciting returns for us as a business. So we've got a very clear plan and opportunity of what we see we can unlock in the U.K. market. And I'll reiterate, when you listen to Neil's presentation, what Neil will provide is proof points on a number of the key metrics of the progress that the business has made over the past 3 years or so that gives us confidence and evidence that we can deliver against this plan. We can deliver more, though, by strengthening the core proposition. So even though we've got core competitive advantage through a program that we call in one range, this will strengthen our offer even more in front of customers. And what we're doing is leveraging the best of what takes place in the group and pulling it together. And specifically, that is aligned in. The great range is that Agnieszka and the team developed in Poundland for clothing and general merchandise. So the clothing ranges that in-house designed unique product that is going to build on this existing strength that we've got from a clothing perspective. Then add that to general merchandise and GM is particularly an exciting opportunity for us. And why would I say that? Well, the GM ranges are quite different to the GM ranges that we currently offer to our U.K. customers. That much more homewares-based, as you've seen in the stores yesterday. That's a real undone for us in the U.K. It's a big market that we haven't managed to access yet. Actually, the average unit price is higher than the current GM ranges in the U.K. So that's got the potential to drive the basket for us. So the combination of these 2 create some really exciting opportunities to further drive that like-for-like performance. We trialed these ranges in some of our Irish stores. The Irish consumer is very similar to the U.K. consumer. And the feedback was extremely strong. You can see that in these NPS results. Now please don't try and read across these NPS numbers to the numbers that Mark shared, they're not like-for-like. There's different methodologies, and these are our internal metrics. But nonetheless, they're consistent in our business, and it demonstrated a really strong performance for us. So look, as I speak to you today, this is the clothing ranges that are aligned in the U.K. business. So everything that you saw in the 2 Pepco stores yesterday, these are now being exposed to U.K. customers, and the initial feedback is very strong. Customers call out the value. They recognize the price points, the quality, the design, and we're seeing really encouraging initial results from the closing ranges. The general merchandise range starts to [ aligned ] from January going forward. So a real exciting opportunity for us. What does this do though? Whilst it's a great opportunity and give something new and a benefit to our customers? It does something really great for the group as well. It creates a much simpler business for us. So doing things once and in one place is a great principle to have as a discount reseller. It creates absolute leverage for us. So leveraging our negotiations with the factories all of that done through PGS under Agnieszka's leadership and Agnieszka will come on and talk about PGS and how that works for us. It creates a much simpler operating model for us as well, much more efficient business and lower cost for us to do business. This actually paves the way for the next category for us to complete the journey, and that's FMCG. So we're starting to work on pulling together our FMCG ranges. So to Andy's point, you will end up with the same proposition across all of our markets and all of our segments. The only difference in the U.K. will be the name above the door. Because of the heritage of the Poundland range, name sorry, we will call it Poundland in the U.K. But essentially, the customer experience and what's inside those 4 walls will be exactly the same, creates a simpler business and really builds that leverage point. How we present in this to customers? Well, as any good retailer does, we continually develop and reinvest in our stores. We reinvest in a very appropriate way for the market and the payback for us. These are well-thought through well-designed stores. What we do is we liberate more space because these ranges -- it's really important that we create a great environment for customers to be able to browse the range and get the right experience as they shop this product and then a consistent deployment model. So each store is laid out and feels the same. So this is our redevelopment program that we run in the U.K. It's not just about the landing of the ranges though. So curb appeal, what's the outside of the store, looking like the signage, flooring and lighting, where appropriate and where required. When you do a refit, that's probably the most expensive things as part of the refit. So we only where it's really required for us, and we've got a very low-cost appropriate solution for us, particularly from a flooring perspective. We have these new ranges but something that is very topical at the moment is security and shrinkage, not just in the U.K. but across Western markets, I would suggest. We deploy a lot of different solutions to make sure that we maintain our shrinkage. And again, you'll see Neil's presentation. We do a good job of keeping that stable. But whether it be security guards, camcorders for colleagues, there's lots of different solutions that we put in place, but our principles are the colleague first and all. And then finally, how we invest in some of the colleague areas. Austin talks a lot in our business about the customer experience can only ever be as good as a colleague experience. So investing in our colleagues, giving them the right tools to do the job in the right environment, it's critically important. Happy colleagues equals happy customers, and that's very much the journey that we're on with the U.K. business. So let me summarize. The U.K. is an attractive market. It's attractive for discount retailers, and it's a real scale market, and we have a very strong presence in that market right now. You'll see proof points of the progress that the business has made over the last number of years that gives us confidence about the journey and the opportunity that we see in front of us. Some of the work that we're doing to pull the overall group together in terms of one range will further leverage the scale of the group and provide benefits in the market to our customers there as well. So an exciting journey for us to continue within the U.K. Now I'm conscious I've not spoken to you about the Pepco business yet, and I look forward to future sessions and future updates here and with you my experiences and the products that we'll make on the Pepco business. But what I'm going to do is I'm going to hand over to Agnieszka and Agnieszka is going to walk through the difference between clothing in GM to FMCG, how we source it and all of the work that goes into creating those amazing ranges and PGS as its model and how that supports us in creating that point of difference and competitive advantage. So I'll hand you over to Agnieszka.

Thank you, Barry. I would like to talk about our business model a bit because you have to understand that some of the decisions we are making now. You will see in the numbers in 10 months, 9 months. For example, now I start to work on the next autumn/winter collection, and we already hedged around 20% of our currency for next autumn/winter. So the process is really different to FMCG and not everything what we are doing now is visible in our numbers now. FMCG, it's 4 to 8 weeks time and done the goods in our shops. In case on GM and clothing, the process takes 10x more time. So it's around 10 months. It's a huge difference. I would like to show you our process based, for example, on spring/summer collection. Very soon in December, the first spring/summer goods transitional collection will appear in our shops. I start to work with my team on that collection already in past February. In February, we started to work on the trend. We have a trend forecast for our trend agency across the world. They prepare the trends and color palette for us. 2, 3 months later, when we have the first results on our spring/summer 23 collection, we matched together. We matched the trend forecast and our real results. And based on these 2 factors, we decided the trends, which we are going for the next spring/summer, which will be in our shops very soon in 3, 4 months. When we have trends, when we have a colored palette, when we know what we sell, good, very good, then we start to plan the collection with planning. So we simply make the concrete style with the number and price when we have the plan, then came to us PGS with the suppliers or we go to Bangladesh, India, China and we start to buy. We start the negotiation process. Of course, the old negotiations are done by PGS before the trip. So they prenegotiate the prices, but the final call is face-to-face with our supplier base. Then when we renegotiate the price, we start the production, we start the placement placing the orders and then the production start and then we moved the production to Europe to our warehouses. And a few weeks later, we start to sell it. So more or less, when you will split up 10 months, we need 5 months, it's called pre-preparation and planning and 5 months, it's production and transportation. That is long process. Why? You probably will ask why we need 10 months? You cannot have everything or you have -- we are not a trendsetter, we are trend follower. We base our collection of the key trends, not on the hottest trends. That's why we don't need short delivery time to deliver the hottest trends. We need a proper core trend in our shops. And we give more time to our supplier base to prepare the capacity to prepare everything to have the best possible price, FOB price for us. We are producing very often our production in low period for supplier when they don't have enough orders, and that's why we can have the best possible price. That's why the process is quite long, but secure us very good quality, delivery on time and the best possible price. What we do to attract our customer? We are delivering permanently the licensed product, which increased the share in our sales year-by-year. Why? Because our customers like very much, the license. Here, you can see a few examples for the last 3 months, when we launched our promo license, Barbie, Warner 100 and Harry Potter. Barbie was the most successful promotion from that year because it was done when the movie arrived in our cinemas and everybody wanted to have a Barbie T-shirts, Barbie skirts or Barbie accessorize. And we sold 80% in 2 weeks. When we launch Harry Potter with quite heavy sweatshirts, it was outside 30 centigrades. It was less successful, but still very successful for us. And when you look on the key numbers, below the slide, you can see that the customers really like that. It brings us additional margin at spring as additional sales. And every 10 customer has some piece of our licensed product in the basket. To attract our customer, we also introduced 2 years ago, the cooperation with quite famous brand, but we also develop our own brand. When we were yesterday in shops, you could see [indiscernible], which is our own sports brand. And I told you a few numbers how successful that collection that brand is for us and how much the customer trust that brand. We already very soon in November, we will introduce the first time for Pepco Master [ Chief ] Collection, everybody knows Master [ Chief ]. And very soon, you can buy Master Chef product with the best possible price on the market on in Pepco. We introduced also Cardio Bunny, sport Polish brand, which has on the online service, and you can buy in Cardio Bunny online leggings for PLN 150 while in Pepco, you can buy the same leggings for PLN 50. So it's 3x less expensive. This collection we create to attract new customer, more affluent customer because we knew the core customer is very important to us. That's why you saw on the presentation of Mark that we still are in our core prices the most competitive on the market but to develop our like-for-like, we need also the new, more demanding customer. And this all license and brand cooperation, it's mostly to attract the new, more affluent customer. This everything will be not possible when we will not have integrated sourcing entity. The sourcing is now part of Pepco. It's our department, sourcing department. And that a few key numbers would done sourcing in year '23 to us. They shipped $ 1.5 billion value. So it's a huge amount. We source 88% to PGS last year. And we would like to source in the next few years, 95%, 96% through our PGS sourcing. Here, you can see flow -- few numbers how we grow, how the PGS grew with us last few years and how important PGS is to us, why? You have to understand to have the best possible FOB price. We have to be very efficient with this all pre-order process. We have to give our supplier everything because we work with Chinese suppliers, they are not speaking English. We are going directly to the factories. We are not working through agent. So our [ tech path ], our 3D development sample, our pattern has to be perfect because we are going directly to the factory, and we gave the factory all technical support to produce the best product. And this is possible only because we have people there. We have people in China. We have people in India. We have people in Bangladesh, Pakistan. Now we also opened PGS office in Europe, and we develop also our Europe sourcing, which in year '24, we'll deliver around USD 35 million FOB. We also would like with PGS derisk China, a lot of speculation about China, but still the China, it's the biggest market for all of us, not only Pepco, but for all retailers. But to the risk that China, we need to discover new countries like Sri Lanka, Cambodia probably in the future also other region. And PGS is there, it's on the floor in that country. look on the situation on factories, research factories, make the factory compliance, control our production, go to the factory, make in-line control after the production finish, make the end control to really secure that the product has the best possible quality and delivery on time. Here, you can see the few levers which help us to deliver our margin and to have the best FOB price. Of course, the biggest lever is economy of scale as we are growing quickly, our quantity increase and that helped us to negotiate better prices. The one range helped that even more. But today, I would like to explain you EBIT, the last lever, like supplier development program, which we introduced last year. What does that mean? That mean, we hired high specialized technical people, they are going to our factories and they help the factory to be more efficient. What does mean that with the efficiency of the factory, they can produce, for example, 20% more per hour as they produce before because we offer them our technical support and down when we improve the efficiency of the factory, of course, we can lower price, and we share the benefit with the factory. So our supplier happy with that, and we are happy because we have better quality and better price. All levers, which you see here help us to manage our pricing and our quality and delivery on time. And this is what we are working on, permanently to improve our product year-by-year season by season. Summary, so 10 months, it's a long process, but it is efficient process and it's a process which match our end customer requirement and in-house competitive advantage to PGS, so once again, every single clothing, which we have in our shops, it's designed in home and 50% of our GM run is designed by us. So you cannot find that product by our competitors because they are exclusive for us. And this is because we have the tools and because we have a PGS, we can allow us to do that. Thank you very much. Marcin?

Thank you, Agnieszka. Good morning, everyone. Yes. So let me introduce myself, however, Andy made just a bit, describing me as long service entity in the group, which is the true. However, not only that, I'm in the group since 17 years before I used to work for almost 11 years in Pepco as a Trading Director, Buying Director. So I know the group quite well. So let me start from the context because I think it's quite important. Why Dealz? So now you ask yourself this question, why Dealz in the group, is this makes sense? And believe or not, 10 years ago, with the former MD of Pepco Rob Taylor, we asked ourselves how to expand Pepcon model. Should we increase the store size? Should we add the FMCG? Should we increase the range even further? So we start the project. Funny enough, we called it as a working Pepco Plus. However, in the meantime, in Pepco Group, Poundland appears. So we've got the opportunity, and we ask ourselves, what do we want to do? Do we want to stretch the Pepco successful model? Adding the new range, extending the store size, it's not -- it's quite complex, honestly speaking. Or do we want to use the opportunity and bring simply the Poundland to this part of the world. So obviously, the right question was okay. The right answer was, yes, let's bring the Poundland here. Obviously, it's not a Poundland. It's a Dealz, which the brand exists already in Republic of Ireland. So we said, let's open the 10 Dealz. Let's take the full range of Poundland almost full range and look what will happen. So that's what we did in 2018. We opened -- in February, we opened first 2 stores with huge help of Barry and his team with basically almost 100% of the range from Poundland, which you can believe that after 3 months, with at least something like 500 lines because it totally doesn't work. However, that's fine. What has happened? Really, we achieved what we wanted because the customer reaction was fantastic. So it was really kind of the commercial success. We were different operator to what have been existing on the market at the time. So we have FMCG offer at the [ EDLP ] basis, the FMCG is much more about the high low. We've got the fantastic unique offer, which you couldn't buy anywhere else. We've got a really great price leadership. And we've got, again, a new -- it was totally new on the market, kind the simple around pricing. So if you now look at the Pepco, [indiscernible] whatever it is, around prices, it's not their investment, basically, we bring it here with the bids. So what Dealz means for the customer? As I said, we achieved what we planned. So basically, 70% of our customers quite consistently say that the number one reason to visit Dealz is the lowest prices. Almost 60% customers constantly said the second reason to go to the Dealz is the wide range, which is kind of typical for the discount variety model. And the third reason to go to Dealz, which is constantly roughly about 50% of the customer said that we've got the unique offer. With got unique offer, which you cannot buy anywhere else. And this is quite consistent. Where we are now, so last financial year was pretty impressive in terms of the growth. And you can imagine that also from the -- some of the not top lines, however, the bottom lines, we pay some price for that because we opened 116 stores on the top of 168, which we closed the last financial year. So it was pretty massive dynamic growth. So yes, we are one of the fastest-growing company, not only in terms of the stores number, also in terms of the market share contribution where we got a pretty good Neilsen data, which showing this as well. As Andy said, let's cool down a bit. Slowdown with the growth because we cannot grow like a [indiscernible]. I would say. So the plan for this year is to open between 50, 60 stores. And that's just stabilized something, which is, I think, the right thing to do. And we still have a big white space in Poland and not only in Poland. Basically, you know that we can expand going with the Pepco route with the Pepco infrastructure across the entire D.C. Just again, whatever we will build successfully in Poland, it will be even more success in the rest of D.C. just because Poland is the most competitive market in this part of Europe, in this part of the world. So the white space is pretty before that model. What you have opportunity to see yesterday, I think majority of you. You could see the old store and you could see the new refreshed format. So basically, since March this year, we open every store in this new format. So currently, the number of the new stores is more than 100 in our chain. So that's fine. And it's much better version of the Dealz. Again, it can be our objective, subjective impressions. However, customers loves it. They love the change. The change was dictated by them basically just to have the clear category roles, just to have the clear navigation. From our business perspective, I was pushing to have a very strong POS, very strong price message. So I think that from the look and feel and shopping environment, we really achieve what customer required from us and to what we want to achieve. Here we got the pictures from the other store. And what is really important, even if we -- as you look for FMCG retailer, the footprint of almost 300 stores of the size of average selling space 390 square meters, it's still not big. However, we are well recognized. So customer loves us and customers need us everywhere in Poland. So as you can see, the brand awareness growing very, very quick, that's just -- I don't say it's a normal trend because in Pepco for this brand awareness at the early stages, we were working for the long, long time. However, now it's with the online mechanics and all the communication tools we can achieve this pretty quick. Also, we've got fantastic NPS score. It's not here. We are top 3 in Poland, included all the retailers, either it's [indiscernible], Pepco actions. So that's very important. We've got almost 4 million unique customers from the catchment where we exist of 10 million inhabitants, yes, so which is good as well. So 4 million customers from catchment the where we are present, 10 million. So it just shows you the potential of growing, expand the business and the model. So yes, definitely, it's something what was written by myself and then accepted by Andy this almost 7 years ago, the simple model, 35, 25, 10. 35% of the gross margin, 25% of the CODB and then 10% for you guys, which is the great model for the FMCG type of the products retailer. Because if you look at our portfolio of the products currently less than 20% represents general merchandise so forth and the rest is FMCG. In action is the totally opposite. Mass of 75% is the GM with a bit of the clothing and 22%, 23% FMCG. Pepco is also different. So we are fit to all this kind of portfolio of the new modern shopping nodes. So 35% gross margin. Obviously, we are not there yet. As all you know, you are a professional team knows that FMCG is all about the scale. So we still have a few points to make up. However, to deliver what we have promised and what is the one of the DNA of the Dealz to deliver the lowest prices. And to have this 35% of the margin, there is -- there is some kind of a challenge we need to face. But this is the challenge. It means the scale. So it's not only scale, it's as well improvement. If you -- once you have been in the stores, you could see that the GM offer maybe it's not so perfect. So I can assure you that from the January and February next year, we'll have a totally new GM proposition. It will be led by Pepco team. It will be unique. So it will be not the same as Pepco obviously, from the obvious reason, just to not cannibalize ourselves. So this is the unique proposition which will fit much more to the -- to the market. So just because of the improving the GM offer, which obviously will improve significantly the sales mix or sales contribution of the GM will make up some of the gross margin just by definition. The second point is once I mentioned about the scale, it's what Andy just -- just mentioned at the beginning, is the one FMCG approach across the group. Because we still buy as a free entity, Dealz and CEE by themselves, Poundland by themselves, Pepco [ Plus ] paying by themselves. So now we've got quite advance initiatives already in flight. So we have already some of the fruits. We have already some contract negotiated with the key players on the group level, which obviously thinks that it brings us the much better buying conditions. As well, one FMCG infrastructure, one of FMCG team will bring us much more unification of the assortment. So this also pretty important, which, again, will help in scale and to buy better. The second -- or the first point here is as well the way how we buy now. So 30% of our goods are coming from Poundland. And many of you could see on the products kind of the stickers, label. We need to label this. We label this in our CEE, which is more than 1% of the gross margin just by definition, yes. So obviously, it's going down every year. However, it's something which we shouldn't have, and it just shows the potential scale benefits. And then if you compare the results of the last year and what we are aiming to achieve this year, just to present of the margin -- gross margin we lost on the ForEx. So it was a pretty headwind of the ForEx management, the war in Ukraine, all the stuff, a bit of the managing the currency. So -- so it wasn't easy. It wasn't easy for everyone. However, we pay the price for that. So willing to improve this. And also the negotiations, the back margin, that's what I mentioned one FMCG. On the operating costs, we are quite efficient already. So we've got a very good way of working and operating model for the labor. It's really, really strong. Really strong already. So we know how to manage this. We also opened a new DC in February this year. This is the central gravity of Poland. We used to work with the two DCs, somewhere in the west side of Poland. So it wasn't great. Now we've got one DC, which is dedicated for us, designed for us, lay out for us, in just the Dealz DC. So we can already see the benefits of reducing the cost. And I can tell you now that we already achieved a lot in terms of the cost optimization. And then we also have the one initiative with Pepco so the property are negotiated together. It's not a single team for Pepco and single team for Dealz. Everything what happened on the property side is the kind of the joint team who -- or actually one team who negotiate on behalf of the two brands. So here as well, we can expect some kind of the benefits on the CODB. So this model is real. It's not far away to show you where we lend this. So that's from the investment perspective is pretty attractive. That's -- that's the kind of the answer of the question, why Dealz, yes because the -- our dream with Andy before with Rob Taylor was -- okay, so let's just build the second Pepco. Pepco was and it still is a successful model with a pretty high level of the saturation. So let just utilize the strength, let utilize the scale of what Pepco build, let's utilize the infrastructure what Pepco build, and just simply build a second brand under the one Pepco Group banner, which is something -- which is standard. If you look at the Inditex, if you look at the LPP, even if you look at the [indiscernible], that's how it works. So it's not unusual. However, I know that you all guys have a question, should we have a one brand across the -- all entity? or is Dealz which makes the things the complex. So as Andy said, we will have downward within the next couple of months. What will be really the strategic decision around the Dealz. However, from my perspective and my recommendation will be let's invest in this. And we can show and we show already that whatever we promise we are trying to deliver. So yes. Thank you for this.

Great. Thank you, Marcin. Okay. Look, a bit ahead of time. It's coffee break now. So will take 20 minutes or so. So we'll call you back when it's time, but feel free to stretch your legs, have a coffee. Coffee is around where it was before, and we'll call you back in about 20 minutes' time. Thank you. [Break]

Okay. Welcome back from the coffee break. So Neil Galloway. Nice to meet all of you. It's always good to come at this point, sort of the end of the morning when all of my colleagues are very helpfully passed sort of all the difficult questions in my direction. But I'm going to try and go through some of the numbers over the next 40, 45 minutes or so and then we'll take questions subsequent to that. Let's wait for a few people to grab their seats. So what I'm going to try and do today is provide a bit of context. So sort of an evolution of the business over the past 5 years and 5 years, really going back to pre-COVID to 2019 as a sort of maybe an undisturbed year prior to the disruption that's come through the pandemic and looking forward to full year '23 where we kind of are today, to give a bit of context. I'll then talk about the key business and cost levers. And maybe just to say right now, this is not a complicated business. And from a financial perspective, there's really three things drive performance: The sales line, and that's driven by like-for-like and growth, it's the margin, and that's really driven -- the gross margin, really driven by how we're buying. Yes, there's some costs against that, and then really the category mix in terms of what's delivering that. And thirdly, it's how we manage our costs. And that's essentially what's at the core of the financial performance. And so we'll talk about some of those inputs and aspects. And then lastly, I'll talk about -- I mean some detail of the store performance review and really cover the core business in Central and Eastern Europe, Western Europe, which I know a number of you have been asking about. And I'll also talk about the U.K. picking up on some of the comments that were made earlier. And fundamentally, the health of the business is really about the health of the stores. And I think that's really felt it was helpful to end on that, and then we'll have a wrap up. In the context of the numbers in the presentation today, just to say, obviously, we haven't closed the year-end yet. We're kind of going through that year-end process. So the numbers you'll see today are not audited at this point in time, so there's health warning around. Some of those may change when we get to the full year audited results announcement, which is on the 12th of December. But it's -- to sort of give some context around performance. So some of these are coming from the P11 annualized or the management accounts, but it's just to give you the best representation we can on the business as it stands sort of as the full year 2023. But just to reiterate, these are not audited numbers at this point, and we will update those when we get to the full year results on the 12th of December. Unless specifically called out, we're really focusing on an IAS 17 EBITDA number. So really trying to bring it back to a cash EBITDA number. Previously, we've tended to a headline on the IFRS 16 EBIT number. So essentially a pre-read number. We felt it was appropriate to bring that back to what we believe is a better metric for reflecting the financial performance of the business, specifically around the stores. And we'll talk of store contribution in that context as well, again talking about the health of the stores. That's excluding central overheads and preopening costs, but I will talk a little bit about the overheads as well, just to give a bit of context on that. So that's just to set the scene in terms of where the numbers are that are in the presentation we're going to go through. So a very short recap on the last 5 years. The business has obviously grown quite materially from 2019. So 65% in revenue terms. The like-for-like in 2019 is about 2.6% across the group. I'll show you the breakdown of how that like-for-like has evolved across the different formats through the period. And instead of 6%, full year 2023. With 72% growth in store numbers. So we've added over 2,000 stores in the last 5 years, so averaging about 500 a year. But we've obviously been accelerated 400 a year, but we've been accelerating the growth of those stores. And as Andy mentioned, the gross store openings last year were around about 800 for full year '23, net about 668 as we disclosed. EBITDA and again, this is the IAS 17 EBITDA up 20%. So it's obviously growing behind the pace of the top line growth, and some of that's just a drag from the pace of growth and leverage has remained fairly flat, it's actually down. A couple of things just to remind the room, this business has grown with no external capital throughout this period. So all of the growth we talk about today has been funded from operating cash flow and some improvements in working capital over the last few years. The debt that's in the business was put in place as part of the capital restructuring at the time of the IPO in 2021. And the equity was raised at the time of the IPO was actually secondary. So the company has actually managed to deliver this growth from operating cash flow. And I think that's quite important in the context of the business and performance. So if we start off with the sort of sales growth over the period of 13% compound growth over the period, Pepco has actually growing at about 20% and Poundland about 4%. We'll talk about Poundland in the future, but over the last few years, we haven't seen much growth in the Poundland business, partly, as Andy referred to, we've been prevaricating about what we do with Poundland and where that fits in within the context of the group. And I think we're fully committed to standing behind Poundland and seeing that as part of the future. And you will see more growth coming through the U.K. and Poundland going forward. And Barry referred to a little bit of that in the opportunity and aspiration for Poundland in the context of the U.K. The red bar in -- the red blocks and the bar chart on the left there are essentially the growth sort of the new store growth. And actually for 2023, that's quite understated just given that a lot of the new store growth came in the latter part -- the second half of the year and particularly in the last quarter. So if we had the benefit of that for the full year, it would have been significantly higher. And you'll obviously see the benefit of that coming through in 2025 -- FY 2024. So even if we didn't open an EU stores, at all in FY 2024, which we do intend to do, there'll be quite material growth from those new stores we opened during FY 2023. And again, you can see the effects of the new stores on the year-on-year growth on the right with the total company growth of 17% versus the like-for-like performance around about 6%. If we go back to 2019 the business was sort of 50-50 between -- essentially between Poundland and Pepco. And you can see -- so you can see from this chart, most of the growth going forward has been driven by expansion in the Pepco format and Pepco brand. Initially from Poland into Central and Eastern Europe and increasingly into Western Europe in the last couple of years, and I'll show the geographic mix and a difference. But it is worth calling at here the U.K. and Poundland remains our single largest market in revenue terms. So I don't think we particularly called that out before, but that has been a fact and remains the fact today the U.K. business is our single largest business today from a revenue perspective. And you'll see some of the contribution numbers at the store level at the end of the presentation, which we affirm the comment Andy made earlier about from a cash contribution [indiscernible] for Poundland is our best performer. If we look at geographic change over the years, you can see the shift here. And I think this is the first time we're actually calling out Western Europe as a block. You can see the growth has accelerated into Central Eastern Europe instead of the lighter green block at the top. And then as we move from '22 into '23, you'll see an emergence in Western Europe as part of the sort of future of the business. And this is that we intend going forward to give this geographic disclosure on an ongoing basis. It's not something we've done before. But I think if we call out the U.K. Republic of Ireland as a block, Poland, the rest of Central and Eastern Europe and Western Europe, we expect to continue to disclose against this, which will hopefully give you some greater visibility on performance across those different geographic markets. In the last couple of years, it hasn't made much sense to talk about Western Europe between a pretty small part of the business, and it's really only a 2-year old business, if we're honest about it. And you'll see some of that when we got on to the details on store contribution and how that's built up over the last couple of years in our key markets. Western Europe today for us is essentially 80% of that from a revenue perspective is coming from Spain and Italy. So that's what we're focused on today. These are really the markets that have enough scale to give some meaningful context into financial performance. If we then talk about category formats, Andy has talked today about moving to one business. That will be a business that's delivering from a core range of FMCG, clothing and general merchandise. Now you've got the three categories here over the last 5 years. They haven't been aligned. I think the FMCG has had a much larger range of products. There's been different clothing and different GM between the Poundland business and the Pepco businesses. But going forward, from this financial year onwards, we're moving to a single core range of FMCG. And there's a lot of work to go on this year to define what that core range is, which will be available across all the stores where we offer FMCG and clothing, as Barry said earlier, is moving into Poundland this year. It's a year of transition. So we're transitioning out from the Pep&Co clothing range. And we've begun to bring in the Pepco Clothing and General Merchandise for next year. As you can see here, FMCG has dwindled as a sort of share of the overall business, it's about 27% now from about 1/3, 5 years ago. Going forward with the increased focus on the Pepco plus model, FMCG will regrow that share going forward over the next 5 years. So clothing has been sort of the growing segment. If we look back 5 years to today, that going forward, FMCG will take a greater share of the overall mix going forward. Now that has some implications on margin over time. But as you'll see from some of the numbers later, it should drive higher frequency from a customer in store and facilitate a larger cash contribution per store. That's the sort of flywheel effect we expect to see from that coming through across the business. So I'll now try and talk about like-for-like, which has certainly been challenging from a forecasting and baselining. So this is by brand over the last 5 years. You can obviously see the impact of the pandemic hitting in 2020 with negative across the board. It was sort of more muted in Poundland because of the food category. A number of the Poundland stores could remain open during COVID as an essential retail, not all of them, but a number of them. So the negative impact was more muted in the case of Poundland and it was in Pepco where stores were open and closed in different geographies that are operating during the pandemic. And then you can see deals obviously growing from a small base. I mean, if you look year-on-year of FY '23 versus FY '22, it's been I've seen about 70% revenue growth. A lot of that coming from new stores. But obviously, as it's matured, it's coming off a low base, but it's been growing quite rapidly as a business. But across the whole group, if you take away the noise, it's about a 3% like-for-like if you go from 2019 through to FY '23 across the whole group made up from that mix. And I'll talk a little bit in a second about the quarter-on-quarter performance throughout the period for each of the brands. You can see a little bit of the challenges we had in terms of forecasting. So a lot of data on this slide. This is the Pepco like-for-like performance. The pink bars represent Poland, which is obviously our biggest market, and the blue bars represent the rest of CEE for Pepco. And this is quarter-on-quarter from 2019 through to date. Clearly, pretty challenging forecasting quarter-on-quarter year-on-year or year-on-quarter in terms of performance. So not an excuse. This is just the fact base that the business has had to try and forecast against to meet sort of external expectations and how to run the business. So it's not been easy. I think one thing to -- and you can see, if you look in the four columns on the far right of the slide, that's the 5-year compound annual growth rate if you just take the quarter-on-quarter, 5-year period, you can see the range is between 4% and 5% essentially like-for-like over those quarters. Q1 has always been our strongest quarter, which is the last quarter of the calendar year, which brings on board our main trading period, which is obviously Halloween now going through Christmas into the new year. So just bear that in mind. So Poland, as you can see here, has underperformed the rest of the -- from a like-for-like performance over the period. A little bit of that is due to, it's the biggest market. We've got more stores. As Mark talked about earlier, more competition, more maturity in the business, probably some cannibalization coming through as we've extended the network in Poland. But just to give some context about splitting out Poland and the rest of CEE. It also goes to Andy's point about the importance of focusing back on Poland and CEE just to drive better performance in our existing business. And when I get on to the store performance, you'll see there's a great opportunity if we can deliver that in terms of profit improvement across the company. One of the questions that comes up regularly is what's driving like-for-like? Is it price? Or is it transaction volumes? If you look at the blue line, that's -- there's a solid blue line. That's essentially the average transaction of the basket. It's around about EUR 9, average basket. You can see it's obviously grown over the 5-year period and the red line that's the total like-for-like across the business. So those lines are, to some extent, converging. So there's been more volume driving improvement than putting the sort of the prices going up. If you look at the dotted lines, that's really taking the 29 team cohort, which was in large part driven by Poland. And you can see, again, it's reflecting what I said in the previous slide, that there's been some erosion in terms of -- I think, again, some of the competition maturity cannibalization in Poland just driving a weaker like-for-like in terms of volumes across the store base in Poland. So we move on to Poundland, Same picture over the same period quarter-by-quarter. And to the point Andy made earlier, Poundland has improved quite significantly over the period in terms of its performance led by Barry Austin and the rest of the team in terms of driving better performance in the core estate. There hasn't been a lot of growth in terms of new stores in Poundland, so the performance has really been driven by improving like-for-like performance. Clearly, there was a big bounce back in 2021 as stores opened again post-COVID, but -- and in 2023, we've seen an outperformance of the business, really driven by its category mix. About 65% of Poundland is FMCG. So it's an FMCG-led discount reserve, as Barry said. And so it's benefited during this year as people are focused on that particular category. Similar chart in terms of price and basket. What you can see is that during when we went through COVID, we saw people shopping less but spending more. And actually, the baskets held up since then quite well. The reality is there's not much convergence in the lines in terms of price and basket, it's just there's not a lot of new stores, it's been -- there's been a little bit of pickup transactions. I think that partly reflects we've picked up some additional customers in the more challenging economic environment we've seen. So we've seen some people, that will be trading down as customers into Poundland, who may not have shopped there before and keeping those customers. Just to give you a little bit of a picture on what's driving the performance across the business. Something else we have talked about in very general terms, but we haven't called out specifically in numbers. There's the difference between -- is related to space. So we have, on average, been opening slightly larger stores throughout the period. So you can see this. If you look at the chart on the left, the sort of lighter, the sort of pink line at the top is the space growth in square meters. And the line below it, which is the sort of -- I think it's the sort of purple color is the number of stores. So we have been growing space ahead of the number of stores. So about 75% space growth over the period compared with about 6% to 8% growth in stores. I mean that has a few consequences, one of which is more stock in the business because we've got more space. So in terms of something -- and we will give more disclosure on an ongoing basis about space metrics as well as store metrics because it has implications on the business more generally. And again, on the chart on the right, again, most of this has clearly been driven by Pepco. You can see that from the store numbers in the blue bars on the bottom and pretty much, in fact, slightly lower store numbers in Poundland. That's partly reflecting running off some of the loss-making stores and underperforming stores and we'll share that -- I'll share a little bit more of visibility on the store performance for Poundland and the other brands at the end. And then obviously, we've got Dealz coming in the light green on the left at the top bar. You can see the average space per store on the right to Poundland larger -- as Barry said, the Poundland store size is gravitating to the higher end, it's sort of than this. There's quite a number of smaller stores from a historical perspective that start within the Poundland, but the Poundland store size is getting increasingly bigger. And actually, some of the Wilko stores that Barry referred to, they're on the larger side. So we'll see a continued increase in the Poundland store size. As Barry mentioned, that's partly behind the plan to drive towards the opportunity we see for Poundland in the U.K. and leverage that opportunity. But also Pepco has been getting slightly bigger. Part of that reflects the move to a Pepco plus format in Western Europe, but we have seen some increase generally in the Pepco stores. And then Dealz actually, we've got a little bit smaller as we've expanded Dealz within Poland. But that just gives you a little bit of context on space versus stores, and we'll give better disclosure on this going forward in the future. What might be more interesting is the sales density picture, which we've given here. And obviously, as we give space metrics, you can obviously calculate this. But just to give a couple of things to highlight on this slide. So Pepco has not recovered to its sales density levels that had pre-COVID in 2019. So it's trading below that. And that's one of the things when Andy talked about getting back to focus on the core business and driving stronger performance is trying to attack this. You'll see from the data later on store performance, Western Europe is actually higher than this. It's over 3,000 square meters. So Western Europe is driving better sales densities in Pepco in some of our core estates in Central and Eastern Europe. The other thing that's probably a call out here may surprise some of you is, the Poundland sales, which is almost double what Pepco is. And that's actually grown from 2019 through to date. So Poundland is driving good sales densities in its business, and that's partly a function of the category mix that's going, FMCG being a frequent purchase category. And Dealz, again, is delivering better sales densities than Pepco. So again, that all points to sort of getting more focused on how do we get that sales density and performance up in the core Pepco business, which is where we have the majority of our stores. A topic a number of you have raised in the last couple of days, and I'm going to go through this briefly, and I'm sure there'll be questions later. But in terms of the gross margin picture, and I'll give you some breakdown in a second by Pepco and Poundland. Poundland actually fairly consistent, probably not surprising given the category mix and actually has improved slightly. We've obviously saw a dip during COVID and the pandemic. But Poundland remarkably consistent. Pepco, we've obviously lost quite a lot again impacted through the pandemic period, recovered slightly afterwards because we had a smaller volume business, but it's still sitting on a gross margin basis of 400 to 500 basis points below where it was in 2019. And obviously, the key objective, there's different reasons for that, and you'll see in a moment why that's the case. The key is really to focus on getting that trajectory back to pre-pandemic 2019 levels or better. And there's good indications as to why that's deliverable, and I'll show you that in a second on the next slide. The other factor, as I mentioned in terms of margins, obviously, the category mix. You can see on the right, we've got FMCG at the bottom, structurally a lower margin, as you'd expect, just given the mix. And within that, there's a mix within a mix. And that's the same for each of those categories. And clothing has sort of underperformed relative to general merchandise over the last couple of years. So if we look at the evolution of gross margin in Pepco, and I'll show you Poundland in a second, we've got what we called out here is the project margins. So the sort of highest margin where we're actually buying the product in the factories. Actually, that now in FY '23 and the benefit for that will flow through into FY '24 and this goes to the point Agnieszka was making earlier about the lead lag impact of the buying cycle, where we're buying at and where we're selling at are not in the same. We're buying now to sell to sell next year. So you've just got to remember, that's part of the reason for giving some context around the different buying cycles for FMCG, clothing and GM. In '20 -- and then you've got the gross margin which is the red line, which is the -- what's actually landing in our financial statements, and obviously, what all of you are particularly focused on. And there's been different drivers throughout the 5-year period impacting that. There's always been freight. If you look at the -- I'll call out the key ones. There's always been freight and transport cost. And that's been fairly steady until 2022 and obviously into 2023 when we saw container rates and going up dramatically. I think for the low point from 1,400 a container to 15,000, 16,000 and they're coming back down. But a lot of the stock we have that's been landing this year, we bought last year when rates were still higher. And as we called out when we had the sort of profit out and discussion a couple of weeks ago, we're still cycling through some of that stock that has some other higher cost sitting in it. And so the sooner we burn through that, the better that will burn off, and we'll see an improvement in the gross margin just as we burn through that component of it. Second element, maybe just to call out marketing. In 2020, in particular, we had a big -- that was really when we had COVID. We were really -- it was critical to sort of drive cash out of the business. So we were marketing that product to drive sales, to drive cash. So that was in -- I wish to describe that as an anomaly due to the environment we were operating in when a lot of the stores were closing, we just needed to generate some cash in the business. It was at the same time we were going around our suppliers looking for payment terms that we hadn't had at the time. So there was a lot of activity that was really focused during the pandemic on getting the business through that period. And we've seen some increase coming back in that this year, and that relates to, obviously, a desire to use markdown, part that we used some over the summer as we saw weakness coming through in consumers to sort of stimulate sales. And partly, we referred to it in the recent rise by sort of putting some provisions in through to try and accelerate the clear out of the stock that's a higher cost to get us back to a better margin position going forward. The other aspect that's hit us during this year has been the FX impact that has been -- and again, remind people we're a Zloty-based business. We've been buying everything as a buying entity into Poland and then reselling into the other markets we operate in. So we've had a challenge in terms of Zloty CNY and dollar CNY. So there's been an impact. But that is largely behind us. And we should see, as we cycle through that, if you look at the product margin outlook and the trend line, as we cycle through the freight rates and the FX headwinds we've had this year, there's a good reason. That's why we keep saying there's a good reason to believe that the gross margin will follow through on that and we'll be in a better place over the next 12 and 24 months. Poundland, slightly different story. I mean we generally had an improving margin. It's also suffered some headwinds in terms of freight rates, container rates. But as you can see from the gray bars here, it's not as impacted because, again, 65% of the business mix is coming from FMCG, which is just entity sourced locally. So it's much less exposed than Pepco is. Remember, Pepco sourcing as you saw earlier, 80-plus percent of its products through PGS from Asia. So the majority of the Pepco range is coming from Asia, whereas the majority of the Poundland range is coming from within -- from the FMCG universe within Europe. So it's not as impacted. And again, that's another reason we move forward to that category mix changing. Moving forward, that will also mitigate some of the risks around freight from other parts of the world. The other thing -- and Barry touched on it to call out in terms of the drag from the product to the gross margin in Poundland has been marked down and shrinkage. And you can see a little bit of a worsening in 2023. And for those of you who spent time in the U.K., it's been difficult to miss the headlines about ramp and theft in the high street. We're pretty much -- I don't think there's a retailer in the U.K. now that was not looking for some actions to try and address this. Partly, there's a material financial loss, it's running north of 2% in terms of shrinkage in the business. And on the sales level, that's a material number. It's a material number in the context of net margin in the business. So just to put it in context, this is a big and structural problem, and it's a growing problem. And as Barry said, it's more of a problem in Western Europe than it is in Central and Eastern Europe, but it is getting worse in Central and Eastern Europe just given the economic environment. But this is a problem we need to try and get after as an industry in the U.K. and other markets because it's becoming a behavioral challenge for some segments of the community in our stores. The other reason the product margin benefit that we've been doing as we move to multi-price and multipack deals, that's obviously helped the margin in Poundland as well. So there's a good margin storing, improving margins storing in Poundland as a business over time. So this chart is giving a little bit more of a call out in relation to the impact of category mix on the margin. This is not someone -- for clarity, this is not a time period from left to right. This is not from 2019 through to 2022. This is taking in the case of clothing, general merchandise and FMCG the subcategory by the various subcategories we measure within the business, the different margins that are sitting within those subcategories. So the average for the business around about 40%, which is the dotted black line across that. And you can see the categories that are above or below that. And within the categories, the subcategories. And so part of the margin outcome depends on the sales mix running through the business in any particular day, week, month of the year. So as we see shifts in behavior, Mark talked a little bit about the challenges we've seen in clothing and GM in Pepco over the course of the last 12 months. We've obviously seen strength in FMCG. So I was saying there's two things around driving the margin outcome. And one is how we're buying and some of the costs against that FX, freight rates, et cetera, and the other is the category mix and where the consumers are shopping. And so it's just a mathematical outcome from all these, and just to give you some visibility on where that -- where the margin structure is. And there's quite a big difference if we were all FMCG for all clothing or all GM and so the mix is important. I think where we feel the best place to be is a blend of all these, and there's pros and cons of each of them. FMCG has been a strength in the business this year. Had we not had it, the outcome for the year would have been worse than it is. It's driven a lot of the like-for-like performance not just in Poundland, but also in the Pepco Plus stores in Spain as an example. So the last area to come on to costs. I talked about sales. We've talked about margin, and I'm talking about costs. Cost has been a real challenge in the last 12 months. We obviously didn't forecast when we went into FY '23. The sort of labor inflation we've seen in Central and Eastern Europe, a 15% wage inflation, we didn't see that coming at that magnitude, and that inflationary headwind has been a challenge all the year. And that's been a challenge generally across the cost base because, obviously, that feeds into things we're buying from suppliers to fixtures and fittings and anything else. It's all part of the same inflationary story. So there's been inflation generally in terms of costs coming into the business from the base business. And obviously, as we've added a lot of new stores, there's been an incremental inflationary impact from that. The dotted line on the left reflects the space growth. So again, you can see a correlation between the space growth which has been accelerating as we've been opening more space because this average store size has been bigger and the cost base. We had particularly probably some own goals in transport, and we've got some handicaps in transport, which is the top gray bar on the left in relation to -- you'll see in a second when I talk about stores. Some of the reasons we've got that handicap. We've got distribution centers sitting in Central and Eastern Europe, we've got stores all the way over in Portugal. And you can see that graphically when I get on to the store performance just to explain some of that. And we also had -- and I think we called out in the full -- we had too much stock at the end of last year, but too much stock at the end of this year, but we had to source some external warehouses to host that incremental stock last year, which is quite a significant additional sort of own goal in terms of costs last year, which fed into the FY '23 numbers. So we hope not to repeat that during the course of this year. We have opened a new distribution center that we -- our own DC in Romania this year obviously helps mitigate some of that. Frankly, the business was struggling from a supply chain perspective to keep up with the growth. And I think we're in a better place now. There's more opportunities. But just to explain why there was some one-off incremental transport distribution cost in the business last year. But most of it is coming from store costs i.e., rent. And as you know, we've got some escalation clauses in our rent bills and new stores and from labor. And we have some challenges in some of our markets in terms of less labor flexibility, for example, in Poland than we do in the U.K. In the U.K., it's much more variable on an hourly basis. In Poland, we've got more stringent contracts with our colleagues in terms of FTE base. So there are some things we -- there are opportunities to address some of that. But this is a super tanker not a speed book. So some of these things take time to work through the system to get improvements, and that's something we intend to get after during the course of 2024. If you look at the graph on the right, if we try and bring that down to a per square meter equivalent basis, actually, you can see from 2019 through 2021, partly as a result of what was going on during COVID. We've actually, the cost trend was in the right direction then. So we did take sort of decisive action to try and mitigate some of this, but we've lost a little bit of control of that in the last 12 to 18 months. And we need to refocus on that. Some of it relates to what Andy said is we've opened new stores with sales aspirations that we didn't meet, we've kind of staffed up to help to support those sales which we haven't met. So we've got some opportunities around some of those areas to take that cost out of the business. We will need to get after and focus on during the next 12 months. If we look at Poundland, it's a much better story in terms of cost management. I think a lot of that is more again, as Barry talked about, much more competitive environment we've been used to living in, in the U.K. and there's been a lot more focus out of necessity just given where Poundland was performing at to focus on costs. So we've done a much better job on controlling and managing rents. And there's more ability to control labor. It's gone up, but it's been relatively well controlled. Where it's been challenging for Poundland and the U.K., and again, for those of you in the U.K., it's been about energy costs, where that's obviously impacts refrigeration in stores and those sorts of things. So we've been -- that's been an impact. We have taken -- we are taking and continue to take efforts to get more efficient in terms of energy use, but that's been an impact. And the other is in terms of transportation and fuel costs. So those are the two things in particular that have had an impact along with, as the store size average gets slightly bigger, again, just remember, although we've got a similar number of stores, the space is slightly larger. So again, those explain some of those costs being higher. But generally, Poundland has been in a better place in terms of managing that cost. But as it gets bigger, there'll be -- it's an ongoing challenge. So the other aspect is central costs are overhead. And you can see the trend line there. The 6.8% in 2020, I mean that's the combination. Yes, costs were up, but obviously, sales were muted because of the pandemic. So I would ignore that from an anomaly perspective, just given the environment the business is operating in. But again, from '22 to '23, we've seen an unfavorable trend in overhead and operating costs, which is something absolutely we need to get after. I'd maybe call out a couple of specific things, but projects, which is the purple bar in there that that's really called out. There's a lot of things that have been going on in the business, which we're relooking at as to whether these are distractions or essential. Just to give you such so there are definitely opportunities to address the overhead costs by doing less to deliver more to use the words Andy was using earlier. So that's an area of specific attack during the course of 2024. So trying to move on to sales have grown, profits haven't grown. Please explain. This is attempting to do that. So the top pink line is the sort of IFRS 16 EBITDA, we have historically been reporting against and guided against. So the latest number you recognize on the far right, we had 731 million of IFRS 16 EBITDA and for FY '22. We've guided to 750 million for the full year. You'll get the final number on the 12th of December when we match the full year results. If we take that down to the next level, the sort of IAS 17 EBITDA. So what's the difference is essentially rent? I mean, I'll characterize it as rent a combination of ROU amortization and interest cost around, but it's essentially rent within the business. That's the difference. And again, that's a combination of increases in the base rent within the core business, and we've opened a lot more stores. So that's really what's driving that impact. So it's about EUR 40 million less than an IAS 17 basis, really is a drag, you could characterize that as a drag from growth in large part. And obviously, some of the rent is coming in, in the latter part of the year. So -- but just to characterize, that's the main difference between IFRS 16 and the cash EBITDA number. The other thing as a consequence of growth and the new look program, which we've talked about in Central Eastern Europe has been a much higher depreciation charge. So we've added about 100 basis. But if you look back to 2019 to today, there's about 100 basis points increase in the depreciation from it's gone from 2.2 to 3.2 as a consequence of opening more stores. CapEx has probably been higher than it should be, and that's something we will look at. And I'll talk about when we go on to the stores. And the new look program has been an additional specific handicap to this factor. And again, we can talk about -- I mean, Andy talked about pausing it. and I'll give some context on the numbers you need to achieve for it to pay for itself, but it's been an incremental cost on the business in a lot of stores that we essentially had no depreciation running through them because they were older stores. So that's been an incremental cost on an existing base business. And we've opened -- I think we've done 700 to 800 stores through the new look program in Central, Eastern -- it's quite a material out of 2,500 stores, about 1/3 of the Central and Eastern European state. We've put incremental costs through as part of the new look program. Which at the time the decision made, I think, was done for all the right reasons. It's just not delivering the performance to offset the impact of that additional cost that's going in to invest in those stores. So that is what's driving that. And obviously, we've got higher interest costs to result slightly higher gross debt. But obviously, as rates have gone up, we've had an impact from that. And that's why the PBT has gone backwards. So just to -- I mean, call out quite simply, that's what's driving the impact from sales to EBITDA to PBT and obviously down to after-tax profit. A bit more context on depreciation that you can see here that an incremental 100 basis points in depreciation moving from 2019 through, the blue line reflects the cumulative new store growth throughout the period. And then the gray lines overlaying the impacts of the new look stores. So you can see about 3,000 -- I mean, round numbers, 3,000 stores over that period. in the context that we've got total 4,000 stores in the business today, just gives you a sense of the impact that that's having on the cost line through depreciation. So just to give you some context around that, that's what's the impact. And we'll talk about what that means going forward for growth in terms of -- we have to be much more rigorous about, are we spending the right amount of money on new stores and on the new look program. So even if it comes back and as we go forward, what can we do to get more aggressive on managing that CapEx per store to sort of mitigate the impact of the depreciation running through the business. And to call out and illustrate the example of what the new look program has meant. It's essentially added about EUR 20,000 in round numbers per store. We're typically depreciating our stores over 5 -- typically a 5 plus 5 lease so we're typically depreciating on a 5-year basis if you took a store. So the impact is about EUR 100,000 we were spending on new looks. It's about 20 -- so we've put an additional tax on those stores. And essentially for that to be profit-neutral at a store level, we'd have needed to deliver about 6% like-for-like in those stores to offset the impact of that investment. And we're not hitting that at the moment. When we started the program, we were, I think we've -- I think, prior to my time, but I think in previous investor community, we were delivering about 10% like-for-like performance in the New look stores against the control group. But that's obviously eroded over the last 6 to 9 months for the reasons we've talked about macro, consumer weather, et cetera, and hence, the reason for pausing and reviewing the program today, I don't think the principle and the premise behind it was banned, but it's not delivering performance needed to offset the incremental cost behind it. So we paused it. The next thing I'll talk about, which sort of feeds into a discussion on cash and working capital stock. So we have too much stock in the business today. We have too much stock in Poundland, we have too much stock in Pepco. Some of that relates to, as Andy described earlier, if we look at the beginning of the year, things were trading particularly well, we bought more stock in the base that, that would continue to be the case, that hasn't. So we bought more stock then we can trade through the business. So we've accumulated more stocks. So we're about 1.2 billion -- slightly more than EUR 1.2 billion of stock in the business. It's about EUR 100 million more than we were in March or this time last year. It will be slightly higher, I think, by the end of September. This is in August -- this is in August -- August period it will be slightly more by September. We are taking action to delay, defer and cancel -- delay, defer and cancel some of the stock, recognizing we are -- the benefit of having PGS and direct relationship with suppliers, we're in a much better position to do that than some other retailers who just don't have that direct relationship. So we've got a good relation with suppliers. So we are managing to mitigate that to some extent in terms of future commitments we would have otherwise had to make. But you can see the stock day position here has gone up, and I'll talk about that. So there's an opportunity if we can get after improving our stock management to move this back to where it was historically, is quite a significant opportunity for cash back into the business. If I look at the mix of the stock, so the gray bar -- this is -- again, this is going back for the last 20 -- last 2 years. This is -- the gray part at the top is FMCG. So just to remind you, about 26%, 27% of sales mix is coming from FMCG. It's about 10% of the stock in the business. Again, that just reflects the higher stop turn we've got in the FMCG category, where we've seen -- and again, it's a little bit difficult to see, but the blue is clothing, and we've seen a gradual buildup in excess clothing over the period. So it's more in clothing we've seen an accumulation stock than GM on a relative basis. And that's largely obviously coming through Pepco more than Poundland. So then taking that and looking at the working capital impact, again, if you look at where we were in 2019, 100 stock days and we're at 130 and right now it's about 130 days. So there's been a material deterioration in stock days in terms of -- we've had a big improvement in payable days. We've gone from 30 to -- close to 80, which is obviously a significant improvement. So the opportunity here obviously, is how can we continue to sort of maintain and improve the payable days. And there are some opportunities around that still. But how can we manage stock down because there's a very material cash opportunity by narrowing that 130 days down towards -- if we could get it back to 100 days -- happy days, that would be a very material cash infusion back into the business. So that is an area of focus in terms of how we deliver against towards that over the coming year. And I'll talk a little bit about cash flow. Again, I referred to this earlier, but this business has funded its own growth. So the solid blue, the dark blue bar there is really the operating free cash flow in the business from trading the business. Obviously struggled in 2020 with COVID and we had to really go out and you can see from the working capital, we really had to go out and beg, borrow and steal from the suppliers to get some payment terms that we really didn't have. I mean, if we come back from history, the business had struggled, and I'll be quite direct that they had struggled from the legacy environment of Steinoff ownership in terms of nervousness around our supplier base and nervousness around the credit insurer market, providing that. COVID actually provided us an opportunity to address a lot of that because of the business needed cash and support from our suppliers to keep going. So funny enough in this respect, the pandemic was actually quite helpful in terms of moving away from that sort of legacy environment to getting support from our suppliers, which they did provide to help us move through. So there was -- the business did a really good job in a very difficult period when a lot of the stores were shut to get after and get support from a supply base. And you can see the working capital benefit there in 2020 from doing that, and that's continued. There are still opportunities, particularly in our supplier base, where we see big growth opportunities, and that's something we are, again, going after this year. But generally, the business has funded all of the CapEx. This year, it's about 373 million of CapEx, record CapEx spend in the business in FY 2023. You can see it's all being covered by the operating free cash flow in the business. So notwithstanding missing on profit, the business has self-funded its own growth. And genetically in its DNA, that's important, and that's something we expect to continue to doing. As Andy said, if we deliver on the sort of revised focus for 2024, we should see a significant improvement in terms of the free cash flow generation after everything from within the group because CapEx will be reduced and there's opportunities around working capital and stocks. So we should see an excess of cash generation during the course of FY '24, and that's very much what the target is for the team. Just to give you some context of where the CapEx spend has gone. Again, you can see the acceleration. Most of it has gone into Pepco that reflects the fact that, that's where most of the new store expansion has gone. Dealz has been a record in the last year as we've added the stores Marcin talked about, and I said Dealz sales year-on-year is about 72% growth, and we've added about well over 100 stores, I think, in the last 12 months in Dealz. And then if you look at the breakdown of CapEx spend, again, the biggest spend is in stores. It's in that network expansion. So you can see that over EUR 200 million last year. The second element, which are the red, relate to the store refitting. The vast majority of that is the New Look program. Some of it was in Poundland,but the vast majority has gone into the New Look program, and that's what we're pausing at the moment, as Andy said. And then the rest is a range of other things. IT and other is a combination of projects and some of the IT investments and the ERP transformation to landing on a single platform, which we think is the right thing to do to move -- to help support the move to one business over time. So the next section, I'm going to try and sort of cover what I believe is the critical metric of health in the company is really the store performance. And I think there's some very good news in here, and there's also some opportunities for us to focus on. So I'm specifically focusing on Pepco and Poundland here because that's essentially the majority of business. I'm going to leave Dealz to one side for today and just talk about Pepco and Poundland. So essentially, the core format. So over 4,300 stores and about 558 net new openings in those formats this year. So the difference between the number we announced the 668 was the Dealz growth. Excuse me for one second. So I'll show you the detail of the business in a second. But in summary, Central and Eastern Europe remains our best-performing region, 16% EBITDA. Again, this is all store level. We had 57 loss-making stores, with less than EUR 1 million of cash drag at the store level. I mean if you talk to any other retailer that is beyond world-class in terms of performance, in terms of that sort of metric. In Western Europe, which I know is a concern to people. And again, I'm focusing particularly on Spain and Italy because that's where we've got up to 2 years of trading history, so -- and enough stores to be meaningful and give us sort of picture. We're only delivering about 5% to 6%. So there is a lot of opportunity in terms of improving performance, and I'll show you where those opportunities lie, and we can talk to them. But a lot of that is within our gift as operators to fix the performance of those stores to get to a level where the store contribution is the right level of contribution. But again, the cash drag from those stores is less than EUR 1 million. That's a business that 2.5 years ago didn't exist. And it's doing about a run rate of about EUR 400 million in sales today. So again, I think as a start-up business in those markets, that's not a bad performance in the space of 2.5 years. And then Poundland, it still has about 100 loss-making stores. It's about less than EUR 8 million in cash drag from those stores. And the right thing to do from those stores is to run them to lease expiry. Most of those stores will run off the books within the next 3 years. And the right cash decision, which I think is the right way of looking at this is to let them run to lease expiry rather than accelerating the exit from those stores. Because they are obviously helping us drive sales and volume and all the benefits we get from having more coming into the business. So there's a self-help mechanism to deal with, with Poundland. And obviously, we're looking much more forward at new stores and opportunities. Wilko was a reflection of that and again, a good base. So that just gives you an overview of the business. So first if I look at Central and Eastern Europe, a couple of things to highlight on this chart, and it's important when we go on to Western Europe, the DC infrastructure, the distribution center infrastructure we have today is sitting in Central and Eastern Europe. We do not have any distribution centers in Western Europe. I'm leaving U.K. to one side, we obviously do. But in the Western European business, the DCs, we've got two in Poland, got one in Hungary, which is our biggest one. And we have a new one that we opened about 3 months ago, I think, in Romania. So all of the products from Pepco is coming from these DCs, not just in Central and Eastern Europe but into Western Europe. Romania added this year. So as I said, when we had an issue last year, we didn't have that DC. So we've added quite a bit more capacity within the business to hold and manage stock. It's about 3,000 stores at the end of '23, 6.5% like-for-like growth. We opened about just under 300 in the year. We entered one new market, which I think was since the last update, which was in Bosnia and Herzegovina. And again, you can see from the pie chart in the bottom, Poland remains our biggest market. And then Mark talked about the other key 3 markets, Hungary, Czech and Romania. So that's about 75% of the CEE business. Actually, some of our strongest markets are the smaller markets up at Lithuania with some very strong performance in some of the smallest markets, some of our smaller markets in the Baltics, really outstanding performance. You'll see that in a second. So this chart, so in the spirit of full transparency, which people are asking for is the store contribution level across the Central and Eastern Europe. It's the like-for-like stores across Central Eastern Europe not hiding anything. The picture is all there. So at 98% of those stores are contributing to the business. 75% of them are higher than 10% EBITDA margin at the store level. As you can see, there are a few which we've highlighted with the little red circle, so you can actually see them. That's the underperforming stores. And 43 of those are losing less than EUR 20,000 a year. So if there's any concern to the point Andy made about the health of the business at core, this is an unbelievable chart to look at it. If you look across map, this is a good story. It also is where the opportunity is. A lot of the attention to date has been on the loss-making stores, of which we have very few and how we fix those. The opportunities around how we improve the profitability in these stores because we've got a lot of them. And as you can see from this slide, if you look left to right, and I've taken the 2019 cohort, it's about 13 stores and going back to 2019 and look forward to 2023. We've seen sales improvement, about EUR 100,000 on average per store of sales improvement. But we've seen a gross margin erosion of over 600 basis points. We've seen the impact of inflation on the operating costs. So we've lost about 700 basis points of store contribution. So that's about EUR 40,000 underperformance relative to where they were in 2019. This is the point that Andy was making earlier. Stores are doing about EUR 211,000 on average, now think about EUR 175,000, EUR 177,000. So if we can recover that level of store contribution across the estate, which I showed you in the prior slide, that's a massive opportunity for profit improvement across the company. And that's really when we talk about focusing on our core business, it's how to get higher profitability in stores that are already generating money because that will drive much higher cash and profit conversion than focusing on a small number of loss-making stores we have, wherever they are in the group because there's not very many of them. And again, the table on the right gives you the average performance across all the stores today, all the like-for-like stores not just the 2019 cohort, the table on the right is all of the like-for-like stores. So it's about EUR 1 million average revenue per store, doing EUR 175,000 contribution at store level. We've got opening costs in terms of CapEx, et cetera, about EUR 200,000. So we've got a cash payback on those stores in about 20 months. It used to be about 16 months when we had the higher performance. So how do we get it back to that 16 months? That's sort of the ambition in terms of trying to drive better improvement? So that's -- this is the core of the business. This is what we're trying to -- this is when we talk about revitalizing refocusing, improving, focusing, it's on this particular part of the business. And again, to give you transparency, this is a sales range across all of the stores in Central and Eastern Europe. So with an 80% of the stores in each of these markets are within that parameters. I mean you can see the underperforming market actually on a sales perspective is Poland on a mean basis. So again, our biggest markets are our biggest opportunity. And the same on the contribution level. So you can see again, Hungary, we've already moved to improve, increase prices. There were some specific issues. So we've already put prices up in Hungary. So we're on a path of seeing some improvements in Hungary specifically. And Poland, again, remains a strong opportunity for us if we can address that. It's our biggest market with the most stores, biggest opportunity for improvement. So hopefully, that at least gives you some confidence about the performance of the core business, which is sitting at the heart of Pepco. So we talk about Western Europe, and again, this is a 2.5 year old business in reality of any sort of materiality. Again, I've put the distribution centers of the red dots in Eastern Europe. So we've got stores in Portugal coming from Hungary products. So we've got product that's sitting in trucks for 8, 10, 12 days depending on traffic and congestion. So we've got a lot of opportunities to improve efficiency from a logistics, warehousing distribution perspective in Western Europe. We know that that's a fixable problem. It's related to network density and scale that we know we need to get after. That's an addressable problem, at the right time, with the right number of stores. But it's a handicap as we speak today, and it has been for the last 12 to 18 months. We just haven't -- so that's something that's improvable. So again, full transparency on Italy. There'll be copies of the slides available. So you're more than welcome to approach, to ask, but we will obviously make all this available after the session. So again, just to give you some picture, if you go from right to left, that's from the newest store to -- 2 years open. So I was asked, I think, yesterday by some of you around the stores, the maturity profile for stores. In Central and Eastern Europe, the Pepco brand is extremely well known. Everyone knows Pepco. Mark showed some of that data. We've got strong market share. We've got strong category performance. When the stores open, they're generally trading at pretty mature -- maturity, pretty much from the day we're opening the store, partly because it's just such a well-known brand. Not the case in Western Europe. But you can see here a fairly consistent sales performance across all of the stores. So we've -- on the far left, we've got those from -- we've got over 2 years, not that many. Then, we've got 1 over a year, so between 1 and 2 years and then less than a year. And to give some proxy for performance, we've annualized the run rate sales in the last month to give you a sense of what it would look like, have they been open for a full year. I'm not forecasting that. I'm just giving you an indication of -- if you take those metrics and annualize it, and gives you a sense of performance, and remarkably consistent, we would argue across the business. So, as a reference point -- and Andy talked about the disposable income of an Italian consumer. These stores are doing essentially 50% more average sales per store than Center Europe about EUR 1.5 million on average per store. So we would argue there is definitely a consumer response and demand for the Pepco proposition in Italy. And again, to remind you, Italy has got no Pepco Pluses. Italy is a Pepco market. It's the standard Pepco, regular Pepco stores. And again, you can see the sales densities are improving. So again, it just reflects that maturity curve. And the reason we haven't talked about this in prior years, we just didn't have much in the way of historical data with very few like-for-like stores. So this is probably the first time we've really been in a position to give you some data about store performance. So a similar picture on Spain, it's a much newer market for us, and there are a few complexities around Spain to highlight. So as you may remember, we had 2 businesses operating in Spain. We had Dealz, and we had Pepco and we took a decision to essentially move to -- essentially eliminate the Dealz brand, move to Pepco brand and introduce what we're now calling a Pepco Plus format, which is including FMCG as part of the range, of part of the offer from a consumer in the store. We've got very few of those that have really got a like-for-like performance. So if you look on the far left, we've got a handful of stores that have been in a Pepco Plus format for anything -- sort of beyond the year. So it's a much younger estate than we have in Italy, about a year younger. Just to give some context around it. And most of those stores have work standard -- sort of Pepco stores. The red ones are essentially the stores that are a Pepco Plus in format. So they're offering FMCG, clothing, NGM. And again, we've -- you can see the average store performance from a sales perspective, the Pepco Pluses on average are doing EUR 2.2 million. If you look at the average line here, you can clearly see that some of the Pepco Plus stores are driving almost double that in terms of sales performance. The standard Pepco stores are more in line with what we're seeing in Central, Eastern Europe. Don't know at this point in time whether that's the end state or they're still going through the same maturity curve as we've seen in Italy. I suspect it's the latter. But again, we need long -- because you can see the improvement between 1 and 2 years, and we haven't got many stores that were over 2 years. So again, we're expecting there to be a similar maturity curve as the customer and the consumer gets more familiar with the brand proposition. But again, we believe in these numbers. And again, you'll see it relative to Poundland, the Pepco Plus store metrics from a revenue perspective are not that far off where Poundland is in the U.K. And we haven't got the same sales densities, and we certainly haven't got the same contribution level. But again, to the question of, is there a market and is there an opportunity for Pepco or Pepco Plus in Western Europe? We believe -- there's enough data here to give us conviction rates. But we have to get after the unit economic, the store economics from a contribution perspective because that's not good enough at the moment. I'll show you that in a second. So if we look at -- I was taking Italy as the proxy for a standard Pepco in Western Europe because that's where we've got the most data, and there's a lot of consistency around the estate as a whole. So they're doing higher sales than a standard Pepco Central Europe. The store contribution, currently, is about half of what it is in Central, Eastern so EUR 90,000 rather than EUR 180,000. We know that's handicap for distribution costs. We know that should see some benefit from a margin recovery perspective. And we know our CapEx here is higher. So it obviously impacts in terms of various other things. So what we thought to do here to give a guidance to what we think we can get after in that business is to get the store contribution close to, or equivalent to what we're seeing currently in Central and Eastern Europe. If we adjust for the transport cost, which we will get after, we see some of the margin recovery, and we can get after a more aggressive view on CapEx in the stores to get to that sort of level. And that would bring it back to what we had guided previously of about, between 2 and 3 years of cash payback for the Western European stores. So yes, lower margin structurally for a number of reasons. But from a cash contribution to store, we don't see any reason why we can't get to the same place where we've got with the other Pepco -- the core Pepco business, given that we've got a higher sales number coming through these stores. So that's -- and again, if I go back to -- and again, prior to my time, but if I go back to what I think was said at the Capital Markets Day last year, I think we've indicated a regular store being about EUR 1.8 million. So we are missing on sales. We are missing on sales versus the target we set ourselves when we laid out the plan for the standard Pepco store in Western Europe. I don't know whether that's the format or the impact from the macro environment that we've seen washing across, I don't know the answer to that. We suspect it's a combination of all of those things. But again, there's every reason to believe if we can address some of the operating issues within the business, which are within our own control, there's a good opportunity for Pepco in Western Europe and the standard Pepco stores. Pepco Plus is a more challenging situation at the moment. On top of the things I've just talked about for the regular stores, there's a couple of particular things that have made it more difficult in Spain for us. The Dealz side of the business that has fed into Pepco Plus and the FMCG that were sitting on the Poundland IT landscape. And the GM and clothing was sitting on a Pepco IT landscape. They're fundamentally different in terms of how they work, and we've had to cobble together the IT platform for now to try and deliver a full range into the Pepco Plus stores. Together with the distance from the DCs into a -- we've had significant availability issues. In both -- well, with a significant visibility issues of products, and we've had significant availability issues of product in the stores in Spain. So we have definitely handicapped our ability to deliver sales in Spain. And if you've been in the stores in Spain, you can see that. So it's just a fact. We have not done a great job in terms of delivering -- giving ourselves the best chance of delivering a successful business in Spain at this point in time. And that is something we're consciously aware of. And it's something that Barry and the team are looking to address specifically over the next few months, how do we get a better outcome for our customers in the stores in Spain. Notwithstanding that, we're delivering an average of EUR 2.2 million in sales, which is not far off of Poundland. So what we need -- we can see a path to getting the store contribution up to round -- again, round about where the Central Eastern Europe Pepco store contribution is, based on various things we believe are within our own control distribution. We're planning to open a distribution center in Spain next year, middle of next year. So that will help on some of the higher costs we've got in distribution running into Spain. So then if I talk about Poundland, which I don't think we've really ever talked about much in the past before, but we will do going forward. So our biggest market is the U.K. Again, this is all of the Poundland estate. You can see there are more loss-making stores in Poundland, but it is still a pretty good picture by any measure in terms of store performance, all credits to Barry, Austin and the team for improving the Poundland business. It wouldn't have looked like this 5 years ago, there's been a material improvement in store performance across the period. So we've got a strong base to build on in Poundland in the U.K. and the loss-making stores that we have. We have a path to exit, as I said earlier, over the next 3 years. So this estate will continue to get better through self-help. So Poundland's base income of EUR 2.5 million on average revenue per store, delivering about EUR 213,000 of cash contribution at the store level. So that's higher than -- that's EUR 40,000 higher than Pepco's today. With an opportunity to, again, continued operational improvements to get that up to about EUR 240,000, EUR 250,000. So that will still remain the highest cash contribution per store in the company. And again, I remind you back to the sales densities in a more than -- close to a double. A couple of specific things, we do have opportunities and we are looking at -- so the CapEx per store is too high and the working capital is too high. And those are things we're looking at, how do we address that. And some of the opportunities for that in CapEx can come through buying across the whole group. So for example, around fixtures and fittings, we're centralizing a lot of the activity around goods not for resale and how we buy better, not just trade, but non-trade products across the company. That's another piece of activity in relation to moving to a single business. But that hopefully gives you a little bit of visibility on the Poundland business, which I think we really haven't talked about in the past, but we have a good foundation and opportunities to grow that business into an increasingly successful retail format in the U.K. So in summary, we've got a healthy -- hopefully, while we've got a healthy store base across our markets, which is fundamental to the company's profit performance. And the specific opportunities to improve that profitability going forward, not just addressing loss making stores, but most importantly, improving the profitability in our core estates. We can see margin recovery coming through. We just have to cycle through and lap through some of the headwinds we've been facing for the last 12 or 18 months. And I appreciate there's a little bit of the boy who cried wolf around this, and I think we fully recognize the -- we need to see that in the rearview mirror. And we need to earn, I think as Andy said, we need to earn the conviction behind that. But that's something over the next 12 month, we expect to see coming through in terms of the financial performance. We've got very specific and identified cost opportunities to address across pretty much every cost line and eliminating some of the projects that have been distraction from the core business. And we will see stronger cash generation through reducing the sort of growth profile and focusing much more attention on stock KPIs than we have done over the last few years. So all of those are specific things we can see a path through to generate more cash in the business. So -- and lastly, there is a successful business model here with good growth prospects. We've just got to get back to focusing on exposing that and delivering it. So I'm sure there'll be questions when we get to that in a minute. I'm going to hand over now to -- but that's the end of this sort of run through in terms of some of the numbers. And hopefully, that breaks down a lot of the questions and address some of the areas of concern or focus that you have. I'm pretty sure it will never be enough detail for some of you, but hopefully, it's enough to detail to at least give a bit of confidence in terms of what the key building blocks are for the business. I'm going to hand over now to Neil -- to Neil Brown. Neil is Non-Executive Director on the Pepco Group Board. He's also a nominee for IBEX, which as you know is our largest single shareholding. And we've had a number of questions around IBEX and where does that sit? And we thought the best way to sort of address that was ask Neil to give a little bit of context around that. as we kind of move forward. So with that, I'll pass it on to Neil.

I'm never quite sure what a vice chair is, but it sounds a bit dodgy, anyway. Thank you very much, Neil and Andy and the whole team for interesting and informative set of presentations today. We're very supportive as a shareholder of getting greater visibility into what's happening in the company. I think it's good for us. I think it's good for everybody in the room. So I think that's really to be applauded. I -- as Neil said, I'm 1 of 5 group of 5 directors who are appointed to oversee the storing of assets over the last 5 years. There's a couple of others of us -- have been around. You may have seen Louis du Preez, who's masterminded a lot of this from South Africa, has been with us. And also [ Sean Mahoney ], who's the newest colleague we've got joining that group has also been present. So you may -- if you see them, say hello and they can introduce themselves. I've only got 2 slides here today, so I won't take up too much time. This is the first slide that relates to a project that since the last Capital Markets Day has been occupying a lot of our time, which is called Project Purple. It was very complicated as these things do, it took an awful lot of times, they're like forever to get it all done, and many -- a few people in the room have been very involved in that process and know it in detail. The good news from the perspective of the Pepco shareholders and stakeholders is there's only really 2 things that matter to this group in relation to that restructuring and both of them, I think, are positive. So the first of those things was the restructuring of the old Steinhoff N.V. and the replacement of Steinhoff with a new top company called IBEX and is controlled by the original lender group. That was followed by pretty much immediately the delisting of Steinhoff N.V., which becomes a shareholder company. And the new Topco Ibex, is parents of IBEX Europe, the company which indirectly owns 72% stake in Pepco. So technically, that has very little impact on the Pepco shareholders or the company. But the removal of the Steinhoff, both as a name and as a listed entity, with all of the public reporting that goes alongside that in the public shareholders and the sort of whole paraphernalia, created quite a lot of confusion around what was actually a much more simple process and structure. So going forward, there won't be really any reference to Steinhoff and we've really separated out at our level, they all signed off legacy and all the cloud of issues that went with litigation and stuff have gone. And I think moving forward, that will become much more apparent and none of that is sort of infection of noise will come down to Pepco to the extent it might have done in the past. What we're left with moving forward, then is a credit to our own structure, no public company interests above Pepco to deal with for ourselves. The IBEX companies now have 3 main assets left with our own separate sell-down programs. Mattress Firm is one of those, which was a U.S. company, which has announced its sales to Tempur Sealy earlier this year, is going through FTC approval process. The second is Pepco in South Africa, which is more advanced, its sell-down process and Pepco. And finally, the third main asset that we've got left is Pepco itself. So it's a simpler task for us. It's a much simpler structure, and a lot of that fog and noise that goes with Steinhoff has really disappeared. The second thing that's really important is, and probably is crucially important for the people in this room and not just a sort of optical clear up, if you like, is the extension of the stable platform that was created by the lenders back in 2019. There's been an extension of the lending commitments from all the lender groups through to June 2026. And with the potential for two 1-year extensions going out to 2028. So this creates a multiyear continuation of the stable platform that was put together at the outset in 2019 by the lenders. It's operated successfully since 2019 to create stability for the group. And there have been very few changes to personnel, either in the director group that we've got managing the assets or for that matter, in the larger lender group that constructed the original stable platform and have stayed with the business and the Board did since that and continue to do so. So where are we now? We have a stable platform. It's been carefully constructed. It allows for all this sell-down of shares over time. And we think that's good for the lenders, and we think it's good for everybody in this room. We have the support of the lenders who have been very patient and cohesive as a group. I think we've had to be more patient, both ourselves and everybody in the room as we've been through the process because of 2 bouts of COVID, because of the war in Ukraine, it's extended the period over which we set out to do the sell-down program, and that's just a thing that's happened. We do believe in the business very strongly. We support the executive and we believe in its potential to become a leading discount retailer across Europe. None of that has changed. We're fully supportive of Andy and his reintroduction into an executive role in the company. And we believe that the changes that we've heard about, the strategic direction that we're going in, are shareholder friendly, and we're fully supportive of disciplined and thoughtful capital allocation, as you can imagine. We also are very supportive, I think, of the changes being introduced by Neil Galloway to provide the market with more visibility and more granular financial performance. We think that's really important. I said at the beginning, and I think I'll just like to reiterate it now, we want to position where there's good visibility for everybody in this room, including ourselves and a common view of the potential performance in the future of the business. So in summary, we've got, I think, a shared view probably with everybody in the room that we'd like to see the share price move up from here. Our first and second and third priority really in terms of how we look to sell our shares over the coming periods is through a steady ABB program. We think that we'd like to see that in a company, by steady share price progression, reflective of business performance and providing increased liquidity that everyone wants to see in this room as well. So there's a virtuous circle there. We are not seeking to go down a path that is -- do anything that's investor unfriendly. And it's not in our interest to do so. We're not seeking to go down a route that hasn't been tried and tested before, and we're not looking to bring any surprises. So while it's taken a lot longer than we would have wanted and it will take a bit longer in the future, our plans are still, I think, solid and sound. And the path forward, I think, will get easier, than we believe, as we go through 2024, and we see sort of tailwinds that we think are in the business coming through and helping deliver performance. So we look forward to hopefully having an acceleration of our sell-down program as the 2024 goes ahead -- goes through. We'd like to think that, that will follow-on from the development that we're seeing in the company and the development performance of the company. So with that, I think I'll leave it for any questions and hand over to Andy to summarize the -- thanks, Andy.

Thank you, Neil. Hi, everyone, again. Thank you, Neil, and thank you all of my team, for what we've been -- hopefully you'll agree, excellent presentations. We're going to take Q&A in a moment. But just to summarize, and I'll reiterate the point from where we started. Coming back into the business, I'm extremely confident and excited about the opportunity the business has got to be Europe's best and biggest discount variety business. There's nothing that I've seen would suggest anything other than possibility, rather than an opportunity, rather than problems. I guess this is a segue into Q&A, I'll upfront this now. When you think about it, I'm very confident that we can get back to sustainable like-for-like growth in our business. And furthermore, I'm very confident we can open shops in an affordable, high return environment and deliver growth in that way. But what we've also got to do and again, I'm confident about this is recover our margins and get some of our costs profligacy over the last 18 months, 2 years back under control. So I've got the challenge of guiding, and with Neil, all of you towards -- we're going to improve sales, we're going to improve margins, and we're going to improve costs. And I'm very confident we can do all of that. But what I'm not going to do today is give you detailed guidance on FY '24 because what we need to do is build confidence and trust in you and other investors that we can deliver. So our first job is to get through the next few months and deliver some of those things that we promised and then talk about them rather than talk about them today, and not deliver. So I'm just preempting some of the detailed discussions. Also, by the way, you're all super bright people. We've actually given you a lot of guidance if you look in the detail about what we are talking about. We've talked about the recovery in FY '24 of our core store EBITDA. We've talked about a guidance on new store openings, and we talked about controlling our costs. So you can actually build quite a detailed view about what we believe we're going to deliver. But what we're not going to do is go to a specific profit number through the discussion we have in a moment. So just bear that in mind, and I hope you understand why we've got to build confidence with you that we can deliver and a lot of it is about delivering it first.

So with that, I'll invite Neil up to join me, and then we'll take Q&A and I'll host the Q&A, but I'll obviously get some colleagues to be involved in that. And there's a mic that's going to come around. So if you have a question, put your hand up, please. And would you also, if you don't mind, introduce yourself with your name and the company you represent, if that's okay. So who wants to ask a question, hands there, please?

Thank you for the presentation. So Michal Potyra from UBS. I have one question. Well, to start, but it's a big one. So I really wanted to ask about Poland. The market kind of underperformed. Sales entities are below COVID, and really trying to figure out, can this extend to other markets? Because my thinking is that the level of competition is significantly higher. This is the market where Sinsay expanded first, and this is also the market where online part of the market was growing the quickest after COVID. So I'm wondering how much of those challenges are macro struggles and how much is just more structural, which will be much harder to address. So if you could just address maybe the competitive landscape, including Sinsay and also the online development and your plans.

Yes, I mean first of all, I mean without suggesting I'm an economist or a politician, and I would argue generally the Polish economy, I would be excited about over the next 12 months in terms of reversal of some of the headwinds that both myself and Mark described, I think we will see an invasion of some of the headwinds that we've seen around mortgage rates inflation in core categories. And therefore, I think the categories we sell in will start to expand again. And we hopefully explained and demonstrated pretty accurately that they've been in contraction over the last 12 months. I think that there's some specific things that will help us over the next 12 months as well as that general macro environment, the implementation, the 800-plus child support grant will be helpful. Whilst minimum wage increase on the cost line is tough for us, the corollary is that a lot of our core customers will have a significant amount more to spend. I think the change in government will provide some other stimulus opportunities. So I think the Polish market over the next 12 months will be easier for us than it has been over the last 12 months is a macro level. In terms of competition, I think, again, as Mark demonstrated, it's certainly been my experience in the sort of nearly 35 years I've been involved in retail. As markets consolidates, good players like Sinsay, like Action, like TEDi become stronger. That is not bad for us. The thing is that markets consolidate where the big players continue to grow and the unfortunate -- this beneficiary of the weaker secondary players. Our market share remains strong in Poland, and it will remain strong. I think in terms of self-help, the things that we need to do, those that we described, and yes, this has got a very good product development program. And we will become more front [ facing ] again in terms of our promotional program, and there'll be some degree of choice for price investment, all of which we can deliver against our target of recovering our gross margins. So I think that, that competitive environment is not to add this benefit. As far as online, I think, first of all, to position that, I think of our competitor environment, by far, the bigger thing we need to reflect on and continue to be strong against is the incremental growth of our store competitors. I think in terms of online, a lot of the transitional -- first of all, the transition to online is relatively low in Poland versus other markets. But where there are new entrants and everyone likes to keep talking about as an example, Shein. And you've got to reflect on the fact that the customer type and the shopping occasion is certainly, in apparel, is fundamentally different. Where there is growth in online shopping, it tends to be for a young person, particularly young woman, who is buying for today, a fast fashion type item, and that is not our market. Whilst I think we've got to have an eye online. And eventually, I'm sure we will need to play in that sector. It's not a big issue for us now. And the growth companies in that market are targeting both a different customer and a different shopping occasion. So wrapping that all up, I actually see the Polish market, not only is our core market, but an actually genuinely exciting opportunity, and I'm optimistic about Poland over the next 12 months.

Let me just challenge you here a little bit.

Please do.

Because I mean, firstly, the competitors seem to perform a little bit better, on like-for-likes and margins. And also regarding the online part, I mean, if you talk to Sinsay, they would argue that kids is the biggest online category and it's very profitable for them.

Well, first of all, I think you may have more analysis than me, but if you strip out what we've said, I don't think many retailers in Poland have privileged economic model to us, a business that with a recovery in our margins will deliver of something like 15-, 16-month payback period. That's an extraordinary economic model. So I would say we're extremely strongly placed in terms of our economic model in Poland against any other retailer. As far as what Sinsay said about their customer, well, that's for Sinsay's stack, I can just talk about ours. I don't agree that our major concern, a major competitive set are online retailers. Our major concern and competitive set should be making sure we're competing aggressively against Sinsay, Action, TEDi and [ Kaes ].

My name is [indiscernible] from [indiscernible] Asset Management and no relation to Marcus.

Do you have to say that [indiscernible] there?

Yes, especially in this setting. So the store refit program, the CapEx is being spent. I guess, one can have a bit of a skeptical view that -- part of that was maintenance CapEx to refresh an existing sort of estate already. With the refit program now falling away, how should one actually think about maintenance CapEx? There's -- the store -- the CapEx on refresh goes away, but surely, there should be a component that still maintains the current estate. So just in terms of that kind of expense, how should we think of that?

The maintenance CapEx across the group is running about EUR 25 million, EUR 30 million a year. So that's in the business, and we'll continue -- I mean, I have a couple of comments. A lot of the -- if we leave aside the new look program, it was more than maintenance. It was obviously -- it wasn't just about making the store look better. There was a number of other things going around it, which was in terms of efficiencies in store from a colleague perspective, some of the things Barry highlighted at around back route, there was a number of other things. So there is a consequence of not going forward on it. But the maintenance -- I mean, don't be under the assumption we're stopping maintaining stores in terms of painting, fitting [indiscernible], all the things that you would expect to see. We've learned lessons from the past and Poundland in particular, has learned lessons in the past for not maintaining the stores. So from that perspective, it's round about that number, and we will continue to do that. The new look was something that was pretty unusual in the context of a retail. Normally, you've got a generation of stores and you'll move through generations on a cyclical basis. Pretty unusual to say, the entirety of your store base and say we want to move this entirely to a new look format, which is what it was about. And it was about doing other things. And it's -- as Andy said, we haven't stopped we've paused it. because it's not delivering on what it was delivering when we started it. And there's a number of reasons that could be behind that all to do with the general performance. So I think we'll revisit it as things change. If you see, though, consumer coming back and spending more in the stores, we'll obviously review it sensibly. But it makes no sense to spend money when it's not generating that return at the moment. But rest assured, there is a sensible maintenance program running across the business. And we've learned lessons in the past, particularly in Poundland, about the risks of not doing that.

It's Henrik Herbst from Morgan Stanley. I just wanted to follow up. I mean, we sort of now -- at the starting point now and we know where you're going. I was just wondering if you could help us a little bit with the trajectory. I know you're not going to give detailed guidance for 2024. But could we -- I mean it sounds like it will be a pretty straight line sort of improvement. I just wanted to check that's actually whole work or whether there will be an investment and sort of it's more of a J curve to get to where you want to be? And then secondly, on that topic as well, are you going to change your LTI programs or remuneration programs at all? I think up to now, it's been based on IFRS 16 EBITDA.

Yes. Look, again, I'm not going to give you detailed information yet to a degree, Henrik, asking me for it. I think that certainly, if we start with margin, we're very confident the trough is behind us. So we will start to see improvements. The rate at which we're going to see improvements are -- remain somewhat ambiguous about, but I do strongly believe in the medium term, we will get back to pre-COVID gross margins. As far as the sales line, this is the one that, in some ways, is the most speculative. If you know we're all grappling with a multivariant environment where, to some degree, our recent historic performance has been driven by weather. It's been driven by consumer environment. It's being driven by a year-on-year analysis of how many Ukrainian people are in our markets. All those things -- and I'm to a degree guessing as much as you about the pace at which we can improve our like-for-likes. But I'm extremely confident again that we can improve our like-for-likes and get back to sustainable positive growth. Now I'm not quite sure exactly when, but I'm confident that we'll get there, and I'm confident it will be sustainable. And then on the cost line, again, I think the [indiscernible], the worst is behind us. There's a lot of stuff that we can stop doing that will improve our cost burn. And Neil started to mention some of the headlines about projects, one-off costs in last year about transportation. So again, I think you'll start to see some pretty quick progressive approach to our cost improvement program. That would be my overall summary. Sorry. And then the LTI. Yes, look, we are -- I mean our -- and this actually hasn't been stated publicly, and it's the matter to the Board rather than me as individual, but I can express that we'll move -- our LTIs are driven off 3 metrics: profits, ESG and -- what is the third one, earnings per share. And we are moving the profit element to that to IAS 17 EBITDA from IFRS 16 and -- sorry, and for the LTIs, as well as annual bonuses and long-term incentives will be realigned to IAS 17 numbers.

[ Toby Lakner ] from [ Kutman ] Capital, also in South Africa. Am I reasonable to conclude that what you've said is that the original EUR 1 billion EBITDA target is probably one we should put on ice until things clear up again, right? Now there are too many moving parts to assume that, that happens 3 or 5 years from now. I think that's the reasonable conclusion from your previous answer.

You might think you're reasonable. I'm joking. Look, I think we are at the moment. Just as a reminder, on one hand, you can look at me and say, this is a guy who's been involved with the business for 12 years. On the other hand, using the metaphor I used earlier. I'm back in the driver's seat, I've been in the passenger seat, you see the world differently from that seat, and it's only 4 weeks since I've been back. So one of the things I think we've done extremely quickly and affect is reshape FY '24 plan. I mean it's probably not been explicit, we inherited a business with a momentum on store opening program, overall project programs is significantly larger than the one we've presented to you today. So job 1 is getting after FY '24 plan, which I think we've done very well. We don't really yet have our own view on how that rolls out over the forthcoming years. But do I think that we can -- in the medium term still hit that target? Yes, I'm not going to be drawing today on exactly when. But this business is not going to only grow its top line, its going to grow its bottom line, which frankly, as you saw earlier, it hasn't been for the last 2 years. So we will be growing our bottom line progressively. But when we get to $1 billion -- I'm not going to get drawn up today.

[indiscernible] company. I have a question about Wilko deal and impact on rollout last year and this year, because I understand that some part of 668 last year was including some Wilko stores. And within the 400 plus for this year was the impact of Wilko.

Sorry, I'm not quite sure I understood the question.

Could you speak up a little bit?

What you are guiding for opening more than 400 stores this year? What's the part of that related to Wilko deal, so like 50 stores coming from Wilko and 10 stores already opened last year? Does it include those stores or not?

Well, look, first of all, one of the reasons we're talking about group number is we want to reinforce this appointment. In the future, all our businesses are Pepco businesses, other than Dealz. So the way -- the only thing I'd like to lay out of that is in the Dealz number for this year, it will be roughly, roughly as Marcin said, about 50 stores.

So those -- but that includes Wilko or without Wilko.

It does include Wilko. Help me here, I need to wait for my...

Thank you, Javier Fernandez from [indiscernible]. Just 2 questions, Andy. One is, I guess you are seeing a big opportunity in Poundland just by rearranging a lot of the business. May you please elaborate a little bit about the execution risks you may see there? And the other is about your management model. It seems to me you are directly moving to a much more centralized management model looking forward.

I mean, first of all, to reiterate what's already been said. I mean, I think one of the most remarkable facts I'm guessing you'll leave today with, we're certainly -- based on people I talked to over dinner last night, I don't think anyone in the room would have voted for Poundland having today the best cash profit per store. So already today, irrespective of future change, the business delivers the best cash profit. And that's based not only what we inherited when we bought the business. And I think we've all done a poor job of communicating and falling in love with what is a good business. That's not least does. But to a degree, we've all decided to see it as their [indiscernible]. But is actually was a good business, and it is an even better business today with the work that Barry and the team and Austin, et cetera, have done. I think when we look forward, to your point about risk, I mean we are going to convert -- fundamentally, we're going to convert Poundland-sourced clothing and Poundland-sourced GM, into Pepco-sourced clothing and GM. So the clothing element of that execution risk is substantially already behind us because that product in shops. Now of course, there's still some degree of execution risk because in the detail, whilst Barry gave a headline that customers love it and they do. Of course, there will be some product that we need to modify, the sales allocations might be so. There's all that stuff you need to do in the detail when you introduce new range, but substantially, the supply chain risk around that change is behind us. The products in the store and it's selling. And the obvious point to flag up is that, it's at a higher gross margin than the historic Poundland product. We are just in the medium stage, it's not the early stage, it's in the flow-through of GM. That product has already been bought. The Poundland team have been involved with that buy, and that product will be in stores from January. So I would argue at least 50% the way through arguably more if you take GM and clothing together of the risk profile of that execution. Now once it's all in, as I say, there'll be lots and lots of little bits and bobs that need to be sorted out. But the biggest risk is, can you get the product from source to the stores? And we're a long way through that. As far as the point about single organization structure, look, we've got to talk and act cautiously about this because it's a fundamental change. But to your point, and you're appropriately reading between the lines. As I said in my presentation, by the end of this change program, we'll have one business, and we'll therefore, have one organization structure, which will be a group structure and it will have a singular operating company. And all the U.K. will be another market for Pepco. Its biggest market and arguably, it's most profitable, but that's what it will be. There's a big change program to go through. That's going to be done thoughtfully and sensitively. But at the end of that, it will be simpler and cheaper.

It's [indiscernible] from GoldenTree Asset Management. I have 2, if I may. The first one is around your rollout pace. You made a comment that you had to quickly reshape the full year '24 plan. I'm curious, I guess, of the 400 stores, how much of it is where you want to be, versus maybe prior commitments that you had to fill through based on the prior expectations? And then the second question, hopefully a quick one around your ERP systems. Has that now been done? Or are there any remaining bottlenecks that you have there around stock management that prevents you from [indiscernible]?

I'll answer the first one. I love handing IT questions to somebody else. Look, on the -- a more general answer to your question, clearly, when we are inheriting -- I am inheriting a business that's got momentum. Some of what you're doing is slowing down or stop doing previous decisions as you articulate. I mean, I'm not specifically concerned about any of those 400-plus stores we will open this year, largely because actually, to Neil's presentation, we actually don't have many stores that are poor. And so our general hit rate of new store opening has always been extremely good. Where we have cut back. It's in very specific areas. We won't be opening many, if any shops in Germany in the next 12 months. we'll be slowing down the rate of growth in Poland because we think we're near a maturity in Poland and then in [indiscernible]. So there, we'll still be opening quite a lot of stores there. So I think we've managed to slow down pretty well. But I think there are other aspects of the program where we clearly are stopping a moving train. So as an example, we've made this bold statement that we're going to pause the New Look program. And we are. But there's still 2 months of program we're financially and legally committed to. So we will be opening some new refurbishments this financial year because we're happy to, legally. And so there will be a certain amount of reality underneath the headlines of what we're seeing. But in general terms, I do not have concerns that we're having to do stuff that we don't want to do. ERP Neil.

So on the ERP program, just to give a bit of back story on what the mysterious ERP program is just for -- so as Andy has described, we've had to date, 2 core operating businesses in Poundland and Pepco. And they've come from different places and they've operated in different ways. The simplest way of describing that is as an FMCG-led retail of [ 61 ], Poundland run as sort of auto replenishment store model where in a fairly classic way. So it's sort of -- that's how it's operated. In clothing and GM, including general merchandise that have fitted in around that core operating model within Poundland. Pepco has been much more of a push allocation of clothing in general merchandise. So they've operated quite differently historically. But the businesses up until the last 12 months or so have been going down their own ERP plans in the context of those businesses, reflecting that, both using at the core, Oracle, as a modern scalable ERP platform in terms of stock and finance, et cetera. But reflecting the history they come from as 2 different operating businesses. Where -- and Poundland is largely complete in that implementation and through to the end of that program. There are a number of other different systems that hang off the core ERP system, providing inputs into that, things like lease management and various other tools. They are also not -- they're not common across -- there are some overlap in terms of categories, where HR -- there's lots of other systems. So they've come from different places. In the context of what we're looking to do now -- and by the way, just to complete, Pepco is also looking at an Oracle Core Solution. It's about probably a year or so behind where Poundland was. And it's sort of a -- it's got through design and migration stage but hasn't implemented that. But in the context over the last 6 to 12 months, if we looked at an acceleration towards 1 business, 1 range and all the rest of it. we're looking to sort of merge those 2 programs onto the same platform and are going through that process at the moment as to how we accelerate an entity on a single IT platform, not just the core ERP but accommodating the other tools hanging off that core. So a long way of describing. We're not at the end state of that. We're clear on what the end -- the core of the end state will be, which will be at the core, Oracle. And we're working through the other related systems that support that through the 2 businesses in a collaborative way to get to essentially in each of those categories, we will have a single solution feeding into the Oracle core across the company. So that will carry on over the next, I don't know, 12 to 24 months to land that, but that's part of the direction of travel. And that has been an acceleration over the last year from where we were a year ago. A year ago, we would have carried on in the parallel tracks with 2 ERP systems that would have had the same thing at the core but have been configured quite differently. And I think in terms of the cost impact of that on the company. I don't think it will be material different from what it would have been. But rather than ending with 2 parallel similar systems, but not identical twins, we'll end up with a single platform that is supporting the whole business. So I think it shouldn't be any more cost than it would have been had we carried on what we're doing, but the end state will be a singular platform. And we will have to make some choices around some of the peripheral systems that support that. To get us to a good place as a single business.

Hello. My name is Juan [indiscernible] from Bank of America. Thank you very much for the presentation which was quite comprehensive. I wanted to elaborate a little bit more on the recovery of the gross margin. You've talked about -- we've seen a lot of detail about what have been the main reasons why the margin has been dropping below pre-COVID levels in the past 5 years. So looking forward, I know you're not going to give guidance, but I was wondering about, what is the clear or the easiest or the low-hanging fruit tasks, or things that you think you're going to achieve in the next 12 months that will help you to recover the gross margin? Would it be good price, cost, freight, or...

Well, good question. And I'm more than happy for my colleagues to build on these -- but to a degree, it's really straightforward. And as much as you look at those detriments that Neil described very clearly, and the size of them and then you think about what are the biggest chunks and what's going to happen, what has already happened historically or may what happen. The biggest and simplest call out is the fact that freight rates are back to $1,600 rather than $16,000. And in FY '23, we were still selling a lot of product where the freight rates were worst, $16,000. So if you think about the size of that blob and what's going to happen totally outside our control, but we're the beneficiary of it, that's going to disappear as a detriment in the next number of months. Now the FX issues that we have specifically in FY '23 will start to abate. So you can start to build a picture that over time, most of those headwinds will disappear through FY '24 and into FY '25. The other variable, as you say, is price. And I would just go back to the headline I gave you, which is, first of all, Mark's point, we remain a very strong price leader, but our price gaps closed. But of equal importance, our promotional stance has weakened over the last 2 years. We will invest some money in pricing and in promotions, but I go back to the headline I stated, I'm still confident in the medium term, adding all that up, we will get back to pre-COVID gross margins.

Okay. Just on the last point. Yes, you said medium term, it's clear pre-COVID levels. What about the next 12 months? 100 basis points?

Come on. You know the answer to your own question, which is, let's move on. Okay. Who's got the next question?

[ Mudassir ] from Barclays. Just obviously, now that you're spending, you're going to be spending less money on opening new stores, the growth -- store growth is reducing. With the focus on improving the working capital as well and mostly not the margins, you should start to kind of accumulate cash a lot quicker. Have you got any plans on what you intend to do with that?

Yes. Look, good question. I mean, first of all, to be clear, that's a privileged position to be in, and one that we're very hopeful based on us achieving our targets will be through the course of this year and certainly towards the tail end of this year. So look, I think it's pretty clear what our priority should be. We should be attributing the right amount of cash to grow aggressively but in a considered way. So priority 1 will be spending the relevant amount of cash to grow. Point 2, we want to always have a relatively conservative perspective on our balance sheet for a whole lot of reasons, not least, we've also got the issue, as Neil has described, we've got a rehabilitation program to go through our trade credit insurers, as well as credit agencies. And really, one of the biggest call-outs for us in the medium term is we should be getting a hell of a lot better in terms from our FMCG suppliers. And part of that is being very prudent in the way we run our balance sheet. All those things said, we will end up with free cash during the year, and the Board will need to make a decision how to repatriate that to shareholders, whether it be through share buybacks or dividends. and we'll be making those decisions in the coming months. But all those opportunities will be considered, and we should have free cash flow in which to make those decisions. Yes, Matt?

Matthew [indiscernible] from [ Bel Post ]. You mentioned a couple of times, Andy, the comparable disposable incomes between Italy and Poland and Czech Republic, let's say. I just wondered if the higher sales per store in Italy and Spain is coming from average basket or coming from customer numbers?

I think it's a bit of both, but I'm going to ask Barry, do you have an answer to that question?

No. I would plead weak [ 3 month ], but, yes, it's a key metric that we've got to go into.

What's -- I mean, I'd just reiterate, clearly, none of us quite haven't answered that question, which is slightly uncomfortable, but it is what it is. But more generally, if you take Italy's side because it potentially is an anomaly. The interesting thing is in [indiscernible] markets and it may be the same when you're involved in the business. But basket size tends to be driven into correlation to household disposable income. So the higher affluents per household, the higher the basket so -- I mean the one that you would assume Italy will have a relatively higher basket size, but it shouldn't theoretically be higher than Poland, but we should -- you may get back to that...

Part of the answer, the average store size in Italy is about 23% larger. So there's an element that half of the difference is in relation to. We've got a little bit more space in Italy. So that's sort of half the gap. I don't think there's a material difference in the baskets that are not material. So it's a little bit of a combination of the other 2. But just remember, the space difference is part of the answer to that question.

Max from UBS. I have just one question. So with the speed of the rollout of the stores, especially in Western Europe, you had in -- especially last half of this year, do you expect the hit rates being materially lower of what you've historically achieved? And do you expect that any of those stores, there's going to have to be a cleanup at some point? Or are you confident that kind of you're going to be at historically very good levels?

I think I answered the question largely early, but I'll reiterate it. Look, I've got no data that tells me we've suddenly become much less good at the hit rate of our stores. So I refer you to Neil's analysis, particularly if you believe in the maturity curve in West Europe which you should believe in that maturity curve, then we've got a business that really quite healthy considering our new. So I don't have a concern in that. And by the way, on the point about maturity curve, it's really -- a lot of -- I've got a lot of faith in Italy and Spain, as Neil has described, a lot of the ways of improving our flow-through from sales to profit within our own control. Improving our distribution cost is massively in our control. Gross margin recovery, we're seeing it coming through. And as Neil has described that will fundamentally change the economics. The other thing is the sales line. And the one thing that we didn't refer to earlier is if you look at the history of the deals business in Spain, that had a 6- or 7-year maturity curve. It was -- I mean, you might want to explain that from having run the Spanish business. It was a very long maturity curve.

I think it was in Neil's numbers as well as showing just the maturity curve of over 2 years. I think what we saw in Spain, a very discount savvy customer. The Spanish consumer loves a bargain but maturity curve, it takes time for people to recognize the brand and you definitely, definitely improve over time. We saw that with NPS as well, by the way, not just sales. So the longer a customer shops with you, the NPS changes materially over the first 12 months as they understand the shop and how it fits into the daily repertoire.

So the one thing, linking back to news, but the one thing we didn't factor in to the presentation that Neil gave you any strong forward-looking maturity curve on the stores in Italy and Spain. We sort of said the sales would deliver now the sales [ were high ]. That's potentially a big upside, but it's right not to put that in for that.

Yes, maybe one sort of -- Bill commented on that in terms of new stores. When obviously, we've been missing target sales on new stores relative to where we were positioning them a year ago as we went through to the point in terms of hit or miss on new stores. So I think in terms of looking from now forward into next year. We've essentially taken down the expectation of new store sales more in line with what we're actually seeing delivering, which essentially is putting more pressure on getting better property deals around those stores because, obviously, we know what the cost makeup needs to be to deliver store economics. So that will -- by reducing the sales targets to open a store and deliver the same economics that will put more pressure on the expansion teams to deliver a better rent deal to deliver the same store economics. So there's an element of -- but I'm sure there will have been -- I mean we obviously -- I showed you on the store economics charts and annualization of run rate where we're sitting at today. And some of those, I mean, there's a big assumption some because you do see in some of the new stores, very strong sales in the first couple of months when they open because it's a new experience. The question is whether that continues on as a steady-state business. So there'll be some noise in those younger stores, but we wanted to try and give some fact-based proxy for what those sales could look like if it continued at that. But we're trying to sort of rebase the target sales and new stores to put pressure on the expansion teams to make sure we're not building a cost base, as Andy described, ahead of the sales outcome. So we're trying to direct back to a better contribution level. So I'm sure there's some misses and what we've done in partly -- its new stores and new markets, new learnings as you go, but we're trying to sort of direct -- put tramlines in place to protect against the risk of that as we look at where the stores are performing today.

Michal Potyra from UBS again. You've given us some data on Italy and Spain, but that was on store level. So I'm wondering if you could give us a little bit more how are the markets profitable if you put all the overheads on top. And also, you kind of avoided giving anything on Germany other than saying that you are putting it on hold. So I'm wondering how bad that is? And what makes you actually believe you can turn that around?

Well, look, I think we -- again, Germany is a very young market for us. And we've got 50 stores today. The number of those that are over a year old as are very small. I think, maybe 15 -- it's...

If you bundle up...

Yes, if you let me -- so yes, look, we are looking at all the markets. But in terms of what's driving Western European performance and the bigger markets, Italy and Spain have enough trading history to give a picture. Yes, we are looking at Austria, Germany. We're also in Greece. We're also in Portugal. We're looking at all of the markets we're operating at a store level. So -- and yes, we are focusing on store contribution. We are handicapped, as I said, because we -- yes, with extra costs going into support business. There's not a huge amount of overhead to open those countries because we're running a central model. It's a store model. But we've described this. Yes, there would be an allocation of management time. We've explained the distribution costs are higher because we're allocating that on a country basis, and we can prove to get that. So yes, there is a -- they aren't profitable from a net profit perspective in those countries, because of where they are. And we've described that. I think the read-through on performance we've described. If you've got a net cash drag in Italy and Spain is 80% in Western Europe, then yes, the profit is going to be a drag. But in the context of the group numbers, it's not material. And it's, you know, Germany, Austria and those are the markets we're reviewing as we are all of the stores on a more disciplined basis, and we'll make the right decisions in terms of performance and where there's weak performance, to either address that or will improve it. But I think Germany, as Andy said, we're very cautious in Germany. We've got 50 stores. We're not going to race and open a lot more stores. We're very clear on the German market. We did a lot of research going into it and aligned it. And we're well aware that there's a number of retailers in Germany in the discount center who are struggling and who have stores either portfolios or stores or the whole business available for sale if anyone wants to buy it, and we haven't acted on that. We're very much focused on delivering our own store performance under our own control.

Yes. We'll take 2 or 3 more questions and then we'll close.

It's [indiscernible] from [ Maybank ]. You gave us some guidance when it comes to store rollout next year, but do you see some change when it comes to let's say, your long-term potential. Could you give us some more color when it comes to 2025, 2026? And the second one, more specific, you gave us a target, EBITDA margin target for Dealz store? And is it on IFRS 16 numbers or pre-IFRS 16?

Look, first of all, beyond FY '24, I'll reiterate what I said earlier, we're reconstructing the plan for growth. So I'm not going to give any indication of future growth other than to say we've still got a huge amount of white space to enter. Even if we didn't go anywhere else in Europe other than markets we're now, that is a very, very long-term white space opportunity at 400, 500, 600 stores, but I'm not going to guide at all on new store openings in FY '24. The key point we're making is we're going to be much more disciplined. We're going to only do the work we have the capacity to do. And in doing so, we'll deliver not only sales growth but significant profit growth. So I'm going to say no more on it than that. And your second question was?

On Dealz' EBITDA margin target? Is it on IFRS 16 numbers, 10%?

IAS 17 numbers. Last question, if anyone has? Yes.

Rafal Wiatr with Citi. Just a quick question on inventories. You were talking about access in clothing. What's the plan for this year? What's the impact on profitability?

Well, in terms of the plan, I think in general terms, again, Neil described it earlier, that we are using all of the simple tools a retailer has to rightsize our inventory. That's about where we've got good relationships with vendors, it might mean canceling product. It might mean delay in product, it might mean differing products. In other areas, the business where like FMCG goods, it's just better flow of goods. So we're going to use all the simple, obvious techniques that are available to us. And then in terms of the risk around our P&L, our plan for this year recognizes and is factored in, some degree of incremental markdown to move through that stock, but it's nothing that is excessive and should be concerning to anyone in the room. A lot of these tools and techniques will not be incremental costs, they're just better techniques that we use in our business. I don't know if you want to...

I mean there's a number of other builds on that. I mean as -- looking at the category stock, we've been looking at where we are in each subcategory and each SKU level within the range as to where are we over and under. One of the benefits we're living right now in the U.K. when we were looking at the plan a few months ago, we there's about 60 Wilko stores that are coming into the Poundland estate, which are, on average, larger size than the standard Poundland store, which are units to sell stock through that we didn't have 2 months ago. Well, we didn't have 6 weeks ago, never mind 2 months ago. So we've got more retail space to sell through products. So that will obviously also help the stock position. And we just have to put the disciplines about: a, selling 3 more and b, not buying as much. So as Andy says, all of these things are within our control. And we've just got to be more aware and current in terms of the sales trends in performance and disorder according to that. I mean there's certainly still some challenges within the supply chain, particularly within Pepco, where we know it's not as efficient as it needs to be, partly because of distance from the DCs and partly just some other inefficiencies. So those are all things that are within our own gift to fix and improve. And all of those lead in -- should lead into a better outcome than the stock performance during the course of 2024.

And the other thing I'd say is -- but one of the things that's implicit and all we've said is part this is management's stance on being pragmatic and arguably prudent rather than too progressive for growth, because you're buying your inventory based on an anticipation of what you're going to deliver. And what we aren't going to do is what we did in half 2 FY '23, which is by way too much stock based on being super aggressive for growth that didn't come through. The last last question down here.

Matt [indiscernible] from Barclays. You mentioned, Andy, in your opening remarks about a lack of data analytics driving business decisions? Just wondering, is that related to lack of loyalty program, lack of online? And how will you address that going forward?

No. Look, I think, first of all, I think we can be better at the visibility within the business of certain data. And as an example, the reorganization that we've already announced, which is the finance teams reporting directly to Neil will help with transparency and visibility. But this isn't fundamentally about do we need customer data. This is just about -- first of all, having transparency in the business and then a cultural norm about how you make decisions, you make decisions based on gut feel or based on data. And we are just going to reorient the culture to be much more facts and data driven. The data is around. Now of course, over time, we're going to benefit from an amazing change in all of business relationships with consumers based on a lot more data, but we're not waiting for that, and we're not reliant on that. This is about internal data culture more than anything. Great. All right. We're going to close it there. Is the lunch provided, Ava? In 10 minutes. Right. Well, perfect time. And they say, look, thank you all for your time. Hopefully, that's been helpful. I appreciate the efforts of my team and appreciate your attendance. You got 10 minutes to sort yourselves out and then it's lunch and safe travels home. Thank you.