Portmeirion Group PLC (PMP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Portmeirion Group PLC investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and we will publish responses, where it's appropriate to do so in the Investor Meet Company platform. Before we begin, we would like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Portmeirion Group PLC. Mike, good afternoon, sir.

Good afternoon, everybody. welcome to Portmeirion's 2024 Prelims webinar. Thank you very much for dialing in. Before I start, I'd just like to introduce my colleague, Jon Hill. It's his first one of these. He joined us late last year, and it's great to have him on board as our Group Finance Director. So I'm going to start off with a few headlines, and then Jon will take us through a more detailed review of our financials. I'll then come back and talk about our plans going forward, our strategy, our priorities. And as Jake said, we'll leave some time to cover questions at the end. All right. To make a start, some headlines for full year '24. Clearly, overall, a disappointing financial performance with reduction in sales and profit, albeit against a much tougher consumer market around the world. Really, all of that downturn in sales and profit was about one particular market, South Korea, and we'll come and explain that as we go through this presentation. Those financial headlines, however, marked some really good strategic progress across a number of areas, and that includes our U.S. division where despite a lot of supply chain disruption, we improved profitability quite considerably. It includes the fact that one of our leading brands, Spode is continuing to grow and is up nearly 50% now in the last 3 or 4 years. Wax Lyrical, our home fragrance business, has continued to grow both sales and has made a considerable profit improvement in the year. And we also took some tough and painful steps at the start of 2024 to cut our cost base, releasing around GBP 5 million or 13% of lower cost. We've developed in the last couple of months a new transformation plan, a plan that we think will help us to accelerate and support the long-term recovery of profitable growth. And a big part of that is a renewed focus and commitment to build a fortress balance sheet as a priority, an intent to repay down our debt in the next 2 or 3 years and maintain a healthy net cash position. Those are some headlines. I'm now going to pass to Jon, who will go through our financial numbers in a little bit more detail.

Thanks, Mike, and hello to everyone. Just taking a run through the financials, you'll see the revenue was 11% lower at GBP 91.2 million for the year. That was due to a significant decline in the Korean sales of about 45% year-on-year, without which the rest of the group was about 1 percentage point down on a constant currency basis, which in a difficult economic climate, we felt was encouraging. When you look at the headline profit before tax, that fell to GBP 1.1 million due again to the South Korea issue. And it's fair to say that the impact of those lost sales and the factory absorption was actually a greater impact than the GBP 1.9 million movement you see here, which means that we did see, as Mike referenced, positive signs elsewhere in the group. And the main positive performances were in the U.S. division, where we saw profits increase by 18% despite slightly lower sales. Wax Lyrical has returned to profitability with sales being up 25%, and it's good to say that they've carried that momentum into the early part of 2025. And given the impact of the Korean piece of sales, the business, as Mike said, had to take quick and decisive decisions, which were painful but necessary to reduce the overhead cost base, which was year-on-year GBP 5.3 million lower. Altogether, that meant, as I said, profit was GBP 1.1 million. But it's important to understand that there were 2 very different halves to the year. So the pain that we saw with the first half where Korean volumes were down by 60% meant that we took a GBP 2 million year-on-year decline in profitability in H1. In H2, that improved. Korea was 13% lower year-on-year. But importantly, the profitability of the group was flat with the prior year at GBP 3 million. As a result of all of that, net debt increased by GBP 4.2 million to GBP 12.1 million with the Korea volume decline essentially meaning that we had lower receipts year-on-year, but also higher inventory of the Botanic Garden stock that have been made here in stoke for that market. And then we also had some supply chain issues in getting product into the U.S. market for the critical Christmas season, which meant that, that later timing led to later billing and therefore, later receipts from customers. As a result of the lower profit and the focus on the fortress balance sheet, which you'll hear more about later, we're not paying a final dividend for this year. Just moving to the balance sheet. So net assets were broadly flat at GBP 55.5 million. Inventory was up by 6%, and there were two drivers of that. One, the reduced Korea order flow, which meant that we were left holding more of the Botanic Garden stock here in Stoke and also the cost of production with general inflation affecting fuel in particular, but also raw material and labor costs and with the reduced volumes from the Korea decline going through the factory, obviously then had an impact on our absorption of overheads. Trade receivables were up by 10% to GBP 21 million. As reference again, the U.S. late delivery into the market for Christmas meant that we build later and received later, and those receipts came in, in January. As a result, operating cash flow was positive at GBP 2.1 million. But when adjusting for CapEx and the lease costs to the business, free cash flow was an outflow of GBP 3.7 million. Obviously, as we mentioned, going forward, our focus is on strengthening the balance sheet by reducing debt and also interest costs to the business. Two smaller points to mention. The business did agree a new RCF GBP 30 million facility on a 4+1 basis with Barclays during the year. And we also have a small legacy DB pension scheme, which is carrying a surplus, up from last year, just about GBP 1.1 million to GBP 1.9 million following the triennial valuation in 2023. Just going back to sales and looking at this on a market-by-market basis. North America was down by 7%, 5% on a constant currency basis. Tougher markets, consumer sentiment and disposable income affecting sales, but also the Christmas supply of stock, which meant that sales were lower than we would have liked. That said, the U.S. retailer customers post-Christmas reported very strong sell-through of our Christmas product, which is very encouraging for later this year. South Korea, as I've already mentioned, was down 45%, driven by overstocks in the market, which we're now closer to and a significant market slowdown with consumer sentiment appetite for purchases taking quite a hit in the year. In the U.K. geography, we were up 5%, driven by Wax Lyrical growth, as I mentioned earlier. And the other international markets were down on a small value basis, but we still feel that they represent an important area for growth for us in the medium term. Brands, obviously, very important to us. When you look at the business performance through the year on a brand-by-brand basis, Portmeirion holds the Botanic Garden product, which is extremely popular in Korea, is our #1 product in Korea. And therefore, that decline in the Korean sales meant that the sales of that product fell proportionately. And so the brand sold GBP 29 million last year. Spode, we continue to be very positive about. It's now 45% above the 2019 levels, grew slightly in the year by 2% to GBP 22 million, which in the markets that we've been facing, we feel is a positive result. Wax Lyrical on a group-wide basis, not just as a standalone entity, was up 19% year-on-year, continuing its growth through the capture of new listings and the introduction of new products. And Nambé, which is very much centered in Santa Fe, New Mexico in the States, that area has suffered lower tourist footfall and we also saw lower sales to the U.S. premium department stores. Nambé is an important brand for us, and it's an area that we're focusing on in the year ahead. Back to you.

Thank you, Jon. I thought it would be useful to do a deeper dive into some of the key markets that impacted our results last year, and I'll start with the U.S. As Jon has said, this is our largest sales market, accounting for nearly 40% of the group sales. We experienced a number of challenges in the last 12 months, weaker consumer sentiment. A real theme of retailers continue to reduce stock levels across the board, but in particular, adverse weather in Asia through the summer delayed production, and that was compounded by strikes on the East Coast of the U.S. at the ports, which delayed our key Christmas stocks getting in and also being able to ship it out to the retailers around the U.S. As a result of that, we lost key sales at a key part of our year and missed out on potential replenishment of orders. The net result of that was that sales in the market were down around 5% at constant currency. But without that supply chain disruption, sales actually would have been up in the market. What's reassuring is that at the end of the season, most of our key retail partners reported that the sell-through of our products has been very strong for the season, indeed, in many cases, up on the previous year. As Jon has said, despite the disruption, the extra cost and some of the margin pressure we felt as a result, the overall profits from this division were up nearly 20% year-on-year. As a result of that experience, we've already taken a number of actions. That includes getting earlier Christmas range production slots for 2025. And those production slots will be earlier, not only for the product made in our own factories in the U.K., but also for our partner factories in Asia. We developed and launched a global Christmas look book. For the first time, we have over 100 pages of all of our Christmas ranges that have been put together that's gone out to all of our customers, and we think that will help leverage the extensive range that we have across our network of customers. We are focused on helping the thousands of independent stores around the U.S. with a new plan as well as bringing out new products and new exclusives for this year. So looking forward in the U.S. whilst we have, in the short term, some caution around the fast-evolving tariff situation, we believe that we've taken steps already to recover from the challenges for the Christmas trading we had last year. We're focused on growing independents. We're focused on growing our own very profitable e-commerce channel as well. Turning next to South Korea and just to build on some of what Jon has already said. We saw huge demand, and we've given a huge amount of orders to make in our factory in 2022 and 2023 as South Korea reevoked rather late from a kind of a long COVID shutdown. Unfortunately, by the time we've made all those orders and they have made their way through the quite long supply chains to get through to the end retail in South Korea, the Asian economies have deteriorated significantly. Retail footfall was down in premium, but also in mass stores. And therefore, those customers at the end of the chain that we've made those orders were left with significant overstocks. That resulted in a much lower level of sales orders in the year that we're reporting on today, 2024, a lost sales margin and the impact on our factory was also significant in terms of lower utilization. Again, in terms of reassurance, what we can see is that online, our sales continue to grow on key online platforms. Our market share has held up and the awareness of our brand engagement with our brand, particularly around our key Portmeirion Botanic Garden products remains strong. In terms of actions that we've taken, we've supported our customers in the last 12 months on reducing those stock levels. I still think there's more to do through 2025, but we've made some good progress. We have and are going to accelerate new product development, giving our customers and the end consumer something new and fresh to look at and to buy. We continue to review our supply chains and work with our customers to get improved information about stock, about sell-through and use that to build into our forward plans. We've launched Christmas ranges for the first time in the last 12 months. And again, we are reassured by the sell-through and the market share that we have. Looking forward for this key market, we expect a modest recovery, I think, in 2025, but probably a fuller return to more historic levels of trading in 2026, 2027. And that will include our key Botanic Garden range as well as some of the new ranges we are introducing, including Spode Christmas tree. A few words about Wax Lyrical, our home fragrance business. Again, this division was most impacted by COVID shutdowns. Its, independent customer base in particular, was shut for a long period of time. We saw in 2021, 2022 and 2023 sales fall and the division making a loss. The great news is that the new strategy that we have in place in this business has made significant improvement to those results. New products have been developed with a really strong value proposition. A lot of new listings have been gained in national grocers and retailers around the U.K. Sell-through of those new ranges have been very, very encouraging with repeat orders. In addition, the management team has strengthened our Christmas ranges -- Christmas gift ranges. And as a result, sales are up 25% in the year and nearly 60% on a 2-year basis. Profit is up nearly GBP 1 million year-on-year and our factory is far better utilized as a result. Looking forward, we started 2025 in home fragrance with good sales momentum. The team are working hard on winning new further listings for this year and also see an opportunity to take some of the successful ranges in grocery in the U.K. and take them into European and other international markets. All of that, we hope, will give us further factory efficiencies with very little CapEx. So that concludes the first part of this review in terms of our historic results. I want to now turn and talk about our forward strategy and in particular, our short-term priorities. We want to accelerate our long-term strategy delivery. We want to accelerate our profit recovery. I think we are fortunate to start with a strong foundation. We have really a great portfolio of premium brands. We sell all around the world, diversified in terms of our global markets. We have 2 great U.K. factories, which have a lot of spare capacity. And in terms of people, we have very experienced people across our organization from operations through to sales, through to marketing. And as we've said already in this presentation, despite challenging market conditions in the last 24 months, we have made good progress in many areas in the business. Our Spode brand is roughly 50% bigger in terms of sales than it was 4 years ago. We've constantly increased our online penetration. Our product is on sale on more online platforms around the world than it's ever been. We've invested in new automation in our factories, which will lead to efficiencies. And our Wax Lyrical business is growing nicely and has returned to profitability. However, that said, we reflect in terms of the near term that markets are likely to remain challenging, remain volatile. And we want to accelerate our progress. And therefore, we've done work in the last 2 or 3 months on a new transformation plan that I'll share with you today over the next few slides. So a 5-point plan. Firstly, returning to growth in our established markets as soon as possible; number two is about driving to having a strong fortress balance sheet; three is about increasing, really increasing the investment behind those premium brands that are the heart of our business; four is about exploring and developing as a driver of accelerating our top line sales growth; and five is about pushing and striving for excellence across all parts of our business, excellence everywhere. And together, we believe these priorities will help us execute more consistently and get back to growth sooner, and I'll deal with these one by one. Established markets, by which I mean the U.S., U.K. and South Korea, which represent just over 90% of our sales today, we want to return these markets to growth as soon as possible. And that will be helped by, firstly, focusing on growing our strong Christmas business and getting market share in other key seasonal gifting events. In Korea, we will continue to support our longstanding retail and distribution partners, support them with eliminating those overstocks that have caused us some pain in the last 12 to 18 months. We'll support them with accelerated new products, and we'll support them by exploring new categories that we can move our well-known brands and ranges into. We're also looking at our independent channel, both in the U.S. and the U.K., the thousands upon thousands and thousands of smaller often single stores that carry already our ranges. How can we support them? How can we encourage them to take more of our products from our extensive existing ranges, how do we incentivize them to grow together with us. We'll also look to continue to develop online channels, both omnichannels with retail partners and in particular, our own highly profitable websites in the U.S. and the U.K. And finally, we are reviewing and we do a reset of our own retail stores in the U.K. That's returning to growth in established markets. Secondly -- actually before I move on to the second one, I want to give a bit more detail about Christmas. For those that have seen our presentations in previous years, you'll know that our Christmas ranges are very strong, very profitable. It's a key part of our year. So how do we grow this part of our business? Well, again, we start with that strong base. We are fortunate to have some market-leading ranges. Designs like Spode Christmas tree have so much history and are loved in many markets around the world, particularly in the U.S. They're high margin, substantially higher margin than our average products and the teams that we have -- sales teams around the world have grown listings, the distribution points that we have in the last 3, 4 years, we're on sale in more places with these ranges than ever before. In terms of operations and the role operations has a role to play and we recognize the disruption and damage that -- the supply chain disruption being late in stock last year caused our P&L. And therefore, having those earlier production slots, building more contingency into the supply chain and timing is important, and that will give us the potential, we think, for a quick rebound in Christmas sales in 2025. There's also commercial leverage. As I said, we've launched a new global Christmas catalog this year. In terms of the trade shows we've done in the first quarter in the U.S. and the U.K., we've done those in a slightly different way this year with a real focus on the Christmas product. We continue to bring out a road map of new products to support those customers and, where possible, offering exclusives to certain retailers. And we're going to increase our marketing dollars and pounds behind our social media campaigns, our influencer work and supporting our products online and offline with digital assets. We also though, looking forward, want to build more market share in other seasonal gifting parts of the year. We want to learn from our successful Christmas ranges and Christmas market share and use that to leverage the customers we already have, lean into the consumer trends, which show that more and more money is being concentrated around key seasonal gifting events. And that includes looking at events like Mother's Day, events like Halloween. So this is very much an opportunity for growth in 2026 and '27, but work is already underway on that. Turning now to the second part of our 5-point plan, which is really about developing and building a fortress balance sheet. What do we mean by that? It's about delivering a consistently improved free cash flow, using that improved cash flow to repay debt. Our intent is to repay down our debt in the next 2 to 3 years. Part of that will come from a plan to reduce inventory. And the benefit of doing this will be that we can take that interest cost, which you can see from the chart on the right side has ramped up a lot in the last 5 or 6 years as interest rates have gone up. We can repoint that interest cost and instead spend that money, nearly GBP 2 million, behind our marketing, behind our sales teams, behind supporting those premium brands as a way of driving that growth engine. Part 3 of our plan is about those premium brands. We want to ramp up the investment over the next 3 to 5 years behind those premium brands. As funds allow, we will scale up starting with Portmeirion and Spode, improving the experience that we give our customers in all of those brand touch points, online, in physical store, with the product, with the packaging, how people order from us with the feedback they give to us, all those brand touch points are important. Part of this brand proposition is renewing our ongoing commitment to making our tableware in Stoke-on-Trent. So a lot of work to do there. I thought I would dive into Spode. And the work we've done with Spode as an example of where we can go with this. So Spode, as we know, is a great premium brand, has a strong heritage. That story going back to when it was founded in 1770 in the last couple of years with really very minimal resources and investment, our marketing team had real success in social media advertising and influencer campaigns that have resulted in real viral engagement with up to kind of 8 million to 10 million views on posts that have gone out. Our brand fans have grown. Engagement of those brand fans on Instagram and Facebook have grown significantly. And all this is with very limited funds. So in 2025 and further forward, we intend to increase the marketing pounds and marketing dollars that we spend here. And hopefully, that will amplify and accelerate the progress that we can make with our brands and be a driver of growth going forward. And while I'm now on our brands and increased investment by our brands, a few words about our Made-in-Stoke proposition, product proposition, a key part of our product proposition. We're very proud to still manufacture in U.K., in Cumbria for our Wax Lyrical business and Stoke-on-Trent for our tableware business. It's part of our DNA, a key part of our product and brand proposition. We recognize that in the last 12 months, the amount of tableware that we make as a proportion of all the sales around the world has fallen and we want that to recover. It's fallen really because of the lower orders we've had from South Korea, particularly Botanic Garden. So our ambition over the next 3 years is to really increase that percentage of tableware that's made in our Stoke factory again. We think our customers want it. They love our U.K. make product. It will help drive the factory economics and of course, it will support the premium brand position and support our price. In the short term, we will do this on a case-by-case basis and are aware of the challenge and different cost basis between Asian manufacturing and U.K. manufacturing, but we believe that there will be a payback, payback in terms of price we can achieve the demand that we can generate. So work is going on now to identify opportunities where we can onshore production that is currently outside of the U.K. Point 4 of our forward plan is about explore and develop. And this really covers a number of different areas, all of which is about accelerating our sales growth engine. It includes, for example, our international markets. We currently trade with last count about 57 markets outside of those top 3, and they drive around 8% of our group sales. So we want to focus on 3 to 5 of those smaller markets and move them up the chain, make them much bigger markets, leverage our full range of products and brands across those markets. Explore and develop is also about the value and the potential of our extensive designs archive. What can we do with that archive in terms of supporting our customers, in terms of new products, what are the licensing opportunities in other categories. All those things are areas that we're going to explore. Next one to talk, it's also about innovation. It's about continue to create beautiful products that is loved by our consumer base around the world. And finally, in this section and our plan, I want to talk about driving excellence everywhere across our organization. It all starts with a brand-first mindset, putting our brands first, recognizing that, that is the heartbeat of our business. It's also about having an attention to detail in our operations, in our factories, in our warehouses, how we design, how we organize, how we support our customers through the process, every part of our business and attention to detail. Many small incremental improvements together, we think, will have a sizable impact on our performance and our ability to deliver in difficult markets. And we'll do this is supported by having an open entrepreneurial culture with a mentality and encouraging people across the organization to have bottom-up ideas. So that was a review of our 5 key priorities for the next couple of years, 2025 and 2026. I'm now going to turn to summary and outlook, and then we'll have time to pick up on questions. So just to recap on what we've gone through so far today. We recognize that financial results that we announced on Monday were disappointing and recognize that really sales reduction in one market, South Korea, was the driver of that. There is, as we've shown today, good progress going on across many other parts of the organization. We recognize the need to accelerate our recovery -- to accelerate our profit recovery. And therefore, we've put together a transformation plan, which I've gone through today to help deliver that. And we have a reinforced and supportive Board behind us, behind Jon and I, that will help us support and drive this next stage of the company's journey. So a few comments around forward outlook. If I start, first of all, with the next 12 months in 2025, we're obviously mindful of the fact that economic environment around the world remains volatile, remains uncertain, and that includes the fast-evolving situation with U.S. tariffs. We've started 2025 positively. We're pleased with the progress that we're making, both financially and with the plan that I've laid out today. We see significant global potential from our portfolio of premium brands. We're very, very sure on what we have to do in the short term this year and next year in order to drive that transformation. And part of that will be this focus on reducing our net debt, improving our free cash flow and using the savings on financing costs to support our brands in terms of increased marketing and investment. Looking further forward, I've talked today about the desire over time to ramp up the investment behind our premium brands. That is going to be important. I've talked about our ambition to eliminate our net debt in the next 2 to 3 years and the benefits that, that will give us. We've talked about our ambition to take those smaller international markets and find 3 to 5 that can become much bigger markets in the next 3 to 5 years. And we're going to continue to develop and innovate with beautiful new products, explore new categories and leverage where we can our extensive archive of designs. And all of that we think should be amplified as the wider markets recovered in terms of the improvements we've already made and are going to make in the next 12 months. So that is us in terms of the formal part of this presentation. I do hope that, that run through has been useful. This slide deck is already on our investor website, and we look forward to answering any questions that you have.

Perfect. Mike, Jon, if I may just jump back in there. Thank you very much indeed for your presentation this afternoon. [Operator Instructions] I like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Guys, we did receive a number of pre-submitted questions ahead of today's event. And as you can see there, we've also received a number of questions throughout your presentation this afternoon as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And Mike, Jon, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. If I pick up from you at the end, that would be great. Thank you.

Thank you very much, Jake. So right, we've had a lot of questions, which is great. Thank you very much. And we'll do our very best to answer as many of those as we can in the time that we've got. You can always contact us outside of this via our Investor website at any time with questions as well. So in terms of the pre-submitted questions that Jon and I have scanned through, there were a number of questions that all came under 2 or 3 headings. So I'm going to deal with those first and then go back and pick up the other questions. So there were 3 or 4 questions around our commitment to making manufacturing in the U.K. And those questions really were around, is that the right strategy? Is U.K. the right place to manufacture given the inflation and situation of the cost base? Why do we want to focus on U.K. made? Is there a cost and margin impact? So let me deal with that first. Firstly, our brands, such as Portmeirion and Spode have been manufactured in the U.K. for many, many years. I think it's a key part of our brand, our product proposition. When we say that we want to increase the percentage of tableware we manufacture in Stoke-on-Trent, we understand that that's going to require careful management. We need to understand the orders and capabilities that we have. This is not going to be a sudden and stark shift overnight. It will be a careful and gradual plan. In terms of priorities, recovering our South Korean volumes back to historic levels will be a key part of supporting that U.K. made commitment, a key part of helping the factory economics overall help reduce the kind of fixed cost allocation to all of our products. So South Korea is our #1 priority, getting those volumes back, that will support our U.K. factory. There's then the opportunity that we've talked about today to really grow some of those smaller international markets. Again, many of the other markets we have small positions in including in other parts of Asia, really, really value the U.K. make proposition. So growing international markets is the second thing that will help support this. When we develop new product, we will always first say can we make this in our own factory in the U.K.? And if we can, that should be our first point of call. If we can't, we don't have the capabilities, then obviously, we can continue to manufacture that overseas. And there will always be some complex products, some product that maybe isn't commercially viable for one reason or the other. And we will continue to make that with our longstanding partnerships with overseas factories. So I hope that, that's clear and helps with the U.K. make questions. The next sort of thematic of the questions were around what we learned from the challenges that the world has thrown at a business like ours in those 2 years and the experience that we've had in terms of financial results. So clearly, there's a lot that we had to deal with and there's a lot we have to learn, and we start with Korea. We recognize if we go back to that chart with our 10 years of sales history that South Korea has been right up and down, the average sales in the market are around GBP 20 million, but we've had years that peaked GBP 26 million and years that have been near GBP 10 million. Smoothing that out would be enormously beneficial to our factory and to our forecasting and our results. How do we do that? We've deepened the relationships and information flow that we have with our Korean partners. I went back in Seoul in Korea in a couple of weeks' time for about 10 days meeting all of our key partners and really start with that relationship, spending time on the ground there. We have someone that also works locally out in Seoul for us, getting better information and hopefully that we can judge stock levels in the supply chain better and have a smoother flow in the future. Part of this was about our commitment, I think, to what we call D2C sales or e-commerce. We are still very committed to our own e-commerce and D2C channels. The opportunity to interact directly with the end consumer is fantastic. Our e-commerce business is very profitable. It's got more profitable in the last few years. So that's absolutely part of our priorities as well. I think then the third area where there were a number of 3 or 4 questions was around outlook. And those questions centered around whether things get better or things are going to still get worse. They centered around when is it realistic to get back to a 10% level of operating margin. They centered around the fact recognizing that last year's performance is disappointing and what is our confidence level with outlook going forward. So if I deal with all of those together, first off, I think that we're aware that generally, economics around the world in terms of key markets are still difficult. U.K., U.S., Asia, we can't control that. We're also very close to the fast-evolving sort of tariff situation in the U.S. U.S. is an important market for us. We have a response to that, and that's going to be about price. Any costs that we incur, we'll pass on as price. What we're going to do, however, is we're going to concentrate all we can control, what we can influence in the next 12, 24 months. And a lot of that I covered today in that 5-point plan. Okay. So returning to the other questions, individual questions, if I may. We had a question about whether the company should buy back its own shares. I think the answer to that is that our priority, as I've laid out today, is to repay our debt. The benefit of repaying our debt is that we can repoint the cost of servicing that debt behind our brands, behind marketing, behind sales, behind growing our top line. So currently, there's no intention to buy back our own shares. There's a question around the interest rates that we pay on our borrowing, and I'll let Jon answer that.

Current interest rates are about just over 6% based on the SONIA overnight interest rate and the margin. So it will move as that rate moves, but currently just over 6%.

Thank you. And Jon, there's a question about what the cost would be to replace our factory or renew our factory in Stoke-on-Trent?

I think at this moment in time, there's no plans to do such a thing. As Mike referenced earlier, there's significant capacity available to us in our current facilities, and we're focusing on getting the most efficiency and productivity out of those rather than looking at a new facility.

Fantastic. And then Jon, do you mind just to take the question about where you see our inventory and net debt level?