PZ Cussons plc (PZC) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to today's PZ Cussons conference call. [Operator Instructions] I must advise you that this conference is being recorded today on the 23rd of September, 2020. And without any further delay, I'm delighted to hand the conference over to your presenter today, Mr. Jonathan Myers, CEO of PZ Cussons. Please go ahead, sir.

Thanks, Petra, and thank you, everyone, who's joined the call today. I know I haven't had the chance to meet many of you yet. I'll come on to that in a moment, but I do appreciate you making the effort to spend some time with us on a busy day. As you may well know, it's my first set of results since taking over as the new CEO of PZ Cussons about 4.5 months ago. And I'm just 1 of the 100-or-so new employees that the company has taken on since the onset of the COVID-19 pandemic. And frankly, all of us have started our roles in ways, which none of us would ever have imagined. And of course, what I haven't been able to do is get out and visit the markets and really get a sense of all of our operations. But I would say how impressed and struck I have been by how well the organization has responded to the COVID-19 pandemic: firstly, looking after our employees and their families, and thereby enabling all of them to really do an extraordinary job of managing and navigating the business through a period of remarkable challenges; and above all, helping millions of people do something as basic, but now we have learned as critical, as washing their hands. And I want to start off by saying thank you and just recognizing the hard work of all of them. One other impact of this pandemic has been that we've got 2 sets of numbers for you this morning, though. So I will be assisted by Alan Bergin, our interim CFO, in a moment. He'll take you through the full year 2020 numbers. And then I'll come back with a trading update on our third quarter and the chance to share a few initial thoughts before we open up to your questions. So if you'd like to turn to Slide 4, I'll hand over to Alan.

Thanks very much, Jonathan. Good morning, everyone, and we will now turn to the key messages for the financial year ended 31st of May, 2020. Overall, the last financial year was a challenging one, with our markets impacted by macroeconomic factors leading to category contraction and consumer discounting in the first half and, of course, the mixed impact of COVID-19 in the second half. We saw progress on the strategy launched in July last year with 3 disposals announced this year, year-on-year growth in the Focus Brands driven by the second half results and a reduction in the organization complexity, particularly in the final quarter of the year. In terms of top line growth, we saw excellent results in the U.K. driven by Carex, but decline in Nigeria and Australia and the adverse impact of COVID-19 on our Beauty business, which, given seasonality, sales largely fall in the second half of the year. In this phase of revenue decline, we implemented overhead measures in the final quarter but maintained a strong commitment to marketing investment, which was in line with the previous year despite the falling profits. Given the operating environment and mix impact of -- on -- of COVID-19, our liquidity was a key focus for the organization as we looked internally, choosing not to participate in U.K. government support schemes, such as the furlough or COVID-19 commercial paper programs, instead focusing on our working capital. And overall, our net debt declined significantly year-on-year. Looking ahead, we continue to see volatility in the markets, and we operate and look to balance off the needs to increase investment behind our great brands with a strong focus on cash. The Board are recommending to pay a final dividend, which reflects this good work on cash management and provides a more sustainable level for future growth. We will now turn to the overview of numbers on Slide 5, please. As we can see from Slide 5, there was a moderate decline of 2.4% in the year with revenue of GBP 587 million driven by Nigeria and the mixed impact of COVID-19 in our business. Focus Brand revenue grew compared to last year at 3.3% principally driven by Carex in Q4. Adjusted profit before tax at GBP 62 million reduced by some 15% driven by these losses in Nigeria, decline in Beauty and lower profits in Australia. This offset excellent results in both the U.K. and Indonesia. Our interest charge was lower than last year, reflecting the reduction in our debt position. Reported profit before tax declined to GBP 29.3 million largely due to the impairment of five:am and Rafferty's Garden and costs associated with the restructuring, offsetting the profits from disposal of our operations in Greece and Poland. The balance sheet was significantly strengthened, with net debt declining to GBP 49.2 million compared to GBP 154 million last year. Net debt to adjusted EBIT ratio is now 0.6x compared to 1.5x last year. And external financing headroom on our external facility is some GBP 200 million. Total free cash flow was GBP 131 million with a conversion rate of 143%. This demonstrates the strong working capital management in the year and clearly shows a focus of liquidity on the business amid volatility. Please, can you now turn to Slide 6? And we look at the performance of our largest region, the Europe and Americas. For Europe and Americas, revenue was GBP 214 million, and it grew by 6% compared to the previous year, with growth also in adjusted operating profit to GBP 55 million. PZ Cussons achieved the #1 in value and volume share terms in the Washing and Bathing category in the U.K. The COVID-19 pandemic has seen our trade partners and consumers reach for Carex, which has a strong heritage and performance in the antibacterial wash and sanitizer. On the back of this, the U.K. enjoyed an outstanding set of results growing strongly this year. Beauty revenue declined sharply compared to last year. Revenue in the first 9 months was impacted by lower consumer confidence in the U.K., while COVID-19 disproportionately impacted results due to the seasonality, specifically in the U.S. Furthermore, COVID-19 led to the cancellation of some of our marketing activities and, in particular, for St. Tropez. Adjusted operating profit for the region grew due to the revenue performance in the U.K., offsetting the COVID-19-related decline in Beauty, together with increased head office cost associates, investment in capabilities, including digital. Margins remained robust but somewhat diluted by the impact of Beauty. Please now, can we turn to Slide 7? And we'll review our Asia Pacific region. Revenue was GBP 185 million, declining 3.7%, with adjusted operating profit at GBP 18.5 million. In Indonesia, revenue was stable despite a reduction in the number of trading days associated with Lebara and some volatility due to COVID-19 impacting the trading outlook. Australia revenue was lower largely driven due to the decline in our food brands, continued high level of promotion activity and the impact of COVID-19 on our Beauty category in the final half of the year. This offset a very strong performance by Morning Fresh and our other Home Care brand Radiant. Excellent profit growth in Indonesia driven by an improved product mix was offset by the performance in Australia, which was further adversely impacted by foreign exchange movements. In Asia Pacific, we have reviewed the value of our acquisitions in Australia, and this has led to an impairment at group level of some GBP 37 million. The impairment of five:am reflects the revision of forecast as a result of increased competition, the delisting of our Simply range, COVID-19 impact on food service products as well as a more negative outlook on the category and macroeconomic assumptions. The impairment of Rafferty's Garden reflects disappointing results in China to grow the brand as well as an outlook on macroeconomic assumptions. Finally, in terms of the regions, let's turn to Slide 8 and have a look at Africa. In Africa, revenue was GBP 187 million, and this declined roughly 9.7% with operating losses of GBP 7 million. Revenue in Nigeria was adversely impacted by the continuation of adverse economic conditions worsening in the final quarter of the financial year as a result of the decline in oil as well as the impact in COVID-19, which led to initial closure of the open markets, difficulties in transporting products around the country and a focus by the consumer on food products. We also continue to see the contraction in our mass market Home and Personal Care brands, resulting in price reductions, discounting and ultimately, lower margins for the industry as a whole. The adjusted operating loss is driven by the decline in our Home and Personal Care categories but accelerated also in Q4 as a result of COVID-19. Losses were further increased through the accounting impact of the devaluation in April 2020. COVID-19 prompted us to prioritize cash collection over sales in the final quarter and review key provisions on the balance sheet regarding stock and debt. The results in Nigeria were partially offset by increased profits in Kenya, Ghana and also contribution from our associate PZ Wilmar. That concludes our review of the region. Please now, can you turn to Slide 8? -- Slide 9, sorry, and we'll talk about brands. We achieved revenue growth of 3.3% across our Focus Brands compared to last year. This was largely driven by the outstanding performance of Carex in the U.K. but also Morning Fresh in its respective markets. St. Tropez and, to a less extent, Sanctuary, were impacted adversely by COVID-19 due to the lockdown, eliminating social gatherings and closing retail and disproportionately impacting our results due to seasonality. Both Imperial Leather and Original Source declined in the first half, reflecting consumer uncertainty and lower footfall in the U.K. and we were impacted in the second half by the contraction in the shower category with the focus of the business also to produce Carex given the limitations on our supply chain as a result of the pandemic. Cussons Baby in Indonesia delivered a robust performance but was impacted by the reduced number of selling days this year, while in Nigeria the brand was impacted by COVID-19 after growth in the first half of the year. Premier in Nigeria declined in the face of heavy promotional activity as well as this adverse of COVID-19 in the second half of the year. Rafferty's Garden in Australia was relaunched and led to a flattening in the decline in market share. But overall for the year, revenue was down. Electricals' growth in the first half was curtailed by COVID-19. And overall, the revenue result was in line with last year. Please now, can you go to Slide 10? And we'll look at our net debt and cash position. As we've seen, net debt reduced from GBP 153 million to GBP 49 million due to the proceeds from disposals and increased focus across the business on managing working capital and capital expenditure. Net proceeds from our disposal program delivered some GBP 45 million, with improvements in working capital generating close to GBP 60 million. This was driven by increased revenue in the U.K., where our debtor days are shorter than the rest of the group; a one-off benefit also in the U.K. of the [ FAS ] deferment program; and prioritization of receivables in Nigeria given the COVID-19 risk. Our balance sheet remains strong with a net debt-to-adjusted EBITDA ratio of 0.6%. And in May 2020, as I said, we have essentially a headroom of some GBP 200 million. In addition, the group's 3 U.K. pension schemes of [indiscernible] accounting surplus offsetting a small deficit in the overall -- in the overseas schemes. Please, can you now turn to Slide 11? And we'll cover our approach to the management of COVID-19 risk in the company. In the face of unparalleled business and social disruption, our priority is to manage through the COVID-19 crisis were to ensure the protection and well-being of our employees and their families and also meeting the needs of consumers and customers around the world. The response of our employees to COVID-19 pandemic has been fantastic. Our factories continue to manufacture during the height of the crisis and maintain supply to our customers when they needed it most. Innovation and supply chain agility meant that we were able to supply new pack sizes and product formats in response to the changing needs of consumers as weeks and months unfolded. At the same time, ensuring safe and secure conditions for our employees in their place of work, whether in factories, distribution centers or at home was a key priority for our teams all around the world. The impact of COVID-19 across our business was significant, although very different by business units and market. In the U.K., we were met with unable to supply exceptional demand for Carex. Our Beauty business was impacted through St. Tropez, as we know. Our business in Nigeria was adversely hit by both the physical impact of the COVID-19 crisis and especially the closure of open markets. Since the foundation of PZ Cussons, over a century ago, a sense of purpose has always been at the heart of the organization. And our actions to support the wider community in the second half of the year were reinforced. Our approach has been targeted to the specific needs of each market with a focus on programs to distribute free soap, sanitizer and hand wash to those who are vulnerable and in need. For example, in the U.K., our That's Why We Carex program is working with homeless, elderly and other vulnerable groups. In Nigeria, the PZ Cussons Foundation distributed soap in the north of the country. While in Asia, we continue to support those communities close to our manufacturing site. Our approach to COVID-19 is constantly evolving in line with the situation, and we see volatility increasing in the short term. Finally, in relation to FY '20, please turn to Slide 12, which concerns the dividend. The Board is recommending a final dividend of 3.13p per share, making a total of 5.80p per share for the year, despite the external volatility and supported by the prudent management of cash to date. This represents a reduction of 30% versus last year. The decrease will reset our dividend coverage to a more sustainable level, which has been diluted over the last few years. It will provide the business with the capacity for investment in our key brands and the new opportunities such as hygiene amid COVID-related uncertainty. I will now hand back to Jonathan to bring us up-to-date with the trading statement for the first quarter ended 31st of August, 2020. Please, can you now turn to Slide 14 for the key messages?

Thanks, Alan. So picking up on Slide 14. We've made a solid start to the year. We're back in growth. The growth is broad-based. We've seen strong growth in some of our top markets and on some of our top brands. In some places, it's a return to growth and in some places, it's an acceleration of the growth that we showed in Q4. Obviously and understandably, we've seen some very strong demand levels for our hygiene-related brands. But as I'll come on to show you in a moment, we've seen renewed momentum beyond hygiene and in other parts of our business as well. Importantly, we've seen growth in all of our regions, which we should look at in a moment as well. But I'd like to stress most significantly that in Africa, we're back in profitability after the disappointing losses last year. However, it's only the start of the year. It's only the start of our efforts to turn around the business. And we're expecting and anticipating some significant volatility ahead manifesting itself in 2 forms, be it the literal physical disruption of COVID-19 and the impact of lockdowns on the various markets in which we operate around the world but also the impact on our consumers as they begin to feel recessionary pressures on the pound, dollar or naira in their pockets. As we work through that volatility, we're going to keep a close focus on the things that have worked well for us in recent months, in particular, driving our cash and liquidity performance. But what we've really tried to do in the first quarter is set about reigniting the business, really trying to unlock some pockets of top line growth and doing so with a sense of urgency so that we can demonstrate the agility, which should be a competitive advantage for a business of our size. It's only one step, the first quarter. No one claim -- no one can claim that we fixed the business or changed everything in 1 quarter. We are pleased with the start, but we do recognize we have much more to do. So let's turn to Slide 15, and we can take a look at those strong overall revenue numbers that I talked about just a moment ago, where we see the top line for the group having grown by 23% really fueled by our Focus Brands, effectively our top brands, which have grown by 37%. We've continued to do very well on our net debt, and we've improved on the year-end position and show significant improvement versus the same position a year ago at about GBP 37 million of net debt at the end of the first quarter. As part of the approach that we've taken to reignite the business, what we chose to do was to identify some set of interventions, a shortlist that we would elevate to what we've called internally, you have to excuse the label for a moment, our turbo boosters that we've really tried to unleash in the first quarter and to demonstrate to ourselves as an organization that we can work in a different way, a more energized and more agile way to really go for activities that will unlock additional revenue within the quarter. Some of those turbo boosters were on hygiene brands, but they were also on e-commerce and other aspects of brand activation, and I'll talk about those in a moment. But if we move on to Slide 16, you'll see why we're saying that the growth is broad-based. You'll remember from the slide that Alan showed, last year, we grew 4 of our top brands. And in the first quarter of this year, we've grown 10. So we're very pleased with that evolution, and we want to sustain it. And we've been able to do that by really driving some of the biggest brands in our portfolio. Carex has continued to establish itself as the market leader, not just in a bigger liquid hand soap market in the U.K. but a dramatically bigger hand-sanitizing gel market. And in fact, we estimate the Carex soap has washed about 1 billion hands in the U.K. in the past 12 months. But more broadly than that, if we look to the other side of the world and we look at Morning Fresh in Australia, we've seen record share levels for the hand wash -- the washing up liquid business in Australia, where we peaked in the last quarter with about AUD 1 out of every AUD 2 being spent on Morning Fresh as part of the overall category. But we've also seen growth in Premier in Nigeria and growth on Cussons Baby in Indonesia, hence why we're saying broad-based; some of those related to hygiene, but clearly not all. St. Tropez was back to growth. And Electricals in Nigeria, also back to growth. Our challenge now is to maintain all the ones that are in green and then make sure we get on to fixing the brands that are in red. It won't be plain sailing, but obviously, we've made a good start. So shifting from a brand lens to a regional lens. If we move to Slide 17, you can see that, that brand momentum really does translate into momentum across all regions, obviously, led by Europe and the Americas. We're going to round up 49% to 50% growth. But we do see solid growth in the other regions as well. Obviously, Europe and Americas was fueled by Carex, but we also saw early signs of renewed momentum in our Beauty business. Now anyone who's working in the beauty category would say whatever positive signs there are, are fragile, and we would say the same. But we also saw benefits from some of the actions we took in the first quarter, not least, much more aggressively opening up new e-commerce routes to market, which meant that we got to a record level of our Beauty sales at 36% of total revenue being sold online. In Asia Pacific, we saw good growth in both Australia, New Zealand and Indonesia, with Cussons Baby continuing to grow in Indonesia despite some challenges on footfall in the modern trade as consumers have been locked down and are more likely to be sticking to the traditional trade in their local neighborhoods. But we also saw a continuation of momentum on Morning Fresh and Radiant in Australia and New Zealand. Meanwhile, Africa clearly benefited from us being able to play in more of our traditional routes to market that were impacted as the open markets were either closed down or subject to curfews in Q4. But we saw also the benefits of us taking pricing actions to offset foreign exchange and raw material input cost inflation, but at the same time, benefiting from some of the relaunch activity on Premier soap that actually took place in the market in the second half of last year. But it wasn't just on Premier soap that we saw momentum in Nigeria. We also saw good momentum and returns to growth on Morning Fresh and Cussons Baby. If we move to Slide 18 then, we can spend a moment on what do we see as our outlook. We're pleased with our solid start, but we remain very cautious. There's a lot of volatility ahead. As I said, that could be the physical disruption of lockdowns across markets and across our supply chain as we all navigate the variables, not at least in the last 24 hours here in the U.K. of COVID-19, but also the looming recession in most of the markets in which we operate. But based on our first quarter, we are also taking actions from a position of confidence. We want to improve our results sustainably in the long term and, therefore, we're looking to increase investments in our business in the balance of the year, be it in capabilities or in direct marketing support to build stronger brands. As we do that, though, we'll maintain a strong focus on the operational aspects of our business that we have done in the last 6 months as we try to navigate through the challenges that remain. I would also say that while we've been doing this work, we've also been taking another look at our strategy. The reality is, as I'm sure all of you have experienced, consumer habits and behaviors have changed dramatically, particularly in some of the categories in which we operate, over the last 6 months. And if we are to be a successful branded consumer goods business in the future, we need to make sure we are responding to changing consumer needs and habits and hence, why we've been taking a look at how we move our strategy forward to get us back to delivering sustainable, reliable growth in the future. So as we move to Slide 18, let me pick up on how we might think about getting back to that path to sustainable, reliable growth. And after a little over 4 months in the role, I want to start by saying how impressed I am with the fundamental building blocks that exist in our business in the form of strong individual brands in individual markets. Be that Carex in the U.K., Morning Fresh in Australia, Cussons Baby in Indonesia, Premier soap in Nigeria or St. Tropez in the U.S. In my mind, these will form the building blocks of our future strategy and our future route to growth or back to reliable, sustainable growth, at the same time, as we work through how we navigate our portfolio and evolve our portfolio to respond to the accelerating needs of consumers in the hygiene category. And as we do that, I think there is a bright future for PZ Cussons to be a branded consumer goods business that sets out to serve consumers. What we now need to do is to serve those consumers we have already better then to find more consumers driving household penetration and ideally, driving up the value of our brands and, importantly, driving up the price/mix so that we're able to expand our gross margins and generate some oxygen in our P&L so that we can sustainably invest in our brands for the future. Also as I look back at the history of the company, the rich history of over 135 years of being in business, I know there are some things that we want to continue to do and even do more of. And whether it's over recent decades or perhaps even more so over the recent months, we've seen a clear pattern of PZ people stepping up to do their bids, often in their local communities, as Alan mentioned, through the crisis of the pandemic, but also increasingly playing an ever more important -- making an even more important contribution to the environment. And that will undoubtedly form an important part of our future strategy. So in summary, we have a lot to get done, not just dealing with the challenges of this year but also dealing with the challenges of delivering a multiyear turnaround. And we're working really hard on both fronts. I want to say thank you to all the people within PZ Cussons as they remain focused on delivering that opportunity whilst navigating the challenges of this year. And I look forward to being able to demonstrate to all of you that we'll be able to deliver sustainable improvement in our performance in the years to come. So with that, what I'd like to do is hear more from all of you and more about your thoughts. And we're ready for your questions.

[Operator Instructions] We will now take our first question.

Nicola Mallard, Investec. A couple of questions, if I may. You've given us very kindly some numbers for Q1 of 23%. I just wondered if you could give us the Q4 revenue performance just to put that in context. Also, you mentioned you'd cut complexity quite significantly in Q4 and I thought if could you give us a little bit more detail on that? And then finally, Imperial Leather and Original Source, clearly, you've sort of deprioritized them a little bit in the short term to focus on the Carex manufacturer. What's the sort of outlook for those brands? I mean we don't clearly want to damage the longer-term performance, but have you been able to reduce some of the sort of logjam in terms of production that you'd be able to put those brands back into the market shortly?

Okay. Nicola, it's Alan. So listen, I'll deal with the revenue performance in Q4 compared to Q1. So Q4 in terms of revenue was essentially you can take flat as guided with essentially Europe and Americas, and particularly the U.K. up, Beauty down, Nigeria down. So all balancing itself off in terms of revenue.

And if I pick up a little bit on the Q4 simplification and then what's the prognosis on Imperial Leather, Original Source versus capacity prioritization, et cetera. So in Q4, the simplification efforts were really in 2 areas: one, very literal and mechanical as we made efforts to reduce some of the SKU count that we have in some of our markets to -- simply to reduce the amount of stuff we were doing so that we could concentrate on some of the more important SKUs and doing some of the classic work to prioritize on your A and B SKUs and deprioritize C SKUs. But I would also say, we took a look at our structure and started to make some choices about how we might simplify our operation for the future. And what that meant was taking out some layers of management and some aspects of previous global category and multifunctional setup so that we could put more of the center of gravity back into our markets closer to the burning heat of the competitive marketplace so that we can move faster and ideally, enable some of that agility that I referred to that we were concentrating on unlocking in the first quarter. And then finally, on Imperial Leather and Original Source versus Carex, I think we have a couple of things going on here. In the early days of the crisis, I was actually, as I said, really impressed with how the organization reprioritized supply both in manufacturing and in distribution to enable us to do a better job of protecting availability, particularly of antibacterial products, at the moment when our consumers and the customers through which we reach them most needed them. What we've worked to do since then is to start to bring back Imperial Leather and Original Source, and there's no doubt that, that constrained supply impacted our ability to grow those brands in the first quarter. But we did also see some consumers move away from some categories during the pandemic. And in line with a number of other Beauty and Personal Care categories, yes, we did see the Bath & Shower categories reduce slightly as, not to put too blunter point on it, people were showering less and bathing less when they were working from home rather than going to the office. So what we're now working to do is more importantly find a future -- a brighter future and get stronger plans for Imperial Leather and Original Source. But we haven't necessarily nailed those yet. So hence, why I say, 1 quarter doesn't mean that we fixed everything, and we still got some work to do.

We will now take our next question.

It's Matthew Webb from Panmure Gordon. I wonder if I could start off by asking, Jonathan, how you think about the balance between investing behind your brands and maintaining -- ideally, growing your current level of profitability? I mean, as I see it, you could either decide that you want to or feel obliged to carry on making around GBP 60 million of PBT and invest what you can within that constraint or you could decide that you just need to increase your investment regardless. And if that means PBT falling to, whatever, GBP 55 million for a while, then that's the right thing to do. I know it's still relatively early days for you, but do you -- is that a fair way of looking at it? And if so, which of those approaches would you sort of currently favor?

Yes. Well, without getting into a detailed outlook discussion on profitability, Matthew. I think what we can say for sure is we want to shift our business model to be one of more reliable, sustainable growth built around rock-solid consumer brands that have pricing power and the ability to reach more consumers through household penetration in the markets in which we choose to operate. To do that, I believe we're going to have to increase some of our marketing investment, but actually also some of our broader marketing capabilities so that we can up our game in our brand-building effectiveness. And we will do that over time, but we can also -- should only also be doing it when we've got what I would call investment-grade plans and investment-grade marketing activity to support. So what we're working on at the moment is, one, trying to generate the oxygen in the P&L by beginning to look at how can we plan to nudge up our price/mix over time so that we're able to generate stronger gross margins. At the same time, we're trying to up our game in the overall marketing machine so that we then have better quality plans that will justify the investment and that we should be able to do both of those things in the mid- to long term as a way that will grow profitability rather than dip into it in the short term.

Got it. Now that's very helpful. Can I ask a couple of other questions, actually, please? The first follows on from Nicola's second question, I suppose, which is where are you now on your ability to meet another surge in demand for hygiene products in the U.K., in particular, as we sadly move into a second wave of COVID? I think during the first wave, clearly, you could have sold a lot more than you did. Where are we now?

So we've done a lot of work, a lot of work in the last 6 months, both to, if you like, maintain the supply that we've got but also to increase our confidence that we can respond to whatever spikes come. And part of that is staying close to our retail partners so that we can meet their needs, right? But a lot of it has also been to continually refine our planning processes, shortening our supply chains and, where possible, increasing our capacity to be able to manufacture in the U.K. and increasingly in-house. And we've made a number of choices and taken a number of actions to prove our ability to do that, whether it be targeted CapEx, whether it be targeted prioritization, whether it be making sure we have sufficient raw materials either on the ground or on the way so that we can dip into them at short notice. And what we'll work through now is what looks like we could be entering another period of, if you like, some volatile trading for our retail partners. And we want to make sure we're ready to support them as they try to meet the needs of their customers.

Can I also just ask about the margin in Africa in the first quarter moving positive? I was just quite surprised to see that given how weak it was, particularly towards the back end of last year. The economic environment still looks very tough. How have you managed to achieve that?

Yes. Matthew, it's Alan. Listen, Matthew, there were also a couple of one-offs in the final quarter that you've got to bring into the numbers. So we did have a devaluation in Nigeria of about 5% or 6%, and that impacts the numbers by about GBP 2 million to GBP 3 million. So you can take that off the profit number. And then in general, on COVID itself, we had some additional costs. So that's the first step. So the base was a bit worse than we expected. And then as we look into Q1, I think we sort of implemented pricing increases in a better way. So we've taken pricing in both Electricals and on the Premier brand but particularly Morning fresh, which is our premium brand. And they've gone better than last year when we had to promote back more heavily. So it's a mixture of pricing and also a lower base from Q4 in honesty.

Got it. Got it. And then sorry, one final question, if you don't mind. I see from the Hut Group IPO material that you're working with them. And I wondered, firstly, how that's going so far? And also how big a part you see the direct-to-consumer channel playing in the future of your business? So I think you might have actually given a target figure for online sales in the press release, but I missed it. Could you just repeat that, please?