Good morning, everyone. Thank you for coming. And good morning, U.S., I know you are early in different cities, East and West Coast, so thank you for joining us. We have a full lineup today. You know Mike, Gareth has presented in the past, John Parry, Anthony Giron, and Dean Franks. What I'm going to do today is keep it very short for myself, so you get to hear the team on basically what the business, how the business is set up for the year ahead and thereafter. And with a bit of luck, guys, if we can keep it sharp, we can give a good half an hour for Q&A, so we can get into the detail. I take the RNS as a given, so I will just make a couple of points on each slide. So you've seen the numbers.
Looking back at FY24, for me, there are 2 highlights in here. We're a financially conservative business. We're not a business that believes in high gearing. We're a disciplined, conservative, financial business, and actually having a leverage ratio just under 1.2x, for me, is absolutely the right shape in the business, so I'm happy with that result. What's underneath that, if you look at the detail, broadly speaking, we have put GBP 500 million year-on-year on net sales. And total stock holding has barely moved year-on-year. From memory, I think it's increased year-on-year GBP 11 million, which is nothing. So we've put GBP 500 million, half a billion pounds on net revenues, with broadly stock holding flat. And that's on the back of last financial year, where the stock holding was also flat pounds.
So what does that tell me as a CEO? The supply chain is incredibly robust and efficient. We don't have to take any unnecessary risks. The quality of those earnings, given the quality of the stock, is in excellent shape. Look forward, the quality of your stock is always your margin tomorrow. So that gives us a very good momentum heading into a new year with having razor-sharp stock, but the best availability the business has had on shelf since I've been in the business, since 2020. Okay? Go back four years, we have delivered GBP 1.8 billion pound check to shareholders cumulatively over four years, 1.8. This is a disciplined business that is all around sustainable, profitable growth, which is cash-generating back to the shareholder. So those are for me, the two highlights of FY24. You've seen this chart before.
The blue line is interesting, but you've heard me before, I'm not in the business of driving market share. I'm in the business of driving sales growth, which are profitable and sustainable, so I always look at the orange line. Pre-pandemic, 342, EBITDA. Last financial year, 629. And what the team is set up to do in the years ahead is to maintain that level of profitability sustainably year after year. Not too quickly, not too slow, sustainably. And that profitability, which is best in class, certainly in the U.K. and in Europe, outside of apparel, gives me the confidence that the business is actually maintaining a high degree of operational and commercial discipline. When I look at that chart, actually, I never look at the history.
I visualize that chart 10 years from now in my head, and that's actually how the business thinks about it. So when I look 10 years from now, yeah, the blue line will have its upward trajectory, but what matters to me is the consistency of the orange line, okay? And that's an important point that I will continue to come back to repeatedly, which is around the discipline of how we grow and what underpins that profitable growth. Quite boring slide. You've seen it before. Three planks, B&M UK, Heron, France. The three businesses are doing well. We're going to keep driving the existing asset base profitably, with high discipline, serving customers in the way we do, EDLP, EDLC, and we're going to grow space confidently, but with discipline. Not too slow, not too fast. I'll come back to some of the details. Mike, all yours!
Thanks, Alex. Morning, everybody. So before I step into the numbers, it's worth reiterating what we see as being absolutely critical in the business from a financial perspective. Four areas. Firstly, disciplined in driving profitable, sustainable growth. Alex has just said it. For us, that means the growth is volume-led, not inflation, and it's coming from like-for-likes, and it's coming from new stores. We see that long-term potential as being very significant. We see the opportunity in all our markets as being large. But attached to that growth focus is the relentless control of our operating costs, so that we keep our customer value proposition as sharp as ever, and we retain our high profit margins, and you'll see that as we come on to our 2024 numbers. Secondly, we've got cash discipline.
We're keeping our stock buys tight, exiting each season clean, and we're maintaining our capital light investment base as well. Thirdly, we're going to operate with a robust balance sheet. Given the large value creation opportunity from the operating strategy, we intend to keep long-dated debt maturities in place, and we're retaining our financial flexibility. And finally, but critically, bringing those three points together, that will mean that we will grow our cash generation and our cash returns to shareholders in line with our capital allocation policy. So moving straight on to an overview of the P&L. It's a straightforward and strong picture. Revenue up 10.1%. All three businesses growing strongly, excluding the extra fifty-third week, revenue growth still remains strong at 7.8%.
Adjusted EBITDA, as we previously guided, it's confirmed at GBP 62 9 million, which is growth of 9.7% in the year and means our profit margins have been maintained. Our cash generation has meant that our leverage ratios have fallen to beneath 1.2 times. Moving into the detail revenues. First page shows total growth. As I'll come back to, I think that's the primary growth metric for our group. B&M UK, total growth of 8.5%, balanced between 3.7% contribution from like for likes, and 2.6% contribution from new stores, with the balance of the numbers coming from the extra week of trading across the year. We opened 47 new B&M UK stores across the whole financial year, which increased average space in the estate by 700,000 sq ft.
The sales densities the new space is delivering are strong. The fact that space has grown by around 5% compared to the 2.6% sales growth contribution of that new space, purely reflects the timing of the openings, and that's giving us momentum as we go into the 2025 financial year. France and Heron, revenue growth again speaks for themselves. Both have high single-digit like-for-likes underpinning those total revenue growths as well. But finally, importantly, customer transaction numbers we always talk about, are once again positive for each of the three businesses across the whole year. So breaking down our U.K. performance by quarter, you can see why the performance is best judged over longer time periods, given calendar effects, prior year comparatives, impacts on short-term numbers.
More importantly here, though, we saw growth in both FMCG and general merchandise in the U.K., with sales participation between the two categories remaining firmly in balance. Also to note, you can see that sales benefit from the new stores increasing quarter by quarter, and it actually represented over half of the total growth, excluding timing effects in the fourth quarter. The gross margin, couple of points. Firstly, second half margin, higher than the first, as is seasonally usual, with the benefit of Golden Quarter. Secondly, U.K. trading margin across the year, up 46 basis points. Importantly, you need to note that the value proposition for our customers is unchanged year-over-year. The improvement comes from discipline in our stock buys, leading to a clean sell-through, with only planned markdowns in the year.
So that's a particularly noticeable effect if you looked at the first half performance year on year, and that's where the improvement has been driven. On adjusted EBITDAs, I will just focus on margins generated, U.K., up from 12.4%-12.6%, driven by the gross profit margins, but also control of operating costs. Particularly important to note is that despite facing a 9.7% increase in the U.K. minimum wage, and also more than a doubling in the number of U.K. store openings, meaning we are experiencing higher pre-opening costs, we've been able to drive that improvement in margins. France, underlying margins up 60 basis points to 9.1%. I say underlying, we're excluding in the prior year, one-off government post-Covid support, and I think that shows the good progress we're making in the year.
It's another step towards the French profit margins reaching double digits. Heron, 6.4%, once again, sector leading. Group margins, as a reported total, are flat, primarily due to the one-off French income and also the increase in the corporate segment costs. Underlying operating costs on the next slide. As per our plan entering the year, the significant work on productivity, our everyday low-cost discipline, has meant that our operating costs as a percentage of the revenues, has reduced for each fascia, and it has also reduced for the group, despite the 9.7% U.K. minimum wage rise. As we look forward at 2025, the operating cost challenge isn't changing. Again, we're facing a large increase, 9.8% increase in U.K. minimum wages, also 6.7% increase in U.K. property rate charges.
Our approach, however, is going to remain exactly the same to as last year, using productivity volume growth that we're delivering, as well as year-on-year favorable hedged currency rates on stock imports to offset any cost increases. We continue to stand behind our guidance, B&M UK margins being delivered in a range of 12%-13%, and the same continuation of the guidance of France and Heron. So slide 15. You heard me earlier emphasizing the importance of total volume growth as being critical in our story. This slide works to explain why that is our focus. First point to say is that we've got structurally sustainable high profit margins in the U.K. of 12%-13%, underpinned by the sales density and our everyday low cost approach.
Secondly, as you can see from the illustrative chart, we're relatively indifferent as to whether that growth comes from new stores or from like-for-likes. Either form of growth, like-for-likes or new stores, is meaningfully accretive to that overall operating profit margin, given our discipline on store fixed costs. And furthermore, as our profit margins are high, the proportionate difference between like-for-likes and new stores is small. And thirdly, of course, this means that our business revenue growth is now diversified very clearly across three elements. It's market size growth, it's market share growth, and it's finally acquisition of new space as well. So changing topics, moving on to cash generation on slide 16. We've returned this year to a normal seasonal trading cash flow pattern, similar, very similar to what we saw pre-pandemic.
As we reported previously, in the first half, we saw a modest working capital outflow as we built up stock to trade the Golden Quarter. That has fully reversed through to the end of the 52nd week. We're clearly reporting on a 53-week basis, so there's a small GBP 8 million outflow to the financial year as a whole, due to a much greater tax payment being made than the GBP 8 million in the 53rd week. Previous year, financial years, that would have been in week 1. This, you know, with the calendar effect, it's now appearing in week 53, and that's just prompting that, that small change, as you see there. Our CapEx approach has been disciplined, focused on new stores that drive proven returns, alongside spending on appropriate maintenance.
A GBP 25 million increase in total CapEx, compared to a GBP 26 million increase in new store spend, shows the discipline to our investment profile. With that discipline, you see once again, our cash generation has been outstanding, leading to a post-tax, post-financing cost, free cash flow of GBP 382 million. So we're therefore proposing a GBP 0.096 per share final dividend, with a total dividend for the full financial year of GBP 0.147. Once again, it's calculated at the upper end of our 30%-40% post-tax adjusted profit number. So to conclude, with a reminder of the bigger picture. Since IPO, we've consistently grown revenues, we've grown cash profits, we've grown our profit margin, and that has driven our operating cash generation.
We're doing this through the discipline of the operating model and the strategy, and our long-term approach and ambition on this is not going to change, simply put. So I'm going to hand back to Alex and the team to talk about our operations and strategy in more detail. Thank you.
Here is that Mike makes it sound, it's easy. It's not easy, guys. It's a lot of hard work in there. I'll be very sharp in here before I hand it over to Gareth. Very pleased with Wilko opening program. I don't have the exact number, but if you assume Q4 last year and Q1 this year with another 4 weeks to go, 52-53 openings, guys? So guys, we've opened 52 shops or so. We have opened in excess of 50 shops over 2 quarters. High quality, accretive, high availability, excellent teams. That's not easy. Yeah, so it's a testament of the work that Ian Pratt, Property Director, he's sitting at the back, you will hear more from Ian in November, and the retail team have done. That's a hell of a momentum the business has had in the opening program, and we haven't compromised a single site.
You know, we went for 51 shops at Wilko, not 70, not 100. Every single lease renegotiated and opening actually, in good shape. Plan is well underpinned. Front end, nothing else to say. Harrow, on the left-hand side, is the next Wilko. Monks Cross on the right-hand side. Standard, there is no difference. They are great shops. Don't make assumptions, one is bigger, one is lower. They're absolutely indistinguishable. They're high quality assets, they are highly accretive businesses, and they are all performing well. Couple of messages before getting into operations. If I look at the last 12 months, what is the best customer impact positively we've had in the business? Availability on shelf has been second to none. I have walked guys at least through 200 to 250 competitors over the last 12 months myself when I see our shops.
We don't do gaps on shelves. It's all around having high availability, 10,000 SKUs, FMCG and general merch, 24/7, 365. Gareth and I, and John, and supply chain obsess about it. That is the number 1 element that underpins the offer to our customer. EDLP is a given. We don't do gimmicks. EDLC is a given. This is actually how we serve customers. Come in, and we're going to please you always with full shelves. On the right-hand side, we've dialed the price point aggressively on general merchandise, performing very well. Simply is performing very nicely across several subcategories, and what I'm going to say is that over the next few weeks, we're going to dial up our posture of aggressiveness on general merchandise to continue to take market share.
Posture of aggressiveness means the right stock, the right price point, no margin dilution, because we are buying well, but the posture of the business is going to be even more aggressive and confident on the general merchandise because we are taking share in this business and in volume. Prices have come down. They are very aggressive, and they will continue to come down as we continue to pass the right savings in the right SKU, in the right subcategory. So when we take stock in November, remember what I'm saying, our posture in general merchandise is going to be even more aggressive to build on the volume we have delivered positive in FY24. Supply chain, you heard me the story. Availability is rock solid. It's what we call the triangle. It's buying, it's shops, it's logistics, and we continue to hammer that every single day in every shop.
Gareth, I'm going to pass it to you. Short and sharp on operations. Why don't you tell the guys when you joined the business, how many shops did B&M have? 7. So these guys have seen 743 shops in his tenure. Go ahead.
Good morning, everyone. I've talked you through the retail approach before, so rather than talk you through the slides, I thought I'd just talk around the way we do it rather than, what's on the slide. So, the first thing to point out is my team has a relentless focus on customer standards and on retail standards, and the way we get about it is very simple. It's high visibility from the senior retail team, and it sounds really obvious, but as a senior retail team, we spend our life in shops. We don't spend our life in strategy meetings, taking time out. We spend our life in shops, seeing what the customer sees. That is really important. So our store managers see us in the trenches working, working with them.
We also give our store managers license to trade, and what that means as an output of that is we sweat our space really hard. We trade every part of the floor, and we let them trade through as hard as they can, and we get the best return possible from our stores. And to do that, we have to keep it simple. Alex mentioned it before, we absolutely focus on the core part of the business. That's our obsessiveness around driving sales and keeping consistent standards. The retail distribution buying collaboration triangle Alex referred to and John will refer to is key to making sure that our focus on core and availability, so that we can keep our shelves so and keep our lives simple, is absolutely fundamental to the DNA, the way we run the business.
And then to finish up, I think there's three things that I would want to leave you with from the retail team outward. Firstly is, despite the fact that we've raised our expectations hugely from what our stores deliver over the past two months, we have a really healthy culture. No one should be under any illusion that running a shop well is hard work. It's 24/7, it's 365, and you have to be absolutely obsessive about everything that everybody does. Despite our raised expectations, an interesting number is, our retail labor turnover is 600 basis points better now than it was two years ago, because people generally take more pride in the shop and the environment that they operate in. The other point I'd leave you with is consistency.
Consistency across the shop and consistency across the estate, whether you're in Penzance or whether you're in Wick. The reason we get that is because our store managers and our store team do it for the right reason and deliver for the customer. They work hard for each other, they work hard for the customer. Interestingly, I give an update to my colleagues at senior level two or three times a week, and the only update I ever give on what is the customer lens, what does the customer see, and what are the two or three loose ends that we all need to tighten up to make sure that customer journey is where we want it to be?
And then lastly, I want- I just wanted to talk about the continuous sustainable improvement that we've made. The first time I spoke to you two years ago, I think I was stood here, and I talked about seven out of ten. Very quickly, we moved to seven and a half out of ten, and now the benchmark is eight out of ten, and nothing less is acceptable. So they are the key pillars that we pin our delivery on and our obsession about standards. I'll be around if you want to talk to me after. I'm going to hand over to John.
Thanks, Gareth. Morning, all. Short and sharp from me today because we're looking forward to welcoming a number of you to our Bedford DC on Monday coming. So just in terms of a reminder, overview, our core purpose in the B&M supply chain is all about serving our customers better than anyone else, and what that really means is a continued improvement and alignment with buying and retail. Referenced a couple of times already in terms of what we call the triangle. Why? Absolutely, the purpose is to drive world-class on-shelf availability.
And we've been focusing on, in the supply chain, real efficient and disciplined capacity for our buyers, to grow, to grow their departments, of course, and categories, and importantly, to support what Alex was talking about earlier on, the ongoing and future rollout of the new store program, let alone the core stores that we've got to continue driving, like-for-like growth. And what that is driving in the supply chain is record volumes. So we are now delivering record volumes, year-on-year as a result of all of the above. From a stability point of view, our approach is all based on the brilliant basics operating process program, and that is about standardizing all operational processes and executing them brilliantly, always. So what is it doing? Record volumes, record throughput, with a more efficient DC and transport set of operations than they've ever been.
The way we measure that is through our five C program. And, you know, we are going to highlight today some of the solid progress that we're making. But just start with compliance. We always start, first and foremost, with compliance, it's the most important thing that we do. There's a real step on in working practices year on year, and we're seeing a significant reduction in serious incidents and RIDDOR, in fact, 50% or better across the network, which is really encouraging. From a customer point of view, it's that increased stock accuracy through the network, and of course, driving improvements in delivery performance in on time for stores, on time in full. And again, what's that doing? Well, of course, it's driving improvement in on shelf availability throughout the supply chain, which is encouraging.
There's been quite a lot of reference today in terms of cost. Of course, a real lifeblood of a supply chain and the logistics network, really important to us. And through our We Operate For Less program, we're really driving down EDLC, that everyday low cost, which is allowing the business to reinvest in everyday low price and get that flywheel turning in the right direction. It's allowed us to lower our percent to sales year-on-year, and it's enabled us to mitigate those inflationary headwinds that Mike talked about earlier on. And we're doing that through real improved productivity in every site, in every transport operation. From a capacity point of view, some highlights here. We've got improved network modeling now.
That's really optimizing and ensuring that we're serving the right stores from the right DCs, and it absolutely enabled us to exit one of the legacy DCs while recording higher throughput and volume. And then sort of the final C, in terms of the thread that goes through things, how we do things. We've got established now a real clear productivity and service culture with the colleagues on the ground, driving down labor turnover, absenteeism year-over-year by over 25%, which we're really encouraged by. So in summary, we're making good, disciplined progress in the supply chain and the logistics network. It's really enabling us to support the growth of the business, the new store program, and also obviously, the categories and departments. And we're doing that with real improved volume, throughput, through absolutely more efficient transport and DC operations.
Thanks for listening and looking forward to seeing a number of you in Bedford on Monday.
Good morning, all. So, an overview of where we stand in France. So first of all, this slide describes the growth of the last few years, and you can see on the graph that the growth is very much based on the growth of FMCG, with the core being home products. So home products are very much based on the success of the formula from the U.K. and the success of the product selection that we enjoy from the U.K. teams, with, of course, an adaptation for the French market. And our focus is clearly to keep growing in FMCG and becoming FMCG a destination, and not only being a destination for home products as it is today. I remind you, we've been voted...
for the third time in a row, third year in a, in a row, the best chain in France, for home decoration. So this is a very good recognition from the customers that the home is really strong. But we want to become as well a destination for references. So this is core in our, proposition, strategy. Second point is, of course, a very strong focus, a very, very strong focus on retail standards. And here, basically, the majority of our, of our work, like, like, Gareth, just said before, is around people, so people management, of course, but also training in order to achieve the best in class position in the French market in terms of, customer experience, product availability, and merchandise, best in class merchandising and pricing message in the store.
That is very key for us because, you know, we're coming from a state originally where the stores were not to the best level we could, and we continually manage that with having in sight, what the U.K. manages to do on the retail operation, side. So this is, for us, a key focus, categories and store standards. In terms of, of, expansion, new stores, so we're very pleased with, the openings we had, in last financial years, last financial year, excuse me. We opened 11 stores in France. Very good stores, very pleased about them. 6 of them are in the Paris region. Also, we started to decrease our average, space towards 2,000 square meters.
Okay, and then the focus now is really on expanding the network on a very proven formula on lower square meters. So this year we will try more stores in the range of 1,500-2,000 square meters, with the intent of increasing the sales density, and a better operating model with more efficient stock turnover. So that's it for France. I leave the floor to you, Alex.
Thanks, Anthony. By the way, Anthony's comment on store sizes is just consistent with the U.K. I think it's part of the learning and optimization, which is good. Accelerate size as well, which is good. Couple of messages, and then we go into Q&A. High quality of earnings, FY24, we haven't cut any corners. Store standards where they need to be, pricing where it needs to be, cost tight, cash discipline. We don't cut any corners. We don't have empty shelves. We don't inflate LFLs through pricing. Quality of earnings, that translates into cash. That's kind of point number one. EDLP, EDLC, that's the bedrock of the business. Discipline. We'll continue to operate the business 24/7, 365, three businesses, B&M UK, France, and Heron, with discipline. This is a small, very high quality team. We all, all work together on a daily basis.
The cross-fertilization of the senior team is daily. We are a non-bureaucratic business. I don't know why they're wearing a suit, but they normally don't wear a suit in the office, which is important. We are not a corporate machine. We connect with our stores one-to-one, and the business actually will continue to do what it does. When we get to 1:30 P.M., Mike, we'll do exactly what we did last year when we used to have one results. We'll have one season behind us, spring/summer. We'll give you a very narrow range for the full year, like we did in November. It's business as usual. Q&A?
Jonathan Pritchard at Peel Hunt. Heron is something you haven't talked about this morning. Could you just tell us a little bit about the evolution of the range? I think that's been moving away from sort of traditional freezer center a little bit to-
Sorry, I'm struggling to... If you could speak a bit-
Sorry. Just Heron, really, the evolution of the product range, just-
Okay
... on that. Then on Wilko, you've had a little bit of a pause, perhaps in non-Wilko openings. That's not a criticism, it's just how it is. But do you think you can get your mojo back from that perspective to keep going with the opening program now that when the Wilkos are all done? And carrying on from that, you've talked about very high, even higher than normal sales densities at Wilkos. Is that a quirk of taking on that Wilko space, or would you expect that the class of H2 25 and FY 26, you'll also be able to say the same about very high sales densities of new space when you revert back to non-Wilko groups?
Thank you, Jonathan. Question one, Heron, the three chambers, as we called it, ambient, frozen, and chilled, performing well. Heron has a very strong managing director, Tony Dobbs. He's been 25 years in the business. Heron now, right? Tony Dobbs reports to John Parry. I made that change one year ago. John and Tony work very closely together. I think the business is trading well. Its EBITDA margin is world-class. I think Heron is the closest equivalent you have to a grocer in terms of our portfolio. Ambient, performing very well. The price point is good. We trade clearance very aggressively. I think the business is nicely set up. I will make sure that we give you an update in November, but the reason why I haven't had an update for the last year is because actually it's going well.
There is not much to say. Let's keep the business delivering, yeah? 20 stores per annum, world-class EBITDA margin, very good operator on Tony. Yeah. Your second question, we have a good opening program in the current year. I've said publicly, not less than 45, it's well underpinned. We've opened more than 50 shops in 26 weeks. The business will continue the discipline on openings, you know? I think the important point I would make is that I haven't opened a single suboptimal shop. None. And of the ones that we have opened, Gareth has said it, I'm very comfortable with the performance of those shops. We take one year at a time. You know that my commitment, I said it two years ago, was to rebuild the run rate to 45 openings. We've already done that. We'll keep cracking on.
But opening 50 shops in 26 weeks, guys, it's not easy. So, my responsibility is to make sure that we open the high, each store high quality and never compromise the culture. Yeah, so the pipeline is very strong. Ian Pratt, sitting in the corner, he will give us an update in November. How many years in the business, Ian? 10 years. This, Ian, symbolizes EDLC in property, knows the market inside out. It's the same property team. I sit with these guys every week. We have a good pipeline coming in. Okay, next question.
If people can introduce themselves as well, and we are taking questions online as well.
If I can ask, would be easier, just ask one or two questions, guys, so we give the chance to throw our words. I don't know where this history of three questions come, but for your results presentation, nothing personal, Jonathan. It's just... Go ahead, two.
One out. Thank you. It's Richard Chamberlain from RBC. Can I just ask a follow-up then on Wilko? What have you guys sort of learned from the opening program there that maybe be applied to the rest of the estate? Is there anything to say there in terms of-
I'll answer before you confuse me with a second question.
Okay.
Paint, DIY, booming. Absolutely booming on volumes. We retrofit that to a core chain. Second learning, one learning, Gareth?
Those units were always fundamentally good, traded in the right way.
So the answer is yes, we retrofit. Without disclosing competitive info, I think we're getting better at tweaking and optimizing the site-specific range grading relative to the local competition. But if I were to highlight DIY, paint, stationery booming, we're taking share in volume and space.
Thank you. On the French business, how are the... Can you give an update on how the sort of ranges are evolving for, in particular, FMCG and how much sort of weight that's gonna be?
Complicated question. How many SKUs do you have? And how much, FMCG, how many you're going to increase this year?
So we now have 2,400 SKUs, and we will rapidly reach 3,000 SKUs.
So, with gradual, Richard, steady, and the beauty, follow, please, and you've heard me before. At least three quarters of the LFL in France is LFL transaction numbers, customer count. So it's actually working the way it should. It's footfall through to the shop, and that helps with the conversions of the densities.
Thanks.
James Anstead.
Two, James.
Two questions. So first one, appreciate that you're not giving a current trading update today. Appreciate that, B&M's a long-term story, and the weather, by its nature, is quite volatile, but I also-
I'll answer the question straight away because I know what you're going to ask. So how tough has spring, summer been? Well, it's not been very sunny. We haven't had any heat wave. But without getting into Q1, what I can tell you is that we placed our buys right, and we are not exposed on stock. I'm not going to say anything else. You can read whatever you choose to in between the lines. It's been profitable so far.
Okay. The second question, I think it's the first time you've been as specific as saying French margins should be over 10%. I just wonder if that is feasible for this year, or is that more of a long-term?
No, I think it's a medium term. I was talking to Warwick yesterday. Mike or I could turn around to Anthony and say, deliver 10.5 tomorrow. I will screw up the business. I'll be greedy. The guys will get to the right level, but it's all around at the speed in which we embed in the culture. 100%. I'm not greedy, I'm consistent. Greed kills. Thank you. Warwick?
Morning, Warwick Okines, BNP Paribas Exane. Two questions then. The first is, could you give us a little bit more color about where you're dialing up the price intensity in general merchandise, any particular categories or sort of thought process behind that?
Yeah, so I'll be careful because I don't want to get into a quarterly piece, so it's more strategic. I think it's a good question, Warwick. The Simply range, and you can see many of our categories have worked exceptionally well. So it reinforces at the entry level a very sharp price point. It's all around the dollar pound where we trade, okay? The volumes we have seen over the last year and a half from Simply have been exceptional. That's what gives John Parry the confidence to say, I don't know if you heard that, and I think it's not a disclosure issue. He said, our cost to serve last year on logistics was... Did you say lower?
I said lower.
Okay. So what this guy has said is that the cost to serve sales percentage on logistics was lower year-on-year. That is despite an increase of minimum wage. You cannot do that without volume. So where we're going to, whether it's paint, as an example, whether it's stationery, whether it's home, I think we're going... I think the phrase I'm using, Warwick, I am dialing up the pressure into next financial year to make it very uncomfortable to the competition. The buying process has been very slick from China. The volumes are there, and we're going to continue to give customers every reason to come and basically shop that volume, now. Look, the consumer in the U.K. and Europe is under pressure. It's been under pressure since 2007. I've, I mean, I've said this before.
It is our responsibility that we negotiate hard, maintain the dollar price point low, but that posture, which is consistent with our margin structure, is all around dialing that entry price point to create that virtuous circle. Yeah. More to come. You might find it in shops in two or three months, but it's going to look fantastic. Yeah, and that is really going to come to life, I would say, Q2. Yeah. So the plan on Q2 is actually quite robust and aggressive, yeah?
Thank you.
I'm ducking the question, but hopefully it just gives you enough color.
Yeah, no, very thank you. Second question is on the Wilko store estate. I think the rollout's been better than your expectations. Does that change any opportunity for further store acquisitions from what were previously Wilko stores that have gone back to landlords? Are there sort of any marginal ones where you could pick up now that performance has been better than the existing estate?
Could be. Could be. I think it was a very good deal. Gareth, I am happy with all of the sites. The property director keeps chipping at them. I think we made the right decision to go for 51, but there will always going to be a few more that come our way, yeah? But it's all around the pipeline and building that partner. So the answer is yes, but it's one by one, Warwick.
Thank you. Sreedhar Mahamkali from UBS. Just one follow-up to, Warwick's question, and then a second one, please. The first follow-up is, to what extent, I think you're implying, but just want you to understand a bit better, the dialing up on, posture, to what extent this is driven by lower or falling, aggregate prices in China?
Lower what?
The factory gate prices from China, or is your sourcing getting even better going forward?
Both.
Is that something you continue to see into next year?
Who knows?
Yeah. Okay. Currently, that's what you're seeing.
It's very good. I think I was in a conference, I think where it was BNP, Warwick, I think it was in January, and I said publicly, we have good sourcing momentum, and that gives the business options. It's all around driving volume. It's all around driving the low price point, pound, dollar, and it's all around consistent at B&M UK with 12%-13% EBITDA margin.
Is this specific to you, or do you see, like, excess capacity in China?
I, I'm not going to answer that. That, I think you have to ask the competition, but what I'm saying is we're in good nick.
Fair enough. Okay. The second one, I think last year you talked about benefiting the grocery side from trading down in terms of transactions. It was quite, you know, a number of comments you made. Is that something you see continuing this year as these inflation-
I'm not going to comment about this year. Let's see how the half trades. What I can elaborate is, we will continue to keep that price point very sharp. It's all around the customer experience and what we mean by standards internally, which is a triangle. And I think the judge in all of this, as always, when I look at the competition, I don't look at the like-for-like. The like-for-like doesn't tell me anything. I look at the bottom line. If a business has volume, there is bottom line. If there is no volume, there is no bottom line. So just... And it may be helpful, John, explain if you use logistics as an example. I've had this conversation with U.S. investors in the past.... Bring to life why a logistics operation cannot be efficient without volume.
Well, I mean, quite simply put, more volume, better hit rate. What do we mean by better hit rate? The more we go to a pick face, we'll be picking two cases, not one. Ultimately, what does that mean? That means your productivity improves, and the cycle is virtuous. So ultimately, volume wins on all costs. It improves productivity, it drives costs down, makes you more efficient.
Volume is the lifeblood of retail. LFLs are meaningless unless you look at units. We run this business on units, not on value. That's why he's able to leverage the cost, and that's actually why the business maintains its level of profitability. It's all around volume and units, casing throughput per day, per pick face.
Thank you.
Hi, Ben Hunt from Investec. One more question about the second half gross margin. We were talking about it earlier before the presentation, but could you give a bit more color on the levers or the dynamics of what's been going on? You had some tailwinds, obviously, from freight and FX. How much was that contributing in the second half? And given that it was a flat performance, what was working the other way? Because, I mean, the stock turns improved hugely. The freight costs improved hugely. So why aren't we seeing, I don't know, perhaps more on gross margin side?
Why should we? It's a strategic question.
That's my question, yeah.
And the answer to that, you can elaborate, Mike, is, it's relative to the prior year comparative, so there is some of that. And we set up the prices and the tone on how we trade it at the right level in EDLP. Now, look, the team on a weekly, monthly, quarterly basis will always be making operational, commercial trade-offs at store department level. But fundamentally, this is a 12%-13% EBITDA margin. The cost lines will be kept tight, pricing is non-negotiable. It's part of the moving bits. Mike, anything you want to add to that?
No, I think I sort of commented on it as part of the presentation. But for us, the gross margin improvement has been achieved without changing the customer value proposition. If anything, customers are getting better value because they are seeing those savings coming through in the numbers. And so, you know, we have consciously chosen to drive volumes, not to drive inflation within those numbers. In the first half, you look at was sort of a stronger step up because of the prior base and the fact that we were able to deliver that very clean stock sell-through that you saw coming through in our stock numbers across the first half.
Thank you. We'll take some questions online now. Alex, what role has marketing played in driving B&M's growth over the last year, and what are your marketing plans for the year ahead?
Hmm. So we don't spend money. We are very aggressive on social, which is free. It's all around trend. Gareth and the team in retail have a very firm plan on social media, but we don't spend money on marketing. We create content and facilitate content, followers, influencers, customer, that creates some momentum. We are an EDLP business. The choice for me is simple. It's a pound that goes into a marketing campaign, or it's a pound that goes into pricing. I put it into pricing. It's a point of belief. Marketing might work for other companies. I stick to EDLP.
Okay. Do you have any plans to return to the debt capital markets near term?
Mike?
So, if you look across our debt structure, the absolute majority of the debt structure is dated out sort of 7-8 years in maturity. So we've got very, very sort of long-dated maturities in place, which we're very happy with, pleased about, given the interest rate environment we're in. I think we've got a small stub of about GBP 150 million of July 2025 notes, which we will deal with at the right moment in time. In the meantime, though, they're a very low cost and attractive source of financing, and we've got choices, ultimately. You know, we're a very strong business, very cash generative, very attractive to debt holders, and at the right moment in time, we'll extend the maturity on that remaining stub.
The best thing the business and Mike and the team did last year was to push out duration. Yes, it has an interest. Interest rate, this market is what it is, but the fact that as a retailer, we have low gearing and long duration, that's absolutely critical. I don't buy short durations. I don't worry about interest rates in the short term. It's all around maturity. It was the best decision they can do.
Okay. How did category performance in fiscal 24 influence the gross margin percentage and cash margin?
The two, as Mike said, the two sides of the business were in balance. General Merchandise and FMCG were fairly consistent, actually. And there is no mix accretion from either. So it's actually all around performance on an equal basis. Was remarkably consistent last year, and I think I said publicly a few weeks ago or months ago, even, when we exited Q4, a General Merchandise was on positive LFL, which is cool.
Could you please explain the drop in H2 gross margin?
I think Mike has already answered that. Anything else you want to say?
No, I mean, I think building on your answer to the previous question, Alex, I think if you look year-on-year in terms of trajectory on gross margin, I think where we've seen the step on year-on-year has been more on the, general merchandise side because of the cleanliness of the sell through on the spring/summer season last year.
And that's the key point that you've heard before. What is the determinant between 12 and 13% EBITDA margin? Is it two seasons markdown? If we have two good seasons, stock is in good shape, we should do the top end. If we have two bad seasons, we are at the lower end. It's actually markdown. That is the delta.
Are you seeing higher pressure on freight rates? Have you picked your freight rates for this year?
We're in very good shape. That's all what I would say.
Very good shape. Let's go back to the room. Any questions?
Thanks. Hi, Andy Wade from Jefferies. Mike, when you were talking, you had the slide up with the sort of drop throughs. You said you're fairly agnostic, whether like-for-likes come from stores or, sorry, whether revenue growth comes from stores or from like-for-like. I mean, is that, is that really genuinely how you feel about it? Because one of them is clearly gonna be considerably higher margin than the other one. If I could offer you 20% like-for-like, but or 20% store-
I'll answer that question. What Mike meant is in terms of the economics and the unit economics of the business, the business will always drive on a yearly basis, positive developer, always. I will make sure that that space is accretive. But what underpins the P&L is not the value on the LFL, is the units sitting underneath the value. So we obsess about volume and units. A 3% positive LFL illustratively with volume decline is an infinitely inferior currency than a flat LFL that is driven by volume, for the reasons we have discussed. I will never judge the business on an LFL basis. It's the units that underpin the LFL.
Andy, I'll build on Alex's point with one more element. I think the other important difference between new space growth versus like-for-like growth is that the new space growth is an element that you absolutely can control, can target to be at absolutely the right pace of growth. So I think critically, when you're looking at both categories of growth, they're both accretive to the overall profit margins for the business because of the volume effects we talk about. But then building on that, yes, of course, like-for-like margin is more accretive. Like-for-like drop throughs are more accretive, but the proportionate difference between the two is actually smaller than you will see in many businesses in the industry, because we've got those high profit margins that are sustainable, that are structurally high.
I'm very low operational gearing.
Understood. Albeit you'd have to invest capital to get the store open anyway, yeah.
Correct. Of course.
Okay, the second question, I appreciate it's gonna sound like a slightly silly question, given your focus on volumes and so on. But, this year, are we gonna be looking... Given the price investments you've talked to, are we gonna be looking at a year where price is a drag on the reported like-for-like number?
I think it's too early to call that. We plan for a positive LFL. We'll give you a full guidance. We're going to be very competitive, and the team has a very clear challenge on how they buy.
Thanks.
Hello.
It's Izabel Dobreva from Morgan Stanley. I have a few questions. I wanted to go back, me too. I wanted to go back to the point on turning up the dial on competitiveness in general merch. So just to clarify, why is now the right time? Is it because you're seeing more pressure from the competition, or maybe you have some idiosyncratic-
I sense the competition is very weak. I sense the competition is very weak. I'm not going to name any. I'm talking about general merchandise. I sense the competition is weak, and I have sufficient volume momentum on the buy process to dial it up. Don't read too much into it. I'm not talking about margins. I'm not talking about... I'm just saying we're going to dial up the posture on general merchandise because I think it's going to be an opportunity. So go back three years. If you go back three years, the naysayers were saying, "Well, the margins of this business are going to collapse because actually general merchandise is going to come off." It's the opposite. The general merchandise out of the business is in very good health.
Okay, so you think now is the right time to attack before the volume-
I'm not saying attack. Those are your words. I'm just dialing the posture in Q2. That's all.
Okay, thank you. And then my second question is longer term. It's on the topic of retail media. I wanted to-
On retail?
Retail media. I wanted to get your thoughts on this.
Sorry, I didn't... Retail media. Okay. Yeah.
I wanted to get your thoughts on this, particularly as we think longer term. Do you think this is something which could affect your relative price gaps?
No. So the way... Good question. So when we think about it, we obsess about the core business. Core business is EDLP, EDLC—discipline on how we grow, and we don't overlay bets. We don't play on online, we don't play on click and collect. If I flip the question on its head, the higher a competitor dials up the narrative on retail media, I suspect what it's telling me is that they are actually suffering from volumes. Their PNL structure is moving away from a shop. So for us, not interested.
Okay, thank you.
Thank you.
Another online question, Alex. Congrats on the great results. Two questions. Firstly, you mentioned you're taking market share in the U.K. Do you have a measure of how much market share you are taking, and who you are taking this from?
Yes, but I'm not going to tell them from. Would be inappropriate.
Secondly, for B&M UK, what actions have you implemented to drive down the labor turnover/absenteeism so considerably year on year?
Gareth, half a minute answer.
It was two years was the number quoted, not one. It's around engagement, it's around taking pride in the job that we deliver, and clear career paths and succession. But you don't open 50 shops without a good career pipeline, succession and pipeline through. They will be the reason.
What I would add to that is actually comes down to the shop. If you guys walk through a competition, and you see some of the extremities we're seeing on poor retail standards, and it's for you to decide who have them, why would an hourly colleague want to work or take any pride in a shop that actually it's staffed from hours, it's staffed from client? I think it's a very human piece, which is everybody enjoys working in a good shop. And I have said publicly, several times, in my view, the only two retailers in the U.K. over the last two years that have consistently and relentlessly driving standard are only two, it's B&M and Marks & Spencer, full stop. And I am on record on that.
So effectively, you're saying there's a second derivative of upgrading the store managers. It then feeds into-
Of course
the staff there.
Probably have time for two more questions, Dave. Can we close off?
Yeah, okay. I'll ask one more from here. Could you please speak about your existing store volume? What level is it relative to before the pandemic? And any update on trading trends during 25?
I'm not going to answer. It's just-
So the trends, sorry, the volumes compared to pre-pandemic, you can give some-
Considerably higher.
Considerably higher.
For sure. The best sign of the health of pre and post-pandemic using the sales density accretion, is actually the two sides of the business, general merchandise and FMCG. The two boats have been lifted consistently, which is, for me, the health of the business. Probably have time for one more in the room?
Sorry, just one more. Probably a bit of an unfair question, but if we look at your peers across in Europe, they seem to be seeing pretty strong like, sort of mainly double digits Action Group. Is there any structural reason as to why they're still seeing that momentum? Is this your opportunity in Europe, or do you see it as there's a reason for it?
I learned from the U.S., you've heard me that before. I prefer to learn from Costco, Walmart, and Home Depot. Good business, highly complementary. They have a different business model. Good for them.
Okay, thank you.
Thank you very much for coming. Thank you.