Hello and welcome to our FY25 Pesults Presentation. I'm joined today by Giles Wilson, our CFO. I'll do a short introduction before handing over to Giles to run through our FY25 financial results, and then I'll return with some closing comments. FY25 was a year of stabilization. At the start of the year, we laid out four key objectives, and I'm pleased to say that we delivered against all of these. We turned around our Americas DTC performance with Americas DTC back to growth in H2. We pivoted our marketing to relentlessly focus on product with great initial results. You heard me talk about these back in November. We have reduced our operating cost base, taking GBP 25 million of annualized savings out of the business. Really importantly, our balance sheet is significantly strengthened with inventory and net debt both down significantly ahead of guidance.
Over to Giles to talk you through the year's financial performance.
Thank you, Ije, and good morning, everyone. Continuing on from the four points Ije just set out, FY25 has been about stabilizing our financials and delivering against our core objectives. Firstly, my focus this year has been about strengthening our balance sheet. We have started with securing the refinance as announced at our half year. At the beginning of the year, we committed to reduce inventory by GBP 40 million, and we have beaten this with our closing inventory, in fact, GBP 67 million lower, a key driver of the GBP 95 million overall reduction in net debt. Secondly, we reset our cost base through the cost action plan, delivering GBP 25 million of cost savings, with the full benefit being seen in FY26. There was some benefit in FY25. The cost action plan helped reset the business's overall approach to cost, and we have embedded into the culture a strong cost discipline.
As Ije highlighted, we have seen Americas DTC return to growth, and that momentum is now building in the U.S.A. as we enter into FY26, albeit these are smaller DTC months. As well as the focus to right-size our own inventory, we saw reduced sales to our wholesale customers in EMEA and U.S. as they encouragingly right-sized their inventory. This sets up the markets for future growth. Overall, we have delivered on our objectives, delivered in line with market guidance, exceeded our inventory and debt reduction targets, and stabilized the business, setting ourselves up well for future growth. Following on from the half year, we are now presenting the financials in both reported and constant currency terms to show the true underlying trading. In addition, this year, we have introduced adjusted performance metrics, stripping out the impact of one-off exceptional and other non-trading related items.
Turning to the financials themselves, in the later slides, I'll give more detailed explanations of some of these key metrics. Our key financial headlines are as follows. Total pairs are down 9%. However, due to the slightly better DTC mix, revenue is only down 8% at GBP 805 million on a constant currency basis, in line with our expectations. Gross margin is down in line with revenue, with gross margin rates slightly down YoY, mainly driven by the product mix, as the shoes and sandals increase, and boots, which has slightly higher margin, declined. In addition, in Q4, we took the opportunity to clear some aged, discontinued, and fragmented stock at reduced rates through our U.S. B2B channel, although, to be clear, this was still profitable to us.
As highlighted on the previous slide, operating costs have been tightly controlled, with a slight increase of 2% YoY, mainly driven by the increased investment in demand generation, as highlighted at the outset of the year to support the move to product-led marketing. Overall adjusted EBIT was GBP 67.1 million, and adjusted PBT was GBP 40.3 million, both significantly back on last year, but slightly ahead of consensus. During the period, we incurred GBP 25.3 million of adjusting items, mainly driven by the GBP 17.3 million of exceptional cost, of which the cost action program accounted for the largest part. I will cover this in more detail on a later slide. EPS on a constant currency basis is GBP 1.10. As highlighted during the FY24 results, it was the intention of the board to keep dividend flat YoY, given this is a year of stabilization.
Starting with Americas, the key driver in revenue decline was wholesale, as expected, with GBP 27 million of the GBP 30 million recorded in the first half as our U.S. wholesalers reduced their inventory levels. Americas DTC was marginally down by GBP 2 million, with the decline all in the first half, and as discussed, a return to DTC growth in the second half. In Q4, we consciously pulled back on discounting over previous year, which slightly reduced our revenue in this quarter, following a good performance in the crucial Q3, as highlighted in the statement in January. Turning to EMEA, here it is the same story as with Americas for wholesale, of the GBP 25 million shortfall, GBP 23 million related to H1, and was in line with our expectations. EMEA DTC continued to be impacted by a highly promotional backdrop generally, together with weaker consumer confidence, particularly in the U.K.
We chose not to participate in promotional activity over and above our plans. Of the GBP 16 million shortfall YoY, the majority, 80%, related to the U.K. In other key markets, France was flat YoY in DTC, and Germany showed growth at a total market level. Finally, in APAC, DTC saw continued strong YoY growth in Japan, South Korea, and China, with South Korea of particular note in Q4. Our distributor in Australia and New Zealand, a nice business for both of us and our partner, showed good revenue growth. The slight decline in APAC wholesale was as planned. Overall, our regional and channel performance was in line with our expectations. Though we are disappointed in the overall EMEA DTC performance, this was in part due to a conscious decision not to participate in wider discounting.
We were pleased to deliver against our objective of returning Americas DTC to growth in H2. The underlying EBIT drops from GBP 126.4 million last year to GBP 67.1 million on an adjusted basis this year. Stepping through the bridge, GBP 50.8 million reduction from the impact of volume at average gross margin, predominantly due to the decline in wholesale revenue, as explained, again with the majority in the first half. Small impact on mix of GBP 0.4 million, with upside of DTC mix shift offset by the U.S. B2B clearance activity. We increased our demand generation OPEX by GBP 4.7 million to support the new product-led marketing approach. We tightly controlled costs, limiting a YoY increase to GBP 1.4 million, a small increase in depreciation due to the annualization of stores, and finally, adjusting items, I will cover on the next slide. As highlighted at the half year, we have incurred exceptional one-off items.
These were comprised of GBP 15.1 million as guided, relating to cost action plan, GBP 8.9 million, executive director changes and buyout-related costs of GBP 4.6 million, and GBP 1.6 million relating to the refinance. In addition, a further GBP 2.8 million related to the setup of our new global technology center in India, which will deliver savings in FY27 once fully established. For FY26, the double running costs offset the benefits. Retail store impairment of GBP 4.3 million related to underperforming stores following a review of our store estate. This mainly relates to stores in the U.S.A. that have not seen traffic recoveries post-COVID, together with some in EMEA. Currency losses of GBP 3.1 million due to the currency gains and losses impact on our accounts receivables and payable balances at balance sheet date. One of the key objectives this year was to reduce our inventory.
As I said earlier, we are really pleased to have beaten our target of GBP 40 million, delivering a reduction of GBP 67 million. This slide is an extension of the slide I showed at H1. As a reminder, this slide sets out the planned inventory reductions over the two years, split into half years. The chart starts at FY 2023 with inventory at GBP 258 million. During the first half of FY 2024, we build up the inventory to GBP 300 million. During the second half of FY 2024, we use that inventory to sell during the peak period, closing the year with GBP 255 million of inventory. As we started FY 2025, the reduced planned purchases can be seen on the chart, with the half-year inventory positions slightly down versus FY 2024 year-end. As we enter the busy period in FY 2025, we utilize our inventories and stock balances fall to GBP 187 million.
In addition, we also took advantage of an opportunity to sell some aged and fragmented line stock through a discount channel in the U.S.A. at reduced but profitable margin levels. For the avoidance of doubt, no deal was transacted in the year at below cost. We have now normalized our inventory levels. Our supply and demand planning system will go live in the first half of FY26, and that will enable us to continue to effectively manage and optimize our inventory levels going forward. Finally, for this year's financial results, turning to cash flow, I'm really pleased to report our significant reduction YoY net debt, both in terms of net bank debt reducing by GBP 83.4 million to GBP 94.1 million, and total debt, including leases, reducing by GBP 110 million to GBP 249.5 million.
As a reminder on this slide, the gray boxes are the net bank debt being bank debt less cash, and the white boxes show the lease liabilities. The bridge sets out the cash flow from FY24 year-end position. The next four boxes show underlying operating cash movement in the period, delivering GBP 108 million of cash inflow, including the GBP 67 million of inventory reduction from the previous page, and after accounting for lease payments of GBP 56 million and interest and tax payments of GBP 40 million. CapEx accounts for GBP 19 million and dividends in the year of GBP 9.5 million. Finally, our net debt to EBITDA finished at 1.9 times, well below our bank covenant level of three times, leaving significant headroom reflecting the strong cash flow generation in the year.
To conclude, we set out in FY25 to deliver on our four key objectives, which were grow America's DTC business in H2, pivot our marketing to a product-led approach, take out of the business between GBP 20 million and GBP 25 million of cost, and strengthen our balance sheet through the reduction of inventory. We have delivered on all four of these objectives, as well as securing new financing arrangements. We have stabilized the business and are now ready to execute on our new strategy and set us up for future growth. As we look forward to the medium term, we expect to deliver sustainable, profitable revenue growth above the rate of the relevant footwear market, with operating leverage driving a mid to high teens EBIT margin and underpinned by strong cash generation. This year, our single focus was to bring stability back to Dr. Martens.
We're now looking forward, and I'll talk in detail about how we're thinking about the business strategy and path from here in a separate presentation later today.