H2 18/19

Apr 10, 2019

Very good. Good morning, everybody. Good morning. Good morning. Thank you very much for taking the time to join us this morning. You have all of the Tesco exec in the room. I actually am going to ask some of my colleagues to help me as I update where we are as a business. You will get to hear from some of them, but you also obviously get a chance to ask any questions of me or them later in the session. Basically, we are going to try and do three things over the next hour or so. I am going to try and take you through an update, aided by my colleagues, of the progress of Tesco so far. We will talk specifically, obviously, about how the different businesses have performed in the year, but I will put it into some context about how that looks over four years. Alan will then take you through the detail of the full year results. I will come back and we will talk about what it is we are going to be doing next to give some context of where we go from here. Look, we said in 2016, we shared externally what we had been working on internally, the six drivers on which we were pursuing the turnaround of Tesco. They have guided our activity since then. By way of update, we made some significant progress on the brand. We talked about the brand a lot from the nadir of October of 2014, and that improvement has continued. Same chart we used back then all the way through a number of different events, but actually the brand continues to improve. It's now at the highest level on the brand index score that it's been since 2011, just to give you some context. At a more detailed level, the improvements in both quality and in value are significant. So a near 10-point improvement in quality, a seven-point improvement in value, a very significant step up in how the brand is perceived in the minds of our customer. Under Ali's leadership, I've talked a lot in the past about some of the advertising, some of the communication. It's very nice to get creative awards for Food Love Stories. But the bit you might be interested to know is that the campaign keeps winning media effectiveness awards. So one of the things that Ali has led inside Tesco for us is being really very clear in terms of the return on investment from our marketing expenditure. Winning a Cannes Lion, if you're in this industry, for creativity is great. Winning the one for effectiveness is very, very rare. I don't know of any other retailer that has, but I just thought I'd call it out because whilst we talk about creativity, it's actually the effectiveness of our investment where I actually think we have a lead as well. We've done a lot on cost. GBP 1.5 billion we said, we're about GBP 1.4 billion. So we're tracking well on our commitment to reduce cost. You'll remember that before we announced this, we'd already taken out nearly GBP 700 million of cost. Giving you a breakdown on the left-hand side. When we made the announcements in 2016, we broke it down in terms of store operating model, logistics and distribution, and goods and service not for resale. So I've given you an update on those three buckets. I think it's fair to say we've made more progress on the store operating model than we said at that time. The one area of our business that's changed quite significantly since we made those commitments is in logistics and distribution, partly because of Palmer and Harvey and also post Booker, different opportunities. So actually the plan that's changed quite a lot has been in logistics and distribution and a place where we still have quite opportunity. Goods and service not for resale, we see an ongoing opportunity. We've not done this for you before, but I thought it might be interesting for you, is to give you that broken down by geography. So about GBP 900 million of that's flown into the U.K. business and GBP 220, GBP 240 in Central Europe and in Asia. So really good progress on cost with one year still to go. We said we'd generate GBP 9 billion of cash. GBP 8.6 billion is where we've got to. There's a GBP 210 million impact in terms of timing, which we can talk about later. I'm really very happy with what we've been doing in terms of getting ourselves to generate cash. On the right-hand side, you see the split is mainly coming from improvements in profitability, but also a significant improvement in working capital. If you look over the last three years, just under GBP 600 million has come from improvements in working capital. If you remember, we said it'd be around GBP 200 million a year. So really good progress there. We introduced a concept when we talked about maxing the mix, being very choiceful about what we sold, where we sold it, in order that it was actually a more profitable and a sustainable piece of our business. I just thought, we look at mix through a number of lenses. Geography is first. On the left-hand side, what you see is I've taken the second half of 2014/2015 and the second half of 2018/2019, and I've excluded Booker from these numbers so they're comparable. What you see is the change in the mix by geography over that period. As a group, 3.79, 3.8%, 3 in the U.K. and Ireland, 4 in Central Europe, 7.4 within Asia. I think the one thing that I'd say about this chart is it's always been my view that if we ran the international business effectively and properly, it could actually be quite a strength within the group. I think what we've seen, and we'll talk about it a little bit more, in Central Europe in particular, is quite a big transformation and still a very good profitable position in our Asian business. We've taken by channel is the other way we look at mix, so within country by channel. Probably the biggest single and easy example there is the decision to step away from Tesco Direct here in the U.K. In 2017/2018, last full year we operated at GBP 400 million of sales, but it lost GBP 94 million. All right? So a decision to walk away from that was not easy. Again, thinking carefully about what we sell where, is it sustainable, is it profitable, is a key part of the way we make decisions inside Tesco. You know that we've done it by product. At first in the U.K., you've seen it in Central Europe as well. Some of the general merchandising categories are challenged and unprofitable, and we've redirected our mix away from that. This is the U.K. number. Over those four years, we've taken 10% of the sales out of general merchandise in order to be maxing the mix in our business. Led by Steve, we talked about how it is we maximize value from our property portfolio. We've realized and released GBP 1.7 billion over that period. You'll have seen one of the announcements last year. We talked, for those at the Capital Markets Day, about air rights. There's been a very significant deal communicated there. We've also bought stores back where they are a good business opportunity at the right commercial terms. We continue to buy back. We bought three back in the U.K. this year. Freehold percentage has gone up to 53%. I have to say, this excludes Booker. You'll see a different number when I include the 183 leases that come from Booker. That comes down ever so slightly. On a like-for-like basis, freeholds increased. I thought you'd be interested to see that we've repurposed about 3.5 million sq ft during that time. All right? In terms of innovation, there's been a lot. We try to get an even pace to our innovation so that we can improve for customers on a consistent basis. We look at it through a product lens, we look at it through a customer lens, and we look at it through a services lens. To give you some context, and interesting for me, in the U.K., we've changed 15,600 products. When I say changed, have to have significantly improved their performance as well as that reformulation. Not only what we have done with the own label relaunch, but elsewhere. That is a phenomenal amount of product change. The investment that we have made in product over the last four years have been significant. A lot of things for customers in terms of Little Helps Plan. In terms of services, an awful lot there also. Not all of it is visible to you. The stuff we have done around Grocery Home Shopping for route planning, for vehicles, what it is we have done with Grocery Home Shopping online, digital apps for Clubcard, so on and so forth. All of that has been very significant. Interestingly, on Clubcard, when we simplified the operation and put the application online, Clubcard activity up 34% year on year. Big asset. Much, much more we can do from it, but we had to get it in shape and up to date in order that we did that. So there has been a lot of innovation as that sixth thrust that we talked about. If I put it in a slightly different context in terms of progress so far, this is what it looks like. I have excluded Korea from the base of sales in 2014/2015 to give you a like-for-like comparison, but the group sales are up to GBP 56.9 billion. Profit has gone from GBP 1 billion to GBP 2.2 billion. If I take that second half margin in 2014/2015 at the group of 0.8%, we are nearly 4% including Booker, and we are 3.8% in the second half year excluding Booker. So, good progress on those. We have done quite a lot in terms of the portfolio, significantly Booker joining the Tesco group, but obviously Homeplus and Kipa leaving and a number of other businesses disposed or exited. So there has been actually quite a lot of work in the portfolio. From a balance sheet point of view, we were GBP 22 billion of total indebtedness. We are now down at GBP 12 billion pre any IFRS 16 changes. In terms of engagement in the business, great place to work, up from 70 to 83. Supplier viewpoint from 55 to 81, again, leading on all of the feedback from suppliers, be it Advantage, be it our own supplier survey, or be it the GSCOP feedback in terms of most improved grocery retailer here in the U.K. I am pleased to see that those numbers, and you will see some examples in a bit, are across the group in terms of how it is we want to build the right engagement with stakeholders in everything that we are doing as Tesco. We talk a lot about growth opportunity. I shared this with you before. When we talk with our suppliers, we are talking about the growth. So GBP 1.1 billion of growth opportunity that comes from Tesco. I do not have all the numbers for else. The blue lines for others implied from Kantar. I have added to Morrisons what it is they also declare from a wholesale point of view, so it is comparable. But we do present an industry-leading growth opportunity for our suppliers. Finally, and very importantly, because you have asked us questions around this, is how do you chart a turnaround? How do you chart such a big turnaround over such a period of time? At top left, you've seen this chart before. First half, second half margins over that four year period. The annual is obviously the number in the bubble. Couple of things I would say about this is, first of all, I'm pretty happy with the shape and I'm pretty happy with where we've got to this year. We do have a trend where the first half is lower than the second half. That's been because as you start that turnaround, most of any restructuring will be announced in the first half and delivered in the second. There's obviously a little bit of seasonality given that Christmas is such a big period, so there's always been a little bit. As you go through a turnaround, I think that shape's completely understandable. We never said that there would be a straight line. But the progress throughout that is exactly as we would want it to be. When you look at the U.K. and Ireland, we get ourselves to 3% excluding Booker in the second half, and 3.3% including Booker. For those who'll remember, when we talked about margins back in 2015 I said, I can't tell you what the market would be, but I do think that Tesco can get back to being industry leading margins in food grocery retail. I think at a group level, we're there, and actually, if I look at it within each of the different segments, we exited the year in a pretty competitive place versus industry margins in all the geographies that we operate in. So more to do. We'll deliver on the commitment we made of 3.5% to 4% this year pre-IFRS changes, but the progression across is significant. I'll call out particularly Central Europe. Matt will talk in a second briefly about the two years of transformation, but really coming home to roost. The one thing, the one fact which is, I think, significant for us is we think, we don't have perfect records. We think that in the second half of this year, last financial year, is the first time since we've been an international business, that every international business for Tesco has been profitable together. We don't have a single business in Tesco now that's not making a profit. Poland made a positive profit contribution in the second half of last year. Every international business is now making a positive contribution. So, that's the bigger picture. We'll now come on and talk about the individual segments, and this is where I'm going to ask my colleagues to help. Look, the U.K.'s had a huge amount of change through this year. Booker, Palmer and Harvey, lots of resets, lots going on. Delighted with the performance, but rather than me talk about it, Jason, do you want to say a few words about the U.K. and Ireland? Morning, all. Sales up 16.1%. If you looked at like-for-like, up 2.9%. If you exclude Booker, U.K. core was +1.7, Ireland was +1.3. Profit up 45%, including Booker, excluding Booker, over 19%, and the margin up 62 bps. In the second half, as you saw from the previous chart, we exited at 3.3% operating margin. So good progress and really strengthening in the second half. We had our best Christmas since 2009 and beat the market, followed up by our January event, celebrating centenary. So some good momentum into the year. I think the most pleasing thing was this was done through strong engagement with our key stakeholders. So I think about our colleagues, at 81% great place to work score. That is market leading, and that is despite all of the change that we put through, whether it be structure change, whether it be the extra workload that we put into the stores around our offer, particularly our own brand offer, whether it be the tough business decisions we made around things like closing Tesco Direct. So, in truth, our colleagues are awesome, and that is 81% in the U.K., 86% in Ireland. If I look at supplier viewpoint, again, we have asked an awful lot of our suppliers this year. We have delivered them growth, but we have asked them to change the ranges with the own brand launches. We have undertaken sourcing reset, focusing on fewer, better suppliers, and we have worked with them on Carrefour and with Booker. That is the best set of results that we have achieved. The U.K. was just under 80% and Ireland was actually at 84%. So a great performance. So well done, Andrew, much better than the previous guy. Very good. Then last, but by no means least, if we turn our attention to customers. Our net promoter score, our fans over critics at +27. That is up 6% on the year. Really pleased because they appreciated our focus on the core shopping trip. Tony would not forgive me if I did not talk about our stores being full, clean, and the prices being right. So price, quality, range, service, a real focus for us, as well as introducing new things that they appreciated as well. So we talked about our own brand launch, Exclusively at Tesco, the eight brands that we launched there. 84% of our customers have bought them, been very successful and underpinned our second half volume and value performance, as well as the relaunch of our app, our Grocery Home Shopping app. It is now the number one rated app for grocery home shopping, we have had over 10 million people download it, as well as our relaunch of Clubcard, digital Clubcard, and faster vouchers. So all very good. Then finally, we opened eight Jack's stores last year. One more last week, and we are really pleased with it. Great customer feedback. Our net promoter score there is over 50%, 53% prompted awareness at 64%, so great customer feedback. In summary, I think good progress from a financial perspective, built on strong engagement with our key stakeholders and focus on core shopping trip + meaningful innovation. Thanks. Okay. Very good indeed. Moving to Booker, personally delighted, but rather than me talk about Booker, Charles, do you want to talk about your first year inside the Tesco Group? Yeah. Thanks, Dave. Morning, all. In terms of Booker, we said we were going to do business as usual. It has been good business as usual. Customer satisfaction, 86%. That drove the sales, GBP 5.8 billion. We were up +11% like for like. We put on over half a billion of growth. That drove through to the profit of GBP 196 million of profit. We are pleased with how that came through. In terms of Joining Forces with Tesco, going really well. Together, Booker and Tesco are building a really good supply chain. We have now got, for example, the Magor distribution center, which is Tesco's, delivering to Booker cash and carries. Booker is delivering to the Tesco petrol forecourts into the One Stop. That building a supply chain that really delivers is working well. We are passing the benefits back to the customers. For the retailers, we have been doing big group better for all. That is helping customers improve the choice, quality, price, and service they sell. That is helping a typical Londis improve profits by about GBP 6,000 this year. That will step up over time, and we are bringing that out to the caterers as well. You are also seeing some of the benefit coming through into the Tesco stores. The bulk packs you see in Tesco, that is now in 70 Tesco stores. That is coming from Booker. Really pleased with how they are performing. As a result of that, we are ahead of guidance on the synergies, the Joining Forces synergies. We delivered GBP 79 million. Pleased with how that has come through. Because we are going for this sort of more progress, less disruption approach, it has meant that rather than the one-offs being about GBP 145 million associated with change, it is closer to GBP 50 million-GBP 75 million. Overall, one year in, Dave, going very well. Thank you, Charles. Matt, you're 2 years in. This is the second year of your leadership of Central Europe and the transformation. Do you want to share what you've been up to? Yeah. Morning, everyone. As Dave was saying, the level of profitability in Central Europe was too low. Performance was too volatile. We're losing a lot of money in Poland as well, which was kind of dragging the whole region down. When we had a hard look at ourselves, we could see that we were basically out of shape. We had too much space, and we were filling that space with too much range, and that was bringing in too much complexity and too much working capital, too much cost into the business. In a market that really values value for money, we were too costly, basically. What we've done is we've set about really two big things in the region. One is stripping a lot of cost out, particularly sorting out our challenges in Poland, but also flowing some of those benefits into the other countries that are significantly more profitable. Also rebuilding the trust and the pride in the business amongst colleagues and getting people working out of their silos and really looking at these challenges end to end, because that's the only way you can really solve space, range, and stock in particular. We put in a plan that would reduce sales. We've been focusing on the hypermarkets where there's too much space. We've been focusing on general merchandise where there's too much stock filling that space. We've been exiting those categories and closing the space down. We've exited department stores across the region, and we've closed a lot of unprofitable stores in Poland in particular. 62 of the 66 stores that we've closed have been in Poland this year, and we've made a significant change to the profitability of Poland, but also more broadly through the region. That's driven 56% profits this year, but that's over 140% profit in the last 2 years. Now we've got a business which is much more sustainable. As well as significantly changing the metrics in Poland, that's meant that we've actually got to a profitable position where we can start to turn the growth back on in the other three countries. It's been focused on cost reduction, but also I wanted to call out stock because our cash cycle was in the wrong place. We've taken a lot of stock out of the back rooms of the business and a lot of stock out of the front of the stores as well and closed that space down. What that's meant is that the colleagues that we have, we have less colleagues, but actually serving customers and not rooting through stock in the back of the store. So actually, the availability, as our systems bed down and as colleagues have got more time to concentrate on availability in the stores, we've put emphasis on availability and pricing. That's meant that the value for money has improved. So while we've been cutting the tail, we've been increasing the core. That's really meant that the core food business and the core formats are all in growth already. So we've got a really good base to work from. The thing I'm most proud about, to be honest, is the way that we're changing the culture. We had people who didn't believe in a plan. We've got a longer term plan, really good three-year plan, and really clear one-year objectives that are set by a longer-term cost repositioning strategy. The team really believe in it. They're really working together. As you can see, we've seen really significant improvements in colleagues believing that Tesco is a great place to work and a great place to shop, and we've been making investments behind that net of all the savings that we've been making. So in a much more sustainable place going forward. Very good. Thanks very much, Matt. Finally, Alison, first year in Asia. Do you want to update everybody on how it's going? Yeah. Hello, everyone. So the story in Asia is continued good performance in Malaysia, but a much better second half performance in Thailand. So you'll see from the chart that sales are still negative, but what that hides is a reduction in the rate of decline. So in Q4, like for like was minus 3% and we had market leading seasonal performance in both countries. Profit at GBP 286 million. Again, in the second half we were stronger than the first half in Thailand and stronger than last year. There's two main reasons for this. So the first is that we accelerated a material restructure in the stores and office in Thailand and simplified the operating model in our large stores. In Q4, the operating costs in large stores were 20.3% compared to 23.3% before the restructure. The second reason was that we concluded our renegotiations with suppliers. We've moved 50% of the back margin in Thailand to the front. The split is now 87 front, 13 back. We think that is right for the market. The second half margin, as you saw, 7.4% now in Asia. I think a bit like Matt and Jason, what we're most pleased about is the fact that customer, colleague, and supplier metrics all remain strong. In fact, for customer with satisfaction at 90%, that is two points higher than it was at the beginning of 2018. The Thai team talked to colleagues about Reset for Growth, so we're carrying on with the large store simplification. We've now stopped 89 processes in the large stores. Again, much like Matt, we've got fewer colleagues, but 93% of those colleagues say that their job is simpler to do this year than it was last year. We've got trials of new customer propositions in 27 convenience stores in Thailand and 16 large stores. Early signs are promising, so sales, margin, and customer sentiment all ahead of our control. Again, like the others, using our global own brand to, again, give us opportunities for growth in our own stores, but also in wholesale and in export too. Very good. Thank you all very much indeed. Look, I think finally from me, in addition to what's going on in each of the geographies from a retail point of view, there's an awful lot going on in Group, and I'll come back to this when we talk about the way ahead. Because actually some of the things you've heard the CEOs talk about is a leverage of group capability. The three I'll pull out is all the work, we always talk about brand in the U.K. for understandable reasons, but if you were to walk into any Tesco market today, they all follow the same brand thinking, brand architecture in terms of design. So we're leveraging the work that Ali and her team lead for the group based here in the U.K. into all of the regions we have retail businesses. The other thing, it was talked about, I don't think many people really picked up the significance, and you'll get it more when we talk in the Capital Markets Day, of the change in Tony's job. By creating a Group Chief Operations Officer, yet also responsible for running the U.K., we leverage operational capability across all of our geographies. So our thinking about store operating model, our thinking around supply chain, all of that is driven through one global operations team that Tony leads. Matt talked about it, one of the initiatives, if you remember early on in the U.K., we introduced this concept of Star Lines from an availability point of view. Star Lines has been rolled out in each of the other geographies. Matt's used it in the way he talked about in terms of focusing the range and the value equation, but also driving up availability. We're taking those capabilities and driving them across the group. The other thing that's significant for us is what's been going on in the bit of the business you don't see, which is business services. We have a center in Bengaluru. We've recruited new people that have been working with us now for more than a year, getting real simplification, doing it once, doing it for all the group, automating AI is all happening in India. That's allowed us to focus the operations much more. These are three group capabilities that behind the scenes are actually helping the CEOs who have just talked about their business, operate more effectively. That was it. That was my update on what's been happening the last four years. A little bit more detail in terms of each of the segments over the last year or so. With that, I'll ask Alan to take us through the actual full year results. Thanks, Dave. Get my water. Thank you very much. Morning, everybody. Morning. As usual, I'll begin with the performance of the group. As Dave has said, I'm pleased to say we've delivered broad-based improvements across all the business. Momentum in our sales growth has continued up 11.5% at actual exchange rates, with 2018/19 representing our third full year of sales growth for the group. Our results include 51 weeks of the Booker business as we completed the merger on March 5, 2018. Once again, we delivered strong profit growth up 34% year on year to GBP 2.206 billion, representing a full year group margin of 3.45%. Excluding Booker synergies, the group margin was 3.79% for the second half, as Dave has said. Our retail operating cash flow was GBP 2.502 billion. This reflects a strong movement in underlying cash profitability. However, our year-on-year progress was held back by approximately GBP 490 million of working capital timing impact, which I'll discuss in detail later. Reflecting our confidence in the ongoing cash generation, we're proposing to pay a final dividend of 4.1 pence per share, taking the full year dividend to 5.77 pence per share, up 92.3% year on year. Including fuel, our group revenue of GBP 63.9 billion was up 11.2%. Looking briefly at the lines of the income statement that I haven't yet mentioned, our share of income from JV and associates increased this year to GBP 24 million, reflecting a further reduction of losses in our associate in China. Our net finance costs decreased by 23.6% year on year, due primarily to lower levels of interest-bearing debt following the further debt repayments and the bond buybacks during last year. Profit before tax, before exceptional items, amortization of acquired intangibles, net pension finance costs, and before the fair value remeasurements of the financial instruments, gosh, that's a mouthful, rose 52.5% to GBP 1.958 billion for the year, which in turn led to an increased tax charge. As a result of all of these, our diluted earnings per share on the same measure as before, increased by 29.4% year on year to 15.4 pence. Our annual EPS growth has averaged 40% per annum in the last three years. This year we've included a slide showing our performance by segment, given that my colleagues have already spoken about it. I'm pleased with the performance from each region, with all areas on an improved trajectory since our last update in October. If we briefly focus on the U.K. and ROI segment, we've seen the strong like-for-like sales growth of 2.9% as we completed the Exclusively at Tesco own brand rollout. In the fourth quarter, our U.K. sales outperformed the market. Operating profit was up 45% at actual exchange rates to GBP 1.537 billion, including the consolidation of Booker. This also reflects good progress on the cost savings program, as Dave has highlighted, and our continued focus on more sustainable and profitable ranges, including the decision to close Tesco Direct. We also saw in the year a benefit of GBP 52 million from the change in Clubcard accounting estimates. We delivered 79 million of Booker synergies, as Charles has said, and we are on track to deliver our target of 200 million per annum by the end of year three. We now expect integration costs, again, as Charles has said, between 50 and GBP 75 million over the three years, lower than the 145 million we originally expected. Our Central European operating profit before exceptional items was 186 million, up 56.3% year on year. We are improving the quality of the business by focusing on more sustainable product pack categories, as well as reducing the operating costs and simplifying the store service model. We closed the 62 loss-making stores in Poland during the year and made a small profit there in the second half. As you know, in the first half, the Asia operating profit was impacted by the combined effect of sales deleverage, price investment, and the renegotiation of promotional investment in Thailand. I'm pleased to say that the second half performance improved significantly, and we've been able to recover our operating margin more fully and quickly than we'd anticipated at the half year. Tesco Bank continues to deliver strong growth in both sales and profits, and I'll cover this in more detail on the next slide. Overall, the group like-for-like sales growth of 1.4% and the operating profit of 2.206 billion, up 34%. If we focus now on the bank, we've continued to deliver great customer experience for our banking and our insurance customers. We've made significant improvements to our customers' online credit card journeys, and we've relaunched the banking app, making it easier for customers to access and manage their accounts. Our operating profit before exceptional items increased by 16.6% year on year to GBP 197 million. This includes a strong retail banking performance with both cards and loans continuing to perform well. The insurance contribution fell year on year due to competitive market conditions, partly offset by a 13 million one-off benefit relating to upfront recognition of insurance renewals with the introduction of IFRS 15. Our lending balances are up 7.8% year on year, primarily driven by the secured lending up 25% year on year in a highly competitive market. This now accounts for 30% of the loan book. Our unsecured lending of 8.7 billion grew by 1.8%. The balance sheet remains strong and well-positioned from both a capital and a liquidity perspective, with a risk asset ratio of 18.4%. Now I'd like to ask Gerry, who joined as CEO of the bank in August 2018, to give his perspectives on the year. Thanks very much, Alan, and good morning, everybody. Alan, I think you've summarized it very well. First of all, the underlying income growth was driven very heavily by really good growth in cards and loans lending. The fall in the net interest margin, which is relatively small, I think, was driven by the mix, meaning we grew mortgages, and mortgages are much lower yielding overall. It was a really competitive year in insurance, and we did focus very heavily on renewals, and we managed to increase our renewals percentage really quite significantly. So that'll have loyalty benefits for future years. The cost-income ratio improvement was really quite significant. There's a lot more to do in cost-income ratio, but not only was it driven by increased income, but it was also underpinned by really strong cost control. The final thing that I'd say is while the bad debt to asset ratio headline has deteriorated, if you strip out the bad debt sales which we had, it's actually constant on a year-on-year basis. It's low by historical comparisons. If you go back to pre the financial crisis, it was significantly higher than that. I have to say, I've got myself into a position where I'm very comfortable with the quality of our overall lending book now. Thanks, Gerry. If we now look and move to the sources and uses of cash, I've used the usual waterfall, which represents how we think about cash within the business. We generated GBP 3.051 billion of cash from retail operations, up GBP 579 million on last year, excluding the working capital movements. I've split the working capital outflow of GBP 312 million into two components, an in-year timing impact of GBP 349 million, and an underlying outflow and an underlying inflow of GBP 37 million. I'll come back to these on the next slide. The exceptional cash items resulted in an outflow of GBP 237 million. Around half of this related to restructuring costs. Also included are owner's lease payments and final payments under the shareholder compensation scheme. Overall, this leads to retail operating cash flow of GBP 2.502 billion. We spent CapEx of GBP 1.126 billion. I'll take you through a more detailed breakdown of this later. Our net interest and tax costs amounted to GBP 585 million. We paid less interest year-on-year due to the lower levels of debt, partly offset by the timing of a coupon repayment on our largest sterling denominated bond. Our tax payments of GBP 302 million were higher than last year as our profitability improved. We had net property transactions of GBP 149 million, including GBP 285 million proceeds from the property sales across the group. As Dave mentioned, this includes the disposal of a site in Kennington, three retail sites in Central Europe and two Booker properties. The proceeds were offset by the three property buybacks in the U.K., which total GBP 136 million. The net impact of acquisitions, disposals and dividends received was GBP 112 million. This excludes the GBP 747 million total cost of combining with Booker, which is reflected, of course, in our net indebtedness. Finally, our commitment to offset any dilution to satisfy new share issuance for share schemes resulted in a net cash outflow of GBP 146 million this year with the bulk of the outflow in the first half of the year. This led to overall free cash flow of GBP 906 million. If we look at the retail operating cash flow, we have delivered a strong increase in underlying cash profitability of GBP 579 million. We have had it held back by around GBP 490 million of working capital timing impact, which can be split into two elements. First, this year's working capital net outflow includes payments of GBP 139 million, which were delayed from the last financial year following the administration of Palmer & Harvey. You remember that we spoke about this time last year. Together with the benefit that we had last year, this creates a GBP 278 million year-on-year timing impact. Secondly, there is a further GBP 210 million arising at the end of the year. The majority of this relates to the implementation of a new general ledger system in the U.K., which went live in November, a few months later than originally planned, and which temporarily delayed the collection of some receivables into the beginning of the 2019/20 financial year. In addition, in order to safeguard availability and service levels for customers at a time of political uncertainty, we deprioritized some ongoing working capital initiatives. In the prior year, we also saw a particularly high inflow of GBP 354 million from working capital, and this level of incremental initiatives has not been repeated. As Dave said, over the last three years, we have generated around GBP 560 million from working capital improvements, an average of around GBP 200 million a year. In the current year, we expect the GBP 210 million timing impact to reverse, and we will maintain our focus on generating sustainable improvements in working capital. These movements result in a total retail operating cash flow of GBP 2.502 billion, down GBP 271 million year-on-year. Capital expenditure for the full year at GBP 1.1 billion remains at a similar level to last year as we continue to exercise discipline in our investment decisions. In the U.K. and ROI, capital spend of GBP 709 million relates largely to maintenance and refresh of the existing stores, as well as the opening of 13 new convenience stores and eight new Jack's stores. We also closed 20 stores in the U.K. The GBP 130 million spend in Central Europe relates mainly to the repurposing of existing stores. As anticipated, we saw a net reduction driven by the closure of the 62 stores in Poland. Looking at Asia, the spend of GBP 235 million remained at a similar level to last year and includes the opening of 17 new convenience stores in Thailand. Going forward, we continue to expect our annual capital to remain within the range of GBP 1.1 billion-GBP 1.4 billion. We continue to make good progress with our balance sheet. Looking at net debt, we did see an increase of GBP 238 million, which is after the net cash outflow of GBP 766 million relating to the Booker combination. Our lease commitments were down GBP 292 million on an underlying basis and up GBP 68 million when we include GBP 360 million of additional Booker operating leases we took on. Our pension deficit reduced from GBP 2.7 billion to GBP 2.3 billion, with continued deficit contributions and strong asset performance over the period. As a result, our total indebtedness reduced by GBP 84 million to GBP 12.2 billion. Of course, this slide is reported on a pre-IFRS 16 basis. We start reporting on an IFRS 16 basis in this financial year, and we will be issuing the full 2018/19 financial statements on this basis on Monday, April 29. This next slide gives some more color on the progress with gross debt. During the year, we repaid EUR 750 million in November, and we also prepaid a total of GBP 1.2 billion across two bond tenders, which took place in April and October last year. As you can see, we continue to target bonds with high coupon rates to maximize the return. We also issued a new bond this year at a lower coupon rate of 1.375%. That is the light blue on the chart. We have achieved almost GBP 100 million of annualized interest savings with liability management exercises over the last two years, and we will continue to look for opportunities here. Looking now at our debt metrics, we made continued progress on the balance sheet with both our key metrics crossing the threshold levels. Our total indebtedness ratio has reduced to 2.8 times from 3.3 times last year, and our fixed charge cover has increased to 3.2 times from 2.7 times. These are all on a pre-IFRS 16 basis. We have today confirmed that we intend to operate with a total indebtedness ratio between a range of 3 and 2.5 times on a post-IFRS 16 basis. We expect fixed charge cover to remain as around 3 times going forward. Our proposed final dividend of 4.1 pence per share will be paid on June 21, subject to the approval of shareholders at the AGM. This will result in a cash cost of around GBP 400 million payable in the current year. Our proposed full year dividend of 5.7% is, as I have said, up 92.3%, reflecting our continued improvement in the performance and the confidence in the future cash generation. I am also pleased to confirm that we are now expecting to reach a dividend cover of around 2 times earnings in the current financial year. Before I conclude, as usual, I have a slide summarizing our guidance for our key financial metrics. As you are aware, the margin cost-saving targets are directly linked to our six strategic drivers. The guidance for working capital, pension contributions, CapEx, finance costs, and tax remain unchanged from October. You can see here that we have updated our debt metrics guidance, as I have just mentioned. To conclude, if we can move to the next slide, please. To conclude, we have met or about to meet the vast majority of our medium-term targets. Sales grew by 11.5% and we saw a significant increase in operating profit of 34% year-on-year. We delivered a second half margin of 3.79% for the group, excluding Booker. Our Booker Joining Forces program delivered GBP 79 million of synergies for the year, and we now expect the integration costs over the three years to total between GBP 50 million and GBP 75 million, while still expecting to deliver at least GBP 200 million of synergies. We delivered retail operating cash flow of GBP 2.5 billion, as our underlying improvements in cash profitability was impacted by working capital timing, including the decisions we made in the second half. We made further substantial progress on our cost savings program, leaving us firmly on track to deliver our GBP 1.5 billion cost saving target. We continue to reduce total indebtedness, strengthening our debt metrics and reaching our threshold targets. Finally, our proposed dividend and the confirmation that we intend to reach 2 times dividend cover in the current year once again demonstrates the board's confidence in our ongoing recovery. Thank you for your time. I will now hand back to Dave. Thanks, Alex. Cheers. Okay, final section from me then is what is next? We said in the announcement that on 18 June, we intend to hold a Capital Markets Day in Welwyn Garden City. At that time, we are going to talk to you about what we still see as untapped value opportunities inside the Tesco business. We are also, on the 26th, going to run a slightly different day. We have done some work over the last 18 months with investors and shareholders who were interested, particularly in the ESG agenda inside Tesco. So we are going to run a very specific day around that agenda, too. There is an awful lot going on inside Tesco that we are particularly proud of, and we will share that on 26 June. To give you a sense, though, for what we are going to talk about, there will be some things which will be familiar to you, and there will be some things that are new to you. Let us start with some of the things that are familiar to you. You will remember, I hope you will remember, if you look back, you will see in 2015/2016, I talked to you about how it is we thought about the business model of Tesco. In this very simplistic diagram is actually quite a lot of what we have been doing over the last four years. If you remember, in the first quarter of 2015, we reorganized the group. We organized the group around having a Chief Product Officer, an Operations Officer, and a Customer Officer. We talked about three pillars in our business, product, channel, and customer. It simplified an awful lot of what we do. It is exactly how we run all of the business today. We are going to use those three pillars as one of the ways that I am going to share, we are going to share with the market what we see as still untapped value opportunities. I do not know if he is in the room, I cannot see him. I borrowed the phrase of untapped value opportunities actually from one of our investors. When I explained to him that sometimes when I talk about improvements, it is always difficult because it can sometimes criticize the past. He said, "Don't worry about that. For us as investors, they are untapped value opportunities." What we are going to do is share with you where those exist across three pillars. That will mean that Andrew, in terms of product, will lead a session, and Tony will lead on channels, and Alessandra on customer, those three pillars. For each of them, we will share where the opportunities exist for us improving the offer for customers, because I think there is a lot we can do, further reducing our costs, and the focus on cash. Through each of those pillars, you will get to see what it means for customers, cost, and cash in terms of where we see untapped value opportunities. That will be one of the things on the day. The other thing you will see on the day is, again, a little bit more from each of the operating CEOs, is that element of mix. You will remember this matrix, it has got slightly bigger now because it has got wholesale and professional on it given the Booker addition to the group. Jason, Charles, Matt, and Alison will share with you the untapped value opportunities that still exist for Tesco through that lens of mix. What do we sell, where, with what operating model supporting it? The third thing we will share on that day is a little bit around transformation. We have had a transformation program running in the business for the last four years. We have talked about some of it as it has become relevant. There is more that we can do. We will share with you what Alan has been leading for in terms of finance transformation. We talked about the general ledger that was introduced in the U.K. before Christmas. There is an awful lot more that we can do to actually simplify our financial systems, an area that historically we have not invested much in, but we have been lately. Likewise, what Natasha can share with you in terms of people transformation. Again, this point of leverage across the group, there is an awful lot that we can do, and we will share with you more what we are doing in business services. It is going to be a pretty full day on that Capital Markets Day. We are going to look through three lenses, the three pillars of the business model, the geographies in terms of maxing the mix, and then the functions within our business about how it is they can add value to the total Tesco operation. That is the way that we are going to talk about it. The things that will not surprise you is I will not be talking about like for like, I will not be talking about percentage margin. Now, again, you know this because we've talked about before. In all my time in Tesco, I've never set a like for like target, and I'm not going to. I've never set a percentage margin target, and I'm not going to. Everything we've done has been about customer satisfaction, cash profitability, cash flow, earning expansion. We've been sharing that chart with you since 2017, 2018, as our underlying business philosophy. We gave you some medium-term ambitions in order that people could chart where our turnaround is, and I'm really very confident that we'll deliver on that. This year, 3.5% to 4% as an outcome in the margin, absolutely. We're very confident about it. But actually, that's just an expression of the cash profitability that we set for ourselves. All right? Now, the really interesting thing about this plan, and for me, the reflective point is, if I look at the plan on which we set the medium-term ambitions, probably every single assumption has changed. We forecast deflation, 18 months in, inflation. We had one exchange rate, Brexit changed that quite considerably. We've had different cost inflation than we saw at the time. Loads has changed. But actually, through all of that, and I think this says something about the resilience and the adaptability of the Tesco business, we've been able to deal with that, adapt, and still get ourselves to a place where actually the cash profitability is ahead of where we said we would be, and it is already in the second half within that aspirational range of margin. We'll finish that job during the course of this year. But when we talk to you in June, we'll talk to you much more about, you've heard me say, put the customer at the center of everything we do. That's in every business, every geography, and will not change. Around that, we'll talk about those untapped value opportunities in terms of how we add value to customers, how it is we drive the cash profitability, the free cash flow, and earnings expansion. That's how we're going to talk about our business going forward. Okay? Now, finally, Alan touched on this, but just to sort of put it in a very simple, you should have worked out probably from all of the things that we've talked about before, but we'll talk it more when we get to the 18th of June. When we think about allocating capital, first and foremost, we'll reinvest back in the business and the customer offer. We will not change the capital discipline that we brought to the business over the last four years, but the first call is always reinvesting back in the business. As Alan talked about, we want to maintain leverage at the 3x or 2.5x total indebtedness to EBITDA on a post IFRS basis. We're going to grow the dividend to around 2x cover in this financial year, and then ongoing, we see ourselves maintaining around a 50% payout ratio as a principle. We will continue to look at opportunities, if they're commercially attractive, around inorganic growth. And when we've exhausted all of those, we obviously have the wonderful opportunity to return any surplus cash to shareholders, and there are a number of ways that we can do that, and you're familiar with. But that's how we think about it, and we'll share more of that as you go. Alan has touched on it in his presentation as well, but just to be clear and transparent for those who ask us the question, this is the way, as a business, we're thinking. The final thing for me to say before questions is it's our birthday. It's 100 years of Jack Cohen starting his business. We're celebrating. We're celebrating, but only in one way. We're celebrating by going back to what he was all about and what Tesco is all about, which is investing and giving customers great value. We did the first activity in January. Jason touched on it, prices that take you back. Very successful activity as far as customers are concerned. We'll carry on doing that. We will continue to invest in Exclusively at Tesco. It's working for us. You'll see a little bit more into. The 400 SKUs will get a little bit broader, as customers say, and we see opportunities for us to do that, but small broadening. But what you will see is the distribution deepening. We replaced all the value SKUs that we had, plus a little bit more. It's working well. We'll extend the distribution in order to offer greater value throughout the estate. You'll see much more from us in the area of loyalty. I touched on some of the impact of the changes that Ali and the team are making and the engagement that that's driving. We think there's an awful lot more to come, and that's something that we should be doing, particularly in our centenary year, as a way of saying thank you to our most loyal customers. In summary, it's been a good year. It's certainly been a lot of hard work, and it gives me a chance to thank not just the colleagues in the room, but the colleagues more broadly. A lot of very hard work, a lot of change in our business. But it's nice to stand here and be ahead of people's expectations for the full year. There's been a significant increase in the profitability. The strategic drivers have worked for us. Actually, having that navigation with everything else changing around has been really very good in aligning our business. The second half margin is within the range. The way that we think about it is we got there quicker. It doesn't mean you set another higher target. It means you got there quicker, and then we'll deliver through the course of this year, while still being able to invest proactively in the offer for customers expressing our competitiveness. Very important for us. We'll celebrate 100 years, and we'll look forward to seeing you at the Capital Markets Day. With that, I'll stop presenting and take questions. Usual rules apply, though, by the way. Detailed model questions for Mr. Griffiths afterwards, if you may. I will, given the feedback, ask you to limit to one question. Though I'm looking at you, mate. One question, and either myself and Alan will ask it, or given I've got the exec in the room, if there's a person better than me asking, I'll invite them to comment as well. How's that? Andrew, why don't you go first, given you're nearest? Yeah. Good morning, everybody. Andrew Gwynn, Exane. Big picture question, which is U.K. market obviously been through a period of intense disruption. Obviously now feeling like it won't get disrupted by a merger. How would you think about the market? How should we think about the market going forward? I think if by the market you're thinking predominantly a U.K. market. Yes Yeah. Look, I think what we've said is, notwithstanding something that's completely outside of our control, and that's, I think, in the words with political uncertainty, I think are the words that we use to avoid any others, is actually quite a stable picture. All right? We don't see any sort of dramatic change. So whilst we see the sentiment numbers that you would see and the concern that people have, we're not seeing that in a change in buying behavior. We're not. So levels of inflation that we've had before, and it's been that 2.5 is where we're assuming going forward. We don't have an assumption that there is some sort of external event that would fundamentally change that. So Andrew, that's our picture now, and that's the program that particularly Charles and Jason. Jason? Jason is working in terms of the U.K. position. Do you want to pass the microphone along and then we will come down to David after? Okay, thank you. Yeah. Xavier Le Mené from Bank of America Merrill Lynch. When you joined a few years ago, the first things you said or mentioned was that you removed too much cost from the shop floor, especially in the U.K. It seems that a big part of your improvement has been actually about removing cost still. Initially, you also mentioned actually quite recently the fact that you are removing also some people from the shop floor. Yep. You are removing some services. Yep. I am trying to square the circle here. Okay. Let me help. I will help and then I am going to ask Tony to add on to that. Look, it is true, we have taken some cost out, but we have changed the operation. The way that we talk about it inside our business is how do we simplify first? Take the work away, and then that allows us to redistribute the work. That is really important. Everything we did in terms of cost reduction, 24-hour stores, not profitable, we stopped. Overnight replenishment in a lot of stores and certainly for general merchandising, we stopped. So we allowed ourselves to repurpose and actually increase the amount of colleague hours that we had serving people as opposed to Matt talked about in Central Europe, actually running the shop. That has been a big part of what has driven that cost there. I think the latest round is around counters. All right? I will ask Tony to talk specifically in a second. Before he does, let me give you one fact that never gets reported. This never gets reported. We did say in the announcement or Jason's announcement earlier this year that we would close some counters. Very unprofitable counters. That actually, as we went through that change, we would put 9,000 colleagues at risk of consultation. We also said at the time that we think by redeployment that that would be net-net about 4,500 roles reduced. The fact that nobody talks about, even though it is out there, and I checked this with Natasha only this week, is if you go back to September of 2014, you made the point of when I started, and you look at where we are now, we have more than 10,000 more colleagues on the shop floor than we did in September 2014. We are not taking cost out of customer service, but we have taken cost out of non-added value, complexity or routines. Tony, do you want to add something to that? Yeah. A couple of points, I guess. One would be on the specific of the counters. The vast majority of our stores will still have counters in some way, shape, or form. So 800 large stores, it is less than 100 that are closing all their counters. The second I would say is that it was fundamentally customer driven. Our customers have been retrained over the last decade. If you think about the growing channels, discounters, online, convenience, none of which have counters. So customers are telling us in their behaviors they are not shopping counters as much as they did in the past. Then you have seen our product development, and that, particularly in the convenience ranges, has improved hugely over time. Therefore, customers, again, from a convenience perspective, picking up prepacked food, and we have seen a load of that. So counters was a customer driven decision. It is not the majority of stores, and we are pretty confident it will be successful on the way through the year. The other bit I would add is we have put 10 points of productivity into our stores. Same point Dave's made in the 10,000 colleagues, but since 2014, 10 points of productivity investment in our store colleagues, and every one of those store colleagues paid more now than they were then. We've got same plans for the next three years, which you'll hear about at the Capital Markets Day. Okay? Do you want to pass to David for me? Thank you. Yeah, good morning. Dave from HSBC. You haven't talked today about your relationship with Carrefour. We've been reading about Yeah the negotiations and CWT have been doing. Can you tell us a bit on that? Give us some kind of scope. Can you tell us how many suppliers are involved Sure on the international override a bit? Can do. Why don't I start, and then I'll ask Andrew to add to it, given that he's intimately involved in it. Look, the strategic rationale here is that we don't overlap in any market other than Poland. That actually there is quite a complementary nature to our two businesses. There are three opportunities that we identified, which was, yes, buying brands better together, so the international override a bit that David talks about, but actually very significantly, goods and service not for resale, and also in own label product development. So there are three big opportunities. The one that everybody talks about is always the branded one for reasons that are there. Do you want to update everybody on where you are? Yeah. I think you've probably covered it. It's three areas we're looking at. The real opportunity is goods and services not for resale. The second big opportunity we're working at is the Carrefour brand and Tesco brand. It's actually bigger than the food opportunity. When you look at our factories in general merchandising clothing, we're using many of the same factories, so there's some real opportunity there. The third area is obviously the global branded suppliers. The global brand suppliers, there's probably about 30 of them. We've had some great conversations with them. We're at some early stages. In terms of our alliance with Carrefour, we're sharing responsibilities. On the global branded, it's being dealt with out of Carrefour in Geneva. I've been out there. We've put an international team on it from Tesco out there, and we're really pleased with the way the sort of conversations and negotiations are going. It's very early stages on all three elements. We think there's lots of opportunities to work together, and we're working with Carrefour and forming the relationship and the priorities with them. sort of week in, week out. So far, so good. It wouldn't surprise me, David, the noise that's in the marketplace about having these conversations doesn't surprise me. Very confident where we are with, comfortable with where we are with the 30. I suppose when you hear people, I suppose the bit of insight I would give you is, when you hear people sort of challenge why it is, as Carrefour and Tesco we might do this. Do me a favor, just ask one question in the other direction, which is, as an international FMCG player, do you have a global purchasing function? And the answer to that is invariably yes. So why wouldn't we, as two complementary businesses, also seek to have a global purchasing function where there is alignment in the way Andrew says, that's all we're trying to do. But we'll do it in the right way, GSCOP compliant, all the things. Yep. All makes sense. No problem with that. Just trying to get a scope. I know you are of the long-term potential. And we're not going to give it to you. How many hundred millions? We will talk about untapped value opportunities. It might give you a steer, but we are not giving you a number. I will go there, and I will go backwards. Is that all right? Yeah. Bruno. Good morning, Bruno Monteyne from Bernstein. If I look at your leverage target, Alan, 3.7 on the new metric, post-IFRS 16 going down to 2.5. At the rate of reduction, it looks like you are 2 years away from being comfortably within the range. Is it therefore fair to assume that the discussion about any excess cash returns on that last slide are 2 years away? Well, I have not seen your model. The way that I think about it, Bruno, is that there are two changes that are happening within that metric. One is total indebtedness, one is the EBITDA. I know that in each of those change in the right direction, the rate of change is pretty quick, and that can move quite quickly. We are focused on it. I think the important thing is having shown the threshold last year, we are going to be operating in an IFRS 16 world. That is the basis in which we need to look at things, and the metrics that we have set out on that range then gives people the opportunity to work through off your own model what it is. But we are getting pretty close to the point that we are able to operate in that. We know that that then tracks into a stable capital structure and the ability to deliver sustainable business, dividend twice covered. Cash generation in the business is very strong. At the right time, and whether it is one year, 2 years or whatever your model shows, we will get to be able to talk about, within the capital allocation hierarchy, if there is money to be returned to shareholders, that is a great position to be in. I wasn't really referring to my model. I just noticed you had the great EBITDA improvement this year. It was amazing profit growth. It came down by 0.5. Given that you're at 3.7- I needed no modeling to come up with two years. We'll talk about it every six months, and we'll get to the place, which may be sooner than you think, in terms of where we're in a position that we're talking about something which is real rather than hypothetical. But it's very clear the framework that we're now operating in. Thank you, Alan. Please, Sam. Yes. You're Maria Laura from Morgan Stanley. You're at a point where you're almost completing the GBP 1.5 billion cost saving plan. Just wondering how you're thinking about it beyond that. And in particular, wanted to understand whether we could expect the same scale of cost reductions in international markets. I think that we will talk about the untapped value opportunities that I touched on through the lens of how we can reduce our cost. I suppose just to avoid any doubt, in the same way going forward, I am not going to set another margin target. I am not going to set another quantum cost target either. We are going to be talking through how it is we can change the operation in a way which lowers the cost, but thinks about how it is we can invest back into the customer. So we are definitely sure that there are other opportunities to lower the cost, but we will not be setting another quantum number. It is going to be much more about within the individual businesses, how it is we can be much more productive and efficient. Okay. I would add that the cost base, the addressable cost base remains large and appealing. Indeed. Thanks very much. Rob Joyce from Goldman Sachs. Stand here. I can see you then. It's a question on cash. This year you reported about GBP 900 million of retail free cash on about 2.2 of trading profit, I'm sorry, EBIT now. I think you confirmed consensus at 2.4. You're happy with that in terms of EBIT for FY 2020? What should we be expecting, sorry, in terms of retail free cash, and should we be expecting improvements in the cash conversion going forward? Thanks a lot. Mm-hmm. Look, I think the drivers, Rob, are pretty clear from what I spoke about in terms of the working capital impact that we saw this year, the GBP 210 million, we'll see that reversing back. We continue to focus on working capital generation opportunities within that, and we've got guidance out there. The two big deltas in terms of free cash this year on year, are ones which we flagged and were expected. As we make more profits, we pay more tax. There's just over GBP 100 million of tax impact. We also, for the first year, had the GBP 150 million or so of share buyback, which year in, year out, we and I expect that to be broadly stable. One of the consequences is the better we do as a business, the more valuable those rewards become and those awards become, so that number may creep up over time, but for the moment, we expect at about 150. CapEx is stable year on year. Really from my mind, it's the increase in profitability, the working capital which we'll focus on, and we'll get the reverse of what we saw this year, plus whatever we generate, and then it'll flow through to free cash. Okay, thanks. Exceptionals? Well, there is some exceptionals. You will see in the exceptionals, and we can take it and give you some detail, but if you look at the detail behind what we have charged through the exceptional and the provisions, it is pretty clear that there is some cash which we will get out as exceptionals. The one thing I have not mentioned, of course, is property, which remains an opportunity to generate cash and frankly, sometimes to spend cash. Thanks very much. Okay. Rob, do you want to pass down and then I will just work back this way, please? Thank you. Sreedhar Mahamkali, Macquarie. One question and just one follow-up on what Rob was asking, please if that is okay. Just on working capital, the reversal you have talked about, we get it, but you have also historically talked about GBP 200 million underlying improvement. Should we be expecting some of that to come through this year on top of the reversal, which is technical? Yes, absolutely. We continue to see opportunity in working capital. I have also been clear that over time, the opportunity becomes less because we are operating, part of it is just within the business. We would expect, as we grow our business, to be generating positive working capital. Matt touched on that in terms of the way that the stock opportunity in Central Europe. There is a natural working capital benefit providing we run the business in the right way. On top of that, there will be some. The GBP 200 million that we have targeted, that remains what we target, but over time, I would expect that potentially to drop away. But right now, that is still what we are targeting. Okay. That is 200 plus- Plus on top of the 200 reversals, yeah. Okay. Very good. Thank you. Just a second one on 2.5 billion GBP incremental revenues that you set out with Booker a while ago. Yes. We haven't had an update today. Just curious to see where you are in that and what your thoughts are? It's definitely in the release. We still have the same aspiration of 2.5 billion GBP. Charles was talking about more than 500 million GBP already in the first year. Same opportunities, same aspiration. Charles, do you want to add anything to that? No, I think the only addition is that great slide of showing Booker, Tesco in the U.K. growing at over 1 billion GBP with some of the competitors, so you're getting back to the biggest player growing at the fastest rate. With experimenting and certainly when we do the Capital Markets Day, we'll be able to show you just some of the developments taking place there. As the market changes, last year, Booker did pick up a pretty unexpected, the 11.1% increase did include some business, which over time Booker and we might have expected to be winning, in different circumstances. So it is not that it has not happened. As we look forward, there are real opportunities there. Mm-hmm. Can we pass back? Yes, Clive's in the next row, the only hand. We will go by rows. Do you want to pass it down? If you would not mind. There you go. Down. We have just got one microphone, have we? Okay. Hard times. Clive Black from Shore Capital. Oh, can't let you get away with that. Okay. Go on. You have reached most of your ambitions quite early, Dave, and I just wondered what your ambitions are for the business, going forward at the high level and where you see yourself on that basis? How about personal questions? Look, the aspirations for the business haven't changed, right? I have said to you before that I think Tesco is at its best when it is thinking only about customers. All right? And I know some of you said he is always talking about putting customers at the center of the business, he never stops. I will never stop. We talk about going forward, customers first, second and third. Okay? I have always believed that, particularly from an investment point of view, a capital efficient, disciplined business generates cash profitability, generates free cash flow, grows earnings, and is a very good, attractive investment, and I am committed that Tesco will be there. Getting there earlier than we said is thanks to a huge number of people to whom I am indebted and grateful, and we have got aspirations for that going forward. So that is what we are doing, that is what I am doing. Until the board say business as usual. Pass it back. Thanks. It is Nick Coulter from Citi. If I may, could I follow up on Booker, and the underlying run rate if you strip away Palmer & Harvey, Matthew Clark? Have you actually seen a step up in the underlying run rate and more specifically, within catering, which I guess is where the rewards really are? Thank you. Charles, do you want to? We are pleased. You saw 11% like for like overall. In the last quarter, it has come down to 4%. Actually, non-tobacco had done a bit better than that. We are pleased, and we are pleased in terms of the way the catering mix is coming through, Nick. In terms of the growth, it is as we signaled on Booker. But if you look historically, you have done 3%-4%. Do you expect that to step up with a greater opportunity as part of the group, or how do you I think we are happy in terms of the growth. But as the growth comes, sometimes you have seen us do double digit, sometimes you have seen us. That sort of range is the right range to be. Nick, if I could just add and maybe, Charles, this will be difficult for you to say. Charles never ran Booker for sales. Booker was always focused on the cash and the profitability and the customer. In that sense, the number is there and for reasons which are helpful to understand, that has been split between tobacco and non-tobacco, but it is all about improving the customer experience and improving the business performance. The sales is there and encouraged. Q4 underlying was stronger than the number that is there because of the non-tobacco element is stronger than there. But it is all about running an efficient business. Thank you. Okay. Is that it? There is not a question in the room. You can have two, Nick. You can. Go on, have another one and I will give Andrew the last one and then we will finish. If I may, then. Thank you very much. Just on the promotional environment in the U.K. Yep I think you are perhaps having more fun than everyone else at the moment. Can I perhaps venture as to why you have a heavier promotional intensity? Aside from centenary, et cetera. Yeah. You obviously have a strategy there that is delivering effectiveness, ROI, et cetera. Let's just get the numbers straight, because different people quote promotional intensity. We've been giving you a number that we've given you all the way through. Last year, promotional intensity was 35.4%. This year, it's 35.9%. It's not changed in total. Right? Be careful of some of the numbers that either exclude or include some of the different geography and do include permanent price reductions as part of their promotional intensity. We've not changed promotional intensity at all. We've changed the type of promotion we have. We are getting a better return, that's for sure. But actually on a continuous basis, it's moved from 35.4% to 35.9%, which is a rounding error in terms of the way we look at it. That 35.9% is down from 46% when I joined in 2014. Okay? So that's the trend in terms of promotion. But the type of activity we're running is very different, and that's why I'm happier with the returns that we're getting from the type of activity we're doing. Do you want to pass to Andrew for me? Yes, maybe a question for Alan, but Andrew Gwynn from Exane again. The international profit obviously stepped up significantly in the second half. As we think forward into next year, how should we think? Should we think that maybe there's a little bit of catch up from the first half and the second half maybe isn't fully representative? Or just try to help us. Andrew, I can see you populating your model as you ask the question. Yeah, no. Look, I think the way I'd answer this is fundamental. If you go back to the way that we think and talk about the business, the customer is at the core. The competitiveness of our business is at the core of it. In order to deliver that increased competitiveness, whether it's in the U.K. market, in the Thai market, in any other market, it's all been about improving the costs of the business, improving the product in order to deliver a better customer experience. That, when we do believe, will flow through into better returns, and we went through the specifics of the changes that Alison spoke about in that market. Really comfortable where we've ended up with suppliers. Really comfortable with the way that the business has faced into some very significant changes in the store operations model and the cost. That primarily customer focused. That's the way we think about it. Would I add something, a slightly different perspective in that sense, which is, I mentioned when I talked about it, which is, I see no reason at all why our international business should be dilutive to the group. You saw where we were in the second half. What I want us to think about, though, is that we get ourselves to the margin ranges that we talked about, and then we free up ourselves to be investing back in the business. We know that our own internal modeling is when we get there, and if we invest in the right things, the impact of that investment on sales and on cash are exactly where we would want it to be. That's the balance we're always managing. So I'm really delighted with where we got to in the international businesses. I think there's more that we can do. There's more that we can do and we should do. The only thing I would say to you is, as we get ourselves into that range, we give ourselves the permission to be able to invest back in the customer in the way that Alan says, and that, I think is the right balance in the retail model. The important thing, though, is you look at the portfolio, and actually the portfolio is an advantage for Tesco when we run all of the bits in the way that we managed to run it, particularly in the second half of last year. Okay? So with that, and slightly ahead of time, I will say thank you very much. I think the two things I'd say at the end is I am delighted with where we are. It gives me a chance, you've got all of the Tesco team in the room here. They've been very busy over the last four years. They've also been very effective. I think not only in terms of business performance, but also what you saw, and very important for all of us, and why I wanted the teams to bring it out, building the engagement of the people that work in Tesco for what it is Tesco does, has been a key part of everything we've done. I hope you are pleased with some of the financial performance. We are where we said we would be. We will finish that job this year. We'll share with you where we're going to take the business to the next few years, but not so much with the point specificity that we gave you last time. Very importantly, keeping our colleagues and all other stakeholders engaged, positively engaged with our business. Thank you very much for your time and your attention. Have a good day. Happy Easter, by the way. Yeah. When it comes