H2 14/15

Apr 22, 2015

Good morning. Morning. It's always reassuring to get some reaction from the audience first thing in the morning. On behalf of Alan and myself, but also on behalf of our new Chairman, John Allan, and other members of our executive committee, I would like to welcome you to our results presentation. As usual, Alan and I will make the presentation and take your questions at the end. Obviously, if there are some things where I can get extra flavor or answer any very specific information, I may call on some of my exec colleagues who are here if that will be helpful. 8th of January, we stood in a room similar to this, and I remember saying to you that it was a very particular day. In fact, I think at the time I described it as a bittersweet day, because we had two messages to share at that particular point. We had the positive message, which was around a Christmas trading period that was stronger than many were expecting, and was a demonstration that the retailing capability of Tesco was still alive and well, and when expressed in the right way, a very compelling and competitive force. It was also the day that we faced into and made the announcements around the need to restructure and to face into some of the financial challenges that we as a group had to do. It was a phasing that we had thought very carefully about, but it was a day where we had two messages for you. I suppose today is similar. We have two big messages for you. We will talk around a GBP 6.4 billion statutory loss. It is a big, significant number. We will share with you what it is that we did that got us to that number. We will share with you objectively how it is we looked at our business, how it is we faced into the fact that the market conditions that we find ourselves in are indeed challenging. We also face into the consequences that our business has not been as competitive in recent years as we would like it to be. We have looked at that objectively, and we will share with you what it is we have done as we faced into the consequences of that. Whilst I can understand why there will be a lot of focus on that, there will, I will seek through the course of the day, to talk a lot also about the second story that I have to share with you, which is we have been relatively busy over the last seven months, with the help of a lot of colleagues around the Tesco business. In fact, all colleagues around the Tesco business. We have been hard at work in addressing the challenges that I have shared with you before. The story I have to tell you there is, actually, we are starting to see some very early, key words very early, but encouraging first steps that actually we are getting a return from that investment. So those are the two messages that we need to share with you today. We will do it in a similar way to what we have done before. I will start by updating where we are on the three key priorities, and we will start with that message of what it is we have been doing to enhance the competitiveness of the Tesco business. Alan will then lead us through the Q4 results and the full year results, and I will come back and tell you a little bit about what happens next. As always, obviously, on January 8, we talked about the third quarter and we talked about Christmas trading, and today, we are going to talk about the transformation plan and the fact that we would say that transformation plan is progressing well. You will have a chance, if you did not at the coffee break, to meet some of the new members of the team that are responsible for the activities of the last six months or so. You have seen this chart a lot. It is consistent for a reason. We set out three priorities, competitiveness in the U.K., protecting and strengthening the balance sheet, and rebuilding trust and transparency in both our brand and indeed our investment case for the business. What I thought I would do now is tell you a little bit about what it is we have been doing against those priorities since we last met. Since the very first day back in September, looking at the business, talking about the business, setting out what it is we wanted to do for the business. You know that what we have been talking about is a need for us to really focus on, invest in, and improve service availability and then selectively price. That sequencing, as you know, I have emphasized, it was important for us to get the base availability better. It was important for us to get the service right, and when that is right, you get more bang for your buck when you do invest in price. We were not saying we did not need to invest in price. We just said we needed to do it in a sequential way because investing price in a poor operating model is indeed wasteful price investment. Some of the things we have been doing, we shared these with you. I am sorry, this screen is a little small for the size of the room. You have got the books in front of you. I suppose what I am seeking to do here is show to you the long-term commitment that we have to be tracking that service improvement, that availability improvement, and that perception of price improvement. I think what you see here is that we took a step up, and we took a step up and we've maintained it, and we continue to inch it up. For those who are very familiar, and the reason I take this to Tesco week 52 is, I think if you look back historically, actually, as the year got, and Bruno's famous for having called this out in a particular call, is actually these indicators normally went down at the end of the year. We've held them consistent through the end of the year and indeed into the first part of this year. One I'd pick out, because a couple of you have asked me about it, when we talk about availability, remember for those in the detail, we now measure it in two ways. We measure it through dotcom availability first thing in the morning, but we've also put a sales-based availability model, which is done in the evenings. We've seen a step up in both of them. There's one benefit in that, which I think the ones I've had a chance to walk stores with, I've shared with, but I'll share it more broadly now, because actually, when we were running our stores very lean in terms of people, the unseen impact was, as dotcom was growing, as our home delivery service was growing, actually, that was taking up a disproportionate amount of the colleagues in store. You'd see, therefore, that there were more people in the store for longer, and you'd get not the service you would want in dotcom necessarily, and you'd also have a knock on into the store. The interesting thing was, this is about store-based availability. As we've made this improvement over the last four weeks, for example, our dotcom availability, grocery home shopping availability is the best we've ever had it since we launched that service. So we're getting benefits across our whole business by raising the fundamentals and the foundations in the way that we have been doing. On price, you've seen some of the things that we've done at Christmas, at Easter. You'll have seen just lately that we've invested also in some more essential products. If you were observant around in stores, you'll have seen the work that Jason and the team have done around chicken, around meat, around some of the dairy products, and again, some of the essentials. We said before that we would invest selectively in price, and that's exactly what we've done, is we've done range reviews and the like. I also said to you that one of the things, and we talked last time, is I was keen for us to improve our operational performance. As we've driven up availability and as we've driven up service, actually we've managed also to improve quite significantly across the group, the stock position. So what this is we're now three days lower than we were. It's a trend that I would like to see continue. It's an opportunity for us as a business going forward, and I'm pleased to say that actually, as we've reshaped and refocused the business, we've actually been able to improve the offer for customers and make the model more efficient in terms of the way that we utilize our working capital. But actually, the next two charts to that story that I want you to think about for a second, are probably the most important and leading indicators of those encouraging signs that I said. You saw from Kantar, in their last 12 weeks, they commented on the fact that a quarter of a million people had come to Tesco more than had done in the previous period. More people are. I said to you at the first, we were holding our footfall. Actually, we have seen our footfall improve over the last three while. The way we measure it is transactions, the number of times that the till rings. What you see here is, and I have gone back to the first quarter of 2013/14, is for the first time in quite a long time, we have got transaction growth in the U.K. Tesco operation. More people are coming, transacting more with Tesco in the fourth quarter than they have been doing for a long time. Very importantly for me, I have used the phrase before that this would be a volume-led recovery. That actually what we needed to do was to get that engine running again because of the leverage that builds all the way through our model. I am pleased to say that after four years of quite aggressive volume decline, for the very first time in that period, we now have registered a small volume growth of 1.2% in the fourth quarter. In that quarter, there was deflation of around 2.2% in our business. Significantly, some of that was market, and you are very familiar with what is going on in the market, but some of that was obviously the investment that we were taking as well. The important thing for us is that the volume is growing. The simple message, and over the last six months, as measured by that fourth quarter, more people are buying more things in Tesco as a result of the things that we have been doing and the service and the offer that we have been giving. That is what has been happening in terms of regaining competitiveness in terms of the sales line. We also, in January, told you that we had some plans to unfortunately close 43 unprofitable stores. I suppose the news I have for you today is as of the 4th of April, that is done. Those stores are closed. It is being completed in, I think, a very professional, very considerate way. It is also being done in quite rapid order and without too much disruption. I put on the right-hand side what that means, because we had the question, what does it mean in terms of the impact, in terms of our square footage? You see it, 0.6 million sq ft as a result. The breakdown you see there in terms of Superstores all the way down to Expresses. That has been done. In terms of the office, last time we got a lot of pressure to say, what is the number? I am going to give you some numbers today. I did not give you the numbers then because I wanted to go through the consultation and the consideration for our colleagues. That is all now done, so I will share with you what the outcome of all of that is. We were looking for a 30% cost reduction. That's indeed what we've done and what I've given for those who are very familiar with our detail, is to give the reduction in headcount by work level. So at the executive level, at my executive table, we're talking about 35% less roles. The level below work level 5, it's actually 43% fewer roles. Works all the way through. It's 25% in terms of jobs. It's 30% in terms of cost. I've given you the numbers here. On the 1st of September, what I'm doing with all of these numbers is, if you like, from the day of starting in the business for Alan ourselves, or just about Alan himself, a couple of weeks later, there were 9,766 people in the head offices of Cheshunt and Welwyn Garden City, across group and U.K. Post the restructuring, it's 7,348. So no problem in sharing the numbers. These are exactly what they are. I have to tell you that the senior management team at that work level 5 and 4 left the business at the end of February, so that's done already. The consultation is all finished for the rest, and over the next 10 to 14 days, actually that will be completed as a restructuring of the office. We're on track to close Cheshunt in the way that we'd indicated and move everything into Welwyn Garden City in the first quarter of 2016. We also announced that we wanted to make some changes in stores. In stores, that was about simplifying the management structure in stores, delayering, if you like, but reducing also hugely the administrative burden that we were placing on stores to free up more time to be customer-facing. It's a massive consultation. We're talking about a quarter of a million people that need to walk through that consultation. It was also about addressing some legacy issues we had around flexible working hours. That's been part of that consultation, too. That consultation started in March and will be, as we said it would be, complete by the end of this month. In terms of numbers, on the 1st of September, in store, we had 254,658 colleagues. At the end, as of when we finish this consultation at the end of April, there will be 259,310, a net increase in numbers by 4,652. I'm giving you the numbers because there's been lots and lots of numbers written about. None of them have been accurate, partly because we've chosen not to fuel speculation until the consultation is finished, but very openly giving you what they are. The other bit I would give you is that net 4,650 is net of closing the stores and delayering in. If you want those numbers, if these are particularly important to you, the 43 stores that we closed had 2,500 roles in them, so they have come out. A little sidebar, 30% of those colleagues were able to find employment elsewhere in the group. In terms of delayering, it was a similar number. So we're positive 4,652, having also taken around 5,000 roles out as we've gone through those changes. So a little more than 2,400 have come out of the office. Net post-closures delayering, 4,652 in the U.K. have gone in. So actually in the U.K. operation, we're talking about more than 2,000 net improvement in employment from the 1st of September to the end of April as a result of the changes that we've made. The question you will ask me is, because the thing that I am interested in is if you take all of that and look at what the percentage of people are in our whole organization who are now customer-facing, significant increase in customer-facing. Consistent with what I said to you before, which is actually head office is about supporting the store operation, about helping stores serve customers. It is not stores serving the head offices, as had been suggested before. We have also done some work in Central Europe, and we did not talk about this in January. It is a significant move that Trevor and the team there have led. Those of you know that in Central Europe, we have been challenged, particularly in terms of profitability over the years and the return that we would want from that business. We have chosen to look at the four businesses and run them at one. We will not have four head offices in Central Europe. There will be one CEO for the totality of those four countries. That is about leveraging the expertise. The offer that we are trying to reinvest in would be familiar to you. It is not dissimilar to the offer that we talk about in the U.K. around fresh, doing the ranging differently, getting great service, and getting trusted on price. So a significant move within Central Europe. I tell you that, A, for information, but B, because it also helps as I come to this. On January 8, we said we would look for GBP 250 million of cost savings as part of this restructuring, and we told you that it would cost us GBP 300 million one-off to get that. These are all annual numbers. We have all annual numbers. We have identified since then and taken action to generate another GBP 150 million of cost saving benefits. So the program that we are running now, the program we announced in January is very well advanced. The program I am telling you about today is we are looking for GBP 400 million of cost savings from our business with a one-off cost of GBP 350 million. Central Europe is part of that. What I have tried to do, and we have not talked about this detail before, is if I put together the changes that we are making in international, which is principally Central Europe, no big changes in Asia, Central Europe, in the bank with Benny, and also in our shared service center in India. Again, same thing. From September 1, we would have had 18,672 colleagues there. Post these changes, 14,575. So we have taken 4,000 out of international bank and shared service India as part of this reshaping of our business model. Net, GBP 400 million annual cost savings for GBP 350 million one-off cost. That is the program as it stands today. Second priority, the balance sheet. Questions I am sure we will get later today. Reduce the CapEx to GBP 1 billion. In plan, in budget, everybody working to. You know because we told you at the third quarter, there will not be a final dividend. What I would update you on is that as of Monday this week, we started the consultation on pensions. We started that consultation. It is a 90-day consultation with everybody that works with us. That is about recognizing and keeping up to this point what people have accrued in terms of defined benefit, and then going forward, offering a competitive defined contribution scheme for Tesco colleagues within the U.K. I am sure we will talk about that when we get to the results and questions that you have got for Alan. The other thing that we talked about in terms of strengthening the balance sheet is, we said in January, 49 sites exited, not going to be built out. We are exploring with Steve and others what the alternative uses of those 49 sites are, and there are indeed some, including residential, but more to come on that later in the year. We have also, since we were last together, concluded a deal with British Land. That basically, if I put it in essence, is a swap of assets, but plus about GBP 80 million-GBP 90 million of cash to Tesco, but importantly, regaining the freehold of 21 of our Superstores. In terms of reshaping the portfolio, you know what we have done in terms of blinkbox, broadband, all of those things are now done, closed, and completed. Dunnhumby is progressing exactly as we would want it to. Very happy with the progress that we are making there, and we will run that process exactly as we said we would. You are going to ask me, I know you are going to ask me about where else we are in terms of the portfolio review and all of the things that go with that. I am afraid that the answer I am going to give you is very similar to the answer I gave you in January. We are working very hard. We have got a clear idea about what it is we would want to do. In any way, revealing that would make it executionally harder for us to do, so you need to respect the fact that we will not be in a position where we are going to tell you what it is we think we should do in the rest of the portfolio. But I will just give you some reassurance. We have got a very clear idea about what it is we do want to do, and we are working very hard on it. The third was about building trust and transparency, and that was around the brand, and it was around the business case. We will talk to you about the business case, and that indeed, Alan will talk to you about enhanced disclosure of results, in his section. We have done a lot since we met. Alison, particularly Jason Tarry, who is running the commercial team in terms of redefining what it is, how it is, we expect people and colleagues within Tesco to behave. So everybody, new code of conduct March of this year. In the commercial area, very specific new guidance and training around commercial income and how it is we would want to recognize and how it is we want to deal with our supplier base. So a lot of work going on in that particular space. A lot of work going on in, we touched on it a little bit last time in terms of our activities in the community. Honestly, I cease to be absolutely in awe of how much colleagues do for communities as I go around and I find out more and more about what it is we do. Part of that is we talk about it in terms of the partnerships between Diabetes UK, between the British Heart Foundation, indeed, Cancer Trust. I suppose we are by far and away the largest supporter of public health charities in the U.K. by a country mile, and we are proud to be so, and we continue to invest. The results have been nothing short of spectacular. You would have seen, I should say for Rebecca's benefit, that some of the activity that we have been doing, which is about Eat Happy, the whole Farm to Fork initiative that we have in educating children about the supply chain and food in general, received a very strong CSR award for the first time, just a little while ago. That is a nice bit of feedback to a team of people who have been working hard on that for a long time preceding me. There are some other things that we have been doing. Jason in particular, tall fellow at the back. We had 24 different ways of generating accounting for commercial income. All right? That is a lot. We think it is too many. We think it is too complicated. We think it potentially leads to some of the wrong behavior. I have said it publicly before, I think if commercial income is focused on closing a profit gap, you lose some of the purpose of what it was designed for in the first place. Under Jason's leadership, we are simplifying that. We are going from 24 of last year to five this year, and that is on a step to next year, it will be down to three. In fact, in our own label supply chain, we have gone straight to three. We need one year to do that, in our branded supplier base. It is about simplifying. It is about being clear. Commercial income is an important part of our business, and we will not be changing that. We are just going to choose the way we choose to negotiate and how it is we want to see the value that is within a relationship with our supplier base is reflected in the cost for customers rather than the way that we might buy or ship product. Again, with Jason and his team, since we last met, I think the team counted it up. I spoke to 110 or so CEOs of our suppliers. Jason and I have had different sessions and spent either collectively or individually with suppliers, walked their supply chain, got to know their business, but more importantly, listened to them. We have really gone with very open ears as to what it is they experience about our business, what works, what does not, what they would like to see in the future, and had some very big sort of grown-up conversations about our business together. I have to tell you, I have been really, really impressed and enthused by the fact the response that we get from them is actually they want us to do well. They have got some concerns about how we have operated. Some of them just in terms of that complexity that I talked about in commercial income. They found us an incredibly complicated business to work with. So what Jason and the team are doing, helped by Alan in the finance, is just trying to make it simple again. Get it customer-focused. They are the lord and master of everything that we do as a retailer or indeed as a supplier. We have a mutual interest in doing something for customers that nobody else can do together. That is the conversation we have been having. Jason has done a lot. Commercial income training, all of those things. He has also put together, for people who may not know, we put together a supply network. So actually our suppliers can talk to each other about their experience of dealing with Tesco. They can share experiences. They can learn from each other. That was launched at the beginning of this year. We do have a Supplier Protector Line, so if you had a problem with Tesco in any way, shape, or form, in the same way we have for our employees, there is a completely independent place where you could lodge that, and be able to register with us if you think that we have done something that we should not do. I am pleased to say that nobody has called that so far, but it has been there since January. We also, a couple of weeks ago, and partly as a reaction to the feedback that we were getting as we went around as to there is just an awful lot of admin and bureaucracy that is taking up time and effort in a relationship where we would not really want it to be. We put a very small team of people, so there is a helpline. So if you are having a difficulty solving an invoice query or a credit note or a piece of admin or just the nuts and bolts, dare I say, of the admin, there is now a place that you can call, and we resolve to solve those issues within 48 hours. I have to say, suppliers have been particularly responsive to that. The one I read last night, which made me laugh as I looked through, because that is the one, in fairness, where we have had some calls. Jason is nodding at the back. There was one which was, there was a dispute with a particular supplier that had gone on for over a year. There were 102, I think it was 102 email exchanges that had gone backwards and forwards between and had not managed to resolve this relatively small issue that had been going on between different parts of the business. Happy to report in 24 hours, the guys who were doing this sorted it out, resolved it, moved on. But it is about just putting some focus into that area, and it is just a small example of that commitment to get us back to a supplier relationship based on the customer. The other thing about the new commercial approach is, and here I do want to make a clarification, is we talked a lot about range reviews. We talked a lot about the end-to-end range reviews, and previous on January 8, I took you through one of them in quite painstaking detail to illustrate the point. You will be pleased to know I am not going to take another one and go through it in that detail today. There have been about seven. There is a combination of two things going on here. If you want to do a real end-to-end, it takes time. Remember, we have just changed the people in Jason's team, and so actually I am very keen that the new people are the ones that are doing this, so it is important that we phase it right. There are some very significant end-to-end ones which take a lot of time. Some of them involve supply chains with a lead time of a year. On those big, those really big range reviews, we are talking about a program that will take us 18 months to walk through. To change that program would give us operational difficulties, and I do not think it is the right thing for us to do. We set out a program, really clear what we are going to do. Having said that, there is some low-hanging fruit. There is some low-hanging fruit, and what we are doing is, where we can, making changes, too. Since we were last together, frozen food, oils, ready meals, and three other categories have gone through that. On average, there is about between 15% and 18% of SKUs net have come out of those range reviews. There is a lot more for us to do, but that range work that I told you about is going on. I just want to be clear, when we finish end-to-end ones, it will be 18 months from now. The whole objective, clearer, lower, simpler prices, more stable prices. That is where we talked about we did it on brands. We talked to you in January about brands. The one fact I would give you there was if you looked at the detail of what we did on the 8th of January, we lowered those brand offerings in Tesco by on average 25% in price. We stopped promoting, we put it into the price. We said, these brands, your favorite brands, are now cheaper in Tesco. Interestingly, in the four weeks following that move, the volume on those lines was up 28%. All right? Some feedback as we have tried different things over this time about actually what it is we can do as we invest, remember, selectively in price and get a different response. It is working for us. As I said at the start, we are doing that in other places as well. The one thing I would keep emphasizing is, because when I say range, I am very surprised, if I am honest, about the number of people that say, "So you are going to become a discounter then?" No. We are not. We are not going to become a limited range discounter. Our intention is still to be market leading on choice. One of our great advantages is that breadth of range. Having 2.5 times the range intensity of our nearest competitor is something we still see core and important to Tesco. The fact that we got to more than 3.5 times is too much for the model. It has unintended consequences, and we want to get that away, but we do need to get back to and will keep a range and a choice offer that is unparalleled in the U.K. Last from me, where are we so far? Volume-based sales recovery is beginning. I have shared with you the numbers for the fourth quarter. There has been a lot of active engagement with our suppliers, this point about redefining that relationship. There is quite an aggressive cost reduction exercise going on, and there is some active balance sheet management. Some you can see and some you cannot see. I will be recognizing that. I suppose the two things, three things I have got to say now is to the first part, and I will come back to this at the end. I can say this to you. I have been absolutely blown away by the way colleagues in Tesco have reacted to the challenges and the changes that we have brought. I have run through it in 15 minutes, and it looks very easy when you write it on the chart. But the way people have engaged around restructuring store closures and all the things that we have talked about here has been nothing short of amazing. As we have walked through it, as difficult as it has been, nobody has said to me, "Dave, this is the wrong thing to do. I do not like what it means for me personally, but I do not disagree." And the way that colleagues have engaged has been just very humbling. Really very humbling. It shows you something about the pride and the passion that they have in the business, and it is really, really impressive. Having said that, God, have we just started. We really have just started. And we have got a lot to do. You can talk to me as much as I can talk to you about the market, the volatility, deflation, and all of those things. Quite happy to have that conversation. But in addition to that, we have got some things that we need to do. We need to keep investing in our offer. We keep needing to introduce some deflation of our own. As we repurpose our business model and make some changes, it will not all go smoothly. I am really clear that it will not go smoothly. Touch wood, at the minute, the things have worked for us. We expect some volatility. We expect some volatility. It will not be a straight line. I would love it to be a smooth line. It will not be that. I think you probably know that, but it is worth saying. I think it will be volatile in the next 12 months. The thing that I would want you to have no doubt about at all is we are clear about what the fundamentals are for our business. Even whilst it is volatile, we will deal with the volatility, but we will not deal with the volatility in any way that has a negative impact on our customers. Indeed, even though our level of profitability is lower than it has been historically, if we need to invest more in order to continue the momentum, we will do that. We will do that. So you will see us all talk about reinvesting because actually, over the next 12 months, that is what we feel we have to do for the long-term good of the business. So that is what we have done since we last met. What I am going to do now is give Alan the. Oh, you have got your own clicker today. Is the results. Thanks, Dave. Good morning, everybody. As Dave has said, what we've done is we've looked at our business, we've looked at our results, we've looked at our position, and we've taken that objectively into the results, which I'm about to run through. On a headline basis, and these are the actual results. I'll move into constant currency when we get deeper into the presentation, but these are the actual results. Our sales on a 53-week basis, we complicated things again as it happened this year. We have a 53-week year. Generally, we have a 52-week year. So wherever relevant, we'll talk about 52 weeks because that gives a better comparison, but the sales and the overall statutory results are on a 53-week basis. So 53-week basis, sales down 1.7%, translated into a 52-week like-for-like basis, down 3% at reported currencies. Group trading profit. You'll recall that in December we said we expected our trading profits to be not more than GBP 1.4 billion. In the full year period, we've reported GBP 1.39 billion. The one-off items I'll come back to. A very large number. By far the majority of them are non-cash. That led to an operating loss of GBP 5.8 billion and a statutory loss of GBP 6.4 billion. The underlying measure of profit, which again, I'll come back and talk about later in the presentation, was GBP 961 million, significantly down year on year, leading to an underlying dilutive earnings per share of 9.42 pence and a statutory loss per share of 70.24 pence. If we then look into the segmental performance, and these are on constant currency 52-week basis, so really giving a better feel across the four business segments we have. We have the three regions geographically, and we have the bank. So in the U.K., our sales down 1.7% and trading profits significantly down at GBP 467 million. A lot of you asked earlier when we spoke, would the U.K. make a loss in the second half of the year? In the results today, we're clear that we did make a small loss in the second half of the year. That's the base from which we're building the business. Asia also impacted, and we'll come on to some detail, 0.9% down and profits down 15.3% at GBP 565 million. The European business, 0.6%, GBP 164 million, significant drop in profitability in our European business. The bank, despite the investment we've made in the personal current account, which launched successfully in the period, profits flat at GBP 1 billion, leading to the overall result, GBP 1.39 billion trading profit and sales of GBP 69.7 billion. Turning into more detail on the U.K. The like-for-like in the U.K. is an important measure of the way that we look at it, and we look at it on a quarterly basis. As Dave has said, you should expect volatility, and we wouldn't necessarily expect that this will be on a straight line basis, particularly because it is by reference to prior year periods. However, the trends that we've seen since the low point in the second quarter of the financial year, we've continued to see improvement. So Q3 results, we reported down 4.2%. Q4 results are down 1%. Within that, the Christmas trading period, which we reported back in January, was slightly better than that. But overall, we can see in the quarter, sales down 1%. Christmas, just for reference, was down 0.3%. Over the whole quarter, though, a significant improvement in terms of the quarterly performance. If we look at that by segment, which again gives some greater insight into where the different parts of the business are trading, this is something which a lot of you have asked questions about. We have continued to see the trend across all four categories, the Extras, the Superstores, the Metros, and the Express businesses. I think the thing that is worth calling out is that the greatest improvement in the quarter, admittedly, we are talking about decimals here, but the greatest improvement in the quarter was in our Extra stores, which are our largest stores. Says something in terms of when you get the range right, you get the availability right, and you get the pricing right. These are very attractive destinations is our belief. We will continue to look at those and look at the business across those four categories. The other element which is worth calling out is how are our online businesses doing. You can see across the whole year, our grocery business grew by 11.5%, our general merchandise by 14.3%, and our clothing business grew very strongly at 28.5%. So we continue to see shift into that channels, and we continue to balance the way we trade those channels, but they all remain very significantly lower in terms of overall parts of the business than these four channels, which are by far the bulk of our U.K. business. When we look at trading profit, I will say it again because every time we put this slide out, you will get out your bar charts and your rulers and try to work out exactly what is happening. What we are trying to give you here is a bridge from where we were last year in terms of the U.K. trading profit to where we have turned out in the year. You can see that some of the Last year we had the commercial income adjustment, which we set out in the presentation and the press release today, and that effectively lowers the base for last year, GBP 208 million lowering of the base. Sorry, in the U.K. it is GBP 145 million lowering of the base. The like for like sales clearly have an impact and we have tried to estimate what that like for like sales decline is. Then of course, we move to what have we done in the second half of the year, having been here since September and really taken some initiatives. We have invested around GBP 300 million in terms of the extra service into stores, the extra availability, and some of the selective price. Of course, there were a number of initiatives that had been entered into in the first part of the year, and those had consequences and we see those now. The other thing which is important is that, and this is something we have spoken about, is that our year end was invisible to our customers. We have had no elements of year end in our results here because we have taken those out and we have got from a customer perspective, the business has continued to trade as if there was no year end. So that takes us down to this level in the chart. Then of course, we also have cost-based inflation, and we have quite significant inflation. We have upwards rates, we have cost inflation in terms of our salary bills, and we've had some benefits. Net that takes us from the GBP 2.19 billion last year to the GBP 467 million that we made in the 2014/15 financial year. I come back to the base for the second half of the year in the U.K. was a loss. If we then move to Asia. In all three of our markets in Asia we face challenging conditions. Korea is our largest business. Malaysia and Thailand we also face some challenges. Overall profits were down 15.3% in our constant currency and this really reflects the operational gearing in the business and it's something which we look at and we'll continue to focus on. We need in all of those markets to get volume coming through our businesses. Our trading margin relatively flat year-on-year with a decline overall between constant currencies and actual exchange rates. Overall about 100 basis points decline in our margin in our Asian business. Europe, again challenging market conditions in our European businesses. Equally currency strongly impacting these businesses but on a constant currency basis, our like for like down 0.8%, trading profit at GBP 166 million and a change overall of 31% down. Our Irish business has faced strong discount pressure. We've spoken about that during the year and our central and Eastern European businesses continue to face pressure. Included in these results is also a one-off charge of GBP 30 million in respect of our Turkish business where we wrote off a petrol wholesaling debt. However, in all markets challenging conditions and again margin change of around 64 basis points in terms of our trading results. Challenging market conditions across all of our territories. The bank as I've said performed well. It invested strongly in the customer offer. Personal customer accounts were raised and overall revenue up 2.1% with the deposits strongly up and our profits held stable. It's got a very strong capital ratio. Tier 1 capital ratio is up 1.2% to 15.2% in the bank and it's a business which we see continuing to grow very strongly from a customer perspective. Very high trust in it and a very strong resonance with what we offer our customers. So continue to invest in that business and to see the growth that we've seen coming through. The next line on our P&L is our JVs and interest in tax and in here the major change I would talk about is the fact that our JV result in the current year includes from May the inclusion of our previously owned business, the China business. It's now treated as an associate and that business made losses in the year which is the primary reason for the shift in JV profitability year-on-year. Our net interest cost went up for a number of reasons. We refinanced our facilities. We're capitalizing less. We're carrying less CapEx. We therefore were carrying less capitalized interest into it and we also had some redemptions. Overall GBP 409 million compared with GBP 315 million. Then finally our tax, GBP 199 million of tax. Our effective tax rate is 20.5%. This is higher than last year principally because last year, because of a change in the overall U.K. tax rate, we had two years of deferred tax balances catch up and we would have spoken about that last year. Overall effective tax rate 20.5%. That takes us down to the one-off items. Very significant one-off items and I will just talk you through these in a little bit more detail. There is a lot more in the deck and then there is a lot more in the detail of the financial statements at the back end of the press release as well. Please feel free to ask any questions about them in the Q&A. The largest is the property. This splits into two elements. The trading stores and this is principally U.K. but it is also we have looked at all of our trading stores around the world. GBP 3.8 billion of impairment in respect of the trading stores. We have also written off GBP 925 million in respect of the development sites we are not going to develop and we have ensured that we are not carrying anything on our balance sheet that is not going to give us value in the future. So that is GBP 925 million. Those two together give the GBP 4.7 billion property write down. Within the goodwill and other impairments, GBP 630 million of that goodwill impairment charge is in respect of our joint venture with China Resources in Hong Kong. You may well have seen that those shares have been suspended for two weeks. Yesterday morning, China Resources Enterprises and CRH, China Resources Holdings, its holding company, announced a proposed restructuring of that business whereby our joint venture will be transferred out of CRE into CRH. For us, it means very little change. The joint venture continues, but clearly there has been some value put on that business, and we have looked at it compared with the expectations of that business and the value which has been put on that as a third-party transaction. Overall, there is a GBP 630 million charge in respect of that. The balance of the goodwill write-off principally relates to Dobbies, and then we have also looked at other U.K. elements, such as Harris + Hoole and Euphorium, where we have slowed the rollout of those, as Dave said earlier in the call to the journalists. The way we look at some of these ventures is we want to ensure that they are making money. We are very strongly in favor of innovation. Equally, we do not want to roll them out strongly until we are very clear as to what the offer is and what we are going to get from it. So in that respect, those are the goodwill and other impairments. The stock write-off comprises principally two elements. GBP 570 million. Again, this is across the whole of the group. We have moved from a basis of provisioning stock based on the basis of when we bought it, so an age basis, to a basis now based on expected sales. The way we look at those expected sales is by reference to the last three months' sales, actually. So this reflects the realities of the business as we are. Again, it is a non-cash item, and it is the large majority of that. We've also looked at, given the changes we've made in store activities as to how do we capitalize costs into that stock, and we've taken GBP 168 million of a one-off charge, reflecting the fact that previously we've been capitalizing more costs into stock. Now with the new ways of working, we're not doing quite as much of that. So GBP 168 million. The restructuring charge, GBP 450 million, by far the majority of it is either what we've previously disclosed at the half year or the GBP 300 million that we announced at the start of the year. There is some further in relation to what Dave just spoken about, and we'll deal with that as we go into the current financial year. The GBP 300 million that we previously announced, plus the already announced half year numbers forms the majority of that GBP 416 million. Commercial income, we previously announced in October GBP 145 million of prior adjustments for commercial income. As we said in October, we would continue to look at this and we'd continue to look at it as we went through the year end. We have done that, and having now carried out further audit work, having carried out further work into all of these areas, we've now increased that charge to GBP 208 million in respect of prior years. And we've given some detail in terms of the press release as to how that fell in last year and the year before that. Again, happy to answer any questions. The other items are a number, including the disposal of blinkbox, about GBP 80 million. We previously spoke about the change in the ATM ruling in terms of rates on ATMs, and that's GBP 41 million of it. Also in the bank, the PPI charge of GBP 27 million, which is slightly up from the half-year number. So overall, that leads to the one-off charges of GBP 7 billion. GBP 600 million of that is the cash element in terms of what we expect to spend in cash. The remainder is a balance sheet item. Again, come back to a format which we set out back in October in terms of retail cash flow. What we're trying to do here, and we'll continue to do as we go forward, is to give you a clarity on where we're earning the cash and a clarity on where we're spending the cash. This is obviously looking at the retail business because the bank has a very different way of operating. So we'll always look at retail cash flow. So cash flow from operations before the one-offs, GBP 2.5 billion. We've set out detail in here how the one-offs work through working capital as statutorily recorded. It is complex. It's very technical. I'm sure that we will face questions on it, but I'm sure we can take it through. We've tried to give you a very clear linkage from what we're showing here back into the detail of the financial statements that we're publishing today and the reporting of the notes. But it is technically quite complex, so please bear with me. This is the cash flow from operations that we generated in our retail businesses. We then have working capital, and in the year, we've had a GBP 660 million outflow of working capital. You will recall that in January, I spoke about the fact that one of the ways we engaged with our suppliers was in relation to payment terms, and that we expected to see some outflow of cash as we went through our year end. Indeed we did. So this GBP 660 million is about a GBP 400 million improvement in underlying working capital, and we have seen somewhat what Dave said in terms of stock days, offset by that change in the payment terms. This is an adjustment which we have taken. We think it is the right way to run the business, but it has adversely affected working capital in the current year. There is a very small amount which we still will take as we go through the current year we are in. That is about a GBP 200 million aspect of working capital further outflow, which we would see as we go through this reporting year. But beyond that, we will be operating again on a basis that cash payment terms and timing of payments is not something that we talk to our suppliers about other than on our standard terms. We spent GBP 2 billion on CapEx, net of disposals, and that is in line with the guidance and what we had set out. We then get into three areas which are linked, the acquisitions and disposals, the investments in loans, and the debt disposed of. These, very little change from what we spoke about in October. This represents investments such as Sociomantic, investments in our online platform, Lazada, in Southeast Asia, and also the investments we have made as part of the China Resources transaction we carried out. With the disposal of our China business, some debt went with it, and those three are shown here. Interest and tax are calls in the business, as are the dividends, and this represents the cost of the dividends in year from a cash perspective. In the current year, of course, we have got no final dividend, and we will talk about dividends in respect of the year we are in when we get through the year. But that represents last year's final dividend and the interim in terms of the cash impact. That led to an overall outflow movement in net debt of GBP 1.9 billion. The other side of it is, of course, the net debt in the balance sheet, which is GBP 8.5 billion. We set out very clearly our CapEx. This is no change from what we said in January. Just to reconfirm that the CapEx for the current year is at GBP 1 billion. That CapEx is focused very strongly on productivity. We are focused on return from it, and we are focused on ensuring that we do not damage the business. That is something which a lot of you have asked about. I can ensure and assure you that we will make investments where we need to. We will invest in stores. We will ensure that we keep the stores satisfactory. Equally, in markets where we can see growth and opportunity and a return from that CapEx, we will invest in new store openings. So we are trading very selectively. We are being very disciplined in terms of it. For the year that we are in, we have confirmed that it is GBP 1 billion of CapEx spend. Liquidity and funding, again, a very important part of our overall balance sheet and the way we look at the company. Just to confirm the bilateral facilities we have got are GBP 2.2 billion. They expire in 2017, and they are across a very wide range of banks. Essentially, they are entered into as three-year facilities. We then have the revolving credit facilities of GBP 2.6 billion, which expire in November 2019. Those are extendable for one year plus another year. So they are five plus one plus one, which is very standard market practice. Again, they are with a very wide and strong group of banks. Some of you doing the maths might well ask, well, that adds up to GBP 2.8 billion. We had set out previously GBP 5 billion of facilities, or GBP 4.8 billion. We set out GBP 5 billion. There is GBP 200 million of the initial facilities we have put in place, which we would expect to see moving into bilaterals over the course of the year. So within our overall business, we have GBP 5 billion of facilities currently undrawn, and that is a very strong position. Leverage is something which, again, we have highlighted and we spoke about it in October. The way we look at our total indebtedness is the on-balance sheet debt, GBP 8.5 billion. We then look at our lease commitments, and we have estimated those as GBP 9.4 billion within our overall. Again, there is detail on this in the press release today. GBP 9.4 billion, which is slightly down year on year. Then the pension deficit, and this is an IAS 19 pension deficit. I will come back and talk about pensions. IAS 19 pension deficit of GBP 3.9 billion, which is up from the prior year figure. Overall indebtedness, GBP 22 billion at the balance sheet date and the way that we look at it. What I would stress is that we have the facilities. We have no short-term maturities. In fact, we have got no significant maturities for more than two years, and we have a very undrawn perspective with that. So we have got a strong funding and a strong liquidity position. We announced in January that we would start consultation with our colleagues in terms of closing the pension fund. More importantly, from my perspective, is the triennial valuation, which was in train as Dave and I joined in September last year. The triennial valuation is done off the March 2014 actuarial valuation. Very important to us is that we meet the obligation we have given all of our colleagues and that our trustees administer on behalf of that. We are committed to meeting that obligation. What is very important as well is recognizing that obligation will pay out over a number of years, and therefore, this is something which is going to be with us for many, many years. Important for us as a business is understanding with the trustees the risk we are carrying in that pension commitment and the cash payments, if there is a deficit, as to how we are going to fund that. I am really pleased to be able to confirm that we have agreed and had the trustees enter into a deficit funding plan with us, which gives us a clarity on cash flows of GBP 270 million per year through this triennial valuation. Now, that will be subject to every two years, it will be tested, and that is something which the regulator, in truth, is able to look at any one time, at any single time. But for us, it's important that we understand, and for the trustees, what it is that we're funding on a regular basis towards our pension deficit, and it's GBP 270 million that we've agreed. The actuarial deficit as of March last year is GBP 2.8 billion. Again, we've looked at this and shown you the IAS 19 number. The IAS 19 number has moved year on year. But for me, much more important is the cash that we're paying out, because the IAS 19 number will move. It's a function of bond rates, it's a function of asset performance, and it's a function of different factors. It's the cash that we're focused on. One comment in respect of the pension fund performance, and a lot of people, and a lot of the speculation in recent days has been what size is the pension fund deficit. The bond yields have certainly come down. That's driven the liability as measured by that bond yield up. But the assets in the second half of the year performed far better than had been expected by those making those calculations. So what we have today is a recognition that at GBP 3.9 billion, the pension deficit, IAS 19, is big, but we do have assets and liabilities which move. And we will continue to focus on de-risking the asset investment side such that we can give predictability on how we're closing that pension deficit, whether it's measured actuarially or IAS 19. And then finally, and this is very important to colleagues, and as Dave has touched on as well, we are in consultation on closing the defined benefit scheme. We will replace it with a DC scheme. That DC scheme will be market competitive, and it will give colleagues the security in terms of their pension arrangements. But it will be different from what we've had up until now. And we've just launched it. We will continue to engage and take feedback as we go through this year. We've also spoken about trust and transparency in the investment case and how do we present ourselves in a way that helps our investors and our other stakeholders. And thank you for all of you who've engaged with me, with Chris, and with us to try and take your feedback. Some of you have asked for commercial information, which, I know why you want it, but for us, we need to protect ourselves and our investors. So there's some information which has been asked for, which we won't give, but we will continue to look at this, and we seek to improve it. We've given more and different disclosure in all of our press and reporting to date. And when we publish the annual report and accounts in a few weeks' time, there will be additional notes. But we've tried today to capture that important information which you would want, and we would want to be giving you on the day of the results. And we've tried to do it in a way which is clear and in a way which reflects the further information you've asked for. So we've spoken about commercial income, we've spoken about property, and I'll give into you more detail on that. And we've also split out the retail and bank net debt. Segmental reporting, we've given more information. And as I say, we will continue to listen and hear. We've also moved to a simpler profit measure. So commercial income, and this is something which forms, as David said, really forms the backbone of our relationship with suppliers. What people call commercial income is different in different businesses. That is very, very clear to us. Equally, commercial income by itself doesn't represent the full economic relationship we have with our suppliers. The FRC has asked us, and we've responded, and we will respond, to look at areas where there's subjectivity and to look where there's judgment. We've had 24 categories. As we've said, that's not an easy way to do business. It doesn't give clarity as to what it is that we'll be looking at. We'll move progressively to the three that Dave has highlighted. Most of the way we engage are just impacts on the price that we're buying the goods. No judgment's involved in that. That's just the price we're buying the goods. When we get into the year end, there are some adjustments where we have volume-related transactions, for example, where we have a price that will be dependent on volume, and we have to make judgments in respect of that. We equally have areas where we have not yet received the income, or we have not yet invoiced the income. I'll just talk you through the three categories. I've put up on the slide here the group and the U.K. figures for the current year within the presentation. The press release, there is also the prior year numbers, so you can see how they've moved year-on-year. Inventories, where we have effectively got a reduction in the price that we will expect in future based on volume deals that we've done, GBP 93 million in the group, GBP 67 million reduction in the inventory carrying cost on the balance sheet of the stock that we've bought. The other side of that entry, for those of you who are doing the math, the double entry, is effectively it reduces the overall trade payable that we have in our balance sheet. So it's a balance sheet adjustment, but it's a judgment. The next three categories, the trade and other receivables and the trade payables, really are different sides of income that we've earned but not yet received. We've either recognizing that it's invoiced but not received, or it's not invoiced and not received, or it's an offset against a trade payable where, under technical accounting rules, we then have to reduce the creditor that we've set up. So those are all three similar aspects relating to judgments in terms of income not received and balance sheet items. We then also finally get where we, for whatever reason, have received income in advance, but we haven't yet earned it, and that obviously is something which goes the other way from the other three. So that's the transparency we've put on it. That's the judgment. As you can see, there isn't significant judgment in terms of our year-end accounting balances. But that's the clarity which we've given on it, and we will continue to give this information as we go forward. In respect of property, this is an area that a lot of you have asked about. There is a lot of detail, and please feel free to ask questions. Overall, our property valuation is down year-on-year, and we've given the details for that, and we've also changed the way we look at it. Prior years, we've included JVs in that headline number. This year we're not, but we've called it out separately. So GBP 22.9 billion is the owned property valuation. On top of that, there's GBP 900 million of JV valuation, which could be added to the property, but we've split them out. We've given the segmental view of it in terms of this presentation, and as I say, there's more detail in the deck. We've also introduced a new way of looking at the space that we have, and I think this is an important metric because we've always defined space by reference to value. Values, as we can see, can shift because there's a market view on that. So we've given both the by-value 14, 71 and 74. Overall, a group position of 53%, which is consistent with what we said before. But we've also then looked at it by the actual physical space, which is a metric which nobody can really argue with, because there's no value implication. When you look at that, it's a 59% that's owned by the group and a somewhat higher percentage of space in two of the markets, somewhat lower in the Asian market. Those metrics are ones which we'll continue to look at, but I would increasingly focus on the space measure because it isn't influenced by external metrics on value. Then finally, just for the record, as Dave said, we completed the British Land asset swap, and that is not in these numbers because it was completed after year-end. Within the numbers, it's just under 2% in terms of the U.K. numbers that will shift the numbers. We've also looked and listened in terms of the way that we measure ourselves in respect of business results. Going forward, we're removing the concept of trading profit, we're removing underlying profit as metrics that we will talk about, and we're moving to an operating profit measure. So we will judge ourselves in terms of operating profit as the key performance measure for ourselves internally and externally. Against that, if there are large distorting items, we will call them out. But the principle we're adopting is operating profit, which then I think gives a clear line of sight from the statutory reported numbers through into the way that we run the business, through into the different divisions. We'll be adopting this with effect from our half year at the end of August when we come back later in the year. So in summary, what we've done is, as I said at the start, we've faced into the conditions we're trading in. We've recognized that our performance is not satisfactory, and we've taken an objective translation of that into these results. Our pension deficit is agreed. We have got a clear line of sight in terms of the cash commitment to that, and we expect that to run through irrespective of accounting variations, and then to be measured and tested every three years under the pensions regime. We have had a disciplined approach to all of our CapEx, and we have got a strong funding and liquidity position. Over to Dave. Thanks, Alan. With those as the results, let us talk about where we go next. You wouldn't be at all surprised to see this chart again. Our priorities for the next 12 months stay unchanged. The focus on the U.K., the balance sheet, and the rebuilding that we talked about is clearly where we feel we should be focused and addressed. There is still a lot of activity going on elsewhere in international, in the bank and others, and that will continue. But in terms of the priorities, we see these as staying consistent. I suppose the thing, and I get asked this question in different ways, but it gives me a chance to talk to you a little bit about the market and the outlook. Everybody talks quite rightly, and you don't really need it from me about the market volatility that is out there. At a macro level, there is deflation or the prospect of deflation. Commodity prices are softening, and that is great news for customers, not so much great news for retailers in that context, but that is macro is exactly what is happening. The interesting thing is, whilst it is good news for customers that they have more money in their pocket, it doesn't seem that they are spending that money in our categories. They are spending it more on bigger capital items and travel and paying down debt than they are here. There is also all the challenges that come from what is happening to the channel mix. Again, you know all of that. The market is unprecedented in terms of the volatility, the change, and the things that are happening. In addition, we have got our own. We are changing our business model quite considerably. Some of you are more familiar than others, but what we are doing, we try to share with you what it is at an operating level we have done. But what I would also try and give you a sense for is the conversations that, Robyn, who has been running the U.K., have, Jill also in her role, and myself with Jason, is we sit down and we say, "Look, it is not that we haven't been investing a lot of money in the customer offer. We have. A very significant amount." We talked about it back in October and January. Question for us is as we actually look at whether that is the right way of investing it, and we say, "Actually, do you know what? Given all the conditions, we'd actually prefer that to be reshaped and offered in a certain way." So we're clear about how it is we'd like to do it, that clear, stable, lower prices running the way that we said. But the activity of actually stopping that activity, and the guys are smiling at the back of the room because you know, you can tell what the impact was of that spend. Taking that, repurposing it, putting it into the offer in a different way whilst we improve the quality of everything, is not a precise science. Predicting exactly what the reaction is of taking from there, putting from there, reshaping everything whilst you're trying to raise the floor, that's what we're doing. That's why when we say we've got our own volatility, we've got our own investment to make, we've got our own deflation to put into that mix. So the combination of the market volatility you know well, and the management challenge of walking through that change in business model, that's why when I'm saying the thing, do I consider it to be a volatile situation going forward? Yeah. Will this recovery be a bumpy recovery? Yes, I think it will. That's okay, but we'll do it on a fundamentals basis. But that's what it is we're trying to deal with. People always say, and so I'm preempting some of the questions I might get probably in the other room after this rather than here, is that people say, "So Dave, what's the biggest thing? What's the hardest thing at the minute?" Honestly, I have to tell you, the hardest single thing at the minute is gauging the pace of change. We've told you what we've been doing in stores, in head office, in our operating function, also in terms of what it is we're doing with our offer. If you sit in Alison's shoes as the HR director at Tesco at the minute, you're sitting on one of the largest ever restructuring consultation programs you will ever see. All right? Jill, in her transformation role, thinking through how it is we manage all of that change program. Changing things, whilst at the same time trying to keep that momentum in improving the operational offer, that's difficult. That's the difficult bit. Because I suppose what I'm saying to you there is, we do know that there are other things that we could still do, that we could do on top of what we've got already as a plan. Some of you have been kind enough to write to me and make those suggestions. Do you know what? I didn't find many that I disagreed with. I suppose the question for us is, we've done a lot in six or seven months. Getting that pace right as we walk through consulting with changing all the operations and not dropping the ball, that's what it is we as a team are trying to manage at the minute. So that's where we are in terms of our biggest challenges. I would re-emphasize that our priority is, and will always be, investing in the customer offer. I make no apology for the fact I will keep talking to you about what we are doing to raise our service levels, what it is we have done in terms of investing in colleague hours, simplifying the offer, and getting the service right. You will hear me keep saying, I say it to every colleague I see, I just want customers, if every day one customer walks away from Tesco with an experience they did not expect, that is 300,000 people a day who start to think differently about our business. That is what we are focused on. The availability, I talked to you about the range, and that is an offer that people really do appreciate. Everybody talks to me, I thought I would say this when Alan was talking. Everybody talks to me about the convenience trend or the move to convenience stores. Actually, the trend is to convenience. What is more convenient to going to one place where you have everything you want at a price that is competitive and the service is excellent? That is the most convenient shopping experience you can have. I think Tesco is uniquely placed to do that. We just have to re-engineer ourselves to offer it again, more consistently. Then there is more work to be done on price. We have done it carefully, we have done it selectively, and we have seen a reaction to it. We are clear that there is more that we want to do, but we are also clear that we have to keep the discipline of generating the benefits in order for us to be able to invest in price. The results speak for themselves. We do not start from a place where that is something that we can do for free, and we need to generate it to do it. On there, I suppose it allows me here to sort of make a comment about the profitability. We have announced an operating profitability of around just under GBP 1.4 billion, in line with what Alan and I were saying. But within that is a second half year U.K., basically breakeven position. We have also got a significant cost inflation issue around the leases of around GBP 200 million or so. We have got some other challenges, the investment in price I would like to make, the fact that Hungarian law has taken away the profitability of that business. So getting back to the profit that we made this year, tell me, is not without its challenges. It is not without its challenges. We have reset and we are going to rebuild. I suppose the one thing I would say to you is, that is our aspiration. We ideally do not want to go below the level of profit that we have today. But I will be honest with you and tell you that actually, if we see the progress continue in the way that we are, and depending on what happens competitively or whatever in the marketplace, we feel that we need to invest and invest a quarter of a billion more, we will. We will. The long-term fundamentals of this business are absolutely fantastic. The market is difficult, I get it, but it is a cyclical market as well. We will do the right thing for the long term of the business. That is what shareholders would want us to do, and that is what it is we are committed to doing. Two final things from me. KPIs. Part of the trust and transparency, part of the openness, but also helping you going forward. These are the KPIs. For me, myself, and everybody, all the way down to the shop floor, our annual KPIs as a business will become quantum of sales. It's 50% of people's individual target, quantum of sales. Quantum of group profit is 30%, and everyone, myself included, will carry three individual objectives, specific initiatives that we're responsible for delivering, which together will make up 20% of any annual reward. In terms of long-term, we made some changes to the long-term incentive plan for this next 12 months. Some review going on there. 70% of that will be TSR, and we'll share with you what the peer group is, and 30% on cash generation. Those are the KPIs and performance that you'll see us manage the group too, going forward. Also, for those who are familiar, the simplification of the steering wheel that goes all the way down, has a balance of six measures in it. The three which are around sales, profit, and cash are all there, but they're also balanced with three measures, one for customers, one for colleagues, and one for our engagement with communities and suppliers. Those will be the six things that we drive all the way through our business. Finally, if you haven't got your pink T-shirt yet, I encourage you to get one. We kicked off last week. In fact, if you'd come into the exec meeting last Thursday, you would have been met by a sea of pink which is quite a sight to behold. We've been 14 years, I think, as a partner with Cancer Research. Over the weeks ahead, my colleagues, but also a lot of other people will be Race for Life. I thought it was an appropriate picture to put up to reprise what I said a little earlier, which is we changed a lot. We've done a lot. Some of it has been really quite painful. Some of it certainly has affected the business that colleagues have worked for a very long time. These guys have been amazing. Absolutely amazing. As a group of people to face into the challenge that we have, couldn't wish for better. Couldn't wish for better. So whilst people will talk about many stories today, the size of the loss and the things that we're doing, these guys have done a tremendous job since the time I started, and I just wanted to say thank you to them. We face into the reality, as Alan says. We're having to deal with, yes, a difficult market, but we're also facing into the fact and being clear that our recent performance hasn't been what we would want it to be, and that's had a big impact. We've not shied away from those consequences openly, but objectively, we're taking that into account. We've got a transformation plan in place. It's progressing well. We're ahead of where we said we would be on cost savings, and there's more to come, and we'll reinvest that back into the business. There are some signs that our customer offer is improving, and he or she is responding well to what it is we're doing. That comes first and foremost, as we said it would, in the volume. As I say, for the U.K. part, the improvement in transactions, the improvement in volume is an important piece of feedback to us that we are doing something that people appreciate. We have done some work on the balance sheet. There is more to come. You will ask us questions about it. We get it, but we are working. The rebuilding the transparency and the trust in the business, we will do it piece by piece. I have said it before, I will say it again. You cannot talk your way out of things you behaved your way into. We are going to behave our way out of this. All right? People will experience us differently every day in store, in the supply chain, in the community, and we will invite them to reappraise us as a business. I think there is an unprecedented pace of change. It really has only been seven months. Actually, if you think about where we started in January, what it is we have managed to deliver in only three months is really quite important. The final thing I would say to you in terms of summary is this theme of a great business, great fundamentals, great long-term credential, even though the market is challenged at the minute. So where we see the opportunity to invest for long-term shareholder return, we will do it. We will do it. Okay. That is it. Do you have any questions for myself or Alan? If we need some help from our team, we will call on it. You might want to stand up. It feels very- I will sit rather than stand. Okay. We have got four microphones for people who are I am going to start towards the back, gentleman in the middle at the back, and we will work down to the front, Bruno. You are all right. Can't see everybody still. There you go. Thanks very much. It's James Collins from Stifel. I've got a few questions, if I may. Firstly, thinking about the waterfall chart that you showed on the U.K. profitability, what had impacted it year on year, the one bit that you didn't break out was what happened from the reduced focus on commercial income. You talked in the statement about the fact that clearly there's been investment in availability, service, et cetera, but the reduced focus on commercial income has hit profits. Where does that fall? An associated question, how much of that comes back as that normalizes? Second, on your comments about volatility, one thing that I note in Kantar data, it looks like your promotional participation has actually been rising over the last six to nine months. Is that something that you will be pulling back on? Is that going to be one of the sources of volatility that you're talking about? Then lastly, can you just talk about vouchering? So where you are on vouchering, where you've been, and how that's impacting the business. Do you want to talk about waterfall chart and I'll do the- Yeah. It is a good question in terms of the commercial income end. Look, there are judgments involved in trying to break things out because you can always put them into different areas. I think for us, the important thing is that the base was too high, and we have adjusted that equally. This is very important. We have not had the year-end activity, which perhaps accelerated and then led to a deceleration. We all know that when one gets into those sort of activities, wherever they are in a business, the next year it has to be bigger. We have stopped that and we have taken it away. The final thing I would make, point I would make is that we are prepared as we reengage with our commercial suppliers. We are prepared to do what is right for the long term of the business, but maybe to short-term detriment. We will need to change the way we work, and if necessary, we will leave what might be some short-term money on the table in order to get the long term right way of working with them. Quantifying that, very, very difficult, but I really would not expect that you should If what you are asking is, should we see a bounce back in commercial income in the next year? I really would not take you down that path because if we look at where we were, we have changed the way we are running the business. Some of what we did earlier has not worked. What we are doing is focusing on what we can see working from a customer and a volume perspective. Building on that, and I will come to the promotional question, is I think to support Alan and Jason, is that movement from back to front is something that we see as important. The quantum of commercial income, we would look to recover. It is not a bounce back. It is not an immediate thing. We talked about recognition in the half year of commercial income, and we took There was an assumption in our business that what had got us to that first half position would happen in the second half position, and we clearly did not do that. Yeah, we just clearly did not do that. Let us just be candid we did not do that. We did not do some of the things at the end of the year that perhaps we may have done in the past as well, and that had an impact. The other thing, and it is fair to say, as Alan said, is actually having had that behavior for two or three years, then saying to suppliers, "Actually, we are not going to negotiate," it was also difficult. There were some things where we chose to walk away from suppliers who wanted to negotiate within the old way, and that is not a critique. It is just that they had learnt that as the way of do it, and we said, "Do you know what? We are not." As a result, we did have to walk away from some things that historically we would not have done, and that is about resetting the base. But we want to get back to the level of commercial income that we had, but we want it to be simpler, more in the case price, less in the other deals. It will take us some time to do that. It won't happen immediately. Not the bounce back. Second thing, in terms of volatility, we should share with you separately what the promotional breakdown is, because actually, it links to your vouchers point. If I were to tell you in the fourth quarter, we issued 30% less vouchers than we'd done in the year before or the period before, we have, it's back to that repurposing money. We've not issued anywhere near as many vouchers and coupons as we had been doing. I checked it very specifically before I came here again. What we have done, and it comes back to giving that benefit directly in stores, we've taken that money, we've repurposed some of it, and we've increased those amount of promotions which give away product in certain categories at the point of shelf. Extra free or things such as that. In certain categories, at certain points, we've done that. I don't recognize the overall increase that you mentioned in Kantar. Actually, when I look at our overall promotional participation, it stays about the same, but the mix underneath of it has changed a lot, significantly down in vouchering and more in terms of product that the customer walks away with and gets an immediate benefit from. We think that's a better way for us to be running our business. Okay. Right at the very back. If I may, then Clive Black. Just one question, if I may. Can't see you, Clive. I'm very short. It's the light, mate. It's the light. Amazing what wit will do. The question on the balance sheet, if I may, I know you want to be relatively, keep your options open, so to speak, but can I just sort of set out maybe some ground rules that may help us? Because would you concede that you can't trade your way out of the leverage you've got at the moment? In that respect, understanding that you've got various negotiations on, that you either have to raise capital or have to engage in disposals to get to where you want to be. Because you said you know where you want to be. You know what you need to do, but just to help us understand the sort of options you're looking at, is that the basic situation? Well, I don't think it is exactly. Let me give you the overall general view, and I'll ask Alan to comment more specifically. I think that there's an awful lot more cash that we can get out of the trading arrangement. And one of the reasons why cash generation sits in everybody's thing is I actually think there's a big working capital job for us to do. That's why I keep talking about stock in the way. I'm not talking about manipulation of credits and debtors. I'm talking about fundamentally getting the stock levels right. If we can release that, and we can get the volume growth and we can get the cash delivery, I actually think there is a trading contribution that can come from that cash generation to the leverage that's there. But we've been very To your second point, we do look at all of the assets that we have. That's why we put Dunnhumby where we put it, and why we dealt with some of the others. I think we recognize that to do it only with trading might take longer than people would like it to be, and that's why But we do continue to keep all of our options open because we don't want to box ourselves into a corner, Clive, in terms of saying it's got to be this, right? Because I think that would be commercially stupid on our part. But do you want to say something to Clive? I think the only thing I'd add is Dave's final point, is what we balance is the cash generation, and there are clear opportunities. If we can turn the stock more quickly, and particularly in some categories, then we will get more cash out of it if we can. So those are clear opportunities. But also, we factor the risk that we run from running a higher level of indebtedness than we would be comfortable with. And that's the basis we do. We look at things through a strategic lens. We've always said we'll look at things through a strategic lens in terms of what's the opportunity and how do we view that from a business perspective, and we weigh those up. So I don't think it's quite as stark as you said. Can I ask the question a slightly different way then? Is there a group-wide debt-to-EBITDA level that you would aspire to? Sorry, say again. Is there a group-wide- Debt-to-EBITDA net debt-to-EBITDA level that you would aspire to? What we've said very clearly is that we believe that we're a business that should be trading at an investment grade rating when looked at through the rating agency's eyes. We recognize we're not there now, but to put a time bound on that and to put a when we're going to get there, I don't think would be good for us as a business, and I think it would be very, very difficult now given the volatility and the reinvestment that we'll be making. But over time, that's where we would expect to be. When we get there, that's going to be the much more difficult question. Thank you. James, you all right? I'm just going to basically try and come down the floor, if you like. Just to give me. Otherwise, I'll miss someone. John Kershaw from Exane. Just following on from that, I- How you doing? Sorry, that light's right in my eye. I can't see you. Perhaps comment on why you might want to keep the international assets then, because the performance, certainly in Europe, you are disappointed with. The Adidas or the store closures in Korea, for example, seem to have been going on for about three years. Can we see a view where you get into a positive like for like in Asia? Because presumably, if you are going to keep these businesses, that is what we need to see. Secondly, just coming to the U.K. Perhaps on the write-downs, can you give us a sense of what your medium-term margin assumption is there? Because you say long-term, you have got a great business. So perhaps give us a sense of what your thinking has been in those write-downs and perhaps actually quantify the U.K. write-down. Finally, what does retaining momentum mean in terms of the U.K. business? Because the business has been in cardiac arrest. You have stabilized it. It is in the recovery suite. But is that winning market share? What does that mean? Okay. Why do not I have a go, and then you can of all three questions, I will try. Look, let me talk about Asia. I think highly attractive assets in a growing and vibrant part of the world. So the fundamentals of those businesses, still ones that we see as attractive, and we invest in them. Let us be honest, they have delivered significant profitability to the group at a time when we have needed it most. So in fairness to Trevor and the others, whilst we have been dealing with some of the things in the U.K., he has perhaps not had the freedom and the flexibility to be able to do as much of it he might want to in parts of Asia because of the level of profit that we have been asking them for. Like yourself, I have tried to understand Deida. I am not sure I have completely got it. I think every year, I am reassured that it is now sort of worked its way through, but the difference of Sundays and Wednesdays and when we chat, good Lord, there is a lot. There is a lot. I get why you ask the question, but you shouldn't in any way take away what we think about fundamentally an important business in Asia. If you were there now, you would see important plans they are doing in Korea, Thailand, and Malaysia that kick off quite strong trading activity in those businesses. When it comes to Europe has been more challenging. We talked about it before as an economic situation, but particularly for us in terms of a return on the capital that we have invested there. Look, I think the interesting thing for us is in Central Europe, we talked about it in Q4, actually some positive momentum in the top line, and that is continuing. What Trevor and the team are now doing is saying, "Actually, we think that there is a way of running this business which actually allows it to become more attractive than it had been in the past." That is all moving in the right direction. We are taking account of doing our business differently. We have got the new challenge of the Hungarian law and the profit, so we will have to deal with that. I have dealt in so-called developing emerging markets all my working life, and they have that sort of volatility. If you are any good at it, you have to be able to sort of roll with the punches now and again. I think we know how to do that, but it doesn't make it convenient when I am standing in front of you trying to explain some of the numbers. Look, I think to your U.K. point, what I would say is, I know why you asked the question. I am going to continue to say to you the following, which is, I have no doubt in my mind that the opportunity for Tesco to have above average industry margins in the U.K., definitely. We might debate how quickly we get there, given the position we start from, but I am absolutely no doubt that that is the case. We will lead this business back into that position. I don't have any doubt about that. I would be foolish to tell you what date of which year that will be, but we will do the fundamentals, we will do it right. To your question about what KPI, the volume, the transactions, the people coming, the relationship measures of what it is people think about our offering, those will be it. Those will be the things that matter. In terms of the way that the market share performs, there will be lots of things that happen in that volatile situation. We will keep tracking how many people come, what it is they buy with us when they are there. We will value volume over value at this point because we know that from a price point of view, there is still investment that we need to make irrespective of what happens out there. That will have that impact. We will track it at that level, John. Helen, is there anything you want to say? Moving down, the lady just next to John. I just had a really quick question. On online, given the strong sales growth that you've had, has profitability improved in the online channel? In grocery home shopping, 20% increase in orders, 11% increase in sales. We have invested something in that business. We invested something particular around the delivery charge and some of the service elements during the course of the year. That did have a depression in profitability. But we've also seen the growth that's there. So net, there's been some reduction in profitability, but it's against a 49% market share in a growing business. So actually, we think it's a good investment for us to have made. Okay. Mr. McCarthy, you're on the same row. I'm coming down row by row. Yes, good morning. Three questions. The first is your U.K. property. Is 40% too low? Do you expect to increase the ownership of that? How are you going to pay for that? Because you're effectively putting money into a format that a lot of investors, not view is hare, but a lot of investors think the Superstore hypermarkets are dead. Second one, you talk about transparency on pricing. Any comments on the super-complaint that's been lodged with the Competition and Markets Authority? Could it cost you any money, or is that just going to be a reallocation of resources? Thirdly, the relationship between CapEx and depreciation. Could you run your business over the medium term with CapEx running below the depreciation level on a like-to-like basis, whether you're talking group or U.K.? Mm-hmm. Got it. You decide. Very clear. Do you want to talk about the property and CapEx? Yeah, property and CapEx. Talk about the promotion. I'll take the depreciation first. We're very Depreciation group wide GBP 1.5 billion, investment GBP 1 billion. There's a point at which those two have to meet. We're very clear that what we're investing in isn't damaging the business, and we will assess it as we go through. But there is a likelihood, I think, that the depreciation charge will run ahead of the CapEx for a number of years. How long that is? It'll certainly be two or three years. Beyond that, it's much more difficult to get visibility. In respect of the property, the 40%, which is the owned percentage, you're right, it's a calculation we have to make. Our aspiration is to own more of our property, because through that ownership, we remove the pressure on the business through external rents, and we also create flexibility in terms of what we're doing. The decision for us to make is that a good use of our cash and our capital as we buy back properties that we've previously sold to either into joint ventures or other structures? Those are the things we do. What we won't do is do something which is economically the wrong decision for us to do, and that's something which we will always factor into account. If we take the British Land deal, very clearly, there was, as it happened, a buyer and a seller who were in two different transactions, and we could look at each other as both buyer and seller, and we could do something which made sense for both of us. That's more challenging when we look at some of our other sell and leaseback transactions and structures that we've got, but that's the way we'll look at it. We'll look at it from a value perspective, combining flexibility, removal of pressure, but are we getting a return for this? I think I'd add to that. I suspect we'll see more volatility in the U.K. property market going forward than we've seen for a while, and I think we should, with all the principles and framework Helen's talked about, I think we'll be very mindful of what those opportunities might be. To the super promotion, as you referred to it. I think firstly, it's very early. I'm not sure we've fully assessed everything that's in there. The bit that I've had a quick look at is some of the things that are in there, certainly as they relate to anything we might offer, is they're very specific in terms of some of the mechanics that they pick. I'd answer in a broader way, David, which is we talked in October and again in January about what it is customers said to us about our pricing integrity. They said to us in Tesco, "We don't understand what you're doing sometimes. We don't understand how it is you change your prices." They also said to us, "We don't understand some of the integrity of your promotional discount curves." I seem to remember receiving one or two comments from yourself about that also in terms of the thing. The gentleman three seats further on knows about that conversation. I suppose what I'd say to you is we want to get it really clear for Tesco customers. That's the journey that we're on, getting off where we've been, not straightforward, but we would want it to be so simple, so straightforward. The question we ask ourselves is, can you explain it to your mother very quickly, and are you proud about the offer that you gave her? If the answer to either of those questions is no, don't do it. All right. Let's go two rows down, if I may. Three questions, if I can. It's Andrew Gwynn from UBS. The first, and you opened yourself up to it, but what is an average industry margin? The second is, just help us understand why trading profit for next year won't be substantially below this year. We obviously have a H2 number, which is clearly a lot lower than H1. You've talked about leaving, forgive your words, but short-term money on the table from suppliers. As well, obviously, we've got this change in definition, so moving towards this IFRS number, which I think is about GBP 100 million lower. So why won't trading profit move substantially below the GBP 1.4 billion reported for this year? Then the final question is just on the pension. Clearly, as you move towards this defined contribution scheme, should we gear ourselves up for an exceptional payment into the scheme to bring down the deficit? Okay. In respect to the pension, we are in consultation. Clearly, that's early stages in terms of what it is, and we really want to receive feedback from colleagues in terms of part of that. One of the ways, if one looks at how pension funds have moved from defined benefit to defined contribution, you're right, there has, generally and quite often, been some element of payment for that change. We're conscious of that. I wouldn't like to say, if anything, what that will be, but it's certainly one of the things which I would expect would be part of the discussion with colleagues and with the representatives as we go through that. Very difficult to factor in, but it's certainly something worth thinking through. What we're intent on doing is giving something which is competitive in the market, which is appropriate for our colleagues. But exactly the shape of that, very difficult to call as we go through it. In terms of average margin, we look at a competitive set of food retailers within the U.K. environment. That will continue to be the base on which we look at the industry average. What's the average current margin? Well, in an industry margin in any year amongst that competitive set, I think Tesco should be at the top end of that range. We're not at the minute. We have to regain that position. That's the benchmark, I mean. I'm trying to think if I missed anything in your question. In respect of the profits, we've set ourselves an aspiration, which, as you say, is coming off a base which didn't make money in the U.K. in the second half of the year. We've also said that we clearly are not wanting to forgo commercial income as we move through time, or the price at which we're buying what we're buying. Those are things which are challenges which we face ourselves, but it's not an easy task. Just going back to your earlier comment, you said that any gains, for instance, from cost savings and productivity, would be reinvested back into the offer. So any positives are going back into price. What we're trying to say is the level of profitability that we've achieved this year, to achieve that next year would be something that we'd aspire to. Right? It has the challenge that you say in the second half of the year, but we think that's the challenge that we should take on. That's the transformation program. That's the costing. As we go forward, as we make that, if we were to get to a place where, let's say, we were exceeding that, anything above that would be reinvested back in the offer. Okay. Thank you. Okay. Okay, I'm just moving along. Otherwise, I will miss people. The gentleman with the Can we go on that one? Yeah. Yes. Hi, Charlie Storey from Macquarie. Two quick ones from me, please. Just doing the rough and ready maths on the profit bridge, 3Q and 4Q investment offer looks to be about GBP 200 million. I am guessing that is Q4 weighted. If so, is there a sort of target you have for this coming year, this current year? Yeah. Also related to that question, sort of rough split between price and service. Probably can not give it, but I am going to ask it anyway. So- Um- Oh, sorry, I thought there was two. Sorry, go on. Leading onto my second one. You have got very easy comps coming up in the U.K., like for like. Obviously, you do not know, and it is a guess, but does it feel like it is a positive like for like year? In the spirit of time and questions, the answers to the first two, no and no. Not going to share. You know I'm not going to share. I get the question, but I won't break those things down. I'm glad it feels where you're sitting that this year feels like I've got some easy comps coming up. There are about 10 of us in the room going, "Mm." Look, we're not going to speculate. We're going to do the right thing every day, every week, every month, and we're going to rebuild the business. Yeah? That's what we're going to do. You're going to see us manage the business on the right things every day. If there are some easy comps out there, I'd love to see them. I haven't seen any just yet. I do see what we talk about in the fourth quarter, we see the fundamentals improving, and that's the most important thing. I'd only add, Dave, sorry. Yeah. The one thing that we haven't used yet is deflation, and there is deflation in the overall line, and there's deflation in what we're doing, and don't forget that. I think that is very important. Thanks, Alan. Now, moving forward, gentleman here. Good morning. James Tracey from Redburn here. Three questions from me. The first one is, where do you see a price gap with the discounters on KVI currently, and where would you like it to be in future? The second question is, could you quantify the reduction in depreciation from the GBP 4 billion PPE impairment, and is that included in the cost savings targets? The final question is, in terms of the second half U.K. trading profit being slightly negative, surely there will be some unwinds of one-off effects. Could you quantify the benefit from the stock write-down and the absolute P&L impact of the commercial income? You have disclosed the balance sheet, but you have not disclosed the P&L impact. So if you could tell us where it was and where it is now in terms of percentage of sales. There is a lot of detail there, as I was expecting from you, James. In terms of depreciation, look, it depends on the timing of our investment spend in the current year because that would give rise to this year's charge for depreciation. It also depends on last year's spend, and we spent GBP 2 billion last year. So there is an upwards pressure on depreciation. Equally, when we spend this year, we will determine it. I think there may well be a slight drop in depreciation when we get through into next year. It is non-cash, but it may be a slight drop. I would not factor in a significant number. I certainly would not put in a three-digit number at this stage when you actually look at it. In respect of the other elements, what was your third question? Well- Commercial income and profit revamp. Essentially, what bounces back in the second half margin for the U.K.? Look, we have run through it, and I think for us, you are getting into a level of detail, which we have given aspirations, we have spoken about where we are. I think to get into more detail, you are really going to get into line by line how we are trading and how we are seeing it. Look, it would get us into that place of giving competitively sensitive information that I have been really clear about we wouldn't. I think the important improvement for us versus the second half here, cost program. A definite cost program. There is no depreciation in the cost program to your specific. Hopefully, a continuation of the volume improvement as we improve the offer. Then we have got the variability of how successfully we renegotiate and put more of the margin back into the front versus the back, and that is a process that nobody, only a fool would predict exactly where that will get to, but it is the right thing for us to do. So that is our challenge. We are clear about what it is we want. To your earlier question, look, in terms of, we do not set our pricing strategy vis-à-vis anybody in particular. We have done some things very specifically against the discounter, so there isn't an index that you If there was, nor would I want it quoted if there were. I think the important thing is, we look at the customer, we ask the customer how it is they relate to certain things, and where it is service and range add something to it, then yeah, that is something that we offer that is unique and only available from us. Where the things that we offer are not unique to us, then we will be more competitive because that is the right thing based on what customers tell us. Hence the point, the brands that we did in January, when we did those, they were price matching. In fact, they were GBP 0.01 an item cheaper than at that time they were in Aldi. We didn't make a big deal about it vis-à-vis the discounter. We did that because we thought that was the right thing to do for Tesco customers. You will see us continue to look at our pricing strategy very much through the customer's eye. Okay? Next row. I am going there because of these two gentlemen. If you want to Have we got a microphone for Please go ahead. Morning. Hi, it's James Grzinic from Jefferies. I had three quick ones. The first one is, GBP 22 billion. Clearly, you are not comfortable with GBP 22 billion in terms of the owning leverage. Where should it be? What's your ambition? So you can give us some scale in terms of the size of that challenge. Second one, your commentary on margin, how dependent is that on really addressing the over-lease position you have got in the U.K.? Because 40%, you are massively below the rest of the industry, and there's obviously some structural issues that come with that. So how is that dependent, that margin commentary dependent on sorting out 40%? Thirdly, as part of that, what's the average lease life you have right now on that 60% of space in the U.K.? Mm-hmm. Right. You take the first and the third, and I will take the second one. Yeah. In terms of the leverage, what we have said is, look, it's not that we are uncomfortable with it because we have a funding position and a liquidity position, which is strong. It's higher than we would like. One key element of it is the pension deficit, which as I have said, can fluctuate quite a lot. We have seen a lot of fluctuation. If bonds were to change, then that pension deficit could close very rapidly. It could close. There's an asset side as well. But the important part of that element of our leverage is actually the cash that we are contributing and, over time, the risk that we are running within that. The lease liabilities, clearly directionally, we are wanting to take more ownership onto our properties. The bank debt is something which is very specific of the GBP 8.5 billion. So getting a specific target, I think is quite difficult when something's going to be changing quite a lot. But aspiration, we do want to see it coming down. It is important that we're very transparent with the way we look at it and that we're very clear that we're not trying to say it's only GBP 8.5 billion. There are other elements which we factor into when we look at our balance sheet and our performance. And as part of that, on the average lease length? We don't split that out. Clearly, we have a number of assets with very different leases. Express convenience stores tend to be on shorter leases. Superstores tend to be on much longer leases. Mm-hmm. And to your question about the, at a group level, we talk about an upward inflation of around GBP 200 million. A lot of that driven by leases. So that's the impact that would challenge any margin recovery. But we've also got productivity and other things that we want to bring in to offset that. So that's all built into the aspirations that we have. But it's about that level. Thank you. Okay. I'm going to keep. There you go. Thanks. Rob Joyce, Goldman Sachs. Morning. Three areas from me. Firstly, just on Asia, which is clearly pretty important now. Seeing similar levels of sales decline there as we see in the rest of the group, but we don't seem to be seeing the deleverage in terms of the margin. Can you give us a little bit of background on why that one is and how we look at that in the future? Second one, you mentioned deflation a fair few times and somewhat your own deflation. Can you give us an idea of how much deflation you think you need to enter into? Just more broadly, how we should be thinking about deflation and volume, given we have seen 2% deflation for 1% volume, how we look at that going forward. Final one, I do not know if you can give me this, but in terms of looking at how that leverage feeds the business, what percentage Sorry, what is the total U.K. rent burden at the moment, and can you give us how much of that is in the Extra stores? The third answer first, no. Just in the interest of time. On the first one, I will give you a very simple answer. Where is Trevor? Put your hand up at the back. See that gentleman over there? Yeah. He responsible for Asia. If you get him in the coffee break, he will give you a bit more. What I would tell you is, the way that we go to market in the Asian markets and the way that our business is structured is different. The way the leverage model is different. It is different. It is a really technical bit, but I will let Trevor talk to you about that, really. If anybody else is interested, we can share it some more. What was the third one? Middle one? Second one was on deflation, just the level of deflation you want to do and how that should look at volume-wise. An answer, but also a glancing blow, which is, look, when coming in, we talked about, or external markets talked about, a basket premium for Tesco versus principal competitor of around sort of 7%, 8%. I think that is too high. If you look at it now, it is 2 points lower than that. I think there is more that we should do. There is more that we should do, but it is about the important thing. The reason I do not want to say it is not just from a competitive point of view, is I am desperate for us as Tesco to be thinking now about how it is we improve our business, how it is we improve our offering and keep doing. Actually, if we can just keep making Tesco better tomorrow than it is today, we will be fine. We will be absolutely fine. I do not want us to get too obsessed about what that means vis-a-vis. Actually, when leaders lead in their own business and they are making themselves better each day, we will be fine. That is the more important thing for us, and we will do it in a commercially sensitive way, we will do it in a customer orientated way, and we are not going to do it in a slightly silly but dogmatic, it is this and therefore, because I could burn an awful lot of value doing that. An awful lot. Right. Conscious of your time and ours. We have got some, so we are 2 rows down, 2 gentlemen here, so we can get efficiency on microphones. Yes, Mike Dennis, Cantor Fitzgerald. Just a question. I am just trying to understand your U.K. margin. I do not. So, there is GBP 900 million of prior initiatives which were lost on as to why the previous management had that amount of prior initiatives, and GBP 467 million of U.K. trading profit, I assume includes Dunnhumby for GBP 100 million. I am assuming also that it has not got blinkbox in it this year, but had blinkbox in it last year. That is another GBP 80 million positive to it. I am assuming that your fuel business makes about a 2%, maybe 2.5% trading margin, and your U.K. business had a 1% trading margin. So trying to understand how you are going to get to an Aldi-esque 5% trading margin from what looks like half a percent U.K. trading margin. Therefore, the question that has been asked before about your trading income, surely there is a massive deferral of trading income somewhere, and if it is not appearing next year, then where is the cash? Um- Because your debt has gone up. Do you want to? Look, we can debate as to whether blinkbox isn't quite as large as what you say it is. Yeah, I don't know. Dunnhumby ballpark figures. You're right. You're pointing out is that the core U.K. business is under a lot of pressure. Clearly, we believe that we can, and we aspire to get that back. We will get it back. I don't believe that there's a massive deferral. If the deferral is there, I haven't seen it. What we need to do is to change the way that we engage with our suppliers and get the margin back. I think that's right. One thing, because there is a lot to what you've just said, and we should sit down and walk it through with you. Very happy to do that. I think the one thing I would say to you is, because everybody talks about the bounce back, I think conceptually what I'd say to you is this: We had, in the last two or three years in particular, got ourselves into a place where a level of profitability was being generated by things that we don't want to repeat going forward. It's as simple as that. Everybody will want to try and triangulate what that means, and I do get where the question comes from. I think where we are at the moment, just so you know where our mindset is, this is our reality today, and we're going to rebuild it from here. Do we think we can rebuild it? We do. There are different elements that we'll rebuild towards it and different times in which we can realize some of that. That's our job. That's what we will do. But trying to triangulate some of the things that we've stopped, that we won't repeat, and what that means for commercial income, honestly, you can spend an awful lot of time doing it, and we have done it. But actually, it's not a metric on which I will manage the business going forward. That's the important thing. We're going to rebase. We've rebased the business, and we're going to rebuild it from here. What you should be interested in is how quickly we can rebuild it from where we are because that's what we're obsessed about. Okay? Maybe I'll ask the question in a different way then. If the margins are low in the U.K. Superstores business, why today are you not closing 200 or so underperforming supermarkets given the margins are systemically that low? Quite simply because we've taken a view. We looked at all of our property, and we looked at 43 stores, and we said, "They're not cash positive even before we charge them rent." So we took a view and said, "This is it. We can't see a way where we can improve them to a place where we would." And so we took a very painful decision to close them. Do we have some other stores that are not making a profit at this moment? Yes, we do. Do we know which ones they are? Yes, we do. Do we as a team think that we can change that position in a foreseeable future? We do, and because we do that, we haven't done the thing that you've just suggested. Simple as that. Do you want to? Simon Denniston-Smith from Travers Capital. A very simple question. What proportion of your online sales are collected in store, and what are the trends as you grow the online business? Looking to Robin, the numbers that I have in my mind in terms of grocery and general merchandising online is between 65% and 70% are click and collect. Okay. And what are the trends as you grow the online? Yeah, it's increasing. Actually, what you find is that, particularly in that sector is for a lot of people find click and collect really quite convenient because actually I can go when I want. It's there, I can go when I want as opposed to sometimes having to stay in a particular period in order to receive it. So actually we've seen an increasing in trending click and collect. Okay. Okay? Front row. Oh, no. One more in the second row and then we'll finish with the stars in the front row. Sorry. Oh, sorry. There you go. Sorry. You had it and you lost it, Bruno. Thank you. Xavier Le Mené, banker from Berenberg Lynch. One quick one actually for me. You said that you are ready to invest more in the U.K. if need be, but what is a key catalyst and how you look at that? Is it your relative performance versus the market? Is it your absolute performance? Are you looking at volume especially? What is a key catalyst for you to potentially invest more in the business? I think the key catalyst is, I suppose, what I have been trying to illustrate all the way through is getting volume back into our business and the benefit of that given our operating model and given our scale is significant. The catalyst for us is, first and foremost, can I do something more for a customer tomorrow than I do today that he or she appreciates in a way that they give us our custom? Therefore, I need to be looking at that as a business opportunity. If there are things that we can do there, then we will seek to find every way we can to be able to offer that to our customers. In terms of what it is we prioritize against investment and make those decisions, yes, that volume and the number of transactions are the key leading indicators, as I said a little bit earlier. It will be on that basis. The front row. There are three hands in the front row. Oh, no, there are four. One, two, three, four. Okay. You get one question. We will go right to left. Yeah, right to left. Morning. Stuart McGuire, Credit Suisse. Do you see any opportunities to renegotiate your leases now that you are closing some of the stores? Perhaps the landlords are a little bit more scared than they were in the past. Can you give us any idea of- I think, Stuart, it goes to the answer I gave to David as well, which is I think the property market, given everything we see in the retail industry, is going to be quite dynamic going forward. If we see an opportunity for us to renegotiate, given how important it is to our business, you can be sure that we will. Yeah? Bruno. Waited patiently. Exactly. Bruno Monteyne from Bernstein. Four questions, if I may. That is the end of- I will make up for it. First one is, when you talk about cost savings, GBP 250 million and GBP 400 million, they sound almost a little bit puny in the size of Tesco. But obviously, you work on much more. You work on the pension scheme, the range simplification. The vouchering. Can you talk a bit more broadly about the real portfolio of cost savings you are working? Surely it is a much bigger number. The second one is in terms of phasing of a price investment, it is clearly different ways. Those brands, we see some of the fresh. Can you sort of indicate how far and how long it will take? Do you think you want it in for about a year or give a bit of a sense of phasing? The third one is maybe for Trevor, on international. Is it the beginning of a long slide, or do you already see some of the volume and transaction recovery, meaning you have already invested in that big margin loss? What do we need to expect worse before it gets better? Last but not least, Tesco in the previous management teams have some objectives of owning about three times their annual wages in stock in the company. Is it still there, and is the management team investing in the business? All right. Well, simplified, are you investing in the business? Okay. Yeah. No, indeed. Okay. I think I will remember. Right? Yes. So look, I think what you should say, Chris and I have this conversation about do we talk I think our competitors always talk about cost savings over a 3-year period or a 5-year period to make the number larger. I think the risk is GBP 400 million a year. You can decide how many years you want to apply that to. We'll leave that with you. Is it everything? No, it's not everything. We're looking, the review we talked about is everywhere. It's absolutely everywhere. But what we will be is when we're clear about what it is we want to do, and we can demonstrate that we know that we can deliver it, we'll put it on the table in the way that it is. But we will be good leaders of the business in terms of being very rigorous on cost going forward given the situation we find ourselves in. So point number one. Point number four, yeah, we still have exactly the same incentive and requirement of senior executives to invest their stock in the business. So that's not changed. In fact, I think it might have increased for people like myself, but no problem. If we're not prepared to invest in the business that we lead, then I think, so simple answer. What were the two in the middle? Asia. Asia. So look- It can only get worse. No, actually. I don't think it will get worse. You can, and you probably should, I'm setting a line up for Trevor. He can get you both later. But actually, Central Europe, we saw at the end of last year, like for like sales growth. We talked about it in the fourth quarter. We saw a positive move in Central Europe, and I don't mind saying that that's something that we're happy to see that sort of continue. So actually, there's some improvement. The issue for there was actually the profitability, and Trevor's taken some very decisive action on that, and I'm very supportive. I think, I suppose what I was saying before is in Asia, I think Trevor's had to deal with helping the group, and now he's in a place where actually he started some investment programs in Korea 10 days ago. I think it was Thailand last week. So we'll see. In 4, 8, 12 weeks' time, we'll see whether we've had the impact of that investment, but we're still investing in those areas. And the third? The second question, I can't. Phasing on pricing. Phasing on prices. Oh! To a line, yeah. Yeah. No. Look, conversation, as I say, customer driven, category by category, opportunity. As we negotiate and we change the relationship with our supplier base, we give the benefit to the customer. Look, I do not believe, it is a bit like the question earlier. Setting an artificial bang, this is it, everything the same. Actually, that is not how customers behave. That is not how we need to behave. So we will be very thoughtful and mindful, but we are clear about what the direction is. Okay? Hey there, Robin, Morgan Stanley. Just one question, so I will be quick. On SKU rationalization, so you gave us an update on timing. Yep. Can you just give us some rough ideas in terms of SKUs that your I can. hypermarkets, Superstores and where you want? I can. I am looking at Jason just in case I quote them wrong. The ones that we have done since the last ones we talked about, I think ready meals was a net reduction of 20. I think frozen food was 10-15. I think oils was between 15 and 20. So actually on the ones that we have done since the last time we have spoken, I think on average there has been a lot of change, a lot of new, but net reduction between 15% and 20%. Okay? Jason? Okay. I will come. Just linked to that, actually. When you started, you talked about a 31% increase in SKUs. Yep across the store. Where are we now? How far has that gone down? Ooh. What's the reduction from when you started? In terms of total? I'd have to go back and recalculate, and I won't guess at the minute because we've done a portion of the stores to different degrees. I'd have to come back and so Chris, can we come back? I'll give you an update on that specific number. It's too complicated to estimate off the top of my head. Okay. The last one was given the historic lows in interest rates, is there any way you could give us a sense of the sensitivity of the pension fund deficit to a 100 or 200 basis point increase in long rates? We can come back on it. I think coming back to the market estimates, we had an 80 basis point shift down year-on-year, and that really drove it, but offset by asset performance. But we can come back, and we disclose the gross liabilities and assets. Penultimate question. But sorry, I would just answer that that is not the measure that I look at because that is an actuarial measure. That is an accounting measure driven by IAS 19. For me, the important thing is what is the actuarial measure and that commitment to cash. So I recognize why you ask it. It will shift the balance sheet and the numbers and our total indebtedness calc- Yeah. Mm-hmm. It's not important for the cash in the business. Penultimate. Arnold Arnaud. You operate all your store format in the U.K. under the Tesco brand. Do you see any inconvenient or any inefficiency linked to this strategy in terms of store differentiation or price perception? Well, one small correction. We have a format in the U.K. store which is One Stop. It's not all under the Tesco brand. I think people ask me the question around what are the pros and cons of segmentation, and what the different offerings could be, and for sure, it's an element that we will consider as we talk about strategy. At the moment, I see a huge benefit from being part of Tesco. The reorganization that we've put in place, the one thing that I'm looking for us as a team to lead for, is actually getting the benefit, going back to getting the benefits and the synergy of the scale of operating Tesco as one. There's a big opportunity for us to do that. We've grown this business very well and very strongly, and I have no problem with it by keeping them separate verticals, as Tesco talk about it. Given what's happening in the market, the opportunity for us to think much more deliberately about actually the benefits across our organization is something that we're doing, and that's the reorganization that we're implementing now. Against that, the benefit of running our stores all as Tesco is significant to us at this point. Gentlemen, right at the back that I missed at the beginning. We'll last one. There you go. Thanks. Hi, yeah, it's Rick from Spirito. Dave, a couple questions. First, can you explain the GBP 350 million difference between your cash and cash EPS, your cash tax, and your cash financial charges versus your EPS version? That seems to be about half of your 9p in EPS. Secondly, the profitability decline in the second half in Asia and Europe seems to be fairly strong. In Europe, are there any other countries other than Turkey that are loss-making now in central Europe? Third, on your U.K. margins, they're now at zero or less than zero in the second half, but you seem to be a little more cautious on going forward, the profitability for the group. Is that principally driven by some of the U.K. investment, or is that Hungary investment? Where exactly is that kind of tone coming from? Finally, just on the Asian assets, you've mentioned you didn't want to sell them, and I can understand why the cash flow is important. What happens if the profitability continues to decline and you can't sell those assets? Those are my questions. Especially the first one, can we just take that offline? If you wouldn't mind talking to Chris, there's a lot of technical stuff, but I'm sure we can give you the answer on that offline in terms of your EPS. Yeah, that's right. The challenge in the U.K. is very specific to the U.K. Also, the activity that we've taken and we've announced is also significantly weighted to the U.K. But we do want to rebuild the U.K. profitability, but we want to do it in a sustainable manner. I can't reemphasize enough that actually we will do that by rebasing the business model of Tesco. We believe in it fundamentally, that if we run it in the right way, it's actually a good model. So we'll do that. I suppose it's still consistent with the tone I tried to set from the start, which is not to promise before it's done, share what the delivery has been after we've done it, and I think I'd like to keep that as a way of operating both inside the business and out. I think one thing you said, which I'd just like to be really clear about, we've not mentioned anything about selling or not selling any part of the portfolio. So I don't want you to take anything out of that. It's part of the review that Alan and I will continue to do. So just to keep everything completely neutral as it relates to that. There was one more question which I thought was one of the old- Europe, if you're seeing- Oh, in terms of loss-making. Europe country loss-making. No, the significant delta was Turkey. Yes, Turkey. The challenge that we have going forward, let's be clear, will be Hungary, given the changes in legislation, both tax and opening in Hungary. So Hungary will become a new challenge in Central Europe, but principally because of that. Ladies and gents, we've deliberately tried to exhaust all of the questions. We don't want you to leave here not having had a chance to ask us anything. I'll go back to where I started from, the three key messages from me. Look, it is a very big number. It's a very big statutory loss. It's driven by a series of one-offs that we think that's us facing into the realities of the market and our relative underperformance. We've done that very objectively. We've done it very openly. I suppose the thing that we would emphasize in that is less than 10% of it is a cash impact. The second thing we would talk about is that story I talked about in the beginning, which is we've set about running, particularly the U.K. business, in a different way. We've invested in ways that I've shared with you, and you see some early signs that are encouraging for us, given that's what we were looking to do. The third thing is, and I will say this, and I mean it wholeheartedly, is at a time of great change, the people that work in Tesco, and I can say that only having been there seven months, are really, really, really good at what they do. They care about the business that they're a part of, and they have engaged with this change program in a way that you just wouldn't believe. I'm indebted to them today and all the times that I'm here. So, please take that third one away with you as well, because it's really, really important to the recovery of the company. All right. Thank you very much indeed.