ASOS Plc

Okay. Good morning, everyone. Can you hear me? I hope so. Yeah. Okay. Thank you for coming this morning, as always. And happy to have you here. And as always, I'm sick. No, just kidding. I have a little bit of cough, but nothing. I thought it would be nice to start with a little bit of a joke. Thank you for coming. As you know, this morning we will be sharing with you our results for H1 and our level of progress in our transformation of ASOS and also our outlook and our guidance for the rest of the year. I promise this is going to be a much shorter session, so we will not be torturing you in these uncomfortable chairs for as long as we did it year-end, so I think we'll have plenty of time for Q&A at the end. So let me get it going with the main messages. So the first thing, let me just start by saying that for us it was clear that fiscal year 24 is a year of change, it's a year of transformation, the transformation of ASOS into a more agile, flexible, cash-generative, and profitable business. And in this journey, there was a very clear starting point, precondition, whatever you want to call it. That is, it was reshaping, resizing our stock, our stock profile. And that was a precondition because that was unlocking two things. On one hand, it was unlocking a lot of cash. And on the other hand, it was, if you want, the precondition when we were going to create the setup to really generate all the potential of our new commercial model. And today, I'm happy to share with you that we are having good progress in this transformation. First of all, I'm happy to say that during the first half of this fiscal year, we have produced the best result in terms of cash generation since the first half of fiscal year 27. That is 240 million pounds better than last year. And that performance has been supported pretty much by two pillars. The first one is the stock resizing. We have done a lot of the heavy lifting of the stock resizing. We have already gone below the 600 million pounds that we were defining as our target for the end of the year. And that has been achieved by a combination of targeted discounts on the older merchandise and a very active management of the in-season merchandise through a management of the intake, but also through a management of the sell-through. And I will give you more color later on. And it has also been achieved by a disciplined approach into cost. That will also give you more color later. But if you want to highlight is the stock resizing. We have done the heavy lifting, and that has resulted in a very – very remarkable, I don't know what would be the right word, level of cash generation in this H1. The second message I wanted to share with you as a highlight is that we see good progress in the strategic transformation of ASOS. This is the data formation to become a more agile, more flexible business that really attracts consumers because of fashionability. I will share more detail later, but just to highlight two of our star initiatives, Test and React and Partner Fulfills. On Test and React, during the course of the hub, we have already reached 5% of the sales of our own brands. And it's not only the size that is placing us in a good and comfortable position to reach our targets for the year. It's also how we have reached that position. We have done that by generating a gross margin of 58%. with our test and react lines, which pretty much means that we are selling the vast majority of it at full price with hardly any discounts. That is precisely how we want to interact with our consumers. The second one that it would be partner fulfills, we have already reached 5% of our sales of third-party brands through this more flexible fulfillment model. That is pretty much the target that we had for the year and that doubles the contribution of last year. So it's also... Very, very reinforcing to see that these two initiatives as an example are moving at that pace. If you want, on the other side of the medal is that as a result of our deliberate actions to tackle the unprofitable sales and also as a result of the reduction in the intake, we have seen a reduction of sales of 18% as we announced in our trading statement in March and we are restating today. All of it together give us great confidence to reiterate our guidance for the rest of the year. And as I said, our guidance of this year pretty much encompasses the capacity to unlock all the value of our proposal going into fiscal year 25 and beyond. And the last message I wanted to highlight here is that I'm very happy to announce the joining of our new CFO. who will be joining at the end of this month, the company. And it's very, very exciting to see him coming. I will also elaborate a little bit more on that later if you guys want. And I would like to take a second to say thank you to Sean, who has been an incredible partner. I have been told that I have not to say partner in crime because in English it's bad, but an incredible partner for these 14 months. And he has given us the position to take all the time we needed and wanted to do the right choice with our CFO. So thank you so much, Sean. I really appreciate it. And you will always be an ASO, sir. That's very clear. With that, let me, if you want, take one second to take you back to the strategy presentation we made six months ago, more or less. In that day, we were saying that our ambition is to be the world's number one fashion destination for fashion-loving 20-somethings. And that ambition was supported by five pillars. offering our consumers the best product, best meaning the most relevant product, both with our own brands and our brand partners. And that was achieved through a set of measures, and speed was a word that I use a lot. The second one was to become a destination of styling. It's the way how we blend our own brands and these third-party brands makes us unique, and we want to leverage more on that capacity and that uniqueness of ASOS. The third one was to offer our consumers a more compelling and distinct brand, and that was going to be supported by a change in our marketing model, but also investments in how our consumers interact with us in our sites, so their shopping experience, The fourth one was to offer them a frictionless and seamless experience, but we wanted to be competitive. And here we were saying that we want to match the best proposition in the market, but not necessarily to go beyond. And all this was underpinned by our strategy. obsession with operational efficiency, with being more efficient, with releasing continuously, with better capital allocation, to continuously release resources and reinvest these resources into our business. These priorities... What we did is we distilled these priorities into three very specific, if you want action plans or priorities, sorry to repeat the word, for fiscal year 24. And these were the three that you can see right now on screen, which was to offer our consumers the most relevant products. And this was supported by making sure they can see these products, so a very disciplined approach into stock management and also this obsession with speed. to develop a stronger set of consumer relationships, and as I said before, supported by changing our marketing model, by also investing in a fashion-led customer experience, and with a reduction in our cost to serve as a result of this obsession with capital allocation and operational excellence. Let me spend the next minutes sharing with you a little bit the level of progress we have reached in each and every one of these priorities. Starting with the most relevant product. You know, we sell clothing. It's the most important thing we do. It's the reason why we're here. It's the reason why our consumers come here. And that has to be always in the center of everything we do. Offering them the right product, offering them the right curation, and the right styling to make ASOS the unique place it is. In order to, let's say, sharpen this capacity of ASOS, we have identified three clear initiatives for this year. The first one is this discipline in stock management, so that consumers can really see the new, and the new is not under a mountain of old stock. Thank you. The second one is we want to be the best partner for our brands so that we can really offer our consumers the best curation of the best brands. And the third one was this obsession with the speed as a way to elevate our own brands. And I'm going to try to elaborate in each and every one of them what we have done. In terms of this discipline stock management, you will probably recall this graph because this is a graph we have used before. And it's been a little bit updated with the real data. We started fiscal year 23 with pretty much 1.1 billion pounds in stock. We ended the half with less than 600. This is a 45% reduction in absolute terms, and this is when I say that we have done the heavy lifting, that's what I mean with that. There has been a lot of work to do that. That is not a coincidence. Pretty much, if you want, there are three main levers behind that. One is how we have tackled our older stock, and the other two are in how we have managed our in-season stock. So let me, if you want, go a little bit deeper on it. How we have tackled our older stock. Obviously, we had a lot of old stock, as we said back in the days, and what we have done is we have been very determined with a targeted but aggressive level of discounts to get rid of that stock. We have invested 60% of our discounts on that type of stock. And 50% of our stock reduction comes from this stock that is older than 12 months. So we're very happy with that. Obviously, that has had an impact on our margins. And this impact is quantified in five points. So the average margin of the half has been reduced by five points because of all the efforts we have been doing here. That is, if you want the bad news. The good news, it has enabled us to unlock 175 million pounds of cash. which is a sizable amount of money. And we are happy to say that we have been able to do it. We have done a lot of the heavy lifting, as I said, with the autumn-winter stock. We need to use the second half to finalize that job with the spring-summer, which is in a better place, but we still have work to do. And as our stock shape gets more normal, obviously the impact on our margin will become lower. And we will see that during the course of the second half. The second part of our effort has been focused on the in-season stock. In the case that we're talking about, it would be now the autumn-winter 23. That is the last season we finished pretty much in January, February this year. And in this in-season stock, we have pretty much done two different things. On one side, we have been very cautious with the intake. We have reduced our intake by 30%. That obviously has had an impact on our capacity to sell, but as I said before, it was almost a precondition to unlock the value of our new commercial model that we would put the stock in the right place. And the second one is that we have been very disciplined in how do we manage the in-season stock, making sure that it's moving at the pace we want at every state. That has taken us to move our stock 40% faster, so the stock trend has increased significantly. The end point of the season has reached 17 percentile points higher than last year, up to 83% sell-through, and it is enabling us to say that today the amount of merchandise that we're carrying over from autumn-winter this year versus last year is two-thirds smaller than last year. So if you want, in simpler terms, The problem of old stock is not going to repeat because we are dealing with it in season instead of waiting to do it later. So let me here make a mention of the Red Sea events. Obviously, the 30% reduction was the planned reduction of the intake. What we have seen starting pretty much in December, but especially over the last almost four months, is that the Red Sea events have had an unplanned impact on our intake. That unplanned impact started having more of an impact on our own brands, which are the brands, obviously, that we have more control on the value chain. We are very actively managing that, and I'm pretty confident to say now that we will have probably neutralized that impact during the course of the next four to eight weeks. What we're seeing now is that part of this impact is moving to our third-party brands, our brand partners, and obviously we will be managing that within the... the partner relationship that we have with them to make sure that everybody's in the best possible position, but so are we. So we will continue with that journey of bringing more intake and clearing the old stock, and obviously that is going to have an impact on the shape of our stock, and as the shape gets more normal, we will see some of the investments to unpack, and that will be obviously great news, but we'll also see more intake that will help us to sell better. The second thing that I mentioned was we want to become the best partner for our brand partners. Sorry to repeat the word. We want them to see ASOS as a different place. We are a different place. We are the place where we can, in the mass market, be in a multi-label, if you want, context, and in a fashion context. And that is something highly appreciated by them. And what we have done in the last six months to improve our relationship with them, one of the things we have done is to make it more flexible through Partner Fulfills. This is a program that you know very well. No need to spend a lot of time on it. I'm happy to say we have already reached 5% of our sales of brand partners through this program, which is very reinforcing. And it's, as I said before, doubling the contribution of last year and already at the target that we have for the full year. And this has done by the addition of 21 brands during the course of the half. The last ones to come to the party that are mentioned in the slide are Converse and Summers, and they are joining a very long list of brands like Adidas, New Balance, Tommy Hilfiger, or Bestseller, to give you some examples. So it's a very consistent. As of today, we have 54 brands that are in this program. We are enriching that relationship with our partners with ASOS Fulfillment Services and we are currently in a pilot with a smaller Spanish brand called Scalpers that has very generously decided to be our guinea pig here and we are obviously using that pilot to develop the technology but also to learn on the implications and we are very comfortable to say that during fiscal year 25, we will be able to roll it out to bigger brands and then have a much bigger contribution into this kind of flexibility and richer and more flexible formulas. And last but not least, I wanted to mention that obviously on top of that, we are always working in bringing new brands and enriching the assortment for our consumers. And I'm very happy to share with you that during the second half of the year, Arquette and Veja are going to be joining the set of brands that we offer our consumers. This is only just an example. We keep on adding new brands continuously and we will continue doing that because, as I said, our ambition is to offer our consumers the best curation of the best brands. Let me go to, as you probably already know, one of my personal favorites. That is, how do we elevate our own brands? Our own brands is our crown jewel is what makes us absolutely unique. Nobody has our own brands. That's quite obvious. And this is our obsession with the speed. And I'm going to talk now more about test and react, even though we have other programs. And we mentioned those programs in the announcement this morning. As you know, Test and React is a market-leading program. We are bringing merchandise in less than three weeks, actually 2.3, if I recall properly, but don't quote me on this one, from design to shelf, I could say, which is quite remarkable. We started the program with suppliers in the UK. We have already enlarged, we have already opened that program to suppliers in Turkey and Morocco and with no impact in our lead time, so I'm very, very happy to say that. This is a program I have already explained before that has a lot of benefits for us and for our consumers. For us, because it gives us the possibility to test with very small quantities, and as we see, that the style is successful. We then ramp up production, and that reduces the risk significantly. That is very clear when I share with you the real data of what we have achieved during this first half. That is a 58% gross margin in these styles overall, which means, take into account these styles are exclusively produced in closer sources, so the initial margin is lower than the average of our own brands. But therefore, we're doing in markdown is significantly lower. And obviously, that results in this 58% gross margin and a stock turn of less than three weeks. That is a great advantage. I think this is transformational, and it can be transformational for ASOS as a whole. The other thing is how it is connecting with consumers. And the reason why you see this picture, that is one of my favorites, the picture, not how to pronounce it, because it's a pepling, poppling top. I think they did it on purpose so that I cannot pronounce it. But anyway, this one, the reason why we bring this picture is like, this is probably the best summary of all the benefits of this program. We brought it online, we saw it was working very well, brought a repeat, sold 1,500 units in the course of a morning, keep on bringing it continuously, is every day top five sales in terms of number of units, every single day, regardless of what we're offering, regardless of the most incredible brands in the planet, regardless of whatever liquidation we do, this top is top five, unless we run out of stock. And then it falls out of the top five, then stock comes back, and it goes up again. It's quite remarkable, and it shows a lot of the power of this program. I think it's important to say that the power of this program is going beyond the sales. It's also in how consumers are talking about ASOS in social media. It's quite interesting to see how consumers are starting to identify ASOS as the first place to go and find fashion. And this is precisely what we want. As I said before, today we are at 5% of our sales of our brands, which places us in a comfortable place to reach the target for the end of the year, around 10%. And it creates, if you want, a good platform to go to our more midterms ambitions, that is to take it much farther, up to 30%. In that sense, just one small note. The fact that we have already expanded from the UK into other sources is a very critical thing to ensure that growth, because obviously that gives us the possibility to open it to new categories like denim, unwovens, and that is very important and that is quite interesting. To give a little bit more of color on this on this uh test and react program um just let me very fast deep dive on the first two categories where we started with which are jersey tops and and jersey evening dresses these are not irrelevant categories all together become 20 of the sales of our asus design womenswear so is they're relevant One of them, even in dresses, is already at 20% of sales coming from Test and React. The other one is already at 40% of sales. So I think it clearly shows that this program can be taken to significant part of the turnover. The other thing that I wanted to highlight is these pictures you are seeing here are pictures from the social media of some of our consumers and how they are talking about ASOS. And it's a completely different way of talking about ASOS when they talk about ASOS as the first place to find ASOS. fashion and actually we did the test lately about where can you find peplin pop sorry leopard print peplin poplin whatever and you could count the number of brands where you can find it with the fingers in only one hand and asos is one of them so clearly it's positioning us in the right place As I said before, the fact that we are already working with suppliers in other geographies that can work with different fabrics is giving us the possibility to go deeper in some of these categories by adding new fabrics like dresses or adding new categories like denim. And as I said, very comfortable that this is only the beginning of a much bigger success story within ASOS. Let me move into the second priority, which was to create stronger customer relationships. You will remember from our year end, again, now recycling another page from year end, when Dan and Vanessa came and told us about how we were going to transform our marketing, if you want, model within ASOS. Without walking through the whole chat, no worries. Pretty much what we were saying is like we were going to move into full funnel marketing from only perform or mainly performance marketing. We're going to invest in stronger relationship with creators and influencers. So we were moving more social if you want. And we were going to work into brand activation. We said back six months ago that obviously this is a set of policies that take some time to have impact. And at the beginning, we would be seeing leading and lagging indicators until we can see the impact on ourselves. And obviously today, we're still in the first part of this journey, taking into account that we only started in November, end of November. But we are confident that we will see this impact over time. So going back to what we have done so far along the year, We started at the end of November, as I said, with our Asos Your Way campaign. That is a campaign focused on the individual style of our consumers, a campaign really focused on our Gen Z consumers, and that's why we leveraged on six star influencers for Gen Z, even though we used overall four influencers. We had a reach of 500 million impressions, and it was pretty much London-centric. We did all our live activations, our out-of-home activations, Here in London, we were previewing a lot of learnings we took, and we saw some interesting results. As I say, leading and lagging, new customers growing by 10%, brand search also growing, direct visits. But it was more the learnings we got rather than the impact it had. We have used these learnings into our new campaign, our ASOS Unreal Finds. And this is, if you want, a different campaign where we're positioning Acer as a destination for style and a place to discover styling. And let me just... Just a snapshot of the campaign. Three big differences between this campaign and the previous one. Well, this campaign is clearly social first. We are working with a wide range of micro and big influencers. to reach an audience of 30 million unique users. Our ambition is to have a much bigger reach of 1.5 billion impressions, so it's almost three times the level of impressions through nine different channels, and this is much more of a national-wide campaign. It's going to be activated in eight cities, rather than only in London. We keep on learning on it, and we are confident that this is going to reinforce the messages that our improved assortment is sending to our consumers. But as I said before, the way we strengthen our relationship with our consumer will not only come from marketing, will also come from their experience on site. And just to share an example with you, we decided to revamp, to change, to upgrade our by-the-look functionality. We started at the beginning of the half. As of the end of the half, we have already implemented that in 42,000 options. By now, it's 52,000 options. Our ambition is to reach 50% of the total assortment by the end of the year, and we think we're in a good place to reach that. This is a functionality that builds in some of the unique capabilities of ASOS. capacity that we are multi-label so we offer our brands and third-party brands our differential capacity to create styling and outfits and and the visual language of our of our studio what we have seen is that the customers are engaging really strongly with this functionality customers buying through uh by the look have a 55 bigger basket which is quite remarkable And if you want the other thing that is also quite remarkable, customers using that tend to be younger and more fashion engaged. So it is very, very interesting functionality. And if you want to send our example of a win-win relationship, because we're doing something for our consumers so that they can buy better and we also benefit. So it's a little bit like test and react. And we're really looking for these flywheels where everybody wins. Moving into the third pillar, which was our obsession with optimization and reduce cost to serve, this is a little bit this mentality of continuous improvement. I'm happy to share with you that during the course of this first half, we have reduced our fixed cost 20%, which is faster than the reduction of our sales, if you remember. And we have also reduced our variable costs as a percentage of sales, obviously, in 80 bps. which means we are more efficient. I think it's quite important to say that. You know I'm a big fan of images, and I've been torturing you for months with the famous fresh fish. No worries, not fresh fish today. This is the new image for the season. The new image for the season is Formula One. That is quite popular in the UK, so I'm pretty sure it's going to resonate with you better than fresh fish. the image is along these lines you know in formula one they go for a lap they stop they move a little bit they go for a second lap they improve just a little bit 0.1 of a second but then they do it over and over and over again and they question everything every time i don't know if you've ever seen how they train this process of changing the wheels in life i did it once and it was shocking You have 10 guys doing that 100 times over and over and over again. They train absolutely every single gesture to make sure that they can change the tires and refill the tank in two seconds or whatever. It's quite remarkable. This obsession for the detail and this obsession for reinventing everything and questioning everything every day is our obsession with cost optimization. If you want operational excellence, this is our obsession. This is the driving force to make sure that we deliver here. During the course of this first half, these improvements have come mainly from two sources. One of it is logistics, and so warehousing, distribution, and so on and so forth. Obviously, the reduction of stock and the subsequent reduction of our logistics footprint, plus a simplification of the delivery in partners, plus our renegotiation of certain contracts, has taken us to reduce our delivery cost per unit by 20%, and I think it's quite remarkable, especially in a moment of losing size or deleveraging the cost base. And it's also obviously the reduction of the footprint has helped us also with the fixed cost of logistics and also having a lot of work here in the headquarters with fixed costs, obviously with a number of people, as you saw, we have been very cautious with that and we have done some activities to reduce, but also with every single overhead cost reduction. to make sure that we are as frugal and as efficient as possible. This has been the main driving forces during this half. As I said, this is only one more lap, so the car is stopping again. We're going to do it a little bit more and gain another half of a second or whatever. This time we're working a lot about the use of data and the effective use of data, and that would not be a surprise because that is happening everywhere, but we are also working on a lot of the automation of our processes through pro-life management systems and so forth. So this is only the beginning of a journey that will never end. We will always be talking about this operational excellence and making sure that we are as efficient as possible and With this obsession that you can always reinvent the business every day, there is always a possibility to improve. So let me just summarize the key messages before I hand it over to Sean to give you a little bit more details. So if you want overarching message, we have done a significant, if you want, development or achievement in terms of our transformation. Remember, this is a transformation. We're really transforming the way we work. As a result of that, happy with the cash generation, the best cash generation since the first half of 2017, £240 million better than last year, supported by we have done the heavy lifting in the stock reduction with a very active management of the old stock and the in-season stock and also a very disciplined approach into cost that will never end. Also very happy with the development of the more, if you want, substantial transformation of the way we operate with consumers. The main two examples that I share with you is partner fulfills and test and react, but there are many other. So with that in mind, happy to reinstate, to reaffirm our guidance for the year and as a way to unlock the value that will be unlocked during fiscal year 25 and going forward. So with that, I'm going to hand it over to Sean so that he can give you more details about our canvas. Sean?

Thank you, Jose. And thanks, everyone, for joining us. So here's our usual summary slide showing you some of our key metrics. Sales were back 18% on the year as we cycled the profit actions taken during the course of last year, which were mostly in H2. Intake was lower by around 30%, resulting in reduced levels of newness on site. Gross margin suffered due to heavy discounting to clear our older stock, but the flip side of that was in our free cash flow performance. This was £240 million better than last year and our best performance since 2017, with an outflow of just £21 million. Looking ahead, gross margin will recover in future years due firstly to the elimination of age stock in our new model and secondly from the lower discount debts we plan over a product's life cycle. I'm really pleased with the performance on cost to serve. That's defined as adjusted operating expenses, excluding depreciation and amortization expressed as a potential sales, and that was down 120 bits. This is despite the deleveraging impact from falling sales and the incremental investment into brand marketing, and was achieved by way of great progress on both fixed and variable costs, as Jose's just outlined. Whilst the cost-to-serve improvement more than offset the volume impact, the additional discounting we employed to cleanse our stock resulted in an EBITDA loss of 16.3 million for the half. However, we've reiterated our guidance for positive adjusted EBITDA for the full year. Net debt has fallen by 83 million from this time last year through a combination of cash generative H2 in FY23 and a small cash outflow this half. Ultimately, our performance in the first half is primarily a function of the action we've taken to prioritise right-sizing our stock ahead of FY25. And I'm really pleased to say these actions have achieved our four-year stock target of less than $600 million ahead of time, as outlined in the chart. The more astute of you may have noticed that this slide isn't our usual KPIs, which are still included in our statement and will be released this morning, and also on the next slide where we cover our segmental performance. However, the strategic indicators listed on this slide are more up-to-date reflection of how we are thinking about running the business and what our progress should look like. As you can see, test and react has reached 4.9% of own brand sales at the end of the half from nothing a year ago. Likewise, flexible fulfillment, which will ultimately encompass both partner fulfills and ASOS fulfills, reached 2.2% of GMV, an increase of 160 bps on H1 FY23. Adjusted growth margin is back 260 bps year-on-year and 280 bps on a two-year view to 40.3% due to that discounting of old and aged stock. As outlined, cost of service has fallen 120 bps and with variable contribution per order falling 4% as the efficiency measures couldn't fully offset that softness in our gross margin. But on a two-year view, we're plus five. But pleasingly, with all the changes we've made, we're seeing our stock work much harder. We've stocked turn up more than 30% on the year as we've reduced the quantity and improved the quality of our inventory. So looking at the segmental performance, basically what we're seeing in the headline numbers is a continuation of the regional variation that we've highlighted in past results, and a reflection of the severity of the profit actions we've taken in each of the regions. As such, the rest of the world and the US have experienced a more pronounced impact on sales than the UK and continental Europe, having previously been less profitable. Between the UK and Europe, consumer sentiment and the wider macro backdrop have been the main differentiating factors. If we move on to growth margin, this slide really shows the scale of the additional discounting we've undertaken to clear that old stock. Whilst the adjusted gross margin was down 260 bps overall, the impact of the markdown was more than 300 bps, which was then partially offset through improved freight rates under our contract with Maersk, as well as improvements in our buying margin resulting from sourcing improvements. you'll note there's a minimal impact on H1 gross margin from surcharges on ocean freight imposed in relation to vessels being rerouted to avoid the Red Sea. This will instead modestly affect gross margin in H2 as we sell through the rerouted intake, but we expect to offset these impacts further down the P&L through other supply chain savings. In terms of cost savings, we've made excellent progress on reducing our cost to serve against that backdrop of decline in sales. We've achieved 100 bps reduction in distribution costs as a percentage of sales and 130 bps in warehouse, resulting from both the actions taken in FOA 23 including cessation of split orders and closure of ancillary storage facilities, but also new initiatives introduced into the first half of FY24, such as renegotiation of delivery partner contracts across each of our major regions and elimination of extra storage sites. While marketing and other costs have increased by 70 bps and 30 bps respectively as a percentage of sales, you can see from the chart on the right that both have fallen in pound turns. This is even after taking account of the additional marketing investment into UK full funnel activity as set out at the start of the year. The net impact is a cost to serve of our activities being 120 bps better at 41.5%. If you follow that through to adjusted EBITDA, you can see that our progress on cost of service more than offset the impact of reduced volume in the hearth. The EBITDA loss is therefore attributable to the high levels of short-term discounting to clear old stock ahead of the full rollout of the new commercial model in FY25. Just briefly on the adjusting items, the majority of these relate to the closure of the Litchfield Fulfillment Centre, which we previously indicated, and that's expected to yield an annual cost saving in the region of £20 million per annum from FY25. This site will be mothballed at the end of May, but has ceased to fulfil orders already in H1. We have yet to formally market it, and in the absence of a firm offer, a non-cash impairment charge has been booked against its value. Of the £150 million of adjusting items in the period, 80% of this figure is non-cash, with the remaining £30 million expected to be cash settled in future periods, including £16 million of automation spend at the Litchfield site that has not been capitalised in H1. And then finally on to cash flow, where we, as explained, we experienced our best H1 since 2017, with an outflow of just 21 million due to strong progress on inventory. Accordingly, bridging from adjusted EBITDA to free cash flow, you can see that the largest items relate to working capital and CapEx. CapEx of £86 million, or £66 million excluding Litchfield, is consistent with our guidance for £130 million of CapEx on an ex-Litchfield basis for the full year. And in the half, the spend is roughly split, 30 million on investment in supply chain, including 20 million on Litchfield, and 55 million on tech capex that's prioritised in areas such as test and react, flexible fulfilment and customer experience improvements. £175 million relates to the reduction of our stock balance to pre-COVID levels, which is partially offset by other working capital movements, including a reduction in payables as we continue to reduce both intake and operating costs. Together with interest in other movements, cash outflow in the half was £21 million, which when you add that to the non-cash movements result in net debt £39 million higher than at the FY23 year-end. However, as a result of the £238 million improvement on last year's H1 free cash flow, we saw net debt close the half at £345 million, £83 million lower than this time last year. And that net debt includes a strong cash position of £332 million, with more cash to be generated in H2. And on that note, I'll hand back to Jose to wrap up a few words on our outlook for the second half.

Thank you so much, Sean. Let's see if I'm lucky. Just a couple of slides. I promise I'll be brief so that we can go into Q&A. So what is it that we're expecting for H2? Well, we need to finish the job we started, and that means, if you want to be more concrete, we need to continue working through our stock. As I said, we have done the heavy lifting, but that doesn't mean we have finished, so we will continue working. dealing with the old stock and bringing the new stock to make sure we normalize the shape of our stock, which will have a set of impacts, positive in terms of our capacity to sell, but also in our capacity to generate gross margin. As you have seen, the gross margin we have generated during this half has been clearly impacted by that shape. The second thing will be we will continue with the transformation of the business with scaling test and react. We're taking even farther. There are other programs I have not mentioned, like speed to market. So all this is going to be part of this half, because obviously the ultimate goal is to make sure that we can really deliver this transformation of the underlying business. The third one will be we will continue strengthening the relationship with our consumers through our changes in marketing, but also through our changes in this fashion-led customer experience. So there will be new features coming, and we will continue deploying our campaigns. And last but not least, we will continue ingraining this culture of continuous improvement. Remember, the picture of the season is going to be the Formula One, so you will see it quite often here. Probably next time I will come with a Formula One T-shirt, so that to remind everyone. So as a result of that, we are comfortable of restating the guidance or confirming the guidance, probably is a better word, that we gave at the beginning of the year, which is sales somewhere between minus 5 and minus 15. adjusted EBITDA positive, stock below 600 million pounds, that as you already know, we're right there, CapEx excluding Litchfield on 130 million pounds, free cash flow generation, and a reduction of net debt. As I said before, this is the way to really unlock the real value of our new commercial model and the transformation of our business. And we are very confident that by the end of this year, the company is going to be in a significantly better position to do that. And with that in mind, I think it's enough of me, and I'm going to hand it over to you for Q&A. Thank you so much. I'm going to take a seat here. Sorry, I forgot to say Michelle is going to be coordinating the Q&A.