ASOS Plc

We're ready? Okay, good morning everyone. Thank you so much for spending time with us this morning in our half-year results presentation. And as always, it's very exciting to have you here in ASOS. So let me start because I'll try to speak less than last time. Last time we didn't leave enough time for questions, so I'm going to try to be more concise. That doesn't really mean I'm going to speak faster. I know I already speak fast enough. I'll try to be more concise so that we can leave more time for questions. So what is it that we want to share with you today? I'm going to start just by sharing the big messages that we want to highlight. Then I will give you more color on the strategic update, on the main actions we have been delivering during the course of the last six months. Then Dave, our CFO, will give you more detail on our financial results, and this is probably where everybody's more interested in, and the outlook, and then we will make sure we have enough time for Q&A at the end. So let me start. And let me start by taking a second, and I promise it's going to be very short, and talking about some concepts that I've been hammering on you over the course of the last one and a half years so that I'm going to try to put them together, let's say, if I do a good job in a way that it resonates with everyone. Over the course of the last two and a half years, I've been talking about things like becoming the most inspirational destination for fashion lovers and some things I've been talking about making sustainable profitable growth, creating a business model that is resilient, a business model that is flexible and hence sustainable. And I want to try to put it all together today. This transformational journey is about doing these two things at the same time. And I don't think they are contradictory. I think they reinforce each other. On one hand, what we're doing is when we look into the consumers, we want to become a place for inspiration, a destination. They come because they are offered the most exciting, the most relevant product in the most inspirational way. And at the same time, we're transforming our business model to be sustainable and resilient and flexible. And when you put these both things together, on one hand, the more inspirational we are, the more profitable we become. And on the other hand, the more resilient and the more flexible we are, the more we release resources to reinvest into our consumers. And this is when we put both of them together This is where we're talking about sustainable, profitable growth. That is the outcome of doing these two things at the same time. And today I'm here very happy telling you that I feel we have really made a step forward in the last six months in this direction. And that's why we have increased our EBITDA versus last year on approximately 60 million pounds. I think this figure summarizes very well where is that we are going and why do we feel we have made such an important step. And this has been built on three main pillars. The first one is our new commercial model. And I've talked a lot about this new commercial model and trying to summarize it in one line is this is being capable of offering our consumers the right product at the right time. This is done for a lot of things. This is done through adding additional speed to the system. This is done ensuring we offer the right level of quality. This is done through enlarging and improving the assortment of brands we offer to our consumers so they are more exciting, offering better, collaborations and more exciting items. This is done through more flexibility in our fulfillment methods and business models. This is done through a more dynamic stock management during the course of the season. There are a lot of activities behind that. But during the course of the last six months, we feel we have to take a step forward here. And I'm going to try to summarize this in two numbers. Number one is that in the last six months, our own brand's full price business has grown while at the same time we have increased our gross margin almost 500 basic points. And I think this is a very good example where both things come together. We are doing more full-price business, 12 points better for full-price business versus last year, and that has resulted in higher margins. And higher margins has not been a detriment to grow our own brands globally full-price business. So I think it's a very good example of when the commercial model works, it delivers very interesting and very positive results. The second pillar is efficient operations. We have to make sure that we deliver while we are obsessed with being efficient. And that is based on two things. One is rigor and discipline in cost management. And we have done a lot of things over the course of the last two and a half years and more concretely over the last six months. We have reinvented our supply chain, for instance. I'll give you more color later. Reducing 140 basic points are the cost of supply chain. but it's also on being very, very disciplined on efficient capital allocation. And again, trying to summarize that into two figures, we're very happy to see that we continue improving our cost efficiency, and that is giving us the right economics to continue. And at the same time, we have accelerated our stock trend, which means we can use our capital better to reinvest our capital into growth. And the third pillar is ensuring that we provide our consumers engaging experiences. engaging, inspirational. There is a lot to do here. We're only at the beginning of the journey. We are very, very excited about what's coming. And I hope I will be able to share with you some of these things this morning. And we think this is going to be what is going to help us to really push this sustainable, profitable growth to a different level. So if you want, in a nutshell, we're very happy with what we have achieved over the six months. There has been a lot of activity. I hope you will appreciate that at the end of this presentation this morning. And the outcome is very encouraging, this improvement of 60 million, which is an increase of 30% of our variable contribution over the course of the last six months. And at the same time, we're very excited about what's coming. We're very excited about all the activity that is coming, all the new things that are going to be landing during the next months. And we feel we are prepared. We feel that we have the right product. We feel that we have the right economics. And it is the right time to take this transformational journey into action. becoming the most inspirational destination for fashion learning 20-somethings while we do it with a profitable, flexible, and sustainable business model to a different step. So let me start giving you a little bit of color of all the activity we had over the last six months. And let me start by our commercial model. And obviously, the target of our commercial model, as I said, is to deliver relevant product at the right time. And let me start with this chart that I find extremely interesting. In this chart you can see the evolution of the variable contribution per geography and per line of business or all brands and brand partners over the course of the last six months. What you can see in the bottom part of the chart is that every line of business, every geography has grown in terms of variable contribution, absolute terms, over the last six months. And I think that is a testament of, yes, our journey into a sustainable profitable business model is going in the right direction, is not an exception, is not one, is the whole business that is moving in this direction. That has happened through a lot of work, and part of this work, as we have shared before, has had a negative impact on sales. For instance, to get here, we have been working on our basket economics, and we have been reducing the availability of product, we have been reducing stock, and over the course of the last two years, it's around 60% reduction. We have been reducing promotion. We have been reducing the investment in performer marketing. So obviously that has an impact on the top line. But that has not been a barrier to grow the variable contribution. And I think that's why this chart is so encouraging for the whole of the team. But there is another thing that is also quite encouraging in this chart. While we've been doing that, we've also been doing other things. We've been implementing our new commercial model. And this new commercial model is starting to show early signs of success. Because while we've been doing that and while we've been increasing our gross margin 500 basic points, we have been capable of growing our full price business in our own brands globally, with the exception of the US. And I will touch upon that a little bit later. So it is very encouraging to see how both things come together and how this is working. Let me give you a little bit, as I said, more color of what is behind this change from our product point of view. And I will start with our own brands. The secret behind the development of our own brands is simple, as everything in life, and it's based on three things. One is speed, the other one is quality, and the third one is flexibility. These are the big changes we have implemented in our own brands. That has taken us to show, as I said, growth of our own brand full-price business globally. That has taken us to grow our total business of ASOS design in the UK by 9%, and to gain market share. One of the critical things behind is the development and the performance of our test and react, one of our flagship projects during the course of the last six months. Test and react is already 15% of our sales, of the sales of our own brands. And test and react is the technology that enables us to be able to understand what the consumers want and react fast and deliver it to them. And that's why we can deliver it to them in the right time, at the right price, to the things that they are looking for. These are some of the examples of the trends we have seen over the last six months. stripes, crochet, boxy shapes, barrel legs. These are things that we learn from the market, we learn from social media, we reacted immediately, we put it in front of consumers and it worked very well. When quality and speed come together, this is when we see the project or if you want the ambition or the test, not the test, sorry, the project working at its best. And let me illustrate that with one example. One of the star categories over the last six months has been needware. Needware is where we have improved significantly our quality and our speed to market. Today, 50% of our needware business in ASOS design is done through test and react. And we have seen double-digit growth globally in the business of needware with ASOS. I think that that is a very clear example of how far the concept can go and how ambitious we can be if we continue going down this path. When we move to our partner brand's business, we have seen, again, a very strong development from variable contribution, less strong from a top-line point of view. We were aware of that. We knew that our own brands would come first. But we're also seeing a very interesting and a very strong momentum happening here. And this is built on three things. One is making sure that we have the right selection of the right partner with us. We have implemented a new brand acquisition team, and this team is having an impact. Over the course of the last six months, we have added 25 new brands. And when we are adding new brands, we are not adding them randomly. We have new brands that are relevant for our consumers. As I told you, we want to be a destination for consumers. So that means we're adding brands in the areas where consumers are interested. We have been adding brands more on the higher end of our assortment, brands like Arquette or Bean by Lola that have resonated with our consumers and are working very well with us. We have also added brands that are exclusive to ASO so we are the first retailer in the UK or in Europe and in that sense for instance we have Princess Polly that is an Australian brand that we are the first the first retailer in the first wholesale partner in Europe and we have added a brand like Gina Trico that is a Scandi brand that is working very well as well and we are the first retailer and partner in the UK for that brand and we're also adding some cold classics brands like Prohibited for instance That is a brand that is also resonating very well with our consumers, that we're styling with vintage products, and we are seeing that it's part of this destination. We are the place where consumers can find all these brands that they are looking for, or find or discover the brands they don't know. That is also a very important part of this journey. The second thing here that is very important is how we have gone deeper in the relationship with some of our core partners. And just to quote some examples here, one would be Mango, a brand that I already quoted in the full year results that had amazing results last year. During the course of this year, we have added Mango Men, and it's working very well with us. And other brands would be Adidas and New Balance, where we have had exclusive items that have worked very well. And I will give you a little bit of color immediately. So this is also part of this discovery journey, being able to offer consumers exclusive items that are the result of our great relationship with some of these key brands. And the last piece is our flex fulfillment models. We have already gone up beyond the 7% of our partner brand business, and we are working with more than 120 brands. So we see that this is gaining more and more momentum, and we are very optimistic that our business in this area will also continue developing very well. As I mentioned, I wanted to give you a little bit of color about the cow print. If you didn't hear about the cow print, it means you were not in the UK in February this year. So I'm sure you heard about it. Or you were maybe skiing. Who knows? But that has been one of the big things happening in the world of fashion in the UK this fall, this autumn. Or spring, actually. And what we did, in case you were not here or you forgot because there are so many things happening, It's like we launched an exclusive colorways with two of the most iconic Adidas products that are the Adidas Sambas and the SL72s. It was a cow print colorway and to reinforce that concept, we use our test and react technology. We created a collection of 10 exclusive items in the course of three weeks so that it was gonna be part of that launch. The D-Day was the 19th of February, and what we saw that day is that traffic grew 70% with zero investment in discounts and zero investment in additional marketing beyond some coffees that we were giving away in King's Cross. So quite modest, to be honest. So that shows the power of when we put these things together. It was interesting to see that we sold out the Adidas styles in quite significant numbers in a matter of hours, a couple of hours. We sold out the exclusive collection. We sold 90% of the units in a matter of two weeks. Actually, we've been repeating this collection ever since and that has been creating more traction with consumers and more excitement. And I think this is a great example of how powerful it can be when we put together both things. Great relationships with some of our key partners our capacity to react to trends very fast and to come to market with relevant products for our consumers. Let me move to the second pole of action, which is efficient operations. I've been talking about that for the last two and a half years. We are relentless in making sure that we are disciplined with our cost management and we have continued doing that. As I said before, we have seen a good development in our cost lines. And I wanted to highlight here two activities that are very relevant. One is what we have done on our supply chain. We have reduced our supply chain costs by 20%, pretty much by reinventing our supply chain. We have simplified our supply chain. You've seen we have closed some of the fulfillment centers we're having, and that has helped significantly. But we have also improved our processes. And just to give you an example, our pick-and-back process is now 10% more efficient than at the beginning of the year, and obviously that has an impact. And there is more room to go here. We will continue. simplifying our supply chain, and as we announced in January, we are closing our warehouse in the US to move to a hybrid model, and I will give you more color later, but we're also seeing opportunity to reinvent the way we're working with some of our partners, our delivery partners, to make our supply chain even more efficient. So we see more room to improve here, and that is a very important area of activity. Another one that I wanted to highlight is returns. Over the course of the last, not only six months, more than that, we've been working on returns. with a full, if you want, package of activities, going from improving the quality of our products and the consistency of our sizing, improving the way we communicate sizing to consumers, using AI to make a better match between what consumers are buying and the sizing of the products to reduce unnecessary returns, and also with the implementation of our net threshold on returns. Our obsession is to reduce non-value-added returns. We think that returns is a critical part of the online experience, but we really want to reduce non-valuable returns. And what we have seen is that in the course of the last six months, we've been able to reduce the underlying return rate by 150 basic points, which is a significant reduction. Again, we see more room to improve here. We think that we can improve more in the use of AI, and we can also continue rolling out these net threshold returns so that we expect that we will be able to continue reducing and improving here. Our obsession with efficiency in operations is not only on costs, it's also on capital allocation. We want to make sure that we are always making the best use of our capital to release resources, to reinvest, as I said before, and to marry the two concepts, to reinvest in our consumer-facing activities. In this sense, over the course of the last six months, we ensured that we were gaining flexibility in our balance sheet through the successful joint venture on Topshop Topman, We have also, as I mentioned before, optimized further our operations in supply chain through the mock polling of Atlanta and not to be also forgotten, the implementation of our new commercial model and the discipline in this new commercial model has helped us to increase the speed of our stock trend and that obviously is releasing capital that we are using in other areas. Yeah, okay. How are we doing that? I think it's interesting to give you a little bit of color here. Basically, the new commercial model, one of the obsessions is return on investment. When we invest in stock, we want to return on it. This returns comes to two main options. One is to sell more, sell through. The other one is to sell with less discount, markdown. So very simple. I like simple things. How do we do that? Well, we improve our sell through and reduce our markdown through three main levers. One is speed. So the closer we make the decision to the moment of sell The higher the hit rate, the lower the markdown, and the higher the sell-through. That is always great news. The second one is an effective in-season management. We're not waiting until the end of the season to act. When something is not working, we monitor that every week, and we take action immediately to make sure that we have an impact. And the third one is obviously the implementation of our flex fulfillment models that is helping us to offer our consumers more depth and more width in a more efficient way. The outcome of that is that during the course of the last two years, we have accelerated our stock turn by 35%, releasing a lot of capital that we are deploying somewhere else in the business. I wanted to pause for a second and give you a little bit of color on the US, which I think is a very interesting example and probably, I don't know if the word is extreme, but certainly stark example of these new policies and this new model that we have implemented. As I told you before, over the course of the last two and a half years, we have been focused on this creation of a sustainable, profitable growth. And in some cases that has, in all cases, that has meant taking some actions that has not necessarily pushed our top line sales. We have reduced the stock significantly, as I told you, around 60% over the course of the last two years. We have reduced promotion and we have reduced the investment in performance marketing in the case of the US significantly more than in other geographies. That has had an implication on top line. The top line of the U.S. over the last six months has dropped by 28%. We have dropped some sales that were not profitable, but were sales. But at the same time, we have increased our variable contribution in the U.S. Actually, the U.S. has shown the highest growth in variable contribution to become one of the most relevant contributors in the company in absolute terms. So obviously, that is very helpful, and that is the right direction of Trump. Lately, we have come with another wave of change in the U.S. And this wave of change has come through two different things. One is like we are becoming more, we are developing our activities into a more and more customized way. So we have a specific team working with the U.S. that has been working on how do we sell to consumers, on how do we do marketing activities to consumers to be more customized to U.S. consumers. And we have changed our delivery model in the U.S. We have mobile at Atlanta warehouse, as I told you before, and we have evolved into a hybrid model where we're serving the U.S. from our fully automated warehouse here in the U.K. in Barnsley, from a smaller and more flexible facility in the U.S. and through partner food fields. The outcome of that second change is really encouraging. Over the course of the last weeks, we have seen our sales trajectory in the U.S. The run rate has improved double digit, while we have significantly reduced discounts, and we see a much higher level of engagement with consumers because they are exposed to a bigger assortment. So we are very, very encouraged by that change. And this change is going to have also another impact, of course. It's going to help us manage our fixed costs. By multiple in Atlanta, this year it will not have a visible impact, but next fiscal year we expect an impact on our EBITDA between 10 and 20 million pounds. So that is clearly the outcome of making the right decisions. In terms of capital allocation, that helps us improve and offer a better concept to consumers. So again, this reinforcing look. And last but not least, I want to talk about engaging customer experience. Here, we're only starting the journey. As I told you, this is the journey to go back to growth, to go back to excitement, to regain the heart of our consumers. And the first thing we have done here is to change our marketing model. We had a marketing model that was really focused on the bottom line or the end of the funnel, and we have evolved into a full funnel marketing model. As a result of that, we have increased the influencer network that we work with, and we have increased that by 30%. during the last six months, and that is having an impact. We are improving our ROAS, but we are also improving the reactivation of consumers. In the UK, it has gone by 7% versus last year, so we are seeing quite interesting results, but that is only the beginning of the journey. The interesting part is going to come now. First, on the product side, During the course of the next six months, we will see test and react going from 15% up to 20%. And this is going to come, obviously, by going deeper in all the categories where we are, but also rolling out to new categories like swimwear and tailoring. This is also going to happen by adding new brands. And we successfully launched a new brand more on the middle, higher price range of the price range we offer, called Arrange, with a very, very successful launch that we sold out in a matter of a few days. and there will be new drops of this brand coming soon. We are scaling our partner fulfills model and we will go beyond where we are right now. We are rolling out partner fulfills in the US and in Ireland and we are also adding a major global brand through AFS soon and we are also continuing adding more and relevant brands. 40 will come during the course of the second half of the year, some of them as relevant as Good American, one iconic brand, or ice cream that is a William Farrell brand or some iconic brands like House of CD. You see the brand. It's up to 40. And as I told you, we're going to work a lot on the customer experience side to make it more exciting and more inspirational. I wanted to highlight three things. There are a lot of things happening here, but I will not bore you. I wanted to highlight three things here. One is the launch of our loyalty program, ASOS World. We have been testing it during the last months and we will be launching it in the second half of the year, so soon. This is a program created around excitement and fashion in our program around discounts. It's a program created around access to product and exclusive experiences. It's a tier-based program and we have been testing it. I mean, some of these experiences are early access to product. Some of these experiences are early access to back-end notifications or some of these access is to exclusive events or to our AI power stylist. It's quite interesting to see that in the test group that we have launched, the people that are interacting with the AI stylist have increased the amount of products SaferLater by 60%. We know that SaferLater product is a clear living indicator of sales. 30% of our sales normally come from SaferLater. So that seems to be a very good sign that this program is going to help us improve the quality of our relationship with our consumers and make it more exciting. As I told you, this is about customer experience, and for us, customer experience is about personalization. We are working very hard in this topic. Not only through the AI stylist, we are improving our search and recommendations engine, and we are landing already new search in a more personalized way, and we will be landing during the course of the next month new recommendations algorithm in a more personalized way. we are launching an AI outfit, AI power outfit creator, where consumers will be able to create outfits out of a specific item, taking into account their preferences and their history. And we're also launching in these next months, ASOS Lives, where we're gonna have much more video content and a much more, obviously, live relationship with consumers, because it's gonna be live, and we are very excited about what it can bring in terms of the quality of our engagement with our consumers. But not least, I want to talk about Topshop that I'm pretty sure is one topic that everybody is also quite interested. We really believe that Topshop is a great brand and we're listening to our consumers because they also think it's a great brand. We've been working in the product, improving the product over the course of the last two years, seeing that the product was in a place where we were feeling more confident. We launched a specific team to take care of Topshop Topman. We've been investing in reigniting the brand heat and based on the reaction we have seen in social media, I think the team is doing a great job. And the time has come for Topshop to come back and has its own expression in front of consumers. In that sense, we are relaunching Topshop.com in the next months. In Q4, we will see Topshop.com live again. And we are, I shouldn't say slowly but surely, but we are coming to physical presence. We have already reached some agreements with some wholesale partners and we're going to do some more to have physical presence. And if I can say that, stay tuned because we will be coming with more news over the course of the next months. So in a nutshell, we're very excited in this transformational journey of becoming the most inspirational fashion destination, but no but, and with a flexible and resilient business model. We think that an improvement of 60 million EBITDA is a very clear proof that this transformation is working. We're very happy about the outcome of all the activity that we have done over the last six months on test and react, on quality, on adding new brands, on adding more partner fulfills, on adding more exclusives, on managing more actively our assortment. And the outcome, as you see, is, as I said, the growth of our own brand and at the same time, full price business, and at the same time, increase of 490 BIPs our gross margin. There has been also a lot of activity in terms of reinventing our supply chain, in terms of returns, in terms of capital allocation and that has created a better cost structure and a faster stock trend and we are also very excited about the activity that is coming and how it's going to help us to really continue in this journey of transforming ASOS and making it the more exciting fashion destination. in the planet. So with that, I hope it was not too boring. I'm gonna hand over to Dave that is gonna share with you the numbers and the guidance, and then we will move to Q&A at the end. So thank you very much.

Thank you, Jose. Morning, everyone. As Jose just said, I'll walk you through briefly our half one performance in a bit more detail, conclude with our outlook, and then we'll take Q&A from the front as well. Regarding the first half, as Jose's just said, our headline here is on our profitability improvement, driven by our new commercial model. Delivering an adjusted EBITDA improvement of almost 60 million year-on-year, supported by both higher gross margin and better order economics, despite the volume due leverage. Taking it through in order, our adjusted constant currency sales declined by 13% year-on-year. Slight improvement on the high teens we outlined at FY24 results, driven by a continuation the trends discussed there namely annualizing the declines in old and aged inventory and a significant reduction in unprofitable performance marketing against this we've seen strong performance in our new stock operating under our commercial model with our own brand full price sales returning to growth year on year adjusted gross margins are up 490 basis points year over year driven by an improved full price mix and the lower discounting that we can do Cost to serve have increased by 60 basis points with strong underlying cost performance broadly being offset by the volume due leverage. The result here is an adjusted EBITDA improvement of 60 million year on year to 42 million, primarily driven by that gross margin improvement and our focus on cost efficiencies. Stock reduced by 181 million year on year to 412 million as we continue to see the efficiency benefits of our new commercial model delivering more efficient return on inventory. Our free cash flow in the first half was an outflow of 84 million, primarily driven by a return to our normal spring-summer intake seasonality earlier in the half, resulting in a significant year-on-year reduction in the trade payables. However, we are still expecting to balancing free cash flow in the second half to leave us broadly neutral as guided. Net debt reduced by 73 million year-on-year as a result of the Topshop Topman transaction and the refinancing that we completed in September, less the impact of the half one free cash outflow. By geography, performance to results similar to what has previously been shared, the variation in revenue performance reflecting the profit actions we've taken across the group in different markets to consistently improve profitability across the board. Our UK sales performance was relatively strongest We've already referenced the performance of ASOS Design, which is gaining market share in the UK, given this is where our strongest brand equity is. US top-line performance does continue to be the weakest of our core markets, but again, as Jose's mentioned, the profitability improvement we're seeing here has resulted in the strongest improvement year-over-year across all of our regions, as earlier discussed. The general trends across the board, declines in active customers while conversion holding steady and ABV increasing, result in resulting in like-for-like sales performance better than the visits to client. In relation to growth margin in half one, as said previously, the main driver of this has been a better execution of full price sales and a lower markdown that we're seeing under the new commercial model. New revenue streams, including flexible fulfillment, continue to be gross margin accretive as they will continue to scale as well. As mentioned, our cost to serve increased by 60 basis points, driven primarily by the operating deleverage across our other predominantly fixed cost items, despite continued improvements in both our distribution and warehouse cost ratios. However, it is worth noting that excluding the introduction of the Topshop topman royalty, our cost to serve was broadly flat year on year. We held our fixed cost base broadly flat year on year despite General inflation that's seen demonstrated a continued focus on driving through efficiency in our cost base. You can see this in our adjusted EBITDA average, a significant year-over-year improvement really driven by the benefit from that gross margin in our commercial model, despite the volume deleverage we've seen, along with the benefits that we're getting in our variable cost to serve. Finally, before turning to outlook, I just want to walk through the half one free cash outflow. Eighty four million in half one, where the primary drivers are inflow from the inventory reduction, which has been more than offset by the reduction in the trade payables as we return to our normal spring summer intake seasonality. The half one EBITDA seasonally lower than half two as normal, meaning that combining this with our net capital outflow, networking capital outflow, CapEx interest and lease payments resulted in a free cash outflow in the first half. In half two, expect a significant free cash inflow driven by the inverse of many of these factors. Seasonally higher EBITDA in the second half and an inflow from our network to capital. Again, our guidance here isn't changed. Finally, to just touch on Outlook, In FY25, continuing to expect the same as we've said before. Gross margins to continue to improve to more than 46%, driven by the commercial model and this full price mix. Adjusted EBITDA growth at at least 60% to 130 million to 150 million, including the impact of that top man royalty. We expect revenue growth at the bottom end of consensus range for FY25, as we continue to focus on creating a solid base on which we'll drive sustainably profitable revenue growth. However, to note that we do expect our GMV growth to be one to two percentage points better than revenue growth, driven by the scaling of our flexible fulfillment models. As this becomes a large part of our base, we will report this on a regular basis, so expect more of that in the full year. Again, continue to be broadly free, cash flow neutral, capex remaining at 130 million and cash interest of 35 million. Into the medium term, expect to continue to generate adjusted EBITDA sustainably ahead of capex interest taxes and leases with adjusted EBITDA margin of moving towards 8% and a return to revenue growth. Our new commercial model can drive materially higher gross margins towards the 50% through a higher full price sales mix, our flexible stock models and the benefit that we see to our revenue derivatives. As a result of the considerable improvements we've made to our operating model, We're confident that this will help us deliver a meaningful free cash inflow in FY26. On that, I will open up to Q&A.

John Stevens at Pill Hunt. A couple of questions to get us going, please. Just in terms of the tariff effect, Do you think there is an opportunity for better factory-grade pricing, whether that's a short-term window or permanent, and what do you see it doing for bought-in over the next year or so, potentially? Second question, just in terms of the underlying customer KPIs, I don't know the extent to which you can X out the active churn from the new commercial model coming in, but what's actually happening under the hood? What are you seeing in terms of frequency? What are you seeing in that underlying chain of active customers, those that are with the business already? What do new customers look like? And finally, can you just comment on what the full price sales mix is today versus what it would have been sort of pre-COVID just as a benchmark and where the business is?