Burberry Group plc

Good morning, everyone, and thank you for joining us for Burberry's Preliminary Results presentation. In terms of our agenda today, our presentation will be structured into three chapters, before moving on to Q&A. I will start with a review of the first phase of our strategy, then cover our vision and plans for the next phase. After this, you will hear from Julie, who will cover our financial results and guidance, I want to start today's presentation with a review of the first phase of our strategy and what we have achieved to date. Fiscal year 21 has been an exceptional year, with the COVID-19 outbreak continuing to impact livelihoods and industries globally. In the last 12 months, we have focused on prioritizing the safety and well-being of our colleagues, partners and customers. contributing to the relief efforts to support our communities globally, continuing to create a more sustainable future for luxury through our ambitious sustainability agenda, and protecting our business to deliver a strong financial performance. Stepping back to three years ago, in 2017, we announced our vision for Burbank. Our goal was to firmly establish our position in luxury fashion and to inspire customers with our unique British attitude. We set out two phases to reach our vision, with clear objectives for the first phase. We wanted to re-energize our brand, renew our product, evolve our communications and transform the customer experience. We also set out to maintain sales and profit broadly stable while undergoing this transition. And I'm pleased to say that in the last three years, we achieved what we set out to do and transformed our business. Starting with communications. In 2017, we said that we would re-energize the brand by placing product at the heart of our communications. Reimagining content with a curated, edited approach and investing in meaningful experiences. And we have achieved this by completely redefining our brand image, renewing all brand touchpoints and elevating our position towards luxury and fashion. One of the very first steps we took was to redefine our brand image. And we did this by refreshing our logo and creating the TB monogram, along with introducing new house codes, which gave new energy to our brand. We presented our new collections in fresh and exciting ways. For example, by showing our Spring-Summer 21 collection outdoors in a beautiful English forest, and by introducing dedicated men's and women's presentations for Autumn-Winter 21. which we made available for everyone to experience digitally during lockdowns. Throughout this journey, we focused on the most relevant channels for the luxury consumer, particularly social media, through video-led content and activations on Instagram, WeChat, and TikTok, as well as occasionally surprising our audiences in totally unexpected ways. We also amplified our brand voice through others, including culturally relevant influencers and communities that have been advocates for our brand, and impactful press titles across every region. As a result, we have elevated the brand and significantly increased our visibility and engagement with luxury consumers. On social media, for example, which is a good indicator of brand heat, we've seen continuous traction. On Instagram, where we have achieved double-digit growth in both earned reach and engagement. And on WeChat, where our reach has also grown double-digit and our engagement levels by triple-digit. In terms of product, our ambition was to renew our offer by increasing fashion content, injecting newness and transforming leather goods. In the last three years, under Ricardo's new creative direction, We have achieved these objectives, transforming ready-to-wear to a new elevated fashion offer, building our leather goods business, diversifying outerwear in line with luxury consumers' preferences, as well as rebuilding our evergreen offer. In ready-to-wear, we elevated our collections, presenting a more luxury and fashion-forward offer. upgrading our products with higher quality materials, supporting higher price points. Additionally, we diversified and elevated outerwear, transitioning from a largely cotton-based offer to luxury pieces with a higher share of technical and eco fabrics, such as nylon, down, and quilt. In terms of leather goods, we also made a significant transition. In fiscal year 17-18, Our top-selling handbags were the Banner, the Rucksack, and the Buckle Tote, a basic offer with an entry-price proposition. Today, our top-selling handbags are the TB, Lola, Pocket, and Title, and you can see these shapes represent a real luxury leather offer, with a step-changing quality of materials, hardware, and finishing, supporting higher prices. They are also distinctive shapes, covering different functionalities, which are resonating well with consumers, like Pocket, which has received great response from our younger customers. More recently, we have introduced Olympia, first revealed on the Autumn-Winter 20 runway, a name after Olympia London, where the show took place. It's a unique, recognizable shape with its crescent curve, and made in beautiful calf leather. Thanks to the integration of Burberry Manufactura, we have achieved high quality and speed in delivery, resulting in margin improvement for this category. Through our efforts, we have seen great traction and sales growth in our core categories, leather goods and outerwear. As you can see from these charts, performance has been strong, particularly in the last two quarters of fiscal year 21, with double-digit growth in full-price sales for leather goods, and outerwear. And since these are our highest AUR categories, as a result, we have seen an improvement in AUR every year, with high single-digit growth across mainline and digital last year. In terms of distribution, in 2017, we said we would transform the distribution experience by reducing exposure to non-luxury channels building a luxury network in line with our brand, upgrading our stores, and transforming the in-store experience. And in the last three years, we have reset our distribution, focusing on luxury doors, upgraded our store's look and feel, and introduced a new store concept, transformed our store experience, and launched industry-leading digital innovation. we reset our distribution network in two phases. This allowed us to shift our network to a higher quality base while maintaining stable revenue and profit. In phase one, we exited non-luxury wholesale accounts and doors in EMEA and Americas, closed non-strategic stores, opened new stores in luxury locations, and refreshed our store's look and feel in line with our new brand image. In phase two, we took steps to reduce markdown activities and designed a new store concept which embodies our updated brand image. The images you see here illustrate our old store format and the step change we have achieved in look and feel by creating new luxury omnichannel spaces supported by impactful Windows and visual merchandising activations. In digital, over the last three years, we launched multiple industry-leading innovations, securing our leadership position in this space. We reimagined Burberry.com with a strong focus on product storytelling and inspiration and inspired consumers with our activations and games We launched our social retail pilot in Shenzhen Bay, bridging social and physical channels to innovate the way customers experience and shop our brand, and focused on creating a seamless integration of our online and offline customer journeys. Additionally, we partner with growing digital platforms to reach digital multi-brand consumers. As a result, from a strong base, we have achieved double-digit growth in full-price digital sales in the first three quarters of fiscal year 21 and triple-digit growth in the last quarter. As a result of these efforts, we have set solid foundations and have built a new Burberry. First and foremost, we have repositioned the brand, with external consumer research confirming that our brand is now firmly considered as luxury. We have attracted a new customer, gaining traction with young, influential, passion-forward consumers, while at the same time driving growth in our existing customer base. Importantly, in the last year, we have seen traction with our local customers, thanks to innovative selling formats during lockdowns. We have built a high-quality business, both in terms of revenue, where growth is being driven by full price sales, and you can see from the chart the momentum we have been having over the past couple quarters, and in terms of profit, with good progress in gross margin, now broadly in line with pre-transition levels. Performance has been strong across the key regions for luxury. In China, We delivered strong double-digit growth every quarter last year, well above industry average, through our significant local efforts. You can see some examples here of our dedicated Lunar Year campaign and capsule, as well as our digital activations with Tmall and Tencent. In the U.S., we have also seen strong performance, again above industry average. which has been supported by our focus on building cultural relevance, content partnerships, and visibility with key global influencers. Throughout the transition, we have focused on building a sustainable future with significant progress across three areas, colleagues, communities, and environment. Starting with the environmental, I'm pleased to say that by the end of this year, we will have a carbon neutral footprint across all of our operations at Burberry. In terms of our colleagues, we have built a diverse, equitable and inclusive organization that has been recognized in the latest Bloomberg Gender Equality Index and Hampton Alexander Report. And in terms of communities, we're really proud of the contribution we made to COVID relief efforts. as well as the partnership we have developed with Marcus Rashford and charities supporting youth across the globe. As you have seen over the last few slides, we are now successfully through our transformation and with new solid foundations are now into the next chapter of our strategy. And this next chapter is about growth acceleration. In this section, I want to outline what our ambitions are and how we will achieve them. In this next phase, we will leverage our unique brand to create significant value, delivering not only growth, but a step change in the quality and composition of this growth. Let me outline the framework we are using to describe this next phase. Sitting above everything is our brand, which we will continue to energize and strengthen throughout. We will also accelerate revenue growth, driven by high quality full price sales. We will deliver meaningful margin expansion and free cash generation. And finally, we will continue to be a force for good in the world, driving positive change for our colleagues, our communities and our environment. Burberry is a unique, powerful brand. with deep roots that set us apart from our peers, grounded in our rich heritage and the founding principles of our founder, Thomas Burberry. Through time, the Burberry brand has represented true luxury, committed to sustainability from our earliest days, from Britain to the world, in the outdoors and beyond. We are unexpected innovators with purpose-driven values inspired by our founder. These unique credentials shape what we want to be known for in the minds of consumers. A true luxury fashion house, creators of beautiful, iconic products, with a relentless focus on quality and craft. A beacon of creativity, imagination, and innovation. Authentic, the definitive luxury outerwear pioneer. A modern brand upholding our rich heritage and bringing a uniquely British perspective. A values-driven brand with a strong purpose, guided by the spirit of our founder. Committed to doing the right thing, from championing our community to protecting the environment. Throughout this next phase, we will continue to energize and strengthen the brand, ensuring the consumer sees us as I just described. Turning then to revenue, we will drive revenue acceleration through five key levers. Building brand advocacy and community. Focusing on core categories. Driving store performance. Supercharging digital sales. And focusing on full price. In the next pages, I will outline our ambition and areas of focus for each lever, including how each of these will contribute to accelerating our revenue growth. Starting with building brand advocacy and community. Our ambition for this next chapter is to excite and inspire the influential luxury consumers, the fashion vanguards, fostering a strong Burberry community. Today, Burberry is a highly relevant brand that all luxury consumers know and consider. The next step for us is to build strong affinity and advocacy for our brand, and this is the key to unlock growth. To drive this, we will focus on four areas. Strengthening the emotional connection with our community with authentic luxury storytelling. Leveraging our strong network of local and global Burberry communities, editorial partners, and influencers to amplify our brand. Driving reach and engagement through new social first content and formats. And creating unexpected, memorable brand experiences that unite and excite our customers. These actions will drive revenue by fueling demand and increasing our price in power. This ambition and focus have underpinned our latest campaign, launching next week, which celebrates our newest bag shape, the Olympia. The campaign will feature a globally recognizable and diverse talent and will tell a story of luxury with quality and craft at the heart. in a way that is creative and innovative. We will leverage our communities to create inspirational content to support storytelling. And large-scale installation in key luxury destinations will complement the campaign, manifesting our craft story on an epic scale. We will also drive revenue through a strong focus on our core categories. Our ambition is to leverage the strong elevated offer we have built over the past few years, maintaining focus and innovation around our anchors, outerwear and leather goods. Our priorities in this next phase will be in five areas. First, expanding our accessories pillars in leather goods. Second, building and owning fabric innovation in outerwear, focusing on luxury performance, and leveraging our own technical gabardine DK fabric. Third, developing a strong position in everyday beautiful ready-to-wear, focusing on 360 quality. Fourth, increasing our focus on shoes, a key category for customer acquisition. And lastly, continuing to build on our replenishment offer. These actions will drive revenue growth as the new offer will accelerate demand. The focus on higher AUR categories drives higher transaction values, and the development of our replenishment offer increases stock availability. Activities are already underway to deliver on our product ambition in this next phase. As an example, in leather goods, we will celebrate our key shapes through a program of over 70 pop-ups and in-store pop-ins in high visibility locations launching this month, including Harrods, which you can see in a preview image here. They will feature 68 leather goods options across our handbag pillars, including TB and Pocket, and celebrate our newest shape, the Olympia. In this next phase, we will also continue to drive our store's performance by creating a luxury, omnichannel experience that attracts and continuously engages customers. We will do this through four key priorities. Rolling out our new store concept and experience. Taking a lead position in omnichannel, including continuing to develop and scale our social retail concept. rapidly scaling outreach to drive appointments, and introducing bespoke clienteling formats. Focusing on local customers, driving customer acquisition, supported by locally relevant content and experiences. These actions will drive revenue growth by attracting new customers to the brand and driving a significant improvement in sales density. Our new store concept rollout has started at pace, with five stores open since the beginning of the new fiscal year, including Shinsegae Times Square in Korea, SKP Accessories in Beijing, and Umeda Ankyo Accessories in Osaka. Sloan Street, which is opening in June, will be the first flagship built with the new concept. The space will embody our luxury positioning. and is a drastic step change versus our old format, as you can see here from these preview images. The rollout of the new store concept will continue at pace over the course of the year, with 55 stores planned in fiscal year 2022, the majority of which will be in the Asia-Pacific region. We will also continue to create immersive in-store experiences to inspire and engage our customers. Building on our test lab social retail store in Shenzhen, we plan to scale successful experiences and activations across our store network globally over the year. The fourth lever to drive revenue growth is digital. In this next phase, we have a bold ambition to remain the digital pioneer in luxury, building on our robust digital foundations and credentials. To supercharge digital sales, we have plans in place to drive qualified traffic to our digital own channels through increased focus on inspiration and precision marketing. Significantly scale customer recruitment through data partnerships. Step change conversion through digital product assortment, personalization and localization. strengthen our clientele and capabilities to cultivate and retain our digital customers, boosting their lifetime value, and deepen our relationship with third-party digital partners. Through these actions, we will drive revenue growth by attracting new customers to the brand and accelerating digital sales, both on owned and third-party channels. capturing the increased demand in the industry. As an example of our progress on our digital ambition, our leather goods program in May will be supported on .com by the launch of the Handbag Hub, an interface offering the experience of our pop-ups virtually. The final lever to revenue growth is our focus on full price. Building on our progress this year, we will exit markdowns in mainline stores in fiscal 22, while focusing on full-price channels. This will enable us to further strengthen our brand and increase AUR, driving high-quality revenue growth. Moving now to the bottom line, in the next phase, we will also drive profit growth through five key levers. gross margin strength through pricing and replenishment, full price penetration, sales density, digital penetration, and continued cost control. This margin expansion will drive good operational gearing as we maintain cost discipline while at the same time enable us to reinvest in critical areas for future growth, consumer-facing activities, digital, and ESG. Our strategy in the next phase will be underpinned by a number of important enablers, including an agile supply chain that delivers exceptional quality and service, investing in consumer-led technology that allows us to enhance the customer experience, attracting and retaining diverse world-class teams while fostering a strong culture of inclusion and belonging, and maintaining operational efficiency. Throughout, in the next phase, we will be relentless in our focus on ESG. This is the purest expression of our values, and we are committed to building not only a financially stronger Burberry, but also a better company. By fueling the creativity of our people, by championing diversity and inclusion and supporting their well-being. Empowering young people in our communities by providing them with the skills, confidence and opportunities to succeed. And creating a more sustainable future for luxury by reducing our environmental impacts and helping transform our industry. Today's customers, colleagues communities and investors rightly expect more. Building on the progress we have made so far, we will accelerate our investment in ESG-related initiatives and raise our ambitions, something you will hear more about in the coming months. To summarize our ambition for the next phase, I would like to highlight our medium-term targets. In terms of revenue, we expect to deliver high single-digit growth from our fiscal 20 base with overperformance of full price. In terms of profit, we expect meaningful margin accretion. And from a cash perspective, we will reinstate a dividend for fiscal 21 and a progressive dividend policy thereafter. Finally, in terms of ESG, we expect to achieve three goals. Diversity and inclusion leadership, positively impacting one million people and become 100% carbon neutral. To conclude, I want to leave you with a simple statement about the vision we have for Burberry. The leading British luxury brand delivering sustainable, high-quality growth and value for our stakeholders and communities. Over to you, Julie.

Thank you, Marco. I will now take you through the financials and guidance. We will start by recapping on our objectives we set out in November 2017. The targets were to hold revenue and earnings broadly stable for two years as we built the foundation for growth. Investment in both product and distribution will be financed with the benefits of a cost-saving programme. we've achieved this the first two years were broadly in line with plan and in fact would have been ahead of our target had it not been for covered impacting the final quarter last year we delivered cost savings ahead of the original guidance at 150 million pounds and we've since bought cumulative benefits to 185 million including the covert related program as marco mentioned Whilst the targeted acceleration in revenue was disrupted this year, we used this period to strengthen the brand further and drive full price sales. We have built a better quality business and we've improved revenue and earnings composition. We also set up a robust financing platform with an investment grade credit rating, and we were the first luxury fashion company to issue a sustainability bond. We managed the COVID crisis well, produced a good financial outcome in the year, and we were well on track to see good acceleration, driven by full price sales from this point. Slide 49 takes us through the main financial figures. Looking at the results for the year and referring to year-on-year changes at constant exchange rates, total revenue was £2.3 billion, down 10% with a strong recovery in the second half. Adjusted operating profit was £396 million, a decline of 8%. The revenue fall of £289 million resulted in an adjusted operating profit decline of just £37 million. The normally high level of operational gearing was partially offset by the actions we took to manage the cost base with both permanent and temporary reductions. This resulted in a margin improvement to 16.9%. A higher tax rate and finance costs resulted in the adjusted diluted EPS falling 14%. And free cash flow in the year was $349 million, up significantly from last year, and we have returned to paying a four-year dividend at 2019 levels, given confidence in our strategy and strong cash position. Slide 50 shows the main moving part within our Q4 performance. Fall price sales performed well, rising 12% on a two-year comparative. We continued our strategy of materially reducing markdown volumes and shortening sale periods, reinforcing the equity of the Burberry brand, resulting in a 3% headwind to Q4 comp sales growth. COVID-related store closures increased this quarter, rising from an average of 7% in Q3 to 16% in Q4. And tourist destinations continue to see the most significant impact on trade, particularly Europe. Turning to slide 51. This shows the quarterly progression of our retail sales on a comparable store basis. Comped for a 9% decline in the full year, That started with a 45% decline in Q1 and closed with 32% growth in the fourth quarter. From Q4 for year 21, we entered a period of low comparatives as we started to anniversary the initial impact of the pandemic. For this reason, we have shown the results against Q4 2019 as we believe the two-year comp is more representative of underlying performance. This shows a decline of 5% in the fourth quarter. But turning to the chart on the right, we believe full price sales are the best barometer of the underlying brand strength and we're encouraged by the improving performance. Full price sales closed up 7% for the full year despite an average 18% of stores being closed and accelerated each quarter with Q4 up 12% against two years ago. Moving on now to slide 52, where we show the quarterly regional performance with Q4 against two years ago. The America's robust performance continued with a 15% comp and a 43% full price growth. Within this, the U.S. was particularly strong with a full price growth of up to almost 50%. driven by attracting new and younger consumers to the brand. Asia-Pacific grew 17%, with full price up 21%, with a standout performance in China and Korea. Mainland China accelerated and grew more than 50%, with full price up almost 70%. Korea also showed a strong performance of around 50%, with full price over 60%. This was partially offset by Japan and the rest of Asia-Pac that continued to be impacted by reduced tourist spend. EMEA fell 44% in the fourth quarter, impacted by around 50% of the stores being closed and a significant reduction in tourist travel. EMEA was the region most impacted by the pandemic. Both continental Europe and the UK fell by more than 50%, compared with 2019, whereas the Middle East increased by a mid-single-digit percentage. The quarter also saw continued strength in digital, with strong double-digit growth against two years ago, with China up triple digits, Asia almost doubling, and America and Europe up double digits. Slide 53 shows the group revenue summary, with retail sales down 9%, and group revenue down 10% at constant exchange rates. All areas of the business were up in the second half, except licensing. Wholesale was particularly strong, up 7% in half too, and this represents a good recovery, given the impact of the pandemic on Asian travel retail, given this typically accounts for almost a quarter of our wholesale business. As you can see from the previous slides, while 2021 was challenging, we managed through the crisis effectively. We saw a good recovery in financials and delivered higher quality revenue and earnings from full price sales and a streamlined operational cost base. We show the income statement in slide 55 where there are a number of key areas to highlight. Gross margin increased by 270 bits at CER, and adjusted operating profit margin increased 50 bits, and I will discuss both of these in more detail shortly. We saw a net credit from adjusting items of £125 million, with the major cash item being £54 million related to rent rebates negotiated with landlords. The effective tax rate rose to 25% due to the geographical mix of profits. Adjusted EPS fell 14% as a result. Slide 56 looks at the main moving parts of the growth margin, which increased to 70%. Around two-thirds of the increase is due to business benefits from full price, positive channel mix and regional mix as the business shifted towards Asia. The growth margin also benefited from COVID provisions taken in the prior year by around 80 basis points. Following the step change in gross margin in full year 21 to 70%, we believe this level will be sustained in full year 22 with a medium-term opportunity based on scaling the business, product categories, and full price mix. To help provide further clarity on the adjusted operating profit margin, we show the bridge on slide 57. The decline in profit was due to reduced revenue, partially offset, by an improved gross margin and OPEX reductions. The cost reduction programmes delivered 60 million this year, bringing cumulative benefits to 185 million. Property savings are enhanced by a 43 million pound reduction in amortisation charges following the store impairment taken last year. Please note, however, that the benefits from rent rebates are greater than this, at 54 million, and have been treated as an adjusting item and therefore not included on this profit bridge. We also voluntarily paid UK rates and did not take the UK furlough, foregoing a further benefit available. In summary, whilst there were reduced charges this year due to the COVID provision in 2020, they have been more than offset by cash benefits taken as adjusting items below the line, meaning this is a good quality trading outcome for the group. This brings us on to adjusting items that represent a credit of 125 million this year as shown on slide 58. This stems from two main sources. Firstly, COVID-19 related items of 137 million. We have mentioned the 54 million of landlord rent rebates, and additionally, there were 9 million of government grants also taken as exceptionals. In addition to this, our COVID provisions last year were taken at the height of the pandemic and trading in certain regions has improved considerably since that point, particularly in the US. We have therefore revised some impairments based on current and expected future trading below the line within adjusting items. Secondly, restricting costs and a profit on disposal netted to a 12 million charge in the year. We have shown the income statement split by half one and half two on slide 59, given the very different performance. Revenue in half two increased 8%. Gross margin increased significantly, leading to a 15% increase in half two gross profit. This, together with our focus on operating costs, resulted in a strong half two margin, with an 8% growth in sales converting to a 48% increase in profits. Going into full year 22, we expect the operating cost base to normalise as stores reopen and social distancing restrictions lift, allowing the more normal cadence of client engagement. We shall review the cost dynamics later to help you formulate your forecast. Having seen the robust performance in the income statement, we now take a look at how this converted to strong cash generation during the year and liquidity management. This year we have seen exceptional cash conversion, with free cash flow of £349 million, resulting from lower lease costs and prioritised capex, together with reduced tax and the close management of working capital. Inventory in particular was well controlled, with gross inventory 16% down from last year and 7% below two years ago, benefiting from improved sell-through. Cash conversion was strong at more than 100%. Turning now to our cash position on slide 62. As mentioned, overall our cash increased by 0.3 of a billion in full year 21. Importantly, we took a number of measures to restructure our financing sources. We obtained an investment grade credit rating to provide easier access to the debt capital markets. and issued our first sustainability bond to provide medium term financing. We also repaid the RCF and the government backed CCSF. As a result, we have 1.2 billion of cash at the end of full year 21, comprising 0.9 of a billion of our own cash and a further 0.3 of a billion from borrowings, with a further 0.3 of a billion available through the revolver. Since 2017, our financial policy has been to maintain a strong balance sheet with solid investment grade credit metrics. And this has placed us in a strong position throughout the pandemic. Our target remains at a net debt to adjusted EBITDA ratio of 0.5 to 1 time. And at March 2021, we had low leverage of 0.1 times. Had the dividend being paid during full year 21 at the level declared today, The net debt increases to 0.4 times on a pro forma basis. Today, we have announced the reinstatement of the full-year dividend back to 2019 levels. To recap, we have four priorities for the use of our capital. First, organic business needs. Second, a progressive dividend. Third, inorganic investments. And fourth, returning excess cash to shareholders based on maintaining solid investment grades. Next year, we expect to return to the policy of declaring an interim dividend in November. We also note our leverage is currently below our target range and we plan to return to that range from full year 22. Slide 64 highlights the use of cash over the last five years based on our capital allocation policy. It's worth noting that we've delivered high cash conversion over 100% on average, including 111% in the current year, And this presents us with the opportunity to invest in the business and provide investors with good return. Over the last five years, we've generated free cash inflow of 2.2 billion. And within this, we have allocated 0.6 of a billion to CapEx, 0.7 of a billion to dividends, 0.1 of a billion to strategic investments, and 0.8 of a billion to buybacks. Overall, we have invested $2.1 billion of the cash flows in the last five years, including a return of over $1.4 billion to shareholders via dividends and buybacks. This is equivalent to 17% of our current market cap, whilst maintaining net debt to EBITDA well below our one-time ceiling. Turning to guidance, as Marco mentioned, our ambition is to deliver high single-digit compound annual revenue growth from a full year 20 base. We wanted to take this opportunity to explain the building blocks as medium term margin accretion. Gross margin will strengthen on an underlying basis, driven by full price sales and will offset headwinds as travel resumes. Coming on to OPEX. Variable costs are a modest part of the cost base and will clearly rise with revenue. The balance of OPEX can be split between two main areas. Firstly, customer-facing areas that will see increased investment. This includes digital, marketing, visual merchandising and events that will rise initially ahead of sales in addition to ESG expenditure. Secondly, enabling areas that will be closely controlled. This is the general admin area that has been reduced over the last few years and will be held below sales growth providing a considerable operational gearing opportunity. We anticipate profit growth to be considerably ahead of sales growth in the medium term. Taking a look at a multi-year horizon, as Marco said, to achieve our revenue ambitions, we will build brand advocacy and community through distinctive and meaningful storytelling, formats and experiences that inspire influential luxury consumers. we will focus on our core categories, drawing on the strong offer with the anchors being outerwear and leather goods. We'll create a truly omnichannel luxury experience while focusing on local consumers. And we will supercharge digital sales and continue to be focused on full price. In terms of operating margin, our aim is to proactively optimize sales growth to take advantage of the strong foundation we have built in the last three years, and we will invest to maximise this opportunity. Fall year 22 will see costs normalised and increased investment to accelerate growth. Meaningful margin accretion is expected in the medium term, driven by revenue and leveraging our fixed cost base. The presentation today highlights how we've transformed our business and built a new Burberry. We completed our objectives for the period with a revitalised brand image, renewed product offer and elevated customer experience, ending the year with strong full-price momentum. Despite the challenges of COVID, we have seen improved earnings quality, excellent cash generation and built a strong financial platform. We have reintroduced a full annual dividend at the 2019 level, giving our confidence in the success of the strategy and on the back of this robust performance. Supported by these foundations, we are targeting an acceleration in growth and we expect to lead to a high single-digit compound annual revenue growth, a constant exchange rate and meaningful margin accretion. Thank you for joining our call. We look forward to your questions and I'd like to leave you now with a video that summarises the journey. Thank you. Thank you.

First telephone question today is from the line of Louise Singlehurst from Goldman Sachs. Please go ahead.