Howden Joinery Group Plc

Good morning everyone. Lovely to be back in a room and seeing everybody face to face. Welcome to the HIDENS 2022 results presentation. I'll begin by introducing our performance for the year. Paul Hayes will then review our financial results for the period. I will then share my perspective on 2022 performance and our plans for 2023 and then we'll take your questions. 2022 was a successful year for Howdens. We were reporting record sales and profits for the year. And with our continued program of investment in our key capabilities, we now have end-to-end a stronger business than we had in pre-COVID times. Group sales rose around 11% on 2021 and 46% on 2019, being the year prior to the onset of the pandemic. And our market share increased significantly. We consolidated the step change in profits achieved in 2021. 2022 profit versus 2019 increased 56%, a higher rate than for sales. And our gross margin was similar to last year's as we mitigated significant input cost pressures with disciplined pricing. Our builders remain busy and we made good progress in our strategic plans, both for the UK and for international operations whose sales continued to increase. The business delivered strong cash flow and we continued to maintain a robust balance sheet. This gave us flexibility both to invest in our growth plans for the business, at the same time provide shareholders with enhanced cash returns in the form of increased dividends for the year and a 250 million share buyback program, which was completed in the period. You will see from the R&S announcement that we've moved on with our ESG agenda. In 2021, we achieved carbon neutral manufacturing at our Howden and Runcorn sites. In 2022, we maintained zero waste to landfill across all manufacturing and logistics with our depots reaching 99.7%. In October 2022, 96% of our UK depots switched to using renewable energy generated in the UK, primarily from wind, solar or hydropower. And we've committed to developing our net zero targets with the science-based targets initiative, signifying our intention to reduce significantly our emission throughout our supply chain. And to achieve net zero by 2050, having half our direct emissions by 2030. The results demonstrate the strength of our local trade-only in-stock model, and we believe we took market share again this year following the gains we made last year. A strong product lineup, high stock availability, industry-leading service levels, a very engaged team have all contributed to our performance, which benefits from the ongoing investments in our customer-focused strategic initiatives. In 2022, our customers on average spent more with us than in 2021, and we had a record number of customer accounts at the year end. We also increased our prices, which helps us defray most of the significant rises in input costs across the year. As well as protecting gross margin, the business delivered annual volumes well ahead of pre-COVID times. Sales for our peak autumn trading period, which for us comprises periods 10 and 11, were the highest ever, with our supply operations delivering an exemplary level of service to our depots. Given prevailing macroeconomic circumstances and ongoing inflationary cost pressures, we're expecting a more challenging marketplace in 2023. However, we have prepared for this, and our customers, who are mainly self-employed people, are adept at managing their businesses through such times. Delivered by our highly entrepreneurial and well-incentivized teams across the business, I believe that our service-orientated trade-only, in-stock, local business model is the right one to deliver sustainable market share gains across changing market conditions. Our model is difficult to replicate and compete with, and we have initiatives in place to make it more so in markets where the long-term opportunities for us are larger than previously thought. We are prioritizing investments in the business on this basis. Now, I will update you on our strategic initiatives, which are key to the longer-term development of the business after Paul has taken you through our financial results for the year. So I'll hand over to Paul. Thank you.

Thank you Andrew and good morning everyone. I'm pleased to be presenting Howden's financial results for the 52 weeks ended 24th of December 2022. We delivered another strong set of results this year, building on the excellent performance we achieved in 2021. Overall group sales increased by 11% as we supported our trade customers with a market leading product range, excellent stock availability and outstanding customer service. Sales were significantly above pre-COVID levels and we've continued to take market share and maintain our sector-leading margins. We also successfully navigated high levels of inflation and ongoing supply chain disruption given the continued headwinds from an uncertain macroeconomic environment. Gross profit was £122 million ahead of 2021 at £1.4 billion. The lower percentage a gross margin of 60.9% was predominantly due to the successful growth of our solid work surface business, given the lower gross margin percentage on these products. Despite high levels of ongoing inflation, we have continued to recover increases in commodity costs, freight and energy costs through price increases. Operating costs of £996 million included inflationary cost increases and our ongoing strategic investments to drive growth. I will provide some more colour on this a little later. As a result, we generated an operating profit of £415 million, up from £402 million in 2021, and 60% ahead of our pre-pandemic levels in 2019. Our operating margins were 17.9%. After net interest charges, profit before tax was up 16 million at 406 million, 56% ahead of 2019. We incurred a tax charge of 31.6 million pounds in the period. This included the impact from the previously announced patent box claim, which we submitted to the HMRC during 2022. The claim includes some catch-up from benefits relating to prior years, which significantly reduced the overall effective tax rate for 2022. I'm pleased to say that if the claim is approved by HMRC, it will also have an ongoing benefit to our effective tax rate, and I'll describe this a little later. After all these items, profit after tax was £374.2 million. So, let's look at revenue in a bit more detail. Haldon's UK revenue increased by 10% to £2.3 billion on a total basis and was up 7.7% on a same depot basis. The UK results reflect both underlying growth across our depots and the benefit of new and revamped depots. The highlight was our record performance during the peak trading period in the autumn. This showed the benefit of our vertically integrated model and the scale of our distribution and supply chain operations. We supported our customers with availability levels above 99%. This was despite a busy selling period. This has been possible from our investments in inventory and cross docking logistics that Andrew will update you on later. During 2022, we have continued to grow sales of our entry level and mid-range kitchens while expanding our ranges of higher priced kitchens, where there remains a significant opportunity to take market share from independents. Our investment in our solid work surface offer and further manufacturing capacity has been an important contributor to our success this year. In the international depots, we generated revenue of 74 million euros, which was a 40% increase on 2022, and that's after adjusting for the closure of five French depots. Our focus here remains on building out the successful Haldens model in major cities, and we're making good progress with our strategy. We also open for business in Dublin and we're excited about the opportunity to expand our footprint in the Republic of Ireland. Now moving on to profit before tax. Bridging from 2021 PBT of £390 on the left, you can see we grew PBT by £16 million to £406 million in 2022. Gross profit increased by £122 million, with similar volumes to last year, against the record prior year comparatives. The solid work surface business grew strongly following the acquisition of Sheridans last year, and the business has added significant capacity. To remind you, solid surface products have a lower gross margin percentage, but an attractive cash margin, given the higher order values. We were very effective in implementing price increases early in 2022 ahead of ongoing inflationary product cost increases. You can see on the slide that price benefits of £195 million more than offset product cost increases of £68 million. You may recall that the first half margin benefited from these early price increases ahead of cost increases. As anticipated, there was an element of catch-up of costs coming through the P&O in the second half, which resulted in the margins normalising. Cost increases have included higher commodity costs, freight and transportation and energy costs, and these were partially offset by operational initiatives and efficiencies. Operating costs increased by £109 million as we continue to support our ongoing investment in our strategic initiatives. We've broken this out on the next slide. We have invested significantly in driving our strategic initiatives. Bridging from left to right, the incremental cost of the 30 new UK depots opened in 2022 and the 31 depots opened in 2021 totaled £17 million. Costs in older existing UK depots increased by £42 million over the period. About half the increase was a result of higher inflation, which included labour, energy and other depot-related costs. We also brought forward the 2022 salary increases into the first half to support our employees. In addition, we made a one-off payment of £500 to those employees most affected by the cost-of-living crisis. This investment of £7 million was the right thing to do to support our employees during a difficult time. Warehouse and transportation costs were £31 million higher as we continue to support our in-stock model. This includes our investment in additional warehousing capacity to support growth and regional cross-docking centres, or XDCs, that improve product availability across our ranges. XDCs represent about half of the overall investment. And given the rise in energy prices, we have also incurred higher transportation costs with increased fuel prices. We've also continued to make further investments in digital, helping customers with new, more flexible ways to trade with us. We invested in our international businesses by opening 25 new depots in France this year, concentrating on the Paris metro area. We're also now expanding the depot network into other major cities such as Lyon and Marseille. The £8 million increase also includes the cost of the 10 depots opened in France during 2021 and our five new depots in the Republic of Ireland. Now moving on to tax. You will recall that we made a patent box claim last year and we can now provide some more detail. In recent years, the UK government has introduced the patent box tax relief scheme to encourage companies to develop and commercialise intellectual property. The scheme allows a reduction in corporation tax when a company earns profits from patented inventions. In 2017, we submitted a patent for a multi-part adjustable leg made from recycled plastic, which we now use on all of our cabinet ranges. This patent was granted in 2020 and the picture here shows the kitchen with the plinth removed so you can see the adjustable leg. The product is strong and robust so that heavy cabinets can be moved across an uneven surface without the legs breaking when they're fitting the kitchen. They are also quick to install and easy to adjust. Under HMRC guidelines, companies can claim tax relief for the time that a patent is in force up to a maximum period of 20 years from the date of filing. We have worked with advisers and the tax authorities to determine the most appropriate structure for that claim. Now, in line with the accounting guidance, IFRIC 23... We have now included the tax impact of the patent box in the financial statements. There is a catch-up element to the claim and a total tax benefit of £36 million has been recognised for the financial periods 2017 to 2021. The success of the patent box claim and the amounts set out in the 2022 financial statements will need to be accepted by the HMRC. but as we consider it more likely than not to be successful, we have accounted for the claim, which is in line with IFRIC 23. Going forward, assuming current prevailing tax rates, we expect the pattern box to reduce our effective tax rate by around 3% in future years. The cash benefit will be realised once HMRC has approved our claim, and we'll provide further details and timing once this becomes clear. Now moving on to cash flow. From an opening cash position of £515 million, we ended the period with £308 million of cash and net cash outflow of £207 million. You can see from the slide that this was mainly due to the shareholder returns of £365 million, including dividends of £115 million and the £250 million share buyback. Overall working capital increased by £52 million to support continued high levels of business activity. stock increased by £70 million as we continued to hold higher levels to underpin our in-stock business model. Now, more than half of that increase was due to inflation. Debtors were £24 million higher than at the previous year end, reflecting the sales growth and the ageing is in good shape. This was offset by higher creditors of £42 million. Capital expenditure totalled £130 million and included depot expansion and revamps and investment in our supply chain and manufacturing sites. This also included expanding our digital capabilities and new depots in France and the Republic of Ireland. You can also see the cash outflow of £25 million relating to the purchase of Sheridan's solid work surface business, which we completed in February 2022. This included 10 million pounds to acquire the site. There was a cash outflow of 115 million pounds for the 2021 final dividend and for the 2022 interim dividend. Now turning to earnings per share. EPS in 2022 was strongly ahead at 65.8 pence, which compares to 53.2 pence in 2021. This includes the impact of the patent box claim and the reduced share count from the share buyback. Turn into dividends. As a result of the group's strong performance in 2022 and our confidence in the outlook, the Board has proposed a final dividend of 15.9 pence, which brings the full year dividend to 20.6 pence, which is an increase of 5.6%. Now turn into our technical advice for 2023. Firstly, as previously identified by many of the analysts, we have a 53rd week. Now, this falls during the Christmas period when our depots are closed, so there are around £17 million of additional costs, but no incremental sales. The ongoing P&L impact of the patent box is worth a 3% reduction in the tax rate, and we would expect an effective tax rate of 22%. In 2023, operating expenses will include the full-year impact of inflationary cost increases and our ongoing investment in our strategic initiatives. This includes new depo openings, expanding our manufacturing and supply chain, including XDC, ongoing digital investments and new depo openings in France and the Republic of Ireland. Foreign exchange moved against us in the second half of 2022, and you will see the potential four-year impact of a one-cent movement in the euro and the US dollar that's shown on the slide. In terms of cash items, we'd expect capital expenditure to be broadly in line with last year as we continue to implement the strategy. Most of the investment is going to support the strategic initiatives. And moving on to pensions, you'll be aware that we have a large final salary scheme which is closed for future accrual. The scheme moved to a small deficit on a technical provisions basis at the end of 2022. Should that position continue, we will need to contribute £2.5 million per month into the scheme, which would be up to £30 million in a full year. And finally, capital returns. In addition to the ordinary dividend, we're also today announcing a £50 million share buyback programme. This is in line with our capital allocation policy, which I'll cover on the next slide. Our capital allocation policy is unchanged. We focus on achieving sustainable profit growth by investing in and developing our business. We also want to maintain and grow our ordinary dividend in line with earnings to reward shareholders with an attractive ongoing income stream. After allowing for these uses of cash, Hounson remains committed to return any surplus capital to shareholders. Our policy is to distribute net cash in excess of £250 million to shareholders on an ongoing basis. And we are confident with this level of cash, the balance sheet will remain strong. So in summary, we've made great progress in 2022. We've delivered strong financial results and are making good progress on our strategic initiatives. Our balance sheet and cash flow supports our continued investment in the business and growth, as well as providing attractive returns to shareholders. Business enters 2023 in great shape and we remain confident in our business model and our ability to continue to make good progress in the year ahead. Thank you. I will now hand you back to Andrew.

Thank you very much, Paul. As I mentioned in my opening comments, we believe the opportunity for the Houdens model are greater than previously thought and we're investing in the business accordingly. Definitions and estimates of the size of the UK market vary. However, based on our proprietary research, we think a reasonable estimate for the market as we think about it is around about 7 billion by value as at the end of 2022. This is larger than we'd assumed previously and gives us plenty of room to increase our market share. Similarly, for other product categories, which include joinery and hardware, we now think of the value of our addressable market as some $4.5 billion, with our share of such categories lower than in our kitchen share. Prior to any changes in market volumes, this gives us total addressable markets of around $11.5 billion versus the $2.26 billion of UK sales that we achieved last year. Turning to our 2022 performance and our plans for 2023, I will use our strategic initiatives for the business as a framework. These are fully aligned with our trade customer only focus, our entrepreneurial culture and based around our core building blocks that are providing trade service and convenience, trade value and product leadership. So these four initiatives are to evolve our depot network, improve our range and supply management, develop our digital capabilities and services, and expand our international operations. So the first strategic initiative is developing our depot network. High service levels, including local proximity and immediate availability, are very important to our customers, and we continue to see profitable opportunities to open up new depots. We're using our updated format for all depot openings. This enables us to provide the best depot environment in which to conduct and work businesses and to make space utilization and productivity gains in cost-effective ways by utilizing vertical racking in the warehouse sections of the depots. In 2022, we opened 30 depots, taking the total to 808 by the end of 2022. Overall, we believe there's scope for around 1,000 depots in the UK, and we plan to open around 30 depots in this year. These will include some of our smaller sized formats that we tested in 2022, utilizing our next day delivery distribution system, which we call XDC to support in-depot stockholdings. The smaller version enables us to open a depot in places lacking suitable properties to accommodate a standard size depot or to open up in an infilled area to provide more local service in less densely populated areas. We've progressed our revamp program for existing depots, which continues to receive very positive feedback from depot staff and customers alike. And providing such a trading and working environment is very important for competitive positioning. During 2022, including relocations, we reformatted 82 depots, taking the total number of revamps to a total of 185 for year to date. The revamps are budgeted to pay back in less than four years, and the depot P&Ls are charged a reformat cost, which ensures the depot teams are motivated to deliver incremental sales. As we revamp more of our estate, we are modifying the scale and scope of the revamps at depots with relatively lower catchment areas so as to maintain the incremental returns. Including relocations, we plan to complete revamps of around 80 more depots in 2023 and to re-rack warehouses of some more without concurrent modifications. By the end of 2023, we expect to have revamped around 40% of those depots which opened in the old format and to have around 50% of all UK depots trading in the updated format. The next strategic initiative is range and supply management. And we're committed to providing market leading and competitively priced product for our customers to sell onto their customers. New products launched in 2022 included 21 new kitchen ranges with an emphasis on higher priced kitchens and on making our most popular styles accessible to all budgets. We innovated in other categories, for example, joinery, which also attracted footfall and can lead to increased kitchen sales. Sales of new product made a significant contribution to our 2022 performance. Total sales of new product introduced in 2021 and 2022 represented around 22% of UK product sales. Sales of new product introduced last year increased by 69% in 2022 and first year sales of new product were up some 11% on first year sales of new product last year. Higher price product contributed more to our kitchen mix by volume than in the same period last year. And the change in mix contributed to the increase in our average kitchen invoice value. Disciplined range management is crucial for both best availability, which is highly valued by our customers, and for profitability. In recent years, we have reorganized our range architecture, removing duplications, and improving the balance between new kitchen introductions and timely discontinuations. We have also introduced a more efficient way of testing new kitchen colors and finishes, which we call Find the Gap. which has enabled us to bring more proven new styles of kitchen ranges to market more quickly. In 2023, we will have more entry and mid-price kitchen ranges, and we are expecting the number of current ranges available to all depots to be around about 90, organised into 10 families. Value for money is always at the forefront of most purchasers' buying decisions and is likely to be never more so than in 2023, with some choosing to reduce their overall spend on a kitchen or to reallocate how they spend their budget, for example, between range, worktops and appliances. Entry-level kitchens have traditionally been our strongest performers and sales volumes of such kitchens are a major contributor to keeping our unit cost of manufacture low. For 2023, we are increasing the net number of ranges aimed at this and the mid-market segments, making more kitchen looks and styles accessible to all budgets. We're extending our entry ranges with more colour options, including Greenwich in Reed Green, Whitney in Pebble, Navy, Allendale in Dusk Blue, and we have new frontals for Greenwich and Whitney to match the Croft Grey cabinet that we are introducing this year. We are refreshing the look of our best-selling kitchen shaker family, which we have named Halesworth, and we are adding a new mid-priced beaded shaker family bridge mirror, initially available in three colours. Recent introductions of higher priced kitchens have proved very popular and in 2023 we were refreshing our offer to these market segments, but keeping to a similar range count to last year and the same number of families. New colours for 2023 include Hockley both in black and fair green and Chilcombe in marine blue and we have easier to fit handless range, a look often associated with the high street independence. In February 2022, we acquired Sheridans, a long-established and leading industry specialist for the manufacture, fabrication, laser templating and installation of premium work surfaces. The acquisition has helped us accelerate our plans to develop Haydn's work surfaces as a market-leading supply and fit business in a growing segment of the market in which we are underrepresented. Bringing more of our solid surface capability in-house simplifies the delivery of the service, gives us more control over it, and brings associated cost benefits. Our in-house solid surface capacity is now amongst the largest in the UK. The number of solid surface worktop orders increased significantly in 2022. And for 2023, we're adding six more color decors to our solid surface template and fit capability. For 2023, we've reinvigorated our offering in other categories. For example, indoors with more styles and builder, with more colour and builder styles at all price points. To flooring, including the launch of a new in-house brand, Oak and Grey. In appliances with further additions to our Lamona brand, which is the leading integrated appliance brand in the UK, alongside extensions to a range of third-party branded products. And in sinks and taps with more styles, colours and finishes. We are committed to providing competitively priced product for our customers and we have reinforced our focus on price and promotions which demonstrate the value we offer and promote footfall across the year. Howdens is an in-stock business and the trade tell us that the high level of stock availability is one of the key reasons that they buy from us. We protect and facilitate high stock availability in several ways. We have long-term relationships and agreements with many of our suppliers, and being a manufacturer ourselves helps us anticipate potential issues with our supplier factories. We manage the inbound logistics for 75% of our bought-in SKUs from factory gate, which improves our visibility of how this stock is flowing through the supply chain. And we use multimodal freight routes to minimize disruption and optimize delivery times. In 2022, we continue to hold enhanced safety stock as a contingency against unexpected demand patterns and interruptions to supply, with heightened emphasis on stock manufactured in-house. As a result of improved supply chain stability, we will continue to operate with enhanced safety stocks in 2023, but at more normalized levels by volume than in recent years. We've improved in stock replenishment by supporting the depot's core weekly delivery through investment in a next day delivery service via regional cross-stocking centres, or XDCs, and by rebalancing where we hold stock across the estate. Feedback from depots and customers using the service has been extremely positive, and we see XDCs as an enabler to delivering the high levels of service and availability which differentiate our offer. The improvements to stock replenishment enable depots to hold deeper stock of faster selling lines, make it simpler and more efficient for them to deliver superior service levels and availability, backed by certainty over lead times. The time spent and cost incurred in stock management, for example, on interdepot transfers of products, Then exiting of discontinued products are reduced and it helps to de-risk depots ranging decisions, which if incorrect, can be costly to unwind. We have developed this capability with third party logistics partners and in the main using their facilities and infrastructure. By the end of 2022, the service is available to 711 depots, up from 400 at the end of 2021. And in January 2023, the service is extended to Scotland and is now operating across all mainland regions, supplied by a network of 12 XDCs. We keep under review what we believe is best to make or buy, balancing cost with supply chain availability, resilience and flexibility. In 2019, investment in manufacturing technology enabled us to make the doors for our popular Hockley kitchen ranges. Since then, we've invested in new lines which enable us to make more doors and panels for more of our kitchen ranges. at the same quality as we can source externally, but at a lower cost and at a reduced lead time to delivery. The new lines located in our Haydn site have commenced manufacturing and will be ramping up to fuller scale production during the course of 2023. Our second Ark Traven skirting line is also now operational, enabling us to service in-house more of the substantial increase in demand that we've seen for these products and for which we are extending our offering in 2023. The supply of kitchens to trade is Howden's principal activity, and we make all the kitchen cabinets and some of the other products we sell, which is a source of competitive advantage for us in several ways. Last year, we announced our intention to extend over the next few years the kitchen manufacturing facilities at our Howden site. We are progressing our investment plans to do this, which will enable us to increase our kitchen manufacturing capacity to make more kitchen furniture within our core competencies, including doors and more finishes, and to configure some of the associated infrastructure. Now turning to our digital platform. We use digital to reinforce our model of strong local relationships between depots and their customers by raising brand awareness, to support the business model with new services and ways of trading with us, and to deliver productivity benefits and more leads for our depot teams and our customers. In 2022, usage of our online account facilities, which provide efficiencies and benefits for customers and depots alike, has continued to increase. New registrations totaled nearly 80,000, and around 45% of customers have an online account by the year end. Average weekly logins to our trade platform increased by 49%, with around 75% of users looking regularly at prices. Customers with online accounts have on average traded with us more frequently and spent significantly more than non-users, and proportionately more of them bought across more product categories. In 2022, we added capabilities to our trade platform, including new app-based functionality, and we'll continue to do so again in 2023. We launched our trade app, which puts more of the local depot in a builder's pocket. The app replicates core features of the online trading platform, including a user's account details and credit status, and makes these readily accessible to them at any time. Users can view their open orders and new features include rapid check-in at the depot, order status updates, and easy order collection functionality. Around 20% of our regular users of the digital account traders are now using the app. Capabilities we've added in recent times are helping end users interact with Howdens online at each stage of their decisions. creating higher quality leads for our designers and customers. The content on Real Kitchens, which utilizes user-generated content to showcase Howden's kitchens in people's homes, is being used frequently by both consumers and our designers, and there are now some 3,400 images to view. Our kitchen visualizer is raising end-user familiarity with our kitchens, our appreciation of their priorities leading to higher quality contact with our kitchen designers. The market leading search functionality we now have enables users to find what they're looking for much more efficiently to the benefit of our teams, to their customers and end users alike. We continue to see high levels of engagement with our web platform and growing in our social media presence which also stimulates interest in viewing our products and services on howdens.com. Impressions were present in 15% more organic search results a month and site visits totaling 21 million. The time that users spend looking at pages increased 51% and the number of page viewed per session was also up. Across social media sites, our follower base at 455,000 was up some 14%, with 1.6 million users actively engaging monthly. As our digital presence grows, awareness of Houdens amongst end consumers has increased. In 2022, our unprompted brand awareness amongst end consumers was 24%. That's around twice what it was in 2019, and we see potential to raise awareness to higher levels. In 2023, we'll be adding new service and capabilities to our trade platform, which collectively improve stock and account knowledge, promote frequency and ease of trading, and reduce time-consuming manual tasks in depots, including stock allocation. These range from a new multi-list feature which gives visibility of dates saved for future projects, enabling depots to prioritize leads on a daily basis and customers to manage all their jobs, and to use digitized in-stock management system to record and pick deliveries, check allocations, and determine depot stock levels. We will have more digital content for end users, including kitchen trends and Houdens around the home, which feature insights from influencers, tips and tricks, makeovers and product spotlights. The final strategic initiative is international. Our operations based in France continued to make progress in 2022. The kitchen market in France is estimated to be worth around 4.3 billion, excluding appliances, with most kitchens purchased through kitchen specialists or DIY stores. As long-term followers of Howden's will know, we tested our ability to access this sizable market in several ways before adopting a city-based approach, serving solely trade customers, led and staffed by people who embrace the Howden's way of doing business. The performance of the refocused business gave us confidence to open more depots. And by the end of 2022, we doubled the depots trading in France and Belgium to 60 in a two-year period, with around half of these located around the Paris area. We believe appreciation of the advantages of our trade-only in-stock model, our service levels and competitive pricing is growing. And in 2022, total sales and local currency increased around 24% and we're some 90% up on 2019. With gross margins above the UK's, as our offer in France presently is a higher kitchen content than in the UK. Around 90% of the product is common to our UK ranges, and this helps us realize scale benefits. Over the next two years, we expect to open around 30 more depots, including around 10 in 2023. This will take the number of trading to around 90 by the end of 2024, including 45 or so in the Paris area. In 2022, we also opened up for business in the Republic of Ireland. We're using a similar location strategy to that in France, with the depot team supported by our UK infrastructure and our digital platform. During 2022, we opened five depots clustered around Dublin. Our arrival in the Irish market has attracted much attention locally, and we're encouraged by the depot sales to date. We plan to open up more depots and expect to have around 10 trading by the end of 2023. So for 2023, we are well planned on our interlocking strategic initiatives, which are aimed at increasing our market share profitably. High stock levels is a major contributor to our performance. And in 2023, we will continue with our safety stock policies, but at more normalized levels. Most of our new kitchen ranges for 2023 will be in stock by the end of June, well ahead of autumn peak trading and with more emphasis on entry and mid price points. We have a program of rooster promotions in place to keep Howden's front of mind of the trade. together with bang on the money price initiatives. And we will continue to make improvements to service and availability, including by utilizing XDCs efficiently. And we are increasing the range of services and functionality we offer online to the benefits of our depot teams, customers, and end users alike. We'll be making more in the UK as our new kitchen door and skirting lines commence fuller scale manufacturing and our solid surface business grows. During 2023, we plan to open around 30 depots in the UK and refurbish another 80 existing depots to the updated format. In France, we plan to have around 70 depots trading by the end of 2023 and to have around 10 trading in the Republic of Ireland. So lastly, on outlook. Now, while it's early days, we've made an encouraging start to 2023 and we're very confident in our business model across changing market conditions. We aim to retain a profitable balance between margin and volume whilst aligning operating costs and working with suppliers to keep product and input costs controlled. Sales in periods one and two increased versus the comparable ones last year, and our feedback is that builders currently remain busy. We are mindful of the changing current macroeconomic conditions, including ongoing inflationary pressures, And we are trading against record prior year comparators. However, all in all at present, we have the momentum for another successful year in 2023. And we will continue to invest in our key capabilities and grow opportunities which are pivotal to the long term development of the business. And finally, all of this is achieved through our 10,000 staff and thanks goes to each of them for their performance over the last year. Thank you for listening and we'll now take your questions, please.