Tesco PLC

Good morning everyone and welcome to our preliminary results presentation. I'm joined by our CFO Imran Nawaz and in a few moments I'll give a brief introduction. Imran will then talk you through the full year results and after that I'll update you on the progress we've made against our strategic priorities, as well as talking to you about the current market environment and our outlook for the year. We then allowed plenty of time for Q&A at the end. We all know that has been an extraordinary year. I'm really proud that throughout all of the challenges and changes, we have stayed resolutely focused on our customers. Our commitment to value has been unwavering, and we have delivered market-leading availability. All of these efforts have resulted in continued strong growth, building on our momentum and helping us to emerge from the pandemic as a stronger business. This has only been possible thanks to the brilliant work of the entire Tesco team, and I want to thank every one of them for going the extra mile for our customers. It has been fantastic being able to get around and meet many more colleagues over the last year, and I feel very privileged to work alongside them. I'm delighted that in agreement with Osdo in the UK, we've been able to agree a substantial new pay deal for our UK store colleagues, as well as a further thank you payment in recognition of colleagues' amazing contribution last year. Our future success depends on our colleagues and our commitment to them has never been stronger. Before I reflect on business performance, I wanted to take a moment to speak about the war in Ukraine. All of those affected are in our thoughts. We were really quick to respond together with our colleagues and customers doing whatever we could to help. Our teams in Central Europe started to transport donations of food and other essential items to the border within hours of the conflict starting, as well as supporting with logistics and supply chain capability at the border. To date, we have supplied nearly 1,000 pallets of food for humanitarian organisations and are helping in other ways too, such as making it easier for refugees to access job opportunities and removing all charges from calls and money transfers to Ukraine. As always, the generosity of Tesco colleagues and customers is incredible. Together, we have raised almost £4 million to support the vital work of the Red Cross, as well as more than £500,000 for humanitarian organisations in Central Europe. Since I presented our results to you 12 months ago, our business has dealt with a remarkable amount of external change. We have continued to support customers and colleagues through the pandemic, navigated significant industry disruption, and further improved our competitive position despite inflation starting to bite. You can see on the slide the contribution we have been able to make on so many different levels. helped by the efforts of our colleagues, the capability of our supply chain, and the strength and depth of our relationship with our supplier partners. Turning to our business performance. As I set out in October, customer satisfaction is critical to our success. It is the best measure of whether the efforts we are taking are being recognised by customers and underpins our ability to grow in the medium term. Over the past year, we have made conscious investments to strengthen the shopping trip for customers, such as expanding Aldi price match and ensuring we had sufficient resource to keep products on the shelf throughout the industry supply chain challenges. I'm really pleased to say that these efforts have been recognized. Our level of outperformance for customers recommending Tesco versus other supermarkets has further improved over the course of the year. As you'll see here, our brand Net Promoter Score has also continued to strengthen. As you know, holding our growing market share in our core UK market is really important to us. It provides us with the scale and reach to serve more customers however, wherever and whenever they choose to shop. This year, we gained market share in every single month. Importantly, our outperformance was even stronger in volume terms than in value, as we held back inflation. You can see that this is set against a market share decline for the rest of the Big Four, which is even more marked in volume terms. We had our longest unbroken run of switching gains too, with 23 consecutive periods where we picked up trade from our competitors. Progress against this measure isn't linear and you should expect it to move around quite a bit, particularly as we see some normalisation in the market. We are pleased with our market share performance across our other markets too. Ireland has driven an improvement of 11 basis points as we have strengthened our value offering and focused on making shopping easier for customers. In Booker, while there isn't a defined market share metric for the wholesale market, we're really pleased with both our customer retention and our rate of new customer acquisition. We also saw an improvement in market share in Central Europe. As you can see, we've delivered improvements in quality, customer satisfaction, and brand perception too, with all three businesses benefiting from leveraging the group's scale and capabilities. Over to you Imran.

Thank you, Ken. Good morning, everyone, and thank you for joining us. I'll start with an overview of performance, followed by some more color on trends and drivers. Throughout my review, percentage growth rates will be expressed in constant currency, unless stated otherwise. In the year, we have delivered a very strong performance in all of our key metrics across the group. Group sales grew by 3% on a one-year basis and by 10.2% on a two-year basis, with a strong performance across all regions on top of exceptional sales last year. Group profit increased by 58.9% to 2.8 billion. This reflects the strong sales performance across the retail businesses, a reduction in COVID-19 costs and a return to profitability in the bank, partially offset by inflationary pressures in the cost base and ongoing investment in the customer proposition. You'll remember that at the half, we introduced a simpler retail free cash flow measure. And on this basis, retail free cash flow was 2.3 billion, up 0.9 billion on last year. This was driven by higher retail operating profits, the elimination of the UK pension contribution following our one-off contribution last year, and a working capital benefit from higher sales, partly offset by an increase in capital expenditure. Net debt at the end of the year was 10.5 billion, £1.4 billion lower than last year, primarily driven by the strong free cash flow generation. In line with our targeted payout ratio of circa 50% of earnings, we have proposed a final dividend of 7.7 pence per ordinary share, taking the full year dividend to 10.9 pence per ordinary share, an increase of 19.1%. Our headline earnings per share of 21.86 represents an improvement of 88.8%, with the recovery in retail and bank profits more than offsetting the higher tax charge. Total retail sales for the year were 53.8 billion with profit of 2.6 billion. Both our UK and Ireland and Central Europe segments delivered a strong profit recovery with quantum profits exceeding 19-20 levels for each segment. Tesco Bank generated 176 million of profit compared to a loss of 175 million in the prior year. Over the next few slides, I will cover the performance of each of our segments in more detail, starting with sales before moving on to profit. Sales have shown good momentum in each of the UK, Ireland and broker businesses. You'll see the exceptional growth on a two-year basis, with substantially higher sales than before the pandemic. More specifically, in the UK, sales grew ahead of our expectations, with like-for-like growth of 0.4%. our relentless focus on value and service drove consistent outperformance against the market throughout the year. While we saw deflation over the year as a whole, our numbers do include some benefit from inflation in the second half. In Ireland, while we delivered double digit like for like growth on a two year basis, our one year like for like declined. we traded over an exceptionally strong comparative with restrictions on hospitality in place last year for longer than in the UK. In Booker, one-year like-for-like sales grew by 15.3%, driven by a sharp recovery in catering sales as the hospitality industry reopened. Retail was also resilient against a very tough base. I'll now break down sales by quarter and then give some color by channel and then by category. In terms of like-for-like growth through the year, you'll see that our UK and Ireland businesses followed a relatively similar shape. Q1 growth was impacted by the lapping of stockpiling and the first lockdown last year. This was followed by stronger growth in Q2 as we lapped a period of lower restrictions and with warmer weather, staycations and events such as the delayed Euro 2020 this year. Q3 and Q4 then lapped further lockdowns. By contrast, for Booker, while sales quantums followed the typical seasonal shape with a summer peak, you'll see that growth rates built quarter by quarter throughout the year, following the phased reopening of hospitality from period two. Focusing on our UK business, you'll see that we delivered a strong performance in our large stores throughout the year, with some normalization in customer shopping behavior, resulting in higher levels of store footfall and discretionary spend. we have consistently focused on delivering a great customer shopping trip, investing to protect availability in light of the strong pressure on our supply chains. As anticipated, with some of our customers choosing to return to shopping in our stores, we did see a decline in online sales, especially as we lapped last year's peak demand in the second half. our online business remained significantly larger than before the pandemic, with two-year like-for-like of 66%, which equates to 2.3 billion of additional online sales. We were pleased that our convenience stores returned to growth in the second half, with a particularly strong growth in our on-the-go stores as City Centre footfall started recovering from Q2 onwards. Turning to performance by category, food obviously reflects the majority of our business, and for the year as a whole, delivered sales that were slightly down, reflecting elevated levels of in-home consumption in our base. Looking across the year, we saw food sales declines in Q1 as we lapped the start of the first lockdown and the period of stockpiling, followed by growth across both Q2 and Q3. In Q4, food sales did decline year on year, reflecting very strong comparators. We saw strong growth in both GM and clothing in the first half of the year, which reflects lower discretionary spend in the first lockdown last year and a benefit this year from the continued closure of non-essential retail. Growth in clothing was particularly strong, especially in kids and leisure wear, as we continue to evolve our ranges to reflect changing customer demand. As a result, we were able to achieve a higher proportion of full price sales, supporting our profitability. Our non-food performance also benefited from rebalancing our space in 116 stores over the last couple of years, making our clothing more of a destination and our GM ranges simpler and easier to shop. On a two-year basis, we delivered growth across all three categories, 8.1% like-for-like in food, 1.6% in GM, and 15.1% in clothing. Turning to Ireland, where sales were 10.6% higher than pre-pandemic, with a strong performance across all categories and all channels. On a one-year basis, our sales declined by 2.9% as we traded over a strong performance in the prior year, reflecting the marked impact of stockpiling in Ireland and the longer period of restrictions on hospitality. We continue to see strong growth in our online business, where we have increased geographic coverage and expanded click and collect locations from 28 to 65 stores. Online now represents 8% of our sales in Ireland. We've announced our intention to acquire 10 Joyces stores in Galway, providing us with a platform to reach more customers and to bring online to more locations in the West of Ireland. Subject to regulatory approval, we expect to complete this transaction this year. In Booker, sales have grown strongly on both a one-year and two-year basis. Performance versus last year was driven by the sharp recovery of cratering sales, which grew by 56.1%, as the hospitality sector reopened for outdoor dining in April and indoor from mid-May onwards. Given the level of COVID-19 distortion, I have included some quarterly charts here on a two-year basis. You will see that our retail business has delivered very consistent growth on a two-year basis, maintaining the increased sales from last year. We are really encouraged by our strong customer retention supported by maintaining our keen focus on pricing. Our catering business recovered strongly from Q2 onwards, and we worked hard to mitigate the impact of significant supply chain challenges. Growth in Q4 was lower than in Q3 due to the emergence of the Omicron variant and its impact on the restaurant industry. In Central Europe, like-for-like sales were up 2.9% on a one-year basis and 2.5% on a two-year basis, with growth across all channels and categories. In addition to some benefit from inflation, we saw a strong one-year performance from non-food. We were able to offer our full range following non-food sales restrictions last year and saw customers returning to our large stores. In addition, we've doubled the size of our online business over the last two years, albeit from a relatively small base. Moving on to profit. As you can see on this graph, retail operating profit improved by $686 million year-on-year to reach $2.6 billion, driven by our UK and Ireland segment. In the UK and Ireland, profit growth of 35.4% was driven by a number of factors. In the UK, COVID-19 costs reduced from $892 million last year to $220 million, with this year's costs primarily relating to absence for those colleagues who were sick or self-isolating. We benefited from a sales recovery in categories that were particularly impacted by COVID-19 last year, including margin-accretive categories such as clothing. We invested in customer shopping trip in price and service. Our efficiencies across the year mitigated the operating cost inflation that we saw coming through, especially towards the end of the year. In Central Europe, profit was up 41.1%, again reflecting lower COVID-19 costs. Non-food sales grew strongly following the restrictions last year, and we benefited from higher mall income. As in the UK, we continued to invest in our customer offer, and our operating efficiencies largely mitigated cost inflation. Turning to Tesco Bank, we have seen some recovery in volumes this year, driven by an increase in new business, although lending balances still remain below 19-20 levels. The bank's return to profitability was predominantly driven by the year-on-year movements in bad debts. The profit also included a 13 million contribution from Tesco underwriting, which is now fully consolidated following the acquisition that we completed back in May. As you can see from the ratios on the slide, the balance sheet remains strong. As a result of the stronger performance this year, the bank paid an £87 million dividend to Tesco Group, consisting of the usual £50 million plus a catch-up of £37 million in relation to the dividend paid last year. This slide gives you more detail on the components of our statutory profit performance, which increased by 186%, as higher adjusting items and tax charges were offset by a reduction in finance costs. Formerly known as exceptional items and now as adjusting items, we incurred 265 million of adjusting charges in the year. As mentioned at the half, this was driven by 193 million settlement relating to historic shareholder litigation claims, which was paid in full in the year. Net finance costs were 542 million, including a fair value remeasurement credit of 123 million, primarily relating to the mark-to-market movement on inflation-linked swaps, which was a significant change to the prior year. Before fair value remeasurements, net finance costs were £58 million lower than last year at £665 million, driven by lower net pension finance costs and a lower interest charge on lease liabilities. Our tax charge was £510 million, up from £104 million in the prior year. This reflects the growth in operating profit both in our retail business and in Tesco Bank. We also incurred a one-off charge due to revaluation of our deferred tax liability, following the increase to the UK Corporation tax rate from 19% to 25%. Moving now to our cash performance. Based on the simplified definition that we introduced at the half year, we generated 2.3 billion of retail free cash. And I'll talk you through the major components and year-on-year movements. Before working capital, you'll see that we generated 4.3 billion of retail free cash from operations, an increase of just over a billion. This reflects higher sales and lower COVID-19 costs, as well as the benefit this year of 351 million from no longer making contributions to the pension scheme, following our one-off contribution last year from the Asia disposal proceeds. Our total working capital inflow was 501 million, mainly driven by a sharp recovery in fuel volumes and the recovery of Booker's catering business in the first half. Working capital in the second half was then broadly neutral, with the typical seasonal unwind after the summer peak being offset by strong sales in the UK and higher fuel payables, reflecting both volume and cost price inflation. Capital expenditure was 1.1 billion, in line with our guidance range, and we have provided the usual breakdowns by region and type in the appendices. This was £148 million higher than last year's capex, reflecting more store openings across the UK and a continued expansion of our online proposition in both the UK and in Ireland. We paid £641 million of interest costs, of which £402 related to finance charges on lease liabilities and £239 to interest paid on bank debt. Cash tax paid was 195 million, benefiting from three factors. First, a benefit of 120 million from the one-off pension contribution last year following the disposal of our Asia business. Second, a benefit of around 80 million from the new super deduction for certain capital investments, which was introduced in March 2021. And third, a benefit from the utilization of prior year losses. We expect the first two of these factors to recur in the coming year. We received 109 million pounds in dividends from Tesco Bank and Property Joint Ventures and purchased 144 million of shares in the market to offset dilution from share schemes. Finally, capital repayments of leases was 571 million. I've included this next slide to describe the performance of items now outside our simplified definition of retail free cash flow. The net business acquisitions and disposals line here includes 122 million of proceeds from the sale of our business in Poland to the selling group, which completed in March. Net property proceeds and purchases of 228 million relate to 308 million from the sale of properties, partially offset by an 80 million outflow related to property buybacks. The property sales included the disposal of our Fannylock distribution center, along with the sale of properties in Poland that were not part of the corporate transaction with the selling group. Partly offsetting this, we bought back one extra store in Barrie and a full stake in the Tesco Sarum Limited Partnership, bringing 11 stores into full ownership. Adjusting items principally covered the historic shareholder litigation claims that I mentioned earlier, which were fully settled in the year. On the previous definition, therefore, we generated 2.3 billion of retail free cash flow, compared to 1.2 billion in the prior year. In the coming year, subject to regulatory approval, we expect our other cash items to include the cash consideration for Joyce's, as well as a circa 200 million proceeds from the sale of 17 malls and one retail park in Central Europe that we agreed this month. We also exercised the option in February to buy back our partners' equity in the Tesco-Dorney property joint venture, which we expect to complete in the fourth quarter of this coming year. Turning to the balance sheet, total indebtedness was 10.8 billion down 2.2 billion with all three components of indebtedness reducing year on year. Due to the impact of market movements on our pension assets, we carried a 2.1 billion IAS 19 pension surplus at the end of the year in comparison to a 1 billion pound deficit last year. In line with our definition, this surplus is not included in indebtedness, so the 0.2 billion deficit that you see on the slide reflects only the pension schemes that are in a net deficit position. We also saw a 0.9 billion reduction in net debt before lease liabilities, driven by our strong cash generation. Finally, lease liabilities themselves reduced to 7.9 billion following the purchase of our partner stake in the Tesco-Saram Limited Partnership that I mentioned earlier, as well as the sale of our Polish business. Our total indebtedness ratio was 2.5 times compared to 3.6 times last year. Our new leverage ratio net debt to EBITDA was 2.5 times compared to 3.3 times last year and is midway in our target leverage range of 2.3 to 2.8 times. Our fixed charge cover was 3.5 times, up from 2.9 times. Along with higher retail EBITDA, the reduction in lease interest payments and lease capital in prepayments more than offset a small increase in net finance costs. I wanted to close by talking about shareholder returns. We've delivered a strong performance this year across sales, profit, and cash generation, and this does of course flow into shareholder returns. First, in line with our targeted payout ratio of circa 50% of earnings, I'm pleased that the proposed full-year dividend is an increase of 19.1%, at 10.9 pence per ordinary share. This increase reflects the growth in retail and bank operating profits, partly offset by the impact from last year's dividend policy exception. As I mentioned in October, we intend to pay a progressive dividend going forward. Second, having launched our ongoing buyback program in October, we have already purchased £300 million worth of Tesco shares to date. I'm pleased to be able to confirm today a commitment to buy back a total of 750 million worth of shares over the next 12 months. Thank you very much for your time. I'll now hand back to Ken.

Thank you Imran. Now to our strategic priorities. As a reminder, These are the four priorities we shared with you in October. Magnetic value for customers, I love my Tesco club card, easily the most convenient and safe to invest. I strongly believe in letting our customers see any new initiatives ahead of our competitors. So we won't be sharing any specific details of our future plans, but I will give you a sense of the progress we have made under each priority. Price is a critical component of magnetic value, and we have been unwavering in our commitment to keep prices as low as possible for our customers. Although we could not have foreseen all of the increasing pressures that consumers are starting to face, our efforts over the last 18 months or so have put us in a really strong position to help. You can see from the chart that we have strengthened our competitiveness throughout this year, reaching our strongest relative price position for many years. As a result, we are much better placed than we were the last time the market experienced significant levels of inflation. Importantly, customers are recognizing this too. Our value perception has gone from strength to strength. Over the last couple of years, you can see a meaningful gap opening up between ourselves and the rest of the big four supermarkets, over five full percentage points. So how have we achieved this? As you know, our value proposition is made up of three key elements, which together form a powerful combination. Aldi price match clearly plays an important role. it is serving its purpose really well, removing price as a reason to shop anywhere other than Tesco. The rigor with which we have made sure that our customers never lose out and the expansion of the basket to 650 lines in October have made it a really powerful part of the proposition. To give you a sense of just how important it is, Aldi price match items feature in 99% of weekly shops in our large stores, providing savings for millions of customers week in, week out. Club cart prices have also landed really well with customers. From the initial trials back in September 2020, we have now moved all of our promotions onto the scheme. As well as providing customers with a really clear sense of how much they are saving, it also enables us to negotiate the very best discounts for them with our suppliers. The most recent addition to Club Car prices was our iconic lunchtime meal deal. This allowed us to keep the price at an inflation-busting three pounds for anyone using their club card, at least 50p cheaper than most of our competitors, and at the same price as it was 10 years ago. Finally, the relaunch of low everyday prices, which benchmarks around 1,600 products to the cheapest available alternative base price, with a particular emphasis on household and health and beauty. This removes the need for customers to shop around on an even wider range of everyday products. Magnetic value is also about ensuring that we are offering our customers fantastic quality. I'm delighted that we've been able to step forward on this front too, particularly in a year with so many supply chain challenges. On the product development side, we launched over 300 new products in the year including adding a significant number of new seasonal lines to our Christmas range. We have also continued to work on reformulation, improving the quality of over 500 lines. Finest is a key focus for us as it offers customers the chance to trade into more premium products without needing to shop elsewhere. At a time when customers are recalibrating their choices as to whether to eat in or out, it's really important to have a great offer to suit every meal occasion. The finest range includes around 2,000 products and grew by 9.3% this year. It generated sales of 1.7 billion pounds, making it the UK's largest premium food own brand. As a result of our efforts so far, you can see from the chart that we delivered an improvement in quality perception this year against the market trend. You may remember that we launched ambitious new health commitments across all of our markets a year ago. Over the course of the year, we have continued our reformulation program, looking at ways to improve the nutritional characteristics each time we touch a product, either reducing the fat, sugar and salt content, or increasing dietary fiber. In total, we have removed a further 7.7 billion calories from our own brand ranges this year. Demand for plant-based products has remained high. Since our 2018 baseline, we have now grown sales of plant-based meat alternatives by 130% in the UK. In December, we launched a range of Wicked Kitchen vegan products through our Booker retail partners. and we have introduced PlanChef to all of our three Central European markets. Although we clearly made good progress on each of these initiatives, our overall percentage of healthy food has held flat for two key reasons. First, with more customers eating at home, we have seen some of our less healthy choices transfer from restaurants into retailers. Second, the temporary consolidation of ranges to support availability throughout the industry supply chain issues has had an effect. We remain committed to moving the percentage up in the coming year and are progressing well with our trials ahead of the forthcoming HFSS legislation. The final component of magnetic value is sustainability. Increasingly, customers see this as a given for whomever they choose to shop with. We launched our ambitious new climate commitments in September, bringing forward our net zero commitments for our own operations across the Group to 2035 and launching a new Scope 3 target of 2050. We were proud to launch the UK's first electric HGVs in January and to be the first to pilot them in Hungary and the Czech Republic. We're also making good progress on electric dot-com vans, For customers, our network of EV charging points is now in 500 stores, providing over 2 million free charging sessions to date. On plastic, we have now removed over 1.6 billion pieces of plastic from our operations, and we're the first retailer to roll out a nationwide soft plastic recycling program in the UK. We're also supporting innovations such as our trial with appeal on citrus fruit, which aims to minimize both plastic and food waste. Our community efforts always get great support. Under our buy one to help a child campaign, we made a donation for every piece of fruit and veg that customers bought over a period of three weeks. This enabled us to donate the equivalent of 3 million extra meals on top of the 53 million donated through our usual food redistribution programs. Moving now to the second of our strategic priorities, I love my Tesco club card. This priority is about combining the power of the Clubcard, our online grocery business, and our increasing digital relationships with customers to create a powerful digital platform. In doing so, we can unlock new value for our customers, for our suppliers, and for Tesco in the form of new incremental income streams. Clubcard prices has been a key enabler of this. encouraging more and more customers to use an app to interact with Clubcard. This drives greater frequency of interaction, enables a much more immediate relationship between earning, checking and spending Clubcard points. You can see on this chart how the number of regular app users has increased more than fourfold over the last two years to 9 million. It is also worth noting that we have been leveraging these same capabilities across the group, with Clubcard prices launching in our other markets, in Tesco Mobile and in Tesco Bank. As a result, Clubcard penetration has continued to increase. Customers are swiping, tapping or scanning their Club Cards on three quarters of all UK Tesco transactions and we expect this to further increase over the coming months. This greater level of engagement is allowing us to improve the customer experience of Club Card 2 with personalised coupons and increasingly relevant rewards. Our third priority is easily the most convenient, serving our customers wherever, whenever, and however they want. It's about keeping our existing estate relevant for customers while seeking out capital-like growth in convenience and online. Tesco has emerged from the pandemic a much stronger business, and nowhere is this more true than online. As expected, we have seen some normalisation, but we are still seeing around 1.2 million orders each week, over 60% higher than pre-pandemic. Basket sizes are up too, and online groceries still represent nearly 14% of the total UK sales, about 5% more than two years ago. This is testament to the brilliant work the team did to open up our capacity when customers needed us most in the first few months of the pandemic and their continued efforts to maintain an outstanding service to our customers over the last two years. As a result, we gained a million new customers to Tesco and around 67% of those are continuing to shop with us either online or in store. I should stress that the normalisation we are seeing is an industry feature and in fact, we are retaining more of the uplift in trade than others. From an exceptionally strong base last year, we have further increased our online market share by over 140 basis points. We continue to lead the online market in the Republic of Ireland with a share of 59% and our online business in Central Europe has grown strongly. While we are expecting further normalisation in the current year, we see online as one of our key medium-term growth opportunities. We now have four urban fulfilment centres open and our fifth in Rotherglen open next month. We've seen the two most recent sites following a faster ramp-up trajectory than either West Bromwich or Lakeside. In addition to providing extra capacity to allow our grocery home shopping business to grow, UFCs also improve the economics. Our UFC pick rates are around four times the rate of manual picking. Another area we are focusing on from an economic point of view is click and collect. Having peaked at around 25% of orders during the pandemic, we are still seeing around double the proportion of click and collect than we had two years ago. This year, we have rolled out an additional 102 locations for customers to be able to pick up their groceries and are continuing to refine the customer experience. Our super fast home delivery service, Tesco Whoosh, is now in 200 stores. While we are still not certain of the scale of demand in this part of the market, our aim is to make sure that if customers do want the convenience of having their shopping delivered within a very short period of time, they can do so without leaving the Tesco ecosystem. We plan to roll this service out to 600 stores in this financial year with further refinements to the customer offer being trialed along the way. We have pushed on with our convenience opening program, opening 40 new express doors and 59 new one-stops. In the coming year, our opening program will take us to a total of over 2,000 express doors and over 1,000 one-stops. In addition, we continue to seek opportunities to make our larger stores even more compelling for customers. with concession partners including Decathlon, Yo Sushi and Homebase. Booker's catering business has coped brilliantly with the challenges of the pandemic and is emerging a stronger business. Over 37,000 new catering customers were added in the last year alone. It is also continuing to build on its partnership with Just Eat and the retail business is performing well too. Although the majority of our growth in stores is in convenience, I would like to mention our planned acquisition of 10 Joyce's Supermarkets in the Republic of Ireland. These stores provide us with a unique opportunity to grow share in the Galway region and we look forward to welcoming our new colleagues to the Tesco Ireland family, subject to regulatory approval. Our final strategic priority is safe to invest. You've already heard from Imran that cost efficiency is not new to Tesco. It's in our DNA to ensure that everything we are doing and every pound we are spending is in the service of our customers. That's more critical now than ever. We set ourselves the goal of being able to offset the impact of cost inflation on our business each year and ideally create additional headroom that will allow us to invest in competitiveness and growth. We identified one billion pounds of savings over three years, broadly evenly phased with the key areas of opportunity being goods and services not for resale, property, improved operational efficiency and central overheads. Since we constructed the plan, the external environment has changed and cost inflation has rapidly accelerated. This is certainly spurring us on, and we will do everything we can to increase the overall pace and scale of the Forward Program, particularly in the first year. We have already delivered a number of changes that will result in lower costs in the coming year, as well as better reflecting how our customers shop at us. For example, we removed counters from a further 317 stores in February. and have been introducing more card-only tills and increasing the efficiency of checkouts. We also moved replenishment from nights to days in a number of stores, enabling more colleagues to be available on the shop floor to help customers at peak times. Closing our JAX format and unifying our leadership structure in clothing and general merchandise also help simplify our business. I wanted to close by talking about the current market environment. We know that this is a really challenging time for many of our customers, facing the biggest increase to the cost of living that we've seen in decades. Over 70% of customers say that inflation is a serious concern for them and real incomes are forecast to fall by almost 4% this year. As you would expect, this has impacted shopper confidence, which has fallen sharply since the start of 2022, on top of any uncertainties around the emergence from the pandemic. You can see from this chart that many customers are already planning changes to the way they shop, and we will make sure that we are there to support them. Unbrand will play an important role and we continue to make sure that we have the strongest range and the best possible prices across every tier and every category. We need to stay close to our suppliers too, with the crisis in Ukraine straining availability and adding to the cost of ingredients, particularly in commodities such as wheat and sunflower oil. The strength of our supply chain and our strong supplier relationships put us in an excellent position relative to others. But we do need to recognise and respond to the challenges being faced by the industry. Against this backdrop, it's essential that we keep listening to our customers. Value is going to be critical and I see three immediate priorities as we look to the year ahead. We will stay laser focused on price. We will not allow price to become a reason for customers to shop anywhere else than Tesco. We will also make sure we have a compelling offer for those customers looking to save by eating in instead of eating out. Feeding the family out of home can be a big expense and we will make sure that we can provide a brilliant alternative at great value. Finally, we recognize that customer needs will change. Despite having spent two years waiting to emerge from the pandemic, many customers are likely to want to economize on travel and the staycation may be with us for longer than we thought. Again, we will make sure our ranges are in tune and our offer strong throughout. So what does that mean for next year? Given the significant external uncertainties, we have given our profit guidance in the form of a wider than usual range. Our current best view is therefore that we will deliver between 2.4 and 2.6 billion of retail adjusted operating profit next year. We've highlighted in the release the three main factors that are likely to influence our actual performance. As we don't want to pretend we have any certain how they will plan out. Clearly, there are levers we could pull to land on a certain level of profit. But that's not what we're about. We're running the business to generate sustainable value for all stakeholders for the long term. If we can do better, we will. or if we think it needs to change, we'll let you know. What we can tell you with certainty is that we will stay focused on our customers throughout, as that's the best way to deliver the medium-term growth and the strong, sustainable cash flows that we have set out. We are confident that we can keep this level of cash generation sustainable into the future and are therefore pleased to commit to a further £750 million capital return under our Share Buyback Programme to be completed by no later than April 2023. In summary, we are pleased with our strong performance in what has been an extraordinary year. We have really good momentum and start from a position of strength. with our most competitive positioning for many, many years. We will maintain our unwavering commitment to value and continue to support our customers and colleagues when they need us most. In uncertain times, we will prioritise the right decisions to create long-term value for all of our stakeholders. By doing the right things for our customers and colleagues, we will continue to drive value for our shareholders and remain firmly committed to returning cash through the buyback program. Thank you for your time so far. Imran and I are now really happy to take your questions.