Tesco PLC

Good morning everyone and welcome to our preliminary results presentation. I'm joined here in Welland by our CFO Imran Nawaz and we are delighted to update you on our progress this year. I'm really pleased that we have delivered another strong performance and that it has been driven by all parts of the group. The results we are announcing today reflect our continued investment in great value and quality for our customers, while at the same time doing everything we can to look after our colleagues. Over the last few years, we have dealt with a number of significant challenges. Rather than allow these to knock us off course, I believe they have made us a stronger business. Whether it is our response to the pandemic, dealing with supply chain challenges, supporting customers and colleagues through the cost of living crisis, or seeking to mitigate significant cost inflation, the resilience and agility we have developed has created a sustainable competitive advantage. We continue to make strong progress against our strategic priorities and our ongoing focus on driving top-line growth, profit and cash is delivering for all of our stakeholders. I want to thank all of our wonderful colleagues for the contribution they are making day in, day out. Customer satisfaction has always been critical to our success. As it improves, it shows that our efforts have been recognised by our customers and provides a strong foundation for growth. Our brand NPS score is the highest of all the full-line grocers, reflecting our outstanding value, great quality and market-leading convenience. Within the building blocks of NPS, we're ranked number one for service, reward and quality, showing that customers have recognised the significant improvements we continue to make. Alongside customer satisfaction, one of our key goals is to grow or at least maintain our core UK market share. It is our share and the reach it gives us that means we are best placed to serve our communities and customers wherever, whenever and however they choose to shop with us. I'm pleased to say that we have had another solid year of market share performance, holding our own despite others in the market opening significant amounts of new space. In fact, we remain the only full line grocer to have grown share over the last three years. As I've said before, our focus on share does not come at the expense of our strong capital discipline, and we will only open new space ourselves when we see attractive returns. It has clearly been a challenging year for many of our customers. Even before the start of the year, household costs were already rising and the events following Russia's invasion of Ukraine have added significantly more pressure. We have been determined to do everything we can to help, working tirelessly with our supplier partners to mitigate as much inflation as possible. Despite rapidly increasing commodity prices and the significantly increased costs of running our own operations, we have continued to invest for customers, ensuring we give them great value and the quality they expect. As you can see from the chart, we have consistently inflated by less than the market throughout the entire year. In addition to our work to mitigate inflation, we have made it even easier for our customers to spend less on the things that matter most to them. For example, we've helped make mealtimes more affordable by bringing together great value products from across our range, allowing customers to feed their families for a fantastic price, in many cases for less than a fiver. We know how expensive it can be for customers to eat while they're on the go. And that's why at Christmas and February half term, we brought back our Kids Eat Free scheme that we first launched last summer. Of course, we also know that many of our customers have been looking to spend less by eating in rather than eating out. Our finest meal deal, which is available exclusively through Clubcard prices, has proved particularly popular, providing restaurant quality food and wine at a fraction of the cost. I'm delighted that, in agreement with Osdall and for the second year in a row, we have made a record investment in base pay for our hourly paid store colleagues in the UK. This represents the third pay increase in 10 months and recognises the incredible contribution that our teams show every day in serving our customers. All UK-based store colleagues are now paid over £11 an hour, and we accelerated this new rate so that it was effective from the start of this month. Since September 2020, we have increased the hourly rate of pay by over 20%, in addition to leading and comprehensive package of benefits. As I've said before, our future success depends on our colleagues, and our commitment to them is as strong as ever. It's also incredibly important that we continue to support our supplier partners, particularly given the pressures they are facing right now. Nowhere is this more acute than in the agricultural sector. We take our responsibility as the industry leader very seriously and have therefore taken additional steps to support the farmers who produce so much of the fresh food that we sell. To give you just a few examples, within the last year, we've announced additional funding for pig farmers, take an extra step to support the UK egg industry, and continue to evolve the support provided by the Tesco Sustainable Dairy Group to address ongoing industry challenges. Our ongoing commitment to our suppliers more broadly has meant that we've been ranked number one in the Advantage Supplier Survey for the seventh consecutive year. We have also received our highest ever supplier satisfaction score at close to 87%. Our scale gives us a unique ability to make a meaningful contribution to the communities we serve. Over the last few years, we have seen unprecedented demand for some of the programmes we support, most notably our food donations. I'm therefore incredibly proud that, with the support of customers and colleagues, we have once again contributed over 50 million meals, working with our brilliant charity partners, FairShare, Oleo and the Trussell Trust. In addition to supporting nationwide programmes, our community grants continue to fund thousands of local projects across the UK. This scheme has supported over 50,000 groups with more than £100 million in grants to date, creating a groundswell of support and reaching many thousands of people. At the end of March, we announced a new £5 million programme to boost school funds. Over 5,000 schools will be able to apply, helping them provide pupils with the food they need and with new sports and play equipment to keep them active. Around 18 months ago, we relaunched our core purpose, putting community and planet at the very heart of our organisation. I couldn't be prouder of the way that colleagues across the group have embraced the change which, in many cases, just draws attention to the fantastic work they were already leading. Together we are making good progress towards our commitment to be carbon neutral in our own operations by 2035 and our ambitious target of net zero emissions across our entire value chain by 2050. Some of the more tangible signs of this that you may have already seen are the ongoing electrification of our home delivery fleet and more recently our first trials of our EV trucks. We have already achieved a significant reduction in the food waste across our own operations and earlier this year we announced our new aim to halve food waste by 2025, which is five years earlier than our original commitment and the UN Sustainable Development Goals target of 2030. We also see it as our responsibility to help customers make healthier and more sustainable choices. At the start of the year, we launched our Better Baskets campaign, which aims to make it easier and more affordable for customers to make better choices when they shop. This has contributed to an increase in the proportion of healthy products that we sell to 60%, and we are on track to achieve our target of 65% by 2025. Our ongoing and significant cash delivery demonstrates the inherent strength of our business. We've set ourselves the goal of generating between 1.4 and 1.8 billion of retail free cash flow each year, and we are confident in our ability to continue delivering within that range. This confidence has enabled us to establish an ongoing share buyback program, and since launching this in October 2021, we have returned over £1 billion to shareholders. I'm really pleased to announce today that we'll be buying back another £750 million worth of shares by April 2024. As you will have seen today, we've also announced a final dividend of 7.05 pence per share, bringing our full year dividend to 10.9 pence per share. Imran is now going to take you through a more detailed review of the strong performance that we've delivered this year. Over to you, Imran.

Thank you, Ken, and good morning everyone. I'll start with an overview of our results followed by some more color on the performance across each of the business segments. I am delighted with the strength of the performance we have seen across the group. We have delivered towards the top end of our profit guidance and we have exceeded the targeted cash range we previously set out. Retail sales grew by 5.1% with a strong performance across all regions on top of last year's already very solid base. Growth strengthened in the second half as general market inflation increased across all regions, and we are pleased with how well our volumes held up. Booker delivered an exceptionally strong performance, most notably in catering, where we saw higher than expected out-of-home consumption throughout the year. Retail profit decreased by 6.3% to 2.5 billion. This reflects the impact of post-pandemic volume normalization, elevated levels of cost inflation, and the ongoing investment in our customer offer. This was partially offset by a very strong contribution from Booker, as well as the acceleration of our Save to Invest program, which delivered well over half a billion of savings. While not shown here, Group's statutory operating profit was down 40% year-on-year, primarily due to a 982 million non-current asset impairment charge in the year, driven mainly by higher discount rates. This is a non-cash movement and it does not reflect any change in the underlying strength of the business. we delivered another fantastic year on free cash flow, generating 2.1 billion, which reflects both strong profit delivery and high working capital inflow. The year-on-year movement reflects last year's exceptionally strong performance in both profit and working capital, combined with a small increase in cash capex this year. Net debt at the end of the year was 10.5 billion, which was in line with last year. Our strong free cash flow generation enabled us to return a total of 1.6 billion to shareholders, inclusive of dividends and the buyback of a further 750 million of our own shares. We have now bought back over 1 billion of shares since October 2021, when we started our program. We generated headline earnings per share of 21.85 pence, which was flat versus last year, as the operating profit impacts I mentioned previously were offset by lower finance costs and tax charges, as well as the benefit of our ongoing share buyback program. In line with our targeted payout ratio of circa 50% of earnings, we have proposed a final dividend of 7.05 pence per ordinary share, which takes the full year dividend to 10.9 pence per ordinary share, which is in line with last year. Total retail sales for the year were 56.6 billion. Our UK and Ireland segment delivered a 4.7% increase in sales as the expected unwind of volumes post-pandemic was more than offset by general market inflation and a very strong contribution from Booker. Our Central Europe segment delivered both sales and profit growth, driven by a strong focus on cost management. We also saw year-on-year sales growth in Tesco Bank, primarily driven by an increase in credit card spending. 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. Let's start with the UK, where we delivered sales growth of 3.3%. As you can see from the slide, food delivered growth of 4.6% with growth across both of the halves. As anticipated, the first half saw some customers return to pre-pandemic shopping habits with higher levels of out-of-home consumption. However, this was offset by a strong performance during key trading periods and throughout the warmer summer months. Growth was even stronger in the second half as general market inflation continued to rise whilst volumes remained resilient and we delivered an outstanding Christmas performance. The depth and breadth of our ranges offered customers great choice as they sought to manage their spend. As a result, we saw strong growth in own-brand participation, particularly within our entry and finest tiers. Overall, our non-food sales declined by 4.5%, with home and clothing down 6.4% and 1.2% respectively. This reflects a very strong performance last year, particularly in the first quarter when we lapped the closure of non-essential retailers. The sales decline across the second half was driven by softening of demand in the more discretionary areas. This was combined with the impact of a circa 10% reduction in our home range as we refined our mix of products to ensure our offer remains relevant. I'm really pleased that clothing delivered growth of circa 7% in Q4 and delivered its highest ever market share over Christmas, up 5.9 percentage points versus pre-pandemic. As a result, we exit the year in a very good place from a stock perspective. As anticipated, we saw a decline in online sales of 5.4% in line with overall normalization in the market, with strong market share at circa 35%. Our online business still remains significantly larger than before the pandemic, and online participation has stabilized at around 13% of sales. Sales returned to growth in the second half, with order numbers holding up well, despite market inflation, with delivery saver reaching almost 700,000 subscribers. We exceeded our original target expansion of Tesco Whoosh, which is now in 1,000 Tesco Express stores. Turning to Ireland, we delivered like-for-like sales growth of 3.3% for the full year, including growth of 6.6% in the second half. As you'll remember, Ireland had a very strong Christmas, despite trading over very high levels of in-home consumption in the prior year as a result of hospitality restrictions. Our clothing business also performed really well as we lapped non-food restrictions last year. Overall, non-food like-for-like growth was 5.4%. We continue to see growth in our online business where we have expanded our slot capacity, building on an already market-leading share with a further increase of 1.6 percentage points year-on-year. Having completed the Joyces acquisition in June 2022, we fully converted and reopened the stores under the Tesco brand in time for the peak Christmas trading period. We are really pleased with how the stores are performing, enabling us to reach even more customers in the region. Booker has had another fantastic year, delivering 12% like-for-like growth, building on the great momentum from last year. Sales grew across both the retail and catering businesses, with underlying growth excluding tobacco at 18.4%. Retail sales excluding tobacco were up 9.9%, driven by strong customer retention, further expansion of the number of retail partners, and general market inflation. Tobacco sales declined by 5.6% in line with the long-term trend, as well as customers returning to overseas travel. In catering, we saw very strong growth in the first quarter as we traded over last year's restrictions when much of the hospitality sector was closed. We continued our strong momentum into the second half, significantly outperforming the market as we worked with our hospitality customers to ensure they could continue to offer outstanding value. Our catering performance includes very strong growth in best foods logistics, where sales grew by 29% for the year. In Central Europe, like-for-like sales were up 10.4% with growth across all three markets. Input cost inflation was even more significant in these markets due to macroeconomic factors. Food was the key contributor of growth at 11.9%. Customers responded positively to the rollout of Club Card prices, with penetration up a massive 23 percentage points versus last year. Non-food sales grew by 1%, driven by home, as customers were able to shop our full range following non-food restrictions in the first quarter last year. Let's move on to retail profit performance, where we delivered nearly 2.5 billion, which is towards the top end of the guidance range I set out in October. Operating margins were around 4% across both segments, reflecting the combined effect of our ongoing focus on offering customers great value and the delivery of over 0.5 billion of savings via our Safe2Invest program. I'll break the movements down in more detail on the next few slides. In the UK and Ireland, profit declined by 7%, which was primarily driven by the impact of lower year-on-year volumes and the ongoing investment in our customer offer. We continue to see the effects of customers seeking to offset cost of living pressures through switching to our own brand products. We manage significant operating cost inflation as a result of higher energy costs and our largest ever single investment in colleague pay. These were partially mitigated by our accelerated safe-to-invest program and a very strong Booker catering performance. Turning to Central Europe, profit was up 3.6% with margins exceeding 4%. Volumes were resilient across the first half, softening across the second half as inflation continued to increase. Convenience had a very strong year with growth of 12.8%. This performance predominantly reflects a strong safe-to-invest delivery which largely mitigated operating cost pressures as well as the new extraordinary retail taxes in Hungary. Turning to Tesco Bank where we have seen strong revenue growth driven by an increase in credit card spending, ATM usage and travel money transactions. we have a very solid risk profile and customer defaults continue to remain low. The bank's profitability declined year on year, which is predominantly due to a significant provision release in the prior year, which reflected a post-pandemic improvement in the macroeconomic outlook at that time. As you can see from the slide, the bank's capital and liquidity position remain very strong, with the capital ratio well in excess of regulatory requirements. This slide here gives you more detail on the components of our statutory profit performance, which decreased by 51%, primarily as a result of the non-cash impairment of non-KARN assets that I mentioned earlier. You may remember that we booked a 626 million impairment charge in the first half, triggered by a significant increase in discount rates. This has now increased to 982 million for the full year, following a further increase in discount rates, combined with a small reduction in UK property values, primarily linked to the weakening of the property investment market. Net finance costs were broadly flat year on year, as we proactively managed net debt, including buying back bonds, to largely offset the impact of higher interest rates. Our tax charge was 247 million, which was down from 510 million in the prior year. which included a one-off charge related to the revaluation of our deferred tax liability following the UK government's decision to increase corporation tax from April 2023. The year-on-year reduction also reflects the lower operating profits and increased adjusting items. Moving now to the cash performance. We've delivered strong retail free cash flow of 2.1 billion, and I'll talk you through the key points. Before working capital, you'll see that we generated 4.1 billion of retail cash from operations. Our total working capital inflow was also strong at 468 million, mainly driven by higher trade payables due to cost price inflation. capital expenditure in the year was 1.1 billion and we have provided the usual breakdowns by region and type in the appendices. The year-on-year increase in cash capex relates to the ongoing investment in simplifying our stores and new store openings across the markets. Net interest was lower year-on-year principally due to the benefit of higher interest on short-term cash investments and a reduction in our leases as a result of store buybacks. Cash tax paid continues to be low at 107 million, as we benefited again from the super deduction allowance on CAPEX and tax relief on the 2.5 billion one-off pension contribution we had made in 2021. The 88 million reduction versus last year reflects lower operating profits year-on-year and the impact of adjusting items. Finally, we received 68 million in dividends from Tesco Bank and Property Joint Ventures, and we purchased 86 million worth of shares in the market, net of colleague share scheme contributions, to offset dilution from colleague share schemes. Turning to the balance sheet, which I'm pleased to say remains very strong. Net debt at the end of the year was 10.5 billion, in line with the prior year. This includes the very strong cash generation I previously mentioned, which enabled us to return over 1.6 billion to shareholders, including 750 million worth of shares that we have bought back since April last year. Our net debt to EBITDA ratio is in the middle of our targeted range at 2.6 times. Our fixed charge cover is very strong at 3.5 times. Before I wrap up, I wanted to touch on our outlook for 2023-24. We will continue to prioritise investment in our customer offer whilst doing everything we can to offset the ongoing impact of elevated cost inflation. We expect to be able to deliver a broadly flat level of retail adjusted operating profit next year. with retail cash flow within our targeted range of 1.4 to 1.8 billion. We expect bank adjusted operating profit of between 130 and 160 million. I'm also really pleased that as a part of our ongoing share buyback program, we're able to confirm a commitment to purchase another 750 million worth of shares over the next 12 months. To summarize, we delivered another solid performance this year across sales, profit and cash generation. We have confidence in our capital allocation and multi-year performance frameworks continuing to guide our actions and progress so that we can create sustainable long-term value for every Tesco stakeholder. A key part of that is our progressive dividend policy, reflected this year in our proposed full-year dividend of 10.9 pence in line with last year. We have made good progress on our ongoing capital return program, returning a total of 1.05 billion since the program started in October 2021. And I am pleased to announce a further 750 million of share buybacks over the next 12 months to April 2024. We will continue, of course, to give an update on our future plans for the share buyback program in April each year. Thank you very much for your time and I'll now hand back to Ken.

Thank you Imran. I now want to share my reflections on the strategic progress we've made over the last few years. You will see in today's trading statement that we have set out some of the key highlights of the last year for all four of our strategic priorities. While I'm not planning to run through every point of detail with you now, I would like to highlight a number of areas that I believe really demonstrate the progress that we've made so far. Most importantly, we have fundamentally repositioned our value proposition for our customers. We are at the most competitive we have ever been and our market leading combination of Aldi price match, low everyday prices, and club card prices has changed the way customers perceive value at Tesco. Over the last seven years, we have materially eroded the price differential to the limited range discounters, and we are now matched penny for penny on over 600 of the most important products, helping to remove price as a reason for customers to shop elsewhere. We're at our strongest price index to date versus the market and customers are choosing Aldi price match products in 99% of large baskets and now in over 85% of top-up shops. Our overall value proposition is more than just great shelf-edge prices. Customers need to believe in the value they are getting from us and trust us. We've worked incredibly hard on this over the last three years. Club cart prices, which we've now rolled out across the group, has created a clearer and more compelling way for our customers to get additional value and treat themselves through great offers. As a result of all the steps we have taken, we have seen a significant improvement in our value perception score over the last three years. We have improved more than any other full-line grocer and achieved this against the backdrop of an overall market that has declined. Quality has also been a key focus for us. In the UK alone, we have reformulated and improved more than 10,000 products over the last three years and grown sales of our finest products by nearly 35% over the same period. All of this has contributed to our quality perception improving by nearly 90 basis points this year, whereas the rest of the full-line grocers declined by an average of 150 basis points. This improvement is even more impressive on a three-year basis where we are up nearly 500 basis points. I'm really pleased to say that for the first time in a number of years, we've been ranked joint number one for quality out of our core grocery peers. We have also driven switching gains from premium retailers consistently for the last six periods. As I described back in October, over the last few years we have been developing a powerful digital platform. The foundations of this platform reflect our unique scale and reach, an ever more digital club card. We now have over 14 million Clubcard app users across the group, with Clubcard sales penetration averaging around 80%. We have market-leading businesses in the UK in large stores, convenience stores, online grocery, and now through Whoosh ultra-fast delivery. Every week, we handle over 50 million transactions, ensuring we have an unrivaled view of customer shopping trends. To add to that, Dunnhumby has over 30 years of experience with its 400 data scientists providing a globally recognized capability. The systems we have developed help us anticipate customer needs and ensure we are offering them the right product at the right time and rewarding them for their loyalty. We now have the largest closed-loop grocery media platform in the UK through Tesco Media and Insights, powering over 6,500 campaigns every year. We are rolling out new solutions such as digital screens, which are now in over 500 stores. We still have much to do, but I believe that we are now in prime position to take advantage of the exciting media monetisation and personalisation opportunities available to us. A key part of our digital transformation is our new combined grocery and club card app. We have now integrated our mobile apps into one single solution, serving our customers across all of their shopping and loyalty needs. The app isn't just for online use. Customers can now use it to enhance their in-store shopping experience too. with additional features such as creating shopping lists and checking stock before leaving home. It puts customers in far more control of every shopping mission. We have also incorporated our in-store payment functionality and the ability to redeem vouchers and rewards that can be preloaded on the app for speedy use. Customers can even place a whoosh order and check on its progress via the app. And for those lucky enough to live close to one of our get-go stores, the app can be used for a checkout-free and frictionless shopping experience. It really is a one-stop shop for customers shopping at Tesco. Clearly, one of the advantages of driving up app usage is the ability to offer our customers a more relevant and personalized shopping experience. We are still very much at the early stages of what we believe is possible. However, over the last year, we've increased the number of customers receiving personalized offers to over 4 million, issuing nearly 90 million coupons in over 10,000 different combinations. Dunhumby's data science also enables us to leverage sponsored searches and create recommendations when customers are placing online grocery orders. We now have over 400 suppliers signed up to sponsored searches and are seeing over 60% customer participation rates on the Have You Forgotten recommendations. The overall personalization opportunity is much broader than just through our app. our website and our stores. The Dunhumby team are already working with several partners in the offsite space such as Sky and ITVX to enable targeted advertising for suppliers. Our large stores are the bedrock of our estate. They've been performing really well, but we are always looking at opportunities to further improve our offer. This year alone, we've added over 700 new offerings and essential services across our large store estate. From well-known brands like Costa, Greggs, Yosushi, IKEA, The Entertainer and Timpsons. During the year, we also took the decision to further refine the range of non-food products, further reducing categories such as electricals, so that we can efficiently focus on what matters most to customers. We also have a strategy to selectively broaden the appeal of our non-food ranges, particularly at the premium end. Our acquisition of the Paper Chase brand in January will allow us to go even faster in delivering this in the popular stationery and cards categories. This year we have achieved some key milestones in our convenience business and our performance is going from strength to strength. Our express business now has sales of nearly seven billion pounds, which would make it one of the largest retailers in the UK in its own right. Just last month, we opened our 2000 express store in Cambridge and we continue to see further opportunities for attractive growth in the years ahead. One Stop also hit a key milestone, opening its 1,000th store in February, and I'm really pleased to say that they won Convenience Retailer of the Year at the recent Retail Industry Awards. We also serve a wider convenience offering through Booker Retail, which has added over 450 new partners to its Premier, Landis, Budgins and Family Shopper faces. As part of this growth, Booker celebrated its 4,000th premier opening in September. As you know, the popularity of immediacy and food delivery accelerated rapidly through the pandemic, and we responded with our first whoosh offer in May 2021. We were able to take a different approach to many of the new entrants in this sector by leveraging our existing network. With a fraction of the capital that others have deployed, we have built a business that is now available in 1,000 stores, which covers over 55% of the UK population, and has a delivery time of circa 25 minutes. I'm really proud of what we've been able to create, and this highlights how we can quickly develop an incremental business proposition with capital discipline that maximizes the value for both customers and shareholders. I mentioned earlier how some of the challenges we have faced in recent years have made us a stronger business, and nowhere is this more true than online. We transformed our grocery home shopping business to serve customers throughout the pandemic, and it has left us with a business that is nearly 60% larger than it was in 2019. Orders are stabilising at about 1.1 million per week and our market share remains very strong at around 35%. We've now got over 500 click and collect locations that help create a compelling and flexible offer for our customers. And we have seen subscribers for our delivery saver scheme grow to nearly 700,000. As Imran mentioned earlier, Booker has delivered an exceptionally strong performance this year, with its highest sales to date. This was in part due to an outstanding performance in the catering business, as even more customers benefited from the unbeatable choice, price and service that Booker can offer. Booker's specialist teams are doing a brilliant job of working with caterers to help them adapt their menus to offer great value to their customers, while ensuring that they are able to cope with the inflationary pressures they are facing. This has contributed to strong growth, even against the backdrop of a declining market. I've already mentioned the retail business at Booker, where we have seen strong growth again this year. In addition to adding new partners, the rollout of our Jaxx product range has provided a great value-owned brand alternative on over 500 lines. Save to Invest has been a key underpin to our strategic progress. We are constantly driving a simpler and more efficient operating model so that we can fund the investments we want to make. This has always been one of our strengths, and last year we took the decision to significantly accelerate our plans, committing to savings of around £1 billion over just two years. We've made great progress this year, which has been critical given the inflationary backdrop, and have delivered ahead of target with savings of over half a billion pounds. As we start the new year, I'm confident that we are firmly on track to deliver at least one billion of savings by February 2024. In summary, we are pleased to have delivered another strong performance in a market that continues to be very challenging. In doing that, we've been able to create value for all of our stakeholders. Our relentless focus on providing great value and quality for our customers means that we are now the most competitive we have ever been. And I'm really pleased that we have also been able to look after colleagues as they faced increasing cost of living pressure. Our strong financial performance with retail free cash flow ahead of expectations means we've been able to return over £1.6 billion to shareholders this year through the share buyback and dividend. We are confident that we have the right strategy to keep winning and that we can continue to generate strong cash flows and create value for shareholders. And of course, as I've mentioned, we will continue to do all of these things while doing the right thing for the communities we serve and our planet. Thank you for your time so far, and we are now really happy to take your questions.