Good morning to everybody. Before I hand it over to Simon, just a few comments.

Two long-serving board members, Jane Shields and Jonathan Bewes, will be stepping down from our board of directors in May. Jane has worked for NEXT more than 40 years.

You don't see that much anymore, do you? More than 40 years, and been on the board of directors since 2013.

Jane's contribution to the success of the company has been substantial, both at the operational level and certainly at the board level. I would just say, I think Jane represents the best qualities of what we have at NEXT plc.

Jonathan Bewes has been a board member for 9.5 years, and he has been Senior Independent Director and Chairman of the Audit Committee. He's made significant contribution.

I'd say, Jonathan, many thanks for your work and your service on the board. I would like to welcome two new board members, Annette Court and Jenny Mundy, who will be joining the board.

Annette started on March 1st, and Jenny will be starting on April 1st, and both will stand for election at the May AGM. As you've seen, the results for the year ended 2026 are very good, and it certainly reflects the broad strength of the group, as we outperform in all areas, be it retail or online UK, and certainly in the international markets.

Before I turn over to Simon, I would like to recognize and thank our more than 40,000 employees globally for their daily decision-making and, basically, making things happen for NEXT throughout the world. Simon?

Thank you very much, Chairman. Right, good morning, everybody.

Slight change of order to things today cuz, I know some people like to slip away early, I'm going to give you the punchline at the beginning. Punchline is, about next year rather than all the the stuff about last year.

In terms of of next year, the big news today was that there was no news. We've held our our targets, and you could look at that 4.5%, and in fact, I think most people did look at it in January and think that it was pessimistic.

If you had only looked at our UK sales in the 8 weeks in the run-up to, our announcement, then you would definitely agree that that was a a pessimistic assessment. However, if you were to look at what's going on in the Middle East and the potential knock-on effects in the UK, you could argue that it was optimistic.

Just in terms of the Middle East, I th- I suppose the first thing to say, in terms of the UK, the numbers we had we those first 8 weeks did not include the really big numbers we hit as the weather improved this time last year. We got some significant, benefit from an early summer, and we're just about to hit those those numbers now.

In terms of the Middle East, it represents 6% of our total sales. We lost for the first week of the conflict, we lost virtually all the sales because it was the our operations stopped working.

We were We are now serving all of the territories in the Middle East. A few of them are on slightly longer lead times, but because we've got a hub in the Middle East, we are able to service them directly, from stock based in the Middle East, which means we're not dependent on air freight for anything other than replenishment, and we are shipping, stock to the Middle East on replenish in replenishment runs at the moment, but that comes at a cost.

In terms of the cost of the conflict, we've quantified that at £15 million, and that's £15 million for 3 months, assuming that it that the the current levels of surcharges, disruption, oil prices last for 3 months. That could be wildly optimistic, or it could be pessimistic, we don't know.

The In terms of the breakdown of that cost, £8 million of it comes from the outbound stock from the UK to our customers overseas. Of the £8 million, £5 million of it is Middle East costs.

The rest are air freight surcharges to the rest of the world. We've then got inbound cost, this is mainly the, surcharge on container, rates as a result of fuel price increases, that's around £4 million, and then UK energy costs, we anticipate, incurring additional costs of around £3 million.

What I should stress is that those numbers are incre- are very volatile, first of all. They're just throwing forward the costs we have today.

The second thing I should say is that we've offset all of them by cost savings or margin gains that we've identified since January. Around £8-£9 million from margin gains, and the balance from, lower revenue expenditure, mainly systems.

The biggest difference between now and January is that we've brought our systems budget down by around six- £6 million. In terms of Don't take that number and multiply it by 3 to get to the cost for the rest of the year, because if it looks like this is going to persist, we will begin to pass through those costs, to consumers, specifically in the affected regions, but also in the UK.

In terms of UK prices, that would mean prices being going up between 1% and 2% from where they are today, in probably June, July, if things, if things persist. In the the much bigger worry, if you want things to worry about, which obviously you do, are is the cost of goods, because things like polyester and energy costs are a huge percentage Energy costs are a big percentage of fabric, as is obviously polyester.

I think you could see significantly larger increases in cost of goods coming through probably October, November, is when those will begin to to hit, and again, if the conflict, persists. That's sort of, business-affected costs and the potential impact on selling prices covered.

The the one thing I should say about that 4.5% is just a reminder that at this time last year, we were our guidance was at 5%, the 4.5% guidance does not limit our ability to outperform that number. Now I think, with things that are in the world as they are, I think that's unlikely, but what I want to stress is a cautious approach to a sales budget, because we're always buy markdown stock and we can eat into it, a cautious approach to sales budget always leaves us with the potential to beat budget if, if the demand is there.

Moving on to last year and starting with the P&L, and just remind you, this is all on a 52-week, basis and not consolidated. Total group sales up 10.8%.

Total full-price NEXT sales up 10.9%. In terms of the breakdown, Retail stores up 3.5%.

In many ways, that's the most remarkable number here, and we think that that number is the one that is most flattered by the good weather in summer and the disruption to a major competitor. We'll talk about each one of those, as we go through.

In terms of profit, profit up 13.9%, and the vast majority of the difference between the growth in sales and the growth in profit is about leverage over fixed overheads and some margin gains as a result of improved clearance, of of drop stock through Directory online. Profit before tax up 14.5%.

The drop in interest charge here is all about the fact that we didn't buy back shares during the year, the cash that we accumulated during the year had interest on it that came to around £8 million, so that that that reverses out in the year ahead, and obviously, you get back in earnings enhancement what you lose by way of P&L, more than what you lose from the P&L cost. In terms of the quality of earnings, good quality of earnings.

There was a very big non-cash gain from £20 million release of, a bad debt provision. That meant that our finance department worked even harder than usual to find out looking every little nook and cranny of the business to check that all of our provisions were where they should be and that we had enough impairments for our small businesses, and we've so we've taken we've taken another £14 million of of impairment costs there to offset that £20 million, or has offset it, not to offset it obviously.

Then some foreign exchange, gains just on the instruments that carry over from one side of the year to the to the other. Earnings per share up 17%.

The main inc- difference between last year's, profit before tax and EPS are is the boost from the previous year's share buybacks. We didn't buy many shares back last year.

Ordinary dividend up by 15%. That gets us back to cover of around 2.8 times, which is where we want to be, and £3.60 of, return to shareholders by way of capital by B share scheme, and that is in place of the buyback cuz we were out of the market.

We're now back in the market. Thank you very much for your help with that.

All of the numbers that we'll tell you today will be on the basis that we can continue to buy shares throughout the year. In terms of the cash flow, on a consolidated basis, and this is looking at a 53-week, year, £147 million from profits, another £24 million from the 53rd week of cash.

In terms not much change in depreciation, that's gone up much less than sales. CapEx up by £17 million, slightly less than we forecast in the half-year, and that's all about the timing of store, CapEx.

So £168 million last year. The really interesting number is the number this year because we've we we've gone back and we've significantly increased our estimate of what we will spend this year, and all of the increase is in warehousing, I think we'll spend £237 million this year.

It's all about our Elmsall 3 warehouse. I'm going to go into lots of detail later on, which is something to look forward to, but just to say, this is a good thing.

This is because we're growing our sales faster than we expected. In terms of the throwing that forward, because this is a sort of 3-year investment program in warehousing, we're looking at CapEx at around £250 million level for, the next 3 years, we think.

You might look at that and worry that NEXT has become fundamentally more capital-consumptive, that the business is entering a phase of of strong capital consumption. Actually, this is our history of CapEx over the last 20 years.

If you look at CapEx as a percentage of profit, which is the right measure, what you can see is that the 19.6% we're at this year is just below the last 20-year average. The fundamentally, the business is not more capital-consumptive, it's just that in periods of strong growth, you have to invest more; in the periods fellow years, you invest less.

I think the other really important thing that this graph demonstrates is that if you look at the data for long enough and hard enough, you can always find the number you want. Working capital up £46 million.

The the real difference here, is the £19 million increase that our aggregator partners owe us, that is all as a result of our sales increasing on their website. They keep the They take the sales, take their commission, hand on a month later the the the sales, there is a debt there.

The faster that grows, the bigger that debt grows. All the other movements in working capital were one-off.

There was a one-off movement in, the timing of aggregator payments, we got a benefit last year, from that we get disbenefit this year. Cash in transit, this is a new accounting standard that we have rushed to embrace, and it's is actually very sensible.

It, means in previous, accounts we had accounted for credit card sales as if they were cash, and not accounted for the 3 days that the credit card companies take to pay us, this accounts for that, conforms with new accounting standards. Also, I think for me in the last 25 years, a bit of a landmark moment as well, because this is the first change in accounting standards that I really agree with.

In terms of surplus cash, £129 million of surplus cash, distribution to shareholders, £221 million. The difference between that, the £93 million difference, is that last year, or previous the year before last, we were accumulating cash on the balance sheet, £40 million of cash accumulation, in anticipation of paying down the bond.

This year we got the bond away, and we've re- returned our leverage to its historic norms, at 0.63, and so there is a cash about 53 more of debt, funding that difference. In terms of stock, stock up 8.8%.

The stock The NEXT stock as at week 52 was up 7%, broadly in line with our sales increase. You'll notice for the last I think 3 or 4 sets of results, we've shown stock increases much greater than sales.

What you can see from this is that that those increases have stopped, but we haven't reversed them out. We're going to keep a little bit of extra cover in the business, in anticipation of the sort of disruptions that we've seen over the last few years potentially happening again.

We think it's it's better to have a little bit more cover, and we didn't suffer from it last last year. In terms of customer receivables, customer receivables up 2%.

You would expect those to be up much more than 2%, given the growth in our credit sales at 5.8%. The reason that we haven't got that growth is because our debtor days continue to reduce.

They've reduced by about 3.6%, which accounts for the difference in those two numbers. The reduction in debtor days is reflected in much, lower rates of default.

What you can see if you take a sort of pre-COVID to now view, you can see that debt that our default rates have dropped to 2.2%, that is lower than the company's ever has, certainly as as long as I've worked for the business, we've never seen default rates that low. That 51% reduction is a little bit deceptive.

It's not because 51% fewer customers are defaulting. Actually, the numbers of customers defaulting is around 8%.

The, What's the big difference is the balance they're defaulting at, and this is the result of much tighter and better credit controls, that we've implemented over the last few years. One of the sort of, advantages of the some of the machine learning, algorithms we've had, and just greater vigilance.

In terms of provisions, we're still comfortably, but not over-provided: 6.9% as against default rate of 2.2%, we've still got room for that to d- to, move the other way if it if it does. In terms of other debtors, I've talked about international aggregators, talked about cash in transit.

The £20 million of interest-free credit is because last year we switched to funding our own interest-free credit for furniture and stores. That hadn't, sorry, the previous year, that didn't fully annualize until last year, the tail end of that cash outflow, is what you're seeing in that £20 million.

In terms of creditors, up 9%, broadly in line with sales, what you'd expect. In terms of net debt, net debt up 8%.

I'm going to talk in a lot more detail about that in a moment. Then in terms of net assets, increase of £26 million.

It only £26 million, and that's what you'd expect, because the vast majority of surplus cash we have, rightly, given back to shareholders. In terms of debt, the 713 was lower than where we targeted year-end debt.

That's all about timing of payments. We we targeted 739 of year-end debt and leverage of 0.63, which is where we think is it we think is a good place for retailer, of of our type to be.

In terms of inflows in the year, we expect £978 million of cash inflow, CapEx and dividends, of £237, £300 million, respectively, £500 million, returned to shareholders through buybacks or other means, and that would get us back to the 0.63 leverage, £790, million. In terms of buybacks, we've bought £196 million, to date, and our plan is to continue that evenly through the rest of the year.

In terms of funding, started the year with £1.2 billion of funding. This year, £114 million of 2026 bond is repaid.

That leaves us at peak with £205 million of headroom. We think that's sufficient for the business, but, if market conditions are right, which they're not at the moment, but if market conditions are right, we will almost certainly issue another bond to the between £200 and £300 million, or look to increase our RCF to give us, to give us a little bit more headroom.

Moving on to Retail. Retail had a good year, total sales up 2.4%, full-price sales up 3.5%.

The difference was the fact that we pushed more of our clearance, sales through online and out of Retail. New space gave us 1.2%.

Underlying like-for-likes of 2.3% up, which is, in context the last 10 years, a very good number. Profit down 5%, which is, given how strong the sales were, a very disappointing number.

When you look at the change in margin of 0.8, that all is down to one factor, and one factor alone. If you look at the cost of National Insurance and the increase in National Living Wage and the numbers of the young people who moved on to the, higher rate, the total cost of that was 1.4%.

Had re- had, wages risen in line with sales, then we would have, seen flat margins. Mar- Positive margins, actually.

In terms of new space, and there's a a little bit of a story here, I softened you up for this 6 months ago, so, this should be no surprise. We missed our sales targets on the stores that we opened, by 12%, and this is not because we had one big store that missed it, this was I think 12 out of 15 stores missed their their target.

What that meant was that although we, were comfortably within our profitability target, we weren't We missed our payback target. I don't think the miss in target and the 24 the missing 24 months are entirely unrelated.

I think in reality, our sales team who put the estimates on the stores pushed the sales as far as they felt comfortable in order to hit those criteria to get the shops open. And, in hindsight, that was a mistake, but as it turns out, it was a very profitable mistake, because if we look at the amount of profit those stores are making, it's £6 million of profit, over 30% internal rate of return.

If the landlords came back to us and said, 'I tell you what, you can have the shops back, and we'll give you all your capital back, do you want it?' , the answer to that will be no.

I think we've we've come to a bit of a big decision, is that either we say that we're just in an environment where like-for-likes per square foot over the last 10 years down 30%, and shop fit costs are up 70, we either have to say we won't take advantage of any opportunities to open new space, or we'll change our criteria. We've opted to move the goalposts.

We don't think these are crazy, crazy levels of risk. We've said internal rates of return at 27%, which equates to a payback around 30 months, and we think that's enough to be to get the sort of returns you need from stores, to pay for the risk, but not so much as to prevent us opening any shops going forward.

In terms of the year ahead, we're expecting the one-off gain that we got in stores from a very good summer and competitor disruption to reverse out in the in the first half. We're expecting, total, retail sales to be down, 1.5%, with 1.5% coming from, from space.

Profit down 6%, that's around a £12 million, hit to profit, margins at 9.7%, still, comfortable Retail margins. In terms of UK Online, and just remind you, I'm going to show you our UK Online sales separately from international sales because the the the dynamics of the business are very different.

In terms of UK sales, total sales are up 10.2%, full-price sales are up 8.7%. The difference was all driven by the increased warehouse capacity.

Because we had more warehouse capacity, we were able to put more of our clearance stock online, both in the UK and overseas, that was more profitable than putting it through the Retail stores, but that's what accounts, for the difference. In terms of the, balance of trade, just over half our business online is now NEXT brand, and wholly-owned brands, which are at full margin, are another 9%, and then third-party is around a third.

In terms of the growth of those areas, what you can see is wholly-owned brands and licenses had an exceptional year, and I'm going to talk a lot more about that later. I think the exciting thing for us was the fact that the NEXT brand, despite the increased competition from brands that we own, the NEXT brand still managed to move forward, which for us is confirmation, to some degree, that we're not just competing with ourselves as we add new brands to the website.

In terms of margin, margin moved forward, to 18.2%. In terms of where the margin gain was made, what this what these lines show is the difference between what's happened to the NEXT brand margin and the non-NEXT brand margin.

You can see pretty much all the gain has come in the non-NEXT brands. So, doing mental gymnastics where we sort of change the axes and just walk forward the UK Online NEXT brand profitability, you can see there's a no-score draw on gross margin.

Warehouse and distribution is flat, but there are a lot of things going on there. Wage inflation eroded would have eroded margin by 0.8%, but leverage over fixed overheads and some of the efficiencies that we're seeing from the new warehouse pay for that.

Then marketing and technology, slight leverage here. Technology we're now beginning to get to the point where our sales our costs are not rising anything like as fast as sales, that's good news, and marketing's a surprise there.

We have significantly increased our marketing budget, but not by as much as sales. In terms of the NEXT, the non-NEXT brands, two things a gain of 0.5% on gross margin, two things going on there: the elimination of unprofitable brands where the commission rate was too low, and weeding out some of the, less profitable lines.

There we've said to our partners basically there's a choice: either we can't sell your product, or we might have to put the commission up a bit. On the whole, they they opt for the latter.

Then because our wholly-owned brands are growing much faster than third-party brands and we make more margin on them, that pushes the mix the margin mix up. Big gain on warehousing and distribution here, and that's because wage inflation, loss is lower on the branded goods cuz they're more expensive, the labor content is lower.

They're growing faster, the leverage over fixed overheads and the efficiencies are higher. Because we've weeded out some of the high-returning, low average selling price items, we're seeing as a result of that, we see another 0.4% improvement in margin.

Non-NEXT brands still a long way behind NEXT brand in terms of profitability, but they have, moved forward significantly. In terms of the year ahead, we expect UK Online, growth to be 4.6%, margin nudge forward to 18.8%.

That's mainly about reversing out large staff incentive payments for this year as a result of having such a good year. It's not a it's not a a cost It's not a an operational saving.

In terms of international business, international, sales up 35% on full price, 39% in total. Again, that's reflection of increased capacity to sell markdown, through the online channel.

Um, I'm going to do a bit of a grand old Duke of York story here and talk you up the hill and then back down. What I would have said before the Middle East conflict conflict is beware of the first-half numbers, because the first-half numbers are likely to be m- much better than the second half in the year ahead, because last year we dramatically increased the amount of particularly wobble brands we were selling on our overseas websites, and we got a big step-change increase in, sales through Zalando as a result of consolidating our warehouse there.

That reverses out. That annualizes in the second half.

All things being equal, you would expect the first half to be stronger than the second, but obviously, we've been hit by Middle East disruption just before Eid, so that pretty much wipes that out, which you'll see later. In terms of third-party, versus NEXT, NEXT websites, third party is around a third of the business.

In terms of the growth on the NEXT direct business, that was 29%, of which we estimate 22% was driven by increased marketing. Third-party aggregation up 46%, of which 10% came from the addition of new aggregators, and existing aggregating the existing aggregator business boosted by the, consolidation in Zalando.

In terms of distribution of the business across the world, Middle East still around 28%. That distribution hasn't changed dramatically.

What is encouraging is that, pre-conflict, we were growing pretty much, in every territory. In terms of, profit, dramatic increase, in profit, partly driven by the sales and also an improvement in margin.

In terms of bought-in margin, the increase here is about product mix and duty savings. Surprisingly, although we put a lot more markdown on our website, we actually improved the rate at which we clear it cleared it.

I think that is testament to the improvement that we've made in our online operations in terms of how we handle, clearance sites, and the number of countries that we have pushed clearance stock to. Lot going on in warehousing.

The same erosion of margin from wage inflation, although because overseas selling prices are, on average, higher than the UK, not as much as the 0.8% erosion we saw in the UK. Then we get leverage over fixed overheads from sales growth, slight increase in handling charge income, where in some countries, where we weren't making enough margin, we pushed that handling charge up a little bit, and the same benefit on average selling price and returns rate through sort of forensically going through and removing high-returning, low average selling price items.

Marketing, big adverse movement here, but that is kind of the whole point, and then leverage over technology, cost centers, and central overheads. The central overhead gain is a little bit of a one-off.

It's not a one-off this year; it was a one-off cost last year, that was the cost of closing, the German hubs. I think the exciting thing about the margin walk forward is the fact that the significant increase in marketing has been paid for by the cost savings we've achieved elsewhere.

In terms of the year ahead, we're anticipating sales of 14.3%, on a marketing spend of increase of 25%. Margin forecast broadly flat.

In terms of customer analysis, and this is across all of our channels, UK and overseas, UK credit customers were up 6%. That number should be a surprise, because that number has for the last 10, 15 years been 1% or 2%.

The big difference here has been the growth in the uptake of our Pay in 3 offer. Pay in 3 is where it's a Klarna-type offer, where if you pay off all of all of the balance in three installments, you pay no interest.

If you don't pay it off and you choose to extend it, then you pay a higher interest than you would have done on a revolving credit. That that means that credit is growing much faster.

It's not as profitable in terms of interest income as a traditional credit account, but it does significantly improve the amount of sales that we can make through those customers. That's more of a sales benefit, that's driving more of a sales benefit than it is a, a credit income benefit.

UK cash up 10%, and then overseas 31%. I should say that this doesn't include any customers that we get from aggregator businesses, cuz obviously, we don't we don't have visibility, of that.

I think the other surprising number here is the growth in the average sales per customer, overseas. You would normally expect, with so many new customers coming in, you would expect that number to move backwards.

That's what we expected at the beginning of the year. It hasn't, largely, we think, as a result of the improvements we've made on our website in terms of improving conversion and average order value, which I'll I'll come on to later.

In terms of Total Platform, and equity partners, total profit, £90 million, up £13 million on last year. At the beginning of the year, I think we estimated that would be £5 or £6, we have done significantly better in pretty much all the partner businesses than than we were expecting.

Equity profit up £9 million, service profit up £4 million. The big increase in service profit comes from the the fact that the previous year we hadn't fully annualized the onboarding of FatFace, from whom we get a, big service income.

In terms of that service income from Total Platform, very healthy margins, 20 just around 20% profit on what we charge the clients, and six around 6% profit on their sales, on their online sales, which is kind which is kind of where we set out to be. Although Total Platform is looking very exciting at the moment in terms of its numbers, you shouldn't expect any big acquisitions or, transactions this year, for simple reason we haven't got the warehouse space to accommodate a a big transaction this year, which, I'll talk about later.

In terms of return on capital, very healthy return on capital, move forward from 17% to 23%, largely, as a result of the return to profitability of, Joules, and growth elsewhere. Tom Tom Joules is in the audience, thank you, Tom, for that.

Um, £94 million profit £95 million profit forecast for the year ahead, an increase of £5 million. Moving on to guidance for the full year.

We've already talked about the 4.5%, I won't talk more about that. Retail sales, we're expecting all the pain in the first half, cuz that was the period where we had the exceptional weather and gained the most from competitor dis- disruption.

UK Online, we think will be a more even performance, throughout the year. That's largely as a result of the performance The reason we are as confident on that on the H1 number is because of the sales we've seen seen to date, online in the UK.

In terms of total UK, 1.3% in the first half, 2.9% in the second. International, 14.7% in the first half, 14% in the second.

If we look at the 2-year growth, which removes any distortion from the timing of the Zalando transaction and the increase in wobble brands on the website, what you can see there is that we're anticipating 47% in the first half, and that that is reflection of the significant disruption we're getting in our Middle Eastern trade, and then a return to more normality in the second half. Obviously, big health warning there.

If the war carries on at its current rate, we won't see the recovery in those sales that we're in the Middle East that we're expecting. Total full-price sales up 5 and a half 4.5%.

In terms of what that means for profit in the year ahead, Online profit driving £76 million of profit increase, £11 million decline in Retail profit as a result of negative like-for-likes, Total Platform and partners adding £5 million. Cost increases:, wage inflation still the biggest cost increase here, but around two-thirds of what it was this time last year.

The reason that is quite as high as it is, actually, would be around If it was just wage inflation, it'd be nearer 35. There is there's still 2 months of the NIC that hasn't annualized in the current year.

Middle East conflict, £15 million of costs coming in there. Higher interest costs, which I mentioned earlier, that's all about the accumulation of cash last year and no share buybacks, and we're anticipating that our marketing spend grows £8 million faster than sales.

In terms of cost savings:, employee incentives, that's reversing out of large incentive payment this year for for a great year. Then the margin gains are where we have already in our in the costings we've got, we already can see around 0.2% gain in margin for both spring/summer and autumn/winter.

Normally, we'd give that back and reinvest it, but given the circumstances, we're not going to do that, so that'd be £10 million. Then other versus last year, the the difference of £8 million is eight is, warehousing and distribution efficiencies in stores, versus our January estimate, the seven £7-£8 million is technology.

That's why those Uh, that gives us £1.2 billion of profit year-end. In terms of earnings per share, we're expecting a smaller enhancement than last year, dividend yield of 2.2%.

If you compare this year's expectations to last year's expectations, whilst the biggest difference is the delta in profit, you can see that the enhancement is significantly lower. The enhancement from dividends and buybacks is significantly this year than last year, and that's cuz last year, in effect, we got a double benefit.

The shares that we would have bought back last year would have enhanced earnings this year. We didn't buy back shares, and we gave all the money back last year.

Actually, dividends and share buybacks together, we would expect to be to give returns of around 5% to 5.5% in a normal year. That's that's what we expect it to be, sort of going forward next year and beyond.

That's all to say on the sort of the numbers and guidance. In terms of the the business itself, it's it's difficult to keep a a handle on this, because with everything going on in the world, everyone's worried about more worried about the Middle East than they are about the business.

When you look at the business itself, it's actually very exciting, because all the avenues of growth we had last year, we think are still there for the for the year ahead, there's more to do. If we look at the £550 million of growth and divide it, UK/overseas, what you can see is that actually, despite all the excitement coming from overseas, the UK delivered not a lot less in terms of actual growth.

Same is true between NEXT product and non-NEXT-branded product. You can see they're exactly the same it's patterns flip in reverse.

The NEXT Although the grow- percentages are very exciting on non-NEXT brands, the NEXT brand still delivered the lion's share of growth. If you divide that into sort of four different businesses: NEXT, non-NEXT, UK, and overseas, you can see that those numbers are remarkably similar.

I think the message here is that, the low growth in the big established businesses is delivering pretty much the same amount of growth as the very dramatic growth, 79%, in our smallest, in the non-NEXT brands overseas. We think that each one of those quadrants will be positive in the year ahead, and there's more to do.

In terms of what's driving that growth, it comes down to two things. Overseas, it's about function- improved functionality, services, and, most importantly, marketing.

In the and across the whole business, non-NEXT and NEXT, it's about better product ranges and broader product ranges. I'm going to start by talking about what we're doing to improve the most important part of the business, which is the NEXT brand.

That comes down to what I've mentioned before in terms of newness, quality, and choice. This is a a drive that we've talked to you about I think now for 2 years, and is one of those, things that I'm reluctant to talk to analysts about because there are no numbers and graphs that I can give you percentage newness and all that stuff, because, if I asked the product teams what percentage of their range is new, they will give me whatever percentage I ask for, because who's to say what's really new and what's not?

I think the key here is that where the buying teams have scoured the world, find found the best trends, and then, most importantly, backed those trends with conviction and in depth, that is where we've seen the by far the biggest sales growth. Where we haven't done that, where we've relied on last year's bestsellers, a little bit of a tweak here and there, changed the neckline, changed the color, those those areas are the ones that have done worst.

That's pretty much universally true across not just the NEXT brand, but other brands as well. The customer wants newness, and gone are the days where you can say, 'We'll trial this new style this year, and then next year, we might do it in three colorways and really maximize the opportunity.'

You If you wait and see, you've waited too long, you're you're you're dead in the water. That's sort of newness.

In terms of quality, there's a lot going on here, and the big thrust on quality is about fabric. That is the thing that, in terms of customer perception, actually upgrading of the fabric and the base materials, the yarns in knitwear, that is where we've had the most success in putting increasing our fabric.

This is a represents a change in the way we work, in that the not all areas, but more and more of the areas at NEXT are now pushing further upstream and talking to mills, spinners, wash houses, and developing yarns and techniques and fabrics long before they decide which garments they go into and what those garments will look like. That process of pushing further upstream, I think it's got a long way to go at NEXT.

I think it's it's very exciting for us. Other retailers do do it, it's not rocket science, but I think it's exciting for us.

I think the other sort of unintended benefit of this is that obviously, the mills have to see the fashion the fashion trends first, because if they don't produce the fabric, you can't produce the trend. The mills and the print houses are also a good indicator of which trends are coming and which ones are going to be strongest.

I think this is also a very good time for us to be, it's a very good time for us to be investing in quality, because we can see a distinct trend over the last 3 years, and this is a gradual thing, it's not dramatic, of customers buying slightly fewer, slightly better things. It's not that they're spending more on clothing, it's that they are choosing to spend that money on better products.

This bit, I can give you some numbers, so, this is analyst delight here. What the numbers What these numbers show is the underlying inflation in like-for-like goods.

If you produce the same t-shirt last year as this year, and obviously, we're doing less of that because it's all about newness, but if you look at those garments, then the the price inflation we've seen over the last 3 years is negative or very modest. If you look at the sold mix, the total amount of cash we've taken versus the, units that we've sold, the sold mix actually has moved forward, and we think that the difference represents the shift in consumer preference.

If you in any one year, that doesn't look like very much, and I should say that the estimate for the year ahead is based on what we've bought, obviously, not what we've sold, because we haven't sold it yet. If you add those all together, you get to numbers, that do show a meaningful shift.

There are there are two things I should stress here. This, isn't about just adding more expensive product to our ranges, although we have increased, we have looked to stretch our price architecture, and to sell some more expensive garments, but this is that's not been the main drive on this.

In fact, the the biggest success we've had on improved quality is where we've significantly upgraded entry-level products to make them much better yarns or fabrics, and that's where we've had the most success without increasing price, or by increasing price just a a a modest amount. In terms of non-NEXT product, first of all, same messages about newness, choice, quality are coming through in all the brands that we we can see that coming through in all the brands that we manage.

The bigger increase was the less exciting percentage of third-party branded profit was up, and that is all about one thing, which is better ranges of our best brands. This is not about adding brands to the website; it's about getting much better selection and better depth on bestsellers from the top 20 or 30 brands that we sell.

In terms of the wholly-owned brands and licenses, very exciting numbers at 50 nearly 50% growth in the year. I think there are a number of encouraging things, that I kind of would like to share with you today about this, relatively new business.

What this shows, this bar shows, is the is the brands that we were already trading, the wholly-owned brands that we had in 2022/2023. It's about £177 million at that point.

If we look at just those brands today, they are 53% up. That is a an encouraging number in itself, but the really encouraging number is the fact that last year, those brands, as existing brands that we've owned for more than 5 years, grew by 24%, and I think that'll grow again in the year ahead.

For us, this was the acid test, because relatively easy to come up with a new label and stick it in the clothing, give it a bit of marketing, but actually having brands that are not flashes in the pan, can be developed and continue to grow in the long term, is kind of what we're trying to achieve. That looks like what we've delivered, and that number, in a way, is all the more impressive when you bear in mind that over the last 5 years, we've added another 29 wholly-owned brands and licenses, which have themselves that last year delivered £116 million of of margin on top.

Again, the fact that those are growing in parallel and with the NEXT brand, evidence, we think, that the brands we are providing are genuinely giving our customers something different and new. We're estimating that the wholly-owned brands and license business grows by 22% in the year ahead.

What this all comes down to is, and, bit of apologies for the cheesy analogy, we use these slides for staff later as well, so, it's multi-purpose, but we really think that NEXT is an amazing place to start a new brand, or to, to take an old brand and and relaunch it, because when you look at it, what you need to start a new brand on NEXT is very different from what you needed to start a new brand 20, 30, even 10 years ago in terms of resources. What you need is a great product team, a good idea, and a sourcing base.

The investment, the total cost that you need to invest to launch a brand, is around £3 million, and that's the cost of the people and the stock that you have to buy before you put anything on sale, the sort of money at risk is around £3 million. The reason that that is so low is because those brands can straightaway take advantage of the billions of pounds that we've invested over the last 20 or 30 years in building 16 million customer base that those brands have instant access to, or the websites, technology, data security, product systems, warehousing, contact centers, and relatively inexpensive funding.

In terms of a environment in which we can begin to develop new fashion brands, we think this is very exciting, all the more exciting if we can sell those brands overseas, and what you can see from the international numbers is that we are getting good traction now with those brands overseas. We launch We're launching two three new brands this year.

I say new, Russell & Bromley obviously isn't a new brand, but it's new to us. Got Bohéme, which is more of a sort of continental style of of brand, and we'll be launching another womenswear brand, sort of top-end womenswear brand, towards the end of the year.

In terms of overseas, 35% growth, and the the driver here is functionality and marketing. Start with functionality.

Now there's a detailed table with lots of complex numbers that are hard to understand, you can read through that at your leisure, but the the overall message is that we have significantly improved pretty much every part of the customer experience, both on the website, when they pay, and delivery and returns, in most of the areas. There's still more to do, and the results, again, here we've got some some numbers.

If you look at the organic conversion rate, that's the conversion rate of non-new of customers coming to the website not through marketing, the average order value, and the frequency of orders, those numbers have significantly increased year-on-year last year, and we think that's as a result of the improvements that we're making. The nice thing about those numbers is that they are cumulative, that if you get, for every person who lands on the website, if 9% more of them order, they each order 3% more in that order, and they then visit you 17% more times, the individual value of that customer visit significantly impro- increases.

That is what has driven, the growth in marketing. The fact that that these two things work hand-in-hand, it's not just about spending more money, but the more effective you can make your website, the more effective your marketing becomes.

One of the things that has driven the marketing and one of the things that has allowed our returns to remain constant despite the dramatic increase in the amount we're spending is the fact that the website is and services are so much better. Just to sort of dwell on those numbers a little bit, that the return that we measure here, and just to be clear, we don't talk about ROAS, we This is not a sales These are This is profit.

This is the incremental profit on the incremental sales that we think we deliver from each and every campaign. They have to hit at least £1.50, and you can see the returns last year actually, despite the enormous increase in spend, was slightly higher than the previous year.

That's not just about, functionality and services, it's also about the improvements we've made to our marketing and we continue to make to the marketing. There's a long list, and you can read it in the in in the report, but we have invested a lot of time, money, and people in improving the way in which we market, and we can see that paying dividends.

Next year, I've mentioned already, we plan to grow marketing overseas by 25%. Now you might look at that number at £1.50 and say, 'Oh, why do they need to be, NEXT are being very greedy, 50% return.'

You'd be right. If if we believe that number, we would be being greedy, but there are two reasons to be cautious about it.

First is that it is based on incrementality, the incremental sales, and that requires an estimate. We've got to estimate how many of the customers who saw the advert, who then bought, actually were stimulated by the advert and wouldn't have bought anyway.

What you'll find when you look at these incrementality tests that we do is that the incrementality is surprisingly low. It's a very important thing that we're unsure of, and we think we need fat margins to absorb that risk.

The second and more important reason is that the profit we're talking about here is the marginal profit, i.e. we assume that if we spend the marketing, that the increase in sales doesn't doesn't result in any increase in HR costs, finance costs, product costs, it all goes into profit.

If you said, 'Oh, well, actually, our fixed overheads are going to grow as fast as sales,' that £1.50 drops to £1.01. I think what this does is it brings home a fundamental truth about which will affect our growth going forward, and that is our ability to control our costs and our fixed costs to make sure that they don't rise, that they actually fall as a percentage of sales.

Doesn't mean fall in absolute terms, but they fall as a percentage of sales. Our ability to control those costs will drive our ability to do marketing, which will drive growth.

That, actually, as a message for people, in the business is very positive. Normally, cost control is seen as a bit of a sigh.

Cost control meeting that we have have with all of our directors once every quarter is not their favorite meeting, but because people think it's all just about squeezing more out of the sponge. Once people see that actually, no, no, this is not just about squeezing more profit out of the business, this is about driving growth, it's much easier to get that message across because people are more excited about growth than they are about cost saving.

The assumption that you might make about fixed overheads, by the way, being fixed, is, not necessarily correct. I do I remember my dad saying to me years and years and years ago that fixed costs are only ever fixed on the way down.

There's a little bit of of truth there. If you look at technology, product, finance, legal, HR, add them all together as a percentage of sales in 2006, and look at them today, not only have they not declined as a percentage of sales, they've actually overperformed.

They've, they've grown faster, than sales. Now don't, don't panic about that.

The overall business The margins of the business have moved forward by 2% in that time, so, and there is none of that investment, I say investment, spending, none of that spending that I would regret. If we hadn't spent much more on technology, we wouldn't have websites, call centers, marketing campaigns.

Our technology spend rep- meant that we could re- stop producing £65 million worth of a catalogue every year. If we're going to grow our product ranges, and NEXT, in terms of the the ranges we offer online today, they're probably about 5 or 6 times the size of the ranges we offered just in stores, you need more product people for that.

We're going to have new wobble, we need new people, we're going to have extra third-party brands, you need someone to manage those relationships. It's not that those investments were wrong; it's that going forward, we need to grow them by less than sales if our marketing is going to be successful.

Fortunately, we are at, I think, the perfect time for saving money in those areas, because the combination of the fact that we've modernized pretty much all of our software platforms, with the exception of finance, over the last 6 years, the fact that we have transformed the way the company handles data, we've made sure that it's sort of universally accessible across the group, that it's consistent, across the group. Combination of modern software, high-quality data means that we are well placed to adopt AI, and, I know that there's going to be a groan.

I can't actually hear it, but a groan when chief executives start talking about AI, because, I'm going to apologize in advance, but I am going to talk about AI, a little bit, and our approach to what we're doing with AI. I think the first thing to say is that the degree of adoption that we're getting across the business is very different.

The areas that have adopted it the most aggressively are technology, contact centers, and e-commerce. Product on the sort of use of AI to envisage product and forecasting has has made some progress, and the other areas really, I've put a little blue bar here, but that blue bar could be smaller if I wasn't so generous.

Where we have invested, we are definitely seeing AI resulting in productivity gains that is translating directly into not just better software and better service in the call centers, but also lower costs, and these are What these show This graph shows is the percentage of sales represented by technology and call centers. I think in both these areas, there's farther to go, and I've written about that.

In terms of our approach to AI, I think I thought it'd be useful to share a little bit as to as to how we approach the whole issue of AI. I think the most important thing for us is what we're not doing.

We don't have a central AI de- department or a Chief AI Officer, a CAIO, I think it would be called. That sounds like goodbye in Italian.

We don't have that, and the reason we don't have that is because the nature of what we do across the different functions of the business is so different that to have one department trying to service all of those would, be extremely unproductive. Because ultimately, the value of AI is not in the technology; it's in the applications it supports.

The design of those applications, what it does for the business, can only be understood by the people who are running the business, not people who have access to the technology. It would And, the best comparison I've heard is that it would be like having a central spreadsheet department, and, a Chief Spreadsheet Officer.

Spreadsheets are used by everyone in very different ways across the business. Same with AI, it's got to be application-led.

That's not to say we're doing nothing centrally. We do talk a lot about it, we encourage people, help them, our IT department provides access to technologies and ensures that the technologies we use are secure, most importantly, and it also monitors the cost of the AI tools that various departments are adopting.

We haven't adopted a one-size-fits-all approach to this, and each director is very much going to have to be their own Chief AI Officer, if they want their part of the business to succeed. What I wouldn't underestimate here is the power of collaboration, and it is just the way that NEXT works, is that all of pretty much all of our directors see each other every week at our trading meeting at least once a week, if not more, and that the people who the directors who are most advanced are actively working not just in their department, but to help the other departments and show them, the sort of things that AI can do for them, and share people and technology providers with them.

In terms of, how far ahead we are in this, I that that graph looked quite impressive, but my even in the areas that we are the furthest ahead, my guess is that we we haven't even scratched the surface. There is so much more to go at, not just in terms of cost-effectiveness, but also, productivity in terms of what people can do, I think this is a huge opportunity.

In terms of the areas that really haven't, moved forward much, I I'm not singling out warehousing because they've done anything wrong, and or because AI, isn't applicable to warehousing. Actually, I think AI could be brilliant for warehousing in terms of handling all the operational management of the warehouse, reforecasting, scenario planning, optimization, and all lots of variables that AI could really turbocharge the management of our warehouses.

They haven't had time, quite rightly, to worry about AI, because the thing they've been most worried about is ensuring that we've got the capacity in warehousing that we need to grow. That provides a slightly artificial, but neat segue into the next subject, which is the last subject, you'll be pleased to hear, the investment, in our warehousing.

This is where we were 2 years ago when we started to invest in Elmsall 3. We were 94% full, in our old warehouses in 2023.

Where we thought we would be, on 5% compound growth in sales, was 80% full of the new extended complex. Sales have actually grown by, sorry, 28%.

We were sorry, we're expecting a 10. We've actually grown at 28.

In addition to that, we've put more clearance into our online operation, and we've increased our cover, that pushes up the stock in peak week, and who is only talking peak weeks here, to 84%. We've decommissioned some of the oldest picking that actually it turned out when we decommissioned it, we we realized just how inaccurate and expensive it was, we don't want to recommission it, and we've had a slight drop in box fill, which means that last year we got to 87% full.

If we look at this year, with 8% plant planned growth in online business overall, we'll be at 94%. Now 94% sounds okay, it's not.

94% At 94%, you begin to get a lot of congestion, things slow down, one small breakage, a conveyor belt breaking can hold up the whole operation, so that's uncomfortable. We're going to manage this year by taking some of our reserve stock, this is the high bay stock that can't be picked, out of high bay in Elmsall 3 and move it into other warehouses owned by the group.

That will be that will be replenished in day, it shouldn't affect stock availability for customers. There will be a slight increase in costs as a result of that, but that'll be more than offset by leverage over the fixed overheads from using so much of the capacity.

In terms of the year after, that's where we really get into trouble. If we grow if we grow at another 8% next year online, then we wouldn't have the capacity, to do that.

We need to invest, and we need to start investing now. In terms of what we're doing, those of you who've been to the warehouse, you remember that we only occupy half of the new Elmsall 3 complex, chamber 1, and we don't occupy all of it, all of chamber 1, there's a little bit left.

Phase 1, which will be on-stream in 2027, will give us 10% more capacity at a cost of £48 million. Phase 2, which is the first half of the second chamber, that's more expensive because that chamber is a shell, it's more expensive per percentage of capacity, it's £134 million.

The final chamber, which will come on the following year, 2029, is another 17% capacity at £125 million. In terms of the P&L impact of that, you could look at that and begin to worry about, 'Well, is that are we going to see a big P&L impact as all this CapEx goes through?'

The answer is you shouldn't, because although the additional depreciation, in year-end Jan 2028 and overheads will be in the order of £5.4 million, we think the cost savings from moving from the old to new capacity will give us at least £5.1 million of savings, so that should be that's broadly, cost-neutral in that year. In terms of the full program, the £307 million of, of CapEx, that will add around £30 million of operating costs, but we get £22.6 million, too precise, about £22 million of savings, we think, from, using that new capacity.

That means that the net cost of all that new capacity is around £7.3 million, and that's if obviously if sales don't grow at all. If sales that the capacity that all of those projects together will give us is around £1.5 billion worth of turnover.

What you can see is that the cost of the increased space, once it's at full capacity or even once it gets to three-quarters full or even half full, the cost of that capacity is very small as a percentage of sales. Over time, these investments should result in our fixed costs in warehousing coming down as a percentage of sales.

In terms of where it leaves us in terms of capacity for growth, that's the 8% trajectory with the new, with the new space added on. The maximum we could get to is compound growth of around 12% online.

I think, if we have that problem, I'll be delighted, but I I don't think we will. So, we think that this program gives us comfortable capacity, for the next 3 to 5 years.

Next question you're going to say, I can see it instantly on your minds, is like, 'What do you do next?' Here's a field.

We've bought the field. The field, that's the warehouse that we have already got planning permission for, we have contracted for the land, we'll complete, I think, in 2 or 3 days, and we'll start work on that, getting foundations laid, we'll start work on that sometime over the next 18 months, we we could have floor space available, if needed, maybe early '28, late '28.

We've got contingency. I think the important point there is that our model of centralized, stock control stockholding for the UK has got legs beyond Elmsall 3.

That, mercifully, is it, almost. Just in in terms of of summary, hopefully, what you can see is that the avenues of growth that we had last year, all of them still have legs in terms of overseas, in terms of NEXT product, in terms of non-NEXT product, we've still got an awful lot that we can do, and that the the business feels can push sales forward.

We have got the means to control costs, through the introduction of new software, AI, mechanization. Got the means to do it, doesn't mean we guarantee that we will, but we have got the means to do it, and we've got the capacity, available, planned, to accommodate the growth if and when it comes.

If things go well, I think the position the business is really well positioned. What is, I think, really interesting when you kind of stand back from When we stand back from what we do day-to-day, and I think about the sorts of things that cross my desk desk and my colleagues' desks, in terms of, overseas, new brands, new AI-driven marketing technologies with Google, all the things that are driving the business are completely different to the sort of things I was doing 25 years ago.

25 years ago, it was it was still very exciting, but it was about stores and, believe it or not, catalogues. Getting more catalogues printed, and printing those catalogues was central.

What the business does today is unrecognizably different from what it was doing 25 years ago. The thing that really has not changed at all are the principles upon which that growth and that the the ethos of the business.

Those two things are, first of all, that absolutely everything we do everything we do, we have to, hand on heart, believe that it is giving good value to our customers. We ha- and the test there is, would you recommend this product to your customers?

Now not everybody is in the market for a mesh dress, I'm not, but if you wanted a mesh dress, could you recommend one from the NEXT website, and say, 'That is the service you want. It's fantastic.

Delivered next day, return to any store.' You have to, hand on heart, believe that.

If you if you genuinely believe all of that, and you're delivering something that's great for the customers, then you can't go too far wrong, whether you're dealing with NEXT brands or others. The second principle is that, that's fine to be doing things that are great for the customer, but they've got to make money.

The two things there is, first of all, have to get a return on capital. Capital is the fuel that drives the business forward, and when the better return we get on the capital we have in the business, the faster we can grow, the more benefit we can share with our our shareholders.

The second thing is margin. This is the the easy one to overlook, particularly when things are good, but every single business we do, it doesn't matter if we're selling, Love & Roses brand in Peru, that brand, in that country, has to make a margin that is commensurate with the sort of risks involved in a fast-moving consumer and fashion business.

As long as we stick to those principles of do great stuff for your customers, get high return on capital, and make healthy margins, then, regardless of of the environment you're in, you're going to be well-placed to handle it. We're making a trading statement in 6 weeks' time.

The one thing I'm pretty sure is that it's going to move. The guidance is going to move, I just don't know which way.

And, but I think the point is that whichever way it moves, if, the the war peters out and things become more positive, then we are really well positioned to take advantage of continued, growth in the UK economy, continued growth overseas. If things don't turn out, and this will not be our first gig when thing, if things going wrong, COVID, financial crisis, cost of living crisis, if things don't turn out as we expect, then actually, the business is well placed to cope with that well, and it's well placed to cope with it because of those margins.

Because kind of there are two lessons about retail that are enduring, and you can, this is sharing the wisdom. There are two lessons.

One is, is like, in the good years, don't get cocky; and in the bad years, don't go bust. I think those two, those two principles are really important, and that's what the reason why, when we've had a great year, we're not going into the next year with a huge, estimate of what we can achieve, we're going in with conservative budgets.

Whichever way things go, we've set the business up to cope with it. On that cliffhanger, I think that leaves you just waiting for the next trading statement, we'll go over to questions.

Thanks, it's Anne Critchlow from Berenberg. I've got two questions, please.

The first one is about the store payback target and extension of that. Have you considered taking into account the benefit of a new store in terms of providing a free pickup and returns point for online customers?

Then secondly, on aggregator websites, you say you don't have visibility on the customer numbers there, but what insights do you receive from aggregators to help you make decisions about marketing, for example?

Yeah. On the store benefit to Online, we don't in any way put any benefit for the online business on stores, and there's actually a good reason for that, and that is that although the store does definitely help the online business, it also hinders it, because it's a competitor.

There's only one store where we've shut and had no other stores anywhere near to pick up the business, and there, we actually saw the online business move forward, because the £2 million or so that we lost in the store, some of that went online, we don't, and we shouldn't account for online benefit of stores. In terms of customer insights into aggregation sites, we don't get very much insight, and quite rightly, they don't share that with us, and we don't share it with our brands either.

What they do share with us is the returns on the marketing we do on their sites, and on somewhere like Zalando, we'll spend around 2% of our sales on marketing. Still have the same hurdles, we still have to get a return on that money, but we can profitably spend money on aggregation sites, and we do, and the insights we get are not about who's buying it, but the returns we get on the marketing that we spend with them.

Thanks, Simon. Morning, Richard Chamberlain from RBC.

A couple more related to the Middle East, if that's all right. The cost savings you talked about that you've identified since the start of the year, £15 million, how many of those or how much of that do you think might come back if demand is a little bit better or the war ends earlier than you're budgeting for?

Then the second one, can you just give us an idea of how the franchise stores in the Middle East have been holding up or not compared to the online offer there? Has there been any sort of big difference in trends?

Thanks.

Yes. Two good questions.

How much of the £15 million will come back? I think very little.

In all honesty, I think there's a much bigger downside risk to that number than there is an upside risk. It could come back, it might be that £7 million of it doesn't materialize, we haven't yet incurred it, but I'm not getting excited about that.

I think the downsides are much bigger, and they will have to go into cost. In terms of franchise business, I don't want to talk about that because it's not our business, but they have definitely been impacted.

It's Adam Cochrane from Deutsche Bank. On the Middle East, just a question in terms of logistically, is it working?

Are you able to fly your products to your warehouse in Dubai?

In terms of the Dubai hub, traditionally, we would have air freighted out of Dubai to other countries like Saudi Arabia and Oman. At the moment, we're going by truck, and that's what's increasing the lead times to places like Saudi Arabia, Oman, and Kuwait.

Intermittently, we have seen that service come back on, and I think things are changing daily, but we're hoping to have air freight back on available for Saudi Arabia soon, but it does depend what happens in the war. The answer is, to Dubai from the UK, we are shipping by air, and we're getting replenishment in at the moment, albeit at a very high premium.

That's a big chunk of that increased operating costs. Then from the Dubai hub to territory, we've switched from air to trucks, which is adding 2 to 3 days to the lead time in most territories.

The second question, in terms of international, how are you progressing with other non-wobble brands, third-party brands on your international site? Is that an area that you're still seeing more growth and more opportunity as brands would like to sell via the NEXT platform?

Yes, we have. Actually, there is detail on that in the pack, in that there's one page of brilliant tables on it, which just show you that I think the growth in third-party brands overseas is around 22%.

Most of that is driven by what's driving the growth in third-party brands anyway, which is a better selection of our key brands, but in some areas, partner brands have agreed to allow us to put their web product on our overseas websites where they hadn't in the past, and that's driven some growth as well. Sorry.

Hello, it's Freddie Wild from Jefferies. Apologies, this is going to be quite a broad question, but it's on a reasonably important topic, or it was important till about 3 weeks ago.

You seem on AI to be talking a lot about cost savings and the ability to run the business more efficiently. I suspect where the debate has been in the market is more about the risks of disintermediation versus the potential benefits to your consumer proposition, I'd love to get your sort of thoughts and outlook on almost the demand side of the AI proposition.

Okay.

It's a big question. I think the first thing to say is, rightly or wrongly, it's not something that we're overly concerned about at the moment, and I think the disintermediation that we're talking about would be the disintermediation of the website rather than any other part.

At the moment, unless, and it'd be relatively easy they could switch just a fraction of their data centers into beautiful clothing warehouses and ChatGPT would have the infrastructure, but at the moment they don't, you're really talking about the disintermediation of the shopping bag and the selection process. There's an economic and an operational problem with that that is yet to be solved.

The economic problem is that if you look at our average order value, net of returns, be around £70. Cost of delivery to the consumers is around £5.

That's about 6%. If your virtual shopping bag takes things from five different retailers, wherever that intermediate website goes, it's got to go to a number of retailers.

If it comes to us, then fine, it's just another form of advertising. If it goes to more than one retailer, then let's say it goes to four retailers rather than one, you end up with that 6% being multiplied by 4.

Someone somewhere has got to pay for that additional 18% of costs that you'll get from splitting the order across multiple websites. I think the operational problem, which in many ways is more of a challenge and applies specifically to clothing, is how you handle returns, because all of your online order goes to John Lewis, or to Marks & Spencer's, or to NEXT, or to Very, you know exactly you can take the whole order back to any one of their shops, scan the items, and you're credited instantly in the way in which you paid.

For an intermediary to do that, you've got to know where to take the item back to. Which of the sub-vendors do I take it back to?

How do I return it to them? Then how do they communicate with the intermediary that the intermediary's got to repay me?

There are big customer service issues with it. At the moment, it feels to me very much like what people were saying about marketplaces versus stocked retailers, because the real asset in trading online clothing is the logistics infrastructure and the product, not the website.

I think that is a direction they're unlikely to go in, and certainly, if you look at the difference in Google approach and ChatGPT approach, Google is still taking the approach of passing the consumer straight through from their AI engine to one or other retailer, it becomes a enhanced form of advertising, and I think to that extent, it's very exciting. I think basically, the better search engines can find what customers are looking for, the more they'll buy, which it's got to be good for the industry overall.

It was a long answer to a broad question, but I hope it covered Most of it, good.

Cheers. Hi, Geoff Lowery at Rothschild & Co Redburn.

You had a great year for customer acquisition in the UK, both credit and cash. There was obviously some competitor disruption, etc.

sitting behind that, weather, all of those things. Can you talk a little bit about the behavior?

Is this gross adds, is this better retention of existing? What is actually driving that, and what measures do you have to sort of keep them active as some of your competitors normalize, etc.

around you? I suppose, look, the reality is, and this comes back to this philosophy that everything's got to make a profit, and I think the risk here is saying the objective is to hold on to those customers, not to make sure that all of our retention programs are profitable.

The amount we invest in retention program makes a good return on the money we invest. Our objective is not to hang on to customers, it's to continue to invest profitably in retention, and our retention programs are performing in line with last year.

I can't see any significant difference at this point, although we've yet to annualize the very strong weather last year, which may affect it, and the competitor disruption, the answer is we don't really know how they will perform. I think the key takeaway for shareholders is that we're not going to throw money at trying to hang on to customers that aren't profitable to keep.

Morning. Warwick Okines from BNP Paribas.

Two questions about warehouse capacity, please, Simon. Firstly, does the level of utilization that you're sort of running up against, reduce the ability for the business to reduce the proportion of products not delivered in full and on time, which is something that you've been bringing down?

Secondly, are there any options to reduce the proportion of products that are shipped from the UK out to international that could reduce the amount of capacity that you might need for the UK business?

Really good questions. In terms of not on-time delivered in full statistics, I didn't put it in the slide because I'm superstitious cuz then it's just got better, but basically, since Christmas, we have seen that drop from around 8% to around 6%, which is sort of I think the lowest we got to was around 5, warehouse have made significant progress in terms of reducing the not delivered in full on-time rates, and we are happy with that for the moment, but I'm going to talk about it in 6 months' time if we can hold it, cuz it's only been a few weeks, but the signs on that are encouraging.

I don't think there's anything I can see in this year's numbers that suggests that we won't be able to hold that, but it will depend on the effectiveness with which we fill the new mechanization and the effectiveness of which we can serve the main forward locations in the warehouse from the offsite reserve warehouses, which again, we haven't started doing earnest, but obviously, the risk there is that you've got something in reserve that you don't have in forward if you don't get it exactly right. I think there is a small risk to that, but it's not something that I'm hugely concerned about, and I'm pretty sure that we'll see year-on-year improvements, certainly that's what we're seeing at the moment.

In terms of delivery to hub direct, we're not doing that to Germany, and the main reason for that is that actually, because it's third party, it's very expensive, we've tried to keep that on 6 weeks' cover. We would normally have 12 to 14 weeks' cover, at the moment, we're not delivering direct to Germany, but it will be an option if we begin to hit capacity issues.

I think the other issue with direct delivery is that it's very hard to deliver much more than 20% to 25% of anticipated demand without getting it wrong, because you never quite know what's going to sell in which territory. We are delivering direct to the Middle East, which obviously looks like a brilliant plan, and our first cargo ships set off I think from the Far East 4 or 5 weeks ago and have recently been turned back from Dubai, so that turned out to be a great plan implemented at exactly the wrong time, but going forward, we will plan to deliver I think it's around 20%, looking at Richard at the back, about 20% of Middle East requirement direct from manufacturer.

Morning, it's Andrew Hollingworth from Holland Advisors. NEXT historically has been very, very good at the whole sort of mentality of sort of try stuff and do more of what works, the Costa coffees years ago and all the rest of it.

Wholly-owned brands is obviously working extremely well, and I think in the statement or your presentation, you described it as still a small business. What you've done up to now is sort of buy, I don't want to say the wrong thing, but sort of troubled UK businesses and you've sort of re-energized them and helped them, and all the rest of it, but you've wanted them, I think, in past Q&A to sort of prove their worth in terms of return on capital in the UK alone.

We've now got a really powerful sort of wholly-owned business internationally. What could this look like 3, 4, 5 years from now in terms of could we be buying Spanish brands, or French brands, or Italian brands, or is it just going to be UK homegrown, and see what we can do with it globally?

Looking even a year ahead is difficult in fashion, 3, 4, 5 years out is absolutely impossible. Would we buy a French, Italian brand?

I don't think at the moment, no, because our business in those territories just isn't anywhere big enough. In Southern Europe generally, isn't big enough to warrant the investment.

The big advantage we provide for Northern European and UK brands is that we can give instant access to a huge market. Actually, our penetration in Southern Europe is very low, I think those countries that you mentioned, and France, although it sort of in the middle, it's sort of fashion-wise, is quite Southern, I think is unlikely, but I would never say no, because even just access through Zalando to those countries might one day give us enough volume to justify it.

I'd quite like to ask a follow-up. Do you think, obviously without mentioning any names, in terms of how you think about this part of the business, that there's still lots of brands that can be added to the portfolio within the sort of your sweet spot of the sort of things you want to buy?

What we're looking for is great brands, preferably with good management, or with our ability to provide good management to it, we're looking for things that we can add value to through our customer base and platform, and at the right price. I can't predict the fourth one.

I think there are lots of brands that I would buy for a pound that I wouldn't buy for a hundred million, and where the price is in between will drive pretty much what we do, I think. Sorry.

Thanks, it's Georgina Johanan from J.P. Morgan, two from me as well, please.

Just first of all, sorry if I missed it, but what actually is the Middle East trading down at the moment, please?

Good spot. You didn't miss it.

Then

the second one was just a bit of a broader question on GLP-1s, and if you could share anything that you're seeing in terms of how the sizing mix is changing in the business or not, as the case may be. Also, just thinking about it longer term, any insights from particular customer cohorts, if they are sort of materially changing the sizes of what they're buying, is their spending increasing, or is it steady, just really any insights you can share would be great.

Thank you.

On the Middle East numbers, the reality is it's very, very hard to read. The reason it's hard to read is because the timing of Eid, because we are still in a period now where last year people were ordering in the run-up to Eid.

Eid was on Sunday this time last year, this year it was last Friday. If we take the same days post-Eid that we are today, that number is changing every day in terms of growth.

In terms of GLP-1s, we have seen some subtle change in mix in sizing, on womenswear, but where we've seen the most dramatic change is actually on the very large outsizes, that's where you can see a change, in terms of reduction in participation. These participations are tiny, but participations on the sort of 22-plus are definitely falling.

Oh, Sreeram, sorry, one last one.

I had two. Marketing expenses: you're still talking to plus 25% or more.

Are you repurposing some of the Middle East marketing into faster-growing Europe or rest of the world? Is something like that an option for you?

The second one, again, international, within the rest of the world, are there a couple of markets that you really are excited about and you see significant potential for them to be meaningful for NEXT? Within the

Where?

Within the rest of the world, in international.

The answer to the second question is yes. The answer to the first question, I think the premise of the question is that we've got a marketing pot, and if it doesn't work in the Middle East, we'll move it somewhere else.

That's just not how we work. We don't have a marketing pot.

We have a hurdle rate of £1.50 return, and whichever territories give us more return than that, we will continue to invest money in, and those that don't, we will reduce. The actual question is, if I sort of stood back from it, do I think we will still be 25% up on what I've seen so far in marketing?

Yes, but I think a lot will depend on the cost of air freight to some of our most expensive territories. Because if the price of air freight goes up, the return on the marketing comes down, which constricts our ability to spend it.

Overall, we've brought down our sales by around 2% overseas at the moment, so that's our best guess as the full impact, but who knows? We've kept the marketing budget where it is.

On that note, we really will finish. Thank you very much.