Good morning, everyone, and thank you for joining Mike and I for our preliminary results presentation for the year to March 2020. We hope you're all keeping well and safe just now.

And we're clearly in very unusual times, and therefore, we will run the agenda slightly differently today. Firstly, I'll run through the financial results.

Mike will also give some brief words on the past year, and then cover COVID-19 and the outlook as clearly COVID-19 has significant bearing on that. For those listening on the morning of our results, we're running a Q&A session separate from this at 9:30 AM, and for anyone listening later, the recording of the Q&A session will follow-on at the end of this presentation.

Turning to the headline numbers. Sales were broadly flat with Grocery and clothing growth, offset by declines in general merchandise.

Retail profits were down 4% year-on-year, reflecting tough comparatives and marketing investment in the first half, general merchandise weakness and a change in transfer pricing, which had the effect of switching around £10 million of profits from Retail to financial services. Overall, we had a better performance for both retail and financial services in the second half.

Free cash flow generation was strong and included £127 million relating to the sale of stores in the British Land joint venture. Non lease net debt reduced by £343 million or 23%, in line with our ambition to reduce net debt this year by at least £300 million.

Statutory pretax profits of £255 million were up year-on-year after exceptional items that were lower year-on-year. These exceptional items were almost entirely noncash, and I'll cover more on that later.

A couple of things to put ice on the sales momentum or sales movement slide. First is the weakness of general merchandise, which is the main driver of the supermarket sales decline.

Second is a weaker convenience number than you're used to seeing. This reflects fewer openings in the year but also the store closures that we announced in September at our Capital Markets Day.

Guidance wise, you can see the balance of opening and closures anticipated this year. These plans are subject to the impact of COVID-19, and that is particularly the case with Argos.

Looking at the momentum of sales over the course of the year, the key highlight for us has been the customer response to the changes we've made to the value of our grocery offer and the investments we've made in the store of space. There is some benefits from about a week of COVID-19-driven stockpiling in quarter 4.

But even without it, it would have been in healthy positive territory. With general merchandise, it's important to make the distinction between double digit declines in Sainsbury's stores and sales in Argos, which have seen some impact, but clearly a better trend, albeit not without challenges, particularly in some key categories like toys and gaming.

We delivered a good clothing performance with strong online growth and good full price sales growth. Picking up on the momentum point, the grocery volume charts are on comparative periods and shows the clear progress we've made relative to our competitors over the course of the year, although it's fair to acknowledge that quarter 4 was against a weak performance in the prior year.

Argos sales growth dipped below the BRC average over the course of the year, reflecting the performance of some categories like toys and gaming, which I've mentioned, which are far bigger in the Argos sales mix than the BRC average. Clothing showed a consistently strong performance against a weak clothing market.

The moving parts of the headline profit number are pretty clear. Again, the change in transfer pricing arrangements benefited financial services at the expense of Retail to the tune of around £10 million.

Also, we delivered £19 million from lower interest as we continue to reduce net debt and benefit from having paid down some of our more expensive debt instruments, regarding the interest cost being £20 million to £30 million lower next year also. Joint venture income reduced given the British Land property sales.

Only a negligible joint venture income is expected now given this and the fact that Nectar is now being fully consolidated. This chart also draws out the difference between H1 and H2, with Retail in H1 impacted by higher marketing spend and tougher weather comparatives, also a significant difference in colleague wage inflation in the two halves and financial services improvement in the second half.

The big headline exceptionals number this year is material, but 90% of it relates to the property strategy program we announced in September and is almost entirely noncash. We've revisited the property strategy program we announced at the Capital Markets Day in September, bringing in some additional closures.

So now, one-off costs are expected to be in the region of £330 million to £350 million, of which we booked £296 million in the year just completed. This compares to a maximum initial expectation of £270 million.

And again, the cash element of this is very limited at only around £50 million. We said that the cash cost of exceptional this year will be less than £100 million, and that has been the case coming in at £71 million, including the bank, and this includes cash costs relating to some exceptionals booked to the P&L in the prior year.

Looking at the financial services profit contribution in a wider sense that we introduced last year, profits grew by 10% with selective lending growth driving income, whilst focusing on capital efficiency. Net income was up £4 million, driven by good performances on travel money and banking fees.

Impairments also benefited from an alignment of impairment policy between Argos financial services and Sainsbury's Bank. Lending wise, you can see the early impact of the change in strategy with personal loan balances down year-on-year and stronger growth in lending linked to our retail customers through the Sainsbury's Bank credit card and the Argos store card.

The increase in mortgages reflects the fact that we didn't stop offering new mortgages until September 2019, and Retail deposits increased by 5% to support the growth in the mortgage book. We expect to see our retail deposits reduce as mortgage book runs off.

It's still early days on the new bank strategy, and that's reflected in our cost base, which is up year-on-year. However, the headcount chart is a good leading indicator of the changes we've been making as is the success of the Argos financial services mobile app and move to a lower cost-to-serve banking model that we will extend across other products.

Clearly, COVID-19 will have a big impact on the outlook for the bank, both short-term, which Mike will cover later, and in terms of five year targets, which we will come back to later in the year. You can see here a step-up in CapEx this year as we accelerated some programs, reflecting, in particular, our confidence in the store investments we've been making.

We continue to guide to £550 million to £600 million of CapEx in the medium term, although, again, the timing and size of this in the year ahead could be influenced by COVID-19. We're very pleased with the strong underlying cash flow and net debt reduction with net debt, excluding leases, down 23% year-on-year.

Higher CapEx was broadly offset by reduced capital injections into the bank. We made good progress towards our target of £750 million net debt reduction over three years.

Mike will talk about the impact of COVID-19 on the outlook later on. On the basis of our base case expectations for the year ahead, there's no need to change this outlook.

But clearly, as per the guidance we've given, it carries a big caveats, given the significant uncertainties relating to the development and ultimate impact of COVID-19 on the business. So in summary, we're very pleased with the strong customer response to changes in our grocery business.

General merchandise remained tough. We made good progress on our financial services plans.

And H2 profit growth was strong, and we delivered strong free cash flow and net debt reduction in line with our guidance. I'll now hand you over to Mike.

Thank you, Kevin, and it's my last results presentation in extraordinary circumstances. And can I start by thanking our colleagues who've been absolutely amazing in a way they've adapted to the changes in our business in the last eight or nine weeks.

And as Kevin has already said, I'm going to present my part of this presentation in two sections. First of all, I'm going to reflect briefly on last year, and then secondly, I'm going to talk about our response to COVID.

So if I turn to Slide 18, we communicated at our Capital Markets Day that our purpose was to help our customers live well for less and that we have a series of priorities, starting with the need to be more competitive on price; offering distinctive products and categories; to offer personalized and seamless physical and digital experiences; to offer fast, friendly and convenient shopping; to drive efficiency to allow us to invest in our business; to be a place where our colleagues love to work; and we've added in January, another objective, which is to be a net zero greenhouse gas emitter by 2040. And it's fair to say we've made a lot of progress against the objectives that we set at the Capital Markets Day, and that's particularly emphasized, given the situation with COVID-19.

And as we've seen during the year, our performance has improved sequentially, and certainly, our volume share has stepped up and actually grew in quarter 4. Now it's always difficult to attribute the performance to any particular thing, but we would say it's as a result of a combination of a number of the actions that we've taken.

If you move on to Slide 19, you can see that we've demonstrably improved our overall pricing, whether it's against the discounters in the form of Aldi or against our mainstream competitors, such as Tesco. And we've done this by launching the 200 items that we talked about at the Capital Markets Day, opening price point products.

Secondly, by improving the pricing and commodities by reducing or holding the price of 2,500 products; and lastly, by improving the weight of promotions in our business, particularly through our lockdown mechanism. And we're pleased that the Which?

Magazine actually recognized us as the cheapest supermarket for branded groceries in 2019. So if we move to Slide 20, We've delivered a series of major growth initiatives in '19-'20.

So we've made 12,500 investments, investing £164 million. We've touched around about three quarters of our supermarkets, almost half of our convenience stores and around half of our Argos stores.

So for instance, we've introduced 124 beauty departments. We've put rapid exit and SmartShop in 118 stores.

We've improved Tu clothing in 110 stores. We've put Food to Go in 210 of our convenience stores and improved the Ambient range in 250, and we've digitized 256 Argos stores.

We've also closed underperforming space and opened a number of new convenience shops and a couple of supermarkets. And we've also actively repurposed our space where we can.

If I move to Slide 21, we've also seen a significant improvement in our customer satisfaction rating. And if I take an example of ease and speed of checkout, as a result of our investment in things like SmartShop and self-checkouts, we've seen that rating moved significantly forward by our customers.

And of course, more recently, despite the fact that we saw a short-term step down in our customer service during the course of March, we've seen a very significant increase in our CSAT measures during the course of April as a result of our customers' response to our response to COVID-19, which I'll come back to in a minute. But overall, our supermarket measures have improved year-on-year in terms of customer satisfaction.

I'll talk briefly about our Convenience business. We've launched a couple of new formats, firstly, our On the Go format in Mansion House, which has proven to be very successful, as is our Neighborhood Hub store in Woodhall Spa.

We actually saw a strong performance in our Convenience business growing by 1.3%, despite the fact that we closed 27 stores in the year and only opened 13 so a net space reduction. Groceries online, pre-COVID, was also growing very strongly.

We've seen roughly 7% compound growth every year for the last five years. And of course, we've also seen a significant improvement in our overall efficiency.

So our pick rates, our items picked per hour, as an example, have actually improved by over 40% over the last three years and by 14% in the last year. But again, post-COVID, we've seen a very significant increase in the uptake of online groceries from our customers, and I'll come back to that in a minute.

So moving on to Slide 24, and talk specifically about our financial services. And again, at the Capital Markets Day, we laid out our priorities to reshape our balance sheet, to simplify our organization and to strengthen our business.

And we've made significant progress in this direction, although, of course, there's still lots to do. So for instance, we've stopped mortgage origination.

We've improved our margins. As Kevin has already referred to, we've lowered our cost base, and we're increasingly focusing on our business on building digital propositions, not least in Argos financial services.

We've simplified our organization, and we're rightsizing our business for its current sales by improving our cost base. We're rationalizing the product offering, and we're reviewing all of our vendor and supply arrangements.

And lastly, we're strengthening our business through operational resilience, through our conduct and through our capital efficiency, and building on our core competencies in customer experiences and digital. So I move on to Slide 25, also, we've seen our Nectar business progress significantly in the last year.

So at the Capital Markets Day in October, we were just about to launch the Nectar Digital proposition. And we've seen that now downloaded by 4.5 million regular users, which is tremendous progress from nothing in October.

We've strengthened the coalition, bringing on Esso, Sky, Sky Store and Argos. And we've extended the proposition more widely across our business.

And we've also launched Nectar 360, and that gives us the ability to not only use insight in our business more regularly but also gives our suppliers to access information about our customers. And of course, when we combine this with SmartShop, it acts as a very powerful tool for our suppliers and ourselves to be able to talk to our customers in real-time.

And we offer Nectar points more widely across our business, both in our stores and in our digital real estate, which acts as a currency that can work both within and outside our organization. If I move to Slide 26.

It's important to reemphasize the way the business has become more and more digital during my tenure. And we've moved the digital sales in 2014-'15 from £1.1 billion to, in the last year, £6.3 billion, and I suspect post-COVID, it will move a lot higher than that.

We've now rolled out SmartShop into all of our supermarkets. And at the end of the year, our participation, our sales participation in our handset stores was around 18%.

Now clearly, it's moved a lot further forward more recently. And last but not least, we're joining together our digital proposition and our real estate and increasingly digitizing all of our properties, whether that's Nectar, whether it's the bank and Argos financial services, whether it's SmartShop and also introducing universal search.

Moving on to Slide 27. We've also maintained our focus on reducing our costs.

And we talked about a strategic cost transformation program, not only covering off the cost of inflation, but also further reducing our costs by £400 million to £600 million over a five year period of time. And we're well on the way to executing that plan.

So for instance, we've completely integrated our operations now, retail operations, marketing and commercial operations. So the company is now fully integrated.

We're already delivering against our property strategy, as already talked about, and Kevin has already talked about. And we're starting to get on with delivering the other cost transformation projects, so not least in our logistics and supply chain.

And you've seen a recent announcement about our work with Blue Yonder to further strengthen and modernize our supply chain as we look forward. So we're confident we've been able to deliver the strategic cost transformation plan despite the challenges that we have in the most immediate future.

If I move on to Slide 28, we introduced our commitment to net zero greenhouse gas emissions by 2040 in January. And we think this will become a bigger part of our business, and indeed, our customers' mindsets as we look forward post-COVID.

So as well as reducing our carbon emissions, we've talked about minimizing our use of water, helping our customers eat healthy and sustainable diets, reducing the use of plastic packaging, reducing food waste, increasing recycling and making a net positive contribution to biodiversity. And we're also committed to using science-based targets and to report progress against these targets every six months.

So moving on to our response to COVID, we thought we'd start by showing you a time line of how much change has gone on in the organization in the last seven or eight weeks. And can I start by thanking all of our people, all of our colleagues, for the ways that they've responded to an incredible period of challenge and how flexible they've been.

And it's a testament to the culture and the values of the organization, how we've responded to a particularly challenging set of circumstances for both our business and societally more widely. And we started out with three specific objectives.

First of all, to feed the nation; secondly, to make sure that we kept our colleagues and customers safe; and thirdly, that we set out to support the communities that we serve. And if we just go through the time line, it shows you how rapidly that we've responded to the challenges put in front of us.

First of all, starting off with product purchasing limits, then to make sure that we have to our colleagues by, first of all, committing to 14 days on full pay if they had to self-isolate, 12 weeks on full pay if they were vulnerable or if they were helping vulnerable people. We put in place priority shopping at the 22nd of March.

We actually closed the Argos stand-alone stores on the 23rd of March. We gave our colleagues a bonus or committed to give our colleagues a bonus for the first trading period of our year as a result of their health and support.

We've introduced social distancing measures right across our business. We had most of those in place by the 24th of March, the day after the Prime Minister announced a lockdown.

By the 10th of April, we'd increased the number of online delivery slots by almost 50%. And actually, that represented an almost doubling of our online volume because, of course, our customers are all doing more when they ordered online.

And we'd also contacted 800,000 vulnerable customers as well as donating £4 million to Comic Relief's Big Night In. So moving on to Slide 31.

What we've done here is laid out for you the sales shape of the various parts of our business, and we give you a detailed sales breakdown week-by-week in our RNS from week 50. As you can see, as you might expect, our grocery business spiked very heavily, particularly in the early part of the year in week one and two.

Secondly, we saw a peak in our general merchandise business across the same period of time, particularly driven by Argos, although we saw a slowdown, and more recently, a slight step-up. Our clothing business fell to minus 70% at the lowest point, although it's come back a bit more recently.

And lastly, we've seen our Fuel business consistently traveling at minus 70% over the last three or four weeks. Now, I'd emphasize that these numbers are actually changed free to phasing, so that we've made sure that we've trade adjusted them, unlike the numbers in our trading statement, which give you the actual year-on-year comparative.

So it's important to remember that these are actually smooth to the effect of Mother's Day and Easter. If I move on to our Groceries online business, as we've already said, we set out from the very beginning to prioritize elderly, disabled and vulnerable customers and also to significantly increase our online capacity.

And we've already referred to the fact that in the last few weeks, we've seen the number of slots available increased by almost 50%. And actually, because the order sizes are higher than we'd normally see, we've almost doubled our online sales as a proportion of our grocery business.

So that's moved from just under 8% to almost 15% in the last few weeks. And the efficiency of the business has also improved because the order sizes are higher, the drop densities because of the numbers of orders are higher, and we've introduced Click & Collect in more of our stores.

It's fair to say the demand still remains high, and we're still not able to keep up with all of the demand that we have, and we'll continue to look to how we can increase the number of grocery slots in our business. And we believe that we'll get to around 600,000 delivery slots by the end of next week.

If I move on to Slide 33, we talked about the fact that at the end of the financial year, the average participation of SmartShop in the stores with handsets was around 18%. And you can see in this chart how much that has spiked.

So almost a third of our sales are now going through SmartShop in these stores that have handsets. And that's, of course, good for our customers.

It makes their shopping experience quicker and safer, but also good for our colleagues because it means that less of our customers are actually going through a checkout, and it increases the speed of our overall shopping experience. If I move on to the impact within Argos, you can see that overall, our average weekly sales have actually gone up, and that's even on the back of the fact that we've closed all of the Argos stand-alone stores.

And you can see how much our home deliveries have grown by 86% over the last few weeks and by 32% for the Click & Collect. And we've seen roughly 9% growth in Argos since the beginning of the financial year.

So as we look forward, we've talked in our RNS in some detail about our base case, but just to walk you through the various moving parts. We're making an inherent assumption that we'll be in full lockdown during all of quarter 1, and that effectively means until the end of June.

And although we'll start to see some of the restrictions being lifted, we'd expect that there would be continued disruption right the way through the first half of our financial year so effectively through the middle of September. We expect things to go back to more normality in the second half.

However, we would expect the backdrop to be a weaker economy. And therefore, although we'd expect the grocery business to remain positive in the first half, we'd expect it to normalize in the second half, but we would expect that general merchandise and clothing will be down in the low double digits in the second half of the year on the back of the economy.

We would expect the Fuel business to return something like normality. So those are the inherent growth assumptions that we've made as far as our base case on our sales outlook is concerned.

If you think about the profit impact, if we look, there are three chunks that we've identified. First of all, there are a series of higher retail costs.

So the costs at 25% absence of peak, currently running at 15%, the fact that we paid a bonus to our colleagues, the fact that we've underwritten 12 weeks absent for our most vulnerable colleagues, obviously significantly increases our operating expenses. There's costs associated with stock clearance, a product that we're not going to sell, particularly in our closing of seasonal ranges.

We expect to see reduced tenant incomes and concession incomes as a result of help that we're giving to both our leases and our concessionaires. We expect as a result of sales weaknesses that we'd see lower profits in our general merchandise, clothing and fuel businesses.

And of course, we'd expect an impact, as Kevin has already alluded to, in our financial services business. So for instance, we've closed our travel money.

We're issuing a lot less cash because customers are using various other methods to pay. We've also taken some impairments on our balance sheet, and we'd expect reduced customer spend and an increase in colleague absence.

So overall, we believe that there's going to be a profit impact in our base case of around £500 million plus. And of course, there are a whole series of variables that could alter that in either direction.

So if we move on to Slide 37, we've laid out our base case. So first of all, we'd expect our costs to increase by at least £500 million, and that's because of the direct colleague costs that I've already talked about but also the profit impact of certain parts of our business.

That will be offset by an increase in our grocery sales and by £450 million of business rates relief. We still, however, will pay business rates on our offices and distribution centers.

So net-net, in our base case, we'd expect the impact to be neutral. However, I would caveat that by saying there is a high-degree of uncertainty, and there are clearly scenarios that can go either way and quite significantly either way.

So moving on to Slide 38, and looking at the businesses liquidity. In all the stress scenarios we've run, we believe the company is more than adequately funded.

In fact, we believe that we've got significant financing headroom. So to give you a couple of examples, at the end of the last financial year, we had £1.45 billion of RCF undrawn at the yearend.

We've drawn £500 million of that down now, and we put that on our balance sheet for prudence. We also have our capital weighted towards the second half for obvious reasons because many of the things that we set out to do in the first half will not be done as a result of COVID.

So turning specifically to our financial services business. Our balance sheet is strong.

We have a regulatory capital surplus and significant excess liquidity. We and we are confident that our financial services business will not require any capital from the group.

So coming on to the dividend on Slide 39, we believe it is prudent for the company to defer the decision on paying a dividend. We believe that there are a very wide range of potential outcomes and that currently, we do not have fully enough visibility on the impact of COVID-19.

And this, of course, will be greater in the latter part of this financial year. So we move on to Slide 40, in summary, we take our results for last year.

We had great momentum in our grocery business. We're coming together as one multi-brand multichannel business, and we generated very strong cash.

So as Kevin has already talked about, we've reduced our net debt after leases by £343 million. We've responded brilliantly to COVID, a great response right across our business, supporting our customers, colleagues, communities and our suppliers.

And it shows the strength and flexibility of the multi-brand multichannel platform that we have built. And our balance sheet strength is helping support suppliers, tenants and our concessionaires.

As we look out, there are significant incremental costs associated with our response to COVID-19 and a duration that, that response is uncertain. The business rates relief is likely to offset the incremental costs and the weaker general merchandise, clothing and financial services contributions.

But our balance sheet is strong, our liquidity is good, but we believe it is prudent to defer the decision on our dividend. Thank you very much.

And we’ll now open up to questions.

A couple if that's okay. The first one would just be about the -- well, a couple about the bank.

One is you clearly mentioned you were expecting a loss for the bank in the year ahead. I just wondered, and it's maybe a bit unfair and a bit premature, but can you finesse the wording on that a little bit?

Would you expect it to be millions, low tens of millions, potentially £100 million? Any kind of extra finesse in that would clearly be helpful.

And I wondered as well, I mean, it sounds like you're being quite clear you're not expecting to make capital injections. I presume that bad debt assumptions are key kind of variables there.

I wondered if you can shed any light on how cautious your assumptions are for how bad debts might get and how much worse they may have to get to make injections necessary. So a couple of questions on the bank.

And then one more, just if you ultimately decide you aren't going to pay a dividend for the year that's just finished, presumably you'd move up your net debt reduction target in line with the dividend cash you would save by doing that.

Yes. I mean, maybe if I just start with a general observation, James, and then Kevin will talk more specifically about the questions you've asked.

I mean, we've given probably the highest level of disclosure we've ever given. And we've been as transparent as we possibly can and indeed put to you a base case accepting that there's a high-degree of variability of outcome for any number of reasons.

And I'm sure you can understand why that is the case. So it's certainly not guidance.

It's a base case. And we think we've given you enough background to be able to draw your own conclusions and, indeed, make different cases if you think our base case isn't appropriate.

We haven't deliberately broken out the components, but by implication you can get some way towards them. And so therefore, we're being slightly circumspect in being any more detailed than we've been in the announcement.

But as I say, I think most of the information you need is actually in the announcement. And if it's not directly in the announcements, you can probably infer it.

But maybe if, Kevin, you want to talk more specifically about the question you asked on the bank.

Good morning, James. First of all, on the bank, we've run a number of scenarios that we said.

And as Mike said, we're not breaking those out between the different business units. But clearly, one of the drags in the £500 million plus number we've talked that is offsetting the rates and the food performance is financial services.

But equally, there's impact on general merchandise, there's impact on clothing, there's impact on a number of areas, as you'd expect, and you can see the assumptions that we've put in the RNS. Specifically on the bank, the bank in all the scenarios we've run and we've run some scenarios worse than the main scenario that you see and we've run some better than the scenarios you've seen, in all the scenarios, we see the bank in the current year under those scenarios being an earnings challenge not a cash challenge.

So we don't see in the scenarios we've run that we need to inject capital in the bank. And maybe just to give you some context there, the bank currently has roughly £300 million of excess regulatory capital.

And that includes -- there's an element of buffer capital, as you're probably aware, that we're allowed to use in times of stress. And so the total there, it's about £120 million of normal capital in normal times and about £200 million of capital that we could dig into in times of stress, so a total of £300 million.

In simple terms, that means the bank would have to lose more than £300 million before we'd have to inject. And in the scenarios we're running, we don't see a scenario where that would happen.

And then even if it did happen, the bank has a range of other options we could look at. We could look at selling assets.

We could look at reducing credit balances and things like credit cards. We could be more cautious about future lending, which would absorb regulatory capital, et cetera.

So there's other things we could do. And clearly, if we did eat into that capital buffer, we'd have to replenish the stress element of that buffer in time, but given a number of years to do that.

So we don't see a scenario at the moment where we would have to inject capital in the bank. And if you look at Note 21 to the accounts, which is post balance sheet events, we have run a model post yearend given the COVID-19 crisis.

We've used three employment scenarios, you can see in there, a 6% unemployment, an 8% unemployment and a 10% unemployment. And using a weighted average of those, we'd estimate that we'd need to book about £30 million of impairment in the bank's books this year to allow for that.

So you'd see that coming through in the first half. The base scenario is a bit more prudent than that, but it's that sort of order of magnitude.

So we're very comfortable with the position right now from that point of view. Moving on to the dividend question, would we repay debt if we didn't pay dividend, we don't know at this stage, James.

You can see our focus the last number of years has been very clear. Focus on generating strong free cash flow and then use that roughly 50-50 to pay down debt to make the business more robust, more financially robust on behalf of shareholders and pay the other 50% to shareholders as dividend.

So that would remain our focus once we can see -- have a greater visibility of what's going to unfold in front of us and we take the right decision at the right time. But it's too early to say right now.

My first question is, at the Capital Markets Day, you quite clearly explained how your somewhat more premium products or unique products, higher-margin but a little more premium customers, really put you at a much better stead in the UK industry. I know I'm paraphrasing, those wouldn't be your exact words.

And now given that we're probably going to go in quite a deep and long recession, would you not think that these more premium customers, more premium products, is going to actually be the reverse and actually quite a drag to how you will trade in the next one or two years? The second question is, so the dividend saves about £150 million of cash.

If you take an extra £500 million out of your revolving credit line, that's £650 million of extra cash. Would it be fair enough that it would be about the size of what you'd think a worst-case scenario would be, so a cash outflow of that order of magnitude?

And last but not least, while I was a little bit surprised within your profit guidance, which seems pretty good being flat year-on-year, was that general merchandising wasn't a bigger drag given that you're sort of expecting double-digit declines? Is that because of the operating leverage in Argos not being so bad anymore like it was in the past because you can reallocate staff in the Argos units to your Sainsbury's stores?

Thanks, Bruno. Well, perhaps if I take number one and number three, and then Kevin can talk specifically about the cash calculation.

Again, going back to the scenario that we've painted as our sort of base case, we are making an assumption that the grocery business in the second half will return to normality. Clearly, there are lots of scenarios, and if we enter a recession as you've described, history would say customers, first of all, will trade out of eating out into eating in.

That generally speaking is good for food retailers. And if anything, during the COVID crisis, we're seeing that at large.

That's, broadly speaking, a trend that is kind of dominating the industry as we are currently trading. But clearly, there are scenarios.

If you go back to 2008, where customers will also go beyond that and start trading down. I don't think any of us know at this stage exactly how that looks.

And of course, you can make your own assumptions from the information we've given you. What we have assumed is that we have returned to some form of normality in our grocery business in the second half.

But there are many scenarios I'm sure that you could paint as we could. And we've had a go at modeling that.

We've given you sort of a base case. But hopefully, we've given you enough information to be able to make your own assumptions, and therefore, model your own cases.

We've also been very clear about the GM business in that context. So actually, the Argos business, as you would have seen from the trading statement, has traded incredibly well despite the fact we've closed all of the stand-alone shops, 9% up in the first 7 weeks.

We're making an assumption that, that will come down. And that if we took the second half that our GM and clothing businesses will be trading down sort of around the 10%, 11% mark year-on-year.

Again, you may not believe that. You may think that that's overly optimistic.

You may believe it's overly pessimistic, but that's the assumption that we've made. And clearly, that has a consequential impact in terms of the profitability of both the Argos business, the clothing business/and of course, the other one that you haven't mentioned is the fuel business, which is equally a drag on the P&L in the current scenario.

And again, depending on where we get with lockdown, we've made an assumption and that assumption may not be right. On the cash, Kevin, perhaps you can talk especially about that.

Yes, Bruno, just a couple of things on the cash. The first one on the £500 million drawdown, we're not actually using that at the moment.

We just felt it was the prudent thing to do is to draw down that money. So we still have £4.45 billion of unused revolving credit facility and that we're not using it, but we have the money rather in the banks, which we felt was the prudent thing to do in the current environment.

The plan will be, on the base case, that would get repaid during the year. So that wouldn't be in the business later in the year and wouldn't be required.

We clearly have some upfront working capital demands, for example, paying our 1,500 smaller suppliers immediately. That's about £100 million, so there's a number of working capital requirements right now.

The base case doesn't assume -- if the base case played out, we don't require the £150 million from the dividend. The dividend decision is being made not on the base case, the dividend decision is being made because we're seven weeks into a crisis and there's just lots we don't know.

We haven't sufficient visibility. And we think the right thing in behalf of the shareholders -- and it wasn't an easy decision, it was a very difficult decision, but the right thing in behalf of the shareholders is defer any decision at this point until we have more visibility.

And that's why we've made that decision. And then if you talk -- you mentioned about what's the worst case.

And frankly, the worst-case is a lot worse than the base case, as you can imagine. As part of the year-end sign-off, we do a very rigorous viability review for the next three years and we have stress tested all sorts of scenarios here and some of these get an awful lot worse where you say countries in a recession for the next three years, et cetera.

And they're done purposely just to see if the business is financially robust. And the answer is yes, it is.

And even in a very persistent high unemployment, very negative situation over the next three years, which we don't expect to happen, but we've stress tested that and we're adequately funded and able to manage through that.

But to come back to the central point, Bruno, which is we've given you a very high level of transparency. And if you don't agree with our estimated base case, then clearly, you can model your own scenarios and come to different conclusions.

But we've given you our best view of where we stand today and the assumptions one which we base that.

Mike, can I just come back on that 1 second. When you say the base case is for grocery to return to some form of normality in the second half, your sense of normality, does that include recession in the UK or not in the second half?

Oh, just an underlying assumption on sales. Clearly, there are some mix effects within that.

The bigger impact in our view would be on the GM and clothing businesses in a recession, and we've been clear again on what assumptions we made in terms of the impact on sales and that clearly has a consequential impact on profitability. But in a recession, depending on the depth of the recession, as I say, in the short term at least, that can be beneficial to a grocery business and to the mix.

In a more deep recession, as you say, there could be an element of trading down. But we've given you pretty clear transparency and you can draw your own conclusions.

Also, Bruno, what we saw in the last -- after the financial crisis, we saw the grocery business was robust, and it was general merchandise and clothing that were subdued. And then clearly, we had a worse scenario, a number of worse scenarios.

And the one that we've shared with you, that's the base case which would see that the grocery business might be impacted in a recession we've played. There's positives and negatives on this.

And as Mike said, you can model your own because you know the broad gross margins of the different parts of the business. And clearly, the biggest impact on any scenario running is what happens to the top line, which I guess is no surprise.

I could also make a very strong case, the fact that sort of eating out of home won't return to any form of normality during the course of not just the first half but the second half of the year. So as I say, we've given you our sort of best estimate of what we think would happen.

That's our base case. But we'd also accept that there's a high degree of volatility both ways.

I've got three sort of areas I'd like to look at. Just firstly, on the dividend.

Just, I guess, in your base case scenario, if the base case is achieved, would you feel comfortable paying the final dividend for FY20 alongside a normalized dividend around 50% of EPS for FY21 assuming you achieve the base case you've laid out? Second and third, just squaring a couple of points you made.

I guess on the Argos, whether -- the question from people, is Argos going into double digit decline in the second half, or for the rest of the year even, even with the first two months being pretty strong? It still implies, as far as I can see, the worst ever trading year for Argos, which probably has pretty broad implications for the economy.

I'm just wondering, are you seeing anything yet in your underlying business? So either the sort of the measures you might look at apart from the headlines that we're seeing from the government, et cetera.

But anything in your own business that would indicate you're going to get to that level of difficulties. And then finally, on the point about eating out of home, I think that's a very valid point.

What's interesting, I just note, in the April data, if we exclude the week post lockdown, it looks like your grocery business is trading around plus 4%. Is that a good read then for the rest of the lockdown period?

And wouldn't we expect that to be higher given there's no eating out of home at the moment?

Yes, just to reiterate the point on the final dividend, we have deferred the decision to pay a dividend, and the Board will review in the light of the prevailing circumstances in October whether or not it would pay a dividend or what level of dividend it will pay in November. So you can't imply anything, and we're certainly not making any assumptions that under any scenarios, we would pay the money in July.

And the next time to review that is when the Board reviews the dividend decision at the interims. So just so we're crystal clear, there is no implication that we would pay anything.

And indeed, if we did pay something, what that something would be. In terms of eating out of home, again, we've tried to be transparent.

We've shown you this, probably for the first and last time, week-by-week data. Clearly, as we see the scenario unfold, we'll have more clarity as to the level of eating out, so all the impact that not eating out has on eating in.

And clearly, I think we're still in a period of time when people are -- our customers are getting used to what the new world looks like and where that settles down. Your guess is as good as mine, but we've painted a scenario that we think is not an unreasonable base case.

But you'll get the market data in the same way that it's normally published, so that over time, I'm sure that you can adjust your models accordingly. And again, we've been, I think, sensibly prudent in terms of our view of the economy.

I don't think any of us know exactly how it's going to play out. We've assumed as we said in the trading statement, the second half will effectively be down 10% plus in our clothing and general merchandise businesses.

And you're right, I mean, that will be a pretty difficult set of economic circumstances, but these times are unprecedented. And I think anybody with a realistic outlook will be pretty prudent at this stage and like all of these things, you're better off planning for the worst and hoping that it will be better.

But you're right. I mean, in the end, it's a fairly serious set of circumstances, but I think that's reflective of where the economy will be.

I don't know if there's anything you'd add to that, Kevin.

Well, Rob, the other thing to add is the Argos business has been remarkably robust. I mean the fact that it's a digital business that we've seen, as you saw in the presentation on the slides Mike talked to, on Slide 34, the massive growth in home delivery, massive growth in Click & Collect, and where sales are ahead while the stores are closed is remarkable really.

So it's a business that's well set up for difficult times and has a broad range of products and a broad customer appeal. But we're assuming this consumer demand will be subdued, and I think everyone would assume that right now.

And hence, the base case that we've forecast.

Okay. And that is broadly right.

Grocery, just doing a straight average of those numbers, is trending around 4% it looks like in April. You're right.

I haven't done that right number, but...

Yes. No, you've got that quicker than I have.

To be quite honest, it gets slightly confusing because of the phasing of Easter, which is the other thing. So in our presentation, we've effectively seasonally adjusted Easter and Mother's Day.

In the RNS, you've got a week-by-week tracker, which again bounces around all over the place. Of course, the last trading week was also a selling week, which generally speaking helps the business just to make it doubly confusing.

But yes, if that's the arithmetic you arrive at, then I'll just take it as read.

Rob, I think you'd have to also build in the fact that in week one and week two of the year with those massive growth numbers, there's going to be a certain amount of stuff in people's kitchens already and they'll be using some of that, so it's hard. Frankly, right now, it's pretty hard to forecast next week.

But…

Yes. All I can say is welcome to our world, Rob.

This is what we have to deal with on a week-to-week, day-to-day basis. And again, as I say, we've given a high level of transparency in terms of what's happened already, a high-level of transparency over the base assumptions that we've used.

But it would equally recognize that there's also a high-degree of volatility. And there's are a whole bunch of other scenarios that you could play out that would either improve the profitability or detract from profitability in the balance of the year.

I have two questions. The first one is with respect to the incremental costs that you have announced.

If the lockdown was to go beyond your base case, what percentage of those costs would actually not be one-off and you would actually have to again re-spend on top of what you've already announced? And the second question, coming back to your base case around declines in the general merchandise and clothing business, how much inventory management flexibility do you have, i.e., for instance, if you do have an assumption of subdued demand in the second half, like where you already have all the orders confirmed and you're not able to actually move away from those?

So any qualitative comments around inventory management would also be very helpful.

Yes. Maybe if I just talk a little bit -- well, I'll talk a little bit about first and second, but I'm sure Kevin would also have something to add.

I mean broadly speaking, as a matter of principle, we are acting as good corporate citizens and therefore, honoring any of the contracts that we already have in our clothing and general merchandise business and taking in any products that have been made for us. There are sort of various aspects of the business.

Some of the parts of the business are basically like the grocery business, you buy and sell on a relatively short cycle. But on the long lead time products, typically, we're talking about a six month lead time between ordering and delivery.

And therefore, the actions that we can take to amend our stock requirements will come through into the autumn and into the winter. And obviously, the teams are thinking quite carefully about the planning assumptions and thought a lot about our base case.

Effectively, in our base case scenario, there is a reasonably high cost of writing down or selling at a lower price stock in both our general merchandise and particularly, our clothing business. So you can imagine we've had a wave of stock coming into the business.

And if that business is trading down, let's say, roughly 50%, then that stock has to be sold obviously overtime. And certainly, that's one of the costs that we've borne in the scenario that we've played out.

Again, we've modeled the scenario in terms of lockdown. We've described, at a headline level, the scenario that we expect to play out, which is effectively lockdown until the end of the first quarter and then some release of the shackles between June and September.

And that has an inherent assumption in terms of the costs. I'm afraid I don't think we're going to go any further than that.

And if we took our asset levels as an example at the peak there at 25%, clearly, that has a big cost for the business. That's now down to 15%, and we don't really have line of sight as to whether or not that will stay at 15% or drop over the next period of time.

So you can kind of see the assumptions inherent in the base case. But afraid I don't think we'll go any further on the costs.

I'm just looking at Kevin.

No. I mean, the other thing to add, Maria, is the cost -- very clearly, there's big store labor costs and logistic labor costs, absence, paying vulnerable colleagues who are off either because they're vulnerable themselves or they're looking after vulnerable relatives, all the extra guarding, cleaning.

So the longer this goes on or if there was a second lockdown, then there'll be more of those costs coming into the business. There is a sort of a direct sort of correlation between them.

But the scenarios we've run that are worse than the base case would assume more of those costs coming into the business should there be an extended lockdown or a second lockdown, et cetera.

And the only other thing to add is that there is an inherent assumption that our cost-saving program will have some elements relating to it in the balance of this year. And of course, again, if lockdown continues for longer, there may be some elements for the delivery of the cost savings program that might come under pressure.

But at this point in time we just don't have line of sight on that.

Yes, three questions from me. Firstly, with the loss absorption, will we be able to operate a lower CET1 ratio in the longer term?

And given the financial services division pre-COVID generating little earnings, in a more challenging environment, what does that mean that you've struggle to improve your CET1 fast enough organically so you may need to put cash in? The second question, just a clarification point from you, Kevin, where you said you're adequately funded in a worst case scenario.

Is that [Indiscernible]? And then just...

Tom, sorry, your line broke just on the on the second question.

So just -- it's a clarification for you, Kevin, where you said that you're adequately funded in a worst-case scenario. Is that at a group level or for the bank?

And then third question is in terms of wholesale, you announced a wholesale agreement with Aussie grocer, Coles, and you're supplying Simply Fresh Coles in the UK on a wholesale basis. Does this represent an entrance into the wholesale industry?

And if so, should we factor in some start-up costs associated with this?

Yes. I mean, maybe if I take the third question and then perhaps Kevin can reiterate the point we've already made about the no need to inject cash into the bank, Tom, just so you're clear.

On wholesale, yes, I mean, we've said for a long time now that we think there are opportunities in wholesaling in the UK. It's a relatively low-cost and margin-enhancing thing from pretty much day 1.

So we wouldn't expect any start-up costs associated with that, because effectively we're riding on the back of existing supply agreements with our suppliers and similarly with the trade that we do overseas. So we already have relationships, as you say with Coles, with Dairy Farm in Hong Kong, with RedMart in Singapore.

So it's certainly part of the business we look to develop. It's not a massive earnings benefit in the short term, although over the long term, you could imagine it could become a bigger part of the business and it is pretty straightforward to do.

We've already built the systems and distribution infrastructure right on the back of that within our organization. So there isn't a significant overhead other than a few people in the center of the organization associated with supplying wholesale either inside or outside the UK.

So Kevin, perhaps you could just reiterate the points on the bank.

Yes. Tom, just on the bank, just to be clear, we have about £320 million buffer, over £300 million, as I said, and that's as measured under the PRA's ICAAP process where we look at capital adequacy.

And of that, £120 million we wouldn't need to rebuild. We could absorb that and not rebuild this if we chose not to.

The balance of £200 million, we'd have to rebuild over time and that would just be an agreement with the regulator. And as you can see, someone like the Co-op Bank, they've eaten into the bottom and haven't rebuilt it over a number of years.

So you're given time to rebuild that buffer. So you're right, we'd have to rebuild it in time.

But as I say, we'd have to get to a point when we're rebuilding it, the bank has to lose substantial amounts of money. And in the scenarios we've run, we don't see that happening.

That's not to say it couldn't happen, but we've run some very stressed scenarios of high levels of unemployment for extended periods of time, and we don't see that. And as I say, I'd refer you to Note 21 as well in the accounts just to give you more color on that.

You talked about worst case scenario, that's on a group level. We run the viability statement at a group level over three years.

And I think everyone can take comfort from -- you can imagine if there was two big discussions around the Board table, on the Audit Committee table this year, there was viability and there was dividend. And the viability statement got a huge amount of review, as it always does, but it got a particular amount of review this year and then signed off by EY.

And again, you can imagine the audit firms are very concerned about signing off on viability at the moment. So we ran a number of stress tests based on previous recessions going on for the three year period.

And then we came out of the other way and said what would it take to stress the business on both scenarios. We got comfortable as a Board that we have sufficient resources to manage the business.

Three, if I may. Firstly, if I could come back on Argos and Sainsbury's general merchandise and clothing, more with a view, I guess, to the year through March '22.

So year two of your year three sign-off review. I mean all else being equal, how should we view the generic operating leverage in those businesses?

And what do you think you can do to mitigate any medium-term weakness given that you have not a decent line of sight, but certainly time to adapt to the scenario with regard to buying practices or cost ratios or the like? Secondly, just on the bank, is it possible to get a little color on current trading?

So the bank's fee income and its interest income, just to get a sense to help us with the kind of the moving parts in addition to the provisioning. And then also, in absolute terms, maybe what you can do on costs, I guess, there's a couple of moving parts within the cost/income ratio.

And then lastly, if I may, on the dividend, it sounds to me like it's entirely prudent on your part, but I guess there's a very real prospect that the uncertainty or lack of visibility will be just as murky when we get to November. So is there a realistic prospect that you also defer any decision, very justifiably, when you get to November as well for the interims?

Yes. So Nick, perhaps if I take the first and third, and then Kevin can talk specifically about the bank.

I mean on the dividend, I think we've been as clear as we can be. We won't pay a dividend in July and the next decision point for a dividend will be in October.

And clearly, at that point, the Board will review the prevailing circumstances and make a decision that's appropriate and communicate it in the right way. And I think at this point, we can go no further than that, and you can speculate one way or the other.

But clearly, that's a decision that will be made in the light of what hopefully will be clearer circumstances. But you're also right that I suspect even at that stage, there's going to be a degree of uncertainty.

But the Board will make the appropriate decisions and communicate that to shareholders at the interim. As far as the scenario planning is concerned, you can imagine that the leadership team has been pretty much 100% on getting the day-to-day sorted out in the last few weeks for hopefully understandable reasons.

But as I hand over to Simon, I'm sure he and the team will be thinking about the very issues that you raised. And I'm sure if you go through the potential scenarios, there are lots of things that could play out.

And indeed, there's been a whole series of fairly real-time experimenting in and of themselves, each one would probably be quite a significant challenge. But the fact that we've been doing them all at the same time obviously gives lots of learning about what the future could look like.

If you take SmartShop in our stores, moving to 30-odd percent of transactions that will sell, that will be a classic example of something that might have taken three or four years to get to, and it happened in the space of less than six weeks. So without being specific about Argos closing or the business more generally, there is starting to be a lot of head scratching going on to understand both the short-term choices that are available to the organization, and indeed the long-term planning horizon and what you may or may not do differently in the light of that.

But I don't think it's for me to opine on any of those particular issues. I'm sure in the fullness of time Simon will come to the right choices, and we'll communicate those for the market.

Presumably, as part of your sign-off review, you kind of have to consider those scenarios.

Yes. I mean, as we've said, we've laid out a base case.

We think we've given you a pretty high level of transparency and we've given you the assumptions on which we've made that base case. So you can apply your version of what you think might happen and the scenarios that might play out.

But it goes without saying that there's a wide degree of variability in terms of the potential outcomes. And that's why we're not issuing guidance, we are just giving you a base of -- a set of basic assumptions on which you can build your models, and probably the highest level of transparency we've ever given in any set of results.

Perhaps if Kevin could talk specifically about the bank costs and trading.

Nick, none of what I'm going to say would surprise you about the bank. We've clearly seen decreased demand for ATMs for the cash coming out of ATMs where we get a commission as people don't use cash and move to contactless because for hygiene reasons.

Travel money, we've shut off the bureaus and we would expect that business to be impacted right through the summer, which is the peak time for that business. So there's commission income there.

We're seeing reduced demand, as again you might expect, for new credit cards, personal loans. And Argos financial services, sort of the Argos store card, some of that will be driven by the fact that stores are closed because a lot of credit is transacted in the stores.

And actually online, there's less credit contracted in the online journey. So that will be the fact that those 570-odd stores are closed.

But all that is exactly what you'd expect given the current uncertainty. And that's built into our base case scenario, and we've got more negative ones and slightly more positive ones.

On the bank cuts, we started the plan that we talked to you about after the Capital Markets Day in September when Jim joined and put together his new team. Clearly, there's big plans around headcount, digitizing the customer journey, which removes a lot of costs for us internally as customers support themselves.

And I think this whole COVID-19 situation will, I think, speed that up, if anything. And customers, I think, value being able to do things on a digital platform rather than having to speak to people now and the time that's involved in that.

And then things like selling to loyal Sainsbury's and Argos customers rather than going through aggregators, well, there's a cost involved in that. But a number of other initiatives.

And that work has started. You saw in the presentation on Slide 11, headcount is down 12% by February '20.

We're seeing people adapting and using the mobile apps as we introduce them. So all those plans are in place and will continue.

Inevitably, there'll be some delay as there will be in the retail business and some of the cost actions just because of the COVID-19 disruption. But it's all still to be delivered and will be delivered, but the timing may be affected.

I have two left. One is on discounters.

During Capital Markets Day, you pretty clearly said that your focus is maintaining market share within the big four, while discounters are likely to continue gaining market share in the UK. Recent Kantar data shows that your growth is significantly above the one of Aldi and actually Lidl as well.

Can you give any of your view on that? Are you winning the customers within COVID environment?

Is it location? Is it assortment?

Is it anything else? And is there anything to stick?

And my second question is related to any color on your online grocery sales profitability versus your average grocery profitability, any color. I know you wouldn't give the exact numbers, but maybe something relative, how much less profitabilities, what the trend is, is it becoming more profitable than before, is mix changing in the current environment.

Yes. And you're right.

In terms of our sort of stark point at the Capital Markets Day would be to maintain our volume share of the grocery market ex the discounters. And actually, if you took our performance in quarter 4, we did better than that.

We actually grew our market share, volume share in that reported statement. But of course, that is now ancient history.

And what we're seeing, as you've described, is a marked change in customers' behavior. Where in effect they are choosing to shop on a needs basis, our transaction levels have effectively were not far as halved.

But of course, that means by implication they're spending more than double what they'd spend on every shopping trip because they're trying to get everything they possibly can in one go. And of course, that mitigates towards coming to larger sheds rather than to the discounters, which is what you can see very clearly in the data.

And indeed shopping locally. I mean there's quite a big step-up, as you'd expect, in convenient shops and also local traders, which have seen a bit of a bonanza.

I think it was 50% up if you look at the sort of local stores data. I have no idea whether that's going to stick, if I'm honest.

I mean your guess is as good as mine. But most of these behavioral changes, if they last for a long period of time -- sorry, if people -- yes, if the sort of lockdown lasts for a period of time, then they start becoming embedded behaviors.

So who knows whether it will go back to where it was, but I suspect it will be some and some, if I was trying to predict the future. As far as the grocery online business is concerned, the broad metrics are the actual number of slots is up roughly 50% and will continue to grow.

The basket size is up roughly 50%. So overall, that business has almost doubled as the participation of our grocery business.

So accounts are not far off, 15% of our total sales in the last week we traded, and that's likely to grow because there's still far more demand than there is supply. It's helpful in terms of, first of all, basket size, the picking efficiency has increased.

Clearly, more orders means higher drop densities. That's also helpful.

And a proportion of the growth of the business is in Click & Collect, which means we're not driving to people's homes, we're only driving into our own car park, which means that the same distances are a lot shorter and therefore a lot more efficient. So in the round, that means the business is more profitable.

It's not as profitable as customers coming to the stores and buying their groceries, particularly in the way that they're choosing currently to buy their groceries. So we still, on balance, prefer people to come to the shops.

But clearly, in the world that we're in, people are obviously taking the opportunity when they can to shop online in their droves. And we'll continue to do everything we can to increase our capacity and to satisfy that demand, which, by virtue of that virtuous circle that I've described, is helpful on balance to the profitability of the online grocery business.

If that helps to give you the color that you need.

I think it's your last event, Mike, so...

It is.

I'm not -- yes, I'm not sure how much you're going to miss us, but I think many of us will miss you.

Thank you, Andrew.

Yes, we're going to miss your transparency, ambition, your passion for the business, your coffee drinking, I'm sure, humor, and maybe even a bit of your singing. But anyway, I wish all the best.

That was going pretty well until the last bit. But anyway...

Yes, so three questions seems to be the way. So firstly, just on that online shift.

I was just wondering to what extent you would anticipate those supply changes sticking around. Obviously, demand is pretty exceptional at the moment.

As you mentioned you'd rather people go to the stores. But would you anticipate post-crisis, do you leave a lot of that kind of store picking process in place?

Second question is just on the rates release. I'm just wondering if there's any scenarios where you wouldn't take the rates release.

We see some of the sales scenarios, I think, they are pretty bearish, particularly around Argos. Are there any circumstances that maybe you think it was the right thing to do?

And then the last one and perhaps quite complex is gross margin. I think it's been described as a magic that we miss.

There's obviously a lot of moving parts within what people are buying in the stores at present. And promotional intensity perhaps down a touch, a bit more scratch cooking, a bit less food to go and so forth.

So just a little bit of help around those moving parts?

Yes. I'll have a go, and I'm sure Kevin might want to follow-up on all three.

Yes, I mean who knows? I mean I go back to the point I made about discounters, there's clearly a marked change in behavior.

And if that was to stick around for any length of time, it would be hugely beneficial to our organization, whether it's a shift away from the discounters, larger basket sizes or indeed the way that the mix has worked out in terms of online shopping. Our experience would say that online shopping and indeed using things like SmartShop and digital shopping becomes habit if you do it for long enough.

And clearly, the longer the lockdown goes on, the more people get used to shopping for their groceries online, the more likely that is to stick. So whether it sticks at the kind of 15% plus level that we're currently seeing, I have no idea.

But I suspect it will certainly be higher than the 7%, 8% levels that we were seeing pre-crisis. So who knows, but it's going to be at least somewhere between the two, but it may well stick at the higher level as people get more and more used to the convenience of online shopping.

On rates relief, clearly, we are appreciative of what government has done. We would certainly anticipate taking that rates relief because we'd also make the point that we would remain one of the largest taxpayers in the UK even with that rates relief.

And indeed, we would pay higher rates than, for instance, Amazon would because we still pay rates from our office space and our distribution warehouses. It's only on our stores and in England, Northern Ireland and Scotland we get the rates relief.

The Welsh has decided to continue to charge rates. So I can't think of any scenarios where we would forgo that opportunity.

And just to reiterate the point about being good corporate citizens, we've also foregone any opportunity to get recompensed for furthering our colleagues. We're paying very generously if our colleagues are ill.

And we haven't taken the opportunity to defer VAT payments. So we continue to act, we believe, in the right way.

As you are no doubt aware, we don't comment on gross margin and won't comment on gross margin other than to say that you can make some assumptions around the scenarios that we've painted. And clearly, the scenarios we painted, the mix effect, you could argue other than the obvious mix effect between the various big chunks of the business is broadly neutral.

It's the sales impact which is the thing that drives the profitability. So inherent in our assumption is let's assume a flat gross margin for the various chunks of the business.

Clearly, in clothing, there's a huge amount of markdown going through at the moment, which is one of the costs certainly in the short term. And we've already talked about the potential mix impact of a prolonged recession, which I would argue has the potential to be helpful rather than unhelpful in terms of the mix impact, but your guess is as good as mine.

And you can build that into your model if you think our base assumptions are wrong. I don't know if there's anything you'd add.

Andrew, the only thing I'd add to what Mike has said on rates, rates, it's not optional and -- whereas the VAT and job potential are optional, and we've chosen not to take them, the rates wasn't optional. I'd echo everything Mike said about it being a tax that unfairly burdens our sector and we'd welcome the government's, as we've talked about for many years, revisiting this after the crisis.

And then the other final point is we have closed over 570 stores that are sitting empty and not trading.

Only one actually. You had a Capital Markets Day last year and you had a long presentation of your strategy.

So I was thinking, in the current environment where the consumers is changing a lot, as you said, and it's difficult to predict, of course, what would be the outcome of the longer-term change of behavior, but is there anything in the strategy that you think you need to potentially accelerate today? And are there other parts that you potentially believe are less strategic today?

Yes. I think I've already made reference to the fact that at this moment in time managing the last seven, eight weeks has been a hell of a thing for the organization and that's what's been the short-term focus of me and the leadership team.

But it's also a good time to be handing over because I'm sure Simon and the leadership team will be looking at exactly and addressing exactly the question that you raised. And clearly, on the back of what we are seeing, there are some choices that can be made to accelerate certain things and, as you say, decelerate certain other things.

I don't think it would be right for me to opine on that today. And I'm sure that when Simon has got his feet under the table and has the time to think about it both for the short-term and the long term, he will be talking to you probably at the pre -- sorry, the interims in November about the kind of choices that the business has made in the light of the scenario that's been playing out.

So clearly, broadly speaking, the direction of travel we set at the Capital Markets Day, the digitization of the business, the various cost-saving initiatives, the need to continuing to invest in the product propositions, et cetera, et cetera, will all hold true to some extent. But clearly, there could be a change of emphasis as the new leadership team look forward.

So it would be wrong of me to, say, opine any further than to say that, clearly, Simon would be reviewing that over the next period of time. And no doubt, we'll talk to you about it at an appropriate moment.

I think as the oldest analyst on planet Earth, just very much wishing you a very long and happy and healthy retirement, Mike, to be fair to you.

Thank you very much, Clive. I appreciate it.

Just two or three questions, please. Mike, in your distinguished career, how would you characterize the present economic challenges of retailing?

You've been through some big ups and downturns over the years, just how do you see this coronavirus crisis for Sainsbury's? Secondly, in that respect, how significant do you think the online activity recently and how much of a strategic shift does that represent, both grocery and nonfood?

And in that respect, the scope for a lot of stores to close in the UK after this crisis. And then just lastly, one more for Kevin perhaps.

Just to maybe give a little bit more color about how robust you think the net debt target in 2022 remains given all the current uncertainty.

Yes. I mean I think on the first point, Clive, it goes without saying that this is unprecedented and not just in my working lifetime but in my lifetime.

I think the only thing that gets anywhere near is the three day week which if you're old enough, you remember not having electricity for eight hours at a time, which is probably, as I say, the only scenario that I can think in my lifetime, and that goes back to the mid-1970s, where we've got anywhere near the kind of situation that we're currently in. And I don't -- one of the reasons why we're deferring the dividend decision is that I don't think any of us can genuinely currently fully understand the economic impact and the subsequent knock-ons.

And therefore, we think it's absolutely right to be prudent. And as I said throughout, we've given you a base case but we could give you plenty of cases that have significant downsides and plenty of cases that have significant upsides.

And on your point about what does that mean for retail, again, I've said it and I'll repeat it, I think it accelerates many of the trends that were already there. So what might have been happening over a three to five year period, digitization, move to online, et cetera, et cetera, I suspect is going to be quite significantly accelerated.

As will indeed the consolidation of certain types of the market, with businesses that might have struggled on for a few more months or years are going bust and no longer existing very sadly. So to that extent, your guess is as good as mine.

But I would say, if we look back in, let's say, a year or two's time, we'd have seen an acceleration of many of the trends that were anyway. In that sense, I'd like to think it's vindicated many of the choices that we made over the last five or six years.

You look at things like SmartShop now accounting for over 30% of sales. That wouldn't have been possible even a year ago.

And that's just a testament to the sort of the investments that we've made in our digital online business. But as I say, you're as experienced as I am and so you can model many of the scenarios.

But inevitably, that's going to increase pressure on high streets as an example, if the trends that we've seen rapidly changing over the last five, six, seven, eight weeks continue for the foreseeable future and beyond. On debt, maybe Kevin can speak.

Yes. Clive, as we've said many times, the key financial targets for the business is delivering a strong free cash flow.

And we use that for two purposes, clearly distributing to shareholders by the dividend and deleveraging the business. The deleveraging is important for us as the management team.

It gives us greater financial flexibility. All the more important in the current crisis, as you can imagine.

And we're very pleased that net debt decreased by 23% this year and over £900 million in the last four years. And as we decrease debt, clearly, the equity value in the business goes up.

So it's good all around. So we're committed to the target.

The issue is timing on the target. And clearly, we see how things play out.

And as we get greater visibility, then we can come back, and the logical time to update you would be the interims again. And just the timing of the target has changed, but we're committed to the targets.

Sorry, Kevin, to come back. Just in terms of your base case scenario, for example, is it still feasible to hit that £750 million reduction in 2022?

Or is it something that is very much more likely to be extended out?

It's a tricky one to answer because with the base case, we could stay on track, but it all depends on what happens the following year, because clearly, it's a three year target. So if we had the base case, we could achieve broadly what we would like to do this year, but it's difficult to be clear because we don't know what next year would be, Clive, if that helps.

Yes. Okay.

Well, for someone who remembers cooking toast in front of the coal fire in the early 1970s, Mike, I hope your retirement doesn't take you back to that. All the best.

I hope, too, as well. But at least, you remember that.

And I hope you agree, that's probably the only economic scenario I can think of that gets anywhere near what we're going through at the moment.

Congratulations on a good growth in like a long time, and I wish you very best for the future. Three questions, if I may.

First of all, around promotions. We're sort of seeing at the moment, I think Nielsen was talking about 10 percentage points lower promotional participation at an industry level.

I was just wondering, at an industry level, are we seeing a lot of inflation effectively from the lower promotional giveaway at the moment? And also, what's sort of happening with suppliers around the funding budgets for that?

Are they on hold at the moment? Are they likely to come back later in the year?

Sort of wondering what discussions you're having there. Second question was around the supply chain and any signs of stress in that.

I mean I'm thinking particularly of the fresh supply chain here, we sort of see some articles around labor shortages, et cetera. Are you seeing any signs of distress?

And does that point to maybe inflation picking up through the summer as we become more reliant on that supply chain? And then the last one was really around Argos and thinking about peak ordering.

And if you could just talk to us, I appreciate it's probably a huge challenge at the moment, but how do you have to think about ordering ahead of peak in Argos? And is that happening over the next few weeks?

And is there a risk that sort of supply becomes sort of self-fulfilling in that if you don't order enough, a peak in demand there? How are you thinking about scenarios around that?

Yes. I mean on the first point, I mean, it's self-evident that the number one priority that we had was to focus all of our resources on making sure that we can supply all of the basic commodities to our customers as quickly as we possibly can.

And in that scenario, it would be absolutely nuts to carry on promoting in the way that you were previously. Clearly, as we come out the other side and we start to see some kind of normality, I suspect you'll start to see the sort of cut and thrust.

In fact, I think we've already seen some of the cut and trust as a sort of normal day-to-day activity within grocery businesses starting to increase. We haven't seen much change in inflation, if I'm honest, in terms of the headline rates.

The business is -- we look at inflation effectively at the average item price level. So there's lots of different ways that you can measure inflation.

But if you think about the categories that have performed particularly well, they've been broadly speaking in the dry goods areas. And therefore, in terms of value per item sold, that would tend to be on the lower side compared with some of the added value, fresh foods as an example.

So we're selling lots of cans of tomato, not many packets of ready meals. And clearly, the ticket price for each one of those items is markedly different.

It's like they're 10 times different. So we haven't seen a significant spike in inflation, and none of us really know what's going to happen to commodity prices over the next weeks and months.

So at this stage, I'm not sure I could do anything more than stick with that as an answer. In terms of supply chain, in the end, the UK relies on 80,000 migrant workers to pick crops, which are now starting to ripen in fields throughout the country.

We think the industry, as we see it, has done a reasonable job of mitigating that, either through bringing migrant labor in, help from the government, also looking to labor within the UK economy to help. It's probably not quite where it needs to be, but it doesn't feel like it was quite as significant as it might have felt a few weeks ago as we were potentially phasing down those 80,000 people not being available to pick the crops and all inherent risks associated with that.

So I'm not saying for a moment it won't be something. There are certain elements of our supply chain, flowers being one that's come up continuously which are under pressure.

But equally, and we think more broadly, the industry is in a position to mitigate those supply chain stresses. There were gaps on the shelf in certain categories at certain times, but broadly speaking, we're returning to whatever normality will look like over the next period of time.

And clearly, for the Argos peak, as you could imagine, not just within Argos but all of our long lead time businesses, we are reviewing our demand. We are looking at the various planning scenarios and we're making sure that we're making the right decisions in terms of stock for the autumn and winter peaks, which, broadly speaking, we've still got to place orders for and therefore we've got a degree of flexibility.

But it wouldn't be a bad scenario to take our base case, the case on which we're planning the business, as a start point, plus or minus a few bits here and there. So I mean we've given you a base case, that's our planning scenario we're working to.

If it was stressier than the marked 10% in general merchandising and clothing, that will give us a stock overhang. But equally, the other way we'd run out of stock if the market was more buoyant than that.

So that's the planning scenario.

I just wanted to add to the various comments about this being your last appearance on one of these results calls. I think I have to say your timing haven't been great.

There can't be many more difficult periods in which to leave the big UK food market given the growth of the discounters, the growth of online and now we're at a global pandemic to finish off with. But I think all the analysts, I'm sure, would agree with me in the same three things.

One, I think you deserve a lot of praise for always looking ahead strategically and not shying away from the big decisions. Also, you've always been very keen to engage and debate with the investment community, which has been very much appreciated.

And I'm sure we all wish you success with whatever you turn your attention to next. It would be nice to think you'll have a relaxing final month to wind downward, but I suspect it's going to be one of the busier months in your time at Sainsbury.

But the very best of luck with whatever comes next.

Thank you very much, James. That's very kind of you.

James, I might add as well, because I think we probably -- I gather we're probably at the end of the questions. I'd like to add, on behalf of the whole business, our thanks as well to Mike.

Mike's knowledge and experience in the industry is unparalleled, and many of you would talk about that. But what you often don't see or what you wouldn't see day to day is just his commercial judgment, his management style and action, and consistently setting the right tone here at Sainsbury's.

And Sains is a business with a really strong heritage for doing the right things, and Mike has been an amazing guardian of that heritage. But also at the same time, invested hugely in our digital capabilities and set us up really well to the future, which we're very grateful for and it's been very evident during the COVID-19 crisis.

So Mike, thank you very much for setting that tone, for looking after the heritage, setting us up well for the future. And we will all miss you, and wish you all the very best.

Thank you. I mean we haven't always seen eye to eye with everybody and we've had many robust debates over the years.

Hopefully, you've seen that I've always tried to set out to do the right thing and I've put the interest of the company in front of any personal interest, and I've tried to do that consistently. And at the center of this organization, of course, are a set of values where we set out to do the right thing in what is an incredibly challenging set of circumstances, and in some cases, quite ambiguous demands.

So that's certainly been my personal stance. As I say, I appreciate the feedback and I've enjoyed our interactions no matter how difficult they have been sometimes.

And I respect the fact that all of you guys have a job to do and that we all have a part to play in this very challenging industry, but nevertheless, very exciting industry. So I thank you very much for the kind words.

And actually, it's not quite the last time I'll do this with you, because I think we've got the fireside chat. So I think I get to deal with you all again on Friday, but it certainly would be the last time that we do this kind of or I do this kind of results discussion.

So thank you very much for the very kind words. And at that point, I think we're going to call it a day.

So thank you very much, everybody.

Thanks, everyone.