Currys plc (CURY) Earnings Call Transcript

Good morning, everybody. So we're pretty proud of the results that we're going to present today, what they show is a strong and strengthening performance by the group. It's founded in the Nordics by us making sure that we're the beneficiary of a rapidly recovering market in the U.K., another year of excellent and strengthening performance. And all this comes as you'll see today, from a strategy that we followed consistently and that we believe is clearly working. There is a lot more left in the tank. We're going to cover that today as well, not least under new leadership, and you'll be in good hands with Fredrik and his world-class team, one of whom, I will hand over to now.

Thank you, Alex. Good morning, everyone. Let me start with some highlights. So as you will have seen for last year, we had good top line growth, up 4% on a like-for-like basis. That helps us grow our profit before tax to GBP 191 million, up 18% year-on-year. In turn, that drove our free cash flow to GBP 157 million, meaning we finished the year with GBP 176 million of net cash. Our adjusted earnings per share increased by 19% to 13.4p. And today, we are proposing a full year dividend of 3p which is double the level of last year. Starting at the top line, our sales continue to improve. So within the U.K., as you can see, it's the second year in a row that we've enjoyed like-for-like growth and market share growth. And in the Nordics, a spectacular year last year, up 6% overall and double-digit growth over the peak period. Going into each of our 2 markets, starting off with the U.K. and Ireland. As I said, strong top line growth, up 3% on a like-for-like basis in the U.K. And I'm pleased to say that our most important sales are recurring service revenue increased by even more at 7%. That helps us drive our adjusted EBIT margins up by GBP 5 million to GBP 158 million, keeping our EBIT margin percent flat at 2.9%. Operating cash flow has increased by GBP 6 million, and our segmented free cash flow increased by GBP 10 million. And that's despite the fact that we invested GBP 27 million in working capital to drive our ID mobile proposition forward. In terms of our EBIT margin, as I said, overall, flat at 2.9%. And within that, our gross margin was up by 20 basis points. That's the fourth year in a row, that we've seen in our gross margin step forward, whilst our operating expense ratio declined by 20 basis points. In terms of the drivers of gross margin, no surprises, exactly the same activity in terms of solution selling, driving services and not chasing less profitable sales. And that was critical because it allowed us to offset a big chunk of the government's imposed headwinds. You might remember we called out last year, GBP 32 million of National Insurance and living wage headline -- headwinds and certainly, those that appear within gross margin within our supply chain and service, we've been able to offset. From an operating expense to sales ratio, as I say, that went backwards by 20 basis points, the cause the same thing, the living wage national insurance impact on our store colleagues and on our central overheads. And although we achieved significant cost savings, it wasn't enough to offset those headwinds. Moving on to the Nordics. Our Nordics performance was even stronger. Like-for-like, as I've already described, was plus 6%. So very, very strong. And again, our recurring services revenue was up 8%. That drove our adjusted EBIT within the Nordics, up by 26%, and our adjusted EBIT margins increased by 40 basis points. Our operating cash flow also increased by 26%, and our segmental free cash flow improved by GBP 4 million. In terms of our EBIT margin in the Nordics, as I said, a 40 basis points improvement overall. If you were to break that down, there's a 60 basis point backward step within our gross margin and 100 basis points improvement within our operating expenses. Now it's really important to drill into this gross margin because on the face of it, it might look like we were losing some of the disciplines that are hard on in terms of focus on margin. And that isn't the case. Pretty much all of that 60 basis points. In fact, 50 basis points of the 60 basis points was caused by foreign exchange. Our Nordic business buys pretty much all of their products in euros and dollars. And our policy is that our Nordic business forward hedge FX on 80% of those purchases up to 6 months in advance. Now what we saw over the course of the last year was an incredible strengthening of the NOK, which meant that pretty much all of those contracts were underwater. And IFRS 9 requires us to post that loss through the same line as the underlying asset, which is why there was a big negative in gross margin. In terms of operating expenses, the Nordics, again, did a fabulous job at offsetting all inflation with cost savings. So on a local currency basis, the costs in our Nordic business broadly flat, which means we've achieved that given significant top line growth, which means that operational leverage improved the ratio, as you can see. This is a slide that we've shown the last couple of presentations, and we've used it to demonstrate, number one, the progress we're making within our Nordic business on progression on EBIT margin. The other reason this slide has been important in the last couple of years has been the weakness of the NOK. And therefore, the fact that on a local basis, we've seen good progression in profit, but that's looked understated when you've looked at it from a GBP perspective. Now the great news in the year that's just finished is that not only has local profits increased, but with the strengthening of the NOK, we've had a double whammy. So a really, really good step forward within Nordic profits. Moving on to cash. Another great year for free cash flow that's stepped forward by GBP 8 million to GBP 157 million. You can see the vast majority of that came through operating cash flow, so higher cash profit up GBP 34 million. Our CapEx was broadly flat at GBP 79 million as we've maintained the strong discipline, making sure that every pound of CapEx we spend is generating a good return. Adjusting items also flat. So of these adjusting items, as you know, are focused on nonoperating properties and also restructuring costs. This is the year that we're presenting is the final year where the number will be this large. And going forward, and I'll show you shortly, we expect that number to be significantly lower. Cash tax is GBP 7 million. That is a surprisingly low number given our profits and the explanation is brought forward losses. Cash interest increased slightly and that's because of lower average cash holdings during the year. And finally, working capital. Working capital was an outflow of GBP 3 million in the year. But again, let me repeat what I said earlier. That's despite the fact that we invested GBP 27 million of working capital growing our ID Mobile business. Outside of that, actually, our working capital improved by GBP 24 million through improving stock turns, management of payment days and reducing debt. What did we do with GBP 157 million? Well, we made a GBP 82 million contribution to the pension scheme. So this was the last big payment to the pension scheme as the deficit approaches 0. And I'll show you shortly that, that number going forward will be significantly lower. We made GBP 74 million of payments to shareholders with GBP 24 million of dividend and GBP 50 million of share buyback. And we also made GBP 23 million of buyback for our employee benefit trust. So this is to pay for the long-term incentive and other colleague share awards. And overall, we finished the year with GBP 176 million of cash. And you'll recognize this slide. This reflects the strength of our balance sheet and we have continued to improve the position. So this brings together our level of debt and the pension deficit. And you can see as our pension deficit is now just GBP 6 million it means that we are in a net cash position of GBP 170 million. Moving on to outlook. Obviously, it's very early in the year. But during the first couple of periods, we're pleased to say that our trading has been very solid. And although there remains macro uncertainty, the group is comfortable that we're going to achieve market consensus. Some headline numbers to help with your modeling. We expect total interest expense to be broadly flat year-on-year between 60% and 65%. We're calling out an increase in capital expenditure, an extra GBP 20 million to GBP 95 million. But again, we won't be giving up any of those disciplines in terms of the quality of that CapEx. I reflected earlier that we expect our exceptional cash flows to fall significantly, and we're calling that going from 35% down to 15% in this new financial year. The annual pension contribution contractually drops from GBP 82 million down to 13%, and we're expecting to make GBP 85 million returns to shareholders with the higher cash dividend costing GBP 35 million and repeating the share buybacks, so a further GBP 50 million of buyback. Now you'll see that those 2 combined add up to GBP 85 million. Part of the contracts we have with our pension scheme is any contributions over GBP 80 million, we have to match them. And that's why we're calling out an extra GBP 5 million of pension payments during the course of this year. Now that will fall off future payments towards the end of that contract period. In terms of our medium-term objectives, no change. Our target is to get to at least 3% EBIT margins. And as you can see, the U.K. has delivered 2.9% again, so we are virtually there. From a Nordic perspective, good progression now for 3 years in a row and moving back to where we were pre-pandemic. And finally, just worth touching on our capital allocation priorities, which at a headline level are unchanged. We will continue to maintain a prudent balance sheet with a year-end net cash of at least GBP 100 million. We will pay the required pension contribution. And as I say, that is contracted now at a much, much lower number. We will then invest to grow in the business to grow profits and grow cash flow. As I showed you, our expectation is that, that CapEx number will be less than GBP 100 million, but we're not constrained by that. And if we see opportunities us to invest to be able to drive profitable or cash flow accretive activity that's in line with our investment criteria, we will do that. And we'll also look at M&A opportunities, infill M&A opportunities to support and deliver upside to some of our key growth areas. Pay and grow our ordinary dividend. As you saw, we are proposing a 4p total dividend, which equates to a 4.5x cover. And today, we're calling out that we expect to reduce that to 4x cover in '26, '27. Finally, surplus cash will be returned to shareholders. And as I say, with calling out GBP 50 million of new buybacks that will start from today. So that's for me. Let me hand back to Alex.

Thanks, Bruce. So the story today is one of the Currys improving its trajectory on every dimension that matters, whether we're talking about the U.K. or the Nordics, on colleague, customer or financial metrics, on sales, market share, margin, cost efficiency, cash conversion, the health of the balance sheet, electrical and mobile products and services on every dimension that you care to mention the trajectory is good and is improving. There's one in particular, I want to draw out and emphasize upfront today, which is the top line growth and the fact that we've been able to return this business without much help from the market to sustainable top line growth. And in the U.K., the picture you see here is one of us almost tripling the total accessible market that we face. We have been able to continue to eke out share improvements in our core market, 60 basis points of growth to show for that. But also, we've been growing this market, as I say, growing it in terms of who we sell to, small- to medium-sized enterprises as well as to consumers as well as what we sell, whether it's the new and emerging categories and solutions, and services. These are areas that are adjacent where we've got a great deal indeed all of what it takes to win, where we start with a lower market share and therefore, have accordingly higher headroom for growth and growing, we are, as you see, in all of these areas that we flagged for growth. We are growing at healthy double digits, and it's making a material contribution to the strong and strengthening performance that we've seen today, both in the U.K. and also in the Nordics. Let's start with what we sell, the new and the growth categories that we're facing. And part of that is new and emerging tech coming from our core categories, so whether it's wearables like the Aura ring or whether it's glasses like the matter or robots, robot vacuums are flying off the shelves. That's all going well. But it's also adjacent categories, whether it's e-mobility or pet tech, seasonal and impulse categories that allow us to take full advantage of the traffic coming into our sites and our stores. Batteries sounds unglamorous but a really important contributor for us. And in the Nordics, of course, we have a strong and strengthening kitchens business as well. All of these are in healthy growth, 50% plus. And as I say, making a material contribution to the sales and the share growth that you've seen. As is our progress in B2B. Small- to medium-sized businesses share many of the characteristics of our core consumers. Their needs are very similar and they have, in most cases, the same products, suppliers, channels services and solutions, supply chain and service operations, we can lean on the core machine in order to serve this adjacent market. And what we do need that's slightly different, we have built, whether it's leadership, whether it's specialism in specialist colleagues in our stores, a tweaked online customer experience or account management skills. Those we have built and we have the strong growth to show for it, 16% up off a big base in the Nordics, 20% up in the U.K. All of this gives us confidence to commit to significant further growth. We're going to at least double the size of the U.K. business in B2B over the next 3 years of a bigger base, the Nordics will grow by at least 40% and over the next 4 big and growing in B2B. And that's one of the reasons these large, accessible sources of new growth where we start with lower headroom, but we've got every right to win, and we're showing strong double-digit growth as proof of that. That's one of the reasons to be confident in the future. But there are many others. And let's zoom back out to the strategy that we've been following in recent years, a strategy that we believe is clearly working. And it starts with the customer. That customer finds the stuff that we sell, tech, exciting, sure, but confusing and expensive. And they need help. They need help to discover, choose, afford and enjoy to the full that technology through the life. And those are needs that we, as the #1, the specialist, the omnichannel at scale and the services provider as well as a retailer, we at Currys are best equipped to provide. And so we are, and we do that by starting with the colleagues. It's very difficult for the experience of the customer to be better than that of the colleague in our space. So we want colleagues who know what they're doing and who want to be here. They in turn make us easy to shop for customers. On those foundations, we get more customers to want to keep coming back, customers for life, and that allows us to grow profits and cash. And this strategy has seen us maintain our #1 spot in all the markets that we operate in. We had a bit of a dip, 30 basis points market share decline in the Nordics, in the year just past, but off a very high base, still 28% and way larger than the #2. In the U.K., we saw a significant step forward, 600 basis points of market share improvement in the U.K. And that actually understates progress. If you look on the left-hand side here, there's the core market in the -- I don't know, orangey red color. And above that, there the sales that we report as a part of our core market, so-called Currys core market sales. But our like-for-likes are higher still, as you see. So our market share gains, our stated market share gains understates the true performance improvement of the business because so much of our growth, as we've talked about, is coming from outside of our core areas coming from new areas. So good, healthy, sustainable top line growth. I mentioned capable and committed colleagues. It all starts with them. So it's good that we've seen another good year of progress on our colleague engagement. One in both of our markets and in the U.K., we're in the top 3% now. of companies worldwide when it comes to colleague engagement. And that's not just our opinion. It's others as well. We've gone from relatively low to top of all 18 major U.K. retailers on Glassdoor as the best place to work, first retailer to crack 4.0 and first time out in the Sunday Times Best Places to Work, we came top amongst U.K. retailers. And this has real commercial value. It's one of the drivers of improved customer satisfaction as well, happy colleagues, make for happy customers. And as you see, another year of progress. The Nordics storming ahead to another couple of points to 65 on NPS, which is creating some healthy internal competition in the group as U.K. colleagues are not happy to be 9 points lagging at 56%, but still good progress in the U.K., 700 basis points of improvement year on 4 and again, not just our measures, but trust pilot, the external measure you could all track has seen us in the last 5 years go from poor to excellent from 2.7% to 4.4%. So good progress on customer satisfaction as well. And happy colleagues and happy customers then allow us to make us easier to shop for our customers, too. And that starts with retail fundamentals. Every retailer to be successful, be well advised to pay attention to having the right range, making sure it's available when the customer wants to buy it, having the right price and having an easy experience in the channels and after the sale. And that, we've worked on really hard and we've talked before about range areas like new categories and about an easy customer experience we've talked before about how we are showing customer satisfaction improvements at every stage of the journey. Today, I want to focus on availability. And availability, as you know, is the single biggest driver of lost sales for a retailer, if you're not available, the customer can't buy it. Conversely, if you improve availability, everything else being equal, you will always drive improved sales. Now Currys started from a high and improving level of availability, but we saw an opportunity for improvement. We saw up to 1/3 of customers coming into our stores and leaving -- intending to buy, but leaving empty handed in large part because of availability constraints and something like 28% of our products, making it to the store, we're not making it to the shelf. Hence, a big focus -shelf availability over the past year, and that's been better analytics and better process at the heart of that. Better analytics, we've got better zeroing in on so-called AA AAA product, our highest priority product where -- which is fastest moving, which is most highest selling and highest margin for us. So the most important product for the customer and for us, we've prioritized for ranging and availability, but better process as well. We've gone from well-meaning, but not helpful covering of gaps in the store shelves. Colleagues had focused on making us look as if we had better availability by covering up into gaps. But that covered up real gaps in availability. So we've moved from making us look available to actually being available by a focus on better replenishment, in particular, the daily gap scanning process. All of this has had happy consequences with an over 60% improvement in on-shelf availability in the pilot stores. So some really good improvements off an already strong base when it comes to availability. And availability, by the way, matters particularly in store. It matters particularly for the -- when the customer wants something urgently or whether they're picking it up on order and collect. Stores, obviously part of an omnichannel model that we believe gives us a priceless advantage in this market. The customers prefer to shop through both. Still over 60% of customer journeys involve a store purchase. We have both channels at scale in ways that no competitor has. And so it's on us to make the most of that. The fact that customers do prefer omnichannel is also backed up on the right-hand side here, our omnichannel sales, for example, online in-store order and collect. Our omnichannel sales are growing faster than our sales overall grew 9% in the U.K. up to fully 1/3 of our sales in the last year. This is a real advantage that we've got that we intend to continue making more of. Omnichannel includes both stores and online, and we've invested heavily in the year just past, and we'll continue to invest in improving both channels. In stores, is tools and processes have improved. Processes like sales floor leader, which has connected more customers with the right colleague faster, but better tools like headsets that get the right colleague to customer -- the right customer faster and also improve security. And tools like electronic shelf-edge labeling and Nordics idea that we copied with pride in the U.K. and is now rolled out to all U.K. stores with good consequences. It means a better customer experience. It allows more nimble pricing, and it takes away cost. I mean a significant multimillion pound benefit per annum from that. I think it took out 138,000 hours of the colleagues most hated task, which is paper ticketing, which makes colleagues happier and makes us happier as well. So that's -- all of these improvements that we're making in our stores are driving good consequences for market share. So another good year for conversion, 50 basis points up overall weighted across the group in stores and another good year in driving sales growth and market share gains in our stores. Not just stores where we're investing, we're also investing online, and we'll continue to make the improvements that we need there, whether it's search, navigation, filtering, product comparison, the more powerful tool deployed there, more reviews, better recommendations, a faster checkout, more payment options, better delivery options and performance. All of these things have stepped on in the year just passed with good consequences, 40 basis points up for online conversion. Worth saying in both online and stores, we gained market share last year. So we're big and improving online. That makes us easy to shop. And on those strong foundations, we can in turn build more customers for life. Customers who want to keep coming back to shop again and again at Currys. And building stickier and more valuable customer relationships as we want to do, does start with knowing those customers' data in other words. And we've had another year of big advances here. Another step on in Nordics customer club numbers, the numbers -- precise numbers to be confirmed, but we've got a very large consented base of customers in the Nordics now with the top tech stack that we have there and the data and analytics capabilities. This is now enabling us to start personalization at scale. And that's pretty exciting, and we should get to at least 5% of Nordic sales over the next 3 years driven by personalization at scale. And the more personalized you are in your appeal to customers, the more relevant you are and the more you will sell. Same true in the U.K., where we've got some pretty big consented customer bases in the U.K., too, whether it's the 2.6 million ID customers, 2.7 million in credit, 8.7 million Perks members or 11.6 million care and repair customers. We've got large data sets of consented customers. And what we have now brought them together, the fabled single customer view is now a reality. We can now much more easily segment and target customers based off who they are, what they bought, when and how they bought it, their attitudes and their behaviors. We can do things -- the marketing tech is talk about building custom audiences, which is basically taking these segments cut any which way of customers pushing them out to the ad platforms in minutes, whereas previously it would take days and weeks if it was possible at all. This allows for much greater marketing efficiency and effectiveness. It also, by the way, enables significantly better third-party monetization. Retail Media is still a big opportunity largely ahead of this business, but we've got the foundations in place now to make something pretty interesting of it. And it's with that, data is with those foundations of knowing our customers better that we're able to provide better, more targeted solutions and services to those customers. And we do want to continue providing more complete solutions to customers. When we sell the customer everything they need, products, accessories, services, the customer is happier because they're getting everything they need, and they're getting good value for money if they buy it all at once. We're happier too because it's a significantly more valuable sales. So it's good that adoption of solutions is growing. It's more than doubled in both markets. We had a dip in the Nordics last year. That's due to an FY '25, an unsustainable spike in screen protection sales, which we're unable to sustain into '26, but still a healthy long-term growth trajectory more than doubled the rate of adoption in the Nordics, just as we have in the U.K. to over 40% and 43% and counting. These numbers look great, but there is more in the tank. To take the U.K. example, 43% looks like a lot. But if you look at complete solutions, if you look at the percentage of sales, where we've sold the customer literally everything that's relevant that they could have bought, that's 0.3% of sales. So there is a lot -- and by the way, that's very valuable because those complete solutions come at 8x the margin of a product-only sale. So there's a lot of value still on the table here at selling more complete solutions, but we should draw comfort from the rate of progress. Important to complete solutions are the services that we offer to customers that allow them to get the most out of their technology to enjoy it to the full. And we've had another good year of growth on those, starting with the credit that helps customers afford sometimes expensive technology. Credit customers, our credit customers are happier 12 points higher NPS and we're happier when customers use Flex Pay as well. They spend more, they come back and shop more frequently, and they have twice the lifetime value of a noncredit customer. They also, by the way, make a meaningful and helpful double-digit straight to the bottom line profit contribution from commissions and also from cost avoidance. Every time a customer uses Flex Pay, they're not using a credit card. So it means that we avoid that commission expense, making a meaningful double-digit profit contribution in its own right and being a significant enabler of retail sales, credit makes everyone happy. And so it's good when we grow it as we are. And as you can see here, healthy growth in credit sales and in credit numbers of customers. And the adoption rate now is not far short of 24%, not far short of 24%. So nearly getting on for a quarter of Currys sales are sold on our own Flex Pay product. We've shown great growth in recent years. Much more to come. We're not happy with the starting with the 2, why should we be? So that's the credit that helps customers afford technology, that's in growth and then helping them get started with their technology, whether it's set up, data transfer or installation, which is illustrated on this slide here. That's all nicely in growth as well, 46% getting on for big box sales in the Nordics are installed, which is good for the customers and good for us because it's a profitable service, catching up in the U.K., but still that number is too low. It's nice that we've grown 700 basis points of adoption on installation over recent years, but there's still a lot more on the tank on that as you see. And the same with connectivity, another good year, 18% up, I think, in subscriber numbers for ID Mobile in the year just passed up to 2.6 million in accounting driven by very high levels of adoption of our app, which is going down well with customers, and you see that in the trust pilot scores which are very high for ID, really good source of sustainable free cash flow and profitability for us is ID, and there's a lot more in the tank for that too. Likewise, finally, for repairs, arguably the single most important service for customers. It gives their product longer life. It's good for their pocket. It's good for the planet, and it's good for our profits, too. So it's good that it is in growth. And as you see here, it is. Important here, there's a moat around this business, repairing at this sort of scale leans on capabilities that we have and that no one else is realistically ever going to develop capabilities like Europe's largest technology repair center in Newark with over 1,000 colleagues repairing or processing getting on for 3 million devices a year. So good growth across all of the services that power our solutions, and they have another benefit, too, is that to a large extent, those revenues are recurring. And we're now -- we've now gone over 30% of our U.K. revenues that are recurring, building welcome stabilizes into the P&L and making us still less dependent on the vagaries of the U.K. consumer. So nice progress, but still significantly further to go. So that's on building, making us easier to shop for customers and then building more customers for life on the back of that. All of this, of course, is in service of more sustainable profit and free cash flow growth. We've talked in the past about, and Bruce just mentioned, the margin and the cost disciplines that have been so important to us and so they are we're not going to relax on the margin disciplines that see us monetize an ever-improving customer experience that keep our supply chain and service operations cost down that make us focus on end-to-end profitability. No letup on any of that. Likewise, what we've heard about top line growth earlier on. But on costs, there's going to be no let up on any of that either. I touched on the customer and the colleague benefits of electronic shelf-edge labeling. Let's not forget the financial benefit, GBP 6 million a year saved from those 138,000 hours, right first time which is, again, good for customers when we turn up on time with the right stuff and can install it there and then, but it's also good for Currys because we avoid the cost of rework, a GBP 6 million a year cost benefit there. And the cloud migration that we've undergone in the U.K. painful at times, but worth it because it's getting us to an over GBP 10 million a year cost -- annual cost benefits. So plenty to go for on costs as we continue the disciplines there, and that's another good reason to believe in a sustainable future for this business. As is this man behind me. So I've worked with Frederik very closely for the past 8 years. He's an outstanding leader and colleague. He's got a great track record built up over many roles in many years, most recently in leading the quite remarkable transformation in fortunes in our Nordics business over the past 3 years, where he's more than tripled profits. And I commend them to you and you'll get to know him really well. And you will see -- what I've come to see is the quality that he brings to the role. And of course, he's got a world-class team to join too. And between him and that world-class team, I have no doubt that we will be able to continue on the trajectory that we're on a trajectory, let's not forget that is seeing this business progress on every measure that matters, whether it's colleague, customer or financial top or bottom line products or services, electrical or mobile, U.K. and Nordics. This business is tracking well. And it's on Frederik and its world-class team to make sure that we maintain and accelerate that trajectory. Thank you very much. And with that, I think Dan is going to compile your questions.

Good morning all. Now time for questions. If you raise your hand, we'll bring a mic to you. And if we could limit it to 2 questions per analyst, we can always come back around if that is not enough. Maybe start with Monique over here.

Excellent. And thanks, Alex, for your work over the years. You'll be missed. The first question I just had is whether we could touch a bit on the U.K. competitive environment conscious that JD is launched do buy and they have plans, obviously, to acquire someone out in the space, although not directly competing from a geographic perspective at the moment. So do you think it's going to be hard to eke out another 60 bps of market share gains in the U.K. this year?

So we fully expect JD to become a serious competitor. I mean we try to exist in the state of healthy paranoia, which I think is appropriate for a viciously competitive market like ours. But Monique, this is nothing new. I mean we've had Amazon snapping at our heels as the #2 in this market for the last 30 years, trying to take our slot. There are no slouches. And here we still are market leader, #1, and extending our lead and showing these strong and strengthening results that we're posting today. So of course, we'll take every competitor seriously. But there's nothing new in a hypercompetitive market. The advantages that we've got with plenty more in the tank to build on those advantages that stem from having the best colleagues who are most engaged building more satisfaction in our customer base. helping those customers be ever easier to shop, shop how they want to shop, omnichannel, which nobody else joy by or anyone else has got at scale and helping them with the solutions that are valuable to the customer as well as to us that nobody else can provide. If we carry on doing what we're doing and we stick with the strategy that's working and continue to build on that, I think it's for competitors to worry about Currys rather than the other way around.

Excellent. And the second question might be more for Bruce. Just trying to understand, conscious, no guidance being given at the moment. But just any moving parts you can give us on gross margin evolution over the year, particularly when we think about the potential for chip shortages and what that might mean for pricing?

Sorry, you're talking about going forward, yes?

Going forward, yes.

I mean as you say, we're not giving any guidance going forward. Maybe a couple of points that we've made in the past, first of all, in terms of headwinds which impact gross margin as well as bottom line. We talked about a GBP 32 million of headwinds from the government last year, that equivalent number in the year ahead is just GBP 5 million, it's 5. It's not just 5, it's 5 within a living wage of roughly 10%, and we get a small rate improvements. So that's going to help us. And I guess the other key point is we're not going to give up any of the disciplines we've had in terms of not chasing less profitable sales and all of the key drivers of margin that Alex has just been talking about.

And anything to touch on in relation to sort of pricing dynamics potentially era?

So on chips, probably the first thing to say is, clearly, it's a real thing. It's in the press every day and it's something that we anticipated carefully. So if you look on our balance sheet, you will see that our stock is GBP 140 million higher than it was the year before. Now that GBP 140 million across both U.K. and Nordics relate, #1 to some buy forwards on laptops and mobile to get ahead of that. And as Alex said, we've probably got enough stock to see us through to September through to the back-to-school period. So that will deal with the first half. We're also driving availability. You heard Alex talk about our AAA products. And clearly, some of the increase in stock is focused around higher rates of sale. But through that investment, I guess you could look at it 2 ways. As a minimum, we've got the stock, and we're able to deliver if you are being glass half full, you would say we're probably going to be one of the few retailers that got the amount of stock we've got. We bought it at a lower price. At the higher price, if prices do go up more customers are likely to shop at curries than elsewhere because of the higher ticket price. And also, we'll be able to sell more services. So there are reasons to be optimistic on something that is a challenge definitely.

Thanks, Monique. Next, could we go down to John?

Thank you, John Stevenson with Peel Hunt. I have 2 questions. To start with cash actually. I mean we talked about it before you're generating cash on this year's numbers. You sat well ahead of your sort of GBP 100 million requirement. I appreciate it gives optionality where what would stop you basically redeploying another buyback as we come into the half year? What the reason not to do that as the year progresses, it feels like you've got plenty of scope go further? And second question just on -- or mentioned the data and the CRM. Is that -- are these improvements actually being employed now to the extent there's a discernible improvement in your marketing efficiency? And driving frequency and share of wallet, can you maybe talk about that?

I'll take the second part first, and then Bruce, you can take the first. Not materially is the short answer. So when we talk about up to 5% of Nordic sales, we expect to be personalization driven within the next 3 years. That's from a negligible base today. But all of the foundations are now in place. It's not -- we're not talking about we're going to do. We're going to develop a single customer view, which is ably taken us a little time to get here, but we've done it. It's there. So it's ready to be used. So in that sense, it's upside to come.

Yes. Thank you, John. So in terms of our cash, I think the first thing to say is we're very comfortable with the strength of our balance sheet, given the uncertainty at macro level, political level. Having a stronger balance sheet is clearly better than having a weaker balance sheet. And I'd remind you that the GBP 100 million that we talk about in terms of a cash number isn't a target. It's a base. We will have at least GBP 100 million of cash within the business to protect us against downside risk. But as you correctly reflected, one of the reasons that we're comfortable holding that level of cash is to give us that optionality to give us a series of choices. So if further opportunities come up to invest. We talked about GBP 95 million of CapEx in the year ahead. If further opportunities came to give us a really solid return, we would spend more than that. M&A is another great opportunity. So you saw those TAM areas that Alex talked about in terms of mobile services, B2B, new categories. If there was an opportunity to do some smaller infill acquisitions that gave us new capabilities to be able to progress those areas at a faster rate. We've got the optionality to do that as well. Now if neither of those things comes true and you stick the numbers we presented here in your model, you're right, our level of cash would probably step forward from GBP 176 million in the year that's just finished to a bigger number at the end of the year that's just started. And that's, I guess, where our capital allocation policy is clear. We are going to progress the dividend. And if we've got excess cash that we can't find a better useful, we'll do more buybacks.

Thank you, John. That's Adam.

Thanks very much Adam Tomlinson from Berenberg. First question is just, can you maybe just comment, Alex, on how that's improved? So I think Currys people used to associate it with a lot of cyclicality. But in the current -- I suppose in the U.K., tough consumer backdrop, you're delivering positive like-for-like growth, very -- you've commented current trading has been very solid. So I would think that flat to even slightly down would be understandable in this environment, but the strength of that trading, just perhaps about how the resilience of the business has improved and a bit of color on that would be great, please. And then a second question just on CapEx, which I think the guidance is to step up a little bit this year, still below that 100%. But if you could just maybe talk about where that additional CapEx might go? And if that includes anything for -- you mentioned some infill M&A as well. So just a comment on that would be great.

Yes. So let me take the resilience point first. And you're right to point it out, Adam, and we just finished with John's question on cash in the bank. I mean having GBP 176 million of net cash even after GBP 150-odd million of shareholder returns and substantially dealing with the pension deficit is clearly a comfortable place to be, and it's good that we've take end of GBP 1 billion of debt out of this business over the past 5 years. I'm sure you'll draw plenty of comfort from that. That's the first answer to the question. But more than that, I mean, when we're talking about growing the business, we're talking about growing the business on strong foundations. It's the very foundations that we built of discipline on margin and costs that have given us the license and the bandwidth to go after these profitable growth opportunities. And as you've heard from Bruce, we have no intention of relaxing those margin and cost disciplines. Why should we they've served the business really well. But now we do have these profitable growth opportunities that are proving themselves, they're not speculative. They're driving healthy double-digit growth and as you say, in a U.K. technology market that went backwards by 1.3% last year, to be posting 3% like-for-like isn't nothing. And we've done that. Yes, by eking out some share growth in the core, the 60 basis points of improvement that we talked about. But also by going after a much broader range of growth opportunities where we still have every right to win. These aren't random growth opportunities. They're ones that grow from our core like small- to medium-sized businesses where our core business that we've established to serve consumers has so much of what it takes to serve small- to medium-sized businesses as well. And what we don't have, we've built, and we've got 20% growth to show for it. But it's not just B2B, there's the new categories and the new -- and then finally, there's solutions and services. Of course, it's good for customers and good for us that we're building out the solutions and the services that are such an important part of them. good for everybody. They rest on capabilities that we've got that nobody else has got or will have. So there's a competitive moat angle to these services and they're a source of higher margin recurring revenues. And that's the last part of the answer. When you've got 30% and growing of your revenues that are occurring, that starts to build stabilizes into the P&L.

Thanks, Adam. So you're right. Our expectation is to grow CapEx in the year ahead. Our CapEx falls into 3 broad buckets, investing in our stores, investing in our supply chain and investing within systems. I think the first point to say is that as we've got behind us some of the maybe risks or challenges, so the GBP 32 million of government headwinds. The big contributions we were paying into the pension scheme, the ongoing high cash exceptionals that we were aware about as those go into the rearview mirror, so we've got more flexibility. So we're able to step up the level of CapEx. I think another point, you will have noticed that the capital expenditure in the year that's just finished, particularly in the U.K. was lower than we originally forecast. The reason for that, we talked about moving some of our technology into the cloud. And we have a few problems, which caused some of the cash outflow within our exceptionals. That caused us to put the handbrake on some of the tech development. So again, that has drifted into the next year.

If we could go to Richard at the front.