Earnings Transcript for TSCO.L - Q2 Fiscal Year 2018

Executives: Dave Lewis - CEO Alan Stewart - CFO

Analysts: Andrew Gwynn - Exane BNP Paribas Stewart Paul - McGuire Clive Black - Shore Capital Group Ltd. Edouard Aubin - Morgan Stanley Bruno Monteyne - Sanford C. Bernstein & Co., LLC. Niamh McSherry - Deutsche Bank AG Sreedhar Mahamkali - Macquarie Research Xavier Le Mené - BofA Merrill Lynch, Research Division Mike Dennis - Lazarus James Grzinic - Jefferies

Dave Lewis: Good morning, ladies and gentlemen. How are we this morning? Good? Good? So I thought I’d start with this chart, if I may, just by way of thank you. And not for any bias at all, I think you should just look at this guy up here in the top left-hand corner. As you know, just over, it will be a month tomorrow, we started the Tesco colleagues started The Great Tesco Walk for Charity, one of our big events for charity. And we’ll finish, we started in London a month ago, and we’ll finish in John of Groats tomorrow. More than 4,000 colleagues have done that. And we thought we’d give you a picture of Chris in his shorts. But actually, it’s, in all seriousness, it’s there as a way of saying thank you because a number of you in the room have sponsored Tesco colleagues in this walk. It’ll raise, we think, a little bit more than £1 million for the two charity partners that we have, so I just want to take the opportunity to thank you for that support. Let’s talk about the results. We have, we believe a very strong set of results to share with you today. I’m going to do that in a very simple and straightforward manner. I will talk around, just very briefly to bring you up to speed, with what we’ve done on our six strategic drivers. I’ll then pass to Alan, who will take you through some detail in terms of the first half results. And then I’ll come back and talk about the value-creation part of our proposition for the four key stakeholders, with a particular emphasis on the shareholder, stakeholder in our business. Okay. So, with that in mind, six strategic drivers. Where are we on building a more differentiated brand? What you see here is the progress on the brand since January of 2014 and I’m pleased to say that, that progress continues through the behavior, through the propositions, through the experience that customers are having in our stores. Actually, we’re seeing a significant improvement in the health of the brand. And in the first half of the year, Net Promoter Score for Tesco has appraised to sharp up 11 points, significantly ahead of any of our peers. And we have the YouGov’s most improved brand for the second year running. And interestingly, if you go into the anatomy of that, what is this driving improvement, the two key things is our perception of value for customers over that time period has improved by 2.9 points a were significant step-up, and that goes to the relative pricing that you’re seeing as we sharpen the offer in our stores. But also, very importantly, actually, the quality perception of the brand in the business is improving at the same time, as that value perception and that is what we are trying to do in terms of the way that we build the branded proposition. So, in terms differentiated brands, very much on track and very pleased with the progress that we’re making. When it comes to operating costs, what I’ve done on this chart here is, before we shared the announcements last October, Alan and I back -- it was nearly three years that Alan and I talked to you for the very first time at Tesco. We announced 250 million reduction by August 16th, we generated a little bit more than 600 million of cost saving and then we shared with you an aspiration to reduce by a further 1.5 billion by [1920] and that’s what you see on the right-hand side. The dotted line is the shape that we gave an indication of in the Capital Markets Day, and the solid line is what we’ve delivered so far. So, we have 485 million cumulative, so we’re nearly a third of the way through. And as we have always said, having set out the target and the first view of phasing, we see it as our job to try and bring forward as quickly as we can by changing the business in a sustainable way as quickly as we can those cost savings. So as we do that that allows us to think about how we invest in our business. So really quite happy with the cost saving plan. We’re ahead of the shape that we said. Our aspiration still remains £1.5 billion in that time period that we put ourselves under pressure in terms of trying to do it as soon as possible. The third was our cash. Now we shared -- [impact] of the £9 billion of cash that we were looking to generate from retail operations and that was in the long-term incentives, you picked it up that’s by ‘18, ‘19 and so far, we are just under £4 billion. We are confident about the cash generation. If I am looking at the first half of this year and we will talk about cash in the results in particular, but there was another £237 million from working capital, a further £71 million of reduction in stock. And if you look at the cumulative working capital improvement and actually what it is we are doing, and getting record levels of availability actually with significantly less stock, that’s a massive improvement over the three years. And we talked for those who were at the session that we did in Welling, about this concept of one-touch replenishment i.e. when it appears at the backdoor how much of our stock is replenished and it’s probably only ever needs to touch it once. We started power play three years ago where on that measure we were in the low 50s and actually in the first half of this year we were actually at 72%, and our aspiration is the very good and important measure for us in terms of how efficient our operation is and we continue to drive that. And what that means is that more than 100 million cases that are only touched once after it gets through the backdoor. Very important way in terms of how this was simplifying the flows in our business. So really, really good performance in terms of cash from operations. We also talk then about how it is we would with manage mix and we shared with you the chart that’s on the left-hand side in October and I haven’t changed the colors. We’ll update all of this in the full year in that degree of detail as we did last year. What I did pull out though is if I go back to that point, in the first half, in that bottom right hand corner in terms of Group, we started from operations first half ‘15, ‘16 we were at the margin -- operating margin of 1.4%, a year later it was 2.2% and you’ve just seen in the numbers and Alan will talk about the results some more, it’s 2.7%. So, as we manage mix, right, that combination of volume of mix and the cost effectiveness is playing through in the recovery of the margin almost exactly as we hoped it would when we set out the plan. What is down on the right-hand side is just to give you that breakdown, you’re probably seeing it in the release, but it’s 50 bps at a Group level, its 32 bps in the UK and Ireland, 132 bps in Central Europe and 146 bps of improvement in Asia. So, across the board geographically, strong contribution to margin improvement and we’ll get into the details of mix of margin in terms of categories when we'll update you full year. But so far so good in terms of how it is, we’re getting a better-quality mix through the business. The next persists around how we as maximize value from property and we’ve made announcements and clear declarations of this as we’ve gone through the turnaround. And what you see on the left-hand side is a cumulative impact of the £1.2 billion of value that we’ve generated from the property portfolio. And in the first half of this year that’s carried on, there's been around £175 million of value released. We talked again -- back to October, we talked about this concept of air rights, and in this half year you saw the Hackney transaction, which is the first of those air right deals. There’s been some more store buybacks from British Land and that sort of concluded our joint venture arrangements with British Land. There are seven stores there. And there's about just over 400,000 of repurposing of our square footage and as by the partnerships that we view, just being the ones here in the UK but we got H&M, Decathlon, TK Maxx in the international portfolio as well. So that element of how it is we can use pace with partners continues the pace. So, again really happy with the progress that we’re making in terms of processes. And then finally, if you were really paying attention a year ago, I said with the concept of innovation funnel and the good thing of that innovation funnel is it allows me to keep all of the things that you've not yet seen in a dark blue circle and you have to wait for us to bring into the market. But I did and it was actually talking to some investors about how much innovation we bring as Tesco and whether we always give enough credit, so I just put it up there some of the things that had happen. Call it product innovation something like 810, 809, I think to be specific, completely new lines launched in Tesco during the half, so very significant activity in the launch of the National Tesco now to our delivery capability, the rebranding of Tesco Pay+, the reissuing of Tesco loyalty card with now a contactless capability, you will see more and more and more as we enhance the capability of things like the loyalty card and thing like our own label, you’ll see quite significant activity continuing in the innovation space, and as for these innovations are for customers part of what’s driving that reappraisal of the brand. So, really happy with the innovation capability, if anything, we’re stepping that up as the brand gets stronger. So really that's it, that’s the fixed strategic drivers, that gives you an update of what happened long-term but also a very importantly in the last six months and with that I’ll hand over to Alan to take you through the results.

Alan Stewart: Thanks. Good morning everyone. So, if we start with our half year results, we’ve made good progress in the first half and it’s another strong financial performance. We’ve continued our momentum in sales which have grown 3.3% of actual rates and 0.7 of constant rates to £25.2 billion. This mean that you’ve seen this morning we’ve now delivered seven consecutive quarters of growth in both the UK and the Group. Our operating profit was £759 million up 27% year-on-year driven largely by the UK and we’ve seen strong margins progression as Dave said in both Central Europe and Asia too. Overall, group margins are up 50 basis points to 2.68%. We’ve generated £1.1 billion of cash which is up 19% year-on-year and means we are firmly on track to achieve our £9 billion cost target. If we turn now to the UK, our volume led recovery continues. Overall group volumes grew by 0.3% and we delivered a particularly strong performance in our fresh food business with volumes up 1.5%, 1.5 percentage points up. We outperformed the market in volumes terms by nearly 6% in meat and 3% in produce. Transactions grew by 0.4% in the half and we’ve seen almost 300,000 more customers shopping with us in the UK year-on-year. These results have been driven by continuing to improve the customer offer, two particular highlights give examples of this. In addition to being named Britain’s Favorite Supermarket for the third year running, we were delighted to be named Supermarket Bakery Business of the year last month. This is the first time in nearly a decade that we’ve had this award. The improvements we’ve made have led to a really strong performance and a positive customer feedback. Our clothing team has also delivered another strong performance with F&F sales up 3.5%. Importantly, the mix of these sales is really strong too with 84% now being sold through at full price. Moving to the headline results of our UK and Irish segment. We’ve seen positive like-for-like of 2.1% for the half. Market conditions have been challenging with the return of inflation, but we’ve been able to protect our customers from more of this pressure than others by working closely with our supplier partners. We’ve included the usual detail in terms of like-for-like sales and channel analysis in your packs, from which you’ll see that we had a particularly strong performance in extras in the UK, which achieved 1.6% like-for-like growth in the half. In Grocery Home Shopping, we saw 4.6 percentage points growth, which is once again driven by increases in both order numbers and in basket size. As you can see from the waterfall on the right, UK and ROI operating margin has increased by 32 basis points to 2.1%. We’ve continued to invest in price for customers and this has contributed to the continued volume growth. These waterfalls often mask offsetting movements meta data. And in this case positive fresh food volumes have been partially offset by declines in, for example general merchandise, where we continue to be far more selective in the volume we drive. I would also highlight the significant progress we’ve made towards reducing costs towards our 1.5 billion group cost reduction target as Dave has already mentioned. As you will have seen from the release, we’ve reported Central Europe and Asia as separate segments to reflect the change we made to our management structure early in the year. In Central Europe, we’ve made and seen an improvement in performance in the second quarter predominantly driven once again by food. We continue to see strong like-for-like growth in the Czech Republic and in Slovakia. And in Poland, which remains particularly competitive, we’ve also seen an improvement reflecting our ongoing investments in this market. Central Europe’s operating margin has increased over 130 basis points to 1.9% driven largely by significant cost savings of £42 million. Partly offsetting this inflation across the region has fed through into our cost base. Whilst this has also led to some sales inflation, we’ve been able to mitigate some of the impact on this on our customers by working closely with our suppliers. Looking now at Asia. As we mentioned in the first quarter announcements, our like-for-like performance has been impacted by our decision to stop unprofitable bulk selling activity in Thailand. Asia’s like-for-like for the half after stripping out this impact was down around 2 percentage points, which largely reflects a reduction in short-term promotional couponing activity in Thailand, again predominantly in the second quarter, which is running around half the previous level. You can see the positive impact of these strategic decisions by turning to the profit waterfall, the market is seeing steady price inflation. We’ve continued to invest in keeping prices low for customers, but our mix has significantly improved. With our continued focus on improving the cost based, margins are up nearly 150 basis points in the Asia segment. Tesco Bank, which is now in its 20th year of serving Tesco shoppers has growing active customer accounts by 2%, 2.6% in the half with further improvements to the offer. These included the introduction of our new features to mobile banking app, which is now used by over 1 million customers. Our headline lending balances have grown 16% with an increased focus on secured lending, which is growing by 37%. Secured lending now accounts for 24% of the loan book, up 4 percentage points year-on-year and we would expect this proportion to grow. Operating profit before exceptionals in the bank is down slightly by 3.4% as our strong retail banking performance is more than offset by the lapping of our higher than usual debt sale in the first half of last year. This slide shows the usual standard metrics we’re always share with you on the bank. I already touched on lending and you can see here the differing rates of growth between the secured and the unsecured lending portfolios. You should also expect to see a much lower rate of unsecured lending growth going forward reflecting the bank’s greater focus on secured lending. Our bad debt-to-asset ratio has increased slightly to 1.3% but remains well below pre-financial crisis levels of 3% to 4% and is something that we continue to monitor very closely. The improvements in our cost-to-income ratio to 59.6% follows the restructuring we made in the bank last year. And finally, on the bank, you can see that our capital and liquidity ratios remain strong. Turning now to cash. We are really pleased with the continued performance in our operating cash flow. As you would have seen from the release we have changed our measure of retail cash flow to better reflect the cash available to shareholders. As such, it’s shown after property transactions exceptional items and business disposals. This waterfall however shows you the way we think about sources and uses of cash within the business. I will start on the left with £1.49 billion of cash from retail operations which is up 27 percentage points year-on-year excluding movements in working capital. If we then look at working capital, as Dave said, we had a positive inflow of £237 million as a result of continued focus in this area. This includes the one-touch replenishment benefits which Dave mentioned, which was a 10% increase in UK packaged food and we have also seen a more efficient promotional strategy in Central Europe. For the second half, we expect to further albeit much smaller improvement. Going forward, I would generally expect around 200 million per year improvement in working capital. Exceptional cash items resulted in an outflow of £247 million. Within this, our £135 million of payments in relation to the Deferred Prosecution Agreement with the SFO and the initial shareholder compensation scheme payments, as well as £82 million of restructuring costs. These restructuring costs are made up of £53 million relating to provisions we made last year and £29 million relating to payments in the first half. This then leads to an overall retail operating cash flow of £1.139 billion, up 19 percentage points year-on-year. I will come to CapEx in more detail in a moment but it’s important to note that the CapEx shown here is on a cash basis and partly reflects the year end accruals now being paid. Net interest and tax payments of £173 million were £38 million lower than last year largely as a result of our significant debt reduction program. Net property transactions include the consideration relating to the BLT transaction which Dave mentioned and in which we regained sold ownership of the seven stores in the UK. This was largely funded by £138 million of proceeds from property sales including the completion of Hackney and the sale of a further 49 sites. We raised £277 million through disposals and dividends received and this is mainly the sale of our remaining minority stake in the Lazada online business. As a result, our overall free cash flow for the half is £586 million. This reflects our strong underlying profitability and working capital improvement offset by the SFO payments and the timing of the cash CapEx and property transactions. If we look now at CapEx, the first half CapEx of £427 million is largely made up of our continued maintenance and refresh program in the UK. The £45 million for Central Europe reflects the space repurposing we’ve been carrying out and from which we’re seeing good returns. In Asia, the £74 million relates to 33 new stores we’ve opened primarily in the convenience format and repurposing in 11 stores. We now expect CapEx for the full year to be at £1.1 billion as we continue to benefit from efficiencies in both the purchase and the use of capital items. Going forward, we expect CapEx annually to remain between £1.1 billion and £1.4 billion. We’ve included a couple of slides here on the pension to help explain the significant movement this half. I’m pleased to say that we’ve concluded the triannual arterial valuation and as agreed with the trustees and the regulator that our annual contributions will increase by £15 million to £285 million from April 2018. The long-term framework for our agreement with the trustees remains unchanged. This is a small increase on the previously agreed £270 million and is in line with our expectations. The valuation also confirms the [arterial] deficit of £3 billion as of March 2017. This is an increase of around £250 million since the last [arterial] valuation in March 2014 and reflects the updated view on expected future returns and the actual scheme experience plus of course the market performance of the assets since the last valuation. Given the understandable interest that always surrounds our pension position, it’s worth pointing out that our scheme is very young compared to the majority of schemes. Only 18% of all members are currently drawing a pension. This means the liabilities are very long-term with over half of the benefits due to be paid in a period beyond 30 years from now. We’ve a long-term plan to manage the funding of these liabilities and a balanced mix of assets to reflect this. Our intention remains to get to a level of self-funding within the scheme over the longer-term. Our IAS-19 pension deficit has reduced significantly to £2.9 billion pre-tax and £2.4 billion post tax as of the end of the August. As you can see from the waterfall, in addition to gains and scheme assets. This reduction has been driven by three key factors. First, the change in the discount rate that we’ve made now to more appropriately reflect corporate bond yields over the life of the schemes liability. Secondly, we’ve applied the latest industry life expectancy tables. And thirdly, there has been positive scheme experience since the last funding valuation in March 2014. Along with the pension deficit, we’ve also made further good progress towards strengthening our balance sheet. Net debt has reduced to £3.3 billion reflecting the improved cash generation I spoke about earlier. We’ve repaid around £1 billion of gross debt in the last year including the £500 million bond tender exercise we’ve recently completed. We’ll see the benefits of the reduced interest from that in the future and we’ll continue to look at making our balance sheet as efficient as is appropriate. We’ve also seen a reduction in our lease commitments following the buyback of the seven stores I have previously mentioned. Total indebtedness now stands at £13 billion an £8 billion reduction from 2014 with lower net debt driving around half of this reduction. Net debt is 56 percentage points lower from 2014 through where we are today. The significant progress we’ve made on our balance sheet is reflected in an improvement across all of our debt metrics. Net debt to EBITDA has improved from 1.6 times to 1.3 times reflecting both the £460 million reduction in net debt, as well as the increasing profitability of the business. Our fixed charge cover has improved from 2.2 times to 2.4 times and the total indebtedness ratio has decreased from 5 times to 3.7 times, reflecting the improvement we’ve made in reducing net debt, the benefit of the discounted lease commitments dropping, as well as the reduction in the pension deficit. We can see a clear path to the investment grade metrics now being met. This table reconciles the operating profit that we’ve made to our diluted earnings per share measure, which strips out the non-cash IAS 19 pension deficit charge and the predominately non-cash impact of fair value re-measurements on financial instruments as required by IAS 39. This is a measure we’ve refined in this half to better reflect the underlying cash performance of the business. The 71% increase in EPS, largely affects the improvements in profitability and the lower left finance costs year-on-year. The tax shown here applies our effective rate to PBT pre-exceptional items and the other adjustments I have just mentioned. We anticipate a full year effective tax rate of 25%. You’ll see the rates for the half is slightly below this. We are pleased to be able to restore the Tesco dividends and have declared an interim dividend of £1p per share, which will be paid on 24th November this year. We anticipate a broadened one-third, two-thirds split between the interim and the final dividend and we will intend to reach the targeted cover as previously announced of around two times earnings in the medium-term. The restoration of the dividend reflects our continued improving performance and the board’s confidence in the plans that we’ve set out. Finally, and before I conclude, we’ve included in this one slide all of the statements we’ve made that help shape your understanding of our continued progression. The margin, costs and cash generation targets are directly linked to our six strategic drivers, which Dave spoke about earlier. A majority of the other items, I’ve touched on already in the presentation. Just a little bit more color on the finance costs and tax to help your modeling on these going forward. On finance costs, our average rate of interest on long-term debt is around 4%, which should give you a sense of how that line will move as we paid down debt. On tax as I mentioned, we expect the tax this year to be around 25% in line with last year. However, we anticipate this to reduce to around 20% in the medium-term. So, in conclusion, we’ve had another half of strong performance across the whole group, 3.3% in sales growth, margin up 50 basis points and an 19% increase in retail cash generation. Our balance sheet is in a significantly stronger place. Our net debt is down £469 million from the year-end and we repaid £1 billion of debt including the £500 million bond tender. We’ve also agreed with pension trustees our annual deficit contributions of £285 million per annual starting in April 2018. And finally, as I said, we are pleased to announce the reinstatement of the dividend demonstrate in the board’s conference in our recovery. I’ll now hand back to Dave.

Dave Lewis: Thanks very much. Cheers, Alan. So as Alan said, I think we look at the first six months of the year and are really pleased with the way that we’ve managed to navigate the market conditions we find ourselves in and the turnaround very much sort of firmly on track. What I want to do now there is comeback to what we through before about the four key stakeholders in our business and what is we’re doing to build long-term value into those relationships. If I look at it from a customer point of view, again you’ll remember the chart on the left I talked about as being if I look at all of the customer metrics and obviously we do, the one that are being really focused on is that whenever a customer walks in our store, everything I want to buy was available and that is a combination where all the range, but also the service proposition comes together. And you’ll remember that where we were in the first half of ‘14, ‘15 was significantly below where the market was. And what we have been doing progressively over that time is getting ourselves to a place where what is we’re offering to customers when we come is the best range of availability in the marketplace. Critical that we never let our customers down, that there’s never something that they want that’s not available. It’s a 100% goal that is always difficult to achieve but relative versus the marketplace we have become much more reliable, transparent and dependable for our customers during this period and that’s obviously crucial to our business. In the last six months, I have shared this chart before but the other way of judging whether we are building value in the relationship we have with our customers is the vote they are making in terms of where it is they choose to shop. And we talked about our volume growth, so the 0.3% volume growth is made up of a very strong performance in food, the 1.5 that Alan talked about. There is dragging there of 0.3 total volume from general merchandise as we reshape that portfolio. This is against the market. This is IRI versus the market. And what you see here is a strong and consistent performance ahead of the market in the categories where we put that priority, and that’s food, that’s fresh foods, that’s packaged food, right. So that volume and indeed value outperformance versus the market continues. For those who are interested, if you were to take count our numbers and look at the market share of food, right, over the last 52 weeks Tesco grew our value market share of food for the first time. We have been doing volume for a little while but actually now you see value market share growth in food in the UK as a result of this outperformance. So, building value with customers, those are two proof points. When it comes to colleagues, now it’s fair to say there’s been a huge amount of change over three years that’s resulted in lots and lots of change in the ways that we work but also in terms of structures and that’s meant that has being restructuring in the first half you've heard from head office restructuring, 25% reduction in head office costs planned there. You have seen the call center change in Cardiff. So, there’s been a significant amount of change for Tesco colleagues as part of this turnaround and there has been consequences to that change. I have to tell you the way that colleagues have engaged in that change, nothing short of exemplary. And here we’ve shared with this you before but a great place to work and a great place to shop on both of those indicators as we walk through just in our -- we do every six months of ‘What Matters To You? Survey. That continues to be positive feedback from colleagues in terms of the way that we are making the transformation inside the business, and that’s crucial given the changes that we are doing. In the first half in addition to the restructuring I’ve mentioned we also announced a 10.5% pay increase for store colleagues over two years. So, a significant investment there. We have also simplified the structures yet further through the organization and the way that I look at it is the result of those changes. We have released another nearly $50,000 to go into serving customers on the shop floor and that’s the sort of release that we want, keep it really simple, keep it really lean and all the things that are not serving customer and released all of the effort into serving Britain shoppers a little better every day. Supply as we talked to you about supplier view point and we’ve shared with you that trend overtime. I thought I'll share with you something ever so slightly differently. This is actually a chart that I used at the IGD, we do a trade briefing to all of our suppliers every year and we’ve shared this with our supplier base and I thought I'll share with you because when I talked to investors this is actually one of the places where I got a lot of interest. Because it plays into that question which is how does scale, how does volume leverage play into the relationship, we’ve always talked to you about total volume, I think what we tried to talk to you over time is being selective about the mixed choices and where it is we can get benefit and that really does come down to the particular category or the particular supplier. So, when you look at total volume, I thought you might be interested to know, and this is to May I've kept completely consistent with what we’ve shared in the IGD. There were 95 Tesco suppliers that in the previous 52 weeks doubled more than doubled their volume with us, i.e. more than double the Tesco volume. All right, and is normally that Tesco is one of their largest customers. I think so on and so forth down that list. There are 1,200 nearly 1,200 suppliers whose growth with Tesco during that year was significantly more, you can do the weighted average if like significantly more than 10%. And so, when we talk about driving volume growth and improving operational leverage in the end-to-end way we work with suppliers, it really comes to fruition of that supplier interface. So, when people ask me how it is we’re managing to offset some of the inflation, how it is we’re working with our suppliers in order to contribute to that, this is one clear indication of how it is we’re managing to do it. The other bit that was interesting from that was to show where that volume comes from. As you know, we’ve taken out some volume from range resets, we’ve talked about that a number of times in this room and that obviously takes volume away. The interesting thing is there is an element of new product development that comes in, so the new innovation and that just about compensates. Now, the fact is the number if you remember, we took out since we started about 7,200 SKUs reduced 2,700 go back in over that period in terms of new innovation, net, net volume about the same, right about the same in this period. The interesting thing is, growing the core. The contribution to the core, i.e. those things that customers most want more available at better prices is what’s driving that. And if you’re a supplier, for most suppliers driving core is much more beneficial to your operational margin than some of the innovation that you bring, right. And that’s what's being a really interesting part what’s changed the nature of the business with our suppliers as well as changing the way we want to do business in terms of our approach. So, a slightly different insight into suppliers to try and help you with how it is we’re managing the business. Final stakeholder, bond stakeholder obviously shareholders. So, I thought I spend just a little bit of time, a little bit more time than we have before telling you a little bit about how we see the investment case within Tesco. Now, I’ve used the UK because it’s a -- where we do get 90% of the questions, I’ve told you I’m showing questions about how it is international can play an important role in the portfolio of Tesco. Well look, I think we start and I think we’ve always been very clear that we start from a relatively advantage place in Tesco in the assets that the business has. We have an unrivalled store network 3,500 stores, we are very much nationwide. We have an unparalleled reach in terms of grocery home shopping, we can get to more than 99% of homes within a one-hour slot. So, our reach is phenomenal, there on our market share in online is greater than our market share in stores. We have 60 million active loyal Tesco customers. And interesting is, we relaunched the Clubcard and brought it up to date in terms of its functionality, what that has done in terms of reawakening people’s engagement with that unique loyalty offer. Supply chain expertise, built up over many years and is being very -- now, if you look at the working capital improvement, if you look at the availability growth that we had, whilst taking significant amount of stock and working capital out of our business, there is real expertise within the Tesco business on the supply chain. I’ve mentioned one touch replenishment, I’d say significant improvement over the time period. And we have a unique own-label capability. Now we’ve talked before about the performance of own-label and perhaps how we took our eye off the ball on that a number of years ago. I’m pleased to say as we put our eye back on the ball, its performed extremely well. We’re getting back towards a participation, which is nearly 50% of sales. Own-label as a totality like-for-like first half of the year 5.5%. And if you look at some of the own-label activity, we show you outside, if you haven’t seen it. We launched two brands in general merchandising, Fox & Ivy and Go Cook and have a look at the ranges if you haven’t. That gives you some idea about the aspiration that we have for own-label as we relaunch through the balance of this year and into next year. But Tesco brand, a key differentiator for our business. And we have some long-standing supplier partnerships. Now I know that most of you, know that already. But it’s really important that we always remember that when we think about what it is and where it is we stop them and how it is we layer on new opportunities for the business. Because if you remember back in January, if I remember back in January and I’m sure Alan remembers back in January, we started from a place we see reflected in our sales baseline. And forgive me for trying to make this really simple. It is deliberately simple and hopefully, allow me to be clear. We talked, and you’re right, we talked about volume led recovery, we did talk about volume, mix and cost. And then if you think about it, when we came in October, we were very clear about what specifically we’re trying to do in cost and specifically what we were trying to do in mix. But we’ve always thought about those three levers as being the ability to turn the business around and what we shared with you in October was, we had this plan before, we shared it with the market obviously, it is, we have an ambition to reduce the cost by 1.5 billion and we could see an outcome in a margin of around 3.5 and 4 if we got all of those elements right. And in doing so, we could do that and generate 9 billion of retail cash. That’s where we started from three years ago. Where are we now, and what does it mean in terms of this invest to think about as going forward? Same ambition, no change. In terms of financial efficiency, our capital discipline has continued to get better and better and better. Alan has updated you in terms of what we think, it will be this year in terms of 1.1 billion. And we see a range over the next couple of years of between 1.1, 1.4 depending on when particular projects land. We continue to optimize working capital significant difference and we have aspiration to further improve that by around 200 million and we’re lowering our cost of debt as we reduced the amount of debt. It’s as simple as that. And we are getting to replace, where we can generate significant free cash flow. Now with that cash flow and again forgive me for being so simplistic we see opportunity in driving shareholder returns and that’s significant in terms of EPS growth aspiration. And we’ve already been clear that we want to get to a dividend cover, which is twice in the medium-term. We’ll continue to strengthen the balance sheet. We’ve done some of that already, Alan has talked to you about debt levels, he's also talked to you about some of the bond repurchasing. And we’ve always had the aspirations as an outcome of what we do that we would invest -- return to an investment grade. And as we carry on doing what we are doing you can see a return to the investment grade metrics in the not too distant future. It’s an outcome of running the business better and also that’s significant free cash flow allows us to invest back in the business in terms of the improvements that we want. And if we get ourselves as we think we may into a place where there’s cash flow available after all of those three things are done, then that gives us good options to be thinking about what is we might do to it. I suppose what we were trying to share with you is we feel that we are at that place now where we have confidence in the levers that we are pulling, the cash that we are generating in a way which allows us to invest back in our business, make a return to shareholders and strengthen the balance sheet. And that’s a significant difference from where we were when we first talked to you three years ago. To that capability we come back to my point about the capacity to innovate, because the other thing that we have as a huge benefit in Tesco is we basically reflect the nation. If you look at the social and economic profile of the market and you look at our participation in it, it’s almost a mirror image, right. So that’s a huge place for us to start in terms of our ability to innovate. Own label, we have done some, you will see more. Our ability to innovate and relaunch around own label is still an opportunity ahead of us. You will see some of it in general merchandising, you will see more of it across the business we now roll forward. Loyalty will be a big part of what you see from us going forward. We have a very significant relationship with our existing loyal customers and as we part different elements of Tesco together, an opportunity to build that loyalty yet further and we do truly see how it is we can use that multi-channel business to innovate more. I talked about Tesco now, but there are other things we can and we will do in that space. So, all of those things tell you a little bit about how it is we are looking to add value to the shareholder, stakeholder in the Tesco business. And then the final part of that is obviously where we are with Booker, don’t have any new news for you in this regard but just to be really clear, in terms of timing, so the timing that basically gives an interim view at the end of October and to produce their report by the end of this calendar year. That would mean therefore that in the first quarter of next year depending on what the outcome of that review is we would be in a position to make that proposal for shareholders. So Q1 ‘18 if you go back to January last year was what we anticipated to be the timing and we are still absolutely on plan for that timing and nothing for me to report to you at this point in time. So, to summarize, where are we? We are delivering on the six drivers. We shared them with you a while ago and I have shared with you where the progress is. I am really happy with the progress we are making on the six drivers. Those six drivers are continuing to drive momentum in our performance. You have seen what we have done in terms of increasing sales, profit and generating cash. It is a more competitive offer. We know that our rate of inflation is below that of our peers is a very good way for us to be able to enhance our relative pricing competitiveness and we have seen that reward in a way that customers have chosen, £300 and more year-on-year shopping with Tesco than they were last year. We have made significant steps on the balance sheet and Alan has taken you through that and all of that allows us to be confident about reinstating the dividend and I’ve tried to share with you a little bit about how we see what that means in terms of a sustainable model for long-term value creation for shareholders as we continue on the journey that we set out for ourselves. So, with that I’ll start and Alan and I will take your questions. Now, the one thing about questions, I did listen to the feedback from last time. So, we’re going to revert to our previous practice, so I need your help at this point. So, we’re going to go back if I may to the idea that there is one question per person and that doesn’t mean one question with A, B, C, D & E. I’m also going to ask you if it really is a very specific point on a technical detail or a technical number in order to help modeling them, I am going actually to drive those and ask you to go to Chris and the team so that I can take the questions which are more for the room than a specific model. So, I need your help in that but I listened to the feedback last time. So, can we start?

Q - Andrew Gwynn: Andrew Gwynn from Exane, my one question. Asia, is like down 2% profit up 14%. Could you talk about the movements, I know you talked about cost savings and things, but it’s obviously quite a big pull in the international component. How much should we extrapolate that into the future, 5.6% margin looks pretty chunky.

Dave Lewis: Well, I think there are two things, Alan touched on it so if you take the improvement, a little bit more than a third of that improvement is driven by our decision not to do bulk selling. The other is as Alan says a change in our couponing activity we’ve reduced that by half. And the third element is, we talked to you a lot about the changes that we’re making in the UK because that’s where the interest is, but you should be really clear, the changes that we’re making in the UK are then shared with Europe and shared with Asia. So, the other parts of that is changes to their operating model that are consistent of with how we’ve been running the business in the UK and it's those three elements that have driven that improvement. The change in bulk selling will be one-off through this year and it will be what it will be but the important in underlying operating is something that we would seek to maintain going forward. So, three things are driving it and we will be happy with that.

Andrew Gwynn: [Question Inaudible]

Dave Lewis: Well, look with the market leading position in the way that we’re managing it, we think that margin is sustainable. Okay, go ahead.

Stewart Paul McGuire: Good morning. Stewart Paul McGuire from Credit Suisse. You called out the performance of the extra is particularly good, likes for likes were 1.6%. Can you give us an indication of what the volume is and that how much of that would be driven by inflation?

Dave Lewis: I don’t have the split on volume inflation by format size. So, I’m going to put that to Chris and we can follow up afterwards. But volume is -- we only share volume of total group, so I don’t switch it down in the same way.

Unidentified Analyst: Thanks, very much. Probably more for Alan I am afraid. On the pension side, so the pension deficits basically halved in the last six months, I know you gave us a little bit of detail in the bar chart. But can you tell us what assumptions have changed that and what’s driven the change in those assumptions over the last six months?

Alan Stewart: Yeah. I’m going to keep it to the high level, because any detail is either set out in the deck or we can go back to Chris and the team. In terms of the reduction, 45% of the reduction is driven by the external factors and mortality and the experience of the scheme, 55% of the reduction is due to the change in the discount rate methodology where we’re now looking at the bottoms.

Andrew Gwynn: Okay. And just what’s driven that, why have they suddenly changed?

Dave Lewis: We can take it offline, but the experience of the scheme is actually, compared with assumptions made three years ago, the mortality tables, you’d have to ask the government actually.

Alan Stewart: So just to add to that because it’s clearly a point of interest. So, asset performance and mortality rate drive 45%. The experience of the group in the changing mortality and 55% is driven by moving from using the guilt returns to corporate bonds, and that’s 55% of the benefit.

Andrew Gwynn: Okay. So, in short, the government is saying we’re going to die sooner?

Alan Stewart: Well, the government is actually saying that the rate at which we are going to increase the amount of time is less than it was last time.

Dave Lewis: Yes. I think that’s, let’s move it on. Apparently, we were going to live longer, but only a little bit.

Clive Black: And UK margins and the movement in the first half, can you give us an indication the dynamics of that? Do you have operational leverage in your business? And given the target you affirmed to date for the medium term, does that create a pressure point for you there's some quite big step adjustments in trading margins in full year ’19 and 20?

Dave Lewis: Short answer, no, it doesn’t. So, I’m really, really happy with the way, we’ve managed the balance in the UK. So, within that, there are always swings and roundabouts within it, we’ve been clear about what’s driving it. So, there is operational leverage, that supply was one that I gave, the mix is another. So actually, the UK given its size, and importantly is driving all of those big indicators in terms of the change in the quality of the business. And Clive, the guidance we’ve given for the medium term of an outcome the 3.5 to 4, really very comfortable with in the UK, will play a full and big part in delivering that. So, no problem.

Clive Black: [Indiscernible]. In your January ’15 plan, you talked about assuming ongoing sales deflation. We don’t have sales. So, are the targets too easy?

Dave Lewis: So, look, you’re absolutely right and we said at the time and the reason to keeping the consistency as we did. When we wrote that plan, we assumed that the inflation would carry on either from a market or from us, it’s changed. Long-term plans, lots of things changed. I don’t think it’s made it easier, because the inflation affects most elements of that. But do we confirm that we still have an output range, which is 3.5 to 4 absolutely we do. And we’re managing the inflation the way that we have.

Alan Stewart: Just to add, the other element of the deflation was our desire to become more competitive relative to the market. And in that sense, the rate, with inflation, the rate at which we can become more competitive, actually, not that it helps us, but it means we can get there more quickly and more that we are absorbing that working with suppliers the more competitive we’re becoming.

Edouard Aubin: Edouard Aubin, Morgan Stanley. Just to follow-up on the hypermarket formats. So, on aggregate, your volumes were down in hypermarkets. Any plans to accelerate the downsizing of the stores?

Dave Lewis: Yes. We talked about the repurposing. We continue to repurpose with the partnerships. I think the thing that we’re saying, what we’re trying to share with you is, if you look at the long-term performance of the extras, they’re not a drag. They’re performing really very well. I’m very happy with the mix. I’m very happy with the profitability that comes out of the extra format and the opportunity we have to repurposes, just an opportunity and we’ll manage it in the fullness of time and very happy with the way we do that. So, it’s not acceleration to use your question, but we've got some really good partners and where those partners allow us to give a mix and an offer to customers to enhance that extra, we can take it and that’s an opportunity for us.

James Tracey: Hi. James Tracey from Redburn. There was 33 million of property costs included in underlying EBIT. Can you please give the split between UK and the other divisions?

Alan Stewart: Yes. It’s about 20 million of that is the UK, the balance is international. And what I would say is that there are also underlying within the underlying earnings and profits that we're declaring, there are movements, some quite significant movements in terms of the costs that we are taking. We have got a lot of technology infrastructure work that we are doing year-on-year, and that’s cost we didn’t call it out, but we want to be really clear and transparent in terms of property profits, in terms of where they split. But its about two-thirds UK, one-third international. And overall group wise, its about 11 basis points on the margin.

Bruno Monteyne: Good morning. Bruno Monteyne from Bernstein. Going back to the slide 5 of your margin progression, 50 basis points lower increase than the year before, UK about 30 basis points. Am I right that to get to your Group target, UK profit improvement has to step up in the next few years, the way that we should think?

David Lewis: I think going back to Clive's question, if you look at the size of the UK in the Group; the UK has to get to around what we talked about for the Group. But I repeat I am very confident in our ability to get there. I think the way that I would encourage you to look at this Bruno, is that, that we had an awful lot of price realignment to take care of and we have done that through volume and mix and cost effectiveness. As we get to a place where our pricing is as competitive as we would want it to be and as Alan says we can do that through avoiding inflation rather than the deflation we assumed at the time. Then as we get to that competitive position, as we continue to make those improvements, then we release more to be able to recover the margin. That’s exactly why we set out the shape that we did. So, I look at the plan, I look at our ability to deliver that and the fact that more of that plays into margin in the future years is exactly how we envisaged it when we started to.

Bruno Monteyne: It sounds like you’ve achieved the point of pricing where you roughly want to be.

David Lewis: Well look, it’s dynamic, right. So, I don’t think anybody would be foolish to say I’ve reached a point in that bit. It changed on a weekly basis you know that. So, we have to keep the ability to flex as we need to. But clearly, we inflated by 1% less than the market, so that’s sharped our pricing and we continue to look for opportunities how we can sharpen the pricing. But there are different ways, it didn’t just have to be a complete price point position, we can change the basket if we want to.

Niamh McSherry : Niamh McSherry, Deutsche Bank. Was surprised by the level of margin improvement in Europe and Asia and even if we exclude the couponing and reduced bulk buying, it still looks like 50 to 100 basis points from the cost cutting program. Is that something that we should expect to continue over the next few years or is there -- was there something particularly driving that this year?

Dave Lewis: So, the bids ones which are not driven by, so let’s take Asia, let’s take Europe as two separate ones and Alan please add as you see fit. In Asia, that’s about the bulk going to significant bit. But the improvements that we have been making to the operating model in the UK, the way that we run stores and all of the things you’ve been seeing, the bits of that which are applicable to the way we run the business in Thailand, we're sharing with Thailand. Tony Hoggett, who was the Company Operating Officer in the UK is now responsible for Asia. So, he is taking some of the lessons and applying them. And therefore, we can improve the operating efficiency in Asia as a result of that, and then we'll decide whether that’s further invested in the offer or enhances margin. In Central Europe it’s slightly different. We are on a journey to look at those markets together. And so, a series of changes both in terms of how we physically run the operations and that’s numbers of offices and all of that good stuff. So that will be a one-off benefit, one-off step that we take. But then there’s an opportunity to buy better, yes, and there’s an opportunity to buy better and you know [indiscernible] was responsible for buying in the UK and take that expertise within there so actually an opportunity there. So, we see opportunities in both, whether that translate itself into ongoing increase in operating margin or whether we choose to reinvest it in a way we have in the UK and drive volume that’s the optionality that we have.

Alan Stewart: The one thing I would say that we would expect to see continued operating profit improvement across our business.

Dan Ekstein: Thank you. Good morning, it’s Dan Ekstein from UBS. Going back to margin progression in the UK, we saw 30 basis points which is, I think pretty decent progress in the context of what you were just saying about offsetting 100 basis points of inflation. And it seems a lot of that relates to more efficient collaborative relationships with suppliers. And I wonder if you could tell us a bit more about where we are at in that process whether sort of the bulk of the improvement there has been achieved or whether there is more to go? Thank you.

Dave Lewis: Okay. So, there is still -- definitely there is more to go, I think the only thing I’d build on I think is the improvement in the UK comes back to that absolute volume performance in the categories that matters most. The mix that we choose to make and choose to sell and the cost effectiveness that we’re able to generate, so it's not just that. And we see opportunities in all three of those, all right. We’re approaching 500 million or 1.5 billion journey that’s an opportunity. In terms of suppliers, just take what I was saying about one such replenishment, we’ve got it to 17, 2 from where we started from 50 with an aspiration to get that yet more. And so, I spent part of the day yesterday with the supply chain team, some really interesting plans on the supplier by supplier basis in terms of how it is we found not just lower cost, but increased the amount of freshness, the shelf life, lots and lots of opportunities. So, we started the journey, the important thing for us, most important things strategically is having built a relationship now where actually partners want to sit down and talk to us about three, five, seven-year plans that can actually fundamentally change the way we work, that’s what we’re working on. Okay.

Sreedhar Mahamkali: It's Sreedhar Mahamkali from Macquarie. Just picking up on Bruno's point, again, a little bit probably differently. As you look at second half, the trade-up that you talked about in terms of improving relative price positioning and the margin, does it look pretty much the same as first half? Is that any different as you're going to walk through the kind of peak inflationary period and probably, if anything, where the inflation is?

Dave Lewis: Yeah. Look -- I think look none of us know exactly how the second half plays out. I think Sreedhar, the best way I can answer is, we see what the market is looking at in terms of expectations for the full year, we’re comfortable with that. Now, we have some plans for the second half year about what it is we want to do, but we’ll see how the market reacts and therefore, I wouldn’t get in, we don’t see any difference in terms of inflation for example to be specific. But we’re comfortable with what the market is expecting and we’ll play the volumes, the mix and the cost effectiveness as we see appropriate as we walk through the next five months.

Sreedhar Mahamkali: And was the shape more or less even through the first half of the year?

Dave Lewis: No, the shape wasn’t n even, but let’s be candid, that’s much more to do with the weather pattern that we saw in the first half than anything we would attribute here. So, we’re not talking about weather but it’s been very different month-by-month, year-versus-year but that’s the cutting trust of retail and as I said in the next six months as well. So, there was much more to do with that in the shape, but the plans that we had to delivered.

Unidentified Participant : Thank you very much. Robin [Bush from Aramis]. You created more transparent relationship with your suppliers. And you mentioned also that with 1,100 suppliers, you increased significantly your volumes. How has that translated in supplier satisfaction? And do you know see also some metrics of the growth rate you see later?

Dave Lewis: Yes. So, if you look at it, we’d share, I think supplier viewpoint as we have gone through. So, if you take that measure it's still high in the 70s. I think we’ve seen that sort of moderate somewhat as we’ve going through sort of that resisting of inflation, but it's still stays at the 70 odd levels. And if you look, the feedback from the grocery code adjudicator is absolutely very, very, very good in terms of the feedback that body is getting out of way the Tesco’s in its business. So actually, those relationships are coming through really, really very strongly. So, it’s still very good.

Xavier Le Mené : Yes. Good morning. Xavier Le Mené from Bank of America Merrill Lynch. Question just on your strategy actually in the UK. A few months, we can say, years ago, you were trying to find the balance between growth and profits. So where are you there? Because we saw some initiative, which could potentially be dilutive to profit rather than accretive. So, what is the strategy in food and then can you elaborate also in non-food?

Dave Lewis: So, where we are, so the growth in online and food was a little more than 4% so 4.3%, 4.4%. Basket size is increasing. Order size is increasing. So actually, the health of our online food business continues to improve and as is the intrinsic profitability of that. And really, the strategy is playing out and online food shopping, exactly as we wanted it too. We were very clear in general merchandising. We start from a different place. The reduction in loss in general merchandising online has been made but we’ve enhanced the offer in a way, which is not dilutive to that sort of profit turnaround that we set out to make. So actually, we made a huge amount of progressing online. And I can’t believe I’m going to tell you this now. So just to give you a really interesting fact is, if you were to take all of the orders and all of the food that was ordered online from Tesco last year and measure how many hours it takes that cumulative effort and you take it to the website and the interface that we have now and you ordered exactly the same volume, same number of people order the same volume. It would take you 3 million hours left to do that activity than it did a year ago. So, the improvements that we’re making in terms of how it is we engage and how we think about it all the way through, really quite material and significant, and we’ve got a long-term plan to how we’ll continue to do that.

Michael Dennis: Thanks. Mike Dennis from Lazarus. I just want to understand in terms of cost savings going into the future, you showed us no volume chart this time which also showed us the IRI data without discounters in terms of package volume growth. And if my interpretation is right, you showed that you took, or you said previously, you took 23% of your range out of your business and actually the volumes are mainly the linear square footage that those 280 odd suppliers have got from taking the range out of the business, so the volume growth that they’ve got is due to the one-off. I am sort of trying to understand how that feeds into cost savings in the future. And why the actual cash margin seems to be going absolutely nowhere?

David Lewis: So, to your core issue of cost savings, we identified when we talked about 1.5 billion of cost savings, we identified three buckets, right. When we get to the full year we will give you the breakdown by the buckets. But in terms of store operating changes, we are delivering those. In terms of the warehousing and distribution logistics, we are delivering on those. And in terms of goods for sale, not from resale, we are making the improvement there. So, the cost efficiencies that we talked about 1.5 billion are in those two buckets. When it comes to volume performance, actually we can and we should share with you in some of those details but the volume improvement that we are taking in aggregate and this is where taking percentages one always needs to get to the actual quantum in order to understand what it is we at Tesco represent to our supply base in terms of volume opportunity and what I was trying to show you with those list of suppliers is, we are not talking about a small amount of people, a small amount of volume for our partners in Tesco, and that’s what we continue to drive. And as we drive that volume leverage, we have the opportunity to invest that back in price. And what we have been doing up to now is investing that in price and taking the benefit and volume and we will continue to do that doing those points. When we get to a price which is as competitive as it needs to be, the opportunities to re-grow margin from that will be available to us.

Michael Dennis: Yes, but within that obviously the suppliers who have gained from the range review have gained linear square footage volume out of the business. So, it’s sort of [some] gain in some ways, it's just gained out of the people’s losses, the range review, and that’s a one-off. It’s not going to happen again. 23% of that.

Alan Stewart: I will give you the answer and then I am moving on, which is that’s why I deliberately gave you the benefit. If I looked to the volume over the 12-month period that came from the range review and innovation and showed you actually what’s happening is the growth is coming from the core, that’s what I was trying to share with you. 300,000 more people are shopping with us every week -- every month and they are buying more volume from Tesco, and that’s what’s driving it.

James Grzinic : Good morning. It’s James Grzinic from Jefferies. A quick question on the brand index chart that you opened up where it looks like your rates of catch-up is falling or it’s the gap remains very static for a few months. Firstly, why is it underperforming? And secondly, how do you make sure you close that you seem be not doing anymore?

David Lewis: Okay. So, I think as we -- it is lower mathematic -- as we get higher the incremental improvements will get more difficult. I am sure you appreciate that. We show you versus an average of 3 for the rest of the market because we don’t want to call out particular competitor much for their sake as anything else. Look the things that turn around and will continue to drive the brand is first of all the core experience and so how do we keep that color experience. We started -- we talked about three years ago that we need to behave our way out of the situation. We want people to re-approach Tesco through the experience that they have and that’s what we have been focused on. As we continue to offer more value that will change the branding and when it comes to the innovation I talked about that really is an opportunity for people to reappraise. So, what you will see in terms of what we do with our own brand, what you see what we do in terms of loyalty and the ability to add value from the whole as the Tesco offer opportunities for us to add yet more value to the brand. And actually, if I look at the brand plan going forward, it’s stronger than it’s been at any of the points in the three years. So, it gets harder as you go higher but I am comfortable that we have enough ammunition to improve.

James Grzinic : So, based on that chart and what you are saying we are still not in a situation where you can let more of that self-help flow to margin. I’m just wondering because if I strip out property profits and presume rental savings the UK margins are largely unchanged?

Dave Lewis: Look, the opportunity so -- the opportunity from adding value to the brand always been clear is a medium and long-term opportunity for Tesco, I don’t believe myself as to where we started from. And therefore, at the moment what we’re talking about is volume mix and cost to get us to 3.5 or 4 that we’ve talked about and we’re really very comfortable with our ability to do that and the progression of the brand in the way that we’ve seen.

James Grzinic : Thank you.

Dave Lewis: Thank you. That actually might have been the last question. Very good. Well, ladies and gents thank you very much for your time. Thank you very much for your attention. As we’ve tried to demonstrate, firmly on track and comfortable with the progress that we’re making and the aspiration for the full year. So, thank you very much indeed.