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Edited Transcript of BOO.L earnings conference call or presentation 25-Sep-19 8:30am GMT

Interim 2020 Boohoo Group PLC Earnings Call

London Oct 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Boohoo Group PLC earnings conference call or presentation Wednesday, September 25, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Carol Mary Kane

boohoo group plc - Group Co-Founder & Executive Director

* John William Lyttle

boohoo group plc - CEO & Director

* Mahmud Abdullah Kamani

boohoo group plc - Co-Founder & Group Executive Chairman

* Neil James Catto

boohoo group plc - CFO & Executive Director

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Conference Call Participants

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* Adam Gareth Cochrane

Citigroup Inc, Research Division - Director

* Andreas Inderst

Macquarie Research - Senior Equity Analyst

* Anne Critchlow

Societe Generale Cross Asset Research - Equity Analyst

* Caroline Rachel Gulliver

Jefferies LLC, Research Division - Equity Analyst

* John Stevenson

Peel Hunt LLP, Research Division - Analyst

* Matthew Neil McEachran

Nplus1 Singer Capital Markets Limited, Research Division - Senior Research Analyst of Retail

* Rebecca Anne McClellan

Grupo Santander, Research Division - Equity Analyst

* Simon Bowler

Numis Securities Limited, Research Division - Analyst

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Presentation

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Unidentified Company Representative, [1]

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Thanks for coming. You've seen the results. That was great, our results. We all continue to focus on our business and work hard. We're building the platform, and we're making sure the foundations are right. So there's a long, long way to go, but we will continue to do our best.

I'll hand you over to John. Thanks.

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John William Lyttle, boohoo group plc - CEO & Director [2]

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Morning, everybody. So first of all, just in terms of agenda this morning. So I'm going to do a brief opening, just really a summary of the last 6 months and what's on our minds at the moment. Then over to Neil in terms of financial review. On to Carol. And then back to myself in terms of business update. I just want to touch areas like people and culture, sustainability, warehousing, et cetera. And then we'll open up the floor to Q&A, and we're hoping to finish about 10:45 a.m. this morning.

And just starting up off with a summary, really. I suppose, look, you've all sort of seen the top line numbers at this stage. So fantastic 6 months. Obviously, completely and very strong on the revenue growth at plus 43%. And then from a profitability point of view, just looking at the adjusted EBITDA margin of 10.8%. So again, super, super results, particularly when you look at what is the retail industry out there at the moment.

And our vision is very clear, and it's to lead the fashion e-commerce market globally. We are focused on growing market share in the U.K. and internationally. We have a scalable, multibrand operating platform now. We acquired 3 highly complementary brands on attractive terms in the first half, so that takes us now to 7 brands in total. We'll talk a little bit more about those brands later in the presentation.

We hit GBP 1 billion of sales in the last 12 months, so that's a real milestone for us as a group. And obviously, that was also with strong EBITDA margins. We have 13 million active customers across our brands now, and that's up from 10 million in the same half last year. And we delivered successful execution of key infrastructure projects. And again, probably Burnley is a great example of that in terms of our automation, which went live on March 30. So from an engineering and technology point of view, clearly, it's working, on budget, on time and in plenty of time for peak. So again in terms of the planning and how we execute, that is really, really important.

We'll continue to invest for the long term in proposition, new brands, infrastructure, technology and people so right across a wide spectrum of our business. And I'd say all in all, look, we're really well positioned for further strong profitable growth, especially as we now enter our second half.

So I'm going to come back later, and I'm going to go into a bit more depth on some of those topics. But I'll hand you over to Neil next (inaudible).

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Neil James Catto, boohoo group plc - CFO & Executive Director [3]

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Thanks, John. Good morning, everyone. Thanks for coming to our half year results presentation. I'm going to take you through the financials for what's been an exceptionally strong first half of the year.

We've seen more great growth and lots of exciting developments across the group. Carol will then go to take you through how the multibrand strategy is developing. And after that, John's going to wrap things up with a business review, and I'm sure you're all eager to hear that.

So here's the income statement. And you can see that, once again, it shows the excellent progress we're making right across the business with our multibrand approach continuing to work incredibly well. We are still driving exceptionally high levels of profitable growth in market conditions that are proving challenging for lots of people out there.

In terms of the key items to draw your attention to here, revenues increased to GBP 565 million. That's up 43% on last year. And that's been a fantastic performance for all brands in all key markets. We've seen growth accelerate through the period, both in percentage terms and absolute market share gains as all of the brands finished the first half with great momentum.

Gross margin was 100 basis points lower than last year, and that's in line with comments we made when we spoke to you at the Q1 update back in June. We've seen really strong demand in response to investments in price and promotion and the customer proposition, and that trend carried on into Q2.

And that said, all of the brands have produced a very strong gross margin performance in the quarter in the mid-50% region, and the group's gross margin at 54.3% is extremely healthy. So a strong top line and margin performance coupled with operating cost leverage, and that's helped us to achieve adjusted EBITDA of GBP 60.7 million. That was ahead of expectations and up 53% on last year.

EBITDA margin was very healthy at 10.8%, up 80 basis points on last year. Around 40 basis points of that increase came from IFRS 16, in line with our previous guidance. The remaining 40 basis points has come from really strong operating leverage achieved across the more established brands. By those, I mean, boohoo, boohooMAN, PrettyLittleThing and Nasty Gal. And that's been offset by investments of a few million pounds into the group's 3 newly acquired brands.

So we've seen boohoo and PrettyLittleThing continue to generate good double-digit EBITDA margins as they leverage fixed costs. BoohooMAN and Nasty Gal's margins have progressed, and we've been able to show EBITDA margin progression for the group at the same time as investing in newly acquired brands.

Adjusting items totaled GBP 6.7 million in the first half, and we delivered an adjusted profit before tax of GBP 51.8 million, up 45% year-on-year and, also, a 46% increase in adjusted earnings per share to 2.91p.

So all in all, a fantastic set of results combining a strong trading performance from our more established brands with investments into the newly acquired brands that are going to provide exciting growth opportunities in the future.

Moving on to look at our sales by brand and geographical market. Group revenues of GBP 565 million, up 43% on last year. And that was also a 43% increase on a constant currency basis. At a brand level, we've definitely been firing on all 4 cylinders with those cylinders being boohoo, boohooMAN, PrettyLittleThing and Nasty Gal. All 4 brands have performed exceptionally well and taken market share in all of their focus markets.

Boohoo has seen continued strong organic growth. Sales of GBP 281 million were up 34% year-on-year. Sales growth has accelerated from 27% in Q1 to over 40% in Q2 as we benefited from improvements made to the product and customer proposition and also a more effective marketing strategy. PLTs continued to trade strongly throughout the half with sales of GBP 238 million, up 41%, with a strong performance in its key markets of the U.K. and the U.S.

Nasty Gal has really been a standout performer in this set of results. And 2.5 years into our ownership, it's made significant strides with revenue up 148% in the first half of the year to GBP 43.9 million. So it's on track to become GBP 100 million-plus business in the not-too-distant future with strong underlying growth in the U.S., its home market, and improving brand awareness in its overseas markets and, in particular, the U.K.

So by geographical region for the group, U.K. revenues were up 35%. That's an extremely encouraging performance in our largest market. And that rate of growth was particularly pleasing against the backdrop of lower levels of growth in the overall clothing market and single-digit percentage rates of growth online, according to external data sources like BRC and Kantar.

International sales grew very strongly, up 55%, and they now account for 45% of our sales mix. And that's an increase of 3 percentage points year-on-year.

So overall, once again, multiple brands taking market share in multiple geographies. The second quarter has been quite exceptional in that it's been the first time that all 4 established brands have grown at well over 30% year-on-year. But that's exactly what we want to achieve with the multibrand approach, and we're clearly delighted with how the strategy is working.

As far as operating costs are concerned, we've continued to leverage our central costs in the first half of this year. Other admin costs decreased by a further 30 basis points to 12.9% of sales. That line includes people, property and technology across the group for all of the brands. So we're seeing good leverage on our group central functions as we scale. And despite the investments in our people, infrastructure and in newer brands, overall admin costs continued to reduce as a percentage of sales in the first half of the year, and we expect that theme to continue over the medium term.

Distribution costs at 23% of sales have decreased 20 basis points year on year, and that's a great performance, reflecting gains from our automation project in Burnley and a mix effect from both country mix and shipping services across our brands. And those are an upward pressure on distribution costs, so it's particularly pleasing that distribution costs as a percentage of sales are reducing down to those efficiencies underlying that.

So that performance was even more impressive because we are continuing to improve our delivery proposition to help facilitate further growth. And we'll continue to do so in order to remain competitive in all of our focus markets.

Marketing at 9.3% of sales is down 60 basis points year on year partly because of the fact that we made some significant and targeted investments in the first half of last year, but it's in line with our own expectations and plans for the year. So we're seeing leverage here, but at the same time, we've seen an increase in new customers. Our more established brands are investing in new and emerging markets for us, and we're also investing in marketing the newer brands.

On to cash flow. We finished the half with GBP 207 million of net cash, up GBP 52 million year-on-year and up GBP 17 million since the year-end. Operating cash flow remained extremely healthy at GBP 56 million with strong free cash flow of GBP 30 million. And that was after investments totaling almost GBP 26 million, including GBP 19 million spent on the newer brands. And as well as that, we've also invested GBP 6.4 million into our infrastructure and operations.

So lastly, the chart on the right-hand side of this slide illustrates what we believe is a real strength of our business model. The combination of our negative working capital cycle and our ability to consistently deliver profitable growth has allowed us to generate significant levels of cash from our operations over the years. And at the same time, we've invested into infrastructure and operations, allowing us to develop a strong asset base. Looking ahead, further growth coupled with that net negative working capital cycle leaves the group with a strong balance sheet that's well positioned for future growth.

The KPIs that you can see on this slide continue to show that we're making excellent progress as a group and moving in the right direction with significant gains in customer engagement and big increases in active customer numbers. The table shows 13 million unique customers at a group level, and that's after de-duping for customers who spend with more than one of the brands. At a gross level, we've almost 16 million active customer accounts across all of the group's brands.

Carol's going to talk more about the multibrand strategy shortly, but you can see that we're continuing to engage with more customers who are shopping more frequently and spending more on each purchase. So we are gaining more and more share of our customers' wallets with that 7% increase in order frequency and a 7% uplift in average order value. That's driving a 14% increase in sales per active customer in the half, in addition to which, we've successfully added a further 3 million active customer accounts. And that's a 30% increase year-over-year.

Moving on to talk about guidance and outlook. It's been a great first half with growth continuing to accelerate at boohoo. PLT continues to outperform. Nasty Gal is gaining real traction and becoming a meaningful contributor to the group's growth and now accounting for around 8% of sales. So we announced on the 5th of September, we expect group sales growth to be between 33% and 38% for the full year. That's up from our –- the previous guidance from Q1 at the start of the year, which was 25% to 30% year on year.

That guidance includes a small low single-digit contribution in terms of percentage rates that's expected from the new brands. And they -- that would be 11 months of trading for MissPap and 5 months for the remainder of the year for Karen Millen and Coast.

The revised guidance also reflects our confidence after a strong first half performance. There's obviously still a long way to go and the all-important peak trading period still to come. But we continue to expect adjusted EBITDA margins for this year to remain at around 10%. And this includes the previously guided benefit from IFRS 16 as well as significant investments that we expect to make over the course of the rest of the year into the 3 newly acquired brands as well as ongoing investment into our more established brands, all of which we believe will help underpin future growth.

Underlying depreciation and amortization should continue to be approximately GBP 20 million for the year with the group's effective tax rate being approximately 20%. Adjusting items of approximately GBP 16 million, and that's split between share-based payment expenses of GBP 11 million and amortization of acquired intangibles of GBP 5 million.

We expect CapEx to be lower than we've previously guided at between GBP 30 million and GBP 40 million. We are on track to -- with our plans to develop GBP 3 billion of net sales capacity from our existing Burnley and Sheffield facilities, and we're keeping comfortably ahead of our ambitious growth curve. And we continue to evaluate options for the medium and long term and deploy capital as efficiently as possible and keep improving our services to customers all over the globe. Our medium-term margin guidance to deliver at least 25% revenue growth at a 10% EBITDA margin remains unchanged as we look to reinvest into opportunities that are going to drive sustainable, long-term growth for the group.

So in summary, it's been a fantastic first half with strong growth, operating leverage. And that's been achieved in our more established brands, demonstrating their significant growth and margin potential with the addition of 3 new brands offering further growth for opportunities for the future.

So on that note, I'd like to hand over to Carol, who is now going to take you through how our multibrand strategy is developing. So thank you, and Carol, over to you.

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Carol Mary Kane, boohoo group plc - Group Co-Founder & Executive Director [4]

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Thank you, Neil. Good morning, everyone. And as you've heard from both John and Neil this morning, what a fantastic first half we've had to this year. We're in a really strong position.

As always, I am going to talk to you about product. I'm going to talk to you about brand, and I'm going to talk to you a little bit about how we're executing our multibrand strategy this morning.

Third time lucky. As you can see, they've not given me any points, just pictures. So a nice break for me from looking at bullet points on the screen there.

So John mentioned the -- gosh, in just 6 months, we've gone from 4 brands to having 7 brands so quite a portfolio we have now. And you can imagine how busy it's been. We've embraced what fantastic opportunities have presented themselves to us, and we secured these brands on great terms.

In March, we acquired MissPap out of administration. This is young value fashion brand, aiming to provide the VIP lifestyle to girls -- young girls on a budget. And just a few weeks ago, both -- we acquired both Karen Millen and Coast.

So Karen Millen, our everyday elevated brand, beautifully designed, crafted with quality and fit at the heart of every garment. And our aim is to make clothing that makes her look and feel amazing.

And Coast, it's all about embracing and celebrating every moment with a collection that reflects a very feminine style with the print-driven handwriting, a perfect destination for occasion wear, be it a wedding, the races or a red carpet event.

And of course, you're all very familiar with boohoo, boohooMAN, PrettyLittleThing and Nasty Gal. But what's really exciting is that all our brands, even boohoo, which is now 13 years old, are all firing on all cylinders. As we continue to invest on our brands' distinct identities, we also continue to improve our product offering to all our customers. And what this means as a group, we are really now starting to dominate the pure-play online space. And the gap between us and our competitors out there is just getting wider.

So let's start by taking a look. We'll queue a video of what we've been up to for the last 6 months.

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Carol Mary Kane, boohoo group plc - Group Co-Founder & Executive Director [5]

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So you can see, there's been a lot -- quite a lot going on. Just in -- just putting the video together takes some time. But we've had some fantastic collaborations in 2019 so far. And as we grow our business and our ability to attract and work with both up-and-coming and high-profile influencers, it just continues to strengthen.

We've probably become the leaders in how we create content and how we use our social media across all our channels, working with celebrities, influencers, and those influencers not only inspire our customers, but actually, we work with a whole sector of influencers who really represent our customers and their peers and how they talk to each other.

And it's that content, it's how girls and guys look in the social arena and how we work with different models of all shapes and sizes. And it's why our customers can really relate to. And I think really, that is a common thread that runs right across our brands. It's really differentiating ourselves at a youth end of the market across all shapes and sizes.

So with boohoo, we run television with -- we run a campaign with a TV personality and digital influencer, Chloe Lewis. We brought back Jordyn Woods for a second collaboration. Earlier this month, we announced the appointment of 2 of this year's Love Islanders, India Reynolds and Maura Higgins. They're our ambassadors for the rest of this year.

And boohooMAN and boohooMAN style really topped up with a couple of rap artists, Quavo and Mist and also working with Tommy Fury. He was another Love Islander. I'm sure you've all been watching Love Island. So you all know these names I'm talking about.

PrettyLittleThing, worked with Jennifer Lopez. JLo, very famous. What an amazing thing to do -- be able to do. And they designed -- PLT designed a tropical scene collection with Grammy award-winning singer/songwriter, Ashanti.

We also have, just a few weeks ago, our first ever runway show with the queen of rap. That was at New York fashion week. Her name was Saweetie. That was a 50-piece collection shown on the runway, very much a hip-hop style. We call it icy style because that's really what she's known for, Saweetie. And also partnered -- PLT partnered with another Love Islander, Molly-Mae, just in the last few weeks.

Nasty Gal has worked with rising star, Rina Lipa, on the summer collection. And in June, which has 4:57 PM been part of the story of Nasty Gal's recent growth, has been a collaboration that we did with EmRata, Emily Ratajkowski. And she has 25 million Instagram followers. Just in 24 hours, one of the jackets in that collection was just gone. It was just flying week -- it was really, on a few days cover. It was that successful.

And MissPap, well, we're just getting started under our ownership. We've run our TV campaigns already, so we're half the mark there. And really, it's MissPap who -- we're giving a push now in the coming weeks. And just in October, we launched a collaboration with Amber Gill. She was the winner of Love Island this year. So you'll be hearing some noise around that. So reflecting all these campaigns, now over 25 million followers on Instagram. And that's a total of 33 million across all our social channels.

And for Karen Millen and Coast, well, we've not even just started yet. Just a few weeks in, but we see this is a huge opportunity working on the marketing strategy as we speak, and we'll be rolling out some of our tried and tested strategies for these new brands.

So product is the key to our success. All of these campaigns, however, they wouldn't be that relevant if we didn't have the right product. It's product that's key to our group success today. And our ambition is that we have the best product available to all our customers. We're leaders when it comes to fashion, newness and choice. And those are the customers our -- those are the areas our customers really do care about.

We've got some really strong trends across the summer, very much a print-dominated season. Animal prints, usually are regularly shown across autumn, winter, went all the way through the summer; florals on tee dresses, absolutely amazing summer trend; polka dots in every kind of shape and size you can imagine; large puffed sleeves, there's one here just to my left; and animal here and square necklines, major trend this summer.

Last year, I talked about the cycling short and had hoped it would go away, and it was a one-hit-wonder. Well, it didn't. It's still selling. It's in lots of young ladies' wardrobes now. And it's just become a staple across the brands. What can I say? What do I know?

We also launched -- we talked about last time our sustainability program. We launched our sustainable collections. We had really good results. It's going to have the same price points as our regular collections. Really well received. They're going to be rolled out right across all the brands going forward. And John will pick up a little bit more on sustainability.

But the definite standout trend for us, which is a little bit of a departure from where we'd all been a few years ago, has been tailoring. It's been a very much head to toe, solid block bright color season where you wear trouser suits in an array of colors, greens, pinks, yellows, reds. You can name it. But it's really been a trouser suit and a blazer dress season. That's really an emerging trend for us as a group. That's something that wasn't [naturally] an area that we were known for before.

And then as we grow our product strategies, we continue, obviously, to improve fit quality. We're always adding new size options. And this is all happening at speed as these trends emerge, and we're always keeping on top of them. And all of this means we continue to work with our new supply and existing and new supply base for continual improvement. I think what's exciting with the new incoming brands of Karen Millen and Coast at a higher exit price will be giving us an opportunity to expand this supply base even further.

So we have talked about our multi-brand strategy before, but I just wanted to run through this slide. Just a little bit of a reminder. We continue to run just pure-play model, each brand retaining its own identity. And we do this because we keep certain functions separate from each other. So our creative teams, all in-house in their own offices, and that includes our buying, our merchandising, our marketing. They're all in their own brand offices. Their budgets are actually determined at brand level, and there's healthy competition between the brands and learnings of successful marketing and product strategies across. But they're not cannibalizing each other. But yes, we do keep them separate, but the learnings are shared.

And it's our group platform that covers the operational side of the business. Now that is really the shared engine room of the business, and John and Neil both talk about platform. And by that, we're talking about our web, our warehouse, our logistics partners, our customer service teams, our financial and legal teams, and the rest of it. So they're all shared, so the commercialism sits underpinning all of the brands.

So we want to just bring you to the focus of share of wallet within the market. We have been focused on capturing share of wallet and offer our customer's unrivaled choice when it comes to product. And since we've moved from a single brand to a multibrand strategy, that's really where a lot of our vision has been.

So we acquire our 16- to 24-year-olds with boohoo, boohooMAN, PrettyLittleThing and MissPap, all high fashion, all value-conscious. However, as you can see from the chart, we reach either side of these brands when it comes to going slightly -- skewing younger and skewing older. Now that is largely through product strategy and the range widths.

And then in 2017, when we acquired Nasty Gal, we not only extended our price points, but we further extended our reach into the 20-somethings. We do accept that shoppers will cross-pollinate across all the brands, and that's fine. That's fine because we're all gaining market share together. But we do use KPIs and including customer life cycles, and we can see that really our customers are just spending more with us as a group.

Our recent acquisitions of Karen Millen and Coast further extend our portfolio into the middle market, reaching a new demographic or higher exit prices, both well-known British brands, as I said earlier, with emphasis on quality and design. And in the early days -- its early days for us. We're just a few weeks in, so we're building out stock. We'll be launching the new site in the next week. And so it's -- that's -- when I leave you guys in a few days, that's what I'll be doing. It's helping John and the team work on that.

So that's very early days. So we're just really hoping to progress you that with what that range buildout will look out. I am wondering where it's going to go in the room. When I stopped there, I thought where do I put another 6 dummies. Please don't buy anymore brands over the next 6 month. The room is not big enough. We'll need a bigger venue.

So yes, so that's what we'll be up to. So I think on the next set of results, we'll be able to give you a little bit more color on Karen Millen and Coast.

And just an extra note on this slide. It's on the Hitwise data for August '19 there and drawing a line between having multiple brand web visits, share of traffic. And for the first time at group level, we've reached the first place with 6.4% market share. And that -- obviously, that doesn't include our app traffic, which is growing as a nice percentage as well.

So coming back to 3 new brands just 6 -- in just 6 months and -- I hope it's the question on all your lips is how do we integrate them and get them up into business and trading at any kind of speed? Well, I think the best example that we have is probably Nasty Gal. So what we do is we build -- we'll build out the brand DNA. We'll plug in the right sourcing model. We'll have an initial investment phase, and then -- in that brand's key markets. So for example, for Nasty Gal, that was the U.S. And for Karen Millen and Coast, that will be the U.K. This will then be followed by international presence and a growing margin profile over time.

So just starting with our product. Our test and repeat model is replicated across all brands, trialing low quantities, repeating those that resonate with our customers. We'll build out ranges as we grow. Now I'm making -- giving you this reference point to bring it back to Karen Millen and Coast because, in Nasty Gal, 2.5 years ago, we started with just 400 styles. We now have over 10,000 today.

Our brand investment phase, well, this involves a high level of marketing spend to raise brand awareness and drive traffic. Starting with the brand's home market, this is the focus for MissPap today and will be for Karen Millen and Coast in coming months. And from an operational point of view, we've moved the brands -- we'll move the brands onto our existing platforms and into our warehouses.

MissPap is now relocated to Manchester. It's in our head office, and the team are now up and running. That's just happened in recent weeks. The warehouse move for MissPap is now complete and then running out of Burnley, and they have now moved onto our -- the same platform as boohoo and Nasty Gal. And both Karen Millen and Coast will move on to our web platform and to our Burnley warehouse next week. And -- but the brand functions for both Karen Millen and Coast currently are based out of London. And the intention for the short term is for them to remain there. So bringing it all back to brand identities I talked about earlier. Retaining, buying and brand functions, MissPap, Coast and Karen Millen, we're just over 100 new employees into the group there.

So that's it really for me. You can see, it's been quite a busy 6 months. There's absolutely loads going on, but it's very, very, very exciting. Yes, feeling very, very proud to be able to have a new challenge. And we're in a really strong position. And the team are all very, very enthusiastic about the future.

So with that, I'm going to hand you back to John.

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John William Lyttle, boohoo group plc - CEO & Director [6]

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Okay. So I should put in a song or something, some light entertainment in the middle.

So just a couple of slides for me. So the first one I'm going to start with really here is market context. So again, just very briefly, our 3 key markets of U.K., Europe and the U.S.A.

Looking at a couple of points here really around apparel market size, the CAGR of 3-year growth, online market size within the apparel CAGR growth over the last 3 years and then clearly, I think if you look at the boohoo growth in the first half, quite clearly, it shows you, look, we're outperforming the market by quite a bit, and we're really disrupting in all markets that we are trading in.

And if you then look at the boohoo group market share of online and, again, in the U.K. at 4.6%, Europe at 0.4% and the U.S.A. at 0.4%, I suppose really, the real point here is that, look, we've got a huge opportunity in the future. And if you ask me, I just say, look, we're really at the beginning of this journey. We've got a long road to go, yes, in terms of the growth that this business can go through. So key point there really is, look, market. We're outperforming the market. We're disrupting in every market we trade in. And clearly, the opportunity ahead is huge.

Carol talked about product, and I suppose just going to go into that in a little bit more detail. But it's all about the right product. It's all about the right price. It's all about the right availability and great marketing.

And obviously, from a product point of view, and I'll talk about sustainability in a while, but it's really about sourced responsibly in terms of in the business. We've got a very, very strong and proven record in terms of sourcing, and we're going to continue to build on that in the future. We often get asked about why are -- we've been very successful and why are we different to lots of other people. Across the group, we launch, on average, 3,000 styles per week. So just to give you a bit of what does that look like. So if you walk down Oxford Street today and you walk by your average fashion store, that's the equivalent of 1 fashion store we launch new every week.

So in terms of newness and keeping pace with us, it's -- you can see from that, it's actually very, very difficult to keep pace with us in terms of what we're doing.

Test and repeat. So again, it's a beautiful model here. So 150, 200 pieces per style turned around very, very quickly obviously because of the quantity that we're ordering. Low investment in terms of stock. If it works, we go back into it. But we don't go into the thousands upon thousands that maybe other retailers do because, again, we're trying to get the latest fashion all the time coming through.

But the real beauty of the model is -- and as we all know in fashion, sometimes things don't work. They're not quite the way we had anticipated them to be. So when you've got 150, 200 pieces, it's quite quick to get out of that and move on to the next fashion thing again. We're not locked down with stock, and we can keep moving all of the time.

And we're continuing to improve our supply chain speed globally. And obviously, as the group increases and volume increases, we need more volume as well. So we're right on top of that in terms of what we need to do. And Carol touched a little bit around range and, again, optimizing range width and range depth in terms of what we need to do in certain brands at certain times.

And then again, we're looking at technology. So we talk a lot about the width of our ranges. So you can imagine in terms of coming in to work in the morning and looking at what do I need to repeat, what do I need to get ahead of? So again, AI -- this was the buzzword, as such, but actually, we have some really clever technology that we're using now in some of the brands, which effectively, the technology is telling the merchandiser in terms of what they should be repeating on a daily, weekly basis and in terms of advising on the depth of that as well. So that's really good in terms of assisting us in what we need to do. So again, product absolutely came for us.

In terms of platform, and again, another in-word in terms of how people use it and what really does that mean for us. So really, the center for us is all around, look, if you think about it, we've got logistics, finance, tech, HR, legal. So you've got all of those in the central point. And again, as we get a brand, we're effectively plugging that in. So Carol described it really great in terms of the brands from a product, brand and marketing operate quite independently. But obviously, they've got all of that resource to plug into in terms of not really needing to think about -- from a tech point of view, maybe not really needing to think about from a logistics and supply chain point of view again. They can just really get on to think about product and marketing in terms of what they do on a day-to-day.

And clearly, obviously, embedding that operating approach across all the brands. So we've got one way of working across all of the brands, makes it much, much more simple for us to operate. Again, leveraging the knowledge and expertise from shared service operations across our group gets us like fantastic efficiency. So another good example of that at the moment would be if you walked into the Burnley warehouse, any of you that have been there already, again, we've got multi-brand being picked from multi-locations at any one time. And it's when you get to the end in terms of the packing station that you see the real efficiency drive because the packer might be now packing a boohoo woman package, the next one coming in could be a boohooMAN or it could be a MissPap or it could be a Nasty Gal. So clearly, getting the efficiencies of the multi-brand through the warehouse there.

And again, that whole sort of flexible approach to the investment in the platform, and that could be some of the things we've done this year. And Carol, again, talked about it in terms of some of the in-house apps that we've designed for some of the brands and, again, been able to do those in terms of exactly what we need, not just by using a third party there.

We've launched a number of new foreign language sites. We got more pay solutions than what we had at the beginning of this half. And again, we've got virtual assistant adviser in our customer services so, again, lots going on in the technology side with regards to what we're doing here.

Relaunching -- as we look forward, relaunching MissPap, Karen Millen and Coast in half 2, again, look, we've got a great experience in terms of bringing brands in-house, and great examples of that are obviously PrettyLittleThing and Nasty Gal. So again, the key initially is obviously the integration. So it's getting it on the platform. It's getting it into the warehouse, but also more importantly, it's ways of working.

So again, if you think of Karen Millen and Coast, they went into administration for a reason. So there's lots of things that we need to change about how those guys are operating so thinking about test and repeat, thinking about only operating online, thinking about SKU with a number of options that they'll need across the range, so again, just getting going on those ones. And then in terms of, obviously, people and brands. It's all about people and brands in terms of making sure that we can deliver on all of these points.

Warehousing and logistics. Key take away here is, look, we have plenty of capacity is what I would say. We have over 20 million units of capacity currently, and that's rising to 30 million units next year. Burnley automation, as I said earlier, went live on time and on budget and in plenty of time for peak this year, which is really, really key. And again, Sheffield operations getting more efficient by the month since their launch last year.

In terms of future focus, again, if you look at this graph here, this is in terms of Burnley automation at GBP 1.2 billion. In terms of the Sheffield and relocation, then we've got the next hall in Sheffield getting mezzanine floors fitted at the moment, and that would be complete next year. And then we have further expansion plans for Burnley, and we are looking at automation perhaps similar to what we have in Burnley for the Sheffield site in the coming years. So basically, by calendar year 2022, we get to sort of GBP 3 billion in terms of net sales that we're able to manage within the current 2 warehouses.

But like anything, we're continuously looking to the future in terms of capacity and what we need. And that may be from further automation in the current warehouses but also, we're beginning to look from an international point of view in terms of what might be next for us and where might that be on our growth journey.

Sustainability, really, really important topic and subject for us. We've done a lot so far from a sustainable point of view. So we've got our for the future in terms of recycled ranges that we've done in both boohoo and in PrettyLittleThing. They've been fantastic. Looking at a lot of recycled packaging also and implementing that across all of our brands. That's been great.

Treating supplies fairly. So we introduced in the summer of this year 14-day payments for our U.K. manufacturers. So at a time in the industry when everybody else is pushing it out and the average is probably somewhere closer to 60 to 90 days, we've been looking at our suppliers and looking for those guys to grow with us. And what would be really advantageous to them would be better payment terms and getting cash quicker, so that's really, really important. And obviously, it has a double benefit as well in terms of if you're going to deal with 2 retailers, would you rather deal with the one on 14 days payment or the one on 90 days payment? So it has a double win, that one for us.

Again, engaging content on the website to promote sustainable use of products to our customers is very, very important. We've got zero-landfill policy at our warehouse. And we've just appointed our first Sustainability Director, Tom Kershaw. So Tom has just taken up the post recently. And clearly, Tom will have a lot to say and continue the great work we've done to-date.

As we look forward, we do want to have greater supply chain transparency and collaboration. We want to work more with our suppliers to improve standards and practices globally across our supply chain and really want to do some good initiatives and partnerships with some ethical supply chain organizations that we think could be beneficial for us and actually really will add some value to what we're doing going forward.

And again, I just want to probably emphasize at the end of this, look, it's a huge topic. It's a really big one on our list and one that we're going to be spending a lot of time in the future as we go forward.

People and culture. You couldn't do all of this without great people in our organization. So we're now approaching 5,000 colleagues across 12 locations in the business, great kind of values that are aligned with our employee proposition. We've got sort of -- I'm very proud of our pay, of our reward, of our sick leave, et cetera, all of that really, really, really proud in terms of what we do there. We're really focused on developing our leaders for the future. Clearly, the organization is growing, and we need leaders, and obviously, as many of those that can come from within the better in terms of what we do there. And again, it's probably not all about work. We've got a great health and well-being program across the business, and that ranges from free gyms and subsidized canteens, support for healthy and mental well-being, et cetera. So lots going on in that one.

We listen to all of our employees, and we have your voice, which again, are committees from the warehouse right into head office where employees are voted onto a committee and they talk about things that they want to do differently and make them happen in the business.

And then we've got our Junior Board, again, which comes from different parts of the business. Colleagues, again, on that Junior Board, and they're thinking about how we do things today and how we should be doing things in the future as well. So we're doing a lot in this space, even locally where we've got the offices, where we've got the warehouses. We're very proud to support local communities. And the boohoo foundation is just about to launch. So again, another really good initiative in this area.

So I suppose, look, overall, in terms of -- in summary and lots of what you heard, but I think it's really important to emphasize some of these points. So our focus is to be the leading player in the fashion e-commerce market. That's where we want to be. We've had a fantastic trading and operational performance in the last 6 months. We're just about to enter peak, and we're really well set up for that. So looking forward to that coming along in the next few weeks.

We've got a significant global market share opportunities for all the brands and all the markets. And again, I'll just emphasize, I really do feel like we're just at the beginning of this journey in terms of what we have to do out there.

We're investing for the long term, as Neil has highlighted, and that could be in brands, infrastructure, technology but also people as well. And again, we're expecting to deliver another record year of profitable growth and revenue growth in financial year '20.

That's it from us. So we're just going to hand over to the floor for some Q&A.

Sorry. People video. I forgot a video.

(presentation)

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John William Lyttle, boohoo group plc - CEO & Director [7]

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It's a great example of some of our great people in the organization.

Q&A now then, yes?

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Questions and Answers

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John William Lyttle, boohoo group plc - CEO & Director [1]

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You got the microphone at the back?

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Unidentified Company Representative, [2]

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Do you want to start in the front, John?

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John William Lyttle, boohoo group plc - CEO & Director [3]

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Yes. That's all right.

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John Stevenson, Peel Hunt LLP, Research Division - Analyst [4]

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John Stevenson of Peel Hunt. Three questions, if I can. First up, just a quick one actually, just on test and repeat. I'm wondering if you can talk what the sort of hit rate is now. But I guess it doesn't matter in itself because of all the news that comes through. But interested to see what sort of level of product gets repeated.

Second question just on warehouse efficiency. I appreciate again it's more about throughput and everything else, but can you talk about how efficient the warehouse has become in terms of the pick right now? And where do you think you can get to?

And final question, just on boohoo. I mean, clearly, it's been more than just sort of sharpening at the proposition, and it's really sort of kicked on. Can you talk about, in practical terms, sort of how you've done that, whether it's been through marketing or...

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Mahmud Abdullah Kamani, boohoo group plc - Co-Founder & Group Executive Chairman [5]

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No, no. We don't want to tell you most of them questions.

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Neil James Catto, boohoo group plc - CFO & Executive Director [6]

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Test and repeat here, right? I mean we don't disclose the hit rate. It's different for the brands. And a lot of the times, the hit rate depends on how much newness you have coming in. Sometimes, you can have lots of newness coming in, which is great, and then your hit rate can go down. But generally, you can see from the numbers that, obviously, the products are really resonating across all of the brands. So hit rates are up and down, but overall, the model is still the same. But I think, and getting back to the third part of your question, look, we've just been getting better at operating the model and being more consistent and so on. So that's hit rates.

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John Stevenson, Peel Hunt LLP, Research Division - Analyst [7]

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I mean you used to -- you did use to quote a number of things in the early days. It's about sort of...

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Neil James Catto, boohoo group plc - CFO & Executive Director [8]

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We always used to say 25% to 30%. And if anything, it's slightly above that. But it can be in that range as well.

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John William Lyttle, boohoo group plc - CEO & Director [9]

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I think what you got to think about as well, John, is if it's just the number of new starts we have hitting across the group per week, which is obviously key to our success as well. In lots of cases, it's been great, but we don't want to go back. We want to move on to new things. So you got to balance what you want to repeat but with newness coming in as well. So again, that's been our strength, keeping ahead, having the latest fashion all the time.

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Neil James Catto, boohoo group plc - CFO & Executive Director [10]

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So shall I -- I'll take the boohoo in the first 6 months.

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Mahmud Abdullah Kamani, boohoo group plc - Co-Founder & Group Executive Chairman [11]

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We're never telling you that.

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John William Lyttle, boohoo group plc - CEO & Director [12]

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Yes. I'll take it if it's okay. Boohoo in the first 6 months, we've done a number of things in boohoo. We've looked at product and felt we could be better. We've looked at availability in product and felt we could be better there. We've looked at the website and felt that could be stronger. We've looked at even the models there and we said that could be stronger. Looked at marketing and said, look, could we be better in there? So we've done a number of different things. And we're really, really, really happy in terms of the payoff on that. And obviously, you can see the numbers coming through now. So a number of things, not one specific.

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John Stevenson, Peel Hunt LLP, Research Division - Analyst [13]

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Which have been most effective maybe you think?

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John William Lyttle, boohoo group plc - CEO & Director [14]

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I think, probably a number of them, I would say. In terms of -- it's all over the place. Listen, it's a number of things. Look, what do we -- we live and die by products, so that's always the #1 for us in terms of -- so product and availability is always key.

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John Stevenson, Peel Hunt LLP, Research Division - Analyst [15]

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Okay. I'm feeling lucky on question 3.

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Neil James Catto, boohoo group plc - CFO & Executive Director [16]

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Wait, no. Which question?

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Carol Mary Kane, boohoo group plc - Group Co-Founder & Executive Director [17]

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Yes.

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Neil James Catto, boohoo group plc - CFO & Executive Director [18]

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Warehouse efficiency. So you can see, we've got leverage in the first half on the distribution costs, and that has been driven a lot by the efficiency in -- from the automation. So it's going really well, exactly as planned. And what you don't see in that ratio as such is that we're getting more express deliveries in the U.K., which is great. And overseas, we're improving our services to customers, which is also great. And there's a higher mix of those overseas services. So you can see that on the efficiency side, it's -- underlying all of those improvements, it's a good situation.

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Matthew Neil McEachran, Nplus1 Singer Capital Markets Limited, Research Division - Senior Research Analyst of Retail [19]

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Yes, Matthew McEachran from Nplus1 Singer. A couple of questions from me. Just in terms of the U.S. market, you highlighted your market share being 0.4%. I mean there's been a lot of activity. You also have a lot of social media followers in the U.S. Are you comfortable with your growth rates at the moment? Or do you expect some of the actions you've taken recently to see that kick on a bit? First question.

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John William Lyttle, boohoo group plc - CEO & Director [20]

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Yes. I mean, listen, we are pleased with the U.S. growth rate that we've seen in the first 6 months. I think what that chart was really just showing is the opportunity that we have ahead. Each of the brands are at different stages of growth in the U.S. market as well in terms of maturity. So big, big, big opportunity in that market, as there is in Europe. Europe is pretty similar. It's not dissimilar in terms of market size and market share so really just emphasizing the growth that we have and opportunity.

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Matthew Neil McEachran, Nplus1 Singer Capital Markets Limited, Research Division - Senior Research Analyst of Retail [21]

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Okay. And just one for Neil. Just trying to square up the guidance on full year sales growth and the second half growth rate versus the 80% increase in stock at the period end. Can you just help us unbundle, if you like, the effects last year of Sheffield and any other earlier phasing of stock that might be included within that?

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Neil James Catto, boohoo group plc - CFO & Executive Director [22]

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Yes. I mean at the end of the last half year, August 2018, PLT was in the middle of the move to Sheffield. So you can almost look at -- PLT probably had half the level of stock cover that it has today or at the end of August. So that's one of the big swing factors in the increase in inventory.

And then the other big factor in the increase in inventory is just the momentum that the brands have coming out of August into the second half of the year, so that's why -- what you're seeing there.

And in terms of squaring that with the guidance for the rest of the year, it's a long way to go for the rest of the year. All of that stock will have probably gone out of the door by the next 5 or 6 weeks. So there's a lot going on there. But we're pleased with the momentum that we finished the year with, probably in a better place than we've been in previous years. There's a long way to go and big peak trading periods, what's going to happen over that. So that's why we're sensibly conservative in the guidance that we're setting for the full year sales growth.

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Anne Critchlow, Societe Generale Cross Asset Research - Equity Analyst [23]

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Anne Critchlow from SG. Two questions, please. With regard to marketing efficiency, were you really just talking there about scale benefits? Or are you doing something differently on marketing, for example, moving more into social or having more influential influencers?

And then a second question on acquisitions and what your attitude would be there now. If something really great came along, would you go for it? Or do you think you've got enough to digest for now?

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Neil James Catto, boohoo group plc - CFO & Executive Director [24]

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On the marketing efficiency, we're -- as we grow, get better, we get more data. The data tells us what's working, what's not working. We factor that in and we try different things going forward. And the whole world has changed over the last 10 years, massively. And that's been a gradual change for us, and we change our marketing spend accordingly. And then you've got things that the brands are -- some of the brands are getting to the scale where they can afford to do a bit more of working with the higher-profile influencers. You saw the Nasty Gal, EmRata. So there's a whole load of things there. And so we were -- in the first half last year, we were giving boohoo a boost, and we've continued to do that. But obviously, you're seeing the benefits coming through in the sales line with all those other improvements that John is talking about. So that's what's going on there. But our spend does change as to what we think is working in the market at the time. It's constantly changing. Google changes the algorithms all the time, and we react to that, but we are on it all the time, which is how we try to get more and more efficient. So I can't remember the second question.

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Anne Critchlow, Societe Generale Cross Asset Research - Equity Analyst [25]

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Acquisition.

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John William Lyttle, boohoo group plc - CEO & Director [26]

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I think from an acquisition point of view, I think, like, most retailers, we're holed up, right, to approach the big quarter. So it heads down, manning the pumps as such, get through peak and come out after Christmas. So we're really just focused now on the 7 brands and getting those going and getting through peak.

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Simon Bowler, Numis Securities Limited, Research Division - Analyst [27]

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It's Simon Bowler from Numis. A couple questions with a couple parts to each, if that's okay. First one, with regards to CapEx, stepped down, as you mentioned. Can you just talk about where that reduction in CapEx is coming through from? And then kind of linked in to that, you obviously kind of spoke around the warehousing capacity that you've got and some of the ideas around going forwards. What kind of time frame you think around with regards to having to make the decisions on the next warehousing steps? And I appreciate there's no immediate need for it.

And then second area, just around kind of marketing. You spoke around the reduction and potentially sales being in line with your expectations. How should we think about that across the second half of the year? And when you talk about investing into new brands, is that the line in which we would expect to see those investments come through from?

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Neil James Catto, boohoo group plc - CFO & Executive Director [28]

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Okay. I'll go on then. So the CapEx, the step-down is really just timing of projects. We're well ahead of the curve capacity-wise. And the main area of development is in Sheffield to expand that capacity, as you can see from that. Not as much spending in Burnley. So it's mainly that Sheffield project timing around the year-end. So we've been able to create more capacity in Sheffield to get through the peak this year. And that enables us to time that -- the expansion project in Sheffield in a more kind of amenable way with the seasonal patterns. And so that's all that it is around the CapEx step-down.

On the next steps, there's -- we -- I think the main -- the next steps if we were going to go with the international warehouses have got to be planned to perfection, and that's the way we're looking at that. So there's no time frame at this point in time, and we're just making sure that we plan that in as much detail as possible.

Marketing as a percentage of sales, for the rest of the year, we are saying it's going to be in a similar area to what we've seen. So we've got the headroom in the guidance to do some big campaigns. All the brands have got some great campaigns planned for the -- as we go through the autumn/winter season. And so we'd expect it to be in a similar area, and let's see how effective those campaigns are through the second half of the year.

And in the -- for the new brands as well, they are one of the reasons why the marketing costs as a percentage are as high as they are, above 9%. And we've been doing that over the last couple of years really. Since PLT and Nasty Gal came into the group, they've been pushing that percentage up because we've been growing them. They are leveraging, but now we've got the newer brands coming in, MissPap, Karen Millen and Coast. So they're keeping that percentage up there, but they're also giving us the great growth going forward.

And at the same time, we're able to invest in other markets for the traditional brands, should we want to, which is -- like John was saying, we're still just at the start of the journey. And in some markets, we haven't started at all. So we can do that, and we're seeing that, that percentage of sales is at a level where it's high enough for us to invest, but we're still creating double-digit EBITDA margins.

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Caroline Rachel Gulliver, Jefferies LLC, Research Division - Equity Analyst [29]

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It's Caroline Gulliver from Jefferies. Can I ask some follow-up questions on your 500 supplier base? Carol, you talked about tailoring being one of the standout trends at the moment, and obviously, you've taken on Karen Millen and Coast. Have you -- are you working with those 500 suppliers on that more tailored product? Or have you added new suppliers in? And do you make a similar gross margin on the more tailored product at a sort of higher price point?

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Carol Mary Kane, boohoo group plc - Group Co-Founder & Executive Director [30]

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I think I'll ask -- John can answer the margin perspective because it's a bit close to me. But we've been growing supply base with product types with trends. So every year, there may have to be new suppliers taken onboard if it's a new trend coming through. Tailoring is probably part of that probably in the last 2 years where we've been growing our supply base, that can make tailoring for us that we may not have had in the portfolio a couple years ago.

I think from a margin perspective, I think it's probably very similar.

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John William Lyttle, boohoo group plc - CEO & Director [31]

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Very, very similar. I mean, again, tailoring is -- from an ASP point of view, is higher, so that tends to drive it. So not -- there's nothing that stands out in terms of margin differential.

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Rebecca Anne McClellan, Grupo Santander, Research Division - Equity Analyst [32]

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Just a question from me, Rebecca McClellan at Santander. Where does your 14 days payment terms in the U.K. come from or compare to? And what -- if -- I'm assuming it's come down over time. And what's the benefit to the bought-in gross margin of a quicker payment cycle?

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John William Lyttle, boohoo group plc - CEO & Director [33]

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So I'll answer the first, but you can do the gross margin. So it was 30 days prior to that, and we brought it down to 14. And that was really working with our suppliers. And clearly, we're growing. We're needing more volume, et cetera. And what really works for them and the cash flow was the big and important one for them. So bringing that from 30 down to 14 days was #1 in terms of what would work best for the supplier group. And clearly, from a cash flow point of view, it was one that worked for us as well.

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Rebecca Anne McClellan, Grupo Santander, Research Division - Equity Analyst [34]

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And the 30 days was in the previous period? Or...

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John William Lyttle, boohoo group plc - CEO & Director [35]

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In the previous period, yes, yes, yes.

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Neil James Catto, boohoo group plc - CFO & Executive Director [36]

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In actual fact, that could change from 30 days to 14 days for product suppliers who's kind of in progress over their half-year-end. So there's still a little bit more of that to come through. But it's not a massive difference in terms of our working capital outflow in the second half of the year. So we've always paid our suppliers promptly, but it's just that extra 14 days. It's not huge.

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John William Lyttle, boohoo group plc - CEO & Director [37]

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And particularly the point I raised at the time when most others seemed to be pushing further towards that sort of 60 and 90, you can see the benefit of 14 to a supplier.

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Rebecca Anne McClellan, Grupo Santander, Research Division - Equity Analyst [38]

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And I'm assuming that there's a bought-in benefit to paying on quicker terms?

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Neil James Catto, boohoo group plc - CFO & Executive Director [39]

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On the margin side, this is -- this will help us support our margins as they are and enable us to increase them going forward. But there's not -- this isn't a discount that they're giving us for paying them more quickly, but it's literally just working together with the suppliers. And -- but we'll -- it will help us with our supplier network wanting to do more business with us on those terms, and it's just going to be a virtuous circle, we hope, for the suppliers and for us. But there's not a specific 2% benefit in gross margin or anything like that.

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Adam Gareth Cochrane, Citigroup Inc, Research Division - Director [40]

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It's Adam Cochrane from Citi. First question on apps. You sort of mentioned a little bit more about apps this time around and bringing them in-house. Looking at how good all of the KPIs have been for each of the brands, can you sort give us a bit of a feel for how the apps -- are they helping that? Are they increasing as a proportion of the overall mix? Just anything you can help us with apps versus the normal website.

And then secondly, on sustainability, I think it's great that you're doing it. Would you be able to sort of say how much of your sales have come from sustainable product? Of those 3,000 lines a week coming in, how many are currently for a sustainable piece? And what's the challenge on sustainability? Is it finding the sustainable products in terms of the raw materials? Is it finding them for the right cost? Or is it customer demand? If you can just give us some ideas of how you're going to think about that for the next, let's say, 12 months.

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John William Lyttle, boohoo group plc - CEO & Director [41]

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So shall I start -- I'll start with sustainability and address that one. So in terms of what's coming through from sustainably made yarns or fabrics, quite low at the moment, but we think that will increase over the next couple of years in terms of what we want to do, but we think also from a consumer demand point of view.

From a cost point of view, technically, it shouldn't cost any more. What you'll see in the industry at the minute is that, actually, number of sustainable products is still relatively low. As that increases, volumes increase, and with that will come, in my view, equal -- from a pricing point of view, I don't think you'll be -- or consumers will need to be paying any more for a sustainable product to what they had been paying previously.

I think also there's lots of different ways to look at sustainability. So there's fabrics and there's yarns. There's also from sustainability in terms of how we work with our factories, how we work with their workers. There's back to the 0, the carbon prints. Again, and a simple one I keep throwing out is if you take one of the large containerships coming from Asia to Europe, that burns about 200 tons of fuel a day. What are we doing about that as well, if retailers who were taking products in that way?

So sustainability is -- there is a piece around fibers and fabrics, but there's a bigger piece as well in terms of kind of end to end, so right down to recyclable bags that we're sending our products out in, the labels are recyclable, their card, the paper, all of that. So we're looking at this from an end to end, really.

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Adam Gareth Cochrane, Citigroup Inc, Research Division - Director [42]

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So you see some big retailers promising to be 100% by 2025 or 2030. Is that something that -- within your sustainability directive? I'm assuming it will be up to them to guide that process.

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John William Lyttle, boohoo group plc - CEO & Director [43]

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I think, clearly, sort of I'm trying to point out we've been doing a number things already in terms of where we are. We clearly think there's a lot more we can do as well, and that's one of the reasons for bringing in the Sustainability Director. And again, we think we'll have a lot more to talk about on that as we go forward.

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Neil James Catto, boohoo group plc - CFO & Executive Director [44]

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On the app question. We've brought the -- we've invested quite a lot in the boohoo Nasty Gal and boohooMAN apps, and they were new in Q2. But in terms of how much of the KPI improvements they're driving, they're certainly not hurting because it's a better app than we had before. And we've seen the app sales increase as a percentage because we've been pushing more or urging people to use the apps more, which is great because it's a great app now. But at the end of the day, we had a great mobile website. So you don't know how much it's actually bringing in incrementally. But we've had more downloads and increase in sales, which is good. And now the app's on those people's desktops on the phones, and that's healthy. But all -- I think across all of the brands, the apps are working well. So -- but is it driving the KPIs? No, I think it's the product and all aspects of the proposition that are driving the KPIs.

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Andreas Inderst, Macquarie Research - Senior Equity Analyst [45]

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This is Andreas Inderst speaking, Macquarie. I have two questions. First one on your new brands. How much of -- I mean you clearly confirmed the outlook medium term, so I'm just wondering how much of your mid-term guidance includes the contribution from new brands in terms of sales and in terms of profitability.

And my second question is maybe related to that. How do you plan to communicate the new brands? Right now, you have a nice line called others. Will you split that up in MissPap, in Karen Millen, et cetera?

And my second question, again, on the U.K., extremely strong acceleration in Q2 versus Q1 on already decent -- very decent comps. What is really behind that? Is it more effective marketing? Is it a better product? Is it weaker competition? Maybe you can shine a bit more light on that one, too.

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Neil James Catto, boohoo group plc - CFO & Executive Director [46]

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So on the growth from the new brands in the medium-term guidance, the medium-term guidance is -- we've been reiterating probably since 2015, and we've had new brands come in, and they're -- obviously, PLT is a significant part. Nasty Gal is becoming more significant. But the new brands that we've acquired this year, that's about planting seeds for the future. Obviously, it's going to take time with those brands before they become significant. So you can almost take the medium-term guidance as being we should be able to achieve that from the other 4 brands rather than with the Karen Millen, Coast, MissPap in that. But obviously, it's more about we've invested, carried on achieving double-digit EBITDA margins, and we've been able to bring in the new brands and invest in them, and at the same time, our growth is consistently, ever since 2015, being above that 25% level.

On a segmental reporting kind of basis, it gets more difficult now. We got 7 brands. You can't have 7 columns on a table in the footnotes to the accounts, really. So we're going to be reviewing the segmental reporting and working out what is the most practical way of reporting that going forward. But at the moment, it's just continuing it, and the other column is still relatively immaterial. And in the U.K...

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Carol Mary Kane, boohoo group plc - Group Co-Founder & Executive Director [47]

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Would you like me to answer? I'll answer a question because nobody has asked me one. Just on the U.K., it's probably a combination. I think John articulated really well that 3,000 new products a week, and that's the same as opening a store a week. So if you can imagine, you've got the best product offering in the U.K. probably in terms of lines. I mean what did we say it was yesterday, Neil? We saw it across the group. I thought it was 70,000...

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Neil James Catto, boohoo group plc - CFO & Executive Director [48]

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It's about 80,000, 90,000, yes.

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Carol Mary Kane, boohoo group plc - Group Co-Founder & Executive Director [49]

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80,000 styles across our brands in terms of size of our proposition. If you want to compare that to the market in more down/upstream and count them out with styles, I don't think there'll be that many. So just in terms of our offering is bigger, and actually, that's really where we've gained that market share in the U.K. plus the combination of the marketing strategy that each brands have, the influencers, the celebrities, being on the content strategy and being on everybody's mobile phone. And we can't forget the amount of mobile visits and that level of social media and how that influences purchase.

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Unidentified Company Representative, [50]

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So I think given the time constraints, we have to make this the last question for the formal part of the session. But maybe you'll be able to talk to the management team at lunch.

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Unidentified Analyst, [51]

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(inaudible) from Credit Suisse. Just one question from me with regards to payment options. If I'm not mistaken, at the beginning of the summer, you said that a pay-later option might be rolled out in all of your major markets by -- before the end of the year, and I was wondering if you could give us an update on that rollout progress, please.

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Neil James Catto, boohoo group plc - CFO & Executive Director [52]

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We've got various pay-later options on all of the brands throughout the world, so we have been rolling out payment types. I think, overall, all I'd say is that getting the right payment types in the right markets is key, and that's what we've been focused on. So you've got pay later in a lot of our focused markets now, but there are still some that it's not that important for. And U.K. is not that important, but we do have those options now. And I suppose that's where we are, but we look at every focus market. We've got to have the right options payment types.

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Unidentified Company Representative, [53]

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Okay. Thank you very much for your attendance this morning. We've got about 10 minutes before the management team has media commitments. So if you want to ask any quick questions without me moving to stop them from giving the answers, please do it.